EDGAR 10-K Filing

Company CIK: 1666700
Filing Year: 2021
Filename: 1666700_10-K_2021_0001666700-21-000005.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
DuPont is a Delaware corporation formed in 2015 (formerly, DowDuPont Inc.), for the purpose of effecting an all-stock merger of equals transactions between The Dow Chemical Company ("TDCC") and E. I. du Pont de Nemours and Company ("EID"). 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 ("DWDP Merger Agreement"), TDCC and EID each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, TDCC and EID became subsidiaries of DowDuPont (the "DWDP Merger"). Prior to the DWDP Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the DWDP Merger Agreement. For purposes of DowDuPont's financial statement presentation, TDCC was determined to be the accounting acquirer in the DWDP Merger and EID's assets and liabilities are reflected at fair value as of the DWDP Merger Effectiveness Time.
On April 1, 2019, the Company completed the separation of the materials science business through the spin-off of Dow Inc., (“Dow”) including Dow’s subsidiary TDCC (the “Dow Distribution”). On June 1, 2019, the Company completed the separation of the agriculture business through the spin-off of Corteva, Inc. (“Corteva”) including Corteva’s subsidiary EID, (the “Corteva Distribution and together with the Dow Distribution, the “DWDP Distributions”).
Following the Corteva Distribution, 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."
DuPont is a global innovation leader with technology-based materials and solutions that help transform industries and everyday life by applying diverse science and expertise to help customers advance their best ideas and deliver essential innovations in key markets including electronics, transportation, building and construction, healthcare and worker safety. At December 31, 2020, the Company has subsidiaries in about 60 countries worldwide and manufacturing operations in about 40 countries. See Note 23 to the Consolidated Financial Statements for details on the location of the Company's sales and property.
On December 15, 2019, the Company entered into definitive agreements to separate and combine the Nutrition & Biosciences business segment (the "N&B Business") with International Flavors & Fragrances Inc. ("IFF") in a tax-efficient Reverse Morris Trust transaction.
On February 1, 2021, DuPont completed the separation and distribution of the N&B Business, and merger of Nutrition & Biosciences, Inc. (“N&B”), a DuPont subsidiary formed to hold the N&B Business, with a subsidiary of IFF. The distribution was effected through an exchange offer (the “Exchange Offer”) where, on the terms and subject to the conditions of the Exchange Offer, eligible participating DuPont stockholders had the option to tender all, some or none of their shares of common stock, par value $0.01 per share, of DuPont (the “DuPont Common Stock”) for a number of shares of common stock, par value $0.01 per share, of N&B (the “N&B Common Stock”) and which resulted in all shares of N&B Common Stock being distributed to DuPont stockholders that participated in the Exchange Offer. The consummation of the Exchange Offer was followed by the merger of N&B with a wholly owned subsidiary of IFF, with N&B surviving the merger as a wholly owned subsidiary of IFF (the “N&B Merger” and, together with the Exchange Offer, the “N&B Transaction”).
On December 31, 2020, DuPont commenced the Exchange Offer which expired at one minute past 11:59 PM ET on January 29, 2021. Pursuant to the Exchange Offer, on February 1, 2021, DuPont accepted approximately 197.4 million shares of DuPont Common Stock in exchange for about 141.7 million shares of N&B Common Stock. The closing of the N&B Merger followed on February 1, 2021 after satisfaction of certain other conditions, including the receipt of a one-time cash payment of approximately $7.3 billion (the “Special Cash Payment”).
In the N&B Merger, each share of N&B common stock was automatically converted into the right to receive one share of IFF common stock, par value $0.125 per share (“IFF Common Stock”). See Note 25 to the Consolidated Financial Statements for more information.
BASIS OF PRESENTATION
The Consolidated Financial Statements included in this annual report present the financial position of DuPont as of December 31, 2020 and 2019 and the results of operations of DuPont for the years ended December 31, 2020, 2019, and 2018 giving effect to the DWDP Distributions, with the historical financial results of Dow and Corteva reflected as discontinued operations, as applicable. The cash flows and comprehensive income related to Dow and Corteva have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income, respectively, for the year ended December 31, 2019 and 2018. Unless otherwise indicated, the information in the Notes to the Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow or Corteva.
At December 31, 2020, the financial results of the N&B Business are included in continuing operations for all periods presented.
SEGMENT INFORMATION
DuPont’s worldwide operations are managed through global businesses, which are currently reported in five reportable segments: Electronics & Imaging; Nutrition & Biosciences; Transportation & Industrial; Safety & Construction; and Non-Core.
In conjunction with the closing of the N&B Transaction on February 1, 2020, the Company announced changes to its management and reporting structure (the “2021 Segment Realignment”). These changes result in the following:
•Realignment of certain businesses from Transportation & Industrial to Electronics & Imaging
•Dissolution of the Non-Core segment with the businesses to be divested and previously divested reflected in Corporate
•Realignment of the remaining Non-Core businesses to Transportation & Industrial
In addition, the following name changes will occur:
•Electronic & Imaging will be renamed Electronics & Industrial
•Transportation & Industrial will be renamed Mobility & Materials
•Safety & Construction will be renamed Water & Protection
The changes became effective February 1, 2021 and the Company will report financial results under this new structure beginning in the first quarter of 2021.
See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 23 to the Consolidated Financial Statements for additional information concerning the Company’s operating segments.
ELECTRONICS & IMAGING
Electronics & Imaging 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 supplier of key materials for the manufacturing of materials and printing systems to the advanced printing industry, and of materials and solutions for the fabrication of semiconductors and integrated circuits addressing both front-end and back-end of the manufacturing process. The segment offers the broadest portfolio of semiconductor and advanced packaging materials in the market, providing chemical mechanical planarization ("CMP") pads and slurries, photoresists and advanced coatings for lithography, removers and cleaners; dielectric and metallization solutions for back-end-of-line advanced chip packaging; along with silicones for light emitting diode ("LED") packaging and semiconductor applications. Electronics & Imaging also provides permanent and process chemistries for the fabrication of printed circuit boards to include laminates and substrates, electroless and electrolytic metallization solutions, as well as patterning solutions and materials and innovative metallization processes for metal finishing, decorative, and industrial applications. Electronics & Imaging is a leading global supplier in the packaging graphics industry providing photopolymer plates and platemaking systems used in flexographic printing and digital inks for textile, commercial and home-office printing applications. In addition, the segment provides cutting-edge materials for the manufacturing of rigid and flexible displays for organic light emitting diode ("OLED"), and other display applications. Electronics & Imaging addresses these markets by leveraging a strong science and technology base to provide the critical materials and solutions for creating a more connected and digital world.
Divestitures
In the first quarter of 2020, the Company completed the sale of its Compound Semiconductor Solutions business unit to SK Siltron. The proceeds received in the first quarter of 2020 related to the sale of the business were approximately $420 million.
Details on Electronics & Imaging's 2020 net sales, by major product line and geographic region, are as follows:
Products
Major applications/market segments and technologies are listed below by major product line:
Major Product Line Applications/Market Segments Technologies
Image Solutions Flexographic printing and inkjet printing,
display materials for mobile devices Flexographic printing plates and materials, digital inks, OLED and other display process materials
Interconnect Solutions Printed circuit board, electronic and industrial finishing Circuit packaging film and laminate materials, interconnect metallization and imaging process chemistries, dry film laminates, polyimide films, and flexible circuit materials
Semiconductor Technologies Integrated circuit fabrication for memory and logic semiconductors CMP consumables, photolithography materials, semiconductor fabrication materials, fabrication cleaners and removers, advanced chip packaging materials and thermal management materials and LED encapsuants
Key Raw Materials
The major commodities, raw materials and supplies for the Electronics & Imaging segment include: p-acetoxystyrene, monomers, pigments and dyes, styrenic block copolymers, copper foil, diglycolamine, dimethylacetamide, hydroxylamine, oxydianiline, palladium metal, photoactive compounds, polyester and other polymer films, polyurethane resins and pyromellitic dianhydride.
Competitors
Electronics & Imaging's competitors include many large multinational firms as well as a number of regional and local competitors. Key competitors include 3M, CMC Materials, Element Solutions, Entegris, Flint Group, JSR Micro, Merck KGaA, Shin-Etsu and Sun Chemical.
Current and Future Investments
In March 2019, the Company announced plans to invest more than $200 million in its Electronics & Imaging segment to build new production assets at its Circleville, Ohio, plant. The new assets will expand production of KAPTON® polyimide film and PYRALUX® flexible circuit materials to meet growing market demand. At December 31, 2020, the Company had spent approximately $160 million since project start date. The Company anticipates that the new assets will be operational by the end of 2021.
2021 Segment Realignment
In conjunction with the 2021 Segment Realignment, KALREZ®/VESPEL®, and Healthcare and Specialty Lubricants (Medical Silicones and MOLYKOTE® lubricants) will move to Electronics & Imaging from Transportation & Industrial. On February 1, 2021, the segment will be renamed Electronics & Industrial and the Image Solutions product line, which will include the additional technologies, will be renamed Industrial Solutions. The Company will report under this structure beginning in the first quarter of 2021.
NUTRITION & BIOSCIENCES
Nutrition & Biosciences is an innovation-driven and customer-focused segment that provides solutions for the global food and beverage, dietary supplements, pharma, home and personal care, energy and animal nutrition 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 and pharmaceutical markets. Its innovative and broad portfolio of natural-based ingredients marketed under the DANISCO® brand serves to improve health and nutrition as well as taste and texture in a wide range of dairy, beverage, bakery and dietary supplement applications. Its probiotics portfolio, including the HOWARU® brand, is world famous for its extensively documented strains that deliver consumers benefits in digestive and immune health. In addition to serving the global food and beverage market, the segment is one of the world's largest producers of cellulosics and alginates based pharma excipients, which are used to improve the functionality and delivery of pharmaceuticals, and enabling the development of more effective pharma solutions. 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. The segment offers better, cleaner and safer solutions to a wide range of industries including food & beverages, dietary supplements, animal nutrition, biofuels, cleaning, personal care, pharmaceutical, and oil and gas.
Divestitures
In June 2019, the Company sold the natural colors business, a H&N Business.
Details on Nutrition & Biosciences' 2020 net sales, by product line and geographic region, are as follows:
Products
Major applications and products are listed below by product line:
Product Line Applications / Market Segments Major Products
Food & Beverage Food and beverage, dietary supplements, infant nutrition, sports nutrition Soy protein, emulsifiers, sweeteners, texturants and ingredient systems
Health & Biosciences Dietary supplements, animal nutrition, home & personal care, biofuels production, food and beverage, microbial control solutions for oil and gas production and other industrial preservation markets
Probiotics, fibers, cultures, enzymes, yeast, betaine, direct-fed microbials, antimicrobials, glutaraldehyde
Pharma Solutions Oral dosage pharmaceuticals excipients Cellulosic and alginates excipients (immediate and controlled release) and active pharmaceutical ingredients
Key Raw Materials
The major commodities, raw materials and supplies for the Nutrition & Biosciences segment include: soybeans, gelatin, glycols, cellulose processed grains (including dextrose and glucose), guar, locust bean gum, organic vegetable oils, peels, saccharides, seaweed, sugars and yeasts.
Competitors
Nutrition & Biosciences' competitors include many large multinational nutrition and biosciences companies as well as a number of regional and local competitors. Key competitors include Chr. Hansen, Novozymes, Royal DSM, Kerry, Corbion, Ingredion, CP Kelco, Croda and Tate & Lyle.
Current and Future Investments
In November 2016, EID announced an investment to expand probiotics production capacity in the United States. The announced investment is the second phase of a broader probiotics expansion project. Phase one was complete as of the end of 2017 and increased capacity by about 30 percent. The second phase represented an investment of approximately $100 million and increased DuPont's probiotics production capacity by an additional 70 percent. The construction was completed in the first quarter of 2019, including the installation of new, high-volume fermenters and other processing equipment. Additional and periodic investments were made in the past years to debottleneck some of our assets running at full capacity.
Nutrition & Biosciences Distribution
On February 1, 2021, DuPont completed the previously announced separation and distribution of its N&B Business. The Company will reflect the results of the N&B Business as discontinued operations beginning in the first quarter of 2021.
TRANSPORTATION & INDUSTRIAL
Transportation & Industrial 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 provide 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.
Details on Transportation & Industrial's 2020 net sales, by major product line and geographic region, are as follows:
Products
Major applications and products are listed below by major product line, all which serve the transportation industry and electronics, medical, industrial and consumer end-markets.
Major Product Line Major Products
Healthcare & Specialty KALREZ® perfluoroelastomer, VESPEL® parts and shapes, MOLYKOTE® lubricants, LIVEO™ silicone solutions for healthcare, BETASEAL™, BETAMATE™ and BETAFORCE™ structural and elastic adhesives
Industrial & Consumer HYTREL® polyester thermoplastic elastomer resins, DELRIN® acetal resins, VAMAC® ethylene acrylic elastomer, and MULTIBASE™ TPSiV™ silicones for thermoplastics
Mobility Solutions DUPONT™ ZYTEL® nylon resins, CRASTIN® PBT thermoplastic polyester resin, RYNITE® PET polyester resin and TYNEX® filaments
Key Raw Materials
The major commodities, raw materials and supplies for the Transportation & Industrial segment include: adipic acid, butanediol, carbon black, dimethyl terephthalate, epoxy resins, fiberglass, flame retardants, hexamethylene diamine, methanol, polyethylene terephthalate, purified terephthalic acid and silicones.
Competitors
Transportation & Industrial's competitors include many large multinational chemical firms as well as a number of regional and local competitors. Key competitors include BASF, Celanese, EMS, Henkel, Kluber, Mitsubishi, Royal DSM, Sika, Victrex and Wacker Chemie.
2021 Segment Realignment
In conjunction with the 2021 Segment Realignment, Kalrez®/Vespel®, and Healthcare and Specialty Lubricants (Medical Silicones and Molykote® lubricants) will move from Transportation & Industrial to Electronic & Imaging. Non-Core businesses including TEDLAR® and Microcircuit Materials (previously part of Photovoltaic & Advanced Materials ("PVAM")), and DuPont Teijin Films will shift from the Non-Core Segment to Transportation & Industrial. Major product lines will be reorganized into Engineering Polymers, Performance Resins, and Advanced Solutions and the segment will be renamed Mobility & Materials effective February 1, 2021. The Company will report under this structure beginning in the first quarter of 2021.
SAFETY & CONSTRUCTION
Safety & Construction is the global leader in providing innovative engineered products and integrated systems for a number of industries including, worker safety, water purification and separation, transportation, energy, medical packaging and building materials. Safety & Construction addresses the growing global needs of businesses, governments and consumers for solutions that make life safer, healthier and better.
Innovation is the business imperative. By uniting market-driven science and engineering with the strength of highly regarded brands including KEVLAR® high-strength material, NOMEX® thermal-resistant material, CORIAN® solid surfaces, TYVEK® selective barriers, FILMTEC™ reverse osmosis elements, STYROFOAM™ insulation and GREAT STUFF™ insulating foam sealants, the segment strives to bring new products and solutions to solve customers' needs faster, better and more cost effectively. Safety & Construction is investing in future growth initiatives such as water management solutions, construction productivity solutions, high strength and light weighting composite solutions, and circular ecosystem / zero waste solutions.
Acquisitions
During the fourth quarter of 2019, the Company completed three acquisitions: (1) BASF's Ultrafiltration Membrane business, including inge GmbH, the business’ international workforce, its headquarters and production site in Greifenberg, Germany, and associated intellectual property currently owned by BASF SE; (2) Evoqua Water Technologies Corp.’s MEMCOR® business including ultrafiltration and membrane biofiltration technologies, which together with the acquisition from BASF, add to Safety & Construction’s leading portfolio of water purification and separation technologies including ultrafiltration, reverse osmosis and ion exchange resins; and (3) OxyMem Limited, a company that develops and produces Membrane Aerated Biofilm Reactor technology for the treatment and purification of municipal and industrial wastewater. In the first quarter of 2020, the Company acquired Desalitech Ltd., a closed circuit reverse osmosis (CCRO) company.
Details on Safety & Construction's 2020 net sales, by major product line and geographic region, are as follows:
Products
Major applications and products are listed below by major product line:
Major Product Line Applications / Market Segments Major Products / Technologies
Safety Solutions Industrial personnel protection, military and emergency response, medical devices and packaging, automotive, aerospace and oil and gas KEVLAR® fiber; NOMEX® fiber and paper; TYVEK® protective materials; TYCHEM® protective suits
Shelter Solutions Rigid and spray foam insulation, weatherization, waterproofing and air sealing, caulks and sealants, roof coatings, and decorative surface materials STYROFOAM™ brand insulation products, THERMAX™ exterior insulation, WALOCEL™ cellulose ethers, XENERGY™ high performance insulation, LIQUIDARMOR™ flashing and sealant, GREAT STUFF™ insulating foam sealants and adhesives, CORIAN® design solid and quartz surfaces, TYVEK® weather resistant barriers
Water Solutions Water filtration and purification technology for residential, municipal and industrial use. Key industries include municipal drinking water and wastewater, power generation, microelectronics, pharmaceuticals, food and beverage, industrial wastewater reuse, metals and mining, and oil and gas segments AMBERLITE™ ion exchange resins, FILMTEC™ reverse osmosis and nanofiltration elements, INTEGRAFLUX™ ultrafiltration modules, FORTILIFE™ challenging water reverse osmosis membranes, and TAPTEC™ water filtration and purification for drinking water in homes and commercial buildings
Key Raw Materials
The major commodities, raw materials and supplies for the Safety & Construction segment include: alumina trihydrate, aniline, benzene, calcium chloride, carbon monoxide, chlorine, divinyl benzene monomers, high-density polyethylene, isophthalic acid, metaphenylenediamine, methyl methacrylate, methylpentanediol, polyester resin, polypropylene, polystyrene, sulfuric acid and terephthalic acid.
