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
Principles of Consolidation and Basis of Presentation
The accompanying Consolidated Financial Statements of DuPont de Nemours, Inc. ("DuPont” or the "Company”) were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The significant accounting policies described below, together with the other notes that follow, are an integral part of the Consolidated Financial Statements.
The Consolidated Financial Statements include the accounts of the Company and subsidiaries in which a controlling interest is maintained. The Consolidated Financial Statements also include the accounts of joint ventures that are variable interest entities ("VIEs") in which the Company is the primary beneficiary due to the Company's power to direct the VIEs significant activities. For those consolidated subsidiaries in which the Company's ownership is less than 100 percent, the outside stockholders' interests are shown as noncontrolling interests. Investments in affiliates over which the Company has the ability to exercise significant influence but does not have a controlling interest are accounted for under the equity method.
The Company is also involved with certain joint ventures accounted for under the equity method of accounting that are VIEs. The Company is not the primary beneficiary, as the nature of the Company's involvement with the VIEs does not provide it the power to direct the VIEs significant activities. Future events may require these VIEs to be consolidated if the Company becomes the primary beneficiary. At December 31, 2021 and 2020, the maximum exposure to loss related to the nonconsolidated VIEs is not considered material to the Consolidated Financial Statements.
Historic Transactions
Effective August 31, 2017, E. I. du Pont de Nemours and Company ("EID") and The Dow Chemical Company ("TDCC") each merged with subsidiaries of DowDuPont Inc. (n/k/a "DuPont”) and, as a result, EID and TDCC became subsidiaries of the Company. 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. DowDuPont Inc. changed its registered name to DuPont de Nemours, Inc. (“DuPont”) (for certain events prior to June 1, 2019, the Company may be referred to as DowDuPont). Beginning on June 3, 2019, the Company's common stock is traded on the New York Stock Exchange under the ticker symbol "DD."
On 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 4 for more information.
The financial position and the results of operations of DuPont present the historical financial results of N&B as discontinued operations for all periods presented and present Dow and Corteva as discontinued operations in 2019. The cash flows and comprehensive income related to Dow, Corteva and N&B have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income, in 2019 for Dow and Corteva and in all periods presented for N&B. Unless otherwise indicated, the information in the notes to the Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow, Corteva and N&B.
Use of Estimates in Financial Statement Preparation
The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company’s Consolidated Financial Statements include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash equivalents represent investments with maturities of three months or less from time of purchase. They are carried at cost plus accrued interest, which approximates fair value.
Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents represents trust assets and cash held in escrow. These funds are restricted as to withdrawal or use under the terms of certain contractual agreements. Restricted cash is classified as a current or non-current asset based on the timing and nature of when or how the cash is expected to be used. See Note 7 for further information.
Fair Value Measurements
Under the accounting guidance for fair value measurements and disclosures, a fair value hierarchy was established that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Company uses the following valuation techniques to measure fair value for its assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
–
|
Quoted market prices in active markets for identical assets or liabilities;
|
|
|
|
|
|
Level 2
|
–
|
Significant other observable inputs (e.g. quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs);
|
|
|
|
|
|
Level 3
|
–
|
Unobservable inputs for the asset or liability, which are valued based on management's estimates of assumptions that market participants would use in pricing the asset or liability.
|
Foreign Currency Translation
The Company's worldwide operations utilize the U.S. dollar ("USD") or local currency as the functional currency, where applicable. The Company identifies its separate and distinct foreign entities and groups the foreign entities into two categories: 1) extension of the parent or foreign subsidiaries operating in a hyper-inflationary environment (USD functional currency) and 2) self-contained (local functional currency). If a foreign entity does not align with either category, factors are evaluated and a judgment is made to determine the functional currency.
For foreign entities where the USD is the functional currency, all foreign currency-denominated asset and liability amounts are re-measured into USD at end-of-period exchange rates, except for inventories, prepaid expenses, property, plant and equipment, goodwill and other intangible assets, which are re-measured at historical rates. Foreign currency income and expenses are re-measured at average exchange rates in effect during the year, except for expenses related to balance sheet amounts re-measured at historical exchange rates. Exchange gains and losses arising from re-measurement of foreign currency-denominated monetary assets and liabilities are included in income in the period in which they occur.
For foreign entities where the local currency is the functional currency, assets and liabilities denominated in local currencies are translated into USD at end-of-period exchange rates and the resultant translation adjustments are reported, net of their related tax effects, as a component of accumulated other comprehensive loss in equity. Assets and liabilities denominated in other than the local currency are re-measured into the local currency prior to translation into USD and the resultant exchange gains or losses are included in income in the period in which they occur. Income and expenses are translated into USD at average exchange rates in effect during the period.
The Company changes the functional currency of its separate and distinct foreign entities only when significant changes in economic facts and circumstances indicate clearly that the functional currency has changed.
Inventories
The Company's inventories are valued at the lower of cost or net realizable value. Elements of cost in inventories include raw materials, direct labor and manufacturing overhead. Stores and supplies are valued at cost or net realizable value, whichever is lower; cost is generally determined by the average cost method. The Company's inventories are generally accounted for under the average cost method. The Company establishes allowances for obsolescence of inventory based upon quality considerations and assumptions about future demand and market conditions.
In periods of abnormally low production, certain fixed costs normally absorbed into inventory are recorded directly to cost of sales in the period incurred.
Property, Plant and Equipment
Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation is based on the estimated service lives of depreciable assets and is calculated using the straight-line method. Fully depreciated assets are retained in property and accumulated depreciation accounts until they are removed from service. When assets are surrendered, retired, sold, or otherwise disposed of, their gross carrying values and related accumulated depreciation are removed from the Consolidated Balance Sheets and included in determining gain or loss on such disposals.
Goodwill and Other Intangible Assets
The Company records goodwill when the purchase price of a business acquisition exceeds the estimated fair value of net identified tangible and intangible assets acquired. Goodwill is tested for impairment at the reporting unit level annually during the fourth quarter, or more frequently when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value.
When testing goodwill for impairment, the Company has the option to first perform qualitative testing to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the Company chooses not to complete a qualitative assessment for a given reporting unit or if the initial assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is required. If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recognized in the amount by which the carrying value of the reporting unit exceeds its fair value, limited to the amount of goodwill at the reporting unit. The Company determines fair values for each of the reporting units using a combination of the income approach and/or market approach. Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. Under the market approach, the Company selects peer sets based on close competitors and reviews the EBIT/EBITDA multiples to determine the fair value. When applicable, third party purchase offers may be utilized to measure fair value. The Company applies a weighting to the market approach and income approach to determine the fair value. See Note 14 for further information on goodwill.
Indefinite-lived intangible assets are tested for impairment at least annually; however, these tests are performed more frequently when events or changes in circumstances indicate that the asset may be impaired. When testing indefinite-lived intangible assets for impairment, the Company has the option to first perform qualitative testing to determine whether it is more likely than not that the fair value of indefinite-lived intangible assets is less than carrying value. If the Company chooses not to complete a qualitative assessment for indefinite-lived intangible assets or if the initial assessment indicates that it is more likely than not that the carrying value of indefinite-lived intangible assets exceeds the fair value, additional quantitative testing is required. Impairment exists when carrying value exceeds fair value. The Company's fair value methodology is primarily based on discounted cash flow techniques.
Definite-lived intangible assets are amortized over their estimated useful lives, generally on a straight-line basis for periods ranging primarily from 1 to 23 years. The Company continually evaluates the reasonableness of the useful lives of these assets.
Impairment and Disposals of Long-Lived Assets
The Company evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances indicate the carrying value may not be recoverable. The carrying value of a long-lived asset group is considered for impairment when the total projected undiscounted cash flows from the assets are separately identifiable and are less than its carrying value. In that event, a loss would be recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset group. The Company's fair value methodology is an estimate of fair market value which is made based on prices of similar assets or other valuation methodologies, including present value techniques. Long-lived assets to be disposed of by sale, if material, are classified as held for sale and reported at the lower of carrying amount or fair value less cost to sell, and depreciation is ceased. Long-lived assets to be disposed of other than by sale are classified as held and used until they are disposed of. Depreciation is recognized over the remaining useful life of the assets.
Acquisitions
In accordance with ASC 805, Business Combinations, acquisitions are recorded using the acquisition method of accounting. The Company includes the operating results of acquired entities from their respective dates of acquisition. The Company recognizes and measures the identifiable assets acquired and liabilities assumed as of the acquisition date fair value, where applicable. The excess, if any, of total consideration transferred in a business combination over the fair value of identifiable assets acquired and liabilities assumed is recognized as goodwill. Costs incurred as a result of a business combination other than costs related to the issuance of debt or equity securities are recorded in the period the costs are incurred.
Leases
The Company adopted the ASC 842, Leases, in the first quarter of 2019 which resulted in a cumulative effect adjustment to opening accumulated deficit of $111 million at January 1, 2019. The Company determines whether an arrangement is a lease at the inception of the arrangement based on the terms and conditions in the contract. A contract contains a lease if there is an identified asset and the Company has the right to control the asset. Operating lease right-of-use ("ROU") assets are included in "Deferred charges and other assets" on the Consolidated Balance Sheets. Operating lease liabilities are included in "Accrued and other current liabilities" and "Other noncurrent obligations" on the Consolidated Balance Sheets. Finance lease ROU assets are included in "Property, plant and equipment - net" and the corresponding lease liabilities are included in "Short-term borrowings and finance lease obligations" and "Long-term debt" on the Consolidated Balance Sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and 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 terms include options to extend the lease when it is reasonably certain those options will be exercised. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and lease expense is recognized on a straight-line basis over the lease term.
The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component for all asset classes. Additionally, for certain equipment leases, the portfolio approach is applied to account for the operating lease ROU assets and lease liabilities. In the Consolidated Statements of Operations, lease expense for operating lease payments is recognized on a straight-line basis over the lease term. For finance leases, interest expense is recognized on the lease liability and the ROU asset is amortized over the lease term. See Note 17 for additional information regarding the Company's leases.
Derivative Instruments
Derivative instruments are reported in the Consolidated Balance Sheets at their fair values. The Company utilizes derivatives to manage exposures to foreign currency exchange rates and commodity prices. Changes in the fair values of derivative instruments that are not designated as hedges are recorded in current period earnings. For derivative instruments designated as cash flow hedges, the gain or loss is reported in "Accumulated other comprehensive loss" ("AOCL") until it is cleared to earnings during the same period in which the hedged item affects earnings.
In the event that a derivative designated as a hedge of a firm commitment or an anticipated transaction is terminated prior to the maturation of the hedged transaction, the net gain or loss in AOCL generally remains in AOCL until the item that was hedged affects earnings. If a hedged transaction matures, or is sold, extinguished, or terminated prior to the maturity of a derivative designated as a hedge of such transaction, gains or losses associated with the derivative through the date the transaction matured are included in the measurement of the hedged transaction and the derivative is reclassified as for trading purposes. Derivatives designated as hedges of anticipated transactions are reclassified as for trading purposes if the anticipated transaction is no longer probable.
For derivative instruments designated as net investment hedges, the gain or loss is reported as a component of Other comprehensive income (loss) and recorded in AOCL. The gain or loss will be subsequently reclassified into net earnings when the hedged net investment is either sold or substantially liquidated.
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. These accruals are adjusted periodically as assessment and remediation efforts progress or as additional technical or legal information becomes available. Accruals for environmental liabilities are included in the Consolidated Balance Sheets in "Accrued and other current liabilities" and "Other noncurrent obligations" at undiscounted amounts. Accruals for related insurance or other third-party recoveries for environmental liabilities are recorded when it is
probable that a recovery will be realized and are included in the Consolidated Balance Sheets as "Accounts and notes receivable - net."
Environmental costs are capitalized if the costs extend the life of the property, increase its capacity, and/or mitigate or prevent contamination from future operations. Environmental costs are also capitalized in recognition of legal asset retirement obligations resulting from the acquisition, construction and/or normal operation of a long-lived asset. Costs related to environmental contamination treatment and cleanup are charged to expense. Estimated future incremental operations, maintenance and management costs directly related to remediation are accrued when such costs are probable and reasonably estimable.
Revenue Recognition
The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for the arrangements that the Company determines are within the scope of Revenue from Contracts with Customers (Topic 606), the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. See Note 5 for additional information on revenue recognition.
Cost of Sales
Cost of sales primarily includes the cost of manufacture and delivery, ingredients or raw materials, direct salaries, wages and benefits and overhead, non-capitalizable costs associated with capital projects and other operational expenses. No amortization of intangibles is included within costs of sales.
Research and Development
Research and development costs are expensed as incurred. Research and development expense includes costs (primarily consisting of employee costs, materials, contract services, research agreements, and other external spend) relating to the discovery and development of new products, and enhancement of existing products.
Selling, General and Administrative Expenses
Selling, general and administrative expenses primarily include selling and marketing expenses, commissions, functional costs, and business management expenses.
Acquisition, Integration and Separation Costs
Acquisition, integration and separation costs primarily consist of financial advisory, information technology, legal, accounting, consulting, and other professional advisory fees associated with the preparation and execution of activities related to strategic initiatives.
Litigation
Accruals for legal matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Legal costs, such as outside counsel fees and expenses, are charged to expense in the period incurred.
Restructuring and Asset Related Charges
Charges for restructuring programs generally include targeted actions involving employee severance and related benefit costs, contract termination charges, and asset related charges, which include impairments or accelerated depreciation/amortization of long-lived assets associated with such actions. Employee severance and related benefit costs are provided to employees under the Company’s ongoing benefit arrangements. These charges are accrued during the period when management commits to a plan of termination and it becomes probable that employees will be entitled to benefits at amounts that can be reasonably estimated. Contract termination charges primarily reflect costs to terminate a contract before the end of its term or costs that will continue to be incurred under the contract for its remaining term without economic benefit to the Company. Asset related charges reflect impairments to long-lived assets and indefinite-lived intangible assets no longer deemed recoverable and depreciation/amortization of long-lived assets, which is accelerated over their remaining economic lives.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted tax rates. The effect of a change in tax rates on deferred tax assets or liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes the financial statement effects of an uncertain income tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. The Company accrues for other tax contingencies when it is probable that a liability to a taxing authority has been incurred and the amount of the contingency can be reasonably estimated. The current portion of uncertain income tax positions is included in "Income taxes payable" and the long-term portion is included in "Other noncurrent obligations" in the Consolidated Balance Sheets.
NOTE 2 - RECENT ACCOUNTING GUIDANCE
Accounting Guidance Issued But Not Adopted at December 31, 2021
In October 2021, the FASB issued Accounting Standards Update No. 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (“ASU 2021-08”), which requires contract assets and contract liabilities (i.e., unearned revenue) acquired in a business combination to be recognized and measured in accordance with ASC 606, Revenue from Contracts with Customers. Historically, the Company has recognized contract assets and contract liabilities at the acquisition date based on fair value estimates in accordance with ASC 805, Business Combinations. ASU 2021-08 is effective for interim and annual periods beginning after December 15, 2022 on a prospective basis, with early adoption permitted. The Company is currently evaluating the potential impact of ASU 2021-08 to its consolidated financial statements in connection with any business combinations.
NOTE 3 - ACQUISITIONS
Intended Rogers Corporation Acquisition
On November 2, 2021, the Company announced that it had entered into a definitive agreement to acquire all the outstanding shares of Rogers Corporation (“Rogers”) for about $5.2 billion (the “Intended Rogers Acquisition”). The acquisition is expected to close by the end of the second quarter of 2022, pending receipt of regulatory approvals and satisfaction of customary closing conditions. When complete, the acquisition of Rogers is expected to broaden the Company’s presence in the electronic materials market. Rogers is complementary to and aligned strategically with the Company’s existing Electronics & Industrial business. The completion of the acquisition is subject to regulatory approvals and other customary closing conditions.
Laird Performance Materials Acquisition
On July 1, 2021, DuPont completed the acquisition (the "Laird PM Acquisition") of 100% of the ownership interest of Laird Performance Materials (“Laird PM”) from Advent International for aggregate, adjusted cash consideration of approximately $2,404 million. The cash consideration paid included a net upward adjustment of approximately $100 million for acquired cash and net working capital, amongst other items. Laird PM is a leader in high-performance electromagnetic shielding and thermal management solutions. Laird PM is being integrated into the Interconnect Solutions business within the Electronics & Industrial segment, in order to enhance the Company's position in advanced electronics applications. The Company accounted for the acquisition in accordance with ASC 805, which requires the assets acquired and liabilities assumed to be recognized on the balance sheet at their fair values as of the acquisition date.
The table below presents the provisional fair values allocated to the assets acquired and liabilities assumed. The purchase accounting and purchase price allocation for Laird PM are substantially complete. However, the Company continues to refine the preliminary valuation of income tax related amounts which could impact the amount of residual goodwill recorded. The Company will finalize the amounts recognized as it obtains the information necessary to complete the analysis, but no later than one year from the date of the acquisition. Final determination of the fair values may result in further adjustments to the values presented in the following table:
|
|
|
|
|
|
|
|
Laird PM Assets Acquired and Liabilities Assumed on July 1, 2021
|
|
(in millions)
|
|
Fair Value of Assets Acquired
|
|
|
Cash and cash equivalents
|
$
|
92
|
|
|
Accounts and notes receivable
|
99
|
|
|
Inventories
|
50
|
|
|
Property, plant, and equipment
|
104
|
|
|
Other current assets
|
10
|
|
|
Goodwill
|
1,213
|
|
|
Other intangible assets
|
1,160
|
|
|
Deferred income tax assets
|
3
|
|
|
Deferred charges and other assets
|
26
|
|
|
Total Assets
|
$
|
2,757
|
|
|
Fair Value of Liabilities Assumed
|
|
|
Accounts payable
|
$
|
75
|
|
|
Income taxes payable
|
10
|
|
|
Accrued and other current liabilities
|
46
|
|
|
Deferred income tax liabilities
|
184
|
|
|
Pension & other post-employment benefits - noncurrent
|
10
|
|
|
Other noncurrent obligations
|
28
|
|
|
Total Liabilities
|
$
|
353
|
|
|
Net Assets (Consideration for Laird PM)
|
$
|
2,404
|
|
The significant fair value adjustments included in the provisional allocation of purchase price are discussed below.
Property, plant and equipment
Property, plant and equipment is comprised of machinery and equipment of $67 million, buildings and building improvements of $18 million, leasehold improvements of $10 million, construction in progress of $5 million and land and land improvements of $4 million. The estimated fair value was primarily determined using a market approach for land and certain types of equipment, and a replacement cost approach for the remaining depreciable property, plant and equipment. The market approach for certain types of equipment represents a sales comparison that measures the value of an asset through an analysis of sales and
offerings of comparable assets. The replacement cost approach used for all other depreciable property, plant and equipment measures the value of an asset by estimating the cost to acquire or construct comparable assets and adjusts for age and condition of the asset.
Goodwill
The excess of the consideration for Laird PM over the net fair value of assets acquired and liabilities assumed resulted in the provisional recognition of $1,213 million of goodwill, which has been assigned to the Electronics & Industrial segment. Goodwill is attributable to Laird PM’s assembled workforce and expected cost synergies to be obtained through procurement efficiencies and the optimization of the combined the Electronics & Industrial segment and Laird PM businesses’ global activities across sales, manufacturing, research & development, and administrative functions.
Other Intangible Assets
Other intangible assets with definite lives include acquired customer-related intangible assets of $840 million, developed technology of $290 million and trademark/tradename of $30 million. Acquired customer-related intangible assets, developed technology, and trademark/tradename have useful lives of 14 years, 8 years, and 3 years, respectively.
The customer-related intangible asset's fair value was determined using the excess earnings method while the developed technology and trademark/tradename fair values were determined utilizing the relief from royalty method. Both the excess earnings method and the relief from royalty method use a discounted cash flows valuation method, which is a form of the income approach. Under the excess earnings method, the estimated cash flows attributable to the customer-related intangible asset are adjusted to exclude the future cash flows that can be attributable to supporting assets, such as trademark/tradenames or fixed assets. Both the amount and the duration of the cash flows are considered from a market participant perspective. The Company's estimates of discounted market participant future cash flows include but are not limited to assumptions related to customer attrition rate, the discount rate, the royalty rates, the economic life, the EBITDA margin, the contributory asset charge, and the projected revenue for the customer-related intangible assets. Under the relief from royalty method, a royalty rate based on observed market royalties is applied to projected revenue supporting the developed technology and trademark/tradename and discounted to present value, using an appropriate discount rate that requires judgment by management. Both the amount and the duration of the cash flows are considered from a market participant perspective. The Company's estimates of discounted market participant future cash flows included assumptions related to the discount rate, the projected revenue, the royalty rate, the obsolescence rate, and the economic life for the developed technology, and the discount rate, the projected revenue, the royalty rate, and the economic life for the trademark/tradename. The customer-related intangible asset, developed technology, and trademark/tradename are being amortized on a straight line basis based on the pattern of economic benefits the Company expects to realize.
Total net sales included in the Consolidated Statements of Income for the year ended December 31, 2021 are $263 million. The Company evaluated the disclosure requirements under ASC 805 and determined Laird PM was not considered a material business combination for purposes of disclosing the earnings of Laird PM since the date of acquisition or supplemental pro forma information.
NOTE 4 - DIVESTITURES
Mobility & Materials Segment Intended Divestiture
On November 2, 2021 the Company announced that it has initiated a divestiture process related to a substantial portion of the Mobility & Materials segment, which predominantly includes the Engineering Polymers and Performance Resins lines of business (the “In-Scope M&M Businesses”). The outcome of which, including the entry into a definitive agreement, is subject to the approval of the DuPont Board of Directors. The scope of the intended divestiture excludes certain product lines including Auto Adhesives and MultibaseTM. The divestiture of the In-Scope M&M Businesses may include a full or partial separation of the businesses from the Company. The Mobility & Materials segment will remain in its current management and reporting structure while these strategic alternatives are considered.
