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 SeptemberJune 30, 20202021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-38196
DUPONT DE NEMOURS, INC.
(Exact name of registrant as specified in its charter)
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| Delaware | | 81-1224539 | |
| State or other jurisdiction of incorporation or organization | | (I.R.S. Employer Identification No.) | |
| | | | | | | | | | | | | | | | | | | | |
| 974 Centre Road | Building 730 | Wilmington | Delaware | | 19805 | |
| (Address of Principal Executive Offices) | | (Zip Code) | |
(302) 774-3034
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock, par value $0.01 per share | DD | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☑ Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☑ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| Large Accelerated Filer | | ☑ | | Accelerated filer | | ¨ |
| Non-accelerated filer | | ¨ | | Smaller reporting company | | ☐ |
| | | | | Emerging growth company | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☑ No
The registrant had 733,849,605523,056,692 shares of common stock, $0.01 par value, outstanding at October 28, 2020.August 2, 2021.
DuPont de Nemours, Inc.
QUARTERLY REPORT ON FORM 10-Q
For the quarterly period ended SeptemberJune 30, 20202021
TABLE OF CONTENTS
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Throughout this Quarterly Report on Form 10-Q, except as otherwise noted by the context, the terms "DuPont" or "Company" used herein mean DuPont de Nemours, Inc. and its consolidated subsidiaries. On June 1, 2019, DowDuPont Inc. changed its registered name to DuPont de Nemours, Inc. (“DuPont”) (for certain events prior to June 1, 2019, the Company may be referred to as DowDuPont). Beginning on June 3, 2019, the Company's common stock is traded on the New York Stock Exchange under the ticker symbol "DD."
On April 1, 2019, the Company completed the separation of itsthe materials science business into a separate and independent public company by way of a distributionthrough the spin-off of Dow Inc., (“Dow”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares ofincluding Dow’s common stocksubsidiary The Dow Chemical Company (the “Dow Distribution”). On June 1, 2019, the Company completed the separation of itsthe agriculture business into a separate and independent public company by way of a distributionthrough the spin-off of Corteva, Inc. (“Corteva”) through a pro rata dividend in-kind of all of the then-issuedincluding Corteva’s subsidiary E. I. du Pont de Nemours and outstanding shares of Corteva’s common stockCompany (“EID”), (the “Corteva Distribution”Distribution and together with the Dow Distribution, the “DWDP Distributions”).
FollowingOn February 1, 2021 the Corteva Distribution,Company completed the divestiture of the Nutrition & Biosciences (“N&B”) business to International Flavors & Fragrance Inc. (“IFF”) in a Reverse Morris Trust transaction (the “N&B Transaction”) that resulted in IFF issuing shares to DuPont holdsstockholders.
The financial position of DuPont as of December 31, 2020 and the specialty products business as continuing operations. The results of operations of DuPont for the 2019 interim periods presented reflectthree and six months ended June 30, 2021 and 2020 present the historical financial results of Dow and CortevaN&B as discontinued operations, as applicable.operations. The cash flows and comprehensive income related to Dow and CortevaN&B have not been segregated and are included in the interim Consolidated Statements of Cash Flows and interim Consolidated Statements of Comprehensive Income, respectively, for the applicable period.all periods presented. Unless otherwise indicated, the information in the notes to the interim Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow or Corteva.N&B.
On December 15, 2019,July 1, 2021, DuPont and International Flavors & Fragrances Inc. ("IFF")completed the previously announced entry into definitive agreements to combine DuPont’s Nutrition & Biosciencesacquisition of the Laird Performance Materials business, (the "N&B Business"“Laird PM Acquisition”) with IFF in a transaction that would result in IFF issuing shares to DuPont shareholders. The transaction is expected to close in the first quarter of 2021, subject to customary closing conditions, including receipt of regulatory approvals and receipt by DuPont of an opinion of tax counsel..
DuPontTM and all products, unless otherwise noted, denoted with TM, SM or ® are trademarks, service marks or registered trademarks of affiliates of DuPont de Nemours, Inc.
FORWARD-LOOKING STATEMENTS
This communication contains "forward-looking statements" within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "target," and similar expressions and variations or negatives of these words.
Forward-looking statements address matters that are, to varying degrees, uncertain and subject to risks, uncertainties and assumptions, many of which that are beyond DuPont's control, that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements are not guarantees of future results. Some of the important factors that could cause DuPont's actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to:to the: (i) the parties’ ability to meet expectations regardingachieve expected benefits, synergies and operating efficiencies in connection with the timing, completion and accounting andLaird PM Acquisition within the expected time frames or at all or to successfully integrate the Laird Performance Materials business; (ii) ability to achieve anticipated tax treatments ofin connection with the intended transaction with IFF;N&B Transaction, Laird PM Acquisition or the DWDP Distributions; (iii) changes in relevant tax and other laws, (ii) failure to obtain necessary regulatory approvals, anticipated tax treatment or any required financing or to satisfy anylaws; (iv) indemnification of certain legacy liabilities of EID in connection with the other conditions to the intended transaction with IFF, (iii) the possibility that unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies that could impact the value, timing or pursuit of the intended transaction with IFF, (iv) risks and costs and pursuit and/or implementation of the separation of the N&B Business, including timing anticipated to complete the separation, any changes to the configuration of businesses included in the separation if implemented,Corteva Distribution; (v) risks and costs related to the Dow Distributionperformance under and impact of the cost sharing arrangement by and between DuPont, Corteva Distribution (together, the “DWDP Distributions”) including (a) with respect to achieving all expected benefits from the DWDP Distributions; (b) the incurrence of significant costs in connection with the DWDP Distributions, including costs to service debt incurred by theand The Chemours Company to establish the relative credit profiles of Corteva, Dow and DuPont and increased costs related to supply, service and other arrangements that, prior to the Dow Distribution, were between entities under the common control of DuPont; (c) indemnification of certain legacy liabilities of E. I. du Pont de Nemours and Company ("Historical EID") in connection with the Corteva Distribution; and (d) potential liability arising from fraudulent conveyance and similar laws in connection with the DWDP Distributions;future eligible PFAS costs; (vi) failure to effectively manage acquisitions, divestitures, alliances, joint ventures and other portfolio changes, including meeting conditions under the Letter Agreement entered in connection with the Corteva Distribution, related to the transfer of certain levels of assets and
businesses; (vii) uncertainty as to the long-term value of DuPont common stock; (viii) potential inability or reduced access to the capital markets or increased cost of borrowings, including as a result of a credit rating downgrade (ix) risks and uncertainties related to the novel coronavirus (COVID-19) and the responses thereto (such as voluntary and in some cases, mandatory quarantines as well as shut downs and other restrictions on travel and commercial, social and other activities) on DuPont’s business, results of operations, access to sources of liquidity and financial condition which depend on highly uncertain and unpredictable future developments, including, but not limited to, the duration and spread of the COVID-19 outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions resume resume; and (x)(ix) other risks to DuPont's business, operationsoperations; each as further discussed in detail in and results of operations including from: failure to develop and market new products and optimally manage product life cycles; ability, cost and impact on business operations, including the supply chain, of responding to changes in market acceptance, rules, regulations and policies and failure to respond to such changes; outcome of significant litigation, environmental matters and other commitments and contingencies; failure to appropriately manage process safety and product stewardship issues; global economic and capital market conditions, including the continued availability of capital and financing, as well as inflation, interest and currency exchange rates; changes in political conditions, including tariffs, trade disputes and retaliatory actions; impairment of goodwill or intangible assets; the availability of and fluctuations in the cost of energy and raw materials; business or supply disruption, including in connection with the DWDP Distributions; ability to effectively manage costs as the company’s portfolio evolves; security threats, such as acts of sabotage, terrorism or war, global health concerns and pandemics, natural disasters and weather events and patterns which could or could continue to result in a significant operational event for DuPont, adversely impact demand or production; ability to discover, develop and protect new technologies and to protect and enforce DuPont's intellectual property rights; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management's response to any of the aforementioned factors. These risks are and will be more fully discussed in DuPont's current, quarterlyDuPont’s annual report on Form 10-K for the year ended December 31, 2020 and annualits subsequent reports on Form 10-Q and other filings made with the U.S. Securities and Exchange Commission, in each case, as may be amended from time to time in future filings with the SEC. While the list of factors presented here is considered representative, no such list should be considered a complete statement of all potential risks and uncertainties. Form 8-K. Unlisted factors may present significant additional obstacles to the realization
of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business or supply chain disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DuPont’s consolidated financial condition, results of operations, credit rating or liquidity. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. DuPont assumes no obligation to publicly provide revisions or updates to any forward-looking statements whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. A detailed discussion of some of the significant risks and uncertainties which may cause results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” in (Part I, Item 1A) of DuPont’s 2019 Annual Report on Form 10-K and in (Part II, Item 1A) of this Form 10-Q.
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| PART I - FINANCIAL INFORMATION |
ITEM 1. FINANCIAL STATEMENTS
DuPont de Nemours, Inc.
Consolidated Statements of Operations
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| Three Months Ended September 30, | Nine Months Ended September 30, |
| In millions, except per share amounts (Unaudited) | 2020 | 2019 | 2020 | 2019 |
| Net sales | $ | 5,096 | | $ | 5,426 | | $ | 15,145 | | $ | 16,308 | |
| Cost of sales | 3,392 | | 3,531 | | 10,001 | | 10,648 | |
| Research and development expenses | 199 | | 225 | | 644 | | 724 | |
| Selling, general and administrative expenses | 524 | | 645 | | 1,698 | | 2,013 | |
| Amortization of intangibles | 530 | | 247 | | 1,591 | | 755 | |
| Restructuring and asset related charges - net | 384 | | 82 | | 807 | | 290 | |
| Goodwill impairment charges | 183 | | 0 | | 3,214 | | 1,175 | |
| Integration and separation costs | 127 | | 191 | | 469 | | 1,149 | |
| Equity in earnings of nonconsolidated affiliates | 30 | | 43 | | 172 | | 132 | |
| Sundry income (expense) - net | 430 | | 79 | | 627 | | 144 | |
| Interest expense | 197 | | 177 | | 573 | | 493 | |
| Income (loss) from continuing operations before income taxes | 20 | | 450 | | (3,053) | | (663) | |
| Provision for income taxes on continuing operations | 92 | | 78 | | 100 | | 142 | |
| (Loss) income from continuing operations, net of tax | (72) | | 372 | | (3,153) | | (805) | |
| Income from discontinued operations, net of tax | 0 | | 5 | | 0 | | 1,217 | |
| Net (loss) income | (72) | | 377 | | (3,153) | | 412 | |
| Net income attributable to noncontrolling interests | 7 | | 5 | | 20 | | 90 | |
| Net (loss) income available for DuPont common stockholders | $ | (79) | | $ | 372 | | $ | (3,173) | | $ | 322 | |
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| Per common share data: | | | | |
| (Loss) earnings per common share from continuing operations - basic | $ | (0.11) | | $ | 0.49 | | $ | (4.31) | | $ | (1.10) | |
| Earnings per common share from discontinued operations - basic | 0 | | 0.01 | | 0 | | 1.53 | |
| (Loss) earnings per common share - basic | $ | (0.11) | | $ | 0.50 | | $ | (4.31) | | $ | 0.43 | |
| (Loss) earnings per common share from continuing operations - diluted | $ | (0.11) | | $ | 0.49 | | $ | (4.31) | | $ | (1.10) | |
| Earnings per common share from discontinued operations - diluted | 0 | | 0.01 | | 0 | | 1.53 | |
| (Loss) earnings per common share - diluted | $ | (0.11) | | $ | 0.50 | | $ | (4.31) | | $ | 0.43 | |
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| Weighted-average common shares outstanding - basic | 734.4 | | 745.5 | | 735.8 | | 748.2 | |
| Weighted-average common shares outstanding - diluted | 734.4 | | 747.7 | | 735.8 | | 748.2 | |
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| Three Months Ended June 30, | Six Months Ended June 30, |
| In millions, except per share amounts (Unaudited) | 2021 | 2020 | 2021 | 2020 |
| Net sales | $ | 4,135 | | $ | 3,289 | | $ | 8,111 | | $ | 6,959 | |
| Cost of sales | 2,655 | | 2,298 | | 5,167 | | 4,617 | |
| Research and development expenses | 148 | | 153 | | 304 | | 326 | |
| Selling, general and administrative expenses | 459 | | 414 | | 915 | | 896 | |
| Amortization of intangibles | 167 | | 177 | | 334 | | 355 | |
| Restructuring and asset related charges - net | 10 | | 24 | | 12 | | 422 | |
| Goodwill impairment charge | 0 | | 2,498 | | 0 | | 3,031 | |
| Integration and separation costs | 23 | | 16 | | 29 | | 139 | |
| Equity in earnings of nonconsolidated affiliates | 25 | | 102 | | 51 | | 141 | |
| Sundry income (expense) - net | 146 | | (11) | | 162 | | 201 | |
| Interest expense | 129 | | 181 | | 275 | | 352 | |
| Income (loss) from continuing operations before income taxes | 715 | | (2,381) | | 1,288 | | (2,837) | |
| Provision for income taxes on continuing operations | 151 | | 8 | | 183 | | 102 | |
| Income (loss) from continuing operations, net of tax | 564 | | (2,389) | | 1,105 | | (2,939) | |
| (Loss) income from discontinued operations, net of tax | (77) | | (82) | | 4,780 | | (142) | |
| Net income (loss) | 487 | | (2,471) | | 5,885 | | (3,081) | |
| Net income attributable to noncontrolling interests | 9 | | 7 | | 13 | | 13 | |
| Net income (loss) available for DuPont common stockholders | $ | 478 | | $ | (2,478) | | $ | 5,872 | | $ | (3,094) | |
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| Per common share data: | | | | |
| Earnings (loss) per common share from continuing operations - basic | $ | 1.05 | | $ | (3.26) | | $ | 1.93 | | $ | (4.01) | |
| (Loss) earnings per common share from discontinued operations - basic | (0.15) | | (0.11) | | 8.43 | | (0.19) | |
| Earnings (loss) per common share - basic | $ | 0.90 | | $ | (3.37) | | $ | 10.36 | | $ | (4.20) | |
| Earnings (loss) per common share from continuing operations - diluted | $ | 1.04 | | $ | (3.26) | | $ | 1.92 | | $ | (4.01) | |
| (Loss) earnings per common share from discontinued operations - diluted | (0.14) | | (0.11) | | 8.41 | | (0.19) | |
| Earnings (loss) per common share - diluted | $ | 0.90 | | $ | (3.37) | | $ | 10.33 | | $ | (4.20) | |
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| Weighted-average common shares outstanding - basic | 529.6 | | 734.3 | | 567.0 | | 736.5 | |
| Weighted-average common shares outstanding - diluted | 531.2 | | 734.3 | | 568.5 | | 736.5 | |
See Notes to the Consolidated Financial Statements.
DuPont de Nemours, Inc.
Consolidated Statements of Comprehensive Income
| | | Three Months Ended September 30, | Nine Months Ended September 30, | | Three Months Ended June 30, | Six Months Ended June 30, |
| In millions (Unaudited) | In millions (Unaudited) | 2020 | 2019 | 2020 | 2019 | In millions (Unaudited) | 2021 | 2020 | 2021 | 2020 |
| Net (loss) income | $ | (72) | | $ | 377 | | $ | (3,153) | | $ | 412 | | |
| Other comprehensive income (loss), net of tax | | | |
| Unrealized gains on investments | 0 | | 0 | | 0 | | 67 | | |
| Net income (loss) | | Net income (loss) | $ | 487 | | $ | (2,471) | | $ | 5,885 | | $ | (3,081) | |
| Other comprehensive (loss) income, net of tax | | Other comprehensive (loss) income, net of tax | | |
| | Cumulative translation adjustments | Cumulative translation adjustments | 606 | | (694) | | 547 | | (829) | | Cumulative translation adjustments | 119 | | 345 | | (365) | | (59) | |
| Pension and other post-employment benefit plans | Pension and other post-employment benefit plans | 4 | | (4) | | 9 | | 187 | | Pension and other post-employment benefit plans | (1) | | 3 | | 11 | | 5 | |
| Derivative instruments | Derivative instruments | 0 | | 0 | | 0 | | (58) | | Derivative instruments | 18 | | 0 | | 18 | | 0 | |
| Split-off of N&B | | Split-off of N&B | 0 | | 0 | | 258 | | 0 | |
| | Total other comprehensive income (loss) | Total other comprehensive income (loss) | 610 | | (698) | | 556 | | (633) | | Total other comprehensive income (loss) | 136 | | 348 | | (78) | | (54) | |
| Comprehensive income (loss) | Comprehensive income (loss) | 538 | | (321) | | (2,597) | | (221) | | Comprehensive income (loss) | 623 | | (2,123) | | 5,807 | | (3,135) | |
| Comprehensive income attributable to noncontrolling interests, net of tax | Comprehensive income attributable to noncontrolling interests, net of tax | 11 | | 4 | | 19 | | 102 | | Comprehensive income attributable to noncontrolling interests, net of tax | 8 | | 10 | | 5 | | 8 | |
| Comprehensive income (loss) attributable to DuPont | Comprehensive income (loss) attributable to DuPont | $ | 527 | | $ | (325) | | $ | (2,616) | | $ | (323) | | Comprehensive income (loss) attributable to DuPont | $ | 615 | | $ | (2,133) | | $ | 5,802 | | $ | (3,143) | |
See Notes to the Consolidated Financial Statements.
DuPont de Nemours, Inc.
Condensed Consolidated Balance Sheets
| | In millions, except share amounts (Unaudited) | In millions, except share amounts (Unaudited) | September 30, 2020 | December 31, 2019 | In millions, except share amounts (Unaudited) | June 30, 2021 | December 31, 2020 |
| Assets | Assets | | | Assets | | |
| Current Assets | Current Assets | | | Current Assets | | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 4,008 | | $ | 1,540 | | Cash and cash equivalents | $ | 3,962 | | $ | 2,544 | |
| | Accounts and notes receivable - net | Accounts and notes receivable - net | 3,623 | | 3,802 | | Accounts and notes receivable - net | 2,826 | | 2,421 | |
| Inventories | Inventories | 3,902 | | 4,319 | | Inventories | 2,642 | | 2,393 | |
| Other current assets | Other current assets | 238 | | 338 | | Other current assets | 216 | | 181 | |
| Assets held for sale | Assets held for sale | 835 | | 0 | | Assets held for sale | 846 | | 810 | |
| Assets of discontinued operations | | Assets of discontinued operations | 0 | | 20,659 | |
| Total current assets | Total current assets | 12,606 | | 9,999 | | Total current assets | 10,492 | | 29,008 | |
| Investments | | | |
| Investments in nonconsolidated affiliates | 951 | | 1,204 | | |
| Other investments | 24 | | 24 | | |
| Noncurrent receivables | 147 | | 32 | | |
| Total investments | 1,122 | | 1,260 | | |
| Property, plant and equipment - net of accumulated depreciation (September 30, 2020 - $5,757; December 31, 2019 - $4,969) | 9,686 | | 10,143 | | |
| Property, plant and equipment - net of accumulated depreciation (June 30, 2021 - $4,528; December 31, 2020 - $4,256) | | Property, plant and equipment - net of accumulated depreciation (June 30, 2021 - $4,528; December 31, 2020 - $4,256) | 6,856 | | 6,867 | |
| Other Assets | Other Assets | | | Other Assets | | |
| Goodwill | Goodwill | 29,690 | | 33,151 | | Goodwill | 18,565 | | 18,702 | |
| Other intangible assets | Other intangible assets | 11,528 | | 13,593 | | Other intangible assets | 7,707 | | 8,072 | |
| Restricted cash | Restricted cash | 6,206 | | 0 | | Restricted cash | 0 | | 6,206 | |
| Investments and noncurrent receivables | | Investments and noncurrent receivables | 1,068 | | 1,047 | |
| Deferred income tax assets | Deferred income tax assets | 237 | | 189 | | Deferred income tax assets | 183 | | 190 | |
| Deferred charges and other assets | Deferred charges and other assets | 1,066 | | 1,014 | | Deferred charges and other assets | 968 | | 812 | |
| Total other assets | Total other assets | 48,727 | | 47,947 | | Total other assets | 28,491 | | 35,029 | |
| Total Assets | Total Assets | $ | 72,141 | | $ | 69,349 | | Total Assets | $ | 45,839 | | $ | 70,904 | |
| Liabilities and Equity | Liabilities and Equity | | | Liabilities and Equity | | |
| Current Liabilities | Current Liabilities | | | Current Liabilities | | |
| Short-term borrowings and finance lease obligations | $ | 2,394 | | $ | 3,830 | | |
| | Accounts payable | Accounts payable | 2,685 | | 2,934 | | Accounts payable | $ | 2,349 | | $ | 2,222 | |
| Income taxes payable | Income taxes payable | 414 | | 240 | | Income taxes payable | 236 | | 169 | |
| Accrued and other current liabilities | Accrued and other current liabilities | 1,364 | | 1,342 | | Accrued and other current liabilities | 1,219 | | 1,085 | |
| Liabilities related to assets held for sale | Liabilities related to assets held for sale | 127 | | 0 | | Liabilities related to assets held for sale | 136 | | 140 | |
| Liabilities of discontinued operations | | Liabilities of discontinued operations | 0 | | 8,610 | |
| Total current liabilities | Total current liabilities | 6,984 | | 8,346 | | Total current liabilities | 3,940 | | 12,226 | |
| Long-Term Debt | Long-Term Debt | 21,802 | | 13,617 | | Long-Term Debt | 10,627 | | 15,611 | |
| Other Noncurrent Liabilities | Other Noncurrent Liabilities | | | Other Noncurrent Liabilities | | |
| Deferred income tax liabilities | Deferred income tax liabilities | 3,011 | | 3,467 | | Deferred income tax liabilities | 1,869 | | 2,053 | |
| Pension and other post-employment benefits - noncurrent | Pension and other post-employment benefits - noncurrent | 1,193 | | 1,172 | | Pension and other post-employment benefits - noncurrent | 1,045 | | 1,110 | |
| Other noncurrent obligations | Other noncurrent obligations | 1,033 | | 1,191 | | Other noncurrent obligations | 894 | | 834 | |
| Total other noncurrent liabilities | Total other noncurrent liabilities | 5,237 | | 5,830 | | Total other noncurrent liabilities | 3,808 | | 3,997 | |
| Total Liabilities | Total Liabilities | 34,023 | | 27,793 | | Total Liabilities | 18,375 | | 31,834 | |
| Commitments and contingent liabilities | Commitments and contingent liabilities | | | Commitments and contingent liabilities | 0 | 0 |
| Stockholders' Equity | Stockholders' Equity | | | Stockholders' Equity | | |
| Common stock (authorized 1,666,666,667 shares of $0.01 par value each; issued 2020: 733,845,391 shares; 2019: 738,564,728 shares) | 7 | | 7 | | |
| Common stock (authorized 1,666,666,667 shares of $0.01 par value each; issued 2021: 524,644,217 shares; 2020: 734,204,054 shares) | | Common stock (authorized 1,666,666,667 shares of $0.01 par value each; issued 2021: 524,644,217 shares; 2020: 734,204,054 shares) | 5 | | 7 | |
| Additional paid-in capital | Additional paid-in capital | 50,219 | | 50,796 | | Additional paid-in capital | 49,681 | | 50,039 | |
| (Accumulated deficit) Retained earnings | (11,808) | | (8,400) | | |
| Accumulated other comprehensive loss | (859) | | (1,416) | | |
| Accumulated deficit | | Accumulated deficit | (22,783) | | (11,586) | |
| Accumulated other comprehensive (loss) income | | Accumulated other comprehensive (loss) income | (26) | | 44 | |
| Total DuPont stockholders' equity | Total DuPont stockholders' equity | 37,559 | | 40,987 | | Total DuPont stockholders' equity | 26,877 | | 38,504 | |
| Noncontrolling interests | Noncontrolling interests | 559 | | 569 | | Noncontrolling interests | 587 | | 566 | |
| Total equity | Total equity | 38,118 | | 41,556 | | Total equity | 27,464 | | 39,070 | |
| Total Liabilities and Equity | Total Liabilities and Equity | $ | 72,141 | | $ | 69,349 | | Total Liabilities and Equity | $ | 45,839 | | $ | 70,904 | |
See Notes to the Consolidated Financial Statements.
DuPont de Nemours, Inc.
Consolidated Statements of Cash Flows
| | | Nine Months Ended September 30, | | Six Months Ended June 30, |
| In millions (Unaudited) | In millions (Unaudited) | 2020 | 2019 | In millions (Unaudited) | 2021 | 2020 |
| Operating Activities | Operating Activities | | | Operating Activities | | |
| Net (loss) income | $ | (3,153) | | $ | 412 | | |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | |
| Net income (loss) | | Net income (loss) | $ | 5,885 | | $ | (3,081) | |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | |
| Depreciation and amortization | Depreciation and amortization | 2,326 | | 2,662 | | Depreciation and amortization | 724 | | 1,546 | |
| Credit for deferred income tax and other tax related items | Credit for deferred income tax and other tax related items | (481) | | (658) | | Credit for deferred income tax and other tax related items | (157) | | (310) | |
| Earnings of nonconsolidated affiliates (in excess of) less than dividends received | (120) | | 700 | | |
| Net periodic pension benefit cost (credit) | 30 | | (58) | | |
| Earnings of nonconsolidated affiliates in excess of dividends received | | Earnings of nonconsolidated affiliates in excess of dividends received | (38) | | (103) | |
| Net periodic pension benefit cost | | Net periodic pension benefit cost | 3 | | 16 | |
| Pension contributions | Pension contributions | (77) | | (485) | | Pension contributions | (45) | | (49) | |
| Net gain on sales of assets, businesses and investments | (612) | | (119) | | |
| Net gain on sales and split-offs of assets, businesses and investments | | Net gain on sales and split-offs of assets, businesses and investments | (5,118) | | (193) | |
| Restructuring and asset related charges - net | Restructuring and asset related charges - net | 807 | | 564 | | Restructuring and asset related charges - net | 14 | | 423 | |
| Goodwill impairment charges | 3,214 | | 1,175 | | |
| Amortization of merger-related inventory step-up | 0 | | 253 | | |
| Goodwill impairment charge | | Goodwill impairment charge | 0 | | 3,031 | |
| Other net loss | Other net loss | 127 | | 326 | | Other net loss | 92 | | 92 | |
| Changes in assets and liabilities, net of effects of acquired and divested companies: | Changes in assets and liabilities, net of effects of acquired and divested companies: | | | Changes in assets and liabilities, net of effects of acquired and divested companies: | | |
| Accounts and notes receivable | Accounts and notes receivable | 133 | | (2,418) | | Accounts and notes receivable | (346) | | 111 | |
| Inventories | Inventories | 312 | | 339 | | Inventories | (337) | | (12) | |
| Accounts payable | Accounts payable | 43 | | (805) | | Accounts payable | 232 | | 34 | |
| Other assets and liabilities, net | Other assets and liabilities, net | 245 | | (1,057) | | Other assets and liabilities, net | (91) | | 15 | |
| Cash provided by operating activities | Cash provided by operating activities | 2,794 | | 831 | | Cash provided by operating activities | 818 | | 1,520 | |
| Investing Activities | Investing Activities | | | Investing Activities | | |
| Capital expenditures | Capital expenditures | (922) | | (2,091) | | Capital expenditures | (499) | | (719) | |
| Investment in gas field developments | 0 | | (25) | | |
| Proceeds from sales of property, businesses, and ownership interests in nonconsolidated affiliates, net of cash divested | 1,008 | | 259 | | |
| Proceeds from sales of property and businesses, net of cash divested | | Proceeds from sales of property and businesses, net of cash divested | 172 | | 427 | |
| Acquisitions of property and businesses, net of cash acquired | Acquisitions of property and businesses, net of cash acquired | (73) | | (9) | | Acquisitions of property and businesses, net of cash acquired | (11) | | (73) | |
| Purchases of investments | Purchases of investments | (1) | | (195) | | Purchases of investments | (2,001) | | (1) | |
| Proceeds from sales and maturities of investments | Proceeds from sales and maturities of investments | 1 | | 233 | | Proceeds from sales and maturities of investments | 2,001 | | 1 | |
| Other investing activities, net | Other investing activities, net | 22 | | 21 | | Other investing activities, net | 9 | | 17 | |
| Cash provided by (used for) investing activities | 35 | | (1,807) | | |
| Cash used for investing activities | | Cash used for investing activities | (329) | | (348) | |
| Financing Activities | Financing Activities | | | Financing Activities | | |
| Changes in short-term notes payable | Changes in short-term notes payable | (1,439) | | 2,876 | | Changes in short-term notes payable | 0 | | (274) | |
| Proceeds from issuance of long-term debt | Proceeds from issuance of long-term debt | 8,275 | | 4,005 | | Proceeds from issuance of long-term debt | 0 | | 2,025 | |
| Proceeds from issuance of long-term debt transferred to IFF at split-off | | Proceeds from issuance of long-term debt transferred to IFF at split-off | 1,250 | | 0 | |
| Payments on long-term debt | Payments on long-term debt | (29) | | (6,899) | | Payments on long-term debt | (5,000) | | (27) | |
| Purchases of common stock | Purchases of common stock | (232) | | (2,040) | | Purchases of common stock | (1,143) | | (232) | |
| Proceeds from issuance of Company stock | Proceeds from issuance of Company stock | 34 | | 76 | | Proceeds from issuance of Company stock | 108 | | 34 | |
| Employee taxes paid for share-based payment arrangements | Employee taxes paid for share-based payment arrangements | (14) | | (83) | | Employee taxes paid for share-based payment arrangements | (25) | | (13) | |
| Distributions to noncontrolling interests | Distributions to noncontrolling interests | (48) | | (18) | | Distributions to noncontrolling interests | (24) | | (10) | |
| Dividends paid to stockholders | Dividends paid to stockholders | (662) | | (1,389) | | Dividends paid to stockholders | (319) | | (442) | |
| Cash held by Dow and Corteva at the respective DWDP Distributions | 0 | | (7,315) | | |
| Debt extinguishment costs | 0 | | (104) | | |
| | Cash transferred to IFF at split-off | | Cash transferred to IFF at split-off | (100) | | 0 | |
| Other financing activities, net | Other financing activities, net | (55) | | (6) | | Other financing activities, net | (3) | | (11) | |
| Cash provided by (used for) financing activities | 5,830 | | (10,897) | | |
| Cash (used for) provided by financing activities | | Cash (used for) provided by financing activities | (5,256) | | 1,050 | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | Effect of exchange rate changes on cash, cash equivalents and restricted cash | 4 | | (2) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | (28) | | (30) | |
| Increase (Decrease) in cash, cash equivalents and restricted cash | 8,663 | | (11,875) | | |
| (Decrease) increase in cash, cash equivalents and restricted cash | | (Decrease) increase in cash, cash equivalents and restricted cash | (4,795) | | 2,192 | |
| Cash, cash equivalents and restricted cash from continuing operations, beginning of period | Cash, cash equivalents and restricted cash from continuing operations, beginning of period | 1,577 | | 8,591 | | Cash, cash equivalents and restricted cash from continuing operations, beginning of period | 8,767 | | 1,569 | |
| Cash, cash equivalents and restricted cash from discontinued operations, beginning of period | Cash, cash equivalents and restricted cash from discontinued operations, beginning of period | 0 | | 5,431 | | Cash, cash equivalents and restricted cash from discontinued operations, beginning of period | 8 | | 8 | |
| Cash, cash equivalents and restricted cash at beginning of period | Cash, cash equivalents and restricted cash at beginning of period | 1,577 | | 14,022 | | Cash, cash equivalents and restricted cash at beginning of period | 8,775 | | 1,577 | |
| Cash, cash equivalents and restricted cash from continuing operations, end of period | Cash, cash equivalents and restricted cash from continuing operations, end of period | 10,240 | | 2,147 | | Cash, cash equivalents and restricted cash from continuing operations, end of period | 3,980 | | 3,762 | |
| Cash, cash equivalents and restricted cash from discontinued operations, end of period | Cash, cash equivalents and restricted cash from discontinued operations, end of period | 0 | | 0 | | Cash, cash equivalents and restricted cash from discontinued operations, end of period | 0 | | 7 | |
| Cash, cash equivalents and restricted cash at end of period | Cash, cash equivalents and restricted cash at end of period | $ | 10,240 | | $ | 2,147 | | Cash, cash equivalents and restricted cash at end of period | $ | 3,980 | | $ | 3,769 | |
DuPont de Nemours, Inc.
Consolidated Statements of Equity
For the ninesix months ended SeptemberJune 30, 20202021 and 20192020
| | In millions (Unaudited) | In millions (Unaudited) | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comp Loss | Unearned ESOP | Treasury Stock | Non-controlling Interests | Total Equity | In millions (Unaudited) | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comp Loss | | Treasury Stock | Non-controlling Interests | Total Equity |
| Balance at December 31, 2018 | $ | 8 | | $ | 81,976 | | $ | 30,257 | | $ | (12,394) | | $ | (134) | | $ | (5,421) | | $ | 1,608 | | $ | 95,900 | | |
| Adoption of accounting standards | — | | — | | (111) | | — | | — | | — | | — | | (111) | | |
| Net income | — | | — | | 322 | | — | | — | | — | | 90 | | 412 | | |
| Other comprehensive (loss) income | — | | — | | — | | (633) | | — | | — | | 12 | | (621) | | |
| Dividends ($1.86 per common share) | — | | (224) | | (1,165) | | — | | — | | — | | — | | (1,389) | | |
| Common stock issued/sold | — | | 76 | | — | | — | | — | | — | | — | | 76 | | |
| Stock-based compensation and allocation of ESOP shares | — | | 173 | | (1) | | — | | 29 | | — | | — | | 201 | | |
| Distributions to non-controlling interests | — | | — | | — | | — | | — | | — | | (18) | | (18) | | |
| Purchases of treasury stock | — | | — | | — | | — | | — | | (2,040) | | — | | (2,040) | | |
| Retirement of treasury stock | — | | — | | (7,461) | | — | | — | | 7,461 | | — | | — | | |
| Spin-off of Dow and Corteva | — | | (30,843) | | (30,123) | | 11,498 | | 105 | | — | | (1,124) | | (50,487) | | |
| Other | (1) | | (3) | | (7) | | — | | — | | — | | — | | (11) | | |
| Balance at September 30, 2019 | $ | 7 | | $ | 51,155 | | $ | (8,289) | | $ | (1,529) | | $ | — | | $ | — | | $ | 568 | | $ | 41,912 | | |
| | Balance at December 31, 2019 | Balance at December 31, 2019 | $ | 7 | | $ | 50,796 | | $ | (8,400) | | $ | (1,416) | | $ | — | | $ | — | | $ | 569 | | $ | 41,556 | | Balance at December 31, 2019 | $ | 7 | | $ | 50,796 | | $ | (8,400) | | $ | (1,416) | | | $ | 0 | | $ | 569 | | $ | 41,556 | |
| Adoption of accounting standards | Adoption of accounting standards | — | | — | | (3) | | — | | — | | — | | — | | (3) | | Adoption of accounting standards | — | | — | | (3) | | — | | | — | | — | | (3) | |
| Net (loss) income | Net (loss) income | — | | — | | (3,173) | | — | | — | | — | | 20 | | (3,153) | | Net (loss) income | — | | — | | (3,094) | | — | | | — | | 13 | | (3,081) | |
| Other comprehensive income (loss) | — | | — | | — | | 557 | | — | | — | | (1) | | 556 | | |
| Dividends ($.90 per common share) | — | | (662) | | — | | — | | — | | — | | — | | (662) | | |
| Other comprehensive loss | | Other comprehensive loss | — | | — | | — | | (49) | | | — | | (5) | | (54) | |
| Dividends ($0.90 per common share) | | Dividends ($0.90 per common share) | — | | (662) | | — | | — | | | — | | — | | (662) | |
| Common stock issued/sold | Common stock issued/sold | — | | 34 | | — | | — | | — | | — | | — | | 34 | | Common stock issued/sold | — | | 34 | | — | | — | | | — | | — | | 34 | |
| Stock-based compensation | Stock-based compensation | — | | 81 | | — | | — | | — | | — | | — | | 81 | | Stock-based compensation | — | | 57 | | — | | — | | | — | | — | | 57 | |
| Contributions from non-controlling interests | | Contributions from non-controlling interests | — | | — | | — | | — | | | — | | 5 | | 5 | |
| Distributions to non-controlling interests | Distributions to non-controlling interests | — | | — | | — | | — | | — | | — | | (48) | | (48) | | Distributions to non-controlling interests | — | | — | | — | | — | | | — | | (10) | | (10) | |
| Purchases of treasury stock | Purchases of treasury stock | — | | — | | — | | — | | — | | (232) | | — | | (232) | | Purchases of treasury stock | — | | — | | — | | — | | | (232) | | — | | (232) | |
| Retirement of treasury stock | Retirement of treasury stock | — | | — | | (232) | | — | | — | | 232 | | — | | — | | Retirement of treasury stock | — | | — | | (232) | | — | | | 232 | | — | | — | |
| Other | Other | — | | (30) | | — | | — | | — | | — | | 19 | | (11) | | Other | — | | (34) | | 1 | | — | | | — | | 0 | | (33) | |
| Balance at September 30, 2020 | $ | 7 | | $ | 50,219 | | $ | (11,808) | | $ | (859) | | $ | — | | $ | — | | $ | 559 | | $ | 38,118 | | |
| Balance at June 30, 2020 | | Balance at June 30, 2020 | $ | 7 | | $ | 50,191 | | $ | (11,728) | | $ | (1,465) | | | $ | 0 | | $ | 572 | | $ | 37,577 | |
| | Balance at December 31, 2020 | | Balance at December 31, 2020 | $ | 7 | | $ | 50,039 | | $ | (11,586) | | $ | 44 | | | $ | 0 | | $ | 566 | | $ | 39,070 | |
| Net income | | Net income | — | | — | | 5,872 | | — | | | — | | 13 | | 5,885 | |
| Other comprehensive loss | | Other comprehensive loss | — | | — | | — | | (70) | | | — | | (8) | | (78) | |
| Dividends ($0.90 per common share) | | Dividends ($0.90 per common share) | — | | (476) | | — | | — | | | — | | — | | (476) | |
| Common stock issued/sold | | Common stock issued/sold | — | | 108 | | — | | — | | | — | | — | | 108 | |
| Stock-based compensation | | Stock-based compensation | — | | 13 | | — | | — | | | — | | — | | 13 | |
| Contributions from non-controlling interests | | Contributions from non-controlling interests | — | | — | | — | | — | | | — | | 67 | | 67 | |
| Distributions to non-controlling interests | | Distributions to non-controlling interests | — | | — | | — | | — | | | — | | (24) | | (24) | |
| Purchases of treasury stock | | Purchases of treasury stock | — | | — | | — | | — | | | (1,143) | | — | | (1,143) | |
| Retirement of treasury stock | | Retirement of treasury stock | — | | — | | (1,143) | | — | | | 1,143 | | — | | 0 | |
| Split-off of N&B | | Split-off of N&B | (2) | | — | | (15,926) | | — | | | — | | (27) | | (15,955) | |
| Other | | Other | — | | (3) | | — | | — | | | — | | 0 | | (3) | |
| Balance at June 30, 2021 | | Balance at June 30, 2021 | $ | 5 | | $ | 49,681 | | $ | (22,783) | | $ | (26) | | | $ | 0 | | $ | 587 | | $ | 27,464 | |
See Notes to the Consolidated Financial Statements.
DuPont de Nemours, Inc.
