A-1
Corteva, Inc.
Consolidated Statements of Operations
(Dollars in millions, except per share amounts)
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Net sales | $ | 4,178 | $ | 3,956 | |||||||
| Cost of goods sold | 2,420 | 2,269 | |||||||||
| Research and development expense | 281 | 280 | |||||||||
| Selling, general and administrative expenses | 733 | 757 | |||||||||
| Amortization of intangibles | 183 | 163 | |||||||||
| Restructuring and asset related charges - net | 100 | 70 | |||||||||
| Other income — net | 337 | 1 | |||||||||
| Interest expense | 7 | 10 | |||||||||
| Income from continuing operations before income taxes | 791 | 408 | |||||||||
| Provision for income taxes on continuing operations | 178 | 127 | |||||||||
| Income from continuing operations after income taxes | 613 | 281 | |||||||||
| (Loss) income from discontinued operations after income taxes | (10) | 1 | |||||||||
| Net income | 603 | 282 | |||||||||
| Net income attributable to noncontrolling interests | 3 | 10 | |||||||||
| Net income attributable to Corteva | $ | 600 | $ | 272 | |||||||
| Basic earnings per share of common stock: | |||||||||||
| Basic earnings per share of common stock from continuing operations | $ | 0.82 | $ | 0.36 | |||||||
| Basic loss per share of common stock from discontinued operations | (0.01) | — | |||||||||
| Basic earnings per share of common stock | $ | 0.81 | $ | 0.36 | |||||||
| Diluted earnings per share of common stock: | |||||||||||
| Diluted earnings per share of common stock from continuing operations | $ | 0.81 | $ | 0.36 | |||||||
| Diluted loss per share of common stock from discontinued operations | (0.01) | — | |||||||||
| Diluted earnings per share of common stock | $ | 0.80 | $ | 0.36 | |||||||
| Average number of shares outstanding used in earnings per share (EPS) calculation (in millions) | |||||||||||
| Basic | 743.4 | 749.9 | |||||||||
| Diluted | 749.6 | 752.5 | |||||||||
A-2
Corteva, Inc.
Condensed Consolidated Balance Sheets
(Dollars in millions, except share amounts)
| March 31, 2021 | December 31, 2020 | March 31, 2020 | ||||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | 2,404 | $ | 3,526 | $ | 1,963 | ||||||||||||||
| Marketable securities | 114 | 269 | 10 | |||||||||||||||||
| Accounts and notes receivable, net | 6,792 | 4,926 | 6,775 | |||||||||||||||||
| Inventories | 4,321 | 4,882 | 4,401 | |||||||||||||||||
| Other current assets | 1,405 | 1,165 | 1,530 | |||||||||||||||||
| Total current assets | 15,036 | 14,768 | 14,679 | |||||||||||||||||
| Investment in nonconsolidated affiliates | 64 | 66 | 64 | |||||||||||||||||
| Property, plant and equipment - net of accumulated depreciation (March 31, 2021 - $3,874; December 31, 2020 - $3,857; March 31, 2020 - $3,406) | 4,299 | 4,396 | 4,358 | |||||||||||||||||
| Goodwill | 10,146 | 10,269 | 10,027 | |||||||||||||||||
| Other intangible assets | 10,584 | 10,747 | 11,241 | |||||||||||||||||
| Deferred income taxes | 433 | 464 | 273 | |||||||||||||||||
| Other assets | 1,987 | 1,939 | 2,336 | |||||||||||||||||
| Total Assets | $ | 42,549 | $ | 42,649 | $ | 42,978 | ||||||||||||||
| Liabilities and Equity | ||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Short-term borrowings and finance lease obligations | $ | 1,250 | $ | 3 | $ | 1,996 | ||||||||||||||
| Accounts payable | 3,098 | 3,615 | 3,021 | |||||||||||||||||
| Income taxes payable | 165 | 123 | 143 | |||||||||||||||||
| Deferred revenue | 2,247 | 2,662 | 1,996 | |||||||||||||||||
| Accrued and other current liabilities | 2,239 | 2,145 | 2,043 | |||||||||||||||||
| Total current liabilities | 8,999 | 8,548 | 9,199 | |||||||||||||||||
| Long-Term Debt | 1,102 | 1,102 | 614 | |||||||||||||||||
