NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
|
|
|
|
|
|
|
|
|
Note
|
|
Page
|
1
|
|
|
2
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
6
|
|
|
7
|
|
|
8
|
|
|
9
|
|
|
10
|
|
|
11
|
|
|
12
|
|
|
13
|
|
|
14
|
|
|
15
|
|
|
16
|
|
|
17
|
|
|
18
|
|
|
19
|
|
|
20
|
|
|
21
|
|
|
22
|
|
|
23
|
|
|
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the interim statements reflect all adjustments (including normal recurring accruals) which are considered necessary for the fair statement of the results for the periods presented. Results from interim periods should not be considered indicative of results for the full year. These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto contained in the Company's Current Report on Form 8-K filed on June 3, 2021, collectively referred to as the "Recast 2020 Annual Report," which was filed in order to recast the Company's 2020 Annual Report on Form 10-K to reflect the presentation of the N&B Business as discontinued operations and to reflect the changes in the Company's reportable segments. These interim Consolidated Financial Statements should also be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The interim Consolidated Financial Statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained.
Basis of Presentation
Effective August 31, 2017, pursuant to the merger of equals transaction contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017 ("Merger Agreement"), The Dow Chemical Company ("TDCC") and E. I. du Pont de Nemours and Company ("EID") each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, TDCC and EID became subsidiaries of DowDuPont (the "DWDP Merger"). Except as otherwise indicated by the context, the term "TDCC" includes TDCC and its consolidated subsidiaries and "EID" includes EID and its consolidated subsidiaries.
On April 1, 2019, the Company completed the separation of the materials science business through the spin-off of Dow Inc., (“Dow”) including Dow’s subsidiary TDCC (the “Dow Distribution”). On June 1, 2019, the Company completed the separation of the agriculture business through the spin-off of Corteva, Inc. (“Corteva”) including Corteva’s subsidiary EID, (the “Corteva Distribution" and together with the Dow Distribution, the “DWDP Distributions”).
Following the Corteva Distribution, DuPont holds the specialty products business as continuing operations. On June 1, 2019, DowDuPont changed its registered name from "DowDuPont Inc." to "DuPont de Nemours, Inc." doing business as "DuPont." Beginning on June 3, 2019, the Company's common stock is traded on the NYSE under the ticker symbol "DD."
N&B Transaction
On February 1, 2021, DuPont completed the separation and distribution of the Nutrition & Biosciences business segment (the "N&B Business"), and merger of Nutrition & Biosciences, Inc. (“N&B”), a DuPont subsidiary formed to hold the N&B Business, with a subsidiary of International Flavors & Fragrances Inc. ("IFF"). The distribution was effected through an exchange offer (the “Exchange Offer”) and the consummation of the Exchange Offer was followed by the merger of N&B with a wholly owned subsidiary of IFF, with N&B surviving the merger as a wholly owned subsidiary of IFF (the “N&B Merger” and, together with the Exchange Offer, the “N&B Transaction”). See Note 2 for more information.
The financial position of DuPont as of December 31, 2020 and the results of operations of DuPont for the three and six months ended June 30, 2021 and 2020 present the historical financial results of N&B as discontinued operations. The cash flows and comprehensive income related to N&B have not been segregated and are included in the interim Consolidated Statements of Cash Flows and interim Consolidated Statements of Comprehensive Income, respectively, for all periods presented. Unless otherwise indicated, the information in the notes to the interim Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of N&B.
2021 Segment Realignment
Immediately following the separation and distribution of the N&B Business, the Company made changes to its management and reporting structure (the “2021 Segment Realignment”) (see Note 22 for additional details). The reporting changes have been retrospectively reflected for all periods presented.
NOTE 2 - ACQUISITIONS AND DIVESTITURES
Laird Performance Materials
On July 1, 2021, DuPont completed the previously announced acquisition of Laird Performance Materials (“Laird PM”) from Advent International (“Laird PM Acquisition”). See Note 23 for further discussion.
N&B Transaction
On February 1, 2021, DuPont completed the separation and distribution of the N&B Business, and merger of N&B, a DuPont subsidiary formed to hold the N&B Business, with a subsidiary of IFF. The distribution was effected through an exchange offer where, on the terms and subject to the conditions of the Exchange Offer, eligible participating DuPont stockholders had the option to tender all, some or none of their shares of common stock, par value $0.01 per share, of DuPont (the “DuPont Common Stock”) for a number of shares of common stock, par value $0.01 per share, of N&B (the “N&B Common Stock”) and which resulted in all shares of N&B Common Stock being distributed to DuPont stockholders that participated in the Exchange Offer. The consummation of the Exchange Offer was followed by the merger of N&B with a wholly owned subsidiary of IFF, with N&B surviving the merger as a wholly owned subsidiary of IFF (the “N&B Merger” and, together with the Exchange Offer, the “N&B Transaction”). The N&B Transaction was subject to IFF shareholder approval, customary regulatory approvals, tax authority rulings including a favorable private letter ruling from the U.S. Internal Revenue Service which confirms the N&B Transaction to be free of U.S. federal income tax, and expiration of the public exchange offer. DuPont does not have an ownership interest in IFF as a result of the N&B Transaction.
In the Exchange Offer, DuPont accepted approximately 197.4 million shares of its common stock in exchange for about 141.7 million shares of N&B Common Stock as of the date of the N&B Transaction. As a result, DuPont reduced its common stock outstanding by 197.4 million shares of DuPont Common Stock. In the N&B Merger, each share of N&B Common Stock was automatically converted into the right to receive one share of IFF common stock, par value $0.125 per share, based on the terms of the N&B Merger Agreement.
The results of operations of N&B are presented as discontinued operations as summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
In millions
|
2020
|
2021
|
2020
|
Net sales
|
$
|
1,539
|
|
$
|
507
|
|
$
|
3,090
|
|
Cost of sales
|
993
|
|
352
|
|
1,992
|
|
Research and development expenses
|
56
|
|
21
|
|
119
|
|
Selling, general and administrative expenses
|
127
|
|
46
|
|
278
|
|
Amortization of intangibles
|
351
|
|
38
|
|
706
|
|
Restructuring and asset related charges - net
|
(5)
|
|
1
|
|
1
|
|
Integration and separation costs
|
129
|
|
172
|
|
203
|
|
Equity in earnings of nonconsolidated affiliates
|
1
|
|
—
|
|
1
|
|
Sundry income (expense) - net
|
(3)
|
|
8
|
|
(4)
|
|
Interest expense
|
12
|
|
13
|
|
24
|
|
Loss from discontinued operations before income taxes
|
(126)
|
|
(128)
|
|
(236)
|
|
Benefit from income taxes on discontinued operations
|
(44)
|
|
(26)
|
|
(94)
|
|
Loss from discontinued operations, net of tax
|
(82)
|
|
(102)
|
|
(142)
|
|
Non-taxable gain on split-off
|
—
|
|
4,950
|
|
—
|
|
(Loss) Income from discontinued operations attributable to DuPont stockholders, net of tax
|
$
|
(82)
|
|
$
|
4,848
|
|
$
|
(142)
|
|
The following table presents depreciation, amortization, and capital expenditures of the discontinued operations related to N&B:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
In millions
|
2020
|
2021
|
2020
|
Depreciation and amortization
|
$
|
425
|
|
$
|
63
|
|
$
|
852
|
|
Capital expenditures
|
$
|
33
|
|
$
|
27
|
|
$
|
125
|
|
|
|
|
|
The carrying amount of major classes of assets and liabilities that were included in discontinued operations at December 31, 2020 related to N&B consist of the following:
|
|
|
|
|
|
In millions
|
December 31, 2020
|
Assets
|
|
Accounts and notes receivable - net
|
$
|
1,130
|
|
Inventories
|
1,333
|
|
Other current assets
|
65
|
|
Investments and noncurrent receivables
|
36
|
|
Property, plant, and equipment - net
|
3,118
|
|
Goodwill
|
11,542
|
|
Other intangible assets - net
|
3,072
|
|
Deferred income tax assets
|
44
|
|
Deferred charges and other assets
|
319
|
|
Total assets of discontinued operations
|
$
|
20,659
|
|
Liabilities
|
|
Short-term borrowings and finance lease obligations
|
$
|
4
|
|
Accounts Payable
|
742
|
|
Income taxes payable
|
36
|
|
Accrued and other current liabilities
|
301
|
|
Long-term debt
|
6,195
|
|
Deferred income tax liabilities
|
852
|
|
Pension and other post employment benefits - noncurrent
|
238
|
|
Other noncurrent obligations
|
242
|
|
Total liabilities of discontinued operations
|
$
|
8,610
|
|
In connection with the N&B Transaction and in accordance with the terms of the N&B Transaction Agreements, defined below, prior to consummation of the Exchange Offer and the N&B Merger, DuPont received a one-time cash payment of approximately $7.3 billion, (the "Special Cash Payment"), which is subject to post closing adjustment pursuant to the terms of the N&B Separation & Distribution Agreement. The special cash payment was partially funded by an offering of $6.25 billion of senior unsecured notes (the “N&B Notes Offering”). The net proceeds of approximately $6.2 billion from the N&B Notes Offering were deposited into an escrow account and at December 31, 2020, are reflected as restricted cash in the Company’s interim Condensed Consolidated Balance Sheets. In order to fund the remainder of the Special Cash Payment, on February 1, 2021, N&B borrowed $1.25 billion under a senior unsecured term loan agreement (the "N&B Term Loan"). The obligations and liabilities associated with the N&B Notes Offering and the N&B Term Loan were separated from the Company on February 1, 2021 upon consummation of the N&B Transaction. The obligations and liabilities of $6.2 billion associated with the N&B Notes Offering are classified as "Liabilities of discontinued operations" in the Company's interim Condensed Consolidated Balance Sheets at December 31, 2020.
The Company recognized a non-taxable gain of approximately $4,950 million on the N&B Transaction. The gain is recorded in "(Loss) Income from discontinued operations, net of tax" in the Company's interim Consolidated Statements of Operations for the six months ended June 30, 2021.
N&B Transaction Agreements
In connection with the N&B Transaction, effective December 15, 2019, the Company, as previously discussed, entered into the following agreements:
•A Separation and Distribution Agreement, subsequently amended and joined by Neptune Merger Sub II Inc., a subsidiary of IFF on January 22, 2021, and as amended further on February 1, 2021 (as amended, the “N&B Separation and Distribution Agreement”) with N&B and IFF, which, among other things, governs the separation of the N&B Business from DuPont and certain other post-closing obligations between DuPont and N&B related thereto;
•An Agreement and Plan of Merger, (the “N&B Merger Agreement”) with N&B, IFF and Neptune Merger Sub I Inc., governing the N&B Merger and related matters; and
•An Employee Matters Agreement, subsequently amended on January 22, 2021, (as amended, the “N&B Employee Matters Agreement Agreement”), with N&B and IFF, which, among other things, allocates among the parties the pre- and post-closing liabilities in respect of the current and former employees of the N&B Business (including liabilities in respect of employee compensation and benefit plans).
In connection with the closing of the N&B Transaction, and effective February 1, 2021, the Company entered into the following agreements:
•DuPont, N&B and certain of their subsidiaries entered into an Intellectual Property Cross-License Agreement (the “N&B IP Cross-License Agreement”). The IP Cross-License Agreement sets forth the terms and conditions under which the applicable parties may use in their respective businesses certain know-how (including trade secrets), copyrights, design rights, software, and patents, allocated to another party pursuant to the N&B Separation and Distribution Agreement, and pursuant to which N&B may use certain standards retained by DuPont. All licenses under the IP Cross-License Agreement are non-exclusive, worldwide, and royalty-free; and
•DuPont, N&B and IFF entered into a Tax Matters Agreement (the “N&B Tax Matters Agreement”), which governs the parties’ rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, the preservation of the expected tax-free status of the transactions contemplated by the N&B Separation and Distribution Agreement, and other matters regarding taxes. See Note 6 for additional information on the N&B Tax Matters Agreement.
