CORTEVA, INC. CAUTIONARY STATEMENTS ABOUT FORWARD-LOOKING STATEMENTS
This report contains certain estimates and forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended, which are intended to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and may be identified by their use of words like "plans," "expects," "will," "anticipates," "believes," "intends," "projects," "estimates," "outlook," or other words of similar meaning. All statements that address expectations or projections about the future, including statements aboutCorteva's financial results or outlook; strategy for growth; product development; regulatory approvals; market position; capital allocation strategy; liquidity; environmental, social and governance ("ESG") targets and initiatives; the anticipated benefits of acquisitions, restructuring actions, or cost savings initiatives; and the outcome of contingencies, such as litigation and environmental matters, are forward-looking statements. Forward-looking statements and other estimates are based on certain assumptions and expectations of future events which may not be accurate or realized. Forward-looking statements and other estimates also involve risks and uncertainties, many of which are beyondCorteva's control. While the list of factors presented below is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect onCorteva's business, results of operations and financial condition. Some of the important factors that could causeCorteva's actual results to differ materially from those projected in any such forward-looking statements include: (i) failure to successfully develop and commercializeCorteva's pipeline; (ii) failure to obtain or maintain the necessary regulatory approvals for some ofCorteva's products; (iii) effect of the degree of public understanding and acceptance or perceived public acceptance ofCorteva's biotechnology and other agricultural products; (iv) effect of changes in agricultural and related policies of governments and international organizations; (v) costs of complying with evolving regulatory requirements and the effect of actual or alleged violations of environmental laws or permit requirements; (vi) effect of climate change and unpredictable seasonal and weather factors; (vii) failure to comply with competition and antitrust laws; (viii) effect of competition inCorteva's industry; (ix) competitor's establishment of an intermediary platform for distribution ofCorteva's products; (x) impact ofCorteva's dependence on third parties with respect to certain of its raw materials or licenses and commercialization; (xi) effect of volatility inCorteva's input costs; (xii) risk related to geopolitical and military conflict; (xiii) effect of industrial espionage and other disruptions toCorteva's supply chain, information technology or network systems; (xiv) risks related to environmental litigation and the indemnification obligations of legacy EIDP liabilities in connection with the separation ofCorteva ; (xv) risks related toCorteva's global operations; (xvi) failure to effectively manage acquisitions, divestitures, alliances, restructurings, cost savings initiatives, and other portfolio actions; (xvii) failure to raise capital through the capital markets or short-term borrowings on terms acceptable toCorteva ; (xviii) failure ofCorteva's customers to pay their debts toCorteva , including customer financing programs; (xix) increases in pension and other post-employment benefit plan funding obligations; (xx) capital markets sentiment towards ESG matters; (xxi) risks related to pandemics or epidemics; (xxii)Corteva's intellectual property rights or defend against intellectual property claims asserted by others; (xxiii) effect of counterfeit products; (xxiv)Corteva's dependence on intellectual property cross-license agreements; and (xxv) other risks related to the Separation from DowDuPont. Additionally, there may be other risks and uncertainties thatCorteva is unable to currently identify or thatCorteva does not currently expect to have a material impact on its business. Where, in any forward-looking statement or other estimate, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations ofCorteva's management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished.Corteva disclaims and does not undertake any obligation to update or revise any forward-looking statement, except as required by applicable law. A detailed discussion of some of the significant risks and uncertainties which may cause results and events to differ materially from such forward-looking statements is included in the section titled "Risk Factors" (Part I, Item 1A of this Form 10-K). 31
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Overview
Refer to pages 3 - 4 for a discussion of the DowDuPont Merger, the Internal Reorganizations, and the business separations.
The following is a summary of results from continuing operations for the year
ended
•The company reported net sales of$17,455 million , an increase of 11 percent versus the year endedDecember 31, 2021 , reflecting a 10 percent increase in price and a 5 percent increase in volume, partially offset by a 3 percent unfavorable impact from currency and a 1 percent unfavorable impact from portfolio. •Cost of goods sold ("COGS") totaled$10,436 million , up from$9,220 million for the year endedDecember 31, 2021 , primarily driven by increased volumes and higher input costs, freight and logistics, which are primarily market-driven, partially offset by ongoing cost and productivity actions. •Restructuring and asset related charges - net were$363 million , an increase from$289 million for the year endedDecember 31, 2021 . The year endedDecember 31, 2022 primarily included$272 million related to severance and related benefit costs, asset related charges, and contract termination charges associated with 2022 Restructuring Activities and$109 million of non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits, partially offset by a benefit associated with previous restructuring programs.
•Income from continuing operations after income taxes was
•Operating EBITDA was$3,224 million , which improved from$2,576 million for the year endedDecember 31, 2021 , primarily driven by strong price execution, volume gains in all regions and productivity actions, partially offset by inflation and currency headwinds. Refer to page 45 for further discussion of the company's Non-GAAP financial measures.
In addition to the financial highlights above, the following events occurred
during or subsequent to the year ended
•The company returned approximately$1.4 billion to shareholders during the year endedDecember 31, 2022 under its previously announced share repurchase programs and through common stock dividends.
•On
•During 2022,Corteva announced that it signed definitive agreements to acquire Stoller and Symborg, which will supplement the crop protection business with additional biological tools that complement evolving farming practices. The acquisitions are expected to close in the first half of 2023 for an aggregate purchase price of$1.6 billion to be paid at closing, following regulatory approvals, which were obtained inFebruary 2023 , and satisfaction of customary closing conditions.
Priorities
The company believes the following priorities will enable it to create significant value for its customers while delivering strong financial returns to its shareholders over the mid-term:
•Accelerate performance and growth through a value creation network focused on four key catalysts: (1) execute portfolio simplification by prioritizing core markets and crops where we can deliver top tier technology to our customers, (2) continue our path towards royalty neutrality, (3) improve product mix with a focus on differentiation and yield advantage, and (4) operational improvements focused on driving price and productivity actions. •Increased investment in our industry leading innovation pipeline focused on delivering greater value and productivity to growers through more differentiated and sustainably advantaged solutions driving advancements in global food security and climate change.
•Disciplined capital deployment investing in growth and complementary M&A opportunities that provide attractive returns to shareholders.
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Analysis of Operations Global Economic Conditions Economic activity continues to be impacted by ongoing factors driving volatility in global markets including the misalignment of supply and demand for labor, transportation and logistic services, energy, raw materials and other inputs, the inflation of (or unavailability of) raw material inputs and transportation and logistics services, currency fluctuations, military conflict betweenRussia andUkraine and resulting economic sanctions, extreme weather and the evolution of the novel coronavirus disease ("COVID-19").Corteva will continue to actively monitor global conditions and may take further actions altering its business operations that it determines are in the best interests of its stakeholders, or as required by federal, state, or local authorities. These alterations or modifications may impact the company's business, including the effects on its customers, employees, and prospects, or on its financial results for the foreseeable future. The ongoing factors driving volatility in global markets that could impact our business' earnings and cash flows include, but are not limited to, the factors discussed above, expectations of future planted area (as influenced by consumer demand, ethanol markets and government policies and regulations), trade and purchasing of commodities globally and relative commodity prices. In response toRussia's military conflict withUkraine , inApril 2022 the company announced its decision to withdraw fromRussia and stop production and business activities ("Russia Exit"). Prior to these decisions,Russia contributed approximately 2 percent of the company's annual net sales. Refer to the 2022 Restructuring Actions discussion below for additional information. 2022 Restructuring Actions In connection with the company's shift to a global business unit model, the company assessed its business priorities and operational structure to maximize the customer experience and deliver on growth and earnings potential. As a result of this assessment, the company has committed to restructuring actions that, combined with the impact of the company's Russia Exit (collectively the "2022 Restructuring Actions"), is expected to result in total net pre-tax restructuring and other charges of$350 million to$420 million , comprised of$105 million to$120 million of severance and related benefit costs,$125 million to$150 million of asset related charges,$65 million to$80 million of costs related to contract terminations (including early lease terminations) and$55 million to$70 million of other charges. Cash payments related to these charges are anticipated to be$180 million to$210 million , of which approximately$90 million has been paid throughDecember 31, 2022 , and primarily relate to the payment of severance and related benefits, contract terminations and other charges. The restructuring actions associated with these charges are expected to be substantially complete in 2023. The total pre-tax restructuring and other charges included$48 million associated with the Russia Exit for the year endedDecember 31, 2022 . TheRussia Exit net pre-tax charges consisted of$6 million of severance and related benefit costs,$6 million of asset related charges, and$26 million of costs related to contract terminations (including early lease terminations). Other pre-tax charges associated with the Russia Exit were recorded to cost of goods sold and other income (expense) - net in the Consolidated Statement of Operations, relating to inventory write-offs of$2 million and settlement costs of$8 million , respectively. Additional pre-tax charges up to$20 million associated with the Russia Exit are possible, primarily associated with the collectibility of government receivables. The company also recorded a pre-tax benefit of$3 million relating to the sale of seeds already under production inRussia when the decision to exit the country was made and that the company was contractually required to purchase, which consisted of$8 million of net sales and$5 million of cost of goods sold in the Consolidated Statement of Operations ("Russian Seed Sale"). The 2022 Restructuring Actions are expected to contribute to the company's ongoing cost and productivity improvement efforts through achieving an estimated$210 million to$220 million of savings on a run rate basis by 2025. See Note 5 - Restructuring and Asset Related Charges - Net, to the Consolidated Financial Statements for additional information. Share Buyback Plan OnSeptember 13, 2022 ,Corteva, Inc. announced that its Board of Directors authorized a$2 billion share repurchase program to purchaseCorteva, Inc.'s common stock, par value$0.01 per share, without an expiration date ("2022 Share Buyback Plan"). OnAugust 5, 2021 ,Corteva, Inc. announced that its Board of Directors authorized a$1.5 billion share repurchase program to purchaseCorteva, Inc.'s common stock, par value$0.01 per share, without an expiration date ("2021 Share Buyback Plan"). In connection with the 2021 Share Buyback Plan, the company repurchased and retired 17,425,000 shares and 5,572,000 shares in 33
