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.
During the second quarter of 2020, Electronics & Imaging realigned a component within the Semiconductor Technologies product line to the Image Solutions product line. The reporting changes have been retrospectively reflected for all periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Trade Revenue by Segment and Business or Major Product Line
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Image Solutions
|
$
|
155
|
|
$
|
169
|
|
$
|
319
|
|
$
|
340
|
|
|
Interconnect Solutions
|
274
|
|
282
|
|
540
|
|
520
|
|
|
Semiconductor Technologies
|
476
|
|
407
|
|
930
|
|
823
|
|
|
Electronics & Imaging
|
$
|
905
|
|
$
|
858
|
|
$
|
1,789
|
|
$
|
1,683
|
|
|
Food & Beverage
|
$
|
739
|
|
$
|
746
|
|
$
|
1,477
|
|
$
|
1,501
|
|
|
Health & Biosciences
|
579
|
|
604
|
|
1,184
|
|
1,174
|
|
|
Pharma Solutions
|
221
|
|
208
|
|
429
|
|
418
|
|
|
Nutrition & Biosciences
|
$
|
1,539
|
|
$
|
1,558
|
|
$
|
3,090
|
|
$
|
3,093
|
|
|
Healthcare & Specialty
|
$
|
291
|
|
$
|
388
|
|
$
|
650
|
|
$
|
772
|
|
|
Industrial & Consumer
|
181
|
|
293
|
|
447
|
|
601
|
|
|
Mobility Solutions
|
360
|
|
588
|
|
879
|
|
1,213
|
|
|
Transportation & Industrial
|
$
|
832
|
|
$
|
1,269
|
|
$
|
1,976
|
|
$
|
2,586
|
|
|
Safety Solutions
|
$
|
581
|
|
$
|
657
|
|
$
|
1,212
|
|
$
|
1,322
|
|
|
Shelter Solutions
|
316
|
|
398
|
|
664
|
|
755
|
|
|
Water Solutions
|
347
|
|
286
|
|
644
|
|
547
|
|
|
Safety & Construction
|
$
|
1,244
|
|
$
|
1,341
|
|
$
|
2,520
|
|
$
|
2,624
|
|
|
Biomaterials
|
$
|
27
|
|
$
|
53
|
|
$
|
61
|
|
$
|
112
|
|
|
Clean Technologies
|
67
|
|
76
|
|
127
|
|
141
|
|
|
DuPont Teijin Films
|
34
|
|
42
|
|
77
|
|
79
|
|
|
Photovoltaic & Advanced Materials
|
180
|
|
230
|
|
409
|
|
484
|
|
|
Sustainable Solutions 1
|
—
|
|
41
|
|
—
|
|
80
|
|
|
Non-Core
|
$
|
308
|
|
$
|
442
|
|
$
|
674
|
|
$
|
896
|
|
|
Total
|
$
|
4,828
|
|
$
|
5,468
|
|
$
|
10,049
|
|
$
|
10,882
|
|
1. The Sustainable Solutions business was divested in the third quarter of 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Trade Revenue by Geographic Region
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
U.S. & Canada
|
$
|
1,513
|
|
$
|
1,826
|
|
$
|
3,255
|
|
$
|
3,602
|
|
|
EMEA 1
|
1,065
|
|
1,291
|
|
2,336
|
|
2,671
|
|
|
Asia Pacific
|
2,012
|
|
2,034
|
|
3,925
|
|
3,979
|
|
|
Latin America
|
238
|
|
317
|
|
533
|
|
630
|
|
|
Total
|
$
|
4,828
|
|
$
|
5,468
|
|
$
|
10,049
|
|
$
|
10,882
|
|
|
|
|
|
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 receivable when the right to consideration becomes unconditional. Contract assets include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Contract liabilities primarily reflect deferred revenue from advance payment for product that the Company has received from customers. The Company classifies deferred revenue as current or noncurrent based on the timing of when the Company expects to recognize revenue.
Revenue recognized in the first six months of 2020 from amounts included in contract liabilities at the beginning of the period was approximately $14 million (approximately $25 million in the first six months of 2019). The amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional was insignificant. The Company did not recognize any asset impairment charges related to contract assets during the period.
|
|
|
|
|
|
|
|
|
|
|
Contract Balances
|
June 30, 2020
|
December 31, 2019
|
|
In millions
|
|
Accounts and notes receivable - trade 1
|
$
|
2,921
|
|
$
|
3,007
|
|
|
Contract assets - current 2
|
$
|
42
|
|
$
|
35
|
|
|
Deferred revenue - current 3
|
$
|
44
|
|
$
|
20
|
|
|
Deferred revenue - noncurrent 4
|
$
|
49
|
|
$
|
24
|
|
|
|
|
|
1.
|
Included in "Accounts and notes receivable - net" in the interim Condensed Consolidated Balance Sheets.
|
|
|
|
|
2.
|
Included in "Other current assets" in the interim Condensed Consolidated Balance Sheets.
|
|
|
|
|
3.
|
Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.
|
|
|
|
|
4.
|
Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets.
|
NOTE 5 - RESTRUCTURING AND ASSET RELATED CHARGES - NET
Charges for restructuring programs and asset related charges, which include other asset impairments, were $19 million and $423 million for the three and six months ended June 30, 2020 ($137 million and $208 million for the three and six months ended June 30, 2019). 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 $164 million at June 30, 2020 ($162 million at December 31, 2019). Restructuring activity consists of the following:
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 following tables summarize the charges related to the 2020 Restructuring Program for the three and six months ended June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020
|
Six Months Ended June 30, 2020
|
|
In millions
|
|
Severance and related benefit costs
|
$
|
6
|
|
$
|
102
|
|
|
Asset related charges
|
9
|
|
24
|
|
|
Total restructuring and asset related charges - net
|
$
|
15
|
|
$
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 Restructuring Program Charges (Credits) by Segment
|
Three Months Ended June 30, 2020
|
Six Months Ended June 30, 2020
|
|
In millions
|
|
Electronics & Imaging
|
$
|
—
|
|
$
|
4
|
|
|
Nutrition & Biosciences
|
1
|
|
7
|
|
|
Transportation & Industrial
|
(3
|
)
|
21
|
|
|
Safety & Construction
|
2
|
|
22
|
|
|
Non-Core
|
—
|
|
—
|
|
|
Corporate
|
15
|
|
72
|
|
|
Total
|
$
|
15
|
|
$
|
126
|
|
The following table summarizes the activities related to the 2020 Restructuring Program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 Restructuring Program
|
Severance and Related Benefit Costs
|
Asset Related Charges
|
Total
|
|
In millions
|
|
Year-to-date restructuring charges
|
$
|
102
|
|
$
|
24
|
|
$
|
126
|
|
|
Charges against the reserve
|
—
|
|
(24
|
)
|
(24
|
)
|
|
Cash payments
|
(21
|
)
|
—
|
|
(21
|
)
|
|
Reserve balance at June 30, 2020
|
$
|
81
|
|
$
|
—
|
|
$
|
81
|
|
At June 30, 2020, total liabilities related to the 2020 Restructuring Program were $81 million, recognized in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets. The Company expects actions related to this program to be substantially complete by the end of 2020.
2019 Restructuring Program
During the second quarter of 2019 and in connection with the ongoing integration activities, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the Distributions (the "2019 Restructuring Program"). The Company has recorded pre-tax restructuring charges of $140 million inception-to-date, consisting of severance and related benefit costs of $106 million and asset related charges of $34 million.
The following table summarizes the charges incurred related to the 2019 Restructuring Program for the three and six months ended June 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Severance and related benefit (credits) costs
|
$
|
(16
|
)
|
$
|
50
|
|
$
|
2
|
|
$
|
50
|
|
|
Asset related charges
|
—
|
|
3
|
|
—
|
|
3
|
|
|
Total restructuring and asset related (credits) charges - net
|
$
|
(16
|
)
|
$
|
53
|
|
$
|
2
|
|
$
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 Restructuring Program (Credits) Charges by Segment
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Electronics & Imaging
|
$
|
(3
|
)
|
$
|
7
|
|
$
|
(3
|
)
|
$
|
7
|
|
|
Nutrition & Biosciences
|
(3
|
)
|
14
|
|
(3
|
)
|
14
|
|
|
Transportation & Industrial
|
(8
|
)
|
12
|
|
(7
|
)
|
12
|
|
|
Safety & Construction
|
(14
|
)
|
17
|
|
(14
|
)
|
17
|
|
|
Non-Core
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Corporate
|
12
|
|
3
|
|
29
|
|
3
|
|
|
Total
|
$
|
(16
|
)
|
$
|
53
|
|
$
|
2
|
|
$
|
53
|
|
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
|
(40
|
)
|
|
Reserve balance at June 30, 2020
|
$
|
42
|
|
At June 30, 2020, total liabilities related to the 2019 Restructuring Program were $42 million, recognized in "Accrued and other current liabilities" ($86 million at December 31, 2019) in the interim Condensed Consolidated Balance Sheets. The 2019 Restructuring Program is considered substantially complete at June 30, 2020.