Consolidated Statements of Equity
For the three months ended SeptemberJune 30, 20202021 and 20192020
| | In millions (Unaudited) | In millions (Unaudited) | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comp Loss | Treasury Stock | Non-controlling Interests | Total Equity | In millions (Unaudited) | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comp Loss | | Treasury Stock | Non-controlling Interests | Total Equity |
| Balance at June 30, 2019 | $ | 7 | | $ | 51,129 | | $ | (8,299) | | $ | (831) | | $ | — | | $ | 570 | | $ | 42,576 | | |
| Net income | — | | — | | 372 | | — | | — | | 5 | | 377 | | |
| Other comprehensive loss | — | | — | | — | | (698) | | — | | (1) | | (699) | | |
| Balance at March 31, 2020 | | Balance at March 31, 2020 | $ | 7 | | $ | 50,605 | | $ | (9,251) | | $ | (1,810) | | | $ | 0 | | $ | 566 | | $ | 40,117 | |
| Net (loss) income | | Net (loss) income | — | | — | | (2,478) | | — | | | — | | 7 | | (2,471) | |
| Other comprehensive income | | Other comprehensive income | — | | — | | — | | 345 | | | — | | 3 | | 348 | |
| Dividends ($0.60 per common share) | | Dividends ($0.60 per common share) | — | | (440) | | — | | — | | | — | | — | | (440) | |
| Common stock issued/sold | Common stock issued/sold | — | | 9 | | — | | — | | — | | — | | 9 | | Common stock issued/sold | — | | — | | — | | — | | | — | | — | | — | |
| Stock-based compensation and allocation of ESOP shares | — | | 20 | | (1) | | — | | — | | — | | 19 | | |
| Stock-based compensation | | Stock-based compensation | — | | 27 | | — | | — | | | — | | — | | 27 | |
| Distributions to non-controlling interests | Distributions to non-controlling interests | — | | — | | — | | — | | — | | (6) | | (6) | | Distributions to non-controlling interests | — | | — | | — | | — | | | — | | (4) | | (4) | |
| Purchases of treasury stock | Purchases of treasury stock | — | | — | | — | | — | | (359) | | — | | (359) | | Purchases of treasury stock | — | | — | | — | | — | | | — | | — | | — | |
| Retirement of treasury stock | Retirement of treasury stock | — | | — | | (359) | | — | | 359 | | — | | — | | Retirement of treasury stock | — | | — | | — | | — | | | — | | — | | — | |
| Other | Other | — | | (3) | | (2) | | — | | — | | — | | (5) | | Other | — | | (1) | | 1 | | — | | | — | | — | | — | |
| Balance at September 30, 2019 | $ | 7 | | $ | 51,155 | | $ | (8,289) | | $ | (1,529) | | $ | — | | $ | 568 | | $ | 41,912 | | |
| Balance at June 30, 2020 | | Balance at June 30, 2020 | $ | 7 | | $ | 50,191 | | $ | (11,728) | | $ | (1,465) | | | $ | 0 | | $ | 572 | | $ | 37,577 | |
| | Balance at June 30, 2020 | $ | 7 | | $ | 50,191 | | $ | (11,728) | | $ | (1,465) | | $ | — | | $ | 572 | | $ | 37,577 | | |
| Net (loss) income | — | | — | | (79) | | — | | — | | 7 | | (72) | | |
| Other comprehensive income | — | | — | | — | | 606 | | — | | 4 | | 610 | | |
| Balance at March 31, 2021 | | Balance at March 31, 2021 | $ | 5 | | $ | 49,964 | | $ | (22,618) | | $ | (163) | | | $ | 0 | | $ | 517 | | $ | 27,705 | |
| Net income | | Net income | — | | — | | 478 | | — | | | — | | 9 | | 487 | |
| Other comprehensive loss | | Other comprehensive loss | — | | — | | — | | 137 | | | — | | (1) | | 136 | |
| Dividends ($0.60 per common share) | | Dividends ($0.60 per common share) | — | | (315) | | — | | — | | | — | | — | | (315) | |
| Common stock issued/sold | Common stock issued/sold | — | | — | | — | | — | | — | | — | | — | | Common stock issued/sold | — | | 18 | | — | | — | | | — | | — | | 18 | |
| Stock-based compensation | Stock-based compensation | — | | 24 | | — | | — | | — | | — | | 24 | | Stock-based compensation | — | | 17 | | — | | — | | | — | | — | | 17 | |
| Contributions from non-controlling interests | | Contributions from non-controlling interests | — | | — | | — | | — | | | — | | 67 | | 67 | |
| Distributions to non-controlling interests | Distributions to non-controlling interests | — | | — | | — | | — | | — | | (38) | | (38) | | Distributions to non-controlling interests | — | | — | | — | | — | | | — | | (5) | | (5) | |
| Purchases of treasury stock | | Purchases of treasury stock | — | | — | | — | | — | | | (643) | | — | | (643) | |
| Retirement of treasury stock | | Retirement of treasury stock | — | | — | | (643) | | — | | | 643 | | — | | 0 | |
| Other | Other | — | | 4 | | (1) | | — | | — | | 14 | | 17 | | Other | — | | (3) | | — | | — | | | — | | 0 | | (3) | |
| Balance at September 30, 2020 | $ | 7 | | $ | 50,219 | | $ | (11,808) | | $ | (859) | | $ | — | | $ | 559 | | $ | 38,118 | | |
| Balance at June 30, 2021 | | Balance at June 30, 2021 | $ | 5 | | $ | 49,681 | | $ | (22,783) | | $ | (26) | | | $ | 0 | | $ | 587 | | $ | 27,464 | |
See Notes to the Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the interim statements reflect all adjustments (including normal recurring accruals) which are considered necessary for the fair statement of the results for the periods presented. Results from interim periods should not be considered indicative of results for the full year. These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto contained in the Company's Current Report on Form 8-K filed on June 3, 2021, collectively referred to as the "Recast 2020 Annual Report," which was filed in order to recast the Company's 2020 Annual Report on Form 10-K to reflect the presentation of the N&B Business as discontinued operations and to reflect the changes in the Company's reportable segments. These interim Consolidated Financial Statements should also be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, collectively referred to as the “2019 Annual Report.”2020. The interim Consolidated Financial Statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained.
Impact of the Novel Coronavirus (“COVID-19”) Pandemic
The COVID-19 pandemic has resulted in significant economic disruption and continues to adversely impact the broader global economy. The extent of the impact on the Company's operational and financial performance will depend on future developments, including, but not limited to, the duration and spread of the outbreak and its impact on the Company's customers and suppliers. As of the date of issuance of these interim Consolidated Financial Statements, the full extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations remains uncertain.
Basis of Presentation
Effective August 31, 2017, pursuant to the merger of equals transaction contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017 ("DWDP Merger Agreement"), The Dow Chemical Company ("Historical Dow"TDCC") and E. I. du Pont de Nemours and Company ("Historical EID") each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, Historical DowTDCC and Historical EID became subsidiaries of DowDuPont (the "DWDP Merger"). Prior to the DWDP Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the DWDP Merger Agreement. Historical Dow was determined to be the accounting acquirer in the DWDP Merger.
Except as otherwise indicated by the context, the term "Historical Dow""TDCC" includes Historical Dow and its consolidated subsidiaries, "Historical EID" includes Historical EIDTDCC and its consolidated subsidiaries and "Dow Silicones" means Dow Silicones Corporation, a wholly owned subsidiary of Historical Dow."EID" includes EID and its consolidated subsidiaries.
Distributions
Effective as of 5:00 p.m. onOn April 1, 2019, the Company completed the separation of itsthe materials science business into a separate and independent public company by way of a distributionthrough the spin-off of Dow Inc., (“Dow”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares ofincluding Dow’s common stock (the “Dow Common Stock”), to holders of the Company’s common stock (the “DowDuPont common stock”), as of the close of business on March 21, 2019subsidiary TDCC (the “Dow Distribution”).
Effective as of 12:01 a.m. on On June 1, 2019, the Company completed the separation of itsthe agriculture business into a separate and independent public company by way of a distributionthrough the spin-off of Corteva, Inc. (“Corteva”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares ofincluding Corteva’s common stocksubsidiary EID, (the “Corteva Common Stock”), to holders of the Company’s common stock as of the close of business on May 24, 2019 (the “Corteva Distribution”Distribution" and together with the Dow Distribution, the “DWDP Distributions”).
Following the Corteva Distribution, DuPont holds the specialty products business.business as continuing operations. On June 1, 2019, DowDuPont changed its registered name from "DowDuPont Inc." to "DuPont de Nemours, Inc." doing business as "DuPont." Beginning on June 3, 2019, the Company's common stock is traded on the NYSE under the ticker symbol "DD."
N&B Transaction
On February 1, 2021, DuPont completed the separation and distribution of the Nutrition & Biosciences business segment (the "N&B Business"), and merger of Nutrition & Biosciences, Inc. (“N&B”), a DuPont subsidiary formed to hold the N&B Business, with a subsidiary of International Flavors & Fragrances Inc. ("IFF"). The distribution was effected through an exchange offer (the “Exchange Offer”) and the consummation of the Exchange Offer was followed by the merger of N&B with a wholly owned subsidiary of IFF, with N&B surviving the merger as a wholly owned subsidiary of IFF (the “N&B Merger” and, together with the Exchange Offer, the “N&B Transaction”). See Note 2 for more information.
The financial position of DuPont as of December 31, 2020 and the results of operations of DuPont for the 2019 interim periods presented reflectthree and six months ended June 30, 2021 and 2020 present the historical financial results of Dow and CortevaN&B as discontinued operations, as applicable.operations. The cash flows and comprehensive income related to Dow and CortevaN&B have not been segregated and are included in the interim Consolidated Statements of Cash Flows and interim Consolidated Statements of Comprehensive Income, respectively, for the applicable period.all periods presented. Unless otherwise indicated, the information in the notes to the interim Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow or Corteva.N&B.
132021 Segment Realignment
On December 15, 2019,Immediately following the Company entered into definitive agreements to separateseparation and combine the Nutrition & Biosciences business segment (the "N&B Business") with International Flavors & Fragrances Inc. ("IFF") in a tax-efficient Reverse Morris Trust transaction, (the "Intended N&B Transaction"). The transaction is expected to close in the first quarter of 2021, subject to approval by IFF shareholders and other customary closing conditions, including regulatory approvals and receipt by DuPont of an opinion of tax counsel. The financial resultsdistribution of the N&B Business, are included in continuing operationsthe Company made changes to its management and reporting structure (the “2021 Segment Realignment”) (see Note 22 for theadditional details). The reporting changes have been retrospectively reflected for all periods presented.
NOTE 2 - RECENT ACCOUNTING GUIDANCE
Recently Adopted Accounting Guidance
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and associated ASUs related to Topic 326. The new guidance introduces the current expected credit loss (“CECL”) model, which requires organizations to record an allowance for credit losses for certain financial instruments and financial assets, including trade receivables, based on expected losses rather than incurred losses. Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. This update became effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.
The Company adopted the new standard in the first quarter of 2020, which required a modified retrospective transition approach, applying the new standard's cumulative-effect adjustment at the date of initial adoption. This cumulative-effect has been reflected as of January 1, 2020 and prior periods have not been restated. The impact of initial adoption was not material to the Company’s interim Condensed Consolidated Balance Sheet, interim Consolidated Statements of Operations, and interim Consolidated Statement of Cash Flows.
NOTE 32 - ACQUISITIONS AND DIVESTITURES
Separation AgreementsLaird Performance Materials
In connection withOn July 1, 2021, DuPont completed the Dow Distribution and the Corteva Distribution, the Company entered into certain agreements that, among other things, effected the separations, provides for the allocationpreviously announced acquisition of assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) among DuPont, Dow, and Corteva (together, the “Parties” and each a “Party”Laird Performance Materials (“Laird PM”), and provides a framework for DuPont’s relationship with Dow and Corteva following the DWDP Distributions. Effective April 1, 2019, the Parties entered into the following agreements referred herein as: the DWDP Separation and Distribution Agreement; the DWDP Tax Matters Agreement; the DWDP Employee Matters Agreement; and the Intellectual Property Cross-License Agreement (the “DuPont-Dow IP Cross-License Agreement” from Advent International (“Laird PM Acquisition”). In addition to the agreements above, DuPont has entered into certain various supply agreements with Dow. These agreements provideSee Note 23 for different pricing than the historical intercompany and intracompany practices prior to the DWDP Distributions.further discussion.
Effective JuneN&B Transaction
On February 1, 2019,2021, DuPont completed the separation and distribution of the N&B Business, and merger of N&B, a DuPont subsidiary formed to hold the N&B Business, with a subsidiary of IFF. The distribution was effected through an exchange offer where, on the terms and subject to the conditions of the Exchange Offer, eligible participating DuPont stockholders had the option to tender all, some or none of their shares of common stock, par value $0.01 per share, of DuPont (the “DuPont Common Stock”) for a number of shares of common stock, par value $0.01 per share, of N&B (the “N&B Common Stock”) and which resulted in connectionall shares of N&B Common Stock being distributed to DuPont stockholders that participated in the Exchange Offer. The consummation of the Exchange Offer was followed by the merger of N&B with a wholly owned subsidiary of IFF, with N&B surviving the merger as a wholly owned subsidiary of IFF (the “N&B Merger” and, together with the Corteva Distribution,Exchange Offer, the “N&B Transaction”). The N&B Transaction was subject to IFF shareholder approval, customary regulatory approvals, tax authority rulings including a favorable private letter ruling from the U.S. Internal Revenue Service which confirms the N&B Transaction to be free of U.S. federal income tax, and expiration of the public exchange offer. DuPont and Corteva entered intodoes not have an ownership interest in IFF as a result of the following agreements: the Intellectual Property Cross-License Agreement (the “DuPont-Corteva IP Cross-License Agreement”); the Letter Agreement; and the Amended and Restated DWDP Tax Matters Agreement.N&B Transaction.
In connection with the DWDP Distributions, Dow and Corteva indemnify the Company against, andExchange Offer, DuPont indemnifies Dow and Corteva against certain litigation, environmental, income taxes, and other liabilities that arose prior to the DWDP Distributions, as applicable. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. Refer to Note 13 for additional information regarding treatment of litigation and environmental related matters under the DWDP Separation and Distribution Agreement and the Letter Agreement.
Materials Science Division
On April 1, 2019, DowDuPont completed the separationaccepted approximately 197.4 million shares of its Materials Science businesses, including the businesses and operations that comprised the Company's former Performance Materials & Coating, Industrial Intermediates & Infrastructure and the Packaging & Specialty Plastics segments, (the "Materials Science Division") through the consummationcommon stock in exchange for about 141.7 million shares of N&B Common Stock as of the Dow Distribution.
On April 1, 2019, priordate of the N&B Transaction. As a result, DuPont reduced its common stock outstanding by 197.4 million shares of DuPont Common Stock. In the N&B Merger, each share of N&B Common Stock was automatically converted into the right to receive one share of IFF common stock, par value $0.125 per share, based on the Dow Distribution,terms of the Company contributed $2,024 million in cash to Dow.N&B Merger Agreement.
The results of operations of the Materials Science DivisionN&B are presented as discontinued operations as summarized below:
| | | | | |
| Nine Months Ended September 30, 2019 |
In millions |
Net sales | $ | 10,867 | |
Cost of sales | 8,917 | |
Research and development expenses | 163 | |
Selling, general and administrative expenses | 329 | |
Amortization of intangibles | 116 | |
Restructuring and asset related charges - net | 157 | |
Integration and separation costs | 44 | |
Equity in earnings of nonconsolidated affiliates | (13) | |
Sundry income (expense) - net 1
| 17 | |
Interest expense | 240 | |
Income from discontinued operations before income taxes | 905 | |
Provision for income taxes on discontinued operations 1
| 176 | |
Income from discontinued operations, net of tax | 729 | |
Income from discontinued operations attributable to noncontrolling interests, net of tax | 37 | |
Income from discontinued operations attributable to DuPont stockholders, net of tax | $ | 692 | |
1.The three and nine months ended September 30, 2019 includes $82 million of expense in "Sundry income (expense) - net" and a benefit of $85 million in "Provision for income taxes on discontinued operations" related to certain unrecognized tax benefits for positions taken on items from prior years.
The following table presents depreciation, amortization, and capital expenditures of the discontinued operations related to the Materials Science Division:
| | | | | |
| Nine Months Ended September 30, 2019 |
In millions |
Depreciation and amortization | $ | 744 | |
Capital expenditures | $ | 597 | |
| |
Agriculture Division
On June 1, 2019, the Company completed the separation of its Agriculture business, including the businesses and operations that comprised the Company's former Agriculture segment (the "Agriculture Division"), through the consummation of the Corteva Distribution.
In 2019, prior to the distribution of Corteva, the Company contributed $7,139 million in cash to Corteva, a portion of which was used to retire indebtedness of Historical EID.
The results of operations of the Agriculture Division are presented as discontinued operations as summarized below:
| | | | | |
| Nine Months Ended September 30, 2019 |
In millions |
Net sales | $ | 7,144 | |
Cost of sales | 4,218 | |
Research and development expenses | 470 | |
Selling, general and administrative expenses | 1,294 | |
Amortization of intangibles | 176 | |
Restructuring and asset related charges - net | 117 | |
Integration and separation costs | 430 | |
Equity in earnings of nonconsolidated affiliates | (4) | |
Sundry income (expense) - net 1
| 52 | |
Interest expense | 91 | |
Income from discontinued operations before income taxes | 396 | |
Provision for income taxes on discontinued operations 1
| 74 | |
Income from discontinued operations, net of tax | 322 | |
Income from discontinued operations attributable to noncontrolling interests, net of tax | 35 | |
Income from discontinued operations attributable to DuPont stockholders, net of tax | $ | 287 | |
1.The three and nine months ended September 30, 2019 includes $6 million of expense in "Sundry income (expense) - net" and a benefit of $8 million in "Provision for income taxes on discontinued operations" related to certain unrecognized tax benefits for positions taken on items from prior years. | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| In millions | 2020 | 2021 | 2020 |
| Net sales | $ | 1,539 | | $ | 507 | | $ | 3,090 | |
| Cost of sales | 993 | | 352 | | 1,992 | |
| Research and development expenses | 56 | | 21 | | 119 | |
| Selling, general and administrative expenses | 127 | | 46 | | 278 | |
| Amortization of intangibles | 351 | | 38 | | 706 | |
| Restructuring and asset related charges - net | (5) | | 1 | | 1 | |
| Integration and separation costs | 129 | | 172 | | 203 | |
| Equity in earnings of nonconsolidated affiliates | 1 | | 0 | | 1 | |
| Sundry income (expense) - net | (3) | | 8 | | (4) | |
| Interest expense | 12 | | 13 | | 24 | |
| Loss from discontinued operations before income taxes | (126) | | (128) | | (236) | |
| Benefit from income taxes on discontinued operations | (44) | | (26) | | (94) | |
| Loss from discontinued operations, net of tax | (82) | | (102) | | (142) | |
| Non-taxable gain on split-off | 0 | | 4,950 | | 0 | |
| (Loss) Income from discontinued operations attributable to DuPont stockholders, net of tax | $ | (82) | | $ | 4,848 | | $ | (142) | |
The following table presents depreciation, amortization, and capital expenditures of the discontinued operations related to N&B:
| | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| In millions | 2020 | 2021 | 2020 |
| Depreciation and amortization | $ | 425 | | $ | 63 | | $ | 852 | |
| Capital expenditures | $ | 33 | | $ | 27 | | $ | 125 | |
| | | |
The carrying amount of major classes of assets and liabilities that were included in discontinued operations at December 31, 2020 related to N&B consist of the Agriculture Division:following:
| | | | | |
| In millions | Nine Months Ended September 30, 2019December 31, 2020 |
In millionsAssets | |
DepreciationAccounts and amortizationnotes receivable - net | $ | 3851,130 | |
Capital expendituresInventories | 1,333 | |
| Other current assets | 65 | |
| Investments and noncurrent receivables | 36 | |
| Property, plant, and equipment - net | 3,118 | |
| Goodwill | 11,542 | |
| Other intangible assets - net | 3,072 | |
| Deferred income tax assets | 44 | |
| Deferred charges and other assets | 319 | |
| Total assets of discontinued operations | $ | 38320,659 | |
| Liabilities | |
| Short-term borrowings and finance lease obligations | $ | 4 | |
| Accounts Payable | 742 | |
| Income taxes payable | 36 | |
| Accrued and other current liabilities | 301 | |
| Long-term debt | 6,195 | |
| Deferred income tax liabilities | 852 | |
| Pension and other post employment benefits - noncurrent | 238 | |
| Other noncurrent obligations | 242 | |
| Total liabilities of discontinued operations | $ | 8,610 | |
In connection with the N&B Transaction and in accordance with the terms of the N&B Transaction Agreements, defined below, prior to consummation of the Exchange Offer and the N&B Merger, DuPont received a one-time cash payment of approximately $7.3 billion, (the "Special Cash Payment"), which is subject to post closing adjustment pursuant to the terms of the N&B Separation & Distribution Agreement. The special cash payment was partially funded by an offering of $6.25 billion of senior unsecured notes (the “N&B Notes Offering”). The net proceeds of approximately $6.2 billion from the N&B Notes Offering were deposited into an escrow account and at December 31, 2020, are reflected as restricted cash in the Company’s interim Condensed Consolidated Balance Sheets. In order to fund the remainder of the Special Cash Payment, on February 1, 2021, N&B borrowed $1.25 billion under a senior unsecured term loan agreement (the "N&B Term Loan"). The obligations and liabilities associated with the N&B Notes Offering and the N&B Term Loan were separated from the Company on February 1, 2021 upon consummation of the N&B Transaction. The obligations and liabilities of $6.2 billion associated with the N&B Notes Offering are classified as "Liabilities of discontinued operations" in the Company's interim Condensed Consolidated Balance Sheets at December 31, 2020.
The Company recognized a non-taxable gain of approximately $4,950 million on the N&B Transaction. The gain is recorded in "(Loss) Income from discontinued operations, net of tax" in the Company's interim Consolidated Statements of Operations for the six months ended June 30, 2021.
N&B Transaction Agreements
In connection with the N&B Transaction, effective December 15, 2019, the Company, as previously discussed, entered into the following agreements:
•A Separation and Distribution Agreement, subsequently amended and joined by Neptune Merger Sub II Inc., a subsidiary of IFF on January 22, 2021, and as amended further on February 1, 2021 (as amended, the “N&B Separation and Distribution Agreement”) with N&B and IFF, which, among other things, governs the separation of the N&B Business from DuPont and certain other post-closing obligations between DuPont and N&B related thereto;
•An Agreement and Plan of Merger, (the “N&B Merger Agreement”) with N&B, IFF and Neptune Merger Sub I Inc., governing the N&B Merger and related matters; and
•An Employee Matters Agreement, subsequently amended on January 22, 2021, (as amended, the “N&B Employee Matters Agreement Agreement”), with N&B and IFF, which, among other things, allocates among the parties the pre- and post-closing liabilities in respect of the current and former employees of the N&B Business (including liabilities in respect of employee compensation and benefit plans).
In connection with the closing of the N&B Transaction, and effective February 1, 2021, the Company entered into the following agreements:
•DuPont, N&B and certain of their subsidiaries entered into an Intellectual Property Cross-License Agreement (the “N&B IP Cross-License Agreement”). The IP Cross-License Agreement sets forth the terms and conditions under which the applicable parties may use in their respective businesses certain know-how (including trade secrets), copyrights, design rights, software, and patents, allocated to another party pursuant to the N&B Separation and Distribution Agreement, and pursuant to which N&B may use certain standards retained by DuPont. All licenses under the IP Cross-License Agreement are non-exclusive, worldwide, and royalty-free; and
•DuPont, N&B and IFF entered into a Tax Matters Agreement (the “N&B Tax Matters Agreement”), which governs the parties’ rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, the preservation of the expected tax-free status of the transactions contemplated by the N&B Separation and Distribution Agreement, and other matters regarding taxes. See Note 6 for additional information on the N&B Tax Matters Agreement.
Other Discontinued Operations Activity
The Company recorded a loss from discontinued operations, net of tax of $63 million and $66 million for the three and six months ended June 30, 2021 related to the binding Memorandum of Understanding (“MOU”) between Chemours, Corteva, EID and a settlement agreement between Chemours, Corteva and DuPont and Delaware's Attorney General. For additional information on these matters, refer to Note 14.
Assets Held for Sale
In October 2020, the Company entered into a definitive agreement to sell its biomaterialsBiomaterials business unit, which includes the Company's equity method investment in DuPont Tate & Lyle Bio Products, for $240 million.Products. The sale of the Biomaterials business unit is subjectexpected to customary closing conditions andclose within one year. In January 2021, the Company entered into a definitive agreement to sell its Clean Technologies business, which is expected to close in the firstsecond half of 2021. These divestitures are subject to regulatory approval and customary closing conditions and are expected to generate in aggregate pre-tax cash proceeds of about $750 million. The Company determined thatalso signed a non-binding letter of intent to sell Chestnut Run labs, a portion of the Company's Chestnut Run campus. This transaction is expected to close within one year.
The assets and liabilities associated with the biomaterials business unit, which are reported in Non-Core,Biomaterials and Clean Technologies businesses met the held for sale criteria as ofat September 30, 2020.
In addition, certain other2020, and the assets and liabilities within Non-Core are expected to be disposed of within one year andassociated with Chestnut Run labs met the held for sale criteria duringat March 31, 2021. These assets and liabilities remain classified as held for sale at June 30, 2021. The results of operations of the third quarterBiomaterials and Clean Technologies businesses are reported in Corporate.
The following table summarizes the carrying value of the major assets and liabilities of the biomaterialsBiomaterials and Clean Technologies business unit, as well as these certain other assetsunits and liabilities within Non-Core classified as held for saleChestnut Run labs as of SeptemberJune 30, 20202021 (collectively, the “Non-Core Held“Held for Sale Disposal Groups”Group”):
| | | | | |
In millions | September 30, 2020 |
Assets | |
Accounts and notes receivable - net | $ | 61 | |
Inventories | 96 | |
Other current assets | 40 | |
Investments in nonconsolidated affiliates | 166 | |
Property, plant and equipment - net | 32 | |
Goodwill | 267 | |
Other intangible assets | 169 | |
Deferred charges and other assets | 4 | |
Assets held for sale | $ | 835 | |
Liabilities | |
Accounts payable | $ | 29 | |
Income taxes payable | 1 | |
Accrued and other current liabilities | 48 | |
Deferred income tax liabilities | 30 | |
Pension and other post-employment benefits - noncurrent | 1 | |
Other noncurrent obligations | 18 | |
Liabilities related to assets held for sale | $ | 127 | |
December 31, 2020:
In connection with the held for sale classification, the Non-Core Held for Sale Disposal Groups were measured at fair value less estimated cost to sell. As a result, the Company recorded a $25 million pre-tax goodwill impairment charge during the third quarter of 2020 which is reflected in “Goodwill impairment charges” in the Company’s interim Consolidated Statements of Operations for the three and nine months ended September 30, 2020. | | | | | | | | |
| In millions | June 30, 2021 | December 31, 2020 |
| Assets | | |
| Accounts and notes receivable - net | $ | 57 | | $ | 63 | |
| Inventories | 69 | | 75 | |
| Other current assets | 38 | | 35 | |
| Investments and noncurrent receivables | 169 | | 164 | |
| Property, plant and equipment - net | 75 | | 34 | |
| Goodwill | 267 | | 267 | |
| Other intangible assets | 168 | | 168 | |
| Deferred charges and other assets | 3 | | 4 | |
| Assets held for sale | $ | 846 | | $ | 810 | |
| Liabilities | | |
| Accounts payable | $ | 52 | | $ | 40 | |
| Income taxes payable | 1 | | 1 | |
| Accrued and other current liabilities | 37 | | 50 | |
| Deferred income tax liabilities | 29 | | 30 | |
| Pension and other post-employment benefits - noncurrent | 1 | | 1 | |
| Other noncurrent obligations | 16 | | 18 | |
| Liabilities related to assets held for sale | $ | 136 | | $ | 140 | |
Sale of TCS/HSC Disposal GroupSolamet®
In the third quarter of 2020,On June 30, 2021, the Company completed the sale of its trichlorosilaneSolamet® business (“TCS Business”) along with its equity ownership interest in DC HSC Holdings LLC and Hemlock Semiconductor L.L.C. (the "HSC Group,” and together with the TCS Business, the “TCS/HSC Disposal Group” andunit, which is part of Corporate. Total consideration received related to the sale of the TCS/HSC Disposal Group, the “TCS/HSC Disposal”) to the HSC Group, bothbusiness is approximately $190 million, of which were part$47 million will be received in the third quarter. For the three months ended June 30, 2021, a pre-tax gain of the Non-Core segment. In connection with the TCS/HSC Disposal, the Company received $550$140 million in cash at closing, subject to certain claw-back provisions, and will receive an additional $175 million in equal installments over the course of the next three years associated with the settlement of an existing supply agreement dispute with the HSC Group. The TCS/HSC Disposal resulted in a net pre-tax benefit of $393 million ($232105 million net of tax),including the settlement of the supply agreement dispute and after allocation of goodwill to the TCS Business. The net pre-tax benefit is was recorded in “Sundry"Sundry income (expense) – net”- net" in the Company’sCompany's interim Consolidated Statements of Operations for the three and nine months ended September 30, 2020.Operations.
Sale of Compound Semiconductor Solutions
In the first quarter of 2020, the Company completed the sale of its Compound Semiconductor Solutions business unit, a part of the Electronics & ImagingIndustrial segment, to SK Siltron. The proceeds received in the first quarter of 2020 related to the sale of the business were approximately $420 million. The sale resulted inFor the six months ended June 30, 2020, a pre-tax gain of $197 million ($102 million net of tax) recorded in "Sundry income (expense) - net" in the Company's interim Consolidated Statements of Operations for the nine months ended September 30, 2020.
Sale of DuPont Sustainable Solutions
In the third quarter of 2019, the Company completed the sale of its Sustainable Solutions business unit, a part of the Non-Core segment, to Gyrus Capital. The sale resulted in a pre-tax gain of $28 million ($22 million net of tax). The gain was recorded in "Sundry income (expense) - net" in the Company's interim Consolidated Statements of Operations for the three and nine months ended September 30, 2019.Operations.
Other Discontinued Operations Activity
For the nine months ended September 30, 2019, the Company recorded "Income from discontinued operations, net of tax" of $86 million related to the adjustment of certain unrecognized tax benefits for positions taken on items from prior years from previously divested businesses and $80 million related to changes in accruals for certain prior year tax positions related to the divested crop protection business and research and development assets of Historical EID.
Integration and Separation Costs
Integration and separation costs for continuing operations through September 30, 2020, primarily have consistedconsist of financial advisory, information technology, legal, accounting, consulting, and other professional advisory feesfees. For the three and six months ended June 30, 2021, these costs were primarily associated with the preparation and execution of activities related to strategic initiatives including the intended separationplanned divestiture of the Nutrition & BiosciencesHeld for Sale Disposal Group and the divestiture of the Solamet® business beginning inunit. For the fourth quarterthree and six months ended June 30, 2020, these costs were primarily associated with the execution of 2019,activities related to the DWDP Merger, post-DWDP Merger integration and the DWDP Distributions.
These costs are recorded within "Integration and separation costs" within the interim Consolidated Statements of Operations.
| | | Three Months Ended September 30, | Nine Months Ended September 30, | | Three Months Ended June 30, | Six Months Ended June 30, |
| In millions | In millions | 2020 | 2019 | 2020 | 2019 | In millions | 2021 | 2020 | 2021 | 2020 |
| Integration and separation costs | Integration and separation costs | $ | 127 | | $ | 191 | | $ | 469 | | $ | 1,149 | | Integration and separation costs | $ | 23 | | $ | 16 | | $ | 29 | | $ | 139 | |
NOTE 43 - REVENUE
Revenue Recognition
Products
Substantially all of DuPont's revenue is derived from product sales. Product sales consist of sales of DuPont's products to supply manufacturers and distributors. DuPont considers purchase orders, which in some cases are governed by master supply agreements, to be a contract with a customer. Contracts with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year.
Disaggregation of Revenue
The Company disaggregates its revenue from contracts with customers by segment and business or major product line and geographic region, as the Company believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows.
DuringOn February 1, 2021, the second quarterCompany realigned and renamed certain businesses as part of 2020,the 2021 Segment Realignment resulting in changes to its management and reporting structure (see Note 22 for additional details). In conjunction with the 2021 Segment Realignment, DuPont made the following changes to its major product lines:
•Within Electronics & ImagingIndustrial (formerly known as Electronics & Imaging) realigned a component within the Semiconductor Technologies product linelines to include businesses formerly in Transportation & Industrial and renamed the Image Solutions product line. The reporting changes have been retrospectively reflected for all periods presented.lines as Industrial Solutions;
| | | | | | | | | | | | | | |
| Net Trade Revenue by Segment and Business or Major Product Line | Three Months Ended
September 30, | Nine Months Ended
September 30, |
| In millions | 2020 | 2019 | 2020 | 2019 |
| Image Solutions | $ | 172 | | $ | 167 | | $ | 491 | | $ | 507 | |
| Interconnect Solutions | 370 | | 339 | | 910 | | 859 | |
| Semiconductor Technologies | 462 | | 428 | | 1,392 | | 1,251 | |
| Electronics & Imaging | $ | 1,004 | | $ | 934 | | $ | 2,793 | | $ | 2,617 | |
| Food & Beverage | $ | 686 | | $ | 736 | | $ | 2,163 | | $ | 2,237 | |
| Health & Biosciences | 570 | | 582 | | 1,754 | | 1,756 | |
| Pharma Solutions | 211 | | 207 | | 640 | | 625 | |
| Nutrition & Biosciences | $ | 1,467 | | $ | 1,525 | | $ | 4,557 | | $ | 4,618 | |
| Healthcare & Specialty | $ | 352 | | $ | 376 | | $ | 1,002 | | $ | 1,148 | |
| Industrial & Consumer | 233 | | 274 | | 680 | | 875 | |
| Mobility Solutions | 460 | | 559 | | 1,339 | | 1,772 | |
| Transportation & Industrial | $ | 1,045 | | $ | 1,209 | | $ | 3,021 | | $ | 3,795 | |
| Safety Solutions | $ | 534 | | $ | 630 | | $ | 1,746 | | $ | 1,952 | |
| Shelter Solutions | 387 | | 411 | | 1,051 | | 1,166 | |
| Water Solutions | 328 | | 286 | | 972 | | 833 | |
| Safety & Construction | $ | 1,249 | | $ | 1,327 | | $ | 3,769 | | $ | 3,951 | |
| Biomaterials | $ | 37 | | $ | 54 | | $ | 98 | | $ | 166 | |
| Clean Technologies | 48 | | 78 | | 175 | | 219 | |
| DuPont Teijin Films | 47 | | 48 | | 124 | | 127 | |
Photovoltaic & Advanced Materials 1 | 199 | | 223 | | 608 | | 707 | |
Sustainable Solutions 2 | 0 | | 28 | | 0 | | 108 | |
| Non-Core | $ | 331 | | $ | 431 | | $ | 1,005 | | $ | 1,327 | |
| Total | $ | 5,096 | | $ | 5,426 | | $ | 15,145 | | $ | 16,308 | |
1. The TCS Business•Realigned certain businesses from the former Non-Core segment and renamed product lines within PhotovoltaicMobility & Materials (formerly known as Transportation & Industrial) as Advanced Materials was divested in the third quarter of 2020.
2. The Sustainable Solutions, business was divested in the third quarter of 2019.Engineering Polymers, and Performance Resins.
| | | | | | | | | | | | | | |
| Net Trade Revenue by Geographic Region | Three Months Ended
September 30, | Nine Months Ended
September 30, |
| In millions | 2020 | 2019 | 2020 | 2019 |
| U.S. & Canada | $ | 1,620 | | $ | 1,822 | | $ | 4,875 | | $ | 5,424 | |
EMEA 1 | 1,069 | | 1,227 | | 3,405 | | 3,898 | |
| Asia Pacific | 2,120 | | 2,057 | | 6,045 | | 6,036 | |
| Latin America | 287 | | 320 | | 820 | | 950 | |
| Total | $ | 5,096 | | $ | 5,426 | | $ | 15,145 | | $ | 16,308 | |
| | | | | | | | | | | | | | |
| Net Trade Revenue by Segment and Business or Major Product Line | Three Months Ended June 30, | Six Months Ended June 30, |
| In millions | 2021 | 2020 | 2021 | 2020 |
| Industrial Solutions | $ | 480 | | $ | 379 | | $ | 938 | | $ | 791 | |
| Interconnect Solutions | 339 | | 274 | | 669 | | 540 | |
| Semiconductor Technologies | 501 | | 458 | | 1,013 | | 895 | |
| Electronics & Industrial | $ | 1,320 | | $ | 1,111 | | $ | 2,620 | | $ | 2,226 | |
| Safety Solutions | $ | 650 | | $ | 581 | | $ | 1,287 | | $ | 1,212 | |
| Shelter Solutions | 419 | | 316 | | 779 | | 664 | |
| Water Solutions | 343 | | 347 | | 674 | | 644 | |
| Water & Protection | $ | 1,412 | | $ | 1,244 | | $ | 2,740 | | $ | 2,520 | |
| Advanced Solutions | $ | 391 | | $ | 249 | | $ | 773 | | $ | 555 | |
| Engineering Polymers | 557 | | 360 | | 1,054 | | 879 | |
| Performance Resins | 322 | | 181 | | 658 | | 447 | |
| Mobility & Materials | $ | 1,270 | | $ | 790 | | $ | 2,485 | | $ | 1,881 | |
Corporate 1 | $ | 133 | | $ | 144 | | 266 | | 332 | |
| Total | $ | 4,135 | | $ | 3,289 | | $ | 8,111 | | $ | 6,959 | |
1. Corporate net sales reflect activity of to be divested and previously divested businesses.
| | | | | | | | | | | | | | |
| Net Trade Revenue by Geographic Region | Three Months Ended June 30, | Six Months Ended June 30, |
| In millions | 2021 | 2020 | 2021 | 2020 |
| U.S. & Canada | $ | 1,155 | | $ | 957 | | $ | 2,206 | | $ | 2,109 | |
EMEA 1 | 814 | | 597 | | 1,644 | | 1,388 | |
| Asia Pacific | 2,016 | | 1,641 | | 3,966 | | 3,222 | |
| Latin America | 150 | | 94 | | 295 | | 240 | |
| Total | $ | 4,135 | | $ | 3,289 | | $ | 8,111 | | $ | 6,959 | |
1.Europe, Middle East and Africa.
Contract Balances
From time to time, the Company enters into arrangements in which it receives payments from customers based upon contractual billing schedules. The Company records accounts receivablereceivables when the right to consideration becomes unconditional. Contract assets include amounts related to the Company’s contractualconditional right to consideration for completed performance obligations not yet invoiced. Contract liabilities primarily reflect deferred revenue from advance payment for product that the Company has received from customers. The Company classifies deferred revenue as current or noncurrent based on the timing of when the Company expects to recognize revenue.
Revenue recognized in the first ninesix months of 20202021 from amounts included in contract liabilities at the beginning of the period was approximately $25 million (approximately $28 million inand the first nine months of 2019). The amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional waswere insignificant. The Company did not recognize any asset impairment charges related to contract assets during the period.
| | Contract Balances | Contract Balances | September 30, 2020 | December 31, 2019 | Contract Balances | June 30, 2021 | December 31, 2020 |
| In millions | In millions | In millions |
Accounts and notes receivable - trade 1 | Accounts and notes receivable - trade 1 | $ | 2,938 | | $ | 3,007 | | Accounts and notes receivable - trade 1 | $ | 2,198 | | $ | 1,911 | |
Contract assets - current 2 | $ | 0 | | $ | 35 | | |
Deferred revenue - current 3 | $ | 18 | | $ | 20 | | |
Deferred revenue - noncurrent 4 | $ | 25 | | $ | 24 | | |
| Deferred revenue - current 2 | | Deferred revenue - current 2 | $ | 31 | | $ | 16 | |
Deferred revenue - noncurrent 3 | | Deferred revenue - noncurrent 3 | $ | 11 | | $ | 21 | |
1.Included in "Accounts and notes receivable - net" in the interim Condensed Consolidated Balance Sheets.
2.Included in "Other current assets" in the interim Condensed Consolidated Balance Sheets.
3.Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.
4.3.Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets.
NOTE 54 - RESTRUCTURING AND ASSET RELATED CHARGES - NET
Charges for restructuring programs and asset related charges, which includeincludes asset impairments, were $384$10 million and $807$12 million for the three and ninesix months ended SeptemberJune 30, 2020 ($822021 and $24 million and $290$422 million for the three and ninesix months ended SeptemberJune 30, 2019).2020. These charges were recorded in "Restructuring and asset related charges - net" in the interim Consolidated Statements of Operations. The total liability related to restructuring programs was $127$48 million at SeptemberJune 30, 2020 ($1622021 and $96 million at December 31, 2019).2020, recorded in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets. Restructuring activity consists of the following:following programs:
2020 Restructuring Program
In the first quarter of 2020, the Company approved restructuring actions designed to capture near-term cost reductions and to further simplify certain organizational structures in anticipation of the expected closure of the Intended N&B Transaction (the "2020 Restructuring Program"). The Company recorded pre-tax restructuring charges of $180 million inception-to-date, consisting of severance and related benefit costs of $128 million and asset related charges of $52 million.