Competitors
Safety & Construction's competitors include many large multinational chemical firms as well as a number of regional and local competitors. Key competitors include 3M, Honeywell, Hydranautics, Kingspan, Lanxess, LG Corp, Owens-Corning, Purolite, Royal DSM, Toray and Teijin.
Current and Future Investments
The Company previously announced plans to invest more than $400 million in Safety & Construction to increase capacity for the manufacture of TYVEK® nonwoven materials at its Luxembourg site due to growing global demand. While the Company experienced delays in construction due to COVID-19 in 2020, the expansion for the new operating line of TYVEK® nonwoven materials is expected to be completed in 2023.
NON-CORE
The Non-Core segment is a leading global supplier of key materials for the manufacturing of photovoltaic cells and panels, including innovative SOLAMET® metallization pastes, TEDLAR® backsheet materials, and FORTASUN® silicone encapsulants and adhesives. The segment also provides materials used in components and films for consumer electronics, automotive, and aerospace markets. The segment also 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 SORONA® specialty biotechnology materials for carpet and apparel markets as well as polyester films for the healthcare, photovoltaics, electronics, packaging and labels, and electrical insulation industries.
Divestitures
The segment historically included the Company's joint venture interests in the Hemlock Semiconductor Corporation Group ("HSC Group"), a U.S.-based group of companies that manufacture and sell polycrystalline silicon products for the photovoltaic and semiconductor industries, as well as its trichlorosilane business (“TCS Business”). In the third quarter of 2020, the Company completed the sale of its ownership interests in both the HSC Group and the TCS Business to The Hemlock Group.
In October 2020, the Company entered into a definitive agreement to sell its Biomaterials business unit, which includes the Company's equity method investment in DuPont Tate & Lyle Bio Products. In January 2021, the Company entered into separate definitive agreements to sell its Clean Technologies and Solamet® businesses. These divestitures, subject to regulatory approval and customary closing conditions, are expected to close in the first half of 2021 and generate in aggregate pre-tax cash proceeds of about $920 million.
In the third quarter of 2019, the Company completed the sale and separation of its Sustainable Solutions business unit, a part of the Non-Core segment, to Gyrus Capital.
2021 Segment Realignment
As part of the 2021 Segment Realignment, the Non-Core segment will be dissolved. TEDLAR® and Microcircuit Materials (both previously part of PVAM), and DuPont Teijin Films will move to Transportation & Industrial. The remaining businesses and historical results of divested businesses will be reported in Corporate. The Company will report under this structure beginning in the first quarter of 2021.
Details on Non-Core's 2020 net sales, by business or major product line and geographic region, are as follows:
Products
Major applications and products/services/technologies are listed below by major product line:
Major Product Line Applications / Market Segments Major Products / Services / Technologies
Biomaterials Carpet, apparel SORONA® polymer
Clean Technologies Sulfuric acid, fertilizer, chemicals, refining, scrubbing STRATCO® alkylation technology, MECS® sulfuric acid & environmental technologies, ISOTHERMING® hydroprocessing technology, BELCO® wet scrubbing technology
DuPont Teijin Films Healthcare, photovoltaics, electronics, packaging and labels, electrical insulation, dry film resists MYLAR®, MELINEX® polyester films
Photovoltaic & Advanced Materials Photovoltaics, aerospace/aircraft, automotive, military, consumer electronics Metallization pastes (including SOLAMET®), TEDLAR® polyvinyl fluoromaterials, FORTASUN® silicone encapsulants and adhesives
Key Raw Materials
The major commodities, raw materials and supplies for the Non-Core segment include propanediol, terephthalic acid, precious metals, silicon metal and hydrochloric acid.
Competitors
Non-Core's competitors include many large multinational chemical firms as well as a number of regional and local competitors. Key competitors include Arkema, Giga Solar Materials, Heraeus, Outotec, Samsung SDI, Yihua Toray Polyester Film, and Zhangjiagang Glory.
INDUSTRY SEGMENTS AND GEOGRAPHIC REGION RESULTS
See Note 4 to the Consolidated Financial Statements for net sales by business or major product line.
Sales by geographic region are included within Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Results of Operations." See Note 23 to the Consolidated Financial Statements for information regarding total net sales, pro forma net sales, pro forma Operating EBITDA and total assets by segment, as well as net sales and long-lived assets by geographic region.
SIGNIFICANT CUSTOMERS AND COMPETITION
In 2020, no significant portion of the Company's sales was dependent upon a single customer. The markets in which the Company participates compete primarily through technology, range of products and services, performance, quality, reliability, brand, reputation, service and support. The Company provides extensive support, technical services and testing services for its customers, in addition to new product development. The Company believes that its proprietary product and process technologies, robust product and application development pipelines, customer intimacy, global manufacturing capability and local service capability enable it to compete successfully.
Against this competitive backdrop, value-in-use is the primary driver of price for the Company’s products, although price is impacted by many factors including, among others, fluctuations in supply and demand, and availability and cost of key manufacturing inputs including raw materials and energy.
DISTRIBUTION
Most products are marketed primarily through the Company's sales organization, although in some regions, more emphasis is placed on sales through distributors. The Company has a diverse worldwide network which markets and distributes the Company's brands to customers globally. This network consists of the Company's sales and marketing organization partnering with distributors, independent retailers, cooperatives and agents throughout the world.
INTELLECTUAL PROPERTY
The Company’s businesses differentially manage their respective intellectual property estates to support Company strategic priorities, which can include leveraging intellectual property within and across product lines.
Trade Secrets: Trade secrets are an important part of the Company's intellectual property. Many of the processes used to make products are kept as trade secrets which, from time to time, may be licensed to third parties. DuPont vigilantly protects all of its intellectual property including its trade secrets. When the Company discovers that its trade secrets have been unlawfully taken, it reports the matter to governmental authorities for investigation and potential criminal action, as appropriate. In addition, the Company takes measures to mitigate any potential impact, which may include civil actions seeking redress, restitution and/or damages based on loss to the Company and/or unjust enrichment.
Patents: The Company applies for and obtains patents in many countries, including the U.S., and has access to a large patent portfolio, both owned and licensed. DuPont’s rights under these patents and licenses, as well as the products made and sold under them, are important to the Company in the aggregate. The protection afforded by these patents varies based on country, scope of individual patent coverage, as well as the availability of legal remedies in each country. The term of these patents is approximately twenty years from the filing date in general, but varies depending on country. This significant patent estate may be leveraged to align with the Company’s strategic priorities within and across product lines. At December 31, 2020, the Company owned about 24,000 patents and patent applications globally, about 9,000 of which are part of the N&B Business. Approximately 80% of the Company’s patent estate has a remaining term of more than 5 years.
Trademarks: The Company owns or licenses many trademarks that have significant recognition at the consumer retail level and/or the product line to product line level. Ownership rights in trademarks do not expire if the trademarks are continued in use and properly protected.
ENVIRONMENTAL MATTERS
Information related to environmental matters is included in several areas of this report: (1) Environmental Proceedings beginning on page 29, (2) Management's Discussion and Analysis of Financial Condition and Results of Operations beginning on page 32, and (3) Notes 1 and 15 to the Consolidated Financial Statements.
HUMAN CAPITAL
Foundational to the Company’s current and future success is its employees, who drive the Company’s strategic vision, manage operations and develop products. The Company focuses significant attention on attracting, motivating, and retaining talent at all levels. Through training and professional development initiatives, promoting a culture of diversity and inclusion, and emphasizing the importance of health, safety, and well-being, the Company’s aim is to create an environment that fully supports the needs of its employees. Annually, an enterprise-wide engagement survey is conducted, which provides insight into employee morale and aspects of workplace culture like core values, communication and employee development.
The Company is committed to creating innovative talent-management opportunities that are aligned to the strategic needs of its workforce. Learning is a continual process, and the Company offers a diverse set of training, education, and development opportunities, both formally and informally, throughout the year. Each segment within the Company has ongoing training programs that are designed specifically to maximize the performance of its employees in meeting business objectives, including better health and safety outcomes. All employees take part in a mix of on-the-job training and appropriate learning and training opportunities focusing on topics that are the most critical and relevant to each employees’ job function.
The Company believes that diversity and inclusion is central to high employee engagement and seeks to foster an environment where employees can bring their authentic selves to work each day. The more perspectives there are, the more ideas that can be generated, which makes diversity, equity, and inclusion (“DE&I”) a driver of innovation, and therefore, integral to the Company’s success. The Company’s employee-led Employee Resource Groups (“ERGs”) help cultivate a culture of acceptance where employees feel not only accepted, but celebrated, at every level. As of December 31, 2020, the Company had eight ERGs - DuPont Corporate Black Employees Network, DuPont Asian Group, DuPont Pride Network, DuPont Latin Network, DuPont Women’s Network, DuPont Veterans Network, DuPont Early Career Network, and DuPont Persons with Disabilities and Allies. Each group is actively sponsored by senior leadership, helping model and promote inclusive values and behaviors. The Company also offers DE&I tools and resources to educate managers and employees in how to utilize diversity as a resource and establish more inclusive work environments. These resources include unconscious bias workshops, networking and mentoring practices, and opportunities for participation in external conferences and events, among others.
The Company’s success also depends on the well-being of employees, including physical, mental and intellectual health. All employees have the support of the Company’s Integrated Health Services (“IHS”) teams, which provides onsite and intranet-based services to support and monitor the health and welfare of employees. The Company’s larger manufacturing and research sites have onsite clinics where employees can get occupational care, first aid treatment, travel vaccinations, and referrals for off-site medical care. The Company continuously strives for zero workplace injuries, occupational illnesses and incidents. The Company’s safety metrics are measured against this goal at least quarterly, and the Company’s Environmental, Health, Safety & Sustainability Committee is charged with driving improvements in the Company's health and safety practices. IHS also
assesses health risks across DuPont to find out which health concerns are most important to our employees, and conducts medical surveillance exams based on occupational risks and regulatory compliance priorities flagged by the Company’s Environment, Health and Safety team.
In response to the COVID-19 pandemic, the Company has corporate, regional and local crisis management teams in place actively monitoring, preparing and managing the Company’s response. The Company has implemented safety plans and protocols based on World Health Organization and Centers for Disease Control guidelines. This includes issuing health and safety guidance for sites that have remained open during the pandemic, and encouraging employees to work remotely, when possible.
As of December 31, 2020, the Company had employed approximately 34,000 people worldwide. Approximately 25 percent of employees were in Asia Pacific, 28 percent were in the EMEA, 5 percent were in Latin America, and 42 percent were in the U.S and Canada. Within the United States, about 7,500 employees were in non-exempt or hourly-rate positions.
On February 1, 2021, the Company completed the N&B Transaction. As of December 31, 2020, the N&B Business employed approximately 11,000 people around the world. About 20 percent of N&B Business employees were located in Asia Pacific, 40 percent in EMEA, 10 percent in Latin America, and 30 percent in the United States. Within the United States, about 1,500 employees were in non-exempt or hourly-rate positions.
AVAILABLE INFORMATION
The Company is subject to the reporting requirements under the Securities Exchange Act of 1934. Consequently, the Company is required to file reports and information with the Securities and Exchange Commission ("SEC"), including reports on the following forms: annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.
The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, from which the public may obtain any materials the Company files with the SEC.
The Company's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are also accessible on DuPont's website at http://www.investors.dupont.com by clicking on the section labeled "Investors," then on "Filings & Reports." These reports are made available, without charge, as soon as is reasonably practicable after the Company files or furnishes them electronically with the SEC.

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ITEM 1A. RISK FACTORS
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 material 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 N&B Transaction and the Dow and Corteva Distributions
The separation and combination of DuPont’s Nutrition & Biosciences business with IFF could result in significant tax liability to DuPont.
Following the N&B Merger, N&B is expected to merge with and into Neptune Merger Sub II LLC (a wholly owned subsidiary of IFF) (“Merger Sub II”), with Merger Sub II surviving as a wholly owned subsidiary of IFF (the “Second Merger,” and together with the N&B Merger, the “Mergers”).
The distribution by DuPont to its stockholders of all the issued and outstanding shares of N&B through the Exchange Offer ("N&B Distribution") and Mergers are expected to be tax-free to DuPont stockholders for U.S. federal income tax purposes (except to the extent that cash is paid to DuPont stockholders in lieu of fractional shares pursuant to the Merger Agreement), and the N&B Contribution, N&B Distribution, and Special Cash Payment are expected to result in no recognition of gain or loss by DuPont for U.S. federal income tax purposes.
DuPont has received an opinion from Skadden, Arps, Slate, Meagher & Flom LLP regarding (i) the qualification of the separation and transfer by DuPont of its N&B Business (the "N&B Contribution"), N&B Distribution, and Special Cash Payment as a “reorganization” within the meaning of Sections 368(a), 361 and 355 of the Internal Revenue Code of 1986 (the “Code”), (ii) the nonrecognition of gain or loss by DuPont on receipt of the Special Cash Payment (subject to certain conditions), (iii) the qualification of the N&B Distribution as a distribution described in Section 355 and to which Section 355(e) does not apply and (iv) the qualification of the Mergers as a “reorganization” within the meaning of Section 368(a) of the Code. This opinion is based upon and rely on, among other things, certain facts and assumptions, as well as certain representations, statements and undertakings of DuPont, N&B, IFF and Merger Sub 1 and Merger Sub II. If any of these representations, statements or undertakings are, or become, inaccurate or incomplete, or if any party breaches any of its covenants in the relevant transaction documents, the opinion may be invalid and the conclusions reached therein could be jeopardized. Notwithstanding the receipt of such opinion, the Internal Revenue Service (the “IRS”) could determine that the separation of DuPont’s Nutrition & Biosciences business should be treated as a taxable transaction if it determines that any of the facts, assumptions, representations, statements or undertakings upon which the opinion of counsel was based are false or have been violated, or if it disagrees with the conclusions in the opinion. An opinion of counsel is not binding on the IRS and there can be no assurance that the IRS will not assert a contrary position.
DuPont has also obtained a private letter ruling from the IRS regarding certain matters impacting the U.S. federal income tax treatment of the N&B Contribution, N&B Distribution, Special Cash Payment and certain related transactions. The conclusions of the IRS private letter ruling were based, among other things, on various factual assumptions DuPont authorized and representations DuPont made to the IRS. If any of assumptions or representations are, or become, inaccurate or incomplete, reliance on the IRS private letter ruling may be affected.
If the N&B Contribution and N&B Distribution failed to qualify for the treatment described above, DuPont would be required to generally recognize taxable gain on the transactions and stockholders of DuPont who receive N&B Common Stock (and subsequently, IFF Common Stock) would be subject to tax on their receipt of the N&B Common Stock. Additionally, if the Special Cash Payment or certain internal transactions related to the separation of the Nutrition & Biosciences business fail to qualify for their intended tax-free treatment under U.S. federal, state, local tax and/or foreign tax law, DuPont could incur additional tax liabilities.
Under the Tax Matters Agreement by and between DuPont with N&B and IFF, N&B or IFF is generally be required to indemnify DuPont for any taxes resulting from the separation of the Nutrition & Biosciences business (and any related costs and other damages) to the extent such amounts resulted from (i) certain actions taken by N&B or IFF involving the capital stock of N&B or IFF or any assets of the N&B group (excluding actions required by the documents governing the proposed transactions), or (ii) any breach of certain representations and covenants made by N&B or IFF.
DuPont is subject to continuing contingent tax-related liabilities of Dow and Corteva following the separations and DWDP Distributions.
After the separations and DWDP 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 TDCC or EID for any taxable period or portion of any taxable period ending on or before the effective date of the DWDP Merger, such subsidiary is jointly and severally liable for the U.S. federal income tax liability of the entire consolidated tax reporting group of TDCC or EID, as applicable, for such taxable period. In connection with the separations and DWDP 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.
In connection with the separations and DWDP 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, including PFAS Stray Liabilities, allocated to or retained by it, and Dow, Corteva and/or third parties may not be able to satisfy their respective indemnification obligations in the future.
Pursuant to the DWDP Separation and Distribution Agreement, the DWDP Employee Matters Agreement, and the DWDP 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 Consolidated Financial Statements and Litigation and Environmental Matters in Note 15 to the 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 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 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. Stray Liabilities include liabilities arising out of actions to the extent related to or resulting from EID’s development, testing, manufacture or sale of per- or polyfluoroalkyl substances, (“PFAS Stray Liabilities”).
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. See Note 15 to the Consolidated Financial Statements and the risk factor below regarding the DuPont, Corteva and Chemours cost sharing arrangement related to future eligible PFAS liabilities.
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 DWDP 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 DWDP 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, EID and TDCC 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 DWDP 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 TDCC and EID immediately prior to the DWDP 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 DWDP 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 DWDP 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 DWDP Merger and the distributions, then under the DWDP 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 DWDP 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 DWDP 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 DWDP separations and DWDP Distributions and the N&B Transaction may expose the Company to potential liabilities arising out of state and federal fraudulent conveyance laws and legal distribution requirements.
Although in connection with the DWDP Distributions and in connection with the N&B Transaction DuPont received separate solvency opinions from investment banks confirming that DuPont, Dow, Corteva and N&B would each be adequately capitalized following the separations and DWDP Distributions, and the N&B Transactions as relevant, (the “Transactions”), the Transactions 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 any of the Transactions and that any one or the aggregate of the Transactions 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 Transactions 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 DWDP Distributions there can be no assurance that a court will not later determine that some or all of the distributions were unlawful.