DowDuPont Cost Synergy Program
In September and November 2017, the Company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program, which was designed to integrate and optimize the organization following the Merger and in preparation for the 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 million inception-to-date, consisting of severance and related benefit costs of $213 million, asset related charges of $209 million and contract termination and other charges of $67 million.
The following tables summarize the charges incurred related to the DowDuPont Cost Synergy Program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Severance and related benefit (credits) costs
|
$
|
(2
|
)
|
$
|
6
|
|
$
|
(2
|
)
|
$
|
49
|
|
|
Contract termination and other charges
|
1
|
|
—
|
|
6
|
|
16
|
|
|
Asset related charges
|
—
|
|
16
|
|
—
|
|
29
|
|
|
Total restructuring and asset related (credits) charges - net 1
|
$
|
(1
|
)
|
$
|
22
|
|
$
|
4
|
|
$
|
94
|
|
1. The charge for the three and six months ended June 30, 2019 includes $21 million and $92 million which was recognized in "Restructuring and asset related charges - net" and $1 million and $2 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 June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Electronics & Imaging
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
Nutrition & Biosciences
|
—
|
|
8
|
|
—
|
|
35
|
|
|
Transportation & Industrial
|
1
|
|
—
|
|
1
|
|
—
|
|
|
Safety & Construction
|
—
|
|
3
|
|
5
|
|
5
|
|
|
Non-Core
|
—
|
|
1
|
|
—
|
|
—
|
|
|
Corporate
|
(2
|
)
|
10
|
|
(2
|
)
|
54
|
|
|
Total
|
$
|
(1
|
)
|
$
|
22
|
|
$
|
4
|
|
$
|
94
|
|
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
|
(36
|
)
|
(2
|
)
|
(38
|
)
|
|
Reserve balance at June 30, 2020
|
$
|
36
|
|
$
|
5
|
|
$
|
41
|
|
At June 30, 2020, total liabilities related to the DowDuPont Cost Synergy Program were $41 million, recognized in "Accrued and other current liabilities" ($76 million at December 31, 2019) in the interim Condensed Consolidated Balance Sheets. The DowDuPont Cost Synergy Program is considered substantially complete at June 30, 2020.
Asset Impairments
In the second quarter of 2020, the Company recorded a $21 million pre-tax impairment charge related to indefinite-lived intangible assets within the Transportation & Industrial segment. This charge was recorded within “Restructuring and asset related charges - net” in the interim Consolidated Statements of Operations for the three and six months ended June 30, 2020. See Note 11 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 segment gave rise to fair value indicators and, thus, triggering events requiring the Company to perform a recoverability assessment related to its biomaterials business unit. The Company performed a long-lived asset impairment test and determined that, based on undiscounted cash flows, the carrying amount of certain long-lived assets was not recoverable. Accordingly, the Company estimated the fair value of these assets using a market approach utilizing Level 3 unobservable inputs. As a result, the Company recognized a $270 million pre-tax impairment charge recorded within “Restructuring and asset related charges - net” in the interim Consolidated Statements of Operations for the six months ended June 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 an impairment charge of $63 million in “Restructuring and asset related charges - net” in the interim Consolidated Statements of Operations related to the Nutrition & Biosciences segment for the three and six months ended June 30, 2019.
NOTE 6 - SUPPLEMENTARY INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sundry Income (Expense) - Net
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Non-operating pension and other post employment benefit (OPEB) credits
|
$
|
8
|
|
$
|
18
|
|
$
|
19
|
|
$
|
39
|
|
|
Interest income
|
2
|
|
9
|
|
4
|
|
49
|
|
|
Net (loss) gain on divestiture and sales of other assets and investments 1,2
|
(4
|
)
|
10
|
|
193
|
|
63
|
|
|
Foreign exchange losses, net
|
(23
|
)
|
(17
|
)
|
(31
|
)
|
(78
|
)
|
|
Miscellaneous income (expenses) - net 3
|
3
|
|
(39
|
)
|
12
|
|
(8
|
)
|
|
Sundry income (expense) - net
|
$
|
(14
|
)
|
$
|
(19
|
)
|
$
|
197
|
|
$
|
65
|
|
1. The six months ended June 30, 2020 includes income of $197 million related to the gain on sale of the Compound Semiconductor Solutions business unit within the Electronics & Imaging segment.
2. The six months ended June 30, 2019 includes income of $51 million related to a sale of assets within the Electronics & Imaging segment.
3. Miscellaneous income (expenses) - net for the three and six months ended June 30, 2019 includes a $48 million charge reflecting a reduction in gross proceeds from lower withholding taxes related to a prior year settlement. The six months ended June 30, 2019 also includes $26 million related to licensing income within the Safety & Construction segment.
Cash, Cash Equivalents and Restricted Cash
From time to time, the Company is required to set aside funds for various activities that arise in the normal course of business. These funds typically have legal restrictions associated with them and are deposited in an escrow account or held in a separately identifiable account by the Company. Historical EID entered into a trust agreement in 2013 (as amended and restated in 2017), establishing and requiring Historical EID to fund a trust (the "Trust") for cash obligations under certain non-qualified benefit and deferred compensation plans upon a change in control event as defined in the Trust agreement. Under the Trust agreement, the consummation of the Merger was a change in control event. After the distribution of Corteva, the Trust assets related to Corteva employees were transferred to a new trust for Corteva (the "Corteva Trust"). As a result, the Trust currently held by DuPont relates to funding obligations to DuPont employees. At June 30, 2020, the Company had restricted cash of $32 million ($37 million at December 31, 2019) included in "Other current assets" in the interim Condensed Consolidated Balance Sheets which was completely attributed to the Trust.
Accrued and Other Current Liabilities
"Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets were $1,496 million at June 30, 2020 and $1,342 million at December 31, 2019. No component of "Accrued and other current liabilities" was more than 5 percent of total current liabilities at June 30, 2020. Accrued payroll, which is a component of "Accrued and other current liabilities," was $479 million at December 31, 2019. No other component of "Accrued and other current liabilities" was more than 5 percent of total current liabilities at December 31, 2019.
NOTE 7 - INCOME TAXES
For periods between the Merger and the Distributions, DuPont's consolidated federal income tax group and consolidated tax return included the Dow and Corteva entities. Generally, the consolidated tax liability of the DuPont U.S. tax group for each year was apportioned among the members of the consolidated group in accordance with the terms of the Amended and Restated Tax Matters Agreement. DuPont, Corteva and Dow intend that to the extent Federal and/or State corporate income tax liabilities are reduced through the utilization of tax attributes of the other, settlement of any receivable and payable generated from the use of the other party’s sub-group attributes will be in accordance with the Amended and Restated Tax Matters Agreement.
The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attributes. The effective tax rate on continuing operations for the second quarter of 2020 was 1.4 percent, compared with an effective tax rate of (16.4) percent for the second quarter of 2019. For the first six months of 2020, the effective tax rate on continuing operations was (0.3) percent, compared with (5.8) percent for the first six months of 2019. The effective tax rate for the second quarter and for the first six months of 2020 was principally the result of a non-tax-deductible goodwill impairment charge impacting the Transportation and Industrial segment in the second quarter and a non-tax-deductible goodwill impairment charge impacting the Non-Core segment in the first quarter. The tax rate in the second quarter of 2019 and for the first six 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 8 - EARNINGS PER SHARE CALCULATIONS
The following tables provide earnings per share calculations for the three and six months ended June 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income for Earnings Per Share Calculations - Basic & Diluted
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Loss from continuing operations, net of tax
|
$
|
(2,471
|
)
|
$
|
(1,103
|
)
|
$
|
(3,081
|
)
|
$
|
(1,177
|
)
|
|
Net income from continuing operations attributable to noncontrolling interests
|
7
|
|
9
|
|
13
|
|
13
|
|
|
Net income from continuing operations attributable to participating securities 1
|
—
|
|
—
|
|
—
|
|
1
|
|
|
Loss from continuing operations attributable to common stockholders
|
$
|
(2,478
|
)
|
$
|
(1,112
|
)
|
$
|
(3,094
|
)
|
$
|
(1,191
|
)
|
|
Income from discontinued operations, net of tax
|
—
|
|
566
|
|
—
|
|
1,212
|
|
|
Net income from discontinued operations attributable to noncontrolling interests
|
—
|
|
25
|
|
—
|
|
72
|
|
|
Income from discontinued operations attributable to common stockholders
|
—
|
|
541
|
|
—
|
|
1,140
|
|
|
Net loss attributable to common stockholders
|
$
|
(2,478
|
)
|
$
|
(571
|
)
|
$
|
(3,094
|
)
|
$
|
(51
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Calculations - Basic
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
Dollars per share
|
2020
|
2019
|
2020
|
2019
|
|
Loss from continuing operations attributable to common stockholders
|
$
|
(3.37
|
)
|
$
|
(1.48
|
)
|
$
|
(4.20
|
)
|
$
|
(1.59
|
)
|
|
Income from discontinued operations, net of tax
|
—
|
|
0.72
|
|
—
|
|
1.52
|
|
|
Net loss attributable to common stockholders
|
$
|
(3.37
|
)
|
$
|
(0.76
|
)
|
$
|
(4.20
|
)
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Calculations - Diluted
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
Dollars per share
|
2020
|
2019
|
2020
|
2019
|
|
Loss from continuing operations attributable to common stockholders
|
$
|
(3.37
|
)
|
$
|
(1.48
|
)
|
$
|
(4.20
|
)
|
$
|
(1.59
|
)
|
|
Income from discontinued operations, net of tax
|
—
|
|
0.72
|
|
—
|
|
1.52
|
|
|
Net loss attributable to common stockholders
|
$
|
(3.37
|
)
|
$
|
(0.76
|
)
|
$
|
(4.20
|
)
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Count Information
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
Shares in millions
|
2020
|
2019
|
2020
|
2019
|
|
Weighted-average common shares - basic
|
734.3
|
|
749.0
|
|
736.5
|
|
749.6
|
|
|
Plus dilutive effect of equity compensation plans
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Weighted-average common shares - diluted
|
734.3
|
|
749.0
|
|
736.5
|
|
749.6
|
|
|
Stock options and restricted stock units excluded from EPS calculations 2
|
6.3
|
|
2.5
|
|
6.6
|
|
2.4
|
|
|
|
|
|
1.