The following tables summarize the charges related to the 2020 Restructuring Program for the three and nine months ended September 30, 2020:Program:
| | | Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | | Three Months Ended June 30, | Six Months Ended June 30, |
| In millions | In millions | In millions | 2021 | 2020 | 2021 | 2020 |
| Severance and related benefit costs | Severance and related benefit costs | $ | 10 | | $ | 112 | | Severance and related benefit costs | $ | 10 | | $ | 5 | | $ | 10 | | $ | 95 | |
| Asset related charges | Asset related charges | 4 | | 28 | | Asset related charges | 0 | | 9 | | 2 | | 24 | |
| Total restructuring and asset related charges - net | Total restructuring and asset related charges - net | $ | 14 | | $ | 140 | | Total restructuring and asset related charges - net | $ | 10 | | $ | 14 | | $ | 12 | | $ | 119 | |
| | | | | | | | | |
| 2020 Restructuring Program Charges by Segment | Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | |
| In millions | |
| Electronics & Imaging | $ | 1 | | $ | 5 | | |
| Nutrition & Biosciences | 5 | | 12 | | |
| Transportation & Industrial | — | | 21 | | |
| Safety & Construction | 2 | | 24 | | |
| Non-Core | 1 | | 1 | | |
Corporate | 5 | | 77 | | |
| Total | $ | 14 | | $ | 140 | | |
| | | | | | | | | | | | | | | |
| 2020 Restructuring Program Charges (Credits) by Segment | Three Months Ended June 30, | Six Months Ended June 30, | |
| In millions | 2021 | 2020 | 2021 | 2020 | |
| Electronics & Industrial | $ | 2 | | $ | 0 | | $ | 2 | | $ | 4 | | |
| Water & Protection | 0 | | 2 | | 0 | | 22 | | |
| Mobility & Materials | 6 | | (3) | | 6 | | 21 | | |
Corporate | 2 | | 15 | | 4 | | 72 | | |
| Total | $ | 10 | | $ | 14 | | $ | 12 | | $ | 119 | | |
The following table summarizes the activities related to the 2020 Restructuring Program:
| | 2020 Restructuring Program | 2020 Restructuring Program | Severance and Related Benefit Costs | Asset Related Charges | Total | | 2020 Restructuring Program | Severance and Related Benefit Costs | Asset Related Charges | Total | |
| In millions | In millions | In millions | Severance and Related Benefit Costs | Asset Related Charges |
| Reserve balance at December 31, 2020 | | $ | 62 | | $ | 0 | | $ | 62 | | |
| Year-to-date restructuring charges | Year-to-date restructuring charges | $ | 112 | | $ | 28 | | $ | 140 | | | Year-to-date restructuring charges | 10 | | 2 | | 12 | | |
| Charges against the reserve | Charges against the reserve | — | | (28) | | (28) | | | Charges against the reserve | 0 | | (2) | | (2) | | |
| Cash payments | Cash payments | (42) | | — | | (42) | | | Cash payments | (39) | | 0 | | (39) | | |
| Reserve balance at September 30, 2020 | $ | 70 | | $ | — | | $ | 70 | | | |
| Reserve balance at June 30, 2021 | | Reserve balance at June 30, 2021 | $ | 33 | | $ | 0 | | $ | 33 | | |
At September 30, 2020, totalTotal liabilities related to the 2020 Restructuring Program were $70$33 million recognizedat June 30, 2021 and $62 million at December 31, 2020, respectively, and recorded in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets. The Company expects actions related to this program to be2020 Restructuring Program is considered substantially complete by the end of 2020.complete.
2019 Restructuring Program
During the second quarter of 2019 and in connection with the ongoing integration activities, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the DWDP Distributions (the "2019 Restructuring Program"). The Company has recorded pre-tax restructuring charges of $140$126 million inception-to-date, consisting of severance and related benefit costs of $106$99 million and asset related charges of $34$27 million.
There were 0 charges incurred related to the 2019 Restructuring Program for the three months ended September 30, 2020. The following table summarizes the charges incurred for the three months ended September 30, 2019 and the nine months ended September 30, 2020 and September 30, 2019:
| | | | | | | | | | | |
| Three Months Ended
September 30, | Nine Months Ended
September 30, |
| In millions | 2019 | 2020 | 2019 |
| Severance and related benefit costs | $ | 48 | | $ | 2 | | $ | 98 | |
| Asset related charges | 21 | | — | | 24 | |
| Total restructuring and asset related charges - net | $ | 69 | | $ | 2 | | $ | 122 | |
| | | | | | | | | | | | |
| 2019 Restructuring Program Charges (Credits) by Segment | Three Months Ended
September 30, | Nine Months Ended
September 30, | |
| In millions | 2019 | 2020 | 2019 | |
| Electronics & Imaging | $ | 35 | | $ | (3) | | $ | 42 | | |
| Nutrition & Biosciences | 4 | | (3) | | 18 | | |
| Transportation & Industrial | 6 | | (7) | | 18 | | |
| Safety & Construction | 3 | | (14) | | 20 | | |
| Non-Core | 3 | | — | | 3 | | |
Corporate | 18 | | 29 | | 21 | | |
| Total | $ | 69 | | $ | 2 | | $ | 122 | | |
The following table summarizes the activities related to the 2019 Restructuring Program:
| | | | | | | |
2019 Restructuring Program | Severance and Related Benefit Costs | | |
In millions |
Reserve balance at December 31, 2019 | $ | 86 | | | |
Year-to-date restructuring charges | 2 | | | |
Non-cash compensation | (6) | | | |
Cash payments | (55) | | | |
Reserve balance at September 30, 2020 | $ | 27 | | | |
At September 30, 2020, totalTotal liabilities related to the 2019 Restructuring Program were $27$6 million recognizedat June 30, 2021 and $14 million at December 31, 2020, respectively, and recorded in "Accrued and other current liabilities" ($86 million at December 31, 2019) in the interim Condensed Consolidated Balance Sheets. The 2019 Restructuring Program wasis considered substantially complete at June 30, 2020.complete.
DowDuPont Cost Synergy Program
In September and November 2017, the Company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the "Synergy Program"), which was designed to integrate and optimize the organization following the DWDP Merger and in preparation for the DWDP Distributions. The portions of the charges, costs and expenses attributable to integration and optimization within the Agriculture and Materials Science Divisions are reflected in discontinued operations. The Company has recorded pre-tax restructuring charges attributable to the continuing operations of DuPont of $489$345 million inception-to-date, consisting of severance and related benefit costs of $213$137 million, asset related charges of $209$159 million and contract termination and other charges of $67$49 million.
There were 0 charges incurred related to the DowDuPont Cost Synergy Program for the three months ended September 30, 2020. The following table summarizes the charges incurred for the three months ended September 30, 2019 and the nine months ended September 30, 2020 and September 30, 2019:
| | | | | | | | | | | |
| Three Months Ended
September 30, | Nine Months Ended
September 30, |
| In millions | 2019 | 2020 | 2019 |
| Severance and related benefit costs (credits) | $ | — | | $ | (2) | | $ | 49 | |
| Contract termination and other charges | — | | 6 | | 16 | |
| Asset related charges | 14 | | — | | 43 | |
Total restructuring and asset related charges - net 1 | $ | 14 | | $ | 4 | | $ | 108 | |
1. The charge for the three and nine months ended September 30, 2019 includes $13 million and $105 million which was recognized in "Restructuring and asset related charges - net" and $1 million and $3 million which was recognized in "Equity in earnings of nonconsolidated affiliates" in the interim Consolidated Statements of Operations.
| | | | | | | | | | | |
| DowDuPont Cost Synergy Program Charges (Credits) by Segment | Three Months Ended
September 30, | Nine Months Ended
September 30, |
| In millions | 2019 | 2020 | 2019 |
| Electronics & Imaging | $ | — | | $ | — | | $ | — | |
| Nutrition & Biosciences | 3 | | — | | 38 | |
| Transportation & Industrial | — | | 1 | | — | |
| Safety & Construction | 2 | | 5 | | 7 | |
| Non-Core | (1) | | — | | (1) | |
Corporate | 10 | | (2) | | 64 | |
| Total | $ | 14 | | $ | 4 | | $ | 108 | |
The following table summarizes the activities related to the DowDuPont Cost Synergy Program:
| | | | | | | | | | | |
| DowDuPont Cost Synergy Program | Severance and Related Benefit Costs | Contract Termination Charges | Total |
| In millions |
| Reserve balance at December 31, 2019 | $ | 74 | | $ | 2 | | $ | 76 | |
| Year-to-date restructuring (credits) charges | (2) | | 6 | | 4 | |
| Charges against the reserve | — | | (1) | | (1) | |
| Cash payments | (47) | | (2) | | (49) | |
| Reserve balance at September 30, 2020 | $ | 25 | | $ | 5 | | $ | 30 | |
At September 30, 2020, totalTotal liabilities related to the DowDuPont Cost Synergy Program were $30$9 million recognizedat June 30, 2021 and $20 million at December 31, 2020, respectively, and recorded in "Accrued and other current liabilities" ($76 million at December 31, 2019) in the interim Condensed Consolidated Balance Sheets. The DowDuPont Cost Synergy Program wasis considered substantially complete at June 30, 2020.complete.
Asset Impairments
In the third quarter of 2020, the TCS/HSC Disposal within the Non-Core segment, as well as further softening conditions in the aerospace markets, gave rise to fair value indicators and, thus, served as triggering events requiring the Company to perform a recoverability assessment related to asset groups within its Photovoltaic and Advanced Materials (“PVAM”) business unit. The Company first performed a long-lived asset impairment test and determined that, based on undiscounted cash flows, the carrying amount of certain long-lived assets was not recoverable. Accordingly, the Company estimated the fair value of these assets using both an income approach and a market approach utilizing Level 3 unobservable inputs. As a result, the Company recognized a pre-tax impairment charge of $318 million ($242 million net of tax) recorded within “Restructuring and asset
related charges - net” in the interim Consolidated Statements of Operations for the three and nine months ended September 30, 2020 with the charge impacting definite-lived intangible assets and property, plant, and equipment. See Note 11 for further discussion of goodwill impairment charges recorded during the third quarter of 2020 resulting from the above triggering events.
Additionally, the Company recorded a pre-tax asset impairment charge of $52 million ($39 million net of tax) in the third quarter of 2020 related to indefinite-lived intangible assets within the Non-Core segment which were deemed no longer recoverable as a result of the Non-Core Held for Sale Disposal Groups classification (refer to Note 3 for additional information). The charge was recorded within “Restructuring and asset related charges – net” in the interim Consolidated Statements of Operations for the three and nine months ended September 30, 2020.
In the second quarter of 2020, the Company recorded a $21 million pre-tax impairment charge of $21 million ($16 million net of tax) related to indefinite-lived intangible assets within the TransportationMobility & IndustrialMaterials segment. This charge was recorded within “Restructuring and asset related charges - net” in the interim Consolidated Statements of Operations for the ninethree and six months ended SeptemberJune 30, 2020. See Note 1112 for further discussion.
The Company reviews and evaluates its long-lived assets for impairment when events and changes in circumstances indicate that the related carrying amount of such assets may not be recoverable and may exceed their fair value. For purposes of determining impairment, assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.
In the first quarter of 2020, expectations of proceeds related to certain potential divestitures within the Non-Core segmentCorporate gave rise to fair value indicators and, thus, triggering events requiring the Company to perform a recoverability assessment related to its biomaterialsBiomaterials business unit. The Company performed a long-lived asset impairment test and determined that, based on undiscounted cash flows, the carrying amount of certain long-lived assets was not recoverable. Accordingly, the Company estimated the fair value of these assets using a market approach utilizing Level 3 unobservable inputs. As a result, the Company recognized a $270 million pre-tax impairment charge of $270 million ($206 million net of tax) recorded within “Restructuring and asset related charges - net” in the interim Consolidated Statements of OperationsOperation for the ninesix months ended SeptemberJune 30, 2020 with the charge impacting definite-lived intangible assets and property, plant, and equipment.
Equity Method Investment Impairment Related Charges
In preparation for the Corteva Distribution, Historical EID completed the separation of the assets and liabilities related to its specialty products businesses into separate legal entities (the “SP Legal Entities”) and on May 1, 2019, Historical EID distributed the SP Legal Entities to DowDuPont (the “Internal SP Distribution”). The Internal SP Distribution served as a triggering event requiring the Company to perform an impairment analysis related to equity method investments held by the Company as of May 1, 2019. The Company applied the net asset value method under the cost approach to determine the fair value of the equity method investments in the Nutrition & Biosciences segment. Based on updated projections, the Company determined the fair value of the equity method investment was below the carrying value and had no expectation the fair value would recover in the short-term due to the current economic environment. As a result, management concluded the impairment was other-than-temporary and recorded a pre-tax impairment charge of $63 million ($47 million net of tax) in “Restructuring and asset related charges - net” in the interim Consolidated Statements of Operations related to the Nutrition & Biosciences segment for the nine months ended September 30, 2019.
NOTE 65 - SUPPLEMENTARY INFORMATION
| | Sundry Income (Expense) - Net | Sundry Income (Expense) - Net | Three Months Ended September 30, | Nine Months Ended September 30, | | Sundry Income (Expense) - Net | Three Months Ended June 30, | Six Months Ended June 30, | |
| In millions | In millions | 2020 | 2019 | 2020 | 2019 | | In millions | 2021 | 2020 | 2021 | 2020 | |
| Non-operating pension and other post-employment benefit (OPEB) credits | Non-operating pension and other post-employment benefit (OPEB) credits | $ | 5 | | $ | 21 | | $ | 24 | | $ | 60 | | | Non-operating pension and other post-employment benefit (OPEB) credits | $ | 13 | | $ | 8 | | $ | 25 | | $ | 19 | | |
| Interest income | Interest income | 3 | | 1 | | 7 | | 50 | | | Interest income | 2 | | 2 | | 4 | | 4 | | |
Net gain on divestiture and sales of other assets and investments 1,2,3 | 419 | | 64 | | 612 | | 127 | | | |
Net gain (loss) on divestiture and sales of other assets and investments 1 | | Net gain (loss) on divestiture and sales of other assets and investments 1 | 140 | | (4) | | 167 | | 193 | | |
Foreign exchange losses, net | Foreign exchange losses, net | (10) | | (23) | | (41) | | (101) | | | Foreign exchange losses, net | (8) | | (18) | | (17) | | (21) | | |
| Miscellaneous income (expenses) - net 4 | 13 | | 16 | | 25 | | 8 | | | |
Miscellaneous (expenses) income - net 2 | | Miscellaneous (expenses) income - net 2 | (1) | | 1 | | (17) | | 6 | | |
| Sundry income (expense) - net | Sundry income (expense) - net | $ | 430 | | $ | 79 | | $ | 627 | | $ | 144 | | | Sundry income (expense) - net | $ | 146 | | $ | (11) | | $ | 162 | | $ | 201 | | |
1.The three and ninesix months ended SeptemberJune 30, 2020 includes a net benefit2021 primarily reflects income of $393$140 million related to the TCS/HSC Disposal, including the settlementgain on sale of a supply agreement dispute,assets within the Non-CoreCorporate segment and $24 million related to the gain on sale of assets within the Electronics & Industrial segment. Refer to Note 3 for further information.
2.The ninesix months ended SeptemberJune 30, 2020 includes income of $197 million related to the gain on sale of the Compound Semiconductor Solutions business unit within the Electronics & ImagingIndustrial segment.
3.2. The three and ninesix months ended SeptemberJune 30, 20202021 includes incomean impairment charge of $30approximately $15 million, recorded in the first quarter of 2021, related to a prior year sale of assets within the Electronics & Imaging segment. The three and nine months ended September 30, 2019 includes income of $34 million and $85 million, respectively, related to a sale of assets within the Electronics & Imaging segment, as well as a gain of $28 million related to the saleChestnut Run labs, which is part of the Sustainable Solutions business unit within the Non-Core segment.
4. Miscellaneous income (expenses) - netHeld for the nine months ended September 30, 2019 includes a $48 million charge reflecting a reduction in gross proceeds from lower withholding taxes related to a prior year settlement. The nine months ended September 30, 2019 also includes $26 million related to licensing income within the Safety & Construction segment.Sale Disposal Group.
Cash, Cash Equivalents and Restricted Cash
On September 16,At December 31, 2020, Nutrition & Biosciences, Inc. (presently a wholly owned subsidiary of DuPont) (“N&B Inc.”) completedthe Company had approximately $6.2 billion recorded within non-current “Restricted cash” in the Consolidated Balance Sheet. The restricted cash relates to net proceeds received from an offering of $6.25 billion of senior unsecured notes (the “N"N&B Notes Offering”Offering"). associated with the N&B transaction. On February 1, 2021 this amount was released from escrow as part of the N&B Transaction and is no longer restricted. The net proceeds of approximately $6.2 billionliability from the N&B Notes Offering were deposited into an escrow account. In connection withwas classified as "Liabilities of discontinued operations" in the intended merger of DuPont's Nutrition & Biosciences business with IFF (the "Intended Merger"), N&B Inc. will make a special cash payment of $7.3 billion, (the “Special Cash Payment”), subject to adjustment, to DuPont, which N&B Inc. will fund with the net proceeds from the N&B Notes Offering together with borrowings under N&B Inc.’s existing Term Loan facilities. The availability of the net proceeds to fund part of the Special Cash Payment and to pay the related financing fees and expenses is subject to certain conditions, including among others, satisfaction of substantially all the conditions to the consummation of the intended transaction with IFF. However, if the closing of the Intended Merger has not occurred on or prior to September 15, 2021, or, if prior to such date, the Merger Agreement is validly terminated, (each a “Special Mandatory Redemption Event”), N&B Inc. must redeem all of the Notes on or before the 15th business day following the Special Mandatory Redemption Event (such date of redemption, the “Special Mandatory Redemption Date”) at a redemption price equal to 101% of the aggregate principal amount of the applicable series of Notes, plus accrued and unpaid interest to, but not including, the Special Mandatory Redemption Date.
At September 30, 2020, the Company had approximately $6.2 billion in net proceeds from the N&B Notes Offering recorded within non-current “Restricted cash” in theCompany's interim Condensed Consolidated Balance Sheets.Sheet as of December 31, 2020. See Note 122 for further discussion of the N&B Notes Offering.
From time to time, the Company is required to set aside funds for various activities that arise in the normal course of business. These funds typically have legal restrictions associated with them and are deposited in an escrow account or held in a separately identifiable account by the Company. Historical EID entered into a trust agreement in 2013 (as amended and restated in 2017), establishing and requiring Historical EID to fund a trust (the "Trust") for cash obligations under certain non-qualified benefit and deferred compensation plans upon a change in control event as defined in the Trust agreement. Under the Trust agreement, the consummationCompany's divestiture of the DWDP Merger was a change in control event. After the distribution of Corteva, the Trust assets related to Corteva employees were transferred to a new trust for Corteva (the "Corteva Trust"). As a result, the Trust currently held by DuPont relates to funding obligations to DuPont employees. At September 30, 2020, the Company had restricted cash attributed to the Trust of $26 million ($37 million at December 31, 2019) included in "Other current assets" in the interim Condensed Consolidated Balance Sheets.N&B business.
Accrued and Other Current Liabilities
"Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets were $1,364$1,219 million at SeptemberJune 30, 20202021 and $1,342$1,085 million at December 31, 2019.2020. Accrued payroll, which is a component of "Accrued and other current liabilities," was $431$360 million at SeptemberJune 30, 2020 and $479 million at December 31, 2019.2021. No other component of "Accrued and other current liabilities" was more than 5 percent of total current liabilities.liabilities at June 30, 2021 and no component was more than 5 percent of total current liabilities at December 31, 2020.
NOTE 6 - INCOME TAXES
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.
The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attributes. The effective tax rate on continuing operations for the second quarter of 2021 was 21.1 percent, compared with an effective tax rate of (0.3) percent for the second quarter of 2020. For the first six months of 2021, the effective tax rate on continuing operations was 14.2% percent, compared with (3.6) percent for the first six months of 2020. The effective tax rate for the first six months of 2021 was principally the result of a $59 million tax benefit related to the step-up in tax basis in the goodwill of the Company’s European regional headquarters legal entity. The effective tax rate for the second quarter and for the first six months of 2020 was principally the result of the non-tax-deductible goodwill impairment charge impacting Corporate. See Note 12 for more information regarding the goodwill impairment charge.
Certain internal distributions and reorganizations that occurred in preparation for the N&B Transaction qualified as tax-free transactions under the applicable sections of the Internal Revenue Code. If the aforementioned transactions were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then the Company could be subject to significant tax liability. In connection with the closing of the N&B Transaction, DuPont, N&B and IFF entered into the N&B Tax Matters Agreement. Under the N&B Tax Matters Agreement, the Company would generally be allocated such liability and not be indemnified, unless certain non-qualifying actions are undertaken by N&B or IFF. To the extent that the Company is responsible for any such liability, there could be a material adverse impact on the Company's business, financial condition, results of operations and cash flows in future reporting periods.
NOTE 7 - INCOME TAXES
For periods between the DWDP Merger and the DWDP Distributions, DuPont's consolidated federal income tax group and consolidated tax return included the Dow and Corteva entities. Generally, the consolidated tax liability of the DuPont U.S. tax group for each year was apportioned among the members of the consolidated group in accordance with the terms of the Amended and Restated DWDP Tax Matters Agreement. DuPont, Corteva and Dow intend that to the extent Federal and/or State corporate income tax liabilities are reduced through the utilization of tax attributes of the other, settlement of any receivable and payable generated from the use of the other party’s sub-group attributes will be in accordance with the Amended and Restated DWDP Tax Matters Agreement.
The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attributes. The effective tax rate on continuing operations for the third quarter of 2020 was 460.0 percent, compared with an effective tax rate of 17.3 percent for the third quarter of 2019. The effective tax rate for the third quarter of 2020 was principally the result of a non-tax-deductible goodwill impairment charge and a non-tax-deductible goodwill allocation in connection with the TCS/HSC Disposal impacting the Non-Core segment. The effective tax rate for the third quarter of 2019 was favorably impacted by, among other items, tax benefits related to the adjustment of certain unrecognized benefits for positions taken on items from a prior year.
For the first nine months of 2020, the effective tax rate on continuing operations was (3.3) percent, compared with (21.4) percent for the first nine months of 2019. The effective tax rate for the first nine months of 2020 was principally the result of a non-tax-deductible goodwill impairment charge impacting the Non-Core segment in the first and third quarter and a non-tax-deductible goodwill impairment charge impacting the Transportation and Industrial segment in the second quarter, coupled with an allocation of non-tax-deductible goodwill related to the TCS/HSC Disposal. The tax rate in the first nine months of 2019 was principally the result of the non-tax-deductible goodwill impairment charges impacting the Nutrition & Biosciences and Non-Core segments. See Note 11 for more information regarding the goodwill impairment charges.
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.
NOTE 87 - EARNINGS PER SHARE CALCULATIONS
The following tables provide earnings per share calculations for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
| | | | | | | | | | | | | | |
| Net Income for Earnings Per Share Calculations - Basic & Diluted | Three Months Ended September 30, | Nine Months Ended September 30, |
| In millions | 2020 | 2019 | 2020 | 2019 |
| (Loss) income from continuing operations, net of tax | $ | (72) | | $ | 372 | | $ | (3,153) | | $ | (805) | |
| Net income from continuing operations attributable to noncontrolling interests | 7 | | 5 | | 20 | | 18 | |
Net income from continuing operations attributable to participating securities 1 | 0 | | 0 | | 0 | | 1 | |
| (Loss) income from continuing operations attributable to common stockholders | $ | (79) | | $ | 367 | | $ | (3,173) | | $ | (824) | |
| Income from discontinued operations, net of tax | 0 | | 5 | | 0 | | 1,217 | |
| Net income from discontinued operations attributable to noncontrolling interests | 0 | | 0 | | 0 | | 72 | |
| Income from discontinued operations attributable to common stockholders | 0 | | 5 | | 0 | | 1,145 | |
| Net (loss) income attributable to common stockholders | $ | (79) | | $ | 372 | | $ | (3,173) | | $ | 321 | |
| | | | | | | | | | | | | | |
| Net Income for Earnings Per Share Calculations - Basic & Diluted | Three Months Ended June 30, | Six Months Ended June 30, |
| In millions | 2021 | 2020 | 2021 | 2020 |
| Income (loss) from continuing operations, net of tax | $ | 564 | | $ | (2,389) | | $ | 1,105 | | $ | (2,939) | |
| Net income from continuing operations attributable to noncontrolling interests | 9 | | 7 | | $ | 13 | | $ | 13 | |
| | | | |
| | | | |
| Income (loss) from continuing operations attributable to common stockholders | $ | 555 | | $ | (2,396) | | $ | 1,092 | | $ | (2,952) | |
| | | | |
| | | | |
| (Loss) income from discontinued operations attributable to common stockholders | (77) | | (82) | | $ | 4,780 | | $ | (142) | |
| Net income (loss) attributable to common stockholders | $ | 478 | | $ | (2,478) | | $ | 5,872 | | $ | (3,094) | |
| | | | | | | | | | | | | | |
| Earnings Per Share Calculations - Basic | Three Months Ended September 30, | Nine Months Ended September 30, |
| Dollars per share | 2020 | 2019 | 2020 | 2019 |
| | | |
| | | | |
| (Loss) earnings from continuing operations attributable to common stockholders | $ | (0.11) | | $ | 0.49 | | $ | (4.31) | | $ | (1.10) | |
| Income from discontinued operations, net of tax | 0 | | 0.01 | | 0 | | 1.53 | |
| Net (loss) earnings attributable to common stockholders | $ | (0.11) | | $ | 0.50 | | $ | (4.31) | | $ | 0.43 | |
| | | | | | | | | | | | | | |
| Earnings Per Share Calculations - Basic | Three Months Ended June 30, | Six Months Ended June 30, |
| Dollars per share | 2021 | 2020 | 2021 | 2020 |
| | |
| | | | |
| Earnings (loss) from continuing operations attributable to common stockholders | $ | 1.05 | | $ | (3.26) | | $ | 1.93 | | $ | (4.01) | |
| (Loss) earnings from discontinued operations, net of tax | (0.15) | | (0.11) | | 8.43 | | (0.19) | |
Earnings (loss) attributable to common stockholders 2 | $ | 0.90 | | $ | (3.37) | | $ | 10.36 | | $ | (4.20) | |
| | | | | | | | | | | | | | |
| Earnings Per Share Calculations - Diluted | Three Months Ended September 30, | Nine Months Ended September 30, |
| Dollars per share | 2020 | 2019 | 2020 | 2019 |
| (Loss) earnings from continuing operations attributable to common stockholders | $ | (0.11) | | $ | 0.49 | | $ | (4.31) | | $ | (1.10) | |
| Income from discontinued operations, net of tax | 0 | | 0.01 | | 0 | | 1.53 | |
| Net (loss) earnings attributable to common stockholders | $ | (0.11) | | $ | 0.50 | | $ | (4.31) | | $ | 0.43 | |
| | | | | | | | | | | | | | |
| Earnings Per Share Calculations - Diluted | Three Months Ended June 30, | Six Months Ended June 30, |
| Dollars per share | 2021 | 2020 | 2021 | 2020 |
| Earnings (loss) from continuing operations attributable to common stockholders | $ | 1.04 | | $ | (3.26) | | $ | 1.92 | | $ | (4.01) | |
| (Loss) earnings from discontinued operations, net of tax | (0.14) | | (0.11) | | 8.41 | | (0.19) | |
Earnings (loss) attributable to common stockholders 2 | $ | 0.90 | | $ | (3.37) | | $ | 10.33 | | $ | (4.20) | |
| Share Count Information | Share Count Information | Three Months Ended September 30, | Nine Months Ended September 30, | Share Count Information | Three Months Ended June 30, | Six Months Ended June 30, |
| Shares in millions | Shares in millions | 2020 | 2019 | 2020 | 2019 | Shares in millions | 2021 | 2020 | 2021 | 2020 |
| Weighted-average common shares - basic | Weighted-average common shares - basic | 734.4 | | 745.5 | | 735.8 | | 748.2 | | Weighted-average common shares - basic | 529.6 | | 734.3 | | 567.0 | | 736.5 | |
| Plus dilutive effect of equity compensation plans | Plus dilutive effect of equity compensation plans | 0 | | 2.2 | | 0 | | 0 | | Plus dilutive effect of equity compensation plans | 1.6 | | 0 | | 1.5 | | 0 | |
| | Weighted-average common shares - diluted | Weighted-average common shares - diluted | 734.4 | | 747.7 | | 735.8 | | 748.2 | | Weighted-average common shares - diluted | 531.2 | | 734.3 | | 568.5 | | 736.5 | |
Stock options and restricted stock units excluded from EPS calculations 2 | 5.5 | | 3.8 | | 6.3 | | 2.8 | | |
Stock options and restricted stock units excluded from EPS calculations 1 | | Stock options and restricted stock units excluded from EPS calculations 1 | 2.3 | | 6.3 | | 2.4 | | 6.6 | |
1.Historical Dow restricted stock units are considered participating securities due to Historical Dow's practice of paying dividend equivalents on unvested shares.
2. These outstanding options to purchase shares of common stock, restricted stock, and restrictedperformance stock units were excluded from the calculation of diluted earnings per share because the effect of including them would have been antidilutive.
2.Earnings per share amounts are computed independently for income from continuing operations, income from discontinued operations and net income attributable to common stockholders. As a result, the per share amounts from continuing operations and discontinued operations may not equal the total per share amounts for net income attributable to common stockholders.
NOTE 98 - INVENTORIESACCOUNTS AND NOTES RECEIVABLE - NET
| | | | | | | | |
| Inventories | September 30, 2020 | December 31, 2019 |
| In millions |
| Finished goods | $ | 2,407 | | $ | 2,621 | |
| Work in process | 803 | | 855 | |
| Raw materials | 465 | | 599 | |
| Supplies | 227 | | 244 | |
| Total inventories | $ | 3,902 | | $ | 4,319 | |
| | | | | | | | |
| In millions | June 30, 2021 | December 31, 2020 |
Accounts receivable – trade 1 | $ | 2,141 | | $ | 1,850 | |
| Notes receivable – trade | 57 | | 61 | |
Other 2 | 628 | | 510 | |
| Total accounts and notes receivable - net | $ | 2,826 | | $ | 2,421 | |
1.Accounts receivable – trade is net of allowances of $35 million at June 30, 2021 and $32 million at December 31, 2020. Allowances are equal to the estimated uncollectible amounts and current expected credit loss. That estimate is based on historical collection experience, current economic and market conditions, and review of the current status of customers' accounts.
2.Other includes receivables in relation to value added tax, fair value of derivative instruments, indemnification assets, and general sales tax and other taxes. No individual group represents more than ten percent of total receivables.
NOTE 9 - INVENTORIES
| | | | | | | | |
| Inventories | June 30, 2021 | December 31, 2020 |
| In millions |
| Finished goods | $ | 1,613 | | $ | 1,503 | |
| Work in process | 591 | | 515 | |
| Raw materials | 289 | | 251 | |
| Supplies | 149 | | 124 | |
| Total inventories | $ | 2,642 | | $ | 2,393 | |
NOTE 10 - PROPERTY, PLANT, AND EQUIPMENT
| | | | | | | | | | | | | | | | | | |
| Estimated Useful Lives (Years) | June 30, 2021 | | December 31, 2020 |
| In millions |
| Land and land improvements | 1 | - | 25 | $ | 621 | | | $ | 682 | |
| Buildings | 1 | - | 50 | 2,065 | | | 2,031 | |
| Machinery, equipment, and other | 1 | - | 25 | 7,397 | | | 7,182 | |
| Construction in progress | | | | 1,301 | | | 1,228 | |
| Total property, plant and equipment | | | | $ | 11,384 | | | $ | 11,123 | |
| Total accumulated depreciation | | | | $ | 4,528 | | | $ | 4,256 | |
| Total property, plant and equipment - net | | | | $ | 6,856 | | | $ | 6,867 | |
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | Six Months Ended June 30, |
| In millions | 2021 | 2020 | 2021 | 2020 |
| Depreciation expense | $ | 166 | | $ | 172 | | $ | 327 | | $ | 340 | |
NOTE 1011 - NONCONSOLIDATED AFFILIATES
The Company's investments in companies accounted for using the equity method ("nonconsolidated affiliates"), by classification are recorded in "Investments and noncurrent receivables" in the interim Condensed Consolidated Balance Sheets, areSheets.
The Company's net investment in nonconsolidated affiliates is shown in the following table:
| | Investments in Nonconsolidated Affiliates | Investments in Nonconsolidated Affiliates | September 30, 2020 | December 31, 2019 | Investments in Nonconsolidated Affiliates | June 30, 2021 | December 31, 2020 |
| In millions | In millions | In millions |
| Investments in nonconsolidated affiliates | $ | 951 | | $ | 1,204 | | |
| Investments and noncurrent receivables | | Investments and noncurrent receivables | $ | 914 | | $ | 889 | |
| Accrued and other current liabilities | Accrued and other current liabilities | (74) | | (85) | | Accrued and other current liabilities | (65) | | (71) | |
| Other noncurrent obligations | — | | (358) | | |
| Net investment in nonconsolidated affiliates | Net investment in nonconsolidated affiliates | $ | 877 | | $ | 761 | | Net investment in nonconsolidated affiliates | $ | 849 | | $ | 818 | |
At September 30, 2020, theThe Company hadmaintained an ownership interest in 1814 nonconsolidated affiliates.
HSC Group
In the third quarter of 2020, the Company sold its equity interest in the HSC group. See Note 3 for further discussion. The following table reflects the carrying value of the HSC Group investmentsaffiliates at December 31, 2019:
| | | | | | | | |
Investment in the HSC Group | | Investment |
In millions | Balance Sheet Classification | Dec 31, 2019 |
Hemlock Semiconductor L.L.C. | Other noncurrent obligations | $ | (358) | |
DC HSC Holdings LLC | Investments in nonconsolidated affiliates | $ | 87 | |
June 30, 2021.
Sales to nonconsolidated affiliates represented less than 2 percent of total net sales for the three and ninesix months ended SeptemberJune 30, 20202021 and less than 3 percent of total net sales for the three and ninesix months ended SeptemberJune 30, 2019.2020. Sales to nonconsolidated affiliates arefor three and six months ended June 30, 2020 were primarily related to the sale of trichlorosilane, a raw material used in the production of polycrystalline silicon, to the HSC Group, prior to the TCS/Hemlock Disposal.Disposal in the third quarter of 2020. Sales of this raw material to the HSC Group are reflected in Non-Core.Corporate. Purchases from nonconsolidated affiliates represented less than 24 percent of “Cost of sales” for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019.
27less than 3 percent for the three and six months ended June 30, 2020.
NOTE 1112 - GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amounts of goodwill during the ninesix months ended SeptemberJune 30, 20202021 were as follows:
| | | | | | | | | | | | | | | | | | | | |
| Elect. & Imaging | Nutrition & Biosciences | Transp. & Industrial | Safety & Const. | Non-Core | Total |
| In millions |
Balance at December 31, 2019 | $ | 7,092 | | $ | 11,012 | | $ | 6,931 | | $ | 6,711 | | $ | 1,405 | | $ | 33,151 | |
| Acquisitions | 0 | | 0 | | 0 | | 53 | | 0 | | 53 | |
Divestitures 1 | (199) | | 0 | | 0 | | 0 | | (514) | | (713) | |
| Impairments | 0 | | 0 | | (2,498) | | 0 | | (716) | | (3,214) | |
| Currency Translation Adjustment | 41 | | 206 | | 67 | | 84 | | 0 | | 398 | |
| Measurement Period Adjustments | 0 | | 0 | | 0 | | 15 | | 0 | | 15 | |
| Balance at September 30, 2020 | $ | 6,934 | | $ | 11,218 | | $ | 4,500 | | $ | 6,863 | | $ | 175 | | $ | 29,690 | |
1. Includes $267 million of goodwill related to the Non-Core segment reclassified as held for sale in connection with the Non-Core Held for Sale Disposal Groups. Refer to Note 3 for further information. | | | | | | | | | | | | | | |
| Electronics & Industrial | Water & Protection | Mobility & Materials | Total |
| In millions |
| Balance at December 31, 2020 | $ | 8,458 | | $ | 6,969 | | $ | 3,275 | | $ | 18,702 | |
| Currency Translation Adjustment | (42) | | (60) | | (43) | | (145) | |
| Other | 0 | | 0 | | 8 | | 8 | |
| Balance at June 30, 2021 | $ | 8,416 | | $ | 6,909 | | $ | 3,240 | | $ | 18,565 | |
The Company tests goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter as of October 1, or more frequently when events or changes in circumstances indicate that fair value is below carrying value. As a result of the related acquisition method of accounting in connection with the DWDP Merger, Historical EID’s assets and liabilities were measured at fair value resulting in increases to the Company’s goodwill and other intangible assets. The fair value valuation increased the risk that declines in financial projections, including changes to key assumptions, could have a material, negative impact on the fair value of the Company’s reporting units and assets, and therefore could result in an impairment.
In the third quarter of 2020, the TCS/HSC Disposal within the Non-Core segment, as well as further softening conditions in aerospace markets, served as triggering events requiring the Company to perform recoverability assessments related to asset groups within its PVAM business unit. These assessments resulted in the Company recording asset impairment charges related to certain long-lived assets whose carrying values were deemed not recoverable (refer to Note 5 for additional information). The Company then performed a series of impairment analyses related to goodwill associated with the PVAM business unit. The goodwill impairment analyses included an assessment of the preceding PVAM reporting unit as well as assessments of re-defined reporting units within the PVAM business unit resulting from the TCS/HSC Disposal along with recent progress in the sales processes for other Non-Core business units, including reallocation of goodwill on a relative fair value basis. As a result of these analyses, the Company determined that the fair value of certain reporting units was below carrying value resulting in impairment charges of goodwill. In connection with the foregoing and as a result of the Non-Core Held For Sale Disposal Groups classification (see Note 3 for additional information), the Company recorded aggregate, pre-tax, non-cash impairment charges of $183 million in the third quarter of 2020 impacting the Non-Core segment and reflected in "Goodwill impairment charges" in the Consolidated Statements of Operations. As a result of the above impairment charges and previous impairment charges recorded impacting Non-Core as discussed below, the carrying value of the reporting units within Non-Core are indicative of fair value. As a result, future changes in fair value could impact the carrying value of these business units which have been and continue to be at risk for impairment charges in future periods.
The Company’s analyses above use a combination of the discounted cash flow models (a form of the income approach) utilizing Level 3 unobservable inputs and the market approach. The Company’s significant assumptions in these analyses include, but are not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate, and the tax rate. The Company’s estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategies. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the Company’s estimates. If the Company’s ongoing estimates of future cash flows are not met, the Company may have to record additional impairment charges in future periods. As referenced, the Company also uses a form of the market approach (utilizes Level 3 unobservable inputs), which is derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services. As such, the Company believes the current assumptions and estimates utilized are both reasonable and appropriate.
In the second quarter of 2020, continued near-term demand weakness in global automotive production resulting from the COVID-19 pandemic, along with revised views of recovery based on third party market information,2021 Segment Realignment served as a triggering event requiring the Company to perform an impairment analysis of the goodwill associated with its Transportation & Industrial reporting unit as of June 30, 2020. The carrying value of the Transportation & Industrial reporting unit is comprised substantially of Historical EID’s assets and liabilities which were measured at fair value in connection with the DWDP Merger, and thus inherently considered at risk for impairment. The Company performed quantitative testing on its Transportation &
Industrial reporting unit as of June 30, 2020, using a combination of the discounted cash flow model (a form of the income approach) utilizing Level 3 unobservable inputs and the Guideline Public Company Method (a form of the market approach). Based on the analysis performed, during the second quarter of 2020, the Company concluded that the carrying amount of the reporting unit exceeded its fair value resulting in a pre-tax, non-cash goodwill impairment charge of $2,498 million, reflected in "Goodwill impairment charges" in the Consolidated Statements of Operations for the nine months ended September 30, 2020.
In the first quarter of 2020, expectations of proceeds related to certain potential divestitures within the Non-Core segment gave rise to fair value indicators and, thus, served as triggering events requiring the Company to perform impairment analyses related to goodwill carried by its reporting units as of March 31, 2020.February 1, 2021, prior to the realignment. As part of the analysis,2021 Segment Realignment, the Company determined that theassessed and re-defined certain reporting units effective February 1, 2021, including reallocation of goodwill on a relative fair value of its PVAMbasis, as applicable, to new reporting unit was below its carrying value resultingunits identified. Goodwill impairment analyses were then performed for the new reporting units identified in an impairment charge to goodwill. Valuationsthe Electronics & Industrial and Mobility & Materials segments impacted by the 2021 Segment Realignment. No impairments were identified as a result of the PVAM reporting unit under a combination of the market approach and income approach reflected softening conditions in photovoltaics markets as compared to prior estimates. In connection with this analysis, the Company recorded a pre-tax, non-cash goodwill impairment charge of $533 million in the first quarter of 2020 impacting the Non-Core segment. This charge is reflected in "Goodwill impairment charges" in the Consolidated Statements of Operations for the nine months ended September 30, 2020.analyses described above.