On January 22, 2021, DuPont, Corteva and Chemours entered into a cost sharing arrangement related to future eligible PFAS costs. The Company’s results of operations could be adversely affected by litigation and other commitments and contingencies, including expected performance under and impact of the cost sharing arrangement.
Although by reducing uncertainty, the Company expects to benefit from the cost sharing arrangement related to future PFAS eligible costs, achievement of any such benefits may not be realized and depend on a number of factors and uncertainties that include, but are not limited to: the achievement, terms and conditions of final agreements related to the cost sharing arrangement; the outcome of any pending or future litigation related to PFAS or PFOA, including personal injury claims and natural resource damages claims; the extent and cost of ongoing remediation obligations and potential future remediation obligations; changes in laws and regulations applicable to PFAS chemicals; the performance by each of the parties of their respective obligations under the cost sharing arrangement.
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.
Risks Relating to DuPont’s Business and Results of Operations
The extent to which the novel coronavirus (COVID-19) and measures taken in response to it, impact DuPont’s business, results of operations, access to sources of liquidity and financial condition depends on future developments, which are highly uncertain and cannot be predicted.
DuPont is actively monitoring the global impacts of COVID-19, including the impacts from responsive measures, and remains focused on its top priorities - the safety and health of its employees and the needs of its customers. The Company’s business and financial condition, and the business and financial condition of the company’s customers and suppliers, have been impacted by the significantly increased economic and demand uncertainties created by the COVID-19 outbreak. In addition, public and private sector responsive measures, such as the imposition of travel restrictions, quarantines, adoption of remote working, and suspension of non-essential business and government services, have impacted the Company’s business and financial condition. Many of DuPont’s facilities and employees are based in areas impacted by the virus. While most DuPont manufacturing sites remain in operation, DuPont has reduced or furloughed certain operations in response to government measures, employee welfare concerns and the impact of COVID-19 on the global demand and supply chain. DuPont’s manufacturing operations may be further adversely affected by impacts from COVID-19 including, among other things, additional government actions and other responsive measures, more and /or deeper supply chain disruptions, quarantines and health and availability of essential onsite personnel. In response, the Company developed site-by-site protocols in 2020 under which the Company continues to operate. These protocols include pre-entrance screening, restricting visitor access, social distancing and masking requirements, additional sanitization and disinfecting requirements, restrictions on all nonessential travel and implementation of work-from-home protocols. The suspension of travel and doing business in-person has increased the Company’s exposure to cybersecurity risks and could negatively impact the Company's innovation and marketing efforts, challenge the ability to deliver against the Company’s strategic priorities and to otherwise transact business in a timely manner, or create operational or other challenges, any of which could harm DuPont’s business. Furthermore, COVID-19 continues to adversely impact the broader global economy, including negatively impacting economic growth and creating disruption and volatility in the global financial and capital markets, which could result in increases in the cost of capital and/or adversely impact the availability of and access to capital, which could negatively affect DuPont’s liquidity. DuPont is unable to predict the extent of COVID-19 related impacts on its business, results of operations, access to sources of liquidity and financial condition which depends on highly uncertain and unpredictable future developments, including, but not limited to, the duration and spread of the COVID-19 outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions resume. DuPont’s financial results may be materially and adversely impacted by a variety of factors that have not yet been determined, including potential impairments of goodwill and other assets. DuPont is taking actions, including reducing costs, restructuring actions, and delaying certain capital expenditures and non-essential spend. In addition, the Company may consider further reductions in or furloughing additional operations in response to further and/or deeper declines in demand and/or or supply chain disruptions. There can be no guaranty that such actions will significantly mitigate the
impact of COVID-19 on the company’s business, results of operations, access to sources of liquidity or financial condition. After the COVID-19 outbreak has subsided, DuPont may experience materially adverse impacts to its business, results of operations and financial condition as a result of related global economic impacts, including any recession that has occurred or may occur in the future.
Supply chain disruptions and volatility in energy and raw material costs could have a significant impact on the Company’s sales and earnings.
The Company’s manufacturing processes depend on the continued availability 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, including potential legislation to address climate change by reducing greenhouse gas emissions, creating a carbon tax or implementing a cap and trade program which could create increases in energy costs and price volatility. Supply chain disruptions, plant and/or power outages, labor disputes and/or strikes, geo-political activity, weather events and natural disasters, including hurricanes or flooding that impact coastal regions, and global health risks or pandemics could seriously harm the Company’s operations as well as the operations of the Company’s customers and suppliers. In addition, the Company’ suppliers may experience capacity limitations in their own operations or may elect to reduce or eliminate certain product lines. To address this risk, generally, the Company seeks to have many sources of supply for key raw materials in order to avoid significant dependence on any one or a few suppliers. In addition, and where the supply market for key raw materials is concentrated, DuPont takes additional steps to manage its exposure to supply chain risk and price fluctuations through, among other things, negotiated long-term contracts some which include minimum purchase obligations. Although there can be no assurance that such mitigation efforts will prevent future difficulty in obtaining sufficient and timely delivery of certain raw materials, DuPont believes it has adequate programs to ensure a reliable supply of key raw materials
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 business, results of operations, financial condition and cash flows could be adversely affected by interruption of the Company’s information technology or network systems and other business disruptions.
DuPont relies on centralized and local information technology networks and systems, some of which are managed or accessible by third parties, to process, transmit and store electronic information, and to otherwise manage or support its business. Additionally, the Company collects and stores certain data, including proprietary business information, and has access to confidential or personal information in certain of our businesses that is subject to privacy and security laws, regulations and customer-imposed controls.
Information technology system and/or network disruptions, whether caused by acts of sabotage, employee error, malfeasance or other actions, could have an adverse impact on the Company’s operations as well as the operations of the Company’s customers and suppliers. 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 is experiencing an increase in attempts to breach its information technology systems, including in conjunction with implementation of work-from-home protocols adopted in response to COVID-19. These cyber-security threats include phishing, spam emails, hacking, social engineering, and malicious software. 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 takes 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.
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 DWDP Merger and related acquisition method of accounting, 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 continuously evaluates acquisition candidates, including significant transactions, 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 DWDP 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 and/or the Company fails to effectively manage its cost as its portfolio evolves, it could adversely impact the Company’s business, results of operations, financial condition and cash flows.
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. 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.
Failure to attract and retain talented people with the necessary knowledge and experience could adversely affect Company’s ability to compete and achieve its strategic goals.
Attracting, developing, and retaining talented employees is essential to the Company’s successful delivery of products and services, ability to innovate, including developing new products and technologies, and ability to identify trends and develop new markets.
Competition for employees can be intense. If the Company is unable to successfully integrate, motivate and reward its employees, it may not be able to retain them or attract new employee in the future which could adversely impact the Company’s ability to effectively compete.
Risks Relating to Capital Resources and Liquidity
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, foreign exchange and other risks.
DuPont does business globally in about 60 countries. The percentage of net sales generated by the international operations of DuPont, including U.S. exports, was approximately 70 percent of net sales on a continuing operations basis for the year ended
December 31, 2020. With Asia Pacific as the Company’s largest 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:
•exchange control regulations
•fluctuations in foreign exchange rates
•foreign investment laws
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 year ended December 31, 2020, the Company’s largest currency exposures are the European euro, Chinese renminbi, and Japanese yen. 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.
Risks Related to Regulatory Changes and Compliance
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, 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.
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.
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 operates.
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.
General Risks that may impact the Company’s business
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:
•correctly identify customer needs and preferences and predict future needs and preferences
•allocate the Company’s research & development funding to products and services with higher growth prospects;
•anticipate and respond to the Company’s competitors’ development of new products and services and technological innovations;
•differentiate the Company’s offerings from the Company’s competitors’ offerings and avoid commoditization;
•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;
•obtain adequate intellectual property rights with respect to key technologies before the Company’s competitors do;
•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;
•obtain necessary regulatory approvals of appropriate scope; and
•stimulate customer demand for, and convince customers, to adopt new technologies
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.
DuPont is subject to numerous laws, regulations and mandates globally which could adversely affect the Company’s operating results and forward strategy.
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.”

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
The Company's corporate headquarters is located in Wilmington, Delaware. The Company's manufacturing, processing, marketing and research and development facilities, as well as regional purchasing offices and distribution centers are located throughout the world. Additional information with respect to the Company's property, plant and equipment and leases is contained in Notes 11, 16 and 23 to the Consolidated Financial Statements.
The Company has investments in property, plant and equipment related to global manufacturing operations. Collectively there are approximately 200 principal sites in total. The number of manufacturing and other significant sites by reportable segment and geographic area around the world at December 31, 2020 is as follows:
Geographic Region Electronics & Imaging Nutrition & Biosciences Transportation & Industrial Safety & Construction Non-Core Total 2
Asia Pacific 17 17 11 12 7 64
EMEA 1
3 38 8 6 1 56
Latin America - 13 2 - - 15
U.S. & Canada 12 24 19 13 10 78
Total 32 92 40 31 18 213
1.. Europe, Middle East, and Africa.
2. Sites that are used by multiple segments are included more than once in the figures above.
The Company's principal sites include facilities which, in the opinion of management, are suitable and adequate for their use and have sufficient capacity for the Company's current needs and expected near-term growth. Properties are primarily owned by the Company; however, certain properties are leased. No title examination of the properties has been made for the purpose of this report and certain properties are shared with other tenants under long-term leases.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. 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, which also includes discussion of the allocation of liabilities in connection with the DWDP Distributions.
Litigation
See Note 15 to the 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.
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. 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 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.
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, EID, and certain DuPont subsidiaries. NJDEP’s allegations relate to former operations of 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.”

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
DuPont de Nemours, Inc.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company's common stock is traded on the NYSE under the ticker symbol "DD." Fourth quarter dividend information can be found in Note 24 to the Consolidated Financial Statements.
At February 3, 2021, there were 75,797 stockholders of record.
See Part III, Item 11. Executive Compensation for information relating to the Company’s equity compensation plans.
Issuer Purchases of Equity Securities
On June 1, 2019, the Company announced a $2 billion share buyback program, which expires on June 1, 2021. For the three months ended December 31, 2020, there were no purchases of the Company’s common stock under this share repurchase program. At December 31, 2020, $1 billion is the approximate dollar value of shares that may yet be purchased by the Company under this program.
Stockholder Return
The form of the chart presented below is in accordance with the requirements of the U.S. Securities and Exchange Commission. Stockholders are cautioned against drawing any conclusions from the data contained therein, as past results are not necessarily indicative of future performance. The chart illustrates the cumulative total return of the Company's stock following completion of the DWDP Merger based on a presumed investment of $100 on September 1, 2017 and a presumption that all dividends were reinvested. The historical stock prices of DuPont presented in the chart have been adjusted to reflect the impact of the DWDP Distributions and the Reverse Stock Split. The Company elected to display the closing price on May 31, 2019, the day preceding the Corteva Distribution, in order to provide the reader a more useful baseline for the Company's performance as a specialty products company after consummation of the DWDP Distributions. The chart does not reflect the Company's forecast of future financial performance.
Cumulative Total Return September 1, 2017 December 29, 2017 December 31, 2018 May 31, 2019 2
December 31, 2019 December 31, 2020
DuPont 1
$ 100.00 $ 106.60 $ 81.92 $ 70.30 $ 70.48 $ 79.86
S&P 500 $ 100.00 $ 108.84 $ 104.07 $ 115.24 $ 136.84 $ 162.02
S&P Industrial Conglomerates $ 100.00 $ 94.76 $ 69.29 $ 77.63 $ 86.70 $ 95.60
1. The historical stock prices of DuPont prior to the DWDP Distributions have been adjusted to reflect the impact of the DWDP Distributions and the Reverse Stock Split.
2. Represents the day preceding the Corteva Distribution.

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ITEM 6. SELECTED FINANCIAL DATA

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s discussion and analysis of financial condition and results of operations is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and related notes to enhance the understanding of the Company’s operations and present business environment. Components of management’s discussion and analysis of financial condition and results of operations include:
•Overview
•Analysis of Operations
•Result of Operations
•Supplemental Unaudited Pro Forma Combined Financial Information
•Segment Results
•Liquidity and Capital Resources
•Outlook
•Recent Accounting Pronouncements
•Critical Accounting Estimates
•Long-Term Employee Benefits
•Environmental Matters
OVERVIEW
As of December 31, 2020, the Company has $6 billion of working capital and over $2.5 billion in cash and cash equivalents. The Company expects its cash and cash equivalents, cash generated from operations, and ability to access the debt capital markets to provide sufficient liquidity and financial flexibility to meet the liquidity requirements associated with its continued operations. In response to the uncertainty surrounding the extent and duration of the COVID-19 pandemic, the Company has also taken additional measures throughout the year to further ensure its liquidity and capital resources. The Company continually assesses its liquidity position, including possible sources of incremental liquidity, in light of the current economic environment, capital market conditions and Company performance.
On February 1, 2021, DuPont completed the separation and distribution of the Nutrition & Biosciences business (the “N&B Business”), and merger of Nutrition & Biosciences, Inc. (“N&B”), a DuPont subsidiary formed to hold the N&B Business, with a subsidiary of IFF. The distribution was effected through an exchange offer (the “Exchange Offer”) where, on the terms and subject to the conditions of the Exchange Offer, eligible participating DuPont stockholders had the option to tender all, some or none of their shares of common stock, par value $0.01 per share, of DuPont (the “DuPont Common Stock”) for a number of shares of common stock, par value $0.01 per share, of N&B (the “N&B Common Stock”) and which resulted in all shares of N&B Common Stock being distributed to DuPont stockholders that participated in the Exchange Offer. The consummation of the Exchange Offer was followed by the merger of N&B with a wholly owned subsidiary of IFF, with N&B surviving the merger as a wholly owned subsidiary of IFF (the “N&B Merger” and, together with the Exchange Offer, the “N&B Transaction”). In connection with the N&B Transaction, N&B made a one-time cash payment of approximately $7.3 billion (the “Special Cash Payment”) to DuPont. The company used a portion of the proceeds to retire its $3 billion term loan facilities on February 1, 2021 and will use the proceeds to fund the redemption, in accordance with their terms, of the $2 billion May 2020 Notes issuance. See discussion below and within “Liquidity and Capital Resources” for more information.
DWDP Merger
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 ("DWDP Merger Agreement"), The Dow Chemical Company ("TDCC") and E. I. du Pont de Nemours and Company ("EID") each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, TDCC and EID became subsidiaries of DowDuPont (the "DWDP Merger"). Prior to the DWDP Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the DWDP Merger Agreement. TDCC was determined to be the accounting acquirer in the DWDP Merger.
DowDuPont completed a series of internal reorganizations and realignment steps in order 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.
DWDP Distributions
On April 1, 2019, the Company completed the separation of the materials science business through the spin-off of Dow Inc., including Dow’s subsidiary TDCC (the “Dow Distribution”). On June 1, 2019, the Company completed the separation of the agriculture business through the spin-off of Corteva including Corteva’s subsidiary EID, (the “Corteva Distribution and together with the Dow Distribution, the “DWDP 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."
The results of operations of DuPont for the 2019 and 2018 periods presented reflect the historical financial results of Dow and Corteva as discontinued operations, as applicable. The cash flows and comprehensive income related to Dow and Corteva have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income, respectively, for the applicable period. Unless otherwise indicated, the information in the notes to the Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow 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 TDCC 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 DWDP Distributions.
N&B Transaction
On December 31, 2020, DuPont commenced the Exchange Offer which expired at one minute past 11:59 PM ET on January 29, 2021. Pursuant to the Exchange Offer, on February 1, 2021, DuPont accepted approximately 197.4 million shares of DuPont Common Stock in exchange for about 141.7 million shares of N&B Common Stock. The closing of the N&B Merger followed on February 1, 2021 after satisfaction of certain other conditions, including the receipt of the Special Cash Payment.
In the N&B Merger, each share of N&B common stock was automatically converted into the right to receive one share of IFF common stock, par value $0.125 per share (“IFF Common Stock”). See Note 25 to the Consolidated Financial Statements for more information.
At December 31, 2020, the financial results of the N&B Business are included in continuing operations for all periods presented.
2021 Segment Realignment
DuPont’s worldwide operations are managed through global businesses, which are currently reported in five reportable segments: Electronics & Imaging; Nutrition & Biosciences; Transportation & Industrial; Safety & Construction; and Non-Core. In conjunction with the closing of the N&B Transaction on February 1, 2020, the Company announced changes to its reportable segments (the “2021 Segment Realignment”). These changes result in the following:
•Realignment of certain businesses from Transportation & Industrial to Electronics & Imaging
•Dissolution of the Non-Core segment with the businesses to be divested and previously divested reflected in Corporate
•Realignment of the remaining Non-Core businesses to Transportation & Industrial
In addition, the following name changes will occur:
•Electronic & Imaging will be renamed Electronics & Industrial
•Transportation & Industrial will be renamed Mobility & Materials
•Safety & Construction will be renamed Water & Protection
The changes became effective February 1, 2021 and the Company will report financial results under this new structure beginning in the first quarter of 2021. The results included in Management’s Discussion and Analysis of Financial Condition and Results of Operations are not reflective of the 2021 Segment Realignment.
ANALYSIS OF OPERATIONS
COVID-19
The novel coronavirus (“COVID-19”) pandemic has resulted in significant economic disruption and continues to adversely impact the broader global economy, including certain of the Company’s customers and suppliers. The ultimate extent of the effects of the COVID-19 pandemic on the Company is highly uncertain and will depend on future developments and the effects could exist for an extended period of time even after the pandemic subsides.