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 (the "Exchange Offer") where, on the terms and subject to the conditions of the Exchange Offer, eligible participating DuPont stockholders had the option to tender all, some or none of their shares of common stock, par value $0.01 per share, of DuPont (the “DuPont Common Stock”) for a number of shares of common stock, par value $0.01 per share, of N&B (the “N&B Common Stock”) and which resulted in all shares of N&B Common Stock being distributed to DuPont stockholders that participated in the Exchange Offer. The consummation of the Exchange Offer was followed by the merger of N&B with a wholly owned subsidiary of IFF, with N&B surviving the merger as a wholly owned subsidiary of IFF (the “N&B Merger” and,
together with the Exchange Offer, the “N&B Transaction”). 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 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2021
|
2020
|
2019
|
|
Net sales
|
$
|
507
|
|
$
|
6,059
|
|
$
|
6,076
|
|
|
Cost of sales
|
354
|
|
4,014
|
|
4,030
|
|
|
Research and development expenses
|
21
|
|
235
|
|
266
|
|
|
Selling, general and administrative expenses
|
47
|
|
534
|
|
606
|
|
|
Amortization of intangibles
|
38
|
|
1,423
|
|
349
|
|
|
Restructuring and asset related charges - net
|
1
|
|
4
|
|
162
|
|
|
Goodwill impairment charges
|
—
|
|
—
|
|
933
|
|
|
Integration and separation costs
|
172
|
|
417
|
|
85
|
|
|
Equity in earnings of nonconsolidated affiliates
|
—
|
|
4
|
|
(1)
|
|
|
Sundry income (expense) - net
|
8
|
|
8
|
|
9
|
|
|
Interest expense
|
13
|
|
95
|
|
1
|
|
|
Loss from discontinued operations before income taxes
|
(131)
|
|
(651)
|
|
(348)
|
|
|
(Benefit from) provision for income taxes on discontinued operations
|
(21)
|
|
(183)
|
|
142
|
|
|
Loss from discontinued operations, net of tax
|
(110)
|
|
(468)
|
|
(490)
|
|
|
Income from discontinued operations attributable to noncontrolling interests, net of tax
|
—
|
|
—
|
|
1
|
|
|
Non-taxable gain on split-off
|
4,920
|
|
—
|
|
—
|
|
|
Income (loss) from discontinued operations attributable to DuPont stockholders, net of tax
|
$
|
4,810
|
|
$
|
(468)
|
|
$
|
(491)
|
|
The following table presents depreciation, amortization, and capital expenditures of the discontinued operations related to N&B:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2021
|
2020
|
2019
|
|
Depreciation and amortization
|
$
|
63
|
|
$
|
1,721
|
|
$
|
664
|
|
|
Capital expenditures
|
$
|
27
|
|
$
|
234
|
|
$
|
359
|
|
|
|
|
|
|
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
|
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 liabilities
|
242
|
|
|
Total liabilities of discontinued operations
|
$
|
8,610
|
|
In connection with and in accordance with the terms of the N&B Transaction, prior to consummation of the Exchange Offer and the N&B Merger, DuPont received a one-time cash payment of approximately $7.3 billion, (the "Special Cash Payment"). 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 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 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" at December 31, 2020 in the Company's Consolidated Balance Sheets.
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 LLC, 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 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; and
•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.
Other Discontinued Operations Activity
The Company recorded a loss from discontinued operations, net of tax of $76 million for the year ended December 31, 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 16. The Company also recorded a loss from discontinued operations, net of tax of $23 million for the year ended December 31, 2021, a portion of which is related to certain charges associated with the amended and restated Tax Matters Agreement under the DWDP Distributions.
For the year ended December 31, 2020, the Company recorded a "Loss from discontinued operations, net of tax" in the Company's Consolidated Statements of Operations of $49 million. The loss primarily relates to litigation matters (refer to Note 16) partially offset by a gain related to the DWDP Tax Matters Agreement. For the year ended December 31, 2019, the Company recorded "Income from discontinued operations, net of tax" in the Company's Consolidated Statements of Operations of $86 million related to the adjustment of certain unrecognized tax benefits for positions taken on items from prior years from previously divested businesses and $80 million related to changes in accruals for certain prior year tax positions related to the divested crop protection business and research and development assets of EID.
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, for $240 million. The sale of the Biomaterials business unit is subject to customary closing conditions and is expected to close mid-year 2022. In January 2021, the Company entered into a definitive agreement to sell its Clean Technologies business, which closed on December 31, 2021. The results of operations of the Biomaterials and Clean Technologies businesses are reported in Corporate. The assets and liabilities associated with the Biomaterials business remain classified as held for sale at December 31, 2021.
The following table summarizes the carrying value of the major assets and liabilities of the Biomaterials business unit as of December 31, 2021 and the Biomaterials and Clean Technologies business units as of December 31, 2020 (collectively, the “Corporate Held for Sale Disposal Group”):
|
|
|
|
|
|
|
|
|
|
|
In millions
|
December 31, 2021
|
December 31, 2020
|
|
Assets
|
|
|
|
Accounts and notes receivable - net
|
$
|
27
|
|
$
|
63
|
|
|
Inventories
|
48
|
|
75
|
|
|
Other current assets
|
—
|
|
35
|
|
|
Investments and noncurrent receivables
|
158
|
|
164
|
|
|
Property, plant and equipment - net
|
12
|
|
34
|
|
|
Goodwill
|
—
|
|
267
|
|
|
Other intangible assets
|
—
|
|
168
|
|
|
Deferred charges and other assets
|
—
|
|
4
|
|
|
Assets held for sale
|
$
|
245
|
|
$
|
810
|
|
|
Liabilities
|
|
|
|
Accounts payable
|
$
|
21
|
|
$
|
40
|
|
|
Income taxes payable
|
—
|
|
1
|
|
|
Accrued and other current liabilities
|
3
|
|
50
|
|
|
Deferred income tax liabilities
|
—
|
|
30
|
|
|
Pension and other post-employment benefits - noncurrent
|
—
|
|
1
|
|
|
Other noncurrent obligations
|
1
|
|
18
|
|
Liabilities related to assets held for sale
|
$
|
25
|
|
$
|
140
|
|
In connection with the held for sale classification, the Corporate Held for Sale Disposal Groups were measured at fair value less estimated cost to sell. As a result, the Company recorded a $25 million pre-tax goodwill impairment charge during the third quarter of 2020 which is reflected in “Goodwill impairment charges” in the Company’s Consolidated Statements of Operations for the year ended December 31, 2020. See Note 6 for further information on the asset impairments recorded related to the Corporate Held for Sale Disposal Groups.
Sale of Clean Technologies
On December 31, 2021, the Company completed the sale of its Clean Technologies business unit, which is part of Corporate. Total consideration related to the sale of the business is approximately $510 million, with cash proceeds of about $500 million reflecting adjustments for customary closing costs as defined within the purchase agreement. For the year ended December 31, 2021, a pre-tax loss of $3 million ($39 million loss net of tax, primarily driven by nondeductible goodwill) on the disposition was recorded in "Sundry income (expense) - net" in the Company's Consolidated Statements of Operations.
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. For the year ended December 31, 2021, a pre-tax gain of $140 million ($105 million net of tax) was recorded in "Sundry income (expense) - net" in the Company's Consolidated Statements of Operations.
Sale of TCS/HSC Disposal Group
In the third quarter of 2020, the Company completed the sale of its trichlorosilane business (“TCS Business”) along with its equity ownership interest in DC HSC Holdings LLC and Hemlock Semiconductor L.L.C. (the "HSC Group,” and together with the TCS Business, the “TCS/HSC Disposal Group” and the sale of the TCS/HSC Disposal Group, the “TCS/HSC Disposal”) to the HSC Group, both of which were part of the businesses reflected in Corporate. In connection with the TCS/HSC Disposal, the Company received $550 million in cash at closing, subject to certain claw-back provisions. The Company also received approximately $58 million in the third quarter of 2021, which was recorded in "Cash and cash equivalents" in the Company's Consolidated Balance Sheets, and will receive an additional $117 million in equal installments over the course of the next two years associated with the settlement of an existing supply agreement dispute with the HSC Group. The TCS/HSC Disposal resulted in a net pre-tax benefit of $396 million ($236 million net of tax), including the settlement of the supply agreement dispute and after allocation of goodwill to the TCS Business. The net pre-tax benefit is recorded in “Sundry income (expense) – net” in the Company’s Consolidated Statements of Operations for the year ended December 31, 2020.
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. The sale resulted in a pre-tax gain of $197 million ($102 million net of tax) recorded in "Sundry income (expense) - net" in the Company's Consolidated Statements of Operations for the year ended December 31, 2020.
Sale of DuPont Sustainable Solutions
In the third quarter of 2019, the Company completed the sale of its Sustainable Solutions business unit, a part of the businesses reflected in Corporate, to Gyrus Capital. The sale resulted in a pre-tax gain of $28 million ($22 million net of tax). The gain was recorded in "Sundry income (expense) - net" in the Company's Consolidated Statements of Operations for the year ended December 31, 2019.
DWDP Distributions
Separation Agreements
In connection with the Dow Distribution and the Corteva Distribution, the Company entered into certain agreements that, among other things, effected the separations, provides for the allocation of assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) among DuPont, Dow, and Corteva (together, the “Parties” and each a “Party”), and provides a framework for DuPont’s relationship with Dow and Corteva following the DWDP Distributions. Effective April 1, 2019, the Parties entered into the following agreements referred to herein as: the DWDP Separation and Distribution Agreement; the DWDP Tax Matters Agreement; the DWDP Employee Matters Agreement; and the Intellectual Property Cross-License Agreement (the “DuPont-Dow IP Cross-License Agreement”). In addition to the agreements above, DuPont has entered into certain various supply agreements with Dow. These agreements provide for different pricing than the historical intercompany and intracompany practices prior to the DWDP Distributions.
Effective June 1, 2019, in connection with the Corteva Distribution, DuPont and Corteva entered into the following agreements: the Intellectual Property Cross-License Agreement (the “DuPont-Corteva IP Cross-License Agreement”); the Letter Agreement; and the Amended and Restated DWDP Tax Matters Agreement.
Certain internal distributions and reorganizations, and the distributions of Dow on April 1, 2019, and of Corteva on June 1, 2019, qualified as tax-free transactions under the applicable sections of the Internal Revenue Code. If the completed distribution of Corteva or Dow, in each case, together with certain related transactions, were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then the Company could be subject, under the DWDP Tax Matters Agreement, to significant tax and indemnification liability. To the extent that the Company is responsible for any liability under the Amended and Restated DWDP Tax Matters Agreement there could be a material adverse impact on the Company's business, financial condition, results of operations and cash flows in future reporting periods.
In connection with the DWDP Distributions, Dow and Corteva indemnify the Company against, and DuPont indemnifies Dow and Corteva against certain litigation, environmental, income taxes, and other liabilities that arose prior to the DWDP Distributions, as applicable. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. Refer to Note 16 for additional information regarding treatment of litigation and environmental related matters under the DWDP Separation and Distribution Agreement and the Letter Agreement.
Materials Science Division
On April 1, 2019, DowDuPont completed the separation of its Materials Science businesses, including the businesses and operations that comprised the Company's former Performance Materials & Coating, Industrial Intermediates & Infrastructure and the Packaging & Specialty Plastics segments, (the "Materials Science Division") through the consummation of the Dow Distribution.
On April 1, 2019, prior to the Dow Distribution, the Company contributed $2,024 million in cash to Dow.
The results of operations of the Materials Science Division are presented as discontinued operations as summarized below:
|
|
|
|
|
|
|
|
In millions
|
2019
|
|
Net sales
|
$
|
10,867
|
|
|
Cost of sales
|
8,917
|
|
|
Research and development expenses
|
163
|
|
|
Selling, general and administrative expenses
|
329
|
|
|
Amortization of intangibles
|
116
|
|
|
Restructuring and asset related charges - net
|
157
|
|
|
Integration and separation costs
|
44
|
|
|
Equity in earnings of nonconsolidated affiliates
|
(13)
|
|
|
Sundry income (expense) - net
|
48
|
|
|
Interest expense
|
240
|
|
|
Income from discontinued operations before income taxes
|
936
|
|
|
Provision for income taxes on discontinued operations
|
207
|
|
|
Income from discontinued operations, net of tax
|
729
|
|
|
Income from discontinued operations attributable to noncontrolling interests, net of tax
|
37
|
|
|
Income from discontinued operations attributable to DuPont stockholders, net of tax
|
$
|
692
|
|
The following table presents depreciation, amortization, and capital expenditures of the discontinued operations related to the Materials Science Division:
|
|
|
|
|
|
|
|
In millions
|
2019
|
|
Depreciation and amortization
|
$
|
744
|
|
|
Capital expenditures
|
$
|
597
|
|
|
|
|
Agriculture Division
On June 1, 2019, the Company completed the separation of its Agriculture business, including the businesses and operations that comprised the Company's former Agriculture segment (the "Agriculture Division"), through the consummation of the Corteva Distribution.
In 2019, prior to the distribution of Corteva, the Company contributed $7,139 million in cash to Corteva, a portion of which was used to retire indebtedness of EID.
The results of operations of the Agriculture Division are presented as discontinued operations as summarized below:
|
|
|
|
|
|
|
|
In millions
|
2019
|
|
Net sales
|
$
|
7,144
|
|
|
Cost of sales
|
4,218
|
|
|
Research and development expenses
|
470
|
|
|
Selling, general and administrative expenses
|
1,294
|
|
|
Amortization of intangibles
|
176
|
|
|
Restructuring and asset related charges - net
|
117
|
|
|
Integration and separation costs
|
430
|
|
|
Equity in earnings of nonconsolidated affiliates
|
(4)
|
|
|
Sundry income (expense) - net
|
40
|
|
|
Interest expense
|
91
|
|
|
Income from discontinued operations before income taxes
|
384
|
|
|
Provision for income taxes on discontinued operations
|
62
|
|
|
Income from discontinued operations, net of tax
|
322
|
|
|
Income from discontinued operations attributable to noncontrolling interests, net of tax
|
35
|
|
|
Income from discontinued operations attributable to DuPont stockholders, net of tax
|
$
|
287
|
|
The following table presents depreciation, amortization, and capital expenditures of the discontinued operations related to the Agriculture Division:
|
|
|
|
|
|
|
|
In millions
|
2019
|
|
Depreciation and amortization
|
$
|
385
|
|
|
Capital expenditures
|
$
|
383
|
|
|
|
|
Acquisition, Integration and Separation Costs
Acquisition, integration and separation costs primarily consist of financial advisory, information technology, legal, accounting, consulting, and other professional advisory fees. For the year ended December 31, 2021, these costs were primarily associated with the execution of activities related to strategic initiatives, including the acquisition of Laird PM, the planned divestiture of the In-Scope M&M Businesses, the Intended Rogers Acquisition, and the completed and planned divestitures of the held for sale businesses included within Corporate. For the years ended December 31, 2020 and December 31, 2019 these costs were primarily associated with the preparation and execution of activities related to the DWDP Merger, post-DWDP Merger integration, and the DWDP Distributions.
These costs are recorded within "Acquisition, integration and separation costs" within the Consolidated Statements of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2021
|
2020
|
2019
|
|
Acquisition, integration and separation costs
|
$
|
133
|
|
$
|
177
|
|
$
|
1,257
|
|
NOTE 5 - 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.
Revenue from product sales is recognized when the customer obtains control of the Company’s product, which occurs at a point in time, usually upon shipment, with payment terms typically in the range of 30 to 60 days after invoicing depending on business and geographic region. The Company elected the practical expedient to not adjust the amount of consideration for the effects of a significant financing component for all instances in which the period between payment and transfer of the goods will be one year or less. When the Company performs shipping and handling activities after the transfer of control to the customer (e.g., when control transfers prior to shipment), these are considered fulfillment activities, and accordingly, the costs are accrued when the related revenue is recognized. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. The Company elected to use the practical expedient to expense cash and non-cash sales incentives as the amortization period for the costs to obtain the contract would have been one year or less.
The transaction price includes estimates for reductions in revenue from customer rebates and rights of return on product sales. These amounts are estimated based upon the most likely amount of consideration to which the customer will be entitled. All estimates are based on historical experience, anticipated performance, and the Company’s best judgment at the time to the extent it is probable, that a significant reversal of revenue recognized will not occur. All estimates for variable consideration are reassessed periodically.
For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation based on the relative standalone selling price. The standalone selling price is the observable price which depicts the price as if sold to a similar customer in similar circumstances.
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. Refer to Note 23 for the breakout of net sales by geographic region.
On February 1, 2021, the Company realigned and renamed certain businesses as part of a 2021 Segment Realignment resulting in changes to its management and reporting structure (the “2021 Segment Realignment”). The reporting changes have been retrospectively reflected for all periods presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Trade Revenue by Segment and Business or Major Product Line
|
2021
|
2020
|
2019
|
|
In millions
|
|
Industrial Solutions
|
$
|
1,890
|
|
$
|
1,617
|
|
$
|
1,646
|
|
|
Interconnect Solutions
|
1,617
|
|
1,280
|
|
1,187
|
|
|
Semiconductor Technologies
|
2,047
|
|
1,777
|
|
1,613
|
|
|
Electronics & Industrial
|
$
|
5,554
|
|
$
|
4,674
|
|
$
|
4,446
|
|
|
Safety Solutions
|
$
|
2,567
|
|
$
|
2,291
|
|
$
|
2,549
|
|
|
Shelter Solutions
|
1,615
|
|
1,426
|
|
1,535
|
|
|
Water Solutions
|
1,370
|
|
1,276
|
|
1,117
|
|
|
Water & Protection
|
$
|
5,552
|
|
$
|
4,993
|
|
$
|
5,201
|
|
|
Advanced Solutions
|
$
|
1,494
|
|
$
|
1,184
|
|
$
|
1,232
|
|
|
Engineering Polymers
|
2,272
|
|
1,853
|
|
2,320
|
|
|
Performance Resins
|
1,279
|
|
968
|
|
1,138
|
|
|
Mobility & Materials
|
$
|
5,045
|
|
$
|
4,005
|
|
$
|
4,690
|
|
|
Corporate 1
|
$
|
502
|
|
$
|
666
|
|
$
|
1,099
|
|
|
Total
|
$
|
16,653
|
|
$
|
14,338
|
|
$
|
15,436
|
|
1.Corporate net sales reflect activity of to be divested and previously divested businesses.
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 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 for the years ended December 31, 2021 and 2020 from amounts included in contract liabilities at the beginning of the period was $33 million and $31 million, respectively. The amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional was insignificant. The Company did not recognize any asset impairment charges related to contract assets during the period.
|
|
|
|
|
|
|
|
|
|
|
Contract Balances
|
December 31, 2021
|
December 31, 2020
|
|
In millions
|
|
Accounts and notes receivable - trade 1
|
$
|
2,125
|
|
$
|
1,911
|
|
|
|
|
|
|
Deferred revenue - current 2
|
$
|
25
|
|
$
|
16
|
|
|
Deferred revenue - noncurrent 3
|
$
|
—
|
|
$
|
21
|
|
1.Included in "Accounts and notes receivable - net" in the Consolidated Balance Sheets.
2.Included in "Accrued and other current liabilities" in the Consolidated Balance Sheets.
3.Included in "Other noncurrent obligations" in the Consolidated Balance Sheets.
NOTE 6 - RESTRUCTURING AND ASSET RELATED CHARGES - NET
Charges for restructuring programs and asset related charges, which includes asset impairments, were $55 million, $845 million and $152 million for the years ended December 31, 2021, 2020, and 2019, respectively. These charges were recorded in "Restructuring and asset related charges - net" in the Consolidated Statements of Operations. The total liability related to restructuring programs was $48 million at December 31, 2021 and $96 million at December 31, 2020, recorded in "Accrued and other current liabilities" in the Consolidated Balance Sheets. Restructuring activity consists of the following programs:
2021 Restructuring Actions
In October 2021, the Company approved targeted restructuring actions to capture near term cost reductions (the "2021 Restructuring Actions"). For the year ended December 31, 2021, DuPont recorded a pre-tax charge related to the 2021 Restructuring Actions in the amount of $46 million, recognized in "Restructuring and asset related charges - net" in the Company's Consolidated Statements of Operations, comprised of $26 million of severance and related benefit costs and $20 million of asset related charges. At December 31, 2021, total liabilities related to the 2021 Restructuring Actions were $25 million for severance and related benefit costs, recognized in "Accrued and other current liabilities" in the Consolidated Balance Sheet.
The following table summarizes the charges incurred by segment related to the 2021 Restructuring Actions:
|
|
|
|
|
|
|
|
2021 Restructuring Actions Charges by Segment
|
2021
|
|
In millions
|
|
Electronics & Industrial
|
$
|
5
|
|
|
Water & Protection
|
32
|
|
|
Mobility & Materials
|
2
|
|
|
Corporate
|
7
|
|
|
Total
|
$
|
46
|
|
The Company expects actions related to this program to be substantially complete by the first half of 2022.