| Other Noncurrent Liabilities | ||||||||||||||||||||
| Deferred income tax liabilities | 902 | 893 | 911 | |||||||||||||||||
| Pension and other post employment benefits - noncurrent | 4,954 | 5,176 | 6,186 | |||||||||||||||||
| Other noncurrent obligations | 1,814 | 1,867 | 1,989 | |||||||||||||||||
| Total noncurrent liabilities | 8,772 | 9,038 | 9,700 | |||||||||||||||||
| Commitments and contingent liabilities | ||||||||||||||||||||
| Stockholders' equity | ||||||||||||||||||||
| Common stock, $0.01 par value; 1,666,667,000 shares authorized; issued at March 31, 2021 - 738,321,000; December 31, 2020 - 743,458,000; and March 31, 2020 - 748,369,000 | 7 | 7 | 7 | |||||||||||||||||
| Additional paid-in capital | 27,630 | 27,707 | 27,906 | |||||||||||||||||
| Retained earnings / (accumulated deficit) | 268 | — | (155) | |||||||||||||||||
| Accumulated other comprehensive loss | (3,367) | (2,890) | (3,933) | |||||||||||||||||
| Total Corteva stockholders' equity | 24,538 | 24,824 | 23,825 | |||||||||||||||||
| Noncontrolling interests | 240 | 239 | 254 | |||||||||||||||||
| Total equity | 24,778 | 25,063 | 24,079 | |||||||||||||||||
| Total Liabilities and Equity | $ | 42,549 | $ | 42,649 | $ | 42,978 | ||||||||||||||
A-3
Corteva, Inc.
Consolidated Statement of Cash Flows
(Dollars in millions, except per share amounts)
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Operating activities | |||||||||||
| Net income | $ | 603 | $ | 282 | |||||||
| Adjustments to reconcile net income to cash used for operating activities: | |||||||||||
| Depreciation and amortization | 304 | 283 | |||||||||
| Provision for deferred income tax | 47 | 26 | |||||||||
| Net periodic pension and OPEB benefit, net | (318) | (85) | |||||||||
| Pension and OPEB contributions | (84) | (95) | |||||||||
| Net loss on sales of property, businesses, consolidated companies, and investments | — | 46 | |||||||||
| Restructuring and asset related charges - net | 100 | 70 | |||||||||
| Other net loss | 54 | 138 | |||||||||
| Changes in assets and liabilities - net | |||||||||||
| Accounts and notes receivable | (2,012) | (1,685) | |||||||||
| Inventories | 467 | 398 | |||||||||
| Accounts Payable | (448) | (557) | |||||||||
| Deferred revenue | (401) | (575) | |||||||||
| Other assets and liabilities | (262) | (176) | |||||||||
| Cash used for operating activities | (1,950) | (1,930) | |||||||||
| Investing activities | |||||||||||
| Capital expenditures | (137) | (128) | |||||||||
| Proceeds from sales of property, businesses, and consolidated companies - net of cash divested | 20 | 11 | |||||||||
| Purchases of investments | (40) | (67) | |||||||||
| Proceeds from sales and maturities of investments | 194 | 58 | |||||||||
| Other investing activities - net | (1) | (4) | |||||||||
| Cash provided by (used for) investing activities | 36 | (130) | |||||||||
| Financing activities | |||||||||||
| Net change in borrowings (less than 90 days) | 828 | 1,619 | |||||||||
| Proceeds from debt | 419 | 875 | |||||||||
| Payments on debt | — | (1) | |||||||||
| Repurchase of common stock | (350) | (50) | |||||||||
| Proceeds from exercise of stock options | 38 | 14 | |||||||||
| Dividends paid to stockholders | (97) | (97) | |||||||||
| Other financing activities | (17) | (16) | |||||||||
| Cash provided by financing activities | 821 | 2,344 | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (50) | (117) | |||||||||
| (Decrease)/increase in cash, cash equivalents and restricted cash | (1,143) | 167 | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 3,873 | 2,173 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 2,730 | $ | 2,340 | |||||||
A-4
Corteva, Inc.
