DuPont de Nemours, Inc 10-Q for FY2024 Q1
DuPont de Nemours, Inc. (DD)
10-Q
2024-05-01
For: 2024-03-31
View Original
Added on
April 10, 2026
About this 10-Q
DuPont de Nemours, Inc filed this 10-Q on May 1, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.93B
- down 2.9% from $3.02B a year earlier
- Net income
- $189M
- down 26.5% from net income of $257M a year earlier
- Diluted EPS
- $0.45
- down 19.6% from $0.56 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended March 31, 2024
or
Commission file number: 001-38196
(Exact name of registrant as specified in its charter)
| State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) | |||||||||||||
(Address of Principal Executive Offices) | (Zip Code) | |||||||||||||||||||
(302 ) 295-5783
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☑ Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
☑ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☑ | Accelerated filer | ¨ | |||||||||||||||||||||
| Non-accelerated filer | ¨ | Smaller reporting company | |||||||||||||||||||||
| Emerging growth company | |||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☑ No
The registrant had 418,104,390 shares of common stock, $0.01 par value, outstanding at April 29, 2024.
DuPont de Nemours, Inc.
QUARTERLY REPORT ON FORM 10-Q
For the quarterly period ended March 31, 2024
TABLE OF CONTENTS
| PAGE | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
3
| DuPont de Nemours, Inc. | ||
DuPontTM and all products, unless otherwise noted, denoted with TM, SM or ® are trademarks, service marks or registered trademarks of affiliates of DuPont de Nemours, Inc.
FORWARD-LOOKING STATEMENTS
This communication contains "forward-looking statements" within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," "target," “stabilization,” “confident,” “preliminary,” “initial,” and similar expressions and variations or negatives of these words. All statements, other than statements of historical fact, are forward-looking statements, including statements regarding outlook, expectations and guidance.
Forward-looking statements address matters that are, to varying degrees, uncertain and subject to risks, uncertainties, and assumptions, many of which that are beyond DuPont's control, that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements are not guarantees of future results. Some of the important factors that could cause DuPont's actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) the possibility that the Company may fail to realize the anticipated benefits of the $1 billion share repurchase program announced on February 6, 2024 and that the program may be suspended, discontinued or not completed prior to its termination on June 30, 2025; (ii) risks and uncertainties related to the settlement agreement concerning PFAS liabilities reached June 2023 with plaintiff water utilities by Chemours, Corteva, EIDP and DuPont; (iii) risks and costs related to each of the parties respective performance under and the impact of the arrangement to share future eligible PFAS costs by and between DuPont, Corteva and Chemours, including 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; (iv) ability to achieve anticipated tax treatments in connection with completed and future, if any, divestitures, mergers, acquisitions and other portfolio changes actions and impact of changes in relevant tax and other laws; (v) indemnification of certain legacy liabilities; (vi) failure to realize expected benefits and effectively manage and achieve anticipated synergies and operational efficiencies in connection with completed and future, if any, divestitures, mergers, acquisitions, and other portfolio management, productivity and infrastructure actions; (vii) risks and uncertainties, including increased costs and the ability to obtain raw materials and meet customer needs from, among other events, pandemics and responsive actions; timing and recovery from demand declines in consumer-facing markets, including in China; adverse changes in worldwide economic, political, regulatory, international trade, geopolitical, capital markets and other external conditions; and other factors beyond the Company's control, including inflation, recession, military conflicts, natural and other disasters or weather related events, that impact the operations of the Company, its customers and/or suppliers; (viii) ability to offset increases in cost of inputs, including raw materials, energy and logistics; (ix) risks associated with demand and market conditions in the semiconductor industry and associated end markets, including from continuing or expanding trade disputes or restrictions, including on exports to China of U.S.-regulated products and technology; (x) risks, including ability to achieve, and costs associated with DuPont’s sustainability strategy including the actual conduct of the company’s activities and results thereof, and the development, implementation, achievement or continuation of any goal, program, policy or initiative discussed or expected; and (xi) other risks to DuPont's business and operations, including the risk of impairment; each as further discussed in DuPont’s most recent annual report and subsequent current and periodic reports filed with the U.S. Securities and Exchange Commission. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business or supply chain disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DuPont’s consolidated financial condition, results of operations, credit rating or liquidity. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. DuPont assumes no obligation to publicly provide revisions or updates to any forward-looking statements whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.
4
| PART I - FINANCIAL INFORMATION | ||
ITEM 1. FINANCIAL STATEMENTS
DuPont de Nemours, Inc.
Consolidated Statements of Operations
| Three Months Ended March 31, | ||||||||||||||
| In millions, except per share amounts (Unaudited) | 2024 | 2023 | ||||||||||||
| Net sales | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||
| Research and development expenses | ||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||
| Amortization of intangibles | ||||||||||||||
| Restructuring and asset related charges - net | ||||||||||||||
| Acquisition, integration and separation costs | ||||||||||||||
| Equity in earnings of nonconsolidated affiliates | ||||||||||||||
| Sundry income (expense) - net | ||||||||||||||
| Interest expense | ||||||||||||||
| Income from continuing operations before income taxes | $ | $ | ||||||||||||
| Provision for income taxes on continuing operations | ||||||||||||||
| Income from continuing operations, net of tax | $ | $ | ||||||||||||
| Income (loss) from discontinued operations, net of tax | ( | |||||||||||||
| Net income | $ | $ | ||||||||||||
| Net income attributable to noncontrolling interests | ||||||||||||||
| Net income available for DuPont common stockholders | $ | $ | ||||||||||||
| Per common share data: | ||||||||||||||
| Earnings per common share from continuing operations - basic | $ | $ | ||||||||||||
| Earnings (loss) per common share from discontinued operations - basic | ( | |||||||||||||
| Earnings per common share - basic | $ | $ | ||||||||||||
| Earnings per common share from continuing operations - diluted | $ | $ | ||||||||||||
| Earnings (loss) per common share from discontinued operations - diluted | ( | |||||||||||||
| Earnings per common share - diluted | $ | $ | ||||||||||||
| Weighted-average common shares outstanding - basic | ||||||||||||||
| Weighted-average common shares outstanding - diluted | ||||||||||||||
See Notes to the Consolidated Financial Statements.
5
DuPont de Nemours, Inc.
Consolidated Statements of Comprehensive Income
| Three Months Ended March 31, | ||||||||||||||
| In millions (Unaudited) | 2024 | 2023 | ||||||||||||
| Net income | $ | $ | ||||||||||||
| Other comprehensive (loss) income, net of tax | ||||||||||||||
| Cumulative translation adjustments | ( | |||||||||||||
| Pension and other post-employment benefit plans | ( | ( | ||||||||||||
| Derivative instruments | ( | |||||||||||||
| Total other comprehensive (loss) income | $ | ( | $ | |||||||||||
| Comprehensive (loss) income | $ | ( | $ | |||||||||||
| Comprehensive income attributable to noncontrolling interests, net of tax | ||||||||||||||
| Comprehensive (loss) income attributable to DuPont | $ | ( | $ | |||||||||||
See Notes to the Consolidated Financial Statements.
6
DuPont de Nemours, Inc.
Condensed Consolidated Balance Sheets
| In millions, except share amounts (Unaudited) | March 31, 2024 | December 31, 2023 | ||||||
| Assets | ||||||||
| Current Assets | ||||||||
Cash and cash equivalents | $ | $ | ||||||
| Restricted cash and cash equivalents | ||||||||
Accounts and notes receivable - net | ||||||||
Inventories | ||||||||
| Prepaid and other current assets | ||||||||
Total current assets | $ | $ | ||||||
Property, plant and equipment - net of accumulated depreciation (March 31, 2024 - $ | ||||||||
| Other Assets | ||||||||
Goodwill | ||||||||
Other intangible assets | ||||||||
| Investments and noncurrent receivables | ||||||||
Deferred income tax assets | ||||||||
Deferred charges and other assets | ||||||||
Total other assets | $ | $ | ||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Equity | ||||||||
| Current Liabilities | ||||||||
Accounts payable | ||||||||
Income taxes payable | ||||||||
Accrued and other current liabilities | ||||||||
Total current liabilities | $ | $ | ||||||
| Long-Term Debt | ||||||||
| Other Noncurrent Liabilities | ||||||||
Deferred income tax liabilities | ||||||||
| Pension and other post-employment benefits - noncurrent | ||||||||
Other noncurrent obligations | ||||||||
Total other noncurrent liabilities | $ | $ | ||||||
| Total Liabilities | $ | $ | ||||||
| Commitments and contingent liabilities | ||||||||
| Stockholders' Equity | ||||||||
Common stock (authorized | ||||||||
Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ( | ||||||
| Accumulated other comprehensive loss | ( | ( | ||||||
Total DuPont stockholders' equity | $ | $ | ||||||
Noncontrolling interests | ||||||||
Total equity | $ | $ | ||||||
| Total Liabilities and Equity | $ | $ | ||||||
See Notes to the Consolidated Financial Statements.
7
DuPont de Nemours, Inc.
Consolidated Statements of Cash Flows
| Three Months Ended March 31, | ||||||||
| In millions (Unaudited) | 2024 | 2023 | ||||||
| Operating Activities | ||||||||
| Net income | $ | $ | ||||||
| Income (loss) from discontinued operations | ( | |||||||
| Net income from continuing operations | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Credit for deferred income tax and other tax related items | ( | ( | ||||||
| Earnings of nonconsolidated affiliates in excess of dividends received | ( | ( | ||||||
| Net periodic benefit costs | ||||||||
| Periodic benefit plan contributions | ( | ( | ||||||
| Net gain on sales of assets, businesses and investments | ( | ( | ||||||
| Restructuring and asset related charges - net | ||||||||
| Other net loss | ||||||||
| Changes in assets and liabilities, net of effects of acquired and divested companies: | ||||||||
| Accounts and notes receivable | ( | |||||||
| Inventories | ( | ( | ||||||
| Accounts payable | ( | |||||||
| Other assets and liabilities, net | ( | |||||||
| Cash provided by operating activities - continuing operations | $ | $ | ||||||
| Investing Activities | ||||||||
| Capital expenditures | ( | ( | ||||||
| Proceeds from sales of property and businesses, net of cash divested | ||||||||
| Purchases of investments | ( | |||||||
| Other investing activities, net | ( | |||||||
| Cash used for investing activities - continuing operations | $ | ( | $ | ( | ||||
| Financing Activities | ||||||||
| Purchases of common stock and forward contracts | ( | |||||||
| Proceeds from issuance of Company stock | ||||||||
| Employee taxes paid for share-based payment arrangements | ( | ( | ||||||
| Distributions to noncontrolling interests | ( | ( | ||||||
| Dividends paid to stockholders | ( | ( | ||||||
| Cash used for financing activities - continuing operations | $ | ( | $ | ( | ||||
| Cash Flows from Discontinued Operations | ||||||||
| Cash used for operations - discontinued operations | ( | ( | ||||||
| Cash used for investing activities - discontinued operations | ( | |||||||
| Cash used in discontinued operations | $ | ( | $ | ( | ||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ( | ||||||
| Decrease in cash, cash equivalents and restricted cash | $ | ( | $ | ( | ||||
| Cash, cash equivalents and restricted cash from continuing operations, beginning of period | ||||||||
| Cash, cash equivalents and restricted cash from discontinued operations, beginning of period | ||||||||
| Cash, cash equivalents and restricted cash at beginning of period | $ | $ | ||||||
| Cash, cash equivalents and restricted cash from continuing operations, end of period | ||||||||
| Cash, cash equivalents and restricted cash from discontinued operations, end of period | ||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | ||||||
8
DuPont de Nemours, Inc.
Consolidated Statements of Equity
For the three months ended March 31, 2024 and 2023
| In millions (Unaudited) | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Accumulated Other Comp Loss | Treasury Stock | Non-controlling Interests | Total Equity | ||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||
| Other comprehensive loss | — | — | — | — | |||||||||||||||||||
Dividends ($ | — | ( | — | — | — | — | ( | ||||||||||||||||
| Common stock issued/sold | — | — | — | — | — | ||||||||||||||||||
| Stock-based compensation | — | ( | — | — | — | — | ( | ||||||||||||||||
Distributions to non-controlling interests | — | — | — | — | — | ( | ( | ||||||||||||||||
| Other | — | ( | — | — | |||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | — | ( | ( | ||||||||||||||||
Dividends ($ | — | ( | — | — | — | — | ( | ||||||||||||||||
Common stock issued/sold | — | — | — | — | — | ||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||
Distributions to non-controlling interests | — | — | — | — | — | ( | ( | ||||||||||||||||
Purchases of treasury stock | — | — | — | — | ( | — | ( | ||||||||||||||||
| Excise tax on purchases of treasury stock | — | — | ( | — | — | — | ( | ||||||||||||||||
Retirement of treasury stock | — | — | ( | — | — | ||||||||||||||||||
| Forward contracts for share repurchase | — | ( | — | — | — | — | ( | ||||||||||||||||
| Settlement of forward contracts for share repurchase | — | — | — | ( | — | ||||||||||||||||||
Other | — | — | — | — | — | ||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||
See Notes to the Consolidated Financial Statements.
9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
| Note | Page | |||||||
| 1 | ||||||||
| 2 | ||||||||
| 3 | ||||||||
| 4 | ||||||||
| 5 | ||||||||
| 6 | ||||||||
| 7 | ||||||||
| 8 | ||||||||
| 9 | ||||||||
| 10 | ||||||||
| 11 | ||||||||
| 12 | ||||||||
| 13 | ||||||||
| 14 | ||||||||
| 15 | ||||||||
| 16 | ||||||||
| 17 | ||||||||
| 18 | ||||||||
| 19 | ||||||||
| 20 | ||||||||
| 21 | ||||||||
10
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
In these notes, the terms "DuPont" or "Company" used herein mean DuPont de Nemours, Inc. and its consolidated subsidiaries. The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the interim statements reflect all adjustments (including normal recurring accruals) which are considered necessary for the fair statement of the results for the periods presented. Results from interim periods should not be considered indicative of results for the full year. These interim Consolidated Financial Statements should also be read in conjunction with the audited Consolidated Financial Statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, collectively referred to as the "2023 Annual Report." The interim Consolidated Financial Statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained.
Beginning in the second quarter of 2023, the Company has segregated the cash flows from discontinued operations from the cash flows from continuing operations in accordance with ASC 230, Statement of Cash Flows. The interim Consolidated Statements of Cash Flows have been recast for all periods to reflect the change in presentation.
M&M Transactions
On November 1, 2022, DuPont completed the previously announced divestiture of the majority of its historic Mobility & Materials segment, including the Engineering Polymers business line and select product lines within the Advanced Solutions and Performance Resins business lines (the “M&M Divestiture”), to Celanese Corporation (“Celanese”) for cash proceeds of $11.0 billion. On November 1, 2023, the Company closed the sale of the Delrin® business to TJC LP ("TJC"), (the “Delrin® Divestiture”). The Delrin® Divestiture and together with the M&M Divestiture, collectively the "M&M Divestitures” and the businesses in scope of the M&M Divestitures collectively the "M&M Businesses". See Note 4 for more information.