|
Historical Dow restricted stock units are considered participating securities due to Historical Dow's practice of paying dividend equivalents on unvested shares.
|
2. These outstanding options to purchase shares of common stock and restricted stock units were excluded from the calculation of diluted earnings per share because the effect of including them would have been antidilutive.
NOTE 9 - INVENTORIES
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
June 30, 2020
|
December 31, 2019
|
|
In millions
|
|
Finished goods
|
$
|
2,671
|
|
$
|
2,621
|
|
|
Work in process
|
821
|
|
855
|
|
|
Raw materials
|
582
|
|
599
|
|
|
Supplies
|
233
|
|
244
|
|
|
Total inventories
|
$
|
4,307
|
|
$
|
4,319
|
|
NOTE 10 - NONCONSOLIDATED AFFILIATES
The Company's investments in companies accounted for using the equity method ("nonconsolidated affiliates"), by classification in the interim Condensed Consolidated Balance Sheets, are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
Investments in Nonconsolidated Affiliates
|
June 30, 2020
|
December 31, 2019
|
|
In millions
|
|
Investments in nonconsolidated affiliates
|
$
|
1,212
|
|
$
|
1,204
|
|
|
Accrued and other current liabilities
|
(78
|
)
|
(85
|
)
|
|
Other noncurrent obligations
|
(270
|
)
|
(358
|
)
|
|
Net investment in nonconsolidated affiliates
|
$
|
864
|
|
$
|
761
|
|
The Company had an ownership interest in 21 nonconsolidated affiliates at June 30, 2020. The following table reflects the Company's principal nonconsolidated affiliates and its ownership interest (direct and indirect) for each at June 30, 2020:
|
|
|
|
|
|
|
|
|
Country
|
Ownership Interest
|
|
|
June 30, 2020
|
|
The HSC Group:
|
|
|
|
DC HSC Holdings LLC 1
|
United States
|
50.0
|
%
|
|
Hemlock Semiconductor L.L.C.
|
United States
|
50.1
|
%
|
|
|
|
|
1.
|
DC HSC Holdings LLC holds an 80.5 percent indirect ownership interest in Hemlock Semiconductor Operations LLC.
|
Sales to nonconsolidated affiliates represented less than 2 percent of total net sales for the three and six months ended June 30, 2020 and 2019. Sales to nonconsolidated affiliates are primarily related to the sale of trichlorosilane, a raw material used in the production of polycrystalline silicon, to the HSC Group. Sales of this raw material to the HSC Group are reflected in Non-Core. Purchases from nonconsolidated affiliates represented less than 2 percent of “Cost of sales” for the three and six months ended June 30, 2020 and 2019.
HSC Group
The following table reflects the carrying value of the HSC Group investments at June 30, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
Investment in the HSC Group
|
|
Investment
|
|
In millions
|
Balance Sheet Classification
|
June 30, 2020
|
Dec 31, 2019
|
|
Hemlock Semiconductor L.L.C.
|
Other noncurrent obligations
|
$
|
(270
|
)
|
$
|
(358
|
)
|
|
DC HSC Holdings LLC
|
Investments in nonconsolidated affiliates
|
$
|
98
|
|
$
|
87
|
|
The following is summarized financial information for the Company's principal nonconsolidated equity method investments. The amounts shown below represent 100 percent of these equity method investments' results of operations:
|
|
|
|
|
|
|
|
|
|
|
Results of Operations
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
|
Revenues 1
|
$
|
345
|
|
$
|
367
|
|
|
Cost of sales 1
|
$
|
234
|
|
$
|
229
|
|
|
Income from continuing operations 2
|
$
|
203
|
|
$
|
135
|
|
|
Net income attributed to entities
|
$
|
198
|
|
$
|
119
|
|
|
|
|
|
1.
|
Includes revenues and cost of sales of $42 million and $55 million for the six months ended June 30, 2020 and 2019, respectively, that have not been eliminated between Hemlock Semiconductor L.L.C and DC HSC Holdings in the presentation of the summarized income statement information above.
|
|
|
|
|
2.
|
Includes benefits associated with customer contract settlements of approximately $165 million, partially offset by inventory valuation adjustments, for the six months ended June 30, 2020. The portion attributable to the Company was a net $64 million benefit.
|
NOTE 11 - GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amounts of goodwill during the six months ended June 30, 2020 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
|
—
|
|
—
|
|
—
|
|
53
|
|
—
|
|
53
|
|
|
Divestitures
|
(199
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(199
|
)
|
|
Impairments
|
—
|
|
—
|
|
(2,498
|
)
|
—
|
|
(533
|
)
|
(3,031
|
)
|
|
Currency Translation Adjustment
|
5
|
|
(5
|
)
|
13
|
|
11
|
|
—
|
|
24
|
|
|
Measurement Period Adjustments
|
—
|
|
—
|
|
—
|
|
20
|
|
—
|
|
20
|
|
|
Balance at June 30, 2020
|
$
|
6,898
|
|
$
|
11,007
|
|
$
|
4,446
|
|
$
|
6,795
|
|
$
|
872
|
|
$
|
30,018
|
|
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 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.
The Company continues to monitor the impact of the COVID-19 pandemic on the broader global economy, including the end markets which the Company serves. 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, 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 Merger, and thus inherently considered at risk for impairment. The Company performed quantitative testing on its Transportation & Industrial reporting unit, 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), as further described below. Based on the analysis performed, 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 three and six months ended June 30, 2020.
The Company's goodwill analysis referenced above used the discounted cash flow model (a form of the income approach) utilizing Level 3 unobservable inputs. The Company’s significant assumptions in this analysis included, but were 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.
The Company also used the Guideline Public Company Method (a form of the market approach). The significant assumptions used in this analysis include, but are not limited to, the derived multiples from comparable market transactions and other market data. The selection of comparable businesses is based on the markets in which the reporting unit operates giving consideration to risk profiles, size, geography, and diversity of products and services.
The Company probability-weighted scenarios for both the income and market approaches and also applied an overall probability-weighting to the income and market approaches to determine the concluded fair value of the reporting unit given the uncertainty in the current economic environment to determine the concluded fair value of the reporting unit. The Company believes the current assumptions and estimates utilized in the income and market approaches are both reasonable and appropriate.
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 as of March 31, 2020. As part of the analysis, the Company determined that the fair value of its Photovoltaic and Advanced Materials (“PVAM”) reporting unit was below its carry value resulting in an impairment charge to goodwill. Valuations of the PVAM reporting unit under a combination of the market approach and income approach 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 six months ended June 30, 2020. As a result of the impairment, the carrying value of the PVAM reporting unit is indicative of fair value and thus is at risk to have impairment charges in future periods.
In the second quarter of 2019, the Company recorded pre-tax, non-cash goodwill impairment charges of $1,175 million impacting the Nutrition & Biosciences and Non-Core segments which are reflected in "Goodwill impairment charges" in the interim Consolidated Statements of Operations for the three and six months ended June 30, 2019.
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.