Consolidated Segment Information
(Dollars in millions, except per share amounts)
| Three Months Ended March 31, | ||||||||||||||
| SEGMENT NET SALES - SEED | 2021 | 2020 | ||||||||||||
| Corn | $ | 1,888 | $ | 1,864 | ||||||||||
| Soybean | 177 | 181 | ||||||||||||
| Other oilseeds | 296 | 248 | ||||||||||||
| Other | 131 | 162 | ||||||||||||
| Seed | $ | 2,492 | $ | 2,455 | ||||||||||
| Three Months Ended March 31, | ||||||||||||||
| SEGMENT NET SALES - CROP PROTECTION | 2021 | 2020 | ||||||||||||
| Herbicides | $ | 986 | $ | 823 | ||||||||||
| Insecticides | 385 | 378 | ||||||||||||
| Fungicides | 261 | 229 | ||||||||||||
| Other | 54 | 71 | ||||||||||||
| Crop Protection | $ | 1,686 | $ | 1,501 | ||||||||||
| Three Months Ended March 31, | ||||||||||||||
| GEOGRAPHIC NET SALES - SEED | 2021 | 2020 | ||||||||||||
North America 1 | $ | 1,210 | $ | 1,290 | ||||||||||
EMEA 2 | 947 | 881 | ||||||||||||
| Latin America | 274 | 216 | ||||||||||||
| Asia Pacific | 61 | 68 | ||||||||||||
Rest of World 3 | 1,282 | 1,165 | ||||||||||||
| Net Sales | $ | 2,492 | $ | 2,455 | ||||||||||
| Three Months Ended March 31, | ||||||||||||||
| GEOGRAPHIC NET SALES - CROP PROTECTION | 2021 | 2020 | ||||||||||||
North America 1 | $ | 533 | $ | 475 | ||||||||||
EMEA 2 | 655 | 586 | ||||||||||||
| Latin America | 244 | 218 | ||||||||||||
| Asia Pacific | 254 | 222 | ||||||||||||
Rest of World 3 | 1,153 | 1,026 | ||||||||||||
| Net Sales | $ | 1,686 | $ | 1,501 | ||||||||||
| 1. Reflects U.S. & Canada | ||||||||||||||
| 2. Reflects Europe, Middle East, and Africa | ||||||||||||||
| 3. Reflects EMEA, Latin America, and Asia Pacific | ||||||||||||||
A-5
Corteva, Inc.