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 following tables summarize the charges related to the 2020 Restructuring Program:
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2021
|
2020
|
|
Severance and related benefit costs
|
$
|
10
|
|
$
|
118
|
|
|
Asset related charges
|
2
|
|
50
|
|
|
Total restructuring and asset related charges - net
|
$
|
12
|
|
$
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 Restructuring Program Charges by Segment
|
2021
|
2020
|
|
|
In millions
|
|
|
Electronics & Industrial
|
$
|
3
|
|
$
|
10
|
|
|
|
Water & Protection
|
—
|
|
57
|
|
|
|
Mobility & Materials
|
4
|
|
18
|
|
|
|
Corporate
|
5
|
|
83
|
|
|
|
Total
|
$
|
12
|
|
$
|
168
|
|
|
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
|
(57)
|
|
—
|
|
(57)
|
|
|
|
|
Reserve balance at December 31, 2021
|
$
|
15
|
|
$
|
—
|
|
$
|
15
|
|
|
|
At December 31, 2021, total liabilities related to the 2020 Restructuring Program were $15 million, recorded in "Accrued and other current liabilities" in the Consolidated Balance Sheets. Actions related to the 2020 Restructuring Program were 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 following tables summarize the charges incurred related to the 2019 Restructuring Program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2021
|
2020
|
2019
|
|
Severance and related benefit costs
|
$
|
1
|
|
$
|
5
|
|
$
|
92
|
|
|
Asset related charges
|
—
|
|
—
|
|
27
|
|
|
Total restructuring and asset related charges - net
|
$
|
1
|
|
$
|
5
|
|
$
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 Restructuring Program Charges (Credits) by Segment
|
2021
|
2020
|
2019
|
|
In millions
|
|
Electronics & Industrial
|
$
|
—
|
|
$
|
(3)
|
|
$
|
47
|
|
|
Water & Protection
|
—
|
|
(14)
|
|
25
|
|
|
Mobility & Materials
|
—
|
|
(7)
|
|
19
|
|
|
Corporate
|
1
|
|
29
|
|
28
|
|
|
Total
|
$
|
1
|
|
$
|
5
|
|
$
|
119
|
|
Total liabilities related to the 2019 Restructuring Program were $2 million at December 31, 2021 and $14 million at December 31, 2020, respectively, and recorded in "Accrued and other current liabilities" in the Consolidated Balance Sheets. Actions related to the 2019 Restructuring Program were 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 pretax restructuring charges attributable to the continuing operations of DuPont of $342 million inception-to-date, consisting of severance and related benefit costs of $136 million, asset related charges of $159 million and contract termination charges and other charges of $47 million.
Total liabilities related to the DowDuPont Cost Synergy Program were $6 million at December 31, 2021 and $20 million in December 31, 2020, respectively, and recorded in "Accrued and other current liabilities" in the Consolidated Balance Sheets. Actions related to the Synergy Program were substantially complete.
Asset Impairments
In the third quarter of 2020, the TCS/HSC Disposal, as well as further softening conditions in the aerospace markets, gave rise to fair value indicators and, thus, served as triggering events requiring the Company to perform a recoverability assessment related to asset groups within its Photovoltaic and Advanced Materials (“PVAM”) business unit. The Company first performed a long-lived asset impairment test and determined that, based on undiscounted cash flows, the carrying amount of certain long-
lived assets was not recoverable. Accordingly, the Company estimated the fair value of these assets using both an income approach and a market approach utilizing Level 3 unobservable inputs. As a result, the Company recognized a pre-tax impairment charge of $318 million ($242 million net of tax) in the Mobility & Materials segment recorded within “Restructuring and asset related charges - net” in the Consolidated Statements of Operations for the year ended December 31, 2020 with the charge impacting definite-lived intangible assets and property, plant, and equipment. See Note 14 for further discussion of goodwill impairment charges recorded during the third quarter of 2020 resulting from the above triggering events.
Additionally, the Company recorded a pre-tax asset impairment charge of $52 million ($39 million net of tax) in the third quarter of 2020 related to indefinite-lived intangible assets reflected in Corporate which were deemed no longer recoverable as a result of the Corporate Held for Sale Disposal Groups classification (refer to Note 4 for additional information). The charge was recorded within “Restructuring and asset related charges – net” in the Consolidated Statements of Operations for the year ended December 31, 2020.
In the second quarter of 2020, the Company recorded a pre-tax asset impairment charge of $21 million ($16 million net of tax) related to indefinite-lived intangible assets within the Mobility & Materials segment. This charge was recorded within “Restructuring and asset related charges - net” in the Consolidated Statements of Operations for the year ended December 31, 2020. See Note 14 for further discussion.
In the first quarter of 2020, expectations of proceeds related to certain potential divestitures related to businesses held 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 pre-tax impairment charge of $270 million ($206 million net of tax) recorded within “Restructuring and asset related charges - net” in the Consolidated Statements of Operations for the year ended December 31, 2020 with the charge impacting definite-lived intangible assets and property, plant, and equipment.
NOTE 7 - SUPPLEMENTARY INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sundry Income (Expense) - Net
|
|
|
|
In millions
|
2021
|
2020
|
2019
|
|
|
|
Non-operating pension and other post-employment benefit costs
|
$
|
52
|
|
$
|
30
|
|
$
|
72
|
|
|
|
|
Interest income
|
4
|
|
12
|
|
56
|
|
|
|
|
Net gain on divestiture and sales of other assets and investments 1, 2, 3
|
171
|
|
632
|
|
144
|
|
|
|
|
Foreign exchange (losses) gains, net
|
(53)
|
|
(39)
|
|
(104)
|
|
|
|
|
Miscellaneous income (expenses) - net 4, 5, 6
|
(11)
|
|
32
|
|
(24)
|
|
|
|
|
Sundry income (expense) - net
|
$
|
163
|
|
$
|
667
|
|
$
|
144
|
|
|
|
1.The year ended December 31, 2021 primarily reflects income of $140 million related to the gain on sale of the Solamet® business unit and $28 million related to the gain on sale of assets within the Electronics & Industrial segment.
2.The year ended December 31, 2020 includes a net benefit of $396 million related to the TCS/HSC Disposal, including the settlement of a supply agreement dispute, within Corporate. It also includes income of $197 million related to the gain on sale of the Compound Semiconductor Solutions business unit within the Electronics & Industrial segment and $30 million of income related to milestone achievement of a prior year sale of assets within the Electronics & Industrial segment. Refer to Note 4 for further information.
3.The year ended December 31, 2019 includes income of $92 million, related to a sale of assets within the Electronics & Industrial segment and as well as a gain of $28 million related to the sale of the Sustainable Solutions business unit within Corporate.
4.The year ended December 31, 2021 includes an impairment charge of approximately $15 million, recorded in the first quarter of 2021, related to an asset sale, whose book value was adjusted to fair value when it was classified as held for sale.
5.The year ended December 31, 2020 includes $17 million related to income from a tax indemnification.
6.The year ended December 31, 2019 includes a $48 million charge reflecting a reduction in gross proceeds from lower withholding taxes related to a prior year legal settlement and a $74 million charge related to tax indemnifications, primarily associated with an adjustment to a one-time transition tax liability required by the Tax Cuts and Jobs Act of 2017, which were recorded in accordance with the Amended and Restated DWDP Tax Matters Agreement. These charges were offset by various indemnification and lease income amounts. The year ended December 31, 2019 also includes $26 million related to licensing income within the Water & Protection segment.
Cash, Cash Equivalents and Restricted Cash
In connection with the cost sharing arrangement entered into as part of the MOU, the Company is contractually obligated to make deposits into an escrow account to address potential future PFAS costs. At December 31, 2021, the Company had restricted cash of $53 million included within non-current "Restricted cash and cash equivalents" in the Consolidated Balance Sheets, the majority of which is attributable to the cost sharing arrangement. Additional information regarding the MOU and the escrow account can be found in Note 16.
At December 31, 2020, the Company had approximately $6.2 billion in net proceeds from the N&B Notes Offering recorded within non-current “Restricted cash and cash equivalents” in the Consolidated Balance Sheets. 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 Consolidated Balance Sheets as of December 31, 2020. See Note 4 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 Consolidated Balance Sheets were $1.2 billion at December 31, 2021 and $1.1 billion at December 31, 2020. Accrued payroll, which is a component of "Accrued and other current liabilities" was $498 million at December 31, 2021. No other component of "Accrued and other current liabilities" was more than five percent of total current liabilities at December 31, 2021 and no component was more than five percent of total current liabilities at December 31, 2020.
NOTE 8 - INCOME TAXES
For periods between the DWDP Merger and the DWDP Distributions, DuPont's consolidated federal income tax group and consolidated tax return included the Dow and Corteva entities. Generally, the consolidated tax liability of the DuPont U.S. tax group for each year was apportioned among the members of the consolidated group in accordance with the terms of the Amended and Restated DWDP Tax Matters Agreement. DuPont, Corteva and Dow intend that to the extent Federal and/or State corporate income tax liabilities are reduced through the utilization of tax attributes of the other, settlement of any receivable and payable generated from the use of the other party’s sub-group attributes will be in accordance with the Amended and Restated DWDP Tax Matters Agreement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Geographic Allocation of Income (Loss) and Provision for (Benefit from) Income Taxes
|
2021
|
2020
|
2019
|
|
(In millions)
|
|
Income (loss) from continuing operations before income taxes
|
|
|
|
|
Domestic
|
$
|
(188)
|
|
$
|
(2,536)
|
|
$
|
(1,818)
|
|
|
Foreign
|
2,384
|
|
290
|
|
1,692
|
|
|
Income (loss) from continuing operations before income taxes
|
$
|
2,196
|
|
$
|
(2,246)
|
|
$
|
(126)
|
|
|
Current tax expense
|
|
|
|
|
Federal
|
$
|
149
|
|
$
|
116
|
|
$
|
22
|
|
|
State and local
|
26
|
|
9
|
|
7
|
|
|
Foreign
|
507
|
|
341
|
|
436
|
|
|
Total current tax expense
|
$
|
682
|
|
$
|
466
|
|
$
|
465
|
|
|
Deferred tax (benefit) expense
|
|
|
|
|
Federal
|
$
|
(131)
|
|
$
|
(229)
|
|
$
|
(499)
|
|
|
State and local
|
(84)
|
|
(51)
|
|
160
|
|
|
Foreign
|
(75)
|
|
(26)
|
|
(128)
|
|
|
Total deferred tax benefit
|
$
|
(290)
|
|
$
|
(306)
|
|
$
|
(467)
|
|
|
Provision for (benefit from) income taxes on continuing operations
|
392
|
|
160
|
|
(2)
|
|
|
Net income (loss) from continuing operations
|
$
|
1,804
|
|
$
|
(2,406)
|
|
$
|
(124)
|
|
Pre-tax income from continuing operations for the year ended December 31, 2021 includes non-deductible goodwill of $114 million in connection with the sale of the Clean Technologies business.
Pre-tax loss from continuing operations for the year ended December 31, 2020 includes non-deductible, non-cash goodwill impairment charges of $3,214 million impacting the businesses held in Corporate and the Mobility & Materials and Electronic & Industrials segments and a non-deductible goodwill allocation of $247 million in connection with the TCS/HSC Disposal. Of these amounts, $2,381 million related to the U.S and the remaining $1,080 million related to foreign operations. See Note 14 for additional information.
Pre-tax loss from continuing operations for the year ended December 31, 2019 includes a non-deductible $242 million non-cash goodwill impairment charge associated with Corporate, related to U.S. operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to U.S. Statutory Rate
|
2021
|
2020
|
2019
|
|
Statutory U.S. federal income tax rate
|
21.0
|
%
|
21.0
|
%
|
21.0
|
%
|
|
Equity earning effect
|
(0.4)
|
|
0.3
|
|
4.8
|
|
|
Foreign income taxed at rates other than the statutory U.S. federal income tax rate
|
(5.1)
|
|
2.1
|
|
15.0
|
|
|
U.S. tax effect of foreign earnings and dividends
|
3.4
|
|
(3.3)
|
|
(13.1)
|
|
|
Unrecognized tax benefits
|
0.4
|
|
(1.4)
|
|
(38.0)
|
|
|
Acquisitions, divestitures and ownership restructuring activities 1, 2
|
4.3
|
|
1.4
|
|
113.1
|
|
|
Exchange gains/losses 3
|
(1.5)
|
|
—
|
|
(13.9)
|
|
|
Impact of Enactment of U.S. Tax Reform 4
|
—
|
|
—
|
|
41.1
|
|
|
State and local income taxes
|
(1.9)
|
|
1.6
|
|
(119.6)
|
|
|
Change in valuation allowance
|
(0.2)
|
|
—
|
|
(25.9)
|
|
|
Goodwill impairments
|
—
|
|
(29.3)
|
|
(40.8)
|
|
|
Stock-based compensation
|
0.1
|
|
(0.4)
|
|
0.8
|
|
|
Other - net 5, 6
|
(2.2)
|
|
0.9
|
|
57.1
|
|
|
Effective tax rate
|
17.9
|
%
|
(7.1)
|
%
|
1.6
|
%
|
1.See Note 4 for additional information.
2. Includes a net tax expense of $25 million, and net tax benefits of $148 million and $102 million related to internal entity restructuring for the years ended December 31, 2021, 2020, and 2019, respectively.
3. Principally reflects the impact of foreign exchange gains and losses on net monetary assets for which no corresponding tax impact is realized.
4. Includes a net tax benefit of $65 million related to the Company’s change in estimate with respect to a one time transition tax for the taxable year ended December 31, 2018 for TDCC.
5. Includes a net tax benefit of $41 million in the year ended December 31, 2019 related to certain unrecognized tax benefits for positions taken on items from prior years.
6. Includes a tax benefit of $50 million, $13 million, and $17 million related to the foreign derived intangible income deduction for the years ended December 31, 2021, 2020, and 2019 respectively.
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Balances at December 31,
|
2021
|
2020
|
|
(In millions)
|
|
Deferred tax assets:
|
|
|
|
Tax loss and credit carryforwards 1
|
$
|
987
|
|
$
|
812
|
|
|
Lease Liability
|
110
|
|
97
|
|
|
Pension and postretirement benefit obligations
|
84
|
|
218
|
|
|
Unrealized exchange gains (losses), net
|
17
|
|
5
|
|
|
Other accruals and reserves
|
134
|
|
131
|
|
|
Other – net
|
218
|
|
156
|
|
|
Gross deferred tax assets
|
$
|
1,550
|
|
$
|
1,419
|
|
|
Valuation allowances 1
|
(779)
|
|
(677)
|
|
|
Total deferred tax assets
|
$
|
771
|
|
$
|
742
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
Inventory
|
5
|
|
(14)
|
|
|
Investments
|
(291)
|
|
(254)
|
|
|
Operating lease asset
|
(110)
|
|
(97)
|
|
|
Property
|
(400)
|
|
(426)
|
|
|
Intangibles
|
(1,806)
|
|
(1,814)
|
|
|
Total deferred tax liabilities
|
$
|
(2,602)
|
|
$
|
(2,605)
|
|
|
Total net deferred tax liability
|
$
|
(1,831)
|
|
$
|
(1,863)
|
|
1.Primarily related to recorded tax benefits and the non-realizability of tax loss and carryforwards from operations in the United States, Luxembourg and Asia Pacific.
Included in the 2021 and 2020 deferred tax asset and liability amounts above is $676 million and $778 million, respectively, of a net deferred tax liability related to the Company’s investment in DuPont Specialty Products USA, LLC, which is a partnership for U.S. federal income tax purposes. The Company and its subsidiaries own in aggregate 100% of DuPont Specialty Products USA, LLC and the assets and liabilities of DuPont Specialty Products USA, LLC are included in the Consolidated Financial Statements of the Company.
|
|
|
|
|
|
|
|
|
|
|
Operating Loss and Tax Credit Carryforwards
|
Deferred Tax Asset
|
|
(In millions)
|
2021
|
2020
|
|
Operating loss carryforwards
|
|
|
|
Expire within 5 years
|
$
|
96
|
|
$
|
12
|
|
|
Expire after 5 years or indefinite expiration
|
694
|
|
660
|
|
|
Total operating loss carryforwards
|
$
|
790
|
|
$
|
672
|
|
|
Tax credit carryforwards
|
|
|
|
Expire within 5 years
|
$
|
59
|
|
$
|
3
|
|
|
Expire after 5 years or indefinite expiration
|
138
|
|
137
|
|
|
Total tax credit carryforwards
|
$
|
197
|
|
$
|
140
|
|
|
Total Operating Loss and Tax Credit Carryforwards
|
$
|
987
|
|
$
|
812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gross Unrecognized Tax Benefits
|
2021
|
2020
|
2019
|
|
(In millions)
|
|
Total unrecognized tax benefits at January 1,
|
$
|
432
|
|
$
|
368
|
|
$
|
1,062
|
|
|
Decreases related to positions taken on items from prior years
|
(18)
|
|
(1)
|
|
(149)
|
|
|
Increases related to positions taken on items from prior years
|
5
|
|
5
|
|
53
|
|
|
Increases related to positions taken in the current year
|
11
|
|
39
|
|
57
|
|
|
Settlement of uncertain tax positions with tax authorities
|
(1)
|
|
(3)
|
|
—
|
|
|
Exchange (gain) loss
|
(14)
|
|
24
|
|
(3)
|
|
|
Spin-offs of Dow and Corteva
|
—
|
|
—
|
|
(652)
|
|
|
Divestiture of N&B
|
$
|
(64)
|
|
$
|
—
|
|
$
|
—
|
|
|
Total unrecognized tax benefits at December 31, 1
|
$
|
351
|
|
$
|
432
|
|
$
|
368
|
|
|
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate of continuing operations
|
$
|
303
|
|
$
|
314
|
|
$
|
260
|
|
|
Total amount of interest and penalties (benefit) recognized in "Provision for (benefit from) income taxes on continuing operations"
|
$
|
(4)
|
|
$
|
5
|
|
$
|
9
|
|
|
Total accrual for interest and penalties associated with unrecognized tax benefits
|
$
|
13
|
|
$
|
17
|
|
$
|
12
|
|
1.Total unrecognized tax benefits includes $46 million, $56 million, and $48 million of benefits related to discontinued operations at December 31, 2021, 2020 and 2019.
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.
Tax years that remain subject to examination for the Company’s major tax jurisdictions are shown below:
|
|
|
|
|
|
|
|
Tax Years Subject to Examination by Major Tax Jurisdiction at December 31, 2021
|
Earliest Open Year
|
|
Jurisdiction
|
|
Brazil
|
2017
|
|
Canada
|
2015
|
|
China
|
2011
|
|
Denmark
|
2015
|
|
Germany
|
2015
|
|
Japan
|
2013
|
|
The Netherlands
|
2017
|
|
Switzerland
|
2015
|
|
United States:
|
|
|
Federal income tax 1
|
2012
|
|
State and local income tax
|
2011
|
1. The U.S. Federal income tax jurisdiction is open back to 2012 with respect to EID pursuant to the DWDP Tax Matters Agreement.
Undistributed earnings of foreign subsidiaries and related companies that are deemed to be permanently invested amounted to $7,897 million at December 31, 2021. In addition to the U.S. federal tax imposed by The Act on all accumulated unrepatriated earnings through December 31, 2017, the Act introduced additional U.S. federal tax on foreign earnings, effective as of January 1, 2018. The undistributed foreign earnings at December 31, 2021 may still be subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply. It is not practicable to calculate the unrecognized deferred tax liability on undistributed foreign earnings due to the complexity of the hypothetical calculation.
Laird PM Acquisition
In connection with the integration of Laird PM, the Company completed certain internal restructurings that were determined to be tax free 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.
N&B Transaction
Certain internal distributions and reorganizations that occurred during 2021 and 2020 in preparation for the N&B Transaction and the external distribution in 2021 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. 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.
In-Scope M&M Divestiture Process
In anticipation of the intended divestiture of the In-Scope M&M Businesses, the Company completed various internal restructurings, some of which were determined to be taxable and some of which were determined to be tax-free for U.S. federal income tax purposes and local country tax purposes.
NOTE 9 - EARNINGS PER SHARE CALCULATIONS
The following tables provide earnings per share calculations for the years ended December 31, 2021, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income for Earnings Per Share Calculations - Basic & Diluted
In millions
|
2021
|
2020
|
2019
|
|
Income (loss) from continuing operations, net of tax
|
$
|
1,804
|
|
$
|
(2,406)
|
|
$
|
(124)
|
|
|
Net income from continuing operations attributable to noncontrolling interests
|
48
|
|
28
|
|
29
|
|
|
Net income from continuing operations attributable to participating
securities 1
|
—
|
|
—
|
|
1
|
|
|
Income (loss) from continuing operations attributable to common stockholders
|
$
|
1,756
|
|
$
|
(2,434)
|
|
$
|
(154)
|
|
|
Income (loss) from discontinued operations, net of tax
|
4,711
|
|
(517)
|
|
724
|
|
|
Net income from discontinued operations attributable to noncontrolling interests
|
—
|
|
—
|
|
73
|
|
|
Income (loss) from discontinued operations attributable to common stockholders
|
4,711
|
|
(517)
|
|
651
|
|
|
Net income (loss) available to common stockholders
|
$
|
6,467
|
|
$
|
(2,951)
|
|
$
|
497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Calculations - Basic
Dollars per share
|
2021
|
2020
|
2019
|
|
Earnings (loss) from continuing operations attributable to common stockholders
|
$
|
3.24
|
|
$
|
(3.31)
|
|
$
|
(0.21)
|
|
|
Earnings (loss) from discontinued operations, net of tax
|
8.68
|
|
(0.70)
|
|
0.87
|
|
|
Earnings (loss) available to common stockholders 2
|
$
|
11.92
|
|
$
|
(4.01)
|
|
$
|
0.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Calculations - Diluted
Dollars per share
|
2021
|
2020
|
2019
|
|
Earnings (loss) from continuing operations attributable to common stockholders
|
$
|
3.23
|
|
$
|
(3.31)
|
|
$
|
(0.21)
|
|
|
Earnings (loss) from discontinued operations, net of tax
|
8.66
|
|
(0.70)
|
|
0.87
|
|
|
Earnings (loss) available to common stockholders 2
|
$
|
11.89
|
|
$
|
(4.01)
|
|
$
|
0.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Count Information
Shares in Millions
|
2021
|
2020
|
2019
|
|
Weighted-average common shares - basic
|
542.7
|
|
735.5
|
|
746.3
|
|
|
Plus dilutive effect of equity compensation plans
|
1.5
|
|
—
|
|
—
|
|
|
Weighted-average common shares - diluted
|
544.2
|
|
735.5
|
|
746.3
|
|
|
Stock options, restricted stock units, and performance-based restricted stock units excluded from EPS calculations 3
|
2.8
|
|
5.7
|
|
3.3
|
|
1. TDCC restricted stock units are considered participating securities due to TDCC's practice of paying dividend equivalents on unvested shares.