Other Discontinued Operations Activity
The Company recorded a loss from discontinued operations, net of tax of $63 million and $66 million for the three and six months ended June 30, 2021 related to the binding Memorandum of Understanding (“MOU”) between Chemours, Corteva, EID and a settlement agreement between Chemours, Corteva and DuPont and Delaware's Attorney General. For additional information on these matters, refer to Note 14.
Assets Held for Sale
In October 2020, the Company entered into a definitive agreement to sell its Biomaterials business unit, which includes the Company's equity method investment in DuPont Tate & Lyle Bio Products. The sale of the Biomaterials business unit is expected to close within one year. In January 2021, the Company entered into a definitive agreement to sell its Clean Technologies business, which is expected to close in the second half of 2021. These divestitures are subject to regulatory approval and customary closing conditions and are expected to generate in aggregate pre-tax cash proceeds of about $750 million. The Company also signed a non-binding letter of intent to sell Chestnut Run labs, a portion of the Company's Chestnut Run campus. This transaction is expected to close within one year.
The assets and liabilities associated with the Biomaterials and Clean Technologies businesses met the held for sale criteria at September 30, 2020, and the assets associated with Chestnut Run labs met the held for sale criteria at March 31, 2021. These assets and liabilities remain classified as held for sale at June 30, 2021. The results of operations of the Biomaterials and Clean Technologies businesses are reported in Corporate.
The following table summarizes the carrying value of the major assets and liabilities of the Biomaterials and Clean Technologies business units and Chestnut Run labs as of June 30, 2021 (collectively, the “Held for Sale Disposal Group”) and the Biomaterials and Clean Technologies business units as of December 31, 2020:
|
|
|
|
|
|
|
|
|
In millions
|
June 30, 2021
|
December 31, 2020
|
Assets
|
|
|
Accounts and notes receivable - net
|
$
|
57
|
|
$
|
63
|
|
Inventories
|
69
|
|
75
|
|
Other current assets
|
38
|
|
35
|
|
Investments and noncurrent receivables
|
169
|
|
164
|
|
Property, plant and equipment - net
|
75
|
|
34
|
|
Goodwill
|
267
|
|
267
|
|
Other intangible assets
|
168
|
|
168
|
|
Deferred charges and other assets
|
3
|
|
4
|
|
Assets held for sale
|
$
|
846
|
|
$
|
810
|
|
Liabilities
|
|
|
Accounts payable
|
$
|
52
|
|
$
|
40
|
|
Income taxes payable
|
1
|
|
1
|
|
Accrued and other current liabilities
|
37
|
|
50
|
|
Deferred income tax liabilities
|
29
|
|
30
|
|
Pension and other post-employment benefits - noncurrent
|
1
|
|
1
|
|
Other noncurrent obligations
|
16
|
|
18
|
|
Liabilities related to assets held for sale
|
$
|
136
|
|
$
|
140
|
|
Sale of Solamet®
On June 30, 2021, the Company completed the sale of its Solamet® business unit, which is part of Corporate. Total consideration received related to the sale of the business is approximately $190 million, of which $47 million will be received in the third quarter. For the three months ended June 30, 2021, a pre-tax gain of $140 million ($105 million net of tax) was recorded in "Sundry income (expense) - net" in the Company's interim Consolidated Statements of Operations.
Sale of Compound Semiconductor Solutions
In the first quarter of 2020, the Company completed the sale of its Compound Semiconductor Solutions business unit, a part of the Electronics & Industrial segment, to SK Siltron. The proceeds received in the first quarter of 2020 related to the sale of the business were approximately $420 million. For the six months ended June 30, 2020, a pre-tax gain of $197 million ($102 million net of tax) was recorded in "Sundry income (expense) - net" in the Company's interim Consolidated Statements of Operations.
Integration and Separation Costs
Integration and separation costs primarily consist of financial advisory, information technology, legal, accounting, consulting, and other professional advisory fees. For the three and six months ended June 30, 2021, these costs were primarily associated with the execution of activities related to strategic initiatives including the planned divestiture of the Held for Sale Disposal Group and the divestiture of the Solamet® business unit. For the three and six months ended June 30, 2020, these costs were primarily associated with the execution of activities related to the post-DWDP Merger integration and the DWDP Distributions.
These costs are recorded within "Integration and separation costs" within the interim Consolidated Statements of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
In millions
|
2021
|
2020
|
2021
|
2020
|
Integration and separation costs
|
$
|
23
|
|
$
|
16
|
|
$
|
29
|
|
$
|
139
|
|
NOTE 3 - REVENUE
Revenue Recognition
Products
Substantially all of DuPont's revenue is derived from product sales. Product sales consist of sales of DuPont's products to supply manufacturers and distributors. DuPont considers purchase orders, which in some cases are governed by master supply agreements, to be a contract with a customer. Contracts with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year.
Disaggregation of Revenue
The Company disaggregates its revenue from contracts with customers by segment and business or major product line and geographic region, as the Company believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows.
On February 1, 2021, the Company realigned and renamed certain businesses as part of the 2021 Segment Realignment resulting in changes to its management and reporting structure (see Note 22 for additional details). In conjunction with the 2021 Segment Realignment, DuPont made the following changes to its major product lines:
•Within Electronics & Industrial (formerly known as Electronics & Imaging) realigned product lines to include businesses formerly in Transportation & Industrial and renamed the Image Solutions product lines as Industrial Solutions;
•Renamed Safety & Construction as Water & Protection;
•Realigned certain businesses from the former Non-Core segment and renamed product lines within Mobility & Materials (formerly known as Transportation & Industrial) as Advanced Solutions, Engineering Polymers, and Performance Resins.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Trade Revenue by Segment and Business or Major Product Line
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
In millions
|
2021
|
2020
|
2021
|
2020
|
Industrial Solutions
|
$
|
480
|
|
$
|
379
|
|
$
|
938
|
|
$
|
791
|
|
Interconnect Solutions
|
339
|
|
274
|
|
669
|
|
540
|
|
Semiconductor Technologies
|
501
|
|
458
|
|
1,013
|
|
895
|
|
Electronics & Industrial
|
$
|
1,320
|
|
$
|
1,111
|
|
$
|
2,620
|
|
$
|
2,226
|
|
Safety Solutions
|
$
|
650
|
|
$
|
581
|
|
$
|
1,287
|
|
$
|
1,212
|
|
Shelter Solutions
|
419
|
|
316
|
|
779
|
|
664
|
|
Water Solutions
|
343
|
|
347
|
|
674
|
|
644
|
|
Water & Protection
|
$
|
1,412
|
|
$
|
1,244
|
|
$
|
2,740
|
|
$
|
2,520
|
|
Advanced Solutions
|
$
|
391
|
|
$
|
249
|
|
$
|
773
|
|
$
|
555
|
|
Engineering Polymers
|
557
|
|
360
|
|
1,054
|
|
879
|
|
Performance Resins
|
322
|
|
181
|
|
658
|
|
447
|
|
Mobility & Materials
|
$
|
1,270
|
|
$
|
790
|
|
$
|
2,485
|
|
$
|
1,881
|
|
Corporate 1
|
$
|
133
|
|
$
|
144
|
|
266
|
|
332
|
|
Total
|
$
|
4,135
|
|
$
|
3,289
|
|
$
|
8,111
|
|
$
|
6,959
|
|
1. Corporate net sales reflect activity of to be divested and previously divested businesses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Trade Revenue by Geographic Region
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
In millions
|
2021
|
2020
|
2021
|
2020
|
U.S. & Canada
|
$
|
1,155
|
|
$
|
957
|
|
$
|
2,206
|
|
$
|
2,109
|
|
EMEA 1
|
814
|
|
597
|
|
1,644
|
|
1,388
|
|
Asia Pacific
|
2,016
|
|
1,641
|
|
3,966
|
|
3,222
|
|
Latin America
|
150
|
|
94
|
|
295
|
|
240
|
|
Total
|
$
|
4,135
|
|
$
|
3,289
|
|
$
|
8,111
|
|
$
|
6,959
|
|
1.Europe, Middle East and Africa.
Contract Balances
From time to time, the Company enters into arrangements in which it receives payments from customers based upon contractual billing schedules. The Company records accounts receivables when the right to consideration becomes unconditional. Contract assets include amounts related to the Company’s conditional 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 2021 from amounts included in contract liabilities at the beginning of the period and the amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional were insignificant.
|
|
|
|
|
|
|
|
|
Contract Balances
|
June 30, 2021
|
December 31, 2020
|
In millions
|
Accounts and notes receivable - trade 1
|
$
|
2,198
|
|
$
|
1,911
|
|
|
|
|
Deferred revenue - current 2
|
$
|
31
|
|
$
|
16
|
|
Deferred revenue - noncurrent 3
|
$
|
11
|
|
$
|
21
|
|
1.Included in "Accounts and notes receivable - net" in the interim Condensed Consolidated Balance Sheets.
2.Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.
3.Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets.
NOTE 4 - RESTRUCTURING AND ASSET RELATED CHARGES - NET
Charges for restructuring programs and asset related charges, which includes asset impairments, were $10 million and $12 million for the three and six months ended June 30, 2021 and $24 million and $422 million for the three and six months ended June 30, 2020. These charges were recorded in "Restructuring and asset related charges - net" in the interim Consolidated Statements of Operations. The total liability related to restructuring programs was $48 million at June 30, 2021 and $96 million at December 31, 2020, recorded in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets. Restructuring activity consists of the following programs:
2020 Restructuring Program
In the first quarter of 2020, the Company approved restructuring actions designed to capture near-term cost reductions and to further simplify certain organizational structures in anticipation of the N&B Transaction (the "2020 Restructuring Program"). The Company recorded pre-tax restructuring charges of $180 million inception-to-date, consisting of severance and related benefit costs of $128 million and asset related charges of $52 million.
The following tables summarize the charges related to the 2020 Restructuring Program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
In millions
|
2021
|
2020
|
2021
|
2020
|
Severance and related benefit costs
|
$
|
10
|
|
$
|
5
|
|
$
|
10
|
|
$
|
95
|
|
Asset related charges
|
—
|
|
9
|
|
2
|
|
24
|
|
Total restructuring and asset related charges - net
|
$
|
10
|
|
$
|
14
|
|
$
|
12
|
|
$
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 Restructuring Program Charges (Credits) by Segment
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2021
|
2020
|
2021
|
2020
|
|
Electronics & Industrial
|
$
|
2
|
|
$
|
—
|
|
$
|
2
|
|
$
|
4
|
|
|
Water & Protection
|
—
|
|
2
|
|
—
|
|
22
|
|
|
Mobility & Materials
|
6
|
|
(3)
|
|
6
|
|
21
|
|
|
Corporate
|
2
|
|
15
|
|
4
|
|
72
|
|
|
Total
|
$
|
10
|
|
$
|
14
|
|
$
|
12
|
|
$
|
119
|
|
|
The following table summarizes the activities related to the 2020 Restructuring Program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 Restructuring Program
|
Severance and Related Benefit Costs
|
Asset Related Charges
|
Total
|
|
|
In millions
|
Reserve balance at December 31, 2020
|
$
|
62
|
|
$
|
—
|
|
$
|
62
|
|
|
|
Year-to-date restructuring charges
|
10
|
|
2
|
|
12
|
|
|
|
Charges against the reserve
|
—
|
|
(2)
|
|
(2)
|
|
|
|
Cash payments
|
(39)
|
|
—
|
|
(39)
|
|
|
|
Reserve balance at June 30, 2021
|
$
|
33
|
|
$
|
—
|
|
$
|
33
|
|
|
|
Total liabilities related to the 2020 Restructuring Program were $33 million at June 30, 2021 and $62 million at December 31, 2020, respectively, and recorded in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets. The 2020 Restructuring Program is considered substantially complete.
2019 Restructuring Program
During the second quarter of 2019 and in connection with the ongoing integration activities, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the DWDP Distributions (the "2019 Restructuring Program"). The Company has recorded pre-tax restructuring charges of $126 million inception-to-date, consisting of severance and related benefit costs of $99 million and asset related charges of $27 million.