Other Intangible Assets
The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
December 31, 2019
|
|
In millions
|
Gross
Carrying
Amount
|
Accum Amort
|
Net
|
Gross Carrying Amount
|
Accum Amort
|
Net
|
|
Intangible assets with finite lives:
|
|
|
|
|
|
|
|
Developed technology
|
$
|
4,366
|
|
$
|
(1,616
|
)
|
$
|
2,750
|
|
$
|
4,343
|
|
$
|
(1,361
|
)
|
$
|
2,982
|
|
|
Trademarks/tradenames
|
2,433
|
|
(1,055
|
)
|
1,378
|
|
2,433
|
|
(455
|
)
|
1,978
|
|
|
Customer-related
|
8,994
|
|
(2,506
|
)
|
6,488
|
|
8,986
|
|
(2,229
|
)
|
6,757
|
|
|
Other
|
303
|
|
(213
|
)
|
90
|
|
303
|
|
(98
|
)
|
205
|
|
|
Total other intangible assets with finite lives
|
$
|
16,096
|
|
$
|
(5,390
|
)
|
$
|
10,706
|
|
$
|
16,065
|
|
$
|
(4,143
|
)
|
$
|
11,922
|
|
|
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
Trademarks/tradenames
|
1,643
|
|
—
|
|
1,643
|
|
1,671
|
|
—
|
|
1,671
|
|
|
Total other intangible assets
|
1,643
|
|
—
|
|
1,643
|
|
1,671
|
|
—
|
|
1,671
|
|
|
Total
|
$
|
17,739
|
|
$
|
(5,390
|
)
|
$
|
12,349
|
|
$
|
17,736
|
|
$
|
(4,143
|
)
|
$
|
13,593
|
|
In the second quarter of 2020, the Company performed quantitative testing on indefinite-lived intangible assets attributable to the Transportation & Industrial 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. 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 after tax), which is reflected in "Restructuring and asset related charges - net," in the Consolidated Statements of Operations for the three and six months ended June 30, 2020. The remaining net book value of the tradenames attributable to the Transportation & Industrial segment at June 30, 2020 was approximately $289 million, which represents fair value.
In the first 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 six months ended June 30, 2020. See Note 5 for further discussion.
The following table provides the net carrying value of other intangible assets by segment:
|
|
|
|
|
|
|
|
|
|
|
Net Intangibles by Segment
|
June 30, 2020
|
December 31, 2019
|
|
In millions
|
|
Electronics & Imaging
|
$
|
1,724
|
|
$
|
1,833
|
|
|
Nutrition & Biosciences
|
3,662
|
|
4,377
|
|
|
Transportation & Industrial
|
3,460
|
|
3,590
|
|
|
Safety & Construction
|
2,999
|
|
3,082
|
|
|
Non-Core
|
504
|
|
711
|
|
|
Total
|
$
|
12,349
|
|
$
|
13,593
|
|
The following table provides information regarding amortization expense related to other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization Expense
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Other intangible assets
|
$
|
528
|
|
$
|
252
|
|
$
|
1,061
|
|
$
|
508
|
|
Total estimated amortization expense for the remainder of 2020 and the five succeeding fiscal years is as follows:
|
|
|
|
|
|
|
|
Estimated Amortization Expense
|
|
|
In millions
|
|
|
Remainder of 2020
|
$
|
1,070
|
|
|
2021
|
$
|
1,069
|
|
|
2022
|
$
|
985
|
|
|
2023
|
$
|
919
|
|
|
2024
|
$
|
840
|
|
|
2025
|
$
|
755
|
|
NOTE 12 - SHORT-TERM BORROWINGS, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES
Debt Offering
On May 1, 2020, the Company completed an underwritten public offering of senior unsecured notes (the “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 from the May Debt Offering are expected to be used by 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 Notes at a redemption price equal to 100% of the aggregate principal amount of the Notes plus accrued and unpaid interest, if any, up to but excluding the Special Mandatory Redemption Date. The Indenture also contains certain limitations on the Company’s ability to incur liens and enter into sale lease-back transactions, as well as customary events of default.
Revolving Credit Facility
In June 2019, the Company entered into a $750 million, 364-day revolving credit facility (the "Old 364-Day Revolving Credit Facility"). 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.
Nutrition & Biosciences Financing
In connection with the Intended N&B Transaction, DuPont and Nutrition & Biosciences, Inc. (presently a wholly owned subsidiary of DuPont) (“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 a one-time $7.3 billion cash payment, subject to adjustment, to DuPont (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 (the "N&B Notes Offering") and (2) certain qualifying term loan commitments under senior unsecured term loan facilities.
In January 2020, N&B Inc. entered into a senior unsecured term loan agreement in the amount of $1.25 billion split evenly between three- and five-year facilities. As a result of entry into the term loan agreement, the commitments under the Bridge Commitment Letter were reduced to $6.25 billion.
NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES
Litigation and Environmental Matters
As of June 30, 2020, the Company had recorded liabilities of $23 million associated with litigation matters and $79 million associated with environmental matters. These recorded liabilities include the Company’s indemnification obligations to each of Dow and Corteva.
Under the Separation and Distribution Agreement, liabilities, including cost and expenses, associated with litigation and environmental matters that primarily related to the materials science business, the agriculture business or the specialty products business were generally allocated to or retained by Dow, Corteva or the Company, respectively, through retention, assumption or indemnification. Related to the foregoing, at June 30, 2020, DuPont has recorded (i) a liability of $37 million (although it is reasonably possible that the ultimate cost could range up to $98 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 Separation and Distribution Agreement and the Letter Agreement between Corteva and DuPont, DDOB liabilities of Historical EID primarily related to Historical EID’s agriculture business were allocated to or retained by Corteva and those primarily related to Historical EID’s specialty products business were allocated to or retained by the Company. Historical EID DDOB liabilities not primarily related to Historical EID’s agriculture business or specialty products business (“Stray Liabilities”), are allocated as follows:
|
|
|
|
•
|
Generally, indemnifiable losses as defined in the Separation and Distribution Agreement, (“Indemnifiable Losses”) for Stray Liabilities, to the extent they do not arise out of actions related to or resulting from the development, testing, manufacture or sale of PFAS, defined below, (“Non-PFAS Stray Liabilities”) that are known as of April 1, 2019 are borne by Corteva up to a specified amount set forth in the schedules to the Separation and Distribution Agreement and/or Letter Agreement. Non-PFAS Stray Liabilities in excess of such specified amounts and any Non-PFAS Stray Liabilities not listed in the schedules to the Separation and Distribution Agreement or Letter Agreement are borne by Corteva and/or DuPont up to separate, aggregate thresholds of $200 million each to the extent Corteva or DuPont, as applicable, incurs an Indemnifiable Loss. Once Corteva’s or DuPont’s $200 million threshold is met, the other would generally bear all Non-PFAS Stray Liabilities until meeting its $200 million threshold. After the respective $200 million thresholds are met, DuPont will bear 71 percent of such losses and Corteva will bear 29 percent of such losses.
|
|
|
|
|
•
|
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 such Stray Liabilities referred to as “PFAS Stray Liabilities”). Indemnifiable Losses to the extent related to PFAS Stray Liabilities in excess of $300 million generally will be borne 71 percent by the Company and 29 percent by Corteva, unless either Corteva or DuPont has met its $200 million threshold. 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.
|
Indemnifiable Losses, as defined in the Separation and Distribution Agreement, include, among other things, attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense of Stray Liabilities.
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 June 30, 2020. Therefore, at June 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 EID and Chemours entered into a Separation Agreement (as amended, the "Chemours Separation Agreement"). Pursuant to the Chemours Separation Agreement, Chemours is obligated to indemnify Historical EID, including its current or former affiliates, against certain litigation, environmental and other liabilities that arose prior to the Chemours Separation. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments.
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 up 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 percent of such obligation would be borne by the Company in accordance with the Letter Agreement. In connection with the foregoing, the Company has not recorded or paid a PFOA liability. At the end 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. Meanwhile, the confidential arbitration process is proceeding.
Indemnifiable Losses related to the Chemours suit are PFAS Stray Liabilities subject to the sharing arrangement between 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.
Personal Injury and Other PFAS Actions
DuPont, which was formed after the spin-off of Chemours, is not named in the personal injury and other PFAS actions discussed below.
Personal Injury
In 2004, Historical EID settled a West Virginia state court class action, Leach v. DuPont, which alleged that PFOA from Historical EID’s former Washington Works facility had contaminated area drinking water supplies and affected the health of area residents. Historical EID has residual liabilities under the Leach settlement related to providing PFOA water treatment to six area water districts and private well users and to fund, through an escrow account, up to $235 million for a medical monitoring program for eligible class members.