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.
3. These outstanding options to purchase shares of common stock, restricted stock units and performance based restricted stock units were excluded from the calculation of diluted earnings per share because the effect of including them would have been antidilutive.
NOTE 10 - ACCOUNTS AND NOTES RECEIVABLE - NET
|
|
|
|
|
|
|
|
|
|
|
In millions
|
December 31, 2021
|
December 31, 2020
|
|
Accounts receivable – trade 1
|
$
|
2,062
|
|
$
|
1,850
|
|
|
Notes receivable – trade
|
63
|
|
61
|
|
|
Other 2
|
586
|
|
510
|
|
|
Total accounts and notes receivable - net
|
$
|
2,711
|
|
$
|
2,421
|
|
1.Accounts receivable – trade is net of allowances of $32 million at December 31, 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, indemnification assets, and general sales tax and other taxes. No individual group represents more than ten percent of total receivables.
Accounts and notes receivable are carried at amounts that approximate fair value.
NOTE 11 - INVENTORIES
|
|
|
|
|
|
|
|
|
|
|
In millions
|
December 31, 2021
|
December 31, 2020
|
|
Finished goods 1
|
$
|
1,706
|
|
$
|
1,447
|
|
|
Work in process 1
|
533
|
|
454
|
|
|
Raw materials 1
|
466
|
|
368
|
|
|
Supplies
|
157
|
|
124
|
|
|
Total inventories
|
$
|
2,862
|
|
$
|
2,393
|
|
1.The prior year amounts have been recast for a reclassification between inventory captions, consistent with current year presentation.
NOTE 12 - PROPERTY, PLANT, AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Lives (Years)
|
December 31, 2021
|
December 31, 2020
|
|
In millions
|
|
Land and land improvements
|
1
|
-
|
25
|
$
|
608
|
|
$
|
682
|
|
|
Buildings
|
1
|
-
|
50
|
2,199
|
|
2,031
|
|
|
Machinery, equipment, and other
|
1
|
-
|
25
|
7,757
|
|
7,182
|
|
|
Construction in progress
|
|
|
|
1,137
|
|
1,228
|
|
|
Total property, plant and equipment
|
|
|
|
$
|
11,701
|
|
$
|
11,123
|
|
|
Total accumulated depreciation
|
|
|
|
$
|
4,735
|
|
$
|
4,256
|
|
|
Total property, plant and equipment - net
|
|
|
|
$
|
6,966
|
|
$
|
6,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2021
|
2020
|
2019
|
|
Depreciation expense
|
$
|
670
|
|
$
|
677
|
|
$
|
701
|
|
NOTE 13 - NONCONSOLIDATED AFFILIATES
The Company's investments in companies accounted for using the equity method ("nonconsolidated affiliates") are recorded in "Investments and other noncurrent receivables" in the Consolidated Balance Sheets.
The Company's net investment in and dividends received from nonconsolidated affiliates are shown in the following tables:
|
|
|
|
|
|
|
|
|
|
|
Investments in Nonconsolidated Affiliates at December 31,
|
2021
|
2020
|
|
In millions
|
|
Investments and other noncurrent receivables
|
$
|
879
|
|
$
|
889
|
|
|
Accrued and other current liabilities
|
(67)
|
|
(71)
|
|
|
Net investment in nonconsolidated affiliates
|
$
|
812
|
|
$
|
818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends Received from Nonconsolidated Affiliates
|
2021
|
2020
|
2019
|
|
In millions
|
|
Dividends from nonconsolidated affiliates
|
$
|
103
|
|
$
|
95
|
|
$
|
189
|
|
The Company had an ownership interest in 14 nonconsolidated affiliates, with ownership interest (direct and indirect) ranging from 49 percent to 50 percent at December 31, 2021.
Sales to nonconsolidated affiliates represented less than 2 percent of total net sales for the year ended December 31, 2021 and less than 3 percent and approximately 4 percent of total net sales for the years ended December 31, 2020 and 2019, respectively. Sales to nonconsolidated affiliates in 2020 and 2019 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 approximately 3 percent of “Cost of sales” for the year ended December 31, 2021 and less than 3 percent and approximately 2 percent for the years ended December 31, 2020 and 2019, respectively.
HSC Group
In the third quarter of 2020, the Company sold its equity interest in the HSC group. See Note 4 for further discussion. The Company's equity earnings from the HSC Group is shown in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Earnings in the HSC Group
|
2020
|
2019
|
|
In millions
|
|
Equity in earnings
|
$
|
108
|
|
$
|
29
|
|
NOTE 14 - GOODWILL AND OTHER INTANGIBLE ASSETS
The following table summarizes changes in the carrying amount of goodwill for the years ended December 31, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronics & Industrial
|
Water & Protection
|
Mobility & Materials
|
Corporate
|
Total
|
|
In millions
|
|
Balance at December 31, 2019
|
$
|
9,403
|
|
$
|
6,711
|
|
$
|
4,795
|
|
$
|
1,230
|
|
$
|
22,139
|
|
|
Acquisitions
|
—
|
|
53
|
|
—
|
|
—
|
|
53
|
|
|
Divestitures 1
|
(199)
|
|
—
|
|
—
|
|
(514)
|
|
(713)
|
|
|
Impairments 2
|
(834)
|
|
—
|
|
(1,664)
|
|
(716)
|
|
(3,214)
|
|
|
Currency Translation Adjustment
|
88
|
|
195
|
|
144
|
|
—
|
|
427
|
|
|
Measurement Period Adjustment
|
—
|
|
10
|
|
—
|
|
—
|
|
10
|
|
|
Balance at December 31, 2020
|
$
|
8,458
|
|
$
|
6,969
|
|
$
|
3,275
|
|
$
|
—
|
|
$
|
18,702
|
|
|
Acquisitions 3
|
1,213
|
|
—
|
|
—
|
|
—
|
|
1,213
|
|
|
Currency Translation Adjustment
|
(88)
|
|
(168)
|
|
(89)
|
|
—
|
|
(345)
|
|
|
Other
|
—
|
|
—
|
|
8
|
|
—
|
|
8
|
|
|
Balance at December 31, 2021
|
$
|
9,583
|
|
$
|
6,801
|
|
$
|
3,194
|
|
$
|
—
|
|
$
|
19,578
|
|
1.Includes $267 million of goodwill related to Corporate reclassified as held for sale in connection with the Corporate Held for Sale Disposal Groups. Refer to Note 4 for further information.
2.The $834 million impairment related to Electronics & Industrial and $1,664 million impairment related to Mobility & Materials were allocated to align with the new segment structure. The $716 million impairment related to Corporate relates to businesses divested in 2020 and 2021 or to be divested in 2022.
3.On July 1, 2021, DuPont completed the acquisition of Laird PM, which is included in the Electronics & Industrial segment. Final determination of the goodwill value assigned may result in adjustments to the preliminary value recorded. See Note 3 for additional information.
The Company tests goodwill for impairment annually during the fourth quarter, or more frequently when events or changes in circumstances indicate that the 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 any declines in financial projections, including changes to key assumptions, could have a material, negative impact on the fair value of the Company’s reporting units and assets, and therefore could result in an impairment.
In the fourth quarter of 2021, the Company performed qualitative testing on all six of its reporting units that have goodwill and determined that it is not more likely than not that the fair values of the reporting units were less than their carrying values. The qualitative evaluation is an assessment of factors, including reporting unit or asset specific operating results and cost factors, as well as industry, market and macroeconomic conditions, to determine whether it is more likely than not (more than 50%) that the fair value of a reporting unit or asset is less than the respective carrying amount, including goodwill.
During the first quarter of 2021, the 2021 Segment Realignment served as a triggering event requiring the Company to perform an impairment analysis related to goodwill carried by certain 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 reporting units impacted. Goodwill impairment analyses were then performed for reporting units impacted in the Electronics and Industrial and Mobility and Materials segments, and no impairments were identified. The fair value of each reporting unit tested was estimated using a combination of a discounted cash flow model and market approach. The Company’s assumptions in estimating fair value include, but are not limited to, projected revenue, gross margins, EBITDA margins, the weighted average costs of capital, the terminal growth rates, and derived multiples from comparable market transactions
In the third quarter of 2020, the TCS/HSC Disposal within Corporate, as well as further softening conditions in aerospace markets, served as triggering events requiring the Company to perform recoverability assessments related to asset groups within its PVAM business unit. These assessments resulted in the Company recording asset impairment charges related to certain long-lived assets whose carrying values were deemed not recoverable (refer to Note 6 for additional information). The Company then performed a series of impairment analyses related to goodwill associated with the PVAM business unit. The goodwill impairment analyses included an assessment of the preceding PVAM reporting unit as well as assessments of re-defined reporting units within the PVAM business unit resulting from the TCS/HSC Disposal along with recent progress in the sales processes for other business units aligned to Corporate, including reallocation of goodwill on a relative fair value basis. As a result of these analyses, the Company determined that the fair value of certain reporting units was below carrying value resulting in impairment charges of goodwill. In connection with the foregoing and as a result of the Corporate Held For Sale Disposal Groups classification (see Note 4 for additional information), the Company recorded aggregate, pre-tax, non-cash impairment charges of $183 million in the third quarter of 2020 impacting Corporate and reflected in "Goodwill impairment charges" in the Consolidated Statements of Operations. As a result of the above impairment charges and previous impairment
charges recorded impacting Corporate as discussed below, the carrying value of the reporting units within business units aligned to Corporate are indicative of fair value. As a result, future changes in fair value could impact the carrying value of these business units which have been and continue to be at risk for impairment charges in future periods.
The Company’s analyses above used a combination of the discounted cash flow models (a form of the income approach) utilizing Level 3 unobservable inputs and the market approach. The Company’s significant assumptions in these analyses include, but are not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate, and the tax rate. The Company’s estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategies. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the Company’s estimates. If the Company’s ongoing estimates of future cash flows are not met, the Company may have to record additional impairment charges in future periods. The Company also uses the Guideline Public Company Method, a form of the market approach (utilizing Level 3 unobservable inputs), which is derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services. When applicable, third party purchase offers may be utilized to measure fair value. The Company applies a weighting to the market approach and income approach to determine the fair value. As such, the Company believes the current assumptions and estimates utilized are both reasonable and appropriate.
In the second quarter of 2020, continued near-term demand weakness in global automotive production resulting from the COVID-19 pandemic, along with revised views of recovery based on third party market information, served as a triggering event requiring the Company to perform an impairment analysis of the goodwill associated with its Mobility & Materials and Industrial Solutions reporting units as of June 30, 2020. The carrying value of the Mobility & Materials and Industrial Solutions reporting units is comprised substantially of EID’s assets and liabilities which were measured at fair value in connection with the DWDP Merger, and thus inherently considered at risk for impairment. The Company performed quantitative testing on its Mobility & Materials and Industrial Solutions reporting units as of June 30, 2020, using a combination of the discounted cash flow model (a form of the income approach) utilizing Level 3 unobservable inputs and the Guideline Public Company Method (a form of the market approach). Based on the analysis performed, during the second quarter of 2020, the Company concluded that the carrying amount of the reporting units exceeded the fair value resulting in a pre-tax, non-cash goodwill impairment charge of $2,498 million, reflected in "Goodwill impairment charges" in the Consolidated Statements of Operations for the year ended December 31, 2020.
The Company's goodwill analysis referenced above used the discounted cash flow model (a form of the income approach) utilizing Level 3 unobservable inputs. The Company’s significant assumptions in this analysis included, but were not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate, and the tax rate. The Company’s estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategies. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the Company’s estimates. If the Company’s ongoing estimates of future cash flows are not met, the Company may have to record additional impairment charges in future periods.
The Company also used the Guideline Public Company Method (a form of the market approach). The significant assumptions used in this analysis include, but are not limited to, the derived multiples from comparable market transactions and other market data. The selection of comparable businesses is based on the markets in which the reporting unit operates giving consideration to risk profiles, size, geography, and diversity of products and services.
The Company probability-weighted scenarios for both the income and market approaches and also applied an overall probability-weighting to the income and market approaches to determine the concluded fair value of the reporting unit given the uncertainty in the current economic environment to determine the concluded fair value of the reporting unit. The Company believes the current assumptions and estimates utilized in the income and market approaches are both reasonable and appropriate.
In the first quarter of 2020, expectations of proceeds related to certain potential divestitures related to the businesses held in Corporate gave rise to fair value indicators and, thus, served as triggering events requiring the Company to perform impairment analyses related to goodwill as of March 31, 2020. As part of the analysis, the Company determined that the fair value of its PVAM reporting unit was below its carrying value resulting in an impairment charge to goodwill. Valuations of the PVAM reporting unit under a combination of the market approach and income approach reflected softening conditions in photovoltaics markets as compared to prior estimates. In connection with this analysis, the Company recorded a pre-tax, non-cash goodwill
impairment charge of $533 million in the first quarter of 2020 impacting Corporate. This charge is reflected in "Goodwill impairment charges" in the Consolidated Statements of Operations for the year ended December 31, 2020.
The Company's analysis used the discounted cash flow model (a form of the income approach) utilizing Level 3 unobservable inputs. The Company’s significant assumptions in this analysis include, but are not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate, and the tax rate. The Company’s estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategies. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the Company’s estimates. If the Company’s ongoing estimates of future cash flows are not met, the Company may have to record additional impairment charges in future periods. As referenced, the Company also uses a form of the market approach. As such, the Company believes the current assumptions and estimates utilized are both reasonable and appropriate.
In preparation for the Corteva Distribution, EID completed the separation of the assets and liabilities related to its specialty products businesses into separate legal entities (the “SP Legal Entities”) and on May 1, 2019, EID completed the Internal SP Distribution. The Internal SP Distribution served as a triggering event requiring the Company to perform an impairment analysis related to goodwill carried by its EID existing reporting units as of May 1, 2019. Subsequent to the Corteva Distribution, on June 1, 2019, the Company realigned certain businesses resulting in changes to its management and reporting structure. As part of the Second Quarter Segment Realignment, the Company assessed and re-defined certain reporting units effective June 1, 2019, including reallocation of goodwill on a relative fair value basis as applicable to new reporting units identified. Goodwill impairment analyses were then performed for reporting units impacted by the Second Quarter Segment Realignment.
In the second quarter of 2019, in connection with the analysis described above, the Company recorded pre-tax, non-cash goodwill impairment charges of $242 million impacting Corporate which are reflected in "Goodwill impairment charges" in the Consolidated Statements of Operations for the year ended December 31, 2019.
Other Intangible Assets
The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 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 1
|
$
|
3,074
|
|
$
|
(1,346)
|
|
$
|
1,728
|
|
$
|
2,752
|
|
$
|
(1,128)
|
|
$
|
1,624
|
|
|
Trademarks/tradenames
|
1,125
|
|
(500)
|
|
625
|
|
1,095
|
|
(440)
|
|
655
|
|
|
Customer-related
|
7,748
|
|
(2,736)
|
|
5,012
|
|
7,075
|
|
(2,361)
|
|
4,714
|
|
|
Other
|
131
|
|
(83)
|
|
48
|
|
131
|
|
(81)
|
|
50
|
|
|
Total other intangible assets with finite lives
|
$
|
12,078
|
|
$
|
(4,665)
|
|
$
|
7,413
|
|
$
|
11,053
|
|
$
|
(4,010)
|
|
$
|
7,043
|
|
|
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
Trademarks/tradenames
|
1,029
|
|
—
|
|
1,029
|
|
1,029
|
|
—
|
|
1,029
|
|
|
Total other intangible assets with indefinite lives
|
$
|
1,029
|
|
$
|
—
|
|
$
|
1,029
|
|
$
|
1,029
|
|
$
|
—
|
|
$
|
1,029
|
|
|
Total
|
$
|
13,107
|
|
$
|
(4,665)
|
|
$
|
8,442
|
|
$
|
12,082
|
|
$
|
(4,010)
|
|
$
|
8,072
|
|
1.The prior year amounts have been adjusted to reflect current year presentation.
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 third quarter of 2020, the Company recorded a pre-tax asset impairment charge of $52 million ($39 million net of tax) related to indefinite-lived intangible assets within Corporate which were deemed no longer recoverable as a result of an impairment test performed related to the Corporate Held For Sale Disposal Groups classification (see Note 4 for additional
information). The charge was recorded within “Restructuring and asset related charges – net” in the Consolidated Statements of Operations for the year ended December 31, 2020.
In the first quarter and third quarter of 2020, the Company recorded non-cash impairment charges related to definite-lived intangible assets impacting Corporate reflected within “Restructuring and asset related charges - net” in the Consolidated Statements of Operations for the year ended December 31, 2020. See Note 6 for further discussion.
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 related to the factors described above. The Company performed an analysis of the fair value using the relief from royalty method (a form of the income approach) using Level 3 inputs within the fair value hierarchy. The key assumptions used in the calculation included projected revenue, royalty rates and discount rates. These key assumptions involve management judgment and estimates relating to future operating performance and economic conditions that may differ from actual cash flows. As a result of the testing, the Company recorded a pre-tax, non-cash indefinite-lived intangible asset impairment charge of $21 million ($16 million net of tax), which is reflected in "Restructuring and asset related charges - net," in the Consolidated Statements of Operations for the year ended December 31, 2020. The remaining net book value of the tradenames attributable to the Mobility & Materials segment at December 31, 2020 was approximately $289 million, which represents fair value.
The following table provides the net carrying value of other intangible assets by segment:
|
|
|
|
|
|
|
|
|
|
|
Net Intangibles by Segment
|
December 31, 2021
|
December 31, 2020
|
|
In millions
|
|
Electronics & Industrial
|
$
|
3,429
|
|
$
|
2,611
|
|
|
Water & Protection
|
2,686
|
|
2,920
|
|
|
Mobility & Materials
|
2,327
|
|
2,541
|
|
|
Total
|
$
|
8,442
|
|
$
|
8,072
|
|
Total estimated amortization expense for the next five fiscal years is as follows:
|
|
|
|
|
|
|
|
Estimated Amortization Expense
|
|
|
In millions
|
|
|
2022
|
$
|
763
|
|
|
2023
|
$
|
734
|
|
|
2024
|
$
|
708
|
|
|
2025
|
$
|
663
|
|
|
2026
|
$
|
637
|
|
NOTE 15 - SHORT-TERM BORROWINGS, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES
The following tables summarize the Company's short-term borrowings and finance lease obligations and long-term debt:
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings and finance lease obligations
|
December 31, 2021
|
December 31, 2020
|
|
In millions
|
|
Commercial paper 1
|
$
|
150
|
|
$
|
—
|
|
|
Long-term debt due within one year
|
—
|
|
1
|
|
|
Total short-term borrowings and finance lease obligations
|
$
|
150
|
|
$
|
1
|
|
1.The weighted-average interest rate on commercial paper at December 31, 2021 was 0.34 percent.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt
|
December 31, 2021
|
December 31, 2020
|
|
In millions
|
Amount
|
Weighted Average Rate
|
Amount
|
Weighted Average Rate
|
|
Promissory notes and debentures 1:
|
|
|
|
|
|
Final maturity 2023 2
|
$
|
2,800
|
|
3.89
|
%
|
$
|
4,800
|
|
3.18
|
%
|
|
Final maturity 2025
|
1,850
|
|
4.49
|
%
|
1,850
|
|
4.49
|
%
|
|
Final maturity 2027 and thereafter
|
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
|
70
|
|
|
90
|
|
|
|
Less: Long-term debt due within one year 3
|
—
|
|
|
1
|
|
|
|
Total
|
$
|
10,632
|
|
|
$
|
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.
3. The year ended December 31, 2020 includes finance lease obligations of $1 million due within one year.
Principal payments of long-term debt for the five succeeding fiscal years is as follows:
|
|
|
|
|
|
|
|
Maturities of Long-Term Debt for Next Five Years at December 31, 2021
|
Total
|
|
In millions
|
|
2022
|
$
|
1
|
|
|
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 22. 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 $12,595 million and $18,336 million at December 31, 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 December 31, 2021
|
|
|
|
In millions
|
Effective Date
|
Committed Credit
|
Credit Available
|
Maturity Date
|
Interest
|
|
Revolving Credit Facility, Five-year
|
May 2019
|
$
|
3,000
|
|
$
|
2,977
|
|
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
|
|
$
|
3,977
|
|
|
|
Intended Rogers Acquisition
On November 22, 2021, the Company entered into a two-year senior unsecured committed term loan agreement in the amount of $5.2 billion (the "2021 Term Loan Facility"). The 2021 Term Loan Facility is intended to fund the Intended Rogers Acquisition. The debt covenants and default provisions in the 2021 Term Loan Facility are consistent with those of the Five-Year Revolver and the $1 billion Revolving Credit Facility.
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 funded in part by the N&B Notes Offering, which was completed on September 16, 2020. See Note 4 for more information.