In the second quarter of 2019,2020, the Company recorded pre-tax, non-cash goodwill impairment charges of $1,175$2,498 million, impacting the Nutritionits Mobility & BiosciencesMaterials and Non-Core segmentsIndustrial Solutions reporting units, which areis reflected in "Goodwill impairment charges" in the interim Consolidated Statements of Operations for the ninethree and six months ended SeptemberJune 30, 2019.2020.
COVID-19 continues to adversely impactIn the broader global economy and has caused significant volatilityfirst quarter of 2020, the Company recorded pre-tax, non-cash goodwill impairment charges of $533 million, impacting Corporate, which is reflected in financial markets. If there is a of lack of recovery, the time period to recovery is longer than expected or further global softening is experienced in certain markets, such as automotive, aerospace, commercial construction, oil & gas and select industrial end-markets, or a sustained decline"Goodwill impairment charges" in the valueinterim Consolidated Statements of Operations for the Company's common stock, the Company may be required to perform additional impairment assessments for its goodwill, other intangibles, and long-lived assets, the results of which could result in material impairment charges.six months ended June 30, 2020.
Other Intangible Assets
The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows:
| | | September 30, 2020 | December 31, 2019 | | June 30, 2021 | December 31, 2020 |
| In millions | In millions | Gross
Carrying
Amount | Accum Amort | Net | Gross Carrying Amount | Accum Amort | Net | In millions | Gross
Carrying
Amount | Accum Amort | Net | Gross Carrying Amount | Accum Amort | Net |
| Intangible assets with finite lives: | Intangible assets with finite lives: | | | Intangible assets with finite lives: | | |
| Developed technology | Developed technology | $ | 4,229 | | $ | (1,705) | | $ | 2,524 | | $ | 4,343 | | $ | (1,361) | | $ | 2,982 | | Developed technology | $ | 2,763 | | $ | (1,230) | | $ | 1,533 | | $ | 2,844 | | $ | (1,220) | | $ | 1,624 | |
| | Trademarks/tradenames | Trademarks/tradenames | 2,395 | | (1,378) | | 1,017 | | 2,433 | | (455) | | 1,978 | | Trademarks/tradenames | 1,095 | | (466) | | 629 | | 1,095 | | (440) | | 655 | |
| Customer-related | Customer-related | 8,942 | | (2,644) | | 6,298 | | 8,986 | | (2,229) | | 6,757 | | Customer-related | 7,004 | | (2,536) | | 4,468 | | 7,075 | | (2,361) | | 4,714 | |
| Other | Other | 175 | | (85) | | 90 | | 303 | | (98) | | 205 | | Other | 131 | | (83) | | 48 | | 131 | | (81) | | 50 | |
| Total other intangible assets with finite lives | Total other intangible assets with finite lives | $ | 15,741 | | $ | (5,812) | | $ | 9,929 | | $ | 16,065 | | $ | (4,143) | | $ | 11,922 | | Total other intangible assets with finite lives | $ | 10,993 | | $ | (4,315) | | $ | 6,678 | | $ | 11,145 | | $ | (4,102) | | $ | 7,043 | |
| Intangible assets with indefinite lives: | Intangible assets with indefinite lives: | | | Intangible assets with indefinite lives: | | |
| Trademarks/tradenames | Trademarks/tradenames | 1,599 | | — | | 1,599 | | 1,671 | | — | | 1,671 | | Trademarks/tradenames | 1,029 | | — | | 1,029 | | 1,029 | | — | | 1,029 | |
| Total other intangible assets | Total other intangible assets | 1,599 | | — | | 1,599 | | 1,671 | | — | | 1,671 | | Total other intangible assets | 1,029 | | — | | 1,029 | | 1,029 | | — | | 1,029 | |
| Total | Total | $ | 17,340 | | $ | (5,812) | | $ | 11,528 | | $ | 17,736 | | $ | (4,143) | | $ | 13,593 | | Total | $ | 12,022 | | $ | (4,315) | | $ | 7,707 | | $ | 12,174 | | $ | (4,102) | | $ | 8,072 | |
InAs part of the third quarter of 2020,2021 Segment Realignment, the Company recordedreallocated its intangible assets with indefinite lives to align with the new segment structure. This served as a pre-tax assettriggering event requiring the Company to perform an impairment charge of $52 million ($39 million net of tax)analysis related to indefinite-lived intangible assets withinwith indefinite lives carried by its existing Electronics & Imaging and Transportation & Industrial segments as of February 1, 2021, prior to the Non-Corerealignment. Subsequent to the realignment the Company realigned intangible assets with indefinite lives as applicable to align the intangible assets with indefinite lives with the new segment whichstructure. Impairment analyses were deemed no longer recoverablethen performed for the intangible assets with indefinite lives carried by the Electronics & Industrial and Mobility & Materials segments. No impairments were identified as a result of the Non-Core Held For Sale Disposal Groups classification (see Note 3 for additional information). The charge was recorded within “Restructuring and asset related charges – net” in the interim Consolidated Statements of Operations for the three and nine months ended September 30, 2020.
In the first quarter and third quarter of 2020, the Company recorded non-cash impairment charges related to definite-lived intangible assets impacting the Non-Core segment reflected within “Restructuring and asset related charges - net” in the interim Consolidated Statements of Operations for the nine months ended September 30, 2020. See Note 5 for further discussion.analyses described above.
In the second quarter of 2020, the Company performed quantitative testing on indefinite-lived intangible assets attributable to the TransportationMobility & IndustrialMaterials segment, for which the Company determined that the fair value of certain tradenames had declined related to the factors described above. The Company performed an analysis of the fair value using the relief from royalty method (a form of the income approach) using Level 3 inputs within the fair value hierarchy. The key assumptions used in the calculation included projected revenue, royalty rates and discount rates. These key assumptions involve management
judgment and estimates relating to future operating performance and economic conditions that may differ from actual cash flows.declined. As a result of the testing, the Company recorded a pre-tax, non-cash indefinite-lived intangible asset impairment charge of $21 million ($16 million net ofafter tax), which is reflected in "Restructuring and asset related charges - net," in the Consolidated Statements of Operations for the ninethree and six months ended SeptemberJune 30, 2020. The remaining net book value of the tradenames attributable to the TransportationMobility & IndustrialMaterials segment at SeptemberJune 30, 2020 was approximately $289 million, which represents fair value.
During the first quarter of 2020, the Company recorded non-cash impairment charges related to definite-lived intangible assets impacting Corporate. See Note 4 for further discussion.
The following table provides the net carrying value of other intangible assets by segment:
| | | | | | | | |
| Net Intangibles by Segment | September 30, 2020 | December 31, 2019 |
| In millions |
| Electronics & Imaging | $ | 1,686 | | $ | 1,833 | |
| Nutrition & Biosciences | 3,360 | | 4,377 | |
| Transportation & Industrial | 3,429 | | 3,590 | |
| Safety & Construction | 2,956 | | 3,082 | |
| Non-Core | 97 | | 711 | |
| Total | $ | 11,528 | | $ | 13,593 | |
| | | | | | | | |
| Net Intangibles by Segment | June 30, 2021 | December 31, 2020 |
| In millions |
| Electronics & Industrial | $ | 2,466 | | $ | 2,611 | |
| Water & Protection | 2,802 | | 2,920 | |
| Mobility & Materials | 2,439 | | 2,541 | |
| Total | $ | 7,707 | | $ | 8,072 | |
Total estimated amortization expense for the remainder of 2021 and the five succeeding fiscal years is as follows:
| | | | | |
| Estimated Amortization Expense | |
| In millions | |
| Remainder of 2021 | $ | 324 | |
| 2022 | $ | 607 | |
| 2023 | $ | 582 | |
| 2024 | $ | 562 | |
| 2025 | $ | 513 | |
| 2026 | $ | 495 | |
NOTE 1213 - SHORT-TERM BORROWINGS, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES
Nutrition & Biosciences FinancingThe following table summarizes the Company's finance lease obligations and long-term debt:
| | | | | | | | | | | | | | |
| Long-Term Debt | June 30, 2021 | December 31, 2020 |
| In millions | Amount | Weighted Average Rate | Amount | Weighted Average Rate |
| Promissory notes and debentures: | | | | |
Final maturity 2023 1,2 | $ | 2,800 | | 3.89 | % | $ | 4,800 | | 3.18 | % |
Final maturity 2025 1 | 1,850 | | 4.49 | % | 1,850 | | 4.49 | % |
Final maturity 2026 and thereafter 1 | 6,050 | | 5.13 | % | 6,050 | | 5.13 | % |
| Other facilities: | | | | |
| Term loan due 2022 | 0 | | 0 | % | 3,000 | | 1.25 | % |
| Finance lease obligations | 2 | | | 2 | | |
| Less: Unamortized debt discount and issuance costs | 74 | | | 90 | | |
Less: Long-term debt due within one year | 1 | | | 1 | | |
| Total | $ | 10,627 | | | $ | 15,611 | | |
1. Represents senior unsecured notes (the "2018 Senior Notes"), which are senior unsecured obligations of the Company.
2. The year ended December 31, 2020 includes $2 billion related to the May 2020 Notes.
Principal Payments of long-term debt for the remainder of 2021 and the five succeeding fiscal years are as follows:
| | | | | | | | | | | | | | |
| Maturities of Long-Term Debt for Next Five Years at June 30, 2021 | Total |
| In millions |
| Remainder of 2021 | $ | 0 | |
| 2022 | $ | 0 | |
| 2023 | $ | 2,800 | |
| 2024 | $ | 0 | |
| 2025 | $ | 1,850 | |
| 2026 | $ | 0 | |
The estimated fair value of the Company's long-term borrowings was determined using Level 2 inputs within the fair value hierarchy, as described in Note 21. Based on quoted market prices for the same or similar issues, or on current rates offered to the Company for debt of the same remaining maturities, the fair value of the Company's long-term borrowings, not including long-term debt due within one year, was $12,965 million and $18,336 million at June 30, 2021 and December 31, 2020, respectively.
Available Committed Credit Facilities
The following table summarizes the Company's credit facilities:
| | | | | | | | | | | | | | | | | |
| Committed and Available Credit Facilities at June 30, 2021 | | |
| In millions | Effective Date | Committed Credit | Credit Available | Maturity Date | Interest |
Revolving Credit Facility, Five-year | May 2019 | $ | 3,000 | | $ | 2,975 | | May 2024 | Floating Rate |
| 364-day Revolving Credit Facility | April 2021 | 1,000 | | 1,000 | | April 2022 | Floating Rate |
| Total Committed and Available Credit Facilities | | $ | 4,000 | | $ | 3,975 | | | |
N&B Transaction
As part of the N&B Transaction, the Company received a Special Cash Payment of approximately $7.3 billion. The Special Cash Payment was partially funded by the N&B Notes Offering, which was completed on September 16, 2020. In connection withorder to fund the Intendedremainder of the Special Cash Payment, immediately prior to the consummation of the N&B Transaction, N&B Inc. entered into a Bridge Commitment Letter (the “Bridge Letter”) in an aggregate principal amount of $7.5 billion (the “Bridge Loans”) to secure committed financing for the "Special Cash Payment" and related financing fees. The aggregate commitment under the Bridge Letter is reduced by, among other things, (1) the amount of net cash proceeds received by N&B Inc. from any issuance of senior unsecured notes pursuant to a Rule 144A offering or other private placement and (2) certain qualifying term loan commitments under senior unsecured term loan facilities.
In January 2020, N&B Inc. entered into a senior unsecured term loan agreement in the amount ofborrowed $1.25 billion split evenly between three- and five-year facilities (the “N&B Term Loan Facilities”). As a result of entry into the term loan agreement, the commitments under the Bridge Commitment Letter were reduced to $6.25 billion.
On September 16, 2020 (the "Offering Date"), N&B Inc. completed an offering in the aggregate principal amount of $6.25 billion of senior unsecured notes in six series, comprised of the following (collectively, the “N&B Notes Offering” and together with the N&B Term Loan Facilities, the “Permanent Financing”): $300 million aggregate principal amount of 0.697% Senior Notes due 2022; $1.0 billion aggregate principal amount of 1.230% Senior Notes due 2025; $1.2 billion aggregate principal amount of 1.832% Senior Notes due 2027; $1.5 billion aggregate principal amount of 2.300% Senior Notes due 2030; $750 million aggregate principal amount of 3.268% Senior Notes due 2040;on February 1, 2021. The obligations and $1.5 billion aggregate principal amount of 3.468% Senior Notes due 2050. As a result of the N&B Notes Offering, the commitments under the Bridge Commitment Letter were further reduced to 0 and were terminated on and as of the Offering Date.
The net proceeds of approximately $6.2 billion from the N&B Notes Offering were deposited into an escrow account. The release of the net proceeds fromliabilities associated with the N&B Notes Offering and the availability of funding under the term loan agreement are subject to customary closing conditions including among others, the satisfaction of substantially all the conditions to the consummation of the intended transaction with IFF. The proceeds from the Permanent Financing will be used to make the Special Cash Payment and to pay the related financing fees and expenses. The obligations and liabilities associated with the Permanent Financing will beN&B Term Loan were separated from the Company on February 1, 2021 upon consummation of the Intended N&B Transaction. However, if the closing of the Intended Merger has not occurred on or prior to September 15, 2021, or, if prior to such date, the Merger Agreement is validly terminated, (each a “Special Mandatory Redemption Event”), N&B Inc. must redeem all of the Notes on or before the 15th business day following the Special Mandatory Redemption Event (such date of redemption, the “Special Mandatory Redemption Date”) at a redemption price equal to 101% of the aggregate principal amount of the applicable series of Notes, plus accrued and unpaid interest to, but not including, the Special Mandatory Redemption Date.See Note 2for more information.
Pursuant to the Merger Agreement, the fees and expenses associated with the financing will be borne (A) entirely by N&B Inc. if the transaction closes; and (B) equally by DuPont and IFF if the Merger Agreement terminates. However, if the Merger Agreement is terminated by IFF, in accordance with its terms, for breach by DuPont, such fees and expenses will be borne entirely by DuPont; and if terminated by DuPont in accordance with its terms for breach by IFF, such fees and expenses will be borne entirely by IFF.
May Debt Offering
On May 1, 2020, the Company completed an underwritten public offering of senior unsecured notes (the “Notes”“May 2020 Notes”) in the aggregate principal amount of $2 billion of 2.169 percent fixed rate Notes due May 1, 2023 (the “May Debt Offering”). The consummation of the N&B Transaction triggered the special mandatory redemption feature of the May Debt Offering. The Company redeemed the May 2020 Notes on May 13, 2021 and funded the redemption with proceeds from the May Debt Offering are expected to be used bySpecial Cash Payment.
Term Loan Facilities
On February 1, 2021, the Company to repay or redeemterminated its fully drawn term loan facilities in the Company’s $0.5aggregate principle amount of $3 billion in floating rate notes due November 2020 and $1.5 billion of 3.77 percent fixed-rate notes due November 2020 (collectively, the “2020 Notes” (the "Term Loan Facilities"). Upon consummation ofThe termination triggered the Intended N&B Transaction, the Company will be required to mail a notice of redemption to holders of the Notes, with a copy to the Trustee, setting forth the date of redemption of all of the Notes on the date (“Special Mandatory Redemption Date”) that is the later of (i) three (3) Business Days after the consummation of the Intended N&B Transaction and (ii) May 1, 2021. On the Special Mandatory Redemption Date, the Company will be required to redeem all of the Notes at a redemption price equal to 100%repayment of the aggregate outstanding principal amount of the Notes$3 billion, plus accrued and unpaid interest if any, up to but excludingthrough and including January 31, 2021. The Company funded the repayment with proceeds from the Special Mandatory Redemption Date. Cash Payment.
Uncommitted Credit Facilities and Outstanding Letters of Credit
Unused bank credit lines on uncommitted credit facilities were $781 million at June 30, 2021. These lines are available to support short-term liquidity needs and general corporate purposes including letters of credit. Outstanding letters of credit were $133 million at June 30, 2021. These letters of credit support commitments made in the ordinary course of business.
Debt Covenants and Default Provisions
The Indenture also contains certainCompany's indenture covenants include customary limitations on liens, sale and leaseback transactions, and mergers and consolidations, subject to certain limitations. The 2018 Senior Notes also contain customary default provisions. The Five-Year Revolving Credit Facility and the Company’s ability2021 $1B Revolving Credit Facility contain a financial covenant requiring that the ratio of Total Indebtedness to incur liensTotal Capitalization for the Company and enter into sale lease-back transactions, as well as customary events of default.its consolidated subsidiaries not exceed 0.60. At June 30, 2021, the Company was in compliance with this financial covenant. There were no material changes to the debt covenants and default provisions at June 30, 2021.
Revolving Credit Facility
In June 2019, the Company entered into a $750 million, 364-day revolving credit facility (the "Old 364-Day Revolving Credit Facility"). On and effective as of April 16, 2020, the Company entered into a new $1.0 billion 364-day revolving credit facility (the “$1B Revolving Credit Facility"). As of the effectiveness of the $1B Revolving Credit Facility, the Old 364-Day Revolving Credit Facility was terminated.
NOTE 1314 - COMMITMENTS AND CONTINGENT LIABILITIES
Litigation, and Environmental Matters, and Indemnifications
AsThe Company and certain subsidiaries are involved in various lawsuits, claims and environmental actions that have arisen in the normal course of September 30, 2020,business with respect to product liability, patent infringement, governmental regulation, contract and commercial litigation, as well as possible obligations to investigate and mitigate the effects on the environment of the disposal or release of certain substances at various sites. In addition, in connection with divestitures and the related transactions, the Company had recordedfrom time to time has indemnified and has been indemnified by third parties against certain liabilities that may arise in connection with, among other things, business activities prior to the completion of $23 million associated with litigationthe respective transactions. The term of these indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. The Company records liabilities for ongoing and indemnification matters when the information available indicates that it is probable that a liability will be incurred and $79 million associated with environmental matters. These recorded liabilities include the Company’s indemnification obligations to eachamount of Dow and Corteva.the loss can be reasonably estimated.
UnderAs of June 30, 2021, the DWDP SeparationCompany has recorded indemnification assets of $60 million within "Accounts and Distribution Agreement,notes receivable - net" and $240 million within "Deferred charges and other assets" and indemnification liabilities including costof $166 million within "Accrued and expenses, associated with litigationother current liabilities" and environmental matters that primarily$190 million within "Other noncurrent obligations" within the Consolidated Balance Sheets.
The Company’s accruals discussed below for indemnification liabilities related to the materials science business, the agriculture business or the specialty products business were generally allocated to or retained by Dow,binding Memorandum of Understanding (“MOU”) between Chemours, Corteva, orEID and the Company respectively, through retention, assumption or indemnification. Relatedand to the foregoing, at September 30, 2020, DuPont has recorded (i) a liability of $37 million (although it is reasonably possible that the ultimate cost could range up to $108 million above the amount accrued) for retained or assumed environmental liabilities, (ii) a liability of $2 million for retained or assumed litigation liabilities, and (iii) an indemnification liability related to legal and environmental matters of $58 million. Liabilities associated with discontinued and/or divested operations and businesses of Historical Dow generally were allocated to or retained by Dow. The allocation of liabilities associated with the discontinued and/or divested operations and businesses of Historical EID is discussed below.
Discontinued and/or Divested Operations and Businesses ("DDOB") Liabilities of Historical EID
Under the DWDP Separation and Distribution Agreement and the Letter Agreement between the Company and Corteva (together the “Agreements”), are included in the balances above.
PFAS Stray Liabilities: Future Eligible PFAS Costs
On July 1, 2015, EID, a Corteva subsidiary since June 1, 2019, completed the separation of EID’s Performance Chemicals segment through the spin-off of Chemours to holders of EID common stock (the “Chemours Separation”).
On January 22, 2021, the Company, Corteva, EID and Chemours entered into the MOU pursuant to which the parties have agreed to release certain claims that had been raised by Chemours including any claims arising out of or resulting from the process and manner in which EID structured or conducted the Chemours Separation, and any other claims that challenge the Chemours Separation or the assumption of Chemours Liabilities (as defined in the Chemours Separation Agreement) by Chemours and the allocation thereof, subject in each case to certain exceptions set forth in the MOU. In connection with the MOU, the confidential arbitration process regarding certain claims by Chemours was terminated in February 2021. The parties have further agreed not to bring any future, additional claims regarding the Chemours Separation Agreement or the MOU outside of arbitration.
Pursuant to the MOU, the parties have agreed to share certain costs associated with potential future liabilities related to alleged historical releases of certain PFAS (per- or polyfluoroalkyl substances, which include perfluorooctanoic acids and its ammonium salts (“PFOA”)) out of pre-July 1, 2015 conduct (“eligible PFAS costs”) until the earlier to occur of (i) December 31, 2040, (ii) the day on which the aggregate amount of Qualified Spend, as defined in the MOU, is equal to $4 billion or (iii) a termination in accordance with the terms of the MOU.
The parties have agreed that, during the term of this sharing arrangement, Qualified Spend will be borne 50 percent by Chemours and 50 percent, up to a cap of $2 billion, by the Company and Corteva. The Company and Corteva will split their 50 percent of Qualified Spend in accordance with the Agreements. After the term of this arrangement, Chemours’ indemnification obligations under the Chemours Separation Agreement would continue unchanged, subject in each case to certain exceptions set forth in the MOU.
In order to support and manage any potential future eligible PFAS costs, the parties have also agreed to establish an escrow account. The MOU provides that (1) no later than each of September 30, 2021 and September 30, 2022, Chemours shall deposit $100 million into an escrow account and DuPont DDOBand 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). Additionally, if on December 31, 2028, the balance of the escrow account (including interest) is less than $700 million, Chemours will make 50 percent of the deposits and DuPont and Corteva together will make 50 percent of the deposits necessary to restore the balance of the escrow account to $700 million. Such payments will be 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 parties have agreed to cooperate in good faith to enter into additional agreements reflecting the terms set forth in the MOU.
Under the Agreements, Divested Operations and Businesses ("DDOB") liabilities of Historical EID primarily related to Historical EID’s agriculture business werenot allocated to or retained by Corteva and those primarily relatedor the Company are categorized as relating to Historical EID’s specialty products business were allocated to or retained by the Company. Historical EID DDOB liabilities not primarily related to Historical EID’s agriculture business or specialty products business (“Stray Liabilities”), are allocated as follows:
•Generally, indemnifiable losses as defined in the DWDP Separation and Distribution Agreement, (“Indemnifiable Losses”) foreither (i) PFAS Stray Liabilities, to the extentif they do not arise out of actions related to or resulting from the development, testing, manufacture or sale of PFAS, defined below, (“Non-PFAS Stray Liabilities”) that are known as of April 1, 2019 are borne by Corteva up to a specified amount set forth in the schedules to the DWDP Separation and Distribution Agreement and/PFAS; or Letter Agreement.(ii) Non-PFAS Stray Liabilities, in excess of such(and together with PFAS Stray Liabilities, the “EID Stray Liabilities”).
The Agreements provide that the Company and Corteva will each bear specified amounts plus an additional $200 million of Indemnifiable Losses, described below, in relation to certain EID Stray Liabilities. The Agreements further provide that the Company and any Non-PFASCorteva will each bear 50 percent, $150 million each, of the first $300 million of total Indemnifiable Losses related to PFAS Stray Liabilities. When the companies meet their respective $150 million threshold, Indemnifiable Losses related to PFAS Stray Liabilities not listed in the schedules to the DWDP Separationwill be borne 71 percent by DuPont and Distribution Agreement or Letter Agreement are borne29 percent by Corteva and/or DuPontCorteva. Indemnifiable Losses up to separate, aggregate thresholds of$150 million incurred for PFAS Stray Liabilities are credited against each company’s $200 million each to the extentthreshold.
Whenever Corteva or DuPont as applicable, incurs an Indemnifiable Loss. Once Corteva’s or DuPont’smeets its $200 million threshold, is met, the other would generally bear all Non-PFAS Stray Liabilities until meeting its $200 million threshold. After the respective $200 million thresholds are met,Thereafter, DuPont will bear 71 percent of such losses and Corteva will bear 29 percent of such losses.
•Generally, Corteva and the Company will each bear 50 percent of the first $300 million (up to $150 million each) for Indemnifiable Losses arising out of actions to the extent related to or resulting from the development, testing, manufacture or sale of per- or polyfluoroalkyl substances, which include collectively perfluorooctanoic acids and its salts (“PFOA”), perfluorooctanesulfonic acid (“PFOS”) and perfluorinated chemicals and compounds (“PFCs”) (all such substances, “PFAS” and suchNon-PFAS Stray Liabilities referred to as “PFAS Stray Liabilities”). Indemnifiable Losses to the extent related to PFAS Stray Liabilities in excess of $300 million generally will be borne 71 percent by the Company and 29 percent by Corteva, unless either Corteva or DuPont has met its $200 million threshold. In that event, the other company would bear all PFAS Stray Liabilities until that company meets its $200 million threshold, at which point DuPont will bear 71 percent of such losses and Corteva will bear 29 percent of such losses.
•Indemnifiable Losses incurred by the companies in relation to PFAS Stray Liabilities up to $300 million (e.g., up to $150 million each) will be applied to each company’s respective $200 million threshold.Liabilities.
Indemnifiable Losses, as defined in the DWDP Separation and Distribution Agreement, include, among other things, attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense of EID Stray Liabilities.
DuPont expects to continue to incur directly and as Indemnifiable Losses, costs and expenses related to litigation defense, such as attorneys’ fees and expenses and court costs, in connection with the Stray Liabilities described below. In accordance with its accounting policy for litigation matters, the Company will expense such litigation defense costs as incurred which could be significant to the Company’s financial condition and/or cash flows in the period.
Even when the Company believes the probability of loss or of an adverse unappealable final judgment is remote, the Company may consider settlement of these matters, and may enter into settlement agreements, if it believes settlement is in the best interest of the Company, including avoidance of future distraction and litigation defense cost, and its shareholders.
Stray Liabilities
Non-PFAS Stray Liabilities
While DuPont believes it is probable that it will incur a liability related to Non-PFAS Stray Liabilities, such liability is not reasonably estimable at September 30, 2020. Therefore, at September 30, 2020, DuPont has not recorded an accrual related to Non-PFAS Liabilities.
PFAS Stray Liabilities
Chemours Suit
On July 1, 2015, Historical EID completed the separation of Historical EID’s Performance Chemicals segment through the spin-off of all the issued and outstanding stock of The Chemours Company (“Chemours”) to holders of Historical EID common stock. In connection with the spin, Historical EIDMOU and the Agreements, the Company has recognized the following indemnification liabilities related to eligible PFAS costs:
| | | | | | | | | | | |
| Indemnified Liabilities Related to the MOU |
| In millions | Jun 30, 2021 | Dec 31, 2020 | Balance Sheet Classification |
| Current indemnified liabilities | $ | 36 | | $ | 12 | | Accrued and other current liabilities |
| Long-term indemnified liabilities | $ | 95 | | $ | 46 | | Other noncurrent obligations |
Total indemnified liabilities accrued under the MOU 1, 2 | $ | 131 | | $ | 58 | | |
| | | |
1.As of June 30, 2021, total indemnified liabilities accrued include $108 million related to Chemours entered into a Separation Agreement (as amended,environmental remediation activities at their site in Fayetteville, North Carolina under the "Chemours Separation Agreement"). PursuantConsent Order between Chemours and the North Carolina Department of Environmental Quality.
2.Excludes liabilities of $27 million recognized by the Company as of December 31, 2020 related to the Chemours Separation Agreement, Chemours is obligated to indemnify Historical EID, including its current or former affiliates, against certain litigation, environmental and other liabilities that arose prior tosettlement of the Chemours Separation. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments.Ohio MDL, discussed below.
In 2017, Historical EID and Chemours amended the Chemours Separation Agreement to provide for a limited sharing of potential future PFOA liabilities for a five-year period that began on July 6, 2017. The amended agreement provides that during that five-year period, Chemours will annually pay the first $25 million of future PFOA liabilities and, if that amount is exceeded, Historical EID will pay any excess amount upaddition to the next $25 million, with Chemours annually bearing any excess liabilities above, that amount. If Historical EID were required to pay PFOA liabilities pursuant to the amended agreement, fifty percentas of such obligation would be borne by the Company in accordance with the Letter Agreement. In connection with the foregoing,June 30, 2021, the Company has not recorded or paidrecognized a PFOA liability. At the endliability of the five-year period, this limited sharing agreement will expire, and Chemours’ indemnification obligations under the Chemours Separation Agreement will continue unchanged.
On May 13, 2019, Chemours filed suit in the Delaware Court of Chancery against Historical EID, Corteva and the Company in an attempt to limit its responsibility for the litigation and environmental liabilities allocated to and assumed by Chemours under the Chemours Separation Agreement. Chemours is asking the court to rewrite the Chemours Separation Agreement by either limiting Chemours’ liabilities or, alternatively, ordering the return to Chemours of all or a portion of a $3.91 billion dividend that Chemours paid to Historical EID, Chemours’ then-sole-shareholder, just prior to the spin of Chemours. DuPont and Corteva, acting jointly, filed a motion to dismiss the lawsuit for lack of subject matter jurisdiction and initiated an arbitration of the dispute as required under the Chemours Separation Agreement. In December 2019, following argument, the Delaware Court of Chancery stayed arbitration pending resolution of the motion to dismiss. On March 30, 2020, the Court of Chancery granted the motion to dismiss and rejected Chemours’ arguments in their entirety. Chemours filed a notice of appeal on April 17, 2020 with the Delaware Supreme Court. The Delaware Supreme Court will hear oral argument on the appeal en banc on December 2, 2020. Meanwhile, the confidential arbitration process is proceeding.
Indemnifiable Losses$12.5 million related to the settlement agreement between Chemours, suit are PFAS Stray Liabilities subject to the sharing arrangement betweenCorteva and DuPont and Corteva, described above. The Company believes the probability of a final unappealable judgment of liability with respect to the Chemours suit to be remote; the defendants continue to vigorously defend full indemnity rights as set forth in the Chemours Separation Agreement.
PFAS Matters
Historical EID is a party to legal proceedings relating to the use of PFOA and PFCs by its former Performance Chemicals segment. Indemnifiable Losses related to PFAS liabilities allocated to and assumed by Chemours under the Chemours Separation Agreement generally are PFAS Stray Liabilities subject to the sharing arrangement between DuPont and Corteva, described above.
Generally, Chemours, with reservations, including as to alleged fraudulent conveyance and voidable transactions, is defending and indemnifying Historical EID in the PFAS Matters discussed below. Although Chemours has refused the tender of the Company’s defense in the actions in which the Company has been named, DuPont believes it is remote that it will ultimately incur a liability in connection with these PFAS Matters.
Ohio MDL Personal Injury Cases
DuPont, which was formed after the spin-off of Chemours, is not named in the personal injury and other PFAS actionsDelaware's Attorney General, discussed below.
Future charges, if any, associated with the MOU would be recognized over the term of the agreement as a component of income from discontinued operations to the extent liabilities become probable and estimable.
In 2004, Historical EID settled a West Virginia state court class action, Leach v. DuPont, which alleged that PFOA from Historical EID’s former Washington Works facility had contaminated area drinking water supplies and affected the health of area residents. Historical EID has residual liabilities under the Leach settlement related to providing PFOA water treatment to six area water districts and private well users and to fund, through an escrow account, up to $235 million for a medical monitoring program for eligible class members.
Members of the Leach class have standing to pursue personal injury claims for just six health conditions that an expert panel appointed under the Leach settlement reported in 2012 had a “probable link” (as defined in the settlement) with PFOA: pregnancy-induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and diagnosed high cholesterol. In 2017, Chemours and Historical EID each paid $335 million to settle the multi-district litigation in the U.S. District Court for the Southern District of Ohio (“Ohio MDL”), thereby resolving claims of about 3,550 plaintiffs alleging injury from exposure to PFOA in drinking water. The 2017 settlement did not resolve claims of Leach class members who did not have claims in the Ohio MDL or whose claims are based on diseases first diagnosed after February 11, 2017. About 80 claimsSince the 2017 settlement about 100 additional cases alleging personal injury, including kidney and testicular cancer claims, havehad been filed since the 2017 settlement. These claims are currentlyor noticed and were pending in the Ohio MDL.
On January 21, 2021, EID and Chemours entered into settlement agreements with plaintiffs’ counsel representing the Ohio MDL plaintiffs providing for a settlement of cases and claims in the Ohio MDL, except as noted below (the “Settlement”). The first two cases, onetotal settlement amount is $83 million in cash with each of the Company and EID contributing $27 million and Chemours contributing $29 million. At June 30, 2021 the Company had paid in full its $27 million contribution. The Settlement was entered into solely by way of compromise and settlement and is not in any way an admission of liability or fault by the
Company, Corteva, EID or Chemours. In connection with the Settlement, in April 2021 the plaintiffs filed a motion to terminate the Ohio MDL. The case captioned “Abbott v E. I. du Pont de Nemours and Company” is not included in the Settlement and the other “Swartz v. E. I. du Pont de Nemours and Company”, involving a testicular cancer and a kidney cancer claim, respectively, proceeded to trial in January 2020. is presently pending appeal.
In the Abbott case, the jury returned a verdict in March 2020 against Historical EID, awarding $50 million in compensatory damages to the plaintiff and his wife, who claimed that exposure to PFOA in drinking water caused him to develop testicular cancer. HistoricalIn March 2021, the trial judge entered an order denying EID’s post-trial motions for a reduction in the verdict amount for Mr. Abbott but reduced Mrs. Abbott’s verdict for loss of consortium from $10 million to $250,000, reducing the total verdict to $40.25 million. EID will appealhas appealed the verdict. The plaintiffs also sought but were not awarded punitive damages. In the Swartz matter, the jury could not reach a verdict. Therefore, the court declared a mistrial and the matter will be retried at a later date. The trials in the cases originally scheduled for June 2020 have been further postponed from October 2020 to late November due to the COVID-19 pandemic.
Natural Resource Damage Claims and Other Claims for Environmental Damages
In addition to the actions described above, there are several cases alleging damages to natural resources, the environment, water, and/or property as well as various other allegations. DuPont and Corteva are named or have been added as defendants in most of the actions discussed below. Such actions include additional claims based on allegations that the transfer by Historical EID of certain PFAS liabilities to Chemours prior to separatingthe Chemours Separation resulted in a fraudulent conveyance or voidable transaction. With the exception of the fraudulent conveyance claims, which are excluded from the MOU, legal fees, expenses, costs, and any potential liabilities for eligible PFAS costs presented by the following matters will be shared as defined in the MOU between Chemours, EID, Corteva and DuPont.
Natural Resource Damage Matters
Since May 2017, a number of state attorneys general have filed lawsuits against DuPont, Corteva, Historical EID, Chemours, and others, claiming environmental contamination by certain PFAS compounds. Such actions are currently pending in Michigan, New Jersey, New Hampshire, New York,Jersey, North Carolina, Ohio and Vermont. In the second quarter 2021, the Michigan action was transferred to the SC MDL, discussed below. Generally, the states raise common law tort claims and seek economic impact damages for alleged harm to natural resources, punitive damages, present and future costs to cleanup contamination from certain PFAS compounds, and to abate the alleged nuisance. The North Carolina action includesMost of these actions include fraudulent transfer claims related to the Chemours separation,Separation and the DowDuPont separations, and questions potential loss of assets caused by future divestitures.separations.
OtherIn July 2021, Chemours, Corteva (for itself and EID) and DuPont reached a resolution with the State of Delaware that avoids litigation and addresses potential Natural Resources Damages (“NRD”) from known historical and current releases by the companies in or affecting Delaware. The resolution releases potential state NRD claims arising from the environmental impacts of various chemicals, including PFAS, Environmental Mattersacross all current and historical locations. Consistent with the MOU, Chemours will bear 50 percent or $25 million of the $50 million settlement and Corteva and DuPont will each bear $12.5 million. The settlement also calls for a potential Supplemental Payment to Delaware up to a total of $25 million funded 50 percent by Chemours and 50 percent by Corteva and DuPont, jointly, under certain circumstances which are not deemed probable.
Several additional lawsuits have been filed by residents, local water districts, and private water companies against Historical EID and Chemours in New York. Additionally, a water district in West Virginia, filed suit in state court against Historical EID, Chemours, Corteva, DuPont and others alleging contamination as a result of PFOAin New York, New Jersey, and PFOS and seeking compensatory, consequential and punitive damages, and attorneys’ fees. The complaint includes a fraudulent transfer allegation associated with the Chemours separation. In September 2020, a complaint was filed in the Central District of California on behalf of Golden State Water Company against DuPont, Corteva, Historical EID, Chemours, and others,generally alleging contamination of water systems from PFOS and PFOA. The complaint includes fraudulent transfer claims relateddue to the Chemours separation, the DowDuPont separations, and questions potential lossrelease of assets caused by future divestitures.
North Carolina PFAS Actions
There are several actions pending in federal court against Historical EID and Chemours, relating to discharges of PFCs, including GenX, into the Cape Fear River. GenX is a polymerization processing aid and a replacement for PFOA introduced by Historical EID which Chemours continues to manufacture at its Fayetteville Works facility in Bladen County, North Carolina. One of these actions is a consolidated putative class action that asserts claims for damages and other relief on behalf of putative classes of property owners and residents in areas near or who draw drinking water from the Cape Fear River. Another action is
a consolidated action brought by various North Carolina water authorities, including the Cape Fear Public Utility Authority and Brunswick County, thatcompounds. These suits seek actualcompensatory and punitive damages, as well as injunctive relief. In addition, anpresent and future costs to clean up the alleged contamination. This includes a putative class action is pendingfiled in North Carolina state courtthe Northern District of New York on behalf of about 100 plaintiffsall individuals who, own wellsas of December 1, 2015, are or were owners of real property located in the Village of Hoosick Falls, New York and property near the Fayetteville Works facility.who obtain their drinking water from a privately owned well which has allegedly been contaminated by PFAS. The plaintiffs seek compensatory and punitive damages for nuisance allegedly caused by releasesas well as medical monitoring. The certification of certain PFCsthe class is currently pending before the court.
Additionally, there are several actions that have been filed in New Jersey against EID and Chemours on behalf of residents who allege personal injuries due to exposure to PFAS in their drinking water. These lawsuits generally seek compensatory and punitive damages stemming from the site.those alleged injuries and medical monitoring.
In the third quarter 2020, 3 lawsuits were filed in North Carolina state court againstApril 2021, Chemours, Historical EID, Corteva and DuPont.DuPont and certain of their respective Dutch entities, received a civil summons filed before the Court of Rotterdam, the Netherlands, on behalf of four municipalities neighboring the Chemours Dordrecht facility. The lawsuits seek damages for alleged personal injuries to more than 100 individuals due to alleged exposure to PFOA and GenX originating from the Fayetteville Works plant. These lawsuits also include fraudulent transfer allegations relatedmunicipalities are seeking liability declarations relating to the Chemours separation.Dordrecht site’s current and historical PFAS operations and emissions. The companies’ response brief in defense of the municipalities’ claims is due in September 2021.
Aqueous Film Forming Foam
Beginning in April 2019, several dozen lawsuits involving water contamination arising from the use of PFAS-containing aqueous firefighting foams (“AFFF”) were filed against Historical EID, Chemours, 3M and other AFFF manufacturers and in different parts of the country. Most were consolidated in multi-district litigation docket in federal district court in South Carolina (the “SC MDL”). Many of those cases also name DuPont as a defendant. Those actions largely seek remediation of the alleged PFAS contamination in and around military bases and airports as well as medical monitoring of affected residents. In September 2020, a complaint was filed in Missouri stateThe first 10 bellwether cases have been selected by the court, on behalfall of a deceased firefighter against 3M, DuPont, Corteva, Historical EID, Chemours and others. The suit seeks damages for injuries and wrongful death of the plaintiff allegedly from his exposure to PFAS contained in firefighting foam. This case has not been removed to the SC MDL.which are water district contamination cases.