Total liabilities related to the 2019 Restructuring Program were $6 million at June 30, 2021 and $14 million at December 31, 2020, respectively, and recorded in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets. The 2019 Restructuring Program is considered substantially complete.
DowDuPont Cost Synergy Program
In September and November 2017, the Company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the "Synergy Program"), which was designed to integrate and optimize the organization following the DWDP Merger and in preparation for the DWDP Distributions. The Company has recorded pre-tax restructuring charges attributable to the continuing operations of DuPont of $345 million inception-to-date, consisting of severance and related benefit costs of $137 million, asset related charges of $159 million and contract termination charges of $49 million.
Total liabilities related to the Synergy Program were $9 million at June 30, 2021 and $20 million at December 31, 2020, respectively, and recorded in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets. The Synergy Program is considered substantially complete.
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 Mobility & Materials 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 12 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 Corporate 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 Operation for the six months ended June 30, 2020 with the charge impacting definite-lived intangible assets and property, plant, and equipment.
NOTE 5 - SUPPLEMENTARY INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sundry Income (Expense) - Net
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2021
|
2020
|
2021
|
2020
|
|
|
Non-operating pension and other post-employment benefit (OPEB) credits
|
$
|
13
|
|
$
|
8
|
|
$
|
25
|
|
$
|
19
|
|
|
|
Interest income
|
2
|
|
2
|
|
4
|
|
4
|
|
|
|
Net gain (loss) on divestiture and sales of other assets and investments 1
|
140
|
|
(4)
|
|
167
|
|
193
|
|
|
|
Foreign exchange losses, net
|
(8)
|
|
(18)
|
|
(17)
|
|
(21)
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous (expenses) income - net 2
|
(1)
|
|
1
|
|
(17)
|
|
6
|
|
|
|
Sundry income (expense) - net
|
$
|
146
|
|
$
|
(11)
|
|
$
|
162
|
|
$
|
201
|
|
|
|
1. The six months ended June 30, 2021 primarily reflects income of $140 million related to the gain on sale of assets within the Corporate segment and $24 million related to the gain on sale of assets within the Electronics & Industrial segment. 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 & Industrial segment.
2. The six months ended June 30, 2021 includes an impairment charge of approximately $15 million, recorded in the first quarter of 2021, related to Chestnut Run labs, which is part of the Held for Sale Disposal Group.
Cash, Cash Equivalents and Restricted Cash
At December 31, 2020, the Company had approximately $6.2 billion recorded within non-current “Restricted cash” in the Consolidated Balance Sheet. The restricted cash relates to net proceeds received from an offering of $6.25 billion of senior unsecured notes (the "N&B Notes Offering") associated with the N&B transaction. On February 1, 2021 this amount was released from escrow as part of the N&B Transaction and is no longer restricted. The liability from the N&B Notes Offering was classified as "Liabilities of discontinued operations" in the Company's interim Condensed Consolidated Balance Sheet as of December 31, 2020. See Note 2 for further discussion of the Company's divestiture of the N&B business.
Accrued and Other Current Liabilities
"Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets were $1,219 million at June 30, 2021 and $1,085 million at December 31, 2020. Accrued payroll, which is a component of "Accrued and other current liabilities," was $360 million at June 30, 2021. No other component of "Accrued and other current liabilities" was more than 5 percent of total current liabilities at June 30, 2021 and no component was more than 5 percent of total current liabilities at December 31, 2020.
NOTE 6 - INCOME TAXES
Each year the Company files hundreds of tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the tax authorities. Positions challenged by the tax authorities may be settled or appealed by the Company. As a result, there is an uncertainty in income taxes recognized in the Company’s financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. The ultimate resolution of such uncertainties is not expected to have a material impact on the Company's results of operations.
The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attributes. The effective tax rate on continuing operations for the second quarter of 2021 was 21.1 percent, compared with an effective tax rate of (0.3) percent for the second quarter of 2020. For the first six months of 2021, the effective tax rate on continuing operations was 14.2% percent, compared with (3.6) percent for the first six months of 2020. The effective tax rate for the first six months of 2021 was principally the result of a $59 million tax benefit related to the step-up in tax basis in the goodwill of the Company’s European regional headquarters legal entity. The effective tax rate for the second quarter and for the first six months of 2020 was principally the result of the non-tax-deductible goodwill impairment charge impacting Corporate. See Note 12 for more information regarding the goodwill impairment charge.
Certain internal distributions and reorganizations that occurred in preparation for the N&B Transaction qualified as tax-free transactions under the applicable sections of the Internal Revenue Code. If the aforementioned transactions were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then the Company could be subject to significant tax liability. In connection with the closing of the N&B Transaction, DuPont, N&B and IFF entered into the N&B Tax Matters Agreement. Under the N&B Tax Matters Agreement, the Company would generally be allocated such liability and not be indemnified, unless certain non-qualifying actions are undertaken by N&B or IFF. To the extent that the Company is responsible for any such liability, there could be a material adverse impact on the Company's business, financial condition, results of operations and cash flows in future reporting periods.
For periods between the DWDP Merger and the DWDP Distributions, DuPont's consolidated federal income tax group and consolidated tax return included the Dow and Corteva entities. Generally, the consolidated tax liability of the DuPont U.S. tax group for each year was apportioned among the members of the consolidated group in accordance with the terms of the Amended and Restated DWDP Tax Matters Agreement. DuPont, Corteva and Dow intend that to the extent Federal and/or State corporate income tax liabilities are reduced through the utilization of tax attributes of the other, settlement of any receivable and payable generated from the use of the other party’s sub-group attributes will be in accordance with the Amended and Restated DWDP Tax Matters Agreement.
NOTE 7 - EARNINGS PER SHARE CALCULATIONS
The following tables provide earnings per share calculations for the three and six months ended June 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income for Earnings Per Share Calculations - Basic & Diluted
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
In millions
|
2021
|
2020
|
2021
|
2020
|
Income (loss) from continuing operations, net of tax
|
$
|
564
|
|
$
|
(2,389)
|
|
$
|
1,105
|
|
$
|
(2,939)
|
|
Net income from continuing operations attributable to noncontrolling interests
|
9
|
|
7
|
|
$
|
13
|
|
$
|
13
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations attributable to common stockholders
|
$
|
555
|
|
$
|
(2,396)
|
|
$
|
1,092
|
|
$
|
(2,952)
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations attributable to common stockholders
|
(77)
|
|
(82)
|
|
$
|
4,780
|
|
$
|
(142)
|
|
Net income (loss) attributable to common stockholders
|
$
|
478
|
|
$
|
(2,478)
|
|
$
|
5,872
|
|
$
|
(3,094)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Calculations - Basic
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
Dollars per share
|
2021
|
2020
|
2021
|
2020
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations attributable to common stockholders
|
$
|
1.05
|
|
$
|
(3.26)
|
|
$
|
1.93
|
|
$
|
(4.01)
|
|
(Loss) earnings from discontinued operations, net of tax
|
(0.15)
|
|
(0.11)
|
|
8.43
|
|
(0.19)
|
|
Earnings (loss) attributable to common stockholders 2
|
$
|
0.90
|
|
$
|
(3.37)
|
|
$
|
10.36
|
|
$
|
(4.20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Calculations - Diluted
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
Dollars per share
|
2021
|
2020
|
2021
|
2020
|
Earnings (loss) from continuing operations attributable to common stockholders
|
$
|
1.04
|
|
$
|
(3.26)
|
|
$
|
1.92
|
|
$
|
(4.01)
|
|
(Loss) earnings from discontinued operations, net of tax
|
(0.14)
|
|
(0.11)
|
|
8.41
|
|
(0.19)
|
|
Earnings (loss) attributable to common stockholders 2
|
$
|
0.90
|
|
$
|
(3.37)
|
|
$
|
10.33
|
|
$
|
(4.20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Count Information
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
Shares in millions
|
2021
|
2020
|
2021
|
2020
|
Weighted-average common shares - basic
|
529.6
|
|
734.3
|
|
567.0
|
|
736.5
|
|
Plus dilutive effect of equity compensation plans
|
1.6
|
|
—
|
|
1.5
|
|
—
|
|
|
|
|
|
|
Weighted-average common shares - diluted
|
531.2
|
|
734.3
|
|
568.5
|
|
736.5
|
|
Stock options and restricted stock units excluded from EPS calculations 1
|
2.3
|
|
6.3
|
|
2.4
|
|
6.6
|
|
1.These outstanding options to purchase shares of common stock, restricted stock, and performance stock units were excluded from the calculation of diluted earnings per share because the effect of including them would have been antidilutive.
2.Earnings per share amounts are computed independently for income from continuing operations, income from discontinued operations and net income attributable to common stockholders. As a result, the per share amounts from continuing operations and discontinued operations may not equal the total per share amounts for net income attributable to common stockholders.
NOTE 8 - ACCOUNTS AND NOTES RECEIVABLE - NET
|
|
|
|
|
|
|
|
|
In millions
|
June 30, 2021
|
December 31, 2020
|
Accounts receivable – trade 1
|
$
|
2,141
|
|
$
|
1,850
|
|
Notes receivable – trade
|
57
|
|
61
|
|
Other 2
|
628
|
|
510
|
|
Total accounts and notes receivable - net
|
$
|
2,826
|
|
$
|
2,421
|
|
1.Accounts receivable – trade is net of allowances of $35 million at June 30, 2021 and $32 million at December 31, 2020. Allowances are equal to the estimated uncollectible amounts and current expected credit loss. That estimate is based on historical collection experience, current economic and market conditions, and review of the current status of customers' accounts.
2.Other includes receivables in relation to value added tax, fair value of derivative instruments, indemnification assets, and general sales tax and other taxes. No individual group represents more than ten percent of total receivables.
NOTE 9 - INVENTORIES
|
|
|
|
|
|
|
|
|
Inventories
|
June 30, 2021
|
December 31, 2020
|
In millions
|
Finished goods
|
$
|
1,613
|
|
$
|
1,503
|
|
Work in process
|
591
|
|
515
|
|
Raw materials
|
289
|
|
251
|
|
Supplies
|
149
|
|
124
|
|
Total inventories
|
$
|
2,642
|
|
$
|
2,393
|
|
NOTE 10 - PROPERTY, PLANT, AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Lives (Years)
|
June 30, 2021
|
|
December 31, 2020
|
In millions
|
Land and land improvements
|
1
|
-
|
25
|
$
|
621
|
|
|
$
|
682
|
|
Buildings
|
1
|
-
|
50
|
2,065
|
|
|
2,031
|
|
Machinery, equipment, and other
|
1
|
-
|
25
|
7,397
|
|
|
7,182
|
|
Construction in progress
|
|
|
|
1,301
|
|
|
1,228
|
|
Total property, plant and equipment
|
|
|
|
$
|
11,384
|
|
|
$
|
11,123
|
|
Total accumulated depreciation
|
|
|
|
$
|
4,528
|
|
|
$
|
4,256
|
|
Total property, plant and equipment - net
|
|
|
|
$
|
6,856
|
|
|
$
|
6,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
In millions
|
2021
|
2020
|
2021
|
2020
|
Depreciation expense
|
$
|
166
|
|
$
|
172
|
|
$
|
327
|
|
$
|
340
|
|
NOTE 11 - NONCONSOLIDATED AFFILIATES
The Company's investments in companies accounted for using the equity method ("nonconsolidated affiliates") are recorded in "Investments and noncurrent receivables" in the interim Condensed Consolidated Balance Sheets.
The Company's net investment in nonconsolidated affiliates is shown in the following table:
|
|
|
|
|
|
|
|
|
Investments in Nonconsolidated Affiliates
|
June 30, 2021
|
December 31, 2020
|
In millions
|
Investments and noncurrent receivables
|
$
|
914
|
|
$
|
889
|
|
Accrued and other current liabilities
|
(65)
|
|
(71)
|
|
Net investment in nonconsolidated affiliates
|
$
|
849
|
|
$
|
818
|
|
The Company maintained an ownership interest in 14 nonconsolidated affiliates at June 30, 2021.