During 2020, the Company benefited from strong demand in certain key end-markets, principally electronics, water filtration, health & wellness and personal protection. Although results reflect notable improvement in automotive markets, along with residential construction, in the second half of 2020 compared to the first half of 2020, the COVID-19 pandemic adversely impacted demand in aerospace, commercial construction, oil & gas, and select industrial end-markets. In response to this uncertainty, the Company delayed certain capital investments in select sectors throughout the year.
Nutrition & Biosciences Financing
In the third quarter of 2020, N&B completed an offering of $6.25 billion of senior unsecured notes (the “N&B Notes Offering”). The net proceeds of approximately $6.2 billion from the N&B Notes Offering were deposited into an escrow account and at December 31, 2020 are reflected as restricted cash in the Company’s consolidated financial statements.
In the first quarter of 2020, N&B entered into a senior unsecured term loan agreement in the amount of $1.25 billion split evenly between three- and five-year facilities.
See Note 14 of the Consolidated Financial Statements for additional information.
Divestitures
In the fourth quarter of 2020, the Company entered into a definitive agreement to sell its Biomaterials business unit, which includes the Company's equity method investment in DuPont Tate & Lyle Bio Products. In January 2021, the Company entered into separate definitive agreements to sell its Clean Technologies and Solamet® businesses. These divestitures, subject to regulatory approval and customary closing conditions, are expected to close in the first half of 2021.
In the third quarter of 2020, the Company completed the sale of its trichlorosilane business (“TCS Business”) along with its equity ownership interest in DC HSC Holdings LLC and Hemlock Semiconductor L.L.C. (the "HSC Group,” and together with the TCS Business, the “TCS/HSC Disposal Group” and the sale of the TCS/HSC Disposal Group, the “TCS/HSC Disposal”) to the HSC Group, both of which were part of the Non-Core segment. The TCS/HSC Disposal resulted in a net pre-tax benefit of $396 million ($236 million net of tax) which was recorded in “Sundry income (expense) - net” in the Company’s Consolidated Statements of Operations.
In the first quarter of 2020, the Company completed the sale of its Compound Semiconductor Solutions business unit, a part of the Electronics & Imaging segment, to SK Siltron, for approximately $420 million. The sale resulted in a pre-tax gain of $197 million ($102 million net of tax) recorded in "Sundry income (expense) - net" in the Company's Consolidated Statements of Operations.
In the third quarter of 2019, the Company completed the sale and separation of its Sustainable Solutions business unit, a part of the Non-Core segment, to Gyrus Capital. The sale resulted in a pre-tax gain of $28 million ($22 million net of tax) which was recorded in "Sundry income (expense) - net" in the Company's Consolidated Statements of Operations.
See Note 3 of the Consolidated Financial Statements for additional information.
Joint Settlement Agreement
On January 22, 2021, the Company, Corteva, EID and Chemours entered into a binding Memorandum of Understanding (the “MOU”), pursuant to which the parties have agreed to share certain costs associated with potential future liabilities related to alleged historical releases of certain PFAS arising out of pre-July 1, 2015 conduct (“eligible PFAS costs”) until the earlier to occur of (i) December 31, 2040, (ii) the day on which the aggregate amount of qualified spend (as defined in the MOU) is equal to $4 billion or (iii) a termination in accordance with the terms of the MOU. The parties have agreed that, during the term of this sharing arrangement, Chemours will bear 50% of any qualified spend and the Company and Corteva shall together bear 50% of any qualified spend. As of December 31, 2020, the Company has recorded a liability of $59 million in connection with the cost sharing arrangement related to future eligible PFAS costs.
On January 21, 2021, EID and Chemours entered into settlement agreements with plaintiffs’ counsel representing the Ohio MDL plaintiffs providing for a settlement of cases and claims in the Ohio MDL totaling $83 million in cash with each of the Company and EID contributing approximately $27 million and Chemours contributing approximately $29 million. As of December 31, 2020, the Company has recorded an indemnification liability of $27 million related to the settlement.
Total pre-tax charges of $86 million ($66 million after-tax) related to both of the above matters are reflected as a loss from discontinued operations for the year ended December 31, 2020 in the Company's Consolidated Statements of Operations.
Goodwill, Long-Lived Asset and Indefinite-Lived Asset Impairments
During the third quarter of 2020, multiple triggering events occurred requiring the Company to perform impairment analyses associated with its Non-Core segment. As a result of the analyses performed, the Company recorded aggregate pre-tax, non-cash goodwill impairment charges of $183 million recognized in "Goodwill impairment charges" and aggregate pre-tax, non-cash asset impairment charges of $370 million recognized in “Restructuring and asset related charges - net” in the Consolidated Statements of Operations.
During the second quarter of 2020, continued near-term demand weakness in global automotive production resulting from the COVID-19 pandemic, along with revised views of recovery based on third party market information, served as a triggering event requiring the Company to perform an impairment analysis of the goodwill associated with its Transportation & Industrial reporting unit. As a result of the analysis performed, the Company recorded pre-tax, non-cash goodwill impairment charges of $2,498 million recognized in "Goodwill impairment charges" in the Consolidated Statements of Operations. In connection with the Transportation & Industrial impairment analysis, the Company also recorded pre-tax, non-cash impairment charges of $21 million related to indefinite-lived intangible assets recognized in “Restructuring and asset related charges - net” in the Consolidated Statements of Operations.
During the first quarter of 2020, the Company was required to perform interim impairment tests of its goodwill and long-lived assets as expectations of proceeds related to certain potential divestitures within the Non-Core segment gave rise to fair value indicators and, thus, served as triggering events. As a result of the analysis performed, the Company recorded pre-tax, non-cash impairment charges related to goodwill of $533 million. The charges were recognized in "Goodwill impairment charge" in the Consolidated Statements of Operations. The Company also recorded pre-tax, non-cash impairment charges of $270 million related to long-lived assets. The charges were recognized in “Restructuring and asset related charges - net” in the Consolidated Statements of Operations.
During the second quarter of 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 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 year ended December 31, 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 charges" in the Consolidated Statements of Operations.
See Notes 5 and 13 of the 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 Consolidated Statements of Operations. See Note 5 of the Consolidated Financial Statements.
Dividends
On February 12, 2020, the Board of Directors declared a first quarter dividend of $0.30 per share, paid on March 16, 2020, to shareholders of record on February 28, 2020. On April 29, 2020, the Company announced that its Board of Directors declared a second quarter dividend of $0.30 per share, paid on June 15, 2020, to shareholders of record on May 29, 2020. On June 25, 2020, the Company announced that its Board of Directors declared a third quarter dividend of $0.30 per share, paid on September 15, 2020, to shareholders of record on July 31, 2020. On October 14, 2020, the Company announced that its Board of Directors declared a fourth quarter dividend of $0.30 per share, paid on December 15, 2020, to shareholders of record on November 30, 2020.
Share Buyback Program
On June 1, 2019, the Company's Board of Directors approved a $2 billion share buyback program, which expires on June 1, 2021. During the year ended December 31, 2020, the Company repurchased and retired 6.1 million shares for $232 million. As of the year ended December 31, 2020, the Company had repurchased and retired 16.9 million shares under this program at a total cost of $982 million.
Restructuring Programs
2020 Restructuring Program
During the first quarter of 2020, the Company approved restructuring actions designed to capture near-term cost reductions and to further simplify certain organizational structures in anticipation of the N&B Transaction (the "2020 Restructuring Program"). For the year ended December 31, 2020, the Company recorded a pre-tax charge related to the 2020 Restructuring Program of $179 million, recognized in "Restructuring and asset related charges - net" in the Company's Consolidated Statements of Operations. At December 31, 2020, total liabilities related to the program were $68 million, which represents expected future cash payments related to this program for the payment of severance and related benefits. The 2020 Restructuring Program was considered substantially complete at December 31, 2020.
2019 Restructuring Program
During the second quarter of 2019 and in connection with the ongoing integration activities, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the DWDP Distributions (the "2019 Restructuring Program"). The Company recorded pre-tax restructuring charges of $140 million inception-to-date, consisting of severance and related benefit costs of $106 million and asset related charges of $34 million, recognized in "Restructuring and asset related charges - net" in the Company's Consolidated Statements of Operations. At December 31, 2020, total liabilities related to the program were $18 million, which represents expected future cash payments related to this program for the payment of severance and related benefits. The 2019 Restructuring Program was considered substantially complete at June 30, 2020.
DowDuPont Cost Synergy Program
In September and November 2017, the Company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the “Synergy Program”), adopted by the DowDuPont Board of Directors. The Synergy Program was designed to integrate and optimize the organization following the DWDP Merger and in preparation for the DWDP Distributions. The Company recorded pre-tax restructuring charges of $492 million inception-to-date, consisting of severance and related benefit costs of $213 million, asset related charges of $212 million and contract termination charges of $67 million. The DowDuPont Cost Synergy program the program was considered substantially complete at June 30, 2020.
RESULTS OF OPERATIONS
Summary of Sales Results For the Years Ended December 31,
In millions 2020 2019 2018
Net sales $ 20,397 $ 21,512 $ 22,594
Sales Variances by Segment and Geographic Region - As Reported
For the Year Ended December 31, 2020 For the Year Ended December 31, 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 (1) % - % 8 % - % 7 % - % (1) % (1) % - % (2) %
Nutrition & Biosciences 1 (1) - - - 1 (2) - (1) (2)
Transportation & Industrial
(4) - (11) - (15) 3 (2) (10) - (9)
Safety & Construction 2 - (8) 2 (4) 3 (1) - (4) (2)
Non-Core 3 - (14) (11) (22) 1 (2) (11) (3) (15)
Total - % - % (4) % (1) % (5) % 2 % (2) % (4) % (1) % (5) %
U.S. & Canada (1) % - % (7) % (1) % (9) % 2 % - % (3) % - % (1) %
EMEA 1
- - (9) - (9) 3 (5) (4) (4) (10)
Asia Pacific (1) - 2 - 1 1 (1) (4) - (4)
Latin America 4 (5) (9) (1) (11) 3 (3) (3) (1) (4)
Total - % - % (4) % (1) % (5) % 2 % (2) % (4) % (1) % (5) %
1. Europe, Middle East and Africa.
2020 versus 2019
The Company reported net sales for the year ended December 31, 2020 of $20.4 billion, down 5 percent from $21.5 billion for the year ended December 31, 2019, due to a 4 percent decrease in volume and a 1 percent decline due to portfolio actions. Local price and product mix and currency remained flat. Volume declined across all geographic regions with the exception of Asia Pacific where it increased 2 percent. Volume gains in Electronics & Imaging (up 8 percent) were more than offset by declines in Non-Core (down 14 percent), Transportation & Industrial (down 11 percent) and Safety & Construction (down 8 percent). Portfolio and other changes contributed 1 percent of the sales decrease which impacted Non-Core (down 11 percent) offset by Safety & Construction (up 2 percent). Currency was flat compared with the same period last year in all segments with the exception of Nutrition & Bioscience (down 1 percent). Local price increased in Latin America (up 4 percent) and in Non-Core (up 3 percent) and Safety & Construction (up 2 percent).
2019 versus 2018
The Company reported net sales for the year ended December 31, 2019 of $21.5 billion, down 5 percent from $22.6 billion for the year ended December 31, 2018, due to a 4 percent decrease in volume, a 2 percent unfavorable currency impact and a 1 percent decline in portfolio actions slightly offset by a 2 percent increase in local price. Volume declined across all geographic regions and all segments with the exception of Nutrition & Biosciences and Safety & Construction which were both flat. The most notable volume decreases were in Non-Core (down 11 percent) and Transportation & Industrial (down 10 percent). Currency was down 2 percent compared with last year, driven primarily by EMEA currencies (down 5 percent). Local price was up 2 percent compared with last year. Local price increased in all geographic regions and in all segments except Electronics & Imaging (flat). Portfolio and other changes contributed 1 percent of the sales decrease which impacted Safety & Construction (down 4 percent; within EMEA), Non-Core (down 3 percent) and Nutrition & Biosciences (down 1 percent).
Cost of Sales
Cost of sales was $13.5 billion for the year ended December 31, 2020, down from $14.1 billion for the year ended December 31, 2019. Cost of sales decreased for the year ended December 31, 2020 primarily due to lower sales volume, cost synergies, and the absence in 2020 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 DWDP Distributions, offset by approximately $245 million of charges associated with temporarily idling several manufacturing plants to align supply with demand due to COVID-19, driven primarily by the Transportation & Industrial segment.
Cost of sales as a percentage of net sales for the year ended December 31, 2020 was 66 percent compared with 65 percent for the year ended December 31, 2019.
For the year ended December 31, 2019, cost of sales was $14.1 billion, down from $15.3 billion for the year ended December 31, 2018. Cost of sales decreased for the year ended December 31, 2019 primarily due to lower sales volume, cost synergies, portfolio actions related to current year divestitures, 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 DWDP Distributions.
Cost of sales as a percentage of net sales for the year ended December 31, 2019 was 65 percent compared with 68 percent for the year ended December 31, 2018.
Research and Development Expense ("R&D")
R&D expense was $860 million for the year ended December 31, 2020, $955 million for the year ended December 31, 2019, and $1,070 million for the year ended December 31, 2018. R&D as a percentage of net sales was 4 percent for both the years ended December 31, 2020 and 2019, and 5 percent for the year December 31, 2018.
The decrease in R&D costs in 2020 compared to 2019 was due to productivity actions as well as 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 a cost of continuing operations for periods prior to the DWDP Distributions. The decrease in R&D costs in 2019 compared to 2018 was primarily due to lower 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 DWDP Distributions.
Selling, General and Administrative Expenses ("SG&A")
For the year ended December 31, 2020, SG&A expenses totaled $2,235 million, down from $2,663 million in the year ended December 31, 2019 and $3,028 million for the year ended December 31, 2018. SG&A as a percentage of net sales was 11 percent, 12 percent, and 13 percent for the years ended December 31, 2020, 2019, and 2018, respectively.
The decrease in SG&A costs in 2020 compared to 2019 was due to productivity actions, temporarily reducing costs due to COVID-19 restrictions, overall reducing spending, and 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 DWDP Distributions. The decrease in SG&A costs in 2019 compared to 2018 was due to cost synergies and lower 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 DWDP Distributions.
Amortization of Intangibles
Amortization of intangibles was $2,119 million, $1,050 million, and $1,044 million for the years ended December 31, 2020, 2019, and 2018, respectively. The increase in amortization in 2020 compared with 2019 was primarily due to the amortization of the Nutrition and Biosciences tradename that was reclassified to definite-lived intangibles in the fourth quarter of 2019 in connection with the N&B Transaction. Amortization in 2019 compared with 2018 was relatively flat. See Note 13 to the Consolidated Financial Statements for additional information on intangible assets.
Restructuring and Asset Related Charges - Net
Restructuring and asset related charges - net were $849 million, $314 million, and $147 million for the years ended December 31, 2020, 2019 and 2018, respectively.
The activity for the year ended December 31, 2020 included a $588 million impairment charge related to long-lived assets and a $52 million impairment charge related to indefinite-lived intangible assets in the Non-Core segment, a $21 million impairment charge related to indefinite-lived intangible assets in the Transportation & Industrial segment, a $179 million charge related to the 2020 Restructuring Program, a $2 million charge related to the 2019 Restructuring Program and a $7 million charge related to the DowDuPont Cost Synergy Program. The charges for the year ended December 31, 2019 included a charge of $138 million related to the 2019 Restructuring Program, a $113 million charge related to the DowDuPont Cost Synergy Program, and a $63 million impairment charge related to an equity method investment. The charges for the year ended December 31, 2018 related to the Synergy Program.
See Note 5 to the Consolidated Financial Statements for additional information.
Goodwill Impairment Charges
Goodwill impairment charges were $3,214 million and $1,175 million for the years ended December 31, 2020 and 2019, respectively. For the year ended December 31, 2020, goodwill impairment charges relate to the Transportation & Industrial and Non-Core segments. For the year ended December 31, 2019, goodwill impairment charges relate to the Nutrition & Biosciences and Non-Core segments. There were no goodwill related impairments in the year ended December 31, 2018. See Note 13 to the Consolidated Financial Statements for additional information.
Integration and Separation Costs
Integration and separation costs were $594 million in 2020, $1,342 million in 2019 and $1,887 million in 2018. Integration and separation costs primarily reflect costs related to the N&B Transaction, which began in the fourth quarter of 2019, the post-DWDP Merger integration, and activities related to the DWDP Distributions. The decline was primarily related to the timing of the DWDP Distributions.
Equity in Earnings of Nonconsolidated Affiliates
The Company's share of the earnings of nonconsolidated affiliates was $191 million, $84 million, and $447 million for the years ended December 31, 2020, 2019 and 2018, respectively. The increase in earnings of nonconsolidated affiliates for the year ended December 31, 2020 compared to the prior year is due to higher HSC Group equity earnings in the first half of 2020, driven mainly by customer settlements in the second quarter of 2020. The decrease in earnings of nonconsolidated affiliates for the year ended December 31, 2019 compared to the year ended December 31, 2018 was primarily due to lower equity earnings from the HSC Group for the year ended December 31, 2019. For the year ended December 31, 2019 lower equity earnings from the HSC Group was mainly attributable to asset impairment charges, partially offset by benefits associated with customer contract settlements.
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 for the year ended December 31, 2020 was $675 million compared with $153 million and $92 million in the years ended December 31, 2019 and 2018, respectively.
The year ended December 31, 2020 included a net pre-tax benefit of $396 million associated with the TCS/HSC Disposal as discussed above, a pre-tax gain of $197 million related to the sale of the Compound Semiconductor Solutions business unit in the Electronics & Imaging segment, miscellaneous income of $47 million, and income related to non-operating pension and other post-employment benefit plans of $32 million, partially offset by foreign currency exchange losses of $56 million.