The interim Consolidated Statements of Operations and the interim Consolidated Statements of Cash Flows for the three months ended March 31, 2023, present the financial results and cash flows of Delrin® as discontinued operations. The comprehensive income of Delrin® has not been segregated and is included in the interim Consolidated Statements of Comprehensive Income for all periods presented. Unless otherwise indicated, the information in the notes to the interim Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of the M&M Businesses.
11
NOTE 2 - RECENT ACCOUNTING GUIDANCE
Recently Adopted Accounting Guidance
In September 2022, the FASB issued Accounting Standards Update No. 2022-04, "Liabilities-Supplier Finance Programs (Subtopic 405-50)" ("ASU 2022-04") to enhance transparency about the use of supplier finance programs. The new guidance requires that a buyer in a supplier finance program provides additional qualitative and quantitative disclosures about its program including the nature of the program, activity during the period, changes from period to period, and the potential magnitude of the program. The amendments in ASU 2022-04 are effective for fiscal years beginning after December 15, 2022 on a retrospective basis, including interim periods within those fiscal years, except for the amendment on rollforward information which is effective prospectively for fiscal years beginning after December 15, 2023. The Company implemented the new disclosures, other than the rollforward information, as required in the first quarter of 2023. The disclosures around rollforward information will be implemented as required for the Annual Report on Form 10-K for the year-ended December 31, 2024. See Note 13 for more information.
Accounting Guidance Issued But Not Adopted at March 31, 2024
In November 2023, the FASB issued Accounting Standards Update No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07") to improve disclosure requirements about reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. The new guidance requires disclosures of significant segment expenses provided to the Chief Operating Decision Maker ("CODM") and included in reported measures of segment profit and loss. Disclosure of the title and position of the CODM is required. The guidance requires interim and annual disclosures about a reportable segment's profit or loss and assets. Additionally, the guidance requires disclosure of other segment items by reportable segment including a description of its composition. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis. The disclosures will be implemented as required for the year-ended December 31, 2024. The Company is currently evaluating the impact of adopting this guidance.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09") to improve transparency and disclosure requirements for the rate reconciliation, income taxes paid and other tax disclosures. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, on a prospective basis. The disclosures will be implemented as required for the year-ended December 31, 2025. The Company is currently evaluating the impact of adopting this guidance.
12
NOTE 3 - ACQUISITIONS
Spectrum Acquisition
On August 1, 2023, the Company completed the previously announced acquisition of Spectrum Plastics Group (“Spectrum”) from AEA Investors (the “Spectrum Acquisition”). Spectrum manufactures flexible packaging products, plastic and silicone extrusions, and components for the industrial, food and medical business sectors throughout the United States and international markets. Spectrum is part of the Electronics & Industrial segment. The net purchase price was approximately $1,792 million, including a net upward adjustment of approximately $43.1 million for acquired cash and net working capital, among other items. The Company accounted for the acquisition in accordance with ASC 805, which requires the assets acquired and liabilities assumed to be recognized on interim Consolidated Balance Sheets at their fair values as of the acquisition date.
The table below presents the provisional fair values allocated to the assets acquired and liabilities assumed. The purchase accounting and purchase price allocation for Spectrum are substantially complete. However, the Company continues to refine the preliminary valuation of certain acquired assets and liabilities assumed, principally working capital settlements, which could impact the amount of residual goodwill recorded. The Company will finalize the amounts recognized as it obtains the information necessary to complete the analysis, but no later than one year from the date of the acquisition. Final determination of the fair values may result in further adjustments to the values presented in the following table:
| Spectrum Assets Acquired and Liabilities Assumed on August 1, 2023 | Estimated fair value as previously reported 1 | Measurement period adjustments 2 | Estimated fair value adjusted | ||||||||
| (In millions) | |||||||||||
| Fair value of assets acquired | |||||||||||
| Cash and cash equivalents | $ | $ | — | $ | |||||||
| Accounts and notes receivable | — | ||||||||||
| Inventories | — | ||||||||||
| Property, plant and equipment | — | ||||||||||
| Other intangible assets | — | ||||||||||
| Deferred charges and other assets | — | ||||||||||
| Total Assets Acquired | $ | $ | — | $ | |||||||
| Fair value of liabilities assumed | |||||||||||
| Accounts payable | $ | $ | — | $ | |||||||
| Income taxes payable | — | ||||||||||
| Deferred income tax liabilities | — | ||||||||||
| Other noncurrent liabilities | |||||||||||
| Total Liabilities Assumed | $ | $ | $ | ||||||||
| Goodwill | |||||||||||
| Total Consideration | $ | $ | — | $ | |||||||
1.As previously reported in the Company’s Annual Report on Form 10-K for the period ended December 31, 2023.
2.The Company recorded measurement period adjustments to reflect changes in preliminary valuation assumptions for tax accounts. The measurement period adjustment was offset against goodwill.
The significant fair value estimates included in the allocation of purchase price are discussed below.
Other Intangible Assets
Other intangible assets with definite lives include acquired customer-related intangible assets of $772 million, developed technology of $126 million and trademark/tradename of $18 million. Acquired customer-related intangible assets, developed technology, and trademark/tradename have useful lives of 20 years, 15 years and 5 years, respectively. The preliminary customer-related intangible assets' fair value was determined using the multi-period excess earnings method while the developed technology and trademark/tradename fair values were determined utilizing the relief from royalty method.
Goodwill
The excess of the consideration for Spectrum over the preliminary net fair value of assets acquired and liabilities assumed resulted in the provisional recognition of $825 million of goodwill, which has been assigned to the Electronics & Industrial segment. Goodwill is primarily attributable to the optimization of the combined Electronics & Industrial segment and Spectrum businesses’ global activities across sales and manufacturing, as well as expected future customer relationships. Spectrum goodwill will no t be deductible for U.S. tax purposes.
13
NOTE 4 - DIVESTITURES
Delrin® Divestiture
On November 1, 2023, the Company closed the Delrin® Divestiture. DuPont received cash proceeds of approximately $1.28 billion, which includes certain customary transaction adjustments, a note receivable in the amount of $350 million, (the "Delrin® Note Receivable") and acquired a 19.9 percent non-controlling equity interest in Derby Group Holdings LLC, (“Derby”). The customary transaction adjustments primarily relate to $27 million of cash transferred with the Delrin® Divestiture for which DuPont was reimbursed at closing resulting in net cash proceeds of $1.25 billion. TJC, through its subsidiaries, holds the 80.1 percent controlling interest in Derby. The Company accounts for its equity interest in Derby as an equity method investment based upon its non-controlling equity interest, its $350 million par value intra-entity note receivable owed by an indirect, wholly owned subsidiary of Derby and its representation on the Derby board of directors. The note receivable has a maturity date of November 2031. The Company has limited continuing involvement with Derby including short term transition service agreements and insignificant sales to the Delrin® business.
As a result of the Delrin® Divestiture, and included as part of the $419 million gain on the sale, the Company initially recognized the 19.9 percent equity interest and the $350 million note receivable at fair values of $121 million and $224 million, respectively, which are recorded in "Investments and noncurrent receivables" in the interim Condensed Consolidated Balance Sheets. The fair value of the equity interest was determined using the enterprise value based on sales proceeds and a market approach primarily based on restricted stock studies. The fair value of the note receivable was determined using a market approach primarily based on current market interest rates for similar credit facilities and the duration of the note. The financial results of Derby, subsequent to the transaction date, are included in DuPont's interim Condensed Consolidated Financial Statements with a three-month lag, using the equity method of accounting and with intercompany profits eliminated in accordance with DuPont’s accounting policy. Refer to Note 11 for additional information.
The interim results of operations for the three months ended March 31, 2023, represent the Delrin® business unless otherwise indicated. The following table summarizes the interim results of operations of the M&M Divestitures which are presented as discontinued operations as summarized below:
| In millions | Three Months Ended March 31, 2023 | ||||
| Net sales | $ | ||||
| Cost of sales | |||||
| Research and development expenses | |||||
Acquisition, integration and separation costs 1 | |||||
| Sundry income (expense) - net | |||||
| Income from discontinued operations before income taxes | $ | ||||
| Provision for income taxes on discontinued operations | |||||
| Income from discontinued operations, net of tax | $ | ||||
Gain on sale, net of tax 2 | $ | ||||
| Income from discontinued operations attributable to DuPont stockholders, net of tax | $ | ||||
1. Includes costs related to both the M&M Divestiture and the Delrin® Divestiture, which primarily consist of financial advisory, information technology, legal, accounting, consulting and other professional advisory fees.
2. Gain includes purchase price adjustments related to the M&M Divestiture.
14
Other Discontinued Operations Activity
The Company recorded a gain from discontinued operations, net of tax of $14 million and a loss of $8 million for the three months ended March 31, 2024 and 2023, respectively.
Discontinued operations activity consists of the following:
| Income (Loss) from Discontinued Operations, Net of Tax | Three Months Ended March 31, | |||||||||||||
| In millions | 2024 | 2023 | ||||||||||||
M&M Divestitures 1 | $ | ( | $ | |||||||||||
MOU Activity 2 | ( | ( | ||||||||||||
Indemnification activity - environmental and legal 3 | ( | ( | ||||||||||||
Tax related matters 4 | ||||||||||||||
| Other | ( | ( | ||||||||||||
| Income (loss) from discontinued operations, net of tax | $ | $ | ( | |||||||||||
1.The three months ended March 31, 2024 primarily includes Acquisition, integration and separation costs.
2.Includes the activity for the binding Memorandum of Understanding (“MOU”) between Chemours, Corteva Inc ("Corteva"), E. I. du Pont de Nemours and Company ("EIDP") and the Company. Refer to Note 14 for additional information.
3.Primarily related to the DWDP Separation and Distribution Agreement and Letter Agreement between Corteva and EIDP. For additional information on these matters, refer to Note 14.
NOTE 5 - REVENUE
Revenue Recognition
Products
Substantially all of DuPont's revenue is derived from product sales. Product sales consist of sales of DuPont's products to supply manufacturers and distributors. DuPont considers purchase orders, which in some cases are governed by master supply agreements, to be a contract with a customer. Contracts with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year.
Disaggregation of Revenue
The Company disaggregates its revenue from contracts with customers by segment and business or major product line and geographic region, as the Company believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows.
Effective as of January 1, 2024, Electronics & Industrial realigned certain product lines that comprise its business units (Industrial Solutions, Interconnect Solutions and Semiconductor Technologies) that are intended to optimize business operations across the segment leading to enhanced value for our customers and cost savings. The Net Trade Revenue by Segment and Business or Major Product Line table below has been recast for all periods presented to reflect the new structure. There was no change to total Electronics and Industrial segment net sales.
| Net Trade Revenue by Segment and Business or Major Product Line | Three Months Ended March 31, | |||||||||||||
| In millions | 2024 | 2023 | ||||||||||||
| Industrial Solutions | $ | $ | ||||||||||||
| Interconnect Solutions | ||||||||||||||
| Semiconductor Technologies | ||||||||||||||
| Electronics & Industrial | $ | $ | ||||||||||||
| Safety Solutions | $ | $ | ||||||||||||
| Shelter Solutions | ||||||||||||||
| Water Solutions | ||||||||||||||
| Water & Protection | $ | $ | ||||||||||||
Corporate & Other 1 | $ | $ | ||||||||||||
| Total | $ | $ | ||||||||||||
1. Net sales within Corporate & Other reflect the Retained Businesses which include the Auto Adhesives & Fluids, MultibaseTM and Tedlar® businesses.
15
| Net Trade Revenue by Geographic Region | Three Months Ended March 31, | |||||||||||||
| In millions | 2024 | 2023 | ||||||||||||
| U.S. & Canada | $ | $ | ||||||||||||
EMEA 1 | ||||||||||||||
Asia Pacific 2 | ||||||||||||||
| Latin America | ||||||||||||||
| Total | $ | $ | ||||||||||||
1.Europe, Middle East and Africa.
2.Net sales attributed to China/Hong Kong, for the three months ended March 31, 2024 and 2023 were $515 million and $525 million, respectively.
Contract Balances
From time to time, the Company enters into arrangements in which it receives payments from customers based upon contractual billing schedules. The Company records accounts receivables when the right to consideration becomes unconditional. Contract liabilities primarily reflect deferred revenue from advance payment for product that the Company has received from customers. The Company classifies deferred revenue as current or noncurrent based on the timing of when the Company expects to recognize revenue.
Revenue recognized in the first three months of 2024 and 2023 from amounts included in contract liabilities at the beginning of the period was insignificant.
| Contract Balances | March 31, 2024 | December 31, 2023 | ||||||
| In millions | ||||||||
Accounts and notes receivable - trade 1 | $ | $ | ||||||
Deferred revenue - current 2 | $ | $ | ||||||
Deferred revenue - noncurrent 3 | $ | $ | ||||||
1.Included in "Accounts and notes receivable - net" in the interim Condensed Consolidated Balance Sheets.
2.Included in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.
3.Included in "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets.
16
NOTE 6 - RESTRUCTURING AND ASSET RELATED CHARGES - NET
The Company records restructuring liabilities that represent nonrecurring charges in connection with simplifying certain organizational structures and operations, including operations related to transformational projects such as divestitures and acquisitions. Charges for restructuring programs and asset related charges, which include asset impairments, were $39 million and $14 million for the three months ended March 31, 2024, and 2023. These charges were recorded in "Restructuring and asset related charges - net" in the interim Consolidated Statements of Operations. The total liability related to restructuring programs was $101 million at March 31, 2024 and $107 million at December 31, 2023, recorded in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets. Raw Material inventory write-offs associated with restructuring programs are recorded to "Cost of Sales” in the interim Consolidated Statements of Operations. Restructuring activity primarily consists of the following programs:
2023-2024 Restructuring Program
In December 2023, the Company approved targeted restructuring actions to capture near-term cost reductions due to macroeconomic factors as well as to further simplify certain organizational structures following the Spectrum acquisition and Delrin® Divestiture (the "2023-2024 Restructuring Program"). The Company recorded pre-tax restructuring charges of $146 million inception-to-date, consisting of severance and related benefit costs of $103 million and asset related charges of $43 million. In connection with the 2023-2024 Restructuring Program, the Company recorded $25 million of raw material inventory write-offs in “Cost of Sales” within the interim Consolidated Statements of Operations related to plant line closures within the Water & Protection segment. The raw material was written down to salvage value as it was only utilizable on the closed lines which were based on outdated technology and has a limited third party resale market. Refer to Note 21 for significant items by segment.