Sales to nonconsolidated affiliates represented less than 2 percent of total net sales for the three and six months ended June 30, 2021 and less than 3 percent of total net sales for the three and six months ended June 30, 2020. Sales to nonconsolidated affiliates for three and six months ended June 30, 2020 were primarily related to the sale of trichlorosilane, a raw material used in the production of polycrystalline silicon, to the HSC Group, prior to the TCS/Hemlock Disposal in the third quarter of 2020. Sales of this raw material to the HSC Group are reflected in Corporate. Purchases from nonconsolidated affiliates represented less than 4 percent of “Cost of sales” for the three and six months ended June 30, 2021 and less than 3 percent for the three and six months ended June 30, 2020.
NOTE 12 - GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amounts of goodwill during the six months ended June 30, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronics & Industrial
|
Water & Protection
|
Mobility & Materials
|
Total
|
In millions
|
Balance at December 31, 2020
|
$
|
8,458
|
|
$
|
6,969
|
|
$
|
3,275
|
|
$
|
18,702
|
|
Currency Translation Adjustment
|
(42)
|
|
(60)
|
|
(43)
|
|
(145)
|
|
Other
|
—
|
|
—
|
|
8
|
|
8
|
|
Balance at June 30, 2021
|
$
|
8,416
|
|
$
|
6,909
|
|
$
|
3,240
|
|
$
|
18,565
|
|
The Company tests goodwill for impairment annually during the fourth quarter as of October 1, or more frequently when events or changes in circumstances indicate that fair value is below carrying value. As a result of the related acquisition method of accounting in connection with the DWDP Merger, 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 2021 Segment Realignment served as a triggering event requiring the Company to perform an impairment analysis related to goodwill carried by its reporting units as of February 1, 2021, prior to the realignment. As part of the 2021 Segment Realignment, the Company assessed and re-defined certain reporting units effective February 1, 2021, including reallocation of goodwill on a relative fair value basis, as applicable, to new reporting units identified. Goodwill impairment analyses were then performed for the new reporting units identified in the Electronics & Industrial and Mobility & Materials segments impacted by the 2021 Segment Realignment. No impairments were identified as a result of the analyses described above.
In the second quarter of 2020, the Company recorded pre-tax, non-cash goodwill impairment charges of $2,498 million, impacting its Mobility & Materials and Industrial Solutions reporting units, which is reflected in "Goodwill impairment charges" in the interim Consolidated Statements of Operations for the three and six months ended June 30, 2020.
In the first quarter of 2020, the Company recorded pre-tax, non-cash goodwill impairment charges of $533 million, impacting Corporate, which is reflected in "Goodwill impairment charges" in the interim Consolidated Statements of Operations for the six months ended June 30, 2020.
Other Intangible Assets
The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
December 31, 2020
|
In millions
|
Gross
Carrying
Amount
|
Accum Amort
|
Net
|
Gross Carrying Amount
|
Accum Amort
|
Net
|
Intangible assets with finite lives:
|
|
|
|
|
|
|
Developed technology
|
$
|
2,763
|
|
$
|
(1,230)
|
|
$
|
1,533
|
|
$
|
2,844
|
|
$
|
(1,220)
|
|
$
|
1,624
|
|
Trademarks/tradenames
|
1,095
|
|
(466)
|
|
629
|
|
1,095
|
|
(440)
|
|
655
|
|
Customer-related
|
7,004
|
|
(2,536)
|
|
4,468
|
|
7,075
|
|
(2,361)
|
|
4,714
|
|
Other
|
131
|
|
(83)
|
|
48
|
|
131
|
|
(81)
|
|
50
|
|
Total other intangible assets with finite lives
|
$
|
10,993
|
|
$
|
(4,315)
|
|
$
|
6,678
|
|
$
|
11,145
|
|
$
|
(4,102)
|
|
$
|
7,043
|
|
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
Trademarks/tradenames
|
1,029
|
|
—
|
|
1,029
|
|
1,029
|
|
—
|
|
1,029
|
|
Total other intangible assets
|
1,029
|
|
—
|
|
1,029
|
|
1,029
|
|
—
|
|
1,029
|
|
Total
|
$
|
12,022
|
|
$
|
(4,315)
|
|
$
|
7,707
|
|
$
|
12,174
|
|
$
|
(4,102)
|
|
$
|
8,072
|
|
As part of the 2021 Segment Realignment, the Company reallocated its intangible assets with indefinite lives to align with the new segment structure. This served as a triggering event requiring the Company to perform an impairment analysis related to intangible assets with indefinite lives carried by its existing Electronics & Imaging and Transportation & Industrial segments as of February 1, 2021, prior to the realignment. Subsequent to the realignment the Company realigned intangible assets with indefinite lives as applicable to align the intangible assets with indefinite lives with the new segment structure. Impairment analyses were then performed for the intangible assets with indefinite lives carried by the Electronics & Industrial and Mobility & Materials segments. No impairments were identified as a result of the analyses described above.
In the second quarter of 2020, the Company performed quantitative testing on indefinite-lived intangible assets attributable to the Mobility & Materials segment, for which the Company determined that the fair value of certain tradenames had declined. As a result of the testing, the Company recorded a pre-tax, non-cash indefinite-lived intangible asset impairment charge of $21 million ($16 million 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 Mobility & Materials segment at June 30, 2020 was approximately $289 million, which represents fair value.
During the first quarter of 2020, the Company recorded non-cash impairment charges related to definite-lived intangible assets impacting Corporate. See Note 4 for further discussion.
The following table provides the net carrying value of other intangible assets by segment:
|
|
|
|
|
|
|
|
|
Net Intangibles by Segment
|
June 30, 2021
|
December 31, 2020
|
In millions
|
Electronics & Industrial
|
$
|
2,466
|
|
$
|
2,611
|
|
Water & Protection
|
2,802
|
|
2,920
|
|
Mobility & Materials
|
2,439
|
|
2,541
|
|
Total
|
$
|
7,707
|
|
$
|
8,072
|
|
Total estimated amortization expense for the remainder of 2021 and the five succeeding fiscal years is as follows:
|
|
|
|
|
|
Estimated Amortization Expense
|
|
In millions
|
|
Remainder of 2021
|
$
|
324
|
|
2022
|
$
|
607
|
|
2023
|
$
|
582
|
|
2024
|
$
|
562
|
|
2025
|
$
|
513
|
|
2026
|
$
|
495
|
|
NOTE 13 - SHORT-TERM BORROWINGS, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES
The following table summarizes the Company's finance lease obligations and long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt
|
June 30, 2021
|
December 31, 2020
|
In millions
|
Amount
|
Weighted Average Rate
|
Amount
|
Weighted Average Rate
|
Promissory notes and debentures:
|
|
|
|
|
Final maturity 2023 1,2
|
$
|
2,800
|
|
3.89
|
%
|
$
|
4,800
|
|
3.18
|
%
|
Final maturity 2025 1
|
1,850
|
|
4.49
|
%
|
1,850
|
|
4.49
|
%
|
Final maturity 2026 and thereafter 1
|
6,050
|
|
5.13
|
%
|
6,050
|
|
5.13
|
%
|
Other facilities:
|
|
|
|
|
Term loan due 2022
|
—
|
|
—
|
%
|
3,000
|
|
1.25
|
%
|
Finance lease obligations
|
2
|
|
|
2
|
|
|
Less: Unamortized debt discount and issuance costs
|
74
|
|
|
90
|
|
|
Less: Long-term debt due within one year
|
1
|
|
|
1
|
|
|
Total
|
$
|
10,627
|
|
|
$
|
15,611
|
|
|
1. Represents senior unsecured notes (the "2018 Senior Notes"), which are senior unsecured obligations of the Company.
2. The year ended December 31, 2020 includes $2 billion related to the May 2020 Notes.
Principal Payments of long-term debt for the remainder of 2021 and the five succeeding fiscal years are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities of Long-Term Debt for Next Five Years at June 30, 2021
|
Total
|
In millions
|
Remainder of 2021
|
$
|
—
|
|
2022
|
$
|
—
|
|
2023
|
$
|
2,800
|
|
2024
|
$
|
—
|
|
2025
|
$
|
1,850
|
|
2026
|
$
|
—
|
|
The estimated fair value of the Company's long-term borrowings was determined using Level 2 inputs within the fair value hierarchy, as described in Note 21. Based on quoted market prices for the same or similar issues, or on current rates offered to the Company for debt of the same remaining maturities, the fair value of the Company's long-term borrowings, not including long-term debt due within one year, was $12,965 million and $18,336 million at June 30, 2021 and December 31, 2020, respectively.
Available Committed Credit Facilities
The following table summarizes the Company's credit facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed and Available Credit Facilities at June 30, 2021
|
|
|
In millions
|
Effective Date
|
Committed Credit
|
Credit Available
|
Maturity Date
|
Interest
|
Revolving Credit Facility, Five-year
|
May 2019
|
$
|
3,000
|
|
$
|
2,975
|
|
May 2024
|
Floating Rate
|
364-day Revolving Credit Facility
|
April 2021
|
1,000
|
|
1,000
|
|
April 2022
|
Floating Rate
|
Total Committed and Available Credit Facilities
|
|
$
|
4,000
|
|
$
|
3,975
|
|
|
|
N&B Transaction
As part of the N&B Transaction, the Company received a Special Cash Payment of approximately $7.3 billion. The Special Cash Payment was partially funded by the N&B Notes Offering, which was completed on September 16, 2020. In order to fund the remainder of the Special Cash Payment, immediately prior to the consummation of the N&B Transaction, N&B borrowed $1.25 billion under the N&B Term Loan on February 1, 2021. The obligations and liabilities associated with the N&B Notes Offering and the N&B Term Loan were separated from the Company on February 1, 2021 upon consummation of the N&B Transaction. See Note 2 for more information.
May Debt Offering
On May 1, 2020, the Company completed an underwritten public offering of senior unsecured notes (the “May 2020 Notes”) in the aggregate principal amount of $2 billion of 2.169 percent fixed rate Notes due May 1, 2023 (the “May Debt Offering”). The consummation of the N&B Transaction triggered the special mandatory redemption feature of the May Debt Offering. The Company redeemed the May 2020 Notes on May 13, 2021 and funded the redemption with proceeds from the Special Cash Payment.
Term Loan Facilities
On February 1, 2021, the Company terminated its fully drawn term loan facilities in the aggregate principle amount of $3 billion (the "Term Loan Facilities"). The termination triggered the repayment of the aggregate outstanding principal amount of $3 billion, plus accrued and unpaid interest through and including January 31, 2021. The Company funded the repayment with proceeds from the Special Cash Payment.
Uncommitted Credit Facilities and Outstanding Letters of Credit
Unused bank credit lines on uncommitted credit facilities were $781 million at June 30, 2021. These lines are available to support short-term liquidity needs and general corporate purposes including letters of credit. Outstanding letters of credit were $133 million at June 30, 2021. These letters of credit support commitments made in the ordinary course of business.
Debt Covenants and Default Provisions
The Company's indenture covenants include customary limitations on liens, sale and leaseback transactions, and mergers and consolidations, subject to certain limitations. The 2018 Senior Notes also contain customary default provisions. The Five-Year Revolving Credit Facility and the 2021 $1B Revolving Credit Facility contain a financial covenant requiring that the ratio of Total Indebtedness to Total Capitalization for the Company and its consolidated subsidiaries not exceed 0.60. At June 30, 2021, the Company was in compliance with this financial covenant. There were no material changes to the debt covenants and default provisions at June 30, 2021.
NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES
Litigation, Environmental Matters, and Indemnifications
The Company and certain subsidiaries are involved in various lawsuits, claims and environmental actions that have arisen in the normal course of business with respect to product liability, patent infringement, governmental regulation, contract and commercial litigation, as well as possible obligations to investigate and mitigate the effects on the environment of the disposal or release of certain substances at various sites. In addition, in connection with divestitures and the related transactions, the Company from time to time has indemnified and has been indemnified by third parties against certain liabilities that may arise in connection with, among other things, business activities prior to the completion of the respective transactions. The term of these indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. The Company records liabilities for ongoing and indemnification matters when the information available indicates that it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated.