As of the end of September 2020,June 30, 2021, approximately 7501,160 personal injury cases have been filed directly in the SC MDL and assert claims on behalf of individual firefighters and others who allege that exposure to PFAS in firefighting foam caused them to develop cancer, including kidney and testicular cancer.cancer, or other injuries. DuPont has been named as a defendant in most of these personal injury AFFF cases. DuPont is seeking the dismissal of DowDuPont and DuPont from these actions. Historical EID and the Company have never made or sold aqueous film forming foam, PFOSAFFF, perfluorooctanesulfonic acid ("PFOS") or PFOS containing products.
Additionally, a case filed by a former firefighter is pending in the Southern District of Ohio seeking certification of a nationwide class of individuals who have detectable levels of PFAS in their blood serum. The suit was filed against 3M and several other defendants in addition to Chemours and Historical EID. The complaint specifically seeks, among other things, the creation of a “PFAS Science Panel” to study the effects of PFAS, but expressly states that the class does not seek compensatory damages for personal injuries. In February 2020, the court denied the defendants' motion to transfer this case to the SC MDL. The decision of whether to certify the class is currently pending before the court.
There are several actions pending in federal court against EID and Chemours, relating to discharges of PFCs, including GenX, into the Cape Fear River. GenX is a polymerization processing aid and a replacement for PFOA introduced by EID which Chemours continues to manufacture at its Fayetteville Works facility in Bladen County, North Carolina. One of these actions is a consolidated putative class action that asserts claims for damages and other relief on behalf of putative classes of property owners and residents in areas near or who draw drinking water from the Cape Fear River. Another action is a consolidated action brought by various North Carolina water authorities, including the Cape Fear Public Utility Authority and Brunswick County, that seek actual and punitive damages as well as injunctive relief. In addition, an action is pending in North Carolina state court on behalf of about 200 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.
Additionally, there are lawsuits filed in North Carolina state court against Chemours, EID, Corteva and DuPont seeking damages for alleged personal injuries to more than 100 individuals due to alleged exposure to PFOA and GenX originating from the Fayetteville Works plant. These lawsuits also include fraudulent transfer allegations related to the Chemours Separation.
While Management believes it has appropriately estimated the liability associated with eligible PFAS matters and Indemnifiable Losses as of the date of this report, it is reasonably possible that the Company could incur additional eligible PFAS costs and Indemnifiable Losses in excess of the amounts accrued. These additional costs could have a significant effect on the Company’s financial condition and/or cash flows in the period in which they occur; however, costs qualifying as Qualified Spend are limited by the terms of the MOU.
Other Litigation Matters
In addition to the specific matters described above, the Company is party to other claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, governmental regulation, contract and commercial litigation, and other actions. Certain of these actions may purport to be class actions and seek damages in very large amounts. As of June 30, 2021, the Company has liabilities of $18 million associated with these other litigation matters. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of the Company. In accordance with its accounting policy for litigation matters, the Company will expense litigation defense costs as incurred, which could be significant to the Company’s financial condition and/or cash flows in the period.
Environmental Matters
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. At SeptemberJune 30, 2020,2021, the Company had accrued obligations of $79$203 million for probable environmental remediation and restoration costs, inclusive of $37 million retained and assumed following the DWDP Distributions and $42 million of indemnified liabilities.costs. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to $172 million above the amount accrued at September 30, 2020. Consequently, itIt is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the Company’s results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration. At December
The accrued environmental obligations includes the Company had accrued obligationsfollowing:
| | | | | | | | | | | |
| Environmental Accrued Obligations |
| In millions | Jun 30, 2021 | Dec 31, 2020 | Potential exposure above the amount accrued 1 |
| Environmental remediation liabilities not subject to indemnity | $ | 39 | | $ | 36 | | $ | 94 | |
| | | |
| Environmental remediation indemnified liabilities | | | |
Indemnifications related to Dow and Corteva 2 | 45 | | 44 | | 63 | |
MOU related obligations (discussed above) 3 | 119 | | 56 | | 55 | |
| Total environmental related liabilities | $ | 203 | | $ | 136 | | $ | 212 | |
1.The environmental accrual as of $77 millionJune 30, 2021 represents management’s best estimate of the costs for probable environmental remediation and restoration costs.with respect to environmental matters, although it is reasonably possible that the ultimate cost with respect to these particular matters could range above the amount accrued.
Pursuant to the DWDP Separation and Distribution Agreement, the Company is required to indemnify Dow and Corteva for certain Non-PFAS clean-up responsibilities and associated remediation costs. The accrued environmental obligations of $79 million as of September 30, 2020 includes amount for which the Company indemnifies Dow and Corteva. At September 30, 2020, the Company has indemnified Dow and Corteva $8 million and $34 million, respectively.
Indemnifications
In connection withThe MOU related obligations are included in the ongoing divestitures and transactions, the Company has indemnified and has been indemnified by respective parties against certain liabilities that may arise in connection with these transactions and business activities priorIndemnified Liabilities Related to the completion of the respective transactions. The term of these indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. At September 30, 2020, indemnified assets were $88 million within "Accounts and notes receivable, net" and $117 million within "Deferred charges and other assets" and indemnified liabilities were $60 million within "Accrued and other current liabilities" and $94 million within "Other noncurrent obligations."MOU presented above.
Guarantees
Obligations for Equity Affiliates & Others
The Company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates and customers. At SeptemberJune 30, 20202021 and December 31, 2019,2020, the Company had directly guaranteed $177$175 million and $187$189 million, respectively, of such obligations. These amounts represent the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guarantees. The Company would be required to perform on these guarantees in the event of default by the guaranteed party.
The Company assesses the payment/performance risk by assigning default rates based on the duration of the guarantees. These default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical default history for counterparties that do not have published credit ratings. For counterparties without an external rating or available credit history, a cumulative average default rate is used.
In certain cases, the Company has recourse to assets held as collateral, as well as personal guarantees from customers. Assuming liquidation, these assets are estimated to cover less than 1 percent ofAt June 30, 2021, no collateral was held by the $17 million of guaranteed obligations of customers. Company.
The following table provides a summary of the final expiration year and maximum future payments for each type of guarantee:
| | Guarantees at September 30, 2020 | Final Expiration Year | Maximum Future Payments | |
| Guarantees at June 30, 2021 | | Guarantees at June 30, 2021 | Final Expiration Year | Maximum Future Payments |
| In millions | In millions | Final Expiration Year | Maximum Future Payments | In millions |
Obligations for customers 1: | Obligations for customers 1: | Obligations for customers 1: | | |
| Bank borrowings | Bank borrowings | 2021 | $ | 17 | | Bank borrowings | 2021 | $ | 17 | |
Obligations for non-consolidated affiliates 2: | Obligations for non-consolidated affiliates 2: | | | Obligations for non-consolidated affiliates 2: | | |
| Bank borrowings | Bank borrowings | 2020 | 160 | | Bank borrowings | 2021 | $ | 158 | |
| Total guarantees | Total guarantees | | $ | 177 | | Total guarantees | | $ | 175 | |
1. Existing guarantees for select customers, as part of contractual agreements. The terms of the guarantees are equivalent to the terms of the customer loans that are primarily made to finance customer invoices. At SeptemberJune 30, 20202021, all maximum future payments had terms less than a year.
2. Existing guarantees for non-consolidated affiliates' liquidity needs in normal operations.
NOTE 1415 - OPERATING LEASES
The components of lease cost for operating leases were as follows:
| | | Three Months Ended September 30, | Nine Months Ended September 30, | | | Three Months Ended June 30, | Six Months Ended June 30, | |
| In millions | In millions | 2020 | 2019 | 2020 | 2019 | | In millions | 2021 | 2020 | 2021 | 2020 | |
| Operating lease costs | Operating lease costs | $ | 49 | | $ | 51 | | $ | 135 | | $ | 141 | | | Operating lease costs | $ | 29 | | $ | 33 | | $ | 58 | | $ | 64 | | |
Operating cash flows from operating leases were $136$57 million and $150$63 million for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively.
Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. New operating lease assets and liabilities entered into during the ninesix months ended SeptemberJune 30, 2021 and 2020 and 2019 were $168$44 million and $111$51 million, respectively. Supplemental balance sheet information related to leases was as follows:
| | In millions | In millions | September 30, 2020 | December 31, 2019 | In millions | June 30, 2021 | December 31, 2020 |
| Operating Leases | Operating Leases | | | Operating Leases | | |
Operating lease right-of-use assets 1 | Operating lease right-of-use assets 1 | $ | 621 | | $ | 556 | | Operating lease right-of-use assets 1 | $ | 413 | | $ | 423 | |
Current operating lease liabilities 2 | Current operating lease liabilities 2 | 159 | | 138 | | Current operating lease liabilities 2 | 95 | | 117 | |
Noncurrent operating lease liabilities 3 | Noncurrent operating lease liabilities 3 | 465 | | 416 | | Noncurrent operating lease liabilities 3 | 321 | | 308 | |
| Total operating lease liabilities | Total operating lease liabilities | $ | 624 | | $ | 554 | | Total operating lease liabilities | $ | 416 | | $ | 425 | |
1.Included in "Deferred charges and other assets" in the interim Condensed Consolidated Balance Sheet.
2.Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheet.
3.Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheet.
Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide the lessor’s implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments.
| | | | | | | | |
| Lease Term and Discount Rate for Operating Leases | June 30, 2021 | December 31, 2020 |
| Weighted-average remaining lease term (years) | 7.77 | 5.83 |
| Weighted average discount rate | 2.06 | % | 2.26 | % |
Maturities of lease liabilities were as follows:
| | | | | |
| Maturity of Lease Liabilities at June 30, 2021 | Operating Leases |
| In millions |
| Remainder of 2021 | $ | 57 | |
| 2022 | 95 | |
| 2023 | 73 | |
| 2024 | 55 | |
| 2025 | 34 | |
| 2026 and thereafter | 142 | |
| Total lease payments | $ | 456 | |
| Less: Interest | 40 | |
| Present value of lease liabilities | $ | 416 | |
In connection with the N&B Distribution, DuPont entered into leasing agreements with IFF, whereby DuPont is leasing certain properties, including office spaces and R&D laboratories to IFF. These leases are classified as operating leases and lessor income and related expenses are not significant to the Company's interim Consolidated Balance Sheet or interim Consolidated Statement of Operations.
NOTE 1516 - STOCKHOLDERS' EQUITY
As part of the Exchange Offer from the N&B Transaction, the Company accepted and retired approximately 197.4 million shares of its common stock in exchange for about 142 million shares of N&B Common Stock. As a result, the Company reduced its common stock outstanding by 197.4 million shares of DuPont Common Stock as of February 1, 2021.
Share Repurchase Program
On June 1, 2019, the Company's Board of Directors approved a $2 billion share buyback program ("2019 Share Buyback Program"), which expiresexpired on June 1, 2021. During the thirdsecond quarter, of 2020, the Company did not repurchase any shares. As of Septemberrepurchased and retired 6.2 million shares for $518 million completing the 2019 Share Buyback Program. At June 30, 2020,2021, the Company had repurchased and retired 16.9a total of 29.9 million shares at a cost of $2 billion under this program.
In the first quarter of 2021, the Company's Board of Directors authorized a new $1.5 billion share buyback program, since inception at a total costwhich expires on June 30, 2022 ("2021 Share Buyback Program"). As of $982 million.June 30, 2021, the Company repurchased and retired 1.5 million shares for $125 million under the 2021 Share Buyback Program.
Accumulated Other Comprehensive Loss
The following table summarizes the activity related to each component of accumulated other comprehensive loss ("AOCL") for the ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
| | | | | | | | | | | | | | | | | |
| Accumulated Other Comprehensive Loss | Unrealized Gains (Losses) on Investments | Cumulative Translation Adj | Pension and OPEB | Derivative Instruments | Total |
| In millions |
| 2019 | | | | | |
Balance at January 1, 2019 | $ | (51) | | $ | (3,785) | | $ | (8,476) | | $ | (82) | | $ | (12,394) | |
| Other comprehensive income (loss) before reclassifications | 68 | | (811) | | 47 | | (43) | | (739) | |
| Amounts reclassified from accumulated other comprehensive income (loss) | (1) | | (18) | | 140 | | (15) | | 106 | |
| Net other comprehensive income (loss) | $ | 67 | | $ | (829) | | $ | 187 | | $ | (58) | | $ | (633) | |
| Spin-offs of Dow and Corteva | $ | (16) | | $ | 3,179 | | $ | 8,196 | | $ | 139 | | $ | 11,498 | |
| Balance at September 30, 2019 | $ | 0 | | $ | (1,435) | | $ | (93) | | $ | (1) | | $ | (1,529) | |
| 2020 | | | | | |
| Balance at January 1, 2020 | $ | 0 | | $ | (1,070) | | $ | (345) | | $ | (1) | | $ | (1,416) | |
| Other comprehensive income (loss) before reclassifications | 0 | | 548 | | (9) | | 0 | | 539 | |
| Amounts reclassified from accumulated other comprehensive income | 0 | | 0 | | 18 | | 0 | | 18 | |
| Net other comprehensive income | $ | 0 | | $ | 548 | | $ | 9 | | $ | 0 | | $ | 557 | |
| Balance at September 30, 2020 | $ | 0 | | $ | (522) | | $ | (336) | | $ | (1) | | $ | (859) | |
| | | | | | | | | | | | | | | |
| Accumulated Other Comprehensive Loss | | Cumulative Translation Adj | Pension and OPEB | Derivative Instruments | Total |
| In millions |
| 2020 | | | | | |
| Balance at January 1, 2020 | | $ | (1,070) | | $ | (345) | | $ | (1) | | $ | (1,416) | |
| Other comprehensive loss before reclassifications | | (54) | | (4) | | 0 | | (58) | |
| Amounts reclassified from accumulated other comprehensive loss | | 0 | | 9 | | 0 | | 9 | |
| Net other comprehensive (loss) income | | $ | (54) | | $ | 5 | | $ | 0 | | $ | (49) | |
| Balance at June 30, 2020 | | $ | (1,124) | | $ | (340) | | $ | (1) | | $ | (1,465) | |
| 2021 | | | | | |
| Balance at January 1, 2021 | | $ | 470 | | $ | (425) | | $ | (1) | | $ | 44 | |
| Other comprehensive (loss) income before reclassifications | | (357) | | 5 | | 18 | | (334) | |
| Amounts reclassified from accumulated other comprehensive loss | | 0 | | 6 | | 0 | | 6 | |
| Split-off of N&B reclassification adjustment | | 184 | | 73 | | 1 | | 258 | |
| Net other comprehensive (loss) income | | $ | (173) | | $ | 84 | | $ | 19 | | $ | (70) | |
| Balance at June 30, 2021 | | $ | 297 | | $ | (341) | | $ | 18 | | $ | (26) | |
The tax effects on the net activity related to each component of other comprehensive income (loss) were not significant for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019 were as follows:
| | | | | | | | | | | | | | |
| Tax Benefit (Expense) | Three Months Ended September 30, | Nine Months Ended September 30, |
| In millions | 2020 | 2019 | 2020 | 2019 |
| Unrealized gains (losses) on investments | $ | 0 | | $ | 0 | | $ | 0 | | $ | (18) | |
| Cumulative translation adjustments | 0 | | 0 | | 0 | | (1) | |
| Pension and other post-employment benefit plans | 1 | | (6) | | 3 | | (41) | |
| Derivative instruments | 0 | | 0 | | 0 | | 16 | |
| Tax expense from income taxes related to other comprehensive income items | $ | 1 | | $ | (6) | | $ | 3 | | $ | (44) | |
A summary of the reclassifications out of AOCL for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 is provided as follows:
| | Reclassifications Out of Accumulated Other Comprehensive Loss | Reclassifications Out of Accumulated Other Comprehensive Loss | Three Months Ended
September 30, | Nine Months Ended
September 30, | Income Classification | Reclassifications Out of Accumulated Other Comprehensive Loss | Three Months Ended June 30, | Six Months Ended June 30, | Income Classification |
| In millions | In millions | 2020 | 2019 | 2020 | 2019 | In millions | 2021 | 2020 | 2021 | 2020 |
| Unrealized gains on investments | $ | 0 | | $ | 0 | | $ | 0 | | $ | (1) | | See (1) below | |
| Tax expense (benefit) | 0 | | 0 | | 0 | | 0 | | See (2) below | |
| After tax | $ | 0 | | $ | 0 | | $ | 0 | | $ | (1) | | | |
| | Cumulative translation adjustments | Cumulative translation adjustments | $ | 0 | | $ | 0 | | $ | 0 | | $ | (18) | | See (3) below | Cumulative translation adjustments | $ | 0 | | $ | 0 | | $ | 184 | | $ | 0 | | See (1) below |
| Pension and other post-employment benefit plans | Pension and other post-employment benefit plans | $ | 7 | | $ | 4 | | $ | 15 | | $ | 171 | | See (4) below | Pension and other post-employment benefit plans | $ | 2 | | $ | 5 | | $ | 108 | | $ | 8 | | See (1) below |
| Tax expense (benefit) | 2 | | (6) | | 3 | | (31) | | See (2) below | |
| Tax (benefit) expense | | Tax (benefit) expense | 0 | | 0 | | (29) | | 1 | | See (1) below |
| After tax | After tax | $ | 9 | | $ | (2) | | $ | 18 | | $ | 140 | | | After tax | $ | 2 | | $ | 5 | | $ | 79 | | $ | 9 | | |
| Derivative Instruments | $ | 0 | | $ | 0 | | $ | 0 | | $ | (18) | | See (5) below | |
| Tax expense | 0 | | 0 | | 0 | | 3 | | See (2) below | |
| After tax | $ | 0 | | $ | 0 | | $ | 0 | | $ | (15) | | | |
| Derivative instruments | | Derivative instruments | $ | 0 | | $ | 0 | | $ | 1 | | $ | 0 | | See (1) below |
| Total reclassifications for the period, after tax | Total reclassifications for the period, after tax | $ | 9 | | $ | (2) | | $ | 18 | | $ | 106 | | | Total reclassifications for the period, after tax | $ | 2 | | $ | 5 | | $ | 264 | | $ | 9 | | |
1. "Net sales"The activity for the six months ended June 30, 2021 is classified within "Income (loss) from discontinued operations, net of tax" and "Sundry income (expense) - net."
2.net" as part of the N&B Transaction and continuing operations, respectively. The activity for the six months ended June 30, 2020 is classified within the "Sundry income (expense) - net" and "Provision for income taxes on continuing operations."operations" lines.
3. "Sundry income (expense) - net."
4. These AOCL components are included in the computation of net periodic benefit cost of the Company's defined benefit pension and other post-employment benefit plans. See Note 17 for additional information.
5. "Cost of sales," "Sundry income (expense) - net" and "Interest expense."34
NOTE 1617 - NONCONTROLLING INTERESTS
Ownership interests in the Company's subsidiaries held by parties other than the Company are presented separately from the Company's equity in the interim Condensed Consolidated Balance Sheets as "Noncontrolling interests." The amounts of consolidated net income attributable to the Company and the noncontrolling interests are both presented on the face of the interim Consolidated Statements of Operations.
The following table summarizes the activity for equity attributable to noncontrolling interests for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
| | Noncontrolling Interests | Noncontrolling Interests | Three Months Ended September 30, | Nine Months Ended September 30, | Noncontrolling Interests | Three Months Ended June 30, | Six Months Ended June 30, |
| In millions | In millions | 2020 | 2019 | 2020 | 2019 | In millions | 2021 | 2020 | 2021 | 2020 |
| Balance at beginning of period | Balance at beginning of period | $ | 572 | | $ | 570 | | $ | 569 | | $ | 1,608 | | Balance at beginning of period | $ | 517 | | $ | 566 | | $ | 566 | | $ | 569 | |
| Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | 7 | | 5 | | 20 | | 90 | | Net income attributable to noncontrolling interests | 9 | | 7 | | 13 | | 13 | |
| Contributions from noncontrolling interests | | Contributions from noncontrolling interests | 67 | | 0 | | 67 | | 5 | |
| Distributions to noncontrolling interests | Distributions to noncontrolling interests | (38) | | (6) | | (48) | | (18) | | Distributions to noncontrolling interests | (5) | | (4) | | (24) | | (10) | |
| | Cumulative translation adjustments | Cumulative translation adjustments | 4 | | (2) | | (1) | | 14 | | Cumulative translation adjustments | (1) | | 3 | | (8) | | (5) | |
| Spin-off of Dow and Corteva | 0 | | 0 | | 0 | | (1,124) | | |
| Other | 14 | | 1 | | 19 | | (2) | | |
| Split-off of N&B | | Split-off of N&B | 0 | | 0 | | (27) | | 0 | |
| | Balance at end of period | Balance at end of period | $ | 559 | | $ | 568 | | $ | 559 | | $ | 568 | | Balance at end of period | $ | 587 | | $ | 572 | | $ | 587 | | $ | 572 | |
NOTE 1718 - PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
A summary of the Company's pension plans and other post-employment benefits can be found in Note 2019 to the Consolidated Financial Statements included in the Company’s Recast 2020 Annual Report on Form 10-K forReport.
On February 1, 2021, the year ended December 31, 2019. Historical DowCompany's net underfunded balance was reduced by $232 million after certain assets and Historical EID did not merge their defined benefit pension and other post-employment benefitobligations were separated from the Company to N&B plans effective as a resultpart of the DWDP Merger.N&B Transaction.
The following sets forth the components of the Company's net periodic benefit (credit) cost for defined benefit pension plans and other post-employment benefits:plans:
| | Net Periodic Benefit (Credit) Cost for All Plans | Net Periodic Benefit (Credit) Cost for All Plans | Three Months Ended September 30, | Nine Months Ended September 30, | Net Periodic Benefit (Credit) Cost for All Plans | Three Months Ended June 30, | Six Months Ended June 30, |
| In millions | In millions | 2020 | 2019 | 2020 | 2019 | In millions | 2021 | 2020 | 2021 | 2020 |
| Defined Benefit Pension Plans: | Defined Benefit Pension Plans: | | | Defined Benefit Pension Plans: | | |
Service cost 1 | Service cost 1 | $ | 20 | | $ | 17 | | $ | 55 | | $ | 166 | | Service cost 1 | $ | 14 | | $ | 17 | | $ | 29 | | $ | 35 | |
Interest cost 2 | Interest cost 2 | 14 | | 19 | | 42 | | 610 | | Interest cost 2 | 10 | | 14 | | 21 | | 28 | |
Expected return on plan assets 3 | Expected return on plan assets 3 | (28) | | (35) | | (82) | | (954) | | Expected return on plan assets 3 | (26) | | (26) | | (54) | | (54) | |
Amortization of prior service credit 4 | Amortization of prior service credit 4 | (1) | | (1) | | (4) | | (8) | | Amortization of prior service credit 4 | (1) | | (2) | | (2) | | (3) | |
Amortization of net loss (gain) 5 | 3 | | (6) | | 11 | | 129 | | |
Amortization of net loss 5 | | Amortization of net loss 5 | 3 | | 4 | | 6 | | 8 | |
Curtailment/settlement 6 | Curtailment/settlement 6 | 6 | | 1 | | 8 | | (1) | | Curtailment/settlement 6 | 1 | | 2 | | 3 | | 2 | |
| Net periodic benefit cost (credit) - total | $ | 14 | | $ | (5) | | $ | 30 | | $ | (58) | | |
| Less: Net periodic benefit credit - discontinued operations | 0 | | 0 | | 0 | | (45) | | |
| Net periodic benefit cost (credit) - continuing operations | $ | 14 | | $ | (5) | | $ | 30 | | $ | (13) | | |
| Other Post-Employment Benefits: | | | |
Service cost 1 | $ | 0 | | $ | 0 | | $ | 0 | | $ | 5 | | |
Interest cost 2 | 1 | | 0 | | 1 | | 52 | | |
Amortization of net gain 5 | 0 | | 0 | | 0 | | (6) | | |
| Net periodic benefit cost - total | Net periodic benefit cost - total | $ | 1 | | $ | 0 | | $ | 1 | | $ | 51 | | Net periodic benefit cost - total | $ | 1 | | $ | 9 | | $ | 3 | | $ | 16 | |
| Less: Net periodic benefit cost - discontinued operations | Less: Net periodic benefit cost - discontinued operations | 0 | | 0 | | 0 | | 50 | | Less: Net periodic benefit cost - discontinued operations | 0 | | 3 | | 1 | | 7 | |
| Net periodic benefit cost - continuing operations | Net periodic benefit cost - continuing operations | $ | 1 | | $ | 0 | | $ | 1 | | $ | 1 | | Net periodic benefit cost - continuing operations | $ | 1 | | $ | 6 | | $ | 2 | | $ | 9 | |
|
1. The service cost from continuing operations was $17$14 million and $47$27 million for the three and ninesix months ended SeptemberJune 30, 2019,2021, respectively, compared with $14 million and $28 million for the three and six months ended June 30, 2020, respectively. The activity from OPEBs was immaterial.
2. The interest cost from continuing operations was $19$10 million and $60$21 million for the three and ninesix months ended SeptemberJune 30, 2019,2021, respectively, compared with $12 million and $25 million for the three and six months ended June 30, 2020, respectively. The activity from OPEBs was immaterial.
3. The expected return on plan assets from continuing operations was $35$26 million and $114$53 million for the three and ninesix months ended SeptemberJune 30, 2019, respectively. The activity from OPEBs was immaterial.2021, respectively, compared with $23 million and $49 million for the three and six months ended June 30, 2020.
4. The amortization of prior service credit from continuing operations was a gain of $1 million and $2 million for the three and ninesix months ended SeptemberJune 30, 2019, respectively. The activity from OPEBs was immaterial.
5. The amortization2021, respectively, compared with a gain of unrecognized net gain from continuing operations was $6$2 million and $3 million for the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively.
5. The activity from OPEBs was immaterial.
6. Curtailments and settlementsamortization of unrecognized net loss from continuing operations resulted in a loss of $1was $3 million and $6 million for the three and six months ended SeptemberJune 30, 20192021, respectively, compared with a net loss $3 million and a gain of $1$6 million for the ninethree and six months ended SeptemberJune 30, 2019.2020, respectively.
6. The activitycurtailment and settlement costs from OPEBscontinuing operations was immaterial.$1 million and $3 million for the three and six months ended June 30, 2021, respectively, compared with $2 million for both the three and six months ended June 30, 2020.
Activity related to other post-employment benefits was considered immaterial for both the current and comparative periods. The continuing operations portion of the net periodic benefit (credit) cost, other than the service cost component, is included in "Sundry income (expense) - net" in the interim Consolidated Statements of Operations.
DuPont expects to make additional contributions in the aggregate of approximately $30$57 million by year-end 2020.2021.
NOTE 1819 - STOCK-BASED COMPENSATION
A summary of the Historical Dow and Historical DuPontCompany's stock-based compensation plans can be found in Note 2120 to the Consolidated Financial Statements included in the Company’sCompany's Recast 2020 Annual Report on Form 10-K for the year ended December 31, 2019. Historical Dow and Historical EID did not merge their equity incentive plans as a result of the DWDP Merger. The Historical Dow and Historical EID stock-based compensation plans were assumed by the Company and remained in place with the ability to grant and issue DowDuPont common stock until the DWDP Distributions.Report.
Immediately followingIn the Corteva Distribution,second quarter of 2020, the stockholders of DuPont approved the 2020 Equity and Incentive Plan (the "2020 Plan") which allows the Company to grant options, share appreciation rights, restricted shares, restricted stock units ("RSUs"), share bonuses, other share-based awards, cash awards, or a combination of the foregoing. Under the 2020 Plan, a maximum of 18 million shares of common stock are available for award as of June 30, 2021. In June of 2019, DuPont adopted the DuPont Omnibus Incentive Plan ("DuPont OIP") which provides for equity-based and cash incentive awards to certain employees, directors, independent contractors and consultants in the form of stock options, restricted stock units ("RSUs")RSUs and performance-based restricted stock units ("PSUs"). Upon adoption of the DuPont OIP, the Historical Dow and Historical EID plans were maintained and rolled into the DuPont OIP as separate subplans. The equity awards under these subplans have the same terms and conditions that were applicable to the awards under the Historical Dow and Historical EID plans immediately prior to the DWDP Distributions. Under the DuPont OIP, a maximum of 102 million shares of common stock are available for award as of SeptemberJune 30, 2020.
During the second quarter of 2020, the stockholders of DuPont approved the DuPont 2020 Equity and Incentive Plan (the "2020 Plan"). The 2020 Plan limits the number of shares that may be subject to awards payable in shares of DuPont common stock to 19 million. The 2020 Plan authorizes the Company to grant options, share appreciation rights, restricted shares, RSUs, share bonuses, other share-based awards, cash awards, each as defined in the 2020 Plan, or any combination of the foregoing. The approval of the 2020 Plan had no effect on the Company’s ability to make future grants under the DuPont OIP in accordance with its terms, and awards that are outstanding under the DuPont OIP remain outstanding in accordance with their terms. There has been no activity under the 2020 Plan to date.2021.
DuPont recognized share-based compensation expense in continuing operations of $25$21 million and $30$22 million for the three months ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $94$38 million and $85$60 million duringfor the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively. The income tax benefits related to stock-based compensation arrangements were $5 million and $6$4 million for the three months ended SeptemberJune 30, 20202021 and 2019,2020, respectively, and $19$8 million and $18$12 million for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, respectively.
In the first quarter of 2020,2021, the Company granted 1.00.6 million RSUs, 0.80.6 million stock options and 0.30.4 million PSUs. The weighted-average fair values per share associated with the grants were $53.49$72.88 per RSU, $8.84$16.92 per stock option and $50.23$78.23 per PSU. The stock options had a weighted-average exercise price per share of $53.50.$72.98. There was minimal activity in the second and third quarter of 2020.2021.
Effect of the N&B Distributions on Equity Awards
At the time of the N&B Distribution, outstanding, unvested share-based compensation awards that were denominated in DuPont common stock and held by N&B Employees were terminated and reissued as equity awards issued under the IFF stock plan.
NOTE 1920 - FINANCIAL INSTRUMENTS
The following table summarizes the fair value of financial instruments at SeptemberJune 30, 20202021 and December 31, 2019:2020:
| | Fair Value of Financial Instruments | Fair Value of Financial Instruments | September 30, 2020 | December 31, 2019 | Fair Value of Financial Instruments | June 30, 2021 | December 31, 2020 |
| In millions | In millions | Cost | Gain | Loss | Fair Value | Cost | Gain | Loss | Fair Value | In millions | Cost | Gain | Loss | Fair Value | Cost | Gain | Loss | Fair Value |
Cash equivalents | Cash equivalents | $ | 2,534 | | $ | — | | $ | — | | $ | 2,534 | | $ | 417 | | $ | — | | $ | — | | $ | 417 | | Cash equivalents | $ | 2,818 | | $ | 0 | | $ | 0 | | $ | 2,818 | | $ | 1,105 | | $ | 0 | | $ | 0 | | $ | 1,105 | |
Restricted cash equivalents 1 | Restricted cash equivalents 1 | $ | 6,232 | | $ | — | | $ | — | | $ | 6,232 | | $ | 37 | | $ | — | | $ | — | | $ | 37 | | Restricted cash equivalents 1 | $ | 18 | | $ | 0 | | $ | 0 | | $ | 18 | | $ | 6,223 | | $ | 0 | | $ | 0 | | $ | 6,223 | |
| | Total cash and restricted cash equivalents | $ | 8,766 | | $ | — | | $ | — | | $ | 8,766 | | $ | 454 | | $ | — | | $ | — | | $ | 454 | | |
| Total cash equivalents and restricted cash equivalents | | Total cash equivalents and restricted cash equivalents | $ | 2,836 | | $ | 0 | | $ | 0 | | $ | 2,836 | | $ | 7,328 | | $ | 0 | | $ | 0 | | $ | 7,328 | |
| Long-term debt including debt due within one year | Long-term debt including debt due within one year | $ | (23,806) | | $ | 2 | | $ | (2,375) | | $ | (26,179) | | $ | (15,618) | | $ | — | | $ | (1,633) | | $ | (17,251) | | Long-term debt including debt due within one year | $ | (10,628) | | $ | 0 | | $ | (2,338) | | $ | (12,966) | | $ | (15,612) | | $ | 0 | | $ | (2,725) | | $ | (18,337) | |
| Derivatives relating to: | Derivatives relating to: | | | Derivatives relating to: | | |
Foreign currency 2 | — | | 4 | | (6) | | (2) | | — | | 6 | | (7) | | (1) | | |
Net investment hedge 2 | | Net investment hedge 2 | 0 | | 24 | | 0 | | 24 | | 0 | | 0 | | 0 | | 0 | |
Foreign currency 3,4 | | Foreign currency 3,4 | 0 | | 17 | | (7) | | 10 | | 0 | | 4 | | (13) | | (9) | |
| Total derivatives | Total derivatives | $ | — | | $ | 4 | | $ | (6) | | $ | (2) | | $ | — | | $ | 6 | | $ | (7) | | $ | (1) | | Total derivatives | $ | 0 | | $ | 41 | | $ | (7) | | $ | 34 | | $ | 0 | | $ | 4 | | $ | (13) | | $ | (9) | |
1.Includes $26 million of restricted cash classifiedClassified as "Other current assets" and $6.2 billion classified as "Restricted cash" in the interim Condensed Consolidated Balance Sheets. Refer to Note 6 for further information.
2.Classified as "Deferred charges and other assets" in the interim Condensed Consolidated Balance Sheets.
3.Classified as "Other current assets" and "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.
4.Presented net of cash collateral where master netting arrangements allow.
Derivative Instruments
Objectives and Strategies for Holding Derivative Instruments
In the ordinary course of business, the Company enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency, and interest rate and commodity price risks. The Company has established a variety of derivative programs to be utilized for financial risk management. These programs reflect varying levels of exposure coverage and time horizons based on an assessment of risk.
Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee, consistent with the Company's financial risk management policies and guidelines. Derivative instruments used are forwards, options, futures and swaps. As of the third quarter of 2020, the Company has not designated any derivatives or non-derivatives as hedging instruments.
The Company's financial risk management procedures also address counterparty credit approval, limits and routine exposure monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions and major commodity exchanges. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company utilizes collateral support annex agreements with certain counterparties to limit its exposure to credit losses. The Company anticipates performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks associated with these instruments are regularly reported to management.
The notional amounts of the Company's derivative instruments were as follows:
| | Notional Amounts | Notional Amounts | September 30, 2020 | December 31, 2019 | Notional Amounts | June 30, 2021 | December 31, 2020 |
| In millions | In millions | In millions |
| Derivatives designated as hedging instruments: | | Derivatives designated as hedging instruments: | | |
| Net investment hedge | | Net investment hedge | $ | 1,000 | | $ | 0 | |
| Derivatives not designated as hedging instruments: | Derivatives not designated as hedging instruments: | | | Derivatives not designated as hedging instruments: | | |
Foreign currency contracts 1 | Foreign currency contracts 1 | $ | (299) | | $ | 26 | | Foreign currency contracts 1 | $ | 255 | | $ | (304) | |
| Commodity contracts | $ | 8 | | $ | 11 | | |
|
1.Presented net of contracts bought and sold.
Derivatives Designated in Hedging Relationships
Net Foreign Investment Hedge
During the three months ended June 30, 2021, the Company entered into a fixed-for-fixed cross currency swaps with an aggregate notional amount totaling $1 billion to hedge the variability of exchange rate impacts between the U.S. Dollar and Euro. Under the terms of the cross-currency swap agreement, the Company notionally exchanged $1 billion at a interest rate of 4.73% for €819 million at a weighted average interest rate of 3.26%. The cross-currency swap is designated as a net investment hedge and expires on November 15, 2028.
The Company has made an accounting policy election to account for the net investment hedge using the spot method. The Company has also elected to amortize the excluded components in interest expense in the related quarterly accounting period that such interest is accrued. The cross-currency swap is marked to market at each reporting date and any unrealized gains or losses are included in unrealized currency translation adjustments within AOCL, net of amounts associated with excluded components which are recognized in interest expense in the Consolidated Statements of Operations.
Derivatives not Designated in Hedging Relationships
Foreign Currency Contracts
The Company routinely uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal earnings impact, after taxes. The Company may use foreign currency exchange contracts to offset a portion of the Company's exposure to certain foreign currency-denominated revenues so that gains and losses on the contracts offset changes in the USD value of the related foreign currency-denominated revenues.
Commodity Contracts
The Company utilizes options, futures and swaps that are not designated as hedging instruments to reduce exposure to commodity price fluctuations on purchases of inventory such as soybeans, soybean oil and soybean meal.
Fair Value of Derivative Instruments
Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the interim Condensed Consolidated Balance Sheets. The presentation of the Company's derivative assets and liabilities is as follows:
| | | | | | | | | | | | | | |
| September 30, 2020 |
| In millions | Balance Sheet Classification | Gross | Counterparty and Cash Collateral Netting 1 | Net Amounts Included in the Consolidated Balance Sheet |
| Asset derivatives: | | | | |
| Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Other current assets | $ | 20 | | $ | (16) | | $ | 4 | |
| Total asset derivatives | | $ | 20 | | $ | (16) | | $ | 4 | |
| | | | |
| Liability derivatives: | | | | |
| Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Accrued and other current liabilities | $ | 22 | | $ | (16) | | $ | 6 | |
| Total liability derivatives | | $ | 22 | | $ | (16) | | $ | 6 | |
| | | | | | | | | | | | | | |
| December 31, 2019 |
| In millions | Balance Sheet Classification | Gross | Counterparty and Cash Collateral Netting 1 | Net Amounts Included in the Consolidated Balance Sheet |
| Asset derivatives: | | | | |
| Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Other current assets | $ | 16 | | $ | (10) | | $ | 6 | |
| Total asset derivatives | | $ | 16 | | $ | (10) | | $ | 6 | |
| | | | |
| Liability derivatives: | | | | |
| Derivatives not designated as hedging instruments: | | | | |
| Foreign currency contracts | Accrued and other current liabilities | $ | 17 | | $ | (10) | | $ | 7 | |
| Total liability derivatives | | $ | 17 | | $ | (10) | | $ | 7 | |
1.Counterparty and cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between the Company and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty.
Effect of Derivative Instruments
Foreign currency derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency-denominated assets and liabilities. The amount charged on a pre-tax basis related to foreign currency derivatives not designated as a hedge, which was included in “Sundry income (expense) - net” in the interim Consolidated Statements of Operations, was a loss of $3$7 million for the three months ended SeptemberJune 30, 2021 and a loss of $27 million for the six months ended June 30, 2021. There was 0 gain or loss for the three months ended June 30, 2020 and 2019, and a $4 million gain of $1 million for the ninesix months ended SeptemberJune 30, 2020 ($63 million loss for the nine months ended September 30, 2019).2020. The income statement effects of other derivatives were immaterial.
Reclassification from AOCL
The Company does not expect to reclassify gains or losses related to foreign currency contracts from AOCL to income within the next 12 months and there are currently no such amounts included within AOCL.
NOTE 2021 - FAIR VALUE MEASUREMENTS
Fair Value Measurements on a Recurring Basis
The following tables summarize the basis used to measure certain assets and liabilities at fair value on a recurring basis:
| | | | | | | |
Basis of Fair Value Measurements on a Recurring Basis at SeptemberJune 30, 20202021 | Significant Other Observable Inputs
(Level 2) | | |
| In millions |
| Assets at fair value: | | | |
Cash equivalents and restricted cash equivalents 1 | $ | 8,7662,836 | | | |
| | | |
Derivatives relating to: 2 | | | |
| Net investment hedge | 24 | | | |
Foreign currency contracts3 | 2025 | | | |
| Total assets at fair value | $ | 8,7862,885 | | | |
| Liabilities at fair value: | | | |
Long-term debt including debt due within one year 34 | $ | 26,17912,966 | | | |
Derivatives relating to: 2 | | | |
| Net investment hedge | 0 | | | |
Foreign currency contracts3 | 2215 | | | |
| Total liabilities at fair value | $ | 26,20112,981 | | | |
1.Treasury bills, time deposits, and money market funds included in "Cash and cash equivalents" and money market funds included in "Other current assets" and "Restricted cash" in the interim Condensed Consolidated Balance Sheets and held at amortized cost, which approximates fair value.
2. See Note 1920 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets.
3. Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the Consolidated Balance Sheets. The offsetting counterparty and cash collateral netting amounts for foreign currency contracts were $8 million for both assets and liabilities as of June 30, 2021.