The following table summarizes the charges incurred by segment related to the 2023-2024 Restructuring Program:
| 2023-2024 Restructuring Program Charges by Segment | Three Months Ended March 31, 2024 | ||||
(In millions) | |||||
| Electronics & Industrial | $ | ||||
Water & Protection 1 | |||||
| Corporate & Other | |||||
| Total | $ | ||||
1.Amount excludes raw materials inventory write-offs recorded during the three months ended March 31, 2024. Refer to Note 21 for additional information.
The following table summarizes the activities related to the 2023-2024 Restructuring Program:
| 2023-2024 Restructuring Program | Severance and Related Benefit Cost | Asset Related Charges | Total | ||||||||
| In millions | |||||||||||
| Reserve balance at December 31, 2023 | $ | $ | $ | ||||||||
Restructuring charges 1 | |||||||||||
| Charges against the reserve | ( | ( | ( | ||||||||
| Cash payments | ( | ( | |||||||||
Reserve balance at March 31, 2024 | $ | $ | $ | ||||||||
1.Amount excludes raw materials inventory write-offs recorded during the three months ended March 31, 2024 impacting the Water & Protection segment. Refer to Note 21 for additional information.
Total liabilities related to the 2023-2024 Restructuring Program were $83 million at March 31, 2024 and $79 million at December 31, 2023, respectively, recognized in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets. The Company expects the program to be substantially complete by the end of 2024.
2022 Restructuring Program
In October 2022, the Company approved targeted restructuring actions to capture near-term cost reductions and to further simplify certain organizational structures following the M&M Divestitures (the "2022 Restructuring Program"). The Company recorded pre-tax restructuring charges of $99 million inception-to-date, consisting of severance and related benefit costs of $85 million and asset related charges of $14 million. The Company recorded pre-tax restructuring charges of $3 million, to Corporate & Other for the three months ended March 31, 2024.
Total liabilities related to the 2022 Restructuring Program were $18 million at March 31, 2024 and $27 million at December 31, 2023, respectively, recognized in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets. Actions related to the 2022 Restructuring Program are substantially complete.
17
NOTE 7 - SUPPLEMENTARY INFORMATION
| Sundry Income (Expense) - Net | Three Months Ended March 31, | |||||||||||||
| In millions | 2024 | 2023 | ||||||||||||
| Non-operating pension and other post-employment benefit credits (costs) | $ | $ | ( | |||||||||||
Interest income 1 | ||||||||||||||
| Net gain on divestiture and sales of other assets and investments | ||||||||||||||
Foreign exchange gains (losses), net | ( | |||||||||||||
| Miscellaneous income (expense) - net | ( | |||||||||||||
| Sundry income (expense) - net | $ | $ | ||||||||||||
1.The three months ended March 31, 2024 includes non-cash interest income of $6 million related to the $350 million Delrin® related party note receivable. Refer to Note 11 for additional information.
Cash, Cash Equivalents and Restricted Cash
At March 31, 2024 and December 31, 2023 the Company had $413 million and $411 million, respectively, within “Restricted cash and cash equivalents”. The majority of these balances are attributable to the Water District Settlement Fund. Additional information can be found in Note 14.
Accrued and Other Current Liabilities
"Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets were $1,255 million at March 31, 2024 and $1,269 million at December 31, 2023. "Accrued and other current liabilities" at March 31, 2024 and December 31, 2023 includes approximately $408 million and $405 million, respectively, related to a settlement agreement further discussed in Note 14. Accrued payroll, which is a component of "Accrued and other current liabilities," was $197 million at March 31, 2024 and $250 million at December 31, 2023. No other component of "Accrued and other current liabilities" was more than 5 percent of total current liabilities at March 31, 2024 and at December 31, 2023.
NOTE 8 - INCOME TAXES
Each year the Company files hundreds of tax returns in the various national, state, and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the tax authorities. The Company has ongoing federal, state, and international income tax audits in various jurisdictions and evaluates uncertain tax positions that may be challenged by local tax authorities. As a result, there is an uncertainty in income taxes recognized in the Company’s financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. The ultimate resolution of such uncertainties is not expected to have a material impact on the Company's interim results of operations.
The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attributes. The effective tax rate on continuing operations for the first quarter of 2024 was 31.5 percent, compared with an effective tax rate of 23.3 percent for the first quarter of 2023. The higher effective tax rate for the first quarter of 2024 was driven by the geographic mix of earnings offset by the U.S. taxation of foreign operations as well as certain one-time discrete tax expenses, including an international statutory tax assessment received for which the Company is indemnified.
Effective from 2024, the Organization for Economic Co-operation and Development’s ("OECD") Global Anti-Base Erosion ("GloBE") rules under Pillar Two have been enacted by the European Union and other countries in which the Company operates. The Company does not expect a resulting material change to the income tax provision for the year ended December 31, 2024. However, the Company expects the effective tax rate and cash tax payments could increase in future years.
18
NOTE 9 - EARNINGS PER SHARE CALCULATIONS
The following tables provide earnings per share calculations for the three months ended March 31, 2024 and 2023:
| Net Income for Earnings Per Share Calculations - Basic & Diluted | Three Months Ended March 31, | |||||||||||||
| In millions | 2024 | 2023 | ||||||||||||
| Income from continuing operations, net of tax | $ | $ | ||||||||||||
| Net income from continuing operations attributable to noncontrolling interests | ||||||||||||||
| Income from continuing operations attributable to common stockholders | $ | $ | ||||||||||||
| Income (loss) from discontinued operations attributable to common stockholders, net of tax | $ | $ | ( | |||||||||||
| Net income attributable to common stockholders | $ | $ | ||||||||||||
| Earnings Per Share Calculations - Basic | Three Months Ended March 31, | |||||||||||||
| Dollars per share | 2024 | 2023 | ||||||||||||
| Earnings from continuing operations attributable to common stockholders | $ | $ | ||||||||||||
| Earnings (loss) from discontinued operations, net of tax | ( | |||||||||||||
Earnings attributable to common stockholders 1 | $ | $ | ||||||||||||
| Earnings Per Share Calculations - Diluted | Three Months Ended March 31, | |||||||||||||
| Dollars per share | 2024 | 2023 | ||||||||||||
| Earnings from continuing operations attributable to common stockholders | $ | $ | ||||||||||||
| Earnings (loss) from discontinued operations, net of tax | ( | |||||||||||||
Earnings attributable to common stockholders 1 | $ | $ | ||||||||||||
Share Count Information | Three Months Ended March 31, | |||||||||||||
| Shares in millions | 2024 | 2023 | ||||||||||||
| Weighted-average common shares - basic | ||||||||||||||
| Plus dilutive effect of equity compensation plans | ||||||||||||||
| Weighted-average common shares - diluted | ||||||||||||||
Stock options, restricted stock units, and performance-based restricted stock units excluded from EPS calculations 2 | ||||||||||||||
1.Earnings per share amounts are computed independently for income from continuing operations, income from discontinued operations and net income attributable to common stockholders. As a result, the per share amounts from continuing operations and discontinued operations may not equal the total per share amounts for net income attributable to common stockholders.
2.These outstanding options to purchase shares of common stock, restricted stock units and performance-based restricted stock units were excluded from the calculation of diluted earnings per share because the effect of including them would have been antidilutive.
19
NOTE 10 - INVENTORIES
| In millions | March 31, 2024 | December 31, 2023 | ||||||
| Finished goods | $ | $ | ||||||
Work in process | ||||||||
| Raw materials | ||||||||
| Supplies | ||||||||
| Total inventories | $ | $ | ||||||
NOTE 11 - NONCONSOLIDATED AFFILIATES
The Company's investments in companies accounted for using the equity method ("nonconsolidated affiliates") are recorded in "Investments and noncurrent receivables" in the interim Condensed Consolidated Balance Sheets. The Company's net investment in nonconsolidated affiliates at March 31, 2024 and December 31, 2023 is $797 million and $788 million, respectively.
Sales to nonconsolidated affiliates represented less than 2 1 percent and 3 percent of “Cost of sales” for the three months ended March 31, 2024 and 2023, respectively. The Company maintained an ownership interest in seven nonconsolidated affiliates at March 31, 2024.
Derby Equity Interest
As a result of the Delrin® Divestiture, on November 1, 2023, the Company received a 19.9 percent non-controlling equity interest in Derby. The financial results of Derby, subsequent to the transaction date, are included in DuPont's Consolidated Financial Statements with a three-month lag, using the equity method of accounting and with intercompany profits eliminated in accordance with DuPont’s accounting policy. For the three months ended March 31, 2024, the Company recorded a loss of $7 million in "Equity in earnings of nonconsolidated affiliates" which includes the impact of approximately $8 million for transaction costs incurred by Derby and amortization expense from purchase accounting. As of March 31, 2024, the carrying values of the retained equity investment and note receivable were $117 million and $234 million, respectively.
For the three months ended March 31, 2024, Company recognized non-cash interest income on the Derby Note Receivable of $6 million, reported in "Sundry income (expense) - net" on the interim Consolidated Statement of Operations, and accreted to the carrying value of the note receivable.
20
NOTE 12 - GOODWILL AND OTHER INTANGIBLE ASSETS
The changes in the carrying amounts of goodwill during the three months ended March 31, 2024 were as follows:
| In millions | Electronics & Industrial | Water & Protection | Corporate & Other | Total | ||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ||||||||||
| Currency translation adjustment | ( | ( | ( | ( | ||||||||||
| Goodwill recognized for Spectrum Acquisition | ||||||||||||||
Balance at March 31, 2024 | $ | $ | $ | $ | ||||||||||
The Company tests goodwill for impairment annually during the fourth quarter, or more frequently when events or changes in circumstances indicate that fair value is below carrying value.
Effective as of January 1, 2024, Electronics & Industrial realigned certain of its product lines making up its business lines (Industrial Solutions, Interconnect Solutions and Semiconductor Technologies). During the first quarter of 2024, the realignment of the businesses within Electronics & Industrial served as a triggering event requiring the Company to perform an impairment analysis related to goodwill carried by certain reporting units as of January 1, 2024, prior to the realignment. As part of the realignment, the Company assessed and re-defined certain reporting units effective January 1, 2024, including reallocation of goodwill on a relative fair value basis, as applicable, to reporting units impacted. Goodwill impairment analyses were then performed for reporting units impacted in the Electronics and Industrial segment and no impairments were identified. The fair value of each reporting unit tested was estimated using a combination of a discounted cash flow model and market approach. The Company’s assumptions in estimating fair value include projected revenue, gross margins, selling, administrative, research and development expenses (SARD), capital expenditures, the weighted average cost of capital, the terminal growth rates, and the tax rate for the income approach and projected EBITDA and derived multiples from comparable market transactions for the market approach.
In connection with the preparation of the full year 2023 financial statements, macroeconomic triggering events required the Company to perform an impairment analysis of the goodwill associated with its Protection reporting unit, within Water & Protection as of December 31, 2023. As a result of the analysis performed, the Company concluded that the carrying amount of the Protection reporting unit exceeded its fair value resulting in a non-cash goodwill impairment charge of $804 million, which was recorded within “Goodwill impairment charge” on the Consolidated Statements of Operations for the year ended December 31, 2023. This reporting unit remains at risk for future impairment due to the fair value now being equal to the carrying value as a result of the recorded impairment. Should macroeconomic conditions worsen, resulting in further recovery delays, or other events occur indicating that the estimated future cash flows of the reporting unit have further declined and the reporting unit is unable to meet or exceed its projections from 2024 and other future years, the Company may be required to record future non-cash impairment charges related to goodwill. As of March 31, 2024, the remaining carrying amount of goodwill within the Protection reporting unit was $4.8 billion.
Other Intangible Assets
The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows:
| March 31, 2024 | December 31, 2023 | |||||||||||||||||||
| In millions | Gross Carrying Amount | Accum Amort | Net | Gross Carrying Amount | Accum Amort | Net | ||||||||||||||
| Intangible assets with finite lives: | ||||||||||||||||||||
| Developed technology | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||
| Trademarks/tradenames | ( | ( | ||||||||||||||||||
| Customer-related | ( | ( | ||||||||||||||||||
| Other | ( | ( | ||||||||||||||||||
| Total other intangible assets with finite lives | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||
| Intangible assets with indefinite lives: | ||||||||||||||||||||
| Trademarks/tradenames | — | — | ||||||||||||||||||
| Total other intangible assets | $ | $ | — | $ | $ | $ | — | $ | ||||||||||||
| Total | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||
21
The following table provides the net carrying value of other intangible assets by segment:
| Net Intangibles by Segment | March 31, 2024 | December 31, 2023 | ||||||
| In millions | ||||||||
| Electronics & Industrial | $ | $ | ||||||
| Water & Protection | ||||||||
| Corporate & Other | ||||||||
| Total | $ | $ | ||||||
Total estimated amortization expense for the remainder of 2024 and the five succeeding fiscal years is as follows:
| Estimated Amortization Expense | |||||
| In millions | |||||
| Remainder of 2024 | $ | ||||
| 2025 | $ | ||||
| 2026 | $ | ||||
| 2027 | $ | ||||
| 2028 | $ | ||||
| 2029 | $ | ||||
NOTE 13 - SHORT-TERM BORROWINGS, LONG-TERM DEBT, AVAILABLE CREDIT FACILITIES AND OTHER OBLIGATIONS
A summary of DuPont's short-term borrowings, long-term debt and available credit facilities can be found in Note 15 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. If applicable, updates have been included in the respective section below.
Long-Term Debt
Long-term debt at March 31, 2024 and December 31, 2023 was $7,776 million and $7,800 million, respectively. Included in the long-term debt balance is a fair value hedging revaluation related to the Company's interest rate swap agreements. At March 31, 2024 and December 31, 2023 this balance was $84 million and $59 million, respectively. See Note 19 for additional information.
Uncommitted Credit Facilities and Outstanding Letters of Credit
Unused bank credit lines on uncommitted credit facilities were approximately $743 million at March 31, 2024. These lines are available to support short-term liquidity needs and general corporate purposes including letters of credit. Outstanding letters of credit were approximately $116 million at March 31, 2024. These letters of credit support commitments made in the ordinary course of business.
Revolving Credit Facilities
On May 10, 2023, the Company entered into a $1 billion 364-day revolving credit facility (the "364-Day Revolving Credit Facility"). There were no drawdowns of the facility during the three month period ended March 31, 2024.
Supplier Financing
The Company and certain of its designated suppliers, at their sole discretion, participate in a supplier financing program with a financial institution serving as an intermediary. Under this program, the Company agrees to pay the financial institution the stated amount of confirmed invoices from its designated suppliers on the same terms and on the original maturity dates of the confirmed invoices, which have a weighted average payment term of approximately 110 days. The Company does not pay any annual subscription or service fee to the financial institution, nor does the Company reimburse its suppliers for any costs they incur to participate in the program. The Company’s obligations are not impacted by the suppliers’ decision to participate in this program. The Company or the financial institution may terminate the agreement upon at least 30 days’ notice.