Members of the Leach class have standing to pursue personal injury claims for just six health conditions that an expert panel appointed under the Leach settlement reported in 2012 had a “probable link” (as defined in the settlement) with PFOA: pregnancy-induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and diagnosed high cholesterol. In 2017, Chemours and Historical EID each paid $335 million to settle the multi-district litigation in the U.S. District Court for the Southern District of Ohio (“Ohio MDL”), thereby resolving claims of about 3,550 plaintiffs alleging injury from exposure to PFOA in drinking water. The 2017 settlement did not resolve claims of Leach class members who did not have claims in the Ohio MDL or whose claims are based on diseases first diagnosed after February 11, 2017. About 80 claims alleging personal injury, including kidney and testicular cancer claims, have been filed since the 2017 settlement. These claims are currently pending in the Ohio MDL. The first two cases, one captioned “Abbott v E. I. du Pont de Nemours and Company” 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. 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. Historical EID will appeal 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 were postponed to August 2020 and have been further postponed to October 2020 due to the COVID-19 pandemic.
Natural Resource Damage Claims and Other Claims for Environmental Damages
In addition to the actions described above, there are about 100 cases alleging damages to natural resources, the environment and/or property as well as various other allegations. DuPont is named as a defendant in certain of these actions as discussed below.
Drinking Water
Since May 2017, a number of municipal water districts and state attorneys general have filed lawsuits against Historical EID, Chemours, 3M, and others, claiming contamination of public water systems by certain PFAS compounds. Such actions are currently pending in Ohio, Michigan, New Jersey, New Hampshire, New York, and Vermont. Generally, the states seek economic impact damages for alleged harm to natural resources, punitive damages, and present and future costs to cleanup contamination from certain PFAS compounds and to abate the alleged nuisance.
DuPont is a named party in the New Jersey suit related to its site in Parlin, New Jersey. In addition, the New Jersey Attorney General and New Jersey State Department of Environmental Protection filed two directives, one of which names DuPont. The directives seek information on the historical and current use of PFAS. DuPont is also a named party to the Vermont suit and the Michigan suit. The amended complaints in the New Jersey and Vermont cases and the complaint filed by Michigan include additional causes of action based on allegations that the transfer by Historical EID of certain PFAS liabilities to Chemours prior to spinning off Chemours resulted in a fraudulent conveyance or voidable transaction.
Several lawsuits have been filed by residents and local water districts against Historical EID and Chemours in New York, and West Virginia, including a putative class action, alleging exposure to PFOA from third-party defendant manufacturing operations and seeking compensatory, consequential and punitive damages, medical monitoring and attorneys’ fees, expenses and interest.
Other PFAS Actions
There are several actions pending in federal court against Historical EID and Chemours, relating to discharges of PFCs, including GenX, into the Cape Fear River. GenX is a polymerization processing aid and a replacement for PFOA introduced by Historical EID which Chemours continues to manufacture at its Fayetteville Works facility in Bladen County, North Carolina. One of these actions is a consolidated putative class action that asserts claims for damages and other relief on behalf of putative classes of property owners and residents in areas near or who draw drinking water from the Cape Fear River. Another action is a consolidated action brought by various North Carolina water authorities, including the Cape Fear Public Utility Authority and Brunswick County, that seek actual and punitive damages as well as injunctive relief. In addition, an action is pending in North Carolina state court on behalf of about 100 plaintiffs who own wells and property near the Fayetteville Works facility. The plaintiffs seek damages for nuisance allegedly caused by releases of certain PFCs from the site.
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.
As of the end of June 2020, approximately 640 personal injury cases have been filed directly in the SC MDL and assert claims on behalf of individual firefighters and others who allege that exposure to PFAS in firefighting foam caused them to develop cancer, including kidney and testicular cancer. DuPont has been named as a defendant in 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, 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.
Other Litigation Matters
In addition to the specific matters described above, the Company is party to other claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, governmental regulation, contract and commercial litigation, and other actions. Certain of these actions may purport to be class actions and seek damages in very large amounts. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of the Company.
Environmental Matters
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. At June 30, 2020, the Company had accrued obligations of $79 million for probable environmental remediation and restoration costs, inclusive of $37 million retained and assumed following the Distributions and $42 million of indemnified liabilities. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to $161 million above the amount accrued at June 30, 2020. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the Company’s results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration. At December 31, 2019, the Company had accrued obligations of $77 million for probable environmental remediation and restoration costs.
Pursuant to the Separation and Distribution Agreement, the Company is required to indemnify certain clean-up responsibilities and associated remediation costs. The accrued environmental obligations of $79 million as of June 30, 2020 includes amount for which the Company indemnifies Dow and Corteva. At June 30, 2020, the Company has indemnified Dow and Corteva $8 million and $34 million, respectively.
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 June 30, 2020 and December 31, 2019, the Company had directly guaranteed $176 million and $187 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 of the $17 million of guaranteed obligations of customers. The following table provides a summary of the final expiration year and maximum future payments for each type of guarantee:
|
|
|
|
|
|
|
|
|
Guarantees at June 30, 2020
|
Final Expiration Year
|
Maximum Future Payments
|
|
In millions
|
|
Obligations for customers 1:
|
|
|
|
Bank borrowings
|
2021
|
$
|
17
|
|
|
Obligations for non-consolidated affiliates 2:
|
|
|
|
Bank borrowings
|
2020
|
$
|
159
|
|
|
Total guarantees
|
|
$
|
176
|
|
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 June 30, 2020 all maximum future payments had terms less than a year.
2. Existing guarantees for non-consolidated affiliates' liquidity needs in normal operations.
NOTE 14 - OPERATING LEASES
The components of lease cost for operating leases were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Operating lease costs
|
$
|
44
|
|
$
|
46
|
|
$
|
86
|
|
$
|
90
|
|
Operating cash flows from operating leases were $85 million and $92 million for the six months ended June 30, 2020 and 2019, 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 six months ended June 30, 2020 were $82 million and immaterial for the six months ended June 30, 2019. Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
In millions
|
June 30, 2020
|
December 31, 2019
|
|
Operating Leases
|
|
|
|
|
Operating lease right-of-use assets 1
|
$
|
576
|
|
$
|
556
|
|
|
Current operating lease liabilities 2
|
148
|
|
138
|
|
|
Noncurrent operating lease liabilities 3
|
431
|
|
416
|
|
|
Total operating lease liabilities
|
$
|
579
|
|
$
|
554
|
|
|
|
|
|
1.
|
Included in "Deferred charges and other assets" in the interim Condensed Consolidated Balance Sheet.
|
|
|
|
|
2.
|
Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheet.
|
|
|
|
|
3.
|
Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheet.
|
NOTE 15 - STOCKHOLDERS' EQUITY
Share Repurchase Program
On June 1, 2019, the Company's Board of Directors approved a new $2 billion share buyback program, which expires on June 1, 2021. During the second quarter of 2020, the Company did not repurchase any shares. At June 30, 2020, the Company had repurchased and retired 16.9 million shares under this program at a total cost of $982 million.
Accumulated Other Comprehensive Loss
The following table summarizes the activity related to each component of accumulated other comprehensive loss ("AOCL") for the six months ended June 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
(117
|
)
|
49
|
|
(43
|
)
|
(43
|
)
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
(1
|
)
|
(18
|
)
|
142
|
|
(15
|
)
|
108
|
|
|
Net other comprehensive income (loss)
|
$
|
67
|
|
$
|
(135
|
)
|
$
|
191
|
|
$
|
(58
|
)
|
$
|
65
|
|
|
Spin-offs of Dow and Corteva
|
$
|
(16
|
)
|
$
|
3,179
|
|
$
|
8,196
|
|
$
|
139
|
|
$
|
11,498
|
|
|
Balance at June 30, 2019
|
$
|
—
|
|
$
|
(741
|
)
|
$
|
(89
|
)
|
$
|
(1
|
)
|
$
|
(831
|
)
|
|
2020
|
|
|
|
|
|
|
Balance at January 1, 2020
|
$
|
—
|
|
$
|
(1,070
|
)
|
$
|
(345
|
)
|
$
|
(1
|
)
|
$
|
(1,416
|
)
|
|
Other comprehensive loss before reclassifications
|
—
|
|
(54
|
)
|
(4
|
)
|
—
|
|
(58
|
)
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
—
|
|
9
|
|
—
|
|
9
|
|
|
Net other comprehensive (loss) income
|
$
|
—
|
|
$
|
(54
|
)
|
$
|
5
|
|
$
|
—
|
|
$
|
(49
|
)
|
|
Balance at June 30, 2020
|
$
|
—
|
|
$
|
(1,124
|
)
|
$
|
(340
|
)
|
$
|
(1
|
)
|
$
|
(1,465
|
)
|
The tax effects on the net activity related to each component of other comprehensive income (loss) for the three and six months ended June 30, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Benefit (Expense)
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Unrealized gains (losses) on investments
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(18
|
)
|
|
Cumulative translation adjustments
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
|
Pension and other post employment benefit plans
|
3
|
|
(3
|
)
|
2
|
|
(35
|
)
|
|
Derivative instruments
|
—
|
|
(8
|
)
|
—
|
|
16
|
|
|
Tax expense from income taxes related to other comprehensive income items
|
$
|
3
|
|
$
|
(11
|
)
|
$
|
2
|
|
$
|
(38
|
)
|
A summary of the reclassifications out of AOCL for the three and six months ended June 30, 2020 and 2019 is provided as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications Out of Accumulated Other Comprehensive Loss
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
Income Classification
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Unrealized gains on investments
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(1
|
)
|
See (1) below
|
|
Tax expense (benefit)
|
—
|
|
—
|
|
—
|
|
—
|
|
See (2) below
|
|
After tax
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(1
|
)
|
|
|
Cumulative translation adjustments
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(18
|
)
|
See (3) below
|
|
Pension and other post employment benefit plans
|
$
|
5
|
|
$
|
—
|
|
$
|
8
|
|
$
|
167
|
|
See (4) below
|
|
Tax expense (benefit)
|
—
|
|
—
|
|
1
|
|
(25
|
)
|
See (2) below
|
|
After tax
|
$
|
5
|
|
$
|
—
|
|
$
|
9
|
|
$
|
142
|
|
|
|
Derivative Instruments
|
$
|
—
|
|
$
|
(7
|
)
|
$
|
—
|
|
$
|
(18
|
)
|
See (5) below
|
|
Tax expense
|
—
|
|
2
|
|
—
|
|
3
|
|
See (2) below
|
|
After tax
|
$
|
—
|
|
$
|
(5
|
)
|
$
|
—
|
|
$
|
(15
|
)
|
|
|
Total reclassifications for the period, after tax
|
$
|
5
|
|
$
|
(5
|
)
|
$
|
9
|
|
$
|
108
|
|
|
1. "Net sales" and "Sundry income (expense) - net."