4. Fair value is based on quoted market prices for the same or similar issues, or on current rates offered to the company for debt of the same remaining maturities and terms.
| | | | | |
Basis of Fair Value Measurements on a Recurring Basis at December 31, 20192020 | Significant Other Observable Inputs
(Level 2) |
| In millions |
| Assets at fair value: | |
Cash equivalents and restricted cash equivalents 1 | $ | 4547,328 | |
| |
Derivatives relating to: 2 | |
Foreign currency contracts3 | 1613 | |
| Total assets at fair value | $ | 4707,341 | |
| Liabilities at fair value: | |
Long-term debt including debt due within one year 34 | $ | 17,25118,337 | |
Derivatives relating to: 2 | |
Foreign currency contracts3 | 1722 | |
| Total liabilities at fair value | $ | 17,26818,359 | |
1. Treasury bills, time deposits, and money market funds included in "Cash and cash equivalents" and money market funds included in "Other current assets" in the interim Condensed Consolidated Balance Sheets and held at amortized cost, which approximates fair value.
2. See Note 1920 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets.
3. Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the Consolidated Balance Sheets. The offsetting counterparty and cash collateral netting amounts were $9 million for both assets and liabilities as of December 31, 2020.
4. Fair value is based on quoted market prices for the same or similar issues, or on current rates offered to the company for debt of the same remaining maturities and terms.
2020 Fair Value Measurements on a Nonrecurring Basis
During the third quarter of 2020, the Company recorded impairment charges related to goodwill, indefinite-lived intangible assets, and long-lived assets within the Non-Core segment. These impairment analyses were performed using Level 3 inputs within the fair value hierarchy. See Notes 3, 5, and 11 for further discussion.
During the second quarter of 2020, the Company recorded impairment charges related to goodwill and indefinite-lived intangible assets within the TransportationMobility & IndustrialMaterials segment. See Notes 5 and 11Note 4 for further discussion of these fair value measurements.
During the first quarter of 2020, the Company recorded impairment charges related to goodwill and long-lived assets within the Non-Core segment.Corporate. See Notes 5 and 11Note 4 for further discussion of thesethis fair value measurements.
During the second quarter of 2019, the Company recorded goodwill impairment charges related to the Nutrition & Biosciences and Non-Core segments. The Company also recorded an other-than-temporary impairment, classified as Level 3 measurements, on an equity method investment. See Notes 5 and 11 for further discussion of these fair value measurements.
NOTE 2122 - SEGMENTS AND GEOGRAPHIC REGIONS
In the first quarter of 2020, in preparation for the Intended N&B Transaction, DuPont changed its management and reporting structure to realign costs associated with its polysaccharides pre-commercial activities from the Non-Core segment to the N&B segment. The reporting changes have been retrospectively reflected in the segment results for all periods presented.
Prior to April 1, 2019, the Company's measure of profit / loss for segment reporting purposes is pro forma Operating EBITDA as this is the manner in which the Company's chief operating decision maker ("CODM") assessed performance and allocates resources. The Company defines pro forma Operating EBITDA as pro forma earnings (i.e. pro forma "Income (loss) from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / other post-employment benefits (“OPEB”) / charges, and foreign exchange gains/losses, excluding the impact of costs historically allocated to the materials science and agriculture businesses that did not meet the criteria to be recorded as discontinued operations and adjusted for significant items. Effective April 1, 2019, the Company's measure of profit/loss for segment reporting purposes is Operating EBITDA as this is the manner in which the Company's chief operating decision maker ("CODM") assesses performance and allocates resources. The Company defines Operating EBITDA as earnings (i.e., “Income from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / OPEB benefits / charges, and foreign exchange gains / losses, adjusted for significant items. Reconciliations of these measures are provided on the following pages.
Pro forma adjustments were determinedEffective February 1, 2021, in accordanceconjunction with Article 11the closing of Regulation S-X. Pro forma financial information is based on the Consolidated Financial Statements of DuPont, adjustedN&B Transaction, the Company completed the 2021 Segment Realignment resulting in a change to give effect toits management and reporting structure. These changes resulted in the impactfollowing:
•Realignment of certain items directly attributablebusinesses from Transportation & Industrial to Electronics & Imaging;
•Dissolution of the DWDP Distributions, and the Term Loan Facilities, the 2018 Senior Notes and the Funding CP Issuance (together, the "Financings"), including the use of proceeds from such Financings (collectively the "Transactions"). The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the Transactions, (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the results. Events that are not expected to have a continuing impact on the combined results are excluded from the pro forma adjustments. Those pro forma adjustments include the impact of various supply agreements entered into in connectionNon-Core segment with the Dow Distribution ("supply agreements")businesses to be divested and are adjustmentspreviously divested reflected in Corporate;
•Realignment of the remaining Non-Core businesses to "Cost of sales." Pro forma Operating EBITDA forTransportation & Industrial.
In addition, the nine months ended September 30, 2019 hasfollowing name changes occurred:
•Electronics & Imaging was renamed Electronics & Industrial;
•Transportation & Industrial was renamed Mobility & Materials;
•Safety & Construction was renamed Water & Protection.
The reporting changes have been adjusted to reflect the supply agreements if they had been effective January 1, 2018 as they are includedretrospectively reflected in the measure of profit/loss reviewed by the CODM in order to show meaningful comparability amongsegment results for all periods while assessing performance and making resource allocation decisions. There were no pro forma adjustments for the three or nine months ended September 30, 2020 and the three months ended September 30, 2019.presented.
| | | | | | | | | | | | | | | | | | | | | | | |
| Segment Information | Elect. & Imaging | Nutrition & Biosciences | Transp. & Industrial | Safety & Const. | Non-Core | Corp. | Total |
| In millions |
| Three months ended September 30, 2020 | | | | | | | |
| Net sales | $ | 1,004 | | $ | 1,467 | | $ | 1,045 | | $ | 1,249 | | $ | 331 | | $ | 0 | | $ | 5,096 | |
Operating EBITDA 1 | $ | 357 | | $ | 379 | | $ | 242 | | $ | 324 | | $ | 14 | | $ | (16) | | $ | 1,300 | |
| Equity in earnings of nonconsolidated affiliates | $ | 8 | | $ | 1 | | $ | 1 | | $ | 7 | | $ | 13 | | $ | 0 | | $ | 30 | |
| Three months ended September 30, 2019 | | | | | | | |
| Net sales | $ | 934 | | $ | 1,525 | | $ | 1,209 | | $ | 1,327 | | $ | 431 | | $ | 0 | | $ | 5,426 | |
Operating EBITDA 1 | $ | 320 | | $ | 354 | | $ | 306 | | $ | 352 | | $ | 94 | | $ | (25) | | $ | 1,401 | |
Equity in earnings of nonconsolidated affiliates 2 | $ | 10 | | $ | 0 | | $ | 1 | | $ | 7 | | $ | 26 | | $ | 0 | | $ | 44 | |
| Nine months ended September 30, 2020 | | | | | | | |
| Net sales | $ | 2,793 | | $ | 4,557 | | $ | 3,021 | | $ | 3,769 | | $ | 1,005 | | $ | 0 | | $ | 15,145 | |
Operating EBITDA 1 | $ | 887 | | $ | 1,182 | | $ | 599 | | $ | 1,041 | | $ | 149 | | $ | (102) | | $ | 3,756 | |
| Equity in earnings of nonconsolidated affiliates | $ | 27 | | $ | 2 | | $ | 3 | | $ | 19 | | $ | 121 | | $ | 0 | | $ | 172 | |
| Nine months ended September 30, 2019 | | | | | | | |
| Net sales | $ | 2,617 | | $ | 4,618 | | $ | 3,795 | | $ | 3,951 | | $ | 1,327 | | $ | 0 | | $ | 16,308 | |
Pro forma operating EBITDA 1 | $ | 854 | | $ | 1,089 | | $ | 1,036 | | $ | 1,108 | | $ | 296 | | $ | (130) | | $ | 4,253 | |
Equity in earnings of nonconsolidated affiliates 2 | $ | 18 | | $ | 0 | | $ | 3 | | $ | 22 | | $ | 92 | | $ | 0 | | $ | 135 | |
| | | | | | | | | | | | | | | | | |
| Segment Information | Elect. & Industrial | Water & Protection | Mobility & Materials | Corporate 1 | Total |
| In millions |
| Three months ended June 30, 2021 | | | | | |
| Net sales | $ | 1,320 | | $ | 1,412 | | $ | 1,270 | | $ | 133 | | $ | 4,135 | |
Operating EBITDA 2 | $ | 424 | | $ | 352 | | $ | 294 | | $ | (7) | | $ | 1,063 | |
| Equity in earnings of nonconsolidated affiliates | $ | 10 | | $ | 8 | | $ | 5 | | $ | 2 | | $ | 25 | |
| Three months ended June 30, 2020 | | | | | |
| Net sales | $ | 1,111 | | $ | 1,244 | | $ | 790 | | $ | 144 | | $ | 3,289 | |
Operating EBITDA 2 | $ | 336 | | $ | 339 | | $ | (23) | | $ | 43 | | $ | 695 | |
| Equity in earnings of nonconsolidated affiliates | $ | 10 | | $ | 5 | | $ | 7 | | $ | 80 | | $ | 102 | |
| Six months ended June 30, 2021 | | | | | |
| Net sales | $ | 2,620 | | $ | 2,740 | | $ | 2,485 | | $ | 266 | | $ | 8,111 | |
Operating EBITDA 2 | $ | 860 | | $ | 707 | | $ | 572 | | $ | (29) | | $ | 2,110 | |
| Equity in earnings of nonconsolidated affiliates | $ | 19 | | $ | 20 | | $ | 8 | | $ | 4 | | $ | 51 | |
| Six months ended June 30, 2020 | | | | | |
| Net sales | $ | 2,226 | | $ | 2,520 | | $ | 1,881 | | $ | 332 | | $ | 6,959 | |
Operating EBITDA 2 | $ | 663 | | $ | 696 | | $ | 192 | | $ | 51 | | $ | 1,602 | |
| Equity in earnings of nonconsolidated affiliates | $ | 19 | | $ | 12 | | $ | 8 | | $ | 102 | | $ | 141 | |
1.Corporate includes activity of to be divested and previously divested businesses.
2.A reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA and pro forma Operating EBITDA, as applicable, is provided below.
2.
Represents equity in earnings (losses) of nonconsolidated affiliates included in pro forma Operating EBITDA, the Company's measure of profit/loss for segment reporting purposes, which excludes significant items. Accordingly, the Non-Core segment presented above excludes restructuring charges of $1 million and $3 million for the three and nine months ended September 30, 2019, respectively, which is presented in "Equity in earnings of nonconsolidated affiliates" in the Company's interim Consolidated Statements of Operations.
| | | | | | | | |
| Reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA for the Three Months Ended September 30, 2020 and 2019 | Three Months Ended September 30, |
| In millions | 2020 | 2019 |
| Loss (income) from continuing operations, net of tax | $ | (72) | | $ | 372 | |
| + Provision for income taxes on continuing operations | 92 | | 78 | |
| Income from continuing operations before income taxes | $ | 20 | | $ | 450 | |
| + Depreciation and amortization | 780 | | 499 | |
- Interest income 1 | 3 | | 1 | |
+ Interest expense 2 | 165 | | 177 | |
- Non-operating pension/OPEB benefit 1 | 5 | | 21 | |
- Foreign exchange losses, net 1 | (10) | | (23) | |
- Significant items 3 | (333) | | (274) | |
| Operating EBITDA | $ | 1,300 | | $ | 1,401 | |
| | | | | | | | | | | |
| Reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA for the Three Months Ended June 30, 2021 and 2020 | Three Months Ended June 30, |
| In millions | 2021 | 2020 |
| Income (Loss) from continuing operations, net of tax | $ | 564 | | $ | (2,389) | |
| + | Provision for income taxes on continuing operations | 151 | | 8 | |
| Income (Loss) from continuing operations before income taxes | $ | 715 | | $ | (2,381) | |
| + | Depreciation and amortization | 333 | | 349 | |
| - | Interest income 1 | 2 | | 2 | |
| + | Interest expense | 129 | | 181 | |
| - | Non-operating pension/OPEB benefit 1 | 13 | | 8 | |
| - | Foreign exchange losses, net 1 | (8) | | (18) | |
| - | Significant items | 107 | | (2,538) | |
| Operating EBITDA | $ | 1,063 | | $ | 695 | |
1.Included in "Sundry income (expense) - net."
2. The three months ended September 30, 2020 excludes N&B financing activity. Refer to details of significant items below.
3. The significant items for the three months ended September 30, 2020 and 2019 are presented on an as reported basis. | | | | | | | | | | | |
| Reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA for the Six Months Ended June 30, 2021 and 2020 | Six Months Ended June 30, |
| In millions | 2021 | 2020 |
| Income (Loss) from continuing operations, net of tax | $ | 1,105 | | $ | (2,939) | |
| + | Provision for income taxes on continuing operations | 183 | | 102 | |
| Income (Loss) from continuing operations before income taxes | $ | 1,288 | | $ | (2,837) | |
| + | Depreciation and amortization | 661 | | 694 | |
| - | Interest income 1 | 4 | | 4 | |
| + | Interest expense | 275 | | 352 | |
| - | Non-operating pension/OPEB benefit 1 | 25 | | 19 | |
| - | Foreign exchange losses, net 1 | (17) | | (21) | |
| - | Significant items | 102 | | (3,395) | |
| Operating EBITDA | $ | 2,110 | | $ | 1,602 | |
| | | | | | | | |
| Reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA for the Nine Months Ended September 30, 2020 and 2019 | Nine Months Ended September 30, |
| In millions | 2020 | 2019 |
| Loss from continuing operations, net of tax | $ | (3,153) | | $ | (805) | |
| + Provision for income taxes on continuing operations | 100 | | 142 | |
| Loss from continuing operations before income taxes | $ | (3,053) | | $ | (663) | |
+ Pro forma adjustments 1 | — | | 122 | |
| + Depreciation and amortization | 2,326 | | 1,533 | |
- Interest income 2 | 7 | | 50 | |
+ Interest expense 3 | 519 | | 522 | |
- Non-operating pension/OPEB benefit 2 | 24 | | 60 | |
- Foreign exchange losses, net 2 | (41) | | (101) | |
+ Costs historically allocated to the materials science and agriculture businesses 4 | 0 | | 256 | |
- Significant items 5 | (3,954) | | (2,492) | |
Operating EBITDA 1 | $ | 3,756 | | $ | 4,253 | |
1. For the nine months ended September 30, 2019, operating EBITDA is on a pro forma basis. The pro forma adjustment reflects the net pro forma impact of items directly attributable to the Transactions, as applicable.
2. Included in "Sundry income (expense) - net."
3. The nine months ended September 30, 2020 excludes N&B financing activity. Refer to details of significant items below.
4. Costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205.
5. The significant items for the nine months ended September 30, 2020 are presented on an as reported basis. The significant items for the nine months ended September 30, 2019 are presented on a pro forma basis.
The significant items for the three months ended September 30, 2020 and 2019 and the nine months ended September 30, 2020 are presented on an as reported basis. The significant items for the nine months ended September 30, 2019 are presented on a pro forma basis. The following tables summarize the pre-tax impact of significant items by segment that are excluded from Operating EBITDA and pro forma Operating EBITDA above:
| | | | | | | | | | | | | | | | | | | | | | | |
| Significant Items by Segment for the Three Months Ended September 30, 2020 | Elect. & Imaging | Nutrition & Biosciences | Transp. & Industrial | Safety & Construction | Non-Core | Corporate | Total |
| In millions |
Integration and separation costs 1 | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | (127) | | $ | (127) | |
Restructuring and asset related credits (charges) - net 2 | (1) | | (5) | | 0 | | (2) | | (1) | | (5) | | (14) | |
Goodwill impairment charges 3 | — | | — | | — | | — | | (183) | | — | | (183) | |
Asset impairment charges 3, 4 | — | | — | | — | | — | | (370) | | — | | (370) | |
Gain on divestitures 5 | — | | — | | — | | — | | 393 | | — | | 393 | |
N&B financing activity - net 6 | — | | — | | — | | — | | — | | (32) | | (32) | |
| Total | $ | (1) | | $ | (5) | | $ | 0 | | $ | (2) | | $ | (161) | | $ | (164) | | $ | (333) | |
| | | | | | | | | | | | | | | | | |
| Significant Items by Segment for the Three Months Ended June 30, 2021 | Elect. & Industrial | Water & Protection | Mobility & Materials | Corporate | Total |
| In millions |
Integration and separation costs 1 | $ | 0 | | $ | 0 | | $ | 0 | | $ | (23) | | $ | (23) | |
Restructuring and asset related charges - net 2 | (2) | | 0 | | (6) | | (2) | | (10) | |
Gain on divestiture 3 | 0 | | 0 | | 0 | | 140 | | 140 | |
| Total | $ | (2) | | $ | 0 | | $ | (6) | | $ | 115 | | $ | 107 | |
1. Integration and separation costs related to strategic initiatives including the divestiture of the Held for Sale Disposal Group.
2. Includes Board approved restructuring plans and asset related charges. See Note 4 for additional information.
3. Reflected in "Sundry income (expense) - net." See Note 2 for additional information.
| | | | | | | | | | | | | | | | | |
| Significant Items by Segment for the Three Months Ended June 30, 2020 | Elect. & Industrial | Water & Protection | Mobility & Materials | Corporate | Total |
| In millions |
Integration and separation costs 1 | $ | 0 | | $ | 0 | | $ | 0 | | $ | (16) | | $ | (16) | |
Restructuring and asset related charges - net 2 | 3 | | 12 | | 10 | | (28) | | (3) | |
Goodwill impairment charge 3 | (834) | | 0 | | (1,664) | | 0 | | (2,498) | |
Asset impairment charges 4 | 0 | | 0 | | (21) | | 0 | | (21) | |
| | | | | |
| Total | $ | (831) | | $ | 12 | | $ | (1,675) | | $ | (44) | | $ | (2,538) | |
1. Integration and separation costs related to the post-DWDP Merger integration and the intended separation of the N&B Business.DWDP Distributions.
2. Includes Board approved restructuring plans and asset related charges. See Note 54 for additional information.
3. Refer toSee Note 1112 for additional information.
4. Refer toSee Note 54 for additional information.
5. Refer to Note 3 for additional information.
6. Represents interest expense, net related to the N&B Notes as well as the financing fee amortization related to the intended separation of the N&B Business. | | | | | | | | | | | | | | | | | |
| Significant Items by Segment for the Six Months Ended June 30, 2021 | Elect. & Industrial | Water & Protection | Mobility & Materials | Corporate | Total |
| In millions |
Integration and separation costs 1 | $ | 0 | | $ | 0 | | $ | 0 | | $ | (29) | | $ | (29) | |
Restructuring and asset related charges - net 2 | (2) | | 0 | | (6) | | (4) | | (12) | |
Gain on divestiture 3 | 2 | | 0 | | 0 | | 141 | | 143 | |
| Total | $ | 0 | | $ | 0 | | $ | (6) | | $ | 108 | | $ | 102 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Significant Items by Segment for the Three Months Ended September 30, 2019 | Elect. & Imaging | Nutrition & Biosciences | Transp. & Industrial | Safety & Construction | Non-Core | Corporate | Total |
| In millions |
Integration and separation costs 1 | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | (191) | | $ | (191) | |
Restructuring and asset related charges - net 2 | (35) | | (7) | | (6) | | (5) | | (2) | | (28) | | (83) | |
| Total | $ | (35) | | $ | (7) | | $ | (6) | | $ | (5) | | $ | (2) | | $ | (219) | | $ | (274) | |
1.Integration and separation costs related to post-DWDP Merger integration and business separation activities.strategic initiatives including the divestiture of the Held for Sale Disposal Group.
2. Includes Board approved restructuring plans and asset related charges. See Note 54 for additional information.
3. Reflected in "Sundry income (expense) - net." See Note 2 for additional information.
| | | | | | | | | | | | | | | | | | | | | | | |
| Significant Items by Segment for the Nine Months Ended September 30, 2020 | Elect. & Imaging | Nutrition & Biosciences | Transp. & Industrial | Safety & Construction | Non-Core | Corporate | Total |
| In millions |
Integration and separation costs 1 | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | (469) | | $ | (469) | |
Restructuring and asset related charges - net 2 | (2) | | (9) | | (15) | | (15) | | (1) | | (104) | | (146) | |
Goodwill impairment charges 3 | — | | — | | (2,498) | | — | | (716) | | — | | (3,214) | |
Asset impairment charges 3, 4 | — | | — | | (21) | | — | | (640) | | — | | (661) | |
Gain on divestitures 5 | 197 | | — | | — | | — | | 393 | | — | | 590 | |
N&B financing activity - net 6 | — | | — | | — | | — | | — | | (54) | | (54) | |
| Total | $ | 195 | | $ | (9) | | $ | (2,534) | | $ | (15) | | $ | (964) | | $ | (627) | | $ | (3,954) | |
| | | | | | | | | | | | | | | | | |
| Significant Items by Segment for the Six Months Ended June 30, 2020 | Elect. & Industrial | Water & Protection | Mobility & Materials | Corporate | Total |
| In millions |
Integration and separation costs 1 | $ | 0 | | $ | 0 | | $ | 0 | | $ | (139) | | $ | (139) | |
Restructuring and asset related charges - net 2 | (1) | | (13) | | (15) | | (102) | | (131) | |
Goodwill impairment charge 3 | (834) | | 0 | | (1,664) | | (533) | | (3,031) | |
Asset impairment charges 4 | 0 | | 0 | | (21) | | (270) | | (291) | |
Gain on divestiture 5 | 197 | | 0 | | 0 | | 0 | | 197 | |
| Total | $ | (638) | | $ | (13) | | $ | (1,700) | | $ | (1,044) | | $ | (3,395) | |
1. Integration and separation costs related to the post-DWDP Merger integration and the intended separation of the N&B Business.DWDP Distributions.
2. Includes Board approved restructuring plans and asset related charges. See Note 54 for additional information.
3. Refer toSee Note 1112 for additional information.
4. Refer toSee Note 54 for additional information.
5. Refer to Note 3 for additional information.
6. Represents interest expense, net related to the N&B Notes as well as the financing fee amortization related to the intended separation of the N&B Business.
| | | | | | | | | | | | | | | | | | | | | | | |
Significant Items by Segment for the Nine Months Ended September 30, 2019
(Pro Forma) | Elect. & Imaging | Nutrition & Biosciences | Transp. & Industrial | Safety & Construction | Non-Core | Corporate | Total |
| In millions |
Integration and separation costs 1 | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | (976) | | $ | (976) | |
Restructuring and asset related charges - net 2 | (42) | | (56) | | (18) | | (27) | | (2) | | (85) | | (230) | |
Goodwill impairment charges 3 | — | | (933) | | — | | — | | (242) | | — | | (1,175) | |
Asset impairment charges 4 | — | | (63) | | — | | — | | — | | — | | (63) | |
Income tax relates item 5 | — | | — | | — | | (48) | | — | | — | | (48) | |
| Total | $ | (42) | | $ | (1,052) | | $ | (18) | | $ | (75) | | $ | (244) | | $ | (1,061) | | $ | (2,492) | |
1.Integration and separation costs related to the DWDP Merger, post-DWDP Merger integration and business separation activities.
2. Includes Board approved restructuring plans and asset related charges. See Note 5 for additional information.
3. Refer to Note 11 for additional information.
4. Refer to Note 5 for additional information.
5. Charge includedReflected in "Sundry income (expense) - net" which reflects a reduction in gross proceeds from lower withholding taxes related to a prior year legal settlement.net." See Note 2 for additional information.
NOTE 23 - SUBSEQUENT EVENTS
Laird Performance Materials
On July 1, 2021, DuPont completed the acquisition of Laird Performance Materials (“Laird PM”) from Advent International (“Laird PM Acquisition”) for aggregate, adjusted consideration of approximately $2.4 billion, which included net upward adjustments of approximately $100 million for acquired cash and net working capital, among other items.
The Company will apply the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” to the Laird PM Acquisition which requires that the Laird PM assets acquired and liabilities assumed be recognized on the Company’s balance sheet at their respective fair values as of the acquisition date. The Company expects to complete the preliminary purchase price allocation for the business combination during the third quarter of 2021. Due to the timing of the acquisition, as of the date of issuance of these interim Consolidated Financial Statements, the Company is not yet able to provide the amounts recognized as of the acquisition date for major classes of Laird PM assets acquired and liabilities assumed.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s discussion and analysis of financial condition and results of operations is provided as a supplement to, and should be read in conjunction with, the interim Consolidated Financial Statements and related notes to enhance the understanding of the Company’s operations and present business environment. Components of management’s discussion and analysis of financial condition and results of operations include:
•Recent Developments
•Result of Operations
•Segment Results
•Changes in Financial Condition
Overview
As of June 30, 2021, the Company has $6.6 billion of working capital and approximately $4.0 billion in cash and cash equivalents. The Company expects its cash and cash equivalents, cash generated from operations, and ability to access the debt capital markets to provide sufficient liquidity and financial flexibility to meet the liquidity requirements associated with its continued operations. The Company continually assesses its liquidity position, including possible sources of incremental liquidity, in light of the current economic environment, capital market conditions and Company performance.
On February 1, 2021, DuPont completed the separation and distribution of the Nutrition & Biosciences business segment (the "N&B Business"), and merger of Nutrition & Biosciences, Inc. (“N&B”), a DuPont subsidiary formed to hold the N&B Business, with a subsidiary of International Flavors & Fragrances Inc. ("IFF"). The distribution was effected through an exchange offer (the “Exchange Offer”) where, on the terms and subject to the conditions of the Exchange Offer, eligible participating DuPont stockholders had the option to tender all, some or none of their shares of common stock, par value $0.01 per share, of DuPont (the “DuPont Common Stock”) for a number of shares of common stock, par value $0.01 per share, of N&B (the “N&B Common Stock”) and which resulted in all shares of N&B Common Stock being distributed to DuPont stockholders that participated in the Exchange Offer. The consummation of the Exchange Offer was followed by the merger of N&B with a wholly owned subsidiary of IFF, with N&B surviving the merger as a wholly owned subsidiary of IFF (the “N&B Merger” and, together with the Exchange Offer, the “N&B Transaction”). In connection with and in accordance with the terms of the N&B Transaction, prior to consummation of the Exchange Offer and the N&B Merger, DuPont received a one-time cash payment of approximately $7.3 billion, (the "Special Cash Payment"), which is subject to post-closing adjustment pursuant to the terms of the N&B Separation and Distribution Agreement. The company used a portion of the proceeds to retire its $3 billion term loan facilities on February 1, 2021 and used the proceeds to fund the redemption, in accordance with their terms, of the $2 billion May 2020 Notes issuance. See discussion below and within “Liquidity and Capital Resources” for more information.
DWDP Merger and DWDP Distributions
Effective August 31, 2017, pursuant to the merger of equals transactionstransaction contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017 ("DWDP Merger Agreement"), The Dow Chemical Company ("Historical Dow"TDCC") and E. I. du Pont de Nemours and Company ("Historical EID") each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, Historical DowTDCC and Historical EID became subsidiaries of DowDuPont (the "DWDP Merger"). Prior to the DWDP Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the DWDP Merger Agreement. Historical Dow was determined to be the accounting acquirer in the DWDP Merger.
DowDuPont completed a series of internal reorganizations and realignment steps in order to separate into three, independent, publicly traded companies - one for each of its agriculture, materials science and specialty products businesses. DowDuPont formed two wholly owned subsidiaries: Dow Inc. ("Dow", formerly known as Dow Holdings Inc.), to serve as a holding company for its materials science business, and Corteva, Inc. ("Corteva"), to serve as a holding company for its agriculture business.
Effective as of 5:00 p.m. onOn April 1, 2019, DowDuPontthe Company completed the separation of itsthe materials science business into a separate and independent public company by way of a distributionthrough the spin-off of Dow through a pro rata dividend in-kind of all of the then-issued and outstanding shares ofInc., including Dow’s common stock, par value $0.01 per share (the “Dow Common Stock”), to holders of the Company’s common stock, par value $0.01 per share (the “DowDuPont common stock”), as of the close of business on March 21, 2019subsidiary TDCC (the “Dow Distribution”).
Effective as of 12:01 a.m. on On June 1, 2019, DuPont de Nemours, Inc. (formerly known as DowDuPont Inc.),the Company completed the separation of itsthe agriculture business into a separate and independent public company by way of a distributionthrough the spin-off of Corteva through a pro rata dividend in-kind of all of the then-issued and outstanding shares ofincluding Corteva’s common stock, par value $0.01 per sharesubsidiary EID, (the “Corteva Common Stock”), to holders of the Company’s common stock, par value $0.01 per share, as of the close of business on May 24, 2019 (the “Corteva Distribution”Distribution and together with the Dow Distribution, the “DWDP Distributions”).
Following the Corteva Distribution, the Company holds the specialty products business.business as continuing operations. On June 1, 2019, DowDuPont changed its registered name from "DowDuPont Inc." to "DuPont de Nemours, Inc." doing business as "DuPont" (the "Company"). Beginning on June 3, 2019, the Company's common stock is traded on the NYSE under the ticker symbol "DD."
N&B Transaction
The financial position of DuPont as of December 31, 2020 and the results of operations of DuPont for the 2019 interim periods presented reflectthree and six months ended June 30, 2021 and 2020 present the historical financial results of Dow and CortevaN&B as discontinued operations, as applicable.operations. The cash flows and comprehensive income related to Dow and CortevaN&B have not been segregated and are included in the interim Consolidated Statements of Cash Flows and interim Consolidated Statements of Comprehensive Income, respectively, for the applicable period.all periods presented. Unless otherwise indicated, the information in the notes to the interim Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow or Corteva.N&B. See Note 2 to the interim Consolidated Financial Statements for additional information on the N&B Transaction.
The statements of operations and pro forma statements of operations included in this report and as discussed below include costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with Financial Accounting Standards Codification 205, "Presentation of Financial Statements" ("ASC 205") and thus are reflected in the Company's results of continuing operations. A significant portion of these costs relate to Historical Dow and consist of leveraged services provided through service centers, as well as other corporate overhead costs related to information technology, finance, manufacturing, research & development, sales & marketing, supply chain, human resources, sourcing & logistics, legal and communications, public affairs & government affairs functions. These costs are no longer incurred by the Company2021 Segment Realignment
Immediately following the DWDP Distributions.
On December 15, 2019, the Company entered into definitive agreements to separateseparation and combine the Nutrition & Biosciences business segment (the "N&B Business") with International Flavors & Fragrances Inc. ("IFF") in a tax-efficient Reverse Morris Trust transaction, (the "Intended N&B Transaction"). The transaction is expected to close in the first quarter of 2021, subject to approval by IFF shareholders and other customary closing conditions, including regulatory approvals and receipt by DuPont of an opinion of tax counsel. The financial resultsdistribution of the N&B Business, are included in continuing operationsthe Company made changes to its management and reporting structure (the “2021 Segment Realignment”) (see Note 22 for theadditional details). The reporting changes have been retrospectively reflected for all periods presented.
RECENT DEVELOPMENTS
COVID-19Laird Performance Materials
On July 1, 2021, DuPont completed the acquisition of Laird Performance Materials (“Laird”) from Advent International (“Laird PM Acquisition”). The novel coronavirus (“COVID-19”) pandemic has resulted in significant economic disruptionLaird PM Acquisition includes cash consideration paid to Advent International of approximately $2.4 billion, which reflects adjustments, including for acquired cash and continues to adversely impact the broader global economy, including certain of the Company’s customers and suppliers. Given the dynamic nature of this situation, the Company cannot reasonably estimate the impacts of COVID-19 on its financial condition, results of operations or cash flows into the foreseeable future. The ultimate extent of the effects of the COVID-19 pandemic on the Company is highly uncertain and will depend on future developments, and such effects could exist for an extended period of time even after the pandemic subsides.net working capital.
DuringDivestitures
In the third quarter of 2020, the Company benefited from strong demand in certain key end-markets, principally electronics, water filtration, health & wellness and personal protection. In addition, third quarter 2020 results reflect notable improvements in automotive markets, along with residential construction, compared to second quarter of 2020. Although management currently expects continued improvement from certain markets in the fourth quarter of 2020, the COVID-19 pandemic is expected to continue to adversely impact demand in aerospace, commercial construction, oil & gas, and select industrial end-markets. In response to this uncertainty, the Company has delayed certain capital investments in select sectors.
Sale of TCS/HSC Disposal Group
In the third quarter of 2020,2021, the Company completed the sale of its trichlorosilaneSolamet® business (“TCS Business”) along with its equity ownership interest in DC HSC Holdings LLC and Hemlock Semiconductor L.L.C. (the "HSC Group,” and together with the TCS Business, the “TCS/HSC Disposal Group” andunit, which is part of Corporate. Total consideration received related to the sale of the TCS/HSC Disposal Group, the “TCS/HSC Disposal”) to the HSC Group, bothbusiness is approximately $190 million, of which were part of$47 million will be received in the Non-Core segment. In connection with the TCS/HSC Disposal, the Company received $550 million in cash at closing, subject to certain claw-back provisions, and will receive an additional $175 million in equal installments over the course of the next three years associated with the settlement of an existing supply agreement dispute with the HSC Group.third quarter. The TCS/HSC Disposalsale resulted in a net pre-tax benefitgain of $393$140 million ($232105 million net of tax), including the settlement of the supply agreement dispute and after allocation of goodwill to the TCS Business. The net pre-tax benefit is which was recorded in “Sundry"Sundry income (expense) – net”- net" in the Company’sCompany's interim Consolidated Statements of Operations. ReferSee Note 2 to Note 3 of the interim Consolidated Financial Statements.
Non-Core Impairments
Multiple triggering events occurred in the third quarter of 2020 requiring the Company to perform impairment analyses associated with its Non-Core segment. As a result of the analyses performed, the Company recognized aggregate pre-tax, non-cash goodwill impairment charges of $183 million recorded within "Goodwill impairment charges" and aggregate pre-tax, non-cash asset impairment charges of$370 million recorded within “Restructuring and asset related charges - net” in the interim Consolidated Statements of Operations. Refer to Notes 3, 5, and 11 of the interim Consolidated Financial Statements.
Nutrition & Biosciences Notes Offering
On September 16, 2020, Nutrition & Biosciences, Inc. (presently a wholly owned subsidiary of DuPont) (“N&B Inc.”) completed an offering of $6.25 billion of senior unsecured notes (the “N&B Notes Offering”). The net proceeds of approximately $6.2 billion from the N&B Notes Offering were deposited into an escrow account. Prior to the intended merger of DuPont's Nutrition & Biosciences business with IFF, N&B Inc. will make a special cash payment of $7.3 billion, (the “Special Cash Payment”), subject to adjustment, to DuPont, which N&B Inc. will fund with the net proceeds from the N&B Notes Offering together with borrowings under N&B Inc.’s existing Term Loan facilities. Refer to Notes 6 and 12of the interim Consolidated Financial Statements.for additional information.
Dividends
On April 28, 2021, the Company announced that its Board declared a second quarter dividend of $0.30 per share payable on June 25, 2020,15, 2021, to shareholders of record on May 28, 2021.
On June 17, 2021, the Company announced that its Board of Directors declared a third quarter dividend of $0.30 per share paidpayable on September 15, 2020,2021, to shareholders of record on July 31, 2020.
On October 14, 2020, the Company announced that its Board of Directors declared a fourth quarter dividend of $0.30 per share payable on December 15, 2020, to shareholders of record on November 30, 2020.
SELECTED FINANCIAL DATA
| | | | | | | | | | | | | | |
| Three Months Ended September 30, | Nine Months Ended September 30, |
| In millions, except per share amounts | 2020 | 2019 | 2020 | 2019 |
| Net sales | $5,096 | $5,426 | $15,145 | $16,308 |
| | | | |
| | | | |
| Cost of sales | $3,392 | $3,531 | $10,001 | $10,648 |
| Percent of net sales | 66.6% | 65.1% | 66.0% | 65.3% |
| | | | |
| Research and development expenses | $199 | $225 | $644 | $724 |
| Percent of net sales | 3.9% | 4.1% | 4.3% | 4.4% |
| | | | |
| Selling, general and administrative expenses | $524 | $645 | $1,698 | $2,013 |
| Percent of net sales | 10.3% | 11.9% | 11.2% | 12.3% |
| | | | |
| Effective tax rate - continuing operations | 460.0% | 17.3% | (3.3)% | (21.4)% |
| | | | |
| Net (loss) earnings available for DuPont common stockholders | $(79) | $372 | $(3,173) | $322 |
| | | | |
| (Loss) earnings per common share – basic | $(0.11) | $0.50 | $(4.31) | $0.43 |
| (Loss) earnings per common share – diluted | $(0.11) | $0.50 | $(4.31) | $0.43 |
RESULTS OF OPERATIONS
| | Summary of Sales Results | Summary of Sales Results | Three Months Ended September 30, | Nine Months Ended September 30, | Summary of Sales Results | Three Months Ended June 30, | Six Months Ended June 30, |
| In millions | In millions | 2020 | 2019 | 2020 | 2019 | In millions | 2021 | 2020 | 2021 | 2020 |
| Net sales | Net sales | $ | 5,096 | | $ | 5,426 | | $ | 15,145 | | $ | 16,308 | | Net sales | $ | 4,135 | | $ | 3,289 | | $ | 8,111 | | $ | 6,959 | |
|
The following table summarizes sales variances by segment and geographic region from the prior year:
| | Sales Variances by Segment and Geographic Region | Sales Variances by Segment and Geographic Region | Sales Variances by Segment and Geographic Region |
| Three Months Ended September 30, 2020 | Nine Months Ended September 30, 2020 | |
| Percentage change from prior year | Percentage change from prior year | Local Price & Product Mix | Currency | Volume | Portfolio & Other | Total | Local Price & Product Mix | Currency | Volume | Portfolio & Other | Total | Percentage change from prior year | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 |
| Electronics & Imaging | (1) | % | — | % | 9 | % | (1) | % | 7 | % | (1) | % | — | % | 8 | % | — | % | 7 | % | |
| Nutrition & Biosciences | — | | — | | (4) | | — | | (4) | | 1 | | (1) | | (1) | | — | | (1) | | |
| Transportation & Industrial | (5) | | — | | (9) | | — | | (14) | | (5) | | — | | (15) | | — | | (20) | | |
| Safety & Construction | 1 | | — | | (10) | | 3 | | (6) | | 2 | | (1) | | (8) | | 2 | | (5) | | |
| Non-Core | 5 | | — | | (18) | | (10) | | (23) | | 3 | | (1) | | (17) | | (9) | | (24) | | |
| Percentage change from prior year | | Percentage change from prior year | Local Price & Product Mix | Currency | Volume | Portfolio & Other | Total | Local Price & Product Mix | Currency | Volume | Portfolio & Other | Total |
| — | % | 2 | % | 17 | % | — | % | 19 | % | (1) | % | 3 | % | 16 | % | — | % | 18 | % |
| Water & Protection | | Water & Protection | — | | 3 | | 11 | | — | | 14 | | — | | 3 | | 6 | | — | | 9 | |
| Mobility & Materials | | Mobility & Materials | 13 | | 6 | | 42 | | — | | 61 | | 6 | | 4 | | 22 | | — | | 32 | |
| Corporate | | Corporate | 7 | | 3 | | 2 | | (20) | | (8) | | 3 | | 2 | | (1) | | (24) | | (20) | |
| Total | Total | — | % | — | % | (6) | % | — | % | (6) | % | — | % | (1) | % | (6) | % | — | % | (7) | % | Total | 3 | % | 4 | % | 20 | % | (1) | % | 26 | % | 2 | % | 3 | % | 13 | % | (1) | % | 17 | % |
| U.S. & Canada | U.S. & Canada | (1) | % | — | % | (9) | % | (1) | % | (11) | % | (1) | % | — | % | (9) | % | — | % | (10) | % | U.S. & Canada | 3 | % | — | % | 21 | % | (3) | % | 21 | % | 1 | % | — | % | 7 | % | (3) | % | 5 | % |
EMEA 1 | EMEA 1 | (1) | | 2 | | (14) | | — | | (13) | | — | | (1) | | (12) | | — | | (13) | | EMEA 1 | — | | 9 | | 27 | | — | | 36 | | (2) | | 8 | | 12 | | — | | 18 | |
| Asia Pacific | Asia Pacific | (1) | | — | | 4 | | — | | 3 | | (1) | | (1) | | 2 | | — | | — | | Asia Pacific | 5 | | 3 | | 15 | | — | | 23 | | 3 | | 3 | | 17 | | — | | 23 | |
| Latin America | Latin America | 5 | | (6) | | (8) | | (1) | | (10) | | 3 | | (5) | | (11) | | (1) | | (14) | | Latin America | (1) | | 4 | | 57 | | — | | 60 | | 3 | | (2) | | 22 | | — | | 23 | |
| Total | Total | — | % | — | % | (6) | % | — | % | (6) | % | — | % | (1) | % | (6) | % | — | % | (7) | % | Total | 3 | % | 4 | % | 20 | % | (1) | % | 26 | % | 2 | % | 3 | % | 13 | % | (1) | % | 17 | % |
1.Europe, Middle East and Africa.