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the open market for a total cost of
The timing, price and volume of purchases in connection with the 2022 and 2021 Share Buyback Plans will be based on market conditions, relevant securities laws and other factors. OnJune 26, 2019 ,Corteva, Inc. announced that its Board of Directors authorized a$1 billion share repurchase program to purchaseCorteva, Inc.'s common stock, par value$0.01 per share, without an expiration date ("2019 Share Buyback Plan"). The company completed the 2019 Share Buyback Plan during the third quarter of 2021 and repurchased and retired 24,705,000 shares between the years endedDecember 31, 2019 and 2021 in the open market. 2021 Restructuring Actions During the first quarter of 2021,Corteva approved restructuring actions designed to right-size and optimize footprint and organizational structure according to the business needs in each region with the focus on driving continued cost improvement and productivity. Through the year endedDecember 31, 2022 , the company recorded net pre-tax restructuring charges of$160 million inception-to-date under the 2021 Restructuring Actions, consisting of$69 million of severance and related benefit costs,$45 million of asset related charges,$6 million of asset retirement obligations and$40 million of costs related to contract terminations (contract terminations includes early lease terminations). Actions associated with the 2021 Restructuring Actions were substantially complete by the end of 2021. The company expected the 2021 Restructuring Actions to contribute to the company's ongoing cost and productivity improvement efforts and achieve an estimated$70 million of savings on a run rate basis by 2023, which was achieved in 2022. See Note 5 - Restructuring and Asset Related Charges - Net, to the Consolidated Financial Statements, for additional information. Execute to Win Productivity Program During the first quarter of 2020,Corteva approved restructuring actions designed to improve productivity through optimizing certain operational and organizational structures primarily related to the Execute to Win Productivity Program. The company recorded net pre-tax restructuring charges of$173 million from inception-to-date under the Execute to Win Productivity Program, consisting of$120 million of asset related charges and$53 million of severance and related benefit costs. Actions associated with the Execute to Win Productivity Program were substantially complete by the end of 2020. The company expected$130 million of savings on a run rate basis by 2023, which was achieved in 2022. See Note 5 - Restructuring and Asset Related Charges - Net, to the Consolidated Financial Statements, for additional information. 34
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Net Sales
For the Year Ended December 31,
(In millions) 2022 2021 2020
Net Sales $ 17,455 $ 15,655 $ 14,217
2022 versus 2021
Net sales were $17,455 million for the year ended December 31, 2022 , compared to
$15,655 million for the year ended December 31, 2021 . The increase was primarily
driven by a 10 percent increase in price and a 5 percent increase in volume
versus the prior year period, partially offset by a (3) percent unfavorable
currency impact and (1) percent unfavorable portfolio impact. Price gains were
driven by the continued execution on the company's price for value strategy with
strong execution across all regions in response to cost inflation, and recovery
of higher input costs. The increase in volume was driven by continued
penetration of new products and gains in all regions, partially offset by
reduced corn acres in North America and supply constraints in North America
canola. The unfavorable currency impacts were led by the Turkish Lira and the
Euro, partially offset by the Brazilian Real. The portfolio impact was driven by
a divestiture in Asia Pacific .
2021 versus 2020
Net sales were $15,655 million for the year ended December 31, 2021 , compared to
$14,217 million for the year ended December 31, 2020 . Volume increased 5 percent
versus the year-ago period with increases in all regions, led by Latin America .
The volume increases were primarily driven by strong demand, the continued
penetration of new and differentiated products and increased planted area. Price
increased 4 percent versus prior year, driven by a continued focus on the
company's price for value strategy and pricing for higher raw material and
logistical costs.
For the Year Ended December 31,
(In millions) 2022 2021 2020
% of Net % of Net % of Net
Net Sales Sales Net Sales Sales Net Sales Sales
Worldwide $ 17,455 100 % $ 15,655 100 % $ 14,217 100 %
North America 8,294 48 % 7,536 48 % 7,168 50 %
EMEA 3,256 19 % 3,123 20 % 2,842 20 %
Latin America 4,445 25 % 3,545 23 % 2,805 20 %
Asia Pacific 1,460 8 % 1,451 9 % 1,402 10 %
Year Ended December 31, 2022 vs.
2021 Percent Change Due To:
Net Sales Change Price & Portfolio /
(in millions) $ % Product Mix Volume Currency Other
North America $ 758 10 % 8 % 2 % - % - %
EMEA 133 4 % 10 % 8 % (14) % - %
Latin America 900 25 % 16 % 7 % 2 % - %
Asia Pacific 9 1 % 7 % 2 % (6) % (2) %
Total $ 1,800 11 % 10 % 5 % (3) % (1) %
Year Ended December 31, 2021 vs.
2020 Percent Change Due To:
Net Sales Change Price & Portfolio /
(in millions) $ % Product Mix Volume Currency Other
North America $ 368 5 % 2 % 2 % 1 % - %
EMEA 281 10 % 3 % 3 % 4 % - %
Latin America 740 26 % 10 % 17 % (1) % - %
Asia Pacific 49 3 % 2 % 1 % 2 % (2) %
Total $ 1,438 10 % 4 % 5 % 1 % - %
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COGS
For the Year Ended December 31,
(In millions) 2022 2021 2020
COGS $ 10,436 $ 9,220 $ 8,507
2022 versus 2021
COGS was $10,436 million (60 percent of net sales) for the year ended December
31, 2022 compared to $9,220 million (59 percent of net sales) for the year ended
December 31, 2021 . The increase was primarily driven by increased volumes in
crop protection, and higher input costs, freight and logistics, which are
primarily market-driven. The increases are partially offset by ongoing cost and
productivity actions and a favorable impact from currency. The market driven
trends are expected to continue as global supply chains and logistics remain
constrained across industries, with the potential for inflationary pressures
easing in late 2023 on a year-over-year basis.
2021 versus 2020
COGS was $9,220 million (59 percent of net sales) for the year ended December
31, 2021 compared to $8,507 million (60 percent of net sales) for the year ended
December 31, 2020 . The increase was primarily driven by increased volumes in
both seed and crop protection, higher input costs, freight and logistics, which
are primarily market-driven, and unfavorable currency, partially offset by
ongoing cost and productivity actions.
Research and Development Expense ("R&D")
For the Year Ended December 31,
(In millions) 2022 2021 2020
R&D $ 1,216 $ 1,187 $ 1,142
2022 versus 2021
R&D expense was $1,216 million (7 percent of net sales) for the year ended
December 31, 2022 and $1,187 million (8 percent of net sales) for the year ended
December 31, 2021 . The increase was primarily driven by an increase in variable
compensation and spending on field, lab and facilities supplies used in
projects, partially offset by favorable currency.
2021 versus 2020
R&D expense was $1,187 million (8 percent of net sales) for the year ended
December 31, 2021 and $1,142 million (8 percent of net sales) for the year ended
December 31, 2020 . The increase was primarily driven by increases in contract
labor, variable compensation and unfavorable currency, partially offset by
ongoing cost and productivity actions.
Selling, General and Administrative Expenses ("SG&A")
For the Year Ended December 31,
(In millions) 2022 2021 2020
SG&A $ 3,173 $ 3,209 $ 3,043
2022 versus 2021
SG&A was $3,173 million (18 percent of net sales) for the year ended December
31, 2022 and $3,209 million (20 percent of net sales) for the year ended
December 31, 2021 . The decrease was primarily driven by favorable currency,
lower functional spend and enterprise resource planning ("ERP") costs, and the
favorable impact relating to deferred compensation plans due to market declines,
partially offset by an increase in commissions expense, selling expense, travel
and consulting fees.
2021 versus 2020
SG&A was $3,209 million (20 percent of net sales) for the year ended December
31, 2021 and $3,043 million (21 percent of net sales) for the year ended
December 31, 2020 . The increase was primarily driven by increases in commission
expense, employee related benefit costs, salaries and wages, variable
compensation, ERP costs and unfavorable currency, partially offset by a decrease
in bad debt expense and ongoing cost and productivity actions.
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Amortization of Intangibles
For the Year Ended December 31,
(In millions) 2022 2021 2020
Amortization of Intangibles $ 702 $ 722 $ 682
2022 versus 2021
Intangible asset amortization was $702 million for the year ended December 31,
2022 and $722 million for the year ended December 31, 2021 . The decrease was
primarily driven by the expiration of the favorable supply contracts on November
1, 2022 , at which point the contracts became fully amortized. See
Note 12 - Goodwill and Other Intangible Assets, to the Consolidated Financial
Statements, for additional information for the above items.
2021 versus 2020
Intangible asset amortization was $722 million for the year ended December 31,
2021 and $682 million for the year ended December 31, 2020 . The increase was
primarily driven by the full year impact of the trade name asset, which changed
from an indefinite lived intangible asset to definite lived with a useful life
of 25 years in the fourth quarter of 2020.
Restructuring and Asset Related Charges - Net
For the Year Ended December 31,
(In millions) 2022 2021 2020
Restructuring and Asset Related Charges - Net $ 363 $
289$ 335 2022 Restructuring and asset related charges - net were$363 million for the year endedDecember 31, 2022 , which was primarily comprised of a$272 million net charge related to the 2022 Restructuring Actions and$109 million of restructuring and asset related charges - net from non-cash accelerated prepaid royalty amortization expense related to the Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits. The$272 million net charge associated with the 2022 Restructuring Actions was comprised of$111 million of severance and related benefit costs,$104 million of asset related charges and$57 million of costs related to contract terminations (including early lease terminations). These charges were partially offset by a benefit associated with previous restructuring programs. Further evaluation of our operations, including decisions involving contract manufacturing opportunities, may result in additional asset related charges, which could be material to our income from continuing operations as reported underU.S. GAAP.
