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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-38196
DUPONT DE NEMOURS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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81-1224539
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State or other jurisdiction of incorporation or organization
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(I.R.S. Employer Identification No.)
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974 Centre Road
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Building 730
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Wilmington
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Delaware
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19805
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(Address of Principal Executive Offices)
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(Zip Code)
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(302) 774-1000
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, par value $0.01 per share
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DD
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New York Stock Exchange
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☑ Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☑ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer
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☑
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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☐
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Emerging growth company
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☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes ☑ No
The registrant had 745,482,399 shares of common stock, $0.01 par value, outstanding at August 2, 2019.
DuPont de Nemours, Inc.
QUARTERLY REPORT ON FORM 10-Q
For the quarterly period ended June 30, 2019
TABLE OF CONTENTS
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PAGE
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 4.
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Item 5.
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Item 6.
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Throughout this Quarterly Report on Form 10-Q, except as otherwise noted by the context, the terms "DuPont" or "Company" used herein mean DuPont de Nemours, Inc. and its consolidated subsidiaries. On June 1, 2019, DowDuPont Inc. changed its registered name to DuPont de Nemours, Inc. (“DuPont”) (for certain events prior to June 1, 2019, the Company may be referred to as DowDuPont). Beginning on June 3, 2019, the Company's common stock is traded on the New York Stock Exchange under the ticker symbol "DD".
Effective as of 5:00 p.m. on April 1, 2019, DowDuPont completed the previously announced separation of its materials science business into a separate and independent public company by way of a distribution of Dow Inc. (“Dow”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Dow’s common stock, par value $0.01 per share (the “Dow Common Stock”), to holders of the Company’s common stock, par value $0.01 per share, as of the close of business on March 21, 2019 (the “Dow Distribution”). Dow's historical financial results for periods prior to April 1, 2019 are reflected in DuPont's interim Consolidated Financial Statements as discontinued operations.
Effective as of 12:01 a.m. on June 1, 2019, the Company completed the previously announced separation of its agriculture business into a separate and independent public company by way of a distribution of Corteva, Inc. (“Corteva”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Corteva’s common stock, par value $0.01 per share (the “Corteva Common Stock”), to holders of the Company’s common stock, par value $0.01 per share, as of the close of business on May 24, 2019 (the “Corteva Distribution”). Corteva's historical financial results for periods prior to June 1, 2019 are reflected in DuPont's interim Consolidated Financial Statements as discontinued operations.
Following the Corteva Distribution, DuPont holds the specialty products business. Unless otherwise indicated, the interim Consolidated Financial Statements and Notes thereto present the financial position of DuPont's continuing operations as of June 30, 2019 and December 31, 2018 and the results of operations for the three and six months ended June 30, 2019 and 2018. The cash flows and comprehensive income related to Dow and Corteva have not been segregated and are included, as applicable, in the interim Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income, respectively, for all periods presented.
FORWARD-LOOKING STATEMENTS
This communication contains "forward-looking statements" within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "target," and similar expressions and variations or negatives of these words.
Forward-looking statements address matters that are, to varying degrees, uncertain and subject to risks, uncertainties and assumptions, many of which that are beyond DuPont's control, that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements are not guarantees of future results. Some of the important factors that could cause DuPont's actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) ability and costs to achieve all the expected benefits from the Dow Distribution and the Corteva Distribution (together, the “Distributions”); (ii) restrictions under intellectual property cross license agreements entered into in connection with the Distributions; (iii) non-compete restrictions agreed in connection with the Distributions; (iv) the incurrence of significant costs in connection with the Distributions, including costs to service debt incurred by the Company to establish the relative credit profiles of Corteva, Dow and DuPont and increased costs related to supply, service and other arrangements that, prior to the Dow Distribution, were between entities under the common control of DuPont; (v) risks related to indemnification of certain legacy liabilities of E. I. du Pont de Nemours and Company ("Historical EID") in connection with the Corteva Distribution; (vi) potential liability arising from fraudulent conveyance and similar laws in connection with the Distributions; (vii) failure to effectively manage acquisitions, divestitures, alliances, joint ventures and other portfolio changes, including meeting conditions under the Letter Agreement entered in connection with the Corteva Distribution, related to the transfer of certain levels of assets and businesses; (viii) uncertainty as to the long-term value of DuPont common stock; (ix) potential inability or reduced access to the capital markets or increased cost of borrowings, including as a result of a credit rating downgrade and (x) other risks to DuPont's business, operations and results of operations including from: failure to develop and market new products and optimally manage product life cycles; ability, cost and impact on business operations, including the supply chain, of responding to changes in market acceptance, rules, regulations and policies and failure to respond to such changes; outcome of significant litigation, environmental matters and other commitments and contingencies; failure to appropriately manage process safety and product stewardship issues; global economic and capital market conditions, including the continued availability of capital and financing, as well as inflation, interest and currency exchange rates; changes in political conditions, including tariffs, trade disputes and retaliatory actions; impairment of goodwill or intangible assets; the availability of and fluctuations in the cost
of energy and raw materials; business or supply disruption, including in connection with the Distributions; security threats, such as acts of sabotage, terrorism or war, natural disasters and weather events and patterns which could result in a significant operational event for DuPont, adversely impact demand or production; ability to discover, develop and protect new technologies and to protect and enforce DuPont's intellectual property rights; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management's response to any of the aforementioned factors. These risks are and will be more fully discussed in DuPont's current, quarterly and annual reports and other filings made with the U.S. Securities and Exchange Commission, in each case, as may be amended from time to time in future filings with the SEC. While the list of factors presented here is considered representative, no such list should be considered a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DuPont’s consolidated financial condition, results of operations, credit rating or liquidity. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. DuPont assumes no obligation to publicly provide revisions or updates to any forward-looking statements whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws. A detailed discussion of some of the significant risks and uncertainties which may cause results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” (Part II, Item 1A of this Form 10-Q).
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PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
DuPont de Nemours, Inc.
Consolidated Statements of Operations
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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In millions, except per share amounts (Unaudited)
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2019
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2018
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2019
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2018
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Net sales
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$
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5,468
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$
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5,857
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$
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10,882
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$
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11,454
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Cost of sales
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3,496
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4,085
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7,117
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7,890
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Research and development expenses
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232
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270
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499
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544
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Selling, general and administrative expenses
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642
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768
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1,368
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1,570
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Amortization of intangibles
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252
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266
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508
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531
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Restructuring and asset related charges - net
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137
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46
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208
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99
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Goodwill impairment charge
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1,175
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—
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1,175
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—
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Integration and separation costs
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347
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428
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958
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793
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Equity in earnings of nonconsolidated affiliates
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49
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54
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89
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111
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Sundry income (expense) - net
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(19
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)
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82
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65
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(16
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)
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Interest expense
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165
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—
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316
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—
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(Loss) income from continuing operations before income taxes
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(948
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)
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130
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(1,113
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)
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122
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Provision for income taxes on continuing operations
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155
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99
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64
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164
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(Loss) income from continuing operations, net of tax
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(1,103
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)
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31
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(1,177
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)
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(42
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)
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Income from discontinued operations, net of tax
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566
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1,773
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1,212
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2,983
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Net (loss) income
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(537
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)
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1,804
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35
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2,941
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Net income attributable to noncontrolling interests
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34
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35
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85
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79
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Net (loss) income available for DuPont common stockholders
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$
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(571
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)
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$
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1,769
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$
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(50
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)
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$
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2,862
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Per common share data:
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(Loss) earnings per common share from continuing operations - basic
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$
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(1.48
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)
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$
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0.03
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$
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(1.59
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)
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$
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(0.09
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)
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Income per common share from discontinued operations - basic
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0.72
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2.26
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1.52
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3.78
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(Loss) earnings per common share - basic
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$
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(0.76
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)
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$
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2.29
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$
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(0.07
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)
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$
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3.69
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(Loss) earnings per common share from continuing operations - diluted
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$
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(1.48
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)
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$
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0.03
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$
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(1.59
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)
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$
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(0.09
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)
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Income per common share from discontinued operations - diluted
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0.72
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2.24
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1.52
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3.78
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(Loss) earnings per common share - diluted
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$
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(0.76
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)
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$
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2.27
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$
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(0.07
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)
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$
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3.69
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Weighted-average common shares outstanding - basic
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749.0
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769.6
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749.6
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771.0
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Weighted-average common shares outstanding - diluted
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749.0
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774.5
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749.6
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771.0
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See Notes to the Consolidated Financial Statements.
DuPont de Nemours, Inc.
Consolidated Statements of Comprehensive Income
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Three Months Ended
June 30,
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Six Months Ended
June 30,
|
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In millions (Unaudited)
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2019
|
2018
|
2019
|
2018
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Net (loss) income
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$
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(537
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)
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$
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1,804
|
|
$
|
35
|
|
$
|
2,941
|
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
Unrealized gains (losses) on investments
|
—
|
|
(14
|
)
|
67
|
|
(39
|
)
|
|
Cumulative translation adjustments
|
(38
|
)
|
(2,393
|
)
|
(135
|
)
|
(1,060
|
)
|
|
Pension and other post employment benefit plans
|
56
|
|
127
|
|
191
|
|
257
|
|
|
Derivative instruments
|
17
|
|
102
|
|
(58
|
)
|
119
|
|
|
Total other comprehensive income (loss)
|
35
|
|
(2,178
|
)
|
65
|
|
(723
|
)
|
|
Comprehensive (loss) income
|
(502
|
)
|
(374
|
)
|
100
|
|
2,218
|
|
|
Comprehensive income attributable to noncontrolling interests, net of tax
|
41
|
|
2
|
|
98
|
|
40
|
|
|
Comprehensive (loss) income attributable to DuPont
|
$
|
(543
|
)
|
$
|
(376
|
)
|
$
|
2
|
|
$
|
2,178
|
|
See Notes to the Consolidated Financial Statements.
DuPont de Nemours, Inc.
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
In millions, except per share amounts (Unaudited)
|
June 30, 2019
|
Dec 31, 2018
|
|
Assets
|
|
|
|
Current Assets
|
|
|
|
Cash and cash equivalents
|
$
|
1,661
|
|
$
|
8,548
|
|
|
Marketable securities
|
8
|
|
29
|
|
|
Accounts and notes receivable - net
|
4,214
|
|
3,391
|
|
|
Inventories
|
4,390
|
|
4,107
|
|
|
Other current assets
|
350
|
|
305
|
|
|
Assets of discontinued operations
|
—
|
|
110,275
|
|
|
Total current assets
|
10,623
|
|
126,655
|
|
|
Investments
|
|
|
|
Investments in nonconsolidated affiliates
|
1,653
|
|
1,745
|
|
|
Other investments
|
29
|
|
28
|
|
|
Noncurrent receivables
|
36
|
|
47
|
|
|
Total investments
|
1,718
|
|
1,820
|
|
|
Property, plant and equipment - net of accumulated depreciation (June 30, 2019 - $4,667; December 31, 2018 - $4,199)
|
9,806
|
|
9,917
|
|
|
Other Assets
|
|
|
|
Goodwill
|
33,330
|
|
34,496
|
|
|
Other intangible assets
|
14,150
|
|
14,655
|
|
|
Deferred income tax assets
|
219
|
|
178
|
|
|
Deferred charges and other assets
|
997
|
|
134
|
|
|
Total other assets
|
48,696
|
|
49,463
|
|
|
Total Assets
|
$
|
70,843
|
|
$
|
187,855
|
|
|
Liabilities and Equity
|
|
|
|
Current Liabilities
|
|
|
|
Short-term borrowings and finance lease obligations
|
$
|
1,621
|
|
$
|
15
|
|
|
Accounts payable
|
3,020
|
|
2,619
|
|
|
Income taxes payable
|
164
|
|
115
|
|
|
Accrued and other current liabilities
|
1,652
|
|
1,129
|
|
|
Liabilities of discontinued operations
|
—
|
|
69,434
|
|
|
Total current liabilities
|
6,457
|
|
73,312
|
|
|
Long-Term Debt
|
15,608
|
|
12,624
|
|
|
Other Noncurrent Liabilities
|
|
|
|
Deferred income tax liabilities
|
3,662
|
|
3,912
|
|
|
Pension and other post employment benefits - noncurrent
|
1,102
|
|
1,343
|
|
|
Other noncurrent obligations
|
1,438
|
|
764
|
|
|
Total other noncurrent liabilities
|
6,202
|
|
6,019
|
|
|
Total Liabilities
|
$
|
28,267
|
|
$
|
91,955
|
|
|
Commitments and contingent liabilities
|
|
|
|
Stockholders' Equity
|
|
|
|
Common stock (authorized 1,666,666,667 shares of $0.01 par value each; issued 2019: 747,443,517 shares; 2018: 784,143,433 shares)
|
7
|
|
8
|
|
|
Additional paid-in capital
|
51,129
|
|
81,976
|
|
|
(Accumulated deficit) Retained earnings
|
(8,299
|
)
|
30,257
|
|
|
Accumulated other comprehensive loss
|
(831
|
)
|
(12,394
|
)
|
|
Unearned ESOP shares
|
—
|
|
(134
|
)
|
|
Treasury stock at cost (2019: 0 shares; 2018: 27,817,518 shares)
|
—
|
|
(5,421
|
)
|
|
Total DuPont's stockholders' equity
|
42,006
|
|
94,292
|
|
|
Noncontrolling interests
|
570
|
|
1,608
|
|
|
Total equity
|
42,576
|
|
95,900
|
|
|
Total Liabilities and Equity
|
$
|
70,843
|
|
$
|
187,855
|
|
See Notes to the Consolidated Financial Statements.
DuPont de Nemours, Inc.
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
In millions (Unaudited)
|
2019
|
2018
|
|
Operating Activities
|
|
|
|
Net income
|
$
|
35
|
|
$
|
2,941
|
|
|
Adjustments to reconcile net income to net cash used for operating activities:
|
|
|
|
Depreciation and amortization
|
2,163
|
|
2,980
|
|
|
Credit for deferred income tax
|
(535
|
)
|
(182
|
)
|
|
Earnings of nonconsolidated affiliates less than dividends received
|
733
|
|
199
|
|
|
Net periodic pension benefit (credit) cost
|
(53
|
)
|
56
|
|
|
Pension contributions
|
(463
|
)
|
(500
|
)
|
|
Net gain on sales of assets, businesses and investments
|
(55
|
)
|
(67
|
)
|
|
Restructuring and asset related charges - net
|
482
|
|
451
|
|
|
Goodwill impairment charge
|
1,175
|
|
—
|
|
|
Amortization of merger-related inventory step-up
|
253
|
|
1,385
|
|
|
Other net loss
|
274
|
|
466
|
|
|
Changes in assets and liabilities, net of effects of acquired and divested companies:
|
|
|
|
Accounts and notes receivable
|
(2,535
|
)
|
(4,454
|
)
|
|
Inventories
|
302
|
|
(215
|
)
|
|
Accounts payable
|
(695
|
)
|
65
|
|
|
Other assets and liabilities, net
|
(1,132
|
)
|
(3,172
|
)
|
|
Cash used for operating activities
|
(51
|
)
|
(47
|
)
|
|
Investing Activities
|
|
|
|
|
Capital expenditures
|
(1,800
|
)
|
(1,586
|
)
|
|
Investment in gas field developments
|
(25
|
)
|
(46
|
)
|
|
Proceeds from sales of property and businesses, net of cash divested
|
126
|
|
96
|
|
|
Distributions and loan repayments from nonconsolidated affiliates
|
—
|
|
55
|
|
|
Proceeds from sale of ownership interests in nonconsolidated affiliates
|
21
|
|
—
|
|
|
Purchases of investments
|
(192
|
)
|
(1,891
|
)
|
|
Proceeds from sales and maturities of investments
|
228
|
|
2,328
|
|
|
Proceeds from interests in trade accounts receivable conduits
|
—
|
|
656
|
|
|
Other investing activities, net
|
(15
|
)
|
(2
|
)
|
|
Cash used for investing activities
|
(1,657
|
)
|
(390
|
)
|
|
Financing Activities
|
|
|
|
Changes in short-term notes payable
|
2,517
|
|
800
|
|
|
Proceeds from issuance of long-term debt
|
4,005
|
|
254
|
|
|
Payments on long-term debt
|
(6,892
|
)
|
(842
|
)
|
|
Purchases of treasury stock
|
(1,681
|
)
|
(2,000
|
)
|
|
Proceeds from issuance of Company stock
|
67
|
|
142
|
|
|
Employee taxes paid for share-based payment arrangements
|
(76
|
)
|
(118
|
)
|
|
Distributions to noncontrolling interests
|
(12
|
)
|
(79
|
)
|
|
Dividends paid to stockholders
|
(1,165
|
)
|
(1,755
|
)
|
|
Cash held by Dow and Corteva at the respective Distributions
|
(7,315
|
)
|
—
|
|
|
Debt extinguishment costs
|
(104
|
)
|
—
|
|
|
Other financing activities, net
|
(5
|
)
|
(4
|
)
|
|
Cash used for financing activities
|
(10,661
|
)
|
(3,602
|
)
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
48
|
|
(171
|
)
|
|
Decrease in cash, cash equivalents and restricted cash
|
(12,321
|
)
|
(4,210
|
)
|
|
Cash, cash equivalents and restricted cash from continuing operations, beginning of period
|
8,591
|
|
4,441
|
|
|
Cash, cash equivalents and restricted cash from discontinued operations, beginning of period
|
5,431
|
|
9,574
|
|
|
Cash, cash equivalents and restricted cash at beginning of period
|
14,022
|
|
14,015
|
|
|
Cash, cash equivalents and restricted cash from continuing operations, end of period
|
1,701
|
|
1,844
|
|
|
Cash, cash equivalents and restricted cash from discontinued operations, end of period
|
—
|
|
7,961
|
|
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
1,701
|
|
$
|
9,805
|
|
See Notes to the Consolidated Financial Statements.
DuPont de Nemours, Inc.
Consolidated Statements of Equity
For the six months ended June 30, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions (Unaudited)
|
Common Stock
|
Additional Paid-in Capital
|
Retained Earnings (Accumulated Deficit)
|
Accumulated Other Comp Loss
|
Unearned ESOP
|
Treasury Stock
|
Non-controlling Interests
|
Total Equity
|
|
Balance at December 31, 2017
|
$
|
8
|
|
$
|
81,272
|
|
$
|
28,931
|
|
$
|
(8,972
|
)
|
$
|
(189
|
)
|
$
|
(1,000
|
)
|
$
|
1,597
|
|
$
|
101,647
|
|
|
Adoption of accounting standards
|
—
|
|
—
|
|
996
|
|
(1,037
|
)
|
—
|
|
—
|
|
—
|
|
(41
|
)
|
|
Net income
|
—
|
|
—
|
|
2,862
|
|
—
|
|
—
|
|
—
|
|
79
|
|
2,941
|
|
|
Other comprehensive loss
|
—
|
|
—
|
|
—
|
|
(723
|
)
|
—
|
|
—
|
|
(39
|
)
|
(762
|
)
|
|
Dividends ($2.27 per common share)
|
—
|
|
—
|
|
(2,629
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,629
|
)
|
|
Common stock issued/sold
|
—
|
|
142
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
142
|
|
|
Stock-based compensation and allocation of ESOP shares
|
—
|
|
285
|
|
—
|
|
—
|
|
44
|
|
—
|
|
—
|
|
329
|
|
|
Distributions to non-controlling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(73
|
)
|
(73
|
)
|
|
Purchases of treasury stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(2,000
|
)
|
—
|
|
(2,000
|
)
|
|
Other
|
—
|
|
—
|
|
(18
|
)
|
—
|
|
—
|
|
—
|
|
56
|
|
38
|
|
|
Balance at June 30, 2018
|
$
|
8
|
|
$
|
81,699
|
|
$
|
30,142
|
|
$
|
(10,732
|
)
|
$
|
(145
|
)
|
$
|
(3,000
|
)
|
$
|
1,620
|
|
$
|
99,592
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2018
|
$
|
8
|
|
$
|
81,976
|
|
$
|
30,257
|
|
$
|
(12,394
|
)
|
$
|
(134
|
)
|
$
|
(5,421
|
)
|
$
|
1,608
|
|
$
|
95,900
|
|
|
Adoption of accounting standards
|
—
|
|
—
|
|
(111
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(111
|
)
|
|
Net income
|
—
|
|
—
|
|
(50
|
)
|
—
|
|
—
|
|
—
|
|
85
|
|
35
|
|
|
Other comprehensive income
|
—
|
|
—
|
|
—
|
|
65
|
|
—
|
|
—
|
|
13
|
|
78
|
|
|
Dividends ($1.86 per common share)
|
—
|
|
(224
|
)
|
(1,165
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,389
|
)
|
|
Common stock issued/sold
|
—
|
|
67
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
67
|
|
|
Stock-based compensation and allocation of ESOP shares
|
—
|
|
153
|
|
—
|
|
—
|
|
29
|
|
—
|
|
—
|
|
182
|
|
|
Distributions to non-controlling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(12
|
)
|
(12
|
)
|
|
Purchases of treasury stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,681
|
)
|
—
|
|
(1,681
|
)
|
|
Retirement of treasury stock
|
—
|
|
—
|
|
(7,102
|
)
|
—
|
|
—
|
|
7,102
|
|
—
|
|
—
|
|
|
Spin-off of Dow and Corteva
|
—
|
|
(30,843
|
)
|
(30,123
|
)
|
11,498
|
|
105
|
|
—
|
|
(1,124
|
)
|
(50,487
|
)
|
|
Other
|
(1
|
)
|
—
|
|
(5
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(6
|
)
|
|
Balance at June 30, 2019
|
$
|
7
|
|
$
|
51,129
|
|
$
|
(8,299
|
)
|
$
|
(831
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
570
|
|
$
|
42,576
|
|
See Notes to the Consolidated Financial Statements.
DuPont de Nemours, Inc.
Consolidated Statements of Equity
For the three months ended June 30, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions (Unaudited)
|
Common Stock
|
Additional Paid-in Capital
|
Retained Earnings (Accumulated Deficit)
|
Accumulated Other Comp Loss
|
Unearned ESOP
|
Treasury Stock
|
Non-controlling Interests
|
Total Equity
|
|
Balance at March 31, 2018
|
$
|
8
|
|
$
|
81,533
|
|
$
|
29,075
|
|
$
|
(7,497
|
)
|
$
|
(150
|
)
|
$
|
(2,000
|
)
|
$
|
1,664
|
|
$
|
102,633
|
|
|
Adoption of accounting standards
|
—
|
|
—
|
|
1,057
|
|
(1,057
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
Net income
|
—
|
|
—
|
|
1,769
|
|
—
|
|
—
|
|
—
|
|
35
|
|
1,804
|
|
|
Other comprehensive loss
|
—
|
|
—
|
|
—
|
|
(2,178
|
)
|
—
|
|
—
|
|
(33
|
)
|
(2,211
|
)
|
|
Dividends ($1.14 per common share)
|
—
|
|
—
|
|
(1,749
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,749
|
)
|
|
Common stock issued/sold
|
—
|
|
34
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
34
|
|
|
Stock-based compensation and allocated ESOP shares
|
—
|
|
132
|
|
—
|
|
—
|
|
5
|
|
—
|
|
—
|
|
137
|
|
|
Distributions to non-controlling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(46
|
)
|
(46
|
)
|
|
Purchases of treasury stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1,000
|
)
|
—
|
|
(1,000
|
)
|
|
Other
|
—
|
|
—
|
|
(10
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
(10
|
)
|
|
Balance at June 30, 2018
|
$
|
8
|
|
$
|
81,699
|
|
$
|
30,142
|
|
$
|
(10,732
|
)
|
$
|
(145
|
)
|
$
|
(3,000
|
)
|
$
|
1,620
|
|
$
|
99,592
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2019
|
$
|
8
|
|
$
|
82,141
|
|
$
|
29,486
|
|
$
|
(12,364
|
)
|
$
|
(105
|
)
|
$
|
(7,000
|
)
|
$
|
1,654
|
|
$
|
93,820
|
|
|
Net loss
|
—
|
|
—
|
|
(571
|
)
|
—
|
|
—
|
|
—
|
|
34
|
|
(537
|
)
|
|
Other comprehensive income
|
—
|
|
—
|
|
—
|
|
35
|
|
—
|
|
—
|
|
7
|
|
42
|
|
|
Dividends ($0.30 per common share)
|
—
|
|
(224
|
)
|
11
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(213
|
)
|
|
Common stock issued/sold
|
—
|
|
4
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
4
|
|
|
Stock-based compensation and allocation of ESOP shares
|
—
|
|
51
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
51
|
|
|
Distributions to non-controlling interests
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
(1
|
)
|
|
Purchases of treasury stock
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(102
|
)
|
—
|
|
(102
|
)
|
|
Retirement of treasury stock
|
—
|
|
—
|
|
(7,102
|
)
|
—
|
|
—
|
|
7,102
|
|
—
|
|
—
|
|
|
Spin-off of Dow and Corteva
|
—
|
|
(30,843
|
)
|
(30,123
|
)
|
11,498
|
|
105
|
|
|
(1,124
|
)
|
(50,487
|
)
|
|
Other
|
(1
|
)
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
(1
|
)
|
|
Balance at June 30, 2019
|
$
|
7
|
|
$
|
51,129
|
|
$
|
(8,299
|
)
|
$
|
(831
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
570
|
|
$
|
42,576
|
|
See Notes to the Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
|
|
|
|
|
|
|
Note
|
|
Page
|
|
1
|
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
|
|
5
|
|
|
|
6
|
|
|
|
7
|
|
|
|
8
|
|
|
|
9
|
|
|
|
10
|
|
|
|
11
|
|
|
|
12
|
|
|
|
13
|
|
|
|
14
|
|
|
|
15
|
|
|
|
16
|
|
|
|
17
|
|
|
|
18
|
|
|
|
19
|
|
|
|
20
|
|
|
|
21
|
|
|
|
22
|
|
|
|
23
|
|
|
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the interim statements reflect all adjustments (including normal recurring accruals) which are considered necessary for the fair statement of the results for the periods presented. Results from interim periods should not be considered indicative of results for the full year. These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, collectively referred to as the “2018 Annual Report.” The interim Consolidated Financial Statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained.
Basis of Presentation
Effective August 31, 2017, pursuant to the merger of equals transaction contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017 ("Merger Agreement"), The Dow Chemical Company ("Historical Dow") and E. I. du Pont de Nemours and Company ("Historical EID") each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, Historical Dow and Historical EID became subsidiaries of DowDuPont (the "Merger"). Prior to the Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the Merger Agreement. Dow was determined to be the accounting acquirer in the Merger.
Except as otherwise indicated by the context, the term "Historical Dow" includes Historical Dow and its consolidated subsidiaries, "Historical EID" includes Historical EID and its consolidated subsidiaries, and "Dow Silicones" means Dow Silicones Corporation, a wholly owned subsidiary of Historical Dow.
Spin-Offs
Effective as of 5:00 p.m. on April 1, 2019, the Company completed the previously announced separation of its materials science business into a separate and independent public company by way of a distribution of Dow Inc. (“Dow”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Dow’s common stock, par value $0.01 per share (the “Dow Common Stock”), to holders of the Company’s common stock, par value $0.01 per share (the “DowDuPont common stock”), as of the close of business on March 21, 2019 (the “Dow Distribution”).
Effective as of 12:01 a.m. on June 1, 2019, the Company completed the previously announced separation of its agriculture business into a separate and independent public company by way of a distribution of Corteva, Inc. (“Corteva”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Corteva’s common stock, par value $0.01 per share (the “Corteva Common Stock”), to holders of the Company’s common stock, par value $0.01 per share, as of the close of business on May 24, 2019 (the “Corteva Distribution” and, together with the Dow Distribution, the “Distributions”).
Following the Corteva Distribution, DuPont holds the specialty products business. On June 1, 2019, DowDuPont changed its registered name from "DowDuPont Inc." to "DuPont de Nemours, Inc." doing business as "DuPont." Beginning on June 3, 2019, the Company's common stock is traded on the NYSE under the ticker symbol "DD".
These interim Consolidated Financial Statements present the financial position of DuPont as of June 30, 2019 and December 31, 2018 and the results of operations of DuPont for the three and six months ended June 30, 2019 and 2018 giving effect to the Distributions, with the historical financial results of Dow and Corteva reflected as discontinued operations. The cash flows and comprehensive income related to Dow and Corteva have not been segregated and are included in the interim Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income, respectively, for all periods presented. Unless otherwise indicated, the information in the notes to the interim Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow or Corteva.
Reverse Stock Split
On June 1, 2019, immediately following the Corteva Distribution, the Company completed a 1-for-3 reverse stock split of DuPont's outstanding common stock (the "Reverse Stock Split") and as a result, DuPont common stockholders now hold one share of common stock of DuPont for every three shares held prior to the Reverse Stock Split. The authorized number of shares of common stock was reduced from 5,000,000,000 shares to 1,666,666,667 shares, par value remained $0.01 per share. Stockholders entitled to fractional shares as a result of the Reverse Stock Split received a cash payment in lieu of receiving fractional shares. All share and share-related information presented in these interim Consolidated Financial Statements have been retroactively adjusted in all periods presented to reflect the decreased number of shares resulting from the Reverse Stock Split. The retroactive adjustments
resulted in the reclassification of $16 million from "Common stock" to "Additional paid-in capital" in the interim Condensed Consolidated Balance Sheets for all periods presented.
Significant Accounting Policies
The Company updated its accounting policy for leases since the issuance of its 2018 Annual Report as a result of the adoption of Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)" in the first quarter of 2019. After the completion of the Distributions, the Company updated its accounting policy for inventories. See Note 1, "Summary of Significant Accounting Policies," to the 2018 Annual Report for more information on DuPont's other significant accounting policies.
Leases
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 interim Condensed Consolidated Balance Sheets. Operating lease liabilities are included in "Accrued and other current liabilities" and "Other noncurrent obligations" on the interim Condensed 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 interim Condensed 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 interim 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 Notes 2 and 16 for additional information regarding the Company's leases.
Inventories
Prior to the Corteva Distribution, the Company recorded inventory under the last-in, first-out ("LIFO"), first-in, first-out and average cost methods. During the second quarter, effective after the Corteva Distribution, DuPont elected to change the method of accounting for inventories of the specialty products business recorded under the LIFO method to the average cost method. The effects of the change in accounting principle have been retrospectively applied to all prior periods presented. See Note 10 for more information regarding the change in inventory accounting method.
NOTE 2 - RECENT ACCOUNTING GUIDANCE
Recently Adopted Accounting Guidance
In February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, Leases (Topic 842), and associated ASUs related to Topic 842, which requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance requires that a lessee recognize assets and liabilities for leases, and recognition, presentation and measurement in the financial statements depends on whether the lease is classified as a finance or operating lease. In addition, the new guidance requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. Lessor accounting remains largely unchanged from previous U.S. GAAP but does contain some targeted improvements to align with the new revenue recognition guidance, referred to as "Topic 606," issued in 2014.
The Company adopted the new standard in the first quarter of 2019, which allows for a modified retrospective transition approach, applying the new standard to all leases existing at the date of initial adoption. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statement as its date of initial application. The Company has elected to apply the transition requirements at the January 1, 2019 effective date rather than at the beginning of the earliest comparative period presented. This approach allows for a cumulative effect adjustment in the period of adoption, and prior periods are not restated and continue to be reported in accordance with historic accounting under ASC 840 (Leases). In addition, the Company has elected the package of practical expedients permitted under the transition guidance within the new standard which does not require reassessment of prior conclusions related to contracts containing a lease, lease classification and initial direct lease costs. As an accounting policy election, the Company chose to not apply the standard to certain existing land easements, excluded short-term leases (term of 12 months or less) from the balance sheet and accounts for nonlease and lease components in a contract as a single component for all asset classes. The following table summarizes the impact of adoption to the consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Changes to the Consolidated Balance Sheet
|
As Reported
Dec 31, 2018 1
|
Effect of Adoption of ASU 2016-02
|
Updated
Jan 1, 2019
|
|
In millions
|
|
Assets
|
|
|
|
|
Deferred charges and other assets
|
$
|
134
|
|
$
|
584
|
|
$
|
718
|
|
|
Total other assets
|
$
|
49,463
|
|
$
|
584
|
|
$
|
50,047
|
|
|
Assets of discontinued operations
|
$
|
110,275
|
|
$
|
2,787
|
|
$
|
113,062
|
|
|
Total Assets
|
$
|
187,855
|
|
$
|
3,371
|
|
$
|
191,226
|
|
|
Liabilities
|
|
|
|
|
Accrued and other current liabilities
|
$
|
1,129
|
|
$
|
156
|
|
$
|
1,285
|
|
|
Total current liabilities
|
$
|
73,312
|
|
$
|
156
|
|
$
|
73,468
|
|
|
Other noncurrent obligations
|
$
|
764
|
|
$
|
428
|
|
$
|
1,192
|
|
|
Total other noncurrent liabilities
|
$
|
6,019
|
|
$
|
428
|
|
$
|
6,447
|
|
|
Liabilities of discontinued operations
|
$
|
69,434
|
|
$
|
2,715
|
|
$
|
72,149
|
|
|
Total Liabilities
|
$
|
91,955
|
|
$
|
3,299
|
|
$
|
95,254
|
|
|
Stockholders' Equity
|
|
|
|
|
Retained earnings 2
|
$
|
30,257
|
|
$
|
72
|
|
$
|
30,329
|
|
|
DuPont's stockholders' equity
|
$
|
94,292
|
|
$
|
72
|
|
$
|
94,364
|
|
|
Total equity
|
$
|
95,900
|
|
$
|
72
|
|
$
|
95,972
|
|
|
Total Liabilities and Equity
|
$
|
187,855
|
|
$
|
3,371
|
|
$
|
191,226
|
|
1.The as reported December 31, 2018 information has been updated to reflect the impact of the reverse stock split and the change in accounting policy discussed in Note 1.
2. The net impact to retained earnings was primarily a result of the recognition of a deferred gain associated with a prior sale-leaseback transaction.
The adoption of the new guidance did not have a material impact on the Company's interim Consolidated Statement of Operations and had no impact on the interim Consolidated Statement of Cash Flows.
Accounting Guidance Issued But Not Adopted at June 30, 2019
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which is part of the FASB disclosure framework project to improve the effectiveness of disclosures in the notes to the financial statements. The amendments in the new guidance remove, modify and add certain disclosure requirements related to fair value measurements covered in ASC 820, Fair Value Measurement. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for either the entire standard or only the requirements that modify or eliminate the disclosure requirements,
with certain requirements applied prospectively, and all other requirements applied retrospectively to all periods presented. The Company is currently evaluating the impact of adopting this guidance.
In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This new standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350, Intangibles - Goodwill and Other, to determine which implementation costs to capitalize as assets or expense as incurred. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted and an entity can elect to apply the new guidance on a prospective or retrospective basis. The Company is currently evaluating the impact of adopting this guidance and does not expect there to be a significant impact.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which was further updated in November 2018 and May 2019. The new guidance introduces the current expected credit loss (CECL) model, which will require an entity to record an allowance for credit losses for certain financial instruments and financial assets, including trade receivables, based on expected losses rather than incurred losses. Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument. This update will be effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance on the Consolidated Financial Statements and related disclosures.
NOTE 3 - DIVESTITURES
Separation Agreements
In connection with the Dow Distribution and the Corteva Distribution, the Company has entered into certain agreements that, among other things, effect the separations, provide 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 provide a framework for DuPont’s relationship with Dow and Corteva following the Distributions. Effective April 1, 2019, the Parties entered into the following agreements:
|
|
|
|
•
|
Separation and Distribution Agreement - The Parties entered into an agreement that sets forth, among other things, the agreements among the Parties regarding the principal transactions necessary to effect the Distributions. It also sets forth other agreements that govern certain aspects of the Parties’ ongoing relationships after the completion of the Distributions (the "Separation and Distribution Agreement").
|
|
|
|
|
•
|
Tax Matters Agreement - The Parties entered into an agreement that governs their respective 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 and other matters regarding taxes.
|
|
|
|
|
•
|
Employee Matters Agreement - The Parties entered into an agreement that identifies employees and employee-related liabilities (and attributable assets) to be allocated (either retained, transferred and accepted, or assigned and assumed, as applicable) to the Parties as part of the Distributions and describes when and how the relevant transfers and assignments will occur.
|
|
|
|
|
•
|
Intellectual Property Cross-License Agreement - DuPont entered into an Intellectual Property Cross-License Agreement with Dow (the “DuPont-Dow IP Cross-License Agreement”). The DuPont-Dow IP Cross-License Agreement sets forth the terms and conditions under which the applicable Parties may use in their respective businesses, following each of the Distributions, certain know-how (including trade secrets), copyrights, software, and certain patents and standards, allocated to another Party pursuant to the Separation and Distribution 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 Distributions.
Effective June 1, 2019, in connection with the Corteva Distribution, DuPont and Corteva entered into the following agreements:
|
|
|
|
•
|
Intellectual Property Cross-License Agreement - DuPont and Corteva entered into an Intellectual Property Cross-License Agreement (the “DuPont-Corteva IP Cross-License Agreement”). The DuPont-Corteva IP Cross-License Agreement sets forth the terms and conditions under which the applicable parties may use in their respective businesses, following the Corteva Distribution, certain know-how (including trade secrets), copyrights, software, and certain patents and standards, allocated to another Party pursuant to the Separation and Distribution Agreement.
|
|
|
|
|
•
|
Letter Agreement - The Company entered into a letter agreement (the "Letter Agreement") with Corteva that sets forth certain additional terms and conditions related to the Corteva Distribution, including certain limitations on DuPont’s and Corteva's ability to transfer certain businesses and assets to third parties without assigning certain of such Party’s indemnification obligations under the Separation and Distribution Agreement to the other Party to the transferee of such businesses and assets or meeting certain other alternative conditions. The Letter Agreement further outlines the allocation between DuPont and Corteva of liabilities associated with certain legal and environmental matters, including liabilities associated with discontinued and/or divested operations and businesses of Historical EID. See Note 15 for more information regarding the allocation.
|
|
|
|
|
•
|
Amended and Restated Tax Matters Agreement - The Parties entered into an amendment and restatement of the Tax Matters Agreement, between DuPont, Corteva and Dow, effective as of April 1, 2019 (as so amended and restated, the “Amended and Restated Tax Matters Agreement”). The Amended and Restated Tax Matters Agreement 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 and other matters regarding taxes. The Parties amended and restated the Tax Matters Agreement in connection with the Corteva Distribution in order to allocate between DuPont and Corteva certain rights and obligations of the Company provided in the original form of the Tax Matters Agreement. See Note 7 for additional information on the Tax Matters Agreement and the Amended and Restated Tax Matters 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
June 30, 2018
|
June 30, 2019
|
June 30, 2018
|
|
Net sales
|
$
|
12,750
|
|
$
|
10,867
|
|
$
|
24,890
|
|
|
Cost of sales
|
10,266
|
|
8,917
|
|
20,055
|
|
|
Research and development expenses
|
188
|
|
163
|
|
361
|
|
|
Selling, general and administrative expenses
|
370
|
|
329
|
|
704
|
|
|
Amortization of intangibles
|
116
|
|
116
|
|
235
|
|
|
Restructuring and asset related charges - net
|
42
|
|
157
|
|
128
|
|
|
Integration and separation costs
|
32
|
|
44
|
|
53
|
|
|
Equity in earnings of nonconsolidated affiliates
|
194
|
|
(13
|
)
|
395
|
|
|
Sundry income (expense) - net
|
21
|
|
99
|
|
117
|
|
|
Interest expense
|
263
|
|
240
|
|
524
|
|
|
Income from discontinued operations before income taxes
|
1,688
|
|
987
|
|
3,342
|
|
|
Provision for income taxes on discontinued operations
|
369
|
|
261
|
|
686
|
|
|
Income from discontinued operations, net of tax
|
1,319
|
|
726
|
|
2,656
|
|
|
Income from discontinued operations attributable to noncontrolling interests, net of tax
|
29
|
|
37
|
|
48
|
|
|
Income from discontinued operations attributable to DuPont stockholders, net of tax
|
$
|
1,290
|
|
$
|
689
|
|
$
|
2,608
|
|
The following table presents depreciation, amortization, and capital expenditures of the discontinued operations related to the Materials Science Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
June 30, 2018
|
June 30, 2019
|
June 30, 2018
|
|
Depreciation and amortization
|
$
|
698
|
|
$
|
743
|
|
$
|
1,407
|
|
|
Capital expenditures
|
$
|
482
|
|
$
|
597
|
|
$
|
868
|
|
The carrying amount of major classes of assets and liabilities classified that were included in discontinued operations at December 31, 2018 related to the Material Science Division consist of the following:
|
|
|
|
|
|
|
|
|
Dec 31, 2018
|
|
In millions
|
|
Assets
|
|
|
Cash and cash equivalents
|
$
|
2,723
|
|
|
Marketable securities
|
100
|
|
|
Accounts and notes receivable - net
|
8,839
|
|
|
Inventories
|
6,891
|
|
|
Other current assets
|
722
|
|
|
Investment in nonconsolidated affiliates
|
3,321
|
|
|
Other investments
|
2,646
|
|
|
Noncurrent receivables
|
358
|
|
|
Property, plant, and equipment - net
|
21,418
|
|
|
Goodwill
|
9,845
|
|
|
Other intangible assets - net
|
4,225
|
|
|
Deferred income tax assets
|
2,197
|
|
|
Deferred charges and other assets
|
742
|
|
|
Total assets of discontinued operations
|
$
|
64,027
|
|
|
Liabilities
|
|
|
Short-term borrowings and finance lease obligations
|
$
|
636
|
|
|
Accounts payable
|
6,867
|
|
|
Income taxes payable
|
557
|
|
|
Accrued and other current liabilities
|
2,931
|
|
|
Long-Term Debt
|
19,254
|
|
|
Deferred income tax liabilities
|
917
|
|
|
Pension and other post employment benefits - noncurrent
|
8,929
|
|
|
Asbestos-related liabilities - noncurrent
|
1,142
|
|
|
Other noncurrent obligations
|
4,706
|
|
|
Total liabilities of discontinued operations
|
$
|
45,939
|
|
Agriculture Division
On June 1, 2019, the Company completed the separation of its Agriculture business, including the businesses and operations that comprised the Company's former Agriculture segment (the "Agriculture Division"), through the consummation of the Corteva Distribution.
In 2019, prior to the distribution of Corteva, the Company contributed $7,139 million in cash to Corteva, a portion of which was used to retire indebtedness of Historical EID.
The results of operations of the Agriculture Division are presented as discontinued operations as summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
June 30, 2019
|
June 30, 2018
|
June 30, 2019
|
June 30, 2018
|
|
Net sales
|
$
|
3,776
|
|
$
|
5,638
|
|
$
|
7,144
|
|
$
|
9,411
|
|
|
Cost of sales
|
2,026
|
|
3,622
|
|
4,218
|
|
6,352
|
|
|
Research and development expenses
|
183
|
|
345
|
|
470
|
|
666
|
|
|
Selling, general and administrative expenses
|
677
|
|
795
|
|
1,294
|
|
1,373
|
|
|
Amortization of intangibles
|
74
|
|
106
|
|
176
|
|
196
|
|
|
Restructuring and asset related charges - net
|
58
|
|
101
|
|
117
|
|
224
|
|
|
Integration and separation costs
|
272
|
|
98
|
|
430
|
|
169
|
|
|
Equity in earnings of nonconsolidated affiliates
|
(3
|
)
|
2
|
|
(4
|
)
|
1
|
|
|
Sundry income (expense) - net
|
(7
|
)
|
75
|
|
58
|
|
192
|
|
|
Interest expense
|
28
|
|
97
|
|
91
|
|
186
|
|
|
Income from discontinued operations before income taxes
|
448
|
|
551
|
|
402
|
|
438
|
|
|
Provision for income taxes on discontinued operations
|
48
|
|
97
|
|
82
|
|
106
|
|
|
Income from discontinued operations, net of tax
|
$
|
400
|
|
$
|
454
|
|
$
|
320
|
|
$
|
332
|
|
|
Income from discontinued operations attributable to noncontrolling interests, net of tax
|
25
|
|
8
|
|
35
|
|
20
|
|
|
Income from discontinued operations attributable to DuPont stockholders, net of tax
|
$
|
375
|
|
$
|
446
|
|
$
|
285
|
|
$
|
312
|
|
Restructuring Charges related to the Agriculture Division
Restructuring charges associated with the Agriculture Division were designed to integrate and optimize the organization following the Merger and in preparation for the Distributions. The complete DowDuPont Agriculture Division Restructuring Program is included in the results of operations of the Agriculture Division within discontinued operations, as well as restructuring charges related to the DowDuPont Cost Synergy Program related to the Agriculture Division.
The following table presents depreciation, amortization, and capital expenditures of the discontinued operations related to the Agriculture Division:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
June 30, 2019
|
June 30, 2018
|
June 30, 2019
|
June 30, 2018
|
|
Depreciation and amortization
|
$
|
136
|
|
$
|
246
|
|
$
|
385
|
|
$
|
470
|
|
|
Capital expenditures
|
$
|
161
|
|
$
|
94
|
|
$
|
383
|
|
$
|
207
|
|
The carrying amount of major classes of assets and liabilities classified that were included in discontinued operations at December 31, 2018 related to the Agriculture Division consist of the following:
|
|
|
|
|
|
|
|
|
Dec 31, 2018
|
|
In millions
|
|
Assets
|
|
|
Cash and cash equivalents
|
$
|
2,211
|
|
|
Marketable securities
|
5
|
|
|
Accounts and notes receivable - net
|
5,109
|
|
|
Inventories
|
5,259
|
|
|
Other current assets
|
1,000
|
|
|
Investment in nonconsolidated affiliates
|
138
|
|
|
Other investments
|
27
|
|
|
Noncurrent receivables
|
72
|
|
|
Property, plant and equipment - net
|
4,543
|
|
|
Goodwill
|
14,691
|
|
|
Other intangible assets - net
|
12,055
|
|
|
Deferred income tax assets
|
(651
|
)
|
|
Deferred charges and other assets
|
1,789
|
|
|
Total assets of discontinued operations
|
$
|
46,248
|
|
|
Liabilities
|
|
|
Short-term borrowings and finance lease obligations
|
$
|
2,151
|
|
|
Accounts payable
|
3,627
|
|
|
Income taxes payable
|
185
|
|
|
Accrued and other current liabilities
|
3,883
|
|
|
Long-Term Debt
|
5,784
|
|
|
Deferred income tax liabilities
|
520
|
|
|
Pension and other post employment benefits - noncurrent
|
5,637
|
|
|
Other noncurrent obligations
|
1,708
|
|
|
Total liabilities of discontinued operations
|
$
|
23,495
|
|
Indemnifications
Pursuant to the Separation and Distribution Agreement and the Letter Agreement, DuPont indemnifies both Dow and Corteva against certain litigation, environmental, workers' compensation and other liabilities that arose prior to the distribution. The term of this indemnification is indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. At June 30, 2019, the indemnified assets are $172 million within "Accounts and notes receivable, net" and $166 million within "Deferred charges and other assets" offset by the corresponding liabilities of $127 million within "Accrued and other current liabilities" and $96 million within "Other noncurrent obligations."
For additional information regarding treatment of litigation and environmental related matters under the Separation and Distribution Agreement and the Letter Agreement refer to Note 15.
Other Discontinued Operations Activity
For the three and six months ended June 30, 2019, the Company recorded "Income from discontinued operations, net of tax" of $86 million related to the adjustment of certain unrecognized tax benefits for positions taken on items from prior years from previously divested businesses and $80 million related to changes in accruals for certain prior year tax positions related to the divested crop protection business and research and development assets of Historical EID.
Integration and Separation Costs
Integration and separation costs for continuing operations to date primarily have consisted of financial advisory, information technology, legal, accounting, consulting, and other professional advisory fees associated with the preparation and execution of activities related to the Merger and the Distributions. These costs are recorded within "Integration and separation costs" within the interim Consolidated Statements of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|
In millions
|
2019
|
2018
|
2019
|
2018
|
|
Integration and separation costs
|
$
|
347
|
|
$
|
428
|
|
$
|
958
|
|
$
|
793
|
|
NOTE 4 - REVENUE
Revenue Recognition
Products
Substantially all of DuPont's revenue is derived from product sales. Product sales consist of sales of DuPont's products to supply manufacturers and distributors. DuPont considers purchase orders, which in some cases are governed by master supply agreements, to be a contract with a customer. Contracts with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year.
Disaggregation of Revenue
The Company disaggregates its revenue from contracts with customers by segment and business or major product line and geographic region, as the Company believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows. On June 1, 2019, the Company realigned certain businesses resulting in changes to its management and reporting structure, including the creation of a new Non-Core segment ("Second Quarter Segment Realignment") (refer to Note 23 for additional details). In conjunction with the Second Quarter Segment Realignment, DuPont made the following changes to its major product lines:
|
|
|
|
•
|
Realigned its product lines within Nutrition & Biosciences as Food & Beverage, Health & Biosciences, and Pharma Solutions;
|
|
|
|
|
•
|
Renamed its product lines within Transportation & Industrial (formerly known as Transportation & Advanced Polymers) as Mobility Solutions, Healthcare & Specialty, and Industrial & Consumer (formerly known as Engineering Polymers, Performance Solutions, and Performance Resins, respectively); and
|
|
|
|
|
•
|
Realigned and renamed its product lines within Safety & Construction as Safety Solutions, Shelter Solutions, and Water Solutions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Trade Revenue by Segment and Business or Major Product Line
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
In millions
|
2019
|
2018
|
2019
|
2018
|
|
Advanced Printing
|
$
|
121
|
|
$
|
136
|
|
$
|
240
|
|
$
|
258
|
|
|
Display Technologies
|
74
|
|
82
|
|
159
|
|
142
|
|
|
Interconnect Solutions
|
282
|
|
298
|
|
520
|
|
579
|
|
|
Semiconductor Technologies
|
381
|
|
405
|
|
764
|
|
806
|
|
|
Electronics & Imaging
|
$
|
858
|
|
$
|
921
|
|
$
|
1,683
|
|
$
|
1,785
|
|
|
Food & Beverage
|
$
|
746
|
|
$
|
783
|
|
$
|
1,501
|
|
$
|
1,527
|
|
|
Health & Biosciences
|
604
|
|
618
|
|
1,174
|
|
1,236
|
|
|
Pharma Solutions
|
208
|
|
220
|
|
418
|
|
435
|
|
|
Nutrition & Biosciences
|
$
|
1,558
|
|
$
|
1,621
|
|
$
|
3,093
|
|
$
|
3,198
|
|
|
Mobility Solutions
|
$
|
588
|
|
$
|
648
|
|
$
|
1,213
|
|
$
|
1,269
|
|
|
Healthcare & Specialty
|
388
|
|
424
|
|
772
|
|
830
|
|
|
Industrial & Consumer
|
293
|
|
345
|
|
601
|
|
696
|
|
|
Transportation & Industrial
|
$
|
1,269
|
|
$
|
1,417
|
|
$
|
2,586
|
|
$
|
2,795
|
|
|
Safety Solutions
|
$
|
657
|
|
$
|
639
|
|
$
|
1,322
|
|
$
|
1,251
|
|
|
Shelter Solutions
|
398
|
|
471
|
|
755
|
|
894
|
|
|
Water Solutions
|
286
|
|
262
|
|
547
|
|
491
|
|
|
Safety & Construction
|
$
|
1,341
|
|
$
|
1,372
|
|
$
|
2,624
|
|
$
|
2,636
|
|
|
Biomaterials
|
$
|
53
|
|
$
|
74
|
|
$
|
112
|
|
$
|
144
|
|
|
Clean Technologies
|
76
|
|
79
|
|
141
|
|
153
|
|
|
DuPont Teijin Films
|
42
|
|
51
|
|
79
|
|
98
|
|
|
Photovoltaic & Advanced Materials
|
230
|
|
283
|
|
484
|
|
571
|
|
|
Sustainable Solutions
|
41
|
|
39
|
|
80
|
|
74
|
|
|
Non-Core
|
$
|
442
|
|
$
|
526
|
|
$
|
896
|
|
$
|
1,040
|
|
|
Total
|
$
|
5,468
|
|
$
|
5,857
|
|
$
|
10,882
|
|
$
|
11,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Trade Revenue by Geographic Region
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
In millions
|
2019
|
2018
|
2019
|
2018
|
|
U.S. & Canada
|
$
|
1,826
|
|
$
|
1,857
|
|
3,602
|
|
3,643
|
|
|
EMEA 1
|
1,291
|
|
1,492
|
|
2,671
|
|
2,957
|
|
|
Asia Pacific
|
2,034
|
|
2,178
|
|
3,979
|
|
4,211
|
|
|
Latin America
|
317
|
|
330
|
|
630
|
|
643
|
|
|
Total
|
$
|
5,468
|
|
$
|
5,857
|
|
$
|
10,882
|
|
$
|
11,454
|
|
|
|
|
|
1.
|
Europe, Middle East and Africa.
|
Contract Balances
From time to time, the Company enters into arrangements in which it receives payments from customers based upon contractual billing schedules. The Company records accounts receivables when the right to consideration becomes unconditional. Contract assets include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Contract liabilities primarily reflect deferred revenue from advance payment for product that the Company has received from customers. The Company classifies deferred revenue as current or noncurrent based on the timing of when the Company expects to recognize revenue.
Revenue recognized in the first six months of 2019 from amounts included in contract liabilities at the beginning of the period was approximately $25 million (approximately $23 million in the first six months of 2018). The amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional was insignificant. The Company did not recognize any asset impairment charges related to contract assets during the period.
|
|
|
|
|
|
|
|
|
|
|
Contract Balances
|
June 30, 2019
|
Dec 31, 2018
|
|
In millions
|
|
Accounts and notes receivable - trade 1
|
$
|
3,346
|
|
$
|
2,960
|
|
|
Contract assets - current 2
|
$
|
38
|
|
$
|
48
|
|
|
Deferred revenue - current 3
|
$
|
106
|
|
$
|
71
|
|
|
Deferred revenue - noncurrent 4
|
$
|
15
|
|
$
|
7
|
|
|
|
|
|
1.
|
Included in "Accounts and notes receivable - net" in the Condensed Consolidated Balance Sheets.
|
|
|
|
|
2.
|
Included in "Other current assets" in the Condensed Consolidated Balance Sheets.
|
|
|
|
|
3.
|
Included in "Accrued and other current liabilities" in the Condensed Consolidated Balance Sheets.
|
|
|
|
|
4.
|
Included in "Other noncurrent obligations" in the Condensed Consolidated Balance Sheets.
|
NOTE 5 - RESTRUCTURING AND ASSET RELATED CHARGES - NET
Charges for restructuring programs and other asset related charges, which includes other asset impairments, were $137 million and $208 million in the three and six months ended June 30, 2019 ($46 million and $99 million for the three and six months ended June 30, 2018). These charges were recorded in "Restructuring and asset related charges - net" in the interim Consolidated Statements of Operations and consist primarily of the following:
2019 Restructuring Program
During the second quarter of 2019 and in connection with the ongoing integration activities, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the Distributions (the "2019 Restructuring Program"). As a result of these actions, the Company expects to record total pre-tax restructuring charges of $85 million to $130 million, comprised of approximately $55 million to $80 million of severance and related benefits costs; $30 million to $45 million of asset related charges; and up to $5 million of costs related to contract terminations. For the three and six months ended June 30, 2019, DuPont recorded a pre-tax charge of $53 million, recognized in "Restructuring and asset related charges - net" in the Company's interim Consolidated Statement of Operations comprised of $50 million of severance and related benefit costs and $3 million of asset related charges. The Company expects actions related to this program to be substantially complete by mid-2020. At June 30, 2019, total liabilities related to the program were $50 million for severance and related benefit costs.