May 2020 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 2020 Debt Offering”). The consummation of the N&B Transaction triggered the special mandatory redemption feature of the May 2020 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 and Revolving Credit Facilities
In May 2019, the Company fully drew the two term loan facilities it entered into in the fourth quarter of 2018 (the “Term Loan Facilities”) in the aggregate principal amount of $3 billion. In May 2019, the Company amended its $3 billion five-year revolving credit facility (the “Five-Year Revolver”) entered into in the fourth quarter of 2018 to become effective and available as of the amendment.
On February 1, 2021, the Company terminated its fully drawn $3 billion Term Loan Facilities. The termination triggered the repayment of the aggregate outstanding principal amount of $3 billion, plus accrued and unpaid interest through and including January 31, 2021. The Company funded the repayment with proceeds from the Special Cash Payment.
On April 15, 2021, the Company entered into an updated $1 billion 364-day revolving credit facility (the “2021 $1B Revolving Credit Facility") as the 1.0 billion 364-day revolving credit facility entered in April 2020 (the “2020 $1B Revolving Credit Facility") expired mid-April 2021. As of the effectiveness of the 2021 $1B Revolving Credit Facility, the 2020 $1B Revolving Credit Facility was terminated.
Uncommitted Credit Facilities and Outstanding Letters of Credit
Unused bank credit lines on uncommitted credit facilities were approximately $786 million at December 31, 2021. These lines are available to support short-term liquidity needs and general corporate purposes including letters of credit. Outstanding letters of credit were approximately $158 million at December 31, 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 2021 Term Loan Facility, 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 December 31, 2021, the Company was in compliance with this financial covenant. There were no material changes to the debt covenants and default provisions at December 31, 2021.
NOTE 16 - 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 December 31, 2021, the Company has recorded indemnification assets of $47 million within "Accounts and notes receivable - net" and $234 million within "Deferred charges and other assets" and indemnified liabilities of $153 million within "Accrued and other current liabilities" and $192 million within "Other noncurrent obligations" within the Consolidated Balance Sheets. At December 31, 2020, the Company has recorded indemnified assets of $90 million within "Accounts and notes receivable - net" and $124 million within "Deferred charges and other assets" and indemnified liabilities of $157 million within "Accrued and other current liabilities" and $132 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 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. PFAS refers to per- or polyfluoroalkyl substances, which include perfluorooctanoic acids and its ammonium salts (“PFOA”).
The parties have agreed that, during the term of this sharing arrangement, Qualified Spend up to $4 billion 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 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 beginning and including 2022. 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. As of September 30, 2021, the initial escrow deposit was completed by all parties in accordance with the MOU. At December 31, 2021, DuPont's $50 million deposit and the accrued interest in the escrow account are reflected in "Restricted cash and cash equivalents" on the Condensed Consolidated Balance Sheet.
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
|
December 31, 2021
|
December 31, 2020
|
Balance Sheet Classification
|
|
Current indemnified liabilities
|
$
|
37
|
|
$
|
12
|
|
Accrued and other current liabilities
|
|
Long-term indemnified liabilities
|
$
|
89
|
|
$
|
46
|
|
Other noncurrent obligations
|
|
Total indemnified liabilities accrued under the MOU 1, 2
|
$
|
126
|
|
$
|
58
|
|
|
|
|
|
|
|
1.As of December 31, 2021, total indemnified liabilities accrued include $112 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 (the "NC DEQ").
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 December 31, 2021, the Company retains 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 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. E. I. du Pont de Nemours and Company, 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 a personal injury action that is not included in the Settlement of the Ohio MDL. DuPont was not a named party in the Leach case or the Ohio MDL and is not a named party in the Abbott case.
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, 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 Company paid its portion of the settlement in January 2022. 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.
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.
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”). Those actions largely seek remediation of the alleged PFAS contamination in and around military bases and airports as well as medical monitoring of affected residents. As of December 31, 2021, the SC MDL includes approximately 1,860 personal injury cases which 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. Many of these cases also name DuPont as a defendant due to claims that the 2015 Separation of Chemours constituted a fraudulent conveyance. Three bellwether cases have been selected by the court, all of which are water district contamination cases. DuPont is seeking the dismissal of DowDuPont and DuPont from these actions. The Company has never made or sold AFFF, perfluorooctanesulfonic acid ("PFOS") or PFOS containing products.
In addition the Company is a named party in various other legal matters that make claims related to PFAS, for which the costs of litigation and future liabilities, if any, are eligible PFAS costs under the MOU and Indemnification Losses under the Agreements. These matters include various lawsuits filed by local water districts and private water companies in New Jersey and California generally alleging contamination of water systems.
There are various other legal matters against Chemours and EID in which the Company is not a named party that make claims related to PFAS. The costs of litigation and future liabilities, if any, related to these matters are eligible PFAS costs under the MOU and Indemnification Losses under the Agreements. These matters include various lawsuits filed by local water districts, private water companies, and individuals in New York, New Jersey, Ohio, North Carolina, Georgia, Alabama and California generally alleging contamination of water systems.
While Management believes it has appropriately estimated the liability associated with eligible PFAS costs 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 December 31, 2021, the Company has liabilities of $20 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 December 31, 2021, the Company had accrued obligations of $205 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
|
December 31, 2021
|
December 31, 2020
|
Potential exposure above the amount accrued 1
|
|
Environmental remediation liabilities not subject to indemnity
|
$
|
43
|
|
$
|
36
|
|
$
|
100
|
|
|
|
|
|
|
|
Environmental remediation indemnified liabilities:
|
|
|
|
|
Indemnifications related to Dow and Corteva 2
|
46
|
|
44
|
|
66
|
|
|
MOU related obligations (discussed above) 3
|
116
|
|
56
|
|
64
|
|
|
Total environmental related liabilities
|
$
|
205
|
|
$
|
136
|
|
$
|
230
|
|
1.The environmental accrual as of December 31, 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. In November 2021, Chemours received additional notices from the NC DEQ related to potential PFAS contamination of groundwater. The Company is unable to reasonably estimate the potential impact on its indemnification liability due to the inherent uncertainties given the early stage of the process.
Guarantees
Obligations for Equity Affiliates
The Company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates. At December 31, 2021 and December 31, 2020, the Company had directly guaranteed $170 million and $167 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. At December 31, 2021, no collateral was held by the Company. The following table provides a summary of the final expiration year and maximum future payments:
|
|
|
|
|
|
|
|
|
|
|
Guarantees at December 31, 2021
|
Final Expiration Year
|
Maximum Future Payments
|
|
In millions
|
|
Obligations for non-consolidated affiliates 1:
|
|
|
|
Bank borrowings
|
2022
|
170
|
|
|
Total guarantees
|
|
$
|
170
|
|
1. Existing guarantees for non-consolidated affiliates' liquidity needs in normal operations.
NOTE 17 - LEASES
The Company has operating leases for real estate, an airplane, railcars, fleet, certain machinery and equipment, and information technology assets. The Company’s leases have remaining lease terms of approximately 1 year to 35 years. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend the lease when it is reasonably certain that the Company will exercise that option. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the initial ROU asset or lease liability.
Certain of the Company's leases include residual value guarantees. These residual value guarantees are based on a percentage of the lessor's asset acquisition price and the amount of such guarantee declines over the course of the lease term. The portion of residual value guarantees that are probable of payment is included in the related lease liability in the Consolidated Balance Sheet. At December 31, 2021, the Company has future maximum payments for residual value guarantees in operating leases of $17 million with final expirations through 2026. The Company's lease agreements do not contain any material restrictive covenants.
The components of lease cost for operating leases for the years ended December 31, 2021, 2020, and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2021
|
2020
|
2019
|
|
Operating lease cost
|
$
|
116
|
|
$
|
147
|
|
$
|
139
|
|
|
Short-term lease cost
|
6
|
|
3
|
|
4
|
|
|
Variable lease cost
|
38
|
|
45
|
|
21
|
|
|
Less: Sublease income
|
48
|
|
22
|
|
22
|
|
|
Total lease cost
|
$
|
112
|
|
$
|
173
|
|
$
|
142
|
|
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
December 31, 2021
|
December 31, 2020
|
December 31, 2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash flows from operating leases
|
$
|
115
|
|
$
|
145
|
|
$
|
142
|
|
|
Gain on sale-leaseback transactions, net
|
$
|
—
|
|
$
|
—
|
|
$
|
17
|
|
New operating lease assets and liabilities entered into during the year ended December 31, 2021 and 2020 were $162 million and $125 million, respectively. Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
In millions
|
December 31, 2021
|
December 31, 2020
|
|
Operating Leases
|
|
|
|
Operating lease right-of-use assets 1
|
$
|
468
|
|
$
|
423
|
|
|
Current operating lease liabilities 2
|
101
|
|
117
|
|
|
Noncurrent operating lease liabilities 3
|
374
|
|
308
|
|
|
Total operating lease liabilities
|
$
|
475
|
|
$
|
425
|
|
1.Included in "Deferred charges and other assets" in the Consolidated Balance Sheet.
2.Included in "Accrued and other current liabilities" in the Consolidated Balance Sheet.
3.Included in "Other noncurrent obligations" in the Consolidated Balance Sheet.
Operating lease ROU 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
|
December 31, 2021
|
December 31, 2020
|
|
Weighted-average remaining lease term (years)
|
8.66
|
5.83
|
|
Weighted average discount rate
|
2.02
|
%
|
2.26
|
%
|
Maturities of lease liabilities were as follows:
|
|
|
|
|
|
|
|
Maturity of Lease Liabilities at December 31, 2021
|
Operating Leases
|
|
In millions
|
|
2022
|
$
|
110
|
|
|
2023
|
90
|
|
|
2024
|
74
|
|
|
2025
|
52
|
|
|
2026
|
37
|
|
|
2027 and thereafter
|
164
|
|
|
Total lease payments
|
$
|
527
|
|
|
Less: Interest
|
52
|
|
|
Present value of lease liabilities
|
$
|
475
|
|
The Company has leases in which it is the lessor, with the largest being a result of the N&B transaction. In connection with the N&B Transaction, DuPont entered into leasing arrangements 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 revenue and related expenses are not significant to the Company’s Consolidated Balance Sheet or Consolidated Statement of Operations. Lease agreements where the Company is the lessor have final expirations through 2036.
As disclosed above, total lease revenue was $48 million for which the net profits recognized from these leases were approximately $8 million, both recorded in "Selling, general, and administrative expenses" and "Research and development expenses" for the year-ended December 31, 2021. Contractual lease revenue for 2022 through 2026 are materially consistent with that of 2021.
NOTE 18 - STOCKHOLDERS' EQUITY
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. At the expiry of the 2019 Share Buyback Program, the Company had repurchased and retired a total of 29.9 million shares at a cost of $2 billion.
In the first quarter of 2021, the Company's Board of Directors authorized a $1.5 billion share buyback program, which expires on June 30, 2022 ("2021 Share Buyback Program"). As of December 31, 2021, the Company had repurchased and retired a total of 14.5 million shares for $1.1 billion under the 2021 Share Buyback Program.
In February 2022, the Company's Board of Directors authorized an additional $1.0 billion share buyback program which expires on March 31, 2023, (the “2022 Share Buyback Program”).
Common Stock
The following table provides a reconciliation of DuPont Common Stock activity for the years ended December 31, 2021, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
Shares of DuPont Common Stock
|
Issued
|
Held in Treasury
|
|
In thousands
|
|
Balance at January 1, 2019
|
784,143
|
|
27,818
|
|
|
Issued
|
2,656
|
|
—
|
|
|
Repurchased
|
—
|
|
20,416
|
|
|
Retired 1
|
(48,234)
|
|
(48,234)
|
|
|
Balance at December 31, 2019
|
738,565
|
|
—
|
|
|
Issued
|
1,719
|
|
—
|
|
|
Repurchased
|
—
|
|
6,080
|
|
|
Retired
|
(6,080)
|
|
(6,080)
|
|
|
Balance at December 31, 2020
|
734,204
|
|
—
|
|
|
Issued
|
2,584
|
|
—
|
|
|
Repurchased 2
|
—
|
|
224,995
|
|
|
Retired 2
|
(224,995)
|
|
(224,995)
|
|
|
Balance at December 31, 2021
|
511,793
|
|
—
|
|
1.Includes 37 million shares of common stock held in treasury that were retired in June 2019 which were returned to the status of authorized but unissued shares.
2.Includes 197 million shares of common stock that were exchanged and retired as part of the N&B Transaction.
Retained Earnings
There are no significant restrictions limiting the Company's ability to pay dividends. Dividends declared and paid to common stockholders during the years ended December 31, 2021, 2020, and 2019 are summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends Declared and Paid
|
2021
|
2020
|
2019
|
|
In millions
|
|
Dividends declared to common stockholders 1
|
$
|
630
|
|
$
|
882
|
|
$
|
1,611
|
|
|
Dividends paid to common stockholders 1
|
$
|
630
|
|
$
|
882
|
|
$
|
1,611
|
|
1.The 2019 dividends declared and paid include dividends declared and paid to DowDuPont common stockholders prior to the DWDP Distributions.
Undistributed earnings of nonconsolidated affiliates included in retained earnings were $912 million at December 31, 2021 and $950 million at December 31, 2020.
Accumulated Other Comprehensive Loss
The following table summarizes the activity related to each component of accumulated other comprehensive loss ("AOCL") for the years ended December 31, 2021, 2020, and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
Unrealized Gains (Losses) on Investments
|
Cumulative Translation Adj
|
Pension and OPEB
|
Derivative Instruments
|
Total
|
|
In millions
|
|
2019
|
|
|
|
|
|
|
Balance at January 1, 2019
|
$
|
(51)
|
|
$
|
(3,785)
|
|
$
|
(8,476)
|
|
$
|
(82)
|
|
$
|
(12,394)
|
|
|
Other comprehensive income (loss) before reclassifications
|
68
|
|
(446)
|
|
(206)
|
|
(43)
|
|
(627)
|
|
|
Amounts reclassified from accumulated other comprehensive income
|
(1)
|
|
(18)
|
|
141
|
|
(15)
|
|
107
|
|
|
Net other comprehensive income (loss)
|
$
|
67
|
|
(464)
|
|
(65)
|
|
(58)
|
|
$
|
(520)
|
|
|
Spin-offs of Dow and Corteva
|
$
|
(16)
|
|
3,179
|
|
8,196
|
|
139
|
|
$
|
11,498
|
|
|
Balance at December 31, 2019
|
$
|
—
|
|
$
|
(1,070)
|
|
$
|
(345)
|
|
$
|
(1)
|
|
$
|
(1,416)
|
|
|
2020
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications
|
—
|
|
1,540
|
|
(102)
|
|
—
|
|
1,438
|
|
|
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
—
|
|
22
|
|
—
|
|
22
|
|
|
Net other comprehensive income (loss)
|
$
|
—
|
|
$
|
1,540
|
|
$
|
(80)
|
|
$
|
—
|
|
$
|
1,460
|
|
|
Balance at December 31, 2020
|
$
|
—
|
|
$
|
470
|
|
$
|
(425)
|
|
$
|
(1)
|
|
$
|
44
|
|
|
2021
|
|
|
|
|
|
|
Other comprehensive (loss) income before reclassifications
|
—
|
|
(742)
|
|
422
|
|
56
|
|
(264)
|
|
|
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
—
|
|
3
|
|
—
|
|
3
|
|
|
Split-off of N&B reclassification adjustment
|
—
|
|
184
|
|
73
|
|
1
|
|
258
|
|
|
Net other comprehensive (loss) income
|
$
|
—
|
|
$
|
(558)
|
|
$
|
498
|
|
$
|
57
|
|
$
|
(3)
|
|
|
Balance at December 31, 2021
|
$
|
—
|
|
$
|
(88)
|
|
$
|
73
|
|
$
|
56
|
|
$
|
41
|
|
The tax effects on the net activity related to each component of other comprehensive income (loss) for the years ended December 31, 2021, 2020, and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Benefit (Expense)
|
2021
|
2020
|
2019
|
|
In millions
|
|
Unrealized gains (losses) on investments
|
$
|
—
|
|
$
|
—
|
|
$
|
(18)
|
|
|
Cumulative translation adjustments
|
—
|
|
—
|
|
(1)
|
|
|
Pension and other post-employment benefit plans
|
(122)
|
|
37
|
|
31
|
|
|
Derivative instruments
|
(18)
|
|
—
|
|
16
|
|
|
Tax expense from income taxes related to other comprehensive income (loss) items
|
$
|
(140)
|
|
$
|
37
|
|
$
|
28
|
|
A summary of the reclassifications out of AOCL for the years ended December 31, 2021, 2020, and 2019 is provided as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications Out of Accumulated Other Comprehensive Loss
|
2021
|
2020
|
2019
|
Income Classification
|
|
In millions
|
|
Unrealized gains on investments
|
$
|
—
|
|
$
|
—
|
|
$
|
(1)
|
|
See (1) below
|
|
|
|
|
|
|
|
Unrealized (gains) losses on investments, after tax
|
$
|
—
|
|
$
|
—
|
|
$
|
(1)
|
|
|
|
Cumulative translation adjustments
|
$
|
184
|
|
$
|
—
|
|
$
|
(18)
|
|
See (1) below
|
|
Pension and other post-employment benefit plans
|
$
|
111
|
|
$
|
19
|
|
$
|
174
|
|
See (1) below
|
|
Tax (benefit) expense
|
(35)
|
|
3
|
|
(33)
|
|
See (1) below
|
|
Pension and other post-employment benefit plans,
after tax
|
$
|
76
|
|
$
|
22
|
|
$
|
141
|
|
|
|
Derivative Instruments
|
$
|
1
|
|
$
|
—
|
|
$
|
(18)
|
|
See (1) below
|
|
Tax expense
|
—
|
|
—
|
|
3
|
|
See (1) below
|
|
Derivative Instruments, after tax
|
$
|
1
|
|
$
|
—
|
|
$
|
(15)
|
|
|
|
Total reclassifications for the period, after tax
|
$
|
261
|
|
$
|
22
|
|
$
|
107
|
|
|
1. The activity for the year ended December 31, 2021 is classified almost entirely within "Income (loss) from discontinued operations, net of tax" as part of the N&B Transaction, with a portion classified within and "Sundry income (expense) - net" as part of continuing operations. The activity for the years ended December 31, 2020 and 2019 is classified within the "Income (loss) from discontinued operations, net of tax", "Sundry income (expense) - net", "Net sales", "Cost of sales", and "Provision for income taxes on continuing operations" lines.
NOTE 19 - PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
In connection with the DWDP Distributions, the TDCC U.S. qualified defined benefit plan and the EID U.S. principal qualified defined benefit plan were separated from the Company to Dow and Corteva, respectively. The defined benefit pension plans that were related to TDCC that were not separated with Dow or Corteva were not merged with any EID plans. The Company retained a portion of pension liabilities relating to foreign benefit plans for both EID and TDCC. The Company retained select OPEB liabilities relating to foreign EID benefit plans but did not retain any TDCC OPEB plans. The Company also retained an immaterial portion of the non-qualified US pension liabilities and other post-employment benefit plans relating to EID US benefit plans. The significant defined benefit pension and OPEB plans of TDCC and EID are summarized below. Unless otherwise noted, all values within this footnote are inclusive of balances and activity associated with discontinued operations.
Defined Benefit Pension Plans
TDCC
TDCC had both funded and unfunded defined benefit pension plans that covered employees in the United States and a number of other countries. The U.S. qualified plan covering the parent company was the largest plan. Benefits for employees hired before January 1, 2008, were based on length of service and the employee’s three highest consecutive years of compensation. Employees hired after January 1, 2008, earned benefits based on a set percentage of annual pay, plus interest.
The Employee Matters Agreement with Dow provides that employees of Dow no longer participate in benefit plans sponsored or maintained by the Company, and that employees of the Company no longer participate in benefit plans sponsored or maintained by Dow, as of the effective time of the Dow Distribution. The U.S. qualified plan is no longer an obligation of the Company, the fundings, maintenance and ultimate payout of the plan is the sole responsibility of Dow. TDCC's funding policy was to contribute to the plans when pension laws and/or economics either require or encourage funding.
The Company has both funded and unfunded defined benefit pension plans that cover employees in a number of non-US countries.
EID
EID had both funded and unfunded noncontributory defined benefit pension plans covering a majority of the U.S. employees. The U.S. qualified plan was the largest pension plan held by EID. Most employees hired on or after January 1, 2007, were not eligible to participate in the U.S. defined benefit pension plans. The benefits under these plans were based primarily on years of service and employees' pay near retirement. EID froze the pay and service amounts used to calculate pension benefits for employees who participated in the U.S. pension plans as of November 30, 2018. Therefore, as of November 30, 2018, employees that participated in the U.S. pension plans no longer accrued additional benefits for future service and eligible compensation received.
The Employee Matters Agreement with Corteva provides that employees of Corteva no longer participate in benefit plans sponsored or maintained by the Company, and that employees of the Company no longer participate in benefit plans sponsored or maintained by Corteva, as of the effective time of the Corteva Distribution. The U.S. qualified plan is no longer an obligation of the Company; the fundings, maintenance and ultimate payout of the plan is the sole responsibility of Corteva Inc. The Company has both funded and unfunded defined benefit pension plans that cover executives in the United States and employees in a number of non-US countries.
EID's funding policy was consistent with the funding requirements of federal laws and regulations. Pension coverage for employees of EID's non-U.S. consolidated subsidiaries was provided, to the extent deemed appropriate, through separate plans. Obligations under such plans are funded by depositing funds with trustees, covered by insurance contracts, or remain unfunded. Total 2019 contributions also includes contributions to fund benefit payments for EID's pension plans where funding is not customary.
DuPont
DuPont has both funded and unfunded defined benefit pension plans covering employees in a number of non-US countries that formerly relate to both TDCC and EID. The United Kingdom qualified plan is the largest pension plan held by DuPont.