As of June 30, 2021, the Company has recorded indemnification assets of $60 million within "Accounts and notes receivable - net" and $240 million within "Deferred charges and other assets" and indemnification liabilities of $166 million within "Accrued and other current liabilities" and $190 million within "Other noncurrent obligations" within the Consolidated Balance Sheets.
The Company’s accruals discussed below for indemnification liabilities related to the binding Memorandum of Understanding (“MOU”) between Chemours, Corteva, EID and the Company and to the DWDP Separation and Distribution Agreement and the Letter Agreement between the Company and Corteva (together the “Agreements”), are included in the balances above.
PFAS Stray Liabilities: Future Eligible PFAS Costs
On July 1, 2015, EID, a Corteva subsidiary since June 1, 2019, completed the separation of EID’s Performance Chemicals segment through the spin-off of Chemours to holders of EID common stock (the “Chemours Separation”).
On January 22, 2021, the Company, Corteva, EID and Chemours entered into the MOU pursuant to which the parties have agreed to release certain claims that had been raised by Chemours including any claims arising out of or resulting from the process and manner in which EID structured or conducted the Chemours Separation, and any other claims that challenge the Chemours Separation or the assumption of Chemours Liabilities (as defined in the Chemours Separation Agreement) by Chemours and the allocation thereof, subject in each case to certain exceptions set forth in the MOU. In connection with the MOU, the confidential arbitration process regarding certain claims by Chemours was terminated in February 2021. The parties have further agreed not to bring any future, additional claims regarding the Chemours Separation Agreement or the MOU outside of arbitration.
Pursuant to the MOU, the parties have agreed to share certain costs associated with potential future liabilities related to alleged historical releases of certain PFAS (per- or polyfluoroalkyl substances, which include perfluorooctanoic acids and its ammonium salts (“PFOA”)) out of pre-July 1, 2015 conduct (“eligible PFAS costs”) until the earlier to occur of (i) December 31, 2040, (ii) the day on which the aggregate amount of Qualified Spend, as defined in the MOU, is equal to $4 billion or (iii) a termination in accordance with the terms of the MOU.
The parties have agreed that, during the term of this sharing arrangement, Qualified Spend will be borne 50 percent by Chemours and 50 percent, up to a cap of $2 billion, by the Company and Corteva. The Company and Corteva will split their 50 percent of Qualified Spend in accordance with the Agreements. After the term of this arrangement, Chemours’ indemnification obligations under the Chemours Separation Agreement would continue unchanged, subject in each case to certain exceptions set forth in the MOU.
In order to support and manage any potential future eligible PFAS costs, the parties have also agreed to establish an escrow account. The MOU provides that (1) no later than each of September 30, 2021 and September 30, 2022, Chemours shall deposit $100 million into an escrow account and DuPont and Corteva shall together deposit $100 million in the aggregate into an escrow account and (2) no later than September 30 of each subsequent year through and including 2028, Chemours shall deposit $50 million into an escrow account and DuPont and Corteva shall together deposit $50 million in the aggregate into an escrow account. Subject to the terms and conditions set forth in the MOU, each party may be permitted to defer funding in any year (excluding 2021). Additionally, if on December 31, 2028, the balance of the escrow account (including interest) is less than $700 million, Chemours will make 50 percent of the deposits and DuPont and Corteva together will make 50 percent of the deposits necessary to restore the balance of the escrow account to $700 million. Such payments will be made in a series of consecutive annual equal installments commencing on September 30, 2029 pursuant to the escrow account replenishment terms as set forth in the MOU.
The parties have agreed to cooperate in good faith to enter into additional agreements reflecting the terms set forth in the MOU.
Under the Agreements, Divested Operations and Businesses ("DDOB") liabilities of EID not allocated to or retained by Corteva or the Company are categorized as relating to either (i) PFAS Stray Liabilities, if they arise out of actions related to or resulting from the development, testing, manufacture or sale of PFAS; or (ii) Non-PFAS Stray Liabilities, (and together with PFAS Stray Liabilities, the “EID Stray Liabilities”).
The Agreements provide that the Company and Corteva will each bear specified amounts plus an additional $200 million of Indemnifiable Losses, described below, in relation to certain EID Stray Liabilities. The Agreements further provide that the Company and Corteva will each bear 50 percent, $150 million each, of the first $300 million of total Indemnifiable Losses related to PFAS Stray Liabilities. When the companies meet their respective $150 million threshold, Indemnifiable Losses related to PFAS Stray Liabilities will be borne 71 percent by DuPont and 29 percent by Corteva. Indemnifiable Losses up to $150 million incurred for PFAS Stray Liabilities are credited against each company’s $200 million threshold.
Whenever Corteva or DuPont meets its $200 million threshold, the other would generally bear all Non-PFAS Stray Liabilities until meeting its $200 million threshold. Thereafter, DuPont will bear 71 percent and Corteva will bear 29 percent of Indemnifiable Losses related to Non-PFAS Stray Liabilities.
Indemnifiable Losses, as defined in the DWDP Separation and Distribution Agreement, include, among other things, attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense of EID Stray Liabilities.
In connection with the MOU and the Agreements, the Company has recognized the following indemnification liabilities related to eligible PFAS costs:
|
|
|
|
|
|
|
|
|
|
|
|
Indemnified Liabilities Related to the MOU
|
In millions
|
Jun 30, 2021
|
Dec 31, 2020
|
Balance Sheet Classification
|
Current indemnified liabilities
|
$
|
36
|
|
$
|
12
|
|
Accrued and other current liabilities
|
Long-term indemnified liabilities
|
$
|
95
|
|
$
|
46
|
|
Other noncurrent obligations
|
Total indemnified liabilities accrued under the MOU 1, 2
|
$
|
131
|
|
$
|
58
|
|
|
|
|
|
|
1.As of June 30, 2021, total indemnified liabilities accrued include $108 million related to Chemours environmental remediation activities at their site in Fayetteville, North Carolina under the Consent Order between Chemours and the North Carolina Department of Environmental Quality.
2.Excludes liabilities of $27 million recognized by the Company as of December 31, 2020 related to the settlement of the Ohio MDL, discussed below.
In addition to the above, as of June 30, 2021, the Company has recognized a liability of $12.5 million related to the settlement agreement between Chemours, Corteva and DuPont and Delaware's Attorney General, discussed below.
Future charges, if any, associated with the MOU would be recognized over the term of the agreement as a component of income from discontinued operations to the extent liabilities become probable and estimable.
In 2004, EID settled a West Virginia state court class action, Leach v. DuPont, which alleged that PFOA from EID’s former Washington Works facility had contaminated area drinking water supplies and affected the health of area residents. 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 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. Since the 2017 settlement about 100 additional cases alleging personal injury, including kidney and testicular cancer claims, had been filed or noticed and were pending in the Ohio MDL.
On January 21, 2021, EID and Chemours entered into settlement agreements with plaintiffs’ counsel representing the Ohio MDL plaintiffs providing for a settlement of cases and claims in the Ohio MDL, except as noted below (the “Settlement”). The total settlement amount is $83 million in cash with each of the Company and EID contributing $27 million and Chemours contributing $29 million. At June 30, 2021 the Company had paid in full its $27 million contribution. The Settlement was entered into solely by way of compromise and settlement and is not in any way an admission of liability or fault by the
Company, Corteva, EID or Chemours. In connection with the Settlement, in April 2021 the plaintiffs filed a motion to terminate the Ohio MDL. The case captioned “Abbott v E. I. du Pont de Nemours and Company” is not included in the Settlement and is presently pending appeal.
In the Abbott case, the jury returned a verdict in March 2020 against 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. In March 2021, the trial judge entered an order denying EID’s post-trial motions for a reduction in the verdict amount for Mr. Abbott but reduced Mrs. Abbott’s verdict for loss of consortium from $10 million to $250,000, reducing the total verdict to $40.25 million. EID has appealed the verdict. The plaintiffs also sought but were not awarded punitive damages.
In addition to the actions described above, there are several cases alleging damages to natural resources, the environment, water, and/or property as well as various other allegations. DuPont and Corteva are named in most of the actions discussed below. Such actions include additional claims based on allegations that the transfer by EID of certain PFAS liabilities to Chemours prior to the Chemours Separation resulted in a fraudulent conveyance or voidable transaction. With the exception of the fraudulent conveyance claims, which are excluded from the MOU, legal fees, expenses, costs, and any potential liabilities for eligible PFAS costs presented by the following matters will be shared as defined in the MOU between Chemours, EID, Corteva and DuPont.
Since May 2017, a number of state attorneys general have filed lawsuits against DuPont, Corteva, EID, Chemours, and others, claiming environmental contamination by certain PFAS compounds. Such actions are currently pending in New Hampshire, New Jersey, North Carolina, Ohio and Vermont. In the second quarter 2021, the Michigan action was transferred to the SC MDL, discussed below. Generally, the states raise common law tort claims and seek economic impact damages for alleged harm to natural resources, punitive damages, present and future costs to cleanup contamination from certain PFAS compounds, and to abate the alleged nuisance. Most of these actions include fraudulent transfer claims related to the Chemours Separation and the DowDuPont separations.
In July 2021, Chemours, Corteva (for itself and EID) and DuPont reached a resolution with the State of Delaware that avoids litigation and addresses potential Natural Resources Damages (“NRD”) from known historical and current releases by the companies in or affecting Delaware. The resolution releases potential state NRD claims arising from the environmental impacts of various chemicals, including PFAS, across all current and historical locations. Consistent with the MOU, Chemours will bear 50 percent or $25 million of the $50 million settlement and Corteva and DuPont will each bear $12.5 million. The settlement also calls for a potential Supplemental Payment to Delaware up to a total of $25 million funded 50 percent by Chemours and 50 percent by Corteva and DuPont, jointly, under certain circumstances which are not deemed probable.
Several additional lawsuits have been filed by residents, local water districts, and private water companies against EID, Chemours, Corteva, DuPont and others in New York, New Jersey, and California generally alleging contamination of water systems due to the release of PFAS compounds. These suits seek compensatory and punitive damages, as well as present and future costs to clean up the alleged contamination. This includes a putative class action filed in the Northern District of New York on behalf of all individuals who, as of December 1, 2015, are or were owners of real property located in the Village of Hoosick Falls, New York and who obtain their drinking water from a privately owned well which has allegedly been contaminated by PFAS. The plaintiffs seek compensatory and punitive damages as well as medical monitoring. The certification of the class is currently pending before the court.
Additionally, there are several actions that have been filed in New Jersey against EID and Chemours on behalf of residents who allege personal injuries due to exposure to PFAS in their drinking water. These lawsuits generally seek compensatory and punitive damages stemming from those alleged injuries and medical monitoring.
In April 2021, Chemours, Corteva and DuPont and certain of their respective Dutch entities, received a civil summons filed before the Court of Rotterdam, the Netherlands, on behalf of four municipalities neighboring the Chemours Dordrecht facility. The municipalities are seeking liability declarations relating to the Dordrecht site’s current and historical PFAS operations and emissions. The companies’ response brief in defense of the municipalities’ claims is due in September 2021.
Beginning in April 2019, several dozen lawsuits involving water contamination arising from the use of PFAS-containing aqueous firefighting foams (“AFFF”) were filed against EID, Chemours, 3M and other AFFF manufacturers and in different parts of the country. Most were consolidated in multi-district litigation docket in federal district court in South Carolina (the “SC MDL”). Many of those cases also name DuPont as a defendant. Those actions largely seek remediation of the alleged PFAS contamination in and around military bases and airports as well as medical monitoring of affected residents. The first ten bellwether cases have been selected by the court, all of which are water district contamination cases.
As of June 30, 2021, approximately 1,160 personal injury cases have been filed directly in the SC MDL and assert claims on behalf of individual firefighters and others who allege that exposure to PFAS in firefighting foam caused them to develop cancer, including kidney and testicular cancer, or other injuries. DuPont has been named as a defendant in most of these personal injury AFFF cases. DuPont is seeking the dismissal of DowDuPont and DuPont from these actions. EID and the Company have never made or sold AFFF, perfluorooctanesulfonic acid ("PFOS") or PFOS containing products.