The following table details restructuring charges recorded at our reportable segments for the three and six months ended June 30, 2019:
|
|
|
|
|
|
|
|
2019 Restructuring Program Charges by Segment
|
Three and Six Months Ended
June 30, 2019
|
|
In millions
|
|
Electronics & Imaging
|
$
|
7
|
|
|
Nutrition & Biosciences
|
14
|
|
|
Transportation & Industrial
|
12
|
|
|
Safety & Construction
|
17
|
|
|
Non-Core
|
—
|
|
|
Corporate
|
3
|
|
|
Total
|
$
|
53
|
|
DowDuPont Cost Synergy Program
In September and November 2017, the Company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program, which was designed to integrate and optimize the organization following the Merger and in preparation for the Distributions of Dow and Corteva. The portions of the charges, costs and expenses attributable to integration and optimization within the Agriculture and Materials Sciences Divisions are reflected in discontinued operations. The Company has recorded pretax restructuring charges attributable to the continuing operations of DuPont of $466 million inception-to-date, consisting of severance and related benefit costs of $222 million, asset related charges of $184 million and contract termination charges of $60 million related to charges. The Company does not expect to incur further significant charges related to this program and the program is considered substantially complete at June 30, 2019.
The following tables summarize the charges incurred related to the DowDuPont Cost Synergy Program for the three and six months ended June 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
Six Months Ended
June 30,
|
|
In millions
|
2019
|
2018
|
2019
|
2018
|
|
Severance and related benefit costs
|
$
|
6
|
|
$
|
37
|
|
$
|
49
|
|
$
|
77
|
|
|
Contract termination charges
|
—
|
|
3
|
|
16
|
|
15
|
|
|
Asset related charges
|
16
|
|
6
|
|
29
|
|
7
|
|
|
Total restructuring and asset related charges - net1
|
$
|
22
|
|
$
|
46
|
|
$
|
94
|
|
$
|
99
|
|
|
|
|
|
1.
|
The charge for the three and six months ended June 30, 2019 includes $21 million and $92 million which was recognized in "Restructuring and asset related charges - net" and $1 million and $2 million which was recognized in "Equity in earnings of nonconsolidated affiliates" in the interim Consolidated Statements of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DowDuPont Cost Synergy Program Charges by Segment
|
Three Months Ended June 30,
|
Six Months Ended
June 30,
|
|
In millions
|
2019
|
2018
|
2019
|
2018
|
|
Electronics & Imaging
|
$
|
—
|
|
$
|
1
|
|
$
|
—
|
|
$
|
2
|
|
|
Nutrition & Biosciences
|
8
|
|
—
|
|
35
|
|
—
|
|
|
Transportation & Industrial
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
|
Safety & Construction
|
3
|
|
12
|
|
5
|
|
19
|
|
|
Non-Core
|
1
|
|
(5
|
)
|
—
|
|
(6
|
)
|
|
Corporate 1
|
10
|
|
38
|
|
54
|
|
85
|
|
|
Total
|
$
|
22
|
|
$
|
46
|
|
$
|
94
|
|
$
|
99
|
|
|
|
|
|
1.
|
Severance and related benefit costs were recorded at Corporate.
|
The following table summarized the activities related to the DowDuPont Cost Synergy Program.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DowDuPont Cost Synergy Program
|
Severance and Related Benefit Costs
|
Contract Termination Charges
|
Asset Related Charges
|
Total
|
|
In millions
|
|
Reserve balance at Dec 31, 2018
|
$
|
126
|
|
$
|
16
|
|
$
|
—
|
|
$
|
142
|
|
|
2019 restructuring charges
|
49
|
|
16
|
|
29
|
|
94
|
|
|
Charges against the reserve
|
—
|
|
—
|
|
(29
|
)
|
(29
|
)
|
|
Cash payments
|
(55
|
)
|
(28
|
)
|
—
|
|
(83
|
)
|
|
Reserve balance at June 30, 2019
|
$
|
120
|
|
$
|
4
|
|
$
|
—
|
|
$
|
124
|
|
At June 30, 2019, $107 million was included in "Accrued and other current liabilities" ($129 million at December 31, 2018) and $17 million was included in "Other noncurrent obligations" ($13 million at December 31, 2018) in the interim Condensed Consolidated Balance Sheets.
Equity Method Investment Impairment Related Charges
In preparation for the Corteva Distribution, Historical EID completed the separation of the assets and liabilities related to its specialty products businesses into separate legal entities (the “SP Legal Entities”) and on May 1, 2019, Historical EID distributed the SP Legal Entities to DowDuPont (the “Internal SP Distribution”). The Internal SP Distribution served as a triggering event requiring the Company to perform an impairment analysis related to equity method investments held by the Company as of May 1, 2019. The Company applied the net asset value method under the cost approach to determine the fair value of the equity method investments in the Nutrition & Biosciences segment. Based on updated projections, the Company determined the fair value of the equity method investment was below the carrying value and had no expectation the fair value would recover in the short-term due to the current economic environment. As a result, management concluded the impairment was other-than-temporary and recorded an impairment charge of $63 million in “Restructuring and asset related charges - net” in the interim Consolidated Statements of Operations related to the Nutrition & Biosciences segment. See Notes 13 and 22 for additional information.
NOTE 6 - SUPPLEMENTARY INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sundry Income (Expense) - Net
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
In millions
|
2019
|
2018
|
2019
|
2018
|
|
Non-operating pension and other post employment benefit credits
|
$
|
18
|
|
$
|
28
|
|
$
|
39
|
|
$
|
55
|
|
|
Interest income
|
9
|
|
11
|
|
49
|
|
21
|
|
|
Net gain on sales of other assets and investments 1
|
10
|
|
—
|
|
63
|
|
6
|
|
|
Foreign exchange (losses) gains, net 2
|
(17
|
)
|
53
|
|
(78
|
)
|
(122
|
)
|
|
Net loss on divestiture and changes in joint venture ownership
|
—
|
|
(21
|
)
|
—
|
|
(21
|
)
|
|
Miscellaneous income (expenses) - net 3
|
(39
|
)
|
11
|
|
(8
|
)
|
45
|
|
|
Sundry income (expense) - net
|
$
|
(19
|
)
|
$
|
82
|
|
$
|
65
|
|
$
|
(16
|
)
|
|
|
|
|
1.
|
The six months ended June 30, 2019 includes a $51 million gain related to a sale of assets within the Electronics & Imaging product lines.
|
|
|
|
|
2.
|
Includes a $50 million foreign exchange loss for the six months ended June 30, 2018 related to adjustments to Historical EID's foreign currency exchange contracts as a result of U.S. tax reform.
|
|
|
|
|
3.
|
Miscellaneous income and expenses - net, for the three months and six months ended June 30, 2019 includes a $48 million charge reflecting a reduction in gross proceeds from lower withholding taxes related to a prior year legal settlement. The miscellaneous income for the three month and six month ended 2018 primarily relates to legal settlements.
|
Cash, Cash Equivalents and Restricted Cash
The Company is required to set aside funds for various activities that arise in the normal course of business including, but not limited to, legal matters and other agreements. These funds typically have legal restrictions associated with them and are deposited in an escrow account or held in a separately identifiable account by the Company. Historical EID entered into a trust agreement in 2013 (as amended and restated in 2017), establishing and requiring Historical EID to fund a trust (the "Trust") for cash obligations under certain non-qualified benefit and deferred compensation plans upon a change in control event as defined in the Trust agreement. Under the Trust agreement, the consummation of the Merger was a change in control event. After the distribution of Corteva, DuPont continues to be responsible for funding the portion of the Trust related to the DuPont employees. At June 30, 2019, the Company had restricted cash of $40 million ($43 million at December 31, 2018) included in "Other current assets" in the interim Condensed Consolidated Balance Sheets which was completely attributed to the Trust.
Accrued and Other Current Liabilities
"Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets were $1,652 million at June 30, 2019 and $1,129 million at December 31, 2018. Accrued payroll, which is a component of "Accrued and other current liabilities," was $366 million at June 30, 2019 and $506 million at December 31, 2018. No other components of "Accrued and other current liabilities" were more than 5 percent of total current liabilities.
NOTE 7 - INCOME TAXES
For periods between the Merger and the Distributions, DuPont's consolidated federal income tax group and consolidated tax return included the Dow and Corteva entities. Generally, the consolidated tax liability of the DuPont U.S. tax group for each year was apportioned among the members of the consolidated group in accordance with the terms of the Amended and Restated Tax Matters Agreement. DuPont, Corteva and Dow intend that to the extent Federal and/or State corporate income tax liabilities are reduced through the utilization of tax attributes of the other, settlement of any receivable and payable generated from the use of the other party’s sub-group attributes will be in accordance with the Amended and Restated Tax Matters Agreement.
On December 22, 2017, the Tax Cuts and Jobs Act (“The Act”) was enacted. The Act reduces the U.S. federal corporate income tax rate from 35 percent to 21 percent, requires companies to pay a one-time transition tax on earnings of foreign subsidiaries that were previously tax deferred, creates new provisions related to foreign sourced earnings, eliminates the domestic manufacturing deduction and moves towards a territorial system. At December 31, 2018, the Company had completed its accounting for the tax effects of The Act.
|
|
|
|
•
|
As a result of The Act, the Company remeasured its U.S. federal deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent. For the three and six months ended June 30, 2018, the Company recorded a charge of $7 million and $24 million, respectively, to “Provision for income taxes on continuing operations" in the interim Consolidated Statements of Operations to adjust the provisional amount related to the remeasurement of the Company's deferred tax balance.
|
|
|
|
|
•
|
For the six months ended June 30, 2018, the Company recorded an indirect impact of The Act related to prepaid tax on the intercompany sale of inventory. The amount recorded related to the inventory was a $54 million charge to "Provision for income taxes on continuing operations."
|
During the first and second quarters of 2019, in connection with the Distributions, the Company repatriated certain funds from its foreign subsidiaries that were not needed to finance local operations or separation activities. For the first quarter of 2019, the Company recorded a tax charge of $10 million, associated with these repatriation activities to "Provision for income taxes on continuing operations." There were no charges associated with these repatriation activities in the second quarter of 2019. Beyond these repatriations, the Company continues to assert indefinite reinvestment related to certain investments in foreign subsidiaries.
The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attribute. The effective tax rate on continuing operations for the second quarter of 2019 was (16.4) percent, compared with an effective tax rate of 76.2 percent for the second quarter of 2018. For the first six months of 2019, the effective tax rate on continuing operations was (5.8) percent, compared with 134.4 percent for the first six months of 2018. The negative tax rate in the second quarter of 2019 and for the first six months of 2019, was principally the result of the non-tax-deductible goodwill impairments impacting the Nutrition & Biosciences and Non-Core segments.
Each year the Company files hundreds of tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the tax authorities. Positions challenged by the tax authorities may be settled or appealed by the Company. As a result, there is an uncertainty in income taxes recognized in the Company’s financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. The ultimate resolution of such uncertainties is not expected to have a material impact on the Company's results of operations.
NOTE 8 - EARNINGS PER SHARE CALCULATIONS
On May 23, 2019, stockholders of DowDuPont approved a reverse stock split of the Company's common stock at a ratio of not less than 2-for-5 and not greater than 1-for-3, with the exact ratio determined by and subject to final approval of the Company’s board of directors. The board of directors approved the Reverse Stock Split with a ratio of 1 new share of DowDuPont common stock for 3 shares of current DowDuPont common stock with par value of $0.01 per share. The Reverse Stock Split became effective immediately following the Corteva Distribution on June 1, 2019. All comparable periods presented have been retrospectively revised to reflect this change.
The following tables provide earnings per share calculations for the three and six months ended June 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income for Earnings Per Share Calculations - Basic & Diluted
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
June 30, 2019
|
June 30, 2018
|
June 30, 2019
|
June 30, 2018
|
|
(Loss) income from continuing operations, net of tax
|
$
|
(1,103
|
)
|
$
|
31
|
|
$
|
(1,177
|
)
|
$
|
(42
|
)
|
|
Net income (loss) from continuing operations attributable to noncontrolling interests
|
9
|
|
(2
|
)
|
13
|
|
11
|
|
|
Net income from continuing operations attributable to participating securities 1
|
—
|
|
7
|
|
1
|
|
13
|
|
|
(Loss) income from continuing operations attributable to common stockholders
|
$
|
(1,112
|
)
|
$
|
26
|
|
$
|
(1,191
|
)
|
$
|
(66
|
)
|
|
Income from discontinued operations, net of tax
|
566
|
|
1,773
|
|
1,212
|
|
2,983
|
|
|
Net income from discontinued operations attributable to noncontrolling interests
|
25
|
|
37
|
|
72
|
|
68
|
|
|
Income from discontinued operations attributable to common stockholders
|
541
|
|
1,736
|
|
1,140
|
|
2,915
|
|
|
Net (loss) income attributable to common stockholders
|
$
|
(571
|
)
|
$
|
1,762
|
|
$
|
(51
|
)
|
$
|
2,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Calculations - Basic
|
Three Months Ended
|
Six Months Ended
|
|
June 30, 2019
|
June 30, 2018
|
June 30, 2019
|
June 30, 2018
|
|
Dollars per share
|
|
(Loss) income from continuing operations attributable to common stockholders
|
$
|
(1.48
|
)
|
$
|
0.03
|
|
$
|
(1.59
|
)
|
$
|
(0.09
|
)
|
|
Income from discontinued operations, net of tax
|
0.72
|
|
2.26
|
|
1.52
|
|
3.78
|
|
|
Net (loss) income attributable to common stockholders
|
$
|
(0.76
|
)
|
$
|
2.29
|
|
$
|
(0.07
|
)
|
$
|
3.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Per Share Calculations - Diluted
|
Three Months Ended
|
Six Months Ended
|
|
June 30, 2019
|
June 30, 2018
|
June 30, 2019
|
June 30, 2018
|
|
Dollars per share
|
|
(Loss) income from continuing operations attributable to common stockholders
|
$
|
(1.48
|
)
|
$
|
0.03
|
|
$
|
(1.59
|
)
|
$
|
(0.09
|
)
|
|
Income from discontinued operations, net of tax
|
0.72
|
|
2.24
|
|
1.52
|
|
3.78
|
|
|
Net (loss) income attributable to common stockholders
|
$
|
(0.76
|
)
|
$
|
2.27
|
|
$
|
(0.07
|
)
|
$
|
3.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Count Information
|
Three Months Ended
|
Six Months Ended
|
|
June 30, 2019
|
June 30, 2018
|
June 30, 2019
|
June 30, 2018
|
|
Shares in millions
|
|
Weighted-average common shares - basic
|
749.0
|
|
769.6
|
|
749.6
|
|
771.0
|
|
|
Plus dilutive effect of equity compensation plans
|
—
|
|
4.9
|
|
—
|
|
—
|
|
|
Weighted-average common shares - diluted
|
749.0
|
|
774.5
|
|
749.6
|
|
771.0
|
|
|
Stock options and restricted stock units excluded from EPS calculations 2
|
2.5
|
|
3.2
|
|
2.4
|
|
2.5
|
|
|
|
|
|
1.
|
Historical Dow restricted stock units are considered participating securities due to Historical Dow's practice of paying dividend equivalents on unvested shares.
|
2. These outstanding options to purchase shares of common stock and restricted stock units were excluded from the calculation of diluted earnings per share because the effect of including them would have been antidilutive.
NOTE 9 - ACCOUNTS AND NOTES RECEIVABLE - NET
|
|
|
|
|
|
|
|
|
|
|
In millions
|
June 30,
2019
|
Dec 31,
2018
|
|
Accounts receivable – trade 1
|
$
|
3,288
|
|
$
|
2,891
|
|
|
Notes receivable – trade
|
58
|
|
69
|
|
|
Other 2
|
868
|
|
431
|
|
|
Total accounts and notes receivable - net
|
$
|
4,214
|
|
$
|
3,391
|
|
|
|
|
|
1.
|
Accounts receivable – trade is net of allowances of $9 million at June 30, 2019 and $10 million at December 31, 2018. Allowances are equal to the estimated uncollectible amounts. That estimate is based on historical collection experience, current economic and market conditions, and review of the current status of customers' accounts.
|
|
|
|
|
2.
|
Other includes receivables in relation to value added tax, fair value of derivative instruments, indemnification assets, and general sales tax and other taxes. No individual group represents more than ten percent of total receivables.
|
Accounts and notes receivable are carried at amounts that approximate fair value.
NOTE 10 - INVENTORIES
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
June 30, 2019
|
Dec 31, 2018
|
|
In millions
|
|
Finished goods
|
$
|
2,645
|
|
$
|
2,599
|
|
|
Work in process
|
888
|
|
833
|
|
|
Raw materials
|
623
|
|
560
|
|
|
Supplies
|
234
|
|
115
|
|
|
Total inventories
|
$
|
4,390
|
|
$
|
4,107
|
|
Effective June 1, 2019, after the Corteva Distribution, the Company changed its method of valuing certain inventories of the specialty products business from the LIFO method to the average cost method. Management believes that the change in accounting is preferable as it results in a consistent method to value inventory across all regions of the business, it improves comparability with industry peers, and it more closely resembles the physical flow of inventory. The effects of the change in accounting principle from LIFO to average cost have been retrospectively applied to all periods presented. This change resulted in an unfavorable adjustment to "(Accumulated Deficit) Retained Earnings" of $280 million as of January 1, 2018. In addition, certain financial statement line items in the Company’s interim Consolidated Statement of Operations for the three and six months ended June 30, 2018 and interim Condensed Consolidated Balance Sheet as of December 31, 2018 were adjusted as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Operations
|
Three Months Ended
June 30, 2018
|
Six Months Ended
June 30, 2018
|
|
In millions
|
As Computed under LIFO
|
As Computed under Average Cost
|
Effect of Change
|
As Computed under LIFO
|
As Computed under Average Cost
|
Effect of Change
|
|
Cost of sales
|
$
|
4,086
|
|
$
|
4,085
|
|
$
|
(1
|
)
|
$
|
7,882
|
|
$
|
7,890
|
|
$
|
8
|
|
|
Provision for income taxes on continuing operations
|
$
|
99
|
|
$
|
99
|
|
$
|
—
|
|
$
|
162
|
|
$
|
164
|
|
$
|
2
|
|
|
Net income
|
$
|
1,803
|
|
$
|
1,804
|
|
$
|
1
|
|
$
|
2,951
|
|
$
|
2,941
|
|
$
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet
|
December 31, 2018
|
|
In millions
|
As Computed under LIFO
|
As Computed under Average Cost
|
Effect of Change
|
|
Inventories
|
$
|
4,472
|
|
$
|
4,107
|
|
$
|
(365
|
)
|
|
Deferred income tax liabilities
|
$
|
3,998
|
|
$
|
3,912
|
|
$
|
(86
|
)
|
|
Retained earnings
|
$
|
30,536
|
|
$
|
30,257
|
|
$
|
(279
|
)
|
Basic and diluted earnings per share from continuing operations were not materially effected for the three and six months ended June 30, 2018, as a result of the above accounting policy change.
There was no impact on cash used by operating activities for prior year periods as a result of the above policy change.
The following table compares the amounts that would have been reported under LIFO with the amounts recorded under the average cost method in the Consolidated Financial Statements as of March 31, 2019 and for the three months then ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Operations
|
Three Months Ended
March 31, 2019
|
|
In millions
|
As Computed under LIFO
|
As Computed under Average Cost
|
Effect of Change
|
|
Cost of sales
|
$
|
3,617
|
|
$
|
3,621
|
|
$
|
4
|
|
|
Benefit from income taxes on continuing operations
|
$
|
(86
|
)
|
$
|
(91
|
)
|
$
|
(5
|
)
|
|
Net income
|
$
|
571
|
|
$
|
572
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet
|
March 31, 2019
|
|
In millions
|
As Computed under LIFO
|
As Computed under Average Cost
|
Effect of Change
|
|
Inventories
|
$
|
4,717
|
|
$
|
4,348
|
|
$
|
(369
|
)
|
|
Deferred income tax liabilities
|
$
|
3,679
|
|
$
|
3,588
|
|
$
|
(91
|
)
|
|
Retained earnings
|
$
|
29,764
|
|
$
|
29,486
|
|
$
|
(278
|
)
|
The following table compares the amounts that would have been reported under LIFO with the amounts recorded under the average cost method in the Consolidated Financial Statements as of June 30, 2019 and for the three and six months then ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Operations
|
Three Months Ended
June 30, 2019
|
Six Months Ended
June 30, 2019
|
|
In millions
|
As Computed under LIFO
|
As Reported under Average Cost
|
Effect of Change
|
As Computed under LIFO
|
As Reported under Average Cost
|
Effect of Change
|
|
Cost of sales
|
$
|
3,498
|
|
$
|
3,496
|
|
$
|
(2
|
)
|
$
|
7,115
|
|
$
|
7,117
|
|
$
|
2
|
|
|
Provision for income taxes on continuing operations
|
$
|
152
|
|
$
|
155
|
|
$
|
3
|
|
$
|
66
|
|
$
|
64
|
|
$
|
(2
|
)
|
|
Net (loss) income
|
$
|
(536
|
)
|
$
|
(537
|
)
|
$
|
(1
|
)
|
$
|
35
|
|
$
|
35
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet
|
June 30, 2019
|
|
In millions
|
As Computed under LIFO
|
As Reported under Average Cost
|
Effect of Change
|
|
Inventories
|
$
|
4,763
|
|
$
|
4,390
|
|
$
|
(373
|
)
|
|
Deferred income tax liabilities
|
$
|
3,750
|
|
$
|
3,662
|
|
$
|
(88
|
)
|
|
Accumulated deficit
|
$
|
(8,014
|
)
|
$
|
(8,299
|
)
|
$
|
(285
|
)
|
Basic and diluted earnings per share from continuing operations were not materially effected for the three months ended March 31, 2019 nor for either the three or six months ended June 30, 2019, as a result of the above accounting policy change.
There was no impact on cash used by operating activities for current year periods as a result of the above policy change.
NOTE 11 - PROPERTY, PLANT, AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Lives (Years)
|
June 30, 2019
|
Dec 31, 2018
|
|
In millions
|
|
Land and land improvements
|
0
|
-
|
25
|
$
|
795
|
|
$
|
944
|
|
|
Buildings
|
1
|
-
|
50
|
2,656
|
|
2,581
|
|
|
Machinery, equipment, and other
|
1
|
-
|
25
|
9,580
|
|
9,133
|
|
|
Construction in progress
|
|
|
|
1,442
|
|
1,458
|
|
|
Total property, plant and equipment
|
|
|
|
$
|
14,473
|
|
$
|
14,116
|
|
|
Total accumulated depreciation
|
|
|
|
$
|
4,667
|
|
$
|
4,199
|
|
|
Total property, plant and equipment - net
|
|
|
|
$
|
9,806
|
|
$
|
9,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
In millions
|
2019
|
2018
|
2019
|
2018
|
|
Depreciation expense
|
$
|
255
|
|
$
|
285
|
|
$
|
526
|
|
$
|
571
|
|
NOTE 12 - NONCONSOLIDATED AFFILIATES
The Company's investments in companies accounted for using the equity method ("nonconsolidated affiliates"), by classification in the Condensed Consolidated Balance Sheets, are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
Investments in Nonconsolidated Affiliates
|
June 30, 2019
|
Dec 31, 2018
|
|
In millions
|
|
Investment in nonconsolidated affiliates
|
$
|
1,653
|
|
$
|
1,745
|
|
|
Accrued and other current liabilities
|
(81
|
)
|
(81
|
)
|
|
Other noncurrent obligations
|
(635
|
)
|
(495
|
)
|
|
Net investment in nonconsolidated affiliates
|
$
|
937
|
|
$
|
1,169
|
|
Subsequent to the Distributions, the Company maintained an ownership interest in 22 nonconsolidated affiliates at June 30, 2019. The following table reflects the Company's principal nonconsolidated affiliates and its ownership interest (direct and indirect) for each at June 30, 2019:
|
|
|
|
|
|
|
|
|
Country
|
Ownership Interest
|
|
|
6/30/2019
|
|
The HSC Group:
|
|
|
|
DC HSC Holdings LLC 1
|
United States
|
50.0
|
%
|
|
Hemlock Semiconductor L.L.C.
|
United States
|
50.1
|
%
|
|
|
|
|
1.
|
DC HSC Holdings LLC holds an 80.5 percent indirect ownership interest in Hemlock Semiconductor Operations LLC.
|
HSC Group
The carrying value of the Company's investments in the HSC Group, which includes Hemlock Semiconductor L.L.C. and DC HSC Holdings LLC, was adjusted as a result of the HSC Group's adoption of Topic 606 on January 1, 2019 in accordance with the effective date of Topic 606 for non-public companies. The resulting impact to the Company's investments in the HSC Group was a reduction to "Investment in nonconsolidated affiliates" of $71 million and an increase to "Other noncurrent obligations" of $168 million, as well as an increase to "Deferred income tax assets" of $56 million and a reduction to "(Accumulated Deficit) Retained earnings" of $183 million in the consolidated balance sheet at January 1, 2019. The following table reflects the carrying value of the HSC Group investments at June 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
Investment in the HSC Group
|
|
Investment
|
|
In millions
|
Balance Sheet Classification
|
June 30, 2019
|
Dec 31, 2018
|
|
Hemlock Semiconductor L.L.C.
|
Other noncurrent obligations
|
$
|
(635
|
)
|
$
|
(495
|
)
|
|
DC HSC Holdings LLC
|
Investment in nonconsolidated affiliates
|
$
|
495
|
|
$
|
535
|
|
The following is summarized financial information for the Company's significant nonconsolidated equity method investments. The amounts shown below represent 100 percent of these equity method investment’s results of operations:
|
|
|
|
|
|
|
|
|
|
|
Results of Operations
|
Six Months Ended
|
|
In millions
|
June 30, 2019
|
June 30, 2018
|
|
Revenues
|
$
|
312
|
|
$
|
400
|
|
|
Costs of good sold
|
$
|
167
|
|
$
|
258
|
|
|
Income from continuing operations
|
$
|
135
|
|
$
|
164
|
|
|
Net income attributed to entities
|
$
|
119
|
|
$
|
145
|
|
NOTE 13 - GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amounts of goodwill during the six months ended June 30, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elect. & Imaging
|
Nutrition & Biosciences
|
Transp. & Industrial
|
Safety & Const.
|
Non-Core
|
Total
|
|
In millions
|
|
Balance at December 31, 2018 1
|
$
|
6,960
|
|
$
|
12,109
|
|
$
|
6,967
|
|
$
|
6,698
|
|
$
|
1,762
|
|
$
|
34,496
|
|
|
Impairments
|
—
|
|
(933
|
)
|
—
|
|
—
|
|
(242
|
)
|
(1,175
|
)
|
|
Currency Translation Adjustment
|
(1
|
)
|
(17
|
)
|
8
|
|
(6
|
)
|
—
|
|
(16
|
)
|
|
Other Goodwill Adjustments
|
—
|
|
(13
|
)
|
—
|
|
—
|
|
38
|
|
25
|
|
|
Balance at June 30, 2019
|
$
|
6,959
|
|
$
|
11,146
|
|
$
|
6,975
|
|
$
|
6,692
|
|
$
|
1,558
|
|
$
|
33,330
|
|
|
|
|
|
1.
|
Updated for changes in reportable segments effective in the second quarter of 2019. Refer to Note 23 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 its carrying value. As a result of the related acquisition method of accounting in connection with the Merger, Historical EID’s assets and liabilities were measured at fair value resulting in increases to the Company’s goodwill and other intangible assets. The fair value valuation increased the risk that 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 preparation for the Corteva Distribution, Historical EID completed the separation of the assets and liabilities related to its specialty products businesses into separate legal entities (the “SP Legal Entities”) and on May 1, 2019, Historical EID 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 Historical 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, including the creation of a new Non-Core segment. 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 connection with the analyses described above, the Company recorded aggregate, pre-tax, non-cash impairment charges of $1,175 million for the three and six months ended June 30, 2019 impacting the Nutrition & Biosciences and Non-Core segments. As part of this analysis, the Company determined that the fair value of its Industrial Biosciences reporting unit was below carrying value resulting in a pre-tax, non-cash goodwill impairment charge of $933 million. The Industrial Biosciences reporting unit, part of the Nutrition & Biosciences segment prior to the Second Quarter Segment Realignment, was comprised solely of Historical EID assets and liabilities, the carrying values of which were measured at fair value in connection with the Merger, and thus considered at risk for impairment. Revised financial projections of the Industrial Biosciences reporting unit reflect unfavorable market conditions, driven by slowed demand in the biomaterials business unit which was realigned to the new Non-Core segment effective June 1, 2019, coupled with challenging conditions in U.S. bioethanol markets. These revised financial projections resulted in a reduction in the long-term forecasts of sales and profitability as compared to prior projections. The $242 million in goodwill impairment charges impacting the Non-Core segment also relates to multiple reporting units comprised solely of Historical EID assets and liabilities, the carrying values of which were measured at fair value in connection with the Merger, and thus considered at risk for impairment. The impairment charges impacting Non-Core were determined through utilization of the market approach which was considered most appropriate as the Company continues to evaluate strategic options for these businesses.
The Company analyses above using discounted cash flow models (a form of the income approach) utilizing Level 3 unobservable inputs. The Company’s significant assumptions in these analyses include, but are not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate, and the tax rate. The Company’s estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategies. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the Company’s estimates. If the Company’s ongoing estimates of future cash flows are not met, the Company may have to record additional impairment charges in future periods. As referenced, the Company also uses a form of the market approach (utilizes Level 3 unobservable inputs), which is derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services. As such, the Company believes the current assumptions and estimates utilized are both reasonable and appropriate.
Other Intangible Assets
The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
December 31, 2018
|
|
In millions
|
Gross
Carrying
Amount
|
Accum Amort
|
Net
|
Gross Carrying Amount
|
Accum Amort
|
Net
|
|
Intangible assets with finite lives:
|
|
|
|
|
|
|
|
Developed technology
|
$
|
4,342
|
|
$
|
(1,179
|
)
|
$
|
3,163
|
|
$
|
4,362
|
|
$
|
(1,010
|
)
|
$
|
3,352
|
|
|
Trademarks/tradenames
|
1,244
|
|
(369
|
)
|
875
|
|
1,245
|
|
(328
|
)
|
917
|
|
|
Customer-related
|
9,007
|
|
(1,973
|
)
|
7,034
|
|
9,029
|
|
(1,720
|
)
|
7,309
|
|
|
Other
|
329
|
|
(120
|
)
|
209
|
|
306
|
|
(114
|
)
|
192
|
|
|
Total other intangible assets with finite lives
|
$
|
14,922
|
|
$
|
(3,641
|
)
|
$
|
11,281
|
|
$
|
14,942
|
|
$
|
(3,172
|
)
|
$
|
11,770
|
|
|
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
IPR&D
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
15
|
|
$
|
—
|
|
$
|
15
|
|
|
Trademarks/tradenames
|
2,869
|
|
—
|
|
2,869
|
|
2,870
|
|
—
|
|
2,870
|
|
|
Total other intangible assets
|
2,869
|
|
—
|
|
2,869
|
|
2,885
|
|
—
|
|
2,885
|
|
|
Total
|
$
|
17,791
|
|
$
|
(3,641
|
)
|
$
|
14,150
|
|
$
|
17,827
|
|
$
|
(3,172
|
)
|
$
|
14,655
|
|
The following table provides the net value of other intangible assets by segment:
|
|
|
|
|
|
|
|
|
|
|
Net Intangibles by Segment
|
June 30, 2019
|
Dec 31, 2018
|
|
In millions
|
|
Electronics & Imaging
|
$
|
1,925
|
|
$
|
2,037
|
|
|
Nutrition & Biosciences
|
4,664
|
|
4,823
|
|
|
Transportation & Industrial
|
3,722
|
|
3,833
|
|
|
Safety & Construction
|
3,145
|
|
3,244
|
|
|
Non-Core
|
694
|
|
718
|
|
|
Total
|
$
|
14,150
|
|
$
|
14,655
|
|
The following table provides information regarding amortization expense related to other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization Expense
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
June 30, 2019
|
June 30, 2018
|
June 30, 2019
|
June 30, 2018
|
|
Other intangible assets
|
$
|
252
|
|
$
|
266
|
|
$
|
508
|
|
$
|
531
|
|
Total estimated amortization expense for the remainder of 2019 and the five succeeding fiscal years is as follows:
|
|
|
|
|
|
|
|
Estimated Amortization Expense
|
|
|
In millions
|
|
|
Remainder of 2019
|
$
|
512
|
|
|
2020
|
$
|
1,015
|
|
|
2021
|
$
|
1,007
|
|
|
2022
|
$
|
993
|
|
|
2023
|
$
|
961
|
|
|
2024
|
$
|
856
|
|
NOTE 14 - 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
|
|
|
|
In millions
|
June 30, 2019
|
Dec 31, 2018
|
|
Commercial paper
|
$
|
1,610
|
|
$
|
—
|
|
|
Notes payable to banks and other lenders
|
5
|
|
4
|
|
|
Long-term debt due within one year1
|
6
|
|
11
|
|
|
Total short-term borrowings and finance lease obligations
|
$
|
1,621
|
|
$
|
15
|
|
|
|
|
|
1.
|
Includes finance lease obligations due within one year.
|
The weighted-average interest rate on notes payable and commercial paper at June 30, 2019 and December 31, 2018 was 2.72 percent and 8.25 percent, respectively. The decrease in the interest rate from 2018 is primarily due to commercial paper issuance at lower interest rates. The Company issued $1,610 million of commercial paper in the second quarter of 2019, of which approximately $1,400 million was issued in anticipation of the Corteva Distribution (the “Funding CP Issuance”).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt
|
June 30, 2019
|
December 31, 2018
|
|
In millions
|
Amount
|
Weighted Average Rate
|
Amount
|
Weighted Average Rate
|
|
Promissory notes and debentures:
|
|
|
|
|
|
Final maturity 2020
|
$
|
2,000
|
|
3.63
|
%
|
$
|
2,000
|
|
3.68
|
%
|
|
Final maturity 2023
|
2,800
|
|
4.14
|
%
|
2,800
|
|
4.16
|
%
|
|
Final maturity 2024 and thereafter
|
7,900
|
|
4.98
|
%
|
7,900
|
|
4.98
|
%
|
|
Other facilities:
|
|
|
|
|
|
Term loan due 2022
|
3,000
|
|
3.51
|
%
|
—
|
|
—
|
%
|
|
Other loans
|
14
|
|
4.18
|
%
|
14
|
|
4.32
|
%
|
|
Finance lease obligations
|
3
|
|
|
25
|
|
|
|
Less: Unamortized debt discount and issuance costs
|
103
|
|
|
104
|
|
|
|
Less: Long-term debt due within one year 1, 2
|
6
|
|
|
11
|
|
|
|
Total
|
$
|
15,608
|
|
|
$
|
12,624
|
|
|
|
|
|
|
1.
|
Presented net of current portion of unamortized debt issuance costs.
|
|
|
|
|
2.
|
Includes finance lease obligations due within one year.
|
Principal payments of long-term debt for the remainder of 2019 and the five succeeding fiscal years is as follows:
|
|
|
|
|
|
|
|
Maturities of Long-Term Debt for Next Five Years at June 30, 2019
|
Total
|
|
In millions
|
|
Remainder of 2019
|
$
|
4
|
|
|
2020
|
$
|
2,005
|
|
|
2021
|
$
|
6
|
|
|
2022
|
$
|
3,001
|
|
|
2023
|
$
|
2,800
|
|
|
2024
|
$
|
—
|
|
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 $17,163 million and $13,080 million at June 30, 2019 and December 31, 2018, respectively.
Available Committed Credit Facilities
The following table summarizes the Company's credit facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed and Available Credit Facilities at June 30, 2019
|
|
|
|
In millions
|
Effective Date
|
Committed Credit
|
Credit Available
|
Maturity Date
|
Interest
|
|
Term Loan Facility
|
May 2019
|
$
|
3,000
|
|
$
|
—
|
|
May 2022
|
Floating Rate
|
|
Revolving Credit Facility, Five-year
|
May 2019
|
3,000
|
|
2,982
|
|
May 2024
|
Floating Rate
|
|
364-day Revolving Credit Facility
|
June 2019
|
750
|
|
750
|
|
June 2020
|
Floating Rate
|
|
Total Committed and Available Credit Facilities
|
|
$
|
6,750
|
|
$
|
3,732
|
|
|
|
Senior Notes
In contemplation of the separations and distributions and in preparation to achieve the intended credit profiles of Corteva, Dow and DuPont, in the fourth quarter of 2018, the Company consummated a public underwritten offer of eight series of senior unsecured notes (the "2018 Senior Notes") in an aggregate principal amount of $12.7 billion. The 2018 Senior Notes are a senior unsecured obligation of the Company and will rank equally with the Company's future senior unsecured debt outstanding from time to time. On November 1, 2018, the Company announced a $3 billion share buyback program, which expired on March 31, 2019. In the first quarter of 2019, proceeds from the 2018 Senior Notes were used to purchase $1.6 billion of shares. As a result, the share buyback program was complete at March 31, 2019.
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 $3,000 million. In May 2019, the Company amended its $3,000 million 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. In addition, in June 2019, the Company entered into a $750 million, 364-day revolving credit facility (the "364-day Revolving Credit Facility").
Uncommitted Credit Facilities and Outstanding Letters of Credit
Unused bank credit lines on uncommitted credit facilities were $597 million at June 30, 2019. These lines are available to support short-term liquidity needs and general corporate purposes including letters of credit. Outstanding letters of credit were $133 million at June 30, 2019. 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. There were no material changes to the debt covenants and default provisions.
NOTE 15 - COMMITMENTS AND CONTINGENT LIABILITIES
Litigation and Environmental Matters
Under the Separation and Distribution Agreement, liabilities, including cost and expenses, associated with litigation and environmental matters that primarily related to the materials science business, the agriculture business or the specialty products business were generally allocated to or retained by Dow, Corteva or the Company, respectively, through retention, assumption or indemnification. Related to the foregoing, at June 30, 2019, DuPont has recorded (i) a liability of $36 million (although it is reasonably possible that the ultimate cost could range up to $108 million above the amount accrued) for retained or assumed environmental liabilities, (ii) a liability of $2 million for retained or assumed litigation liabilities, and (iii) an indemnification liability related to legal and environmental matters of $64 million. Liabilities associated with discontinued and/or divested operations and businesses of Historical Dow generally were allocated to or retained by Dow. The allocation of liabilities associated with the discontinued and/or divested operations and businesses of Historical EID is discussed below.
The liabilities allocated to and assumed by Dow and Corteva are reflected as discontinued operations of the Company at December 31, 2018. Such liabilities assumed by Dow as of the consummation of the Dow Distribution on April 1, 2019, include the following matters discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, (the “Annual Report”) and Quarterly Report on Form 10-Q for the three-month period ended March 31, 2019, (the “First Quarterly Report”): Asbestos-Related Matters of Union Carbide Corporation, Urethane Matters, Rocky Flats Matter, Dow Silicones Chapter 11 Related Matters, Midland Off-Site Environmental Matters, Dow Silicones Midland, Michigan, Freeport, Texas, Plaquemine, Louisiana and St. Charles, Louisiana Steam-Assisted Flares Matters, Freeport, Texas, Facility Matter, Mt. Meigs, Alabama Matter, Union Carbide Matter and Union Carbide - Seadrift, Texas and, with indemnity from DuPont and Corteva, the Sabine Plant, Orange Texas-EPA Multimedia Inspection. Such liabilities assumed by Corteva as of the consummation of the Corteva Distribution on June 1, 2019, include the following matters discussed in the Company’s Annual Report and the First Quarterly Report: La Porte Plant, La Porte, Texas - Crop Protection-Release Incident Investigation and La Porte Plant, La Porte, Texas - EPA Multimedia Inspection.
Discontinued and/or Divested Operations and Businesses ("DDOB") Liabilities of Historical EID
Under the Separation and Distribution Agreement and the Letter Agreement between Corteva and DuPont, DDOB liabilities of Historical EID primarily related to Historical EID’s agriculture business were allocated to or retained by Corteva and those primarily related to Historical EID’s specialty products business were allocated to or retained by the Company. Historical EID DDOB liabilities not primarily related to Historical EID’s agriculture business or specialty products business (“Stray Liabilities”), are allocated as follows
|
|
|
|
•
|
Generally, indemnifiable losses as defined in the Separation and Distribution Agreement, (“Indemnifiable Losses”) for Stray Liabilities, to the extent they do not arise out of actions related to or resulting from the development, testing, manufacture or sale of PFAS, defined below, (“Non-PFAS Stray Liabilities”) that are known as of April 1, 2019 are borne by Corteva up to a specified amount set forth in the schedules to the Separation and Distribution Agreement and/or Letter Agreement. Non-PFAS Stray Liabilities in excess of such specified amounts and any Non-PFAS Stray Liabilities not listed in the schedules to the Separation and Distribution Agreement or Letter Agreement are borne by Corteva and/or DuPont up to separate, aggregate thresholds of $200 million each to the extent Corteva or DuPont, as applicable, incurs an Indemnifiable Loss. Once Corteva’s or DuPont’s $200 million threshold is met, the other would generally bear all Non-PFAS Stray Liabilities until meeting its $200 million threshold. After the respective $200 million thresholds are met, DuPont will bear 71 percent of such losses and Corteva will bear 29 percent of such losses.
|
|
|
|
|
•
|
Generally, Corteva and the Company will each bear 50 percent of the first $300 million (up to $150 million each) for Indemnifiable Losses arising out of actions to the extent related to or resulting from the development, testing, manufacture or sale of per- or polyfluoroalkyl substances, which include collectively perfluorooctanoic acids and its salts (“PFOA”), perfluorooctanesulfonic acid (“PFOS”) and perfluorinated chemicals and compounds (“PFCs”) (all such substances, “PFAS” and such Stray Liabilities referred to as “PFAS Stray Liabilities”). Indemnifiable Losses to the extent related to PFAS Stray Liabilities in excess of $300 million generally will be borne 71 percent by the Company and 29 percent by Corteva, unless either Corteva or DuPont has met its $200 million threshold. In that event, the other company would bear all PFAS Stray Liabilities until that company meets its $200 million threshold, at which point DuPont will bear 71 percent of such losses and Corteva will bear 29 percent of such losses.
|
|
|
|
|
•
|
Indemnifiable Losses incurred by the companies in relation to PFAS Stray Liabilities up to $300 million (e.g., up to $150 million each) will be applied to each company’s respective $200 million threshold.
|
Non-PFAS Stray Liabilities
While DuPont believes it is probable that it will incur a liability related to Non-PFAS Stray Liabilities, such liability is not reasonably estimable at June 30, 2019. Therefore, at June 30, 2019, DuPont has not recorded an accrual related to Non-PFAS Liabilities.
PFAS Stray Liabilities
DuPont expects to incur costs and expenses such as attorneys’ fees and expenses and court costs in connection with the Chemours suit, described below. While such costs and expenses are Indemnifiable Losses, the Company will expense them as incurred in accordance with its accounting policy for litigation matters. The Company believes the probability of ultimate liability with respect to the Chemours suit is remote.
Generally, The Chemours Company (“Chemours”), with reservations, including as to alleged fraudulent conveyance and voidable transactions, is defending and indemnifying Historical EID in the PFAS Matters discussed below. Although Chemours has refused the tender of the Company’s defense in the limited actions in which the Company has been named, DuPont believes it is remote that it will ultimately incur a liability in connection with these PFAS Matters. However, in the highly improbable event that Chemours is unable to pay or is successful in limiting its obligations under the Chemours Separation Agreement, defined below, it could impact the Company’s business, financial condition, results of operations and cash flows.
Chemours Suit
On July 1, 2015, Historical EID completed the separation of Historical EID’s Performance Chemicals segment through the spinoff of all the issued and outstanding stock of The Chemours Company (“Chemours”) to holders of Historical EID common stock. In connection with the spin, Historical EID and Chemours entered into a Separation Agreement (as amended, the "Chemours Separation Agreement"). Pursuant to the Chemours Separation Agreement, Chemours is obligated to indemnify Historical EID, including its current or former affiliates, against certain litigation, environmental and other liabilities that arose prior to the Chemours Separation. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments.
In 2017, Historical EID and Chemours amended the Chemours Separation Agreement to provide for a limited sharing of potential future PFOA liabilities for a five-year period that began on July 6, 2017. The amended agreement provides that during that five-year period, Chemours will annually pay the first $25 million of future PFOA liabilities and, if that amount is exceeded, Historical EID will pay any excess amount up to the next $25 million, with Chemours annually bearing any excess liabilities above that amount. At the end of the five-year period, this limited sharing agreement will expire, and Chemours’ indemnification obligations under the Chemours Separation Agreement will continue unchanged.
On May 13, 2019, Chemours filed suit in the Delaware Court of Chancery against Historical EID, Corteva and the Company in an attempt to limit its responsibility for the litigation and environmental liabilities allocated to and assumed by Chemours under the Chemours Separation Agreement. Chemours is asking the court to rewrite the Chemours Separation Agreement by either limiting Chemours’ liabilities or, alternatively, ordering the return to Chemours of all or a portion of a $3.91 billion dividend that Chemours paid to Historical EID, Chemours’ then-sole-shareholder, just prior to the spin of Chemours. DuPont and Corteva, acting jointly, have filed a motion to dismiss the lawsuit for lack of subject matter jurisdiction and have initiated an arbitration of the dispute as required under the Chemours Separation Agreement. Indemnifiable Losses related to the Chemours suit are PFAS Stray Liabilities subject to the sharing arrangement between DuPont and Corteva, described above.
PFAS Matters
Historical EID is a party to legal proceedings relating to the use of PFOA and PFCs by its former Performance Chemicals segment. Indemnifiable Losses related to PFAS liabilities allocated to and assumed by Chemours under the Chemours Separation Agreement generally are PFAS Stray Liabilities subject to the sharing arrangement between DuPont and Corteva, described above.
Personal Injury and Other PFAS Actions
DuPont, which was formed after the spinoff of Chemours as a subsidiary of Historical EID and Historical Dow, is not named in the personal injury and other PFAS actions discussed below.
Personal Injury
In 2004. Historical EID settled a West Virginia state court class action, Leach v. DuPont, which alleged that PFOA from Historical EID’s former Washington Works facility had contaminated area drinking water supplies and affected the health of area residents. Historical EID has residual liabilities under the Leach settlement related to providing PFOA water treatment to six area water districts and private well users and to fund, through an escrow account, up to $235 million for a medical monitoring program for eligible class members.
Members of the Leach class have standing to pursue personal injury claims for just six health conditions that an expert panel appointed under the Leach settlement reported in 2012 had a “probable link” (as defined in the settlement) with PFOA: pregnancy-induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and diagnosed high cholesterol. In 2017, Chemours and Historical EID each paid $335 million to settle the multi-district litigation in the U.S. District Court for the Southern District of Ohio (“Ohio MDL”), thereby resolving claims of about 3,550 plaintiffs alleging injury
from exposure to PFOA in drinking water. The Ohio MDL settlement did not resolve claims of plaintiffs who did not have claims in the Ohio MDL or whose claims are based on diseases first diagnosed after February 11, 2017. There are several dozen claims pending in the Ohio MDL.
Lawsuits have been filed against Historical EID and Chemours in New York federal and state courts, including a putative class action, alleging exposure to PFOA from third-party defendant manufacturing operations and seeking compensatory, consequential and punitive damages, medical monitoring and attorneys’ fees, expenses and interest.
Other PFAS Actions
A case is pending in the Southern District of Ohio seeking certification of a nationwide class of individuals who have detectable levels of PFAS in their blood serum. The suit was filed against several defendants in addition to Chemours and Historical EID. The complaint specifically seeks, among other things, the creation of a “PFAS Science Panel” to study the effects of PFAS, but expressly states that the class does not seek compensatory damages for personal injuries.
There are several actions pending in federal court against Historical EID and Chemours, relating to discharges of PFCs, including GenX, into the Cape Fear River. GenX is a polymerization processing aid and a replacement for PFOA introduced by Historical EID which Chemours continues to manufacture at its Fayetteville Works facility in Bladen County, North Carolina. One of these actions is a consolidated putative class action that asserts claims for damages and other relief on behalf of putative classes of property owners and residents in areas near or who draw drinking water from the Cape Fear River. Another action is a consolidated action brought by various North Carolina water authorities, including the Cape Fear Public Utility Authority and Brunswick County, that seek actual and punitive damages as well as injunctive relief. In addition, an action is pending in North Carolina state court on behalf of about 100 plaintiffs who own wells and property near the Fayetteville Works facility. The plaintiffs seek damages for nuisance allegedly caused by releases of certain PFCs from the site.
Natural Resource Damage Claims and Other Claims for Environmental Damages
DuPont, which was formed after the spinoff of Chemours as a subsidiary of Historical EID and Historical Dow, is named in certain of the actions discussed below.
Drinking Water
Since May 2017, a number of municipal water districts and state attorneys general have filed lawsuits against Historical EID, Chemours, 3M, and others, claiming contamination of public water systems by certain PFAS compounds. Such actions are currently pending in Alabama, Ohio, New Jersey, New Hampshire, South Dakota and Vermont. Generally, the states seek economic impact damages for alleged harm to natural resources, punitive damages, and present and future costs to cleanup contamination from certain PFAS compounds and to abate the alleged nuisance.
DuPont is a named party in the New Jersey suit related to its site in Parlin, New Jersey. In addition, the New Jersey Attorney General and New Jersey State Department of Environmental Protection filed two directives, one of which names DuPont. The directives seek information on the historical and current use of PFAS. DuPont is also a named party to the Vermont suit. The complaints filed in New Jersey and Vermont were recently amended to introduce additional causes of action based on allegations that the transfer by Historical EID of certain PFAS liabilities to Chemours prior to spinning off Chemours resulted in a fraudulent conveyance or voidable transaction.
Firefighting Foam
Historical EID and Chemours are named in about 20 cases originally filed in Louisiana, Michigan, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oklahoma, South Dakota, Tennessee and Texas. The Company is named in the New Hampshire action. These cases were transferred to a multi-district litigation docket in federal district court in South Carolina (the “SC MDL”), which includes approximately 150 cases. The suits allege contamination of neighboring drinking and groundwater from the use of aqueous firefighting foams on military installations, air force bases, commercial airports and refineries. The claims against Historical EID and Chemours involve alleged sales of PFOA and PFOS products to foam manufacturers, including 3M, who are also defendants in the SC MDL. Historical EID and the Company have never made or sold firefighting foam, PFOS or PFOS containing products.
Other Litigation Matters
In addition to the specific matters described above, the Company is party to other claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, governmental regulation, contract and commercial litigation, and other actions. Certain of these actions may purport to be class actions and seek damages in very large amounts. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of the Company.
Environmental Matters
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. At June 30, 2019, the Company had accrued obligations of $78 million for probable environmental remediation and restoration costs, inclusive of $36 million retained and assumed following the Distributions and $42 million of indemnified liabilities. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to $170 million above the amount accrued at June 30, 2019. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the Company’s results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration. At December 31, 2018, the Company had accrued obligations of $51 million for probable environmental remediation and restoration costs.
Pursuant to the Separation and Distribution Agreement, the Company's is required to indemnify certain clean-up responsibilities and associated remediation costs. The accrued environmental obligations of $78 million as of June 30, 2019 includes amount for which the Company indemnifies Dow and Corteva. At June 30, 2019, the Company has indemnified Dow and Corteva $8 million and $34 million, respectively.
Guarantees
Obligations for Equity Affiliates & Others
The Company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates, and customers. At June 30, 2019 and December 31, 2018, the Company had directly guaranteed $185 million and $199 million, respectively, of such obligations. These amounts represent the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guarantees. The Company would be required to perform on these guarantees in the event of default by the guaranteed party.
The Company assesses the payment/performance risk by assigning default rates based on the duration of the guarantees. These default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical default history for counterparties that do not have published credit ratings. For counterparties without an external rating or available credit history, a cumulative average default rate is used.
In certain cases, the Company has recourse to assets held as collateral, as well as personal guarantees from customers. Assuming liquidation, these assets are estimated to cover approximately 11 percent of the $19 million of guaranteed obligations of customers. The following table provides a summary of the final expiration year and maximum future payments for each type of guarantee:
|
|
|
|
|
|
|
|
|
Guarantees at June 30, 2019
|
Final Expiration Year
|
Maximum Future Payments
|
|
In millions
|
|
Obligations for customers1:
|
|
|
|
Bank borrowings
|
2020
|
$
|
19
|
|
|
Obligations for non-consolidated affiliates2:
|
|
|
|
Bank borrowings
|
2019
|
$
|
166
|
|
|
Total guarantees
|
|
$
|
185
|
|
|
|
|
|
1.
|
Existing guarantees for select customers, as part of contractual agreements. The terms of the guarantees are equivalent to the terms of the customer loans that are primarily made to finance customer invoices. Of the total maximum future payments, $18 million had terms less than a year.
|
|
|
|
|
2.
|
Existing guarantees for non-consolidated affiliates' liquidity needs in normal operations.
|
NOTE 16 - LEASES
The Company has operating and finance 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 40 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 on the accompanying consolidated balance sheet other than certain finance leases that include the maximum residual value guarantee amount in the measurement of the related liability given the election to use the package of practical expedients at the date of adoption. At June 30, 2019, the Company has future maximum payments for residual value guarantees in operating leases of $19 million with final expirations through 2024. The Company's lease agreements do not contain any material restrictive covenants.