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
| Three Months Ended March 31, | ||||||||||||||
| 2021 | ||||||||||||||
| Net Sales (GAAP) | $ | 4,178 | ||||||||||||
| Less: Impacts from Currency and Portfolio | (25) | |||||||||||||
| Organic Sales (Non-GAAP) | $ | 4,203 | ||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| OPERATING EBITDA | 2021 | 2020 | ||||||||||||
| Seed | $ | 617 | $ | 581 | ||||||||||
| Crop Protection | 321 | 238 | ||||||||||||
| Corporate Expenses | (34) | (25) | ||||||||||||
| Operating EBITDA (Non-GAAP) | $ | 904 | $ | 794 | ||||||||||
| RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS AFTER INCOME TAXES TO OPERATING EBITDA | Three Months Ended March 31, | |||||||||||||
| 2021 | 2020 | |||||||||||||
| Income from continuing operations after income taxes (GAAP) | $ | 613 | $ | 281 | ||||||||||
| Provision for income taxes on continuing operations | 178 | 127 | ||||||||||||
| Income from continuing operations before income taxes (GAAP) | 791 | 408 | ||||||||||||
| Depreciation and amortization | 304 | 283 | ||||||||||||
| Interest income | (21) | (18) | ||||||||||||
| Interest expense | 7 | 10 | ||||||||||||
Exchange losses - net1 | 35 | 61 | ||||||||||||
Non-operating benefits - net2 | (311) | (73) | ||||||||||||
Mark-to-market gains on certain foreign currency contracts not designated as hedges3 | (1) | |||||||||||||
Significant items charge4 | 100 | 123 | ||||||||||||
| Operating EBITDA (Non-GAAP) | $ | 904 | $ | 794 | ||||||||||
1.Refer to page A-12 for pre-tax and after tax impacts of exchange losses - net.
2.Non-operating benefits—net consists of non-operating pension and other post-employment benefit (OPEB) (benefits) costs, tax indemnification adjustments, environmental remediation and legal costs associated with legacy EID businesses and sites. Tax indemnification adjustments relate to changes in indemnification balances, as a result of the application of the terms of the Tax Matters Agreement, between Corteva and Dow and/or DuPont that are recorded by the company as pre-tax income or expense.
3.Effective January 1, 2021, on a prospective basis, the company excludes net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. There was no activity in the three months ended March 31, 2020.
4.Refer to page A-8 for pre-tax and after tax impacts of significant items.
A-6
Corteva, Inc.
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
| PRICE - VOLUME - CURRENCY ANALYSIS | ||||||||||||||||||||||||||
| REGION | ||||||||||||||||||||||||||
| Q1 2021 vs. Q1 2020 | Percent Change Due To: | |||||||||||||||||||||||||
| Net Sales Change (GAAP) | Organic Change 1 (Non-GAAP) | Local Price & | Portfolio / | |||||||||||||||||||||||
| $ | % | $ | % | Product Mix | Volume | Currency | Other | |||||||||||||||||||
| North America | $ | (22) | (1) | % | $ | (30) | (2) | % | 1 | % | (3) | % | 1 | % | — | % | ||||||||||
| EMEA | 135 | 9 | % | 86 | 6 | % | 3 | % | 3 | % | 3 | % | — | % | ||||||||||||
| Latin America | 84 | 19 | % | 166 | 38 | % | 14 | % | 24 | % | (19) | % | — | % | ||||||||||||
| Asia Pacific | 25 | 9 | % | 26 | 9 | % | 3 | % | 6 | % | 4 | % | (4) | % | ||||||||||||
| Rest of World | 244 | 11 | % | 278 | 13 | % | 5 | % | 8 | % | (1) | % | (1) | % | ||||||||||||
| Total | $ | 222 | 6 | % | $ | 248 | 6 | % | 3 | % | 3 | % | — | % | — | % | ||||||||||
| SEED | ||||||||||||||||||||||||||