The amount of invoices outstanding confirmed as valid under the supplier financing programs as of March 31, 2024 and December 31, 2023 was $89 million and $97 million, respectively, and is recorded in “Accounts Payable” in the interim Condensed Consolidated Balance Sheets.
22
NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES
Litigation, Environmental Matters, and Indemnifications
The Company and certain subsidiaries are involved in various lawsuits, claims and environmental actions that have arisen in the normal course of business with respect to product liability, patent infringement, governmental regulation, contract and commercial litigation, as well as possible obligations to investigate and mitigate the effects on the environment of the disposal or release of certain substances at various sites. In addition, in connection with divestitures and the related transactions, the Company from time to time has indemnified and has been indemnified by third parties against certain liabilities that may arise in connection with, among other things, business activities prior to the completion of the respective transactions. The term of these indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. The Company records liabilities for ongoing and indemnification matters when the information available indicates that it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated.
As of March 31, 2024, the Company has recorded indemnification assets of $26 million within "Accounts and notes receivable - net" and $284 million within "Deferred charges and other assets" and indemnification liabilities of $178 million within "Accrued and other current liabilities" and $238 million within "Other noncurrent obligations" within the interim Condensed Consolidated Balance Sheets. As of December 31, 2023, the Company has recorded indemnification assets of $21 million within "Accounts and notes receivable - net" and $242 million within "Deferred charges and other assets" and indemnified liabilities of $200 million within "Accrued and other current liabilities" and $263 million within "Other noncurrent obligations" within the interim Condensed Consolidated Balance Sheets.
The Company’s accruals for indemnification liabilities related to the binding Memorandum of Understanding (“MOU”) between Chemours, Corteva, EIDP and the Company and to the DowDuPont ("DWDP") Separation and Distribution Agreement and the Letter Agreement between the Company and Corteva (together the “Agreements”) discussed below, are included in the balances above. Additionally, as of March 31, 2024, the Company has recognized a liability of $408 million (including interest) related to the settlement agreement between Chemours, Corteva, EIDP and DuPont related to the aqueous film-forming foams multi-district litigation, as discussed below.
PFAS Stray Liabilities: Future Eligible PFAS Costs
On July 1, 2015, EIDP, a Corteva subsidiary since June 1, 2019, completed the separation of EIDP’s Performance Chemicals segment through the spin-off of Chemours to holders of EIDP common stock (the “Chemours Separation”). On June 1, 2019, the Company completed the separation of its agriculture business through the spin-off of Corteva, including Corteva’s subsidiary EIDP.
On January 22, 2021, the Company, Corteva, EIDP and Chemours entered into the MOU pursuant to which the parties have agreed to release certain claims that had been raised by Chemours including any claims arising out of or resulting from the process and manner in which EIDP structured or conducted the Chemours Separation, and any other claims that challenge the Chemours Separation or the assumption of Chemours Liabilities (as defined in the Chemours Separation Agreement) by Chemours and the allocation thereof, subject in each case to certain exceptions set forth in the MOU.
Pursuant to the MOU, the parties have agreed to share certain costs associated with potential future liabilities related to alleged historical releases of certain PFAS out of pre-July 1, 2015 conduct (“eligible PFAS costs”) until the earlier to occur of (i) December 31, 2040, (ii) the day on which the aggregate amount of Qualified Spend, as defined in the MOU, is equal to $4 billion or (iii) a termination in accordance with the terms of the MOU. PFAS refers to per- or polyfluoroalkyl substances, which include perfluorooctanoic acids and its ammonium salts (“PFOA”).
The parties have agreed that, during the term of this sharing arrangement, Qualified Spend up to $4 billion will be borne 50 percent by Chemours and 50 percent, up to a cap of $2 billion, by the Company and Corteva. The Company and Corteva will split their 50 percent of Qualified Spend in accordance with the Agreements; accordingly, the Company's portion of the $2 billion is approximately $1.4 billion. At March 31, 2024, the Company had paid Qualified Spend of approximately $175 million against its portion of the $2 billion cap. After the term of this arrangement, Chemours’ indemnification obligations under the Chemours Separation Agreement would continue unchanged.
In order to support and manage any potential future eligible PFAS costs, the parties also agreed to establish an escrow account, (the "MOU Escrow Account"). The MOU provides that (1) no later than each of September 30, 2021 and September 30, 2022, Chemours shall deposit $100 million and DuPont and Corteva shall together deposit $100 million in the aggregate into the MOU Escrow Account and (2) no later than September 30 of each subsequent year through and including 2028, Chemours shall deposit $50 million and DuPont and Corteva shall together deposit $50 million in the aggregate into the MOU Escrow Account. Subject to the terms and conditions set forth in the MOU, each party may be permitted to defer funding in any calendar year
23
beginning with 2022 through and including 2028. Additionally, if on December 31, 2028, the balance in the MOU Escrow Account (including interest) is less than $700 million, Chemours will make 50 percent of the deposits and DuPont and Corteva together will make 50 percent of the deposits necessary to restore the balance to $700 million. Such payments will be made in a series of consecutive annual equal installments commencing on September 30, 2029 pursuant to the replenishment terms set forth in the MOU.
Under the Agreements, Divested Operations and Businesses ("DDOB") liabilities of EIDP not allocated to or retained by Corteva or the Company are categorized as relating to either (i) PFAS Stray Liabilities, if they arise out of actions related to or resulting from the development, testing, manufacture or sale of PFAS; or (ii) Non-PFAS Stray Liabilities, (and together with PFAS Stray Liabilities, the “EIDP Stray Liabilities”).
The Agreements provide that the Company and Corteva will each bear a certain percentage of the Indemnifiable Losses, described below, rising from EIDP Stray Liabilities and that the percentage changes upon each company meeting its respective threshold of $150 million for PFAS Stray Liabilities and $200 million for EIDP Stray Liabilities. In addition, for certain Non-PFAS Liabilities, (“Specified Spend Non-PFAS Liabilities”), Corteva must spend specified amounts before costs associated with such matter will be considered Indemnifiable Losses.
The Agreements provide that the Company and Corteva each bear 50 percent of the first $300 million ($150 million) of total Indemnifiable Losses related to PFAS Stray Liabilities. In 2023, the companies met their respective $150 million threshold and as a result the Company bears 71 percent of Indemnifiable Losses related to PFAS Stray Liabilities and Corteva bears 29 percent. At March 31, 2024, DuPont has accrued for future Qualified Spend and Indemnifiable Losses related to PFAS Stray Liabilities accordingly.
The $150 million of Indemnifiable Losses incurred for PFAS Stray Liabilities has been credited against each company’s $200 million threshold. Corteva has met its $200 million threshold. As a result, until the Company meets its $200 million threshold, it is responsible for managing the Non-PFAS Stray Liabilities, excluding Specified Spend Non-PFAS Liabilities for which Corteva has not reached its specified spend amount, and is bearing all Indemnifiable Losses associated with such Non-PFAS Stray Liabilities. Thereafter, DuPont will bear 71 percent and Corteva will bear 29 percent of Indemnifiable Losses related to Non-PFAS Stray Liabilities. At March 31, 2024, the Company has accrued for future Indemnifiable Losses related to Non-PFAS Stray Liabilities, including Specified Spend Non-PFAS Liabilities, accordingly.
Indemnifiable Losses, as defined in the DWDP Separation and Distribution Agreement, include, among other things, attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense of EIDP Stray Liabilities.
In connection with the MOU and the Agreements, the Company has recognized the following indemnification liabilities related to eligible PFAS costs:
| Indemnification Related Liabilities Associated with the MOU | |||||||||||
| In millions | March 31, 2024 | December 31, 2023 | Balance Sheet Classification | ||||||||
| Current indemnification liabilities | $ | $ | Accrued and other current liabilities | ||||||||
| Long-term indemnification liabilities | Other noncurrent obligations | ||||||||||
Total indemnification liabilities accrued under the MOU 1 | $ | $ | |||||||||
1.As of March 31, 2024 and December 31, 2023, total indemnified liabilities accrued include $136 million and $139 million, respectively, related to Chemours environmental remediation activities at their site in Fayetteville, North Carolina under the Consent Order between Chemours and the North Carolina Department of Environmental Quality (the "NC DEQ"). This excludes amounts related to the Water District Settlement Agreement, as defined below.
In addition to the above, beginning the second quarter of 2023 and as of March 31, 2024, the Company has recognized a liability related to the Water District Settlement Agreement, defined below, between Chemours, Corteva, EIDP and DuPont related to the aqueous film-forming foams multi-district litigation. As of March 31, 2024, the liability recognized by the Company related to the Water District Settlement Agreement is $408 million, including interest.
Future charges associated with the MOU will be recognized over the term of the agreement as a component of income from discontinued operations to the extent liabilities become probable and estimable.
24
Under EIDP’s 2004 settlement of a West Virginia state court class action, Leach v.EIDP , members of the class have standing to pursue personal injury claims for just six health conditions that an expert panel appointed under the Leach settlement reported in 2012 had a “probable link” (as defined in the settlement) with PFOA: pregnancy-induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and diagnosed high cholesterol. After the panel reported its findings, approximately 3,550 personal injury lawsuits filed in Ohio and West Virginia state and federal courts , were consolidated in multi-district litigation in the U.S. District Court for the Southern District of Ohio (“Ohio MDL”). In 2017, Chemours and EIDP settled the Ohio MDL for $670 million.
Post the 2017 settlement, approximately 100 additional cases were filed by Leach class members. EIDP and Chemours settled all but one these cases in 2021 for $83 million with each of the Company and EIDP contributing $27 29 million. The 2021 settlement was entered solely by way of compromise and settlement and is not in any way an admission of liability or fault by the Company, Corteva, EIDP or Chemours. The remaining case resulted in a jury verdict for the plaintiff. The Company paid its share in accordance with the Agreements and MOU in the fourth quarter 2023 after EIDP had exhausted its appeal rights. DuPont was not a named party in the Leach case or the Ohio MDL and it is not named as a defendant in the new cases being filed into the Ohio MDL.
In November 2023, DuPont, Chemours and Corteva reached a settlement agreement with the State of Ohio designed to benefit Ohio's natural resources and the people of the State of Ohio. Among other things, and subject to certain limitations and preservations, the settlement resolves the State's claims relating to releases of PFAS in or into the State from the companies' facilities and claims relating to the manufacture and sale of PFAS-containing products. The settlement also resolves the State's claims related to AFFF and is expected to be paid in 2024. As part of the settlement, the companies agreed to pay the State of Ohio a combined total of $110 million, 80 percent of which the State has allocated to restoration of natural resources related to operation of the Washington Works facility. Consistent with the MOU, DuPont's share of the settlement will be approximately $39 million, which is accrued for as of March 31, 2024.
In July 2021, Chemours, Corteva (for itself and EIDP) and DuPont reached a resolution with the State of Delaware for $50 million among other consideration, that avoids litigation and addresses potential natural resources damages from known historical and current releases by the companies in or affecting Delaware. In 2022, the companies paid the settlement consistent with the MOU, accordingly DuPont paid $12.5 25 million, in the event certain conditions are met. As a result of the settlement agreement with the State of Ohio reached in November 2023, a Supplemental Payment is owed to the State of Delaware. The supplemental payment is to be paid subjected to the terms of the MOU. As a result, the Company has accrued approximately $9 million as of March 31, 2024 related to the Supplemental Payment.
As of March 31, 2024, there are various cases alleging damages due to PFAS which are discussed below. Such actions often include additional claims based on allegations that the transfer by EIDP of certain PFAS liabilities to Chemours resulted in a fraudulent conveyance or voidable transaction. With the exception of the fraudulent conveyance claims, which are excluded from the MOU, legal fees, expenses, costs, and any potential liabilities for eligible PFAS costs presented by the following matters will be shared as defined in the MOU between Chemours, EIDP, Corteva and DuPont.
Beginning in April 2019, several dozen lawsuits alleging damages from the use of PFAS-containing aqueous film-forming foams (“AFFF”) were filed against EIDP and Chemours, in additional to 3M and other AFFF manufacturers. The majority of these lawsuits were consolidated in a multi-district litigation (the “AFFF MDL”). The AFFF MDL is captioned In Re: Aqueous Film Forming Foams (AFFF) Products Liability Litigation and is pending in the United States District Court for the District of South Carolina, (the “Court”). Most of the actions in the AFFF MDL identify DuPont as a defendant due to fraudulent transfer claims related to the Chemours Separation and the DowDuPont separations. A portion of cases in the AFFF MDL were resolved by Chemours, Corteva, EIDP and DuPont as discussed below. DuPont has never made or sold AFFF, perfluorooctanesulfonic acid ("PFOS") or PFOS-containing products.
On June 30, 2023, Chemours, Corteva, EIDP and DuPont entered a definitive agreement to comprehensively resolve all PFAS-related claims of a defined class of U.S. public water systems, including but not limited to water systems that are part of the AFFF MDL related to the use of aqueous film-forming foam, (the “Water District Settlement Agreement”) for $1.185 billion in cash. In August 2023, the Court preliminarily approved the Water District Settlement Agreement. Subsequent to the approval, during the third quarter of 2023, Chemours, EIDP, Corteva and DuPont collectively contributed $1.185 billion to a Qualified Settlement Fund (the “Water District Settlement Fund”). In accordance with the MOU, Chemours contributed about 50 percent of the settlement amount (about $592 million), and DuPont (about $400 million) and Corteva (about $193 million) together contributed the remaining 50 percent. Each of Chemours, Corteva and DuPont used its respective MOU Escrow Account deposits to fund in part their respective contributions into the Water District Settlement Fund.
25
DuPont had deposited an aggregate of $100 million into the MOU Escrow Account as of June 30, 2023. The $100 million aggregate deposit was used to fund in part DuPont's $400 million contribution to the Water District Settlement Fund. DuPont's $400 million contribution was made by way of a cash payment into the fund in the third quarter 2023. At March 31, 2024, DuPont has recorded a liability of about $408 million (including interest) in connection with the Water District Settlement Agreement, included in "Accrued and other current liabilities" within the interim Condensed Consolidated Balance Sheets. As of March 31, 2024, the $400 million deposited, plus interest, within the Water District Settlement Fund is reflected in "Restricted cash and cash equivalents - current" on the interim Condensed Consolidated Balance Sheets. The Company has presented these funds as restricted cash since their use is restricted under the Water District Settlement Agreement. DuPont's aggregate MOU escrow deposits of $100 million, excluding interest, at December 31, 2023 is reflected in "Restricted cash and cash equivalents - noncurrent" on the interim Condensed Consolidated Balance Sheets.