DuPont's funding policy is consistent with the funding requirements of each country's laws and regulations. Pension coverage for employees of DuPont's non-U.S. consolidated subsidiaries is provided, to the extent deemed appropriate, through separate plans. Obligations under such plans are funded by depositing funds with trustees, covered by insurance contracts, or remain unfunded. During 2021, the Company contributed $88 million to its benefit plans. DuPont expects to contribute approximately $90 million to its benefit plans in 2022.
The weighted-average assumptions used to determine pension plan obligations and net periodic benefit costs for all plans are summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average Assumptions for Pension Plans
|
Benefit Obligations
at December 31,
|
Net Periodic Costs
for the Years Ended
|
|
|
2021
|
2020
|
2021
|
2020
|
2019 1
|
|
Discount rate
|
1.32
|
%
|
0.84
|
%
|
0.87
|
%
|
1.21
|
%
|
3.80
|
%
|
|
Interest crediting rate for applicable benefits
|
1.25
|
%
|
1.25
|
%
|
1.25
|
%
|
1.25
|
%
|
3.72
|
%
|
|
Rate of compensation increase
|
3.15
|
%
|
3.09
|
%
|
3.15
|
%
|
3.11
|
%
|
3.42
|
%
|
|
Expected return on plan assets 2
|
N/A
|
N/A
|
2.73
|
%
|
2.98
|
%
|
6.46
|
%
|
1.Includes three months of Dow activity (January - March), five months of Corteva activity (January - May) and twelve months of DuPont activity, all based on dates of the DWDP Distributions.
2. The decrease in expected return on assets between 2020 and 2019 is due to de-risking of DuPont's two largest country plans within the United Kingdom and Switzerland. For the United Kingdom this process involved purchasing two buy-in insurance contracts for some current beneficiaries. For Switzerland this process involved changing the pension plan to a defined contribution plan (cash balance plan under US GAAP) at an insurance company for the current employees and adopting a low-risk fixed income strategy for the current beneficiaries of the plan.
Other Post-employment Benefit Plans
The Company retained U.S. and foreign other post-employment benefit obligations with the Canadian plan and the U.S. long-term disabilities plan being the two largest and accounting for the majority of the Company's total other post-employment benefit obligations. In comparison to the Company's defined benefit pension plans, the Company's other post-employment benefit plans are not significant. The total other post-employment benefits projected benefit obligation was $37 million as of December 31, 2021 and $40 million as of December 31, 2020.
Assumptions
The Company determines the expected long-term rate of return on plan assets by performing a detailed analysis of key economic and market factors driving historical returns for each asset class and formulating a projected return based on factors in the current environment. Factors considered include, but are not limited to, inflation, real economic growth, interest rate yield, interest rate spreads, and other valuation measures and market metrics.
Service cost and interest cost for all other plans are determined on the basis of the discount rates derived in determining those plan obligations. The discount rates utilized to measure the majority of pension and other postretirement obligations are based on the Aon AA corporate bond yield curves applicable to each country at the measurement date. DuPont utilizes the mortality tables and generational mortality improvement scales, where available, developed in each of the respective countries in which the Company holds plans.
Summarized information on the Company's pension and other postretirement benefit plans is as follows:
|
|
|
|
|
|
|
|
|
|
|
Change in Projected Benefit Obligations of All Plans
|
2021
|
2020
|
|
In millions
|
|
Change in projected benefit obligations:
|
|
|
|
Benefit obligations at beginning of year
|
$
|
5,335
|
|
$
|
4,806
|
|
|
Service cost
|
53
|
|
72
|
|
|
Interest cost
|
42
|
|
58
|
|
|
Plan participants' contributions
|
9
|
|
11
|
|
|
Actuarial changes in assumptions and experience
|
(411)
|
|
316
|
|
|
Benefits paid
|
(243)
|
|
(271)
|
|
|
Plan amendments
|
(8)
|
|
—
|
|
|
Acquisitions/divestitures/other 1
|
(342)
|
|
—
|
|
|
Effect of foreign exchange rates
|
(149)
|
|
347
|
|
|
Termination benefits/curtailment cost/settlements
|
—
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
Benefit obligations at end of year
|
$
|
4,286
|
|
$
|
5,335
|
|
1. Primarily related to the N&B Transaction, partially offset by the Laird PM Acquisition.
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets and Funded Status of All Plans
|
2021
|
2020
|
|
In millions
|
|
Change in plan assets:
|
|
|
|
Fair value of plan assets at beginning of year
|
$
|
4,158
|
|
$
|
3,757
|
|
|
Actual return on plan assets
|
222
|
|
309
|
|
|
Employer contributions
|
88
|
|
101
|
|
|
Plan participants' contributions
|
9
|
|
11
|
|
|
Benefits paid
|
(243)
|
|
(271)
|
|
|
Acquisitions/divestitures/other 1
|
(116)
|
|
—
|
|
|
Effect of foreign exchange rates
|
(82)
|
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
$
|
4,036
|
|
$
|
4,158
|
|
|
|
|
|
|
Funded status:
|
|
|
|
|
|
|
|
Plans with plan assets
|
$
|
438
|
|
$
|
(341)
|
|
|
All other plans
|
(688)
|
|
(836)
|
|
|
Funded status at end of year
|
$
|
(250)
|
|
$
|
(1,177)
|
|
1. Primarily related to the N&B Transaction, partially offset by the Laird PM Acquisition.
The following tables summarize the amounts recognized in the consolidated balance sheets for all significant plans:
|
|
|
|
|
|
|
|
|
|
|
Amounts Recognized in the Consolidated Balance Sheets for All Significant Plans
|
December 31, 2021
|
December 31, 2020
|
|
In millions
|
|
Amounts recognized in the consolidated balance sheets:
|
|
|
|
Deferred charges and other assets
|
$
|
653
|
|
$
|
225
|
|
|
Assets of discontinued operations
|
—
|
|
5
|
|
|
Accrued and other current liabilities
|
(51)
|
|
(59)
|
|
|
Pension and other postretirement benefits - noncurrent
|
(852)
|
|
(1,110)
|
|
|
Liabilities of discontinued operations
|
—
|
|
(238)
|
|
|
Net amount recognized
|
$
|
(250)
|
|
$
|
(1,177)
|
|
|
|
|
|
|
Pretax amounts recognized in accumulated other comprehensive loss (income):
|
|
|
|
Net (gain) loss
|
$
|
(60)
|
|
$
|
603
|
|
|
Prior service credit
|
(40)
|
|
(47)
|
|
|
Pretax balance in accumulated other comprehensive loss at end of year
|
$
|
(100)
|
|
$
|
556
|
|
The increase in the Company's actuarial gains for the year ended December 31, 2021 was primarily due to the changes in weighted-average discount rates, which increased from 0.84 percent at December 31, 2020 to 1.32 percent at December 31, 2021 in addition to gains on assets in excess of what was expected.
The accumulated benefit obligation for all pension plans was $4.0 billion and $5.0 billion at December 31, 2021 and 2020, respectively.
|
|
|
|
|
|
|
|
|
|
|
Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets
|
December 31, 2021
|
December 31, 2020
|
|
In millions
|
|
Accumulated benefit obligations
|
$
|
1,007
|
|
$
|
1,896
|
|
|
Fair value of plan assets
|
$
|
216
|
|
$
|
735
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Plans with Projected Benefit Obligations in Excess of Plan Assets
|
December 31, 2021
|
December 31, 2020
|
|
In millions
|
|
Projected benefit obligations
|
$
|
1,187
|
|
$
|
2,605
|
|
|
Fair value of plan assets
|
$
|
322
|
|
$
|
1,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit Costs for All Significant Plans for the Year Ended December 31,
|
2021
|
2020
|
2019
|
|
In millions
|
|
Net Periodic Benefit Costs:
|
|
|
|
|
Service cost 1
|
$
|
53
|
|
$
|
72
|
|
$
|
189
|
|
|
Interest cost 2
|
42
|
|
58
|
|
683
|
|
|
Expected return on plan assets 3
|
(105)
|
|
(110)
|
|
(988)
|
|
|
Amortization of prior service credit 4
|
(5)
|
|
(5)
|
|
(9)
|
|
|
Amortization of unrecognized loss 5
|
12
|
|
16
|
|
122
|
|
|
Curtailment/settlement/other 6
|
3
|
|
9
|
|
—
|
|
|
Net periodic benefit costs (credits) - Total
|
$
|
—
|
|
$
|
40
|
|
$
|
(3)
|
|
|
Less: Net periodic benefit costs (credits) - discontinued operations
|
1
|
|
13
|
|
15
|
|
|
Net periodic benefit costs - Continuing operations
|
$
|
(1)
|
|
$
|
27
|
|
$
|
(18)
|
|
|
Changes in plan assets and benefit obligations recognized in other comprehensive loss (income):
|
|
|
|
|
Net (gain) loss
|
$
|
(528)
|
|
$
|
117
|
|
$
|
352
|
|
|
Prior service credit
|
(8)
|
|
—
|
|
(65)
|
|
|
Amortization of prior service credit
|
5
|
|
5
|
|
3
|
|
|
Amortization of unrecognized loss
|
(12)
|
|
(16)
|
|
(7)
|
|
|
Curtailment loss
|
—
|
|
(4)
|
|
(2)
|
|
|
Settlement loss
|
(3)
|
|
(9)
|
|
(2)
|
|
|
Effect of foreign exchange rates
|
(11)
|
|
21
|
|
(2)
|
|
|
Total recognized in other comprehensive (income) loss
|
$
|
(557)
|
|
$
|
114
|
|
$
|
277
|
|
|
Noncontrolling interest
|
$
|
—
|
|
$
|
2
|
|
$
|
—
|
|
|
Total recognized in net periodic benefit (credits) costs and other comprehensive (income) loss
|
$
|
(558)
|
|
$
|
139
|
|
$
|
259
|
|
1.The service cost from continuing operations was $51 million, $56 million, and $54 million for the years ended December 31, 2021, 2020, and 2019, respectively, for significant plans.
2. The interest cost from continuing operations was $42 million, $54 million and $75 million for the years ended December 31, 2021, 2020, and 2019, respectively, for significant plans.
3. The expected return on plan assets from continuing operations was $104 million, $100 million and $140 million for the years ended December 31, 2021, 2020 and 2019, respectively, for significant plans.
4. The amortization of prior year service credits from continuing operations was $5 million , $4 million, and $3 million for the years ended December 31, 2021, 2020, and 2019, respectively, for significant plans.
5. The amortization of unrecognized gain/loss from continuing operations was losses of $12 million for the years ended December 31, 2021 and 2020, and gains of $4 million for the year ended December 31, 2019 for significant plans.
6. The curtailment and settlement loss from continuing operations was $3 million and $9 million for the years ended December 31, 2021 and 2020, respectively, and immaterial for the year ended December 31, 2019 for significant plans.
Estimated Future Benefit Payments
The estimated future benefit payments of continuing operations, reflecting expected future service, as appropriate, are presented in the following table:
|
|
|
|
|
|
|
|
Estimated Future Benefit Payments at December 31, 2021
|
|
In millions
|
|
|
2022
|
$
|
198
|
|
|
2023
|
192
|
|
|
2024
|
194
|
|
|
2025
|
198
|
|
|
2026
|
207
|
|
|
Years 2027-2031
|
1,054
|
|
|
Total
|
$
|
2,043
|
|
Plan Assets
TDCC
Plan assets consist primarily of equity and fixed income securities of U.S. and foreign issuers, and include alternative investments such as real estate, private market securities and absolute return strategies. TDCC's investment strategy for the plan assets was to manage the assets in relation to the liability in order to pay retirement benefits to plan participants over the life of the plans. This was accomplished by identifying and managing the exposure to various market risks, diversifying investments across various asset classes and earning an acceptable long-term rate of return consistent with an acceptable amount of risk, while considering the liquidity needs of the plans.
The plans were permitted to use derivative instruments for investment purposes, as well as for hedging the underlying asset and liability exposure and rebalancing the asset allocation. The plans used value-at-risk, stress testing, scenario analysis and Monte Carlo simulations to monitor and manage both the risk within the portfolios and the surplus risk of the plans.
Equity securities primarily included investments in large- and small-cap companies located in both developed and emerging markets around the world. Fixed income securities included investment and non-investment grade corporate bonds of companies diversified across industries, U.S. treasuries, non-U.S. developed market securities, U.S. agency mortgage-backed securities, emerging market securities and fixed income related funds. Alternative investments primarily included investments in real estate, private equity limited partnerships and absolute return strategies. Other significant investment types included various insurance contracts and interest rate, equity, commodity and foreign exchange derivative investments and hedges.
TDCC mitigated the credit risk of investments by establishing guidelines with investment managers that limit investment in any single issue or issuer to an amount that was not material to the portfolio being managed. These guidelines were monitored for compliance both by TDCC and external managers. Credit risk related to derivative activity was mitigated by utilizing multiple counterparties, collateral support agreements and centralized clearing, where appropriate.
EID
Plan assets consisted primarily of equity and fixed income securities of U.S. and foreign issuers, and included alternative investments such as real estate and private market securities. EID established strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between return and risk. Strategic asset allocations in other countries were selected in accordance with the laws and practices of those countries. Where appropriate, asset liability studies were utilized in this process. U.S. plan assets and a portion of non-U.S. plan assets are managed by investment professionals employed by EID. The remaining assets are managed by professional investment firms unrelated to EID. EID's pension investment professionals had discretion to manage the assets within established asset allocation ranges approved by management. Additionally, pension trust funds were permitted to enter into certain contractual arrangements generally described as derivative instruments. Derivatives were primarily used to reduce specific market risks, hedge currency and adjust portfolio duration and asset allocation in a cost-effective manner.
Global equity securities include varying market capitalization levels. U.S. equity investments are primarily large-cap companies. Global fixed income investments include corporate-issued, government-issued and asset-backed securities. Corporate debt investments include a range of credit risk and industry diversification. U.S. fixed income investments are weighted heavier than non-U.S fixed income securities. Other investments include cash and cash equivalents, hedge funds, real estate and private market securities such as interests in private equity and venture capital partnerships.
DuPont
Plan assets consist primarily of equity and fixed income securities of U.S. and foreign issuers, and alternative investments such as insurance contracts, pooled investment vehicles and private market securities. At December 31, 2021, plan assets totaled $4 billion.
The Company establishes strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between return and risk. Strategic asset allocations in other countries are selected in accordance with the laws and practices of those countries. Where appropriate, asset liability studies are utilized in this process. The assets are managed by professional investment firms unrelated to the Company. Pension trust funds are permitted to enter into certain contractual arrangements generally described as derivative instruments. Derivatives are primarily used to reduce specific market risks, hedge currency and adjust portfolio duration and asset allocation in a cost-effective manner.
Equity securities primarily included investments in large- and small-cap companies located in both developed and emerging markets around the world. Global equity securities include varying market capitalization levels. U.S. equity investments are primarily large-cap companies. Fixed income securities included investment and non-investment grade corporate bonds of companies diversified across industries, U.S. treasuries, non-U.S. developed market securities, U.S. agency mortgage-backed securities, emerging market securities and fixed income related funds. Global fixed income investments include corporate-issued, government-issued and asset-backed securities. Corporate debt investments include a range of credit risk and industry diversification. U.S. fixed income investments are weighted heavier than non-U.S fixed income securities. Alternative investments primarily included investments in real estate, various insurance contracts and interest rate, equity, commodity and foreign exchange derivative investments and hedges. Other investments include cash and cash equivalents, pooled investment vehicles, hedge funds and private market securities such as interests in private equity and venture capital partnerships.
The weighted-average target allocation for plan assets of DuPont's pension plans is summarized as follows:
|
|
|
|
|
|
|
|
Target Allocation for Plan Assets at December 31, 2021
|
DuPont
|
|
Asset Category
|
|
Equity securities
|
9
|
%
|
|
Fixed income securities
|
17
|
|
|
Alternative investments
|
23
|
|
|
Hedge funds
|
28
|
|
|
Pooled investment vehicles
|
15
|
|
|
Other investments
|
8
|
|
|
Total
|
100
|
%
|
Fair value calculations may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
For pension plan assets classified as Level 1 measurements (measured using quoted prices in active markets), total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.
For pension plan assets classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks. For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatilities obtained from various market sources. For other pension plan assets for which observable inputs are used, fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models.
For pension plan assets classified as Level 3 measurements, total fair value is based on significant unobservable inputs including assumptions where there is little, if any, market activity for the investment. Valuations of the investments are provided by investment managers or fund managers. These valuations are reviewed for reasonableness based on applicable sector, benchmark and company performance. Valuations of insurance contracts are contractually determined and are based on exit price valuations or contract value. Adjustments to valuations are made where appropriate.
Certain pension plan assets are held in funds where fair value is based on an estimated net asset value per share (or its equivalent) as of the most recently available fund financial statements which are received on a monthly or quarterly basis. These valuations are reviewed for reasonableness based on applicable sector, benchmark and company performance. Adjustments to valuations are made where appropriate to arrive at an estimated net asset value per share at the measurement date. Where available, audited annual financial statements are obtained and reviewed for the investments as support for the manager’s investment valuation. These funds are not classified within the fair value hierarchy.
The following table summarizes the bases used to measure the Company’s pension plan assets at fair value for the years ended December 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis of Fair Value Measurements
|
December 31, 2021
|
December 31, 2020
|
|
In millions
|
Total
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|
Cash and cash equivalents
|
$
|
175
|
|
$
|
175
|
|
$
|
—
|
|
$
|
—
|
|
$
|
97
|
|
$
|
97
|
|
$
|
—
|
|
$
|
—
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
U.S. equity securities
|
$
|
119
|
|
$
|
119
|
|
$
|
—
|
|
$
|
—
|
|
$
|
336
|
|
$
|
336
|
|
$
|
—
|
|
$
|
—
|
|
|
Non - U.S. equity securities
|
241
|
|
241
|
|
—
|
|
—
|
|
480
|
|
473
|
|
7
|
|
—
|
|
|
Total equity securities
|
$
|
360
|
|
$
|
360
|
|
$
|
—
|
|
$
|
—
|
|
$
|
816
|
|
$
|
809
|
|
$
|
7
|
|
$
|
—
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
Debt - government-issued
|
$
|
235
|
|
$
|
—
|
|
$
|
235
|
|
$
|
—
|
|
$
|
308
|
|
$
|
20
|
|
$
|
288
|
|
$
|
—
|
|
|
Debt - corporate-issued
|
45
|
|
—
|
|
45
|
|
—
|
|
106
|
|
16
|
|
90
|
|
—
|
|
|
Debt - asset-backed
|
1
|
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Total fixed income securities
|
$
|
281
|
|
$
|
—
|
|
$
|
281
|
|
$
|
—
|
|
$
|
414
|
|
$
|
36
|
|
$
|
378
|
|
$
|
—
|
|
|
Alternative investments:
|
|
|
|
|
|
|
|
|
|
Real estate
|
$
|
75
|
|
—
|
|
—
|
|
75
|
|
$
|
84
|
|
7
|
|
—
|
|
$
|
77
|
|
|
Insurance contracts
|
855
|
|
—
|
|
30
|
|
825
|
|
788
|
|
—
|
|
30
|
|
758
|
|
|
Derivatives - asset position
|
—
|
|
—
|
|
—
|
|
—
|
|
4
|
|
—
|
|
4
|
|
—
|
|
|
Derivatives - liability position
|
—
|
|
—
|
|
—
|
|
—
|
|
(1)
|
|
—
|
|
(1)
|
|
—
|
|
|
Total alternative investments
|
$
|
930
|
|
$
|
—
|
|
$
|
30
|
|
$
|
900
|
|
$
|
875
|
|
$
|
7
|
|
$
|
33
|
|
$
|
835
|
|
|
Other Investments:
|
|
|
|
|
|
|
|
|
|
Pooled Investment Vehicles
|
$
|
593
|
|
$
|
593
|
|
$
|
—
|
|
$
|
—
|
|
$
|
627
|
|
$
|
627
|
|
$
|
—
|
|
$
|
—
|
|
|
Private market securities
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Other investments
|
—
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Total other investments
|
$
|
593
|
|
$
|
593
|
|
$
|
—
|
|
$
|
—
|
|
$
|
627
|
|
$
|
627
|
|
$
|
—
|
|
$
|
—
|
|
|
Subtotal
|
$
|
2,339
|
|
$
|
1,128
|
|
$
|
311
|
|
$
|
900
|
|
$
|
2,829
|
|
$
|
1,576
|
|
$
|
418
|
|
$
|
835
|
|
|
Investments measured at net asset value:
|
|
|
|
|
|
|
|
|
|
Debt - government-issued
|
$
|
406
|
|
|
|
|
$
|
273
|
|
|
|
|
|
Hedge funds
|
1,128
|
|
|
|
|
933
|
|
|
|
|
|
Private market securities
|
163
|
|
|
|
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments measured at net asset value
|
$
|
1,697
|
|
|
|
|
$
|
1,328
|
|
|
|
|
|
Items to reconcile to fair value of plan assets:
|
|
|
|
|
|
|
|
|
|
Pension trust receivables 1
|
$
|
—
|
|
|
|
|
$
|
3
|
|
|
|
|
|
Pension trust payables 2
|
—
|
|
|
|
|
(2)
|
|
|
|
|
|
Total
|
$
|
4,036
|
|
|
|
|
$
|
4,158
|
|
|
|
|
1. Primarily receivables for investment securities sold.
2. Primarily payables for investment securities purchased.
The following table summarizes the changes in the fair value of Level 3 pension plan assets for the years ended December 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement of Level 3 Pension Plan Assets
|
|
|
Real Estate
|
Insurance Contracts
|
Total
|
|
In millions
|
|
Balance at Jan 1, 2020
|
|
|
$
|
66
|
|
$
|
304
|
|
$
|
370
|
|
|
Actual return on assets:
|
|
|
|
|
|
|
Relating to assets sold during 2020
|
|
|
—
|
|
—
|
|
—
|
|
|
Relating to assets held at Dec 31, 2020
|
|
|
9
|
|
64
|
|
73
|
|
|
Purchases, sales and settlements, net
|
|
|
2
|
|
390
|
|
392
|
|
|
|
|
|
|
|
|
|
Balance at Dec 31, 2020
|
|
|
$
|
77
|
|
$
|
758
|
|
$
|
835
|
|
|
Actual return on assets:
|
|
|
|
|
|
|
Relating to assets sold during 2021
|
|
|
—
|
|
—
|
|
—
|
|
|
Relating to assets held at Dec 31, 2021
|
|
|
(1)
|
|
(12)
|
|
(13)
|
|
|
Purchases, sales and settlements, net
|
|
|
2
|
|
(35)
|
|
(33)
|
|
|
Transfers into Level 3 1
|
|
|
—
|
|
141
|
|
141
|
|
|
Transfers out of Level 3 2
|
|
|
(3)
|
|
(27)
|
|
(30)
|
|
|
Balance at Dec 31, 2021
|
|
|
$
|
75
|
|
$
|
825
|
|
$
|
900
|
|
1. Related to the Laird PM Acquisition.
2. Related to the N&B Transaction.
Defined Contribution Plans
The Company provides defined contribution benefits to its employees. The most significant is the U.S. Retirement Savings Plan ("the Plan"), which covers all U.S. full-service employees. This Plan includes a non-leveraged Employee Stock Ownership Plan ("ESOP"). Employees are not required to participate in the ESOP and those who do are free to diversify out of the ESOP. The purpose of the Plan is to provide retirement savings benefits for employees and to provide employees an opportunity to become stockholders of the Company. The Plan is a tax qualified contributory profit sharing plan, with cash or deferred arrangement and any eligible employee of the Company may participate. Currently, the Company contributes 100 percent of the first 6 percent of the employee's contribution election and also contributes 3 percent of each eligible employee's eligible compensation regardless of the employee's contribution. The Company's matching contributions vest immediately upon contribution. The 3 percent nonmatching employer contribution vests after employees complete three years of service. The Company's contributions to the Plan were $71 million in 2021 and $78 million in 2020. Both periods are inclusive of N&B activity related to discontinued operations.