The year ended December 31, 2019 included a net gain on sale of assets and investments of $157 million, income related to non-operating pension and other post-employment benefit plans of $74 million, and interest income of $55 million partially offset by foreign currency exchange losses of $110 million and miscellaneous expenses of $23 million which includes a $48 million charge reflecting a reduction in gross proceeds from lower withholding taxes related to a prior year legal settlement. The net gain on sale of assets includes income of $92 million related to a sale of assets within the Electronics & Imaging segment and as well as a gain of $28 million related to the sale of the Sustainable Solutions business unit within the Non-Core segment.
The year ended December 31, 2018 included income related to non-operating pension and other post-employment benefit plans of $96 million, miscellaneous income of $83 million and interest income of $39 million, partially offset by foreign currency exchange losses of $93 million and loss on divestiture and change in joint venture ownership of $41 million. The foreign currency exchange losses included 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 on divestitures and change in joint venture ownership include a $14 million loss on the divestiture of the European XPS STYROFOAMTM business (related to Safety & Construction) and a $27 million negative impact for adjustments related to the Dow Silicones ownership restructure (related to Non-Core).
See Notes 6 to the Consolidated Financial Statements for additional information.
Interest Expense
Interest expense was $767 million, $668 million, and $55 million for the years ended December 31, 2020, 2019, and 2018, respectively. The increase in interest expense in 2020 compared to 2019 primarily relates to financing costs associated with the N&B Transaction and the May Debt Offering, partially offset by reduced borrowing rates on floating rate debt. For the year ended December 31, 2018, there was less than one quarter of interest expense as the Company did not have outstanding
borrowings until the 2018 Senior Notes issuance in the fourth quarter of 2018. Refer to Note 14 to the Consolidated Financial Statements for additional information.
(Benefit from) 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 attributes. For the year ended December 31, 2020, the Company's effective tax rate was 0.8 percent on a pre-tax loss from continuing operations of $2,897 million. The effective tax rate for the year ended December 31, 2020, was principally the result of a non-tax-deductible goodwill impairment charge impacting the Non-Core segment in the first and third quarter and a non-tax-deductible goodwill impairment charge impacting the Transportation and Industrial segment in the second quarter, coupled with an allocation of non-tax-deductible goodwill related to the TCS/HSC Disposal. See Note 13 for more information regarding the goodwill impairment charges. The underlying factors affecting the Company’s overall tax rate are summarized in Note 7 to the Consolidated Financial Statements.
For the year ended December 31, 2019, the Company's effective tax rate was (29.5) percent on a pre-tax loss from continuing operations of $474 million. The effective tax rate was principally the result of the non-tax-deductible goodwill impairment charges impacting the Nutrition & Biosciences and Non-Core segments.
For the year ended December 31, 2018, the Company's effective tax rate was 32.6 percent on pre-tax income from continuing operations of $600 million. The effective tax was favorably impacted by the geographic mix of earnings but was more than offset by a $67 million charge associated with a valuation allowance recorded against the net deferred tax asset position of the Company’s legal entity in Brazil related to the separated agriculture business.
(Loss) Income from Discontinued Operations, Net of Tax
Loss from discontinued operations, net of tax was $49 million for the year ended December 31, 2020, compared to income from discontinued operations, net of tax of $1,214 million and $3,595 million for the years ended December 31, 2019 and 2018, respectively. For the year ended December 31, 2020, loss from discontinued operations, net of tax primarily related to litigation matters, partially offset by a gain related to the DWDP Tax Matters Agreement. For the year ended December 31, 2019 and 2018, income from discontinued operations, net of tax primarily related to the DWDP Distributions. The decrease each year is attributable to the timing of the DWDP Distributions. Refer to Notes 3 and 15 to the 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 $28 million, $102 million, and $155 million, for the years ended December 31, 2020, 2019, and 2018 respectively.
Net income attributable to noncontrolling interests of continuing operations was $28 million, $30 million, and $39 million, for the years ended December 31, 2020, 2019, and 2018 respectively.
SUPPLEMENTAL UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following supplemental unaudited pro forma financial information (the “unaudited pro forma financial statements”) was derived from DuPont’s Consolidated Financial Statements, adjusted to give effect to certain events directly attributable to the DWDP Distributions. In contemplation of the DWDP 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 "DWDP Financings"). The unaudited pro forma financial statements below 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 DWDP Distributions and the DWDP Financings (collectively the "DWDP 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 years ended December 31, 2019 and 2018 give effect to the pro forma events as if the DWDP Transactions had occurred on January 1, 2018. There were no pro forma adjustments for the year ended December 31, 2020.
Restructuring or integration activities or other costs following the DWDP Distributions that may be incurred to achieve cost or growth synergies of DuPont are not reflected. The unaudited pro forma statements of operations 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 DWDP 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 2019 2018
In millions, except per share amounts DuPont 1
Pro Forma Adjustments2
Pro Forma DuPont 1
Pro Forma Adjustments2
Pro Forma
Net sales $ 21,512 $ - $ 21,512 $ 22,594 $ - $ 22,594
Cost of sales 14,056 22 14,078 15,302 74 15,376
Research and development expenses 955 - 955 1,070 - 1,070
Selling, general and administrative expenses 2,663 - 2,663 3,028 - 3,028
Amortization of intangibles 1,050 - 1,050 1,044 - 1,044
Restructuring and asset related charges - net 314 - 314 147 - 147
Goodwill impairment charges 1,175 - 1,175 - - -
Integration and separation costs 1,342 (173) 1,169 1,887 (493) 1,394
Equity in earnings of nonconsolidated affiliates 84 - 84 447 - 447
Sundry income (expense) - net 153 - 153 92 - 92
Interest expense
668 29 697 55 629 684
(Loss) Income from continuing operations before income taxes
(474) 122 (352) 600 (210) 390
Provision for income taxes on continuing operations
140 30 170 195 (42) 153
(Loss) Income from continuing operations, net of tax
(614) 92 (522) 405 (168) 237
Net income attributable to noncontrolling interests of continuing operations
30 - 30 39 - 39
Net (loss) income from continuing operations attributable to DuPont
$ (644) $ 92 $ (552) $ 366 $ (168) $ 198
Per common share data:
(Loss) Income per common share from continuing operations - basic
$ (0.86) $ (0.74) $ 0.46 $ 0.24
(Loss) Income per common share from continuing operations - diluted
$ (0.86) $ (0.74) $ 0.45 $ 0.23
Weighted-average common shares outstanding - basic
746.3 746.3 767.0 767.0
Weighted-average common shares outstanding - diluted
746.3 746.3 771.8 771.8
1. See the Company's historical U.S. GAAP Consolidated Statements of Operations.
2. Certain pro forma adjustments were made to illustrate the estimated effects of the DWDP Transactions, assuming that the DWDP 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 DWDP 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") 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.
Pro forma adjustments were determined in accordance with Article 11 of Regulation S-X. Pro forma financial information is based on the Consolidated Financial Statements of DuPont, adjusted to give effect to the impact of certain items directly attributable to the DWDP Distributions, and the Term Loan Facilities, the 2018 Senior Notes and the Funding CP Issuance (together, the "DWDP Financings"), including the use of proceeds from such Financings (collectively the "DWDP Transactions"). The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the DWDP Transactions, (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the results. Events that are not expected to have a continuing impact on the combined results are excluded from the pro forma adjustments. Those pro forma adjustments include the impact of various supply agreements entered into in connection with the Dow Distribution ("supply agreements") and are adjustments to "Cost of sales." The impact of these supply agreements 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. Refer to the Supplemental Unaudited Pro Forma Combined Financial Information section for further information.
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 provides innovative metallization processes for metal finishing, decorative, and industrial applications as well as films and laminate materials for a broad range of uses in printed circuit board and other electronic industry applications. Electronics & Imaging is a leading provider of photopolymer plates and platemaking systems used in flexographic printing and digital inks for textile, commercial and home-office printing applications. In addition, the segment provides cutting-edge materials for the manufacturing of rigid and flexible displays for organic light emitting diode ("OLED"), and other display applications.
Electronics & Imaging For the Years Ended December 31,
In millions 2020 2019 2018
Net sales $ 3,814 $ 3,554 $ 3,635
Operating EBITDA 1
$ 1,210 $ 1,147 $ 1,210
Equity earnings $ 35 $ 24 $ 23
1.For the year ended December 31, 2019 and 2018 operating EBITDA is on a pro forma basis.
Electronics & Imaging For the Years Ended December 31,
Percentage change from prior year 2020 2019
Change in Net Sales from Prior Period due to:
Local price & product mix
(1) % - %
Currency
- (1)
Volume
8 (1)
Portfolio & other
- -
Total
7 % (2) %
2020 Versus 2019
Electronics & Imaging net sales were $3,814 million for the year ended December 31, 2020, up from $3,554 million for the year ended December 31, 2019. Net sales increased due to a 8 percent volume increase partially offset by a 1 percent decrease in local price. Volume growth was driven by Semiconductor Technologies with continued strength and new technology in logic and foundry and increased demand in the memory segment. Volume growth within Interconnect Solutions was driven by increased material content in next-generation smartphones. Within Image Solutions, volume growth in OLED materials for displays and digital printing inks for the consumer segment offset weakness in flexographic plates and commercial printing and textile inks. Volume grew significantly in Asia Pacific.
Operating EBITDA was $1,210 million for the year ended December 31, 2020, up 5 percent compared with pro forma Operating EBITDA of $1,147 million for the year ended December 31, 2019 as volume growth, productivity and higher equity income more than offset higher raw material logistic costs and lower gains related to asset sales.
2019 Versus 2018
Electronics & Imaging net sales were $3,554 million for the year ended December 31, 2019, down from $3,635 million for the year ended December 31, 2018 due to a 1 percent volume decline and a 1 percent unfavorable currency impact, primarily in Asia Pacific and EMEA. Volume decreased overall as Semiconductor Technologies and Interconnect Solutions declines more than offset volume gains in Image Solutions. Within Semiconductor Technologies, weakened demand in the memory sector was partially offset by increased volumes related to semiconductor packaging materials. Demand for advanced materials for smartphones remained strong but overall volumes in Interconnect Solutions were down due to soft circuit board demand. Volume growth in Image Solutions reflects increased demand for OLED materials partially offset by volume declines in flexographic printing.
Pro forma Operating EBITDA was $1,147 million for the year ended December 31, 2019, down 5 percent compared with $1,210 million for the year ended December 31, 2018, as higher raw material costs, volume declines and an unfavorable currency impact more than offset cost synergies and income associated with an asset sale.
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, pharma, home and personal care, energy, and animal nutrition 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 and pharmaceutical 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 For the Years Ended December 31,
In millions 2020 2019 2018
Net sales $ 6,059 $ 6,076 $ 6,216
Operating EBITDA 1
$ 1,523 $ 1,406 $ 1,420
Equity earnings $ 4 $ (1) $ (1)
1.For the year ended December 31, 2019 and 2018 operating EBITDA is on a pro forma basis.
Nutrition & Biosciences For the Years Ended December 31,
Percentage change from prior year 2020 2019
Change in Net Sales from Prior Period due to:
Local price & product mix
1 % 1 %
Currency
(1) (2)
Volume
- -
Portfolio & other
- (1)
Total
- % (2) %
2020 Versus 2019
Nutrition & Biosciences net sales were $6,059 million for the year ended December 31, 2020, or essentially flat compared with $6,076 million for the year ended December 31, 2019. A 1 percent increase in local price was offset by a 1 percent unfavorable currency impact. Volume remained flat. Food & Beverage volume declined due to decreased demand in food service and sweeteners, partially offset by higher demand for plant-based meat. Health & Biosciences volume gains were driven by probiotics along with strong demand in home & personal care and animal nutrition, offset by declined demand in biorefinery and microbial control. Pharma Solutions volume gains were driven by increased demand in key products.
Operating EBITDA was $1,523 million for the year ended December 31, 2020, up 8 percent compared with pro forma Operating EBITDA of $1,406 million for the year ended December 31, 2019 due to a cost productivity actions, favorable product mix led by Health & Biosciences, and pricing gains.
2019 Versus 2018
Nutrition & Biosciences net sales were $6,076 million for the year ended December 31, 2019, down from $6,216 million for the year ended December 31, 2018, due to a 2 percent unfavorable currency impact, primarily in EMEA and Latin America, and a 1 percent decrease from portfolio actions partially offset by a 1 percent increase in local price. Volume was flat year over year as volume gains in Food & Beverage, primarily in cellulosics from growing demand in the meat alternatives and high protein nutritional beverages, was offset by declines in Health & Biosciences due to continued market-driven softness in biorefineries and decreased volume related to home and personal care applications which were partially offset by strength in food enzymes.
Pro forma Operating EBITDA was $1,406 million for the year ended December 31, 2019, down 1 percent compared with $1,420 million for the year ended December 31, 2018 as unfavorable impacts related to product mix and currency were partially offset by cost synergies, productivity actions and pricing gains.
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 provide 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
For the Years Ended December 31,
In millions 2020 2019 2018
Net sales $ 4,189 $ 4,950 $ 5,422
Operating EBITDA 1
$ 916 $ 1,313 $ 1,518
Equity earnings $ 4 $ 4 $ 1
1.For the year ended December 31, 2019 and 2018 operating EBITDA is on a pro forma basis.
Transportation & Industrial
For the Years Ended December 31,
Percentage change from prior year 2020 2019
Change in Net Sales from Prior Period due to:
Local price & product mix
(4) % 3 %
Currency
- (2)
Volume
(11) (10)
Portfolio & other
- -
Total
(15) % (9) %
2020 Versus 2019
Transportation & Industrial net sales were $4,189 million for the year ended December 31, 2020, down from $4,950 million for the year ended December 31, 2019 due to a 11 percent decrease in volume and a 4 percent decrease in local price. Volume declines were due to the impact of the COVID-19 pandemic on the automotive industry and the other key industrial markets.
Operating EBITDA was $916 million for the year ended December 31, 2020, down 30 percent compared with pro forma Operating EBITDA of $1,313 million for the year ended December 31, 2019 driven primarily by price and volume declines due to the COVID-19 pandemic and approximately $170 million in charges associated with temporarily idling several manufacturing plants to align supply with demand.
2019 Versus 2018
Transportation & Industrial net sales were $4,950 million for the year ended December 31, 2019, down from $5,422 million for the year ended December 31, 2018. The change in net sales was due to a 10 percent decrease in volume and a 2 percent unfavorable currency impact, primarily in EMEA and Asia Pacific, which more than offset a 3 percent increase in local price. Volume declines were primarily due to destocking in the automotive channel and decreased demand in automotive and electronics markets in Asia Pacific and EMEA. Local price increased across all regions and primarily in Mobility Solutions.
Pro forma Operating EBITDA was $1,313 million for the year ended December 31, 2019, down 14 percent compared with $1,518 million for the year ended December 31, 2018 as volume declines, higher raw material costs and an unfavorable currency impact were partially offset by pricing gains and cost synergies.
SAFETY & CONSTRUCTION
Safety & Construction is the global leader in providing innovative engineered products and integrated systems for a number of industries including, worker safety, water purification and separation, transportation, energy, medical packaging and building materials. Safety & Construction addresses the growing global needs of businesses, governments and consumers for solutions that make life safer, healthier and better. By uniting market-driven science and engineering 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 For the Years Ended December 31,
In millions 2020 2019 2018
Net sales $ 4,993 $ 5,201 $ 5,294
Operating EBITDA 1
$ 1,351 $ 1,419 $ 1,283
Equity earnings $ 26 $ 27 $ 24
1.For the year ended December 31, 2019 and 2018 operating EBITDA is on a pro forma basis.
Safety & Construction For the Years Ended December 31,
Percentage change from prior year 2020 2019
Change in Net Sales from Prior Period due to:
Local price & product mix
2 % 3 %
Currency
- (1)
Volume
(8) -
Portfolio & other
2 (4)
Total
(4) % (2) %
2020 Versus 2019
Safety & Construction net sales were $4,993 million for the for the year ended December 31, 2020, down from $5,201 million for the year ended December 31, 2019 as a 2 percent increase in local price and 2 percent increase in portfolio were more than offset by a 8 percent volume decline. The portfolio impact reflects the recent acquisitions in the Water Solutions business. Volume growth in the segment was led by gains in Water Solutions and TYVEK® protective garment sales within Safety Solutions which were more than offset by weakened demand in end markets for NOMEX® and KEVLAR®. Shelter Solutions volume declined due to the COVID-19 pandemic and the resulting impact on commercial construction activity.
Operating EBITDA was $1,351 million for the year ended December 31, 2020, down 5 percent compared with pro forma Operating EBITDA of $1,419 million for the year ended December 31, 2019 due to lower volumes, the absence of licensing income, and costs associated with idling facilities more than offsetting pricing gains, improved product mix, and productivity actions.
2019 Versus 2018
Safety & Construction net sales were $5,201 million for the year ended December 31, 2019, down from $5,294 million for the year ended December 31, 2018 as portfolio declines of 4 percent and a 1 percent unfavorable impact from currency in all regions more than offset a 3 percent increase in local price. The portfolio impact reflects the prior year divestiture of the European XPS STYROFOAM™ business on December 1, 2018. Local price increased across all businesses and in all regions.
Volume was flat compared with the prior year as volume growth in Water Solutions was offset by declines in Safety Solutions and Shelter Solutions. Water Solutions volume gains were driven by strong demand for ion exchange and reverse osmosis membranes mainly in the industrial market. Safety Solutions volume declined as a result of supply constraints and planned maintenance downtime which more than offset TYVEK® volume gains from increased demand in the personal protection market. Volume declines in Shelter Solutions were primarily due to weakness in the construction market.