The components of lease cost for operating and finance leases for the three and six months ended June 30, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Three Months Ended June 30, 2019
|
Six Months Ended
June 30, 2019
|
|
Operating lease cost
|
$
|
46
|
|
$
|
90
|
|
|
Finance lease cost
|
|
|
|
Amortization of right-of-use assets
|
(3
|
)
|
3
|
|
|
Interest on lease liabilities
|
—
|
|
—
|
|
|
Total finance lease cost
|
(3
|
)
|
3
|
|
|
Short-term lease cost
|
1
|
|
2
|
|
|
Variable lease cost
|
2
|
|
3
|
|
|
Sublease income
|
5
|
|
12
|
|
|
Total lease cost
|
$
|
41
|
|
$
|
86
|
|
New leases entered into during the six months ended June 30, 2019 were not considered material. Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
|
|
In millions
|
Six Months Ended
June 30, 2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
Operating cash flows from operating leases
|
$
|
92
|
|
|
Operating cash flows from finance leases
|
$
|
—
|
|
|
Financing cash flows from finance leases
|
$
|
3
|
|
Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
|
|
|
In millions
|
June 30, 2019
|
|
Operating Leases
|
|
|
|
Operating lease right-of-use assets1
|
$
|
539
|
|
|
Current operating lease liabilities2
|
144
|
|
|
Noncurrent operating lease liabilities3
|
394
|
|
|
Total operating lease liabilities
|
$
|
538
|
|
|
|
|
|
Finance Leases
|
|
|
|
Property, plant, and equipment, gross
|
$
|
13
|
|
|
Accumulated depreciation
|
5
|
|
|
Property, plant, and equipment, net
|
$
|
8
|
|
|
Short-term borrowings and finance lease obligations
|
$
|
1
|
|
|
Long-Term Debt
|
2
|
|
|
Total finance lease liabilities
|
$
|
3
|
|
|
|
|
|
1.
|
Included in "Deferred charges and other assets" in the interim Condensed Consolidated Balance Sheet.
|
|
|
|
|
2.
|
Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheet.
|
|
|
|
|
3.
|
Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheet.
|
DuPont utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable.
|
|
|
|
|
|
|
Lease Term and Discount Rate
|
June 30, 2019
|
|
Weighted-average remaining lease term (years)
|
|
|
Operating leases
|
5.12
|
|
|
Finance leases
|
4.72
|
|
|
Weighted average discount rate
|
|
|
Operating leases
|
3.40
|
%
|
|
Finance leases
|
3.32
|
%
|
Maturities of lease liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
Maturity of Lease Liabilities at June 30, 2019
|
Operating Leases
|
Finance Leases
|
|
In millions
|
|
2019
|
$
|
92
|
|
$
|
1
|
|
|
2020
|
126
|
|
1
|
|
|
2021
|
95
|
|
1
|
|
|
2022
|
77
|
|
—
|
|
|
2023
|
43
|
|
—
|
|
|
2024 and thereafter
|
179
|
|
1
|
|
|
Total lease payments
|
$
|
612
|
|
$
|
4
|
|
|
Less: Interest
|
74
|
|
1
|
|
|
Present value of lease liabilities
|
$
|
538
|
|
$
|
3
|
|
Future minimum lease payments for operating leases accounted for under ASC 840, "Leases," with remaining non-cancelable terms in excess of one year at December 31, 2018 were as follows:
|
|
|
|
|
|
|
|
Minimum Lease Commitments at December 31, 2018
|
|
In millions
|
|
2019
|
$
|
654
|
|
|
2020
|
497
|
|
|
2021
|
418
|
|
|
2022
|
363
|
|
|
2023
|
297
|
|
|
2024 and thereafter
|
1,063
|
|
|
Total
|
$
|
3,292
|
|
|
Total minimum lease commitments from discontinued operations
|
2,980
|
|
|
Total minimum lease commitments from continuing operations
|
$
|
312
|
|
NOTE 17 - STOCKHOLDERS' EQUITY
On May 23, 2019, stockholders of DowDuPont approved a 1-for-3 reverse stock split of DowDuPont shares of common stock with par value of $0.01 per share, which became effective immediately following the Corteva Distribution on June 1, 2019. All comparable periods presented have been retrospectively revised to reflect this change.
Treasury Stock
On June 25, 2019, the Company retired 37 million shares of its common stock held in treasury. The shares were returned to the status of authorized but unissued shares. As a result, the treasury stock balance decreased by $7,102 million. As a part of the retirement, the Company reduced "Common stock" and "(Accumulated Deficit) Retained Earnings" by $0.04 million and $7,102 million, respectively.
The following table provides a reconciliation of DuPont Common Stock activity for the six months ended June 30, 2019:
|
|
|
|
|
|
|
|
|
Shares of DuPont Common Stock
|
Issued
|
Held in Treasury
|
|
In thousands
|
|
Balance at December 31, 2018
|
784,143
|
|
27,818
|
|
|
Issued
|
2,112
|
|
—
|
|
|
Repurchased
|
—
|
|
10,993
|
|
|
Retired
|
(38,811
|
)
|
(38,811
|
)
|
|
Balance at June 30, 2019
|
747,444
|
|
—
|
|
Share Repurchase Program
On June 1, 2019, the Company's Board of Directors approved a new $2 billion share buyback program, which expires on June 1, 2021. At June 30, 2019, the Company had repurchased and retired 1.4 million shares under this program at a total cost of $102 million.
Accumulated Other Comprehensive Loss
The following table summarizes the activity related to each component of accumulated other comprehensive loss ("AOCL") for the six months ended June 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
Unrealized Gains (Losses) on Investments
|
Cumulative Translation Adj
|
Pension and OPEB
|
Derivative Instruments
|
Total
|
|
In millions
|
|
2018
|
|
|
|
|
|
|
Balance at January 1, 2018
|
$
|
17
|
|
$
|
(1,935
|
)
|
$
|
(6,923
|
)
|
$
|
(111
|
)
|
$
|
(8,952
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
(41
|
)
|
(1,058
|
)
|
9
|
|
75
|
|
(1,015
|
)
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
2
|
|
(2
|
)
|
248
|
|
44
|
|
292
|
|
|
Net other comprehensive income (loss)
|
$
|
(39
|
)
|
$
|
(1,060
|
)
|
$
|
257
|
|
$
|
119
|
|
$
|
(723
|
)
|
|
Reclassification of stranded tax effects 1
|
$
|
(1
|
)
|
$
|
(107
|
)
|
$
|
(927
|
)
|
$
|
(22
|
)
|
$
|
(1,057
|
)
|
|
Balance at June 30, 2018
|
$
|
(23
|
)
|
$
|
(3,102
|
)
|
$
|
(7,593
|
)
|
$
|
(14
|
)
|
$
|
(10,732
|
)
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
Balance at January 1, 2019
|
$
|
(51
|
)
|
$
|
(3,785
|
)
|
$
|
(8,476
|
)
|
$
|
(82
|
)
|
$
|
(12,394
|
)
|
|
Other comprehensive income (loss) before reclassifications
|
68
|
|
(117
|
)
|
49
|
|
(43
|
)
|
(43
|
)
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
(1
|
)
|
(18
|
)
|
142
|
|
(15
|
)
|
108
|
|
|
Net other comprehensive income (loss)
|
$
|
67
|
|
$
|
(135
|
)
|
$
|
191
|
|
$
|
(58
|
)
|
$
|
65
|
|
|
Spin-offs of Dow and Corteva
|
$
|
(16
|
)
|
$
|
3,179
|
|
$
|
8,196
|
|
$
|
139
|
|
$
|
11,498
|
|
|
Balance at June 30, 2019
|
$
|
—
|
|
$
|
(741
|
)
|
$
|
(89
|
)
|
$
|
(1
|
)
|
$
|
(831
|
)
|
|
|
|
|
1.
|
Amounts reclassified to retained earnings as a result of the adoption of ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which was adopted April 1, 2018. The ASU allowed a reclassification from AOCL to retained earnings for stranded tax effects resulting from The Act.
|
The tax effects on the net activity related to each component of other comprehensive income (loss) for the three and six months ended June 30, 2019 and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Benefit (Expense) 1
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
In millions
|
2019
|
2018
|
2019
|
2018
|
|
Unrealized gains (losses) on investments
|
$
|
—
|
|
$
|
3
|
|
$
|
(18
|
)
|
$
|
9
|
|
|
Cumulative translation adjustments
|
—
|
|
(25
|
)
|
(1
|
)
|
(20
|
)
|
|
Pension and other post employment benefit plans
|
34
|
|
(34
|
)
|
2
|
|
(64
|
)
|
|
Derivative instruments
|
(8
|
)
|
(7
|
)
|
16
|
|
(8
|
)
|
|
Tax expense from income taxes related to other comprehensive income items
|
$
|
26
|
|
$
|
(63
|
)
|
$
|
(1
|
)
|
$
|
(83
|
)
|
|
|
|
|
1.
|
Prior period amounts were updated to conform with the current year presentation.
|
A summary of the reclassifications out of AOCL for the three and six months ended June 30, 2019 and 2018 is provided as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications Out of Accumulated Other Comprehensive Loss
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
Income Classification
|
|
In millions
|
2019
|
2018
|
2019
|
2018
|
|
Unrealized (gains) losses on investments
|
$
|
—
|
|
$
|
1
|
|
$
|
(1
|
)
|
$
|
3
|
|
See (1) below
|
|
Tax expense (benefit)
|
—
|
|
—
|
|
—
|
|
(1
|
)
|
See (2) below
|
|
After tax
|
$
|
—
|
|
$
|
1
|
|
$
|
(1
|
)
|
$
|
2
|
|
|
|
Cumulative translation adjustments
|
$
|
—
|
|
$
|
(2
|
)
|
$
|
(18
|
)
|
$
|
(2
|
)
|
See (3) below
|
|
Pension and other post employment benefit plans
|
$
|
(25
|
)
|
$
|
156
|
|
$
|
142
|
|
$
|
310
|
|
See (4) below
|
|
Tax benefit
|
25
|
|
(34
|
)
|
—
|
|
(62
|
)
|
See (2) below
|
|
After tax
|
$
|
—
|
|
$
|
122
|
|
$
|
142
|
|
$
|
248
|
|
|
|
Derivative Instruments
|
$
|
(7
|
)
|
$
|
26
|
|
$
|
(18
|
)
|
$
|
52
|
|
See (5) below
|
|
Tax benefit
|
2
|
|
(3
|
)
|
3
|
|
(8
|
)
|
See (2) below
|
|
After tax
|
$
|
(5
|
)
|
$
|
23
|
|
$
|
(15
|
)
|
$
|
44
|
|
|
|
Total reclassifications for the period, after tax
|
$
|
(5
|
)
|
$
|
144
|
|
$
|
108
|
|
$
|
292
|
|
|
|
|
|
|
1.
|
"Net sales" and "Sundry income (expense) - net."
|
|
|
|
|
2.
|
"Provision for income taxes on continuing operations."
|
|
|
|
|
3.
|
"Sundry income (expense) - net."
|
|
|
|
|
4.
|
These AOCL components are included in the computation of net periodic benefit cost of the Company's defined benefit pension and other post employment benefit plans. See Note 19 for additional information.
|
|
|
|
|
5.
|
"Cost of sales," "Sundry income (expense) - net" and "Interest expense".
|
NOTE 18 - NONCONTROLLING INTERESTS
Ownership interests in the Company's subsidiaries held by parties other than the Company are presented separately from the Company's equity in the Condensed Consolidated Balance Sheets as "Noncontrolling interests." The amount of consolidated net income attributable to the Company and the noncontrolling interests are both presented on the face of the interim Consolidated Statements of Operations.
The following table summarizes the activity for equity attributable to noncontrolling interests for the three and six months ended June 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interests
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
In millions
|
2019
|
2018
|
2019
|
2018
|
|
Balance at beginning of period
|
$
|
1,654
|
|
$
|
1,664
|
|
$
|
1,608
|
|
$
|
1,597
|
|
|
Net income attributable to noncontrolling interests
|
34
|
|
35
|
|
85
|
|
79
|
|
|
Distributions to noncontrolling interests 1
|
(1
|
)
|
(46
|
)
|
(12
|
)
|
(73
|
)
|
|
Noncontrolling interests from Merger
|
—
|
|
—
|
|
—
|
|
56
|
|
|
Cumulative translation adjustments
|
9
|
|
(34
|
)
|
16
|
|
(40
|
)
|
|
Spin-off of Dow and Corteva
|
(1,124
|
)
|
—
|
|
(1,124
|
)
|
—
|
|
|
Other
|
(2
|
)
|
1
|
|
(3
|
)
|
1
|
|
|
Balance at end of period
|
$
|
570
|
|
$
|
1,620
|
|
$
|
570
|
|
$
|
1,620
|
|
|
|
|
|
1.
|
Net of dividends paid to a joint venture, which were reclassified to "Equity in earnings of nonconsolidated affiliates" in the interim Consolidated Statements of Operations, totaled zero for the three months ended June 30, 2019 ($6 million for the three months ended June 30, 2018) and zero for the six months ended June 30, 2019 ($6 million for the six months ended June 30, 2018).
|
NOTE 19 - PENSION PLANS AND OTHER POST EMPLOYMENT BENEFITS
In connection with the Distributions, the Historical Dow U.S. qualified defined benefit plan and the Historical EID U.S. principal qualified defined benefit plan were separated from the Company to Dow and Corteva, respectively. The Company retained a portion of pension liabilities and select other post employment benefit plans relating to foreign benefit plans for both Historical EID and Historical Dow. The Company also retained an immaterial portion of the non-qualified US pension liabilities and other post employment benefit plans relating to Historical EID US benefit plans.
The Employee Matters Agreement with Dow and Corteva provides that employees of Dow and 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 either Dow or Corteva, as of the effective time of the Dow Distribution and Corteva Distribution, respectively. At June 30, 2019, the Company's pension and other post employment benefit plans retained an underfunded status of $980 million after certain assets and obligations were separated from the Company to Dow and Corteva plans effective as of the Dow Distribution and Corteva Distribution, respectively.
The following sets forth the components of the Company's net periodic benefit (credit) cost for defined benefit pension plans and other post employment benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit (Credit) Cost for All Plans
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
June 30, 2019
|
June 30, 2018
|
June 30, 2019
|
June 30, 2018
|
|
Defined Benefit Pension Plans:
|
|
|
|
|
|
Service cost
|
$
|
18
|
|
$
|
165
|
|
$
|
149
|
|
$
|
332
|
|
|
Interest cost
|
144
|
|
406
|
|
591
|
|
814
|
|
|
Expected return on plan assets
|
(206
|
)
|
(705
|
)
|
(919
|
)
|
(1,414
|
)
|
|
Amortization of prior service credit
|
(1
|
)
|
(6
|
)
|
(7
|
)
|
(12
|
)
|
|
Amortization of net loss
|
2
|
|
169
|
|
135
|
|
340
|
|
|
Curtailment/settlement 1
|
(2
|
)
|
(4
|
)
|
(2
|
)
|
(4
|
)
|
|
Net periodic benefit (credit) cost - total
|
$
|
(45
|
)
|
$
|
25
|
|
$
|
(53
|
)
|
$
|
56
|
|
|
Less: discontinued operations
|
41
|
|
(35
|
)
|
45
|
|
(73
|
)
|
|
Net periodic benefit credit - continuing operations
|
$
|
(4
|
)
|
$
|
(10
|
)
|
$
|
(8
|
)
|
$
|
(17
|
)
|
|
Other Post Employment Benefits:
|
|
|
|
|
|
Service cost
|
$
|
1
|
|
$
|
5
|
|
$
|
5
|
|
$
|
10
|
|
|
Interest cost
|
15
|
|
33
|
|
52
|
|
65
|
|
|
Amortization of net gain
|
—
|
|
(6
|
)
|
(6
|
)
|
(12
|
)
|
|
Net periodic benefit cost - total
|
$
|
16
|
|
$
|
32
|
|
$
|
51
|
|
$
|
63
|
|
|
Less: discontinued operations
|
(16
|
)
|
(32
|
)
|
(50
|
)
|
(63
|
)
|
|
Net periodic benefit cost - continuing operations
|
$
|
—
|
|
$
|
—
|
|
$
|
1
|
|
$
|
—
|
|
1. The 2018 impact relates to the curtailment and settlement of pension plans in the U.S. and Australia all of which have been transferred to Corteva and included in Discontinued Operations. The 2019 impact relates to the curtailment of pension plans in Canada which have been retained by DuPont and included in Continuing Operations.
Net periodic benefit (credit) cost, other than the service cost component, is included in "Sundry income (expense) - net" in the interim Consolidated Statements of Operations.
DuPont expects to make additional contributions in the aggregate of approximately $240 million by year-end 2019 to certain non-US pension and other post employment benefit plans.
NOTE 20 - STOCK-BASED COMPENSATION
On May 23, 2019, stockholders of DowDuPont approved a reverse stock split of DowDuPont shares of common stock. DowDuPont's Board of Directors established a reverse stock split ratio of 1 new share of DowDuPont common stock for every 3 shares of current DowDuPont common stock with par value of $0.01 per share. The stock split became effective immediately following the Corteva Distribution on June 1, 2019. All comparable periods presented have been retrospectively revised to reflect this change.
Historical Dow and Historical EID did not merge their equity incentive plans as a result of the Merger. The Historical Dow and Historical EID stock-based compensation plans were assumed by DowDuPont and remained in place with the ability to grant and issue DowDuPont common stock until the Distributions.
There was minimal grant activity in the first five months of 2019 under the Dow Chemical Company 2012 Stock Incentive Plan (the "2012 Plan"). In the first quarter of 2019, Historical EID granted 1.1 million restricted stock units ("RSUs") with a weighted-average fair value of $70.52 per share under the E. I. du Pont de Nemours and Company Equity and Incentive Plan (the "DuPont EIP"). There was minimal grant activity in April and May of 2019 under the DuPont EIP.
Effect of the Distributions on Equity Awards
In accordance with the Employee Matters Agreement between DuPont, Dow and Corteva, certain executives and employees were entitled to receive equity compensation awards of DuPont in replacement of previously outstanding awards granted under Historical Dow and Historical EID equity incentive plans. At the time of the Dow Distribution, equity awards denominated in DowDuPont common stock held by DuPont employees were adjusted using a formula designed to preserve the intrinsic value of the awards immediately prior to the Dow Distribution, and either remained denominated in DowDuPont common stock, or were adjusted into a combination of equity awards denominated in both DowDuPont common stock and Dow common stock. For employees of Dow Inc., outstanding share-based compensation awards denominated in DowDuPont common stock were adjusted to equity awards denominated in either Dow common stock, or into a combination of equity awards denominated in both DowDuPont common stock and Dow common stock using a formula designed to preserve the intrinsic value of the awards immediately prior to the Dow Distribution.
At the time of the Corteva Distribution, equity awards denominated in DowDuPont common stock held by DuPont employees were adjusted using a formula designed to preserve the intrinsic value of the awards immediately prior to the Corteva Distribution, and were either adjusted into DuPont common stock, or were adjusted into a combination of equity awards denominated in both DuPont common stock and Corteva common stock. For Corteva employees, outstanding share-based compensation awards denominated in DowDuPont common stock were adjusted to equity awards denominated in either Corteva common stock, or into a combination of equity awards denominated in both DuPont common and Corteva common stock using a formula designed to preserve the intrinsic value of the awards immediately prior to the Corteva Distribution. For Dow employees, outstanding DowDuPont equity awards at the time of the Corteva Distribution were adjusted into a combination of equity awards denominated in both DuPont common stock and Corteva common stock using a formula designed to preserve the intrinsic value of the awards immediately prior to the Corteva Distribution.
Immediately following the Corteva Distribution, on June 1, 2019, DuPont adopted the Dupont Omnibus Incentive Plan ("DuPont OIP") which grants stock-based compensation to certain employees, directors, independent contractors and consultants through grants of stock options, RSUs, and other stock-based awards. The DuPont OIP has two subplans to reflect the DuPont EIP and the 2012 Plan. The equity awards under these subplans have the same terms and conditions that were applicable to the awards under the DuPont EIP and 2012 Plan immediately prior to the Distributions. Under the DuPont OIP, a maximum of 15 million shares of common stock may be awarded. From the period June 1 to June 30, 2019, there was minimal grant activity under the DuPont OIP.
DuPont recognized share-based compensation expense in continuing operations of $34 million and $32 million during the three months ended June 30, 2019 and 2018, respectively, and $55 million and $52 million during the six months ended June 30, 2019 and 2018, respectively. The income tax benefits related to stock-based compensation arrangements were $7 million and $12 million for the three and six months ended June 30, 2019, respectively, and $7 million and $11 million for the three and six months ended June 30, 2018, respectively.
Performance Stock Units
In June 2019, DuPont approved performance stock units ("PSUs") to certain members of senior leadership. The approved PSU's are expected to be granted in the third quarter of 2019.
NOTE 21 - FINANCIAL INSTRUMENTS
The following table summarizes the fair value of financial instruments at June 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Financial Instruments
|
June 30, 2019
|
December 31, 2018
|
|
In millions
|
Cost
|
Gain
|
Loss
|
Fair Value
|
Cost
|
Gain
|
Loss
|
Fair Value
|
|
Cash equivalents
|
$
|
532
|
|
$
|
—
|
|
$
|
—
|
|
$
|
532
|
|
$
|
8,226
|
|
$
|
—
|
|
$
|
—
|
|
$
|
8,226
|
|
|
Restricted cash equivalents 1
|
$
|
40
|
|
$
|
—
|
|
$
|
—
|
|
$
|
40
|
|
$
|
43
|
|
$
|
—
|
|
$
|
—
|
|
$
|
43
|
|
|
Marketable securities
|
$
|
8
|
|
$
|
—
|
|
$
|
—
|
|
$
|
8
|
|
$
|
29
|
|
$
|
—
|
|
$
|
—
|
|
$
|
29
|
|
|
Equity securities 2
|
$
|
4
|
|
$
|
—
|
|
$
|
—
|
|
$
|
4
|
|
$
|
2
|
|
$
|
—
|
|
$
|
—
|
|
$
|
2
|
|
|
Total cash and restricted cash equivalents, marketable securities and other investments
|
$
|
584
|
|
$
|
—
|
|
$
|
—
|
|
$
|
584
|
|
$
|
8,300
|
|
$
|
—
|
|
$
|
—
|
|
$
|
8,300
|
|
|
Long-term debt including debt due within one year
|
$
|
(15,614
|
)
|
$
|
—
|
|
$
|
(1,555
|
)
|
$
|
(17,169
|
)
|
$
|
(12,635
|
)
|
$
|
5
|
|
$
|
(461
|
)
|
$
|
(13,091
|
)
|
|
Derivatives relating to:
|
|
|
|
|
|
|
|
|
|
Foreign currency 3
|
—
|
|
11
|
|
(6
|
)
|
5
|
|
—
|
|
37
|
|
(6
|
)
|
31
|
|
|
Total derivatives
|
$
|
—
|
|
$
|
11
|
|
$
|
(6
|
)
|
$
|
5
|
|
$
|
—
|
|
$
|
37
|
|
$
|
(6
|
)
|
$
|
31
|
|
|
|
|
|
1.
|
Classified as "Other current assets" in the Condensed Consolidated Balance Sheets.
|
|
|
|
|
2.
|
Equity securities with a readily determinable fair value. Presented in accordance with ASU 2016-01. "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities."
|
3. 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 has not designated any derivatives or non-derivatives as hedging instruments.
The Company's financial risk management procedures also address counterparty credit approval, limits and routine exposure monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions and major commodity exchanges. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company utilizes collateral support annex agreements with certain counterparties to limit its exposure to credit losses. The Company anticipates performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks associated with these instruments are regularly reported to management.
The notional amounts of the Company's derivative instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
Notional Amounts
|
June 30, 2019
|
Dec 31, 2018
|
|
In millions
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
Foreign currency contracts
|
$
|
(80
|
)
|
$
|
2,057
|
|
|
Commodity contracts
|
$
|
8
|
|
$
|
9
|
|
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.
Commodity Contracts
The Company utilizes options, futures and swaps that are not designated as hedging instruments to reduce exposure to commodity price fluctuations on purchases of inventory such as soybeans, soybean oil and soybean meal.
Fair Value of Derivative Instruments
Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the interim Condensed Consolidated Balance Sheets. The presentation of the Company's derivative assets and liabilities is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
In millions
|
Balance Sheet Classification
|
Gross
|
Counterparty and Cash Collateral Netting 1
|
Net Amounts Included in the Consolidated Balance Sheet
|
|
Asset derivatives:
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Foreign currency contracts
|
Other current assets
|
27
|
|
(16
|
)
|
11
|
|
|
Total asset derivatives
|
|
$
|
27
|
|
$
|
(16
|
)
|
$
|
11
|
|
|
|
|
|
|
|
|
Liability derivatives:
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Foreign currency contracts
|
Accrued and other current liabilities
|
$
|
20
|
|
$
|
(14
|
)
|
$
|
6
|
|
|
Total liability derivatives
|
|
$
|
20
|
|
$
|
(14
|
)
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
In millions
|
Balance Sheet Classification
|
Gross
|
Counterparty and Cash Collateral Netting 1
|
Net Amounts Included in the Consolidated Balance Sheet
|
|
Asset derivatives:
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Foreign currency contracts
|
Other current assets
|
$
|
72
|
|
$
|
(35
|
)
|
$
|
37
|
|
|
Total asset derivatives
|
|
$
|
72
|
|
$
|
(35
|
)
|
$
|
37
|
|
|
|
|
|
|
|
|
Liability derivatives:
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Foreign currency contracts
|
Accrued and other current liabilities
|
$
|
21
|
|
$
|
(15
|
)
|
$
|
6
|
|
|
Total liability derivatives
|
|
$
|
21
|
|
$
|
(15
|
)
|
$
|
6
|
|
|
|
|
|
1.
|
Counterparty and cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between the Company and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty.
|
Effect of Derivative Instruments
Foreign currency derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency-denominated assets and liabilities. The amount charged on a pretax basis related to foreign currency derivatives not designated as a hedge, which was included in “Sundry income (expense) - net” in the interim Consolidated Statements of Operations, was a loss of $13 million for the three months ended June 30, 2019 ($177 million gain for the three months ended June 30, 2018) and a loss of $60 million for the six months ended June 30, 2019 ($4 million loss for the six months ended June 30, 2018). The income statement effects of other derivatives were immaterial.
Reclassification from AOCL
The Company does not expect to reclassify gains related to foreign currency contracts from AOCL to income within the next 12 months.
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 June 30, 2019
|
Significant Other Observable Inputs
(Level 2)
|
|
In millions
|
|
Assets at fair value:
|
|
|
Cash equivalents and restricted cash equivalents 1
|
$
|
572
|
|
|
Marketable securities 2
|
8
|
|
|
Equity securities 3
|
4
|
|
|
Derivatives relating to: 4
|
|
|
Foreign currency contracts
|
27
|
|
|
Total assets at fair value
|
$
|
611
|
|
|
Liabilities at fair value:
|
|
|
Long-term debt including debt due within one year 5
|
$
|
17,169
|
|
|
Derivatives relating to: 4
|
|
|
Foreign currency contracts
|
20
|
|
|
Total liabilities at fair value
|
$
|
17,189
|
|
|
|
|
|
1.
|
Treasury bills, time deposits, and money market funds included in "Cash and cash equivalents" and money market funds included in "Other current assets" in the interim Condensed Consolidated Balance Sheets and held at amortized cost, which approximates fair value.
|
|
|
|
|
2.
|
Primarily time deposits with maturities of greater than three months at time of acquisition.
|
|
|
|
|
3.
|
The Company’s investments in equity securities are included in “Other investments” in the interim Condensed Consolidated Balance Sheets.
|
|
|
|
|
4.
|
See Note 21 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets.
|
|
|
|
|
5.
|
See Note 21 for information on fair value measurements of long-term debt.
|
|
|
|
|
|
|
|
|
Basis of Fair Value Measurements on a Recurring Basis at Dec 31, 2018
|
Significant Other Observable Inputs
(Level 2)
|
|
In millions
|
|
Assets at fair value:
|
|
|
Cash equivalents and restricted cash equivalents 1
|
$
|
8,269
|
|
|
Marketable securities 2
|
29
|
|
|
Equity securities 3
|
2
|
|
|
Derivatives relating to: 4
|
|
|
Foreign currency contracts
|
72
|
|
|
Total assets at fair value
|
$
|
8,372
|
|
|
Liabilities at fair value:
|
|
|
Long-term debt including debt due within one year 5
|
$
|
13,091
|
|
|
Derivatives relating to: 4
|
|
|
Foreign currency contracts
|
21
|
|
|
Total liabilities at fair value
|
$
|
13,112
|
|
|
|
|
|
1.
|
Treasury bills, time deposits, and money market funds included in "Cash and cash equivalents" and money market funds included in "Other current assets" in the interim Condensed Consolidated Balance Sheets and held at amortized cost, which approximates fair value.
|
|
|
|
|
2.
|
Primarily time deposits with maturities of greater than three months at time of acquisition.
|
|
|
|
|
3.
|
The Company’s investments in equity securities are included in “Other investments” in the interim Condensed Consolidated Balance Sheets.
|
|
|
|
|
4.
|
See Note 21 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets
|
|
|
|
|
5.
|
See Note 21 for information on fair value measurements of long-term debt.
|
Fair Value Measurements on a Nonrecurring Basis
During the second quarter of 2019, the Company recorded goodwill impairment charges related to the Nutrition & Biosciences and the Non-Core segments. See Note 13 for further discussion of these fair value measurements.
The Internal SP Distribution served as a triggering event to assess equity method investments for impairment. The Company recorded an other-than-temporary impairment, classified as Level 3 measurements, on an equity method investment for the three and six months ended June 30, 2019. The impairment charge of $63 million was recorded in "Restructuring and asset related charges - net" in the interim Consolidated Statements of Operations. See Note 5 for further discussion of these fair value measurements.
NOTE 23 - SEGMENTS AND GEOGRAPHIC REGIONS
Effective June 1, 2019, DuPont changed its management and reporting structure resulting in the creation of a new Non-Core segment ("Second Quarter Segment Realignment").
|
|
|
|
•
|
The Second Quarter Segment Realignment resulted in the following being realigned to Non-Core:
|
|
|
|
|
◦
|
Photovoltaic and Advanced Materials business unit (including the HSC Group joint ventures: DC HSC Holdings LLC and Hemlock Semiconductor L.L.C) from the Electronics & Imaging segment;
|
|
|
|
|
◦
|
Biomaterials and Clean Technologies business units from the Nutrition & Biosciences segment;
|
|
|
|
|
◦
|
DuPont Teijin Films joint venture from the Transportation & Industrial (formerly known as Transportation & Advanced Polymers) segment; and
|
|
|
|
|
◦
|
Sustainable Solutions business unit from the Safety & Construction segment.
|
•In addition, the following changes have occurred:
|
|
|
|
◦
|
Consolidation of the Nutrition & Health business with the Industrial Biosciences business within the Nutrition & Biosciences reportable segment. Previously, Nutrition & Health and Industrial Biosciences were separate operating segments which did not meet the quantitative thresholds.
|
|
|
|
|
◦
|
Pre-commercial activities related to the Biomaterials business unit was realigned from Corporate to Non‑Core, with the remaining pre-commercial activities realigned to the Nutrition & Biosciences segment.
|
The reporting changes have been retrospectively reflected in the segment results for all periods presented.
Prior to April 1, 2019, the Company's measure of profit/loss for segment reporting purposes is pro forma Operating EBITDA as this is the manner in which the Company's chief operating decision maker ("CODM") assessed performance and allocates resources. The Company defines pro forma Operating EBITDA as pro forma earnings (i.e. pro forma "Income (loss) from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / other post employment benefits (“OPEB”) / charges, and foreign exchange gains/losses, excluding the impact of costs historically allocated to the materials science and agriculture businesses that did not meet the criteria to be recorded as discontinued operations and adjusted for significant items. Effective April 1, 2019, the Company's measure of profit/loss for segment reporting purposes is Operating EBITDA as this is the manner in which the Company's chief operating decision maker ("CODM") assesses performance and allocates resources. The Company defines Operating EBITDA as earnings (i.e., “Income from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / OPEB benefits / charges, and foreign exchange gains / losses, adjusted for significant items. Reconciliations of these measures are provided on the following pages.
Pro forma adjustments were determined in accordance with Article 11 of Regulation S-X. Pro forma financial information is based on the Consolidated Financial Statements of DuPont, adjusted to give effect to the impact of certain items directly attributable to the Distributions, and the Term Loan Facilities, the 2018 Senior Notes and the Funding CP Issuance (together, the "Financings"), including the use of proceeds from such Financings (collectively the "Transactions"). The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the Transactions, (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the results. Events that are not expected to have a continuing impact on the combined results are excluded from the pro forma adjustments. Pro forma adjustments impacting consolidated results are outlined in the Supplemental Unaudited Pro Forma Combined Financial Information section contained in Management's Discussion and Analysis ("MD&A"). Those pro forma adjustments include the impact of various supply agreements entered into in connection with the Dow Distribution ("supply agreements") and are outlined in the Supplemental Unaudited Pro Forma Combined Information section of the MD&A as adjustments to "Cost of sales". The impact of these supply agreements are 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. There were no pro forma adjustments for the three months ended June 30, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Information
|
Elect. & Imaging
|
Nutrition & Biosciences
|
Transp. & Industrial
|
Safety & Const.
|
Non-Core
|
Corp.
|
Total
|
|
In millions
|
|
Three months ended June 30, 2019
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
858
|
|
$
|
1,558
|
|
$
|
1,269
|
|
$
|
1,341
|
|
$
|
442
|
|
$
|
—
|
|
$
|
5,468
|
|
|
Operating EBITDA 1
|
$
|
246
|
|
$
|
391
|
|
$
|
357
|
|
$
|
382
|
|
$
|
99
|
|
$
|
(53
|
)
|
$
|
1,422
|
|
|
Equity in earnings (losses) of nonconsolidated affiliates
|
$
|
5
|
|
$
|
—
|
|
$
|
2
|
|
$
|
7
|
|
$
|
35
|
|
$
|
—
|
|
$
|
49
|
|
|
Three months ended June 30, 2018
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
921
|
|
$
|
1,621
|
|
$
|
1,417
|
|
$
|
1,372
|
|
$
|
526
|
|
$
|
—
|
|
$
|
5,857
|
|
|
Pro forma operating EBITDA 1
|
$
|
290
|
|
$
|
383
|
|
$
|
402
|
|
$
|
296
|
|
$
|
123
|
|
$
|
(72
|
)
|
$
|
1,422
|
|
|
Equity in earnings (losses) of nonconsolidated affiliates
|
$
|
6
|
|
$
|
—
|
|
$
|
1
|
|
$
|
8
|
|
$
|
39
|
|
$
|
—
|
|
$
|
54
|
|
|
Six months ended June 30, 2019
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
1,683
|
|
$
|
3,093
|
|
$
|
2,586
|
|
$
|
2,624
|
|
$
|
896
|
|
$
|
—
|
|
$
|
10,882
|
|
|
Pro forma operating EBITDA 1
|
$
|
534
|
|
$
|
744
|
|
$
|
730
|
|
$
|
756
|
|
$
|
193
|
|
$
|
(105
|
)
|
$
|
2,852
|
|
|
Equity in earnings (losses) of nonconsolidated affiliates
|
$
|
8
|
|
$
|
—
|
|
$
|
2
|
|
$
|
15
|
|
$
|
64
|
|
$
|
—
|
|
$
|
89
|
|
|
Six months ended June 30, 2018
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
1,785
|
|
$
|
3,198
|
|
$
|
2,795
|
|
$
|
2,636
|
|
$
|
1,040
|
|
$
|
—
|
|
$
|
11,454
|
|
|
Pro forma operating EBITDA 1
|
$
|
567
|
|
$
|
751
|
|
$
|
791
|
|
$
|
622
|
|
$
|
233
|
|
$
|
(136
|
)
|
$
|
2,828
|
|
|
Equity in earnings (losses) of nonconsolidated affiliates
|
$
|
13
|
|
$
|
1
|
|
$
|
3
|
|
$
|
13
|
|
$
|
81
|
|
$
|
—
|
|
$
|
111
|
|
|
|
|
|
1.
|
A reconciliation of "Income (loss) from continuing operations, net of tax" to Operating EBITDA and pro forma Operating EBITDA, as applicable, is provided below.
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of "(Loss) Income from continuing operations, net of tax" to Operating EBITDA for the Three Months Ended June 30, 2019 and 2018
|
Three Months Ended
|
|
In millions
|
June 30, 2019
|
June 30, 2018
|
|
(Loss) Income from continuing operations, net of tax
|
$
|
(1,103
|
)
|
$
|
31
|
|
|
+ Provision for income taxes on continuing operations
|
155
|
|
99
|
|
|
(Loss) income from continuing operations before income taxes
|
$
|
(948
|
)
|
$
|
130
|
|
|
+ Depreciation and amortization
|
507
|
|
551
|
|
|
- Interest income 1
|
9
|
|
11
|
|
|
+ Interest expense
|
165
|
|
171
|
|
|
- Non-operating pension/OPEB benefit1
|
18
|
|
28
|
|
|
- Foreign exchange gains (losses), net 1
|
(17
|
)
|
53
|
|
|
+ Costs historically allocated to the materials science and agriculture businesses 2
|
—
|
|
352
|
|
|
+ Pro forma adjustments 3
|
—
|
|
(52
|
)
|
|
- Adjusted significant items
|
(1,708
|
)
|
(362
|
)
|
|
Operating EBITDA 3
|
$
|
1,422
|
|
$
|
1,422
|
|
|
|
|
|
1.
|
Included in Sundry income (expense) - net.
|
2. 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.
3. For the three months ended June 30, 2018, operating EBITDA is on a pro forma basis. Refer to the Supplemental Unaudited Pro Forma Combined Financial Information contained in the MD&A for additional information related to the pro forma adjustments.
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of "(Loss) Income from continuing operations, net of tax" to Pro Forma Operating EBITDA for the Six months Ended June 30, 2019 and 2018
|
Six Months Ended
|
|
In millions
|
June 30, 2019
|
June 30, 2018
|
|
Loss from continuing operations, net of tax
|
$
|
(1,177
|
)
|
$
|
(42
|
)
|
|
+ Provision for income taxes on continuing operations
|
64
|
|
164
|
|
|
(Loss) Income from continuing operations before income taxes
|
$
|
(1,113
|
)
|
$
|
122
|
|
|
+ Depreciation and amortization
|
1,034
|
|
1,102
|
|
|
- Interest income 1
|
49
|
|
21
|
|
|
+ Interest expense
|
345
|
|
342
|
|
|
- Non-operating pension/OPEB benefit
|
39
|
|
55
|
|
|
- Foreign exchange gains (losses), net 1, 2
|
(78
|
)
|
(72
|
)
|
|
+ Costs historically allocated to the materials science and agriculture businesses 3
|
256
|
|
608
|
|
|
+ Pro forma adjustments 4
|
122
|
|
(150
|
)
|
|
- Adjusted significant items
|
(2,218
|
)
|
(808
|
)
|
|
Pro Forma Operating EBITDA 4
|
$
|
2,852
|
|
$
|
2,828
|
|
|
|
|
|
1.
|
Included in "Sundry income (expense) - net."
|
|
|
|
|
2.
|
Excludes a $50 million pretax foreign exchange loss significant item related to adjustments to Historical EID's foreign currency exchange contracts as a result of U.S. tax reform during the six months ended June 30, 2018.
|
3. 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.
4. Refer to the Supplemental Unaudited Pro Forma Combined Financial Information contained in the MD&A section for additional information related to the pro forma adjustments.
The significant items for the three months ended June 30, 2019, are presented on an as reported basis. The adjusted significant items for the six months ended June 30, 2019 and for the three and six months ended June 30, 2018, are presented on a pro forma basis. The following tables summarize the pretax impact of adjusted significant items by segment that are excluded from Operating EBITDA and pro forma Operating EBITDA above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment for the Three Months Ended June 30, 2019
|
Elect. & Imaging
|
Nutrition & Biosciences
|
Transp. & Industrial
|
Safety & Const.
|
Non-Core
|
Corp.
|
Total
|
|
In millions
|
|
Integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(347
|
)
|
$
|
(347
|
)
|
|
Restructuring and asset related charges - net 2
|
(7
|
)
|
(85
|
)
|
(12
|
)
|
(20
|
)
|
(1
|
)
|
(13
|
)
|
(138
|
)
|
|
Goodwill impairment charges 3
|
—
|
|
(933
|
)
|
—
|
|
—
|
|
(242
|
)
|
—
|
|
(1,175
|
)
|
|
Income tax related items 4
|
—
|
|
—
|
|
—
|
|
(48
|
)
|
—
|
|
—
|
|
(48
|
)
|
|
Total
|
$
|
(7
|
)
|
$
|
(1,018
|
)
|
$
|
(12
|
)
|
$
|
(68
|
)
|
$
|
(243
|
)
|
$
|
(360
|
)
|
$
|
(1,708
|
)
|
|
|
|
|
1.
|
Integration and separation costs related to the Merger, post-Merger integration and business separation activities.
|
|
|
|
|
2.
|
Includes Board approved restructuring plans and asset related charges, which include other asset impairments. See Note 5 for additional information.
|
|
|
|
|
3.
|
See Note 13 for additional information.
|
4. $48 million charge included in "Sundry income (expense) - net" reflects a reduction in gross proceeds from lower withholding taxes related to a prior year legal settlement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Significant Items by Segment for the Three Months Ended June 30, 2018 (Pro Forma)
|
Elect. & Imaging
|
Nutrition & Biosciences
|
Transp. & Industrial
|
Safety & Const.
|
Non-Core
|
Corp.
|
Total
|
|
In millions
|
|
Merger-related inventory step-up amortization 1
|
$
|
—
|
|
$
|
(4
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(4
|
)
|
|
Net loss on divestitures and changes in joint venture ownership 2
|
—
|
|
—
|
|
—
|
|
—
|
|
(21
|
)
|
—
|
|
(21
|
)
|
|
Integration and separation costs 3
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(291
|
)
|
(291
|
)
|
|
Restructuring and asset related charges - net 4
|
(1
|
)
|
—
|
|
—
|
|
(12
|
)
|
5
|
|
(38
|
)
|
(46
|
)
|
|
Total
|
$
|
(1
|
)
|
$
|
(4
|
)
|
$
|
—
|
|
$
|
(12
|
)
|
$
|
(16
|
)
|
$
|
(329
|
)
|
$
|
(362
|
)
|
|
|
|
|
1.
|
Includes the fair value step-up in Historical EID's inventories as a result of the Merger and the acquisition of FMC Corporation's Health and Nutrition business in November 2017.
|
|
|
|
|
2.
|
Reflected in "Sundry income (expense) - net."
|
|
|
|
|
3.
|
Integration and separation costs related to the Merger, post-Merger integration and business separation activities.
|
|
|
|
|
4.
|
Includes Board approved restructuring plans and asset related charges, which includes other asset impairments. See Note 5 for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Significant Items by Segment for the Six Months Ended June 30, 2019 (Pro Forma)
|
Elect. & Imaging
|
Nutrition & Biosciences
|
Transp. & Industrial
|
Safety & Const.
|
Non-Core
|
Corp.
|
Total
|
|
In millions
|
|
Integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(785
|
)
|
$
|
(785
|
)
|
|
Restructuring and asset related charges - net 2
|
(7
|
)
|
(112
|
)
|
(12
|
)
|
(22
|
)
|
—
|
|
(57
|
)
|
(210
|
)
|
|
Goodwill impairment charges 3
|
—
|
|
(933
|
)
|
—
|
|
—
|
|
(242
|
)
|
—
|
|
(1,175
|
)
|
|
Income tax related items 4
|
—
|
|
—
|
|
—
|
|
(48
|
)
|
—
|
|
—
|
|
(48
|
)
|
|
Total
|
$
|
(7
|
)
|
$
|
(1,045
|
)
|
$
|
(12
|
)
|
$
|
(70
|
)
|
$
|
(242
|
)
|
$
|
(842
|
)
|
$
|
(2,218
|
)
|
|
|
|
|
1.
|
Integration and separation costs related to the Merger, post-Merger integration and business separation activities.
|
|
|
|
|
2.
|
Includes Board approved restructuring plans and asset related charges, which include other asset impairments. See Note 5 for additional information.
|
|
|
|
|
3.
|
See Note 13 for additional information.
|
4. $48 million charge included in "Sundry income (expense) - net" reflects a reduction in gross proceeds from lower withholding taxes related to a prior year legal settlement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Significant Items by Segment for the Six Months Ended June 30, 2018 (Pro Forma)
|
Elect. & Imaging
|
Nutrition & Biosciences
|
Transp. & Industrial
|
Safety & Const.
|
Non-Core
|
Corp.
|
Total
|
|
In millions
|
|
Merger-related inventory step-up amortization 1
|
$
|
—
|
|
$
|
(68
|
)
|
$
|
—
|
|
$
|
(5
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(73
|
)
|
|
Net loss on divestitures and changes in joint venture ownership 2
|
—
|
|
—
|
|
—
|
|
—
|
|
(21
|
)
|
—
|
|
(21
|
)
|
|
Integration and separation costs 3
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(565
|
)
|
(565
|
)
|
|
Restructuring and asset related charges - net 4
|
(2
|
)
|
—
|
|
1
|
|
(19
|
)
|
6
|
|
(85
|
)
|
(99
|
)
|
|
Income tax related item 5
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(50
|
)
|
(50
|
)
|
|
Total
|
$
|
(2
|
)
|
$
|
(68
|
)
|
$
|
1
|
|
$
|
(24
|
)
|
$
|
(15
|
)
|
$
|
(700
|
)
|
$
|
(808
|
)
|
|
|
|
|
1.
|
Includes the fair value step-up in Historical EID's inventories as a result of the Merger and the acquisition of FMC Corporation's Health and Nutrition business in November 2017.
|
|
|
|
|
2.
|
Reflected in "Sundry income (expense) - net".
|
|
|
|
|
3.
|
Integration and separation costs related to the Merger, post-Merger integration and business separation activities.
|
|
|
|
|
4.
|
Includes Board approved restructuring plans and asset related charges, which includes other asset impairments. See Note 5 for additional information.
|
|
|
|
|
5.
|
Includes a foreign exchange loss related to adjustments to Historical EID's foreign currency exchange contracts as a result of U.S. tax reform.
|
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Effective August 31, 2017, pursuant to the merger of equals transactions contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017 ("Merger Agreement"), The Dow Chemical Company ("Historical Dow") and E. I. du Pont de Nemours and Company ("Historical EID") each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, Historical Dow and Historical EID became subsidiaries of DowDuPont (the "Merger"). Prior to the Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the Merger Agreement. Historical Dow was determined to be the accounting acquirer in the Merger.
As discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, DowDuPont previously announced its intent to separate into three, independent, publicly traded companies - one for each of its agriculture, materials science and specialty products businesses. DowDuPont formed two wholly owned subsidiaries: Dow Inc. ("Dow", formerly known as Dow Holdings Inc.), to serve as a holding company for its materials science business, and Corteva, Inc. ("Corteva"), to serve as a holding company for its agriculture business.
Effective as of 5:00 p.m. on April 1, 2019, DowDuPont completed the previously announced separation of its materials science business into a separate and independent public company by way of a distribution of Dow through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Dow’s common stock, par value $0.01 per share (the “Dow Common Stock”), to holders of the Company’s common stock, par value $0.01 per share (the “DowDuPont common stock”), as of the close of business on March 21, 2019 (the “Dow Distribution”).
Effective as of 12:01 a.m. on June 1, 2019, DuPont de Nemours, Inc. (formerly known as DowDuPont Inc.), completed the previously announced separation of its agriculture business into a separate and independent public company by way of a distribution of Corteva through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Corteva’s common stock, par value $0.01 per share (the “Corteva Common Stock”), to holders of the Company’s common stock, par value $0.01 per share, as of the close of business on May 24, 2019 (the “Corteva Distribution” and, together with the Dow Distribution, the “Distributions”).
Following the Corteva Distribution, the Company holds the specialty products business. On June 1, 2019, DowDuPont changed its registered name from "DowDuPont Inc." to "DuPont de Nemours, Inc." doing business as "DuPont" (the "Company"). Beginning on June 3, 2019, the Company's common stock is traded on the NYSE under the ticker symbol "DD".
These interim Consolidated Financial Statements present the consolidated financial position of DuPont as of June 30, 2019 and December 31, 2018 and the results of operations of DuPont for the three and six months ended June 30, 2019 and 2018 giving effect to the Distributions, with the historical financial results of Dow and Corteva reflected as discontinued operations. The cash flows related to Dow and Corteva have not been segregated and are included, as applicable, in the interim Consolidated Statements of Cash Flows for all periods presented. Unless otherwise indicated, the information included in Management's Discussion and Analysis refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow or Corteva.
The statements of operations and pro forma statements of operations included in this report and as discussed below include costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with Financial Accounting Standards Codification 205, "Presentation of Financial Statements" ("ASC 205") and thus are reflected in the Company's results of continuing operations. A significant portion of these costs relate to Historical Dow and consist of leveraged services provided through service centers, as well as other corporate overhead costs related to information technology, finance, manufacturing, research & development, sales & marketing, supply chain, human resources, sourcing & logistics, legal and communications, public affairs & government affairs functions. These costs are no longer incurred by the Company following the Distributions.
RECENT DEVELOPMENTS
Business Separations and Separation and Distribution Agreements
DuPont completed the separation of Dow on April 1, 2019 and Corteva on June 1, 2019. In connection with the Dow Distribution and Corteva Distribution, DuPont has entered into certain agreements that provide for the allocation of DuPont’s 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 Distributions. Effective April 1, 2019, the Parties entered into the following agreements:
|
|
|
|
•
|
Separation and Distribution Agreement - The Parties entered into an agreement that sets forth, among other things, the agreements among the Parties regarding the principal transactions necessary to effect the Distributions. It also sets forth other agreements that govern certain aspects of the Parties’ ongoing relationships after the completion of the Distributions (the "Separation and Distribution Agreement").
|
|
|
|
|
•
|
Tax Matters Agreement - The Parties entered into an agreement that governs their respective 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 and other matters regarding taxes.
|
|
|
|
|
•
|
Employee Matters Agreement - The Parties entered into an agreement that identifies employees and employee-related liabilities (and attributable assets) to be allocated (either retained, transferred and accepted, or assigned and assumed, as applicable) to the Parties as part of the Distributions and describes when and how the relevant transfers and assignments will occur.
|
|
|
|
|
•
|
Intellectual Property Cross-License Agreement - DuPont entered into an Intellectual Property Cross-License Agreement with Dow (the “DowDuPont-Dow IP Cross-License Agreement”). The DowDuPont-Dow IP Cross-License Agreement sets forth the terms and conditions under which the applicable Parties may use in their respective businesses, following each of the Distributions, certain know-how (including trade secrets), copyrights, software, and certain patents and standards, allocated to another Party pursuant to the Separation and Distribution 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 Distributions.
Effective June 1, 2019, in connection with the Corteva Distribution, DuPont and Corteva entered into the following agreements:
|
|
|
|
•
|
Intellectual Property Cross-License Agreement - DuPont and Corteva entered into an Intellectual Property Cross-License Agreement (the “DuPont-Corteva IP Cross-License Agreement”). The DuPont-Corteva IP Cross-License Agreement sets forth the terms and conditions under which the applicable parties may use in their respective businesses, following the Corteva Distribution, certain know-how (including trade secrets), copyrights, software, and certain patents and standards, allocated to another Party pursuant to the Separation and Distribution Agreement.
|
|
|
|
|
•
|
Letter Agreement - The Company entered into a letter agreement (the "Letter Agreement") with Corteva that sets forth certain additional terms and conditions related to the Corteva Distribution, including certain limitations on DuPont’s and Corteva's ability to transfer certain businesses and assets to third parties without assigning certain of such Party’s indemnification obligations under the Separation and Distribution Agreement to the other Party to the transferee of such businesses and assets or meeting certain other alternative conditions. The Letter Agreement further outlines the allocation between DuPont and Corteva of liabilities associated with certain legal and environmental matters, including liabilities associated with discontinued and/or divested operations and businesses of Historical EID. See Note 15 to the interim Consolidated Financial Statements for more information regarding the allocation.
|
|
|
|
|
•
|
Amended and Restated Tax Matters Agreement - The Parties entered into an amendment and restatement of the Tax Matters Agreement, between DuPont, Corteva and Dow, effective as of April 1, 2019 (as so amended and restated, the “Amended and Restated Tax Matters Agreement”). The Amended and Restated Tax Matters Agreement 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 and other matters regarding taxes. The Parties amended and restated the Tax Matters Agreement in connection with the Corteva Distribution in order to allocate between the DuPont and Corteva certain rights and obligations of the Company provided in the original form of the Tax Matters Agreement.
|
Segment Realignment
Effective June 1, 2019, DuPont changed its management and reporting structure resulting in the creation of a new Non-Core segment ("Second Quarter Segment Realignment").
These changes result in the following being realigned to Non-Core:
|
|
|
|
•
|
Photovoltaic and Advanced Materials business unit (including the HSC Group joint ventures: DC HSC Holdings LLC and Hemlock Semiconductor L.L.C) from the Electronics & Imaging segment;
|
|
|
|
|
•
|
Biomaterials and Clean Technologies business units from the Nutrition & Biosciences segment;
|
|
|
|
|
•
|
DuPont Teijin Films joint venture from the Transportation & Industrial (formerly Transportation & Advanced Polymers) segment; and
|
|
|
|
|
•
|
Sustainable Solutions business unit from the Safety & Construction segment.
|
In addition, the following changes have occurred:
|
|
|
|
•
|
Consolidation of the Nutrition & Health business with the Industrial Biosciences business within the Nutrition & Biosciences reportable segment. Previously, Nutrition & Health and Industrial Biosciences were separate operating segments which did not meet the quantitative thresholds.
|
|
|
|
|
•
|
Pre-commercial activities related to the Biomaterials business unit was realigned from Corporate to Non-Core, with the remaining pre-commercial activities realigned to the Nutrition & Biosciences segment.
|
Refer to Notes 4 and 23 to the interim Consolidated Financial Statements for additional information.
Nutrition & Biosciences and Non-Core Goodwill Impairments
During the three months ended June 30, 2019, the Company was required to perform interim impairment tests of its goodwill due to the internal distribution of the specialty products legal entities from Historical EID to DowDuPont (the "Internal SP Distribution") and the Second Quarter Segment Realignment. As a result of the analyses performed, the Company recorded pre-tax, non-cash impairment charges during the three and six months ended June 30, 2019 totaling $1,175 million, of which $933 million related to the Nutrition & Biosciences segment and $242 million related to the Non-Core segment. The charges were recognized in "Goodwill impairment charge" in the interim Consolidated Statements of Operations. Refer to Note 13 of the interim Consolidated Financial Statements.
Equity Method Investment Impairment
During the second quarter of 2019, in connection with the Internal SP Distribution and the impairment of the Industrial Biosciences reporting unit, the Company performed an impairment analysis on the reporting unit's equity method investments. As a result of the analysis performed, the Company recorded pre-tax, non-cash impairment charges of $63 million to write-down the value of an equity method investment. The charge was recognized in "Restructuring and asset related charges - net" in the interim Consolidated Statements of Operations. Refer to Note 5 of the interim Consolidated Financial Statements.
Reverse Stock Split
On May 23, 2019, stockholders of DowDuPont approved a 1-for-3 reverse stock split of DowDuPont shares of common stock with par value of $0.01 per share, which became effective immediately following the Corteva Distribution on June 1, 2019. All comparable periods presented have been retrospectively revised to reflect this change.
Share Buyback Program
On June 1, 2019, the Company's Board of Directors approved a new $2 billion share buyback program, which expires on June 1, 2021. At June 30, 2019, the Company had repurchased 1.4 million shares under this program at a total cost of $102 million.
Dividends
On February 14, 2019, the Company announced that its Board declared a pro rata dividend of $851 million, paid on March 15, 2019, to shareholders of record on February 28, 2019. On March 8, 2019, the Company announced that its Board declared a pro rata dividend of $325 million, paid on May 28, 2019, to shareholders of record on April 26, 2019.
On June 27, 2019, the Company announced that its Board declared a third quarter dividend of $0.30 per share payable on September 13, 2019, to shareholders of record on July 31, 2019.
2019 Restructuring Program
During the second quarter of 2019 and in connection with the ongoing integration activities, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the Distributions. As a result of these actions, the Company expects to record total pre-tax restructuring charges of $85 million to $130 million, comprised of approximately $55 million to $80 million of severance and related benefits costs; $30 million to $45 million of asset related charges; and up to $5 million of costs related to contract terminations. For the three and six months ended June 30, 2019, DuPont recorded a pre-tax charge of $53 million, recognized in "Restructuring and asset related charges - net" in the Company's interim Consolidated Statements of Operations. At June 30, 2019, total liabilities related to the program were $50 million. Future cash payments related to this program are anticipated to be approximately $55 million to $85 million, primarily related to the payment of severance and related benefits and contract termination costs.
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”), adopted by the DowDuPont Board of Directors. The Synergy Program was designed to integrate and optimize the organization following the Merger and in preparation for the Distributions. The Company has recorded pre-tax restructuring charges of $466 million inception-to-date, consisting of severance and related benefit costs of $222 million, asset related charges of $184 million and contract termination charges of $60 million. The Company does not expect to incur further significant charges related to the DowDuPont Cost Synergy program and at June 30, 2019 the program is considered substantially complete.