2021
Restructuring and asset related charges - net were$289 million for the year endedDecember 31, 2021 , which was primarily comprised of a$167 million net charge related to the 2021 Restructuring Actions and$125 million of restructuring and asset related charges - net from non-cash accelerated prepaid royalty amortization expense related to the Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits. The$167 million net charge associated with the 2021 Restructuring Actions was comprised of$74 million of severance and related benefit costs,$45 million of asset related charges,$6 million of asset retirement obligations and$42 million of costs related to contract terminations (including early lease terminations).
2020
Restructuring and asset related charges - net were$335 million for the year endedDecember 31, 2020 , which was comprised of a$176 million net charge related to the Execute to Win Productivity Program and$159 million of restructuring and asset related charges - net from non-cash accelerated prepaid royalty amortization expense related to the Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits. The$176 million net charge associated with the Execute to Win Productivity Program was comprised of$113 million of asset related charges and$63 million of severance and related benefit costs.
See Note 5 - Restructuring and Asset Related Charges - Net, to the Consolidated Financial Statements for additional information.
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Other Income (Expense) - Net
For the Year Ended December 31,
(In millions) 2022 2021 2020
Other Income (Expense) - Net $ (60) $ 1,348 $ 212
2022 versus 2021
Other income (expense) - net was $(60) million for the year ended December 31,
2022 and $1,348 million for the year ended December 31, 2021 . The change was
primarily driven by a decrease in non-operating pension and other
post-employment benefit credits due to the prior year impact of the December
2020 OPEB plan amendments, an increase in net exchange losses, estimated
settlement reserves, the Employee Retention Credit benefit recognized in 2021
(see details below) and losses associated with a previously held equity
investment. The increases are partially offset by a decrease in loss on sale of
receivables, an increase in interest income and the absence of charges related
to an officer indemnification payment and a contract termination with a
third-party service provider that were recognized in 2021.
2021 versus 2020
Other income (expense) - net was $1,348 million for the year ended December 31,
2021 and $212 million for the year ended December 31, 2020 . The increase was
primarily driven by an increase in non-operating pension and other
post-employment benefit credits, driven by the 2020 OPEB Plan Amendments, a
decrease in net exchange losses, and the Employee Retention Credit pursuant to
the Coronavirus Aid, Relief, and Economic Security ("CARES") Act as enhanced by
the Consolidated Appropriations Act ("CAA") and American Rescue Plan Act
("ARPA"). The increases are partially offset by the 2021 officer indemnification
payment and a charge related to a contract termination with a third-party
service provider.
See Note 6 - Supplementary Information, to the Consolidated Financial Statements
for additional information.
Interest Expense
For the Year Ended December 31,
(In millions) 2022 2021 2020
Interest Expense $ 79 $ 30 $ 45
2022 versus 2021
Interest expense was $79 million and $30 million for the years ended December
31, 2022 and 2021, respectively. The change was primarily driven by higher
interest rates on seasonal short-term borrowings and new foreign currency
borrowings.
2021 versus 2020
Interest expense was $30 million and $45 million for the years ended December
31, 2021 and 2020, respectively. The change was primarily driven by lower
average short-term borrowings and lower interest rates, partially offset by
higher average long-term borrowings.
Provision for (Benefit from) Income Taxes on Continuing Operations
For the Year Ended December 31,
(In millions) 2022 2021 2020
Provision for (Benefit from) Income Taxes on
Continuing Operations $ 210 $ 524 $ (81)
Effective Tax Rate 14.7 % 22.3 % (12.0) %
2022
For the year ended December 31, 2022 , the company's effective tax rate of 14.7
percent on pre-tax income from continuing operations of $1,426 million was
favorably impacted by tax benefits relating to the establishment of deferred
taxes in connection with the impact of a change in a U.S. legal entity's tax
characterization, a worthless stock deduction in the U.S. , and the release of a
valuation allowance recorded against the net deferred tax asset position of a
legal entity in Brazil in the amount of $(55) million , $(42) million and $(36)
million , respectively. These items were partially offset by the unfavorable tax
impact of certain net exchange losses recognized on the re-measurement of the
net monetary asset positions which were not deductible in their local
jurisdictions, and a $24 million charge associated with repatriation of cash
held outside of the U.S.
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2021
For the year endedDecember 31, 2021 , the company's effective tax rate of 22.3 percent on pre-tax income from continuing operations of$2,346 million was unfavorably impacted by the tax impact of certain net exchange losses recognized on the re-measurement of the net monetary asset positions which were not deductible in their local jurisdictions, the tax impact of income from pension and other post employment benefits, and a$23 million charge associated with repatriation of cash held outside of theU.S. These items were partially offset by the impacts of favorable geographic mix of earnings and a$(57) million benefit related toU.S. tax credits for increasing research activities.
2020
For the year endedDecember 31, 2020 , the company's effective tax rate of (12.0) percent on pre-tax income from continuing operations of$675 million was favorably impacted by a$(182) million tax benefit associated with the recognition of an elective cantonal component of the recent enactment of the Federal Act on Tax Reform and AHV Financing ("Swiss Tax Reform"), a$(51) million tax benefit related to a return to accrual adjustment associated with an elective change in accounting method for the 2019 tax year impact of The Act's foreign tax provisions, a$(14) million tax benefit related to a return to accrual adjustment to reflect a change in estimate on the impact of a tax law enactment in a foreign jurisdiction, as well as an additional$(14) million of net tax benefits associated with changes in accruals for certain prior year tax positions in various other jurisdictions. These benefits were partially offset by the impacts of unfavorable geographic mix of earnings, the tax impact of certain net exchange losses recognized on the re-measurement of the net monetary asset positions which were not deductible in their local jurisdictions, and a$19 million tax charge associated with a state tax valuation allowance in theU.S. based on a change in judgment about the realizability of a deferred tax asset.
(Loss) Income from Discontinued Operations After Tax
For the Year Ended December 31,
(In millions) 2022 2021 2020
(Loss) Income from Discontinued Operations After
Income Taxes $ (58) $ (53) $ (55)
2022 versus 2021
(Loss) income from discontinued operations after income taxes was $(58) million
for the year ended December 31, 2022 and $(53) million for the year ended
December 31, 2021 . The year ended December 31, 2022 primarily reflects charges
pursuant to the MOU with Chemours and DuPont, relating to PFAS environmental
remediation activities primarily at Chemours' Fayetteville Works facility and
adjustments of certain prior year tax positions for previously divested
businesses. See below for discussion of discontinued operations for the year
ended December 31, 2021 .
2021 versus 2020
(Loss) income from discontinued operations after income taxes was $(53) million
for the year ended December 31, 2021 and $(55) million for the year ended
December 31, 2020 . The year ended December 31, 2021 primarily reflects charges
relating to PFAS environmental remediation activities at the Chemours
Fayetteville Works facility and the settlement with the State of Delaware for
PFAS related natural resource damage claims. The year ended December 31, 2020
primarily reflects an after-tax charge of $(65) million as a result of the MOU,
and the settlement of approximately 95 matters, as well as unfiled matters
remaining in the Ohio MDL. See Note 15 - Commitments and Contingent Liabilities,
to the Consolidated Financial Statements, for further discussion.
EIDP Analysis of Operations
As discussed in Note 1 - Basis of Presentation, to the EIDP Consolidated
Financial Statements, EIDP is a subsidiary of Corteva, Inc. and continues to be
a reporting company, subject to the requirements of the Exchange Act. The below
relates to EIDP only and is presented to provide an Analysis of Operations, only
for the differences between EIDP and Corteva, Inc.
Interest Expense
2022 versus 2021
EIDP's interest expense was $124 million for the year ended December 31, 2022
and $80 million for the year ended December 31, 2021 . The change was primarily
driven by the items noted on page 38, under the header "Interest Expense - 2022
versus 2021," partially offset by lower interest expense incurred on the related
party loan between EIDP and Corteva, Inc. See Note 2 - Related Party
Transactions, to the EIDP Consolidated Financial Statements for further
information.
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2021 versus 2020 EIDP's interest expense was$80 million for the year endedDecember 31, 2021 and$145 million for the year endedDecember 31, 2020 . The change was primarily driven by the items noted on page 38, under the header "Interest Expense - 2021 versus 2020," and by lower interest expense incurred on the related party loan betweenEIDP and Corteva, Inc. See Note 2 - Related Party Transactions, to the EIDP Consolidated Financial Statements for further information. Provision for (Benefit from) Income Taxes 2022 For the year endedDecember 31, 2022 , EIDP had an effective tax rate of 14.4 percent on pre-tax income from continuing operations of$1,381 million , driven by the items noted on page 38, under the header "Provision for Income Taxes - 2022 and a tax benefit related to the interest expense incurred on the related party loan betweenEIDP and Corteva, Inc. See Note 3 - Income Taxes, to the EIDP Consolidated Financial Statements for further information.
2021
For the year endedDecember 31, 2021 , EIDP had an effective tax rate of 22.2 percent on pre-tax income from continuing operations of$2,296 million , driven by the items noted on page 39, under the header "Provision for Income Taxes - 2021" and a tax benefit related to the interest expense incurred on the related party loan betweenEIDP and Corteva, Inc. See Note 3 - Income Taxes, to the EIDP Consolidated Financial Statements for further information.