Additionally, a case filed by a former firefighter is pending in the Southern District of Ohio seeking certification of a nationwide class of individuals who have detectable levels of PFAS in their blood serum. The suit was filed against 3M and several other defendants in addition to Chemours and EID. The complaint specifically seeks, among other things, the creation of a “PFAS Science Panel” to study the effects of PFAS, but expressly states that the class does not seek compensatory damages for personal injuries. In February 2020, the court denied the defendants' motion to transfer this case to the SC MDL. The decision of whether to certify the class is currently pending before the court.
There are several actions pending in federal court against EID and Chemours, relating to discharges of PFCs, including GenX, into the Cape Fear River. GenX is a polymerization processing aid and a replacement for PFOA introduced by EID which Chemours continues to manufacture at its Fayetteville Works facility in Bladen County, North Carolina. One of these actions is a consolidated putative class action that asserts claims for damages and other relief on behalf of putative classes of property owners and residents in areas near or who draw drinking water from the Cape Fear River. Another action is a consolidated action brought by various North Carolina water authorities, including the Cape Fear Public Utility Authority and Brunswick County, that seek actual and punitive damages as well as injunctive relief. In addition, an action is pending in North Carolina state court on behalf of about 200 plaintiffs who own wells and property near the Fayetteville Works facility. The plaintiffs seek damages for nuisance allegedly caused by releases of certain PFCs from the site.
Additionally, there are lawsuits filed in North Carolina state court against Chemours, EID, Corteva and DuPont seeking damages for alleged personal injuries to more than 100 individuals due to alleged exposure to PFOA and GenX originating from the Fayetteville Works plant. These lawsuits also include fraudulent transfer allegations related to the Chemours Separation.
While Management believes it has appropriately estimated the liability associated with eligible PFAS matters and Indemnifiable Losses as of the date of this report, it is reasonably possible that the Company could incur additional eligible PFAS costs and Indemnifiable Losses in excess of the amounts accrued. These additional costs could have a significant effect on the Company’s financial condition and/or cash flows in the period in which they occur; however, costs qualifying as Qualified Spend are limited by the terms of the MOU.
Other Litigation Matters
In addition to the matters described above, the Company is party to claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, governmental regulation, contract and commercial litigation, and other actions. Certain of these actions may purport to be class actions and seek damages in very large amounts. As of June 30, 2021, the Company has liabilities of $18 million associated with these other litigation matters. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of the Company. In accordance with its accounting policy for litigation matters, the Company will expense litigation defense costs as incurred, which could be significant to the Company’s financial condition and/or cash flows in the period.
Environmental Matters
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. At June 30, 2021, the Company had accrued obligations of $203 million for probable environmental remediation and restoration costs. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the Consolidated Balance Sheets. 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.
The accrued environmental obligations includes the following:
|
|
|
|
|
|
|
|
|
|
|
|
Environmental Accrued Obligations
|
In millions
|
Jun 30, 2021
|
Dec 31, 2020
|
Potential exposure above the amount accrued 1
|
Environmental remediation liabilities not subject to indemnity
|
$
|
39
|
|
$
|
36
|
|
$
|
94
|
|
|
|
|
|
Environmental remediation indemnified liabilities
|
|
|
|
Indemnifications related to Dow and Corteva 2
|
45
|
|
44
|
|
63
|
|
MOU related obligations (discussed above) 3
|
119
|
|
56
|
|
55
|
|
Total environmental related liabilities
|
$
|
203
|
|
$
|
136
|
|
$
|
212
|
|
1.The environmental accrual as of June 30, 2021 represents management’s best estimate of the costs for remediation and restoration with respect to environmental matters, although it is reasonably possible that the ultimate cost with respect to these particular matters could range above the amount accrued.
2.Pursuant to the DWDP Separation and Distribution Agreement, the Company is required to indemnify Dow and Corteva for certain Non-PFAS clean-up responsibilities and associated remediation costs.
3.The MOU related obligations are included in the Indemnified Liabilities Related to the MOU presented above.
Guarantees
Obligations for Equity Affiliates & Others
The Company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates and customers. At June 30, 2021 and December 31, 2020, the Company had directly guaranteed $175 million and $189 million, respectively, of such obligations. These amounts represent the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guarantees. The Company would be required to perform on these guarantees in the event of default by the guaranteed party.
The Company assesses the payment/performance risk by assigning default rates based on the duration of the guarantees. These default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical default history for counterparties that do not have published credit ratings. For counterparties without an external rating or available credit history, a cumulative average default rate is used.
In certain cases, the Company has recourse to assets held as collateral, as well as personal guarantees from customers. At June 30, 2021, no collateral was held by the Company.
The following table provides a summary of the final expiration year and maximum future payments for each type of guarantee:
|
|
|
|
|
|
|
|
|
Guarantees at June 30, 2021
|
Final Expiration Year
|
Maximum Future Payments
|
In millions
|
Obligations for customers 1:
|
|
|
Bank borrowings
|
2021
|
$
|
17
|
|
Obligations for non-consolidated affiliates 2:
|
|
|
Bank borrowings
|
2021
|
$
|
158
|
|
Total guarantees
|
|
$
|
175
|
|
1. Existing guarantees for select customers, as part of contractual agreements. The terms of the guarantees are equivalent to the terms of the customer loans that are primarily made to finance customer invoices. At June 30, 2021, all maximum future payments had terms less than a year.
2. Existing guarantees for non-consolidated affiliates' liquidity needs in normal operations.
NOTE 15 - 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
|
2021
|
2020
|
2021
|
2020
|
|
|
Operating lease costs
|
$
|
29
|
|
$
|
33
|
|
$
|
58
|
|
$
|
64
|
|
|
|
Operating cash flows from operating leases were $57 million and $63 million for the six months ended June 30, 2021 and 2020, respectively.
Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. New operating lease assets and liabilities entered into during the six months ended June 30, 2021 and 2020 were $44 million and $51 million, respectively. Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
|
|
|
|
In millions
|
June 30, 2021
|
December 31, 2020
|
Operating Leases
|
|
|
Operating lease right-of-use assets 1
|
$
|
413
|
|
$
|
423
|
|
Current operating lease liabilities 2
|
95
|
|
117
|
|
Noncurrent operating lease liabilities 3
|
321
|
|
308
|
|
Total operating lease liabilities
|
$
|
416
|
|
$
|
425
|
|
1.Included in "Deferred charges and other assets" in the interim Condensed Consolidated Balance Sheet.
2.Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheet.
3.Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheet.
Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide the lessor’s implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments.
|
|
|
|
|
|
|
|
|
Lease Term and Discount Rate for Operating Leases
|
June 30, 2021
|
December 31, 2020
|
Weighted-average remaining lease term (years)
|
7.77
|
5.83
|
Weighted average discount rate
|
2.06
|
%
|
2.26
|
%
|
Maturities of lease liabilities were as follows:
|
|
|
|
|
|
Maturity of Lease Liabilities at June 30, 2021
|
Operating Leases
|
In millions
|
Remainder of 2021
|
$
|
57
|
|
2022
|
95
|
|
2023
|
73
|
|
2024
|
55
|
|
2025
|
34
|
|
2026 and thereafter
|
142
|
|
Total lease payments
|
$
|
456
|
|
Less: Interest
|
40
|
|
Present value of lease liabilities
|
$
|
416
|
|
In connection with the N&B Distribution, DuPont entered into leasing agreements with IFF, whereby DuPont is leasing certain properties, including office spaces and R&D laboratories to IFF. These leases are classified as operating leases and lessor income and related expenses are not significant to the Company's interim Consolidated Balance Sheet or interim Consolidated Statement of Operations.
NOTE 16 - STOCKHOLDERS' EQUITY
As part of the Exchange Offer from the N&B Transaction, the Company accepted and retired approximately 197.4 million shares of its common stock in exchange for about 142 million shares of N&B Common Stock. As a result, the Company reduced its common stock outstanding by 197.4 million shares of DuPont Common Stock as of February 1, 2021.
Share Repurchase Program
On June 1, 2019, the Company's Board of Directors approved a $2 billion share buyback program ("2019 Share Buyback Program"), which expired on June 1, 2021. During the second quarter, the Company repurchased and retired 6.2 million shares for $518 million completing the 2019 Share Buyback Program. At June 30, 2021, the Company had repurchased and retired a total of 29.9 million shares at a cost of $2 billion under this program.
In the first quarter of 2021, the Company's Board of Directors authorized a new $1.5 billion share buyback program, which expires on June 30, 2022 ("2021 Share Buyback Program"). As of June 30, 2021, the Company repurchased and retired 1.5 million shares for $125 million under the 2021 Share Buyback Program.
Accumulated Other Comprehensive Loss
The following table summarizes the activity related to each component of accumulated other comprehensive loss ("AOCL") for the six months ended June 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
Cumulative Translation Adj
|
Pension and OPEB
|
Derivative Instruments
|
Total
|
In millions
|
2020
|
|
|
|
|
|
Balance at January 1, 2020
|
|
$
|
(1,070)
|
|
$
|
(345)
|
|
$
|
(1)
|
|
$
|
(1,416)
|
|
Other comprehensive loss before reclassifications
|
|
(54)
|
|
(4)
|
|
—
|
|
(58)
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
—
|
|
9
|
|
—
|
|
9
|
|
Net other comprehensive (loss) income
|
|
$
|
(54)
|
|
$
|
5
|
|
$
|
—
|
|
$
|
(49)
|
|
Balance at June 30, 2020
|
|
$
|
(1,124)
|
|
$
|
(340)
|
|
$
|
(1)
|
|
$
|
(1,465)
|
|
2021
|
|
|
|
|
|
Balance at January 1, 2021
|
|
$
|
470
|
|
$
|
(425)
|
|
$
|
(1)
|
|
$
|
44
|
|
Other comprehensive (loss) income before reclassifications
|
|
(357)
|
|
5
|
|
18
|
|
(334)
|
|
Amounts reclassified from accumulated other comprehensive loss
|
|
—
|
|
6
|
|
—
|
|
6
|
|
Split-off of N&B reclassification adjustment
|
|
184
|
|
73
|
|
1
|
|
258
|
|
Net other comprehensive (loss) income
|
|
$
|
(173)
|
|
$
|
84
|
|
$
|
19
|
|
$
|
(70)
|
|
Balance at June 30, 2021
|
|
$
|
297
|
|
$
|
(341)
|
|
$
|
18
|
|
$
|
(26)
|
|
The tax effects on the net activity related to each component of other comprehensive income (loss) were not significant for the three and six months ended June 30, 2021 and 2020.
A summary of the reclassifications out of AOCL for the three and six months ended June 30, 2021 and 2020 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
|
2021
|
2020
|
2021
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation adjustments
|
$
|
—
|
|
$
|
—
|
|
$
|
184
|
|
$
|
—
|
|
See (1) below
|
Pension and other post-employment benefit plans
|
$
|
2
|
|
$
|
5
|
|
$
|
108
|
|
$
|
8
|
|
See (1) below
|
Tax (benefit) expense
|
—
|
|
—
|
|
(29)
|
|
1
|
|
See (1) below
|
After tax
|
$
|
2
|
|
$
|
5
|
|
$
|
79
|
|
$
|
9
|
|
|
Derivative instruments
|
$
|
—
|
|
$
|
—
|
|
$
|
1
|
|
$
|
—
|
|
See (1) below
|
Total reclassifications for the period, after tax
|
$
|
2
|
|
$
|
5
|
|
$
|
264
|
|
$
|
9
|
|
|
1. The activity for the six months ended June 30, 2021 is classified within "Income (loss) from discontinued operations, net of tax" and "Sundry income (expense) - net" as part of the N&B Transaction and continuing operations, respectively. The activity for the six months ended June 30, 2020 is classified within the "Sundry income (expense) - net" and "Provision for income taxes on continuing operations" lines.