In connection with these actions, the Company recorded pre-tax charges of $22 million and $94 million for the three and six months ended June 30, 2019, respectively. Future cash payments related to this program are anticipated to be approximately $124 million, primarily related to the payment of severance and related benefits.
SELECTED FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
|
In millions, except per share amounts
|
June 30, 2019
|
June 30, 2018
|
June 30, 2019
|
June 30, 2018
|
|
Net sales
|
$
|
5,468
|
|
$
|
5,857
|
|
$
|
10,882
|
|
$
|
11,454
|
|
|
|
|
|
|
|
|
Gross Margin
|
$
|
1,972
|
|
$
|
1,772
|
|
$
|
3,765
|
|
$
|
3,564
|
|
|
Gross Margin Percentage
|
36.1
|
%
|
30.3
|
%
|
34.6
|
%
|
31.1
|
%
|
|
|
|
|
|
|
|
Research and development expenses
|
$
|
232
|
|
$
|
270
|
|
$
|
499
|
|
$
|
544
|
|
|
Percent of net sales
|
4.2
|
%
|
4.6
|
%
|
4.6
|
%
|
4.7
|
%
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
$
|
642
|
|
$
|
768
|
|
$
|
1,368
|
|
$
|
1,570
|
|
|
Percent of net sales
|
11.7
|
%
|
13.1
|
%
|
12.6
|
%
|
13.7
|
%
|
|
|
|
|
|
|
|
Effective tax rate - continuing operations
|
(16.4
|
)%
|
76.2
|
%
|
(5.8
|
)%
|
134.4
|
%
|
|
|
|
|
|
|
|
Net (loss) income available for DuPont common stockholders
|
$
|
(571
|
)
|
$
|
1,769
|
|
$
|
(50
|
)
|
$
|
2,862
|
|
|
|
|
|
|
|
|
(Loss) earnings per common share – basic
|
$
|
(0.76
|
)
|
$
|
2.29
|
|
$
|
(0.07
|
)
|
$
|
3.69
|
|
|
(Loss) earnings per common share – diluted
|
$
|
(0.76
|
)
|
$
|
2.27
|
|
$
|
(0.07
|
)
|
$
|
3.69
|
|
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Sales Results
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
June 30, 2019
|
June 30, 2018
|
June 30, 2019
|
June 30, 2018
|
|
Net sales
|
$
|
5,468
|
|
$
|
5,857
|
|
$
|
10,882
|
|
$
|
11,454
|
|
The following table summarizes sales variances by segment and geographic region from the prior year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Variances by Segment and Geographic Region
|
|
|
Three Months Ended June 30, 2019
|
Six Months Ended June 30, 2019
|
|
Percentage change from prior year
|
Local Price & Product Mix
|
Currency
|
Volume
|
Portfolio & Other
|
Total
|
Local Price & Product Mix
|
Currency
|
Volume
|
Portfolio & Other
|
Total
|
|
Electronics & Imaging
|
—
|
%
|
(2
|
)%
|
(5
|
)%
|
—
|
%
|
(7
|
)%
|
—
|
%
|
(2
|
)%
|
(4
|
)%
|
—
|
%
|
(6
|
)%
|
|
Nutrition & Biosciences
|
1
|
|
(3
|
)
|
(1
|
)
|
(1
|
)
|
(4
|
)
|
1
|
|
(3
|
)
|
(1
|
)
|
—
|
|
(3
|
)
|
|
Transportation & Industrial
|
5
|
|
(3
|
)
|
(12
|
)
|
—
|
|
(10
|
)
|
6
|
|
(3
|
)
|
(10
|
)
|
—
|
|
(7
|
)
|
|
Safety & Construction
|
4
|
|
(3
|
)
|
1
|
|
(4
|
)
|
(2
|
)
|
4
|
|
(2
|
)
|
2
|
|
(4
|
)
|
—
|
|
|
Non-Core
|
—
|
|
(2
|
)
|
(14
|
)
|
—
|
|
(16
|
)
|
(2
|
)
|
(2
|
)
|
(10
|
)
|
—
|
|
(14
|
)
|
|
Total
|
2
|
%
|
(3
|
)%
|
(5
|
)%
|
(1
|
)%
|
(7
|
)%
|
3
|
%
|
(3
|
)%
|
(4
|
)%
|
(1
|
)%
|
(5
|
)%
|
|
U.S. & Canada
|
1
|
%
|
—
|
%
|
(3
|
)%
|
—
|
%
|
(2
|
)%
|
1
|
%
|
—
|
%
|
(2
|
)%
|
—
|
%
|
(1
|
)%
|
|
EMEA 1
|
3
|
|
(6
|
)
|
(6
|
)
|
(4
|
)
|
(13
|
)
|
4
|
|
(6
|
)
|
(4
|
)
|
(4
|
)
|
(10
|
)
|
|
Asia Pacific
|
2
|
|
(3
|
)
|
(6
|
)
|
—
|
|
(7
|
)
|
2
|
|
(3
|
)
|
(5
|
)
|
—
|
|
(6
|
)
|
|
Latin America
|
4
|
|
(4
|
)
|
(3
|
)
|
(1
|
)
|
(4
|
)
|
5
|
|
(4
|
)
|
(2
|
)
|
(1
|
)
|
(2
|
)
|
|
Total
|
2
|
%
|
(3
|
)%
|
(5
|
)%
|
(1
|
)%
|
(7
|
)%
|
3
|
%
|
(3
|
)%
|
(4
|
)%
|
(1
|
)%
|
(5
|
)%
|
|
|
|
|
1.
|
Europe, Middle East and Africa.
|
The Company reported net sales for the three months ended June 30, 2019 of $5.5 billion, down 7 percent from $5.9 billion for the three months ended June 30, 2018, due to a 5 percent decrease in volume, a 3 percent unfavorable currency impact and a 1 percent decline in portfolio actions slightly offset a by 2 percent increase in local price. Volume declined across all geographic regions and all segments with the exception of Safety & Construction (up 1 percent). The most notable volume decreases were in Non-Core (down 14 percent) and Transportation & Industrial (down 12 percent). Portfolio and other changes contributed 1 percent of the sales decrease which impacted Safety & Construction (down 4 percent; within EMEA) and Nutrition & Biosciences (down 1 percent). Local price was up 2 percent compared with the same period last year. Local price increased in all geographic regions and in all segments except Electronics & Imaging and Non-core (flat in both). Currency was down 3 percent compared with the same period last year, driven primarily by EMEA currencies (down 6 percent).
Net sales for the six months ended June 30, 2019 were $10.9 billion, down 5 percent from $11.5 billion for the six months ended June 30, 2018, due to a 4 percent decrease in volume, a 3 percent unfavorable currency impact and a 1 percent decline in portfolio actions slightly offset by a 3 percent increase in local price. Volume declined across all geographic regions and in all segments with the exception of Safety & Construction (up 2 percent). The most notable volume decreases were in Transportation & Industrial (down 10 percent) and Non-Core (down 10 percent). Portfolio and other changes decreased 1 percent due to a 4 percent decrease related to Safety & Construction within EMEA. Local price was up 3 percent compared with the same period last year. Local price increased in all geographic regions and in most segments except Electronics & Imaging (flat) and Non-core (down 2 percent). Currency was down 3 percent compared with the same period last year, driven primarily by EMEA currencies (down 6 percent).
Cost of Sales
Cost of sales was $3.5 billion for the three months ended June 30, 2019, down from $4.1 billion for the three months ended June 30, 2018. Cost of sales decreased for the three months ended June 30, 2019 primarily due to lower sales volume, cost synergies, currency impacts, and the absence of costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205 and therefore remained as costs of continuing operations for periods prior to the Distributions.
Cost of Sales as a percentage of net sales for the three months ended June 30, 2019 was 64 percent compared with 70 percent for the three months ended June 30, 2018.
For the six months ended June 30, 2019, cost of sales was $7.1 billion, down from $7.9 billion for the six months ended June 30, 2018. Cost of sales decreased for the six months ended June 30, 2019 primarily due to lower sales volume, cost synergies, currency impacts, and lower costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205 and therefore remained as costs of continuing operations for periods prior to the Distributions. Cost of sales for the six months ended June 30, 2018 was also negatively impacted by a $73 million charge related to amortization of the fair value step-up in Historical EID's inventories as a result of the Merger and the acquisition of FMC Corporation's Health and Nutrition business in November 2017; there were no charges related to this fair value step-up during the first half of 2019.
Cost of sales as a percentage of net sales for the six months ended June 30, 2019 was 65 percent compared with 69 percent for the six months ended June 30, 2018.
Research and Development Expenses ("R&D")
R&D expenses totaled $232 million in the second quarter of 2019, down from $270 million in the second quarter of 2018. R&D as a percentage of net sales was 4 percent and 5 percent for the three months ended June 30, 2019 and 2018, respectively.
For the first six months of 2019, R&D expenses totaled $499 million, down from $544 million in the first six months of 2018. R&D as a percentage of net sales was 5 percent for both the six months ended June 30, 2019 and 2018.
The decrease for the three months ended June 30, 2019 as compared with the same period of the prior year was primarily due to the absence of R&D costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205 and therefore remained as costs of continuing operations for periods prior to the Distributions.
Selling, General and Administrative Expenses ("SG&A")
SG&A expenses were $642 million in the second quarter of 2019, down from $768 million in the second quarter of 2018. SG&A as a percentage of net sales was 12 percent and 13 percent for the three months ended June 30, 2019 and 2018, respectively.
For the first six months of 2019, SG&A expenses totaled $1,368 million, down from $1,570 million in the first six months of 2018. SG&A as a percentage of net sales was 13 percent and 14 percent for the six months ended June 30, 2019 and 2018, respectively.
The decrease for the three months ended June 30, 2019 as compared with the same period of the prior year was primarily due to the absence of SG&A costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205 and therefore remained as costs of continuing operations for periods prior to the Distributions. In addition to the absence of similar SG&A costs related to the discontinued operations for the six months ended June 30, 2019, SG&A decreased due to cost synergies.
Amortization of Intangibles
Amortization of intangibles was $252 million in the second quarter of 2019, down from $266 million in the second quarter of 2018. In the first six months of 2019, amortization of intangibles was $508 million, down from $531 million in the same period last year. See Note 13 to the interim Consolidated Financial Statements for additional information on intangible assets.
Restructuring and Asset Related Charges - Net
Restructuring and asset related charges - net were $137 million and $46 million for the three months ended June 30, 2019 and 2018, respectively. The activity in the second quarter of 2019 was primarily related to a $63 million impairment charge related to an equity method investment, a $53 million charge related to the new 2019 Restructuring Program and a $21 million charge related to the DowDuPont Cost Synergy Program. The charges in the second quarter of 2018 related to the DowDuPont Cost Synergy Program.
Restructuring and asset related charges - net were $208 million and $99 million for the six months ended June 30, 2019 and 2018, respectively. The activity for the six months ended June 30, 2019 was related to the equity method investment impairment charge and 2019 Restructuring Program, both described above, as well as a $92 million charge related to the DowDuPont Cost Synergy Program. The charges in the first half of 2018 related to the DowDuPont Cost Synergy Program.
See Note 5 to the interim Consolidated Financial Statements for additional information.
Goodwill Impairment Charges
Goodwill impairments charges were $1,175 million in the three and six months ended June 30, 2019. The goodwill impairment charges relate to the Nutrition & Biosciences and Non-Core segments. There were no goodwill related impairments in the same periods of 2018. See Note 13 to the interim Consolidated Financial Statements for additional information.
Integration and Separation Costs
Integration and separation costs, primarily reflect costs related to the post-Merger integration and activities related to the Distributions, were $347 million in the second quarter of 2019, down from $428 million in the second quarter of 2018. In the first six months of 2019, integration and separation costs were $958 million, up from $793 million in the same period last year.
Equity in Earnings of Nonconsolidated Affiliates
The Company's share of the earnings of nonconsolidated affiliates was $49 million in the second quarter of 2019, down from $54 million in the second quarter of 2018. In the first six months of 2019, the Company's share of the earnings of nonconsolidated affiliates was $89 million, down from $111 million in the first six months of 2018. The decrease in the 2019 periods is primarily due to lower equity earnings from the HSC Group.
Sundry Income (Expense) - Net
Sundry income (expense) - net includes a variety of income and expense items such as foreign currency exchange gains or losses, interest income, dividends from investments, gains and losses on sales of investments and assets, non-operating pension and other post employment benefit plan credits or costs, and certain litigation matters. Sundry income (expense) - net in the second quarter of 2019 was a loss of $19 million, compared with income of $82 million in the second quarter of 2018. The second quarter of 2019 included income related to non-operating pension and other post employment benefit credits of $18 million, a gain on sale of assets of $10 million and interest income of $9 million partially offset by foreign currency exchange losses of $17 million and a $48 million charge reflecting a reduction in gross proceeds from lower withholding taxes related to a prior year legal settlement included in miscellaneous income. The second quarter of 2018 included income related to non-operating pension and other post employment benefit credits of $28 million and foreign currency exchange gains of $53 million partially offset by the loss on divestiture and changes in joint venture ownership of $21 million.
In the first six months of 2019, sundry income (expense) - net was income of $65 million compared with a loss of $16 million in the first six months of 2018. In addition to the amounts previously discussed, the first six months of 2019 included income related to non-operating pension and other post employment benefit plans of $39 million, a gain on sale of assets of $63 million and interest income of $49 million partially offset by foreign currency exchange losses of $78 million. The first six months of 2018 included foreign currency exchange losses of $122 million, including a $50 million foreign currency exchange loss related to adjustments to foreign currency exchange contracts as a result of U.S. tax reform. The loss was offset by income related to non-operating pension and other post employment benefit plans of $55 million and miscellaneous income of $45 million. See Notes 6 and 19 to the interim Consolidated Financial Statements for additional information.
Interest Expense
Interest expense was $165 million and $316 million for the three and six months ended June 30, 2019, respectively. There was no interest expense related to continuing operations for the three and six months ended June 30, 2018 as the Company did not have outstanding borrowings until the 2018 Senior Notes issuance in the fourth quarter of 2018.
Provision for Income Taxes on Continuing Operations
The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attribute. The effective tax rate for the second quarter of 2019 was (16.4) percent, compared with an effective tax rate of 76.2 percent for the second quarter of 2018. For the first six months of 2019, the effective tax rate was (5.8) percent, compared with 134.4 percent for the first six months of 2018.
The negative tax rate in the second quarter of 2019 and for the first six months of 2019, was principally the result of the non-tax-deductible goodwill impairment charges impacting the Nutrition & Biosciences and Non-Core segments. See Note 13 for more information regarding the goodwill impairment charges.
Income from Discontinued Operations, Net of Tax
Income from discontinued operations, net of tax was $566 million and $1,773 million for the three months ended June 30, 2019 and 2018, respectively, and $1,212 million and $2,983 million for the six months ended June 30, 2019 and 2018, respectively. The decreases are attributable to the timing of the Distributions. Refer to Note 3 to the interim Consolidated Financial Statements for additional information.
Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests, including the portion attributable to discontinued operations, was $34 million in the second quarter of 2019, down from $35 million in the second quarter of 2018. For the first six months of 2019, net income attributable to noncontrolling interests, including the portion attributable to discontinued operations, was $85 million, compared with $79 million for the same period last year.
Net income attributable to noncontrolling interests of continuing operations for the three and six months ended June 30, 2019 was $9 million and $13 million, respectively, as compared to a loss of $2 million and income of $11 million for the same periods in the prior year, respectively.
SUPPLEMENTAL UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following supplemental unaudited pro forma financial information (the “unaudited pro forma financial statements”) are derived from DuPont’s Consolidated Financial Statements, adjusted to give effect to certain events directly attributable to the Distributions. In contemplation of the Distributions and to achieve the respective credit profiles of each of the current companies, in the fourth quarter of 2018, DowDuPont borrowed $12.7 billion under the 2018 Senior Notes and entered the Term Loan Facilities with an aggregate principal amount of $3.0 billion. Additionally, DuPont issued approximately $1.4 billion in commercial paper in May 2019 in anticipation of the Corteva Distribution (the “Funding CP Issuance” together with the 2018 Senior Notes and the Term Loan Facilities, the "Financings"). The unaudited pro forma financial statements for the six months ended June 30, 2019 and for three and six months ended June 30, 2018 were prepared in accordance with Article 11 of Regulation S-X. The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the Distributions and the Financings (collectively the "Transactions"), (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the results. The unaudited pro forma statements of operations for the six months ended June 30, 2019 and for three and six months ended June 30, 2018 give effect to the pro forma events as if they had been consummated on January 1, 2018. There were no pro forma adjustments for the three months ended June 30, 2019.
Restructuring or integration activities or other costs following the Distributions that may be incurred to achieve cost or growth synergies of DuPont are not reflected. The unaudited pro forma income statements provides shareholders with summary financial information and historical data that is on a basis consistent with how DuPont reports current financial information.
The unaudited pro forma financial statements are presented for informational purposes only, and do not purport to represent what DuPont's results of operations or financial position would have been had the Transactions occurred on the dates indicated, nor do they purport to project the results of operations or financial position for any future period or as of any future date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma Combined
Statement of Operations
|
Three Months Ended June 30,
|
|
2018
|
|
In millions, except per share amounts
|
DuPont 1
|
Pro Forma Adjustments2
|
Pro Forma
|
|
Net sales
|
$
|
5,857
|
|
$
|
—
|
|
$
|
5,857
|
|
|
Cost of sales
|
4,085
|
|
18
|
|
4,103
|
|
|
Research and development expenses
|
270
|
|
—
|
|
270
|
|
|
Selling, general and administrative expenses
|
768
|
|
—
|
|
768
|
|
|
Amortization of intangibles
|
266
|
|
—
|
|
266
|
|
|
Restructuring and asset related charges - net
|
46
|
|
—
|
|
46
|
|
|
Integration and separation costs
|
428
|
|
(137
|
)
|
291
|
|
|
Equity in earnings of nonconsolidated affiliates
|
54
|
|
—
|
|
54
|
|
|
Sundry income (expense) - net
|
82
|
|
—
|
|
82
|
|
|
Interest expense
|
—
|
|
171
|
|
171
|
|
|
Income (Loss) from continuing operations before income taxes
|
130
|
|
(52
|
)
|
78
|
|
|
Provision (Credit) for income taxes on continuing operations
|
99
|
|
(10
|
)
|
89
|
|
|
Income (Loss) from continuing operations, net of tax
|
31
|
|
(42
|
)
|
(11
|
)
|
|
Net loss attributable to noncontrolling interests of continuing operations
|
(2
|
)
|
—
|
|
(2
|
)
|
|
Net income (loss) from continuing operations attributable to DuPont
|
33
|
|
(42
|
)
|
(9
|
)
|
|
|
|
|
|
|
Per common share data:
|
|
|
|
|
Earnings (Loss) per common share from continuing operations - basic
|
$
|
0.03
|
|
|
$
|
(0.02
|
)
|
|
Earnings (Loss) per common share from continuing operations - diluted
|
$
|
0.03
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic
|
769.6
|
|
|
769.6
|
|
|
Weighted-average common shares outstanding - diluted
|
774.5
|
|
|
769.6
|
|
|
|
|
|
1.
|
See the historical U.S. GAAP Consolidated Statements of Operations.
|
|
|
|
|
2.
|
Certain pro forma adjustments were made to illustrate the estimated effects of the Transactions, assuming that the Transactions had occurred on January 1, 2018. The adjustments include the impact to "Cost of sales" of different pricing than historical intercompany and intracompany practices related to various supply agreements entered into with the Dow Distribution, adjustments to "Integration and separation costs" to eliminate one time transaction costs directly attributable to the Distributions, and adjustments to "Interest expense" to reflect the impact of the Financings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma Combined
Statement of Operations
|
Six Months Ended June 30,
|
|
2019
|
2018
|
|
In millions, except per share amounts
|
DuPont 1
|
Pro Forma Adjustments2
|
Pro Forma
|
DuPont 1
|
Pro Forma Adjustments2
|
Pro Forma
|
|
Net sales
|
$
|
10,882
|
|
$
|
—
|
|
$
|
10,882
|
|
$
|
11,454
|
|
$
|
—
|
|
$
|
11,454
|
|
|
Cost of sales
|
7,117
|
|
22
|
|
7,139
|
|
7,890
|
|
36
|
|
7,926
|
|
|
Research and development expenses
|
499
|
|
—
|
|
499
|
|
544
|
|
—
|
|
544
|
|
|
Selling, general and administrative expenses
|
1,368
|
|
—
|
|
1,368
|
|
1,570
|
|
—
|
|
1,570
|
|
|
Amortization of intangibles
|
508
|
|
—
|
|
508
|
|
531
|
|
—
|
|
531
|
|
|
Restructuring and asset related charges - net
|
208
|
|
—
|
|
208
|
|
99
|
|
—
|
|
99
|
|
|
Goodwill impairment charge
|
1,175
|
|
—
|
|
1,175
|
|
—
|
|
—
|
|
—
|
|
|
Integration and separation costs
|
958
|
|
(173
|
)
|
785
|
|
793
|
|
(228
|
)
|
565
|
|
|
Equity in earnings of nonconsolidated affiliates
|
89
|
|
—
|
|
89
|
|
111
|
|
—
|
|
111
|
|
|
Sundry income (expense) - net
|
65
|
|
—
|
|
65
|
|
(16
|
)
|
—
|
|
(16
|
)
|
|
Interest expense
|
316
|
|
29
|
|
345
|
|
—
|
|
342
|
|
342
|
|
|
(Loss) Income from continuing operations before income taxes
|
(1,113
|
)
|
122
|
|
(991
|
)
|
122
|
|
(150
|
)
|
(28
|
)
|
|
Provision (Credit) for income taxes on continuing operations
|
64
|
|
30
|
|
94
|
|
164
|
|
(31
|
)
|
133
|
|
|
(Loss) Income from continuing operations, net of tax
|
(1,177
|
)
|
92
|
|
(1,085
|
)
|
(42
|
)
|
(119
|
)
|
(161
|
)
|
|
Net income attributable to noncontrolling interests of continuing operations
|
13
|
|
—
|
|
13
|
|
11
|
|
—
|
|
11
|
|
|
Net (loss) income from continuing operations attributable to DuPont
|
(1,190
|
)
|
92
|
|
(1,098
|
)
|
(53
|
)
|
(119
|
)
|
(172
|
)
|
|
|
|
|
|
|
|
|
|
Per common share data:
|
|
|
|
|
|
|
|
Loss per common share from continuing operations - basic
|
$
|
(1.59
|
)
|
|
$
|
(1.47
|
)
|
$
|
(0.09
|
)
|
|
$
|
(0.24
|
)
|
|
Loss per common share from continuing operations - diluted
|
$
|
(1.59
|
)
|
|
$
|
(1.47
|
)
|
$
|
(0.09
|
)
|
|
$
|
(0.24
|
)
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding - basic
|
749.6
|
|
|
749.6
|
|
771.0
|
|
|
771.0
|
|
|
Weighted-average common shares outstanding - diluted
|
749.6
|
|
|
749.6
|
|
771.0
|
|
|
771.0
|
|
|
|
|
|
1.
|
See the historical U.S. GAAP Consolidated Statements of Operations.
|
|
|
|
|
2.
|
Certain pro forma adjustments were made to illustrate the estimated effects of the Transactions, assuming that the Transactions had occurred on January 1, 2018. The adjustments include the impact to "Cost of sales" of different pricing than historical intercompany and intracompany practices related to various supply agreements entered into with the Dow Distribution, adjustments to "Integration and separation costs" to eliminate one time transaction costs directly attributable to the Distributions, and adjustments to "Interest expense" to reflect the impact of the Financings.
|
SEGMENT RESULTS
Prior to April 1, 2019, the Company's measure of profit/loss for segment reporting purposes is pro forma Operating EBITDA as this is the manner in which the Company's chief operating decision maker ("CODM") assesses performance and allocates resources. The Company defines pro forma Operating EBITDA as pro forma earnings (i.e., pro forma “Income from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / other post employment benefits (“OPEB”) / charges, and foreign exchange gains / losses, excluding the impact of costs historically allocated to the materials science and agriculture businesses that did not meet the criteria to be recorded as discontinued operations and adjusted for significant items. Effective April 1, 2019, the Company's measure of profit/loss for segment reporting purposes is Operating EBITDA as this is the manner in which the Company's CODM assesses performance and allocates resources. The Company defines Operating EBITDA as earnings (i.e., “Income from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / OPEB benefits / charges, and foreign exchange gains / losses, adjusted for significant items. Reconciliations of these measures can be found in Note 23 to the interim Consolidated Financial Statements. Prior year data has been updated to conform with the current year presentation.
Pro forma adjustments used in the calculation of pro forma Operating EBITDA were determined in accordance with Article 11 of Regulation S-X and were derived from DuPont's historical Consolidated Financial Statements and accompanying notes, adjusted to give effect to the Distributions as if they had been consummated on January 1, 2018. The pro forma adjustments impacting pro forma Operating EBITDA reflect the impact of various supply agreements ("supply agreements") entered into in connection with the Dow Distribution and are outlined in the preceding section, Supplemental Unaudited Pro Forma Combined Financial Information, as adjustments to "Cost of sales". The impact of these supply agreements are 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. There were no pro forma adjustments for the three months ended June 30, 2019.
ELECTRONICS & IMAGING
The Electronics & Imaging segment is a leading global supplier of differentiated materials and systems for a broad range of consumer electronics including mobile devices, television monitors, personal computers and electronics used in a variety of industries. The segment is a leading provider of materials and solutions for the fabrication of semiconductors and integrated circuits, and also provides innovative metallization processes for metal finishing, decorative, and industrial applications. Electronics & Imaging in the advanced printing and packaging graphics industry provides flexographic printing inks, photopolymer plates, and platemaking systems used in digital printing applications for textile, commercial and home-office use. In addition, the segment provides cutting-edge materials for the manufacturing of rigid and flexible displays for advanced-matrix organic light emitting diode ("AMOLED"), and quantum dot applications.
In March 2019, the Company announced plans to invest more than $200 million in its Electronics & Imaging segment to increase capacity for the manufacture of KAPTON® film at its Circleville, Ohio, site due to growing global demand.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronics & Imaging
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
Jun 30, 2019
|
Jun 30, 2018
|
Jun 30, 2019
|
Jun 30, 2018
|
|
Net sales
|
$
|
858
|
|
$
|
921
|
|
$
|
1,683
|
|
$
|
1,785
|
|
|
Operating EBITDA 1
|
$
|
246
|
|
$
|
290
|
|
$
|
534
|
|
$
|
567
|
|
|
Equity earnings
|
$
|
5
|
|
$
|
6
|
|
$
|
8
|
|
$
|
13
|
|
|
|
|
|
1.
|
For the six months ended June 30, 2019 and for the three and six months ended June 30, 2018, operating EBITDA is on a pro forma basis.
|
|
|
|
|
|
|
|
|
|
Electronics & Imaging
|
Three Months Ended
|
Six Months Ended
|
|
Percentage change from prior year
|
Jun 30, 2019
|
Jun 30, 2019
|
|
Change in Net Sales from Prior Period due to:
|
|
|
|
Local price & product mix
|
—
|
%
|
—
|
%
|
|
Currency
|
(2
|
)
|
(2
|
)
|
|
Volume
|
(5
|
)
|
(4
|
)
|
|
Portfolio & other
|
—
|
|
—
|
|
|
Total
|
(7
|
)%
|
(6
|
)%
|
Electronics & Imaging net sales were $858 million for the three months ended June 30, 2019, down from $921 million for the three months ended June 30, 2018. Net sales decreased due to a 5 percent volume decline and a 2 percent unfavorable currency impact, driven primarily by Asia Pacific. Volume gains in Display Technologies were more than offset by softer volumes in Semiconductor Technologies and Interconnect Solutions. Volume growth in Display Technologies reflects increased demand for organic light emitting diode ("OLED") materials. Increased demand for semiconductor packaging materials in Semiconductor Technologies was more than offset by weakened demand in the memory sector. Demand for advanced materials for smartphones remained strong but overall volumes in Interconnect Solutions were down due to soft circuit board demand.
Operating EBITDA was $246 million for the three months ended June 30, 2019, down 15 percent compared with pro forma Operating EBITDA of $290 million for the three months ended June 30, 2018. Cost synergies were more than offset by volume decline and higher raw material costs in the second quarter of 2019 compared with the second quarter of 2018.
Electronics & Imaging net sales were $1,683 million for the six months ended June 30, 2019, down from $1,785 million for the six months ended June 30, 2018. Net sales decreased due to a 4 percent volume decline and a 2 percent unfavorable currency impact, driven primarily by Asia Pacific. Volume growth in Display Technologies driven by increased OLED demand was more than offset by volume declines in Interconnect Solutions and Semiconductor Technologies.
Pro forma Operating EBITDA was $534 million for the six months ended June 30, 2019, down 6 percent compared with $567 million for the six months ended June 30, 2018. Favorable impacts from an asset sale and cost synergies were more than offset by higher raw material costs and volume declines.
NUTRITION & BIOSCIENCES
The Nutrition & Biosciences segment is an innovation-driven and customer-focused segment that provides solutions for the global food and beverage, dietary supplements, home and personal care, energy, animal nutrition and pharma markets. The segment is one of the world's largest producers of specialty ingredients, developing and manufacturing solutions for the global food and beverage, dietary supplements, enzymes and pharmaceutical excipient markets. Additionally, the segment is an industry pioneer and innovator that works with customers to improve the performance, productivity and sustainability of their products and processes, through differentiated technology in ingredients applications, fermentation, biotechnology, chemistry and manufacturing process excellence.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nutrition & Biosciences
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
Jun 30, 2019
|
Jun 30, 2018
|
Jun 30, 2019
|
Jun 30, 2018
|
|
Net sales
|
$
|
1,558
|
|
$
|
1,621
|
|
$
|
3,093
|
|
$
|
3,198
|
|
|
Operating EBITDA 1
|
$
|
391
|
|
$
|
383
|
|
$
|
744
|
|
$
|
751
|
|
|
Equity earnings
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1
|
|
1. For the six months ended June 30, 2019 and for the three and six months ended June 30, 2018, operating EBITDA is on a pro forma basis.
|
|
|
|
|
|
|
|
|
Nutrition & Biosciences
|
Three Months Ended
|
Six Months Ended
|
|
Percentage change from prior year
|
Jun 30, 2019
|
Jun 30, 2019
|
|
Change in Net Sales from Prior Period due to:
|
|
|
|
Local price & product mix
|
1
|
%
|
1
|
%
|
|
Currency
|
(3
|
)
|
(3
|
)
|
|
Volume
|
(1
|
)
|
(1
|
)
|
|
Portfolio & other
|
(1
|
)
|
—
|
|
|
Total
|
(4
|
)%
|
(3
|
)%
|
Nutrition & Biosciences net sales were $1,558 million for the three months ended June 30, 2019, down from $1,621 million for the three months ended June 30, 2018, due to a 1 percent increase in local price, which was more than offset by a 3 percent unfavorable currency impact, a 1 percent decrease in volume and a 1 percent decrease from portfolio actions. Volume gains in Health & Biosciences were more than offset by lower volumes in Food & Beverage and Pharma Solutions. Volume gains in Health & Biosciences were led by increased probiotics and microbial control demand partially offset by volume declines in bioactives resulting from ongoing challenged conditions in U.S. energy markets. Food & Beverage volumes were lower than the same quarter of last year as volume gains in specialty proteins driven by growing demand in the meat-free market were more than offset by declines in functional solutions and emulsifiers & sweeteners. Pharma Solutions volumes declined due to capacity constraints and product mix shift.
Operating EBITDA was $391 million for the three months ended June 30, 2019, up 2 percent compared with pro forma Operating EBITDA of $383 million for the three months ended June 30, 2018 due to cost synergies and pricing gains which were partially offset by unfavorable currency impacts, higher raw material costs and volume declines.
Nutrition & Biosciences net sales were $3,093 million for the six months ended June 30, 2019, down from $3,198 million for the six months ended June 30, 2018. The decrease was due to a 1 percent increase in local price, which was more than offset by a 3 percent unfavorable currency impact and a 1 percent decrease in volume. Volume gains in Food & Beverage as a result of increased demand in cellulosic and proteins were more than offset by volume declines in Health & Biosciences due to decreased biorefinery and microbial control demand.
Pro forma Operating EBITDA was $744 million for the six months ended June 30, 2019, down 1 percent compared with $751 million for the six months ended June 30, 2018. Cost synergies and pricing gains were more than offset by unfavorable currency impacts, higher raw material costs and volume declines.
TRANSPORTATION & INDUSTRIAL
The Transportation & Industrial segment provides high-performance engineering resins, adhesives, silicones, lubricants and parts to engineers and designers in the transportation, electronics, healthcare, industrial and consumer end-markets to enable systems solutions for demanding applications and environments. The segment delivers a broad range of polymer-based high-performance materials in its product portfolio, including elastomers and thermoplastic and thermoset engineering polymers which are used by customers to fabricate components for mechanical, chemical and electrical systems. In addition, the segment produces innovative engineering polymer solutions, high performance parts, specialty silicones and differentiated adhesive technologies to meet customer specifications in automotive, aerospace, electronics, industrial, healthcare and consumer markets. Transportation & Industrial is a global leader of advanced materials that provides technologies that differentiate customers’ products with improved performance characteristics enabling the transition to hybrid-electric-connected vehicles, High Speed High Frequency connectivity and smart Healthcare.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transportation & Industrial
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
Jun 30, 2019
|
Jun 30, 2018
|
Jun 30, 2019
|
Jun 30, 2018
|
|
Net sales
|
$
|
1,269
|
|
$
|
1,417
|
|
$
|
2,586
|
|
$
|
2,795
|
|
|
Operating EBITDA 1
|
$
|
357
|
|
$
|
402
|
|
$
|
730
|
|
$
|
791
|
|
|
Equity earnings
|
$
|
2
|
|
$
|
1
|
|
$
|
2
|
|
$
|
3
|
|
1. For the six months ended June 30, 2019 and for the three and six months ended June 30, 2018, operating EBITDA is on a pro forma basis.
|
|
|
|
|
|
|
|
|
Transportation & Industrial
|
Three Months Ended
|
Six Months Ended
|
|
Percentage change from prior year
|
Jun 30, 2019
|
Jun 30, 2019
|
|
Change in Net Sales from Prior Period due to:
|
|
|
|
Local price & product mix
|
5
|
%
|
6
|
%
|
|
Currency
|
(3
|
)
|
(3
|
)
|
|
Volume
|
(12
|
)
|
(10
|
)
|
|
Portfolio & other
|
—
|
|
—
|
|
|
Total
|
(10
|
)%
|
(7
|
)%
|
Transportation & Industrial net sales were $1,269 million for the three months ended June 30, 2019, down from $1,417 million for the three months ended June 30, 2018. The change in net sales was due to a 5 percent increase in local price which was more than offset by a 12 percent decrease in volume and a 3 percent unfavorable currency impact, primarily in EMEA and Asia Pacific. Volume declines were primarily due to decreased demand in automotive and electronics markets as trade and tariff concerns impact Asia Pacific and EMEA. Local price increased in all regions compared to the same quarter of last year.
Operating EBITDA was $357 million for the three months ended June 30, 2019, down 11 percent compared with pro forma Operating EBITDA of $402 million for the three months ended June 30, 2018 as pricing gains and cost synergies were more than offset by volume declines and unfavorable currency impacts.
Transportation & Industrial net sales were $2,586 million for the six months ended June 30, 2019, down from $2,795 million for the six months ended June 30, 2018 as a 6 percent increase in local price, led by Mobility Solutions, was more than offset by a 10 percent of volume decline and a 3 percent unfavorable currency impact. Volume declines were primarily due to decreased demand in automotive and electronics markets.
Pro forma Operating EBITDA was $730 million for the six months ended June 30, 2019, down 8 percent compared with $791 million for the six months ended June 30, 2018 due to pricing gains and cost synergies, which were more than offset by volume declines, higher raw material costs and unfavorable currency impacts.
SAFETY & CONSTRUCTION
The Safety & Construction segment is a leading provider of engineered products and integrated systems for a number of industries including construction, worker safety, energy, oil and gas, transportation, medical devices and water purification and separation. The segment satisfies the growing global needs of businesses, governments, and consumers for solutions that make life safer, healthier, and better. By uniting market-driven science with the strength of highly regarded brands, the segment strives to bring new products and solutions to solve customers' needs faster, better and more cost effectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Safety & Construction
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
Jun 30, 2019
|
Jun 30, 2018
|
Jun 30, 2019
|
Jun 30, 2018
|
|
Net sales
|
$
|
1,341
|
|
$
|
1,372
|
|
$
|
2,624
|
|
$
|
2,636
|
|
|
Operating EBITDA 1
|
$
|
382
|
|
$
|
296
|
|
$
|
756
|
|
$
|
622
|
|
|
Equity earnings
|
$
|
7
|
|
$
|
8
|
|
$
|
15
|
|
$
|
13
|
|
1. For the six months ended June 30, 2019 and for the three and six months ended June 30, 2018, operating EBITDA is on a pro forma basis.
|
|
|
|
|
|
|
|
|
Safety & Construction
|
Three Months Ended
|
Six Months Ended
|
|
Percentage change from prior year
|
Jun 30, 2019
|
Jun 30, 2019
|
|
Change in Net Sales from Prior Period due to:
|
|
|
|
Local price & product mix
|
4
|
%
|
4
|
%
|
|
Currency
|
(3
|
)
|
(2
|
)
|
|
Volume
|
1
|
|
2
|
|
|
Portfolio & other
|
(4
|
)
|
(4
|
)
|
|
Total
|
(2
|
)%
|
—
|
%
|
Safety & Construction net sales were $1,341 million for the three months ended June 30, 2019, down from $1,372 million for the three months ended June 30, 2018 as a 4 percent increase in local price and 1 percent of volume growth were more than offset by portfolio declines of 4 percent and a 3 percent unfavorable impact from currency. Volume growth in the segment was led by gains in Water Solutions partially offset by declines in Shelter Solutions due to construction slowdown in the U.S. residential market. Safety Solutions volumes were flat compared with the prior year driven by supply constraints.
Operating EBITDA was $382 million for the three months ended June 30, 2019, up 29 percent compared with pro forma Operating EBITDA of $296 million for the three months ended June 30, 2018 due to local price gains, cost synergies, productivity improvements and volume gains partially offset by an unfavorable impact from currency.
Safety & Construction net sales were $2,624 million for the six months ended June 30, 2019, slightly down from $2,636 million for the six months ended June 30, 2018 as a 4 percent increase in local price and 2 percent of volume growth were offset by portfolio declines of 4 percent and a 2 percent unfavorable impact from currency. Volume growth in the segment was led by gains in Water Solutions and Safety Solutions. Safety Solutions growth was driven by strong industrial markets and increased demand in medical packaging and garments. These gains were partially offset by volume declines in Shelter Solutions, primarily due to weakness in the construction global residential market.
Pro forma Operating EBITDA was $756 million for the six months ended June 30, 2019, up 22 percent compared with $622 million for the six months ended June 30, 2018, due to pricing gains, cost synergies and volume growth, partially offset by unfavorable currency impacts.
NON-CORE
The Non-Core segment is a leading global supplier of key materials for the manufacturing of photovoltaics and solar cells, including innovative metallization pastes and backsheet materials for the production of solar cells and solar modules, and components and films for consumer electronics, automotive, and aerospace markets. The segment also includes the Company's share of the results of the HSC Group, a U.S.-based group of companies that manufacture and sell polycrystalline silicon products. In addition, the segment provides sustainable materials and services for sulfuric acid production and regeneration technologies, alkylation technology for production of clean, high-octane gasoline, and a comprehensive suite of aftermarket service and solutions offerings, including safety consulting and services, to improve the safety, productivity, and sustainability of organizations across a range of industries. The Non-Core segment is also a leading producer of specialty biotechnology materials for residential carpet and stretch comfort apparel markets as well as polyester films for the healthcare, photovoltaics, electronics, packaging and labels, and electrical insulation industries.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Core
|
Three Months Ended
|
Six Months Ended
|
|
In millions
|
Jun 30, 2019
|
Jun 30, 2018
|
Jun 30, 2019
|
Jun 30, 2018
|
|
Net sales
|
$
|
442
|
|
$
|
526
|
|
$
|
896
|
|
$
|
1,040
|
|
|
Operating EBITDA 1
|
$
|
99
|
|
$
|
123
|
|
$
|
193
|
|
$
|
233
|
|
|
Equity earnings
|
$
|
35
|
|
$
|
39
|
|
$
|
64
|
|
$
|
81
|
|
1. For the six months ended June 30, 2019 and for the three and six months ended June 30, 2018, operating EBITDA is on a pro forma basis.
|
|
|
|
|
|
|
|
|
Non-Core
|
Three Months Ended
|
Six Months Ended
|
|
Percentage change from prior year
|
Jun 30, 2019
|
Jun 30, 2019
|
|
Change in Net Sales from Prior Period due to:
|
|
|
|
Local price & product mix
|
—
|
%
|
(2
|
)%
|
|
Currency
|
(2
|
)
|
(2
|
)
|
|
Volume
|
(14
|
)
|
(10
|
)
|
|
Portfolio & other
|
—
|
|
—
|
|
|
Total
|
(16
|
)%
|
(14
|
)%
|
Non-Core net sales were $442 million for the three months ended June 30, 2019, down from $526 million for the three months ended June 30, 2018 due to a 14 percent volume decline and a 2 percent unfavorable impact from currency. Volume declines were driven by weak demand for trichlorosilane due to historically low polysilicon pricing and lower paste sales into electronic component end markets. Biomaterials volume declines were primarily a result of a slow-down in demand in the U.S. residential carpet market.
Operating EBITDA was $99 million for the three months ended June 30, 2019, down 20 percent compared with pro forma Operating EBITDA of $123 million for the three months ended June 30, 2018 mainly due to volume declines and an unfavorable impact from currency.
Non-Core net sales were $896 million for the six months ended June 30, 2019, down from $1,040 million for the six months ended June 30, 2018. Net sales declined due to a 10 percent decline in volume, a 2 percent decline in local price and a 2 percent unfavorable impact from currency. Volume declines were driven by weak demand for trichlorosilane due to historically low polysilicon pricing and lower paste sales into electronic component end markets. Biomaterials volume declines were primarily a result of a slow-down in demand in the U.S. residential carpet market.
Pro forma Operating EBITDA was $193 million for the six months ended June 30, 2019, down 17 percent compared with $233 million for the six months ended June 30, 2018 as cost synergies were more than offset by higher raw material costs, volume declines and an unfavorable impact from currency.
CHANGES IN FINANCIAL CONDITION
Liquidity & Capital Resources
The Company continually reviews its sources of liquidity and debt portfolio and occasionally may make adjustments to one or both to ensure adequate liquidity. The Company’s primary source of incremental liquidity is cash flows from operating activities. Management expects the generation of cash from operations and the ability to access the debt capital markets and other sources of liquidity will continue to provide sufficient liquidity and financial flexibility to meet the Company’s and its subsidiaries obligations as they come due.
|
|
|
|
|
|
|
|
|
|
|
In millions
|
June 30, 2019
|
December 31, 2018
|
|
Cash, cash equivalents and marketable securities
|
$
|
1,669
|
|
$
|
8,577
|
|
|
Total debt
|
$
|
17,229
|
|
$
|
12,639
|
|
In November 2018, DuPont consummated the offering of the senior unsecured notes (the "2018 Senior Notes") in an aggregate principal amount of $12.7 billion. The offering consisted of $0.5 billion in floating rate notes due November 2020, $0.3 billion in floating rate notes due November 2023, and six tranches of fixed-rate notes: $1.5 billion due November 2020, $2.5 billion due November 2023, $1.85 billion due November 2025, $2.25 billion due November 2028, $1.65 billion due November 2038 and $2.15 billion due November 2048. The net proceeds of the offering after the underwriting discount was $12.6 billion. See Note 14 to the interim Consolidated Financial Statements for additional information on the interest related to the 2018 Senior Notes.
Term Loan and Revolving Credit Facilities
In November 2018, the Company entered into a term loan agreement that establishes two term loan facilities in the aggregate principal amount of $3 billion, (the “Term Loan Facilities”) as well as a five-year $3 billion revolving credit facility (the “Five-Year Revolving Credit Facility”). Effective May 2, 2019, the Company fully drew the two Term Loan Facilities in the aggregate principal amount of $3.0 billion and the Five-Year Revolving Credit Facility became effective and available. In June 2019, the Company entered into a 364-day $750 million revolving credit facility (the “364-Day Revolving Credit Facility”). The Five-Year Revolving Credit Facility is generally expected to remain undrawn, and serve as a backstop to the Company’s commercial paper and letter of credit issuance. The 364-Day Revolving Credit Facility may be drawn against for general corporate purposes, including but not limited to net working capital, costs and expenses.
Commercial Paper
In April 2019, DuPont authorized a $3 billion commercial paper program (the “DuPont Commercial Paper Program”). The Company’s issuance under the Commercial Paper Program included the Funding CP Issuance in May 2019 in anticipation of the Corteva Distribution, as well as borrowings for general corporate purposes.
The net proceeds from the 2018 Senior Notes, Term Loan Facilities, and commercial paper together with cash from operations were used to fund cash contributions to Dow and Corteva, and DowDuPont’s November 2018 $3.0 billion share repurchase program, which was completed in the first quarter of 2019. The remaining proceeds were used to reduce outstanding liabilities of Historical EID that would otherwise be attributed to Corteva; and further pay any related premiums, fees and expenses.
Credit Ratings
The Company's credit ratings impact its access to the debt capital markets and cost of capital. The Company remains committed to a strong financial position and strong investment-grade rating. At July 31, 2019, DuPont's credit ratings were as follows:
|
|
|
|
|
|
|
|
Credit Ratings
|
Long-Term Rating
|
Short-Term Rating
|
Outlook
|
|
Standard & Poor’s
|
A-
|
A-2
|
Stable
|
|
Moody’s Investors Service
|
Baa1
|
P-2
|
Stable
|
|
Fitch Ratings
|
BBB+
|
F-2
|
Stable
|
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 Term Loan Facilities, the Five-Year Revolving Credit Facility and the 364-Day Revolving Credit Facility contain a financial covenant, typical for companies with similar credit ratings, requiring that the ratio of Total Indebtedness to Total Capitalization for the Company and its consolidated subsidiaries not exceed 0.60. At June 30, 2019, the Company was in compliance with this financial covenant.
The Company's cash, cash equivalents and marketable securities at June 30, 2019 and December 31, 2018 were $1.7 billion and $8.6 billion, respectively, of which $1.6 billion at June 30, 2019 and $2.1 billion at December 31, 2018 were held by subsidiaries in foreign countries, including United States territories. The decrease in cash and cash equivalents held by subsidiaries in foreign countries is due to the repatriation activities discussed below. For each of its foreign subsidiaries, the Company makes an assertion
regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States.
The Tax Cuts and Jobs Act (“The Act”) requires companies to pay a one-time transition tax on earnings of foreign subsidiaries, a majority of which were previously considered permanently reinvested by the Company (see Note 7 to the interim Consolidated Financial Statements for further details of The Act). The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign investments. The Company has the ability to repatriate additional funds to the U.S., which could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or U.S. state income taxes and the impact of foreign currency movements. It is not practicable to calculate the unrecognized deferred tax liability on undistributed foreign earnings due to the complexity of the hypothetical calculation. During the first and second quarters of 2019, in connection with the Intended Business Separations, the Company repatriated certain funds from its non-U.S. subsidiaries that are not needed to finance local operations or separation activities. For the first quarter of 2019, the Company recorded tax expense of $10 million, associated with these repatriation activities. There were no charges associated with these repatriation activities in the second quarter of 2019.
Summary of Cash Flows
The Company’s cash flows from operating, investing and financing activities, as reflected in the interim Consolidated Statements of Cash Flows, are summarized in the following table. The cash flows related to Dow and Corteva have not been segregated and are included in the interim Consolidated Statements of Cash Flows for all periods presented, as applicable.
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Summary
|
Six Months Ended
|
|
In millions
|
June 30, 2019
|
June 30, 2018
|
|
Cash provided by (used for):
|
|
|
|
Operating activities
|
$
|
(51
|
)
|
$
|
(47
|
)
|
|
Investing activities
|
$
|
(1,657
|
)
|
$
|
(390
|
)
|
|
Financing activities
|
$
|
(10,661
|
)
|
$
|
(3,602
|
)
|
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
$
|
48
|
|
$
|
(171
|
)
|
|
Cash, cash equivalents and restricted cash reclassified as discontinued operations
|
$
|
—
|
|
$
|
7,961
|
|
Cash Flows from Operating Activities
In the first six months of 2019, cash used for operating activities was $51 million, compared with cash used for operating activities of $47 million in the same period last year. The increase in the use of cash was primarily due to the impact of the Dow and Corteva Distributions to period earnings, largely counter-balanced by lesser use of cash for net working capital versus the prior period.
|
|
|
|
|
|
|
|
|
|
|
Net Working Capital 1
|
June 30, 2019
|
Dec 31, 2018
|
|
In millions (except ratio)
|
|
Current assets
|
$
|
10,623
|
|
$
|
16,380
|
|
|
Current liabilities
|
6,457
|
|
3,878
|
|
|
Net working capital
|
$
|
4,166
|
|
$
|
12,502
|
|
|
Current ratio
|
1.65:1
|
|
4.22:1
|
|
1. Net working capital has been restated to exclude the assets and liabilities related to the Distributions. The assets and liabilities related to the Distributions are presented as assets of discontinued operations and liabilities of discontinued operations, respectively, in the Condensed Consolidated Balance Sheets for all periods presented.
Cash Flows from Investing Activities
In the first six months of 2019, cash used for investing activities was $1,657 million, compared to cash used for investing of $390 million in the first six months of 2018. The increase in cash used was primarily attributable to increased capital expenditures, a decrease in sales and maturities of investments, as well as a decline in trade accounts receivable conduits.
Cash Flows from Financing Activities
In the first six months of 2019, cash used for financing activities was $10,661 million compared with $3,602 million in the same period last year. The primary driver of the increased use of cash is the cash held by Dow and Corteva at the respective Distributions, reflecting cash on the balance sheet of each at the time of their respective spinoff; as well as payments of long-term debt of Historical Dow and Historical EID prior to the Distributions. These uses were partly offset by issuance of long-term debt in the form of the Term Loan Facilities draw in May 2019.
Free Cash Flow
The Company defines free cash flow as cash from operating activities less capital expenditures. Under this definition, free cash flow represents the cash generated by the Company from operations after investing in its asset base. Free cash flow, combined with cash balances and other sources of liquidity, represent the cash available to fund obligations and provide returns to shareholders. Free cash flow is an integral financial measure used in the Company's financial planning process. This financial measure is not recognized in accordance with U.S. GAAP and should not be viewed as an alternative to U.S. GAAP financial measures of performance. All companies do not calculate non-GAAP financial measures in the same manner and, accordingly, the Company's free cash flow definition may not be consistent with the methodologies used by other companies.
For additional information relating to the change in cash used for operating activities, see the discussion in the previous section entitled "Cash Flows from Operating Activities."
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of "Cash From Operating Activities" to Free Cash Flow (non-GAAP)
|
Six Months Ended
|
|
In millions
|
June 30, 2019
|
June 30, 2018
|
|
Cash from operating activities (GAAP)
|
$
|
(51
|
)
|
$
|
(47
|
)
|
|
Capital expenditures
|
(1,800
|
)
|
(1,586
|
)
|
|
Free cash flow (non-GAAP)
|
$
|
(1,851
|
)
|
$
|
(1,633
|
)
|
Dividends
On February 14, 2019, the Company announced that its Board declared a dividend of $851 million in aggregate on a pro rata basis, paid on March 15, 2019, to shareholders of record on February 28, 2019. On March 8, 2019, the Company announced that its Board declared a dividend of $325 million in the aggregate on a pro rata basis, which was paid on May 28, 2019, to shareholders of record on April 26, 2019.
On June 27, 2019, the Company announced that its Board declared a third quarter dividend of $0.30 per share payable on September 13, 2019, to shareholders of record on July 31, 2019.
Share Buyback Programs
On June 1, 2019, the Company's Board of Directors authorized a new $2 billion share buyback program, which expires on June 1, 2021. At June 30, 2019, the Company had repurchased 1.4 million shares under this program at a total cost of $102 million.
See Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, for additional information.
Pension and Other Post Employment Plans
DuPont expects to make additional contributions in the aggregate of approximately $240 million by year-end 2019 to certain non-US pension and other post employment benefit plans. Any such contribution could be funded by existing cash balances and/or cash from other available sources of liquidity.
Restructuring
Future cash payments related to the 2019 Restructuring Program are anticipated to be approximately $55 million to $85 million, primarily related to the payment of severance and related benefits, lease termination costs, and contract termination costs. The activities related to the DowDuPont Cost Synergy Program are expected to result in additional cash expenditures of approximately $124 million consisting of severance and related benefit costs and contract terminations. Actions associated with the DowDuPont Cost Synergy Program, including employee separations, are considered substantially complete (see Note 5 to the interim Consolidated Financial Statements). It is possible that additional charges and future cash payments could occur in relation to the Company's restructuring actions. The Company expects to incur additional employee-related costs, including involuntary termination benefits, related to its other optimization activities. These costs cannot be reasonably estimated at this time.
Off-balance Sheet Arrangements
Guarantees arise in the ordinary course of business from relationships with customers and nonconsolidated affiliates when the Company undertakes an obligation to guarantee the performance of others if specific triggering events occur. At June 30, 2019 and December 31, 2018, the Company had directly guaranteed $185 million and $199 million, respectively, of such obligations. Additional information related to the guarantees of the Subsidiaries can be found in the “Guarantees” section of Note 15 to the interim Consolidated Financial Statements.
Contractual Obligations
Information related to the Company's contractual obligations at December 31, 2018 can be found in the Company's 2018 Annual Report, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Contractual Obligations. There have been material changes in the Company's contractual obligations since December 31, 2018 as a result of the distributions of Dow and Corteva. Information related to DuPont's significant contractual obligations is summarized in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due In
|
|
In millions
|
Total at June 30, 2019
|
Remainder of 2019
|
2020-2021
|
2022-2023
|
2024 and
beyond
|
|
Long-term debt obligations 1,2
|
$
|
15,713
|
|
$
|
3
|
|
$
|
2,009
|
|
$
|
5,801
|
|
$
|
7,900
|
|
|
Expected cash requirements for interest 3
|
7,640
|
|
345
|
|
1,306
|
|
1,062
|
|
4,927
|
|
|
Finance lease obligations
|
4
|
|
1
|
|
2
|
|
—
|
|
1
|
|
|
Operating leases
|
612
|
|
92
|
|
221
|
|
120
|
|
179
|
|
|
Pension and other post employment benefits
|
1,184
|
|
237
|
|
138
|
|
123
|
|
686
|
|
|
Purchase obligations 4
|
647
|
|
108
|
|
312
|
|
179
|
|
48
|
|
|
Other liabilities 5
|
178
|
|
27
|
|
73
|
|
24
|
|
54
|
|
|
Total contractual obligations
|
$
|
25,978
|
|
$
|
813
|
|
$
|
4,061
|
|
$
|
7,309
|
|
$
|
13,795
|
|
|
|
|
|
1.
|
Included in the interim Consolidated Financial Statements.
|
|
|
|
|
2.
|
Excludes unamortized debt fees of $103 million.
|
|
|
|
|
3.
|
Cash requirement for interest on long-term debt was calculated using current interest rates at June 30, 2019 and includes $383 million of various floating rate notes and debt instruments.
|
|
|
|
|
4.
|
Represents enforceable and legally binding agreements in excess of $1 million to purchase goods or services that specify fixed or minimum quantities; fixed, minimum or variable price provisions; and the approximate timing of the agreement.
|
|
|
|
|
5.
|
Includes liabilities related to environmental remediation, legal settlements, and other noncurrent liabilities. The table excludes uncertain tax positions due to uncertainties in the timing of the effective settlement of tax positions with the respective taxing authorities and deferred tax liabilities as it is impractical to determine whether there will be a cash impact related to these liabilities. The table also excludes deferred revenue as it does not represent future cash requirements arising from contractual payment obligations.
|
The Company expects to meet its contractual obligations through its normal sources of liquidity and believes it has the financial resources to satisfy the contractual obligations that arise in the ordinary course of business.