Pro forma Operating EBITDA was $1,419 million for the year ended December 31, 2019, up 11 percent compared with $1,283 million for the year ended December 31, 2018 due to local price gains, cost synergies, productivity improvements and volume gains partially offset by an unfavorable impact from currency.
NON-CORE
The Non-Core segment is a leading global supplier of key materials for the manufacturing of photovoltaic cells and panels, including innovative metallization pastes, backsheet materials and silicone encapsulants and adhesives. The segment provides materials used in components and films for consumer electronics, automotive, and aerospace markets. Additionally, 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 carpet and apparel markets as well as polyester films for the healthcare, photovoltaics, electronics, packaging and labels, and electrical insulation industries. Until its sale in the third quarter of 2020, 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 for the photovoltaic and semiconductor industries.
Non-Core For the Years Ended December 31,
In millions 2020 2019 2018
Net sales $ 1,342 $ 1,731 $ 2,027
Operating EBITDA 1
$ 168 $ 512 $ 702
Equity earnings 2
$ 122 $ 258 $ 400
1. For the year ended December 31, 2019 and 2018 operating EBITDA is on a pro forma basis.
2. Excludes a net charge primarily related to a joint venture in the Non-Core segment.
Non-Core For the Years Ended December 31,
Percentage change from prior year 2020 2019
Change in Net Sales from Prior Period due to:
Local price & product mix
3 % 1 %
Currency
- (2)
Volume
(14) (11)
Portfolio & other
(11) (3)
Total
(22) % (15) %
2020 Versus 2019
Non-Core net sales were $1,342 million for the year ended December 31, 2020, down from $1,731 million for the year ended December 31, 2019 due to a 14 percent decrease in volume and an 11 percent portfolio decline which more than offset a 3 percent increase in local price. The portfolio decline was driven by the third quarter 2020 sale of the trichlorosilane ("TCS") business within Photovoltaic & Advanced Materials and the third quarter 2019 sale of the Sustainable Solutions business. Volume declines were driven by declines in demand for trichlorosilanes, TEDLAR® aircraft films, biomaterials due to weakened demand in carpet and apparel markets, and lower volumes in Clean Technologies.
Operating EBITDA was $168 million for the year ended December 31, 2020, down 67 percent compared with pro forma Operating EBITDA of $512 million for the year ended December 31, 2019 due to declines in customer settlements, volume declines, the absence of the gain on the sale of the Sustainable Solutions business, and the absence of earnings from the Sustainable Solutions, TCS, and HSC businesses.
2019 Versus 2018
Non-Core net sales were $1,731 million for the year ended December 31, 2019, down from $2,027 million for the year ended December 31, 2018 due to a 11 percent decrease in volume, a 3 percent portfolio decline and a 2 percent unfavorable impact from currency, primarily in Asia Pacific, which more than offset a 1 percent increase in local price. Portfolio declines were due to the sale of the Sustainable Solutions business in the third quarter of 2019. Volume declines in Photovoltaic & Advanced Materials were driven by weak demand for trichlorosilanes due to low polysilicon production and lower paste sales in electronic component end markets. Biomaterials volume declines were primarily a result of a slow-down in demand in the carpet and apparel markets.
Pro forma Operating EBITDA was $512 million for the year ended December 31, 2019, down 27 percent compared with $702 million for the year ended December 31, 2018 as a result of volume declines, lower HSC Group equity earnings due to lower customer settlements, and unfavorable impacts from currency and portfolio actions, which were partially offset by cost synergies and a gain on the sale of the Sustainable Solutions business.
LIQUIDITY & CAPITAL RESOURCES
The Company continually reviews its sources of liquidity and debt portfolio and may make adjustments to one or both to ensure adequate liquidity and increase the Company’s optionality and financing efficiency as it relates to financing cost and balancing terms/maturities. The Company’s primary source of incremental liquidity is cash flows from operating activities. COVID-19 continues to impact the broader global economy, including negatively impacting economic growth and creating disruption and volatility in the global financial and capital markets, which could result in increases in the cost of capital and/or adversely impact the availability of and access to capital, which could negatively affect DuPont’s liquidity. 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; however, DuPont is unable to predict the extent of COVID-19 related impacts which depends on highly uncertain and unpredictable future developments, including the duration and spread of the COVID-19 outbreak, and the speed and extent of the resumption of normal economic and operating conditions. In light of this uncertainty, the Company has taken steps to further ensure liquidity and capital resources, as discussed below.
In millions December 31, 2020 December 31, 2019
Cash and cash equivalents 1
$ 2,544 $ 1,540
Total debt 2
$ 21,811 $ 17,447
1.The net proceeds of approximately $6.2 billion from the N&B Notes Offering were recorded within non-current “Restricted cash” in the Consolidated Balance Sheets at December 31, 2020 and thus are not included in "Cash and cash equivalents" as presented in the table above.
2.This includes $6.25 billion of debt obligations associated with the N&B Notes Offering.
The Company's cash and cash equivalents at December 31, 2020 and December 31, 2019 were $2.5 billion and $1.5 billion, respectively, of which $1.8 billion at December 31, 2020 and $1.4 billion at December 31, 2019 were held by subsidiaries in foreign countries, including United States territories. 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.
Total debt at December 31, 2020 and December 31, 2019 was $21.8 billion and $17.4 billion, respectively. The increase was primarily due to the N&B Notes Offering and the May Debt Offering. This increase was partially offset by the repayment of the notes due in November 2020 and a decline in commercial paper.
As of December 31, 2020, the Company is contractually obligated to make future cash payments of $21,958 million and $9,235 million associated with principal and interest, respectively, on debt obligations. Related to the principal balance, $5 million will be due in the next twelve months and the remainder will be due subsequent to 2021. Related to interest, $754 million will be due in the next twelve months and the remainder will be due subsequent to 2021. The majority of interest obligations will be due in 2026 or later. The obligations associated with the N&B Notes Offering were separated from the Company on February 1, 2021, upon consummation of the N&B Transaction. This resulted in $6,250 million of principal, mostly due subsequent to 2025, and related $2,637 million of future interest obligations being separated from the Company.
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 billion and the Five-Year Revolving Credit Facility became effective and available. 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. In June 2019, the Company entered into a 364-day $750 million revolving credit facility (the “Old 364-Day Revolving Credit Facility”).
In April 2020, the Company entered into a $1 billion 364-day revolving credit facility (the “$1B Revolving Credit Facility"). The $1B Revolving Credit Facility replaced the Old 364-Day Revolving Credit Facility, improving the Company’s liquidity position in response to near term uncertainties. As of the effectiveness of the $1B Revolving Credit Facility, the Old 364-Day Revolving Credit Facility was terminated. The $1B Revolving Credit facility may be used for general corporate purposes.
On February 1, 2021, the Company terminated its fully drawn $3 billion Term Loan Facilities. The termination triggered the repayment of the aggregate outstanding principal amount of $3 billion, plus accrued and unpaid interest through and including January 31, 2021. The Company funded the repayment with proceeds from the Special Cash Payment.
May Debt Offering
On May 1, 2020, the Company completed an underwritten public offering of senior unsecured notes (the “May 2020 Notes”) in the aggregate principal amount of $2 billion of 2.169 percent fixed rate Notes due May 1, 2023 (the “May Debt Offering”). The proceeds from the May Debt Offering were used by the Company to repay the Company’s $0.5 billion in floating rate notes due November 2020 and $1.5 billion of 3.77 percent fixed-rate notes due November 2020. Upon consummation of the N&B Transaction, the special mandatory redemption feature of the May Debt Offering was triggered, requiring the Company to redeem all of the May 2020 Notes at a redemption price equal to 100% of the aggregate principal amount of the May 2020 Notes plus accrued and unpaid interest. The Company intends to redeem the May 2020 Notes in May 2021 and will fund the redemption with proceeds from the Special Cash Payment.
Commercial Paper
In April 2019, DuPont authorized a $3 billion commercial paper program (the “DuPont Commercial Paper Program”). At December 31, 2020, the Company had no issuances outstanding of commercial paper ($1.8 billion at December 31, 2019). The Company’s issuance under the Commercial Paper Program in 2019 included the issuance of $1.4 billion (the “Funding CP Issuance”) in May 2019 in anticipation of the Corteva Distribution, as well as borrowings for general corporate purposes.
Nutrition & Biosciences Financing
In January 2020, N&B entered into a senior unsecured term loan agreement in the amount of $1.25 billion split evenly between three- and five-year facilities ("N&B Term Loan Facilities").
On September 16, 2020 (the “Offering Date”), N&B completed an offering in the aggregate principal amount of $6.25 billion of senior unsecured notes in six series, comprised of the following (collectively, the “N&B Notes Offering" and together with the N&B Term Loan Facilities, the “Permanent Financing”): $300 million aggregate principal amount of 0.697% Senior Notes due 2022; $1.0 billion aggregate principal amount of 1.230% Senior Notes due 2025; $1.2 billion aggregate principal amount of 1.832% Senior Notes due 2027; $1.5 billion aggregate principal amount of 2.300% Senior Notes due 2030; $750 million aggregate principal amount of 3.268% Senior Notes due 2040; and $1.5 billion aggregate principal amount of 3.468% Senior Notes due 2050. The net proceeds of approximately $6.2 billion from the N&B Notes Offering were deposited into an escrow account.
On February 1, 2021, upon consummation of the N&B Transaction, the proceeds from the Permanent Financing were used to make the Special Cash Payment and to pay the related financing fees and expenses. At this time, the net proceeds from the N&B Notes Offering were released from escrow. The obligations and liabilities associated with the Permanent Financing were also separated from the Company upon consummation of the N&B Transaction.
Credit Ratings
The Company's credit ratings impact its access to the debt capital markets and cost of capital. The Company remains committed to maintaining a strong financial position with a balanced financial policy focused on maintaining a strong investment-grade rating and driving shareholder value and remuneration. At January 31, 2021, DuPont's credit ratings were as follows:
Credit Ratings Long-Term Rating Short-Term Rating Outlook
Standard & Poor’s BBB+ A-2 Stable
Moody’s Investors Service Baa1 P-2 Stable
Fitch Ratings BBB+ 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 $1B 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 December 31, 2020, the Company was in compliance with this financial covenant.
Summary of Cash Flows
The Company’s cash flows from operating, investing and financing activities, as reflected in the Consolidated Statements of Cash Flows, are summarized in the following table. The cash flows related to the materials science and agriculture businesses have not been segregated and are included in the Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018.
Cash Flow Summary
2020 2019 2018
In millions
Cash provided by (used for):
Operating activities
$ 4,095 $ 1,409 $ 4,731
Investing activities
$ (202) $ (2,313) $ (2,462)
Financing activities
$ 3,238 $ (11,550) $ (1,918)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
$ 67 $ 9 $ (344)
Cash, cash equivalents and restricted cash in discontinued operations
$ - $ - $ 5,431
Cash Flows from Operating Activities
Cash provided by operating activities was $4,095 million and $1,409 million for the years ended December 31, 2020 and 2019, respectively. Cash provided by operating activities increased in 2020 compared with 2019, primarily due to a release of cash from net working capital in 2020 versus a use of cash for net working capital in the prior period, partially offset by lower earnings versus the prior period. Cash provided by operating activities for the year ended December 31, 2018 was $4,731 million. Cash provided by operating activities decreased in 2019 compared to 2018, primarily driven by the impact of the DWDP Distributions of the materials science and agriculture businesses to period earnings, partially offset by a decrease in the use of cash for net working capital versus the prior period.
Net Working Capital
December 31, 2020 December 31, 2019
In millions (except ratio)
Current assets
$ 10,877 $ 9,999
Current liabilities
4,699 8,346
Net working capital $ 6,178 $ 1,653
Current ratio 2.31:1 1.20:1
Cash Flows from Investing Activities
Cash used for investing activities in 2020 was $202 million compared to cash used for investing of $2,313 million in 2019. The decrease in cash used was primarily attributable to lower capital expenditures and an increase in proceeds from sales of property and businesses, partially offset by a decrease in proceeds from sales and maturities of investments. Cash used for investing activities in 2018 was $2,462 million primarily driven by capital expenditures and purchases of investments, which were partially offset by proceeds from sales and maturities of investments and proceeds from interests in trade accounts receivable conduits.
Capital expenditures totaled $1,194 million for the year ended December 31, 2020, $2,472 million for the year ended December 31, 2019, and $3,837 million for the year ended December 31, 2018. The Company expects 2021 capital expenditures to be approximately $825 million. The Company may adjust its spending throughout the year as economic conditions develop.
Cash Flows from Financing Activities
Cash provided by financing activities in 2020 was $3,238 million compared to cash used by financing activities of $11,550 million in 2019. The difference in cash flows from financing activities in 2020 versus the prior year is primarily driven by the increase in proceeds from the issuance of long-term debt, largely related to the N&B Transaction, as well as the impact of the DWDP Distributions of the materials science and agriculture businesses to cash balances in 2019, partially offset by the increased use of cash in decreasing short-term notes payable. Cash used for financing activities in 2018 was $1,918 million. The primary driver of the difference in cash used for financing activities between 2019 and 2018 is the increased proceeds in issuance of long-term debt in 2018 and the impact of the DWDP Distributions of the materials science and agriculture businesses to cash balances in 2019.
Dividends
The following table provides dividends paid to common shareholders for the years ended December 31, 2020, 2019, and 2018:
Dividends Paid
December 31, 2020 December 31, 2019 December 31, 2018
In millions
Dividends paid, per common share $ 1.20 $ 2.16 $ 4.56
Dividends paid to common stockholders 1
$ 882 $ 1,611 $ 3,491
1.The 2019 and 2018 dividends include dividends paid to DowDuPont common stockholders prior to the DWDP Distributions.
Share Buyback Programs
On June 1, 2019, the Company's Board of Directors authorized a $2 billion share buyback program, which expires on June 1, 2021. As of December 31, 2020, the Company had repurchased 16.9 million shares under this program since inception at a total cost of $982 million, including 6.1 million shares repurchased and retired for $232 million during the year ended December 31, 2020.
Under this program, the Company has remaining authorization to repurchase and retire about $1 billion of its common stock in the open market or privately negotiated deals. The timing and amount of any share repurchases will be determined by the Company based on its evaluation of market conditions and other factors.
See Part II, Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities and Note 17 to the Consolidated Financial Statements, for additional information.
Pension and Other Post-Employment Plans
TDCC and EID did not merge their pension plans and other post-employment benefit plans as a result of the DWDP Merger. TDCC and EID had defined benefit pension plans in the United States and a number of other countries. Subsequent to the DWDP Distributions, the Company retained defined benefit pension plans in a number of other countries but does not have any qualified defined benefit pension plan in the United States.
The Company's funding policy is to contribute to defined benefit pension plans based on pension funding laws and local country requirements. Contributions exceeding funding requirements may be made at the Company's discretion. The Company expects to contribute approximately $100 million to its pension plans in 2021. The amount and timing of the Company’s actual future contributions will depend on applicable funding requirements, discount rates, investment performance, plan design, and various other factors, separations and distributions. See Note 19 to the Consolidated Financial Statements for additional information concerning the Company’s pension plans.
TDCC's funding policy was to contribute to plans when pension laws and/or economics either require or encourage funding. Prior to the Dow Distribution, TDCC made discretionary contributions exceeding funding requirements. In 2018 TDCC contributed $1,656 million to its pension plans, including contributions to fund benefit payments for its non-qualified pension plans. In the third quarter of 2018, TDCC made $1,100 million discretionary contributions to their principal U.S. pension plans, which are included in the 2018 contribution amounts above. The discretionary contributions were based on TDCC's funding policies, which permit discretionary contributions to defined benefit pension plans when economics encourage funding, and reflected considerations relating to tax deductibility and capital structure. During the three months of 2019, TDCC made contributions of $103 million to TDCC plans that were separated with Dow after the DWDP Distributions.
As of December 31, 2020, the Company is contractually obligated to make future cash payments of $1,416 million related to pension and other post-employment benefit plans. $106 million will be due in the next twelve months and the remainder will be due subsequent to 2021 with the majority due subsequent to 2025.
EID's funding policy was to contribute to defined benefit pension plans based on pension funding laws and local country requirements. Prior to the Corteva Distribution, EID made discretionary contributions exceeding funding requirements. EID contributed $1,308 million, including discretionary contributions of $1,100 million to its principal U.S. pension plans in 2018. These contributions included contributions to fund benefit payments for non-qualified pension plans. The discretionary contributions were based on EID's funding policies, which permit discretionary contributions to defined benefit pension plans when economics encourage funding, and reflected considerations relating to tax deductibility and capital structure. During the five months of 2019, EID made $36 million contributions to plans that were separated from the Company in conjunction with the Corteva Distribution.
Restructuring
In March 2020, the Company approved restructuring actions designed to capture near-term cost reductions and to further simplify certain organizational structures in anticipation of the N&B Transaction. As a result of these actions, the Company recorded pre-tax restructuring charges of $179 million inception-to-date, consisting of severance and related benefit costs of $129 million and asset related charges of $50 million. Actions associated with the 2020 Restructuring Program are considered substantially complete. Future cash payments related to the 2020 Restructuring Program are anticipated to be $68 million primarily related to the payment of severance and related benefits.
In June 2019, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the DWDP Distributions. As a result of these actions, the Company has recorded pre-tax restructuring charges of $140 million inception-to-date, consisting of severance and related benefit costs of $106 million, and asset related charges of $34 million. Actions associated with this program are considered substantially complete. Future cash payments related to the 2019 Restructuring Program are anticipated to be $18 million and relate to the payment of severance and related benefits.