| Q1 2021 vs. Q1 2020 | Percent Change Due To: | |||||||||||||||||||||||||
| Net Sales Change (GAAP) | Organic Change 1 (Non-GAAP) | Local Price & | Portfolio / | |||||||||||||||||||||||
| $ | % | $ | % | Product Mix | Volume | Currency | Other | |||||||||||||||||||
| North America | $ | (80) | (6) | % | $ | (84) | (7) | % | (1) | % | (6) | % | 1 | % | — | % | ||||||||||
| EMEA | 66 | 7 | % | 47 | 5 | % | 3 | % | 2 | % | 2 | % | — | % | ||||||||||||
| Latin America | 58 | 27 | % | 104 | 48 | % | 9 | % | 39 | % | (21) | % | — | % | ||||||||||||
| Asia Pacific | (7) | (10) | % | (5) | (7) | % | 5 | % | (12) | % | (3) | % | — | % | ||||||||||||
| Rest of World | 117 | 10 | % | 146 | 13 | % | 5 | % | 8 | % | (3) | % | — | % | ||||||||||||
| Total | $ | 37 | 2 | % | $ | 62 | 3 | % | 2 | % | 1 | % | (1) | % | — | % | ||||||||||
| CROP PROTECTION | ||||||||||||||||||||||||||
| Q1 2021 vs. Q1 2020 | Percent Change Due To: | |||||||||||||||||||||||||
| Net Sales Change (GAAP) | Organic Change 1 (Non-GAAP) | Local Price & | Portfolio / | |||||||||||||||||||||||
| $ | % | $ | % | Product Mix | Volume | Currency | Other | |||||||||||||||||||
| North America | 58 | 12 | % | $ | 54 | 11 | % | 6 | % | 5 | % | 1 | % | — | % | |||||||||||
| EMEA | 69 | 12 | % | 39 | 7 | % | 3 | % | 4 | % | 5 | % | — | % | ||||||||||||
| Latin America | 26 | 12 | % | 62 | 28 | % | 18 | % | 10 | % | (16) | % | — | % | ||||||||||||
| Asia Pacific | 32 | 14 | % | 31 | 14 | % | 2 | % | 12 | % | 5 | % | (5) | % | ||||||||||||
| Rest of World | 127 | 12 | % | 132 | 13 | % | 6 | % | 7 | % | — | % | (1) | % | ||||||||||||
| Total | $ | 185 | 12 | % | $ | 186 | 12 | % | 6 | % | 6 | % | 1 | % | (1) | % | ||||||||||
A-7
Corteva, Inc.
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
| SEED PRODUCT LINE | ||||||||||||||||||||||||||
| Q1 2021 vs. Q1 2020 | Percent Change Due To: | |||||||||||||||||||||||||
| Net Sales Change (GAAP) | Organic Change 1 (Non-GAAP) | Local Price & | Portfolio / | |||||||||||||||||||||||
| $ | % | $ | % | Product Mix | Volume | Currency | Other | |||||||||||||||||||
| Corn | $ | 24 | 1 | % | $ | 43 | 2 | % | 2 | % | — | % | (1) | % | — | % | ||||||||||
| Soybeans | (4) | (2) | % | (7) | (4) | % | (4) | % | — | % | 2 | % | — | % | ||||||||||||
| Other oilseeds | 48 | 19 | % | 54 | 22 | % | 4 | % | 18 | % | (3) | % | — | % | ||||||||||||
| Other | (31) | (19) | % | (28) | (17) | % | (5) | % | (12) | % | (2) | % | — | % | ||||||||||||
| Total | $ | 37 | 2 | % | $ | 62 | 3 | % | 2 | % | 1 | % | (1) | % | — | % | ||||||||||
| CROP PROTECTION PRODUCT LINE | ||||||||||||||||||||||||||
| Q1 2021 vs. Q1 2020 | Percent Change Due To: | |||||||||||||||||||||||||
| Net Sales Change (GAAP) | Organic Change 1 (Non-GAAP) | Local Price & | Portfolio / | |||||||||||||||||||||||
| $ | % | $ | % | Product Mix | Volume | Currency | Other | |||||||||||||||||||
| Herbicides | $ | 163 | 20 | % | $ | 142 | 17 | % | 5 | % | 12 | % | 3 | % | — | % | ||||||||||
| Insecticides | 7 | 2 | % | 15 | 4 | % | 8 | % | (4) | % | (2) | % | — | % | ||||||||||||
| Fungicides | 32 | 14 | % | 43 | 19 | % | 5 | % | 14 | % | (1) | % | (4) | % | ||||||||||||
| Other | (17) | (24) | % | (14) | (20) | % | (1) | % | (19) | % | (4) | % | — | % | ||||||||||||
| Total | $ | 185 | 12 | % | $ | 186 | 12 | % | 6 | % | 6 | % | 1 | % | (1) | % | ||||||||||
1.Organic sales is defined as price and volume and excludes currency and portfolio impacts.