2020
For the year endedDecember 31, 2020 , EIDP had an effective tax rate of (18.3) percent on pre-tax income from continuing operations of$575 million , driven by the items noted on page 39, under the header "Provision for Income Taxes - 2020" and a tax benefit related to the interest expense incurred on the related party loan betweenEIDP and Corteva, Inc. See Note 3 - Income Taxes, to the EIDP Consolidated Financial Statements for further information. Corporate Outlook - 2023 The outlook for agriculture remains robust in 2023, with record demand for grain and oilseeds as ending stocks continue to be under pressure. Commodity prices are above historical averages, and farmer balance sheets and income levels remain healthy, leading farmers to prioritize technology to maximize return. The company expects an increase inU.S. planted area and continues to monitor dynamic weather conditions around the world. The company expects net sales to be in the range of$18.1 billion and$18.4 billion . Operating EBITDA is expected to be in the range of$3.4 billion and$3.6 billion . Operating Earnings Per Share is expected to be in the range of$2.70 and$2.90 per share, which reflects higher earnings and lower average share count, partially offset by forecasted higher effective tax rate and interest expense. Refer to further discussion of Non-GAAP metrics on pages 45 - 47. The above outlook does not contemplate any extreme weather events, operational disruptions, significant changes in customers' demand or ability to pay, further acceleration of currency and inflation impacts resulting from global economic conditions or the impact of the previously announced Biologicals acquisitions that are expected to close in the first half of 2023.Corteva is not able to reconcile its forward-looking non-GAAP financial measures to its most comparableU.S. GAAP financial measures, as it is unable to predict with reasonable certainty items outside of the company's control, such as Significant Items, without unreasonable effort (refer to page 46 for Significant Items recorded in the years endedDecember 31, 2022 , 2021 and 2020). However, during 2022 the company committed to restructuring activities relating to the 2022 Restructuring Actions, which are expected to be completed in 2023. The total net pre-tax restructuring and other charges are not expected to be material to the company's Consolidated Financial Statements. See Note 5 - Restructuring and Asset Related Charges - Net, to the Consolidated Financial Statements, for additional information. The company also expects non-operating charges associated with pension and OPEB costs to increase when compared to 2022, which is mainly due to an increase in discount rates and a decrease in asset returns due to lower pension plan assets. Refer to the company's discussion on Long-Term Employee Benefits on page 57. Additionally, beginningJanuary 1, 2020 , the company recognizes non-cash accelerated prepaid royalty amortization expense as a restructuring and asset related charge. For further discussion of accelerated prepaid royalty amortization refer to the Company's Critical Accounting Estimates for Prepaid Royalties on page 55. 40
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Recent Accounting Pronouncements See Note 3 - Recent Accounting Guidance, to the Consolidated Financial Statements for a description of recent accounting pronouncements.
Segment Reviews The company operates in two reportable segments: seed and crop protection. The company's seed segment is a global leader in developing and supplying advanced germplasm and traits that produce optimum yield for farms around the world. The segment offers trait technologies that improve resistance to weather, disease, insects and enhance food and nutritional characteristics, herbicides used to control weeds, and digital solutions that assist farmer decision-making with a view to optimize product selection and, ultimately, help maximize yield and profitability. The segment competes in a wide variety of agricultural markets. The crop protection segment serves the global agricultural input industry with products that protect against weeds, insects and other pests, and disease, and that improve overall crop health both above and below ground via nitrogen management and seed-applied technologies. The segment offers crop protection solutions and digital solutions that provide farmers the tools they need to improve productivity and profitability, and help keep fields free of weeds, insects and diseases. The segment is a leader in global herbicides, insecticides, nitrogen stabilizers and pasture and range management herbicides. Summarized below are comments on individual segment net sales and segment operating EBITDA for the years endedDecember 31, 2022 , 2021 and 2020. The company defines segment operating EBITDA as earnings (loss) (i.e., income (loss) from continuing operations before income taxes) before interest, depreciation, amortization, corporate expenses, non-operating benefits (costs), foreign exchange gains (losses), and net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting, excluding the impact of significant items. Non-operating benefits (costs) consists of non-operating pension and OPEB credits (costs), tax indemnification adjustments, environmental remediation and legal costs associated with legacy EIDP businesses and sites, and the 2021 officer indemnification payment. Tax indemnification adjustments relate to changes in indemnification balances, as a result of the application of the terms of the Tax Matters Agreement, betweenCorteva and Dow and/or DuPont that are recorded by the company as pre-tax income or expense. See Note 22 - Segment Information, to the Consolidated Financial Statements for details related to significant pre-tax benefits (costs) excluded from segment operating EBITDA. All references to prices are based on local price unless otherwise specified. A reconciliation of segment operating EBITDA to income (loss) from continuing operations after income taxes for the years endedDecember 31, 2022 , 2021 and 2020 is included in Note 22 - Segment Information, to the Consolidated Financial Statements. 41
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, continued
Seed For the Year Ended December 31,
In millions 2022 2021 2020
Net sales $ 8,979 $ 8,402 $ 7,756
Segment operating EBITDA $ 1,656 $ 1,512 $ 1,208
Seed 2022 vs. 2021 Percent Change Due To:
Net Sales Change Price & Portfolio /
In millions $ % Product Mix Volume Currency Other
North America $ 174 3 % 6 % (2) % (1) % - %
EMEA 10 1 % 11 % 2 % (13) % 1 %
Latin America 338 24 % 18 % 4 % 2 % - %
Asia Pacific 55 15 % 12 % 11 % (8) % - %
Total $ 577 7 % 9 % - % (2) % - %
Seed 2022 vs. 2021 Percent Change Due To:
Net Sales Change Price & Portfolio /
In millions $ % Product Mix Volume Currency Other
Corn $ 337 6 % 9 % (1) % (2) % - %
Soybeans 242 15 % 11 % 5 % (1) % - %
Other oilseeds (38) (5) % 8 % (4) % (9) % - %
Other 36 8 % 4 % 7 % (3) % - %
Total $ 577 7 % 9 % - % (2) % - %
Seed 2021 vs. 2020 Percent Change Due To:
Net Sales Change Price &
Portfolio /
In millions $ % Product Mix Volume Currency Other
North America $ 209 4 % 1 % 2 % 1 % - %
EMEA 131 9 % 5 % 1 % 3 % - %
Latin America 303 27 % 16 % 14 % (3) % - %
Asia Pacific 3 1 % 2 % (2) % 1 % - %
Total $ 646 8 % 4 % 4 % - % - %
Seed 2021 vs. 2020 Percent Change Due To:
Net Sales Change Price & Portfolio /
In millions $ % Product Mix Volume Currency Other
Corn $ 436 8 % 5 % 3 % - % - %
Soybeans 123 9 % - % 7 % 2 % - %
Other oilseeds 133 21 % 5 % 14 % 2 % - %
Other (46) (9) % (2) % (8) % 1 % - %
Total $ 646 8 % 4 % 4 % - % - %
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Seed
Seed net sales were$8,979 million in 2022, up 7 percent from$8,402 million in 2021. The sales increase was driven by a 9 percent increase in price, partially offset by a 2 percent unfavorable currency impact. The increase in price was driven by strong execution globally, led byNorth America andLatin America , with global corn and soybean prices up 9 percent and 11 percent, respectively. Volume gains inLatin America corn andNorth America soybeans were offset by reduced corn acres inNorth America and supply constraints inNorth America canola. Enlist E3TM soybean market penetration reached over 45 percent of total North American acres. Unfavorable currency impacts were led by the Turkish Lira and the Euro, partially offset by the Brazilian Real. Seed operating EBITDA was$1,656 million in 2022, up 10 percent from$1,512 million in 2021. Price execution and ongoing cost and productivity actions more than offset higher input and freight costs, the unfavorable impact of currency, lower volumes inNorth America , and increased investment in R&D. Segment operating EBITDA margin improved by approximately 45 basis points versus the prior-year period. Seed net sales were$8,402 million in 2021, up 8 percent from$7,756 million in 2020. The increase was driven by a 4 percent increase in price and a 4 percent increase in volume. Local price gains were driven by strong adoption of new Seed technology, including price execution inLatin America and EMEA, with corn price up 5 percent globally. These gains were partially offset by competitive pricing pressure inNorth America soybeans, where price was down 2 percent. The increase in volume was driven by strong demand for corn inBrazil , coupled with higher soybean and corn sales inNorth America . Seed operating EBITDA was$1,512 million in 2021, up 25 percent from$1,208 million in 2020. Continued price execution, volume gains, ongoing cost and productivity actions, lower royalties, and lower bad debt expense more than offset higher input costs, higher freight and warehousing costs, and higher variable compensation costs. Crop Protection For the Year Ended December 31, In millions 2022 2021 2020 Net sales$ 8,476 $ 7,253 $ 6,461 Segment operating EBITDA$ 1,684 $ 1,202 $ 1,004 Crop Protection 2022 vs. 2021 Percent Change Due To: Net Sales Change Price & Portfolio / In millions $ % Product Mix Volume Currency Other North America $ 584 23 % 14 % 10 % (1) % - % EMEA 123 8 % 7 % 15 % (14) % - % Latin America 562 26 % 14 % 10 % 2 % - % Asia Pacific (46) (4) % 5 % (1) % (5) % (3) % Total $ 1,223 17 % 11 % 9 % (3) % - % Crop Protection 2022 vs. 2021 Percent Change Due To: Net Sales Change Price & Portfolio / In millions $ % Product Mix Volume Currency Other Herbicides $ 776 20 % 15 % 8 % (3) % - % Insecticides 101 6 % 7 % 3 % (4) % - % Fungicides 140 11 % 6 % 10 % (3) % (2) % Other 206 52 % 7 % 47 % (2) % - % Total $ 1,223 17 % 11 % 9 % (3) % - % 43
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Crop Protection 2021 vs. 2020 Percent Change
Due To:
Net Sales Change Price & Portfolio /
In millions $ % Product Mix Volume Currency Other
North America $ 159 7 % 6 % - % 1 % - %
EMEA 150 11 % 2 % 4 % 5 % - %
Latin America 437 26 % 7 % 19 % - % - %
Asia Pacific 46 4 % 1 % 3 % 3 % (3) %
Total $ 792 12 % 5 % 6 % 2 % (1) %
Crop Protection 2021 vs. 2020 Percent Change Due To:
Net Sales Change Price & Portfolio /
In millions $ % Product Mix Volume Currency Other
Herbicides $ 535 16 % 7 % 7 % 2 % - %
Insecticides (34) (2) % 2 % (5) % 1 % - %
Fungicides 278 27 % 4 % 22 % 3 % (2) %
Other 13 3 % (8) % 11 % - % - %
Total $ 792 12 % 5 % 6 % 2 % (1) %
Crop Protection
Crop protection net sales were $8,476 million in 2022, up 17 percent from $7,253
million in 2021. The increase was driven by an 11 percent increase in price and
a 9 percent increase in volumes. These gains were partially offset by a 3
percent unfavorable currency impact.