In September and November 2017, the Company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program, adopted by the DowDuPont Board of Directors. The Synergy Program was designed to integrate and optimize the organization following the DWDP Merger and in preparation for the DWDP Distributions whereby the Company has recorded pre-tax restructuring charges attributable to the continuing operations of DuPont of $492 million inception-to-date, consisting of severance and related benefit costs of $213 million, asset related charges of $212 million and contract termination and other charges of $67 million. The activities related to the Synergy Program are expected to result in additional cash expenditures of $20 million and relate primarily to the payment of severance and related benefit costs. Actions associated with the Synergy Program, including employee separations, are considered substantially complete.
See Note 5 to the Consolidated Financial Statements for more information on the Company's restructuring programs.
Other Off-balance Sheet Arrangements
Certain Guarantee Contracts
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 December 31, 2020 and December 31, 2019, the Company had directly guaranteed $189 million and $187 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 Consolidated Financial Statements.
The MOU Cost Sharing Agreement
In connection with the cost sharing arrangement entered into as part of the MOU, the companies agreed to establish an escrow account to address potential future PFAS costs. Subject to the terms of the arrangement, contributions to the escrow account will be made by Chemours, DuPont and Corteva, annually over an eight-year period. Over such period, Chemours will deposit a total of $500 million into the account and DuPont and Corteva, together, will deposit an additional $500 million pursuant to the terms of their existing Letter Agreement.
The Company is contractually obligated to make deposits to the escrow account of $50 million no later than September 30, 2021. Additional information regarding the MOU and funding of the escrow account can be found in Note 15 to the Consolidated Financial Statements.
Other Contractual Obligations
As of December 31, 2020, the Company is contractually obligated to make future cash payments of $1,191 million and $809 million related to purchase and lease obligations, respectively. Related to purchases, $372 million will be due in the next twelve months and the remainder will be due subsequent to 2021. Related to leases, $186 million will be due in the next twelve months and remainder will be due subsequent to 2021.
As of December 31, 2020, the Company is contractually obligated to make future cash payments of $188 million related to other miscellaneous obligations, the majority of which is due subsequent to 2021.
OUTLOOK
In 2021, the Company expects demand to remain strong for semiconductors, smartphones, protective garments, water and residential construction, along with continued improvements in automotive markets. This anticipated strong demand, along with benefits from our continued cost actions, are expected to drive earnings improvement. In addition, the Company is expected to benefit from a lower share count resulting from the Exchange Offer and lower interest expense resulting from the pay down of Commercial Paper and the pay down of the Term Loan Facilities and May 2020 Notes, both funded by proceeds from the Special Cash Payment.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2 to the Consolidated Financial Statements for a description of recent accounting pronouncements.
CRITICAL ACCOUNTING ESTIMATES
The Company's significant accounting policies are more fully described in Note 1 to the Consolidated Financial Statements. Management believes that the application of these policies on a consistent basis enables the Company to provide the users of the financial statements with useful and reliable information about the Company's operating results and financial condition.
The preparation of the Consolidated Financial Statements in conformity with generally accepted accounting principles ("GAAP") in the United States of America requires management to make estimates and assumptions that affect the reported amounts, including, but not limited to, receivable and inventory valuations, impairment of tangible and intangible assets, long-term employee benefit obligations, income taxes, restructuring liabilities, environmental matters and litigation. Management's estimates are based on historical experience, facts and circumstances available at the time and various other assumptions that are believed to be reasonable. The Company reviews these matters and reflects changes in estimates as appropriate. Management believes that the following represent some of the more critical judgment areas in the application of the Company's accounting policies which could have a material effect on the Company's financial position, liquidity or results of operations.
Pension Plans
Accounting for employee benefit plans involves numerous assumptions and estimates. Discount rate and expected return on plan assets are two critical assumptions in measuring the cost and benefit obligation of the Company's pension plans. Management reviews these two key assumptions when plans are re-measured. These and other assumptions are updated periodically to reflect the actual experience and expectations on a plan specific basis as appropriate. As permitted by GAAP, actual results that differ from the assumptions are accumulated on a plan by plan basis and to the extent that such differences exceed 10 percent of the greater of the plan's benefit obligation or the applicable plan assets, the excess is amortized over the average remaining service period of active employees or the average remaining life expectancy of the inactive participants if all or almost all of a plan’s participants are inactive.
For the majority of the benefit plans, the Company utilizes the Aon AA corporate bond yield curves to determine the discount rate, applicable to each country, at the measurement date.
The Company establishes strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes in accordance with the laws and practices of those countries. Where appropriate, asset-liability studies are also taken into consideration. For plans, the long-term expected return on plan assets pension expense is determined using the fair value of assets.
The following table highlights the potential impact on the Company's pre-tax earnings due to changes in certain key assumptions with respect to the Company's pension plans based on assets and liabilities at December 31, 2020:
Pre-tax Earnings Benefit (Charge)
(Dollars in millions)
1/4 Percentage
Point
Increase 1/4 Percentage
Point
Decrease
Discount rate $ (1) $ (2)
Expected rate of return on plan assets 10 (10)
Additional information with respect to pension plans, liabilities and assumptions is discussed under "Long-term Employee Benefits" beginning on page 57 and in Note 19 to the Consolidated Financial Statements.
Legal Contingencies
The Company's results of operations could be affected by significant litigation adverse to the Company, including product liability claims, patent infringement and antitrust claims, and claims for third party property damage or personal injury stemming from alleged environmental torts. The Company records accruals for legal matters when the information available indicates that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Management makes adjustments to these accruals to reflect the impact and status of negotiations, settlements, rulings, advice of counsel and other information and events that may pertain to a particular matter. Predicting the outcome of claims and lawsuits and estimating related costs and exposure involves substantial uncertainties that could cause actual costs to vary materially from estimates. In making determinations of likely outcomes of litigation matters, management considers many factors. These factors include, but are not limited to, the nature of specific claims including unasserted claims, the Company's experience with similar types of claims, the jurisdiction in which the matter is filed, input from outside legal counsel, the likelihood of resolving the matter through alternative dispute resolution mechanisms, and the matter's current status. Considerable judgment is required in determining whether to establish a litigation accrual when an adverse judgment is rendered against the Company in a court proceeding. In such situations, the Company will not recognize a loss if, based upon a thorough review of all relevant facts and information, management believes that it is probable that the pending judgment will be successfully overturned on appeal. A detailed discussion of significant litigation matters is contained in Note 15 to the Consolidated Financial Statements.
Income Taxes
The breadth of the Company's operations and the global complexity of tax regulations require assessments of uncertainties and judgments in estimating taxes the Company will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation and resolution of disputes arising from federal, state and international tax audits in the normal course of business. The resolution of these uncertainties may result in adjustments to the Company's tax assets and tax liabilities. It is reasonably possible that changes to the Company’s global unrecognized tax benefits could be significant; however, due to the uncertainty regarding the timing of completion of audits and possible outcomes, a current estimate of the range of increases or decreases that may occur within the next twelve months cannot be made.
Deferred income taxes result from differences between the financial and tax basis of the Company's assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Significant judgment is required in evaluating the need for and magnitude of appropriate valuation allowances against deferred tax assets. The realization of these assets is dependent on generating future taxable income, as well as successful implementation of various tax planning strategies. For example, changes in facts and circumstances that alter the probability that the Company will realize deferred tax assets could result in recording a valuation allowance, thereby reducing the deferred tax asset and generating a deferred tax expense in the relevant period. In some situations, these changes could be material.
At December 31, 2020, the Company had a net deferred tax liability balance of $2.7 billion, net of a valuation allowance of $0.7 billion. Realization of deferred tax assets is expected to occur over an extended period of time. As a result, changes in tax laws, assumptions with respect to future taxable income, and tax planning strategies could result in adjustments to deferred tax assets. See Note 7 to the Consolidated Financial Statements for additional details related to the deferred tax liability balance.
Goodwill
The assets and liabilities of acquired businesses are measured at their estimated fair values at the dates of acquisition. The excess of the purchase price over the estimated fair value of the net assets acquired, including identified intangibles, is recorded as goodwill. The determination and allocation of fair value to the assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment, including estimates based on historical information, current market data and future expectations. The Company’s significant assumptions in these analyses include, but are not limited to, future cash flow projections (with probability weighting applied when applicable), the weighted average cost of capital, the terminal growth rate, and the tax rate for the income approach, and metrics of publicly traded companies or historically completed transactions of comparable businesses for the market approach. The Company will also apply a weighting to the market approach and income approach to determine the fair value. When applicable, third party purchase offers may be utilized to measure fair value under the market approach. Although the estimates are deemed reasonable by management based on information available at the dates of acquisition, those estimates are inherently uncertain.
Assessment of the potential impairment of goodwill, other intangible assets, property, plant and equipment, investments in nonconsolidated affiliates, and other assets is an integral part of the Company's normal ongoing review of operations. Testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management's best estimates at a particular point in time. The dynamic economic environments in which the Company's diversified product lines operate, and key economic and product line assumptions with respect to projected selling prices, market growth and inflation
rates, can significantly affect the outcome of impairment tests. Estimates based on these assumptions may differ significantly from actual results. Changes in factors and assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as well as the time in which such impairments are recognized. In addition, the Company continually reviews its diverse portfolio of assets to ensure they are achieving their greatest potential and are aligned with the Company's growth strategy. Strategic decisions involving a particular group of assets may trigger an assessment of the recoverability of the related assets. Such an assessment could result in impairment losses.
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 tests goodwill for impairment annually (during the fourth quarter), or more frequently when events or circumstances indicate it is more likely than not that the fair value of the reporting unit has declined below its carrying value. As of the date of the annual impairment test, the Company identified twelve reporting units, of which seven have goodwill assigned. Two of those reporting units were reclassified as held for sale disposal groups as of the date of the annual impairment test. Of those two reporting units, one has goodwill assigned and is presented in “Assets held for sale” in the Consolidated Balance Sheet. The held for sale disposal groups are recorded at the lower of carrying amount or fair value less cost to sell each reporting period the disposal group is reclassified as held for sale.
For purposes of goodwill impairment testing, the Company has the option to first perform qualitative testing to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. The qualitative evaluation is an assessment of factors, including reporting unit or asset specific operating results and cost factors, as well as industry, market and macroeconomic conditions, to determine whether it is more likely than not (more than 50%) that the fair value of a reporting unit or asset is less than the respective carrying amount, including goodwill. If the Company chooses not to complete a qualitative assessment for a given reporting unit or if the initial assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is required.
If additional quantitative testing is performed, an impairment loss is recognized in the amount by which the carrying value of the reporting unit exceeds its fair value, limited to the amount of goodwill at the reporting unit. The Company determined fair values for each of the reporting units using a combination of the income approach and market approach.
Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The Company uses its internal forecasts to estimate future cash flows and includes an estimate of long-term future growth rates based on its most recent views of the long-term outlook for each reporting unit. The discounted cash flow valuations are completed using the following key assumptions: projected revenue growth rates; discount rates; tax rates; and terminal values. The Company applies probability-weighted scenarios to the income approach to determine the concluded fair value of the reporting unit given the uncertainty in the current economic environment to determine the concluded fair value, where applicable. These key assumptions are determined through evaluation of the Company as a whole and underlying business fundamentals and industry risk. Actual results may differ from those assumed in the Company’s forecasts. The Company derives its discount rates using a capital asset pricing model and analyzing published rates for industries relevant to its reporting units to estimate the cost of equity financing. The Company uses discount rates that are commensurate with the risks and uncertainty inherent in the respective reporting units and in its internally developed forecasts. Discount rates used in the Company’s reporting unit valuations ranged from 8% to 9.5%.
Under the market approach, the Company used the Guideline Public Company Method ("GPCM"). The selected peer sets were based on close competitors and reviews of analysts' reports, public filings, and industry research related to firms operating in the respective reporting units industries. In selecting the EBIT/EBITDA multiples and determining the fair value, the Company considered the size, growth, and profitability of each reporting unit versus the relevant guideline public companies.
Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is reasonably possible that the judgments and estimates described above could change in future periods.
2020 Interim Goodwill Impairment Testing
During the third quarter of 2020, multiple triggering events occurred requiring the Company to perform impairment analyses associated with its Non-Core segment. As a result of the analyses performed, the Company recorded aggregate pre-tax, non-cash goodwill impairment charges of $183 million recognized in "Goodwill impairment charges" in the Consolidated Statements of Operations.
During the second quarter of 2020, continued near-term demand weakness in global automotive production resulting from the COVID-19 pandemic, along with revised views of recovery based on third party market information, served as a triggering event requiring the Company to perform an impairment analysis of the goodwill associated with its Transportation & Industrial reporting unit. As a result of the analysis performed, the Company recorded pre-tax, non-cash goodwill impairment charges of $2,498 million recognized in "Goodwill impairment charges" in the Consolidated Statements of Operations.
During the first quarter of 2020, the Company was required to perform interim impairment tests of its goodwill and long-lived assets as expectations of proceeds related to certain potential divestitures within the Non-Core segment gave rise to fair value indicators and, thus, served as triggering events. As a result of the analysis performed, the Company recorded pre-tax, non-cash impairment charges related to goodwill of $533 million. The charges were recognized in "Goodwill impairment charge" in the Consolidated Statements of Operations.
The Company’s analyses above use a combination of the discounted cash flow models (a form of the income approach) utilizing Level 3 unobservable inputs and the market approach. The Company’s significant assumptions in these analyses include, but are not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate, and the tax rate. The Company’s estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategies. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the Company’s estimates. If the Company’s ongoing estimates of future cash flows are not met, the Company may have to record additional impairment charges in future periods. The Company also uses the Guideline Public Company Method, a form of the market approach (utilizing Level 3 unobservable inputs), which is derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services. When applicable, third party purchase offers may be utilized to measure fair value.
For further information see Note 13 to the Consolidated Financial Statements.
2020 Annual Goodwill Impairment Testing
In the fourth quarter of 2020, the Company performed its annual goodwill impairment testing by applying the qualitative assessment to four of its reporting units and the quantitative assessment to two of its reporting units. For the reporting units tested under the qualitative assessment, the Company considered various qualitative factors that would have affected the estimated fair value of the reporting units, and the results of the qualitative assessments indicated that it is not more likely than not that the fair values of the reporting units were less than their carrying values. For the reporting units tested under the quantitative assessment, the results indicated that, the estimated fair values of the reporting units exceeded their carrying values.
The dynamic economic environments in which the Company's diversified product lines operate, and key economic and product line assumptions with respect to projected selling prices, market growth and inflation rates, can significantly affect the outcome of impairment tests. Estimates based on these assumptions may differ significantly from actual results.
Impairment and Disposals of Long-Lived Assets
The Company evaluates the carrying value of long-lived assets (collectively the “asset group”) to be held and used when events or changes in circumstances indicate the carrying value may not be recoverable. Such reviews are performed in accordance with ASC 360. The carrying value of a long-lived asset group is considered impaired when the anticipated future undiscounted cash flows to be derived from the asset group over the remaining economic life of the asset group’s primary asset are separately identifiable and are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset group. Fair value of the asset group is determined using a combination of a discounted cash flow model and/or market approach. Long-lived assets to be disposed of by sale, if material, are classified as held for sale and reported at the lower of carrying amount or fair value less cost to sell, and depreciation is ceased. Long-lived assets to be disposed of other than by sale are classified as held and used until they are disposed of and reported at the lower of carrying amount or fair value. Depreciation is recognized over the remaining useful life of the assets.
LONG-TERM EMPLOYEE BENEFITS
The Company has various obligations to its employees and retirees. The Company maintains retirement-related programs in many countries that have a long-term impact on the Company's earnings and cash flows. These plans are typically defined benefit pension plans. The Company has a few medical, dental and life insurance benefits for employees, pensioners and survivors and for employees (other post-employment benefits or "OPEB" plans).
Pension coverage for employees of the Company's non-U.S. consolidated subsidiaries is provided, to the extent deemed appropriate, through separate plans. The Company regularly explores alternative solutions to meet its global pension obligations in the most cost effective manner possible as demographics, life expectancy and country-specific pension funding rules change. Where permitted by applicable law, the Company reserves the right to change, modify or discontinue its plans that provide pension, medical, dental and life insurance. Benefits under defined benefit pension plans are based primarily on years of service and employees' pay near retirement.
Pension benefits are paid primarily from trust funds established to comply with applicable laws and regulations of the sovereign country in which the pension plan operates. Unless required by law, the Company does not make contributions that are in excess of tax deductible limits. The actuarial assumptions and procedures utilized are reviewed periodically by the plans' actuaries to provide reasonable assurance that there will be adequate funds for the payment of benefits. Thus, there is not necessarily a direct correlation between pension funding and pension expense. In general, however, improvements in plans' funded status tends to moderate subsequent funding needs.
The Company contributed $28 million, $497 million, and $93 million to its funded pension plans for the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively.
The Company does maintain one U.S. pension benefit plan. This plan is a separate unfunded plan and these benefits are paid to employees from operating cash flows. The Company's remaining pension plans with no plan assets are paid from operating cash flows. The Company made benefit payments of $70 million, $71 million, and $61 million to its unfunded plans for the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively.
The Company's OPEB plans are unfunded and the cost is paid from operating cash flows. Pre-tax cash requirements to cover payments for the Company's OPEB plans was $3 million for the year ended December 31, 2020 and $1 million for the years ended December 31, 2019 and December 31, 2018, respectively.
In 2021, the Company expects to contribute approximately $100 million to its funded pension plans and its remaining plans with no plan assets, and about $6 million for its OPEB plans. The amount and timing of actual future contributions will depend on applicable funding requirements, discount rates, investment performance, plan design, and various other factors.