OTHER MATTERS
Recent Accounting Guidance
See Note 2 to the interim Consolidated Financial Statements for a description of recent accounting guidance.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported in the interim Consolidated Financial Statements and accompanying notes. Note 1 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Annual Report”) describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. DuPont’s accounting policies that are impacted by judgments, assumptions and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s 2018 Annual Report. Since December 31, 2018, there have been no material changes in the Company’s accounting policies that are impacted by judgments, assumptions and estimates. See the discussion in this section for information regarding the valuation of assets and impairment considerations.
Valuation of Assets and Impairment Considerations
The Company tests goodwill for impairment annually during the fourth quarter, or more frequently when events or changes in circumstances indicate that the fair value is below its carrying value. Goodwill is evaluated for impairment using qualitative and/or quantitative testing procedures. The Company performs goodwill impairment testing at the reporting unit level which is defined as the operating segment or one level below the operating segment. One level below the operating segment, or component, is a business in which discrete financial information is available and regularly reviewed by segment management. The Company aggregates certain components into reporting units based on economic similarities. The Company assessed and re-defined certain reporting units effective June 1, 2019 in connection with the Second Quarter Segment Realignment. At June 30, 2019, the Company had identified 11 reporting units, eight of which carried goodwill.
During the second quarter 2019, the Company recorded goodwill impairment charges of $1,175 million. Refer to Note 13 to the interim Consolidated Financial Statements for further information.
As a result of the related acquisition method of accounting in connection with the Merger, Historical EID’s assets and liabilities were measured at fair value resulting in increases to the Company’s goodwill and other intangible assets. The fair value valuation increased the risk that 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. There were no other indicators for the Company’s other reporting units that would suggest that it is more likely than not that the fair value is less than its carrying value at June 30, 2019. The Company will perform its annual goodwill and intangible asset impairment test in the fourth quarter.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s global operations are exposed to financial market risks relating to fluctuations in foreign currency exchange rates, commodity prices, and interest rates. The Company has established a variety of programs including the use of derivative instruments and other financial instruments to manage the exposure to financial market risks as to minimize volatility of financial results. In the ordinary course of business, the Company enters into derivative instruments to hedge its exposure to foreign currency, interest rate and commodity price risks under established procedures and controls. For additional information on these derivatives and related exposures, see Note 21 to the interim Consolidated Financial Statements. Decisions regarding whether or not to hedge a given commitment are made on a case-by-case basis, taking into consideration the amount and duration of the exposure, market volatility and economic trends. Foreign currency exchange contracts are also used, from time to time, to manage near-term foreign currency cash requirements.
Foreign Currency Exchange Rate Risks
The Company has significant international operations resulting in a large number of currency transactions that result from international sales, purchases, investments and borrowings. The primary currencies for which the Company has an exchange rate exposure are the European euro ("EUR"), Chinese renminbi, Swiss franc, and South Korean won. The Company uses forward exchange contracts to offset its net exposures, by currency, related to the foreign currency denominated monetary assets and liabilities of its operations. In addition to the contracts disclosed in Note 21 to the interim Consolidated Financial Statements, from time to time, the Company will enter into foreign currency exchange contracts to establish with certainty the U.S. dollar ("USD") amount of future firm commitments denominated in a foreign currency.
The following table illustrates the fair values of outstanding foreign currency contracts at June 30, 2019, and the effect on fair values of a hypothetical adverse change in the foreign exchange rates that existed at June 30, 2019. The sensitivities for foreign currency contracts are based on a 10 percent adverse change in foreign exchange rates.
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
Asset/(Liability)
|
Fair Value
Sensitivity
|
|
In millions
|
June 30, 2019
|
June 30, 2019
|
|
Foreign currency contracts
|
$
|
7
|
|
$
|
(285
|
)
|
Since the Company's risk management programs are highly effective, the potential loss in value for each risk management portfolio described above would be largely offset by changes in the value of the underlying exposure.
Concentration of Credit Risk
The Company maintains cash and cash equivalents, marketable securities, derivatives and certain other financial instruments with various financial institutions. These financial institutions are generally highly rated and geographically dispersed and the Company has a policy to limit the dollar amount of credit exposure with any one institution.
As part of the Company's financial risk management processes, it continuously evaluates the relative credit standing of all of the financial institutions that service DuPont and monitors actual exposures versus established limits. The Company has not sustained credit losses from instruments held at financial institutions.
The Company's sales are not materially dependent on any single customer. As of June 30, 2019, no one individual customer balance represented more than five percent of the Company's total outstanding receivables balance. Credit risk associated with its receivables balance is representative of the geographic, industry and customer diversity associated with the Company's global product lines.
The Company also maintains strong credit controls in evaluating and granting customer credit. As a result, it may require that customers provide some type of financial guarantee in certain circumstances. Length of terms for customer credit varies by industry and region.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company’s Disclosure Committee and the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to paragraph (b) of Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
In connection with the Distributions, there are several processes, policies, operations, technologies and information systems that were integrated following the Merger which have been or will be replicated, transferred or separated. The Company continues to take steps to ensure that adequate controls are designed and maintained throughout this transition period.
|
|
|
|
|
DuPont de Nemours Inc.
PART II - OTHER INFORMATION
|
ITEM 1. LEGAL PROCEEDINGS
The Company and its subsidiaries are subject to various litigation matters, including, but not limited to, product liability, patent infringement, antitrust claims, and claims for third party property damage or personal injury stemming from alleged environmental torts. Information regarding certain of these matters is set forth below and in Note 15 to the Consolidated Financial Statements.
Litigation
See Note 15 to the interim Consolidated Financial Statements.
Environmental Proceedings
The Company believes it is remote that the following matters will have a material impact on its financial position, liquidity or results of operations. The description is included per Regulation S-K, Item 103(5)(c) of the Securities Exchange Act of 1934. Refer to Note 15 of the Consolidated Financial Statements for additional discussion of the allocation of liabilities under the Separation and Distribution Agreement and the Letter Agreement.
Divested Neoprene Facility, La Place, Louisiana - EPA Compliance Inspection
In 2016, the EPA conducted a focused compliance investigation at the Denka Performance Elastomer LLC (“Denka”) neoprene manufacturing facility in La Place, Louisiana. Historical EID sold the neoprene business, including this manufacturing facility, to Denka in the fourth quarter of 2015. Subsequent to this inspection, the U.S. Environmental Protection Agency (“EPA)”, the U.S. Department of Justice (“DOJ”), the Louisiana Department of Environmental Quality (“DEQ”) the Company, originally through Historical EID, and Denka began discussions in the spring of 2017 relating to the inspection conclusions and allegations of noncompliance arising under the Clean Air Act, including leak detection and repair. DuPont, Denka, EPA, DOJ and DEQ are continuing these discussions, which include potential settlement options.
FilmTec Edina, Minnesota Matter
On March 14, 2017, FilmTec Corporation ("FilmTec"), a wholly owned subsidiary of Historical Dow, received notification from the EPA, Region 5 and the DOJ of a proposed penalty for alleged violations of the Clean Air Act at FilmTec’s Edina, Minnesota, manufacturing facility. In the second quarter 2019, the EPA, the DOJ and FilmTec agreed, subject to publication and entry of a final Consent Decree, to settle the matter for a civil penalty of $250,000 and FilmTec’s agreement to undertake certain remedial actions.
New Jersey Directive PFAS
On March 25, 2019, the New Jersey Department of Environmental Protection (“NJDEP”) issued a Directive and Notice to Insurers to a number of companies, including Chemours, DowDuPont, Historical EID, and certain DuPont subsidiaries. NJDEP’s allegations relate to former operations of Historical EID involving poly- and perfluoroalkyl substances, (“PFAS”), including PFOA and PFOA- replacement products. The NJDEP seeks past and future costs of investigating, monitoring, testing, treating, and remediating New Jersey’s drinking water and waste systems, private drinking water wells and natural resources including groundwater, surface water, soil, sediments and biota. The Directive seeks certain information as to future costs and information related to the historic uses of PFAS and replacement chemicals including “information ranging from use and discharge of the chemicals through wastewater treatment plants, air emissions, and sales of products containing the chemicals to current development, manufacture, use and release of newer chemicals in the state.”
ITEM 1A. RISK FACTORS
The Company's operations could be affected by various risks, many of which are beyond its control. Based on current information, the Company believes that the following identifies the most significant risk factors that could affect its operations. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.
Risks Relating to the Separations and Distributions
DuPont is subject to continuing contingent tax-related liabilities of Dow and Corteva following the separations and Distributions.
After the separations and Distributions, there are several significant areas where the liabilities of Dow and Corteva may become the Company’s obligations, either in whole or in part. For example, to the extent that any subsidiary of the Company was included in the consolidated tax reporting group of either Historical Dow or Historical EID for any taxable period or portion of any taxable period ending on or before the effective date of the Merger, such subsidiary is jointly and severally liable for the U.S. federal income tax liability of the entire consolidated tax reporting group of Historical Dow or Historical EID, as applicable, for such taxable period. In connection with the separations and Distributions, DuPont, Dow and Corteva have entered into a Tax Matters Agreement, as amended, that allocates the responsibility for prior period consolidated taxes among Dow, Corteva and DuPont. If Dow or Corteva are unable to pay any prior period taxes for which it is responsible, however, DuPont could be required to pay the entire amount of such taxes, and such amounts could be significant. Other provisions of federal, state, local, or foreign law may establish similar liability for other matters, including laws governing tax-qualified pension plans, as well as other contingent liabilities.
Restrictions under the intellectual property cross-license agreements will limit the Company’s ability to develop and commercialize certain products and services and/or prosecute, maintain and enforce certain intellectual property.
Following the separations and Distributions, DuPont is dependent to a certain extent on Dow and Corteva to prosecute, maintain and enforce certain of the intellectual property licensed under the intellectual property cross-license agreements entered into by DuPont, Dow and Corteva in connection with the separations and Distributions. For example, Dow and Corteva are responsible for filing, prosecuting and maintaining (at their respective discretion) patents that Dow and Corteva, respectively, license to the Company. Dow or Corteva, as applicable, will also have the first right to enforce their respective patents, trade secrets and know-how licensed to the Company. If Dow or Corteva, as applicable, fails to fulfill its obligations or chooses to not enforce the licensed patents, trade secrets or know-how under the intellectual property cross-license agreements, DuPont may not be able to prevent competitors from making, using and selling competitive products and services.
In addition, the Company’s use of the intellectual property licensed to it under the intellectual property cross-license agreements is restricted to certain fields, which could limit the Company’s ability to develop and commercialize certain products and services. For example, the licenses granted to it under the agreements do not extend to all fields of use that DuPont may in the future decide to enter. These restrictions may make it more difficult, time consuming and/or expensive for it to develop and commercialize certain new products and services, or may result in certain of the Company’s products or services being later to market than those of the Company’s competitors.
Certain of the contracts transferred or assigned to it as part of the separations and Distributions contain provisions requiring the consent of a third party in connection with the transactions contemplated by the separations and Distributions. If such consent is not given, DuPont may not be entitled to the benefit of such contracts in the future.
Certain of the contracts transferred or assigned to it in connection with the separations and Distributions contain provisions that require the consent of a third party. Some parties may use consent requirements or other rights to seek to terminate contracts or obtain more favorable contractual terms from it. If DuPont is unable to obtain such consents on commercially reasonable and satisfactory terms, the Company’s ability to obtain the benefit of such contracts in the future may be impaired and DuPont may be required to seek alternative arrangements which may be less advantageous to it.
The Company’s customers, prospective customers, suppliers or other companies with whom DuPont conducts business may need assurances that the Company’s financial stability on a stand-alone basis is sufficient to satisfy their requirements for doing or continuing to do business with them.
Some of the Company’s customers, prospective customers, suppliers or other companies with whom DuPont conducts business may need assurances that the Company’s financial stability on a stand-alone basis is sufficient to satisfy their requirements for doing or continuing to do business with them, and may require it to provide additional credit support, such as letters of credit or other financial guarantees. Obtaining such credit support could increase the Company’s costs. Any failure of parties to be satisfied with the Company’s financial stability could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.
Non-compete restrictions in the Separation and Distribution Agreement limit the Company’s ability to compete with certain businesses of Dow for certain periods of time and may limit strategic transactions or discourage the Company’s potential investors from purchasing the Company’s securities. Moreover, when the non-compete restrictions expire, Dow may re-enter these limited business areas, which could cause DuPont to lose market share.
Pursuant to the Separation and Distribution Agreement, and subject to specified exceptions, DuPont and Dow agree not to compete in limited areas of the other’s businesses for a period 30 months from the date of the Dow Distribution. As a result, even if market conditions or the Company’s strategic direction change, DuPont would not be able to enter the subject materials science businesses during the non-compete period. This non-compete restriction could delay, defer or prevent a change of control, merger, consolidation, takeover or other business combination involving it that the Company’s board of directors or the Company’s shareholders may otherwise support, and could also discourage a potential investor from acquiring the Company’s securities and may harm the market price of the Company’s securities, including the Notes.
Once the non-compete period terminates, Dow could elect to re-enter the Company’s subject business areas, in which case DuPont would face increased competition. This may cause it to lose market share and could have an adverse effect on the Company’s business, financial condition, results of operations and cash flows.
In connection with the separations and Distributions, certain liabilities are allocated to or retained by DuPont through assumption or indemnification of Dow and/or Corteva, as applicable. If DuPont is required to make payments pursuant to these indemnities to Dow and/or Corteva, DuPont may need to divert cash to meet those obligations, and the Company’s financial results could be negatively impacted. In addition, certain liabilities are allocated to or retained by Dow and/or Corteva through assumption or indemnification, or subject to indemnification by other third parties. These indemnities may not be sufficient to insure the Company against the full amount of liabilities allocated to or retained by it, and Dow and/or Corteva may not be able to satisfy its indemnification obligations in the future.
Pursuant to the Separation and Distribution Agreement, the Employee Matters Agreement, and the Tax Matters Agreement, as amended, (collectively, the “Core Agreements”) with Dow and Corteva, as well as the Letter Agreement between DuPont and Corteva, DuPont has agreed to assume, and indemnify Dow and Corteva for, certain liabilities. (See discussion of the Core Agreements in Note 3 to the interim Consolidated Financial Statements and Litigation and Environmental Matters in Note 15 to the interim Consolidated Financial Statements.) Payments pursuant to these indemnities may be significant and could negatively impact the Company’s business, particularly indemnities relating to the Company’s actions that could impact the tax-free nature of the distributions. Third parties could also seek to hold it responsible for any of the liabilities allocated to Dow and Corteva, including those related to Historical EID’s materials science and/or agriculture businesses, or for the conduct of such businesses prior to the distributions, and such third parties could seek damages, other monetary penalties (whether civil or criminal) and/or other remedies. Additionally, DuPont generally assumes and is responsible for the payment of the Company’s share of (i) certain liabilities of DowDuPont relating to, arising out of or resulting from certain general corporate matters of DuPont and (ii) certain separation expenses not otherwise allocated to Corteva or Dow (or allocated specifically to it) pursuant to the Core Agreements, and third parties could seek to hold it responsible for Dow’s or Corteva’s share of any such liabilities. Dow and/or Corteva, as applicable, have agreed to indemnify it for such liabilities; however, such indemnities may not be sufficient to protect it against the full amount of such liabilities or from other remedies, and Dow and/or Corteva, as applicable, may not be able to fully satisfy their indemnification obligations. Even if DuPont ultimately succeeds in recovering from Dow and/or Corteva, as applicable, any amounts for which DuPont are held liable, DuPont may be temporarily required to bear these losses. Each of these risks could negatively affect the Company’s business, financial condition, results of operations and cash flows.
Generally, as described in Litigation and Environmental Matters, losses related from liabilities related to discontinued and/or divested operations and businesses of Historical EID that are not primarily related to its agriculture business or specialty products business, (“Stray Liabilities”), are allocated to or shared by each of Corteva and DuPont. Certain Stray Liabilities are subject to third party indemnities; however, such indemnities may not be sufficient to protect the Company against the full amount of such liabilities or such third parties may refuse or otherwise claim defenses to payment. Although the Company believes it is remote, there can be no assurance that any such third party would have adequate resources to satisfy its indemnification obligation when due, or, would not ultimately be successful in claiming defenses against payment. Even if recovery from the third party is ultimately successful, DuPont may be temporarily required to bear these losses. Each of these risks could negatively affect the Company’s business, financial condition, results of operations and cash flows.
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 to significant tax and indemnification liability.
The completed distributions of Corteva and Dow were each conditioned upon the receipt of an opinion from Skadden, Arps, Slate, Meagher & Flom LLP, the Company’s tax counsel, regarding the qualification of the applicable distribution along with certain related transactions as a tax-free transaction under Section 355 and Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code,” and such opinions, collectively, the “Tax Opinions”). The Tax Opinions relied on certain facts, assumptions,
and undertakings, and certain representations from the Company, Dow and Corteva, as applicable, as well as the IRS Ruling (as defined below). Notwithstanding the Tax Opinions and the IRS Ruling, the Internal Revenue Service (the “IRS”) could determine on audit that either, or both, of the distributions and certain related transactions should be treated as taxable transactions if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated, or that the distributions should be taxable for other reasons, including if the IRS were to disagree with the conclusions of the Tax Opinions.
Even if a distribution otherwise constituted a tax-free transaction to stockholders under Section 355 of the Code, the Company could be required to recognize corporate level tax on such distribution and certain related transactions under Section 355(e) of the Code if the IRS determines that, as a result of the Merger or other transactions considered part of a plan with such distribution, there was a 50 percent or greater change in ownership in the Company, Dow or Corteva, as relevant. In connection with the Merger, the Company sought and received a private letter ruling from the IRS regarding the proper time, manner and methodology for measuring common ownership in the stock of the Company, Historical EID and Historical Dow for purposes of determining whether there was a 50 percent or greater change of ownership under Section 355(e) of the Code as a result of the Merger (the “IRS Ruling”). The Tax Opinions relied on the continued validity of the IRS Ruling and representations made by the Company as to the common ownership of the stock of Historical Dow and Historical EID immediately prior to the Merger, and concluded that there was not a 50 percent or greater change of ownership for purposes of Section 355(e) as a result of the Merger. Notwithstanding the Tax Opinions and the IRS Ruling, the IRS could determine that a distribution or a related transaction should nevertheless be treated as a taxable transaction to the Company if it determines that any of the Company’s facts, assumptions, representations or undertakings was not correct or that a distribution should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the Tax Opinions that are not covered by the IRS Ruling.
Generally, corporate taxes resulting from the failure of a distribution to qualify for non-recognition treatment for U.S. federal income tax purposes would be imposed on the Company. Under the Tax Matters Agreement, as amended, that the Company entered into with Dow and Corteva, Dow and Corteva are generally obligated to indemnify the Company against any such taxes imposed on it. However, if a distribution fails to qualify for non-recognition treatment for U.S. federal income tax purposes for certain reasons relating to the overall structure of the Merger and the distributions, then under the Tax Matters Agreement, as amended, the Company and Corteva, on the one hand, and Dow, on the other hand, would share the tax liability resulting from such failure in accordance with the relative equity values of the Company and Dow on the first full trading day following the distribution of Dow, and the Company and Corteva would in turn share any such resulting tax liability in accordance with the relative equity values of the Company and Corteva on the first full trading day following the distribution of Corteva. Furthermore, under the terms of the Tax Matters Agreement, as amended, a party also generally will be responsible for any taxes imposed on the other parties that arise from the failure of either distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code or the failure of certain related transactions to qualify for tax-free treatment, to the extent such failure to qualify is attributable to actions, events or transactions relating to such party, or such party's affiliates’, stock, assets or business, or any breach of such party's representations made in connection with the IRS Ruling or in any representation letter provided to a tax advisor in connection with certain tax opinions, including the Tax Opinions, regarding the tax-free status of the distributions and certain related transactions. To the extent that the Company is responsible for any liability under the Tax Matters Agreement, as amended, there could be a material adverse impact on the Company's business, financial condition, results of operations and cash flows in future reporting periods.
The separations and Distributions may expose the Company to potential liabilities arising out of state and federal fraudulent conveyance laws and legal distribution requirements.
Although DuPont received a solvency opinion from an investment bank confirming that DuPont, Dow and Corteva would each be adequately capitalized following the separations and Distributions, the separations and Distributions could be challenged under various state and federal fraudulent conveyance laws. Fraudulent conveyances or transfers are generally defined to include transfers made or obligations incurred with the actual intent to hinder, delay or defraud current or future creditors or transfers made or obligations incurred for less than reasonably equivalent value when the debtor was insolvent, or that rendered the debtor insolvent, inadequately capitalized or unable to pay its debts as they become due. Any unpaid creditor could claim that DuPont did not receive fair consideration or reasonably equivalent value in the separations and distributions, and that the separations and distributions left DuPont insolvent or with unreasonably small capital or that DuPont intended or believed DuPont would incur debts beyond the Company’s ability to pay such debts as they mature. If a court were to agree with such a plaintiff, then such court could void the separations and distributions as a fraudulent transfer or impose substantial liabilities on it, which could adversely affect the Company’s financial condition and the Company’s results of operations.
The separations and Distributions are also subject to review under state corporate distribution statutes. Under the Delaware General Corporation Law, a corporation may only pay dividends to its stockholders either (i) out of its surplus (net assets minus capital) or (ii) if there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Although DuPont’s Board of Directors made the distributions out of DuPont’s surplus and received an opinion that
DuPont had adequate surplus under Delaware law to declare the dividends of Corteva and Dow common stock in connection with the Distributions, there can be no assurance that a court will not later determine that some or all of the distributions were unlawful.
Risks Related to DuPont’s Operations After the Separations and Distributions
Changes in the Company’s credit ratings could increase the Company’s cost of borrowing or restrict the Company’s ability to access debt capital markets. The Company’s credit ratings are important to the Company’s cost of capital.
DuPont relies on access to the debt capital markets and other short-term borrowings to finance the Company’s long-term and day-to-day operations. A decrease in the ratings assigned to it by the ratings agencies may negatively impact the Company’s access to the debt capital markets and increase the Company’s cost of borrowing. The major rating agencies will routinely evaluate the Company’s credit profile and assign debt ratings to it. This evaluation is based on a number of factors, which include weighing the Company’s financial strength versus business, industry and financial risk. The addition of further leverage to the Company’s capital structure could impact the Company’s credit ratings. Failure to maintain an investment grade rating at the Company’s current level would adversely affect the Company’s cost of funding and the Company’s results of operations and could adversely affect the Company’s liquidity and access to the capital markets. Any limitation on the Company’s ability to continue to raise money in the debt capital markets could have a substantial negative effect on the Company’s liquidity. If DuPont is unable to generate sufficient cash flow or maintain access to adequate external financing, including from significant disruptions in the global credit markets, it could restrict the Company’s current operations, activities under its current and future stock buyback programs, and the Company’s growth opportunities, which could adversely affect the Company’s operating results.
A significant percentage of the Company’s net sales are generated from the Company’s international operations and are subject to economic, political, regulatory, foreign exchange and other risks.
The percentage of net sales generated by the international operations of DuPont, including U.S. exports, was approximately 65 percent of net sales on a continuing operations basis for the three months ended June 30, 2019. With Asia Pacific as the Company’s largest and currently highest growth region, DuPont expects the percentage of the Company’s net sales derived from international operations to continue to be significant. Risks related to international operations include:
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difficulties and costs associated with complying with a wide variety of complex, and often conflicting, laws, treaties and regulations, including antitrust regulations;
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restrictions on, as well as difficulties and costs associated with, the repatriation of cash from foreign countries to the United States and the allocation of revenues or distributions of cash between the Company’s foreign subsidiaries;
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exchange control regulations;
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fluctuations in foreign exchange rates;
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labor compliance costs, including wage, salary and benefit controls and other costs associated with a global workforce, as will as difficulties in hiring and maintaining a qualified staff outside of the United States, especially in the Asia Pacific region;
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government mandated price controls;
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foreign investment laws;
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potential for changes in global trade policies, including import, export and other trade restrictions (such as sanctions and embargoes) and tariffs;
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trends such as populism, economic nationalism and negative sentiment toward multinational companies, as well as government takeover or nationalization of businesses; and
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instability and uncertainty arising from the global geopolitical environment and the evolving international and domestic political, regulatory and economic landscape.
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These and other factors can impair the Company’s flexibility in modifying product, marketing, pricing or other strategies for growing the Company’s businesses, as well as the Company’s ability to improve productivity and maintain acceptable operating margins.
The Company’s international operations expose it to fluctuations in foreign currencies relative to the U.S. dollar, which could adversely affect the Company’s results of operations. For its continuing operations as of the six months ended June 30, 2019, the Company’s largest currency exposures are the European euro and Chinese renminbi. U.S. dollar fluctuations against foreign currency have an impact to commercial prices and raw material costs in some cases and could result in local price increases if the price or raw material costs is denominated in U.S. dollar.
Sales and expenses of the Company’s non-U.S. businesses are also translated into U.S. dollars for reporting purposes and fluctuations of foreign currency against the U.S. dollar could impact U.S. dollar-denominated earnings. In addition, the Company’s assets and liabilities denominated in foreign currencies can also be impacted by foreign currency exchange rates against the U.S. dollar, which could result in exchange gain or loss from revaluation.
DuPont also faces exchange rate risk from the Company’s investments in subsidiaries owned and operated in foreign countries.
DuPont has a balance sheet hedging program and actively looks for opportunities in managing currency exposures related to earnings. However, foreign exchange hedging activities bear a financial cost and may not always be available to it or be successful in completely mitigating such exposures.
DuPont generates significant amounts of cash outside of the United States that is invested with financial and non-financial counterparties. While DuPont employs comprehensive controls regarding global cash management to guard against cash or investment loss and to ensure the Company’s ability to fund the Company’s operations and commitments, a material disruption to the counterparties with whom DuPont transacts business could expose it to financial loss.
Any one or more of the above factors could adversely affect the Company’s international operations and could significantly affect the Company’s business, results of operations, financial condition and cash flows.
Volatility in energy and raw material costs could have a significant impact on the Company’s sales and earnings.
The Company’s manufacturing processes consume significant amounts of energy and raw materials, the costs of which are subject to worldwide supply and demand as well as other factors beyond the Company’s control. Significant variations in the cost of energy, which primarily reflect market prices for oil, natural gas and raw materials, affect the Company’s operating results from period to period. Legislation to address climate change by reducing greenhouse gas emissions, creating a carbon tax or implementing a cap and trade program could create increases in energy costs and price volatility.
When possible, DuPont purchases raw materials through negotiated long-term contracts to minimize the impact of price fluctuations. Additionally, DuPont uses over-the-counter and exchange traded derivative commodity instruments to hedge the Company’s exposure to price fluctuations on certain raw material purchases, including food ingredients. DuPont also takes actions to offset the effects of higher energy and raw material costs through selling price increases, productivity improvements and cost reduction programs. Success in offsetting higher raw material costs with price increases is largely influenced by competitive and economic conditions and could vary significantly depending on the market served. As a result, volatility in these costs may negatively impact the Company’s business, results of operations, financial condition and cash flows.
The Company’s results will be affected by competitive conditions and customer preferences.
Demand for the Company’s products, which impacts revenue and profit margins, will be affected by (i) the development and timing of the introduction of competitive products; (ii) the Company’s response to downward pricing trends to stay competitive; (iii) changes in customer order patterns, such as changes in the levels of inventory maintained by customers and the timing of customer purchases which may be affected by announced price changes, changes in the Company’s incentive programs, or the customer’s ability to achieve incentive goals; (iv) the impact of tariffs or trade disputes on availability of raw materials; and (v) changes in customers’ preferences for the Company’s products, including the success of products offered by the Company’s competitors, and changes in customer’s designs for their products that can affect the demand for some of the Company’s products.
Additionally, success in achieving the Company’s growth objectives is significantly dependent on the timing and market acceptance of the Company’s new product offerings, including the Company’s ability to renew the Company’s pipeline of new product offerings and to bring those offerings to market. This ability may be adversely affected by difficulties or delays in product development, such as the inability to identify viable new products, obtain adequate intellectual property protection, or gain market acceptance of new products. There are no guarantees that new products will prove to be commercially successful. The Company’s success will depend on several factors, including the Company’s ability to:
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correctly identify customer needs and preferences and predict future needs and preferences;
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allocate the Company’s research & development funding to products and services with higher growth prospects;
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anticipate and respond to the Company’s competitors’ development of new products and services and technological innovations;
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differentiate the Company’s offerings from the Company’s competitors’ offerings and avoid commoditization;
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innovate and develop new technologies and applications, and acquire or obtain rights to third-party technologies that may have valuable applications in the Company’s served markets;
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obtain adequate intellectual property rights with respect to key technologies before the Company’s competitors do;
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successfully commercialize new technologies in a timely manner, price them competitively and cost-effectively manufacture and deliver sufficient volumes of new products of appropriate quality on time;
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obtain necessary regulatory approvals of appropriate scope; and
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stimulate customer demand for, and convince customers, to adopt new technologies.
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There are no guarantees that new product offerings will prove to be commercially successful. Additionally, the Company’s expansion into new markets may result in greater-than-expected risks, liabilities and expenses.
The costs of complying with evolving regulatory requirements could negatively impact the Company’s business, results of operations, financial condition and cash flows. Actual or alleged violations of environmental laws or permit requirements could result in restrictions or prohibitions on plant operations and substantial civil or criminal sanctions, as well as the assessment of strict liability and/or joint and several liability.
DuPont continues to be subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment, greenhouse gas emissions, and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. Costs and capital expenditures relating to environmental, health or safety matters are subject to evolving regulatory requirements and depend on the timing of the promulgation and enforcement of specific standards which impose the requirements. Moreover, changes in environmental regulations could inhibit or interrupt the Company’s operations, or require modifications to the Company’s facilities. Changes to regulations or the implementation of additional regulations, especially in certain highly regulated markets served by the Company’s Nutrition & Biosciences businesses, such as regulatory modernization of food safety laws and evolving standards and regulations affecting pharmaceutical excipients, or in reaction to new or next-generation technologies, including advances in protein engineering, gene editing and gene mapping, or novel uses of existing technologies may result in significant costs or capital expenditures or require changes in business practice that could result in reduced margins or profitability.
Accordingly, environmental, health or safety regulatory matters could result in significant unanticipated costs or liabilities causing a negative impact on the Company’s business, cash flows and results of operations.
The Company’s business, results of operations and reputation could be adversely affected by industry-specific risks including process safety and product stewardship/regulatory compliance issues.
DuPont is subject to risks which include, but are not limited to, product safety or quality; shifting consumer preferences; federal, state, and local regulations on manufacturing or labeling; environmental, health and safety regulations; and customer product liability claims. While DuPont maintains general liability insurance, the amount of liability that may result from certain of these risks may not always be covered by, or could exceed, the applicable insurance coverage. In addition, negative publicity related to product liability, food safety, safety, health and environmental matters may damage the Company’s reputation. The occurrence of any of the matters described above could adversely affect the Company’s business, results of operations, financial condition and cash flows.
In most jurisdictions, DuPont must test the safety, efficacy and environmental impact of the Company’s products to satisfy regulatory requirements and obtain the needed approvals. In certain jurisdictions, DuPont must periodically renew the Company’s approvals, which may require it to demonstrate compliance with then-current standards. The regulatory approvals process is lengthy, complex and in some markets unpredictable, with requirements that can vary by product, technology, industry and country. Additionally, the regulatory environment may be impacted by the activities of non-governmental organizations and special interest groups and stakeholder reactions to the actual or perceived impacts of new technology, products or processes on safety, health and the environment. Obtaining and maintaining regulatory approvals will require submitting a significant amount of information and data, which may require participation from technology providers. Regulatory standards and trial procedures are continuously changing. The pace of change together with the lack of regulatory harmony could result in unintended noncompliance. To maintain the Company’s right to produce or sell existing products or to commercialize new products, DuPont must be able to demonstrate the Company’s ability to satisfy the requirements of regulatory agencies.
The failure to meet existing and new requirements or receive necessary permits or approvals could have near- and long-term effects on the Company’s ability to produce and sell certain current and future products, which could significantly increase operating costs and adversely affect the Company’s business, results of operations, financial condition and cash flows.
The Company’s business, results of operations, financial condition and cash flows could be adversely affected by interruption of the Company’s supply chain, information technology or network systems and other business disruptions.
Supply chain disruptions, plant and/or power outages, labor disputes and/or strikes, information technology system and/or network disruptions, whether caused by acts of sabotage, employee error, malfeasance or other actions, geo-political activity, weather events and natural disasters, including hurricanes or flooding that impact coastal regions, could seriously harm the Company’s operations as well as the operations of the Company’s customers and suppliers. In addition, terrorist attacks and natural disasters have increased stakeholder concerns about the security and safety of chemical production and distribution.
Supply chain and other business disruptions may also be caused by security breaches, which could include, for example, attacks on information technology and infrastructure by hackers, viruses, breaches due to employee error, malfeasance or other actions or other disruptions. DuPont and/or the Company’s suppliers may fail to effectively prevent, detect and recover from these or
other security breaches and, therefore, such breaches could result in misuse of the Company’s assets, loss of property including trade secrets and confidential or personal information, some of which is subject to privacy and security laws, and other business disruptions. As a result, DuPont may be subject to legal claims or proceedings, reporting errors, processing inefficiencies, negative media attention, loss of sales, interference with regulatory compliance which could result in sanctions or penalties, liability or penalties under privacy laws, disruption in the Company’s operations, and damage to the Company’s reputation, which could adversely affect the Company’s business, results of operations, financial condition and cash flows.
Like most major corporations, DuPont is the target of industrial espionage, including cyber-attacks, from time to time. DuPont has determined that these attacks have resulted, and could result in the future, in unauthorized parties gaining access to certain confidential business information. Although management does not believe that DuPont has experienced any material losses to date related to these security breaches, including cybersecurity incidents, there can be no assurance that DuPont will not suffer such losses in the future.
DuPont seeks to actively manage the risks within the Company’s control that could lead to business disruptions and security breaches. As these threats continue to evolve, particularly around cybersecurity, DuPont may be required to expend significant resources to enhance the Company’s control environment, processes, practices and other protective measures. Despite these efforts, such events could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.
Enforcing the Company’s intellectual property rights, or defending against intellectual property claims asserted by others, could adversely affect the Company’s business, results of operations, financial condition and cash flows.
Intellectual property rights, including patents, trade secrets, know-how and other confidential information, trademarks, tradenames and other forms of trade dress, are important to the Company’s business. DuPont endeavors to protect the Company’s intellectual property rights in jurisdictions in which the Company’s products are produced or used and in jurisdictions into which the Company’s products are imported. However, DuPont may be unable to obtain protection for the Company’s intellectual property in key jurisdictions. Further, changes in government policies and regulations, including changes made in reaction to pressure from non-governmental organizations, or the public generally, could impact the extent of intellectual property protection afforded by such jurisdictions.
DuPont has designed and implemented internal controls intended to restrict access to and distribution of the Company’s intellectual property. Despite these precautions, the Company’s intellectual property is vulnerable to unauthorized access through employee error or actions, theft and cybersecurity incidents, and other security breaches. When unauthorized access and use or counterfeit products are discovered, DuPont considers the matter for report to governmental authorities for investigation, as appropriate, and take measures to mitigate any potential impact. Protecting intellectual property related to biotechnology is particularly challenging because theft is difficult to detect and biotechnology can be self-replicating. Accordingly, the impact of such theft can be significant.
Competitors are increasingly challenging the Company’s intellectual property positions, and the potential outcomes can be highly uncertain. Third parties may also claim the Company’s products violate their intellectual property rights. Defending such claims, even those without merit, is time-consuming and expensive. In addition, as a result of such claims, DuPont has and could be required in the future to enter into license agreements, develop non-infringing products or engage in litigation that could be costly. If challenges are resolved adversely, it could negatively impact the Company’s ability to obtain licenses on competitive terms, commercialize new products and generate sales from existing products.
In addition, because of the rapid pace of technological change, the confidentiality of patent applications in some jurisdictions and/or the uncertainty in predicting the outcome of complex proceedings relating to ownership or the scope of protection of patents relating to certain emerging technologies, competitors may be unexpectedly issued patents that DuPont does not anticipate. These patents could reduce the value of the Company’s commercial or pipeline products or, to the extent they cover key technologies on which DuPont has unknowingly relied, require it to seek to obtain licenses or cease using the technology, no matter how valuable to the Company’s business. If DuPont decided to obtain licenses to continue using the technology, it cannot ensure DuPont would be able to obtain such a license on acceptable terms.
Legislation and jurisprudence on patent protection is evolving, and changes in laws could affect the Company’s ability to obtain or maintain patent protection for the Company’s products.
Any one or more of the above factors could significantly affect the Company’s business, results of operations, financial condition and cash flows.
Increased concerns regarding chemicals in commerce and their potential impact on the environment have resulted in more restrictive regulations, may lead to new regulations and compliance may be costly.
Concerns about chemicals and biotechnology, as well as their potential impact on health and the environment, reflect a growing trend in societal demands for increasing levels of product safety and environmental protection. These concerns could manifest themselves in stockholder proposals, preferred purchasing, delays or failures in obtaining or retaining regulatory approvals, delayed product launches, lack of market acceptance, product discontinuation, continued pressure for and adoption of more stringent regulatory intervention and litigation. These concerns could also influence public perceptions, the viability or continued sales of certain of the Company’s products, the Company’s reputation and the cost to comply with regulations and, as a result, could have a negative impact on the Company’s business, results of operations and financial condition.
An impairment of goodwill or intangible assets could negatively impact the Company’s financial results.
At least annually, DuPont must assess both goodwill and indefinite-lived intangible assets for impairment. Intangible assets with finite lives are tested for impairment when events or changes in circumstances indicate their carrying value may not be recoverable. If testing indicates that goodwill or intangible assets are impaired, their carrying values will be written down based on fair values with a charge against earnings. Where DuPont utilizes discounted cash flow methodologies in determining fair values, continued weak demand for a specific product line or business could result in an impairment. Accordingly, any determination requiring the write-off of a significant portion of goodwill or intangible assets could negatively impact the Company’s results of operations.
As a result of the Merger and related acquisition method of accounting, Historical EID’s assets and liabilities were measured at fair value, and any declines in projected cash flows could have a material, negative impact on the fair value of the Company’s reporting units and assets. Future impairments of the Company’s goodwill or intangible assets also could be recorded due to changes in assumptions, estimates or circumstances and the magnitude of such impairments may be material to it.
Failure to effectively manage acquisitions, divestitures, alliances and other portfolio actions could adversely impact the Company’s business, results of operations, financial condition and cash flows.
DuPont from time to time evaluates acquisition candidates that may strategically fit the Company’s business and/or growth objectives. If DuPont is unable to successfully integrate and develop acquired businesses, DuPont could fail to achieve anticipated synergies and cost savings, including any expected increases in revenues and operating results, which could have a material adverse effect on the Company’s financial results. DuPont expects to continually review the Company’s portfolio of assets for contributions to the Company’s objectives and alignment with the Company’s growth strategy. The Letter Agreement between the Company and Corteva limits DuPont’s ability to separate certain businesses and assets to third parties without assigning certain of its indemnification obligations under the Separation and Distribution Agreement to the transferee of such businesses and assets or meeting certain other alternative conditions. DuPont may be unable to meet the conditions under the Letter Agreement, if applicable.
Even if the conditions under the Letter Agreement are met or are not applicable, DuPont may not be successful in separating underperforming or non-strategic assets, and gains or losses on the divestiture of, or lost operating income from, such assets may affect the Company’s earnings. Moreover, DuPont might incur asset impairment charges related to acquisitions or divestitures that reduce the Company’s earnings. In addition, if the execution or implementation of acquisitions, divestitures, alliances, joint ventures and other portfolio actions is not successful, it could adversely impact the Company’s business, results of operations, financial condition and cash flows.
The Company’s results of operations could be adversely affected by litigation and other commitments and contingencies.
DuPont faces risks arising from various unasserted and asserted litigation matters, including product liability, patent infringement and other intellectual property disputes, contract and commercial litigation, claims for damage or personal injury, antitrust claims, governmental regulations and other actions. An adverse outcome in any one or more of these matters could be material to the Company’s business, results of operations, financial condition and cash flows.
In the ordinary course of business, DuPont may make certain commitments, including representations, warranties and indemnities relating to current and past operations, including those related to divested businesses, and DuPont may issue guarantees of third-party obligations. If DuPont is required to make payments as a result, they could exceed the amounts accrued therefor, thereby adversely affecting the Company’s results of operations.
DuPont is subject to numerous laws, regulations and mandates globally which could adversely affect the Company’s operating results and forward strategy.
DuPont does business globally in more than 60 countries. DuPont is required to comply with the numerous and far-reaching laws and regulations administered by United States federal, state, local and foreign governmental authorities. DuPont is required to comply with other general business regulations covering areas such as income taxes, anti-corruption, anti-bribery, global trade, trade sanctions, environmental protections, product safety, and handling and production of regulated substances. DuPont expects to frequently face challenges from U.S. and foreign tax authorities regarding the amount of taxes due. These challenges may include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions.
In evaluating the exposure associated with various tax filing positions, DuPont expects to record reserves for estimates of potential additional tax DuPont may owe. Any failure to comply with applicable laws and regulations or appropriately resolve these challenges could subject it to administrative, civil and criminal remedies including fines, penalties, disgorgement, injunctions and recalls of the Company’s products, and damage to the Company’s reputation.
Governmental policies, including antitrust and competition law, trade restrictions, regulations related to medical applications and devices, food safety regulations, sustainability requirements, traceability and other government regulations and mandates, can impact the Company’s ability to execute this strategy successfully. See also “-A significant percentage of the Company’s net sales are generated from the Company’s international operations and are subject to the economic, political, regulatory, foreign exchange and other risks.”
Failure to maintain a streamlined operating model and sustain operational improvements may reduce the Company’s profitability or adversely impact the Company’s business, results of operations, financial condition and cash flows.
The Company’s profitability and margin growth will depend in part on the Company’s ability to maintain a streamlined operating model and drive sustainable improvements, through actions and projects, such as consolidation of manufacturing facilities, transitions to cost-competitive regions and product line rationalizations. A variety of factors may adversely affect the Company’s ability to realize the targeted cost synergies, including failure to successfully optimize the Company’s facilities footprint, the failure to take advantage of the Company’s global supply chain, the failure to identify and eliminate duplicative programs, and the failure to otherwise integrate Historical EID’s or Historical Dow’s respective specialty products businesses, including their technology platforms. There can be no assurance that DuPont is be able to achieve or sustain any or all of the cost savings generated from restructuring actions.
The Company’s U.S. and non-U.S. tax liabilities will be dependent, in part, upon the distribution of income among various jurisdictions in which DuPont operate.
The Company’s future results of operations could be adversely affected by changes in the effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, changes in tax laws, regulations and judicial rulings (or changes in the interpretation thereof), changes in generally accepted accounting principles, changes in the valuation of deferred tax assets and liabilities, changes in the amount of earnings permanently reinvested offshore, the results of audits and examinations of previously filed tax returns and continuing assessments of the Company’s tax exposures and various other governmental enforcement initiatives. The Company’s tax expense includes estimates of tax reserves and reflects other estimates and assumptions, including assessments of future earnings of the Company which could impact the valuation of the Company’s deferred tax assets. Changes in tax laws or regulations, including further regulatory developments arising from U.S. tax reform legislation as well as multi-jurisdictional changes enacted in response to the action items provided by the Organization for Economic Co-operation and Development (OECD), will increase tax uncertainty and impact the Company’s provision for income taxes
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table provides information regarding purchases of the Company’s common stock by the Company during the three months ended June 30, 2019:
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Issuer Purchases of Equity Securities
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Total number of shares purchased as part of the Company's publicly announced share repurchase program 1
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Approximate dollar value of shares that may yet be purchased under the Company's publicly announced share
repurchase program 1
(In millions)
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Period
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Total number of shares purchased
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Average price paid per share
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April 2019
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—
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$
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—
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—
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$
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—
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May 2019
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—
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$
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—
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—
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$
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—
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June 2019
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1,371,450
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$
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74.18
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1,371,450
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$
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1,898
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Second quarter 2019
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1,371,450
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$
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74.18
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1,371,450
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$
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1,898
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1.
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On June 1, 2019, the Company announced a new $2 billion share buyback program, which expires on June 1, 2021.
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In July 2019, the Company purchased an additional 2,050,898 shares at a total cost of $148 million. Approximately $1.75 billion of the Company’s $2.0 billion share repurchase authorization is remaining.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
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EXHIBIT NO.
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DESCRIPTION
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Second Amended and Restated Certificate of Incorporation of DowDuPont Inc. effective as of June 1, 2019, incorporated by reference to Exhibit 3.2 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed June 3, 2019.
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The Amended and Restated Bylaws of DuPont de Nemours, Inc., effective as of June 1, 2019, incorporated by reference to Exhibit 3.3 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed June 3, 2019.
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Intellectual Property Cross-License Agreement, effective as of June 1, 2019, by and among DuPont de Nemours, Inc. and Corteva, Inc., incorporated by reference to Exhibit 10.1 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed June 3, 2019.
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Letter Agreement, effective as of June 1, 2019 by and between DuPont de Nemours, Inc. and Corteva, Inc., incorporated by reference to Exhibit 10.2 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed June 3, 2019.
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Amended and Restated Tax Matters Agreement, effective as of June 1, 2019, by and among DowDuPont Inc., Corteva, Inc. and Dow Inc., incorporated by reference to Exhibit 10.3 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed June 3, 2019.
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DuPont Senior Executive Severance Plan, effective as of June 1, 2019, incorporated by reference to Exhibit 10.4 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed June 3, 2019.
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DuPont Management Deferred Compensation Plan, effective June 1, 2019.
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DuPont Stock Accumulation and Deferred Compensation Plan for Directors, effective June 1, 2019.
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DuPont Deferred Variable Compensation Plan, effective June 1, 2019.
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DuPont Retirement Savings Restoration Plan, effective June 1, 2019.
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DuPont Pension Restoration Plan, effective June 1, 2019.
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DuPont Omnibus Incentive Plan effective June 1, 2019.
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Amended and Restated Employment Agreement by and between DuPont de Nemours, Inc. and Edward D. Breen, dated as of June 1, 2019.
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Preferability Letter of PricewaterhouseCoopers LLP, independent registered public accounting firm.
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Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS
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XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
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101.SCH
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XBRL Taxonomy Extension Schema Document.
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document.
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document.
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document.
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document.
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*Filed herewith
**Upon request of the U.S. Securities and Exchange Commission, (the “SEC”), DuPont hereby undertakes to furnish supplementally a copy of any omitted schedule or exhibit to such agreement; provided, however, that DuPont may omit confidential information pursuant to Item 601(b)(10) or request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any schedule or exhibit so furnished.
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DuPont de Nemours Inc.
Signatures
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DUPONT DE NEMOURS INC.
Registrant
Date: August 6, 2019
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By:
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/s/ MICHAEL G. GOSS
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Name:
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Michael G. Goss
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Title:
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Vice President and Controller
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City:
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Wilmington
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State:
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Delaware
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DuPont
Management Deferred Compensation Plan
(Effective June 1, 2019)
Article 1
PURPOSE & SPIN-OFF
Section 1.01 Purpose. DuPont de Nemours, Inc. (f/k/a DowDuPont Inc. (the “Company”)) desires to provide certain of its employees with an opportunity to accumulate additional retirement savings through voluntary compensation deferral contributions to a plan intended to constitute a non-qualified deferred compensation plan which, in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), is unfunded and maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The Company intends that a participant’s compensation deferrals, and the earnings thereon, will not be subject to federal income tax until such amounts are paid or made available to the participant.
Section 1.02 Spin-Off. Effective as of the Effective Date, the Company distributed its interest in Corteva, Inc. (“Corteva”) to the Company’s shareholders and agreed to assume elections and deferrals made under Corteva’s Management Deferred Compensation Plan (the “Corteva MDCP”) with respect to calendar years through 2019 by certain participants therein (the “Effective Date Participants”), all as more fully described in that certain Employee Matters Agreement dated March 31, 2019 by and among the Company, Corteva and The Dow Chemical Company (as it may be amended from time to time). This Plan document governs such elections and deferrals, which notwithstanding anything herein to the contrary shall remain subject to the terms and conditions that governed them under the Corteva MDCP, and also provides for participation in the Plan in respect of 2019 by Eligible Employees who first become Eligible Employees during 2019 on or after the Effective Date.
ARTICLE 2
DEFINITIONS
Section 2.01 “Account” means each account established on the books of account of the Employer to reflect the balance of Plan benefits attributable to a Participant. An Account shall be credited or debited, as applicable, with Deferral Contributions, Credited Investment Return and Dividend Equivalent Units, and any payments made by the Employer to the Participant or the Participant’s Beneficiary pursuant to this Plan. A Participant’s Account shall be divided into Directed Investment Subaccounts, with respect to which he/she shall be permitted to make Deemed Investment Elections, and Stock Unit Subaccounts, with respect to which he/she shall not be permitted to make Deemed Investment Elections.
Section 2.02 “Active Participant” means a Participant on whose behalf a current Deferral Election is in effect.
Section 2.03 “Administrator” means the Company.
Section 2.04 “Affiliate” means any corporation, organization or entity which is under common control with the Company or which is otherwise required to be aggregated with the Company pursuant to paragraphs (b), (c), (m), or (o) of Section 414 of the Code.
Section 2.05 “Base Salary” means the basic pay from the Employer (excluding LTI Awards and STI Awards, distributions from nonqualified deferred compensation plans, commissions, overtime, severance, fringe benefits, stock options and other equity awards, relocation expenses, incentive payments, non-monetary awards, automobile and other allowances (whether or not such allowances are included in the Employee’s gross income) and other non-regular forms of compensation paid to a Participant for employment services rendered). Base Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or nonqualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant’s gross income under Code Sections 125, 132, 402(e)(3), 402(h), or 403(b) pursuant to plans or arrangements established by any Employer; provided, however, that all such amounts will be included in Base Salary only to the extent that had there been no such plan, the amount would have been payable in cash to the Employee. Notwithstanding anything in this Plan to the contrary, Base Salary shall not include any amount paid pursuant to a long-term disability plan or pursuant to a long-term disability insurance policy.
Section 2.06 “Base Salary Deferral Eligible Employee” means any U.S.-based employee of the Employer who is designated from time to time by the Employer as eligible to defer the payment of Base Salary in accordance with Article 4 hereof.
Section 2.07 “Beneficiary” means the person or persons designated as such pursuant to Article 7 hereof.
Section 2.08 “Change of Control” means an objectively determined event that occurs with respect to the Company or the Employer for whom the Participant renders services and which constitutes both a Change in Control for purposes of the Equity and Incentive Plan and change in the ownership or effective control of the Company or Employer, as applicable, or in the ownership of a substantial portion of the Company’s or Employer’s, as applicable, assets for purposes of Code Section 409A.
Section 2.09 “Changed Personal Circumstances” means an event or series of events beyond the control of the Participant which were unforeseeable at the time a Deferral Election was made which will result in a severe financial hardship for the Participant absent a cancellation of the Deferral Election at issue. A financial hardship shall be deemed severe if the amount involved equals or exceeds the annual Deferral otherwise resulting from the Deferral Election at issue. Whether a Participant has experienced Changed Personal Circumstances shall be determined on a facts-and-circumstances basis in the sole discretion of the Administrator.
Section 2.10 “Code” means the Internal Revenue Code of 1986, as amended, and the regulations and rulings issued thereunder.
Section 2.11 “Common Stock Unit” means a notional unit representing one share of common stock of the Company.
Section 2.12 “Credited Investment Return” means the hypothetical gain or loss credited to a Participant’s Directed Investment Subaccounts pursuant to Article 5 hereof.
Section 2.13 “Deemed Investment Election” means the selection by a Participant, pursuant to Article 5 hereof, of Investment Options in which his/her Directed Investment Subaccounts shall be deemed invested.
Section 2.14 “Deferral Contributions” means the elective contributions made to the Plan by a Participant pursuant to Article 4 hereof.
Section 2.15 “Deferral Election” means an election, pursuant to Article 4 hereof, to defer receipt of Base Salary or STI Awards, or the settlement of LTI Awards. Deferral Elections shall be made in accordance with the procedures established by the Administrator for that purpose. A Deferral Election may be cancelled due to an “unforeseeable emergency” as defined in Treasury Regulation Section 1.409A-3(i)(3) or a hardship distribution pursuant to Section 1.401(k)-1(d)(3). The Deferral Election must be cancelled, not merely postponed or otherwise delayed. Any later Deferral Election will be subject to the provisions of Article 4 of this Plan governing Deferral Elections.
Section 2.16 “Directed Investment Subaccount” means that portion of a Participant’s Account to which a Participant’s Deferral Contributions of Base Salary and STI Awards, and Credited Investment Return and Dividend Equivalent Units attributable thereto, will be allocated and with respect to which he/she may make Deemed Investment Elections in accordance with Article 5 hereof. A Participant may maintain no more than five (5) Directed Investment Subaccounts under this Plan.
Section 2.17 “Dividend Equivalent Units” means additional Common Stock Units credited to a Participant’s Account pursuant to Section 5.05.
Section 2.18 “Dividend Payment Date” means each date on which the Company pays a dividend on its common stock.
Section 2.19 “Effective Date” means June 1, 2019.
Section 2.20 “Eligible Employee” means any Base Salary Deferral Eligible Employee, STI Deferral Eligible Employee or LTI Deferral Eligible Employee.
Section 2.21 “Employer” means the Company and any Affiliate which, with the consent of the Company, adopts this Plan.
Section 2.22 “Equity and Incentive Plan” means the Company’s 2019 Omnibus Incentive Plan exclusive of Annex B thereto.
Section 2.23 “Form of Payment” means either (i) a lump sum or (ii) annual installments (for up to fifteen (15) years). Annual installments are available only in connection with a Separation from Service or Change of Control. In the event of a Participant’s death, his/her remaining Account balance will be distributable in a single lump sum.
Section 2.24 “Identification Date” means each December 31.
Section 2.25 “Investment Options” means one or more alternatives designated from time to time, pursuant to Article 5 hereof, for purposes of crediting earnings or losses to Directed Investment Subaccounts.
Section 2.26 “LTI Award” means an award of RSUs or PSUs.
Section 2.27 “LTI Deferral Eligible Employee” means any U.S.-based employee of the Employer who is designated from time to time by the Company as eligible to defer the settlement of an LTI Award in accordance with Article 4 hereof.
Section 2.28 “Participant” means any Eligible Employee who has elected to participate in the Plan by completing the appropriate forms (including electronic forms) prescribed by the Administrator for that purpose.