The Company reported net sales for the three months ended SeptemberJune 30, 20202021 of $5.1$4.1 billion, down 6up 26 percent from $5.4$3.3 billion for the three months ended SeptemberJune 30, 2019,2020, due to a 620 percent decreaseincrease in volume. Localvolume, a 4 percent favorable currency impact, and a 3 percent increase in local price and product mix currency, and portfolio remained flat. Volume declined across all geographic regions with the exception of Asia Pacific where it increased 4 percent. Volume declined across all segments with the exception of Electronics & Imaging (up 9 percent). The most notable volume decreases were in Non-Core (down 18 percent), Safety & Construction (down 10 percent) and Transportation & Industrial (down 9 percent). Currency was flat compared with the same period last year in all segments. Portfolio and other changes were flat overall while Non-Core saw a decrease of 10 percent. Local price was flat compared with the same period last year. Local price increased in Latin America (up 5 percent) and in Non-Core (up 5 percent) and Safety & Construction (up 1 percent).
Net sales for the nine months ended September 30, 2020 were $15.1 billion, down 7 percent from $16.3 billion for the nine months ended September 30, 2019, due to a 6 percent decrease in volume andoffset by a 1 percent unfavorable currency impact. Local price and product mix anddecline in portfolio actions remained flat.actions. Volume declinedincreased across all geographic regions with the exception of Asia Pacific where itoperating segments, Mobility & Materials (up 42 percent), Electronics & Industrial (up 17 percent), and Water & Protection (up 11 percent). Volume increased 2 percent. Volume declinedsignificantly across all segments with the exception of Electronics & Imaging (up 8 percent). The most notable volume decreases were in Non-Core (down 17 percent), Transportation & Industrial (down 15 percent) and Safety-Construction (down 8 percent).regions. Currency was down 1up 4 percent compared with the same period last year, driven primarily by EMEA (up 9 percent), Latin American currencies (down 5America (up 4 percent) and EMEA and Asia Pacific currencies (down 1(up 3 percent). Local price was up 3 percent each)with the same period last year driven by Mobility & Materials (up 13 percent). Portfolio and other changes partially offset sales growth with a 1 percent decrease which impacted Corporate (down 20 percent).
Net sales for the six months ended June 30, 2021 were flat overall while Non-Core saw$8.1 billion, up 17 percent from $7.0 billion for the six months ended June 30, 2020, due to a negative13 percent increase in volume, a 3 percent favorable currency impact, on sales fromand a 2 percent increase in local price and product mix offset by a 1 percent decline in portfolio changes (down 9actions. Volume increased across all operating segments, the most notable volume increases were in Mobility & Materials (up 22 percent), Electronics & Industrial (up 16 percent) and Water & Protection (up 6 percent). Volume grew across all geographic regions. Currency was up 3 percent compared with the same period last year, driven primarily by EMEA (up 8 percent) and Asia Pacific currencies (up 3 percent). Local price and product mix was flat comparedup 2 percent with the same period last year. Local price increased in Latin America (up 3across all regions except EMEA (down 2 percent). Portfolio and in all segments except Transportation & Industrialother changes decreased 1 percent primarily due to the sale of businesses within Corporate (down 5 percent) and Electronics & Imaging (down 124 percent).
Cost of Sales
Cost of sales was $3.4$2.7 billion for the three months ended SeptemberJune 30, 2020, down2021, up from $3.5$2.3 billion for the three months ended SeptemberJune 30, 20192020. Cost of sales increased for the three months ended June 30, 2021 primarily due to lowerincreased sales volume, currency impacts, and cost synergieshigher raw materials and logistics costs partially offset by approximately $60$150 million of charges in the prior year associated with temporarily idling several manufacturing plants to align supply with demand mainly in the Transportation & Industrial and Safety & Construction segments.due to COVID-19.
Cost of sales as a percentage of net sales for the three months ended SeptemberJune 30, 20202021 was 6764 percent compared with 6570 percent for the three months ended SeptemberJune 30, 2019, driven mainly by the charges associated with temporary idling several manufacturing plans referenced above.2020.
For the ninesix months ended SeptemberJune 30, 2020,2021, cost of sales was $10.0$5.2 billion, downup from $10.6$4.6 billion for the ninesix months ended SeptemberJune 30, 2019.2020. Cost of sales decreasedincreased for the ninesix months ended SeptemberJune 30, 20202021 primarily due to lowerincreased sales volume, cost synergies, currency impacts, and lowerhigher raw materials and logistics costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205 and therefore remained as costs of continuing operations for periods prior to the DWDP Distributions,partially offset by approximately $220$150 million of charges in the prior year associated with temporarily idling several manufacturing plants to align supply with demand due to COVID-19, driven primarily by the Transportation & Industrial segment.COVID-19.
Cost of sales as a percentage of net sales for the ninesix months ended SeptemberJune 30, 20202021 was 6664 percent compared with 6566 percent for the ninesix months ended SeptemberJune 30, 2019.2020.
Research and Development Expenses ("R&D")
R&D expenses totaled $199$148 million in the thirdsecond quarter of 2020,2021, down slightly from $225$153 million in the thirdsecond quarter of 2019.2020. R&D as a percentage of net sales was 4 percent and 5 percent for the three months ended SeptemberJune 30, 2021 and 2020, and 2019.respectively.
For the first ninesix months of 2020,2021, R&D expenses totaled $644$304 million, down from $724$326 million in the first ninesix months of 2019.2020. R&D as a percentage of net sales was 4 percent and 5 percent for the ninesix months ended SeptemberJune 30, 20202021 and 2019.2020. The decrease for the six months ended June 30, 2021 as compared with the same period of the prior year was primarily due to productivity actions and cost reductions related to COVID-19.
Selling, General and Administrative Expenses ("SG&A")
SG&A expenses were $524$459 million in the thirdsecond quarter of 2020, down2021, up from $645$414 million in the thirdsecond quarter of 2019 primarily due to productivity actions and reduced spending. SG&A as a percentage of net sales was 10 percent and 12 percent for the three months ended September 30, 2020 and 2019, respectively.
For the first nine months of 2020, SG&A expenses totaled $1,698 million, down from $2,013 million in the first nine months of 2019.2020. SG&A as a percentage of net sales was 11 percent and 1213 percent for the ninethree months ended SeptemberJune 30, 2021 and 2020, and 2019, respectively.
The decreaseincrease for the ninethree months ended SeptemberJune 30, 20202021 as compared with the same period of the prior year was primarily due to productivity actions, reduced spendingcurrency fluctuations and higher personnel related expenses.
For the absencefirst six months of 2021, SG&A costs previously allocatedexpenses totaled $915 million, up from $896 million in the first six months of 2020. SG&A as a percentage of net sales was 11 percent and 13 percent for the six months ended June 30, 2021 and 2020, respectively. The increase for the six months ended June 30, 2021 as compared with the same period of the prior year was primarily due to the materials sciencecurrency fluctuations and agriculture businesses that did not meet the definition of expenseshigher personnel related to discontinued operations in accordance with ASC 205 and therefore remained as costs of continuing operations for periods prior to the DWDP Distributions.expenses.
Amortization of Intangibles
Amortization of intangibles was $530$167 million in the second quarter of 2021, down from $177 million in the second quarter of 2020. In the first six months of 2021, amortization of intangibles was $334 million, down from $355 million in the same period of the prior year. The decrease in the amortization of intangibles for the three and six months ended 2021 compared with the same period of the prior year is due to the sale of the TCS business in the third quarter of 2020, up from $247 millioncoupled with the classification of the Biomaterials business unit as held for sale in the third quarter of 2019. In the first nine months of 2020, amortization of intangibles was $1,591 million, up from $755 million in the same period last year. The increase was primarily due2020. See Note 12 to the amortization of the Nutrition and Biosciences tradenames that were reclassified to definite-lived intangibles in the fourth quarter of 2019 in connection with the Intended N&B Transaction.Consolidated Financial Statements for additional information on intangible assets.
Restructuring and Asset Related Charges - Net
Restructuring and asset related charges - net were $384$10 million in the thirdsecond quarter of 2020, up2021, down from $82$24 million in the thirdsecond quarter of 2019.2020. The activity in the thirdsecond quarter of 2020 included asset impairment charges in the Non-Core segment of $318 million related2021 is due to long-lived assets and $52 million related to indefinite-lived intangible assets, and a $14$10 million charge related to the 2020 Restructuring Program. The chargesactivity in the thirdsecond quarter of 2019 included a $69 million charge related to the 2019 Restructuring Program and a $13 million charge related to the DowDuPont Cost Synergy Program.
In the first nine months of 2020, restructuring and asset related charges - net were $807 million, up from $290 million in the same period last year. The activity for the nine months of 2020 included asset impairment charges in the Non-Core segment of $588 million related to long-lived assets and $52 million related to indefinite-lived intangible assets, a $21 million impairment charge related to indefinite-lived intangible assets in the TransportationMobility & IndustrialMaterials segment, a $140$14 million charge related to the 2020 Restructuring Program, a $13 million credit related to the 2019 Restructuring Program and a $2 million charge related to the DowDuPont Cost Synergy Program.
In the first six months of 2021, restructuring and asset related charges - net were $12 million, down from $422 million in the same period last year. The activity for the six months of 2021 is related to the 2020 Restructuring Program. The charges in the same period of 2020 included a $270 million impairment charge related to long-lived assets in Corporate, a $21 million impairment charge related to indefinite-lived intangible assets in the Mobility & Materials segment, a $119 million charge related to the 2020 Restructuring Program, a $5 million charge related to the 2019 Restructuring Program and a $4$7 million charge related to the DowDuPont Cost Synergy Program. The charges in the same period of 2019 included a charge of $122 million related to the 2019 Restructuring Program, a $105 million charge related to the DowDuPont Cost Synergy Program, and $63 million impairment charge related to an equity method investment.
See Note 54 to the interim Consolidated Financial Statements for additional information.
Goodwill Impairment ChargesCharge
Goodwill impairment charges were $183 million in the third quarter of 2020. There were no goodwill related impairments infor the third quarter of 2019. Goodwill impairment charges were $3,214 million in the ninethree and six months ended SeptemberJune 30, 2021. For the three months ended June 30, 2020, up from $1,175 million in the same period last year. The third quarter of 2020 goodwill impairment charges relatecharge was $2,498 million related to the Non-Core segment. InMobility & Materials and Industrial Solutions reporting units. For the first ninesix months ofended June 30, 2020, the goodwill impairment charges relatecharge was $3,031 million related to Corporate and the TransportationMobility & Materials and Industrial and Non-Core segments. Goodwill impairment charges for the first nine months of 2019 relate to the Nutrition & Biosciences and Non-Core segments.Solutions reporting units. See Note 1112 to the interim Consolidated Financial Statements for additional information.
Integration and Separation Costs
Integration and separation costs, which primarily reflectconsist of financial advisory, information technology, legal, accounting, consulting, and other professional advisory fees. For the three and six months ended June 30, 2021, these costs were primarily associated
with the execution of activities related to strategic initiatives including the Intended N&B Transaction beginning inplanned divestiture of the fourth quarterHeld for Sale Disposal Group and the divestiture of 2019,the Solamet® business unit. For the three and six months ended June 30, 2020, these costs were primarily associated with the execution of activities related to the post-DWDP Merger integration and activitiesthe DWDP Distributions. These costs were $23 million in the second quarter of 2021, up from $16 million in the second quarter of 2020. The increase is related to the DWDP Distributions, were $127 millionexecution of these strategic initiatives in the third quarter of 2020, down from $191 million in the third quarter of 2019.2021. In the first ninesix months of 2020,2021, integration and separation costs were $469$29 million, down from $1,149$139 million in the same period last year. The decline was primarily related to the timing of the post-DWDP Merger integration activities and the DWDP Distributions.
Equity in Earnings of Nonconsolidated Affiliates
The Company's share of the earnings of nonconsolidated affiliates was $30$25 million in the thirdsecond quarter of 2020,2021, down from $43$102 million in the third quarter of 2019 primarily due to lower HSC Group equity earnings coupled with the sale of the Company's equity interest in the HSC Group in the thirdsecond quarter of 2020. In the first ninesix months of 2020,2021, the Company's share of the earnings of nonconsolidated affiliates was $172$51 million, updown from $132$141 million in the first ninesix months of 2019.2020. The increasedecrease is primarily due to higherthe sale of the HSC Group equity earnings in the first half of 2020, mainly driven by customer settlements in the secondthird quarter of 2020.
Sundry Income (Expense) - Net
Sundry income (expense) - net includes a variety of income and expense items such as foreign currency exchange gains or losses, interest income, dividends from investments, gains and losses on sales of investments and assets, non-operating pension and other post-employment benefit plan credits or costs, and certain litigation matters. Sundry income (expense) - net in the thirdsecond quarter of 20202021 was income of $430$146 million compared with incomea loss of $79$11 million in the thirdsecond quarter of 2019.
2020. The thirdsecond quarter of 2020 included a net pre-tax benefit of $393 million related to the TCS/HSC Disposal in the Non-Core segment, which includes the settlement of a supply agreement dispute. The third quarter of 20192021 included benefits related to salesthe sale of assets within the Corporate segment of $64$140 million and income related to non-operating pension and other post-employment benefit credits of $21$13 million, partially offset by foreign currency exchange losses of $23$8 million. The second quarter of 2020 included foreign exchange losses of $18 million, partially offset by income related to non-operating pension and other post-employment benefit credits of $8 million.
In the first ninesix months of 2020,2021, sundry income (expense) - net was income of $627$162 million compared with income of $144 million in the$201 million. The first ninesix months of 2019. The first nine months of 20202021 included a net pre-tax net benefit of $393 million associated with the TCS/HSC Disposal as discussed above, a gain of $197 millionbenefits related to the sale of assets within the Compound Semiconductor Solutions business unit in theCorporate and Electronics & ImagingIndustrial segment of $140 million and $24 million, respectively, and income related to non-operating pension and other post-employment benefit credits of $24$25 million, partially offset by miscellaneous expenses of $17 million and foreign currency exchange losses of $17 million. The first six months of 2020 included benefits related to the sale of the Compound Semiconductor Solutions business unit of $197 million, income related to non-operating pension and other post employment benefit credits of $19 million and miscellaneous income of $6 million, partially offset by foreign currency exchange losses of $41$21 million. The first nine months of 2019 included benefits related to sales of assets of $127 million, income related to non-operating pension and other post-employment benefit plans of $60 million and interest income of $50 million, partially offset by foreign currency exchange losses of $101 million and a $48 million charge reflecting a reduction in gross proceeds from lower withholding taxes related to a prior year legal settlement.
Interest Expense
Interest expense was $197$129 million inand $181 million for the third quarter ofthree months ended June 30, 2021 and 2020, up from $177respectively. Interest expense was $275 million inand $352 million for the third quarter of 2019.six months ended June 30, 2021 and 2020, respectively. The increasedecrease for both the three and six months ended June 30, 2021 compared to the three and six months ended June 30, 2020 primarily relates to the maturity of the November 2020 Notes, the early repayment of the $3.0 billion Term Loan Facilities on February 1, 2021, and absence of commercial paper borrowings, partially offset by financing costs associated with the Intended N&B transaction.
In the first nine months of 2020, interest expense was $573 million, up from $493 million in the same period last year. The increase primarily relatesrelated to financing costs associated with the Intended N&B Transaction and the May Debt Offering. Refer to Note 13 to the interim Consolidated Financial Statements for additional information.
Provision for Income Taxes on Continuing Operations
The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attribute. The effective tax rate on continuing operations for the thirdsecond quarter of 20202021 was 460.021.1 percent, compared with an effective tax rate of 17.3(0.3) percent for the thirdsecond quarter of 2019. The effective tax rate for the third quarter of 2020 was principally the result of a non-tax-deductible goodwill impairment charge and a non-tax-deductible goodwill allocation in connection with the TCS/HSC Disposal impacting the Non-Core segment in the third quarter. The effective tax rate for the third quarter of 2019 was favorably impacted by, among other items, tax benefits related to the adjustment of certain unrecognized benefits for positions taken on items from a prior year.
2020. For the first ninesix months of 2020,2021, the effective tax rate on continuing operations was (3.3)14.2 percent, compared with (21.4)(3.6) percent for the first ninesix months of 2019.2020. The effective tax rate for the first ninesix months of 2021 was principally the result of a $59 million tax benefit related to the step-up in tax basis in the goodwill of the Company’s European regional headquarters legal entity. The effective tax rate for the second quarter and for the first six months of 2020 was principally the result of athe non-tax-deductible goodwill impairment charge impacting the Non-Core segment in the first and third quarter and a non-tax-deductible goodwill impairment charge impacting the Transportation and Industrial segment in the second quarter, coupled with an allocation of non-tax-deductible goodwill related to the TCS/HSC Disposal. The tax rate for the first nine months of 2019 was principally the result of non-tax-deductible goodwill impairment charges impacting the Nutrition & Biosciences and Non-Core segments. See Note 11 to the interim Consolidated Financial Statements for additional information on the goodwill impairment charges.Corporate.
Income from Discontinued Operations, Net of Tax
In the third quarter of 2020 and for the first nine months of 2020, the Company did not have activity from discontinued operations. In the third quarter of 2019 and for the nine months of 2019, income from discontinued operation, net of tax was $5 million and $1,217 million, respectively. The decrease period over period is attributable to the timing of the DWDP Distributions. Refer to Note 3 to the interim Consolidated Financial Statements for additional information.
Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests was $7 million in the third quarter of 2020, up from $5 million in the third quarter of 2019. For the first nine months of 2020, net income attributable to noncontrolling interests was $20 million, down from $90 million for the same period last year due to the timing of the DWDP Distributions.
SUPPLEMENTAL UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following supplemental unaudited pro forma financial information (the “unaudited pro forma financial statements”) is derived from DuPont’s Consolidated Financial Statements, adjusted to give effect to certain events directly attributable to the DWDP Distributions. In contemplation of the DWDP Distributions and to achieve the respective credit profiles of each of the current companies, in the fourth quarter of 2018, DowDuPont borrowed $12.7 billion under the 2018 Senior Notes and entered the Term Loan Facilities with an aggregate principal amount of $3.0 billion. Additionally, DuPont issued approximately $1.4 billion in commercial paper in May 2019 in anticipation of the Corteva Distribution (the “Funding CP Issuance” together with the 2018 Senior Notes and the Term Loan Facilities, the "Financings"). The unaudited pro forma financial statements for the nine months ended September 30, 2019 were prepared in accordance with Article 11 of Regulation S-X. The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the DWDP Distributions and the Financings (collectively the "Transactions"), (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the results. The unaudited pro forma statements of operations for the nine months ended September 30, 2019 give effect to the pro forma events as if they had been consummated on January 1, 2018. There were no pro forma adjustments for the three and nine months ended September 30, 2020 and for the three months ended September 30, 2019.
Restructuring or integration activities or other costs following the DWDP Distributions that may be incurred to achieve cost or growth synergies of DuPont are not reflected. The unaudited pro forma income statement provides shareholders with summary financial information and historical data that is on a basis consistent with how DuPont reports current financial information.
The unaudited pro forma financial statements are presented for informational purposes only, and do not purport to represent what DuPont's results of operations or financial position would have been had the Transactions occurred on the dates indicated, nor do they purport to project the results of operations or financial position for any future period or as of any future date.
| | | | | | | | | | | |
Unaudited Pro Forma Combined
Statements of Operations | Nine Months Ended September 30, |
| 2019 |
| In millions, except per share amounts | DuPont 1 | Pro Forma Adjustments2 | Pro Forma |
| Net sales | $ | 16,308 | | $ | — | | $ | 16,308 | |
| Cost of sales | 10,648 | | 22 | | 10,670 | |
| Research and development expenses | 724 | | — | | 724 | |
| Selling, general and administrative expenses | 2,013 | | — | | 2,013 | |
| Amortization of intangibles | 755 | | — | | 755 | |
| Restructuring and asset related charges - net | 290 | | — | | 290 | |
| Goodwill impairment charges | 1,175 | | — | | 1,175 | |
| Integration and separation costs | 1,149 | | (173) | | 976 | |
| Equity in earnings of nonconsolidated affiliates | 132 | | — | | 132 | |
| Sundry income (expense) - net | 144 | | — | | 144 | |
| Interest expense | 493 | | 29 | | 522 | |
| Loss from continuing operations before income taxes | (663) | | 122 | | (541) | |
| Provision for income taxes on continuing operations | 142 | | 30 | | 172 | |
| Loss from continuing operations, net of tax | (805) | | 92 | | (713) | |
| Net income attributable to noncontrolling interests of continuing operations | 18 | | — | | 18 | |
| Net loss from continuing operations attributable to DuPont | $ | (823) | | $ | 92 | | $ | (731) | |
| | | |
| Per common share data: | | | |
| Loss per common share from continuing operations - basic | $ | (1.10) | | | $ | (0.98) | |
| Loss per common share from continuing operations - diluted | $ | (1.10) | | | $ | (0.98) | |
| | | |
| Weighted-average common shares outstanding - basic | 748.2 | | | 748.2 | |
| Weighted-average common shares outstanding - diluted | 748.2 | | | 748.2 | |
| | | |
| | | |
| | | |
1.See the historical U.S. GAAP Consolidated Statements of Operations.
2. Certain pro forma adjustments were made to illustrate the estimated effects of the Transactions, assuming that the Transactions had occurred on January 1, 2018. The adjustments include the impact to "Cost of sales" of different pricing than historical intercompany and intracompany practices related to various supply agreements entered into with the Dow Distribution, adjustments to "Integration and separation costs" to eliminate one-time transaction costs directly attributable to the DWDP Distributions, and adjustments to "Interest expense" to reflect the impact of the Financings.
SEGMENT RESULTS
In the first quarter of 2020, in preparation for the Intended N&B Transaction, DuPont changed its management and reporting structure to realign costs associated with its polysaccharides pre-commercial activities from the Non-Core segment to the N&B segment. The reporting changes have been retrospectively reflected in the following discussion of segment results for all periods presented. Refer to Note 21 to the interim Consolidated Financial Statements for additional information.
Prior to April 1, 2019, the Company's measure of profit/loss for segment reporting purposes is pro forma Operating EBITDA as this is the manner in which the Company's chief operating decision maker ("CODM") assessed performance and allocated resources. The Company defines pro forma Operating EBITDA as pro forma earnings (i.e., pro forma “Income from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / other post-employment benefits (“OPEB”) / charges, and foreign exchange gains / losses, excluding the impact of costs historically allocated to the materials science and agriculture businesses that did not meet the criteria to be recorded as discontinued operations and adjusted for significant items. Effective April 1, 2019, the Company's measure of profit/loss for segment reporting purposes is Operating EBITDA as this is the manner in which the Company's CODMchief operating decision maker ("CODM") assesses performance and allocates resources. The Company defines Operating EBITDA as earnings (i.e., “Income from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / OPEB benefits / charges, and foreign exchange gains / losses, adjusted for significant items. Reconciliations of these measures can be found in Note 2122 to the interim Consolidated Financial Statements. Prior year data has been updated to conform with the current year presentation.
Pro forma adjustments usedEffective February 1, 2021, DuPont changed its management and reporting structure. The reporting changes have been retrospectively reflected in the calculationfollowing discussion of pro forma Operating EBITDA were determined in accordance with Article 11 of Regulation S-X and were derived from DuPont's historicalsegment results for all periods presented. See Note 22 to the interim Consolidated Financial Statements and accompanying notes, adjusted to give effect to the DWDP Distributions as if they had been consummated on January 1, 2018. The pro forma adjustments impacting pro forma Operating EBITDA reflect the impact of various supply agreements ("supply agreements") entered into in connection with the Dow Distribution and are outlined in the preceding section, Supplemental Unaudited Pro Forma Combined Financial Information, as adjustments to "Cost of sales." The impact of these supply agreements is reflected in pro forma Operating EBITDA for the periods noted above as it is included in the measure of profit/loss reviewed by the CODM in order to show meaningful comparability among periods while assessing performance and making resource allocation decisions. There were no pro forma adjustments for the three and nine months ended September 30, 2020 and for the three months ended September 30, 2019.additional information.
ELECTRONICS & IMAGINGINDUSTRIAL
The Electronics & ImagingIndustrial segment is a leading global supplier of differentiated materials and systems for a broad range of consumer electronics including mobile devices, television monitors, personal computers and electronics used in a variety of industries. The segment is a leading provider of materials and solutions for the fabrication of semiconductors and integrated circuits, and provides innovative metallization processes for metal finishing, decorative, and industrial applications as well as films and laminate materials for a broad range of uses in printed circuit board and other electronic industry applications. Electronics & ImagingIndustrial is a leading provider of platemaking systems and photopolymer plates for the packaging graphics industry, and digital printing inks for a variety of applications in the textile, commercial printing, and home-office markets. In addition, the segment provides cutting-edge materials for the manufacturing of rigid and flexible displays for organic light emitting diode ("OLED"),. In addition, the segment produces innovative engineering polymer solutions, high performance parts, medical silicones and other display applications.specialty lubricants.
| | Electronics & Imaging | Three Months Ended | Nine Months Ended | |
| Electronics & Industrial | | Electronics & Industrial | Three Months Ended | Six Months Ended |
| In millions | In millions | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | In millions | June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 |
| Net sales | Net sales | $ | 1,004 | | $ | 934 | | $ | 2,793 | | $ | 2,617 | | Net sales | $ | 1,320 | | $ | 1,111 | | $ | 2,620 | | $ | 2,226 | |
Operating EBITDA 1 | $ | 357 | | $ | 320 | | $ | 887 | | $ | 854 | | |
| Operating EBITDA | | Operating EBITDA | $ | 424 | | $ | 336 | | $ | 860 | | $ | 663 | |
| Equity earnings | Equity earnings | $ | 8 | | $ | 10 | | $ | 27 | | $ | 18 | | Equity earnings | $ | 10 | | $ | 10 | | $ | 19 | | $ | 19 | |
1.For the nine months ended September 30, 2019, operating EBITDA is on a pro forma basis.
| | Electronics & Imaging | Three Months Ended | Nine Months Ended | |
| Electronics & Industrial | | Electronics & Industrial | Three Months Ended | Six Months Ended |
| Percentage change from prior year | Percentage change from prior year | September 30, 2020 | September 30, 2020 | Percentage change from prior year | June 30, 2021 | June 30, 2021 |
| Change in Net Sales from Prior Period due to: | Change in Net Sales from Prior Period due to: | | | Change in Net Sales from Prior Period due to: | | |
| Local price & product mix | Local price & product mix | (1) | % | (1) | % | Local price & product mix | — | % | (1) | % |
| Currency | Currency | — | | — | | Currency | 2 | | 3 | |
| Volume | Volume | 9 | | 8 | | Volume | 17 | | 16 | |
| Portfolio & other | Portfolio & other | (1) | | — | | Portfolio & other | — | | — | |
| Total | Total | 7 | % | 7 | % | Total | 19 | % | 18 | % |
|
Electronics & ImagingIndustrial net sales were $1,004$1,320 million for the three months ended SeptemberJune 30, 2020,2021, up 719 percent from $934$1,111 million for the three months ended SeptemberJune 30, 2019.2020. Net sales increased due to a 917 percent increase in volume and a 2 percent favorable currency impact. Volume growth was led by Industrial Solutions reflecting broad-based demand most notably in displays, electronics, healthcare and automotive markets. Within Interconnect Solutions, volume growth was driven by higher material content in next-generation smartphones, broad based electronics demand and recovery in industrial applications. Continued strength in Semiconductor Technologies was driven by new technology ramps at advanced nodes within logic and foundry and increased memory demand in servers and data centers.
Operating EBITDA was $424 million for the three months ended June 30, 2021, up 26 percent compared with $336 million for the three months ended June 30, 2020 driven by strong volume growth offset by higher raw materials and logistics costs.
Electronics & Industrial net sales were $2,620 million for the six months ended June 30, 2021, up 18 percent from $2,226 million for the six months ended June 30, 2020. Net sales increased due to a 16 percent increase in volume and a 3 percent favorable currency impact partially offset by a 1 percent local price decline and a 1 percent decrease from prior portfolio actions.in price. Volume growth was driven by Semiconductor Technologies with continued strength in thenew technology ramps at advanced nodes within logic and foundry segment. Volumeand increased memory demand in servers and data centers. Continued volume growth in Industrial Solutions due to increased demand most notably for display materials and within the healthcare market. Within Interconnect Solutions, volume growth was driven by increasedhigher material content in next-generation smartphones. Within Image Solutions, volume growthsmartphones, broad based electronics demand and recovery in OLED materials for displays offset weakness in flexographic plates and textile inks.industrial applications.
Operating EBITDA was $357$860 million for the threesix months ended SeptemberJune 30, 2020,2021, up 1230 percent compared with $320$663 million for the threesix months ended September 30, 2019 due to volume gains and cost productivity actions. The three months ended SeptemberJune 30, 2020 and 2019 include income of $30 million and $34 million, respectively, related to an asset sale from 2019.
Electronics & Imaging net sales were $2,793 million for the nine months ended September 30, 2020, up 7 percent from $2,617 million for the nine months ended September 30, 2019. Net sales increased due to an 8 percentdriven by strong volume growth offset byand a 1 percent decline in local price. Volume growth was driven by demand in Semiconductor Technologies ingain on the logic and foundry segment, higher material content in smartphones and increased demand for OLED materials.
Operating EBITDA was $887 million for the nine months ended September 30, 2020, down 4 percent compared with pro forma Operating EBITDAsale of $854 million for the nine months ended September 30, 2019. Favorable impacts from volume gains and cost productivity actions were offset by higher logistics costs and $55 million decrease in income compared to prior year related to a 2019 asset sale.assets.
NUTRITIONWATER & BIOSCIENCESPROTECTION
The NutritionWater & Biosciences segment is an innovation-driven and customer-focused segment that provides solutions for the global food and beverage, dietary supplements, home and personal care, energy, animal nutrition and pharma markets. The segment is one of the world's largest producers of specialty ingredients, developing and manufacturing solutions for the global food and beverage, dietary supplements, enzymes and pharmaceutical excipient markets. Additionally, the segment is an industry pioneer and innovator that works with customers to improve the performance, productivity and sustainability of their products and processes, through differentiated technology in ingredients applications, fermentation, biotechnology, chemistry and manufacturing process excellence.
| | | | | | | | | | | | | | |
| Nutrition & Biosciences | Three Months Ended | Nine Months Ended |
| In millions | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 |
| Net sales | $ | 1,467 | | $ | 1,525 | | $ | 4,557 | | $ | 4,618 | |
Operating EBITDA 1 | $ | 379 | | $ | 354 | | $ | 1,182 | | $ | 1,089 | |
| Equity earnings | $ | 1 | | $ | — | | $ | 2 | | $ | — | |
1. For the nine months ended September 30, 2019, operating EBITDA is on a pro forma basis.
| | | | | | | | |
| Nutrition & Biosciences | Three Months Ended | Nine Months Ended |
| Percentage change from prior year | September 30, 2020 | September 30, 2020 |
| Change in Net Sales from Prior Period due to: | | |
| Local price & product mix | — | % | 1 | % |
| Currency | — | | (1) | |
| Volume | (4) | | (1) | |
| Portfolio & other | — | | — | |
| Total | (4) | % | (1) | % |
Nutrition & Biosciences net sales were $1,467 million for the three months ended September 30, 2020, down 4 percent from $1,525 million for the three months ended September 30, 2019 due to a 4 percent decrease in volume. Food & Beverage volumes declined due to continued weak demand in food service and in sweeteners. Health & Biosciences volume gains in probiotics and strong demand in home & personal care were more than offset by declined demand in biorefinery and microbial control. Pharma Solutions sales were relatively flat compared to the prior period.
Operating EBITDA was $379 million for the three months ended September 30, 2020, up 7 percent compared with $354 million for the three months ended September 30, 2019 due to cost productivity actions and favorable product mix more than offsetting the lower volumes.
Nutrition & Biosciences net sales were $4,557 million for the nine months ended September 30, 2020, down 1 percent compared with $4,618 million for the nine months ended September 30, 2019. A 1 percent increase in local price was offset by a 1 percent decrease in volume and a 1 percent unfavorable currency impact. Food & Beverage volume declined due to decreased demand in food service and sweeteners applications, partially offset by higher demand for plant-based meat. Health & Biosciences volume gains were driven by probiotics along with strong demand in home & personal care and animal nutrition, offset by declined demand in biorefinery and microbial control. Pharma Solutions volume gains were driven by increased demand in key products.
Operating EBITDA was $1,182 million for the nine months ended September 30, 2020, up 9 percent compared with pro forma Operating EBITDA of $1,089 million for the nine months ended September 30, 2019 due to a cost productivity actions, favorable product mix led by Health & Biosciences, and pricing gains.
TRANSPORTATION & INDUSTRIAL
The Transportation & Industrial segment provides high-performance engineering resins, adhesives, silicones, lubricants and parts to engineers and designers in the transportation, electronics, healthcare, industrial and consumer end-markets to enable systems solutions for demanding applications and environments. The segment delivers a broad range of polymer-based high-performance materials in its product portfolio, including elastomers and thermoplastic and thermoset engineering polymers which are used by customers to fabricate components for mechanical, chemical and electrical systems. In addition, the segment produces innovative engineering polymer solutions, high performance parts, specialty silicones and differentiated adhesive technologies to meet customer specifications in automotive, aerospace, electronics, industrial, healthcare and consumer markets. Transportation & Industrial is a global leader of advanced materials that provides technologies that differentiate customers’ products with improved performance characteristics enabling the transition to hybrid-electric-connected vehicles, high speed high frequency connectivity and smart healthcare.
| | | | | | | | | | | | | | |
| Transportation & Industrial | Three Months Ended | Nine Months Ended |
| In millions | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 |
| Net sales | $ | 1,045 | | $ | 1,209 | | $ | 3,021 | | $ | 3,795 | |
Operating EBITDA 1 | $ | 242 | | $ | 306 | | $ | 599 | | $ | 1,036 | |
| Equity earnings | $ | 1 | | $ | 1 | | $ | 3 | | $ | 3 | |
1. For the nine months ended September 30, 2019, operating EBITDA is on a pro forma basis.
| | | | | | | | |
| Transportation & Industrial | Three Months Ended | Nine Months Ended |
| Percentage change from prior year | September 30, 2020 | September 30, 2020 |
| Change in Net Sales from Prior Period due to: | | |
| Local price & product mix | (5) | % | (5) | % |
| Currency | — | | — | |
| Volume | (9) | | (15) | |
| Portfolio & other | — | | — | |
| Total | (14) | % | (20) | % |
Transportation & Industrial net sales were $1,045 million for the three months ended September 30, 2020, down from $1,209 million for the three months ended September 30, 2019. The change in net sales was due to a 9 percent decrease in volume and a 5 percent decrease in local price. While volume improved notably from second quarter of 2020, volume declines compared to prior year due to the impact of the COVID-19 pandemic on the automotive industry and the other key industrial end markets more than offset strong demand for KALREZ® within Healthcare & Specialty in the semiconductor market.
Operating EBITDA was $242 million for the three months ended September 30, 2020, down 21 percent compared with $306 million for the three months ended September 30, 2019. Cost productivity actions were more than offset by volume declines and the impact of temporarily idling manufacturing plants to align supply with demand due to the COVID-19 pandemic, along with lower price.
Transportation & Industrial net sales were $3,021 million for the nine months ended September 30, 2020, down from $3,795 million for the nine months ended September 30, 2019 due to a 15 percent decrease in volume and a 5 percent decrease in local price. Volume declines were primarily due to impact of the COVID-19 pandemic on the automotive industry and the other key industrial markets.
Operating EBITDA was $599 million for the nine months ended September 30, 2020, down 42 percent compared with pro forma Operating EBITDA of $1,036 million for the nine months ended September 30, 2019 driven primarily by volume declines due to the COVID-19 pandemic, price declines, and approximately $160 million in charges associated with temporarily idling several manufacturing plants to align supply with demand.
SAFETY & CONSTRUCTION
The Safety & ConstructionProtection segment is a leading provider of engineered products and integrated systems for a number of industries including worker safety, water purification and separation, aerospace, energy, medical packaging and building materials. The segment satisfies the growing global needs of businesses, governments, and consumers for solutions that make life safer, healthier, and better. By uniting market-driven science with the strength of highly regarded brands, the segment strives to bring new products and solutions to solve customers' needs faster, better and more cost effectively.
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| Safety & Construction | Three Months Ended | Nine Months Ended |
| In millions | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 |
| Net sales | $ | 1,249 | | $ | 1,327 | | $ | 3,769 | | $ | 3,951 | |
Operating EBITDA 1 | $ | 324 | | $ | 352 | | $ | 1,041 | | $ | 1,108 | |
| Equity earnings | $ | 7 | | $ | 7 | | $ | 19 | | $ | 22 | |
1. For the nine months ended September 30, 2019, operating EBITDA is on a pro forma basis.
| | | | | | | | |
| Safety & Construction | Three Months Ended | Nine Months Ended |
| Percentage change from prior year | September 30, 2020 | September 30, 2020 |
| Change in Net Sales from Prior Period due to: | | |
| Local price & product mix | 1 | % | 2 | % |
| Currency | — | | (1) | |
| Volume | (10) | | (8) | |
| Portfolio & other | 3 | | 2 | |
| Total | (6) | % | (5) | % |
| | | | | | | | | | | | | | |
| Water & Protection | Three Months Ended | Six Months Ended |
| In millions | June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 |
| Net sales | $ | 1,412 | | $ | 1,244 | | $ | 2,740 | | $ | 2,520 | |
| Operating EBITDA | $ | 352 | | $ | 339 | | $ | 707 | | $ | 696 | |
| Equity earnings | $ | 8 | | $ | 5 | | $ | 20 | | $ | 12 | |
Safety
| | | | | | | | |
| Water & Protection | Three Months Ended | Six Months Ended |
| Percentage change from prior year | June 30, 2021 | June 30, 2021 |
| Change in Net Sales from Prior Period due to: | | |
| Local price & product mix | — | % | — | % |
| Currency | 3 | | 3 | |
| Volume | 11 | | 6 | |
| Portfolio & other | — | | — | |
| Total | 14 | % | 9 | % |
Water & ConstructionProtection net sales were $1,249$1,412 million for the three months ended SeptemberJune 30, 2020, down2021, up 14 percent from $1,327$1,244 million for the three months ended SeptemberJune 30, 2019 as2020. Net sales increased due to a 11 percent increase in volume and a 3 percent increasefavorable currency impact. Local price and portfolio remained flat. Strong volume gains were led by continued demand for Shelter Solutions in portfolioresidential construction and a 1 percent increasedo-it-yourself applications. Within Safety Solutions, volume growth was driven by recovery in local priceend-markets for aramid fibers. Volume gains were more thanslightly offset by a 10 percent decline in volume. The portfolio impact reflects the recent acquisitions in the Water Solutions business. Local price increased led by Safety Solutions. Volume gainsdeclines in Water Solutions and demand for TYVEK® protective garments were more than offset by volume declines in Safety and Shelter Solutions due to weakened demand across end markets and declined commercial construction activity as a result of the COVID-19 pandemic.logistic challenges.
Operating EBITDA was $324 million for the three months ended September 30, 2020, down 8 percent compared with $352 million for the three months ended SeptemberJune 30, 2019 due to lower volumes2021, up 4 percent compared with $339 million for the three months ended June 30, 2020 as volume gains were offset by higher raw material and costs associatedlogistics costs.
Water & Protection net sales were $2,740 million for the six months ended June 30, 2021, up 9 percent from $2,520 million for the six months ended June 30, 2020 driven by a 6 percent increase in volume and a 3 percent favorable currency impact. Local price and portfolio remained flat. Volume growth across the segment was driven by recovery of end markets following the COVID-19 pandemic. Within Shelter Solutions, volume growth was driven by continued demand in residential construction and do-it-yourself applications.
Operating EBITDA was $707 million for the six months ended June 30, 2021, up 2 percent compared with capacity reductions to align supply with demand more than offsetting productivity actions$696 million for the six months ended June 30, 2020 as volume gains were offset by higher raw material and lower raw materiallogistics costs.