A-8
Corteva, Inc.
Significant Items
(Dollars in millions, except per share amounts)
| SIGNIFICANT ITEMS BY SEGMENT (PRE-TAX) | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Seed | $ | (21) | $ | (10) | |||||||
| Crop Protection | (32) | (71) | |||||||||
| Corporate | (47) | (42) | |||||||||
| Total significant items before income taxes | $ | (100) | $ | (123) | |||||||
| SIGNIFICANT ITEMS - PRE-TAX, AFTER TAX, AND EPS IMPACTS | ||||||||||||||||||||||||||||||||||||||
| Pre-tax | After tax4 | ($ Per Share) | ||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||
| 1st Quarter | ||||||||||||||||||||||||||||||||||||||
Restructuring and asset related charges, net 1 | $ | (100) | $ | (70) | $ | (77) | $ | (57) | $ | (0.10) | $ | (0.08) | ||||||||||||||||||||||||||
Loss on divestiture 2 | — | (53) | — | (43) | — | (0.06) | ||||||||||||||||||||||||||||||||
Income tax items 3 | — | — | — | (19) | — | (0.02) | ||||||||||||||||||||||||||||||||
1st Quarter — Total | $ | (100) | $ | (123) | $ | (77) | $ | (119) | $ | (0.10) | $ | (0.16) | ||||||||||||||||||||||||||
1.First quarter 2021 includes restructuring and asset related charges of $(100). The charges primarily relate to a $(89) charge associated with the 2021 Restructuring Actions and a $(7) charge related to non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits.
First quarter 2020 includes restructuring and asset related charges of $(70). The charge included a $(63) charge related to the Execute to Win Productivity Program, a $(10) charge related to non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits, and a $3 asset related benefit associated with the DowDuPont Synergy Program.
2.First quarter 2020 includes a loss of $(53) included in other income - net related to the sale of the La Porte site, for which the company signed an agreement during the first quarter 2020, and closed during the first quarter of 2021.
3.First quarter 2020 includes an after tax charge related to the impact of a state tax valuation allowance in the U.S. based on a change in judgment about the realizability of a deferred tax asset.
4.Unless specifically addressed in notes above, the income tax effect on significant items was calculated based upon the enacted tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment.
A-9
Corteva, Inc.
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
| Operating Earnings Per Share (Non-GAAP) | ||||||||||||||||||||||||||
| Operating earnings per share is defined as earnings per share from continuing operations – diluted, excluding non-operating benefits - net, amortization of intangibles (existing as of Separation), net unrealized gain or loss from mark-to-market activity on certain foreign currency derivative instruments that do not qualify for hedge accounting, and significant items. | ||||||||||||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
| $ | $ | EPS (diluted) | EPS (diluted) | |||||||||||||||||||||||
| Net income from continuing operations attributable to Corteva (GAAP) | $ | 610 | $ | 271 | $ | 0.81 | $ | 0.36 | ||||||||||||||||||
Less: Non-operating benefits - net, after tax 1 | 237 | 57 | 0.31 | 0.08 | ||||||||||||||||||||||
| Less: Amortization of intangibles (existing as of Separation), after tax | (143) | (114) | (0.19) | (0.15) | ||||||||||||||||||||||
Less: Mark-to-market gains on certain foreign currency contracts not designated as hedges, after tax2 | 1 | — | ||||||||||||||||||||||||
| Less: Significant items charge, after tax | (77) | (119) | (0.10) | (0.16) | ||||||||||||||||||||||
| Operating Earnings (Non-GAAP) | $ | 592 | $ | 447 | $ | 0.79 | $ | 0.59 | ||||||||||||||||||
1.Non-operating benefits—net consists of non-operating pension and other post-employment benefit (OPEB) benefits (costs), tax indemnification adjustments, and environmental remediation and legal costs associated with legacy EID businesses and sites. Tax indemnification adjustments relate to changes in indemnification balances, as a result of the application of the terms of the Tax Matters Agreement, between Corteva and Dow and/or DuPont that are recorded by the company as pre-tax income or expense.