The increase in price, led by North America and Latin America , reflected pricing
for higher raw material and logistical costs and the value of our differentiated
technology. The increase in volume was driven by continued penetration of new
products, including EnlistTM and ArylexTM herbicides and IsoclastTM insecticide,
with new product sales up 33 percent compared to the same period last year.
Unfavorable currency impacts were led by the Euro and the Turkish Lira,
partially offset by the Brazilian Real.
Segment Operating EBITDA was $1,684 million in 2022, up 40 percent from $1,202
million from 2021. Pricing and volume gains and productivity actions more than
offset higher input costs, including raw material costs, and the unfavorable
impact of currency. Segment operating EBITDA margin improved by approximately
330 basis points versus the prior-year period largely driven by pricing
execution and new and differentiated technology.
Crop protection net sales were $7,253 million in 2021, up 12 percent from $6,461
million in 2020. The increase was due to a 6 percent increase in volume, a 5
percent increase in price and a 2 percent favorable impact from currency,
partially offset by a 1 percent unfavorable portfolio impact.
Volume gains were led by continued penetration of new products globally, with
combined sales of over $1.4 billion in 2021, up nearly $450 million compared to
the prior-year period, led by EnlistTM and ArylexTM herbicides and IsoclastTM
insecticide. These volume gains were partially offset by an approximate $275
million impact from the company's decision to phase out select low-margin
products.
The increase in price was primarily driven by gains in North America and Latin
America , including pricing for higher raw material and logistical costs.
Favorable currency impacts were primarily from the Euro. The portfolio impact
was driven by a divestiture in Asia Pacific .
Crop protection operating EBITDA was $1,202 million in 2021, up 20 percent from
$1,004 million from 2020. Pricing execution, continued penetration of new
products, ongoing cost and productivity actions, and a favorable impact from
currency more than offset higher input costs, including raw material and
logistical costs, and higher variable compensation costs.
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Non-GAAP Financial Measures The company presents certain financial measures that do not conform toU.S. GAAP and are considered non-GAAP measures. These measures include Operating EBITDA and operating earnings (loss) per share. Management uses these measures internally for planning and forecasting, including allocating resources and evaluating incentive compensation. Management believes that these non-GAAP measures best reflect the ongoing performance of the company during the periods presented and provide more relevant and meaningful information to investors as they provide insight with respect to ongoing operating results of the company and a more useful comparison of year over year results. These non-GAAP measures supplement the company'sU.S. GAAP disclosures and should not be viewed as an alternative toU.S. GAAP measures of performance. Furthermore, such non-GAAP measures may not be consistent with similar measures provided or used by other companies. Reconciliations for these non-GAAP measures toU.S. GAAP are provided below. Operating EBITDA is defined as earnings (loss) (i.e., income (loss) from continuing operations before income taxes) before interest, depreciation, amortization, non-operating benefits (costs), foreign exchange gains (losses), and net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting, excluding the impact of significant items. EffectiveJanuary 1, 2021 , on a prospective basis, the company excludes from segment operating EBITDA net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. Non-operating benefits (costs) consists of non-operating pension and OPEB credits (costs), tax indemnification adjustments, environmental remediation and legal costs associated with legacy businesses and sites, and the 2021 officer indemnification payment. Tax indemnification adjustments relate to changes in indemnification balances, as a result of the application of the terms of the Tax Matters Agreement, betweenCorteva and Dow and/or DuPont that are recorded by the company as pre-tax income or expense. Operating earnings (loss) per share is defined as "earnings (loss) per common share from continuing operations - diluted" excluding the after-tax impact of significant items, the after-tax impact of non-operating benefits (costs), the after-tax impact of amortization expense associated with intangible assets existing as of the Separation from DowDuPont, and the after-tax impact of net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. Although amortization of the company's intangible assets is excluded from these non-GAAP measures, management believes it is important for investors to understand that such intangible assets contribute to revenue generation. Amortization of intangible assets that relate to past acquisitions will recur in future periods until such intangible assets have been fully amortized. Any future acquisitions may result in amortization of additional intangible assets. Net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting represents the non-cash net gain (loss) from changes in fair value of certain undesignated foreign currency derivative contracts. Upon settlement, which is within the same calendar year of execution of the contract, the realized gain (loss) from the changes in fair value of the non-qualified foreign currency derivative contracts will be reported in the relevant non-GAAP financial measures, allowing quarterly results to reflect the economic effects of the foreign currency derivative contracts without the resulting unrealized mark to fair value volatility. 45
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Reconciliation of Income (Loss) from Continuing Operations after Income Taxes to
Operating EBITDA
Year Ended December 31 ,
(In millions) 2022 2021 2020 Income (loss) from continuing operations after income taxes
$ 1,216 $
1,822
210 524 (81)
Income (loss) from continuing operations before income taxes
1,426 2,346 675
Depreciation and amortization 1,223 1,243 1,177
Interest income (124) (77) (56)
Interest expense 79 30 45
Exchange (gains) losses 229 54 174
Non-operating (benefits) costs1 (111) (1,256) (316)
Mark-to-market (gains) losses on certain foreign currency contracts not designated as hedges2
- -
Significant items (benefit) charge 502 236 388 Operating EBITDA (Non-GAAP)$ 3,224 $ 2,576 $ 2,087 1. The year endedDecember 31, 2021 includes non-cash benefits related to the 2020 OPEB Plan Amendments. Refer to Note 17 -Pension Plans and Other Post Employment Benefits, to the Consolidated Financial Statements, for additional information. 2. EffectiveJanuary 1, 2021 , on a prospective basis, the company excludes net unrealized gains or losses from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. There was no unrealized mark-to-market (gain) loss for the year endedDecember 31, 2020 . Significant Items Year Ended December 31, (In millions) 2022 2021 2020 Restructuring and asset related charges - net$ 363 $ 289 $ 335 Equity securities mark-to-market gain - (47) - Employee Retention Credit (9) (60) - Contract termination - 54 - Estimated settlement expense1 87 - - Inventory write-offs 33 - - (Gain) loss on sale of business and assets (15) - 53 Loss on exit of non-strategic asset 5 - - AltEn facility remediation charges 33 - - Seed sale associated with Russia Exit2 (3) - - Settlement costs associated with the Russia Exit 8 - - Total pretax significant items (benefit) charge 502 236 388
Total tax (benefit) charge impact of significant items3 (102)
(51) (86)
Tax only significant item (benefit) charge4 (133) (9) (192)
Total significant items (benefit) charge, net of tax $ 267 $
176
1.Consists of estimated Lorsban® related charges. 2.Includes a benefit of$3 million relating to the sale of seeds already under production inRussia when the decision to exit the country was made and that the company was contractually required to purchase. It consists of$8 million of net sales and$5 million of cost of goods sold. 3.Unless specifically addressed above, the income tax effect on significant items was calculated based upon the enacted tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment. 4.The tax only significant item benefit for the year endedDecember 31, 2022 relates to the impact of a change in aU.S. legal entity's tax characterization, resulting in the establishment of deferred taxes, the release of a valuation allowance recorded against the net deferred tax asset position of a legal entity inBrazil and a worthless stock deduction in theU.S. in the amount of$(55) million ,$(36) million , and$(42) million , respectively. The tax only significant item benefit for the year endedDecember 31, 2021 reflects a net benefit for the impact of changes in valuation allowances recorded against the net deferred tax asset positions of two legal entities inBrazil of$(57) million and$44 million , as well as an adjustment related to the impacts of Swiss Tax Reform of$4 million . The tax only significant item benefit for the year endedDecember 31, 2020 reflects the impacts of the recognition of an elective cantonal component of the recent enactment of the Federal Act on Tax Reform and AHV Financing ("Swiss Tax Reform")($(182) million benefit) and a benefit due to an elective change in accounting method that alters the 2019 impact of the Separation on foreign tax provisions($(29) million benefit), 46
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partially offset by a state tax valuation allowance in the
Reconciliation of Income (Loss) from Continuing Operations Attributable to
Year Ended December 31 ,
(In millions) 2022
2021 2020
Income (loss) from continuing operations attributable to
$ 1,205 $ 1,812 $ 736 Less: Non-operating benefits (costs), after tax 80 955 237 Less: Amortization of intangibles (existing as of Separation), after tax (542)
(562) (518)
Less: Mark-to-market gains (losses) on certain foreign currency contracts not designated as hedges, after tax1
- -
Less: Significant items benefit (charge), after tax (267) (176) (110) Operating Earnings (Loss) (Non-GAAP)$ 1,934 $ 1,595 $ 1,127 Year Ended December 31, 2022
2021 2020
Earnings (loss) per share of common stock from continuing
operations attributable to
$ 1.66 $ 2.44 $ 0.98 Less: Non-operating benefits (costs), after tax 0.11 1.29 0.32 Less: Amortization of intangibles (existing as of Separation), after tax (0.75)
(0.76) (0.69) Less: Mark-to-market gains (losses) on certain foreign currency contracts not designated as hedges, after tax1
- -
Less: Significant items benefit (charge), after tax (0.37) (0.24) (0.15)
Operating Earnings (Loss) Per Share (Non-GAAP) $ 2.67 $ 2.15 $ 1.50
Diluted Shares Outstanding (in millions) 724.5 741.6 751.2
1.EffectiveJanuary 1, 2021 , on a prospective basis, the company excludes net unrealized gain or loss from mark-to-market activity for certain foreign currency derivative instruments that do not qualify for hedge accounting. There was no unrealized mark-to-market (gain) loss for the year endedDecember 31, 2020 . Liquidity & Capital Resources The company continually reviews its sources of liquidity and debt portfolio and occasionally may make adjustments to one or both to ensure adequate liquidity. (Dollars in millions) December 31, 2022 December 31, 2021 Cash, cash equivalents and marketable securities $ 3,315 $ 4,545 Total debt $ 1,307 $ 1,117 The company's credit ratings impact its access to the debt capital markets and cost of capital. The company remains committed to a strong financial position and strong investment-grade rating. The company's long-term and short-term credit ratings assigned to EIDP are as follows: Long-term Short-term Outlook Standard & Poor's1 A- A-2 Stable Moody's Investors Service A3 P-2 Stable Fitch Ratings1 A F1 Stable 1.In addition,Corteva, Inc. has been assigned a long-term issuer credit rating of A- with Stable outlook byStandard & Poor's and an Issuer Default Rating of A with Stable outlook by Fitch Ratings. 47