In addition, the Company made contributions to other defined contribution plans in 2021 in the amount of $35 million and $38 million in 2020. Both periods are inclusive of N&B activity related to discontinued operations.
NOTE 20 - STOCK-BASED COMPENSATION
Effective with the DWDP Merger, on August 31, 2017, DowDuPont assumed all TDCC and EID equity incentive compensation awards outstanding immediately prior to the DWDP Merger. The TDCC and EID stock-based compensation plans were assumed by DowDuPont and remained in place with the ability to grant and issue DowDuPont common stock until the DWDP Distributions.
Immediately following the Corteva Distribution, DuPont adopted the DuPont Omnibus Incentive Plan ("DuPont OIP") which provides for equity-based and cash incentive awards to certain employees, directors, independent contractors and consultants. Upon adoption of the DuPont OIP, the TDCC and EID plans were rolled into the DuPont OIP as separate subplans and no longer grant new awards. All previously granted equity awards under these subplans have the same terms and conditions that were applicable to the awards under the TDCC and EID plans immediately prior to the DWDP Distributions. Under the DuPont OIP, a maximum of 1 million shares of common stock are available for award as of December 31, 2021.
During the second quarter of 2020, the stockholders of DuPont approved the DuPont 2020 Equity and Incentive Plan (the "2020 EIP"), which allows the Company to grant options, share appreciation rights, restricted shares, restricted stock units ("RSUs"), share bonuses, other share-based awards, cash awards, each as defined in the 2020 EIP, or any combination of the foregoing. Under the EIP, a maximum of 18 million shares of common stock are available for award as of December 31, 2021. The approval of the 2020 Plan had no effect on the Company’s ability to make future grants under the DuPont OIP in accordance with its terms, and awards that are outstanding under the DuPont OIP remain outstanding in accordance with their terms.
A description of the Company's stock-based compensation is discussed below followed by a description of TDCC and EID stock-based compensation.
Accounting for Stock-Based Compensation
The Company grants stock-based compensation awards that vest over a specified period or upon employees meeting certain performance and/or retirement eligibility criteria. The fair value of equity instruments issued to employees is measured on the grant date. The fair value of liability instruments issued to employees is measured at the end of each quarter. The fair value of equity and liability instruments is expensed over the vesting period or, in the case of retirement, from the grant date to the date on which retirement eligibility provisions have been met and additional service is no longer required. The Company estimates expected forfeitures.
DuPont recognized share-based compensation expense in continuing operations of $76 million, $97 million, and $87 million during the years ended December 31, 2021, 2020 and 2019, respectively. The income tax benefits related to stock-based compensation arrangements were $15 million, $19 million, and $18 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Total unrecognized pretax compensation cost in continuing operations related to nonvested stock option awards of $5 million at December 31, 2021, is expected to be recognized over a weighted-average period of 1.7 years. Total unrecognized pretax compensation cost in continuing operations related to RSUs and performance based stock units ("PSUs") of $74 million at December 31, 2021, is expected to be recognized over a weighted average period of 1.9 years. The total fair value of RSUs and PSUs vested in the year ended December 31, 2021 was $86 million. The weighted average grant-date fair value of RSUs and PSUs granted during 2021 was $74.04.
At the time of the N&B separation, 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.
DuPont 2020 Equity Incentive Plan
EIP Stock Options
The exercise price of shares subject to option is equal to the market price of the Company's stock on the date of grant. Stock option awards expire 10 years after the grant date. The plan allows retirement-eligible employees of the Company to retain any granted awards upon retirement provided the employee has rendered at least 12 months of service following the grant date.
The Company uses the Black-Scholes option pricing model to determine the fair value of stock option awards and the assumptions set forth in the table below. The weighted-average assumptions used to calculate total stock-based compensation are included in the following table:
|
|
|
|
|
|
|
|
EIP Weighted-Average Assumptions
|
2021
|
|
Dividend yield
|
1.6
|
%
|
|
Expected volatility
|
28.4
|
%
|
|
Risk-free interest rate
|
0.9
|
%
|
|
Expected life of stock options granted during period (years)
|
6.0
|
The Company determines the dividend yield by dividing the annualized dividend on DuPont's common stock by the option exercise price. A historical daily measurement of volatility is determined based on the expected life of the option granted. The risk-free interest rate is determined by reference to the yield on an outstanding U.S. Treasury note with a term equal to the expected life of the option granted. Expected life is determined by reference to DuPont's historical experience, adjusted for expected exercise patterns of in-the-money options.
The following table summarizes stock option activity for 2021 under the EIP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EIP Stock Options
|
2021
|
|
|
Number of Shares
(in thousands)
|
Weighted Average Exercise Price (per share)
|
Weighted Average Remaining Contractual Term (in years)
|
Aggregate Intrinsic Value (in thousands)
|
|
Outstanding at January 1, 2021
|
—
|
|
$
|
—
|
|
|
|
|
Granted
|
239
|
|
$
|
72.98
|
|
|
|
|
Exercised
|
(1)
|
|
$
|
72.98
|
|
|
|
|
Forfeited/Expired
|
(11)
|
|
$
|
72.98
|
|
|
|
|
Outstanding at December 31, 2021
|
227
|
|
$
|
72.98
|
|
9.02
|
$
|
1,770
|
|
|
Exercisable at December 31, 2021
|
5
|
|
$
|
72.98
|
|
2.91
|
$
|
42
|
|
|
|
|
|
|
|
|
|
Additional Information about EIP Stock Options
|
|
|
In millions, except per share amounts
|
2021
|
|
Weighted-average fair value per share of options granted
|
$
|
16.92
|
|
|
Total compensation expense for stock options plans
|
$
|
2
|
|
|
Related tax benefit
|
$
|
—
|
|
The aggregate intrinsic values in the table above represent the total pretax intrinsic value (the difference between the closing stock price on the last trading day of 2021 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options at year end.
EIP Restricted Stock Units and Performance Based Stock Units
The Company grants RSUs to certain employees that generally vest over a three-year period and, upon vesting, convert one-for-one to DuPont common stock. A retirement eligible employee retains any granted awards upon retirement provided the employee has rendered at least 12 months of service following the grant date. The fair value of all stock-settled RSUs is based upon the market price of the underlying common stock as of the grant date.
The Company grants PSUs to senior leadership under the DuPont EIP. Vesting for PSUs granted is based upon achieving certain return on invested capital ("ROIC") targets and certain adjusted corporate net income annual growth targets, weighted evenly between the metrics and modified by a relative total shareholder return ("TSR") percentile ranking goal as compared to the S&P 500. The actual award, delivered as DuPont common stock, can range from zero percent to 200 percent of the original grant. The weighted-average grant-date fair value of the PSUs, subject to the TSR metric, is based upon the market price of the underlying common stock as of the grant date and estimated using a Monte Carlo simulation.
Nonvested awards of RSUs and PSUs are shown below:
|
|
|
|
|
|
|
|
|
|
|
EIP RSUs and PSUs
|
2021
|
|
|
Number of Shares
(in thousands)
|
Weighted Average Grant Date Fair Value
(per share)
|
|
Nonvested at January 1, 2021
|
—
|
|
$
|
—
|
|
|
Granted
|
641
|
|
$
|
73.97
|
|
|
Vested
|
(22)
|
|
$
|
72.98
|
|
|
Forfeited
|
(27)
|
|
$
|
73.97
|
|
|
Nonvested at December 31, 2021
|
592
|
|
$
|
74.01
|
|
DuPont Omnibus Incentive Plan
The DuPont OIP has two subplans that have the same terms and conditions of the TDCC and EID plans immediately prior to the DWDP Distributions. Awards previously granted under those plans that were nonvested will now vest in each subplan. All new awards will be granted by the OIP.
OIP Stock Options
The exercise price of shares subject to option is equal to the market price of the Company's stock on the date of grant. Stock option awards expire 10 years after the grant date. The plan allows retirement-eligible employees of the Company to retain any granted awards upon retirement provided the employee has rendered at least six months of service following the grant date.
The Company uses the Black-Scholes option pricing model to determine the fair value of stock option awards and the assumptions set forth in the table below. The weighted-average assumptions used to calculate total stock-based compensation are included in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OIP Weighted-Average Assumptions
|
2021
|
2020
|
2019
|
|
Dividend yield
|
1.6
|
%
|
2.3
|
%
|
1.8
|
%
|
|
Expected volatility
|
28.3
|
%
|
23.0
|
%
|
21.1
|
%
|
|
Risk-free interest rate
|
0.9
|
%
|
1.2
|
%
|
1.6
|
%
|
|
Expected life of stock options granted during period (years)
|
6.0
|
6.0
|
6.1
|
The Company determines the dividend yield by dividing the annualized dividend on DuPont's common stock by the option exercise price. A historical daily measurement of volatility (using DowDuPont stock information after the DWDP Merger date and a weighted average of TDCC and EID prior to DWDP Merger date) is determined based on the expected life of the option granted. The risk-free interest rate is determined by reference to the yield on an outstanding U.S. Treasury note with a term equal to the expected life of the option granted. Expected life is determined by reference to DuPont's historical experience, adjusted for expected exercise patterns of in-the-money options.
The following table summarizes stock option activity for 2021 under the OIP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OIP Stock Options
|
2021
|
|
|
Number of Shares
(in thousands)
|
Weighted Average Exercise Price (per share)
|
Weighted Average Remaining Contractual Term (in years)
|
Aggregate Intrinsic Value (in thousands)
|
|
Outstanding at January 1, 2021
|
2,272
|
|
$
|
60.40
|
|
|
|
|
Granted
|
377
|
|
$
|
73.00
|
|
|
|
|
Exercised
|
(56)
|
|
$
|
53.50
|
|
|
|
|
Forfeited/Expired
|
(433)
|
|
$
|
62.38
|
|
|
|
|
Outstanding at December 31, 2021
|
2,160
|
|
$
|
62.39
|
|
7.86
|
$
|
39,748
|
|
|
Exercisable at December 31, 2021
|
1,275
|
|
$
|
63.56
|
|
7.43
|
$
|
21,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Information about OIP Stock Options 1
|
|
|
|
|
In millions, except per share amounts
|
2021
|
2020
|
2019
|
|
Weighted-average fair value per share of options granted
|
$
|
16.83
|
|
$
|
9.18
|
|
$
|
11.85
|
|
|
Total compensation expense for stock options plans
|
$
|
24
|
|
$
|
16
|
|
$
|
5
|
|
|
Related tax benefit
|
$
|
5
|
|
$
|
3
|
|
$
|
1
|
|
1.No awards have vested under the OIP as of December 31, 2021.
The aggregate intrinsic values in the table above represent the total pretax intrinsic value (the difference between the closing stock price on the last trading day of 2021 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options at year end.
OIP Restricted Stock Units and Performance Based Stock Units
The Company grants RSUs to certain employees that serially vested over a three-year period and, upon vesting, convert one-for-one to DuPont common stock. A retirement eligible employee retains any granted awards upon retirement provided the employee has rendered at least six months of service following the grant date. The fair value of all stock-settled RSUs is based upon the market price of the underlying common stock as of the grant date.
The Company grants PSUs to senior leadership under a subplan of the DuPont OIP. Vesting for PSUs granted is based upon achieving certain return on invested capital ("ROIC") targets and certain adjusted corporate net income annual growth targets, weighted evenly between the metrics and modified by a relative total shareholder return ("TSR") percentile ranking goal as compared to the S&P 500. The actual award, delivered as DuPont common stock, can range from zero percent to 200 percent of the original grant. The weighted-average grant-date fair value of the PSUs, subject to the TSR metric, is based upon the market price of the underlying common stock as of the grant date and estimated using a Monte Carlo simulation.
Nonvested awards of RSUs and PSUs are shown below.
|
|
|
|
|
|
|
|
|
|
|
OIP RSUs and PSUs
|
2021
|
|
|
Number of Shares
(in thousands)
|
Weighted Average Grant Date Fair Value
(per share)
|
|
Nonvested at January 1, 2021
|
1,899
|
|
$
|
56.31
|
|
|
Granted
|
673
|
|
$
|
74.25
|
|
|
Vested
|
(670)
|
|
$
|
60.62
|
|
|
Forfeited
|
(402)
|
|
$
|
58.08
|
|
|
Nonvested at December 31, 2021
|
1,500
|
|
$
|
50.77
|
|
TDCC Stock Incentive Plan
In connection with the DWDP Merger, on August 31, 2017 all outstanding TDCC stock options under the TDCC 2012 Stock Incentive Plan (the "2012 Plan") were converted into stock options with respect to DowDuPont Common Stock.
TDCC Stock Options
TDCC granted stock options to certain employees, subject to certain annual and individual limits, with terms of the grants fixed at the grant date. The exercise price of each stock option equals the market price of TDCC’s stock on the grant date. Options vest from one year to three years, and had a maximum term of 10 years. To measure the fair value of the awards on the date of grant, TDCC used the Black-Scholes option pricing model. No awards were granted by the Company out of the TDCC plan during 2021, 2020, and 2019.
The following table summarizes stock option activity for 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDCC Stock Options
|
2021
|
|
|
Number of Shares
(in thousands)
|
Weighted Average Exercise Price
(per share)
|
Weighted Average Remaining Contractual Term (in years)
|
Aggregate Intrinsic Value
(in thousands)
|
|
Outstanding at January 1, 2021
|
595
|
|
$
|
59.45
|
|
|
|
|
Exercised
|
(143)
|
|
$
|
50.81
|
|
|
|
|
Forfeited/Expired
|
(29)
|
|
$
|
51.76
|
|
|
|
|
Outstanding at December 31, 2021
|
423
|
|
$
|
62.91
|
|
3.57
|
$
|
6,602
|
|
|
Exercisable at December 31, 2021
|
417
|
|
$
|
63.05
|
|
3.61
|
$
|
6,428
|
|
EID Equity Incentive Plan
EID Stock Options
The exercise price of shares subject to option is equal to the market price of EID's stock on the date of grant. All options vest serially over a three-year period. Stock option awards granted between 2010 and 2015 expire seven years after the grant date and options granted between 2016 and 2018 expire ten years after the grant date. The plan allowed retirement-eligible employees of EID to retain any granted awards upon retirement provided the employee has rendered at least six months of service following the grant date.
EID used the Black-Scholes option pricing model to determine the fair value of stock option awards and the assumptions set forth in the table below. The weighted-average grant-date fair value of options granted for the year ended December 31, 2019 was $15.69. There were no options granted out of the EID EIP in 2021 and 2020. The weighted-average assumptions used to calculate total stock-based compensation are included in the following table:
|
|
|
|
|
|
|
|
EID Weighted-Average Assumptions
|
2019
|
|
Dividend yield
|
1.6
|
%
|
|
Expected volatility
|
19.8
|
%
|
|
Risk-free interest rate
|
2.4
|
%
|
|
Expected life of stock options granted during period (years)
|
6.1
|
EID determined the dividend yield by dividing the annualized dividend on DowDuPont's Common Stock by the option exercise price. A historical daily measurement of volatility (using DowDuPont stock information after the DWDP Merger date and a weighted average of TDCC and EID prior to DWDP Merger date) is determined based on the expected life of the option granted. The risk-free interest rate is determined by reference to the yield on an outstanding U.S. Treasury note with a term equal to the expected life of the option granted. Expected life is determined by reference to EID's historical experience, adjusted for expected exercise patterns of in-the-money options.
The following table summarizes stock option activity for 2021 under EID's EIP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EID Stock Options
|
2021
|
|
|
Number of Shares (in thousands)
|
Weighted Average Exercise Price (per share)
|
Weighted Average Remaining Contractual Term (in years)
|
Aggregate Intrinsic Value (in thousands)
|
|
Outstanding at January 1, 2021
|
5,024
|
|
$
|
69.71
|
|
|
|
|
Exercised
|
(1,160)
|
|
$
|
56.12
|
|
|
|
|
Forfeited/Expired
|
(638)
|
|
$
|
82.79
|
|
|
|
|
Outstanding at December 31, 2021
|
3,226
|
|
$
|
72.01
|
|
5.53
|
$
|
97,557
|
|
|
Exercisable at December 31, 2021
|
3,068
|
|
$
|
71.94
|
|
5.22
|
$
|
79,260
|
|
EID Restricted Stock Units
EID issued RSUs that serially vested over a three-year period and, upon vesting, convert one-for-one to DowDuPont Common Stock. A retirement eligible employee retains any granted awards upon retirement provided the employee has rendered at least six months of service following the grant date. Additional RSUs were also granted periodically to key senior management employees. These RSUs generally vested over periods ranging from three years to five years. The fair value of all stock-settled RSUs is based upon the market price of the underlying common stock as of the grant date. The awards have the same terms and conditions as were applicable to such equity awards immediately prior to the DWDP Merger closing date.
EID granted PSUs to senior leadership. Upon a change in control, EID's EIP provisions required PSUs to be converted into RSUs based on the number of PSUs that would vest by assuming that target levels of performance are achieved. Service requirements for vesting in the RSUs replicate those inherent in the exchanged PSUs. In accordance with the DWDP Merger Agreement, PSUs converted to RSU awards based on an assessment of the underlying market conditions in the PSUs at the greater of target or actual performance levels as of the closing date. As the actual performance levels were not in excess of target as of the closing date, all PSUs converted to RSUs based on target and there was no incremental benefit from the DWDP Merger Agreement when compared with EID’s EIP.
Nonvested awards of RSUs are shown below.
|
|
|
|
|
|
|
|
|
|
|
EID RSUs
|
2021
|
|
Shares in thousands
|
Shares
|
Grant Date Fair Value 1
|
|
Nonvested at January 1, 2021
|
900
|
|
$
|
71.44
|
|
|
Vested
|
(439)
|
|
$
|
74.87
|
|
|
Forfeited
|
(140)
|
|
$
|
79.92
|
|
|
Nonvested at December 31, 2021
|
321
|
|
$
|
68.45
|
|
1. Weighted-average per share.
The weighted average grant-date fair value of stock units granted during 2019 was $70.69. There were no RSUs granted out of the EID EIP in 2021 and 2020.
NOTE 21 - FINANCIAL INSTRUMENTS
The following table summarizes the fair value of financial instruments at December 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Financial Instruments
|
December 31, 2021
|
December 31, 2020
|
|
In millions
|
Cost
|
Gain
|
Loss
|
Fair Value
|
Cost
|
Gain
|
Loss
|
Fair Value
|
|
Cash equivalents
|
$
|
853
|
|
$
|
—
|
|
$
|
—
|
|
$
|
853
|
|
$
|
1,105
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,105
|
|
|
Restricted cash equivalents 1
|
$
|
65
|
|
$
|
—
|
|
$
|
—
|
|
$
|
65
|
|
$
|
6,223
|
|
$
|
—
|
|
$
|
—
|
|
$
|
6,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash and restricted cash equivalents
|
$
|
918
|
|
$
|
—
|
|
$
|
—
|
|
$
|
918
|
|
$
|
7,328
|
|
$
|
—
|
|
$
|
—
|
|
$
|
7,328
|
|
|
Long-term debt including debt due within one year
|
$
|
(10,632)
|
|
$
|
—
|
|
$
|
(1,963)
|
|
$
|
(12,595)
|
|
$
|
(15,612)
|
|
$
|
—
|
|
$
|
(2,725)
|
|
$
|
(18,337)
|
|
|
Derivatives relating to:
|
|
|
|
|
|
|
|
|
|
Net investment hedge 2
|
—
|
|
74
|
|
—
|
|
74
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Foreign currency 3, 4
|
—
|
|
5
|
|
(10)
|
|
(5)
|
|
—
|
|
4
|
|
(13)
|
|
(9)
|
|
|
Total derivatives
|
$
|
—
|
|
$
|
79
|
|
$
|
(10)
|
|
$
|
69
|
|
$
|
—
|
|
$
|
4
|
|
$
|
(13)
|
|
$
|
(9)
|
|
1.At December 31, 2021 there was $12 million of restricted cash classified as "Other current assets" and $53 million classified as "Restricted cash and cash equivalents" in the Consolidated Balance Sheets. At December 31, 2020 there was $17 million of restricted cash classified as "Other current assets" and $6.2 billion classified as "Restricted cash and cash equivalents" in the Consolidated Balance Sheets. See Note 7 for more information on restricted cash.