The Water District Settlement's defined class is composed of all Public Water Systems, as defined in 42 U.S.C § 300f, with a current detection of PFAS and all Public Water Systems that are currently required to monitor for PFAS under the EPA’s Fifth Unregulated Contaminant Monitoring Rule (“UCMR 5”) or other applicable federal or state law. The class does not include water systems owned and operated by a State or the United States government; small systems that have not detected PFAS and are not currently required to monitor for it under federal or state requirements; and, unless they otherwise request to be included, water systems in the lower Cape Fear River Basin of North Carolina. While it is reasonably possible that the excluded systems or claims could result in additional future lawsuits, claims, assessments or proceedings, it is not possible to predict the outcome of any such matters, and as such, the Company is unable to develop an estimate of a possible loss or range of losses, if any, at this time.
As part of the approval process, the Court established, among other things, a mechanism for class members to submit request to be excluded from the settlement. The Notice Administrator submitted a report on February 6, 2024 indicating that 924 of 14,167 entities on the list of potential class members submitted timely requests for exclusion. The Court issued a revised order during the first quarter 2024 extending the date by which water systems that elected to be excluded from the settlement could rejoin the class to March 15, 2024. The Notice Administrator has not issued an updated report. Therefore, the number of opt-outs is not final and is subject to a court ordered review process for compliance with the opt out process.
On February 8, 2024, the Court granted the plaintiffs’ motion for final approval of the Water District Settlement Agreement and final certification of settlement class. An appeal was filed on March 11, 2024 on behalf of one water district, and was still pending at March 31, 2024. On April 16, 2024, the water district filed a motion to dismiss its appeal which the Court granted on April 17, 2024. No additional appeals were filed during the appeal period and, accordingly, the entry of judgment became final in April 2024. The Company’s contribution, including interest, paid into the Water District Settlement Fund will be removed from restricted cash along with the associated accrued liability in the second quarter 2024 due to the judgment becoming final. In the non-water provider cases in the AFFF MDL, the parties have begun the discovery process for 25 bellwether personal injury cases.
There are also state attorneys general lawsuits against DuPont, outside of the AFFF MDL that make claims of environmental contamination by certain PFAS compounds distinct from AFFF. Generally, the states raise common law tort claims and seek economic impact damages for alleged harm to natural resources, punitive damages, present and future costs to clean up contamination from certain PFAS compounds, and to abate the alleged nuisance. Most of these actions include fraudulent transfer claims related to the Chemours Separation and the DowDuPont separations.
In April 2021, a historic DuPont Dutch subsidiary and the Dutch entities of Chemours and Corteva, received a civil summons filed before the Court of Rotterdam, the Netherlands, on behalf of four municipalities neighboring the Chemours Dordrecht facility. The municipalities are seeking liability declarations relating to the Dordrecht site’s current and historical PFAS operations and emissions. On September 27, 2023, the Court determined that the defendants were liable to the municipalities for (i) PFOA emissions between July 1, 1984 to March 1, 1998 and (ii) removal costs if deposited emissions on the municipalities' land infringes the applicable municipalities' property rights by an objective standard. Additional briefing is expected on this judgment and in accordance with local procedure, the Court will determine damages, if any, in a separate, subsequent proceeding.
In addition to the above matters, the Company is a named party in various other legal matters that make claims related to PFAS, for which the costs of litigation and future liabilities, if any, are eligible PFAS costs under the MOU and Indemnification Losses under the Agreements.
There are pending cases that make claims related to PFAS that have been filed against Chemours and Corteva/EIDP in which the Company is not a named party, but for which the costs of litigation and future liabilities, if any, are or may be eligible PFAS costs under the MOU and Indemnification Losses under the Agreements.
26
While Management believes it has appropriately estimated the liability associated with eligible PFAS matters and Indemnifiable Losses as of the date of this report, it is reasonably possible that the Company could incur additional eligible PFAS costs and Indemnifiable Losses in excess of the amounts accrued. It is not possible to predict the outcome of any such matters due to various reasons including, among others, future actions and decisions, as well as factual and legal issues to be resolved in connection with PFAS matters. As such, at this time DuPont is unable to develop an estimate of a possible loss or range of losses, if any, above the liability accrued at March 31, 2024. It is possible that additional costs or losses could have a significant effect on the Company’s financial condition and/or cash flows in the period in which they occur; however, costs qualifying as Qualified Spend are limited by the terms of the MOU.
Other Litigation Matters
In addition to the matters described above, the Company is party to claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, governmental regulation, contract and commercial litigation, and other actions. Certain of these actions may purport to be class actions and seek damages in very large amounts. As of March 31, 2024, the Company has liabilities of $20 million associated with these other litigation matters. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the interim results of operations, financial condition and cash flows of the Company. In accordance with its accounting policy for litigation matters, the Company will expense litigation defense costs as incurred, which could be significant to the Company’s financial condition and/or cash flows in the period.
Environmental Matters
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. At March 31, 2024, the Company had accrued obligations of $284 million for probable environmental remediation and restoration costs. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets. It is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the Company’s interim results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration.
The accrued environmental obligations includes the following:
| Environmental Accrued Obligations | |||||||||||
| In millions | March 31, 2024 | December 31, 2023 | Potential exposure above the amount accrued 1 | ||||||||
| Environmental remediation liabilities not subject to indemnity | $ | $ | $ | ||||||||
| Environmental remediation indemnification Related Liabilities: | |||||||||||
Indemnifications related to Dow and Corteva 2 | |||||||||||
MOU related obligations (discussed above) 3 | |||||||||||
| Other environmental indemnifications | |||||||||||
| Total environmental related liabilities | $ | $ | $ | ||||||||
1.The environmental accrual represents management’s best estimate of the costs for remediation and restoration with respect to environmental matters, although it is reasonably possible that the ultimate cost with respect to these particular matters could range above the amount accrued, as of March 31, 2024.
2.Pursuant to the DWDP Separation and Distribution Agreement and Letter Agreement, the Company is required to indemnify Dow and Corteva for certain Non-PFAS clean-up responsibilities and associated remediation costs.
3.The MOU related obligations include the Company's estimate of its liability under the MOU for remediation activities based on the current regulatory environment.
27
NOTE 15 - OPERATING LEASES
The lease cost for operating leases were as follows:
| Three Months Ended March 31, | ||||||||||||||||||||
| In millions | 2024 | 2023 | ||||||||||||||||||
| Operating lease costs | $ | $ | ||||||||||||||||||
Operating cash flows from operating leases were $30 million and $27 million for the three months ended March 31, 2024 and 2023, respectively.
New operating lease assets and liabilities entered into during the three months ended March 31, 2024 and 2023, were $8 million and $18 million, respectively. Supplemental balance sheet information related to leases was as follows:
| In millions | March 31, 2024 | December 31, 2023 | ||||||
Operating Leases | ||||||||
Operating lease right-of-use assets 1 | $ | $ | ||||||
Current operating lease liabilities 2 | ||||||||
Noncurrent operating lease liabilities 3 | ||||||||
Total operating lease liabilities | $ | $ | ||||||
1.Included in "" in the interim Condensed Consolidated Balance Sheets.
2.Included in "" in the interim Condensed Consolidated Balance Sheets.
3.Included in "" in the interim Condensed Consolidated Balance Sheets.
Operating lease right-of-use ("ROU") assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide the lessor’s implicit rate, the Company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments.
| Lease Term and Discount Rate for Operating Leases | March 31, 2024 | December 31, 2023 | ||||||
| Weighted-average remaining lease term (years) | ||||||||
| Weighted average discount rate | % | % | ||||||
Maturities of lease liabilities were as follows:
Maturity of Lease Liabilities at March 31, 2024 | Operating Leases | ||||
| In millions | |||||
| Remainder of 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 and thereafter | |||||
| Total lease payments | $ | ||||
| Less: Interest | |||||
| Present value of lease liabilities | $ | ||||
The Company has leases in which it is the lessor. In connection with the 2021 sale of the N&B businesses and the M&M Divestitures, DuPont entered into leasing agreements with IFF and Celanese, whereby DuPont is leasing certain properties, including office spaces and R&D laboratories. These leases are classified as operating leases and lessor income and related expenses are not significant to the Company's interim Condensed Consolidated Balance Sheets or interim Consolidated Statement of Operations. Lease agreements where the Company is the lessor have final expirations through 2036.
28
NOTE 16 - STOCKHOLDERS' EQUITY
Share Repurchase Program
In November 2022, DuPont’s Board of Directors approved a new share repurchase program authorizing the repurchase and retirement of up to $5 billion of common stock (the “$5 B Share Buyback Program").
In the third quarter of 2023, DuPont entered into new accelerated share repurchase agreements with three financial counterparties to repurchase an aggregate of $2 billion of common stock ("$2 B ASR Transaction"). DuPont paid an aggregate of $2 billion to the counterparties and received initial deliveries of 21.2 million shares in aggregate of DuPont common stock, which were retired immediately and recorded as a reduction to retained earnings of $1.6 billion. In the first quarter of 2024, the $2 B ASR Transaction was completed. The settlement resulted in the delivery of 6.7 million additional shares of DuPont common stock, which were retired immediately and recorded as a reduction of retained earnings of $426 million. In total, the Company repurchased 27.9 million shares at an average price of $71.67 per share under the $2 B ASR Transaction. The completion of the $2 B ASR Transaction effectively completes the $5 B Share Buyback Program and the Company's stock repurchase authorization.
In the first quarter 2024, the Company’s Board of Directors approved a new share repurchase program authorizing the repurchase and retirement of up to $1 billion of common stock (“the $1 B Share Buyback Program”). Under the $1 B Share Buyback Program, repurchases may be made from time to time on the open market at prevailing market prices or in privately negotiated transactions off market, including additional ASR agreements in accordance with applicable federal securities laws. The $1 B Share Buyback Program terminates on June 30, 2025, unless extended or shortened by the Board of Directors. In the first quarter 2024, DuPont entered into an ASR agreement with one counterparty for the repurchase of $500 million of common stock ("Q1 2024 ASR Transaction"). DuPont paid an aggregate of $500 million to the counterparty and received initial deliveries of 6.0 million shares of DuPont common stock, which were retired immediately and recorded as a reduction of retained earnings of $400 million. The remaining $100 million was evaluated as an unsettled forward contract indexed to DuPont common stock, classified within stockholders' equity as of March 31, 2024.
Subsequent to quarter end, the Q1 2024 ASR Transaction was completed. The settlement resulted in the delivery of approximately 1 million additional shares of DuPont common stock, which were retired immediately and will be recorded as a reduction of retained earnings in the second quarter of 2024. In total, the Company repurchased 6.9 million shares at an average price of $71.96 per share under the Q1 2024 ASR Transaction.
The Inflation Reduction Act of 2022 introduced a 1 percent nondeductible excise tax imposed on the net value of certain stock repurchases. The net value is determined by the fair market value of the stock repurchased during the tax year, reduced by the fair market value of stock issued during the tax year. The Company recorded total excise tax of $8 million as a reduction to retained earnings for the three months ended March 31, 2024, reflected within stockholders' equity and a corresponding liability within "Accounts Payable" in our interim Condensed Consolidated Balance Sheets as of March 31, 2024.
29
Accumulated Other Comprehensive Loss
The following table summarizes the activity related to each component of accumulated other comprehensive loss ("AOCL") for the three months ended March 31, 2024 and 2023:
| Accumulated Other Comprehensive Loss | Cumulative Translation Adj | Pension and OPEB | Derivative Instruments | Total | |||||||||||||
| In millions | |||||||||||||||||
| 2023 | |||||||||||||||||
| Balance at January 1, 2023 | $ | ( | $ | $ | $ | ( | |||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ( | ( | |||||||||||||||
| Net other comprehensive income (loss) | $ | $ | ( | $ | ( | $ | |||||||||||
Balance at March 31, 2023 | $ | ( | $ | $ | $ | ( | |||||||||||
| 2024 | |||||||||||||||||
| Balance at January 1, 2024 | $ | ( | $ | ( | $ | $ | ( | ||||||||||
| Other comprehensive (loss) income before reclassifications | ( | ( | ( | ||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ( | ( | |||||||||||||||
| Net other comprehensive (loss) income | $ | ( | $ | ( | $ | $ | ( | ||||||||||
Balance at March 31, 2024 | $ | ( | $ | ( | $ | $ | ( | ||||||||||
The tax effects on the net activity related to each component of other comprehensive loss were not significant for the three months ended March 31, 2024 and 2023.
30
NOTE 17 - PENSION PLANS AND OTHER POST-EMPLOYMENT BENEFITS
A summary of the Company's pension plans and other post-employment benefits can be found in Note 19 to the Consolidated Financial Statements included in the Company’s 2023 Annual Report.
The following sets forth the components of the Company's net periodic benefit costs (credits) for defined benefit pension plans:
| Net Periodic Benefit Costs for All Significant Plans | Three Months Ended March 31, | |||||||||||||
| In millions | 2024 | 2023 | ||||||||||||
Service cost 1 | $ | $ | ||||||||||||
Interest cost 2 | ||||||||||||||
Expected return on plan assets 3 | ( | ( | ||||||||||||
Amortization of prior service credit 4 | ( | ( | ||||||||||||
Curtailment/settlement 5 | ( | |||||||||||||
| Net periodic benefit costs - Total | $ | $ | ||||||||||||
| Less: Net periodic benefit credits - Discontinued operations | ( | |||||||||||||
| Net periodic benefit costs - Continuing operations | $ | $ | ||||||||||||
1.The service cost from continuing operations was $8 million for the three months ended March 31, 2023 for significant plans.
2.The interest cost from continuing operations was $23 million for the three months ended March 31, 2023 for significant plans.
3.The expected return on plan assets from continuing operations was $19 million for the three months ended March 31, 2023 for significant plans.
4.The amortization of prior service credit from continuing operations was $1 million for the three months ended March 31, 2023 for significant plans.
5.The curtailment and settlement gain from continuing operations was $1 million for the three months ended March 31, 2023 for significant plans.
The continuing operations portion of the net periodic benefit costs, other than the service cost component, is included in "Sundry income (expense) - net" in the interim Consolidated Statements of Operations.
DuPont expects to make additional contributions in the aggregate of approximately $44 million by year-end 2024.
NOTE 18 - STOCK-BASED COMPENSATION
A summary of the Company's stock-based compensation plans can be found in Note 20 to the Consolidated Financial Statements included in the Company's 2023 Annual Report.
In the second quarter of 2020, the stockholders of DuPont approved the DuPont 2020 Equity and Incentive Plan (the "2020 Plan") which allows the Company to grant options, share appreciation rights, restricted shares, restricted stock units ("RSUs"), share bonuses, other share-based awards, cash awards, or any combination of the foregoing. Under the 2020 Plan, a maximum of 15 million shares of common stock are available for award as of March 31, 2024.
DuPont recognized share-based compensation expense in continuing operations of $23 million and $16 million for the three months ended March 31, 2024 and 2023, respectively. The income tax benefits related to stock-based compensation arrangements were $5 million and $3 million for the three months ended March 31, 2024 and 2023.