2. "Provision for income taxes on continuing operations."
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."
NOTE 16 - 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 amount of consolidated net income attributable to the Company and the noncontrolling interests is 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 six months ended June 30, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interests
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Balance at beginning of period
|
$
|
566
|
|
$
|
1,654
|
|
$
|
569
|
|
$
|
1,608
|
|
|
Net income attributable to noncontrolling interests
|
7
|
|
34
|
|
13
|
|
85
|
|
|
Distributions to noncontrolling interests
|
(4
|
)
|
(1
|
)
|
(10
|
)
|
(12
|
)
|
|
Cumulative translation adjustments
|
3
|
|
9
|
|
(5
|
)
|
16
|
|
|
Spin-off of Dow and Corteva
|
—
|
|
(1,124
|
)
|
—
|
|
(1,124
|
)
|
|
Other
|
—
|
|
(2
|
)
|
5
|
|
(3
|
)
|
|
Balance at end of period
|
$
|
572
|
|
$
|
570
|
|
$
|
572
|
|
$
|
570
|
|
NOTE 17 - 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 20 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Historical Dow and Historical EID did not merge their defined benefit pension and other post employment benefit plans as a result of the Merger.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit (Credit) Cost for All Plans
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
2020
|
2019
|
|
Defined Benefit Pension Plans:
|
|
|
|
|
|
Service cost 1
|
$
|
17
|
|
$
|
18
|
|
$
|
35
|
|
$
|
149
|
|
|
Interest cost 2
|
14
|
|
144
|
|
28
|
|
591
|
|
|
Expected return on plan assets 3
|
(26
|
)
|
(206
|
)
|
(54
|
)
|
(919
|
)
|
|
Amortization of prior service credit 4
|
(2
|
)
|
(1
|
)
|
(3
|
)
|
(7
|
)
|
|
Amortization of net loss 5
|
4
|
|
2
|
|
8
|
|
135
|
|
|
Curtailment/settlement 6
|
2
|
|
(2
|
)
|
2
|
|
(2
|
)
|
|
Net periodic benefit cost (credit) - total
|
$
|
9
|
|
$
|
(45
|
)
|
$
|
16
|
|
$
|
(53
|
)
|
|
Less: Net periodic benefit credit - discontinued operations
|
—
|
|
(41
|
)
|
—
|
|
(45
|
)
|
|
Net periodic benefit cost (credit) - continuing operations
|
$
|
9
|
|
$
|
(4
|
)
|
$
|
16
|
|
$
|
(8
|
)
|
|
Other Post Employment Benefits:
|
|
|
|
|
|
Service cost 1
|
$
|
—
|
|
$
|
1
|
|
$
|
—
|
|
$
|
5
|
|
|
Interest cost 2
|
—
|
|
15
|
|
—
|
|
52
|
|
|
Amortization of net gain 5
|
—
|
|
—
|
|
—
|
|
(6
|
)
|
|
Net periodic benefit cost - total
|
$
|
—
|
|
$
|
16
|
|
$
|
—
|
|
$
|
51
|
|
|
Less: Net periodic benefit cost - discontinued operations
|
—
|
|
16
|
|
—
|
|
50
|
|
|
Net periodic benefit cost - continuing operations
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1
|
|
1. The service cost from continuing operations was $14 million and $30 million for the three and six months ended June 30, 2019, respectively. The activity from OPEBs was immaterial.
|
|
|
|
2.
|
The interest cost from continuing operations was $20 million and $41 million for the three and six months ended June 30, 2019, respectively. The activity from OPEBs was immaterial.
|
3. The expected return on plan assets from continuing operations was $36 million and $79 million for the three and six months ended June 30, 2019, respectively. The activity from OPEBs was immaterial.
4. The amortization of prior service credit from continuing operations was $1 million for the three and six months ended June 30, 2019. The activity from OPEBs was immaterial.
5. The amortization of unrecognized net loss from continuing operations was $1 million and $3 million for the three and six months ended June 30, 2019, respectively. The activity from OPEBs was immaterial.
6. The curtailment and settlement gains from continuing operations were $2 million for the three and six months ended June 30, 2019. The activity from OPEBs was immaterial.
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 $45 million by year-end 2020.
NOTE 18 - STOCK-BASED COMPENSATION
A summary of the Historical Dow and Historical DuPont stock-based compensation plans can be found in Note 21 to the Consolidated Financial Statements included in the Company’s 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 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 Distributions.
Immediately following the Corteva Distribution, 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") and performance-based restricted stock units ("PSUs"). Upon adoption of the DuPont OIP, the Historical Dow and Historical EID plans were maintained and rolled into the DuPont OIP as separate subplans. The equity awards under these subplans have the same terms and conditions that were applicable to the awards under the Historical Dow and Historical EID plans immediately prior to the Distributions. Under the DuPont OIP, a maximum of 10 million shares of common stock are available for award as of June 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.
DuPont recognized share-based compensation expense in continuing operations of $28 million and $34 million for the three months ended June 30, 2020 and 2019, respectively, and $69 million and $55 million during the six months ended June 30, 2020 and 2019, respectively. The income tax benefits related to stock-based compensation arrangements were $5 million and $7 million for the three months ended June 30, 2020 and 2019, respectively, and $14 million and $12 million for the six months ended June 30, 2020 and 2019, respectively.
In the first quarter of 2020, the Company granted 1.0 million RSUs, 0.8 million stock options and 0.3 million PSUs. The weighted-average fair values per share associated with the grants were $53.49 per RSU, $8.84 per stock option and $50.23 per PSU. The stock options had a weighted-average exercise price per share of $53.50. There was minimal activity in the second quarter of 2020.
NOTE 19 - FINANCIAL INSTRUMENTS
The following table summarizes the fair value of financial instruments at June 30, 2020 and December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Financial Instruments
|
June 30, 2020
|
December 31, 2019
|
|
In millions
|
Cost
|
Gain
|
Loss
|
Fair Value
|
Cost
|
Gain
|
Loss
|
Fair Value
|
|
Cash equivalents
|
$
|
2,523
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,523
|
|
$
|
417
|
|
$
|
—
|
|
$
|
—
|
|
$
|
417
|
|
|
Restricted cash equivalents 1
|
$
|
32
|
|
$
|
—
|
|
$
|
—
|
|
$
|
32
|
|
$
|
37
|
|
$
|
—
|
|
$
|
—
|
|
$
|
37
|
|
|
Total cash and restricted cash equivalents
|
$
|
2,555
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,555
|
|
$
|
454
|
|
$
|
—
|
|
$
|
—
|
|
$
|
454
|
|
|
Long-term debt including debt due within one year
|
$
|
(17,611
|
)
|
$
|
3
|
|
$
|
(2,285
|
)
|
$
|
(19,893
|
)
|
$
|
(15,618
|
)
|
$
|
—
|
|
$
|
(1,633
|
)
|
$
|
(17,251
|
)
|
|
Derivatives relating to:
|
|
|
|
|
|
|
|
|
|
Foreign currency 2
|
—
|
|
3
|
|
(23
|
)
|
(20
|
)
|
—
|
|
6
|
|
(7
|
)
|
(1
|
)
|
|
Total derivatives
|
$
|
—
|
|
$
|
3
|
|
$
|
(23
|
)
|
$
|
(20
|
)
|
$
|
—
|
|
$
|
6
|
|
$
|
(7
|
)
|
$
|
(1
|
)
|
|
|
|
|
1.
|
Classified as "Other current assets" in the interim Condensed Consolidated Balance Sheets.
|
|
|
|
|
2.
|
Presented net of cash collateral where master netting arrangements allow.
|
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, 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 second 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
|
June 30, 2020
|
Dec 31, 2019
|
|
In millions
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
Foreign currency contracts 1
|
$
|
(40
|
)
|
$
|
26
|
|
|
Commodity contracts
|
$
|
8
|
|
$
|
11
|
|
|
|
|
|
1.
|
Presented net of contracts bought and sold.
|
Derivatives not Designated in Hedging Relationships
Foreign Currency Contracts
The Company routinely uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal earnings impact, after taxes. The Company may use foreign currency exchange contracts to offset a portion of the Company's exposure to certain foreign currency-denominated revenues so that gains and losses on the contracts offset changes in the USD value of the related foreign currency-denominated revenues.