2.Classified as "Deferred charges and other assets" in the Consolidated Balance Sheets.
3.Classified as "Other current assets" and "Accrued and other current liabilities" in the 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, interest rate and commodity price risks. The Company has established a variety of derivative programs to be utilized for financial risk management. These programs reflect varying levels of exposure coverage and time horizons based on an assessment of risk.
Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee, consistent with the Company's financial risk management policies and guidelines. Derivative instruments used are forwards, options, futures and swaps.
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
|
December 31, 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
|
$
|
(625)
|
|
$
|
(304)
|
|
|
|
|
|
1.Presented net of contracts bought and sold.
Derivatives Designated in Hedging Relationships
Net Foreign Investment Hedge
In the second quarter of 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 an 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 also uses 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 pretax basis related to foreign currency derivatives not designated as a hedge, which was included in “Sundry income (expense) - net” in the Consolidated Statements of Operations, was a loss of $40 million for the year ended December 31, 2021 ($1 million loss for the year ended December 31, 2020 and $62 million loss for the year ended December 31, 2019). The income statement effects of other derivatives were immaterial.
NOTE 22 - 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 December 31, 2021
|
Significant Other Observable Inputs
(Level 2)
|
|
|
|
In millions
|
|
Assets at fair value:
|
|
|
|
|
Cash equivalents and restricted cash equivalents 1
|
$
|
918
|
|
|
|
|
Derivatives relating to: 2
|
|
|
|
|
Net investment hedge
|
74
|
|
|
|
|
Foreign currency contracts 3
|
11
|
|
|
|
|
Total assets at fair value
|
$
|
1,003
|
|
|
|
|
Liabilities at fair value:
|
|
|
|
|
Long-term debt including debt due within one year 4
|
$
|
12,595
|
|
|
|
|
Derivatives relating to: 2
|
|
|
|
|
Foreign currency contracts 3
|
16
|
|
|
|
|
Total liabilities at fair value
|
$
|
12,611
|
|
|
|
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 Consolidated Balance Sheets and held at amortized cost, which approximates fair value.
2. See Note 21 for the classification of derivatives in the Consolidated Balance Sheets.
3. Assets 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 amounts were $6 million for both assets and liabilities as of December 31, 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 Consolidated Balance Sheets and held at amortized cost, which approximates fair value.
2. See Note 21 for the classification of derivatives in the Consolidated Balance Sheets.
3. Assets 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 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.
For assets and liabilities classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability, or by using observable market data points of similar, more liquid securities to imply the price. For time deposits classified as held-to-maturity investments and reported at amortized cost, fair value is based on an observable interest rate for similar securities. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks.
For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatilities obtained from various market sources. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance/quality checks.
For all other assets and liabilities for which observable inputs are used, fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models.
There were no transfers between Levels 1 and 2 during the year ended December 31, 2021 and December 31, 2020.
Fair Value Measurements on a Nonrecurring Basis
The following table summarizes the basis used to measure certain assets at fair value on a nonrecurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis of Fair Value Measurements on a Nonrecurring Basis
|
Significant Other Unobservable Inputs (Level 3)
|
Total Losses
|
|
In millions
|
|
2020
|
|
|
|
Assets at fair value:
|
|
|
|
Long-lived assets, intangible assets, and other assets
|
$
|
447
|
|
$
|
(661)
|
|
2020 Fair Value Measurements on a Nonrecurring Basis
During the third quarter of 2020, the Company recorded impairment charges related to indefinite-lived intangible assets and long-lived assets within Corporate and the Mobility & Materials segment. These impairment analyses were performed using Level 3 inputs within the fair value hierarchy. See Notes 4, 6, and 14 for further discussion.
During the second quarter of 2020, the Company recorded impairment charges related to indefinite-lived intangible assets within the Mobility & Materials segment. See Notes 6 and 14 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 Notes 6 for further discussion of these fair value measurements.
NOTE 23 - SEGMENTS AND GEOGRAPHIC REGIONS
The Company's segments are aligned with the market verticals they serve, while maintaining integration and innovation strengths within strategic value chains. DuPont is comprised of three operating segments: Electronics & Industrial; Water & Protection; and Mobility & Materials. Corporate reflect activity of to be divested and previously divested businesses, as well as, the reconciliation between the totals for the reportable segments and the Company’s totals.
Major products by segment include: Electronics & Industrial (printing and packaging materials, photopolymers, electronic materials, specialty silicones and lubricants); Water & Protection (nonwovens, aramids, construction materials, water filtration and purification resins, elements and membranes); and Mobility & Materials (engineering resins, adhesives, metallization pastes, polyvinyl fluoromaterials, silicone encapsulants and adhesives, polyester films). The Company operates globally in substantially all of its product lines. Transfers of products between operating segments are generally valued at cost.
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. Prior to April 1, 2019, the Company's measure of profit / loss for segment reporting purposes is pro forma Operating EBITDA as this is the manner in which the Company's CODM assessed performance and allocates resources. The Company defines pro forma Operating EBITDA as pro forma earnings (i.e. pro forma "Income (loss) from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / OPEB / charges, and foreign exchange gains/losses, excluding the impact of costs historically allocated to the materials science and agriculture businesses that did not meet the criteria to be recorded as discontinued operations and adjusted for significant items.
Pro forma adjustments were determined in accordance with Article 11 of Regulation S-X. Pro forma financial information is based on the Consolidated Financial Statements of DuPont, adjusted to give effect to the impact of certain items directly attributable to the DWDP Distributions, and the Term Loan Facilities, the 2018 Senior Notes and the Funding CP Issuance (together, the "DWDP Financings"), including the use of proceeds from such DWDP Financings (collectively the "DWDP Transactions"). The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the DWDP Transactions, (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the results. Events that are not expected to have a continuing impact on the combined results are excluded from the pro forma adjustments. Those pro forma adjustments include the impact of various supply agreements entered into in connection with the Dow Distribution ("supply agreements") and are adjustments to "Cost of sales." The impact of these supply agreements is reflected in pro forma Operating EBITDA for the periods noted above as they are included in the measure of profit/loss reviewed by the CODM in order to show meaningful comparability among periods while assessing performance and making resource allocation decisions.
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. The reporting changes have been retrospectively reflected in the segment results for all periods presented.
Sales are attributed to geographic regions based on customer location; long-lived assets are attributed to geographic regions based on asset location.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Trade Revenue by Geographic Region
|
2021
|
2020
|
2019
|
|
In millions
|
|
United States
|
$
|
4,321
|
|
$
|
3,960
|
|
$
|
4,564
|
|
|
Canada
|
311
|
|
271
|
|
296
|
|
|
EMEA 1
|
3,322
|
|
2,755
|
|
3,213
|
|
|
Asia Pacific 2
|
8,097
|
|
6,838
|
|
6,733
|
|
|
Latin America
|
602
|
|
514
|
|
630
|
|
|
Total
|
$
|
16,653
|
|
$
|
14,338
|
|
$
|
15,436
|
|
1.Europe, Middle East and Africa.
2. Net sales attributed to China/Hong Kong, for the years ended December 31, 2021, 2020, and 2019 were $3,962 million, $3,194 million, and $3,036 million, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived Assets by Geographic Region
|
December 31,
|
|
In millions
|
2021
|
2020
|
2019
|
|
United States
|
$
|
3,948
|
|
$
|
3,795
|
|
$
|
4,148
|
|
|
Canada
|
73
|
|
72
|
|
68
|
|
|
EMEA 1
|
1,673
|
|
1,770
|
|
1,628
|
|
|
Asia Pacific
|
1,224
|
|
1,184
|
|
1,207
|
|
|
Latin America
|
48
|
|
46
|
|
49
|
|
|
Total
|
$
|
6,966
|
|
$
|
6,867
|
|
$
|
7,100
|
|
1.Europe, Middle East and Africa.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Information
|
Electronics & Industrial
|
Water & Protection
|
Mobility & Materials
|
Corporate
|
Total
|
|
In millions
|
|
For the Year Ended December 31, 2021
|
|
|
|
|
|
|
Net sales
|
$
|
5,554
|
|
$
|
5,552
|
|
$
|
5,045
|
|
$
|
502
|
|
$
|
16,653
|
|
|
Operating EBITDA 1
|
1,758
|
|
1,385
|
|
1,082
|
|
(55)
|
|
4,170
|
|
|
Equity in earnings of nonconsolidated affiliates
|
41
|
|
36
|
|
9
|
|
8
|
|
94
|
|
|
Restructuring and asset related charges - net 2
|
8
|
|
30
|
|
7
|
|
10
|
|
55
|
|
|
Depreciation and amortization
|
518
|
|
511
|
|
363
|
|
3
|
|
1,395
|
|
|
Assets of continuing operations
|
17,701
|
|
15,003
|
|
9,072
|
|
3,686
|
|
45,462
|
|
|
Investment in nonconsolidated affiliates
|
502
|
|
310
|
|
61
|
|
6
|
|
879
|
|
|
Capital expenditures
|
337
|
|
391
|
|
156
|
|
7
|
|
891
|
|
|
For the Year Ended December 31, 2020
|
|
|
|
|
|
|
Net sales
|
$
|
4,674
|
|
$
|
4,993
|
|
$
|
4,005
|
|
$
|
666
|
|
$
|
14,338
|
|
|
Operating EBITDA 1
|
1,468
|
|
1,313
|
|
588
|
|
70
|
|
3,439
|
|
|
Equity in earnings of nonconsolidated affiliates
|
34
|
|
26
|
|
19
|
|
108
|
|
187
|
|
|
Restructuring and asset related charges - net 2
|
7
|
|
48
|
|
351
|
|
439
|
|
845
|
|
|
Depreciation and amortization 4
|
449
|
|
502
|
|
370
|
|
52
|
|
1,373
|
|
|
Assets of continuing operations
|
15,065
|
|
15,142
|
|
9,204
|
|
10,024
|
|
49,435
|
|
|
Investment in nonconsolidated affiliates
|
505
|
|
315
|
|
67
|
|
2
|
|
889
|
|
|
Capital expenditures
|
345
|
|
328
|
|
152
|
|
8
|
|
833
|
|
|
For the Year Ended December 31, 2019
|
|
|
|
|
|
|
Net sales
|
$
|
4,446
|
|
$
|
5,201
|
|
$
|
4,690
|
|
$
|
1,099
|
|
$
|
15,436
|
|
|
Pro forma operating EBITDA 1
|
1,454
|
|
1,370
|
|
954
|
|
366
|
|
4,144
|
|
|
Equity in earnings (losses) of nonconsolidated affiliates 3
|
24
|
|
27
|
|
4
|
|
258
|
|
313
|
|
|
Restructuring asset related charges - net 2
|
47
|
|
32
|
|
15
|
|
58
|
|
152
|
|
|
Depreciation and amortization 4
|
447
|
|
507
|
|
387
|
|
61
|
|
1,402
|
|
|
Assets of continuing operations
|
16,000
|
|
15,060
|
|
11,497
|
|
5,514
|
|
48,071
|
|
|
Investment in nonconsolidated affiliates
|
510
|
|
326
|
|
76
|
|
259
|
|
1,171
|
|
|
Capital expenditures
|
363
|
|
459
|
|
284
|
|
10
|
|
1,116
|
|
|
|
|
|
|
|
|
1.A reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA and pro forma Operating EBITDA, as applicable, is provided in the table on the following page.
2.See Note 6 for information regarding the Company's restructuring programs and asset related charges.
3.Represents equity in earnings (losses) of nonconsolidated affiliates included in pro forma Operating EBITDA, the Company's measure of profit/loss for segment reporting purposes, which excludes significant items. Accordingly, Corporate presented above excludes a net charge of $224 million related to a joint venture and the Mobility & Materials segment reflects a restructuring charge of $4 million which are presented in "Equity in earnings of nonconsolidated affiliates" in the Company's Consolidated Statement of Operations.
4.The prior year amounts for Electronics & Industrial and Mobility & Materials have been adjusted to reflect current year presentation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Information Reconciliation to Consolidated Financial Statements
|
Segment Totals
|
N&B Separation
|
Corteva Distribution
|
Dow Distribution
|
Other 1
|
Total
|
|
In millions
|
|
For the Year Ended December 31, 2021
|
|
|
|
|
|
|
|
Capital expenditures
|
$
|
891
|
|
$
|
14
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(14)
|
|
$
|
891
|
|
|
Depreciation and amortization
|
$
|
1,395
|
|
$
|
63
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,458
|
|
|
For the Year Ended December 31, 2020
|
|
|
|
|
|
|
|
Capital expenditures
|
$
|
833
|
|
$
|
213
|
|
$
|
—
|
|
$
|
—
|
|
$
|
148
|
|
$
|
1,194
|
|
|
Depreciation and amortization
|
$
|
1,373
|
|
$
|
1,721
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
3,094
|
|
|
For the Year Ended December 31, 2019
|
|
|
|
|
|
|
|
Capital expenditures
|
$
|
1,116
|
|
$
|
304
|
|
$
|
252
|
|
$
|
426
|
|
$
|
374
|
|
$
|
2,472
|
|
|
Depreciation and amortization
|
$
|
1,402
|
|
$
|
664
|
|
$
|
385
|
|
$
|
744
|
|
$
|
—
|
|
$
|
3,195
|
|
1.Reflects the incremental cash spent or unpaid on capital expenditures; total capital expenditures are presented on a cash basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Asset Reconciliation at December 31,
|
2021
|
2020
|
2019
|
|
In millions
|
|
Assets of continuing operations
|
$
|
45,462
|
|
$
|
49,435
|
|
$
|
48,071
|
|
|
Assets held for sale
|
245
|
|
810
|
|
—
|
|
|
Assets of discontinued operations
|
—
|
|
20,659
|
|
21,278
|
|
|
Total assets
|
$
|
45,707
|
|
$
|
70,904
|
|
$
|
69,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of "Income (Loss) from continuing operations, net of tax" to Operating EBITDA
|
2021
|
2020
|
2019
|
|
In millions
|
|
Income (Loss) from continuing operations, net of tax
|
$
|
1,804
|
|
$
|
(2,406)
|
|
$
|
(124)
|
|
|
+
|
Provision for (Benefit from) income taxes on continuing operations
|
392
|
|
160
|
|
(2)
|
|
|
Income (Loss) from continuing operations before income taxes
|
$
|
2,196
|
|
$
|
(2,246)
|
|
$
|
(126)
|
|
|
+
|
Pro forma adjustments 1
|
—
|
|
—
|
|
128
|
|
|
+
|
Depreciation and amortization
|
1,395
|
|
1,373
|
|
1,402
|
|
|
-
|
Interest income 2
|
4
|
|
12
|
|
56
|
|
|
+
|
Interest expense 3, 4
|
503
|
|
672
|
|
696
|
|
|
-
|
Non-operating pension/OPEB benefit 2
|
52
|
|
30
|
|
72
|
|
|
-
|
Foreign exchange losses, net 2
|
(53)
|
|
(39)
|
|
(104)
|
|
|
+
|
Costs historically allocated to the materials science and agriculture businesses 5
|
—
|
|
—
|
|
256
|
|
|
-
|
Significant items 6
|
(79)
|
|
(3,643)
|
|
(1,812)
|
|
|
Operating EBITDA
|
$
|
4,170
|
|
$
|
3,439
|
|
$
|
4,144
|
|
1.For the year ended December 31, 2019, operating EBITDA is on a pro forma basis. The pro forma adjustment reflects the net pro forma impact of items directly attributable to the DWDP Transactions, as applicable.
2.Included in "Sundry income (expense) - net."
3.The year ended December 31, 2021 excludes significant items, refer to details below.
4.The year ended December 31, 2019 is presented on a pro forma basis giving effect to the DWDP Financings.
5.Costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205.
6.The significant items for the years ended December 31, 2021 and 2020 are presented on an as reported basis. The significant items for the year ended December 31, 2019 is presented on a pro forma basis.
The significant items for the years ended December 31, 2021 and 2020 are presented on an as reported basis. The significant items for the year ended December 31, 2019 are presented on a pro forma basis. The following tables summarize the pre-tax impact of significant items by segment that are excluded from Operating EBITDA and pro forma Operating EBITDA above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment for the Year Ended December 31, 2021
|
Electronics & Industrial
|
Water & Protection
|
Mobility & Materials
|
Corporate
|
Total
|
|
In millions
|
|
Acquisition, integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(133)
|
|
$
|
(133)
|
|
|
Restructuring and asset related charges - net 2
|
(8)
|
|
(30)
|
|
(7)
|
|
(10)
|
|
(55)
|
|
|
Merger-related inventory step-up amortization 3
|
(12)
|
|
—
|
|
—
|
|
—
|
|
(12)
|
|
|
Gain on divestiture 4
|
2
|
|
—
|
|
—
|
|
141
|
|
143
|
|
|
Intended Rogers Acquisition financing fees 5
|
—
|
|
—
|
|
—
|
|
(22)
|
|
(22)
|
|
|
Total
|
$
|
(18)
|
|
$
|
(30)
|
|
$
|
(7)
|
|
$
|
(24)
|
|
$
|
(79)
|
|
1. Acquisition, integration and separation costs related to strategic initiatives including the acquisition of Laird PM, the planned divestiture of the In-Scope M&M Businesses, the Intended Rogers Acquisition, and the completed and planned divestitures of the held for sale businesses included within Corporate.
2. Includes Board approved restructuring plans and asset related charges. See Note 6 for additional information.
3. Includes the amortization of the fair value step-up in Laird PM's inventories as a result of the acquisition.
4. Reflected in "Sundry income (expense) - net." Refer to Note 4 for additional information.
5. Includes acquisition costs associated with the Intended Rogers Acquisition related to the financing agreements, specifically the structuring fees and the amortization of the commitment fees reflected in "Interest Expense".
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment for the Year Ended December 31, 2020
|
Electronics & Industrial
|
Water & Protection
|
Mobility & Materials
|
Corporate
|
Total
|
|
In millions
|
|
Acquisition, integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(177)
|
|
$
|
(177)
|
|
|
Restructuring and asset related charges - net 2
|
(7)
|
|
(48)
|
|
(12)
|
|
(117)
|
|
(184)
|
|
|
Goodwill impairment charges 3
|
(834)
|
|
—
|
|
(1,664)
|
|
(716)
|
|
(3,214)
|
|
|
Asset impairment charges 3, 4
|
—
|
|
—
|
|
(339)
|
|
(322)
|
|
(661)
|
|
|
Gain on divestiture 5
|
197
|
|
—
|
|
—
|
|
396
|
|
593
|
|
|
Total
|
$
|
(644)
|
|
$
|
(48)
|
|
$
|
(2,015)
|
|
$
|
(936)
|
|
$
|
(3,643)
|
|
1.Acquisition, integration and separation costs related to strategic initiatives including the divestiture of the held for sale businesses and post-DWDP Merger integration.
2. Includes Board approved restructuring plans and asset related charges. See Note 6 for additional information.
3. See Note 14 for additional information.
4. See Note 6 for additional information.
5. Refer to Note 4 for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment for the Year Ended December 31, 2019 (Pro Forma)
|
Electronics & Industrial
|
Water & Protection
|
Mobility & Materials
|
Corporate
|
Total
|
|
In millions
|
|
Acquisition, integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(1,084)
|
|
$
|
(1,084)
|
|
|
Restructuring and asset related charges - net 2
|
(47)
|
|
(32)
|
|
(19)
|
|
(58)
|
|
(156)
|
|
|
Goodwill impairment charges 3
|
—
|
|
—
|
|
—
|
|
(242)
|
|
(242)
|
|
|
Net charge related to a joint venture 4
|
—
|
|
—
|
|
—
|
|
(208)
|
|
(208)
|
|
|
Income tax related items 5
|
—
|
|
(48)
|
|
—
|
|
(74)
|
|
(122)
|
|
|
Total
|
$
|
(47)
|
|
$
|
(80)
|
|
$
|
(19)
|
|
$
|
(1,666)
|
|
$
|
(1,812)
|
|
1.Acquisition, integration and separation costs related to the DWDP Merger, post-DWDP Merger integration, the DWDP Distributions and business separation activities.
2. Includes Board approved restructuring plans and asset related charges, which include other asset impairments. See Note 6 for additional information.
3. See Note 14 for additional information.
4. Reflects the Company’s share of net charges related to its investment in the HSC Group, consisting of $456 million in asset impairment charges, primarily fixed assets, partially offset by benefits associated with certain customer contract settlements of $248 million deemed non-recurring in nature.
5. Includes a $48 million charge which reflects a reduction in gross proceeds from lower withholding taxes related to a prior year legal settlement and a $74 million charge related to tax indemnifications, primarily associated with an adjustment to a one-time transition tax liability required by the Tax Cuts and Jobs Act of 2017, which were recorded in accordance with the Amended and Restated Tax Matters Agreement. Both charges were recorded in "Sundry income (expense) - net" in the Consolidated Statements of Operations.