Safety & Construction net sales were $3,769 million for the nine months ended September 30, 2020, down from $3,951 million for the nine months ended September 30, 2019 as a 2 percent increase in local price and 2 percent increase in portfolio were more than offset by a 8 percent volume decline and a 1 percent unfavorable impact from currency. The portfolio impact reflects the recent acquisitions in the Water Solutions business. Volume growth in the segment was led by gains in Water Solutions and TYVEK® protective garment sales within Safety Solutions which were more than offset by weakened demand in end markets for NOMEX® and KEVLAR®. Shelter Solutions volume declined due to the COVID-19 pandemic and the resulting impact on commercial construction activity.
Operating EBITDA was $1,041 million for the nine months ended September 30, 2020, down 6 percent compared with pro forma Operating EBITDA of $1,108 million for the nine months ended September 30, 2019 due to lower volumes, the absence of licensing income, and costs associated with capacity reductions more than offsetting pricing gains, improved product mix, and productivity actions.
NON-COREMOBILITY & MATERIALS
The Non-CoreMobility & Materials segment isprovides high-performance engineering resins and adhesives to engineers and designers in the transportation, electronics, industrial and consumer end-markets to enable systems solutions for demanding applications and environments. The segment delivers a leading global supplierbroad range of polymer-based high-performance materials in its product portfolio, including elastomers and thermoplastic and thermoset engineering polymers which are used by customers to fabricate components for mechanical, chemical and electrical systems. In addition, the segment supplies key materials for the manufacturing of photovoltaic cells and panels, including innovative metallization pastes, backsheet materials and silicone encapsulantsencapsulates and adhesives. The segment also includes the Company's share of the results of the HSC Group, a U.S.-based group of companies that manufacture and sell polycrystalline silicon products for the photovoltaic and semiconductor industries. Additionally, the segment provides materials used in componentsspecialty pastes and films forused in consumer electronics, automotive, and aerospace markets. The segment alsoMobility & Materials is a global leader of advanced materials that provides sustainable materialstechnologies that differentiate customers’ products with improved performance characteristics enabling the transition to hybrid-electric-connected vehicles and services for sulfuric acid production and regeneration technologies, alkylation technology for production of clean, high-octane gasoline, and a comprehensive suite of aftermarket service and solutions offerings, including safety consulting and services, to improve the safety, productivity, and sustainability of organizations across a range of industries. The Non-Core segment is also a leading producer of specialty biotechnology materials for carpet and apparel markets as well as polyester films for the healthcare, photovoltaics, electronics, packaging and labels, and electrical insulation industries.high speed high frequency connectivity.
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| Non-Core | Three Months Ended | Nine Months Ended |
| In millions | September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 |
| Net sales | $ | 331 | | $ | 431 | | $ | 1,005 | | $ | 1,327 | |
Operating EBITDA 1 | $ | 14 | | $ | 94 | | $ | 149 | | $ | 296 | |
Equity earnings 2 | $ | 13 | | $ | 26 | | $ | 121 | | $ | 92 | |
1. For the nine months ended September 30, 2019, operating EBITDA is on a pro forma basis.
2. Represents equity in earnings (losses) of nonconsolidated affiliates included in pro forma Operating EBITDA, the Company's measure of profit/loss for segment reporting purposes, which excludes significant items. Accordingly, the Non-Core segment presented above excludes a restructuring charge of $1 million and $3 million for the three and nine months ended September 30, 2019 which is presented in "Equity in earnings of nonconsolidated affiliates" in the Company's interim Consolidated Statements of Operations. | | | | | | | | | | | | | | |
| Mobility & Materials | Three Months Ended | Six Months Ended |
| In millions | June 30, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 |
| Net sales | $ | 1,270 | | $ | 790 | | $ | 2,485 | | $ | 1,881 | |
| Operating EBITDA | $ | 294 | | $ | (23) | | $ | 572 | | $ | 192 | |
| Equity earnings | $ | 5 | | $ | 7 | | $ | 8 | | $ | 8 | |
| | | | | | | | |
| Non-Core | Three Months Ended | Nine Months Ended |
| Percentage change from prior year | September 30, 2020 | September 30, 2020 |
| Change in Net Sales from Prior Period due to: | | |
| Local price & product mix | 5 | % | 3 | % |
| Currency | — | | (1) | |
| Volume | (18) | | (17) | |
| Portfolio & other | (10) | | (9) | |
| Total | (23) | % | (24) | % |
| | | | | | | | |
| Mobility & Materials | Three Months Ended | Six Months Ended |
| Percentage change from prior year | June 30, 2021 | June 30, 2021 |
| Change in Net Sales from Prior Period due to: | | |
| Local price & product mix | 13 | % | 6 | % |
| Currency | 6 | | 4 | |
| Volume | 42 | | 22 | |
| Portfolio & other | — | | — | |
| Total | 61 | % | 32 | % |
Non-CoreMobility & Materials net sales were $331$1,270 million for the three months ended SeptemberJune 30, 2020, down2021, up from $431$790 million for the three months ended SeptemberJune 30, 20192020. Net sales increased due to 5a 42 percent pricing gains more than offset byincrease in volume, a 1813 percent volume declineincrease in local price, and a 106 percent portfolio decline. The portfolio declinefavorable currency impact. Volume growth across the segment was driven by the third quarter 2020 salerecovery of key industrial end markets following the COVID-19 pandemic, most notably the recovery of the trichlorosilane ("TCS") business within Photovoltaic & Advanced Materials and the third quarter 2019 sale of the Sustainable Solutions business. Price gains were driven by increased metal prices. Volume gains for photovoltaic materials were more than offset by declines in demand for trichlorosilane, lower volumes in Clean Technologies, and declines in demand for biomaterials as a result of weakened demand in carpet and apparel markets.
Operating EBITDA was $14$294 million for the three months ended SeptemberJune 30, 2020, down 85 percent2021 compared with $94$(23) million for the threesix months ended SeptemberJune 30, 2019 due to volume declines, the absence of the gain on the sale of the Sustainable Solutions business,2020. The increase was driven by higher volumes, pricing gains, and the absence of earnings fromapproximately $130 million of charges recorded in the Sustainable Solutions, TCS, and HSC businesses.prior year associated with temporarily idling several manufacturing facilities during the COVID-19 pandemic.
Non-CoreMobility & Materials net sales were $1,005$2,485 million for the ninesix months ended SeptemberJune 30, 2020, down2021, up from $1,327$1,881 million for the ninesix months ended SeptemberJune 30, 2019.2020. Net sales declinedincreased due to a 1722 percent declineincrease in volume, a 9 percent portfolio decline due to the sale of the Sustainable Solutions and TCS businesses and a 1 percent unfavorable impact from currency, which more than offset a 36 percent increase in local price.price and a 4 percent favorable currency impact. Volume declines were driven by declines in demand for trichlorosilane, TEDLAR® aircraft films, biomaterialsgrowth was attributable to the continued recovery of the automotive industry and the other key industrial end markets. Within Engineering Polymers, volume growth was partially offset due to weakened demand in carpet and apparel markets, and lower volumes in Clean Technologies.
Operating EBITDA was $149$572 million for the ninesix months ended SeptemberJune 30, 2020, down 50 percent2021, compared with pro forma Operating EBITDA of $296$192 million for the ninesix months ended SeptemberJune 30, 2019 as a customer settlement gain of $64 million was more than offset2020 driven by volume declines, the absence of the gain on the sale of the Sustainable Solutions business,higher volumes and the absence of earnings fromcharges recorded in the Sustainable Solutions, prior year associated with temporarily idling several manufacturing facilities, as referenced above.
Corporate
Corporate includes certain enterprise and governance activities including non-allocated corporate overhead costs and support functions, leveraged services, non-business aligned litigation expenses and other costs not absorbed by reportable segments. The sales and activity of to be divested and previously divested businesses including the operations of Biomaterials, Clean Technologies, and Solamet® business units, and the trichlorosilane business (“TCS Business”) along with its equity ownership interest in DC HSC Holdings LLC and HSC businesses.Hemlock Semiconductor L.L.C. (the "HSC Group”) historically included in the Non-Core segment are reflected as Corporate activity.
CHANGES IN FINANCIAL CONDITION
Liquidity & Capital Resources
Information related to the Company's liquidity and capital resources can be found in the Company's 2019 AnnualCurrent Report on Form 8-K filed on June 3, 2021, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources. Discussion below provides the updates to this information for the ninesix months ended SeptemberJune 30, 2020.2021.
The Company continually reviews its sources of liquidity and debt portfolio and may make adjustments to one or both to ensure adequate liquidity and increase the Company’s optionality and financing efficiency as it relates to financing cost and balancing terms/maturities. The Company’s primary source of incremental liquidity is cash flows from operating activities. COVID-19 continues to adversely impact the broader global economy, including negatively impacting economic growth and creating disruption and volatility in the global financial and capital markets, which could result in increases in the cost of capital and/or adversely impact the availability of and access to capital, which could negatively affect DuPont’s liquidity. Management expects the generation of cash from operations and the ability to access the debt capital markets and other sources of liquidity will continue to provide sufficient liquidity and financial flexibility to meet the Company’s and its subsidiaries obligations as they come due; however, DuPont due.
is unable to predict the extent of COVID-19 related impacts which depends on highly uncertain and unpredictable future developments, including the duration and spread of the COVID-19 outbreak, and the speed and extent of the resumption of normal economic and operating conditions. In light of this uncertainty, the Company has taken steps to further ensure liquidity and capital resources, as discussed below.
| | | | | | | | |
| In millions | September 30, 2020 | December 31, 2019 |
Cash and cash equivalents 1 | $ | 4,008 | | $ | 1,540 | |
| Total debt | $ | 24,196 | | $ | 17,447 | |
| | | | | | | | |
| In millions | June 30, 2021 | December 31, 2020 |
| Cash and cash equivalents | $ | 3,962 | | $ | 2,544 | |
Total debt 1 | $ | 10,628 | | $ | 15,612 | |
1.The net proceedsIncludes the current portion of approximately $6.2 billion fromlong-term debt that's within the N&B Notes Offering were recorded within non-current “Restricted cash”"Accrued and other current liabilities" line in the interim Condensed Consolidated Balance Sheets at September 30, 2020 and thus are not included in "Cash and cash equivalents" as presented in the table above.Sheets.
The Company's cash and cash equivalents at SeptemberJune 30, 20202021 and December 31, 20192020 were $4.0 billion and $1.5$2.5 billion, respectively, of which $1.7$1.3 billion at SeptemberJune 30, 20202021 and $1.4$1.8 billion at December 31, 20192020 were held by subsidiaries in foreign countries, including United States territories. The decrease in cash and cash equivalents held by subsidiaries in foreign countries is due to repatriation activities necessary for completing the acquisition of Laird Performance Materials. For each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States. The increase in cash and cash equivalents was primarily due to receipt of proceeds from the May Debt Offering, discussed further below.
Total debt at SeptemberJune 30, 20202021 and December 31, 20192020 was $24.2$10.6 billion and $17.4$15.6 billion, respectively. The increasedecrease was primarily due to the N&B Notes Offeringtermination and repayment of the Company's $3 billion Term Loan Facilities in the first quarter of 2021, and the redemption of the May Debt Offering, partially offset by2020 Notes, described further below, in accordance with special mandatory redemption feature in the second quarter of 2021.
As of June 30, 2021, the Company is contractually obligated to make future cash payments of $10,700 million and $6,184 million associated with principal and interest, respectively, on debt obligations assuming held to maturity. Related to the principal balance, the majority of it will be due subsequent to June 30, 2022. Related to interest, $503 million will be due in the next twelve months and the remainder will be due subsequent to June 30, 2022. The decrease in debt and interest obligations since December 31, 2020 is mostly due to the termination and repayment of the $3 billion Term Loan Facilities and the redemption of the May 2020 Notes.
Special Cash Payment
In connection with and in accordance with the terms of the N&B Transaction, prior to consummation of the Exchange Offer and the N&B Merger, DuPont received a decline in commercial paper.one-time cash payment of approximately $7.3 billion, (the "Special Cash Payment"), which is subject to post-closing adjustment pursuant to the terms of the N&B Separation and Distribution Agreement. The Company utilized the Special Cash Payment to repay the $3 billion Term Loan Facilities and used a portion of the Special Cash Payment to redeem the May 2020 Notes, as discussed below.
Term Loan and Revolving Credit Facilities
In November 2018, the Company entered into a term loan agreement that establishes two term loan facilities in the aggregate principal amount of $3 billion, (the “Term Loan Facilities”) as well as a five-year $3 billion revolving credit facility (the “Five-Year Revolving Credit Facility”). Effective May 2, 2019, the Company fully drew the two Term Loan Facilities in the aggregate principal amount of $3$3.0 billion and the Five-Year Revolving Credit Facility became effective and available. The Five-Year Revolving Credit Facility is generally expected to remain undrawn, and serve as a backstop to the Company’s commercial paper and letter of credit issuance. In June 2019,
On February 1, 2021, the Company terminated its fully drawn $3 billion Term Loan Facilities. The termination triggered the repayment of the aggregate outstanding principal amount of $3 billion, plus accrued and unpaid interest through and including January 31, 2021. The Company funded the repayment with proceeds from the Special Cash Payment.
On April 15, 2021, the Company entered into a 364-day $750 million revolving credit facility (the “Old 364-Day Revolving Credit Facility”).
In April 2020, the Company entered into aan updated $1.0 billion 364-day revolving credit facility (the “$1B“2021 $1B Revolving Credit Facility"). The as the $1.0 billion 364-day revolving credit facility entered in April 2020 (the “2020 $1B Revolving Credit Facility replaced the Old 364-Day Revolving Credit Facility, improving the Company’s liquidity position in response to near term uncertainties.Facility") expired mid-April. As of the effectiveness of the 2021 $1B Revolving Credit Facility, the Old 364-Day2020 $1B Revolving Credit Facility was terminated. The $1B Revolving Credit facility may be used for general corporate purposes.
May Debt Offering
On May 1, 2020, the Company completed an underwritten public offering of senior unsecured notes (the “Notes”“May 2020 Notes”) in the aggregate principal amount of $2 billion of 2.169 percent fixed rate Notes due May 1, 2023 (the “May Debt Offering”). The proceeds fromUpon consummation of the N&B Transaction, the special mandatory redemption feature of the May Debt Offering are expected to be used bywas triggered, requiring the Company to repay or redeem the Company’s $0.5 billion in floating rate notes due November 2020 and $1.5 billion of 3.77 percent fixed-rate notes due November 2020 (collectively, the “2020 Notes”). Upon consummation of the Intended N&B Transaction, the Company will be required to mail a notice of redemption to holders of the Notes, with a copy to the Trustee, setting forth the date of redemption of all of the Notes on the date (“Special Mandatory Redemption Date”) that is the later of (i) three (3) Business Days after the consummation of the Intended N&B Transaction and (ii) May 1, 2021. On the Special Mandatory Redemption Date, the Company will be required to redeem all of the May 2020 Notes at a redemption price equal to 100% of the aggregate principal amount of the May 2020 Notes plus accrued and
unpaid interest, if any, up to but excludinginterest. The Company redeemed the Special Mandatory Redemption Date. In the event a special mandatory redemption is triggered, the Company expects to fundMay 2020 Notes on May 13, 2021 and funded the redemption with proceeds from the Special Cash Payment.
Commercial PaperLaird Performance Materials
In April 2019, DuPont authorized a $3 billion commercial paper program (the “DuPont Commercial Paper Program”). At September 30, 2020,On July 1, 2021, the Company had issued $390 millioncompleted the acquisition of commercial paper ($1.8Laird Performance Materials ("Laird") from Advent International for aggregate consideration of $2.4 billion, at December 31, 2019).
Nutritionwhich reflects adjustments, including for acquired cash and net working capital. The acquisition is part of the Electronic & Biosciences Financing
In connection with the Intended N&B Transaction, N&B Inc. entered into a Bridge Commitment Letter (the "Bridge Letter") in an aggregate principal amount of $7.5 billion, (the “Bridge Loans”) to secure committed financingIndustrials segment. The Company paid for the Special Cash Payment and related financing fees and expenses. The aggregate commitment under the Bridge Letter is reduced by, among other things, (1) the amount of netacquisition from existing cash proceeds received by N&B Inc. from any issuance of senior unsecured notes pursuant to a Rule 144A offering or other private placement and (2) certain qualifying term loan commitments under senior unsecured term loan facilities.
In January 2020, N&B Inc. entered into a senior unsecured term loan agreement in the amount of $1.25 billion split evenly between three- and five-year facilities (the "N&B Term Loan Facilities"). As a result of entry into the term loan agreement, the commitments under the Bridge Commitment Letter were reduced to $6.25 billion.
On September 16, 2020 (the “Offering Date”), N&B Inc. completed an offering in the aggregate principal amount of $6.25 billion of senior unsecured notes in six series, comprised of the following (collectively, the “N&B Notes Offering" and together with the N&B Term Loan Facilities, the “Permanent Financing”): $300 million aggregate principal amount of 0.697% Senior Notes due 2022; $1.0 billion aggregate principal amount of 1.230% Senior Notes due 2025; $1.2 billion aggregate principal amount of 1.832% Senior Notes due 2027; $1.5 billion aggregate principal amount of 2.300% Senior Notes due 2030; $750 million aggregate principal amount of 3.268% Senior Notes due 2040; and $1.5 billion aggregate principal amount of 3.468% Senior Notes due 2050. As a result of the N&B Notes Offering, the commitments under the Bridge Commitment Letter were further reduced to zero and terminated on and as of the Offering Date.
The net proceeds of approximately $6.2 billion from the N&B Notes Offering were deposited into an escrow account. The release of the net proceeds from the N&B Notes Offering and the availability of funding under the term loan agreement are subject to customary closing conditions including among others, the satisfaction of substantially all the conditions to the consummation of the intended transaction with IFF. The proceeds from the Permanent Financing will be used to make the Special Cash Payment and to pay the related financing fees and expenses. The obligations and liabilities associated with the Permanent Financing will be separated from the Company upon consummation of the Intended N&B Transaction. However, if the closing of the Intended Merger has not occurred on or prior to September 15, 2021, or, if prior to such date, the Merger Agreement is validly terminated, (each a “Special Mandatory Redemption Event”), N&B Inc. must redeem all of the Notes on or before the 15th business day following the Special Mandatory Redemption Event (such date of redemption, the “Special Mandatory Redemption Date”) at a redemption price equal to 101% of the aggregate principal amount of the applicable series of Notes, plus accrued and unpaid interest to, but not including, the Special Mandatory Redemption Date. Borrowing under the term loan agreement would occur immediately prior to the closing of the Intended N&B Transaction.
Pursuant to the Merger Agreement, the fees and expenses associated with the financing will be borne (A) entirely by N&B Inc. if the transaction closes; and (B) equally by DuPont and IFF if the Merger Agreement terminates. However, if the Merger Agreement is terminated by IFF, in accordance with its terms, for breach by DuPont, such fees and expenses will be borne entirely by DuPont; and if terminated by DuPont in accordance with its terms for breach by IFF, such fees and expenses will be borne entirely by IFF.balances.
Credit Ratings
The Company's credit ratings impact its access to the debt capital markets and cost of capital. The Company remains committed to a strong financial position and strong investment-grade rating. At October 28, 2020,July 30, 2021, DuPont's credit ratings were as follows:
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| Credit Ratings | Long-Term Rating | Short-Term Rating | Outlook |
| Standard & Poor’s | BBB+ | A-2 | Negative WatchStable |
| Moody’s Investors Service | Baa1 | P-2 | Stable |
| Fitch Ratings | BBB+ | F-2 | Stable |
The Company's indenture covenants related to its 2018 Senior Notes and May Debt Offering containscontain certain limitations on the Company’s ability to incur liens and enter into sale lease-back transactions, mergers and consolidations as well as customary events of default. The Term Loan Facilities, the Five-Year Revolving Credit Facility and the 2021 $1B Revolving Credit Facility
Facilities contain a financial covenant, typical for companies with similar credit ratings, requiring that the ratio of Total Indebtedness to Total Capitalization for the Company and its consolidated subsidiaries not exceed 0.60. At SeptemberJune 30, 2020,2021, the Company was in compliance with this financial covenant.
Summary of Cash Flows
The Company’s cash flows from operating, investing and financing activities, as reflected in the interim Consolidated Statements of Cash Flows, are summarized in the following table. The cash flows related to the Materials Science and Agriculture businessesN&B have not been segregated and are included in the interim Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 2019.2021 and 2020.
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| Cash Flow Summary | Nine Months Ended September 30, |
| In millions | 2020 | 2019 |
| Cash provided by (used for): | | |
| Operating activities | $ | 2,794 | | $ | 831 | |
| Investing activities | $ | 35 | | $ | (1,807) | |
| Financing activities | $ | 5,830 | | $ | (10,897) | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | $ | 4 | | $ | (2) | |
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| Cash Flow Summary | Six Months Ended |
| In millions | June 30, 2021 | June 30, 2020 |
| Cash provided by (used for): | | |
| Operating activities | $ | 818 | | $ | 1,520 | |
| Investing activities | $ | (329) | | $ | (348) | |
| Financing activities | $ | (5,256) | | $ | 1,050 | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | $ | (28) | | $ | (30) | |
| Cash, cash equivalents and restricted cash reclassified as discontinued operations | $ | — | | $ | 7 | |
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Cash Flows from Operating Activities
In the first ninesix months of 2020,2021, cash provided by operating activities was $2,794$818 million, compared with $831$1,520 million in the same period last year. The increasedecrease in cash provided by operating activities was primarily due to an increase in the use of cash for net working capital, as well as a decrease in cash usednet income after adjustment for non-cash items such as net gain on sales of businesses and investments, restructuring and asset related charges, goodwill impairment charges, and depreciation and amortization. Activity related to the N&B business is included in all six months of the comparative period and the first month of 2021.
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Net Working Capital 1 | June 30, 2021 | December 31, 2020 |
| In millions (except ratio) |
| Current assets | $ | 10,492 | | $ | 8,349 | |
| Current liabilities | 3,940 | | 3,616 | |
| Net working capital | $ | 6,552 | | $ | 4,733 | |
| Current ratio | 2.66:1 | 2.31:1 |
1.Net working capital offset byas presented excludes the impactassets and liabilities related to the N&B Transaction. The assets and liabilities related to the N&B Transaction are presented as assets of discontinued operations and liabilities of discontinued operations, respectively, in the DWDP Distributions to period earnings.
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| Net Working Capital | Sept 30, 2020 | Dec 31, 2019 |
| In millions (except ratio) |
| Current assets | $ | 12,606 | | $ | 9,999 | |
| Current liabilities | 6,984 | | 8,346 | |
| Net working capital | $ | 5,622 | | $ | 1,653 | |
| Current ratio | 1.80:1 | 1.20:1 |
Cash Flows from Investing Activities
In the first ninesix months of 2020, cash provided by investing activities was $35 million, compared with2021, cash used for investing activities of $1,807was $329 million, compared with $348 million in the first ninesix months of 2019. Cash provided2020. The decrease in cash used was primarily attributable to a decrease in capital expenditures and a decrease in acquisitions of property and businesses (net of cash divested), partially offset by investing activities was driven bya decrease in proceeds from sales of property and businesses in 2020 and lower capital expenditures compared to the same period(net of prior year. The first nine months of 2019 also contains activitycash dividend). Activity related to the Materials ScienceN&B business is included in all six months of the comparative period and Agriculture businesses prior to the DWDP Distributions.first month of 2021.
Cash Flows from Financing Activities
In the first ninesix months of 2020,2021, cash used for financing activities was $5,256 million compared with cash provided by financing activities was $5,830 million compared with cash used for financing activities of $10,897$1,050 million in the same period last year. The primary driver of the increase in cash providedused was an increase in payments on long-term debt, a decrease in proceeds from long-term debt issuances, and an increase in share purchases of common stock, partially offset by proceeds from issuances of long-term debt as well as a decrease in cash used for paymentstransferred to IFF at split-off. Activity related to the DWDP DistributionsN&B business is included in all six months of the Materials Sciencecomparative period and Agriculture businesses, a reduction in payments on long-term debt, and a reduction in share repurchasethe first month of common stock, partially offset by decreased issuances of short-term notes payable. The first nine months of 2019 also contains activity related to the Materials Science and Agriculture businesses prior to the DWDP Distributions.2021.
Dividends
On February 12, 2020,18, 2021, the Board of Directors declared a first quarter dividend of $0.30 per share, paid on March 16, 2020,15, 2021, to shareholders of record on February 28, 2020.March 1, 2021.
On April 29, 2020,28, 2021, the Company announced that its Board declared a second quarter dividend of $0.30 per share paidpayable on June 15, 2020,2021, to shareholders of record on May 29, 2020.28, 2021.
On June 25, 2020,17, 2021, the Company announced that its Board declared a third quarter dividend of $0.30 per share paidpayable on September 15, 2020,2021, to shareholders of record on July 31, 2020.30, 2021.
On October 14, 2020, the Company announced that its Board of Directors declared a fourth quarter dividend of $0.30 per share payable on December 15, 2020, to shareholders of record on November 30, 2020.
Share Buyback Programs
On June 1, 2019, the Company's Board of Directors authorized a new $2 billion share buyback program, which expiresexpired on June 1, 2021. During the third quarter2021 ("2019 Share Buyback Program"). As of 2020,June 30, 2021, the Company did not repurchase any shares. As of September 30, 2020,had completed the Company2019 Share Buyback Program having repurchased 16.929.9 million shares under this program since inception at a total cost of $982 million. $2 billion.
In the first quarter of 2021, the Company's Board of Directors authorized a new $1.5 billion share buyback program, which expires on June 30, 2022 ("2021 Share Buyback Program"). As of June 30, 2021, the Company has repurchased and retired 1.5 million shares for $125 million under the 2021 Share Buyback Program.
See Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, for additional information.
Pension and Other Post-Employment Plans
DuPont expects to make additional contributions in the aggregate of approximately $30$57 million by year-end 20202021 to certain non-US pension and other post-employment benefit plans. Any such contribution could be funded by existing cash balances and/or cash from other available sources of liquidity.
Restructuring
In March 2020, the Company approved restructuring actions designed to capture near-term cost reductions following the expected closureand to further simplify certain organizational structures in anticipation of the Intended N&B Transaction (the "2020 Restructuring Program"). As a result of these actions, the Company recorded pre-tax restructuring charges of $140$180 million inception-to-date, consisting of severance and related benefit costs of $112$128 million and asset related charges of $28$52 million. The Company expects actions related to this program to beActions associated with the 2020 Restructuring Program are considered substantially complete by the end of 2020.complete. Future cash payments related to the 2020 Restructuring Program are anticipated to be $70$33 million primarily related to the payment of severance and related benefits.
In June 2019, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the DWDP Distributions (the "2019 Restructuring Program"). As a result of these actions, the Company has recorded pre-tax restructuring charges of $140$126 million inception-to-date, consisting of severance and related benefit costs of $106$99 million and asset related charges of $34$27 million. Actions associated with the 2019 Restructuring Program are considered substantially complete. Future cash payments related to the 2019 Restructuring Program are anticipated to be $27$6 million primarily relatedand relate to the payment of severance and related benefits.
In September and November 2017, the Company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the "Synergy Program"), adopted by the DowDuPont Board of Directors. The DowDuPont Cost Synergy Program was designed to integrate and optimize the organization following the DWDP Merger and in preparation for the DWDP Distributions whereby the Company has recorded pre-tax restructuring charges attributable to the continuing operations of DuPont of $489$345 million inception-to-date, consisting of severance and related benefit costs of $213$137 million, asset related charges of $209$159 million and contract termination charges of $67$49 million. The activities related to the DowDuPont Cost Synergy Program are expected to result in additional cash expenditures of $30 million consisting of severance and related benefit costs and contract terminations. Actions associated with the DowDuPont Cost Synergy Program, including employee separations, are considered substantially complete (seecomplete. Future cash payments related to the Synergy Program are anticipated to be $9 million and relate to the payment of severance and related benefits.
See Note 54 to the interim Consolidated Financial Statements).Statements for more information on the Company's restructuring programs.
Off-balance Sheet Arrangements
Guarantees arise in the ordinary course of business from relationships with customers and nonconsolidated affiliates when the Company undertakes an obligation to guarantee the performance of others if specific triggering events occur. At SeptemberJune 30, 20202021 and December 31, 2019,2020, the Company had directly guaranteed $177$175 million and $187$189 million, respectively, of such obligations. Additional information related to the guarantees of the Subsidiaries can be found in the “Guarantees” section of Note 1314 to the interim Consolidated Financial Statements.
Contractual Obligations
Information related to the Company's contractual obligations at December 31, 2019 can be found in the Company's 2019 Annual Report, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Contractual Obligations. There were no material changes to the Company's contractual obligations during the first nine months of 2020, outside of the items shown below.
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| | Payments Due In |
| In millions | Total at September 30, 2020 | Remainder of 2020 | 2021-2022 | 2023-2024 | 2025 and beyond |
Long-term debt obligations 1 | $ | 23,959 | | $ | 2,001 | | $ | 3,307 | | $ | 4,801 | | $ | 13,850 | |
Expected cash requirements for interest 1 | 9,546 | | 311 | | 1,463 | | 1,209 | | 6,563 | |
| Total contractual obligations | $ | 33,505 | | $ | 2,312 | | $ | 4,770 | | $ | 6,010 | | $ | 20,413 | |
1.A portion of these obligations relate to the N&B Notes Offering. The obligations associated with the N&B Notes Offering will be separated from the Company upon consummation of the Intended N&B Transaction. Refer to the Liquidity and Capital Resources section for more information.
OTHER MATTERS
Recent Accounting Guidance
See Note 2 to the interim Consolidated Financial Statements for a description of recent accounting guidance.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported in the interim Consolidated Financial Statements and accompanying notes. Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Annual Report”) describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. DuPont’s accounting policies that are impacted by judgments, assumptions and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2019 Annual Report. Since December 31, 2019, there have been no material changes in the Company’s accounting policies that are impacted by judgments, assumptions and estimates. See the discussion in this section for information regarding the valuation of assets and impairment considerations.
Valuation of Assets and Impairment Considerations
The Company tests goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter as of October 1, or more frequently when events or changes in circumstances indicate that the fair value is below its carrying value. Goodwill is evaluated for impairment using qualitative and/or quantitative testing procedures. The Company performs goodwill impairment testing at the reporting unit level which is defined as the operating segment or one level below the operating segment. One level below the operating segment, or component, is a business in which discrete financial information is available and regularly reviewed by segment management. The Company aggregates certain components into reporting units based on economic similarities.
As a result of the related acquisition method of accounting in connection with the DWDP Merger, Historical EID’s assets and liabilities were measured at fair value resulting in increases to the Company’s goodwill and other intangible assets. The fair value valuation increased the risk that declines in financial projections, including changes to key assumptions, could have a material, negative impact on the fair value of the Company’s reporting units and assets, and therefore could result in an impairment.
COVID-19 continues to adversely impact the broader global economy and has caused significant volatility in financial markets. If there is a of lack of recovery, the time period to recovery is longer than expected or further global softening is experienced in certain markets, such as automotive, aerospace, commercial construction, oil & gas and select industrial end-markets, or a sustained decline in the value of the Company's common stock, the Company may be required to perform additional impairment assessments for its goodwill, other intangibles, and long-lived assets, the results of which could result in material impairment charges.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Note 1920 to the interim Consolidated Financial Statements. See also Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk, of the Company's 2019 AnnualCurrent Report on Form 10-K8-K filed on June 3, 2021 for information on the Company's utilization of financial instruments and an analysis of the sensitivity of these instruments.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains a system of disclosure controls and procedures to give reasonable assurance that information required to be disclosed in the Company's reports filed or submitted under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. These controls and procedures also give reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to management to allow timely decisions regarding required disclosures.
As of SeptemberJune 30, 2020,2021, the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO), together with management, conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the CEO and CFO concluded that these disclosure controls and procedures are effective.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 that was conducted during the three months ended September 30, 2020last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
In connection with the Intended N&B Transaction, there are several processes, policies, operations, technologies and information systems that are expected to be transferred or separated. During the quarter ended September 30, 2020, the Company continues to take steps to ensure that adequate controls are designed and maintained throughout this transition period.
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DuPont de Nemours Inc.
PART II - OTHER INFORMATION |
ITEM 1. LEGAL PROCEEDINGS
The Company and its subsidiaries are subject to various litigation matters, including, but not limited to, product liability, patent infringement, antitrust claims, and claims for third party property damage or personal injury stemming from alleged environmental torts. Information regarding certain of these matters is set forth below and in Note 1314 to the interim Consolidated Financial Statements.
Litigation
See Note 1314 to the interim Consolidated Financial Statements.
Environmental Proceedings
The Company believes it is remote that the following matters will have a material impact on its financial position, liquidity or results of operations. The description is included per Regulation S-K, Item 103(5)(c) of the Securities Exchange Act of 1934.
Divested Neoprene Facility, La Place, Louisiana - EPA Compliance Inspection
In 2016, the EPA conducted a focused compliance investigation at the Denka Performance Elastomer LLC (“Denka”) neoprene manufacturing facility in La Place, Louisiana. Historical EID sold the neoprene business, including this manufacturing facility, to Denka in the fourth quarter of 2015. Subsequent to this inspection, the U.S. Environmental Protection Agency (“EPA”), the U.S. Department of Justice (“DOJ”), the Louisiana Department of Environmental Quality (“DEQ”), the Company (originally through Historical EID), and Denka began discussions in the spring of 2017 relating to the inspection conclusions and allegations of noncompliance arising under the Clean Air Act, including leak detection and repair. DuPont, Denka, EPA, DOJ and DEQ are continuing these discussions, which include potential settlement options.
New Jersey Directive PFAS
On March 25, 2019, the New Jersey Department of Environmental Protection (“NJDEP”) issued a Directive and Notice to Insurers to a number of companies, including Chemours, DowDuPont, Historical EID, and certain DuPont subsidiaries. NJDEP’s allegations relate to former operations of Historical EID involving poly- and perfluoroalkyl substances, (“PFAS��PFAS”), including PFOA and PFOA- replacement products. The NJDEP seeks past and future costs of investigating, monitoring, testing, treating, and remediating New Jersey’s drinking water and waste systems, private drinking water wells and natural resources including groundwater, surface water, soil, sediments and biota. The Directive seeks certain information as to future costs and information related to the historic uses of PFAS and replacement chemicals including “information ranging from use and discharge of the chemicals through wastewater treatment plants, air emissions, and sales of products containing the chemicals to current development, manufacture, use and release of newer chemicals in the state.”
ITEM 1A. RISK FACTORS
Other than the risk factor set forth below, thereThere have been no material changes in the Company's risk factors discussed in Part I, Item 1A, Risk Factors, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The extent to which the novel coronavirus (COVID-19) and measures taken in response to it, impact DuPont’s business, results of operations, access to sources of liquidity and financial condition depends on future developments, which are highly uncertain and cannot be predicted.
DuPont is actively monitoring the global impacts of COVID-19, including the impacts from responsive measures, and remains focused on its top priorities - the safety and health of its employees and the needs of its customers. The Company’s business and financial condition, and the business and financial condition of the company’s customers and suppliers, have been impacted by the significantly increased economic and demand uncertainties created by the COVID-19 outbreak. In addition, public and private sector responsive measures, such as the imposition of travel restrictions, quarantines, adoption of remote working, and suspension of non-essential business and government services, have impacted the company’s business and financial condition. Many of DuPont’s facilities and employees are based in areas impacted by the virus. While most DuPont manufacturing sites remain in operation, DuPont has reduced or furloughed certain operations in response to government measures, employee welfare concerns and the impact of COVID-19 on the global demand and supply chain. DuPont’s manufacturing operations may be further adversely affected by impacts from COVID-19 including, among other things, additional government actions and other responsive measures, more and /or deeper supply chain disruptions, quarantines and health and availability of essential onsite personnel. Furthermore, COVID-19 continues to adversely impact the broader global economy, including negatively impacting economic growth and creating disruption and volatility in the global financial and capital markets, which could result in increases in the cost of capital and/or adversely impact the availability of and access to capital, which could negatively affect DuPont’s liquidity. DuPont is unable to predict the extent of COVID-19 related impacts on its business, results of operations, access to sources of liquidity and financial condition which depends on highly uncertain and unpredictable future developments, including, but not limited to, the duration and spread of the COVID-19 outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions resume. DuPont’s financial results may be materially and adversely impacted by a variety of factors that have not yet been determined, including potential impairments of goodwill and other assets. DuPont is taking actions, including reducing costs, restructuring actions, and delaying certain capital expenditures and non-essential spend. In addition, the Company may consider further reductions in or furloughing additional operations in response to further and/or deeper declines in demand and/or or supply chain disruptions. There can be no guaranty that such actions will significantly mitigate the impact of COVID-19 on the company’s business, results of operations, access to sources of liquidity or financial condition. After the COVID-19 outbreak has subsided, DuPont may experience materially adverse impacts to its business, results of operations and financial condition as a result of related global economic impacts, including any recession that has occurred or may occur in the future.2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
On June 1, 2019, the Company announced a $2 billion share buyback program, which expires on June 1, 2021. For the three months ended September 30, 2020, there were noThe following table provides information regarding purchases of the Company’s common stock under this share repurchase program. At September 30, 2020, $1,018 million is the approximate dollar value of shares that may yet be purchased by the Company under this program.during the three months ended June 30, 2021:
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| Issuer Purchases of Equity Securities | | Total number of shares purchased as part of the Company's publicly announced share repurchase program | Approximate dollar value of shares that may yet be purchased under the Company's publicly announced share repurchase program (In millions) |
| Period | Total number of shares purchased | Average price paid per share |
| April | — | | — | | — | | 2,018 | |
May 1 | 5,480,645 | | 83.40 | | 5,480,645 | | 1,561 | |
June 2, 3 | 2,265,758 | | 81.95 | | 2,265,758 | | 1,375 | |
| Second Quarter 2021 | 7,746,403 | | $ | 82.97 | | 7,746,403 | | $ | 1,375 | |
1. Purchases completed under the Company's share buyback program announced on June 1, 2019 which expired June 1, 2021.
2. Purchases were made under the Company's share buyback program announced on March 8, 2021 which expires June 30, 2022.
3. Approximately 719 thousand shares were purchased in May, and settled in June, for $61 million under the 2019 Share Buyback Program.
As of July 30, 2021, the Company had repurchased and retired an additional 1.6 million shares for $125 million under the 2021 Share Buyback Program.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
In anticipation of and to facilitate the intended transaction with IFF, DuPont is planning for the internal separation of the N&B Business, both domestically and internationally, through a series of transactions that are intended to be tax-efficient from both a United States and foreign perspective (collectively, the "N&B Internal Separations"). See Part I, Item 1 and Part II, Item 1A of this report for more information regarding the intended transaction. The N&B Internal Separations are currently expected to consist of internal transactions undertaken by DuPont and its subsidiaries to separate ownership of the N&B Business from ownership of their other businesses, including a number of distributions intended to qualify as tax-free spinoffs for United States tax purposes under Section 355 of the Internal Revenue Code. The N&B Internal Separations are expected to occur in the United States and in (or involving entities domiciled in) various jurisdictions, including (but not limited to) the Netherlands. Following the completion of the N&B Internal Separations, DuPont expects that DuPont will effectuate the separation, pending DuPont Board approval, in a distribution intended to qualify as a tax-free spinoff for United States tax purposes under Section 355 of the Internal Revenue Code. The DuPont subsidiaries, or their successors, that are included in the current plans for the N&B Internal Separations as distributing corporations in the N&B Internal Separations (each in one or more tax-free spinoffs for United States tax purposes under Section 355 of the Internal Revenue Code) are the following: Specialty Electronic Materials Netherlands B.V.; DDP Specialty Electronic Materials US, LLC; DDP Specialty Electronic Materials US 4, LLC; DDP Specialty Electronic Materials US 5, LLC; DDP Specialty Electronic Materials US 8, LLC; DuPont Services Company B.V.; Performance Specialty Products NA, LLC; DuPont Polymers, Inc.; Danisco Holding USA Inc.; DuPont US Holding, LLC; Rohm and Haas Electronic Materials CMP, LLC.; Specialty Products US, LLC; and Specialty Products US 4, LLC.None.
ITEM 6. EXHIBITS
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| EXHIBIT NO. | | DESCRIPTION |
| | | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 101.INS | | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | | XBRL Taxonomy Extension Schema Document. |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
*Filed herewith
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DuPont de Nemours, Inc. Signatures |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DUPONT DE NEMOURS, INC.
Registrant
Date: October 30, 2020August 4, 2021
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| By: | /s/ MICHAEL G. GOSS | | | |
| Name: | Michael G. Goss | | | |
| Title: | Vice President and Controller | | | |
| City: | Wilmington | | | |
| State: | Delaware | | | |