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The company believes its ability to generate cash from operations and access to capital markets and commercial paper markets will be adequate to meet anticipated cash requirements to fund its operations, including seasonal working capital, capital spending, dividend payments, share repurchases and pension obligations.Corteva's strong financial position, liquidity and credit ratings will provide access as needed to capital markets and commercial paper markets to fund seasonal working capital needs. The company's liquidity needs can be met through a variety of sources, including cash provided by operating activities, commercial paper, syndicated credit lines, bilateral credit lines, long-term debt markets, bank financing and committed receivable repurchase facilities.Corteva considers the borrowing costs and lending terms when selecting the source to fund its operations and working capital needs. The company had access to approximately$6.0 billion and$6.4 billion atDecember 31, 2022 and 2021, respectively, in committed and uncommitted unused credit lines, which includes the uncommitted revolving credit lines relating to the Foreign Currency Loans. These facilities provide support to meet the company's short-term liquidity needs and for general corporate purposes, which may include funding of discretionary and non-discretionary contributions to certain benefit plans, severance payments, repayment and refinancing of debt, working capital, capital expenditures, repurchases and redemptions of securities, funding of acquisitions and fundingCorteva's costs and expenses. InNovember 2018 , EIDP entered into a$3 billion , 5-year revolving credit facility and a$3 billion , 3-year revolving credit facility (the "Revolving Credit Facilities"). The 2018 Revolving Credit Facilities became effectiveMay 2019 .Corteva, Inc. became a party at the time of the Corteva Distribution. InMay 2021 , the company entered into an amendment that extended the maturity date of the 3-year revolving credit facility fromMay 2022 toMay 2023 . Other than the change in maturity date, there were no material modifications to the terms of the credit facility. DuringMay 2022 , the Revolving Credit Facilities were refinanced for purposes of extending the maturity dates to 2027 and 2025 for the 5-year and 3-year revolving credit facilities, respectively, lowering the facility amount of the 3-year revolving credit facility to$2 billion and transitioning the interest rate to Adjusted Term SOFR, which is Term SOFR plus 0.10 percent, plus the applicable margin. The Revolving Credit Facilities may serve as a substitute to the company's commercial paper program, and can be used, from time to time, for general corporate purposes including, but not limited to, the funding of seasonal working capital needs. The Revolving Credit Facilities contain customary representations and warranties, affirmative and negative covenants and events of default that are typical for companies with similar credit ratings. Additionally, the Revolving Credit Facilities contain a financial covenant requiring that the ratio of total indebtedness to total capitalization forCorteva and its consolidated subsidiaries not exceed 0.60. AtDecember 31, 2022 , the company was in compliance with these covenants. InMay 2020 , EIDP issued$500 million of 1.70 percent Senior Notes due 2025 and$500 million of 2.30 percent Senior Notes due 2030 (theMay 2020 Debt Offering). The proceeds of this offering are used for general corporate purposes. InMay 2022 , the company entered into a$500 million , 364-day revolving credit agreement (the "364-Day Revolving Credit Facility") expiring inMay 2023 . Borrowings under the 364-Day Revolving Credit Facility will have an interest rate equal to Adjusted Term SOFR, which is Term SOFR plus 0.10 percent, plus the applicable margin. The 364-Day Revolving Credit Facility includes a provision under which the company may convert any advances outstanding prior to the maturity date into term loans having a maturity date up to one year later. The 364-Day Revolving Credit Facility will be used for general corporate purposes including, but not limited to, the funding of seasonal working capital needs. The 364-Day Revolving Credit Facility contains customary representations and warranties, affirmative and negative covenants and events of default that are typical for companies with similar credit ratings. Additionally, the 364-Day Revolving Credit Facility contains a financial covenant requiring that the ratio of total indebtedness to total capitalization forCorteva and its consolidated subsidiaries not exceed 0.60. AtDecember 31, 2022 , the company was in compliance with these covenants. InJanuary 2023 , the company amended and restated the 364-Day Revolving Credit Facility agreement to increase the facility amount to$1 billion and extend the expiration date fromMay 2023 toJanuary 2024 . The company enters into short-term and long-term foreign currency loans from time-to-time by accessing uncommitted revolving credit lines to fund working capital needs of foreign subsidiaries in the normal course of business ("Foreign Currency Loans"). Interest rates are variable and determined at the time of borrowing. Total unused bank credit lines on the Foreign Currency Loans atDecember 31, 2022 was approximately$75 million . The company's long-term Foreign Currency Loans have varying maturities through 2024.
The company's indenture covenants include customary limitations on liens, sale
and leaseback transactions, and mergers and consolidations affecting
manufacturing plants, mineral producing properties or research facilities
located in the
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consolidated subsidiaries owning such plants, properties and facilities subject to certain limitations. The outstanding long-term debt also contains customary default provisions. The company has meaningful seasonal working capital needs based in part on providing financing to its customers. Working capital is funded through multiple methods including cash, commercial paper, a receivable repurchase facility, the Revolving Credit Facilities, the 364-day Revolving Credit Facility, and factoring. InFebruary 2022 , the company entered into a committed receivable repurchase facility of up to$500 million (the "2022 Repurchase Facility") which expired inDecember 2022 . Under the 2022 Repurchase Facility,Corteva sold a portfolio of available and eligible outstanding customer notes receivables to participating institutions and simultaneously agreed to repurchase at a future date. The company has factoring agreements with third-party financial institutions to sell its trade receivables under both recourse and non-recourse agreements in exchange for cash proceeds in an effort to reduce its receivables risk. For arrangements that include an element of recourse, the company provides a guarantee of the trade receivables in the event of customer default. Refer to Note 9 - Accounts and Notes Receivable - Net, to the Consolidated Financial Statements for more information. The company also organizes agreements with third-party financial institutions who directly provide financing for select customers of its seed and crop protection products in each region. Terms of the third-party loans are less than a year and programs are renewed on an annual basis. In some cases, the company guarantees a portion of the extension of such credit to such customers. Refer to Note 15 - Commitments and Contingent Liabilities, to the Consolidated Financial Statements, for more information on the company's guarantees. The company's cash, cash equivalents and marketable securities atDecember 31, 2022 andDecember 31, 2021 are$3.3 billion and$4.5 billion , respectively, of which$2.0 billion and$2.9 billion atDecember 31, 2022 and 2021, respectively, was held by subsidiaries in foreign countries, includingUnited States territories. Upon actual repatriation, such earnings could be subject to withholding taxes, foreign and/orU.S. state income taxes, and taxes resulting from the impact of foreign currency movements. The cash held by foreign subsidiaries is generally used to finance the subsidiaries' operational activities and future foreign investments. AtDecember 31, 2022 , management believed that sufficient liquidity is available in theU.S. with global operating cash flows, borrowing capacity from existing committed credit facilities, and access to capital markets and commercial paper markets. Capacity Expansion During 2022, the company's previously announced expansion of Spinosyns fermentation capacity was completed. Production began upon completion of the expansion and is on track to achieve the expected 30 percent increase in capacity over the next several years. For the Year Ended December 31, (Dollars in millions) 2022 2021 2020
Cash provided by (used for) operating activities
Cash provided by (used for) operating activities for the year endedDecember 31, 2022 was$872 million compared to$2,727 million for the year endedDecember 31, 2021 . The change in cash provided by (used for) operating activities was driven by higher earnings offset by changes in working capital primarily driven by an increase in inventories reflecting a rebuild of safety stocks to support growth, higher input and commodity costs as well as the impact from market volatility, higher receivables from revenue growth and changes in deferred revenue due to lower increases in prepayments from customers. Cash provided by (used for) operating activities for the year endedDecember 31, 2021 was$2,727 million compared to$2,064 million for the year endedDecember 31, 2020 . The increase in cash provided by (used for) operating activities was driven by an increase in net income, and improvement in working capital primarily driven by higher customer prepayments and higher accounts payable. 49
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OF OPERATIONS, continued
For the Year Ended December 31,
(Dollars in millions) 2022 2021 2020
Cash provided by (used for) investing activities
Cash provided by (used for) investing activities was$(632) million for the year endedDecember 31, 2022 compared to$(362) million for the year endedDecember 31, 2021 . The change was primarily due to higher purchases of investments, lower proceeds from sales and maturities of investments, escrow funding associated with acquisitions and higher capital expenditures. Cash provided by (used for) investing activities was$(362) million for the year endedDecember 31, 2021 compared to$(674) million for the year endedDecember 31, 2020 . The change was primarily due to lower purchases of investments and proceeds of marketable securities, partially offset by higher capital expenditures.
Capital expenditures totaled
For the Year Ended December 31,
(Dollars in millions) 2022 2021 2020
Cash provided by (used for) financing activities
Cash provided by (used for) financing activities was$(1,180) million for the year endedDecember 31, 2022 compared to$(1,266) million for the year endedDecember 31, 2021 . The change was primarily due to higher borrowings partially offset by higher repurchases of common stock, lower proceeds from stock options and higher dividends paid to stockholders. Cash provided by (used for) financing activities was$(1,266) million for the year endedDecember 31, 2021 compared to$303 million for the year endedDecember 31, 2020 . The change was primarily due to lower borrowings and higher repurchases ofCorteva common stock.