Commodity Contracts
The Company utilizes options, futures and swaps that are not designated as hedging instruments to reduce exposure to commodity price fluctuations on purchases of inventory such as soybeans, soybean oil and soybean meal.
Fair Value of Derivative Instruments
Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the interim Condensed Consolidated Balance Sheets. The presentation of the Company's derivative assets and liabilities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 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
|
$
|
7
|
|
$
|
(4
|
)
|
$
|
3
|
|
|
Total asset derivatives
|
|
$
|
7
|
|
$
|
(4
|
)
|
$
|
3
|
|
|
|
|
|
|
|
|
Liability derivatives:
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Foreign currency contracts
|
Accrued and other current liabilities
|
$
|
27
|
|
$
|
(4
|
)
|
$
|
23
|
|
|
Total liability derivatives
|
|
$
|
27
|
|
$
|
(4
|
)
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 insignificant for the three months ended June 30, 2020 ($13 million loss for the three months ended June 30, 2019) and a gain of $4 million for the six months ended June 30, 2020 ($60 million loss for the six months ended June 30, 2019). 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 20 - 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 June 30, 2020
|
Significant Other Observable Inputs
(Level 2)
|
|
In millions
|
|
Assets at fair value:
|
|
|
Cash equivalents and restricted cash equivalents 1
|
$
|
2,555
|
|
|
Derivatives relating to: 2
|
|
|
Foreign currency contracts
|
7
|
|
|
Total assets at fair value
|
$
|
2,562
|
|
|
Liabilities at fair value:
|
|
|
Long-term debt including debt due within one year 3
|
$
|
19,893
|
|
|
Derivatives relating to: 2
|
|
|
Foreign currency contracts
|
27
|
|
|
Total liabilities at fair value
|
$
|
19,920
|
|
|
|
|
|
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 19 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets.
|
|
|
|
|
3.
|
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, 2019
|
Significant Other Observable Inputs
(Level 2)
|
|
In millions
|
|
Assets at fair value:
|
|
|
Cash equivalents and restricted cash equivalents 1
|
$
|
454
|
|
|
Derivatives relating to: 2
|
|
|
Foreign currency contracts
|
16
|
|
|
Total assets at fair value
|
$
|
470
|
|
|
Liabilities at fair value:
|
|
|
Long-term debt including debt due within one year 3
|
$
|
17,251
|
|
|
Derivatives relating to: 2
|
|
|
Foreign currency contracts
|
17
|
|
|
Total liabilities at fair value
|
$
|
17,268
|
|
1. Treasury bills, time deposits, and money market funds included in "Cash and cash equivalents" and money market funds included in "Other current assets" in the interim Condensed Consolidated Balance Sheets and held at amortized cost, which approximates fair value.
2. See Note 19 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets.
3. 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.
Fair Value Measurements on a Nonrecurring Basis
During the second quarter of 2020, the Company recorded impairment charges related to goodwill and indefinite-lived assets within the Transportation & Industrial segment. See Notes 11 and 5 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. See Notes 11 and 5 for further discussion of these 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 Note 11 and 5 for further discussion of these fair value measurements.
NOTE 21 - 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 determined in accordance with Article 11 of Regulation S-X. Pro forma financial information is based on the Consolidated Financial Statements of DuPont, adjusted to give effect to the impact of certain items directly attributable to the Distributions, and the Term Loan Facilities, the 2018 Senior Notes and the Funding CP Issuance (together, the "Financings"), including the use of proceeds from such Financings (collectively the "Transactions"). The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the Transactions, (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the results. Events that are not expected to have a continuing impact on the combined results are excluded from the pro forma adjustments. Those pro forma adjustments include the impact of various supply agreements entered into in connection with the Dow Distribution ("supply agreements") and are adjustments to "Cost of sales." Pro forma Operating EBITDA for the six months ended June 30, 2019 has been adjusted to reflect the supply agreements if they had been effective January 1, 2018 as they are included in the measure of
profit/loss reviewed by the CODM in order to show meaningful comparability among periods while assessing performance and making resource allocation decisions. There were no pro forma adjustments for the three or six months ended June 30, 2020 and the three months ended June 30, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Information
|
Elect. & Imaging
|
Nutrition & Biosciences
|
Transp. & Industrial
|
Safety & Const.
|
Non-Core
|
Corp.
|
Total
|
|
In millions
|
|
Three months ended June 30, 2020
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
905
|
|
$
|
1,539
|
|
$
|
832
|
|
$
|
1,244
|
|
$
|
308
|
|
$
|
—
|
|
$
|
4,828
|
|
|
Operating EBITDA 1
|
$
|
277
|
|
$
|
418
|
|
$
|
49
|
|
$
|
349
|
|
$
|
93
|
|
$
|
(51
|
)
|
$
|
1,135
|
|
|
Equity in earnings of nonconsolidated affiliates
|
$
|
10
|
|
$
|
1
|
|
$
|
1
|
|
$
|
5
|
|
$
|
86
|
|
$
|
—
|
|
$
|
103
|
|
|
Three months ended June 30, 2019
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
858
|
|
$
|
1,558
|
|
$
|
1,269
|
|
$
|
1,341
|
|
$
|
442
|
|
$
|
—
|
|
$
|
5,468
|
|
|
Operating EBITDA 1
|
$
|
246
|
|
$
|
386
|
|
$
|
357
|
|
$
|
382
|
|
$
|
104
|
|
$
|
(53
|
)
|
$
|
1,422
|
|
|
Equity in earnings of nonconsolidated affiliates 2
|
$
|
5
|
|
$
|
—
|
|
$
|
2
|
|
$
|
7
|
|
$
|
36
|
|
$
|
—
|
|
$
|
50
|
|
|
Six months ended June 30, 2020
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
1,789
|
|
$
|
3,090
|
|
$
|
1,976
|
|
$
|
2,520
|
|
$
|
674
|
|
$
|
—
|
|
$
|
10,049
|
|
|
Operating EBITDA 1
|
$
|
530
|
|
$
|
803
|
|
$
|
357
|
|
$
|
717
|
|
$
|
135
|
|
$
|
(86
|
)
|
$
|
2,456
|
|
|
Equity in earnings of nonconsolidated affiliates
|
$
|
19
|
|
$
|
1
|
|
$
|
2
|
|
$
|
12
|
|
$
|
108
|
|
$
|
—
|
|
$
|
142
|
|
|
Six months ended June 30, 2019
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
1,683
|
|
$
|
3,093
|
|
$
|
2,586
|
|
$
|
2,624
|
|
$
|
896
|
|
$
|
—
|
|
$
|
10,882
|
|
|
Pro forma operating EBITDA 1
|
$
|
534
|
|
$
|
735
|
|
$
|
730
|
|
$
|
756
|
|
$
|
202
|
|
$
|
(105
|
)
|
$
|
2,852
|
|
|
Equity in earnings of nonconsolidated affiliates 2
|
$
|
8
|
|
$
|
—
|
|
$
|
2
|
|
$
|
15
|
|
$
|
66
|
|
$
|
—
|
|
$
|
91
|
|
|
|
|
|
1.
|
A reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA and pro forma Operating EBITDA, as applicable, is provided below.
|
|
|
|
|
2.
|
Represents equity in earnings (losses) of nonconsolidated affiliates included in pro forma Operating EBITDA, the Company's measure of profit/loss for segment reporting purposes, which excludes significant items. Accordingly, the Non-Core segment presented above excludes a restructuring charge of $1 million and $2 million for the three and six months ended June 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 June 30, 2020 and 2019
|
Three Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
|
Loss from continuing operations, net of tax
|
$
|
(2,471
|
)
|
$
|
(1,103
|
)
|
|
+ (Benefit from) provision for income taxes on continuing operations
|
(36
|
)
|
155
|
|
|
Loss from continuing operations before income taxes
|
$
|
(2,507
|
)
|
$
|
(948
|
)
|
|
+ Depreciation and amortization
|
774
|
|
507
|
|
|
- Interest income 1
|
2
|
|
9
|
|
|
+ Interest expense 2
|
181
|
|
165
|
|
|
- Non-operating pension/OPEB benefit 1
|
8
|
|
18
|
|
|
- Foreign exchange losses, net 1
|
(23
|
)
|
(17
|
)
|
|
- Significant items 3
|
(2,674
|
)
|
(1,708
|
)
|
|
Operating EBITDA
|
$
|
1,135
|
|
$
|
1,422
|
|
1. Included in "Sundry income (expense) - net."
2. The three months ended June 30, 2020 excludes N&B financing fee amortization. Refer to details of significant items below.