2.Effective January 1, 2021, on a prospective basis, the company excludes net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. There was no activity in the three months ended March 31, 2020.
A-10
Corteva, Inc.
Operating EBITDA to Operating Earnings Per Share
(Dollars in millions, except per share amounts)
| Operating EBITDA to Operating Earnings Per Share | ||||||||||||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||
Operating EBITDA (Non-GAAP)1 | $ | 904 | $ | 794 | ||||||||||||||||||||||
| Depreciation | (121) | (120) | ||||||||||||||||||||||||
| Interest Income | 21 | 18 | ||||||||||||||||||||||||
| Interest Expense | (7) | (10) | ||||||||||||||||||||||||
Provision for income taxes on continuing operations before significant items, non-operating benefits - net, amortization of intangibles (existing as of Separation), mark-to-market gains on certain foreign currency contracts not designated as hedges, and exchange gains/(losses), net (Non-GAAP)1 | (162) | (147) | ||||||||||||||||||||||||
Base income tax rate from continuing operations (Non-GAAP)1 | 20.3 | % | 21.6 | % | ||||||||||||||||||||||
Exchange losses - net, after tax2 | (40) | (78) | ||||||||||||||||||||||||
| Net income attributable to non-controlling interests | (3) | (10) | ||||||||||||||||||||||||
Operating Earnings (Non-GAAP)1 | $ | 592 | $ | 447 | ||||||||||||||||||||||
| Diluted Shares (in millions) | 749.6 | 752.5 | ||||||||||||||||||||||||
Operating Earnings Per Share (Non-GAAP)1 | $ | 0.79 | $ | 0.59 | ||||||||||||||||||||||
1. Refer to pages A-5 through A-9 and A-11 for Non-GAAP reconciliations.
2. Refer to page A-12 for pre-tax and after tax impacts of exchange gains (losses) - net.
A-11
Corteva, Inc.
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
| Reconciliation of Base Income Tax Rate to Effective Income Tax Rate | |||||||||||||||||||||||
| Base income tax rate is defined as the effective income tax rate less the effect of exchange (losses) gains, significant items, amortization of intangibles (existing as of Separation), mark-to-market gains on certain foreign currency contracts not designated as hedges, and non-operating benefits - net. | |||||||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||
Income from continuing operations before income taxes (GAAP) | $ | 791 | $ | 408 | |||||||||||||||||||
Add: Significant items - charge 1 | 100 | 123 | |||||||||||||||||||||
| Non-operating benefits - net | (311) | (73) | |||||||||||||||||||||
| Amortization of intangibles (existing as of Separation) | 183 | 163 | |||||||||||||||||||||
Mark-to-market gains on certain foreign currency contracts not designated as hedges2 | (1) | ||||||||||||||||||||||
Less: Exchange losses, net3 | (35) | (61) | |||||||||||||||||||||
Income from continuing operations before income taxes, significant items, non-operating benefits - net, amortization of intangibles (existing as of Separation), mark-to-market gains on certain foreign currency contracts not designated as hedges, and exchange losses, net (Non-GAAP) | $ | 797 | $ | 682 | |||||||||||||||||||
Provision for income taxes on continuing operations (GAAP) | $ | 178 | $ | 127 | |||||||||||||||||||
Add: Tax benefits on significant items charge1 | 23 | 4 | |||||||||||||||||||||
| Tax expenses on non-operating benefits - net | (74) | (16) | |||||||||||||||||||||
| Tax benefits on amortization of intangibles (existing as of Separation) | 40 | 49 | |||||||||||||||||||||
Tax benefits on mark-to-market gains on certain foreign currency contracts not designated as hedges2 | — | ||||||||||||||||||||||