During 2022, the company's Board of Directors authorized and paid quarterly
dividends on its common stock of
OnSeptember 13, 2022 ,Corteva, Inc. announced that its Board of Directors authorized a$2 billion share repurchase program to purchaseCorteva, Inc.'s common stock, par value$0.01 per share, without an expiration date ("2022 Share Buyback Plan"). OnAugust 5, 2021 , the company's Board of Directors authorized a$1.5 billion share repurchase program to purchaseCorteva, Inc.'s common stock, par value$0.01 per share, without an expiration date ("2021 Share Buyback Plan"). The company repurchased approximately$1.3 billion under the 2021 Share Buyback Plan since the inception of the plan. In connection with the 2021 Share Buyback Plan, the company repurchased and retired 17,425,000 shares and 5,572,000 shares during the years endedDecember 31, 2022 and 2021, respectively, in the open market for a total cost of$1 billion and$250 million , respectively. OnJune 26, 2019 , the company's Board of Directors authorized a$1 billion share repurchase program to purchaseCorteva, Inc.'s common stock, par value$0.01 per share, without an expiration date ("2019 Share BuyBack Plan"). The company completed the 2019 Share Buyback Plan during the third quarter of 2021 and repurchased and retired 24,705,000 shares between the years endedDecember 31, 2019 and 2021 in the open market. See Note 16 - Stockholders' Equity, to the Consolidated Financial Statements, for additional information related to the share buyback plans. 50
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EIDP Liquidity Discussion As discussed in Note 1 - Basis of Presentation, to the EIDP Consolidated Financial Statements, EIDP is a subsidiary ofCorteva, Inc. and continues to be a reporting company, subject to the requirements of the Exchange Act. The below relates to EIDP only and is presented to provide a Liquidity discussion, only for the differences betweenEIDP and Corteva, Inc. Cash provided by (used for) operating activities EIDP's cash provided by (used for) operating activities for the year endedDecember 31, 2022 was$839 million compared to$2,689 million for the year endedDecember 31, 2021 . The change was primarily driven by the items noted on page 49, under the header "Cash provided by (used for) operating activities." EIDP's cash provided by (used for) operating activities for the year endedDecember 31, 2021 was$2,689 million compared to$1,986 million for the year endedDecember 31, 2020 . The change was primarily driven by the items noted on page 49, under the header "Cash provided by (used for) operating activities." Cash provided by (used for) investing activities EIDP's cash provided by (used for) investing activities for the year endedDecember 31, 2022 was$(632) million compared to$(362) million for the year endedDecember 31, 2021 . The change was primarily driven by the items noted on page 50, under the header "Cash provided by (used for) investing activities." EIDP's cash provided by (used for) investing activities for the year endedDecember 31, 2021 was$(362) million compared to$(674) million for the year endedDecember 31, 2020 . The change was primarily driven by the items noted on page 50, under the header "Cash provided by (used for) investing activities." Cash provided by (used for) financing activities EIDP's cash provided by (used for) financing activities was$(1,147) million for the year endedDecember 31, 2022 compared to$(1,228) million for the year endedDecember 31, 2021 . The change was primarily driven by higher borrowings partially offset by higher payments on debt. EIDP's cash provided by (used for) financing activities was$(1,228) million for the year endedDecember 31, 2021 compared to$381 million for the year endedDecember 31, 2020 . The change was primarily driven by lower proceeds from issuance of long-term debt partially offset by lower payments on long-term debt on related party debt.
See Note 2 - Related Party Transactions, to the EIDP Consolidated Financial
Statements for further information on the related party loan between
Critical Accounting Estimates
The company's significant accounting policies are more fully described in Note 2
- Summary of Significant Accounting Policies, to the Consolidated Financial
Statements. Management believes that the application of these policies on a
consistent basis enables the company to provide the users of the financial
statements with useful and reliable information about the company's operating
results and financial condition.
The preparation of the Consolidated Financial Statements in conformity with
generally accepted accounting principles ("GAAP") in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts, including, but not limited to, receivable and inventory
valuations, impairment of tangible and intangible assets, long-term employee
benefit obligations, income taxes, environmental matters and litigation.
Management's estimates are based on historical experience, facts and
circumstances available at the time and various other assumptions that are
believed to be reasonable. The company reviews these matters and reflects
changes in estimates as appropriate. Management believes that the following
represent some of the more critical judgment areas in the application of the
company's accounting policies which could have a material effect on the
company's financial position, liquidity or results of operations.
Pension Plans and Other Post Employment Benefits
Accounting for employee benefit plans involves numerous assumptions and
estimates. Discount rate and expected long-term rate of return on plan assets
are two critical assumptions in measuring the cost and benefit obligation of the
company's pension and OPEB plans. Management reviews these two key assumptions
when plans are re-measured. These and other assumptions are updated periodically
to reflect the actual experience and expectations on a plan specific basis as
appropriate. As permitted
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by GAAP, actual results that differ from the assumptions are accumulated on a plan by plan basis and to the extent that such differences exceed 10 percent of the greater of the plan's benefit obligation or the applicable plan assets, the excess is amortized over the average remaining service period of active employees or the average remaining life expectancy of plan participants if all or almost all of a plan's participants are inactive. Substantially all of the company's benefit obligation for pensions and OPEB are attributable to the benefit plans in theU.S. In theU.S. , the single equivalent discount rate is developed by matching the expected cash flow of the benefit plans to a yield curve constructed from a portfolio of high quality fixed-income instruments provided by the plans' actuaries as of the measurement date. The company measures the service and interest cost components utilizing a full yield curve approach by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. The company primarily utilizes prevailing long-term high quality corporate bond indices to determine the discount rate, applicable to each country, at the measurement date for non-U.S. benefit plans. The weighted average discount rates used in developing the 2023 net periodic pension and OPEB costs are expected to be 5.17 percent and 5.09 percent, respectively. Within theU.S. , the company establishes strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between return and risk. Strategic asset allocations in other countries are selected in accordance with the laws and practices of those countries. Where appropriate, asset-liability studies are also taken into consideration. The expected long-term rate of return on plan assets in theU.S. is based upon historical real returns (net of inflation) for the asset classes covered by the investment policy, expected performance, and projections of inflation and interest rates over the long-term period during which benefits are payable to plan participants. In determining the 2022 net periodic pension cost in theU.S. , an assumption of 4.5 percent for expected long-term rate of return on plan assets was used. After re-evaluating the current strategic asset allocation and recent market conditions, the company kept the expected long-term rate of return on plan assets assumption at 4.5 percent to be used in determining the 2023 net periodic pension cost in theU.S. Consistent with prior years, the expected long-term rate of return on plan assets in theU.S. reflects the asset allocation of the plan and the effect of the company's active management of the plan's assets. In determining annual expense for the principalU.S. pension plan, the company uses a market-related value of assets rather than its fair value. Accordingly, there may be a lag in recognition of changes in market valuation. As a result, changes in the fair value of assets are not immediately reflected in the company's calculation of net periodic pension cost. For the years endedDecember 31, 2022 and 2021, the market-related value of assets is calculated by averaging market returns over 36 months.