NOTE 17 - NONCONTROLLING INTERESTS
Ownership interests in the Company's subsidiaries held by parties other than the Company are presented separately from the Company's equity in the interim Condensed Consolidated Balance Sheets as "Noncontrolling interests." The amounts of consolidated net income attributable to the Company and the noncontrolling interests are both presented on the face of the interim Consolidated Statements of Operations.
The following table summarizes the activity for equity attributable to noncontrolling interests for the three and six months ended June 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interests
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
In millions
|
2021
|
2020
|
2021
|
2020
|
Balance at beginning of period
|
$
|
517
|
|
$
|
566
|
|
$
|
566
|
|
$
|
569
|
|
Net income attributable to noncontrolling interests
|
9
|
|
7
|
|
13
|
|
13
|
|
Contributions from noncontrolling interests
|
67
|
|
—
|
|
67
|
|
5
|
|
Distributions to noncontrolling interests
|
(5)
|
|
(4)
|
|
(24)
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative translation adjustments
|
(1)
|
|
3
|
|
(8)
|
|
(5)
|
|
Split-off of N&B
|
—
|
|
—
|
|
(27)
|
|
—
|
|
|
|
|
|
|
Balance at end of period
|
$
|
587
|
|
$
|
572
|
|
$
|
587
|
|
$
|
572
|
|
NOTE 18 - 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 19 to the Consolidated Financial Statements included in the Company’s Recast 2020 Annual Report.
On February 1, 2021, the Company's net underfunded balance was reduced by $232 million after certain assets and obligations were separated from the Company to N&B plans effective as part of the N&B Transaction.
The following sets forth the components of the Company's net periodic benefit (credit) cost for defined benefit pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit (Credit) Cost for All Plans
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
In millions
|
2021
|
2020
|
2021
|
2020
|
Defined Benefit Pension Plans:
|
|
|
|
|
Service cost 1
|
$
|
14
|
|
$
|
17
|
|
$
|
29
|
|
$
|
35
|
|
Interest cost 2
|
10
|
|
14
|
|
21
|
|
28
|
|
Expected return on plan assets 3
|
(26)
|
|
(26)
|
|
(54)
|
|
(54)
|
|
Amortization of prior service credit 4
|
(1)
|
|
(2)
|
|
(2)
|
|
(3)
|
|
Amortization of net loss 5
|
3
|
|
4
|
|
6
|
|
8
|
|
Curtailment/settlement 6
|
1
|
|
2
|
|
3
|
|
2
|
|
Net periodic benefit cost - total
|
$
|
1
|
|
$
|
9
|
|
$
|
3
|
|
$
|
16
|
|
Less: Net periodic benefit cost - discontinued operations
|
—
|
|
3
|
|
1
|
|
7
|
|
Net periodic benefit cost - continuing operations
|
$
|
1
|
|
$
|
6
|
|
$
|
2
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. The service cost from continuing operations was $14 million and $27 million for the three and six months ended June 30, 2021, respectively, compared with $14 million and $28 million for the three and six months ended June 30, 2020, respectively.
2. The interest cost from continuing operations was $10 million and $21 million for the three and six months ended June 30, 2021, respectively, compared with $12 million and $25 million for the three and six months ended June 30, 2020, respectively.
3. The expected return on plan assets from continuing operations was $26 million and $53 million for the three and six months ended June 30, 2021, respectively, compared with $23 million and $49 million for the three and six months ended June 30, 2020.
4. The amortization of prior service credit from continuing operations was a gain of $1 million and $2 million for the three and six months ended June 30, 2021, respectively, compared with a gain of $2 million and $3 million for the three and six months ended June 30, 2020, respectively.
5. The amortization of unrecognized net loss from continuing operations was $3 million and $6 million for the three and six months ended June 30, 2021, respectively, compared with a net loss $3 million and $6 million for the three and six months ended June 30, 2020, respectively.
6. The curtailment and settlement costs from continuing operations was $1 million and $3 million for the three and six months ended June 30, 2021, respectively, compared with $2 million for both the three and six months ended June 30, 2020.
Activity related to other post-employment benefits was considered immaterial for both the current and comparative periods. The continuing operations portion of the net periodic benefit (credit) cost, other than the service cost component, is included in "Sundry income (expense) - net" in the interim Consolidated Statements of Operations.
DuPont expects to make additional contributions in the aggregate of approximately $57 million by year-end 2021.
NOTE 19 - STOCK-BASED COMPENSATION
A summary of the Company's stock-based compensation plans can be found in Note 20 to the Consolidated Financial Statements included in the Company's Recast 2020 Annual Report.
In the second quarter of 2020, the stockholders of DuPont approved the 2020 Equity and Incentive Plan (the "2020 Plan") which allows the Company to grant options, share appreciation rights, restricted shares, restricted stock units ("RSUs"), share bonuses, other share-based awards, cash awards, or a combination of the foregoing. Under the 2020 Plan, a maximum of 18 million shares of common stock are available for award as of June 30, 2021. In June of 2019, DuPont adopted the DuPont Omnibus Incentive Plan ("DuPont OIP") which provides for equity-based and cash incentive awards to certain employees, directors, independent contractors and consultants in the form of stock options, RSUs and performance-based restricted stock units ("PSUs"). Under the DuPont OIP, a maximum of 2 million shares of common stock are available for award as of June 30, 2021.
DuPont recognized share-based compensation expense in continuing operations of $21 million and $22 million for the three months ended June 30, 2021 and 2020, respectively, and $38 million and $60 million for the six months ended June 30, 2021 and 2020, respectively. The income tax benefits related to stock-based compensation arrangements were $5 million and $4 million for the three months ended June 30, 2021 and 2020, respectively, and $8 million and $12 million for the six months ended June 30, 2021 and 2020, respectively.
In the first quarter of 2021, the Company granted 0.6 million RSUs, 0.6 million stock options and 0.4 million PSUs. The weighted-average fair values per share associated with the grants were $72.88 per RSU, $16.92 per stock option and $78.23 per PSU. The stock options had a weighted-average exercise price per share of $72.98. There was minimal activity in the second quarter of 2021.
Effect of the N&B Distributions on Equity Awards
At the time of the N&B Distribution, outstanding, unvested share-based compensation awards that were denominated in DuPont common stock and held by N&B Employees were terminated and reissued as equity awards issued under the IFF stock plan.
NOTE 20 - FINANCIAL INSTRUMENTS
The following table summarizes the fair value of financial instruments at June 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Financial Instruments
|
June 30, 2021
|
December 31, 2020
|
In millions
|
Cost
|
Gain
|
Loss
|
Fair Value
|
Cost
|
Gain
|
Loss
|
Fair Value
|
Cash equivalents
|
$
|
2,818
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,818
|
|
$
|
1,105
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,105
|
|
Restricted cash equivalents 1
|
$
|
18
|
|
$
|
—
|
|
$
|
—
|
|
$
|
18
|
|
$
|
6,223
|
|
$
|
—
|
|
$
|
—
|
|
$
|
6,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash equivalents and restricted cash equivalents
|
$
|
2,836
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2,836
|
|
$
|
7,328
|
|
$
|
—
|
|
$
|
—
|
|
$
|
7,328
|
|
Long-term debt including debt due within one year
|
$
|
(10,628)
|
|
$
|
—
|
|
$
|
(2,338)
|
|
$
|
(12,966)
|
|
$
|
(15,612)
|
|
$
|
—
|
|
$
|
(2,725)
|
|
$
|
(18,337)
|
|
Derivatives relating to:
|
|
|
|
|
|
|
|
|
Net investment hedge 2
|
—
|
|
24
|
|
—
|
|
24
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Foreign currency 3,4
|
—
|
|
17
|
|
(7)
|
|
10
|
|
—
|
|
4
|
|
(13)
|
|
(9)
|
|
Total derivatives
|
$
|
—
|
|
$
|
41
|
|
$
|
(7)
|
|
$
|
34
|
|
$
|
—
|
|
$
|
4
|
|
$
|
(13)
|
|
$
|
(9)
|
|
1.Classified as "Other current assets" in the interim Condensed Consolidated Balance Sheets.
2.Classified as "Deferred charges and other assets" in the interim Condensed Consolidated Balance Sheets.
3.Classified as "Other current assets" and "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.
4.Presented net of cash collateral where master netting arrangements allow.
Derivative Instruments
Objectives and Strategies for Holding Derivative Instruments
In the ordinary course of business, the Company enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency, and interest rate risks. The Company has established a variety of derivative programs to be utilized for financial risk management. These programs reflect varying levels of exposure coverage and time horizons based on an assessment of risk.
Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee, consistent with the Company's financial risk management policies and guidelines. Derivative instruments used are forwards, options, futures and swaps.
The Company'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, 2021
|
December 31, 2020
|
In millions
|
Derivatives designated as hedging instruments:
|
|
|
Net investment hedge
|
$
|
1,000
|
|
$
|
—
|
|
Derivatives not designated as hedging instruments:
|
|
|
Foreign currency contracts 1
|
$
|
255
|
|
$
|
(304)
|
|
|
|
|
1.Presented net of contracts bought and sold.
Derivatives Designated in Hedging Relationships
Net Foreign Investment Hedge
During the three months ended June 30, 2021, the Company entered into a fixed-for-fixed cross currency swaps with an aggregate notional amount totaling $1 billion to hedge the variability of exchange rate impacts between the U.S. Dollar and Euro. Under the terms of the cross-currency swap agreement, the Company notionally exchanged $1 billion at a interest rate of 4.73% for €819 million at a weighted average interest rate of 3.26%. The cross-currency swap is designated as a net investment hedge and expires on November 15, 2028.
The Company has made an accounting policy election to account for the net investment hedge using the spot method. The Company has also elected to amortize the excluded components in interest expense in the related quarterly accounting period that such interest is accrued. The cross-currency swap is marked to market at each reporting date and any unrealized gains or losses are included in unrealized currency translation adjustments within AOCL, net of amounts associated with excluded components which are recognized in interest expense in the Consolidated Statements of Operations.
Derivatives not Designated in Hedging Relationships
Foreign Currency Contracts
The Company routinely uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal earnings impact, after taxes. The Company may use foreign currency exchange contracts to offset a portion of the Company's exposure to certain foreign currency-denominated revenues so that gains and losses on the contracts offset changes in the USD value of the related foreign currency-denominated revenues.
Effect of Derivative Instruments
Foreign currency derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency-denominated assets and liabilities. The amount charged on a pre-tax basis related to foreign currency derivatives not designated as a hedge, which was included in “Sundry income (expense) - net” in the interim Consolidated Statements of Operations, was a loss of $7 million for the three months ended June 30, 2021 and a loss of $27 million for the six months ended June 30, 2021. There was no gain or loss for the three months ended June 30, 2020 and a $4 million gain for the six months ended June 30, 2020. The income statement effects of other derivatives were immaterial.
NOTE 21 - 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, 2021
|
Significant Other Observable Inputs
(Level 2)
|
|
|
In millions
|
Assets at fair value:
|
|
|
|
Cash equivalents and restricted cash equivalents 1
|
$
|
2,836
|
|
|
|
|
|
|
|
Derivatives relating to: 2
|
|
|
|
Net investment hedge
|
24
|
|
|
|
Foreign currency contracts 3
|
25
|
|
|
|
Total assets at fair value
|
$
|
2,885
|
|
|
|
Liabilities at fair value:
|
|
|
|
Long-term debt including debt due within one year 4
|
$
|
12,966
|
|
|
|
Derivatives relating to: 2
|
|
|
|
Net investment hedge
|
—
|
|
|
|
Foreign currency contracts 3
|
15
|
|
|
|
Total liabilities at fair value
|
$
|
12,981
|
|
|
|
1. Treasury bills, time deposits, and money market funds included in "Cash and cash equivalents" and money market funds included in "Other current assets" in the interim Condensed Consolidated Balance Sheets and held at amortized cost, which approximates fair value.
2. See Note 20 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets.
3. Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the Consolidated Balance Sheets. The offsetting counterparty and cash collateral netting amounts for foreign currency contracts were $8 million for both assets and liabilities as of June 30, 2021.