31
NOTE 19 - FINANCIAL INSTRUMENTS
The following table summarizes the fair value of financial instruments at March 31, 2024 and December 31, 2023:
| Fair Value of Financial Instruments | March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||
| In millions | Cost | Gain | Loss | Fair Value | Cost | Gain | Loss | Fair Value | ||||||||||||||||||
Cash equivalents | $ | $ | — | $ | — | $ | $ | $ | — | $ | — | $ | ||||||||||||||
Restricted cash equivalents 1 | — | — | — | — | ||||||||||||||||||||||
| Total cash and restricted cash equivalents | $ | $ | — | $ | — | $ | $ | $ | — | $ | — | $ | ||||||||||||||
Long-term debt including debt due within one year 2 | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | $ | ( | $ | ( | ||||||||||||
| Derivatives relating to: | ||||||||||||||||||||||||||
Net investment hedge 3 | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Foreign currency 4, 5 | ( | ( | ( | |||||||||||||||||||||||
Interest rate swap agreements 6 | ( | ( | ( | ( | ||||||||||||||||||||||
| Total derivatives | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | ||||||||||||||||
1.Refer to Note 7 and Note 14 or more information on Restricted cash equivalents.
2.Included in the balance is a fair value hedging revaluation related to the Company's interest rate swap agreements. At March 31, 2024 and December 31, 2023 this balance was $84 million and $59 million, respectively. Fair value of long-term debt including debt due within one year is based on quoted market prices for the same or similar issues, or on current rates offered to the company for debt of the same remaining maturities and terms and represents a Level 2 fair value measurement.
3.Classified as "Deferred charges and other assets" in the interim Condensed Consolidated Balance Sheets.
4.Classified as "Prepaid and other current assets" and "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.
5.Presented net of cash collateral where master netting arrangements allow.
6.Classified as "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets.
Derivative Instruments
Objectives and Strategies for Holding Derivative Instruments
In the ordinary course of business, the Company enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency, interest rate and commodity price risks. The Company has established a variety of derivative programs to be utilized for financial risk management. These programs reflect varying levels of exposure coverage and time horizons based on an assessment of risk.
Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee, consistent with the Company's financial risk management policies and guidelines. Derivative instruments used are forwards, options, futures and swaps.
The Company's financial risk management procedures also address counterparty credit approval, limits and routine exposure monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions and major commodity exchanges. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company utilizes collateral support annex agreements with certain counterparties to limit its exposure to credit losses. The Company anticipates performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks associated with these instruments are regularly reported to management.
The notional amounts of the Company's derivative instruments were as follows:
| Notional Amounts | March 31, 2024 | December 31, 2023 | ||||||
| In millions | ||||||||
| Derivatives designated as hedging instruments: | ||||||||
| Net investment hedge | $ | $ | ||||||
| Interest rate swap agreements | $ | $ | ||||||
| Derivatives not designated as hedging instruments: | ||||||||
Foreign currency contracts 1 | $ | ( | $ | ( | ||||
1.Presented net of contracts bought and sold.
32
Derivatives Designated in Hedging Relationships
Net Foreign Investment Hedge
In the second quarter of 2021, the Company entered into a fixed-for-fixed cross currency swaps with an aggregate notional amount totaling $1 billion to hedge the variability of exchange rate impacts between the U.S. Dollar and Euro. Under the terms of the cross-currency swap agreement, the Company notionally exchanged $1 billion at an interest rate of 4.73 percent for €819 million at a weighted average interest rate of 3.26 percent. The cross-currency swap is designated as a net investment hedge and expires on November 15, 2028.
The Company has made an accounting policy election to account for the net investment hedge using the spot method. The Company has also elected to amortize the excluded components in interest expense in the related quarterly accounting period that such interest is accrued. The cross-currency swap is marked to market at each reporting date and any unrealized gains or losses are included in unrealized currency translation adjustments within AOCL, net of amounts associated with excluded components which are recognized in interest expense in the interim Consolidated Statements of Operations.
Interest Rate Swap Agreements
In the second quarter of 2022, the Company entered into fixed-to-floating interest rate swap agreements with an aggregate notional principal amount totaling $1 billion to hedge changes in the fair value of the Company’s long-term debt due to interest rate change movements. These swaps converted $1 billion of the Company’s $1.65 billion principal amount of fixed rate notes due 2038 into floating rate debt for the portion of their terms through 2032 with an interest rate based on the Secured Overnight Financing Rate ("SOFR"). Under the terms of the agreements, the Company agrees to exchange, at specified intervals, fixed for floating interest amounts based on the agreed upon notional principal amount. The interest rate swaps are designated as fair value hedges and expire on November 15, 2032.
The interest rate swaps are carried at fair value. Fair value hedge accounting has been applied and thus, changes in the fair value of these swaps and changes in the fair value of the related hedged portion of long-term debt will be presented and will net to zero in "Sundry income (expense) – net" in the interim Consolidated Statements of Operations.
Derivatives not Designated in Hedging Relationships
Foreign Currency Contracts
The Company routinely uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal earnings impact, after taxes. The Company may use foreign currency exchange contracts to offset a portion of the Company's exposure to certain foreign currency-denominated revenues so that gains and losses on the contracts offset changes in the USD value of the related foreign currency-denominated revenues.
Effect of Derivative Instruments
Foreign currency derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency-denominated assets and liabilities. The amount charged on a pre-tax basis related to foreign currency derivatives not designated as a hedge, which was included in “Sundry income (expense) - net” in the interim Consolidated Statements of Operations, was a loss of $21 million and a loss of $19 million for the three months ended March 31, 2024 and 2023, respectively. The income statement effects of other derivatives were immaterial.
33
NOTE 20 - FAIR VALUE MEASUREMENTS
Fair Value Measurements on a Recurring Basis
The following tables summarize the basis used to measure certain assets and liabilities at fair value on a recurring basis:
Basis of Fair Value Measurements on a Recurring Basis of Significant Other Observable Inputs (Level 2) | March 31, 2024 | December 31, 2023 | ||||||||||||
| In millions | ||||||||||||||
| Assets at fair value: | ||||||||||||||
Cash equivalents and restricted cash equivalents 1 | $ | $ | ||||||||||||
Derivatives relating to: 2 | ||||||||||||||
| Net investment hedge | ||||||||||||||
Foreign currency contracts 3 | ||||||||||||||
| Total assets at fair value | $ | $ | ||||||||||||
| Liabilities at fair value: | ||||||||||||||
Derivatives relating to: 2 | ||||||||||||||
| Interest rate swap agreements | ||||||||||||||
Foreign currency contracts 3 | ||||||||||||||
| Total liabilities at fair value | $ | $ | ||||||||||||
1. Time deposits included in "Cash and cash equivalents" in the interim Condensed Consolidated Balance Sheets are held at amortized cost, which approximates fair value. Restricted cash and cash equivalents" at March 31, 2024 and December 31, 2023 in the interim Condensed Consolidated Balance Sheets includes $408 million and $405 million, respectively, deposited within a qualified settlement fund consisting of treasury bills representing Level 1 fair value measurement investments, also held at amortized cost. "Restricted cash and cash equivalents" at December 31, 2023 in the interim Condensed Consolidated Balance Sheets also includes $50 million of money market funds, representing Level 1 fair value measurement investments, also held at amortized cost.
2. See Note 19 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets.
3. Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the interim Condensed Consolidated Balance Sheets. The offsetting counterparty and cash collateral netting amounts for foreign currency contracts were $5 million and zero respectively, for both assets and liabilities as of March 31, 2024. The offsetting counterparty and cash collateral netting amounts were $11 million and zero , respectively, for assets and liabilities as of December 31, 2023.
NOTE 21 - SEGMENTS AND GEOGRAPHIC REGIONS
The Company's measure of profit/loss for segment reporting purposes is Operating EBITDA as this is the manner in which the Company's chief operating decision maker ("CODM") assesses performance and allocates resources. The Company defines Operating EBITDA as earnings (i.e., “Income from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / OPEB benefits / charges, and foreign exchange gains / losses, excluding Future Reimbursable Indirect Costs, and adjusted for significant items. Reconciliations of these measures are provided on the following pages.
Historical Delrin® costs that were classified as discontinued operation in prior years included only direct operating expenses incurred by Delrin® prior to the November 1, 2023 divestiture. Indirect costs, such as those related to corporate and shared service functions previously allocated to the Delrin® Business, did not meet the criteria for discontinued operations and were reported within continuing operations in the respective prior years. A portion of these historical indirect costs included costs related to activities the Company is undertaking on behalf of Delrin®, and for which it is reimbursed (“Future Reimbursable Indirect Costs”). Future Reimbursable Indirect Costs are reported within continuing operations but are excluded from operating EBITDA as defined below. The remaining portion of these indirect costs are not subject to reimbursement (“Stranded Costs”). Stranded Costs are reported within continuing operations in Corporate & Other and are included within Operating EBITDA.
34
| Segment Information | Electronics & Industrial | Water & Protection | Corporate & Other | Total | ||||||||||
| In millions | ||||||||||||||
| Three months ended March 31, 2024 | ||||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||
Operating EBITDA 1 | $ | $ | $ | $ | ||||||||||
| Equity in earnings (losses) of nonconsolidated affiliates | $ | $ | $ | ( | $ | |||||||||
| Three months ended March 31, 2023 | ||||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||
Operating EBITDA 1 | $ | $ | $ | $ | ||||||||||
| Equity in earnings of nonconsolidated affiliates | $ | $ | $ | $ | ||||||||||
1.A reconciliation of "Income from continuing operations, net of tax" to Operating EBITDA is provided below.
Reconciliation of "Income from continuing operations, net of tax" to Operating EBITDA for the Three Months Ended March 31, 2024 and 2023 | Three Months Ended March 31, | ||||||||||
| In millions | 2024 | 2023 | |||||||||
| Income from continuing operations, net of tax | $ | $ | |||||||||
| + | Provision for income taxes on continuing operations | ||||||||||
| Income from continuing operations before income taxes | $ | $ | |||||||||
| + | Depreciation and amortization | ||||||||||
| - | Interest income 1 | ||||||||||
| + | Interest expense | ||||||||||
| - | Non-operating pension/OPEB benefit credits (costs) 1 | ( | |||||||||
| - | Foreign exchange gains (losses), net 1 | ( | |||||||||
| + | Future reimbursable indirect costs | ||||||||||
| - | Significant items charge | ( | ( | ||||||||
| Operating EBITDA | $ | $ | |||||||||
1.Included in "Sundry income (expense) - net."
The following tables summarize the pre-tax impact of significant items by segment that are excluded from Operating EBITDA above:
Significant Items by Segment for the Three Months Ended March 31, 2024 | Electronics & Industrial | Water & Protection | Corporate & Other | Total | ||||||||||
| In millions | ||||||||||||||
Restructuring and asset related charges - net 1 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
Inventory write-offs 2 | ( | ( | ||||||||||||
Acquisition, integration and separation costs 3 | ( | ( | ||||||||||||
Income Tax Items 4 | ||||||||||||||
| Total | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
1. Includes restructuring actions and asset related charges. See Note 6 for additional information.
2. Reflects raw material inventory write-offs recorded in “Cost of Sales” in connection with restructuring actions related to plant line closures within the Water & Protection segment.
3. Acquisition, integration and separation costs related to the Spectrum Acquisition.
4. Reflects the impact of an international tax audit.
Significant Items by Segment for the Three Months Ended March 31, 2023 | Electronics & Industrial | Water & Protection | Corporate & Other | Total | ||||||||||
| In millions | ||||||||||||||
Restructuring and asset related charges - net 1 | $ | ( | $ | $ | ( | $ | ( | |||||||
Gain on divestiture 2 | ( | |||||||||||||
| Total | $ | ( | $ | $ | ( | $ | ( | |||||||
1. Includes restructuring actions and asset related charges. See Note 6 for additional information.
2. Reflected in "Sundry income (expense) - net."
35
ITEM 2. 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 interim 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
•Result of Operations
•Segment Results
•Changes in Financial Condition
OVERVIEW
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.
As of March 31, 2024, the Company has $4.0 billion of working capital and approximately $1.9 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 continuing operations.
Outlined below are recent developments and material historical transactions impacting this Quarterly Report on Form 10-Q.
Mobility & Materials Divestitures
On November 1, 2022, (the "Transaction Date") DuPont completed the previously announced divestiture of the majority of the historic Mobility & Materials segment, including the Engineering Polymers business line and select product lines within the Advanced Solutions and Performance Resins business lines (the “M&M Divestiture”). On February 18, 2022, the Company announced that its Board of Directors approved of the divestiture of the Delrin® acetal homopolymer (H-POM) business (the "Delrin® Divestiture"). On November 1, 2023, the Company closed the sale of the Delrin® business to TJC LP ("TJC"), (the “Delrin® Divestiture”). DuPont acquired a 19.9 percent non-controlling equity interest in Derby Group Holdings LLC, (“Derby”). The Delrin® Divestiture together with the M&M Divestiture (collectively the "M&M Divestitures" and the businesses in scope for the M&M Divestitures collectively the "M&M Businesses") represent a strategic shift that has a major impact on DuPont's operations and results.
The interim results of operations and the interim Consolidated Statements of Cash Flows for the three months ended March 31, 2023 present the financial results of the Delrin® Divestiture, as discontinued operations. The comprehensive income of the Delrin® Divestiture have not been segregated and are included in the interim Consolidated Statements of Comprehensive Income, respectively, for all periods presented. Unless otherwise indicated, the information in the notes to the interim Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of the Delrin® Divestiture. See Note 4 to the interim Consolidated Financial Statements for additional information.
36
Recent Developments
Macroeconomic Conditions
The Company anticipates volume improvement throughout the remainder of the year driven by further electronics market recovery as semiconductor and printed circuit board utilization rates are expected to increase, as well as reduced destocking impact in areas such as water, medical packaging and biopharma. The ultimate extent to which these markets will recover in 2024 is not known.
Share Buyback Program
In the first quarter of 2024, the Company completed the $2 billion accelerated share repurchase ("ASR") transaction, which completed the Company’s $5B Share Buyback Program.
Also in the first quarter of 2024, the Company’s Board of Directors approved a new share repurchase program authorizing the repurchase and retirement of up to $1 billion of common stock (the "$1B Share Buyback Program”). Under the $1B Share Buyback Program, repurchases may be made from time to time on the open market at prevailing market prices or in privately negotiated transactions off market, including additional ASR agreements in accordance with applicable federal securities laws. The $1B Share Buyback Program terminates on June 30, 2025, unless extended or shortened by the Board of Directors. DuPont entered an ASR agreement with one counterparty for the repurchase of about $500 million of common stock (the "Q1 2024 ASR Transaction").