Section 2.29 “Payment Event” means any of the following:
(a) Separation from Service
(b) The earlier of (i) Separation from Service or (ii) a specified date
(c) Change of Control
Notwithstanding the foregoing, (i) in the event of a Participant’s death, his/her remaining Account balance will automatically be distributed to his/her Beneficiary in a single lump sum within ninety days (90) thereafter and (ii) a Participant may request that all or a portion of his/her Account be distributed on account of an “unforeseeable emergency” as defined in Treasury Regulation Section 1.409A-3(i)(3) and subject to the restrictions on such distributions set forth therein.
Section 2.30 “Plan” means this DuPont Management Deferred Compensation Plan.
Section 2.31 “Plan Year” means the twelve (12) month period beginning January 1 and ending December 31.
Section 2.32 “PSU” means a performance-based restricted stock unit granted under the Equity and Incentive Plan.
Section 2.33 “Qualified Leave” means military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the individual retains a right to reemployment with the service recipient under an applicable statute or by contract. A leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the employee will return to perform services for the employer. If the period of leave exceeds six months and the individual does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period.
Section 2.34 “RSU” means a time-vested restricted stock unit granted under the Equity and Incentive Plan.
Section 2.35 “Section 16 Person” means any employee who is subject to the reporting requirements of Section 16(a) or the liability provisions of Section 16(b) of the Securities and Exchange Act of 1934, as amended.
Section 2.36 “Separation from Service” means a “separation from service” as defined in Treasury Regulation Section 1.409A-1(h).
Section 2.37 “Similar Plan” means a plan required to be aggregated with this Plan under Treasury Regulation Section 1.409A-1(c)(2)(i)(A).
Section 2.38 “Specified Employee” means an officer of the Employer at any time during the 12-month period ending on an Identification Date. If a Participant is a Specified Employee as of an Identification Date, such Participant is treated as a Specified Employee for the 12-month period beginning on the first day of the first month following the Identification Date.
Section 2.39 “STI Award” means a cash-based award under the Equity and Incentive Plan or Pioneer Hi-Bred International, Inc. Annual Reward Plan.
Section 2.40 “STI Deferral Eligible Employee” means any U.S.-based employee of the Employer who is designated from time to time by the Employer as eligible to defer the payment of an STI Award in accordance with Article 4 hereof.
Section 2.41 “Stock Unit Subaccount” means that portion of a Participant’s Account to which a Participant’s Deferral Contributions of LTI Awards, and Dividend Equivalent Units attributable thereto, will be allocated and with respect to which he/she may not make Deemed Investment Elections in accordance with Article 5 hereof. A Participant may maintain no more than five (5) Stock Unit Subaccounts under this Plan.
Section 2.42 “Triggering Event” means, with respect to a Distribution Subaccount, the Payment Event elected by a Participant pursuant to Section 4.03.
ARTICLE 3
ELIGIBILITY
Section 3.01 Procedure For and Effect of Admission. Each Eligible Employee who desires to participate in this Plan shall complete such forms (including electronic forms) and provide such data as is reasonably required by the Administrator. By becoming a Participant, an Eligible Employee shall be deemed to have consented to the provisions of this Plan and all amendments hereto.
Section 3.02 Cessation of Participation. A Participant shall cease to be an Active Participant on the earlier of:
(a) The date on which the Plan terminates;
(b) The date on which he/she ceases to be an Eligible Employee; or
(c) The date on which he/she is permitted by the Administrator to terminate Deferral Contributions to the Plan.
A former Active Participant will be considered a Participant for all purposes, except with respect to the right to make contributions, as long as he/she retains an Account.
ARTICLE 4
DEFERRAL ELECTIONS
Section 4.01 Annual Deferral Elections
(a) Deferral Contributions of Base Salary. A Base Salary Deferral Eligible Employee may elect to defer a percentage, not to exceed 60%, of his/her Base Salary payable with respect to services performed during the Plan Year; provided, however, that such Deferral Election shall be made (i) during the open enrollment period established by the Administrator for that purpose and (ii) on or before the last day of the calendar year preceding the first day of the Plan Year to which such Deferral Election relates. A Base Salary Deferral Eligible Employee may elect to cancel a Deferral Election made pursuant to this section on account of Changed Personal Circumstances provided such election is made on or before the last day of the calendar year preceding the first day of the Plan Year to which such Deferral Election relates. Any election made pursuant to this section shall remain in effect unless and until changed by the Participant; provided, however, that with respect to Base Salary earned in any future taxable year, such election becomes irrevocable on December 31 of the preceding calendar year.
(b) Deferral Contributions of STI Awards. An STI Deferral Eligible Employee may elect to defer a percentage, not to exceed 60%, of an STI Award; provided, however, that (i) such STI Deferral Eligible Employee performs services continuously from the later of the beginning of the performance period or the date the performance criteria are established through the date the election to defer is made and (ii) such Deferral Election is made (A) during the open enrollment period established by the Administrator for that purpose and (B) on or before the date that is six months before the end of the performance period over which the STI Award shall be determined. An STI Deferral Eligible Employee may elect to cancel a Deferral Election made pursuant to this section on account of Changed Personal Circumstances provided such election is made on or before the date that is six months before the end of the performance period over which the STI Award shall be determined. Any election made pursuant to this section shall remain in effect unless and until changed by the Participant; provided, however, that with respect to any STI Award earned during any future taxable year, such election becomes irrevocable on the date that is six months before the end of the performance period over which the STI Award shall be determined.
(c) Deferral Contributions of LTI Awards.
(i) RSUs. An LTI Deferral Eligible Employee may elect to defer the settlement of RSUs granted during a Plan Year; provided, however, that such Deferral Election shall be made (i) during the open enrollment period established by the Administrator for that purpose and (ii) on or before the last day of the calendar year preceding the first day of the Plan Year to which such Deferral Election relates. An LTI Deferral Eligible Employee may elect to cancel a Deferral Election made pursuant to this section on account of Changed Personal Circumstances provided such election is made on or before the last day of the calendar year preceding the first day of the Plan Year to which such Deferral Election relates. Notwithstanding the foregoing, an LTI Deferral Eligible Employee may elect to defer the settlement of RSUs that are subject to a vesting period of at least 12 months, provided such election is made on or before the thirtieth (30th) day after the LTI Deferral Eligible Employee is granted the RSUs and further provided that the election is made at least 12 months in advance of the earliest date on which the vesting period could expire. In the event that a timely election to defer the settlement of RSUs may not be made pursuant to either of the foregoing sentences of this paragraph, an LTI Deferral Eligible Employee may elect to defer the settlement of RSUs provided such election is made at least 12 months in advance of the date on which the restrictions on such RSUs lapse and further provided that such RSUs may not be settled until the fifth anniversary of the date that the restrictions on the RSUs lapsed. Notwithstanding the foregoing to the contrary, an LTI Deferral Eligible Employee shall not be permitted to elect to defer the settlement of RSUs unless such election complies with Code Section 409A. If a Participant elects to defer settlement of RSUs, any restrictions on transferability and/or events of forfeiture applicable to such RSUs under the Equity and Incentive Plan or the Award Terms (as defined under the Equity and Incentive Plan) shall continue in full force and effect. Upon expiration of all restrictions on transferability, the appropriate number of Common Stock Units of the Company, including Dividend Equivalent Units attributable thereto, shall be credited to the Participant’s applicable Stock Unit Subaccount. Any election made pursuant to this Section shall remain in effect unless and until changed by the Participant; provided, however, that with respect to RSUs granted in any future taxable year, such election becomes irrevocable on the last day of the calendar year preceding the Plan Year during which the RSUs are granted or, if later, on the thirtieth (30th) day after the LTI Deferral Eligible Employee is granted the RSUs and at least 12 months in advance of the earliest date on which the vesting period could expire.
(ii) PSUs. An LTI Deferral Eligible Employee may elect to defer the settlement of PSUs provided, however, that (i) such LTI Deferral Eligible Employee performs services continuously from the later of the beginning of the performance period or the date the performance criteria are established through the date the election to defer is made and (ii) such Deferral Election is made (A) during the open enrollment period established by the Administrator for that purpose and (B) on or before the date that is six months before the end of the performance period over which the PSU settlement shall be determined. An LTI Deferral Eligible Employee may elect to cancel a Deferral Election made pursuant to this section on account of Changed Personal Circumstances provided such election is made on or before the date that is six months before the end of the performance period over which the PSU settlement shall be determined. Any election made pursuant to this Section shall remain in effect unless and until changed by the Participant; provided, however, that with respect to any PSUs earned during any future taxable year, such election becomes irrevocable on the date that is six months before the end of the performance period over which the PSU settlement shall be determined.
Section 4.02 Initial Distribution Elections.
(a) Directed Investment Subaccounts. A Participant may elect to establish up to five (5) Directed Investment Subaccounts under his/her Account. At the time a Participant establishes a Directed Investment Subaccount, he/she must also elect a Payment Event and Form of Payment with respect to such subaccount. When making a Deferral Election with respect to Base Salary or STI Awards, a Participant shall designate: (i) to which Directed Investment Subaccounts amounts deferred pursuant to that election, and Credited Investment Return and Dividend Equivalent Units attributable thereto, shall be allocated; and (ii) how those amounts shall be allocated among the designated Directed Investment Subaccounts. If a Participant fails to establish a Directed Investment Subaccount or fails to designate the Directed Investment Subaccount(s) to which his/her Deferral Contributions of Base Salary or STI Awards should be allocated, such Deferral Contributions shall be allocated to the default Directed Investment Subaccount established by the Administrator. The Payment Event with respect to such default Directed Investment Subaccount shall be Separation of Service and the Form of Payment shall be a lump sum.
(b) Stock Unit Subaccount. A Participant may elect to establish up to five (5) Stock Unit Subaccounts under his/her Account. At the time a Participant establishes a Stock Unit Subaccount, he/she must also elect a Payment Event and Form of Payment with respect to such subaccount. When making a Deferral Election with respect to LTI Awards, a Participant shall designate: (i) to which Stock Unit Subaccounts amounts deferred pursuant to that election, and Dividend Equivalent Units attributable thereto, shall be allocated; and (ii) how those amounts shall be allocated among the designated Stock Unit Subaccounts. If a Participant fails to establish a Stock Unit Subaccount or fails to designate the Stock Unit Subaccount(s) to which his/her Deferral Contributions of LTI Awards should be allocated, such Deferral Contributions shall be allocated to the default Stock Unit Subaccount established by the Administrator. The Payment Event with respect to such default Stock Unit Subaccount shall be Separation of Service and the Form of Payment shall be a lump sum.
Section 4.03 Subsequent Distribution Elections. A Participant may subsequently elect to change the Payment Event or Form of Payment elected with respect to one or more Directed Investment Subaccounts or Stock Unit Subaccounts in accordance with procedures established by the Administrator for such purpose; provided, however, that: (i) such subsequent election may not take effect until at least 12 months after the date on which it is made; (ii) the payment with respect to which such election is made must be deferred for a period of not less than five (5) years from the date such payment would otherwise have been made; and (iii) any subsequent election related to a payment at a specified time or in accordance with a fixed schedule may not be made less than 12 months prior to the date of the first scheduled payment.
ARTICLE 5
INVESTMENT OF ACCOUNTS
Section 5.01 Investment Options. The Administrator shall designate from time to time one or more Investment Options in which a Participant’s Directed Investment Subaccounts may be deemed invested. The Administrator shall have the sole discretion to determine the number of Investment Options to be designated hereunder and the nature of the Investment Options and may change or eliminate any of the Investment Options from time to time. In the event of such change or elimination, the Administrator shall give each Participant timely notice and opportunity to make a new election. No such change or elimination of any Investment Options shall be considered to be an amendment to the Plan pursuant to Section 9.01.
Section 5.02 Making Deemed Investment Elections. A Participant shall select one or more Investment Options in which his/her Directed Investment Subaccounts shall be deemed invested. Separate Deemed Investment Elections may be made with respect to each Directed Investment Subaccount. Any such election shall be made by filing with the Administrator the appropriate form prescribed for that purpose. The Administrator shall establish procedures relating to Deemed Investment Elections. Deemed Investment Elections shall remain in effect until changed by a Participant pursuant to Section 5.03.
Section 5.03 Changes to Deemed Investment Elections. A Participant may request a change to his/her Deemed Investment Elections for future amounts allocated to his/her Directed Investment Subaccount and amounts already allocated to his/her Directed Investment Subaccount. Any such change shall be made by filing with the Administrator the appropriate form (including electronic forms) prescribed by the Administrator for that purpose. The Administrator shall establish procedures relating to changes in Deemed Investment Elections, which may include limiting the percentage, amount and frequency of such changes and specifying the effective date for any such changes.
Section 5.04 Crediting or Debiting of Investment Experience. Each Participant’s Directed Investment Subaccount shall be credited or debited, as applicable, daily with the amount which the Participant’s Directed Investment Subaccount would have earned or lost, as applicable, if the amounts credited to such account had, in fact, been invested in accordance with the Participant’s Deemed Investment Elections.
Section 5.05 Dividend Equivalent Units. If dividends on the Company’s common stock are paid during any period that a Participant holds Common Stock Units in one or more of his/her Directed Investment Subaccounts or Stock Unit Subaccounts, as of the applicable Dividend Payment Date, a number of additional Common Stock Units shall be credited to such Directed Investment Subaccount(s) or Stock Unit Subaccount(s), as applicable. The number of such additional Common Stock Units to be credited shall be determined by first multiplying: (a) the total number of Common Stock Units, including fractional units, standing to the Participant’s credit in such account on the day immediately preceding such Dividend Payment Date (including all Dividend Equivalent Units credited to such account on all previous Dividend Payment Dates); by (b) the per share dollar amount of the dividend paid on such Dividend Payment Date; and then (c) dividing the resulting amount by the closing price of one share of the Company’s common stock on such Dividend Payment Date.
ARTICLE 6
PAYMENT OF ACCOUNTS
Section 6.01 Payment in General. Upon the occurrence of a Triggering Event that is a Separation from Service or a Change of Control, the Employer shall, within 90 days thereafter, commence payment of the applicable Distribution Subaccount(s) to the Participant, or his/her Beneficiary, as applicable, in the Form of Payment elected by the Participant with respect thereto. Upon the occurrence of a Triggering Event that is a specified date or a fixed schedule of payments, the Employer shall commence payment of the applicable Subaccount to the Participant on such specified date or in accordance with such fixed schedule of payments. The amount of each payment made pursuant to this section shall be based upon the fair market value of the Participant’s Account as of the latest practicable date preceding the payment date and the number of remaining scheduled payments due.
Section 6.02 Specified Employees. Notwithstanding Section 6.01, upon the occurrence of a Triggering Event that is a Separation from Service (other than on account of death), the Employer shall commence payment of the applicable Distribution Subaccount(s) to the Participant in the Form of Payment elected by the Participant with respect thereto on the later of: (1) the date that is six months and one day after such Triggering Event; or (2) the date on which such payment was otherwise scheduled to commence.
Section 6.03 Medium of Payments. Payments attributable to that portion of a Participant’s Directed Investment Subaccount which is deemed to be invested in Common Stock Units shall be paid in shares of the Company’s common stock for each whole unit and cash for each fraction of a unit. Payments attributable to the remaining portion of a Participant’s Directed Investment Subaccount shall be paid in cash. Payments attributable to a Participant’s Stock Unit Subaccounts shall be delivered in shares of the Company’s common stock for each whole unit and cash for each fraction of a unit.
ARTICLE 7
BENEFICIARY DESIGNATION
Section 7.01 Right to Designate Beneficiary. The Participant will have the right, at any time, to designate any person or persons as Beneficiary (both primary and contingent) to whom payment under the Plan will be made in the event of the Participant’s death. The Beneficiary designation will be effective when it is submitted in writing or electronically to the Administrator during the Participant’s lifetime on a form prescribed by the Administrator.
Section 7.02 Cancellation/Revocation of Beneficiary Designation. The submission of a new Beneficiary designation will cancel all prior Beneficiary designations.
Section 7.03 Failure to Designate Beneficiary or Death of Beneficiary. If a Participant fails to designate a Beneficiary as provided above, or if every person designated as Beneficiary predeceases the Participant, then the Administrator will direct the distribution of the benefits to the Participant’s estate. If a primary Beneficiary dies after commencement the Participant’s death but prior to completion of benefits under this Plan, and no contingent Beneficiary has been designated by the Participant, any remaining payments will be paid to the Beneficiary’s estate.
ARTICLE 8
PLAN ADMINISTRATION
Section 8.01 Administrator’s Responsibilities. The Administrator is responsible for the day to day administration of the Plan. The Administrator may appoint other persons or entities to perform certain of its functions. Such appointment shall be made and accepted by the appointee in writing and shall be effective upon the written approval of the Company. The Administrator and any such appointee may employ advisors and other persons necessary or convenient to help him/her carry out his/her duties. The Administrator shall have the right to remove any such appointee from his/her position. Any person, group of persons or entity may serve in more than one capacity.
Section 8.02 Records and Accounts. All individual and group records relating to Participants and Beneficiaries, and all other records necessary for the proper operation of the Plan, shall be made available to the Employer and to each Participant and Beneficiary for examination during business hours except that a Participant or Beneficiary shall examine only such records as pertain exclusively to the examining Participant or Beneficiary and those records and documents relating to all Participants generally.
Section 8.03 Administrator’s Specific Powers and Duties. In addition to any powers, rights and duties set forth elsewhere in the Plan, the Administrator shall have the following powers and duties:
(a) to adopt such rules and regulations consistent with the provisions of the Plan;
(b) to enforce the Plan in accordance with its terms and any rules and regulations it establishes;
(c) to maintain records concerning the Plan sufficient to prepare reports, returns and other information required by the Plan or by law;
(d) to construe and interpret the Plan and to resolve all questions arising under the Plan;
(e) to direct the Employer to pay benefits under the Plan, and to give such other directions and instructions as may be necessary for the proper administration of the Plan;
(f) to engage assistants and professional advisors.
Section 8.04 Construction of the Plan. The Administrator shall have the sole and absolute discretion to interpret the Plan and shall resolve all questions arising in the administration, interpretation and application of the Plan. The Administrator shall correct any defect, reconcile any inconsistency, or supply any omission with respect to this Plan. All such corrections, reconciliations, interpretations and completions of Plan provisions shall be final and binding upon the parties.
Section 8.05 Employer’s Responsibility to Administrator. Each Employer shall furnish the Administrator such data and information as it may require. The records of the Employer shall be determinative of each Participant’s period of employment, termination of employment and the reason therefor, leave of absence, reemployment, years of service, personal data, and compensation reductions. Participants and their Beneficiaries shall furnish to the Administrator such evidence, data, or information, and execute such documents, as the Administrator requests.
Section 8.06 Engagement of Assistants and Advisers; Plan Expenses. The Administrator shall have the right to hire such professional assistants and consultants as it, in its sole discretion, deems necessary or advisable, including, but not limited to:
(a) investment managers and/or advisers;
(b) accountants;
(c) actuaries;
(d) attorneys;
(e) consultants; and
(f) clerical and office personnel.
Section 8.07 Liability. Neither the Administrator nor the Employer shall be liable to any person for any action taken or omitted in connection with the administration of this Plan unless attributable to its own fraud or willful misconduct; nor shall the Employer be liable to any person for such action unless attributable to fraud or willful misconduct on the part of a director, officer or employee of the Employer.
Section 8.08 Payment of Expenses. If directed by the Company, expenses of the Administrator incurred in the operation or administration of this Plan shall be charged against the Participant’s Accounts to which the expense relates. If an expense is applicable to more than one Participant’s Accounts, the expense shall be allocated among such Participants’ Accounts in a non-discriminatory manner as determined by the Company.
Section 8.09 Indemnity of Administrator. The Employer shall indemnify the Administrator (including any individual who is a member of a committee serving as the Administrator) or any individual who is a delegate of the Administrator against any and all claims, loss, damage, expense or liability arising from any action or failure to act, except when due to gross negligence or willful misconduct.
ARTICLE 9
AMENDMENT OR TERMINATION
Section 9.01 Amendment. The Board of Directors of the Company, or its delegate, may amend the Plan at any time and from time to time and any amendment may have retroactive effect, including, without limitation, amendments to the amount of contributions; provided, however, that no amendment shall (i) reduce the value of a Participant’s Account or (ii) change the form or timing of payment of an amount contributed prior to the date of amendment.
Section 9.02 Termination. While the Plan is intended to be permanent, the Board of Directors of the Company, or its delegate, may at any time terminate or partially terminate the Plan, provided that upon such termination, except to the extent otherwise permitted under Code Section 409A, all Accounts will be distributed in accordance with the terms of the Plan as in effect on the date of termination. Written notice of such termination or partial termination, setting forth the date and terms thereof, shall be given to the Administrator.
Section 9.03 Change in Control. Notwithstanding the foregoing, following a Change in Control (as such term is defined in the Company’s Equity and Incentive Plan) no amendment or termination referenced in Section 9.01 or 9.02, respectively, may adversely affect any benefits accrued or deferrals made under the Plan prior to the adoption of the amendment or termination (including, without limitation, any terms, conditions or distribution alternatives applicable to such accrued benefits). In addition, for a period of two years following a Change in Control, the Plan shall not be terminated in whole or in part or be amended in any way that adversely affects or limits the terms and conditions of benefits as available pursuant to the Plan immediately prior to the Change in Control.
ARTICLE 10
MISCELLANEOUS
Section 10.01 Section 16 Person. With respect to Section 16 Persons, the Administrator may establish, in writing, such rules, regulations, policies or practices hereunder which it deems, in its sole discretion, to be necessary and appropriate.
Section 10.02 Claims Review. In any case in which a claim for Plan benefits of a Participant or Beneficiary is denied or modified, the Administrator shall furnish written notice to the claimant within 90 days (or within 180 days if additional information requested by the Administrator necessitates an extension of the 90-day period), which notice shall:
(a) State the specific reason or reasons for the denial or modification;
(b) Provide specific reference to pertinent Plan provisions on which the denial or modification is based;
(c) Provide a description of any additional material or information necessary for the Participant, his/her Beneficiary, or representative to perfect the claim and an explanation of why such material or information is necessary; and
(d) Explain the Plan’s claim review procedure as contained herein, including the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse review determination.
In the event a claim for Plan benefits is denied or modified, if the Participant, his/her Beneficiary, or a representative of such Participant or Beneficiary desires to have such denial or modification reviewed, he/she must, within 60 days following receipt of the notice of such denial or modification, submit a written request for review by the Administrator of its initial decision. In connection with such request, the Participant, his/her Beneficiary, or the representative of such Participant or Beneficiary may review any pertinent documents upon which such denial or modification was based and may submit issues and comments in writing. Within 60 days following such request for review the Administrator shall, after providing a full and fair review, render its final decision in writing to the Participant, his/her beneficiary or the representative of such Participant or Beneficiary stating specific reasons for such decision, making specific references to pertinent Plan provisions upon which the decision is based and stating that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim. If special circumstances require an extension of such 60-day period, the Administrator’s decision shall be rendered as soon as possible, but not later than 120 days after receipt of the request for review. If an extension of time for review is required, written notice of the extension shall be furnished to the Participant, Beneficiary, or the representative of such Participant or Beneficiary prior to the commencement of the extension period.
Section 10.03 Limitation of Participant’s Rights. Nothing in this Plan shall be construed as conferring upon any Participant any right to continue in the employment of an Employer, nor shall it interfere with the rights of an Employer to terminate the employment of any Participant and/or take any personnel action affecting any Participant without regard to the effect which such action may have upon such Participant as a recipient or prospective recipient of benefits under the Plan.
Section 10.04 Obligations to Employer. If a Participant becomes entitled to a distribution of benefits under the Plan, and if at such time the Participant has outstanding any debt, obligation, or other liability representing an amount owing to an Employer, then such Employer may offset such amount owed to it against the amount of benefits otherwise distributable. Such determination shall be made by the Administrator.
Section 10.05 Nonalienation of Benefits. Except as expressly provided herein, no Participant or Beneficiary shall have the power or right to transfer (otherwise than by will or the laws of descent and distribution), alienate, or otherwise encumber the Participant’s interest under the Plan. Any such attempted assignment shall be considered null and void. The interest of any Participant or any beneficiary receiving payments hereunder shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors of the Participant or the Participant’s Beneficiary. An Employer’s obligations under this Plan are not assignable or transferable except to (a) a business entity which acquires all or substantially all of an Employer’s assets or (b) any business entity into which an Employer may be merged or consolidated.
Section 10.06 Unfunded Status of Plan. The Plan is intended to constitute an “unfunded” plan of deferred compensation for Participants for tax and for purposes of Title I of ERISA. The Plan constitutes a mere promise by the Employer to make benefit payments in the future. Each Employer shall not be liable for any benefit payments to any other Employer’s Eligible Employees who are Participant is this Plan. Benefits payable hereunder shall be payable out of the general assets of the applicable Employer, and no segregation of any assets whatsoever for such benefits shall be made. With respect to any payments not yet made to a Participant, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of his/her Employer.
Section 10.07 Severability. If any provision of this Plan is held unenforceable, the remainder of the Plan shall continue in full force and effect without regard to such unenforceable provision and shall be applied as though the unenforceable provision were not contained in the Plan.
Section 10.08 Gender, Singular & Plural. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular.
Section 10.09 Notice. Any notice or filing required or permitted to be given to the Administrator under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the Administrator or to such representatives as the Administrator may designate from time to time. Such notice shall be deemed given as to the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.
Section 10.10 Governing Law. The Plan shall be governed and construed under the laws of the State of Delaware to the extent not preempted by Federal law which shall otherwise control.
Section 10.11 Binding Terms. The provisions of the Plan shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, executors, administrators and successors.
Section 10.12 Headings. All headings preceding the text of the several Sections hereof are inserted solely for reference and shall not constitute a part of this Plan, nor affect its meaning, construction or effect.
Section 10.13 Representations. The Employer does not represent or guarantee that any particular federal or state income, payroll, personal property or other tax consequence will result from participation in the Plan. A Participant should consult with professional tax advisors to determine the tax consequences of his/her participation. In addition, the Company does not represent or guarantee positive Credited Investment Return and shall not be required to restore any negative Credited Investment Return.
Section 10.14 Compliance with Section 409A. The Company intends that this Plan provide for the deferral of compensation as permitted under Code Section 409A. If any provision of this Plan is determined to be inconsistent with such intent, it shall be severable and the balance of this Plan shall remain in full force and effect.
DUPONT
STOCK ACCUMULATION AND DEFERRED
COMPENSATION PLAN FOR DIRECTORS
(Effective June 1, 2019)
The purpose of the DuPont Stock Accumulation and Deferred Compensation Plan for Directors (the “Plan”) is to permit non-employee members of the Board of Directors (the “Board”) of DuPont de Nemours, Inc., f/k/a DowDuPont Inc. (the “Company”, and such persons, “Directors”) to defer the payment of all or a specified part of their compensation for services performed as Directors.
The provisions of this Plan shall apply to amounts deferred on or after the Effective Date (or, with respect to Pre-Spin Participants (as defined below), in taxable years beginning after December 31, 2008). Notwithstanding the foregoing, Section 12 of this Plan shall, to the extent provided therein, apply to amounts deferred in taxable years before 2009, provided that such amounts were not earned and vested before January 1, 2005. For purposes of this Section 1, a right to an amount is earned and vested only if the amount is not subject to a substantial risk of forfeiture for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations and rulings issued thereunder (collectively, “Code Section 409A”).
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2.
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SPIN-OFF INVOLVING THE DOW CHEMICAL COMPANY AND CORTEVA, INC.
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Effective June 1, 2019 (the “Effective Date”), the Company distributed its interest in Corteva, Inc. (“Corteva”) to the Company’s shareholders and agreed to assume elections and deferrals made under the E. I. du Pont de Nemours and Company Stock Accumulation and Deferred Compensation Plan for Directors, as amended August 31, 2017 (the “Corteva Plan”) with respect to participants therein who were nonemployee directors of the Company immediately prior to the Effective Date (the “Pre-Spin Participants” and, together with the other Directors from time to time, the “Participants”), all as more fully described in that certain Employee Matters Agreement effective April 1, 2019 by and among the Company, Corteva and The Dow Chemical Company (as it may be amended from time to time). In addition to the purpose set forth in Section 1, this Plan document governs the elections and deferrals of Pre-Spin Participants, which notwithstanding anything herein to the contrary shall remain subject to the terms and conditions that governed them under the Corteva Plan.
Members of the Board who are not employees of the Company or any of its subsidiaries or affiliates shall be eligible under this Plan to defer compensation for services performed as Directors.
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4.
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ADMINISTRATION AND AMENDMENT
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The Plan shall be administered by the People and Compensation Committee of the Board (the “Committee”). The decision of the Committee with respect to any questions arising as to the interpretation of this Plan, including the severability of any and all of the provisions thereof, shall be final, conclusive and binding. The Board reserves the right to modify the Plan from time to time, or to terminate the Plan entirely, provided, however, that (a) no modification of the Plan shall operate to annul an election already in effect for the current calendar year or any preceding calendar year; (b) the foregoing shall not preclude any amendment necessary or desirable to conform to changes in applicable law, including, but not limited to, changes in the Code; and (c) upon termination of the Plan, except to the extent otherwise permitted under Code Section 409A, all balances will be distributed in accordance with the terms of the Plan as in effect on the date of termination.
The Committee is authorized, subject to the provisions of the Plan, from time to time to establish such rules and regulations as it deems appropriate for the proper administration of the Plan, and to make such determinations and take such steps in connection therewith as it deems necessary or advisable.
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5.
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COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT / CHANGE IN LAW
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It is the Company’s intent that the Plan comply in all respects with Rule 16b-3 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and any regulations promulgated thereunder. If any provision of this Plan is found not to be in compliance with such rule and regulations, the provision shall be deemed null and void, and the remaining provisions of the Plan shall continue in full force and effect. All transactions under this Plan shall be executed in accordance with the requirements of Section 16 of the Exchange Act and the regulations promulgated thereunder.
The Board may, in its sole discretion, modify the terms and conditions of this Plan in response to and consistent with any changes in applicable law, rule or regulation.
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6.
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ELECTION TO DEFER AND FORM OF PAYMENT
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On or before December 31 of any calendar year, a Director may elect to defer, in the form of cash or stock units, the payment of all or a specified part of all fees payable to the Director for services as a Director during the following calendar year.
To the extent permitted under Code Section 409A, any person who shall become a Director during any calendar year, and who was not a Director on the preceding December 31, may elect, within thirty days after election to the Board, to defer in the same manner the receipt of the payment of all or a specified part of fees not yet earned for the remainder of that calendar year in the form of cash or stock units.
At the time a Director elects to defer his/her fees for a calendar year, he/she must also elect:
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(a)
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the payment event for such deferred amounts (a specified calendar year or his/her separation from service);
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(b)
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with respect to amounts deferred to separation from service, the form of payment (lump sum or equal annual installments);
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(c)
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the number of equal annual installments, if applicable; and
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(d)
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the calendar year following his/her separation from service in which payment(s) of such deferred amounts shall commence (if distribution is to commence by reason of a separation from service). For purposes of clarity, calendar year in this context refers to the sequential calendar year following separation from service (for example, first calendar year, second calendar year, etc.).
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Amounts deferred to a specified year shall be payable only in a lump sum during the specified calendar year. If amounts are payable in equal annual installments, the first annual installment shall be made in the calendar year specified pursuant to clause (d) above with remaining installments paid in successive calendar years until all installments have been paid.
Elections shall be made by written notice delivered to the Secretary of the Committee. All such elections as to deferral and form of payment are irrevocable.
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7.
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PARTICIPANTS’ ACCOUNTS
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Fees deferred in the form of cash shall be held in the general funds of the Company and shall be credited to an account in the name of the Participant. Deferred cash will bear interest at a rate corresponding to the average 30-year Treasury securities rate applicable for the quarter (or at such other rate as may be specified by the Committee from time to time). Interest will be compounded quarterly and will also be deferred. If the rate changes, the new rate will apply to all deferred cash amounts beginning with the following quarter. Fees deferred in the form of stock units shall be allocated to each Participant’s account based on the closing price of the Company’s common stock as reported on the Composite Tape of the New York Stock Exchange (“Stock Price”) on the date the fees would otherwise have been paid. The Company shall not be required to reserve or otherwise set aside shares of common stock for the payment of its obligations hereunder, but shall make available as and when required a sufficient number of shares of common stock to meet the needs of the Plan. An amount equal to any cash dividends (or the fair market value of dividends paid in property other than dividends payable in common stock of the Company) payable on the number of shares represented by the number of stock units in each Participant’s account will be allocated to each Participant’s account in the form of stock units based upon the Stock Price on the dividend payment date. Any stock dividends payable on such number of shares will be allocated in the form of stock units. If adjustments are made to outstanding shares of common stock as a result of split-ups, recapitalizations, mergers, consolidations and the like, an appropriate adjustment shall also be made in the number of stock units in a Participant’s account. Stock units shall not entitle any person to rights of a stockholder unless and until shares of Company common stock have been issued to that person with respect to stock units as provided in Section 8.
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8.
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PAYMENT FROM PARTICIPANTS’ ACCOUNTS
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The aggregate amount of deferred fees, together with interest and dividend equivalents accrued thereon, shall be paid in accordance with the time and form of payment elections made by the Director under Section 6, and, with respect to Pre-Spin Participants, in accordance with the time and form of payment elections made by the Pre-Spin Participant under the Corteva Plan. Amounts credited to a Participant’s account in cash shall be paid in cash and amounts credited in stock units shall be paid in one share of common stock of the Company for each stock unit, except that a cash payment will be made with any final installment for any fraction of a stock unit remaining in the Participant’s account. Such fractional share shall be valued at the closing Stock Price on the date of settlement. Restricted stock units payable in cash, and the dividend equivalents associated with such deferred units, shall be paid in cash, each unit to equal the value of one share of Company common stock based on the average of the high and low prices of Company common stock as reported on the Composite Tape of the New York Stock Exchange as of the effective date of payment.
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9.
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PAYMENT IN EVENT OF DEATH
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A Participant may file with the Secretary of the Committee a written designation of a beneficiary for his or her account under the Plan on such form as may be prescribed by the Committee, and may, from time to time, amend or revoke such designation. If a Participant should die before all deferred amounts credited to the Participant’s account have been distributed, the balance of any deferred fees and interest and dividend equivalents then in the Participant’s account shall be paid to the Participant’s designated beneficiary upon the Participant’s death. If the Participant did not designate a beneficiary, or in the event that the beneficiary designated by the Participant shall have predeceased the Participant, the balance in the Participant’s account shall be paid promptly to the Participant’s estate.
During a Participant’s lifetime, the right to any deferred fees, including interest and dividend equivalents thereon, shall not be transferable or assignable, except as may otherwise be provided in the Plan or in rules established by the Committee.
The Plan shall be governed and construed under the laws of the State of Delaware to the extent not preempted by Federal law, which shall otherwise control.
Notwithstanding anything in this Plan to the contrary, this Section 12 shall, to the extent provided herein, apply to amounts deferred in taxable years beginning before 2009, provided that such amounts were not earned and vested before January 1, 2005. For purposes of this Section 12, a right to an amount is earned and vested only if the amount is not subject to a substantial risk of forfeiture for purposes of Code Section 409A.
To the extent that an amount is payable in connection with a Participant’s retirement or other separation from service as a Director, no amounts shall be paid hereunder on account thereof unless such retirement or separation from service constitutes a separation from service within the meaning of Code Section 409A.
To the extent that an amount is payable promptly at the beginning of a calendar year, whether as a result of a Participant’s deferral election or the terms of a prior plan document, such amount shall be paid no later than the last day of that calendar year.
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13.
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COMPLIANCE WITH SECTION 409A
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The Company intends that the Plan provide for the deferral of compensation as permitted under Code Section 409A. To the extent subject thereto, the terms of the Plan shall be interpreted as necessary to comply with the requirements of Code Section 409A. To the extent necessary to avoid the imposition of taxes and/or penalties under Code Section 409A, a “separation from service” as used herein shall mean a separation from service within the meaning of Code Section 409A. Each amount to be paid or benefit to be provided under this Plan shall be construed as a separate identified payment for purposes of Section 409A. In the event that any provision of the Plan is inconsistent with Code Section 409A, the applicable provisions of Code Section 409A shall be deemed to automatically supersede such inconsistent provision and the Plan shall be administered to comply with Code Section 409A.
DUPONT
RETIREMENT SAVINGS
RESTORATION
PLAN
Effective June 1, 2019
DuPont de Nemours, Inc.
DUPONT RETIREMENT SAVINGS RESTORATION PLAN
The purpose of this Plan is to provide an eligible employee with the opportunity to defer, until termination of employment, receipt of salary that, because of compensation limits imposed by law, is ineligible to be considered in calculating benefits within certain tax-qualified defined contribution plan(s) and thereby recover benefits lost because of that restriction.
Effective June 1, 2019 (the “Effective Date”), DuPont de Nemours, Inc. (f/k/a DowDuPont Inc. (the “Company”)) distributed its interest in Corteva, Inc. (“Corteva”) to the Company’s shareholders and agreed to assume elections and deferrals made under the E. I. du Pont de Nemours and Company Retirement Savings Restoration Plan (the “Corteva RSRP”) with respect to calendar years through 2019 by certain participants therein (the “Effective Date Participants”), all as more fully described in that certain Employee Matters Agreement dated March 31, 2019 by and among the Company, Corteva and The Dow Chemical Company (as it may be amended from time to time). This Plan document governs such elections and deferrals, which notwithstanding anything herein to the contrary shall remain subject to the terms and conditions that governed them under the Corteva RSRP.
The administration of this Plan is vested in the Benefit Plan Administrative Committee appointed by the Senior Vice President - HR of the Company. The Committee may adopt such rules as it may deem necessary for the proper administration of the Plan, and may appoint such person(s) or group(s) as may be judged necessary to assist in the administration of the Plan. The Committee’s decision in all matters involving the interpretation and application of this Plan shall be final. The Committee shall have the discretionary right to determine eligibility for benefits hereunder and to construe the terms and conditions of this Plan. In all cases, terms of this Plan shall be interpreted as necessary to comply with the requirements of Section 409A of the Internal Revenue Code and accompanying regulations.
Effective as of the Effective Date, each Effective Date Participant shall be eligible to participate in this Plan. After the Effective Date, an employee of the Company who is eligible to participate in the Company’s Retirement Savings Plan and who is Grade 13 or above (or equivalent level for a participating subsidiary), or an employee of a Company who is eligible to participate in the tax-qualified 401(k) plan sponsored by the Company and who is eligible as listed on Exhibit A, shall be eligible to participate in this Plan (each, a “New Participant” and, together with the Effective Date Participants, the “Participants”).
Except where the context requires otherwise, for purposes of this Plan, the term “Company” means DuPont de Nemours, Inc. (f/k/a DowDuPont Inc.), any wholly-owned subsidiary or part thereof and any joint venture, partnership, or other entity in which DuPont de Nemours, Inc. has an ownership interest, provided that such entity (1) adopts this Plan with the approval of the Company and (2) agrees to make the necessary financial commitment in respect of any of its employees who become Participants in this Plan.
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V.
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PARTICIPANTS’ ACCOUNTS
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(A)
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Participant Contributions. Participants may elect to defer receipt of a percentage of compensation in excess of the amount prescribed in Internal Revenue Code Section 401(a)(17), and have the dollar equivalent of the deferral percentage credited to a Participant Account under this Plan. The deferral percentage elected under this Plan shall not exceed 6%. Except as provided below, such deferral election will be made prior to the beginning of each calendar year and will be irrevocable for that calendar year.
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For purposes of a New Participant’s first year of participation in this Plan, the compensation deferral election must be made within 30 days of the date the employee becomes eligible to participate in the Plan, and no later than 30 days prior to the first day of the month for which compensation is deferred and will be irrevocable for the remainder of that calendar year.
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(B)
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Company Matching Contributions. To the extent that a Participant makes or made under the Corteva RSRP a deferral election under the terms of subparagraph (A) above, the Company will credit to that Participant’s Account in this Plan an amount equivalent to 100% of the Participant Contribution.
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(C)
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Company Non-elective Contributions. For each employee eligible to participate in this Plan, whether or not he or she makes a deferral election under the terms of subparagraph (A) above, the Company will credit to that Participant’s Account in this Plan an amount equal to 3% of the employee’s compensation in excess of the amount prescribed in Internal Revenue Code Section 401(a) (17).
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(D)
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Earnings Equivalents. Credits for Participant Contributions and Company Matching and Non-elective Contributions shall be treated as having been invested in one or more of the investment options available for the ongoing deposit of new employee contributions in the Retirement Savings Plan. Additional credit (or debit) amounts will be posted to the Participant’s Account in this Plan based on the performance of those investment options.
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The Participant shall have the right to:
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(1)
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designate which of the available investment options are to be used in valuing his/her Account under this Plan, subject to the rules governing investment direction in the Retirement Savings Plan; and/or
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(2)
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change the designated investment options used in valuing his/her Account under this Plan, subject to the rules governing investment direction and/or transfers among funds in the Retirement Savings Plan.
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(E)
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Credits to Accounts. Participant Contributions, Company Matching and Non-elective Contributions and Earnings Equivalents shall be credited (or debited) to the Participant’s Account under this Plan as unfunded book entries stated as cash balances, and will not be payable to Participants until such time as employment with the Company terminates. The cash balances in Participant Accounts shall be unfunded general obligations of the Company, and no Participant shall have any claim to or security interest in any asset of the Company on account thereof.
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(F)
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Definition of Compensation. Compensation for purposes of this Plan shall mean “compensation” as defined in the tax-qualified plan in which the Participant participates.
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Participant Contributions and Company Matching and Earnings Equivalents attributable thereto shall be vested at the time such amounts are credited to the Participant’s Account. Company Non-elective Contributions and Earnings Equivalents thereto shall be vested after the employee completes 3 years of service, as defined in the tax qualified plan in which the participant participates (taking into account any service credited to an Effective Date Participant under the Corteva RSRP), or, if earlier, upon the occurrence of a Change in Control (as defined in the Company’s Equity and Incentive Plan, a “Change in Control”).
Amounts payable under this Plan shall be distributed in one of the following forms and at a time as elected by the Participant:
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(1)
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a lump sum at termination of employment, or in any year up to five years after termination of employment; or
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(2)
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annual installments for up to 15 years, beginning in the year of termination of employment or in any of the first five years following termination of employment.
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If the Participant does not make a valid election as to form and time of distribution, or upon the Participant’s death, amounts payable shall be delivered in a cash lump sum as soon as practical after termination of employment or death. Any such election shall be made by the Participant at the time the deferral election is made. Notwithstanding any provision of this Plan to the contrary, amounts payable to an officer of the Company shall be paid no sooner than the sixth month anniversary of the employee’s termination date. All payments under this Plan shall be made by, and all expenses of administering this Plan shall be borne by, the Company.
Benefits payable due to a Participant’s death shall be paid to the beneficiary designated on the most recent valid beneficiary designation form received by the Committee, or, if no valid beneficiary designation is on file or the beneficiary cannot be determined by the Committee, to the Participant’s estate.
No assignment or alienation of the rights and interests of participants, beneficiaries and survivors under this Plan will be permitted or recognized under any circumstances. Plan benefits can be paid only to participants, beneficiaries or survivors.
The Company reserves the right to change or discontinue this Plan in its discretion by action of the Compensation Committee of the Board of Directors, or its delegate; provided, however, that following the Change in Control no such amendment or termination may adversely affect the deferrals made under the Plan prior to the termination or adoption of the amendment (including, without limitation, any terms, conditions or distribution alternatives applicable to such deferrals). In addition, notwithstanding anything to the contrary above, for a period of two years following a Change in Control, the Company shall not terminate the Plan in whole or in part or make any amendment to the Plan which in any way adversely affects or limits the terms and conditions of benefits as available pursuant to the Plan immediately prior to the Change in Control.
DuPont Retirement Savings Restoration Plan
Exhibit A
Participating Employers (Effective June 1, 2019)
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Agtech Products Inc. (1403)
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Belco Technologies Corporation (1242)
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Coastal Training Technologies Corp. (1321)
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Danisco US Inc. (1395)
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Danisco USA Inc. (1396)
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DDP Spec Elec Mat US 9, LLC. (2673)
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DDP Specialty Elect Mat US Inc (2670)
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DDP Specialty Electronic Materials US 5, LLC (2667)
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DDP Specialty Electronic Materials US 8, LLC (2668)
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DuPont Electronic Polymers LP (1023)
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DuPont Industrial Biosciences USA, LLC (9501)
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DuPont Nutrition USA, Inc. (9500)
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DuPont Specialty Products USA, LLC (8974)
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EKC Technology, Inc (1027)
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FilmTec Corporation (1921)
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MECS Inc (1374)
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Multibase, Inc. (2302)
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Rohm & Haas Elect Matl CMP Inc (2261)
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Rohm & Haas Electronic Materials LLC (2260)
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Solae L.L.C. (1077)
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Specialty Products US, LLC (7484)
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DUPONT
PENSION RESTORATION PLAN
Effective - June 1, 2019
DuPont de Nemours, Inc.
DUPONT
PENSION RESTORATION PLAN
I. PURPOSE
The purpose of the DuPont Pension Restoration Plan (the “Plan”) is to provide employees (or their eligible survivor(s)) of DuPont de Nemours, Inc. (the “Company”) and/or its participating subsidiaries their benefit that was accrued, as of May 31, 2019, under the Pension Restoration Plan sponsored by E. I. du Pont de Nemours and Company (“Corteva Plan“).
This Plan is intended to constitute an unfunded excess benefit plan under Section 3(36) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and a non-qualified, unfunded deferred compensation plan maintained “primarily for the purpose of providing deferred compensation for a select group of management or other highly compensated individuals” (i.e., a “top hat plan”). All benefits payable under this Plan shall be binding obligations of the Company, as well as any of their respective successors and assigns. This document is intended to satisfy the written plan document requirements of Section 402 of ERISA.
II. HISTORY
This Plan is a spin-off from the Corteva Plan which was originally adopted January 1, 1976. In connection with the spin-off of Corteva Inc. from the Company effective June
1, 2019 (the “Spin-Off”), the accrued benefits in the Corteva Plan of active employees of the Company were transferred to this Plan, along with any correlated assets held in trust for the Plan. This Plan is frozen as to new accruals and new participants.
III. ADMINISTRATION
The Benefit Plan Administrative Committee appointed by the Company is the Plan Administrator, except that the People and Compensation Committee shall determine the discount rate to be used in calculating the lump sum payment described in Section V. The Benefit Plan Administrative Committee may adopt such rules as it may deem necessary for the proper administration of the Plan, and its decision in all matters involving the interpretation and application of this Plan shall be final. The Benefit Plan Administrative Committee shall have the discretionary right to determine eligibility for benefits hereunder and to construe the terms and conditions of this Plan.
The Plan Administrator’s powers include, but are not limited to, the following authority:
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•
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The authority to make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan, including the establishment of any claims procedures that may be required by applicable provisions of law;
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•
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The Plan Administrator shall have complete discretion to interpret the provisions of the Plan, including but not limited to determinations regarding eligibility for participation in and coverage under the Plan and the types and amounts of benefits payable under the Plan, and to make all necessary findings of fact. The Plan Administrator shall have the discretion and authority to interpret the Plan, and its interpretation thereof in good faith shall be final and conclusive on all persons claiming benefits under the Plan. Decisions by the Plan Administrator may not be overturned unless found by a court to be arbitrary and capricious and having no foundation;
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•
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The authority to appoint such agents, counsel, accountants, consultants and other persons as may be required to assist in administering the Plan;
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•
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The authority to allocate and delegate its responsibilities under the Plan, and to designate other persons to carry out any of its responsibilities under the Plan; and
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•
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The authority to enter into any and all contracts and agreements for carrying out the terms of this Plan and for the administration of the Plan, and to do all acts as it, in its sole discretion, may deem necessary or advisable. Such contracts and agreements shall be binding and conclusive on the parties hereto and anyone claiming benefits hereunder.
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Benefits under the Plan will be paid only if the Plan Administrator (or its authorized delegate, such as the claims administrator) decides, in its sole and absolute discretion, that payment is merited pursuant to the terms of the Plan.
In administering the Plan, the Plan Administrator is entitled, to the extent permitted by law, to rely on all tables, valuations, certificates, opinions and reports which are furnished by accountants, counsel or other experts employed or engaged by the Plan Administrator.
IV. ELIGIBILITY
An employee (or the survivor of an employee, as applicable) of the Company and/or its participating subsidiary who has been in active employment with the Company and/or its participating subsidiary after the Spin-Off and who had a benefit under the Corteva Plan as of May 31, 2019, will be eligible for payments under this Plan.
V. AMOUNT PAYABLE
The amount payable to a person eligible to receive payments under this Plan will be the actuarial lump sum present value equivalent of the monthly pension (and companypaid survivor benefit, if applicable) or survivor benefit accrued under the Corteva Plan as of May 31, 2019, reduced by the early commencement reduction factors in effect in the Corteva Plan at May 31, 2019 but based on the participant’s age at his or her Earliest Benefit Commencement Date under this Plan.
The lump sum present value shall be determined as of the Earliest Benefit Commencement Date using the Applicable Interest Rate and the Applicable Mortality Table. The term “Applicable Interest Rate” means, for benefit commencement dates during a calendar quarter, the average, rounded to two decimal places, of the rate of interest prescribed by the Secretary of the Treasury as required by Section 417(e)(3) of the Internal Revenue Code for the fourth and fifth month preceding the first day of the calendar quarter. The term “Applicable Mortality Table” means the table prescribed by the Secretary of the Treasury as required by Section 417(e)(3) of the Internal Revenue Code. The amount payable will include the value of the company-paid survivor benefit, if applicable, converted to a lump sum based on the actual age of the survivor unless the employee is single at the time of termination, in which case the value will be calculated on the assumption that the employee has a spouse of the same age.
If the Earliest Benefit Commencement Date is the first day of a month, the amount payable will be credited with interest each month at the Applicable Interest Rate for such month beginning with the first day of the month following the month of the Earliest Benefit Commencement Date and ending with the end of the month of the payment date. If the Earliest Benefit Commencement Date is not the first day of a month, the amount payable will be credited with interest each month at the Applicable Interest Rate for such month beginning with the first day of the month following the one month anniversary of the Earliest Benefit Commencement Date and ending with the end of the month of the payment date.
VI. AMOUNT PAYABLE IN THE EVENT OF THE DEATH OF AN ACTIVE EMPLOYEE
Survivor benefits are payable as follows upon the death of an active employee:
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•
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Employee had less than 15 years of service as of May 31, 2019: No survivor benefits are payable.
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•
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Employee had 15 or more years of service as of May 31, 2019: The amount payable to the survivor(s) will be determined in accordance with the survivor benefit provisions in effect in the Corteva Plan on May 31, 2019.
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VII. BENEFICIARY DESIGNATION
If a former employee dies after his or her Earliest Benefit Commencement Date, but before payment is made under this Plan, the calculated lump sum amount to which such former employee would have been entitled shall be paid to the designated beneficiary, or to such former employee’s estate (in case there is no designated beneficiary).
VIII. PAYMENTS OF BENEFITS
The amount payable under this Plan will be a lump sum payment paid at the later of (i) three (3) months after termination (except for officers of the Company or its participating subsidiary for whom the three month period shall be a six month period), or (ii) the end of the month in which the Earliest Benefit Commencement Date (as defined below) occurs.
For purposes of this Plan, the Earliest Benefit Commencement Date is defined as follows:
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Age at Termination
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Service at May 31, 2019
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Earliest Benefit Commencement Date
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At least age 50
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15 years or more
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Termination Date + 1 Day
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Not yet age 50
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15 years or more
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Age 50
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Any Age
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10 through 14 years
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Age 60
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Any Age
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Less than 10 years
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Age 65
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However, for officers of the Company or its participating subsidiary, the Earliest
Commencement Date must be at least six (6) months after the date of termination of employment with the Company. All payments under this Plan shall be made by, and all expenses of administering this Plan shall be borne by, the Company.
All benefits and/or payments under this Plan shall be net of an amount sufficient to satisfy any federal, state or local withholding tax requirements and, if applicable, employment taxes (e.g., FICA).
IX. RIGHT TO MODIFY
The Company reserves the right to change this Plan in its discretion by action of the People and Compensation Committee or its delegate, or to discontinue this Plan in its discretion by action of the Board of Directors: provided, however, that following a Change in Control (as defined in the Company’s Equity and Incentive Plan) no such amendment or termination may adversely affect any benefits accrued under the Plan prior to the termination or adoption of the amendment (including without limitation, any terms, conditions or distribution alternatives applicable to such accrued benefits). In addition, for a period of two (2) years following a Change in Control, the Company shall not terminate the Plan in whole or in part or make any amendment to the Plan which in any way adversely affects or limits the terms and conditions or benefits that are available pursuant to the Plan immediately prior to the Change in Control.
If any provision of this Plan is or in the future becomes contrary to any applicable law, rule, regulation or order issued by competent government authority, the Company reserves the sole right to amend or discontinue this Plan in its discretion without notice.
X. NONASSIGNMENT
Except to the extent required by applicable law, no assignment or alienation of the rights and interests under this Plan will be permitted or recognized under any circumstances, nor shall such rights and interests be subject to attachment or other legal processes for debt.
XI. CLAIMS AND APPEALS PROCEDURES
The Plan Administrator shall approve or wholly or partially deny all claims for benefits under the Plan within a reasonable period of time after all required documentation has been furnished to the Plan Administrator.
If a claim is wholly or partially denied, the Plan Administrator shall provide the claimant with written notice setting forth the specific reasons for the denial, making reference to the pertinent provisions of the Plan or the Plan documents on which the denial is based; describe any additional material or information that should be received before the claim may be acted upon favorably, and explain why such material or information, if any, is needed; and inform the person making the claim of his or her right pursuant to this Section to request review of the decision by the Plan Administrator.
A claimant shall have the right to request a review of the decision denying the claim. Such request must be made by filing a written application for review with the Plan Administrator no later than sixty (60) days after receipt by the claimant of written notice of the denial of his or her claim. The claimant may review pertinent Plan documents and shall submit such written comments and other information which he or she wishes the Plan Administrator to consider in connection with his or her claim.
The Plan Administrator may hold any hearing or conduct any independent investigation which it deems necessary to render its decision on review. Such decision shall be made as soon as practicable after the Plan Administrator receives the request for review. Written notice of the decision on review shall be promptly furnished to the claimant and shall include specific reasons for the decision.
For all purposes under the Plan, decisions on claims (where no review is requested)
and decisions on review (where review is requested) shall be final, binding and conclusive on all interested persons.
XII. TIME LIMIT ON LEGAL ACTIONS
All claims and appeals procedures provided for in the Plan must be exhausted before any legal action is brought. A claimant seeking judicial review of an adverse benefit determination under the Plan, whether in whole or in part, must file any suit or legal action (including, without limitation, a civil action under Section 502(a) of ERISA) within 12 months (the “Limitations Period”) following the date the final adverse benefit determination is issued. Notwithstanding the foregoing, any claimant that fails to engage in or exhaust the claims and review procedures must file any suit or legal action within the Limitations Period following the date of the alleged facts or conduct giving rise to the claim (including, without limitation, the date the claimant alleges he or she became entitled to the Plan benefits requested in the suit or legal action). Nothing in this Plan should be construed to relieve a claimant of the obligation to exhaust all claims and review procedures under the Plan before filing suit in state or federal court. A claimant who fails to file such suit or legal action within the Limitations Period will lose any rights to bring any such suit or legal action thereafter.