4. Fair value is based on quoted market prices for the same or similar issues, or on current rates offered to the company for debt of the same remaining maturities and terms.
|
|
|
|
|
|
Basis of Fair Value Measurements on a Recurring Basis at December 31, 2020
|
Significant Other Observable Inputs
(Level 2)
|
In millions
|
Assets at fair value:
|
|
Cash equivalents and restricted cash equivalents 1
|
$
|
7,328
|
|
|
|
Derivatives relating to: 2
|
|
Foreign currency contracts 3
|
13
|
|
Total assets at fair value
|
$
|
7,341
|
|
Liabilities at fair value:
|
|
Long-term debt including debt due within one year 4
|
$
|
18,337
|
|
Derivatives relating to: 2
|
|
Foreign currency contracts 3
|
22
|
|
Total liabilities at fair value
|
$
|
18,359
|
|
1. Treasury bills, time deposits, and money market funds included in "Cash and cash equivalents" and money market funds included in "Other current assets" in the interim Condensed Consolidated Balance Sheets and held at amortized cost, which approximates fair value.
2. See Note 20 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets.
3. Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the Consolidated Balance Sheets. The offsetting counterparty and cash collateral netting amounts were $9 million for both assets and liabilities as of December 31, 2020.
4. Fair value is based on quoted market prices for the same or similar issues, or on current rates offered to the company for debt of the same remaining maturities and terms.
2020 Fair Value Measurements on a Nonrecurring Basis
During the second quarter of 2020, the Company recorded impairment charges related to indefinite-lived assets within the Mobility & Materials segment. See Note 4 for further discussion of these fair value measurements.
During the first quarter of 2020, the Company recorded impairment charges related to long-lived assets within Corporate. See Note 4 for further discussion of this fair value measurement.
NOTE 22 - SEGMENTS AND GEOGRAPHIC REGIONS
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.
Effective February 1, 2021, in conjunction with the closing of the N&B Transaction, the Company completed the 2021 Segment Realignment resulting in a change to its management and reporting structure. These changes resulted in the following:
•Realignment of certain businesses from Transportation & Industrial to Electronics & Imaging;
•Dissolution of the Non-Core segment with the businesses to be divested and previously divested reflected in Corporate;
•Realignment of the remaining Non-Core businesses to Transportation & Industrial.
In addition, the following name changes occurred:
•Electronics & Imaging was renamed Electronics & Industrial;
•Transportation & Industrial was renamed Mobility & Materials;
•Safety & Construction was renamed Water & Protection.
The reporting changes have been retrospectively reflected in the segment results for all periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Information
|
Elect. & Industrial
|
Water & Protection
|
Mobility & Materials
|
Corporate 1
|
Total
|
In millions
|
Three months ended June 30, 2021
|
|
|
|
|
|
Net sales
|
$
|
1,320
|
|
$
|
1,412
|
|
$
|
1,270
|
|
$
|
133
|
|
$
|
4,135
|
|
Operating EBITDA 2
|
$
|
424
|
|
$
|
352
|
|
$
|
294
|
|
$
|
(7)
|
|
$
|
1,063
|
|
Equity in earnings of nonconsolidated affiliates
|
$
|
10
|
|
$
|
8
|
|
$
|
5
|
|
$
|
2
|
|
$
|
25
|
|
Three months ended June 30, 2020
|
|
|
|
|
|
Net sales
|
$
|
1,111
|
|
$
|
1,244
|
|
$
|
790
|
|
$
|
144
|
|
$
|
3,289
|
|
Operating EBITDA 2
|
$
|
336
|
|
$
|
339
|
|
$
|
(23)
|
|
$
|
43
|
|
$
|
695
|
|
Equity in earnings of nonconsolidated affiliates
|
$
|
10
|
|
$
|
5
|
|
$
|
7
|
|
$
|
80
|
|
$
|
102
|
|
Six months ended June 30, 2021
|
|
|
|
|
|
Net sales
|
$
|
2,620
|
|
$
|
2,740
|
|
$
|
2,485
|
|
$
|
266
|
|
$
|
8,111
|
|
Operating EBITDA 2
|
$
|
860
|
|
$
|
707
|
|
$
|
572
|
|
$
|
(29)
|
|
$
|
2,110
|
|
Equity in earnings of nonconsolidated affiliates
|
$
|
19
|
|
$
|
20
|
|
$
|
8
|
|
$
|
4
|
|
$
|
51
|
|
Six months ended June 30, 2020
|
|
|
|
|
|
Net sales
|
$
|
2,226
|
|
$
|
2,520
|
|
$
|
1,881
|
|
$
|
332
|
|
$
|
6,959
|
|
Operating EBITDA 2
|
$
|
663
|
|
$
|
696
|
|
$
|
192
|
|
$
|
51
|
|
$
|
1,602
|
|
Equity in earnings of nonconsolidated affiliates
|
$
|
19
|
|
$
|
12
|
|
$
|
8
|
|
$
|
102
|
|
$
|
141
|
|
1.Corporate includes activity of to be divested and previously divested businesses.
2.A reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA is provided below.
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA for the Three Months Ended June 30, 2021 and 2020
|
Three Months Ended June 30,
|
In millions
|
2021
|
2020
|
Income (Loss) from continuing operations, net of tax
|
$
|
564
|
|
$
|
(2,389)
|
|
+
|
Provision for income taxes on continuing operations
|
151
|
|
8
|
|
Income (Loss) from continuing operations before income taxes
|
$
|
715
|
|
$
|
(2,381)
|
|
+
|
Depreciation and amortization
|
333
|
|
349
|
|
-
|
Interest income 1
|
2
|
|
2
|
|
+
|
Interest expense
|
129
|
|
181
|
|
-
|
Non-operating pension/OPEB benefit 1
|
13
|
|
8
|
|
-
|
Foreign exchange losses, net 1
|
(8)
|
|
(18)
|
|
-
|
Significant items
|
107
|
|
(2,538)
|
|
Operating EBITDA
|
$
|
1,063
|
|
$
|
695
|
|
1.Included in "Sundry income (expense) - net."
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA for the Six Months Ended June 30, 2021 and 2020
|
Six Months Ended June 30,
|
In millions
|
2021
|
2020
|
Income (Loss) from continuing operations, net of tax
|
$
|
1,105
|
|
$
|
(2,939)
|
|
+
|
Provision for income taxes on continuing operations
|
183
|
|
102
|
|
Income (Loss) from continuing operations before income taxes
|
$
|
1,288
|
|
$
|
(2,837)
|
|
+
|
Depreciation and amortization
|
661
|
|
694
|
|
-
|
Interest income 1
|
4
|
|
4
|
|
+
|
Interest expense
|
275
|
|
352
|
|
-
|
Non-operating pension/OPEB benefit 1
|
25
|
|
19
|
|
-
|
Foreign exchange losses, net 1
|
(17)
|
|
(21)
|
|
-
|
Significant items
|
102
|
|
(3,395)
|
|
Operating EBITDA
|
$
|
2,110
|
|
$
|
1,602
|
|
1.Included in "Sundry income (expense) - net."
The following tables summarize the pre-tax impact of significant items by segment that are excluded from Operating EBITDA above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment for the Three Months Ended June 30, 2021
|
Elect. & Industrial
|
Water & Protection
|
Mobility & Materials
|
Corporate
|
Total
|
In millions
|
Integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(23)
|
|
$
|
(23)
|
|
Restructuring and asset related charges - net 2
|
(2)
|
|
—
|
|
(6)
|
|
(2)
|
|
(10)
|
|
Gain on divestiture 3
|
—
|
|
—
|
|
—
|
|
140
|
|
140
|
|
Total
|
$
|
(2)
|
|
$
|
—
|
|
$
|
(6)
|
|
$
|
115
|
|
$
|
107
|
|
1. Integration and separation costs related to strategic initiatives including the divestiture of the Held for Sale Disposal Group.
2. Includes Board approved restructuring plans and asset related charges. See Note 4 for additional information.
3. Reflected in "Sundry income (expense) - net." See Note 2 for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment for the Three Months Ended June 30, 2020
|
Elect. & Industrial
|
Water & Protection
|
Mobility & Materials
|
Corporate
|
Total
|
In millions
|
Integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(16)
|
|
$
|
(16)
|
|
Restructuring and asset related charges - net 2
|
3
|
|
12
|
|
10
|
|
(28)
|
|
(3)
|
|
Goodwill impairment charge 3
|
(834)
|
|
—
|
|
(1,664)
|
|
—
|
|
(2,498)
|
|
Asset impairment charges 4
|
—
|
|
—
|
|
(21)
|
|
—
|
|
(21)
|
|
|
|
|
|
|
|
Total
|
$
|
(831)
|
|
$
|
12
|
|
$
|
(1,675)
|
|
$
|
(44)
|
|
$
|
(2,538)
|
|
1. Integration and separation costs related to the post-DWDP Merger integration and the DWDP Distributions.
2. Includes Board approved restructuring plans and asset related charges. See Note 4 for additional information.
3. See Note 12 for additional information.
4. See Note 4 for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment for the Six Months Ended June 30, 2021
|
Elect. & Industrial
|
Water & Protection
|
Mobility & Materials
|
Corporate
|
Total
|
In millions
|
Integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(29)
|
|
$
|
(29)
|
|
Restructuring and asset related charges - net 2
|
(2)
|
|
—
|
|
(6)
|
|
(4)
|
|
(12)
|
|
Gain on divestiture 3
|
2
|
|
—
|
|
—
|
|
141
|
|
143
|
|
Total
|
$
|
—
|
|
$
|
—
|
|
$
|
(6)
|
|
$
|
108
|
|
$
|
102
|
|
1. Integration and separation costs related to strategic initiatives including the divestiture of the Held for Sale Disposal Group.
2. Includes Board approved restructuring plans and asset related charges. See Note 4 for additional information.
3. Reflected in "Sundry income (expense) - net." See Note 2 for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment for the Six Months Ended June 30, 2020
|
Elect. & Industrial
|
Water & Protection
|
Mobility & Materials
|
Corporate
|
Total
|
In millions
|
Integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(139)
|
|
$
|
(139)
|
|
Restructuring and asset related charges - net 2
|
(1)
|
|
(13)
|
|
(15)
|
|
(102)
|
|
(131)
|
|
Goodwill impairment charge 3
|
(834)
|
|
—
|
|
(1,664)
|
|
(533)
|
|
(3,031)
|
|
Asset impairment charges 4
|
—
|
|
—
|
|
(21)
|
|
(270)
|
|
(291)
|
|
Gain on divestiture 5
|
197
|
|
—
|
|
—
|
|
—
|
|
197
|
|
Total
|
$
|
(638)
|
|
$
|
(13)
|
|
$
|
(1,700)
|
|
$
|
(1,044)
|
|
$
|
(3,395)
|
|
1. Integration and separation costs related to the post-DWDP Merger integration and the DWDP Distributions.
2. Includes Board approved restructuring plans and asset related charges. See Note 4 for additional information.
3. See Note 12 for additional information.
4. See Note 4 for additional information.
5. Reflected in "Sundry income (expense) - net." See Note 2 for additional information.
NOTE 23 - SUBSEQUENT EVENTS
Laird Performance Materials
On July 1, 2021, DuPont completed the acquisition of Laird Performance Materials (“Laird PM”) from Advent International (“Laird PM Acquisition”) for aggregate, adjusted consideration of approximately $2.4 billion, which included net upward adjustments of approximately $100 million for acquired cash and net working capital, among other items.
The Company will apply the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” to the Laird PM Acquisition which requires that the Laird PM assets acquired and liabilities assumed be recognized on the Company’s balance sheet at their respective fair values as of the acquisition date. The Company expects to complete the preliminary purchase price allocation for the business combination during the third quarter of 2021. Due to the timing of the acquisition, as of the date of issuance of these interim Consolidated Financial Statements, the Company is not yet able to provide the amounts recognized as of the acquisition date for major classes of Laird PM assets acquired and liabilities assumed.