The Company's income can be significantly affected by pension and defined contribution charges/(benefits) as well as OPEB costs. The following table summarizes the extent to which the Company's income for the years ended December 31, 2020, December 31, 2019, and December 31, 2018 was affected by pre-tax charges related to long-term employee benefits:
For the Years Ended
In millions December 31, 2020 December 31, 2019 December 31, 2018
Long-term employee benefit plan charges $ 155 $ 98 $ 75
The above charges (benefit) for pension and OPEB are determined as of the beginning of each period. See "Pension Plans and Other Post-Employment Benefits" under the Critical Accounting Estimates section beginning on page 53 of this report for additional information on determining annual expense.
For 2021, long term employee benefit expense from continuing operations is expected to decrease by about $20 million. The decrease is mainly due to lower interest cost and higher expected return on plan assets.
ENVIRONMENTAL MATTERS
The Company operates global manufacturing, product handling and distribution facilities that are subject to a broad array of environmental laws and regulations. Such rules are subject to change by the implementing governmental agency, and the Company monitors these changes closely. Company policy requires that all operations fully meet or exceed legal and regulatory requirements. In addition, the Company implements voluntary programs to reduce air emissions, minimize the generation of hazardous waste, decrease the volume of water use and discharges, increase the efficiency of energy use and reduce the generation of persistent, bioaccumulative and toxic materials. Management has noted a global upward trend in the amount and complexity of proposed chemicals regulation. The costs to comply with complex environmental laws and regulations, as well as internal voluntary programs and goals, are significant and will continue to be significant for the foreseeable future. The Company has incurred environmental remediation costs of $6 million, $28 million, and $15 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Based on existing facts and circumstances, management does not believe that year-over-year changes, if any, in environmental expenses charged to current operations will have a material impact on the Company's financial position, liquidity or results of operations. Annual expenditures in the near term are not expected to vary significantly from the range of such expenditures experienced in the past few years. Longer term, expenditures are subject to considerable uncertainty and may fluctuate significantly.
Environmental Operating Costs
As a result of its operations, the Company incurs costs for pollution abatement activities including waste collection and disposal, installation and maintenance of air pollution controls and wastewater treatment, emissions testing and monitoring, and obtaining permits. The Company also incurs costs related to environmental related research and development activities including environmental field and treatment studies as well as toxicity and degradation testing to evaluate the environmental impact of products and raw materials.
Remediation Accrual
Changes in the remediation accrual balance are summarized below:
(Dollars in millions)
Balance at December 31, 2018 $ 51
Remediation payments (12)
Net increase in remediation accrual 28
Net change, indemnification 1
Balance at December 31, 2019 $ 77
Remediation payments (5)
Net increase in remediation accrual 6
Net change, indemnification 1
Balance at December 31, 2020 $ 80
1.Represents the net change in indemnified remediation obligations based on activity pursuant to the DWDP Separation and Distribution Agreement and Letter Agreement as discussed below and in Notes 3 and 15 to the Consolidated Financial Statements. This is not inclusive of the accrual of $59 million related to eligible PFAS costs associated with the MOU.
Considerable uncertainty exists with respect to environmental remediation costs, and, under adverse changes in circumstances, the potential liability may range up to $170 million above the amount accrued as of December 31, 2020. However, based on existing facts and circumstances, management does not believe that any loss, in excess of amounts accrued, related to remediation activities at any individual site will have a material impact on the financial position, liquidity or results of operations of the Company.
Pursuant to the DWDP Separation and Distribution Agreement and the Letter Agreement discussed in Notes 3 and 15 to the Consolidated Financial Statements, the Company indemnifies Dow and Corteva for certain environmental matters. The Company has recorded an indemnification liability of $44 million corresponding to the Company's accrual balance related to these matters at December 31, 2020. The indemnification liability is included in the total remediation accrual liability of $80 million.
Environmental Capital Expenditures
Capital expenditures for environmental projects, either required by law or necessary to meet the Company’s internal environmental goals, were $43 million for the year ended December 31, 2020. The Company currently estimates expenditures for environmental-related capital projects to be approximately $48 million in 2021.
Climate Change
The Company believes that climate change is an important global issue that presents risks and opportunities. For instance, the Company continuously evaluates opportunities for existing and new product and service offerings to meet the anticipated demands of a low-carbon economy. In 2019, the Company announced nine new sustainability goals, including an Acting on Climate goal to achieve a 30 percent reduction in absolute greenhouse gas (GHG) emissions by 2030 and carbon neutral operations by 2050. DuPont reports on its progress against these goals in its annual sustainability report.
The Company is actively engaged in efforts to develop constructive public policies to reduce GHG emissions and encourage lower-carbon forms of energy. Such policies may bring higher operating costs as well as greater revenue and margin opportunities. Legislative efforts to control or limit GHG emissions could affect the Company's energy source and supply choices as well as increase the cost of energy and raw materials derived from fossil fuels. Such efforts are also anticipated to provide the business community with greater certainty for the regulatory future, help guide investment decisions, and drive growth in demand for low-carbon and energy-efficient products, technologies, and services. Similarly, demand is expected to grow for products that facilitate adaptation to a changing climate. However, the current unsettled policy environment in the U.S., where many company facilities are located, adds an element of uncertainty to business decisions, particularly those relating to long-term capital investments.
In addition, significant differences in regional or national approaches could present challenges in a global marketplace. An effective global climate policy framework will help drive the market changes that are needed to stimulate and efficiently deploy new innovations in science and technology, while maintaining open and competitive global markets.
Sustainability
In October 2019, DuPont announced its fifth-generation sustainability strategy - nine ambitious priorities that reflect the Company's best opportunity to make a positive impact in the world while advancing our business objectives. The ten-year strategy prioritizes global challenges such as climate change, water stewardship, advancing circular economy and processes, improving health and safety, and more. With these goals, DuPont committed to using the Company's strength in innovation to advance progress on several of the United Nations’ Sustainable Development Goals (SDGs), increasing resiliency and reducing environmental and social impacts across value chains, and ensuring people are put at the center of all our work.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. 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 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, and Japanese yen. 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 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 December 31, 2020, and the effect on fair values of a hypothetical adverse change in the foreign exchange rates that existed at December 31, 2020. 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 December 31, 2020 December 31, 2020
Foreign currency contracts $ (9) $ (219)
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 December 31, 2020, 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.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required by this Item are included herein, commencing on page of this report.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains a system of disclosure controls and procedures to give reasonable assurance that information required to be disclosed in the Company's reports filed or submitted under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. These controls and procedures also give reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to management to allow timely decisions regarding required disclosures.
As of December 31, 2020, the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO), together with management, conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the CEO and CFO concluded that these disclosure controls and procedures are 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 quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
In connection with the N&B Transaction, there were several processes, policies, operations, technologies and information systems that were transferred or separated. Through the quarter ended December 31, 2020, the Company continued to take steps to ensure that adequate controls were designed and maintained throughout this transition period.
The Company has completed its evaluation of its internal controls and has concluded that the Company's system of internal controls over financial reporting was effective as of December 31, 2020 (see page).

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.
DuPont de Nemours, Inc.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information related to Directors, certain executive officers and certain corporate governance matters (including identification of Audit Committee members and financial expert(s)) is contained in the definitive Proxy Statement for the 2021 Annual Meeting of Stockholders of DuPont De Nemours Inc. and is incorporated herein by reference.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
Information related to executive compensation and the Company's equity compensation plans is contained in the definitive Proxy Statement for the 2021 Annual Meeting of Stockholders of DuPont de Nemours, Inc. and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information with respect to beneficial ownership of DuPont de Nemours, Inc. common stock by each Director and all Directors and executive officers of the Company as a group is contained in the definitive Proxy Statement for the 2021 Annual Meeting of Stockholders of DuPont de Nemours, Inc. and is incorporated herein by reference.
Information relating to any person who beneficially owns in excess of 5 percent of the total outstanding shares of DuPont de Nemours, Inc. common stock is contained in the definitive Proxy Statement for the 2021 Annual Meeting of Stockholders of DuPont de Nemours, Inc. and is incorporated herein by reference.
Information with respect to compensation plans under which equity securities are authorized for issuance is contained in the definitive Proxy Statement for the 2021 Annual Meeting of Stockholders of DuPont de Nemours, Inc. and is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Reportable relationships and related transactions, if any, as well as information relating to director independence are contained in the definitive Proxy Statement for the 2021 Annual Meeting of Stockholders of DuPont de Nemours, Inc. and are incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information with respect to fees and services related to the Company’s independent auditors, PricewaterhouseCoopers LLP, and the disclosure of the Audit Committee’s pre-approval policies and procedures are contained in the definitive Proxy Statement for the 2021 Annual Meeting of Stockholders of DuPont and are incorporated herein by reference.
DuPont de Nemours, Inc.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)Financial Statements and Financial Statement Schedules:
1.Financial Statements (See the Index to the Consolidated Financial Statements on page of this report).
2.Financial Statement Schedules
Schedule II-Valuation and Qualifying Accounts
(In millions) for the years ended December 31, 2020 2019 2018
Accounts Receivable-Allowance for Doubtful Receivables
Balance at beginning of period $ 9 $ 10 $ 1
Additions charged to expenses 34 - 10
Deductions from reserves1
(2) (1) (1)
Balance at end of period $ 41 $ 9 $ 10
Inventory-Obsolescence Reserve
Balance at beginning of period $ 41 $ 43 $ 40
Additions charged to expenses 29 45 44
Deductions from reserves2
(45) (47) (41)
Balance at end of period $ 25 $ 41 $ 43
Deferred Tax Assets-Valuation Allowance
Balance at beginning of period $ 634 $ 593 $ 741
Additions charged to expenses 3
109 91 13
Deductions from reserves 3
(45) (50) (161)
Balance at end of period $ 698 $ 634 $ 593
1.Deductions include write-offs, recoveries and currency translation adjustments.
2.Deductions include disposals and currency translation adjustments.
3.Additions and Deductions include currency translation adjustments.
Financial Statement Schedules listed under the Securities and Exchange Commission ("SEC") rules but not included in this report are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or notes thereto incorporated by reference.
(b) Exhibits required to be filed by Item 601 of Regulation S-K (all of which are under Commission File No. 0001666700):
EXHIBIT NO. DESCRIPTION
3.2
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.
3.3
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.
4.1
Description of Capital Stock incorporated by reference to Exhibit 4.1 to DuPont de Nemours, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
4.2
Indenture, dated as of November 28, 2018, by and between DowDuPont Inc. and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.1 to the DuPont de Nemours. Inc. Current Report on Form 8-K filed on November 28, 2018.
4.3
First Supplemental Indenture, dated November 28, 2018, by and between DowDuPont Inc. and U.S. Bank National Association, as trustee incorporated by reference to Exhibit 4.2 to the DuPont de Nemours. Inc. Current Report on Form 8-K filed on November 28, 2018.
4.4
Second Supplemental Indenture, dated May 1, 2020, by and between DuPont de Nemours, Inc. and U.S. Bank National Association, as trustee incorporated by reference to Exhibit 4.2 to the DuPont de Nemours. Inc. Current Report on Form 8-K filed on May 1, 2020.
10.1
DuPont de Nemours, Inc. 2020 Equity and Incentive Plan, incorporated by reference to Exhibit 10.1 to the DuPont de Nemours, Inc. Current Report on Form 8- K filed May 29, 2020.
10.2
Employment Contract by and between DuPont de Nemours, Inc. and Matthias Heinzel, effective August 1, 2011, as amended by the Terms of Treatment dated October 28, 2014 as fully executed on November 21, 2014, and dated November 11, 2019 as fully executed on November 30, 2019 incorporated by reference to Exhibit 10.1 to DuPont de Nemours, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
10.3
Letter Agreement by and between DuPont de Nemours, Inc. and Matthias Heinzel dated May 28, 2019 incorporated by reference to Exhibit 10.2 to DuPont de Nemours, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
10.4
Letter Agreement by and between DuPont de Nemours, Inc. and Matthias Heinzel dated August 30, 2019 as fully executed on September 26, 2019 incorporated by reference to Exhibit 10.3 to DuPont de Nemours, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
10.5
Letter Agreement by and between DuPont de Nemours, Inc. and Matthias Heinzel dated October 25, 2019 as fully executed on October 28, 2019 incorporated by reference to Exhibit 10.4 to DuPont de Nemours, Inc. Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
10.6
Memorandum of Understanding, dated January 22, 2021, by and among DuPont de Nemours, Inc., Corteva, Inc., E. I. du Pont de Nemours and Company and The Chemours Company, incorporated by reference to Exhibit 10.1 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed January 22, 2021.
10.7
Agreement and Plan of Merger, dated December 15, 2019, by and among DuPont de Nemours Inc., Nutrition & Biosciences, Inc., International Flavors & Fragrances Inc. and Neptune Merger Sub I Inc. incorporated by reference to Exhibit 2.1 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed December 18, 2019.
10.8
Separation and Distribution Agreement, dated as of December 15, 2019, by and among DuPont de Nemours Inc., Nutrition & Biosciences, Inc. and International Flavors & Fragrances Inc. incorporated by reference to Exhibit 2.2 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed December 18, 2019.
10.9
Amendment No. 1 dated January 22, 2021 to that certain Separation and Distribution Agreement dated as of December 15, 2019, by and among DuPont de Nemours Inc., Nutrition & Biosciences, Inc. and International Flavors & Fragrances Inc.and Neptune Merger Sub II LLC, incorporated by reference to Exhibit 2.1 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed January 25, 2021.
10.10
Amendment No. 2 dated February 1, 2021 to that certain Separation and Distribution Agreement dated December 15, 2019, by and among DuPont de Nemours Inc., Nutrition & Biosciences, Inc., International Flavors & Fragrances Inc. and Neptune Merger Sub II LLC, incorporated by reference to Exhibit 2.4 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed February 4, 2021.
10.11
Employee Matters Agreement, dated December 15, 2019, by and among DuPont de Nemours Inc., Nutrition & Biosciences, Inc. and International Flavors & Fragrances Inc. incorporated by reference to Exhibit 10.1 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed December 18, 2019.
10.12
Amendment No. 1 dated January 22, 2021 to that certain Employee Matters Agreement, dated December 15, 2019, by and among DuPont de Nemours Inc., Nutrition & Biosciences, Inc. and International Flavors & Fragrances Inc. incorporated by reference to Exhibit 10.1 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed January 25, 2021.
10.13
Tax Matters Agreement dated February 1, 2021, by and among DuPont de Nemours Inc., Nutrition & Biosciences, Inc. and International Flavors & Fragrances Inc. incorporated by reference to Exhibit 10.1 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed February 4, 2021.
10.14
Intellectual Property Cross-License Agreement, dated February 1, 2021, by and among DuPont de Nemours Inc., Nutrition & Biosciences, Inc. and the other parties identified therein incorporated by reference to Exhibit 10.2 to the DuPont de Nemours, Inc. Current Report on Form 8-K filed February 4, 2021.
10.15
Separation and Distribution Agreement, effective as of April 1, 2019, by and among DowDuPont Inc., Dow Inc. and Corteva, Inc. incorporated by reference to Exhibit 2.1 to the DowDuPont Inc. Current Report on Form 8-K filed April 2, 2019.
10.16
Tax Matters Agreement, effective as of April 1, 2019, by and among DowDuPont Inc., Dow Inc. and Corteva, Inc. incorporated by reference to Exhibit 10.1 to the DowDuPont Inc. Current Report on Form 8-K filed April 2, 2019.
10.17
Employee Matters Agreement, effective as of April 1, 2019, by and among DowDuPont Inc., Dow Inc. and Corteva, Inc. incorporated by reference to Exhibit 10.2 to the DowDuPont Inc. Current Report on Form 8-K filed April 2, 2019.
10.18
Intellectual Property Cross-License Agreement, effective as of April 1, 2019, by and among DowDuPont Inc. and Dow Inc., incorporated by reference to Exhibit 10.3 to the DowDuPont Inc. Current Report on Form 8-K filed April 2, 2019.
10.19
Intellectual Property Cross-License Agreement, effective as of April 1, 2019, by and among Dow Inc. and Corteva, Inc., incorporated by reference to Exhibit 10.4 to the DowDuPont Inc. Current Report on Form 8-K filed April 2, 2019.
10.20
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.
10.21
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.
10.22
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.
10.23
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.
10.24
DuPont Management Deferred Compensation Plan, effective June 1, 2019, incorporated by reference to Exhibit 10.5 to DuPont de Nemours, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
10.25
DuPont Stock Accumulation and Deferred Compensation Plan for Directors, effective June 1, 2019, incorporated by reference to Exhibit 10.6 to DuPont de Nemours, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
10.26
DuPont Deferred Variable Compensation Plan, effective June 1, 2019, incorporated by reference to Exhibit 10.7 to DuPont de Nemours, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
10.27
DuPont Retirement Savings Restoration Plan, effective June 1, 2019, incorporated by reference to Exhibit 10.8 to DuPont de Nemours, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
10.28
DuPont Pension Restoration Plan, effective June 1, 2019, incorporated by reference to Exhibit 10.9 to DuPont de Nemours, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
10.29
DuPont Omnibus Incentive Plan effective June 1, 2019, incorporated by reference to Exhibit 10.10 to DuPont de Nemours, Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
10.30
Amended and Restated Employment Agreement by and between DuPont de Nemours, Inc. and Edward D. Breen, dated as of December 28, 2019, incorporated by reference to Exhibit 10.1 to DuPont de Nemours, Inc. Current Report on Form 8-K filed December 29, 2020.
Subsidiaries of the Registrant.
23.1
Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP.
23.2
Consent of Independent Registered Public Accounting Firm, Deloitte & Touche LLP.
23.3
Consent of Independent Registered Public Accounting Firm, Deloitte & Touche LLP.
23.4
Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP.
Power of Attorney (included as part of signature page).
31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS 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.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB XBRL Taxonomy Extension Label Linkbase Document.
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).