XIII. DISCLAIMER OF LIABILITY
Except as otherwise provided under Sections 404 through 409 of ERISA, neither the Company, nor any person described in this Section XIII that is designated to carry out fiduciary responsibilities under this Plan, shall be liable for any act, or failure to act, which is made in good faith pursuant to the provisions of the Plan.
Unless liability is otherwise provided under Section 405 of ERISA, a fiduciary shall not be liable for any act or omission of any other party to the extent that (a) such responsibility was properly allocated to such other party as a named fiduciary, or (b) such other party has been properly designated to carry out such responsibility pursuant to the procedures set forth above.
XIV. FUNDING OF THE PLAN
Nothing contained in this Plan shall require the Company to segregate any monies from its general funds, or to create any trusts, or to make any special deposits for any amounts to be paid to a person eligible to receive payments under this Plan.
All benefits payable in accordance with this Plan, shall constitute a general unsecured obligation of the Company and its successors and assigns and shall be payable from the general assets of any or all of them.
The Company, in its sole discretion, may establish a trust for the purpose of providing funds for the payment of the benefits under the Plan. Such trust shall be an irrevocable grantor trust containing provisions which are the same as, or are similar to, the provisions contained in the model “rabbi trust” set forth in Internal Revenue Service Revenue Procedure 92-64 (or any successor ruling thereto). The Company shall pay all costs relating to the establishment and maintenance of the trust and the investment of funds held in such trust.
XV. ERRONEOUS PAYMENTS AND OTHER ERRORS
If a benefit is paid that is larger than the amount payable under the Plan, the Company has a right to recover the excess amount from the person or agency that received such overpayment. Erroneous payments or statements will not change the rights or obligations under this Plan, and will not operate to grant additional benefits or coverage.
XVI. MISCELLANEOUS
For purposes of clarity, in no event shall benefits under this Plan be duplicative of the benefits provided by any other Company or its subsidiaries’ plan, program, policy or arrangement.
The Plan is to be construed, administered, and enforced in accordance with ERISA, and to the extent they are not preempted by ERISA, by and in accordance with and other pertinent federal laws and in accordance with the laws of the State of Delaware (without regard to its choice of law principles) to the extent not preempted by ERISA. If any provision of this Plan is held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions of the Plan will remain fully effective
Participation in this Plan does not give to any employee the right to be retained in the employ of the Company or its participating subsidiaries, nor any right or interest in this Plan other than as provided in this Plan document.
No term, condition, or provision of this Plan or any benefit program shall be deemed to be waived, and there shall be no estoppel against enforcing any provision of the Plan or benefit program, except through a writing of the party to be charged by the waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless explicitly made so, and shall operate only with regard to the specific term or condition waived, and shall not be deemed to waive such term or condition in the future, or as to any act other than as specifically waived. No covered person other than as named or described by class in the waiver shall be entitled to rely on the waiver for any purposes.
The “plan year” for the Plan is from January 1 through December 31.
XVII. SECTION 409A
The Plan is intended to comply with, or be exempt from, Section 409A of the Internal Revenue Code of 1986, as amended, and the rulings and regulations issued thereunder (“Code Section 409A”), and to the maximum extent permitted this Plan shall be limited, construed and interpreted in accordance with such intent.
If at the time of an employee’s separation from service, an employee is a “specified employee,” any and all amounts payable under this Plan in connection with such separation from service that constitute deferred compensation subject to Code Section 409A, as determined by the Plan Administrator in its sole discretion, and that would (but for this provision) be payable within six months following such separation from service, shall instead be paid on the first day of the first calendar month following the end of the six month period.
For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), the right to receive payments in the form of installment payments shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment shall at all times be considered a separate and distinct payment. If any payment could be paid in either of two different calendar years, it shall be paid in the later calendar year.
The Company does not represent, warrant or guarantee that the payment of a benefit under this Plan will not result in any penalty pursuant to Code Section 409A or any similar state statute or regulation.
IN WITNESS WHEREOF, DuPont de Nemours, Inc. has caused this Plan to be executed by its duly authorized individual on the date shown below, but adopted effective as of June 1, 2019.
DuPont de Nemours, Inc.
By: ____________________________
Title: ___________________________
Date: ___________________________
DUPONT
OMNIBUS INCENTIVE PLAN
The name of the Plan is the DuPont Omnibus Incentive Plan. The purposes of the Plan are to (a) provide an additional incentive to selected employees, directors, independent contractors and consultants of the Company or its Affiliates whose contributions are essential to the growth and success of the Company, (b) strengthen the commitment of such individuals to the Company and its Affiliates, (c) motivate those individuals to faithfully and diligently perform their responsibilities and (d) attract and retain competent and dedicated individuals whose efforts will result in the long-term growth and profitability of the Company. To accomplish these purposes, the Plan provides that the Company may grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Other Stock-Based Awards, Cash Awards or any combination of the foregoing.
Effective as of the Effective Date, all references in this Plan document to DowDuPont Inc. shall be deemed changed to reflect the name of the Company as changed to DuPont de Nemours, Inc.
(a) This Plan comprises Sections 1-34 hereof and two respective subplans, the provisions of Annex A and the provisions of Annex B. Sections 1-34 hereof together with Annex A constitute the E. I. du Pont de Nemours and Company Equity and Incentive Plan (the “DuPont Plan”) as amended and restated as of the Effective Date. Sections 1-34 hereof together with Annex B constitute The Dow Chemical Company 2012 Stock Incentive Plan (the “Dow Plan”) as amended and restated as of the Effective Date.
(b) Effective as of the consummation of the transactions (the “Mergers”) contemplated by that certain Agreement and Plan of Merger dated as of December 11, 2015, as it was amended, by and among DowDuPont Inc., The Dow Chemical Company and E. I. du Pont de Nemours and Company, the DuPont Plan and Dow Plan were adjusted in certain respects to reflect the occurrence of such transactions, and as of and before the Effective Date, Historical DuPont Awards and Historical Dow Awards were adjusted as described in Section 1.09 of that certain Employee Matters Agreement effective as of April 1, 2019, by and among DowDuPont Inc., The Dow Chemical Company and Corteva, Inc. References herein to the DuPont Plan, the Dow Plan, Historical DuPont Awards and Historical Dow Awards shall be deemed to refer to such plans and awards after giving effect to such adjustments.
(c) For purposes of administering and interpreting this Plan, (i) the Plan exclusive of Annex B shall apply to (A) Historical DuPont Awards and (B) Awards granted on or after the Effective Date that are made subject to Annex A, and (ii) the Plan exclusive of Annex A shall apply to (A) Historical Dow Awards and (B) Awards granted on or after the Effective Date that are made subject to Annex B, provided that, in any event, subject to Section 1(b), the terms of each respective Historical DuPont Award and Historical Dow Award as in effect immediately before the Effective Date shall apply to and govern such Award.
(d) No Award shall be granted pursuant to Annex A that could not have been granted under the DuPont Plan as in effect immediately before the Effective Date, and no Award (other than a Cash Award) shall be granted pursuant to Annex B that could not have been granted under the Dow Plan as in effect immediately before the Effective Date; provided, however, that (i) if the Administrator purports to grant an Award under Annex A that cannot be granted under the DuPont Plan as in effect immediately before the Effective Date, but can be granted under the Dow Plan as in effect immediately before the Effective Date (including with respect to the number of available shares thereunder), then such Award shall be deemed to have been granted pursuant to Annex B; and (ii) if the Administrator purports to grant an Award under Annex B that cannot be granted under the Dow Plan as in effect immediately before the Effective Date, but can be granted under the DuPont Plan as in effect immediately before the Effective Date (including with respect to the number of available shares thereunder), then such Award shall be deemed to have been granted pursuant to Annex A.
For purposes of the Plan, the following terms shall be defined as set forth below:
(a) “Administrator” means the Board, or, if and to the extent the Board does not administer the Plan, the Committee in accordance with Section 3.
(b) “Affiliate” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified as of any date of determination.
(c) “Applicable Laws” means the applicable requirements under U.S. federal and state corporate laws, U.S. federal and state securities laws, including the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Awards are granted under the Plan, as are in effect from time to time.
(d) “Award” means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-Based Award or Cash Award granted under the Plan.
(e) “Award Agreement” means any written notice, agreement, contract or other instrument or document evidencing an Award, including through electronic medium, which shall contain such terms and conditions with respect to an Award as the Administrator shall determine, consistent with the Plan.
(f) “Beneficial Owner” (or any variant thereof) has the meaning defined in Rule 13d-3 under the Exchange Act.
(g) “Board” means the Board of Directors of the Company.
(h) “Bylaws” mean the bylaws of the Company, as may be amended and/or restated from time to time.
(i) “Cash Award” means cash awarded under Section 11, including cash awarded as a bonus or upon the attainment of performance goals or otherwise as permitted under the Plan.
(j) “Cause”, with respect to Awards granted after the Effective Date and Historical DuPont Awards, shall have the meaning set forth in the Participant’s employment or other agreement with the Company, any Subsidiary or any Affiliate, if any, provided that if the Participant is not a party to any such employment or other agreement or such employment or other agreement does not contain a definition of Cause, then Cause shall mean (i) the willful and continued failure of the Participant to perform substantially the Participant’s duties with the Company or any Subsidiary or Affiliate (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Participant by the employing Company, Subsidiary or Affiliate that specifically identifies the alleged manner in which the Participant has not substantially performed the Participant’s duties, or (ii) the willful engaging by the Participant in illegal conduct or misconduct that is injurious to the Company or any Subsidiary or Affiliate, including without limitation any breach of the Company’s Code of Business Conduct or other applicable ethics policy.
(k) “Change in Capitalization” means any (i) merger, consolidation, reclassification, recapitalization, spin-off, spin-out, repurchase or other reorganization or corporate transaction or event, (ii) special or extraordinary dividend or other extraordinary distribution (whether in the form of cash, Common Stock or other property), stock split, reverse stock split, share subdivision or consolidation, (iii) combination or exchange of shares or (iv) other change in corporate structure, which, in any such case, the Administrator determines, in its sole discretion, affects the Shares such that an adjustment pursuant to Section 5 is appropriate.
(l) “Change in Control”, with respect to Awards granted on or after the Effective Date, means that the event set forth in any one of the following paragraphs shall have occurred:
(i)any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing 30% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (A) of paragraph (iii) below; or
(ii)the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or
(iii)there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or other entity, other than (A) a merger or consolidation which results in (I) the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 60% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation and (II) the individuals who comprise the Board immediately prior thereto constituting immediately thereafter at least a majority of the board of directors of the Company, the entity surviving such merger or consolidation or, if the Company or the entity surviving such merger is then a subsidiary, the ultimate parent thereof, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 30% or more of the combined voting power of the Company’s then outstanding securities; or
(iv)the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets (it being conclusively presumed that any sale or disposition is a sale or disposition by the Company of all or substantially all of its assets if the consummation of the sale or disposition is contingent upon approval by the Company’s stockholders unless the Board expressly determines in writing that such approval is required solely by reason of any relationship between the Company and any other Person or an Affiliate of the Company and any other Person), other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity (A) at least 60% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition and (B) the majority of whose board of directors immediately following such sale or disposition consists of individuals who comprise the Board immediately prior thereto; or
(v)a corporate transaction or series of transactions involving a sale or other disposition of a business of, or operations relating to, the Company or any of its Affiliates (whether by sale, spin-off, split-off, divestiture or other disposition of an organizational unit or business unit of the Company or one of its subsidiaries) that the Administrator expressly determines in its discretion, before the occurrence of such transaction or the completion of such series of transactions, to deem such transaction or series of transactions as a Change in Control for purposes of the Plan with respect to some or all of the Participants.
Notwithstanding the foregoing, (i) a Change in Control shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the holders of common shares of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions; and (ii) to the extent necessary to avoid the imposition of adverse taxation under Section 409A of the Code, in no event will a Change in Control be deemed to have occurred if such transaction is not also a “change in the ownership or effective control of” the Company or “a change in the ownership of a substantial portion of the assets of” the Company as determined under Treasury Regulation Section 1.409A-3(i)(5) (without regard to any alternative definition thereunder).
(m) “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
(n) “Committee” means the Compensation Committee of the Board or any other committee or subcommittee the Board may appoint to administer the Plan. Subject to the discretion of the Board, the Committee shall be composed entirely of individuals who meet the qualifications of a “non-employee director” within the meaning of Rule 16b-3 and any other qualifications required by the applicable stock exchange on which the Common Stock is traded.
(o) “Common Stock” means the common stock of the Company, having a par value of $0.01 per share.
(p) “Company” means DowDuPont Inc., a Delaware corporation, as renamed E. I. du Pont de Nemours and Company effective as of the Effective Date (or any successor company, except as the term “Company” is used in the definition of “Change in Control” above).
(q) “Disability”, (i) with respect to Awards granted on or after the Effective Date, (A) shall have the meaning assigned to such term in any individual service, employment or severance agreement or Award Agreement with the Participant or, if no such agreement exists or if such agreement does not define such term, then (B) shall mean that a Participant is considered to be disabled within the meaning of the applicable Company benefit plan or, if no such Company benefit plan exists, then (C) shall not be applicable with respect to this Plan; (ii) with respect to Historical DuPont Awards, shall mean that a Participant is considered to be disabled within the meaning of the applicable Company benefit plan; and (iii) with respect to Historical Dow Awards, (A) shall have the meaning assigned to such term in any individual service, employment or severance agreement or Award Agreement with the Participant or, if no such agreement exists or if such agreement does not define such term, then (B) shall not be applicable with respect to this Plan.
(r) “Dividend Equivalents” means an amount payable in cash or Common Stock, as determined by the Committee, with respect to an Award equal to what would have been received if the shares underlying the Award had been owned by the Participant.
(s) “Effective Date” has the meaning set forth in Section 19.
(t) “Eligible Recipient” means an employee, director, independent contractor or consultant of the Company or any Affiliate of the Company who has been selected as an eligible participant by the Administrator; provided, however, to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, an Eligible Recipient of an Option or a Stock Appreciation Right means an employee, non-employee director, independent contractor or consultant of the Company or any Affiliate of the Company with respect to whom the Company is an “eligible issuer of service recipient stock” within the meaning of Section 409A of the Code.
(u) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
(v) “Exercise Price” means, (i) with respect to any Option, the per share price at which a holder of such Option may purchase Shares issuable upon exercise of such Award and (ii) with respect to a Stock Appreciation Right, the base price per share of such Stock Appreciation Right.
(w) “Fair Market Value” of a share of Common Stock or another security as of a particular date means the fair market value as determined by the Administrator in its sole discretion; provided, that, (i) if the Common Stock or other security is admitted to trading on a national securities exchange, the fair market value on any date shall be the closing sale price reported on such date, or if no shares were traded on such date, on the last preceding date for which there was a sale of a share of Common Stock on such exchange, or (ii) if the Common Stock or other security is then traded in an over-the-counter market, the fair market value on any date shall be the average of the closing bid and asked prices for such share in such over-the-counter market for the last preceding date on which there was a sale of such share in such market.
(x) “Free Standing Rights” has the meaning set forth in Section 8.
(y) “Full Value Award” means any Award, other than an Option or Stock Appreciation Right, which Award is settled in Stock.
(z) “Good Reason”, with respect to Awards granted after the Effective Date and Historical DuPont Awards, means (i) a material diminution in the Participant’s base compensation, (ii) a material diminution in the Participant’s authority, duties, or responsibilities, or (iii) a material change in the geographic location at which the Participant must perform his/her services for the Company.
(aa) “Historical Dow Award” means any Award that was outstanding under the Dow Plan as of immediately before the Effective Date.
(bb) “Historical DuPont Award” means any Award that was outstanding under the DuPont Plan as of immediately before the Effective Date.
(cc) “Incentive Compensation” means annual cash bonus and any Award.
(dd) “ISO” means an Option that is an “incentive stock option” within the meaning of Section 422 of the Code.
(ee) “Nonqualified Stock Option” means an Option that is not designated or that otherwise does not qualify as an ISO.
(ff) “Option” means an option to purchase shares of Common Stock granted pursuant to Section 7. The term “Option” as used in the Plan includes the terms “Nonqualified Stock Option” and “ISO.”
(gg) “Other Stock-Based Award” means a right or other interest granted pursuant to Section 10 that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Common Stock, including without limitation unrestricted Shares, Dividend Equivalents or performance units, each of which may be subject to the attainment of performance goals or a period of continued provision of service or employment or other terms or conditions as permitted under the Plan.
(hh) “Participant” means any Eligible Recipient selected by the Administrator, pursuant to the Administrator’s authority provided for in Section 3, to receive grants of Awards, and, upon his or her death, his or her successors, heirs, executors and administrators, as the case may be.
(ii) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof.
(jj) “Plan” means this Omnibus Incentive Plan, comprising the DuPont Plan and the Dow Plan (each term as defined in Section 1(a)).
(kk) “Related Rights” has the meaning set forth in Section 8.
(ll) “Restricted Period” has the meaning set forth in Section 9.
(mm) “Restricted Stock” means a Share granted pursuant to Section 9 subject to certain restrictions that lapse at the end of a specified period (or periods) of time and/or upon attainment of specified performance objectives.
(nn) “Restricted Stock Unit” means the right granted pursuant to Section 9 to receive a Share at the end of a specified restricted period (or periods) of time and/or upon attainment of specified performance objectives.
(oo) “Rule 16b-3” means Rule 16b-3 under the Exchange Act.
(pp) “Section 16 Officer” means any officer of the Company whom the Board has determined is subject to the reporting requirements of Section 16 of the Exchange Act, whether or not such individual is a Section 16 Officer at the time the determination to recoup compensation is made.
(qq) “Securities Act” means the Securities Act of 1933, as amended from time to time.
(rr) “Stock Appreciation Right” or “SAR” means a right granted pursuant to Section 8 to receive an amount equal to the excess, if any, of (i) the aggregate Fair Market Value, as of the date such Award or portion thereof is surrendered, of the Shares covered by such Award or such portion thereof, over (ii) the aggregate Exercise Price of such Award or such portion thereof.
(ss) “Shares” means Common Stock reserved for issuance under the Plan, as adjusted pursuant to the Plan, and any successor (pursuant to a merger, consolidation or other reorganization) security.
(tt) “Subsidiary” means, with respect to any Person, as of any date of determination, any other Person as to which such first Person owns or otherwise controls, directly or indirectly, more than 50% of the voting shares or other similar interests or a sole general partner interest or managing member or similar interest of such other Person.
(uu) “Term” has the meaning set forth in Section 3.
(vv) “Transfer” has the meaning set forth in Section 17.
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Section 3.
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Administration.
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(a) The Plan shall be administered by the Administrator and shall be administered, to the extent applicable, in accordance with Rule 16b-3.
(b) Pursuant to the terms of the Plan, the Administrator, subject, in the case of any Committee, to any restrictions on the authority delegated to it by the Board, shall have the power and authority, without limitation:
(i)to select those Eligible Recipients who shall be Participants;
(ii)to determine whether and to what extent Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Cash Awards, Other Stock-Based Awards or a combination of any of the foregoing, are to be granted hereunder to Participants;
(iii)to determine the number of Shares to be covered by each Award granted hereunder;
(iv)to determine the terms and conditions, not inconsistent with the terms of the Plan, of each Award granted hereunder (including without limitation (A) the restrictions applicable to Restricted Stock or Restricted Stock Units and the conditions under which restrictions applicable to such Restricted Stock or Restricted Stock Units shall lapse, (B) the performance goals and periods applicable to Awards, (C) the Exercise Price of each Option and Stock Appreciation Right or the purchase price of any other Award, (D) the vesting schedule and terms applicable to each Award, (E) the number of Shares or amount of cash or other property subject to each Award and (F) subject to the requirements of Section 409A of the Code (to the extent applicable), amendments to the terms and conditions of outstanding Awards, including without limitation extending the exercise period of such Awards and accelerating the vesting and/or payment schedules of such Awards; provided, however, that such acceleration may only occur in the event of the Participant’s death or Disability);
(v)to determine the terms and conditions, not inconsistent with the terms of the Plan, which shall govern all written instruments evidencing Awards;
(vi)to determine Fair Market Value in accordance with the terms of the Plan;
(vii)to determine the duration and purpose of leaves of absence which may be granted to a Participant without constituting termination of the Participant’s service or employment for purposes of Awards granted under the Plan;
(viii)to adopt, alter and repeal such administrative rules, regulations, guidelines and practices governing the Plan as it shall from time to time deem advisable;
(ix)to establish subplans and adopt or modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable; provided that any subplans and modifications to Plan terms and procedures established hereby shall be attached to the Plan as appendices;
(x)to construe and interpret the terms and provisions of, and supply or correct omissions in, the Plan and any Award issued under the Plan (and any Award Agreement relating thereto), and to otherwise supervise the administration of the Plan and to exercise all powers and authorities either specifically granted under the Plan or necessary and advisable in the administration of the Plan; and
(xi)to prescribe, amend and rescind rules and regulations relating to sub-plans established for the purpose of satisfying applicable non-United States laws or for qualifying for favorable tax treatment under applicable non-United States laws, which rules and regulations may be set forth in an annex or annexes to the Plan.
(c) Subject to Section 5, neither the Board nor the Committee shall have the authority to reprice or cancel and regrant any Award at a lower exercise, base or purchase price or cancel any Award with an exercise, base or purchase price of less than Fair Market Value in exchange for cash, property or other Awards without first obtaining the approval of the Company’s shareholders.
(d) All decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all Persons, including the Company and the Participants.
(e) The expenses of administering the Plan shall be borne by the Company and its Affiliates.
(f) If at any time or to any extent the Board shall not administer the Plan, then the functions of the Administrator specified in the Plan shall be exercised by the Committee. Except as otherwise provided in the Certificate of Incorporation or Bylaws of the Company, any action of the Committee with respect to the administration of the Plan shall be taken by a majority vote at a meeting at which a quorum is duly constituted or by unanimous written consent of the Committee’s members. Subject to the provisions of applicable law, the Board may also delegate to one or more officers, acting alone or together with one or more members of the Board, authority to grant awards to employees subject, however, to prescribed limits set forth in the resolutions of the Board delegating such authority.
(g) The aggregate value of all Awards that may be granted during any fiscal year to an individual nonemployee director may not exceed (i) $500,000 in value (such value computed as of the date of grant in accordance with applicable financial accounting rules), plus (ii) an additional $500,000 in value for one-time Awards to a newly appointed or elected nonemployee director.
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Section 4.
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Shares Reserved for Issuance Under the Plan.
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With respect to Shares available for issuance under the Plan, Annex A shall apply to the extent Awards are subject to Annex A, and Annex B shall apply to the extent Awards are subject to Annex B.
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Section 5.
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Equitable Adjustments.
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Except as provided in an Award Agreement or as otherwise provided in the Plan, in the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Stock, or other property), recapitalization, Stock split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, affects the Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan, then the Committee shall make such equitable changes or adjustments as it deems necessary or appropriate to any or all of (a) the number and kind of shares of Stock or other property (including cash) that may thereafter be issued in connection with Awards or the total number of Awards issuable under the Plan, (b) the number and kind of shares of Stock or other property issued or issuable in respect of outstanding Awards, (c) the exercise price, grant price or purchase price relating to any Award, (d) the performance goals and (e) the individual limitations applicable to Awards; provided that, with respect to ISOs, any adjustment shall be made in accordance with the provisions of Section 424(h) of the Code and any regulations or guidance promulgated thereunder, and provided further that no such adjustment shall cause any Award hereunder which is or becomes subject to Section 409A of the Code to fail to comply with the requirements of such section.
The Participants in the Plan shall be selected from time to time by the Administrator, in its sole discretion, from those individuals that qualify as Eligible Recipients. Each Award Agreement in respect of an Award made after the Effective Date shall specify whether the Award is being issued subject to Annex A or Annex B.
(a) General. Options granted under the Plan shall be designated as Nonqualified Stock Options or ISOs. Each Participant who is granted an Option shall enter into an Award Agreement with the Company, containing such terms and conditions as the Administrator shall determine, in its sole discretion, including, among other things, the Exercise Price of the Option, the term of the Option and provisions regarding exercisability of the Option, and whether the Option is intended to be an ISO or a Nonqualified Stock Option (and in the event the Award Agreement has no such designation, the Option shall be a Nonqualified Stock Option). The provisions of each Option need not be the same with respect to each Participant. More than one Option may be granted to the same Participant and be outstanding concurrently hereunder. Options granted under the Plan shall be subject to the terms and conditions set forth in this Section 7 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable and set forth in the applicable Award Agreement.
(b) Exercise Price. The Exercise Price of Shares purchasable under an Option shall be determined by the Administrator in its sole discretion at the time of grant, but in no event shall the exercise price of an Option be less than one hundred percent (100%) of the Fair Market Value of a share of Common Stock on the date of grant.
(c) Option Term. The maximum term of each Option shall be fixed by the Administrator, but no Option shall be exercisable more than ten (10) years after the date such Option is granted. Each Option’s term is subject to earlier expiration pursuant to the applicable provisions in the Plan and the Award Agreement.
(d) Exercisability. Each Option shall be exercisable at such time or times and subject to such terms and conditions, including the attainment of performance goals, as shall be determined by the Administrator in the applicable Award Agreement. The Administrator may also provide that any Option shall be exercisable only in installments.
(e) Method of Exercise. Options may be exercised in whole or in part by giving written notice of exercise to the Company specifying the number of whole Shares to be purchased, accompanied by payment in full of the aggregate Exercise Price of the Shares so purchased in cash or its equivalent, as determined by the Administrator. As determined by the Administrator, in its sole discretion, with respect to any Option or category of Options, payment in whole or in part may also be made (i) by means of consideration received under any cashless exercise procedure approved by the Administrator (including the withholding of Shares otherwise issuable upon exercise), (ii) in the form of unrestricted Shares already owned by the Participant which have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (iii) any other form of consideration approved by the Administrator and permitted by Applicable Laws or (iv) any combination of the foregoing.
(f) ISOs. The terms and conditions of ISOs granted hereunder shall be subject to the provisions of Section 422 of the Code and the terms, conditions, limitations and administrative procedures established by the Administrator from time to time in accordance with the Plan. ISOs may be granted only to an employee of the Company, its “parent corporation” (as such term is defined in Section 424(e) of the Code), if any, or a Subsidiary of the Company.
(i)ISO Grants to 10% Stockholders. Notwithstanding anything to the contrary in the Plan, if an ISO is granted to a Participant who owns shares representing more than ten percent (10%) of the voting power of all classes of shares of the Company, its “parent corporation” (as such term is defined in Section 424(e) of the Code), if any, or a Subsidiary of the Company, the term of the ISO shall not exceed five (5) years from the time of grant of such ISO and the Exercise Price shall be at least one hundred and ten percent (110%) of the Fair Market Value of the Shares on the date of grant.
(ii)$100,000 Per Year Limitation For ISOs. To the extent the aggregate Fair Market Value (determined on the date of grant) of the Shares for which ISOs are exercisable for the first time by any Participant during any calendar year (under all plans of the Company) exceeds $100,000, such excess ISOs shall be treated as Nonqualified Stock Options.
(iii)Disqualifying Dispositions. Each Participant awarded an ISO under the Plan shall notify the Company in writing immediately after the date the Participant makes a “disqualifying disposition” of any Share acquired pursuant to the exercise of such ISO. A “disqualifying disposition” is any disposition (including any sale) of such Shares before the later of (i) two years after the date of grant of the ISO and (ii) one year after the date the Participant acquired the Shares by exercising the ISO. The Company may, if determined by the Administrator and in accordance with procedures established by it, retain possession of any Shares acquired pursuant to the exercise of an ISO as agent for the applicable Participant until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Shares.
(iv)Share Limits. No more than 141,020,000 Shares may be made subject to ISOs granted after the Effective Date pursuant to Annex A, and no more than 95,000,000 Shares may be made subject to ISOs granted after the Effective Date pursuant to Annex B.
(g) Termination of Employment or Service. Treatment of an Option upon termination of employment of a Participant shall be provided for by the Administrator in the Award Agreement.
(h) Other Change in Employment or Service Status. An Option shall be affected, both with regard to vesting schedule and termination, by leaves of absence, including unpaid and unprotected leaves of absence, changes from full-time to part-time employment, partial Disability or other changes in the employment status or service status of a Participant, as and to the extent determined in the discretion of the Administrator.
(i) No Shareholder Rights. A Participant shall have no rights to dividends, Dividend Equivalents or distributions or any other rights of a stockholder with respect to the Shares subject to an Option until the Participant has given written notice of the exercise thereof, and has paid in full for such Shares and has satisfied the requirements of Section 16.
(j) Additional Terms (Dow Awards). Options subject to Annex B shall not be granted in consideration for and shall not be conditioned upon the delivery of shares of Common Stock to the Company in payment of the exercise price and/or tax withholding obligation under any other employee stock option.
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Section 8.
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Stock Appreciation Rights.
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(a) General. Stock Appreciation Rights may be granted either alone (“Free Standing Rights”) or in conjunction with all or part of any Option granted under the Plan (“Related Rights”). Related Rights may be granted either at or after the time of the grant of such Option. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, grants of Stock Appreciation Rights shall be made. Each Participant who is granted a Stock Appreciation Right shall enter into an Award Agreement with the Company, containing such terms and conditions as the Administrator shall determine, in its sole discretion, including, among other things, the number of Shares to be awarded, the Exercise Price per Share, and all other conditions of Stock Appreciation Rights. Notwithstanding the foregoing, no Related Right may be granted for more Shares than are subject to the Option to which it relates. The provisions of Stock Appreciation Rights need not be the same with respect to each Participant. Stock Appreciation Rights granted under the Plan shall be subject to the following terms and conditions set forth in this Section 8 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable, as set forth in the applicable Award Agreement.
(b) Awards; Rights as Stockholder. A Participant shall have no rights to dividends or any other rights of a stockholder with respect to the shares of Common Stock, if any, subject to a Stock Appreciation Right until the Participant has given written notice of the exercise thereof and has satisfied the requirements of Section 16.
(c) Exercise Price. The Exercise Price of Shares purchasable under a Stock Appreciation Rights shall be determined by the Administrator in its sole discretion at the time of grant, but in no event shall the exercise price of a Stock Appreciation Rights be less than one hundred percent (100%) of the Fair Market Value of a share of Common Stock on the date of grant.
(d) Exercisability.
(i)Stock Appreciation Rights that are Free Standing Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator in the applicable Award Agreement.
(ii)Stock Appreciation Rights that are Related Rights shall be exercisable only at such time or times and to the extent that the Options to which they relate shall be exercisable in accordance with the provisions of Section 7 and this Section 8.
(e) Payment Upon Exercise.
(i)Upon the exercise of a Free Standing Right, the Participant shall be entitled to receive up to, but not more than, that number of Shares equal in value to the excess of the Fair Market Value as of the date of exercise over the Exercise Price per share specified in the Free Standing Right multiplied by the number of Shares in respect of which the Free Standing Right is being exercised.
(ii)A Related Right may be exercised by a Participant by surrendering the applicable portion of the related Option. Upon such exercise and surrender, the Participant shall be entitled to receive up to, but not more than, that number of Shares equal in value to the excess of the Fair Market Value as of the date of exercise over the Exercise Price specified in the related Option multiplied by the number of Shares in respect of which the Related Right is being exercised. Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the Related Rights have been so exercised.
(iii)Notwithstanding the foregoing, the Administrator may determine to settle the exercise of a Stock Appreciation Right in cash (or in any combination of Shares and cash).
(f) Termination of Employment or Service. Treatment of a Stock Appreciation Right upon termination of employment of a Participant shall be provided for by the Administrator in the Award Agreement.
(g) Term.
(i)The term of each Free Standing Right shall be fixed by the Administrator, but no Free Standing Right shall be exercisable more than ten (10) years after the date such right is granted.
(ii)The term of each Related Right shall be the term of the Option to which it relates, but no Related Right shall be exercisable more than ten (10) years after the date such right is granted.
(h) Other Change in Employment or Service Status. Stock Appreciation Rights shall be affected, both with regard to vesting schedule and termination, by leaves of absence, including unpaid and un-protected leaves of absence, changes from full-time to part-time employment, partial Disability or other changes in the employment or service status of a Participant, as and to the extent determined in the discretion of the Administrator.
(i) No Shareholder Rights. A Participant shall have no rights to dividends, Dividend Equivalents or distributions or any other rights of a stockholder with respect to the Shares subject to a Stock Appreciation Right until the Participant has given written notice of the exercise thereof, and has paid in full for such Shares and has satisfied the requirements of Section 16.
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Section 9.
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Restricted Stock and Restricted Stock Units.
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(a) General. Restricted Stock or Restricted Stock Units may be issued under the Plan. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, Restricted Stock or Restricted Stock Units shall be made. Each Participant who is granted Restricted Stock or Restricted Stock Units shall enter into an Award Agreement with the Company, containing such terms and conditions as the Administrator shall determine in its sole discretion (subject to Section 3), including, among other things, the number of Shares to be awarded; the price, if any, to be paid by the Participant for the acquisition of Restricted Stock or Restricted Stock Units; the period of time restrictions, performance goals or other conditions that apply to Transfer, delivery or vesting of such Awards (the “Restricted Period”); and all other conditions applicable to the Restricted Stock and Restricted Stock Units. If the restrictions, performance goals or conditions established by the Administrator are not attained, a Participant shall forfeit his or her Restricted Stock or Restricted Stock Units, in accordance with the terms of the grant. The provisions of the Restricted Stock or Restricted Stock Units need not be the same with respect to each Participant.
(b) Awards and Certificates.
(i)Except as otherwise provided below in Section 9(c), (A) each Participant who is granted an Award of Restricted Stock may, in the Company’s sole discretion, be issued a share certificate in respect of such Restricted Stock and (B) any such certificate so issued shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to any such Award. For the avoidance of doubt, Restricted Stock may, in the Company’s sole discretion, be issued in uncertificated form.
(ii)The Company may require that the share certificates, if any, evidencing Restricted Stock granted hereunder be held in the custody of the Company until the restrictions thereon shall have lapsed, and that, as a condition of any Award of Restricted Stock, the Participant shall have delivered a share transfer form, endorsed in blank, relating to the Shares covered by such Award. Except to the extent otherwise provided in the Plan, certificates for shares of unrestricted Common Stock may be delivered to the Participant only after the Restricted Period has expired without forfeiture in such Restricted Stock.
(iii)With respect to Restricted Stock Units to be settled in Shares, at the expiration of the Restricted Period, share certificates in respect of the shares of Common Stock underlying such Restricted Stock Units may be delivered to the Participant, or his legal representative, in a number equal to the number of shares of Common Stock underlying the Restricted Stock Units Award.
(iv)Further, notwithstanding anything in the Plan to the contrary, with respect to Restricted Stock Units at the expiration of the Restricted Period, Shares, or cash, as applicable, shall promptly be issued (either in certificated or uncertificated form, in the Company’s sole discretion) to the Participant, unless otherwise deferred in accordance with procedures established by the Company in accordance with Section 409A of the Code, and such issuance or payment shall in any event be made within such period as is required to avoid the imposition of a tax under Section 409A of the Code.
(c) Restrictions and Conditions. The Restricted Stock or Restricted Stock Units granted pursuant to this Section 9 shall be subject to the following restrictions and conditions and any additional restrictions or conditions as determined by the Administrator at the time of grant or, subject to Section 409A of the Code where applicable, thereafter:
(i)The Administrator may, in its sole discretion, provide for the lapse of restrictions in installments.
(ii)Except as provided in the applicable Award Agreement, the Participant shall generally have the rights of a stockholder of the Company with respect to Restricted Stock during the Restricted Period; provided, however, that dividends declared during the Restricted Period with respect to an Award shall only become payable if (and to the extent) the underlying Restricted Stock vests. Except as provided in the applicable Award Agreement, the Participant shall generally not have the rights of a stockholder with respect to Shares subject to Restricted Stock Units during the Restricted Period; provided, however, that, to the extent an Award Agreement provides (and only to that extent) and further subject to Section 409A of the Code, an amount equal to dividends declared during the Restricted Period with respect to the number of Shares covered by Restricted Stock Units shall be paid to the Participant at the time (and to the extent) Shares in respect of the related Restricted Stock Units are delivered to the Participant.
(iii)The rights of Participants granted Restricted Stock or Restricted Stock Units upon termination of employment or service as a director, independent contractor or consultant to the Company or to any Affiliate thereof terminates for any reason during the Restricted Period shall be set forth in the Award Agreement.
(d) Form of Settlement. The Administrator reserves the right in its sole discretion to provide (either at or after the grant thereof) that any Restricted Stock Unit represent the right to receive the amount of cash per unit that is determined by the Administrator in connection with the Award.
(e) Minimum Vesting. Notwithstanding anything to the contrary in this Section 9 (but in each case subject to Section 5, Section 9(c)(iii) and Section 12):
(i)With respect to any Restricted Stock or Restricted Stock Unit (or Other Stock-Based Award granted subject to Annex A and settled in Shares) that (i) is based on the achievement of performance criteria, the applicable performance period shall not be less than the first anniversary following the date of grant, and (ii) is based solely upon the continued performance of services or passage of time, the Award may not vest or be settled in full prior to the third anniversary following the date of grant (but may be subject to pro-rata vesting over such period), subject in each case to clauses (ii) and (iii), below.
(ii)With respect to any Award described in clause (i), above, that is subject to Annex A, (A) no portion thereof may vest prior to the first anniversary following the date of grant, and (B) the limitations set forth in this Section 9(e) shall not apply if the Award is granted to a Participant upon commencement of the Participant’s employment.
(iii)With respect to any Award described in clause (i), above, that is subject to Annex B, (A) the Committee may provide for the satisfaction and/or lapse of all applicable conditions in the event of the Participant’s death, disability or retirement, (B) the Committee may provide that any such restriction or limitation will not apply if the Award is granted in payment or settlement of compensation that has been earned by the Participant, and (C) up to 5% of the aggregate number of shares of Common Stock authorized for issuance under this Plan (as described in Annex B) may be issued pursuant to such Awards without respect to the limitations set forth in this Section 9(e).
(f) Additional Terms (DuPont Awards). To the extent Restricted Stock or Restricted Stock Units are subject to Annex A,
(i)If and to the extent that the applicable Award Terms so provide, a Participant shall have the right to vote and receive dividends on Restricted Stock granted under the Plan. Unless otherwise provided in the applicable Award Terms, any Stock received as a dividend on or in connection with a stock split shall be subject to the same restrictions as such Restricted Stock.
(ii)Subject to the requirements of Section 409A of the Code, an Award of Restricted Stock Units may provide the Participant with the right to receive Dividend Equivalent payments with respect to Stock subject to the Award (both before and after the Stock subject to the Award is earned or vested), which payments may be either made currently or credited to an account for the Participant, and may be settled in cash or Stock, as determined by the Committee. Any such settlements and any such crediting of Dividend Equivalents may be subject to such conditions, restrictions and contingencies as the Committee shall establish, including the reinvestment of such credited amounts in Stock equivalents.
(g) Additional Terms (Dow Awards). To the extent Restricted Stock or Restricted Stock Units are subject to Annex B,
(i)Dividends and Distributions. Participants in whose name Restricted Stock are granted shall be entitled to receive all dividends and other distributions paid with respect to those shares of Common Stock, unless determined otherwise by the Committee. The Committee will determine whether any such dividends or distributions will be automatically reinvested in additional shares of Restricted Stock and/or subject to the same restrictions on transferability as the Restricted Stock with respect to which they were distributed or whether such dividends or distributions will be paid in cash. Unless otherwise provided in the Award Agreement, during the period prior to shares being issued in the name of a Participant under any Stock Unit, the Company shall pay or accrue Dividend Equivalents on each date dividends on Common Stock are paid, subject to such conditions as the Committee may deem appropriate. The time and form of any such payment of Dividend Equivalents shall be specified in the Award Agreement. Notwithstanding anything herein to the contrary, in no event will dividends or Dividend Equivalents be paid during the performance period with respect to Awards of Restricted Stock or Restricted Stock Units that are subject to performance-based vesting criteria, and no dividends or Dividend Equivalents will be paid with respect to performance-based Restricted Stock or shares underlying performance-based Restricted Stock Units that do not vest.
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Section 10.
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Other Stock-Based Awards (DuPont Awards).
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(a) This Section 10 shall apply to the extent an Award is subject to Annex A.
(b) Other Stock-Based Awards may be issued under the Plan. Subject to the provisions of the Plan, the Administrator shall have sole and complete authority to determine the individuals to whom and the time or times at which such Other Stock-Based Awards shall be granted. Each Participant who is granted an Other Stock-Based Award shall enter into an Award Agreement with the Company, containing such terms and conditions as the Administrator shall determine, in its sole discretion, including, among other things, the number of shares of Common Stock to be granted pursuant to such Other Stock-Based Awards, or the manner in which such Other Stock-Based Awards shall be settled (e.g., in shares of Common Stock, cash or other property), or the conditions to the vesting and/or payment or settlement of such Other Stock-Based Awards (which may include, but not be limited to, achievement of performance criteria) and all other terms and conditions of such Other Stock-Based Awards. In the event that the Administrator grants a bonus in the form of Shares, the Shares constituting such bonus shall, as determined by the Administrator, be evidenced in uncertificated form or by a book entry record or a certificate issued in the name of the Participant to whom such grant was made and delivered to such Participant as soon as practicable after the date on which such bonus is payable. Notwithstanding anything set forth in the Plan to the contrary, any dividend or Dividend Equivalent Award issued hereunder shall be subject to the same restrictions, conditions and risks of forfeiture as apply to the underlying Award.
(a) The Administrator may grant Awards that are denominated in, or payable to Participants solely in, cash, as deemed by the Administrator to be consistent with the purposes of the Plan, and, such Cash Awards shall be subject to the terms, conditions, restrictions and limitations determined by the Administrator, in its sole discretion, from time to time.
(b) Additional Terms (DuPont Awards). To the extent Cash Awards are subject to Annex A, (i) the maximum value of the aggregate payment that any Participant may receive with respect to Cash Awards pursuant to this Section 11 in respect of any annual performance period is $15 million and for any other performance period in excess of one year, such amount multiplied by a fraction, the numerator of which is the number of months in the performance period and the denominator of which is twelve (12); and (ii) payments earned in respect of any Cash Award may be decreased in the sole discretion of the Committee based on such factors as it deems appropriate.
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Section 12.
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Change in Control.
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(a) Unless otherwise determined by the Committee or evidenced in an applicable Award Terms or employment or other agreement, in the event of a Change in Control:
(i)Options and Stock Appreciation Rights.
(A) If the Company is the surviving entity or the surviving entity assumes the Options or SARs or substitutes in lieu thereof equivalent stock options or SARs relating to the stock of such surviving entity (“Substitute Options/SARs”), the Options/SARs or the Substitute Options/SARs, as applicable, shall be governed by their respective terms;
(B) If the Company is the surviving entity or the surviving entity assumes the Options/SARs or issues Substitute Options/SARs, and the Participant is terminated without Cause or for Good Reason within twenty-four (24) months following the Change in Control, Options/SARs or Substitute Options/SARs held by the Participant that were not previously vested and exercisable shall become fully vested and, to the extent an Award is subject to Annex A, shall remain exercisable until the date that is two (2) years following the date of such termination, or the original expiration date, whichever first occurs;
(C) If the Company is not the surviving entity, and the surviving entity does not assume the Options/SARs or issue Substitute Options/SARs, each Option/SAR shall become fully vested and cancelled in exchange for a cash payment in an amount equal to (i) the excess of Fair Market Value per share of the Stock subject to the Award immediately prior to the Change in Control over the exercise or base price (if any) per share of Stock subject to the Award multiplied by (ii) the number of shares of Stock subject to the Option/SAR.
(ii)Other Awards Not Subject to Performance Goals.
(A) If the Company is the surviving entity or the surviving entity assumes Awards (other than Options or SARs) not subject to performance goals (“Time-Vested Awards”) or substitutes in lieu thereof equivalent stock awards relating to the stock of such surviving entity (“Substitute Awards”), the Time-Vested Awards or the Substitute Awards, as applicable, shall be governed by their respective terms;
(B) If the Company is the surviving entity or the surviving entity assumes the Time-Vested Awards or issues Substitute Awards, and the Participant is terminated without Cause or for Good Reason within twenty-four (24) months following the Change in Control, Time-Vested Awards or Substitute Awards held by the Participant that were not previously vested shall become fully vested;
(C) If the Company is not the surviving entity, and the surviving entity does not assume the Time-Vested Awards or issue Substitute Awards, the Time-Vested Awards shall become fully vested and cancelled in exchange for a cash payment in an amount equal to the Fair Market Value per share of the Stock subject to the Award immediately prior to the Change in Control multiplied by the number of shares of Stock subject to the Award.
(iii)Other Awards Subject to Performance Goals.
(A) To the extent Awards (other than Options or SARs) subject to performance goals are subject to Annex A, such Awards shall be converted into Time-Vested Awards at target, without proration, and continue to vest as though such Award had originally been granted as a Time-Vested Award with a restricted period equal in length to the performance period of such Award. Such Time-Vested Award shall thereafter be governed in accordance with their respective otherwise applicable terms and subsection (ii) above.
(B) To the extent Awards (other than Options or SARs) subject to performance goals are subject to Annex B, and if either (x) such Awards are not assumed or substituted for equivalent awards relating to the stock of the surviving entity (and otherwise governed by their respective terms), or (y) such Awards are so assumed or substituted but the Participant is thereafter terminated without Cause or for Good Reason within twenty-four (24) months following the Change in Control, then in either case the Participant shall have the right to receive a payment based on performance through a date determined by the Committee prior to the Change in Control (unless such performance cannot be determined, in which case the Participant shall have the right to receive a payment equal to the target amount payable).
(b) The Committee may, in its sole discretion, provide that: (i) each Award shall, upon the occurrence of a Change in Control, be canceled in exchange for a payment in an amount equal to (A) the Fair Market Value per share of the Stock subject to the Award immediately prior to the Change in Control over the exercise or base price (if any) per share of Stock subject to the Award multiplied by (B) the number of Shares granted under the Award; and (ii) each Award shall, upon the occurrence of a Change in Control, be canceled without payment therefore if the Fair Market Value per share of the Stock subject to the Award immediately prior to the Change in Control is less than the exercise or purchase price (if any) per share of Stock subject to the Award.
(c) Notwithstanding the foregoing, except as otherwise determined by the Board, a “Change in Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately following such transaction or series of transactions.
(d) To the extent an Award is subject to Annex A and unless otherwise provided by the Committee or set forth in a Grantee’s Award Terms, notwithstanding the provisions of this Plan, in the event that any payment or benefit received or to be received by the Grantee in connection with a Change in Control or the termination of the Grantee’s employment or service (whether pursuant to the terms of this Plan or any other plan, arrangement or agreement with the Company, any Subsidiary, any Affiliate, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (all such payments and benefits, “Total Payments”) would be subject (in whole or part), to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the payment or benefit to be received by the Grantee upon a Change in Control shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments).
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Section 13.
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Deferral of Gains (Dow Awards).
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To the extent an Award is subject to Annex B, the Committee may, in an Award Agreement or otherwise, provide for the deferred delivery of Common Stock upon settlement, vesting or other events with respect to Restricted Stock or Restricted Stock Units, or in payment or satisfaction of Incentive Compensation. Notwithstanding anything herein to the contrary, in no event will any deferral of the delivery of Common Stock or any other payment with respect to any Award be allowed if the Committee determines, in its sole discretion, that the deferral would result in the imposition of the additional tax under Section 409A(a)(1)(B) of the Code. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or for any action taken by the Board.
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Section 14.
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Amendment and Termination.
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The Board may amend, alter or terminate the Plan at any time, but no amendment, alteration or termination shall be made that would impair the rights of a Participant under any Award theretofore granted without such Participant’s consent. The Board shall obtain approval of the Company’s stockholders for any amendment that would require such approval in order to satisfy the requirements of any rules of the stock exchange on which the Common Stock is traded or other Applicable Law. The Administrator may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Section 5 and the immediately preceding sentence, no such amendment shall materially impair the rights of any Participant without his or her consent.
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Section 15.
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Unfunded Status of Plan.
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The Plan is intended to constitute an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general unsecured creditor of the Company.
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Section 16.
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Withholding Taxes.
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Each Participant shall, no later than the date as of which the value of an Award first becomes includible in the gross income of such Participant for purposes of applicable taxes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, an amount up to the maximum statutory tax rates in the Participant’s applicable jurisdiction with respect to the Award, as determined by the Company. The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company shall, to the extent permitted by Applicable Laws, have the right to deduct any such taxes from any payment of any kind otherwise due to such Participant. Whenever cash is to be paid pursuant to an Award, the Company shall have the right to deduct therefrom an amount sufficient to satisfy any applicable withholding tax requirements related thereto. Whenever Shares or property other than cash are to be delivered pursuant to an Award, the Company shall have the right to require the Participant to remit to the Company in cash an amount sufficient to satisfy any related taxes to be withheld and applied to the tax obligations; provided, that, with the approval of the Administrator, a Participant may satisfy the foregoing requirement by either (i) electing to have the Company withhold from delivery of Shares or other property, as applicable, or (ii) delivering already owned unrestricted shares of Common Stock, in each case, having a value not exceeding the applicable taxes to be withheld and applied to the tax obligations. Such already owned and unrestricted shares of Common Stock shall be valued at their Fair Market Value on the date on which the amount of tax to be withheld is determined and any fractional share amounts resulting therefrom shall be settled in cash. Such an election may be made with respect to all or any portion of the Shares to be delivered pursuant to an award. The Company may also use any other method of obtaining the necessary payment or proceeds, as permitted by Applicable Laws, to satisfy its withholding obligation with respect to any Award.
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Section 17.
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Transfer of Awards.
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Until such time as the Awards are fully vested and/or exercisable in accordance with the Plan or an Award Agreement, no purported sale, assignment, mortgage, hypothecation, transfer, charge, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest in or lien on, any Award or any agreement or commitment to do any of the foregoing (each, a “Transfer”) by any holder thereof will be valid, except with the prior written consent of the Administrator, which consent may be granted or withheld in the sole discretion of the Administrator. Any purported Transfer of an Award or any economic benefit or interest therein in violation of the Plan or an Award Agreement shall be null and void ab initio and shall not create any obligation or liability of the Company, and any Person purportedly acquiring any Award or any economic benefit or interest therein transferred in violation of the Plan or an Award Agreement shall not be entitled to be recognized as a holder of such Shares or other property underlying such Award. Unless otherwise determined by the Administrator, an Option or a Stock Appreciation Right may be exercised, during the lifetime of the Participant, only by the Participant or, during any period during which the Participant is under a legal Disability, by the Participant’s guardian or legal representative.
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Section 18.
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Continued Employment or Service.
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Neither the adoption of the Plan nor the grant of an Award shall confer upon any Eligible Recipient any right to continued employment or service with the Company or any Affiliate thereof, as the case may be, nor shall it interfere in any way with the right of the Company or any Affiliate thereof to terminate the employment or service of any of its Eligible Recipients at any time.
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Section 19.
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Effective Date.
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The Plan as set forth herein shall be effective as of the date of distribution to Company shareholders of the common stock of Corteva, Inc. (the “Effective Date”).
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Section 20.
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Electronic Signature.
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A Participant’s electronic signature of an Award Agreement shall have the same validity and effect as a signature affixed by hand.
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Section 21.
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Term of Plan.
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No Award shall be granted subject to Annex A after March 1, 2021, and no Award shall be granted subject to Annex B after May 10, 2022, but in each case Awards theretofore granted may extend beyond that date.
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Section 22.
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Securities Matters and Regulations.
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(a) Notwithstanding anything herein to the contrary, the obligation of the Company to sell or deliver Shares with respect to any Award granted under the Plan shall be subject to all Applicable Laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Administrator. The Administrator may require, as a condition of the issuance and delivery of certificates evidencing shares of Common Stock pursuant to the terms hereof, that the recipient of such shares make such agreements and representations, and that such certificates bear such legends, as the Administrator, in its sole discretion, deems necessary or advisable.
(b) Each Award is subject to the requirement that, if at any time the Administrator determines that the listing, registration or qualification of Shares is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Shares, no such Award shall be granted or payment made or Shares issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Administrator.
(c) In the event that the disposition of Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act and is not otherwise exempt from such registration, such Shares shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Administrator may require a Participant receiving Common Stock pursuant to the Plan, as a condition precedent to receipt of such Common Stock, to represent to the Company in writing that the Common Stock acquired by such Participant is acquired for investment only and not with a view to distribution.
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Section 23.
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Section 409A of the Code.
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The Plan as well as payments and benefits under the Plan are intended to be exempt from, or to the extent subject thereto, to comply with Section 409A of the Code, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted in accordance therewith. Notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, the Participant shall not be considered to have terminated employment or service with the Company for purposes of the Plan and no payment shall be due to the Participant under the Plan or any Award until the Participant would be considered to have incurred a “separation from service” from the Company and its Affiliates within the meaning of Section 409A of the Code. Any payments described in the Plan that are due within the “short term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless Applicable Law requires otherwise. Notwithstanding anything to the contrary in the Plan, to the extent that any Awards (or any other amounts payable under any plan, program or arrangement of the Company or any of its Affiliates) are payable upon a separation from service and such payment would result in the imposition of any individual tax and penalty interest charges imposed under Section 409A of the Code, the settlement and payment of such awards (or other amounts) shall instead be made on the first business day after the date that is six (6) months following such separation from service (or death, if earlier). Each amount to be paid or benefit to be provided under the Plan shall be construed as a separate identified payment for purposes of Section 409A of the Code. The Company makes no representation that any or all of the payments or benefits described in the Plan will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment. The Participant shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A of the Code.
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Section 24.
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Notification of Election Under Section 83(b) of the Code.
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If any Participant shall, in connection with the acquisition of shares of Common Stock under the Plan, make the election permitted under Section 83(b) of the Code, such Participant shall notify the Company of such election within ten (10) days after filing notice of the election with the Internal Revenue Service.
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Section 25.
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No Fractional Shares.
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No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan. The Administrator shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
A Participant may file with the Administrator a written designation of a beneficiary on such form as may be prescribed by the Administrator and may, from time to time, amend or revoke such designation. If no designated beneficiary survives the Participant, the executor or administrator of the Participant’s estate shall be deemed to be the Participant’s beneficiary.
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Section 27.
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Paperless Administration.
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In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Participant may be permitted through the use of such an automated system.
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Section 28.
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Severability.
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If any provision of the Plan is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or unenforceable provision had not been included in the Plan.
(a) Each Award granted under the Plan shall be subject to any applicable recoupment policy maintained by the Company or any of its Affiliates as in effect from time to time.
(b) Notwithstanding any other provisions in the Plan, any Award which is subject to recovery under any Applicable Laws, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such Applicable Law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).
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Section 30.
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Governing Law.
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The Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to principles of conflicts of law of such state.
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Section 31.
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Indemnification.
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To the extent allowable pursuant to applicable law, each member of the Board and the Administrator and any officer or other employee to whom authority to administer any component of the Plan is delegated shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided, however, that he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such individuals may be entitled pursuant to the Company’s Certificate of Incorporation or Bylaws, as a matter of Applicable Law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
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Section 32.
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Titles and Headings, References to Sections of the Code or Exchange Act.
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The titles and headings of the sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. References to sections of the Code, the Securities Act or the Exchange Act shall include any amendment or successor thereto.
The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.
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Section 34.
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Relationship to other Benefits.
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No payment pursuant to the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare, or other benefit plan of the Company or any Affiliate except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
Section 35.