Tax expenses on exchange losses, net3 | (5) | (17) | |||||||||||||||||||||
Provision for income taxes on continuing operations before significant items, non-operating benefits - net, amortization of intangibles (existing as of Separation), mark-to-market gains on certain foreign currency contracts not designated as hedges, and exchange losses, net (Non-GAAP) | $ | 162 | $ | 147 | |||||||||||||||||||
Effective income tax rate (GAAP) | 22.5 | % | 31.1 | % | |||||||||||||||||||
| Significant items, non-operating benefits, amortization of intangibles (existing as of Separation), and mark-to-market gains on certain foreign currency contracts not designated as hedges effect | (0.6) | % | (4.7) | % | |||||||||||||||||||
| Tax rate from continuing operations before significant items, non-operating benefits - net, amortization of intangibles (existing as of Separation), and mark-to-market gains on certain foreign currency contracts not designated as hedges | 21.9 | % | 26.4 | % | |||||||||||||||||||
Exchange losses, net effect3 | (1.6) | % | (4.8) | % | |||||||||||||||||||
Base income tax rate from continuing operations (Non-GAAP) | 20.3 | % | 21.6 | % | |||||||||||||||||||
| 1. See Significant Items table for further detail. | |||||||||||||||||||||||
| 2. Effective January 1, 2021, on a prospective basis, the company excludes net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. There was no activity in the three months ended March 31, 2020. | |||||||||||||||||||||||
| 3. See page A-12 for further details of exchange gains (losses). | |||||||||||||||||||||||
A-12
Corteva, Inc.
(Dollars in millions, except per share amounts)
| Exchange Gains/Losses | ||||||||||||||||||||||||||
| The company routinely uses foreign currency exchange contracts to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets and liabilities. The objective of this program is to maintain an approximately balanced position in foreign currencies in order to minimize, on an after-tax basis, the effects of exchange rate changes on net monetary asset positions. The hedging program gains (losses) are largely taxable (tax deductible) in the United States (U.S.), whereas the offsetting exchange gains (losses) on the remeasurement of the net monetary asset positions are often not taxable (tax deductible) in their local jurisdictions. The net pre-tax exchange gains (losses) are recorded in other income (expense) - net and the related tax impact is recorded in provision for (benefit from) income taxes on continuing operations in the Consolidated Statements of Operations. | ||||||||||||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||
| Subsidiary Monetary Position Loss | ||||||||||||||||||||||||||
| Pre-tax exchange losses | $ | (51) | $ | (226) | ||||||||||||||||||||||
| Local tax (expenses) benefits | (1) | 23 | ||||||||||||||||||||||||
| Net after tax impact from subsidiary exchange losses | $ | (52) | $ | (203) | ||||||||||||||||||||||
| Hedging Program Gain | ||||||||||||||||||||||||||
| Pre-tax exchange gains | $ | 16 | $ | 165 | ||||||||||||||||||||||
| Tax expenses | (4) | (40) | ||||||||||||||||||||||||
| Net after tax impact from hedging program exchange gains | $ | 12 | $ | 125 | ||||||||||||||||||||||
| Total Exchange Loss | ||||||||||||||||||||||||||
| Pre-tax exchange losses | $ | (35) | $ | (61) | ||||||||||||||||||||||
| Tax expenses | (5) | (17) | ||||||||||||||||||||||||
| Net after tax exchange losses | $ | (40) | $ | (78) | ||||||||||||||||||||||
| As shown above, the "Total Exchange Loss" is the sum of the "Subsidiary Monetary Position Loss" and the "Hedging Program Gain." | ||||||||||||||||||||||||||