Subsequent to quarter end, the Q1 2024 ASR Transaction was completed. The settlement resulted in the delivery of approximately 1 million additional shares of DuPont common stock, which were retired immediately and will be recorded as a reduction of retained earnings in the second quarter of 2024. In total, the Company repurchased 6.9 million shares at an average price of $71.96 per share under the Q1 2024 ASR Transaction.
See Liquidity and Capital Resource below and Note 16 to the interim Consolidated Financial Statements for additional information.
Dividends
On April 17, 2024, the Board of Directors declared a second quarter 2024 dividend of $0.38 per share, payable on June 17, 2024, to shareholders of record on May 31, 2024.
On February 5, 2024, the Company announced that its Board of Directors declared a first quarter 2024 dividend of $0.38 per share which was paid on March 15, 2024, to shareholders of record on February 29, 2024.
37
RESULTS OF OPERATIONS
| Summary of Sales Results | Three Months Ended March 31, | |||||||||||||
| In millions | 2024 | 2023 | ||||||||||||
| Net sales | $ | 2,931 | $ | 3,018 | ||||||||||
The following table summarizes sales variances by segment and geographic region from the prior year:
| Sales Variances by Segment and Geographic Region | ||||||||||||||||||||||||||||||||
| Percentage change from prior year | Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||||
| Local Price & Product Mix | Currency | Volume | Portfolio & Other | Total | ||||||||||||||||||||||||||||
| Electronics & Industrial | (1) | % | (1) | % | (1) | % | 8 | % | 5 | % | ||||||||||||||||||||||
| Water & Protection | — | (1) | (10) | — | (11) | |||||||||||||||||||||||||||
Corporate & Other 1 | (2) | — | 3 | — | 1 | |||||||||||||||||||||||||||
| Total | (1) | % | (1) | % | (5) | % | 4 | % | (3) | % | ||||||||||||||||||||||
| U.S. & Canada | — | % | — | % | (7) | % | 10 | % | 3 | % | ||||||||||||||||||||||
EMEA 2 | (1) | 1 | (7) | — | (7) | |||||||||||||||||||||||||||
| Asia Pacific | (2) | (2) | (2) | — | (6) | |||||||||||||||||||||||||||
| Latin America | 2 | — | (10) | 6 | (2) | |||||||||||||||||||||||||||
| Total | (1) | % | (1) | % | (5) | % | 4 | % | (3) | % | ||||||||||||||||||||||
1.Corporate & Other includes activities of the Retained Businesses and previously divested businesses.
2.Europe, Middle East and Africa.
The Company reported net sales for the three months ended March 31, 2024 of $2.9 billion, down 3 percent from $3.0 billion for the three months ended March 31, 2023, due to a 5 percent decrease in volume, a 1 percent decrease in local price and product mix, and a 1 percent unfavorable currency impact, partially offset by a 4 percent increase in portfolio actions. The volume decrease was primarily driven by Water and Protection (down 10 percent). Currency was down 1% compared with the same period last year, driven by Asia Pacific (down 2 percent) and slightly offset by EMEA (up 1 percent). Local price and product mix declined slightly in Asia Pacific (down 2 percent) and EMEA (down 1 percent) but was slightly offset by Latin America (up 2 percent). The increase in portfolio actions was attributable to the acquisition of Spectrum in August 2023.
Cost of Sales
Cost of sales was $1.9 billion for the three months ended March 31, 2024, down slightly from $2.0 billion for the three months ended March 31, 2023. Cost of sales decreased for the three months ended March 31, 2024 primarily due to decreased sales volume, lower raw materials, logistics and energy costs and a favorable currency impact partially offset with the impact from the Spectrum Acquisition and $25 million of raw material inventory write-offs in connection with the 2023-2024 Restructuring Program.
Cost of sales as a percentage of net sales for the three months ended March 31, 2024 was 65 percent compared with 66 percent for the three months ended March 31, 2023. The decrease as a percentage of sales for the three months ended March 31, 2024 as compared with the same period of the prior year was primarily due to lower raw material, logistics and energy costs offset by sales volume and the impact of the Spectrum Acquisition.
Research and Development Expenses ("R&D")
R&D expenses totaled $125 million in the first quarter of 2024, down from $127 million in the first quarter of 2023. R&D as a percentage of net sales was consistent period over period at 4 percent for the three months ended March 31, 2024 and 2023.
Selling, General and Administrative Expenses ("SG&A")
SG&A expenses were $384 million in the first quarter of 2024, up from $340 million in the first quarter of 2023. SG&A as a percentage of net sales was relatively consistent period over period at 13 percent and 11 percent for the three months ended March 31, 2024 and 2023. The increase for the three months ended March 31, 2024 as compared with the same period of the prior year was primarily due to higher expenses driven by the impact from the Spectrum Acquisition and personnel related expenses.
38
Amortization of Intangibles
Amortization of intangibles was $149 million in the first quarter of 2024, up from $147 million in the first quarter of 2023. The increase for the three months ended March 31, 2024 as compared with the same period of the prior year was primarily due to the amortization of the intangible assets acquired in the Spectrum Acquisition in the third quarter of 2023, partially offset by the absence of amortization in 2024 from fully amortized assets.
Restructuring and Asset Related Charges - Net
Restructuring and asset related charges - net were $39 million in the first quarter of 2024, up from $14 million charges in the first quarter of 2023. The activity in the first quarter of 2024 is primarily related to the 2023-2024 Restructuring Program, while the activity in the first quarter of 2023 is primarily related to the 2022 Restructuring Program.
Acquisition, Integration and Separation Costs
Acquisition, integration and separation costs primarily consist of financial advisory, information technology, legal, accounting, consulting and other professional advisory fees. The Company recorded $3 million for the three months ended March 31, 2024 and recorded no cost related to continuing operations for the three months ended March 31, 2023. For the three months ended March 31, 2024, these costs were primarily associated with the Spectrum Acquisition.
Equity in Earnings of Nonconsolidated Affiliates
The Company's share of the earnings of nonconsolidated affiliates was $12 million in the first quarter of 2024, down from $15 million in the first quarter of 2023. The decrease is due to loss from equity earnings from Derby, partially offset by higher equity earnings across other affiliates.
Sundry Income (Expense) - Net
Sundry income (expense) - net includes a variety of income and expense items such as foreign currency exchange gains or losses, interest income, dividends from investments, gains and losses on sales of investments and assets, non-operating pension and other post-employment benefit plan credits or costs, and certain litigation matters. Sundry income (expense) - net in the first quarter of 2024 was $38 million compared with $29 million in the first quarter of 2023. Interest income was $20 million and $46 million for the three months ended March 31, 2024 and 2023, respectively. The decrease in interest income period over period is due to the decreased cash balance in 2024. The three months ended March 31, 2024 included a $4 million net foreign exchange gain while the three months ended March 31, 2023 included a $20 million net foreign exchange loss.
Interest Expense
Interest expense was $96 million and $95 million for the three months ended March 31, 2024 and 2023, respectively. The increase in interest expense from the prior year is primarily due to the reduction in capitalized interest related to a reduction in capital expenditures, partially offset by the absence of interest expense on the $300 million floating-rate long-term senior unsecured notes that matured in November 2023.
Provision for Income Taxes on Continuing Operations
The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attribute. The effective tax rate on continuing operations for the first quarter of 2024 was 31.5 percent, compared with an effective tax rate of 23.3 percent for the first quarter of 2023. The higher effective tax rate for the first quarter of 2024 was driven by the geographic mix of earnings offset by the U.S. taxation of foreign operations as well as certain one-time discrete tax expenses, including an international statutory tax assessment received for which the Company is indemnified.
39
SEGMENT RESULTS
The revenues and certain expenses of the Delrin® Divestiture are classified as discontinued operations for the three months ended March 31, 2023. In addition, the Auto Adhesives & Fluids, MultibaseTM and Tedlar® product lines within the historical Mobility & Materials segment (the "Retained Businesses") were not included in the scope of the M&M Divestitures and are included in Corporate & Other.
Historical Delrin® costs that were classified as discontinued operation in prior years included only direct operating expenses incurred by Delrin® prior to the November 1, 2023 divestiture. Indirect costs, such as those related to corporate and shared service functions previously allocated to the Delrin® Business, did not meet the criteria for discontinued operations and were reported within continuing operations in the respective prior years. A portion of these historical indirect costs included costs related to activities the Company is undertaking on behalf of Delrin®, and for which it is reimbursed (“Future Reimbursable Indirect Costs”). Future Reimbursable Indirect Costs are reported within continuing operations but are excluded from operating EBITDA as defined below. The remaining portion of these indirect costs are not subject to reimbursement (“Stranded Costs”). Stranded Costs are reported within continuing operations in Corporate & Other and are included within Operating EBITDA.
On August 1, 2023, the Company completed the previously announced acquisition of Spectrum Plastics Group (“Spectrum”) from AEA Investors (the “Spectrum Acquisition”). Spectrum is part of the Electronics & Industrial segment.
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 / other post-employment benefits (“OPEB”) / charges, and foreign exchange gains / losses, excluding Future Reimbursable Indirect Costs, and adjusted for significant items.
40
ELECTRONICS & INDUSTRIAL
The Electronics & Industrial 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 and packaging of semiconductors and integrated circuits and provides innovative solutions for thermal management and electromagnetic shielding as well as metallization processes for metal finishing, decorative, and industrial applications. Electronics & Industrial is a leading provider of platemaking systems and photopolymer plates for the packaging graphics industry, digital printing inks and cutting-edge materials for the manufacturing of displays for organic light emitting diode ("OLED"). In addition, the segment produces innovative engineering polymer solutions, high performance parts, flexible packaging products, plastic and silicone extrusions, medical silicones, specialty lubricants and critical polymer-based components and devices for medical and other industrial markets.
| Electronics & Industrial | Three Months Ended | |||||||||||||
| In millions | March 31, 2024 | March 31, 2023 | ||||||||||||
| Net sales | $ | 1,365 | $ | 1,296 | ||||||||||
| Operating EBITDA | $ | 374 | $ | 362 | ||||||||||
| Equity in earnings of nonconsolidated affiliates | $ | 10 | $ | 5 | ||||||||||
| Electronics & Industrial | Three Months Ended | |||||||
| Percentage change from prior year | March 31, 2024 | |||||||
| Change in Net Sales from Prior Period due to: | ||||||||
Local price & product mix | (1) | % | ||||||
Currency | (1) | |||||||
Volume | (1) | |||||||
Portfolio & other | 8 | |||||||
Total | 5 | % | ||||||
Electronics & Industrial net sales were $1,365 million for the three months ended March 31, 2024, up 5 percent from $1,296 million for the three months ended March 31, 2023. Net sales increased due to a 8 percent increase in portfolio actions, partially offset by 1 percent decreases in local price and product mix, sales volume and unfavorable currency impacts. The portfolio impact reflects the August 2023 acquisition of Spectrum. Volume declines in Industrial Solutions were related to ongoing channel inventory destocking primarily for Kalrez® parts and within biopharma markets. Within Semiconductor Technologies, volume gains were driven by the start of semiconductor demand recovery and the normalization of customer inventory levels along with increased demand for OLED materials. Volume gains in Interconnect Solutions were driven by increased demand and inventory channel stabilization within Laminates and Metallization & Imaging. These volume gains were mostly offset by local price and product mix declines in Interconnect Solutions, including the impact of lower pass-through metals. The unfavorable currency impact is primarily driven by the Japanese yen and Chinese yuan.
Operating EBITDA was $374 million for the three months ended March 31, 2024, up 3 percent compared with $362 million for the three months ended March 31, 2023, primarily due to the earnings contribution from the Spectrum acquisition and strength in Semiconductor Technologies and Interconnect Solutions partially offset by lower volumes within Industrial Solutions.
41
WATER & PROTECTION
The Water & Protection segment is a leading provider of engineered products and integrated systems for a number of industries including worker safety, water purification and separation, aerospace, energy, medical packaging and building materials. The segment satisfies the growing global needs of businesses, governments, and consumers for solutions that make life safer, healthier, and better. By uniting market-driven science with the strength of highly regarded brands, the segment strives to bring new products and solutions to solve customers' needs faster, better and more cost effectively.
| Water & Protection | Three Months Ended | |||||||||||||
| In millions | March 31, 2024 | March 31, 2023 | ||||||||||||
| Net sales | $ | 1,291 | $ | 1,449 | ||||||||||
| Operating EBITDA | $ | 295 | $ | 344 | ||||||||||
| Equity in earnings of nonconsolidated affiliates | $ | 9 | $ | 10 | ||||||||||
| Water & Protection | Three Months Ended | |||||||
| Percentage change from prior year | March 31, 2024 | |||||||
| Change in Net Sales from Prior Period due to: | ||||||||
Local price & product mix | — | % | ||||||
Currency | (1) | |||||||
Volume | (10) | |||||||
Portfolio & other | — | |||||||
Total | (11) | % | ||||||
Water & Protection net sales were $1,291 million for the three months ended March 31, 2024, down 11 percent from $1,449 million for the three months ended March 31, 2023. The net sales decreased due to a 10 percent decline in volume and a 1 percent unfavorable currency impact. Volume declines within Safety Solutions were mainly due to channel inventory destocking, primarily in medical packaging products within healthcare markets. Water Solutions volume declines were primarily due to distributor inventory destocking and weaker industrial demand in China. Shelter Solutions was relatively flat. The unfavorable currency impact is primarily driven by the Chinese yuan and Japanese yen partially offset by the European euro.
Operating EBITDA was $295 million for the three months ended March 31, 2024, down 14 percent compared with $344 million for the three months ended March 31, 2023, driven by decreased sales volumes partially offset by lower product costs.
CORPORATE AND OTHER
Corporate & Other includes sales and activity of the Retained Businesses including the Auto Adhesives & Fluids, MultibaseTM and Tedlar® product lines. Related to the Delrin® Divestiture, Corporate & Other includes DuPont's equity interest in Derby Holdings Group, Stranded Costs and Future Reimbursable Indirect Costs. Corporate & Other also includes certain enterprise and governance activities including non-allocated corporate overhead costs and support functions, leveraged services, non-business aligned litigation expenses and other costs not absorbed by reportable segments.
| Corporate & Other | Three Months Ended | |||||||||||||
| In millions | March 31, 2024 | March 31, 2023 | ||||||||||||
| Net sales | $ | 275 | $ | 273 | ||||||||||
| Operating EBITDA | $ | 13 | $ | 8 | ||||||||||
| Equity in earnings (losses) of nonconsolidated affiliates | $ | (7) | $ | — | ||||||||||
42
CHANGES IN FINANCIAL CONDITION
Liquidity & Capital Resources
Information related to the Company's liquidity and capital resources can be found in the Company's 2023 Annual Report, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources. Discussion below provides the updates to this information for the three months ended March 31, 2024.