3. The significant items for the three months ended June 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, 2020 and 2019
|
Six Months Ended June 30,
|
|
In millions
|
2020
|
2019
|
|
Loss from continuing operations, net of tax
|
$
|
(3,081
|
)
|
$
|
(1,177
|
)
|
|
+ Provision for (benefit from) income taxes on continuing operations
|
8
|
|
64
|
|
|
Loss from continuing operations before income taxes
|
$
|
(3,073
|
)
|
$
|
(1,113
|
)
|
|
+ Pro forma adjustments 1
|
—
|
|
122
|
|
|
+ Depreciation and amortization
|
1,546
|
|
1,034
|
|
|
- Interest income 2
|
4
|
|
49
|
|
|
+ Interest expense 3
|
354
|
|
345
|
|
|
- Non-operating pension/OPEB benefit 2
|
19
|
|
39
|
|
|
- Foreign exchange losses, net 2
|
(31
|
)
|
(78
|
)
|
|
+ Costs historically allocated to the materials science and agriculture businesses 4
|
—
|
|
256
|
|
|
- Significant items 5
|
(3,621
|
)
|
(2,218
|
)
|
|
Operating EBITDA 1
|
$
|
2,456
|
|
$
|
2,852
|
|
1. For the six months ended June 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 six months ended June 30, 2020 excludes N&B financing fee amortization. Refer to details of significant items below.
4. Costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205.
5. The significant items for the six months ended June 30, 2020 are presented on an as reported basis. The significant items for the six months ended June 30, 2019 are presented on a pro forma basis.
The significant items for the three months ended June 30, 2020 and 2019 and the six months ended June 30, 2020, are presented on an as reported basis. The significant items for the six months ended June 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 June 30, 2020
|
Elect. & Imaging
|
Nutrition & Biosciences
|
Transp. & Industrial
|
Safety & Construction
|
Non-Core
|
Corporate
|
Total
|
|
In millions
|
|
Integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(145
|
)
|
$
|
(145
|
)
|
|
Restructuring and asset related credits (charges) - net 2
|
3
|
|
2
|
|
10
|
|
12
|
|
—
|
|
(25
|
)
|
2
|
|
|
Goodwill impairment charges 3
|
—
|
|
—
|
|
(2,498
|
)
|
—
|
|
—
|
|
—
|
|
(2,498
|
)
|
|
Asset impairment charges 3
|
—
|
|
—
|
|
(21
|
)
|
—
|
|
—
|
|
—
|
|
(21
|
)
|
|
N&B financing fee amortization 4
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(12
|
)
|
(12
|
)
|
|
Total
|
$
|
3
|
|
$
|
2
|
|
$
|
(2,509
|
)
|
$
|
12
|
|
$
|
—
|
|
$
|
(182
|
)
|
$
|
(2,674
|
)
|
1. Integration and separation costs related to the post-Merger integration and the intended separation of the N&B Business.
2. Includes Board approved restructuring plans and asset related charges. See Note 5 for additional information.
3. See Note 11 for additional information.
4. Reflected in "Interest expense" and relates to the intended separation of the N&B Business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment for the Three Months Ended June 30, 2019
|
Elect. & Imaging
|
Nutrition & Biosciences
|
Transp. & Industrial
|
Safety & Construction
|
Non-Core
|
Corporate
|
Total
|
|
In millions
|
|
Integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(347
|
)
|
$
|
(347
|
)
|
|
Restructuring and asset related charges - net 2
|
(7
|
)
|
(22
|
)
|
(12
|
)
|
(20
|
)
|
(1
|
)
|
(13
|
)
|
(75
|
)
|
|
Goodwill impairment charges 3
|
—
|
|
(933
|
)
|
—
|
|
—
|
|
(242
|
)
|
—
|
|
(1,175
|
)
|
|
Asset impairment charges 4
|
—
|
|
(63
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(63
|
)
|
|
Income tax relates items 5
|
—
|
|
—
|
|
—
|
|
(48
|
)
|
—
|
|
—
|
|
(48
|
)
|
|
Total
|
$
|
(7
|
)
|
$
|
(1,018
|
)
|
$
|
(12
|
)
|
$
|
(68
|
)
|
$
|
(243
|
)
|
$
|
(360
|
)
|
$
|
(1,708
|
)
|
|
|
|
|
1.
|
Integration and separation costs related to the Merger, post-Merger integration and business separation activities.
|
|
|
|
|
2.
|
Includes Board approved restructuring plans and asset related charges. See Note 5 for additional information.
|
3. See Note 11 for additional information.
4. See Note 5 for additional information.
5. Charge included in "Sundry income (expense) - net" which reflects a reduction in gross proceeds from lower withholding taxes related to a prior year legal settlement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment for the Six Months Ended June 30, 2020
|
Elect. & Imaging
|
Nutrition & Biosciences
|
Transp. & Industrial
|
Safety & Construction
|
Non-Core
|
Corporate
|
Total
|
|
In millions
|
|
Integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(342
|
)
|
$
|
(342
|
)
|
|
Restructuring and asset related charges - net 2
|
(1
|
)
|
(4
|
)
|
(15
|
)
|
(13
|
)
|
—
|
|
(99
|
)
|
(132
|
)
|
|
Goodwill impairment charges 3
|
—
|
|
—
|
|
(2,498
|
)
|
—
|
|
(533
|
)
|
—
|
|
(3,031
|
)
|
|
Asset impairment charges 3, 4
|
—
|
|
—
|
|
(21
|
)
|
—
|
|
(270
|
)
|
—
|
|
(291
|
)
|
|
Gain on divestiture 5
|
197
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
197
|
|
|
N&B financing fee amortization 6
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(22
|
)
|
(22
|
)
|
|
Total
|
$
|
196
|
|
$
|
(4
|
)
|
$
|
(2,534
|
)
|
$
|
(13
|
)
|
$
|
(803
|
)
|
$
|
(463
|
)
|
$
|
(3,621
|
)
|
1. Integration and separation costs related to the post-Merger integration and the intended separation of the N&B Business.
2. Includes Board approved restructuring plans and asset related charges. See Note 5 for additional information.
3. See Note 11 for additional information.
4. See Note 5 for additional information.
5. Reflected in "Sundry income (expense) - net." Refer to Note 3 for additional information.
6. Reflected in "Interest expense" and relates to the intended separation of the N&B Business.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment for the Six Months Ended June 30, 2019
(Pro Forma)
|
Elect. & Imaging
|
Nutrition & Biosciences
|
Transp. & Industrial
|
Safety & Construction
|
Non-Core
|
Corporate
|
Total
|
|
In millions
|
|
Integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(785
|
)
|
$
|
(785
|
)
|
|
Restructuring and asset related charges - net 2
|
(7
|
)
|
(49
|
)
|
(12
|
)
|
(22
|
)
|
—
|
|
(57
|
)
|
(147
|
)
|
|
Goodwill impairment charges 3
|
—
|
|
(933
|
)
|
—
|
|
—
|
|
(242
|
)
|
—
|
|
(1,175
|
)
|
|
Asset impairment charges 4
|
—
|
|
(63
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(63
|
)
|
|
Income tax relates item 5
|
—
|
|
—
|
|
—
|
|
(48
|
)
|
—
|
|
—
|
|
(48
|
)
|
|
Total
|
$
|
(7
|
)
|
$
|
(1,045
|
)
|
$
|
(12
|
)
|
$
|
(70
|
)
|
$
|
(242
|
)
|
$
|
(842
|
)
|
$
|
(2,218
|
)
|
|
|
|
|
1.
|
Integration and separation costs related to the Merger, post-Merger integration and business separation activities.
|
|
|
|
|
2.
|
Includes Board approved restructuring plans and asset related charges. See Note 5 for additional information.
|
3. See Note 11 for additional information.
4. See Note 5 for additional information.
5. Charge included in "Sundry income (expense) - net" which reflects a reduction in gross proceeds from lower withholding taxes related to a prior year legal settlement.