DUPONT
OMNIBUS INCENTIVE PLAN
ANNEX A
Subject to Section 1(b) of the Plan, the maximum number of shares of Stock reserved for the grant or settlement of Awards under the Plan (the “Share Limit”) shall be 110,000,000 (as adjusted to reflect the Mergers) and shall be subject to adjustment as provided herein; provided that each share in excess of 30,000,000 (as adjusted to reflect the Mergers) issued under the Plan pursuant to a Full Value Award shall be counted against the foregoing Share Limit as four and one-half shares for every one share actually issued in connection with such Award. (For example, if 32,000,000 shares of Restricted Stock are granted under this Plan, 39,000,000 shall be charged against the Share Limit in connection with that Award (in each case as adjusted to reflect the Mergers).) The aggregate number of shares of Stock made subject to Awards granted during any fiscal year to any single individual shall not exceed 3,846,000. Such shares may, in whole or in part, be authorized but unissued shares or shares that shall have been or may be reacquired by the Company in the open market, in private transactions or otherwise. If any shares subject to an Award are forfeited, canceled, exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of shares to the Participant, the shares of stock with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan. Notwithstanding the foregoing, shares of Stock that are exchanged by a Participant or withheld by the Company as full or partial payment in connection with any Award under the Plan, as well as any shares of Stock exchanged by a Participant or withheld by the Company or any Subsidiary to satisfy the tax withholding obligations related to any Award under the Plan, shall not be available for subsequent Awards under the Plan. Upon the exercise of any Award granted in tandem with any other Awards, such related Awards shall be canceled to the extent of the number of shares of Stock as to which the Award is exercised and, notwithstanding the foregoing, such number of shares shall no longer be available for Awards under the Plan. Upon the exercise of a SAR, the total number of shares subject to such SAR shall not again be available for Awards under the Plan.
For purposes of all then-outstanding Historical DuPont Awards, a Change in Control (as defined below) occurred on August 31, 2017. “Change in Control”, with respect to Historical DuPont Awards, means that the event set forth in any one of the following paragraphs shall have occurred:
(i)any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its Affiliates) representing 30% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (A) of paragraph (iii) below; or
(ii)the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or
(iii)there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or other entity, other than (A) a merger or consolidation which results in (I) the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 60% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation and (II) the individuals who comprise the Board immediately prior thereto constituting immediately thereafter at least a majority of the board of directors of the Company, the entity surviving such merger or consolidation or, if the Company or the entity surviving such merger is then a subsidiary, the ultimate parent thereof, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing 30% or more of the combined voting power of the Company’s then outstanding securities; or
(iv)the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets (it being conclusively presumed that any sale or disposition is a sale or disposition by the Company of all or substantially all of its assets if the consummation of the sale or disposition is contingent upon approval by the Company’s stockholders unless the Board expressly determines in writing that such approval is required solely by reason of any relationship between the Company and any other Person or an Affiliate of the Company and any other Person), other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity (A) at least 60% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale or disposition and (B) the majority of whose board of directors immediately following such sale or disposition consists of individuals who comprise the Board immediately prior thereto; or
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Section 36.
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a corporate transaction or series of transactions involving a sale or other disposition of a business of, or operations relating to, the Company or any of its Affiliates (whether by sale, spin-off, split-off or other transaction) that the Board expressly determines in its discretion to be appropriate to deem such transaction or series of transactions as a Change in Control for purposes of the Plan with respect to some or all of the Participants.
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DUPONT
OMNIBUS INCENTIVE PLAN
ANNEX B
Subject to Section 1(b) of the Plan:
(a) Aggregate Limits. The aggregate number of shares of Common Stock issuable under the Plan, as of February 13, 2014 (subject to grants, forfeitures and recycling since that date), shall not exceed 95,000,000, plus any shares of Common Stock that were subject to outstanding awards under the Prior Plans as of the Original Effective Date (such awards the “Prior Plan Awards”) that are subsequently canceled, expired, forfeited or otherwise not issued under a Prior Plan Award or settled in cash. Any shares of Common Stock issued under Options or Stock Appreciation Rights shall be counted against the number of shares issuable under the Plan on a one-for-one basis and any shares of Common Stock issued pursuant to Awards other than Options or Stock Appreciation Rights shall be counted against this limit as 2.1 shares of Common Stock for every one (1) share of Common Stock subject to such Award. Shares of Common Stock subject to Prior Plan Awards that, after the Original Effective Date, are canceled, expired, forfeited or otherwise not issued under the Prior Plan Award or settled in cash shall be added to the number of shares of Common Stock issuable under the Plan as one (1) share of Common Stock if such shares were subject to options or stock appreciation rights granted under the Prior Plans, and as 2.1 shares of Common Stock if such shares were subject to awards other than options or stock appreciation rights granted under the Prior Plans. The aggregate number of shares of Common Stock available for grant under this Plan and the number of shares of Common Stock subject to Awards outstanding at the time of any event described in Section 5 of the Plan shall be subject to adjustment as provided in Section 5 of the Plan. The shares of Common Stock issued pursuant to Awards granted under this Plan may be shares that are authorized and unissued or shares that were reacquired by the Company, including shares purchased in the open market.
(b) Issuance of Shares. For purposes of clause (a) of this Annex B, the aggregate number of shares of Common Stock issued under this Plan at any time shall equal only the number of shares of Common Stock actually issued upon exercise or settlement of an Award, and shares of Common Stock subject to Awards that have been canceled, expired, forfeited or otherwise not issued under an Award and shares of Common Stock subject to Awards settled in cash shall not count as shares of Common Stock issued under this Plan. Notwithstanding the foregoing, the following shares of Common Stock will not be added back (or with respect to Prior Plan Awards, will not be added) to the aggregate number of shares of Common Stock available for issuance: (i) shares of Common Stock that were subject to a stock-settled Stock Appreciation Right (or a stock appreciation right granted under a Prior Plan) and were not issued upon the net settlement or net exercise of such Stock Appreciation Right (or stock appreciation right granted under a Prior Plan), (ii) shares of Common Stock delivered to or withheld by the Company to pay the exercise price of an Option (or an option granted under a Prior Plan), (iii) shares of Common Stock delivered to or withheld by the Company to pay the withholding taxes related to an Option or Stock Appreciation Right (or an option or stock appreciation right granted under a Prior Plan), or (iv) shares of Common Stock repurchased on the open market with cash proceeds from exercise of an Option (or option granted under a Prior Plan). Any shares of Common Stock that again become available for grant pursuant to this Annex B shall be added back as one (1) share of Common Stock if such shares were subject to Options or Stock Appreciation Rights granted under the Plan or options or stock appreciation rights granted under a Prior Plan, and as 2.1 shares of Common Stock if such shares were subject to Awards other than Options or Stock Appreciation Rights granted under the Plan or subject to awards other than options or stock appreciation rights granted under the Prior Plans. In addition, any shares issued by the Company through the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares available for grants under the Plan.
(c) Tax Code Limits. The aggregate number of shares of Common Stock subject to Awards granted under this Plan during any calendar year to any one Participant shall not exceed 3,000,000. The aggregate number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options granted under this Plan shall not exceed 95,000,000, as of February 13, 2014 (subject to grants, forfeitures and recycling since that date, as applicable), which number shall be calculated and adjusted pursuant to Section 5 of the Plan only to the extent that such calculation or adjustment will not affect the status of any option intended to qualify as an Incentive Stock Option under Section 422 of the Code.
(d) Substitute Awards. Substitute Awards shall not reduce the shares of Common Stock authorized for issuance under the Plan or authorized for grant to a Participant in any calendar year. Additionally, in the event that a company acquired by the Company or any Subsidiary, or with which the Company or any Subsidiary combines, has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the shares of Common Stock authorized for issuance under the Plan; provided, that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were employees of such acquired or combined company before such acquisition or combination. For purposes of this clause (e) of Annex B, “Substitute Awards” means Awards granted or Common Stock issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.
For purposes of all then-outstanding Historical Dow Awards, a Change in Control (as defined below) occurred on August 31, 2017. “Change in Control”, with respect to Historical Dow Awards, means the consummation of:
(i)a change in ownership of a corporation where one person, or more than one person acting as a group acquires ownership of stock of the corporation that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of such corporation (including without limitation the consummation of a transaction having such effect); or
(ii)a change in the effective control of the corporation under which either: (A) any one person, or more than one person acting as a group acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the corporation possessing 30% or more of the total voting power of the stock of the corporation; or (B) a majority of members of the corporation’s board of directors is replaced during any 12 month period by directors whose appointment or election is not endorsed by a majority of the members of the corporation’s board of directors prior to the date of the appointment or election.
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is hereby entered into this June 1, 2019, with an employment term to be effective as of the Effective Date (as defined below), by and between DuPont de Nemours, Inc. (f/k/a DowDuPont Inc., the “Company”) and Edward D. Breen, an individual (the “Executive” and, together with the Company, the “Parties” and each a “Party”).
RECITALS
WHEREAS, pursuant to the transactions contemplated by that certain Agreement and Plan of Merger, dated as of December 11, 2015, as amended, by and among the Company, The Dow Chemical Company (“Dow”), Diamond Merger Sub, Inc., E. I. du Pont de Nemours and Company (“Old DuPont”) and Orion Merger Sub, Inc., Old DuPont and Dow each became subsidiaries of the Company (such transactions the “Mergers” and the date of consummation of the Mergers the “Closing Date”);
WHEREAS, effective as of the Closing Date, Old DuPont and Executive entered into an Employment Agreement the “Prior Agreement”) pursuant to which the Executive is serving as the Chief Executive Officer of the Company and as a member of its Board of Directors (the “Board”);
WHEREAS, effective February 1, 2019, Executive ceased being an employee of Old DuPont and became an employee of DuPont Specialty Products USA, LLC (“DSPU”), and Old DuPont assigned to DSPU, and DSPU assumed from Old DuPont, all of Old DuPont’s rights and obligations under the Prior Agreement;
WHEREAS, the Company has completed the separation of its Materials Science Business from its other businesses through the spin-off of Dow and the separation of its agriculture business and specialty products business through the spin-off of Corteva, Inc. (such company “Corteva” and such spin-off the “AgCo Spin”);
WHEREAS, effective as of immediately before the execution of this Agreement, DSPU has assigned and the Company assumed all of DSPU’s rights and obligations under the Prior Agreement;
WHEREAS, effective with effect from consummation of the AgCo Spin (the “Effective Time” and the date on which the Effective Time occurs, the “Effective Date”), the Parties wish to cause this amendment and restatement of the Prior Agreement to become effective and to read in its entirety as set forth herein;
WHEREAS, the Parties acknowledge that, after the Effective Time, Executive would have had “Good Reason” to terminate his employment under the Prior Agreement; and
WHEREAS, the Parties desire to amend and restate the Prior Agreement to provide that, among other things, a portion of the cash payment to which Executive otherwise would have been entitled upon such a termination generally instead shall be subject to Executive’s continued employment for the period specified herein.
NOW, THEREFORE, in consideration of the respective agreements of the Parties contained herein, it is agreed as follows:
1. Term. The term (the “Employment Term”) of Executive’s employment under this Agreement shall be for the period commencing at the Effective Time and ending December 31, 2020, or such later date as the Parties may mutually agree in writing.
2. Employment. During the Employment Term:
(a) Position, Duties and Reporting. Executive shall be employed by the Company or at the discretion of the Company one of its direct or indirect wholly-owned subsidiaries and shall serve as Executive Chairman of the Company. Executive shall report directly to the Board in his capacity as Executive Chairman of the Company. Executive shall perform the duties, undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons situated in similar executive capacities and consistent with the Bylaws of the Company as amended and in effect from time to time. The Chief Executive Officer shall report directly to Executive.
(b) Service on Board and Other Positions. The Company shall re-nominate Executive for election to the Board. Executive shall not receive separate or additional compensation for service on the Board. At, or any time after, the time of his termination of employment with the Company for any reason, Executive shall resign from the Board if requested to do so by the Company and Executive shall resign from each other position he holds with the Company or its affiliates within the meaning of Rule 12b-2 promulgated under Section 12 of the Securities Exchange Act of 1934, as amended (each, an “Affiliate”). The preceding sentence shall survive any termination of the Employment Term.
(c) Other Activities. Excluding periods of vacation and sick leave to which Executive is entitled and other service outside of the Company contemplated in this Section 2(c), Executive shall devote his full professional time and attention to the business and affairs of the Company to discharge the responsibilities of Executive hereunder. Before joining or agreeing to serve on corporate, civil or charitable boards or committees on which he does not serve as of the date hereof, Executive shall obtain approval of the Board. It is acknowledged and agreed that, as of the date hereof, Executive serves as a member of the Board of Directors of Comcast Corporation and the Advisory Board of New Mountain Capital LLC and that such service does not violate the terms of this Section 2(c). Executive may manage personal and family investments, participate in industry organizations and deliver lectures at educational institutions, so long as such activities do not interfere with the performance of Executive’s responsibilities hereunder.
(d) Employment Location. Executive’s principal place of employment shall be located in the headquarters of the Company effective as of the Effective Date or such other location as mutually agreed upon by the Board and Executive, provided that Executive shall travel and shall temporarily render services at other locations as may reasonably be required by his duties hereunder.
(e) Company Policies. Executive shall be subject to and shall abide by each of the personnel policies applicable to senior executives of the Company, including without limitation any policy restricting pledging and hedging investments in Company equity by Company executives, any policy the Company adopts regarding the recovery of incentive compensation (sometimes referred to as “clawback”) and any additional clawback provisions as required by law and applicable listing rules. This Section 2(e) shall survive the termination of the Employment Term.
3. Annual Compensation. During the Employment Term:
(a) Base Salary. Executive shall be paid an annual base salary of $1,000,000 (as it may be modified in accordance with the succeeding provisions of this subsection (a), “Base Salary”) in accordance with his employer’s regular payroll practices as in effect from time to time. During the Employment Term, the Base Salary will be reviewed at least annually and is subject to increase at the discretion of the independent members of the Board upon recommendation from the People and Compensation Committee of the Board (the “Committee”). Any such increase shall be Executive’s “Base Salary” for all purposes under this Agreement (including without limitation Section 5 hereof).
(b) Annual Bonus. The Company shall assume and honor the target annual cash bonus previously established by the Company and its Affiliates in respect of calendar year 2019. With respect to calendar year 2020, Executive shall be eligible to receive a target annual cash bonus of 100% of Base Salary (the “Target Bonus”) based on the achievement of such performance criteria as may be established by the independent members of the Board upon recommendation from the Committee. In the event of a termination of Executive’s employment as a result of, or following, the expiration of the Employment Term for reasons other than for Cause (as defined below), Executive shall be eligible for a bonus for the fiscal year in which such termination occurs based on achievement of applicable Company performance requirements for such fiscal year, payable when bonuses are paid to other senior executives, and prorated based on the number of days employed during such fiscal year.
4. Long-Term Incentive Compensation. With respect to calendar year 2020, Executive shall be eligible to receive long-term incentive compensation grants with a grant date fair value for financial accounting purposes of $9,000,000 at target based on the achievement of such performance criteria as may be established by the independent members of the Board upon recommendation from the Committee. To the extent that eligibility for “retirement” (or analogous concept) favorably affects rights under any such grant or any long-term incentive compensation grant at any time from the Company or Old DuPont held by Executive as of the date hereof, Executive’s age and years of service with the Company (and Old DuPont) from time to time shall be deemed to satisfy the requirements for such retirement, the terms of any such grant to the contrary notwithstanding. Grants made after the Effective Date shall have retirement vesting and, for any stock options, exercise terms that are not less favorable to Executive than such terms as are in effect for grants outstanding prior to the Effective Date). In the event of Executive’s termination of employment as a result of, or following, the expiration of the Employment Term for reasons other than for Cause, for purposes of such retirement eligibility he shall be deemed to have satisfied any post-grant minimum service period provided under such grants outstanding on such termination date. For the avoidance of doubt, in the event of a termination of Executive’s employment, other than either by the Company for Cause or by Executive without Good Reason (as defined below) (and not due to Disability (as defined below)), Executive shall be treated under the most favorable terms of each such grant respecting such termination or retirement.
5. Retention Benefit. If Executive remains employed by the Company or an Affiliate through December 31, 2020, or, if earlier, the date of Executive’s employment termination by the Company without Cause, by Executive for Good Reason or by reason of Executive’s death or Disability (Cause, Good Reason and Disability as defined below and such earliest date the “Retention Payment Date”), the Company shall pay (or cause to be paid) to Executive (or his estate, as the case may be), a cash lump-sum, within fifteen (15) days after the effectiveness of the Release (as defined below), equal to three (3) times the sum of Executive’s Base Salary and Target Bonus, provided that Executive (or his estate in the case of Executive’s death) (a) executes a general release of claims in the form attached hereto as Exhibit A (“Release”), and all applicable revocation periods relating to the Release expire within fifty-five (55) days following the Retention Payment Date, (b) complies with the provisions of Section 10 of the Old DuPont Senior Executive Severance Plan (as assumed by the Company in respect of employees of the Company or its subsidiaries who, as of immediately before the Effective Time, were participants therein (the “SESP”)), other than Section 10.5 thereof (titled "Non-Competition Regarding Activities"), and (c) complies with Section 10(b) of this Agreement, provided that the Restricted Period thereunder shall be for a period of eighteen (18) months following the date of Executive's termination of employment.
6. Other Benefits. During the Employment Term:
(a) Employee Benefits. Executive shall be entitled to participate in all employee benefit plans, practices and programs maintained by the Company and its Affiliates on the same basis and terms as are applicable to senior executives of the Company generally.
(b) Business Expenses. Upon submission of proper invoices in accordance with, and subject to, the normal policies and procedures of the Company and its Affiliates, Executive shall be entitled to receive prompt reimbursement of all reasonable out-of-pocket business, entertainment and travel expenses incurred by him in connection with the performance of his duties hereunder.
(c) Office and Facilities. Executive shall be provided with an appropriate permanent office and with such permanent secretarial and other support facilities as are commensurate with Executive’s status with the Company, which facilities shall be adequate for the performance of his duties hereunder.
(d) Vacation. Executive shall be entitled to paid time off in accordance with the policies as periodically established for senior executives of the Company, provided that he shall be eligible for not less than four weeks of vacation per calendar year (pro-rated for the portion of calendar year 2020 during the Employment Term).
(e) SESP. Executive’s participation in the SESP shall continue in effect as of and following the Effective Date in accordance with and subject to the terms and conditions of the SESP (as in effect on the date hereof, subject to the provisions of this Agreement and, as under the Prior Agreement, determined without regard to any otherwise applicable expiration of its Term (as defined therein)).
7. Termination Events. Executive’s employment with the Company and its Affiliates hereunder may be terminated under the circumstances set forth below in this Section 7:
(a) Death. Executive’s employment shall be terminated as of the date of Executive’s death.
(b) Disability. The Company may terminate Executive’s employment upon and at any time during the continuance of his disability within the meaning of the long-term disability plan maintained by the Company or its Affiliates in respect of senior executives of the Company as in effect from time to time (“Disability”).
(c) By the Company. The Company may terminate Executive’s employment either for Cause or without Cause (within the meaning of the SESP (“Cause”)) effective as of the date specified in the applicable Notice of Termination (as defined below).
(d) By Executive. Executive may terminate his employment either for Good Reason or without Good Reason (within the meaning of the SESP, provided that whether Good Reason exists shall be determined by reference to changes in the terms and conditions of Executive’s employment as in effect immediately following the Effective Time (“Good Reason”)) effective as of the date specified in the applicable Notice of Termination.
Notwithstanding anything in this Agreement to the contrary, to the extent required to avoid the imposition of a tax under Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended, Executive shall not be considered to have terminated employment with the Company and its Affiliates for purposes of this Agreement until he would be considered to have incurred a “separation from service” from the Company and its Affiliates within the meaning of Section 409A.
8. Termination Procedures.
(a) Notice of Termination. Any purported termination of Executive’s employment (other than by reason of death) shall be communicated by written Notice of Termination provided in accordance with Section 11(c) hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) specify the Date of Termination (as defined below) and (iii) set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.
(b) Date of Termination. For purposes of this Agreement, “Date of Termination” shall mean (i) if Executive’s employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that Executive shall not have returned to the full-time performance of Executive’s duties during such thirty (30) day period), and (ii) if Executive’s employment is terminated for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).
9. Compensation Upon Termination. Without limiting Section 5 hereof, upon termination of Executive’s employment during or immediately upon the expiration of the Employment Term, Executive (or his estate, as the case may be) shall be entitled to compensation and benefits as follows:
(a) Accrued Compensation. If Executive’s employment is terminated for any reason, the Company shall pay (or cause to be paid) to Executive or his estate, as the case may be, except to the extent it would result in a duplication of benefits payable under the SESP, (i) any unpaid Base Salary earned by Executive, and any unused paid time off accrued by Executive, through the Date of Termination, (ii) any expenses incurred but not yet reimbursed in accordance with Section 6(b) hereof, (iii) any vested employee benefits to which Executive is entitled as of the Date of Termination under the employee benefit plans of the Company or an Affiliate, (iv) except in the case of a termination by the Company for Cause, any annual cash bonus earned by Executive for a prior year but not yet paid to Executive as of the Date of Termination, and (v) for the year in which the Employment Term expires, if applicable, a bonus as set forth in Section 3(b) (collectively, as applicable, the “Accrued Compensation”).
(b) Other than for Cause. If Executive’s employment terminates for any reason other than by the Company for Cause, the Company shall pay or provide (or cause to be paid or provided) to Executive or his estate, as the case may be, the compensation and benefits determined for a Tier I participant under Section 2.1(ii)-2.1(vi) of the SESP (but, for the avoidance of doubt, not the compensation described in Section 2.1(i) of the SESP) without regard for any expiration of the Term (as defined under the SESP) thereunder, subject to (i) a Release from Executive (or his estate, as the case may be) on the terms otherwise applicable under the SESP, (ii) Executive's compliance with the provisions of Section 10 of the SESP, other than Section 10.5 thereof, and (iii) complies with Section 10(b) of this Agreement, provided that the Restricted Period thereunder shall be for a period of eighteen (18) months following the date of Executive's termination of employment.
(b) For Cause. If Executive’s employment is terminated by the Company for Cause, the Company shall pay (or cause to be paid) to Executive the Accrued Compensation and shall have no further obligation to provide compensation or benefits to Executive by reason of such termination.
(c) Equity and Other Long-Term Incentive Awards. All unvested equity or other long-term incentive compensation awards outstanding immediately prior to a termination of Executive’s employment shall be governed by the respective terms of the awards, subject to Section 4 above.
10. Restrictive Covenants.
(a) Non-Disparagement. From and following the Date of Termination, Executive agrees not to make negative comments or otherwise disparage the Company or any companies that are or ever were its controlled affiliates whether or not still controlled, or any of their current or former directors or officers at a level of Vice President or above, in any manner reasonably likely to be harmful to them or their business, business reputation or personal reputation, as applicable. The Company agrees that the Company will not, and the Company will instruct the individuals reporting directly to Executive as of the Date of Termination and the members of the Board as of the Date of Termination to not, while employed by the Company or its Affiliates or serving as a member of the Board, as the case may be, make negative comments about Executive or otherwise disparage Executive in any manner that is reasonably likely to be harmful to his business reputation or personal reputation. The Company and Executive will not assist, encourage, discuss, cooperate, incite, or otherwise confer with or aid any others in discrediting the other or in pursuit of a claim or other action against the other, except as required by law. Nothing contained in this Section 10(a) shall prevent either Party from making truthful statements in any judicial, arbitration, governmental, or other appropriate forum for adjudication of disputes between or among the Parties or in any response or disclosure by either Party compelled by legal process or required by applicable law.
(b) Non-Competition. During Executive’s employment and for a period of one (1) year after Executive’s employment with the Company terminates for any reason (the "Restricted Period"), whether voluntarily or involuntarily, Executive will not, without the express written consent of the General Counsel of the Company or her or his designee, directly or indirectly perform the same or similar duties that Executive performed for the Company during the two (2) years preceding the termination of Executive’s employment, for any Competing Business. A “Competing Business,” as used in this Agreement, means only those companies (and their subsidiaries) set forth on the Appendix attached hereto. Notwithstanding any of the foregoing to the contrary, if Executive is employed by the Company in Georgia, Louisiana, or South Dakota, then the geographic scope of this restriction is limited to the counties, municipalities, and/or parishes in which Executive worked for the Company, and all directly adjacent counties, municipalities, and/or parishes within the same state. The Restricted Period set forth in this Section 10(b) shall not expire and shall be tolled during any period in which Executive is in violation of such restrictive period; and therefore, such Restricted Period shall be extended for a period equal to the duration of Executive’s violations thereof. Executive further agrees that he will promptly disclose the existence of the post-employment restriction set forth in this Section 10(b) to all subsequent employers and/or prospective employers until all such covenant has expired. The restrictive covenant set forth in this Section 10(b) above (the “Non-Competition Covenant”) shall be the sole covenant governing restrictions on Executive’s engaging in competitive activity, and shall supersede and control over any and all other non-competition covenants, governing Executive’s non-competition obligations to the Company during and after Executive’s employment. For the avoidance of doubt, the Non-Competition Covenant (x) shall supersede and control over covenants in Section 10.5 of the SESP (as in effect on or after the date hereof) and the covenant titled “Non-Competition” in the applicable section of Executive’s award agreements under the Company Equity and Incentive Plan (entered into at any time); (y) shall not supersede or control over any of the covenants in Sections 10.2, 10.3, and 10.4 of the SESP (as in effect at any time), the covenants titled “Non-Solicitation of and Non-Interference with Employees” and “Non-Solicitation and Non-Service of Customers” in the applicable sections of award agreements under the Company’s Equity and Incentive Plan (entered into at any time), or any other restrictive covenants of Executive (entered into at any time) governing non-solicitation of or non-interference with customers or non-solicitation of, non-hire of or non-interference with employees; and (z) shall not control over any other agreement between Executive and the Company (or an affiliate of the Company) that is entered into after the date hereof that provides, by specific reference to this Section 10(b), that the Non-Competition Covenant is not so controlling.
If Executive engages in restricted conduct prohibited in this Section 10(b) for any reason, in addition to all other remedies in law and/or equity available to the Company, (i) Executive shall forfeit all performance units granted in 2016 and all stock options, restricted stock units and performance units granted on or after January 1, 2017 (whether or not vested) and shall immediately pay to the Company, (I) with respect to previously exercised stock options, an amount equal to (x) the per share Fair Market Value of the Stock (as defined in the Company Equity and Incentive Plan) on the date on which the Stock was issued with respect to the applicable previously exercised options times (y) the number of shares of Stock underlying such previously exercised options, without regard to any taxes that may have been deducted from such amount, and (II) Executive shall forfeit all restricted stock units and performance units (whether or not vested) and shall immediately pay to the Company, with respect to any such previously vested units, a cash amount equal to the Fair Market Value of the Stock on the date on which the Stock was issued with respect to such units, without regard to any taxes that may have been deducted from such amount; (ii) the Company shall be entitled to monetary damages incurred as a result of such conduct, (iii) the Company shall be entitled to injunctions, both preliminary and permanent, enjoining or restraining such conduct, and (iv) the Company shall be entitled to all reasonable sums and costs, including attorneys’ fees, incurred to successfully defend or enforce the provisions of this Agreement (and shall pay to Executive all reasonable sums and costs, including attorneys’ fees, incurred by Executive if such effort is not successful).
11. Miscellaneous.
(a) Successors and Assigns.
(i) This Agreement shall be binding upon and shall inure to the benefit of the Company, its respective successors and permitted assigns and the Company shall require any respective successor or assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place. The Company may not assign or delegate any rights or obligations hereunder except to a successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company.
(ii) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by Executive, his beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal personal representatives.
(b) Fees and Expenses. The Company will pay Executive’s reasonable professional fees incurred in connection with the negotiation and preparation of this Agreement up to a maximum of fifty thousand dollars ($50,000). The Company shall reimburse Executive (or cause him to be reimbursed) for all expenses (including reasonable attorney’s fees) incurred by Executive in enforcing this Agreement or any provision hereof or as a result of the Company contesting the validity or enforceability of this Agreement or any provision hereof, regardless of the outcome thereof, provided, that the Company shall not be obligated to pay any such fees and expenses arising out of any action brought by Executive if the finder of fact in such action determines that Executive’s position in such action was frivolous or maintained in bad faith. Such costs shall be paid to Executive promptly upon presentation of expense statements or other supporting information evidencing the incurrence of such expenses.
(c) Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including any Notice of Termination) shall be in writing and shall be deemed to have been duly given when personally delivered or sent by Certified mail, return receipt requested, postage prepaid, addressed to the respective addresses last given by one Party to the other Party or, if none, in the case of the Company, to the Company’s headquarters directed to the attention of the Company’s General Counsel and, in the case of Executive, to the most recent address shown in the personnel records of the Company or its Affiliates. All notices and communications shall be deemed to have been received on the date of personal delivery thereof or on the third business day after the mailing thereof, except that notice of change of address shall be effective only upon receipt.
(d) Withholding. The Company shall be entitled to withhold (or to cause the withholding of) the amount, if any, of all taxes of any applicable jurisdiction required to be withheld by an employer with respect to any amount paid to Executive hereunder. The Company, in its sole and absolute discretion, shall make all determinations as to whether it is obligated to withhold any taxes hereunder and the amount thereof.
(e) Modification. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and the Company. No waiver by either Party at any time of any breach by the other Party of, or compliance with, any condition or provision of this Agreement to be performed by the other Party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
(f) Effect of Other Law. Anything herein to the contrary notwithstanding, the terms of this Agreement shall be modified to the extent required to meet the provisions of the Sarbanes-Oxley Act of 2002, Section 409A, the Dodd-Frank Wall Street Reform and Consumer Protection Act or other federal law applicable to the employment arrangements between Executive and the Company; provided, and for the avoidance of doubt, the adjudication of any dispute between Executive and the Company in respect of Executive’s entitlements under the SESP or Section 5 hereof shall be de novo by a court of competent jurisdiction. Any delay in providing benefits or payments, any failure to provide a benefit or payment, or any repayment of compensation that is required under the preceding sentence shall not in and of itself constitute a breach of this Agreement, provided, however, that the Company shall provide (or cause to be provided) economically equivalent payments or benefits to Executive to the extent permitted by law.
(g) Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the Delaware applicable to contracts executed in and to be performed entirely within such State, without giving effect to the conflict of law principles thereof.
(h) Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.
(i) Headings. The headings and captions in this Agreement are provided for reference and convenience only, shall not be considered part of this Agreement, and shall not be employed in the construction of this Agreement.
(j) Construction. This Agreement shall be deemed drafted equally by both the Parties, and any presumption or principle that the language is to be construed against either Party shall not apply.
(k) Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. Signatures delivered by facsimile or in .pdf format shall be deemed effective for all purposes.
(l) Section 409A. The Parties intend for the payments and benefits under this Agreement to be exempt from Section 409A or, if not so exempt, to be paid or provided in a manner which complies with the requirements of such section, and intend that this Agreement shall be construed and administered in accordance with such intention. If any payments or benefits due to Executive hereunder would cause the application of an accelerated or additional tax under Section 409A, such payments or benefits shall be restructured in a manner which does not cause such an accelerated or additional tax. For purposes of the limitations on nonqualified deferred compensation under Section 409A, each payment of compensation under this Agreement shall be treated as a separate payment of compensation. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following Executive’s separation from service shall instead be paid on the first business day after the date that is six months following Executive’s termination date (or death, if earlier). Notwithstanding anything to the contrary in this Agreement, all (A) reimbursements and (B) in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (x) the amount of expenses eligible for reimbursement, or in kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in kind benefits to be provided, in any other calendar year; (y) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred; and (z) the right to reimbursement or in kind benefits is not subject to liquidation or exchange for another benefit.
(m) Entire Agreement. This Agreement and the SESP constitute the entire agreement between or among Executive, Old DuPont and the Company and supersede all prior agreements (including without limitation, effective the Effective Date, the Prior Agreement), understandings and arrangements, oral or written, between or among Executive, Old DuPont and the Company, with respect to the subject matter hereof, including without limitation any term sheets or other similar presentations. In the event of any inconsistency between this Agreement and any other plan, program, practice or agreement in which Executive is a participant (“Other Agreement”), this Agreement shall control unless such Other Agreement specifically refers to this Agreement as not so controlling.
(n) Certain Executive Acknowledgments. Executive acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on Executive’s own judgment. Executive acknowledges that he has had the opportunity to consult with legal counsel of his choice in connection with the drafting, negotiation and execution of this Agreement.
(o) Indemnification; D&O Insurance. Executive shall be indemnified and held harmless (including advances of attorneys fees and costs, subject to a customary undertaking to refund such amounts if finally determined not to be so indemnifiable), and covered under any contract of directors and officers liability insurance that covers members of the Board in respect of his actions and omissions to act as an officer of the Company and member of the Board (including service on any committee thereof) or otherwise on behalf of the Company, including without limitation as an officer or member of the board of directors of Old DuPont (for the avoidance of doubt, including without limitation prior to the Closing Date), to the maximum extent permitted under the Company certificate of incorporation and Bylaws and applicable law. This Section 11(o) shall survive the termination of Executive’s employment and the expiration of the Employment Term.
[Remainder of page left intentionally blank]
IN WITNESS WHEREOF, the Parties have executed this Employment Agreement as of the day and year first above written.
DUPONT DE NEMOURS, INC.
By: /s/ Darrell Ford
Name: Darrell Ford
Title: Chief Human Resources Officer
EXECUTIVE
/s/ Edward D. Breen
Edward D. Breen
[Signature Page to Edward D. Breen Employment Agreement]
APPENDIX
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1.
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3M Company
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2.
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AGRANA Beteiligungs-Aktiengesellschaft
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3.
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Akzo Nobel N.V.
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4.
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Albemarle Corporation
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5.
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ALPEK, S.A.B. de C.V.
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6.
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Archer-Daniels-Midland Company
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7.
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Arkema S.A.
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8.
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Asahi Kasei Corporation
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9.
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Ashland Global Holdings Inc.
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10.
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Associated British Foods plc
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11.
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Axalta Coating Systems Ltd.
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12.
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BASF SE
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13.
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Bayer Aktiengesellschaft
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14.
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Berry Global Group, Inc.
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15.
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Braskem S.A.
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16.
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Bunge Limited
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17.
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Cabot Corporation
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18.
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Celanese Corporation
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19.
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CF Industries Holdings, Inc.
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20.
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China National Chemical Corporation Limited
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21.
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Chr. Hansen Holding A/S
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22.
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CHS Inc.
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23.
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Clariant AG
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24.
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Compagnie de Saint-Gobain S.A.
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25.
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Covestro AG
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26.
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DIC Corporation
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27.
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Eagle Materials Inc.
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28.
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Eastman Chemical Company
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29.
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Ecolab Inc.
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30.
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Evonik Industries AG
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31.
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Exxon Mobil Corporation
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32.
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Ferro Corporation
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33.
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FMC Corporation
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34.
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Formosa Chemicals & Fibre Corporation
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35.
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Givaudan SA
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36.
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Glanbia plc
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37.
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Hailiang Group Co., Ltd.
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38.
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Hanwha Chemical Corporation
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39.
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Heilongjiang Beidahuang Land Reclamation Group Corporation
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40.
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Hitachi Chemical Company, Ltd.
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41.
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Honeywell International Inc.
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42.
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Huntsman Corporation
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43.
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Hyosung Corporation
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44.
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Illinois Tool Works Inc.
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45.
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Indorama Ventures Public Company Limited
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46.
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Ingredion Incorporated
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47.
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International Flavors & Fragrances Inc.
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48.
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Johnson Matthey Plc
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49.
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JSR Corporation
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50.
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Kaneka Corporation
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51.
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Kerry Group plc
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52.
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Kolon Industries, Inc.
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53.
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Koninklijke DSM N.V.
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54.
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Kumho Petrochemical Co., Ltd.
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55.
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Kuraray Co., Ltd.
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56.
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LafargeHolcim Ltd
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57.
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Land O'Lakes, Inc.
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58.
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LANXESS Aktiengesellschaft
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59.
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LG Chem, Ltd.
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60.
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LIXIL Group Corporation
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61.
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Lotte Chemical Corporation
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62.
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LyondellBasell Industries N.V.
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63.
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Mapei SpA
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64.
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Mexichem, S.A.B. de C.V.
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65.
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Mitsubishi Chemical Holdings Corporation
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66.
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Mitsui Chemicals, Inc.
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67.
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Novozymes A/S
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68.
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Nutrien Ltd.
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69.
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Olin Corporation
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70.
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Owens Corning
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71.
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PPG Industries, Inc.
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72.
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Platform Specialty Products Corporation
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73.
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PolyOne Corporation
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74.
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PTT Global Chemical Public Company Limited
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75.
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Saudi Basic Industries Corporation
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76.
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Shin-Etsu Chemical Co., Ltd.
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77.
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Sinopec Shanghai Petrochemical Company Limited
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78.
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SK Innovation Co., Ltd.
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79.
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SKC Co., Ltd.
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80.
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Solvay SA
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81.
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Syngenta AG
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82.
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Sumitomo Chemical Company, Limited
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83.
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Tate & Lyle plc
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84.
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Teijin Limited
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85.
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The Mosaic Company
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86.
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Toray Industries, Inc.
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87.
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Toyobo Co., Ltd.
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88.
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Travis Perkins plc
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89.
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Trinseo S.A.
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90.
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Tronox Limited
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91.
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Umicore S.A.
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92.
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UPL Limited
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93.
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USG Corporation
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94.
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Wacker Chemie AG
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95.
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Westlake Chemical Corporation
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96.
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Yunnan Yuntianhua Co., Ltd.
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EXHIBIT A
GENERAL RELEASE
DowDuPont Inc. (“Employer”) and Edward D. Breen, his/her heirs, executors, administrators, successors, and assigns (collectively “Employee”), agree that:
1. Last Day of Employment. Employee’s last day of employment with Employer, and/or each of Employer’s parents, affiliates, and subsidiaries, is , 20__ (“Separation Date”).
2. Consideration. Provided that (a) Employee signs this General Release (“Agreement”) and does not revoke this Agreement within the time periods set forth herein, and (b) Employee complies with the provisions of Section 10 (Restrictive Covenants) of the Company’s Senior Executive Severance Plan, Employee will receive the payments and benefits set forth in Section 9(c) of the Employment Agreement entered into ______________, 201_ by and between Employer and Employee (“Employment Agreement”), including the cash payments set forth on Attachment 1 hereto. Such payments and benefits shall be provided in accordance with the terms of the Employment Agreement, and will not be paid before Employee’s employment with Employer terminates on the Separation Date, Employee signs this Agreement within the time period set forth below, the revocation period set forth below expires, and Employee has not revoked Employee’s acceptance of this Agreement.
3. No Consideration Absent Execution of this Agreement. Employee understands and agrees that Employee would not receive the monies and/or benefits specified in paragraph “2” above, except for Employee’s execution of this Agreement and the fulfillment of the promises contained herein.
4. General Release, Claims Not Released and Related Provisions.
a. General Release of Claims. Employee knowingly and voluntarily releases and forever discharges Employer, its parent corporation, affiliates and subsidiaries, each of their divisions, predecessors, insurers, successors and assigns, and all of their current and former employees, attorneys, officers, directors and agents, whether now in existence or hereafter created, both individually and in their business capacities, and their employee benefit plans and programs and their administrators and fiduciaries (collectively referred to throughout the remainder of this Agreement as “Releasees”), of and from any and all claims, complaints, actions, suits, arbitrations, disputes, rights, promises, obligations, losses, damages, costs, fees, attorneys’ fees or liabilities of every kind whatsoever, in law or in equity known and unknown, asserted or unasserted (“Claims”), which Employee ever had, now has or may hereafter claim to have by reason of any matter, cause or thing whatsoever: (i) arising from the beginning of time up to the date the Employee executes this Agreement, including, but not limited to (A) any such Claims relating in any way to Employee’s employment relationship with Employer or any other Releasee, (B) any such Claims arising under any federal, state, local or foreign statute or regulation, including, without limitation, the Age Discrimination in Employment Act of 1967, as amended by the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, the Worker Adjustment and Retraining Notification Act of 1988, 42 U.S.C. Section 1981, the Equal Pay Act of 1963, the Occupational Safety and Health Act of 1970, the Fair Credit Reporting Act of 1970, the Delaware, Discrimination in Employment Act, the Delaware Handicapped Persons Employment Protections Act, each as amended and including each of their respective implementing regulations, and/or any other federal, state, local or foreign law (statutory, regulatory or otherwise) that may be legally waived and released, and (C) any such public policy, contract, tort, or common law Claim, including without limitation, breach of contract, breach of a covenant of good faith and fair dealing, interference with business opportunity or contracts, negligence, misrepresentation, fraud, detrimental reliance, personal injury, assault, battery, defamation, false light, invasion of privacy, infliction of emotional distress, retaliation, constructive discharge, or wrongful discharge; (ii) arising out of or relating to the termination of Employee’s employment with Employer or any other Releasee; or (iii) arising under or relating to any policy, agreement, understanding or promise, written or oral, formal or informal, between Employer or any other Releasee and Employee, including, but not limited to, the Employment Agreement.
b. Claims Not Released. Employee is not waiving any rights he/she may have to: (a) his own vested or accrued employee benefits under Employer’s health, welfare, or retirement plans as of the Separation Date; (b) his benefits and/or the right to seek benefits under applicable workers’ compensation and/or unemployment compensation statutes; (c) claims for indemnification (including advances) under Section 11(p) of the Employment Agreement, under the Merger Agreement (as defined in the Employment Agreement) or under the Company’s governing instruments or applicable law, or any applicable contract of directors and officers liability insurance, (d) claims as a stockholder of the Company, (e) any bounty that may be recoverable as a result of participating in the Securities and Exchange Commission’s whistleblower program, or any other bounty program for which recovery cannot be waived as a matter of law; (f) pursue claims which by law cannot be waived by signing this Agreement; (g) enforce this Agreement; and/or (h) challenge the validity of this Agreement.
c. Governmental Agencies. Nothing in this Agreement prohibits or prevents Employee from filing a charge with or participating, testifying, or assisting in any investigation, hearing, whistleblower proceeding or other proceeding before the U.S. Equal Employment Opportunity Commission, the National Labor Relations Board or a similar agency enforcing federal, state or local anti-discrimination laws, or any federal, state, or local government agency (e.g. EEOC, NLRB, SEC., etc.), nor does anything in this Agreement preclude, prohibit, or otherwise limit, in any way, Employee’s rights and abilities to contact, communicate with, report matters to, or otherwise participate in any whistleblower program administered by any such agencies. However, to the maximum extent permitted by law, Employee agrees that if such an administrative claim is made to such an anti-discrimination agency, Employee shall not be entitled to recover any individual monetary relief or other individual remedies, except that Employee may recover any bounty that may be payable as a result of participating in the Securities and Exchange Commission’s whistleblower program as set forth in paragraph “4b” above.
In addition, nothing in this Agreement or any other agreement with or policy of Employer or any other Releasee, including but not limited to the release of claims, prohibits Employee from: (1) reporting possible violations of federal law or regulations, including any possible securities laws violations, to any governmental agency or entity, including but not limited to the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the U.S. Congress, or any agency Inspector General; (2) making any other disclosures that are protected under the whistleblower provisions of federal law or regulations; or (3) otherwise fully participating in any federal whistleblower programs, including but not limited to any such programs managed by the U.S. Securities and Exchange Commission and/or the Occupational Safety and Health Administration. Moreover, nothing in this Agreement prohibits or prevents Employee from receiving individual monetary awards or other individual relief by virtue of participating in such federal whistleblower programs.
5. Waiver of California Civil Code § 1542 (for Employees who lived and/or worked for Employer in California). To affect a full and complete release as described above, Employee expressly waives and relinquishes all rights and benefits of section 1542 of the Civil Code of the State of California, and does so understanding and acknowledging the significance and consequence of specifically waiving section 1542. Section 1542 of the California Civil Code states:
A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.
Thus, notwithstanding the provisions of section 1542, and to implement a full and complete release of all claims, Employee expressly acknowledges this Agreement is intended to include, without limitation, all claims Employee does not know or suspect to exist in Employee’s favor at the time of signing this Agreement, and that this Agreement contemplates the extinguishment of any such Claim or Claims. Employee warrants Employee has read this Agreement, including this waiver of California Civil Code section 1542, and has had the opportunity to consult with legal counsel about this Agreement and specifically about this waiver of section 1542, and that Employee understands this Agreement and the section 1542 waiver. Employee therefore freely and knowingly enters into this Agreement. Employee acknowledges he/she may later discover facts different from or in addition to those he/she now knows or believes to be true regarding the matters released or described in this Agreement, and even so agrees the releases and agreements contained in this Agreement shall remain effective in all respects notwithstanding any later discovery of any different or additional facts. Employee assumes any and all risk of any mistake in connection with the true facts involved in the matters, disputes or controversies described in this Agreement or with regard to any facts now unknown relating to those matters.
6. Acknowledgments and Affirmations.
a. Employee affirms that Employee has been paid and/or has received all compensation, wages, bonuses, commissions, and/or benefits which are due and payable as of the date Employee signs this Agreement.
b. Employee also affirms that Employee has been granted any leave to which Employee was entitled under the Family and Medical Leave Act or state or local leave or disability accommodation laws.
c. To the extent that Employee has any pending applications or claims for benefits, including Long-Term Disability benefits, Employee hereby withdraws such applications and/or claims in consideration of this Agreement.
d. Employee further affirms that Employee has no known workplace injuries or occupational diseases that Employee has not disclosed to Employer.
e. Employee further affirms that all of Employer’s decisions regarding Employee’s pay and benefits through the Separation Date were not discriminatory based on age, disability, race, color, sex, religion, national origin or any other classification protected by law.
7. Limited Disclosure. Employee agrees, prior to any public disclosure by the Company, not to disclose any information regarding the substance of this Agreement, except to Employee’s spouse, tax advisor, an attorney with whom Employee chooses to consult regarding Employee’s consideration of this Agreement and/or to any federal, state or local government agency.
8. Return of DuPont Property.
a. Employee affirms that Employee has returned all of Employer’s property, documents, and/or confidential information in Employee’s possession or control, whether in hard copy of electronic format. Employee also affirms that Employee is in possession of all of Employee’s property that Employee had at Employer’s premises and that Employer is not in possession of any of Employee’s property.
b. Notwithstanding any other provision of this Agreement or any other agreement with or policy of Employer or any other Releasee, pursuant to the federal Defend Trade Secrets Act of 2016, Employee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made to Employee’s attorney in relation to a lawsuit for retaliation against Employee for reporting a suspected violation of law; or (C) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
9. Rights in Connection With Investigations. Notwithstanding any of the foregoing to the contrary, nothing in Agreement or any other policy or agreement with Employer or any other Releasee shall be construed to prohibit Employee from reporting possible violations of law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress and any Inspector General, or making other disclosures that are protected under the whistleblower provision of law or regulation. Employee is not required to obtain prior approval or notify Employer that such reports or disclosures have been made. Furthermore, Employee’s cooperation with and participation in any investigation by, or action taken by, federal, state or local administrative agencies, regulatory agencies or law enforcement agencies will not violate any provision of this Agreement.
10. Cooperation. Following the termination of Employee’s employment, Employee agrees to cooperate with Employer in any reasonable manner as Employer may request, including, but not limited to, furnishing information to and otherwise consulting with Employer, and assisting Employer in any litigation or potential litigation or other legal matters in which Employer (or any of the Releasees) and Employee are not adverse, provided that such litigation or potential litigation or other legal matters concern or relate to Employee’s employment with Employer, including, but not limited to, meeting with and fully answering the questions of Employer or its representatives or agents, and testifying and preparing to testify at any deposition or trial. Employer agrees to compensate Employee for any reasonable and documented out-of-pocket expenses incurred as a result of such cooperation.
11. Governing Law and Interpretation. This Agreement shall be governed and conformed in accordance with the laws of the State of Delaware without regard to its conflict of laws provision. Any action arising out of or relating to this Agreement or Employee’s employment or termination of employment shall be brought exclusively in the state or federal courts of the State of Delaware, and the Parties expressly consent to the jurisdiction and venue of such courts. In the event of a breach of any provision of this Agreement, either party may institute an action specifically to enforce any term or terms of this Agreement and/or seek any damages for breach. Should any provision of this Agreement be declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, excluding the general release language, such provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect.
12. [Explanation of Selection Process, Eligibility Requirements, and Decisional Unit Data.]
13. Nonadmission of Wrongdoing. The parties agree that neither this Agreement nor the furnishing of the consideration for this Agreement shall be deemed or construed at any time for any purpose as an admission by Releasees of wrongdoing or evidence of any liability or unlawful conduct of any kind.
14. Amendment. This Agreement may not be modified, altered or changed except in writing and signed by both Parties wherein specific reference is made to this Agreement.
15. Entire Agreement. This Agreement sets forth the entire agreement between the parties hereto, and fully supersedes any prior agreements or understandings between the parties, except any written intellectual property, restrictive covenant or confidentiality agreements between Employer and Employee, which are incorporated herein by reference and shall remain in full force and effect. If any such agreements are in conflict with each other, they shall be construed to provide the maximum protection for Employer.
16. Expiration of Offer & Revocation. The offer contained in this Agreement will expire if it is not accepted within [twenty-one (21)] [forty-five (45)] calendar days following Employee’s Separation Date, unless such expiration is waived in writing by an authorized designee of Employer. Employee may revoke the Agreement for up to seven (7) calendar days after signing the Agreement, after which the Agreement will become irrevocable, unless Employee is employed in Minnesota, in which case Employee may revoke the Agreement for up to fifteen (15) calendar days after signing the Agreement, after which the Agreement will become irrevocable. Any such revocations shall be submitted by either:
a. Mailing a revocation notice, with the subject line “Revocation,” to: HR Direct Service Center, Attention: Release, 974 Centre Road, Wilmington, Delaware 19805; or
b. Emailing a revocation notice, with the subject line “ Revocation,” to: hrdirect.usa@dupont.com.
Provided that Employee has not revoked this Agreement in the time frames set forth above, this Agreement shall become effective on the eighth (8th) day after it has been executed by Employee.
17. Execution and Return of Agreement. This Agreement may be executed and returned on or after the Separation Date by either:
a. Mailing a signed copy of this complete agreement (not just the signature page), with subject line “Release,” to: HR Direct Service Center, Attention: Release, 974 Centre Road, Wilmington, Delaware 19805; or
b. Scanning and emailing a signed copy of this complete agreement (not just the signature page), with subject line “Release,” to: hrdirect.usa@dupont.com.
This Agreement may not be executed or returned prior to the Separation Date. The Agreement may be signed in counterparts, each of which shall be deemed an original, but all of which, taken together, shall constitute the same instrument. A signature made on a copy of this Agreement transmitted by electronic mail will have the same effect as the original signature.
EMPLOYEE IS ADVISED THAT EMPLOYEE HAS UP TO [TWENTY ONE (21)] [FORTY-FIVE (45)] CALENDAR DAYS FOLLOWING EMPLOYEE’S SEPARATION DATE TO EXECUTE AND RETURN THIS AGREEMENT. EMPLOYEE ALSO IS ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO EMPLOYEE’S SIGNING OF THIS AGREEMENT. EMPLOYEES WHO WERE EMPLOYED BY EMPLOYER WITHIN THE STATE OF WEST VIRGINIA ARE FURTHER ADVISED THAT THE WEST VIRGINIA STATE BAR ASSOCIATION CAN BE REACHED AT 1 (800) 642-3617.
EMPLOYEE MAY REVOKE THIS AGREEMENT FOR A PERIOD OF SEVEN (7) CALENDAR DAYS FOLLOWING THE DAY EMPLOYEE SIGNS THIS AGREEMENT. IF EMPLOYEE WAS EMPLOYED BY EMPLOYER WITHIN THE STATE OF MINNESOTA, EMPLOYEE MAY ALSO REVOKE EMPLOYEE’S WAIVER OF CLAIMS UNDER THE MINNESOTA HUMAN RIGHTS ACT WITHIN FIFTEEN (15) CALENDAR DAYS FOLLOWING THE DAY EMPLOYEE SIGNS THIS AGREEMENT. INFORMATION ON HOW TO SUBMIT A REVOCATION IS SET FORTH IN PARAGRAPH 16, ABOVE.
EMPLOYEE AGREES THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL UP TO [TWENTY ONE (21)] [FORTY-FIVE (45)] CALENDAR DAY CONSIDERATION PERIOD.
EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS EMPLOYEE HAS OR MIGHT HAVE AGAINST RELEASEES.
The parties knowingly and voluntarily sign this Agreement as of the date(s) set forth below:
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EDWARD D. BREEN
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DOWDUPONT INC.
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By:
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By:
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[Insert Appropriate Signatory]
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Date
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Date:
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This Agreement shall not be signed by Employee prior to the Separation Date.
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Attachment 1
Cash Payments and Benefits
[Insert schedule of cash payments and noncash benefits pursuant to Section 5 or Section 9(b) of the Employment Agreement]
August 6, 2019
Board of Directors
DuPont de Nemours, Inc.
974 Centre Road
Wilmington, Delaware 19805
Dear Directors:
We are providing this letter to you for inclusion as an exhibit to DuPont de Nemours, Inc.’s (the “Company”) Quarterly Report on Form 10-Q for the period ended June 30, 2019 (the “Form 10-Q”) pursuant to Item 601 of Regulation S-K.
We have been provided a copy of the Company’s Form 10-Q. Note 10 therein describes a change in accounting principle from LIFO to Average Cost. It should be understood that the preferability of one acceptable method of accounting over another for inventory costing has not been addressed in any authoritative accounting literature, and in expressing our concurrence below we have relied on management’s determination that this change in accounting principle is preferable. Based on our reading of management’s stated reasons and justification for this change in accounting principle in the Form 10-Q, and our discussions with management as to their judgment about the relevant business planning factors relating to the change, we concur with management that such change represents, in the Company’s circumstances, a change to a preferable accounting principle in conformity with Accounting Standards Codification 250, Accounting Changes and Error Corrections.
We have not audited any financial statements of the Company. Accordingly, our comments are subject to change upon completion of an audit of the financial statements covering the period of the accounting change.
Very truly yours,
/s/PricewaterhouseCoopers LLP
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DuPont de Nemours Inc.
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EXHIBIT 31.1
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Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, C. Marc Doyle, certify that:
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1.
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I have reviewed this quarterly report on Form 10-Q of DuPont de Nemours Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
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a)
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 6, 2019
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/s/ C. Marc Doyle
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C. Marc Doyle
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Chief Executive Officer
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DuPont de Nemours Inc.
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EXHIBIT 31.2
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Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Jeanmarie F. Desmond, certify that:
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1.
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I have reviewed this quarterly report on Form 10-Q of DuPont de Nemours Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
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a)
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: August 6, 2019
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/s/ Jeanmarie F. Desmond
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Jeanmarie F. Desmond
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Chief Financial Officer
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DuPont de Nemours, Inc.
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EXHIBIT 32.1
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Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, C. Marc Doyle, Chief Executive Officer of DuPont de Nemours Inc. (the “Company”), certify that:
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1.
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the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2019 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ C. Marc Doyle
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C. Marc Doyle
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Chief Executive Officer
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August 6, 2019
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DuPont de Nemours Inc.
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EXHIBIT 32.2
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Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Jeanmarie F. Desmond, Chief Financial Officer of DuPont de Nemours Inc. (the “Company”), certify that:
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1.
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the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2019 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Jeanmarie F. Desmond
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Jeanmarie F. Desmond
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Chief Financial Officer
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August 6, 2019
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