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. 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 macroeconomic related impacts which depend on uncertain and unpredictable future developments. In light of this uncertainty, the Company has taken steps to further ensure liquidity and capital resources, as discussed below.
| In millions | March 31, 2024 | December 31, 2023 | ||||||
| Cash, cash equivalents | $ | 1,934 | $ | 2,392 | ||||
| Total debt | $ | 7,776 | $ | 7,800 | ||||
The Company's cash, cash equivalents at March 31, 2024 and December 31, 2023 were $1.9 billion and $2.4 billion, respectively, of which approximately $1.1 billion at March 31, 2024 and $1.3 billion at December 31, 2023 were held by subsidiaries in foreign countries, including United States territories. The change in the balance in cash and cash equivalents held by subsidiaries in foreign countries is due to cash flows during the period, offset by repatriation. 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. Refer to subsequent paragraphs for drivers of the change in cash, cash equivalents.
Total debt at March 31, 2024 and December 31, 2023 was $7,776 million and $7,800 million, respectively. The slight decrease, as shown in the table above, was primarily due to the changes in the fair value of interest rate swaps designated as fair value hedges.
As of March 31, 2024, the Company is contractually obligated to make future cash payments of $7.9 billion and $4.9 billion associated with principal and interest, respectively, on debt obligations. Related to the principal, no payments will be due in the next twelve months. Related to interest, $394 million will be due in the next twelve months, and the remainder will be due subsequent to March 31, 2025. The majority of interest obligations will be due in 2029 or later.
Revolving Credit Facilities
On May 10, 2023, the Company entered into a $1 billion 364-day revolving credit facility (the "364-Day Revolving Credit Facility"), which terminates on May 8, 2024. The 364-Day Revolving Credit Facility will be used for general corporate purposes. There were no drawdowns of the facility during the three month period ended March 31, 2024. The Company is in the process of standing a new $1 billion 364-day revolving credit facility with an expected effective date in May 2024.
Water District Settlement Agreement
In 2023, the Company utilized the MOU escrow account balance of approximately $100 million and cash on hand to make its $400 million contribution to the Water District Settlement Fund. The $400 million contribution, plus interest, to the Water District Settlement Fund is reflected as "Restricted cash and cash equivalents" on the interim Condensed Consolidated Balance sheets. The $400 million contribution, plus interest, will be reflected as a cash outflow within cash flows from discontinued operations during the second quarter 2024 as the judgment became final in April 2024. See Note 14 to the interim Consolidated Financial Statement for additional information.
43
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 April 26, 2024, 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+ | F-2 | Stable | ||||||||
The Company's indenture covenants include customary limitations on liens, sale and leaseback transactions, and mergers and consolidations, subject to certain limitations. The $1B 364-Day Revolving Credit Facility contains 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 March 31, 2024, the Company was in compliance with this financial covenant.
Summary of Cash Flows
Beginning in the second quarter of 2023, the Company has segregated the cash flows from discontinued operations from the cash flows from continuing operations in accordance with ASC 230, Statement of Cash Flows. The interim Consolidated Statements of Cash Flows have been recast for all periods to reflect the change in presentation.
The Company’s cash flows from operating, investing and financing activities from continuing operations and cash used in discontinued operations, as reflected in the interim Consolidated Statements of Cash Flows, are summarized in the following table.
Cash Flow Summary | Three Months Ended | |||||||
In millions | March 31, 2024 | March 31, 2023 | ||||||
| Cash provided by (used for) from continuing operations: | ||||||||
| Operating activities | $ | 493 | $ | 405 | ||||
Investing activities | $ | (202) | $ | (250) | ||||
Financing activities | $ | (691) | $ | (213) | ||||
| Cash used in discontinued operations | $ | (31) | $ | (71) | ||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | $ | (25) | $ | (7) | ||||
Cash Flows from Operating Activities - Continuing Operations
In the first three months of 2024, cash provided by operating activities of continuing operations was $493 million, compared with $405 million in the same period last year. The increase in cash provided by operating activities of continuing operations is primarily from improvements in net working capital.
The table below reflects net working capital on a continuing operations basis:
Net Working Capital | March 31, 2024 | December 31, 2023 | ||||||
In millions (except ratio) | ||||||||
Current assets | $ | 7,067 | $ | 7,514 | ||||
Current liabilities | 3,032 | 3,098 | ||||||
| Net working capital | $ | 4,035 | $ | 4,416 | ||||
| Current ratio | 2.33:1 | 2.43:1 | ||||||
Cash Flows from Investing Activities - Continuing Operations
In the first three months of 2024, cash used for investing activities of continuing operations was $202 million, compared with $250 million in the first three months of 2023. The decrease in cash used for investing activities of continuing operations is primarily attributable to the reduction in capital expenditures and purchases of investments.
Cash Flows from Financing Activities - Continuing Operations
In the first three months of 2024, cash used for financing activities of continuing operations was $691 million compared with $213 million in the same period last year. The increase in cash used for financing activities of continuing operations is primarily attributable to the Q1 2024 ASR Transaction.
44
Cash Flows from Discontinued Operations
In the first three months of 2024, cash used from discontinued operations was $31 million compared with $71 million in the same period last year. The cash used from discontinued operations primarily includes MOU activity and transaction costs, refer to Note 4 to the interim Consolidated Financial Statements for additional information. For the three months ended March 31, 2023, the interim Consolidated Statements of Cash Flows present the cash flows of Delrin® and transaction cost from the M&M Divestiture as discontinued operations.
Dividends
On February 5, 2024, the Board of Directors declared a first quarter 2024 dividend of $0.38 per share, paid on March 15, 2024, to shareholders of record on February 29, 2024.
On April 17, 2024, the Board of Directors declared a second quarter 2024 dividend of $0.38 per share, payable on June 17, 2024, to shareholders of record on May 31, 2024.
Share Buyback Programs
In the third quarter of 2023, DuPont entered into new accelerated share repurchase agreements with three financial counterparties to repurchase an aggregate of $2 billion of common stock ("$2B ASR Transaction"). DuPont paid an aggregate of $2 billion to the counterparties and received initial deliveries of 21.2 million shares in aggregate of DuPont common stock, which were retired immediately and recorded as a reduction to retained earnings of $1.6 billion. In the first quarter of 2024, the $2B ASR Transaction was completed. The settlement resulted in the delivery of 6.7 million additional shares of DuPont common stock, which were retired immediately and were recorded as a reduction of retained earnings in the first quarter of 2024. In total, the Company repurchased 27.9 million shares at an average price of $71.67 per share under the $2B ASR Transaction. The completion of the $2B ASR Transaction effectively completes the $5B Share Buyback Program and the Company's stock repurchase authorization.
In the first quarter 2024, the Company’s Board of Directors approved a new share repurchase program authorizing the repurchase and retirement of up to $1 billion of common stock (“the $1B Share Buyback Program”). Under the $1B Share Buyback Program, repurchases may be made from time to time on the open market at prevailing market prices or in privately negotiated transactions off market, including additional ASR agreements in accordance with applicable federal securities laws.
In the first quarter 2024, DuPont entered an ASR agreement with one counterparty for the repurchase of $500 million of common stock ("Q1 24 ASR Transaction"). DuPont paid an aggregate of $500 million to the counterparty and received initial deliveries of 6.0 million shares of DuPont common stock, which were retired immediately and recorded as a reduction of retained earnings of $400 million. The remaining $100 million was evaluated as an unsettled forward contract indexed to DuPont common stock, classified within stockholders' equity as of March 31, 2024.
Subsequent to quarter end, the Q1 2024 ASR Transaction was completed. The settlement resulted in the delivery of approximately 1 million additional shares of DuPont common stock, which were retired immediately and will be recorded as a reduction of retained earnings in the second quarter of 2024. In total, the Company repurchased 6.9 million shares at an average price of $71.96 per share under the Q1 2024 ASR Transaction.
See Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, for additional information.
Pension and Other Post-Employment Plans
DuPont expects to make additional contributions in the aggregate of approximately $44 million by year-end 2024 to pension and other post-employment benefit plans. Any such contribution could be funded by existing cash balances and/or cash from other available sources of liquidity.
Restructuring
In December 2023, the Company approved targeted restructuring actions to capture near-term cost reductions due to macroeconomic factors as well as to further simplify certain organizational structures following the Spectrum Acquisition and Delrin® Divestiture (the "2023-2024 Restructuring Program"). As a result, the Company recorded pre-tax restructuring charges of $146 million inception-to-date, consisting of severance and related benefit costs of $103 million and asset related charges of $43 million. At March 31, 2024, total liabilities related to the 2023-2024 Restructuring Program were $83 million for severance and related benefit costs, recognized in "Accrued and other current liabilities" in the interim Consolidated Balance Sheets. Raw material inventory write-offs for plant line closures within the Water & Protection segment in connection with the 2023-2024 Restructuring Program were $25 million in "Cost of Sales" within the interim Consolidated Statements of Operations. The Company expects the program to be substantially complete by the end of 2024. See Note 6 and 21 to the interim Consolidated Financial Statements for more information on the Company's restructuring programs.
45
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Note 19 to the interim Consolidated Financial Statements. See also Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk, of the Company's 2023 Annual Report on Form 10-K for information on the Company's utilization of financial instruments and an analysis of the sensitivity of these instruments.
ITEM 4. 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 March 31, 2024, 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 last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
46
| DuPont de Nemours Inc. PART II - OTHER INFORMATION | ||
ITEM 1. LEGAL PROCEEDINGS
The Company and its subsidiaries are subject to various litigation matters, including, but not limited to, product liability, patent infringement, antitrust claims, and claims for third party property damage or personal injury stemming from alleged environmental torts. Information regarding certain of these matters is set forth below and in Note 14 to the interim Consolidated Financial Statements.
Litigation
See Note 14 to the interim Consolidated Financial Statements.
Environmental Proceedings
The Company believes it is remote that the following matters will have a material impact on its financial position, liquidity or results of operations. The description is included per Regulation S-K, Item 103(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. EIDP 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 EIDP), 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, EIDP, and certain DuPont subsidiaries. NJDEP’s allegations relate to former operations of EIDP 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 historical uses of PFAS and replacement chemicals including “information ranging from use and discharge of the chemicals through wastewater treatment plants, air emissions, and sales of products containing the chemicals to current development, manufacture, use and release of newer chemicals in the state.”
ITEM 1A. RISK FACTORS
There have been no material changes in the Company's risk factors discussed in Part I, Item 1A, Risk Factors, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
47
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES
Issuer Purchases of Equity Securities
In November 2022, DuPont’s Board of Directors approved a share repurchase program authorizing the repurchase and retirement of up to $5 billion of common stock (the “$5B Share Buyback Program"). In the first quarter 2024, the Company’s Board of Directors approved a new share repurchase program authorizing the repurchase and retirement of up to $1 billion of common stock (“the $1B Share Buyback Program”).
The following table provides information regarding purchases of the Company’s common stock by the Company during the three months ended March 31, 2024:
| Issuer Purchases of Equity Securities | Total number of shares purchased as part of the Company's publicly announced share repurchase program | Approximate dollar value of shares that may yet be purchased under the Company's publicly announced share repurchase program (In millions) | ||||||||||||
| Period | Total number of shares purchased | Average price paid per share | ||||||||||||
$5B Share Buyback Program | ||||||||||||||
January 1 | 6,681,016 | $ | 71.76 | 6,681,016 | $ | — | ||||||||
| February | — | — | — | — | ||||||||||
| March | — | $ | — | — | — | |||||||||
| First Quarter 2024 | 6,681,016 | $ | 71.76 | 6,681,016 | $ | — | ||||||||
$1B Share Buyback Program | ||||||||||||||
| January | — | $ | — | — | $ | — | ||||||||
February 2 | 5,961,252 | 67.10 | 5,961,252 | 500 | ||||||||||
| March | — | $ | — | — | 500 | |||||||||
| First Quarter 2024 | 5,961,252 | $ | 67.10 | 5,961,252 | $ | 500 | ||||||||
1. In September 2023, DuPont entered into accelerated share repurchase agreements (the "$2B ASR Transaction") with each of three financial institutions to repurchase an aggregate of $2 billion of common stock, under the $5B Share Buyback Program. On September 8, 2023, DuPont received initial deliveries of 21.2 million shares of common stock in the aggregate. On January 19, 22 and 23, 2024, the final 6.7 million shares were received and retired for a total of 27.9 million shares based on the volume-weighted average stock price for DuPont common stock during the terms of the $2B ASR Transaction, less an agreed upon discount. See Note 16 to the interim Consolidated Financial Statements for additional information.
2. In February 2024, DuPont entered into accelerated share repurchase agreements (the "Q1 24 ASR Transaction") with a financial institution to repurchase an aggregate of $500 million of common stock, under the $1B Share Buyback Program. On February 9, 2024, DuPont received initial deliveries of 6.0 million shares of common stock in the aggregate. See Note 16 to the interim Consolidated Financial Statements for additional information.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Insider Trading Arrangements and Policies
During the three months ended March 31, 2024, no director or officer of the Company adopted terminated
48
ITEM 6. EXHIBITS
| EXHIBIT NO. | DESCRIPTION | ||||||||||
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). | ||||||||||
*Filed herewith
**The Company has omitted certain schedules and other similar attachments to such agreement pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish a copy of such omitted documents to the SEC upon request.
†Certain provisions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
49
DuPont de Nemours, Inc. Signatures | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DUPONT DE NEMOURS, INC.
Registrant
Date: May 1, 2024
| By: | /s/ MICHAEL G. GOSS | |||||||||||||
| Name: | Michael G. Goss | |||||||||||||
| Title: | Vice President and Controller | |||||||||||||
| City: | Wilmington | |||||||||||||
| State: | Delaware | |||||||||||||
50
| DuPont de Nemours, Inc. | EXHIBIT 31.1 | |||||||||||||
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Edward D. Breen, certify that:
1. I have reviewed this quarterly report on Form 10-Q of DuPont de Nemours, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 1, 2024
| /s/ Edward D. Breen | ||
| Edward D. Breen | ||
| Chief Executive Officer | ||
| DuPont de Nemours, Inc. | EXHIBIT 31.2 | |||||||||||||
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Lori Koch, certify that:
1.I have reviewed this quarterly report on Form 10-Q of DuPont de Nemours, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 1, 2024
| /s/ Lori Koch | ||
| Lori Koch | ||
| Chief Financial Officer | ||
| DuPont de Nemours, Inc. | EXHIBIT 32.1 | |||||||||||||
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Edward D. Breen, Chief Executive Officer of DuPont de Nemours Inc. (the “Company”), certify that:
1.the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2024 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Edward D. Breen | ||
| Edward D. Breen | ||
| Chief Executive Officer | ||
| May 1, 2024 | ||
| DuPont de Nemours, Inc. | EXHIBIT 32.2 | |||||||||||||
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Lori Koch, Chief Financial Officer of DuPont de Nemours Inc. (the “Company”), certify that:
1.the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2024 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Lori Koch | ||
| Lori Koch | ||
| Chief Financial Officer | ||
| May 1, 2024 | ||