The following table shows the market-related value and fair value of plan assets
for the principal
(Dollars in billions) December
31, 2022
$ 13.6 $ 17.2 $ 16.3
Fair value of plan assets 12.3 17.5 17.5
For plans other than the principal
The following table highlights the potential impact on the company's pre-tax earnings due to changes in certain key assumptions with respect to the company's pension and OPEB plans, based on assets and liabilities atDecember 31, 2022 :
Pre-tax Earnings Benefit (Charge) 1/4 Percentage 1/4 Percentage
Point Point
(Dollars in millions) Increase Decrease
Discount rate $ (18) $ 18
Expected rate of return on plan assets 33 (33)
Additional information with respect to pension and OPEB expenses, liabilities and assumptions is discussed under "Long-Term Employee Benefits" beginning on page 57 and in Note 17 - Pension Plans and Other Post Employment Benefits, to the Consolidated Financial Statements. 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. AtDecember 31, 2022 , the company had accrued obligations of$512 million for probable 52
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environmental remediation and restoration costs, including$61 million for the remediation of Superfund sites. As remediation activities vary substantially in duration and cost from site to site, it is difficult to develop precise estimates of future site remediation costs. The company's estimates are based on a number of factors, including the complexity of the geology, the nature and extent of contamination, the type of remedy, the outcome of discussions with regulatory agencies and other Potentially Responsible Parties ("PRPs") at multi-party sites and the number of and financial viability of other PRPs. Therefore, considerable uncertainty exists with respect to environmental remediation and costs, and, under adverse changes in circumstances, it is reasonably possible that the ultimate cost with respect to these particular matters could range up to approximately$600 million above the accrued obligations amount. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the company's results of operations, financial condition and cash flows. It is the opinion of the company's management, however, that the possibility is remote that costs in excess of the range disclosed will have a material impact on the company's results of operations, financial condition or cash flows. For further discussion, see "Environmental Matters" section on page 58 and Note 15 - Commitments and Contingent Liabilities, to the Consolidated Financial Statements. Legal Contingencies The company's results of operations could be affected by significant litigation adverse to the company, including product liability claims, patent infringement and antitrust claims, and claims for third-party property damage or personal injury stemming from alleged environmental torts. The company records accruals for legal matters when the information available indicates that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Management makes adjustments to these accruals to reflect the impact and status of negotiations, settlements, rulings, advice of counsel and other information and events that may pertain to a particular matter. Predicting the outcome of claims and lawsuits and estimating related costs and exposure involves substantial uncertainties that could cause actual costs to vary materially from estimates. In making determinations of likely outcomes of litigation matters, management considers many factors. These factors include, but are not limited to, the nature of specific claims including unasserted claims, the company's experience with similar types of claims, the jurisdiction in which the matter is filed, input from outside legal counsel, the likelihood of resolving the matter through alternative dispute resolution mechanisms, and the matter's current status. Considerable judgment is required in determining whether to establish a litigation accrual when an adverse judgment is rendered against the company in a court proceeding. In such situations, the company will not recognize a loss if, based upon a thorough review of all relevant facts and information, management believes that it is probable that the pending judgment will be successfully overturned on appeal. A detailed discussion of significant litigation matters is contained in Note 15 - Commitments and Contingent Liabilities, to the Consolidated Financial Statements. Indemnification Assets The company has entered into various agreements where the company is indemnified for certain liabilities by DuPont, Dow, and Chemours. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. In connection with the recognition of liabilities related to these matters, the company records an indemnification asset when recovery is deemed probable. In assessing the probability of recovery, the company considers the contractual rights under the separation agreements and any potential credit risk. Future events, such as potential disputes related to recovery as well as the solvency of DuPont, Dow, and/or Chemours, could cause the indemnification assets to have a lower value than anticipated and recorded. The company evaluates the recovery of the indemnification assets recorded when events or changes in circumstances indicate the carrying values may not be fully recoverable. See Note 15 - Commitments and Contingent Liabilities, to the Consolidated Financial Statements, for additional information related to indemnifications. Income Taxes The breadth of the company's operations and the global complexity of tax regulations require assessments of uncertainties and judgments in estimating taxes the company will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation and resolution of disputes arising from federal, state and international tax audits in the normal course of business. The resolution of these uncertainties may result in adjustments to the company's tax assets and tax liabilities. It is reasonably possible that changes to the company's global unrecognized tax benefits could be significant; however, due to the uncertainty regarding the timing of completion of audits and possible outcomes, a current estimate of the range of increases or decreases that may occur within the next twelve months cannot be made. 53
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Deferred income taxes result from differences between the financial and tax basis of the company's assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Significant judgment is required in evaluating the need for and magnitude of appropriate valuation allowances against deferred tax assets. The realization of these assets is dependent on generating future taxable income, as well as successful implementation of various tax planning strategies. For example, changes in facts and circumstances that alter the probability that the company will realize deferred tax assets could result in recording a valuation allowance, thereby reducing the deferred tax asset and generating a deferred tax expense in the relevant period. In some situations, these changes could be material. See Note 7 - Income Taxes, to the Consolidated Financial Statements for additional information. AtDecember 31, 2022 , the company had a net deferred tax liability balance of$640 million , inclusive of a valuation allowance of$342 million . Realization of deferred tax assets is expected to occur over an extended period of time. As a result, changes in tax laws, assumptions with respect to future taxable income, and tax planning strategies could result in adjustments to deferred tax assets. See Note 7 - Income Taxes, to the Consolidated Financial Statements for additional details related to the deferred tax liability balance. Valuation of Assets and Impairment Considerations The assets and liabilities of acquired businesses are measured at their estimated fair values at the dates of acquisition. The excess of the purchase price over the estimated fair value of the net assets acquired, including identified intangible assets, is recorded as goodwill. The determination and allocation of fair value to the assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment, including estimates based on historical information, current market data and future expectations. The principal assumptions utilized in the company's valuation methodologies include revenue growth rates, EBITDA margin estimates, royalty rates, and discount rates. Although the estimates are deemed reasonable by management based on information available at the dates of acquisition, those estimates are inherently uncertain. Assessment of the potential impairment of goodwill, other intangible assets, property, plant and equipment, investments in nonconsolidated affiliates, and other assets is an integral part of the company's normal ongoing review of operations. Testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management's best estimates at a particular point in time. The dynamic economic environment in which the company's segments operate, and key economic and business assumptions with respect to projected selling prices, market growth and inflation rates, can significantly affect the outcome of impairment tests. Estimates based on these assumptions may differ significantly from actual results. Changes in factors and assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as well as the time in which such impairments are recognized. In addition, the company continually reviews its portfolio of assets to ensure they are achieving their greatest potential and are aligned with the company's growth strategy. Strategic decisions involving a particular group of assets may trigger an assessment of the recoverability of the related assets. Such an assessment could result in impairment losses. The company tests goodwill and other indefinite-lived intangible assets for impairment annually (during the fourth quarter), or more frequently when events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit has declined below its carrying value.Goodwill is evaluated for impairment using qualitative and / or quantitative testing procedures. The company performs goodwill impairment testing at the reporting unit level which is defined as the operating segment or one level below the operating segment. One level below the operating segment, or component, is a business in which discrete financial information is available and regularly reviewed by segment management. The company aggregates certain components into reporting units based on economic similarities. The company's reporting units included seed, crop protection and digital until itsApril 2022 implementation of a global business unit organization model ("BU Reorganization"), after which its reporting units are seed and crop protection. The BU Reorganization resulted in the company's digital reporting unit being merged into the seed and crop protection reporting units with the goodwill relating to the former digital reporting unit being reassigned to the seed and crop protection reporting units using a relative fair value allocation approach. For purposes of goodwill impairment testing, the company has the option to first perform qualitative testing to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors assessed at the company level include GDP growth rates, long-term commodity prices, equity and credit market activity, discount rates, and overall financial performance. Qualitative factors assessed at the reporting unit level include changes in industry and market structure, competitive environments, planned capacity and new product launches, cost factors such as raw 54
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material prices, and financial performance of the reporting unit. If the company chooses not to complete a qualitative assessment for a given reporting unit or if the initial assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is required. If additional quantitative testing is required, the reporting unit's fair value is compared with its carrying amount, and an impairment charge, if any, is recognized for the amount by which the carrying amount exceeds the reporting unit's fair value, limited to the amount of goodwill associated with the reporting unit. The company determines fair values for each of the reporting units using a discounted cash flow model (a form of the income approach), utilizing Level 3 unobservable inputs, or the market approach. Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The company's significant assumptions in these analyses include future cash flow projections, weighted average cost of capital, the terminal growth rate and the tax rate. The company's estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and assumed business strategy from a market participant perspective and includes an estimate of long-term future growth rates based on such strategy. Actual results may differ from those assumed in the company's forecasts. The company derives its discount rates using a capital asset pricing model and analyzes published rates for industries relevant to its reporting units to estimate the cost of equity financing. The company uses discount rates that are commensurate with the risks and uncertainty inherent in the respective reporting units and in its internally developed forecasts. Under the market approach, the company uses metrics of publicly traded companies or historically completed transactions for comparable companies. As a result of the BU Reorganization, the company determined that a triggering event had occurred during the second quarter of 2022 that required an interim impairment assessment as ofApril 1, 2022 . The interim impairment assessment was performed on the seed, crop protection, and the former digital reporting units immediately prior to the BU Reorganization and for the seed and crop protection reporting units immediately after the BU Reorganization resulting in no goodwill impairment charges. Qualitative interim impairment assessments were performed for the seed and crop protection reporting units as ofApril 1, 2022 . Based on the qualitative assessment performed, it was more likely than not that the fair value of each reporting unit exceeded the carrying value and therefore a quantitative test was not performed. A quantitative impairment assessment was performed for the former digital reporting unit as ofApril 1, 2022 using a combination of the discounted cash flow model (a form of the income approach) and the market approach. The discount rate used in the company's valuation was 19.0 percent. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is reasonably possible that the judgments and estimates described above could change in future periods. The company believes the current assumptions and estimates utilized are both reasonable and appropriate. Based on the quantitative annual goodwill impairment analyses performed in the fourth quarter 2022, which were performed using the income approach, the company concluded the fair value of each of the reporting units exceeded their respective carrying values by more than 50.0 percent, and no goodwill impairment charge was necessary. The discount rate used in the company's valuations was 11.0 percent. Prepaid Royalties The company's seed segment currently has certain third-party biotechnology trait license agreements, which require up-front and variable payments subject to the licensor meeting certain conditions. These payments are reflected as other current assets and other assets and are amortized to cost of goods sold as seeds containing the respective trait technology are utilized over the term of the license. The rate of royalty amortization expense recognized is based on the company's strategic plans which include various assumptions and estimates including product portfolio, market dynamics, farmer preferences, growth rates and projected planted acres. Changes in factors and assumptions included in the strategic plans, including potential changes to the product portfolio in favor of internally developed biotechnology, could impact the rate of recognition of the relevant prepaid royalty. AtDecember 31, 2022 , the balance of prepaid royalties reflected in other current assets and other assets was$224 million and$101 million , respectively. The majority of the balance of prepaid royalties relates to the company's wholly owned subsidiary,Pioneer Hi-Bred International, Inc.'s ("Pioneer") non-exclusive license inthe United States andCanada for the Monsanto 55
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Company's Genuity® Roundup Ready 2 Yield® glyphosate tolerance trait and Roundup
Ready 2 Xtend® glyphosate and dicamba tolerance trait for soybeans ("Roundup
Ready 2 License Agreement"). The prepaid royalty asset relates to a series of
up-front, fixed and variable royalty payments to utilize the traits in Pioneer's
soybean product mix. The company's historical expectation was that the
technology licensed under the Roundup Ready 2 License Agreement would be used as
the primary herbicide tolerance trait platform in the Pioneer® brand soybean
through the term of the agreement. DAS and MS Technologies, L.L.C. jointly
developed and own the Enlist E3TM herbicide tolerance trait for soybeans which
provides tolerance to 2, 4-D choline in Enlist Duo® and Enlist One® herbicides,
as well as glyphosate and glufosinate herbicides. In connection with the
validation of breeding plans and large-scale product development timelines,
during the fourth quarter of 2019, the company committed to accelerate the ramp
up of the Enlist E3TM trait platform in the company's soybean portfolio mix
across all brands, including Pioneer® brands, over the subsequent five years.
During the ramp-up period, the company has begun to significantly reduce the
volume of products with the Roundup Ready 2 Yield® and Roundup Ready 2 Xtend®
herbicide tolerance traits beginning in 2021, with expected minimal use of the
trait platform thereafter for the remainder of the Roundup Ready 2 License
Agreement (the "Transition Plan"). As of December 31, 2022 , Enlist E3TM trait
platform has grown to approximately 50 percent of our soybean portfolio. Royalty
expense has therefore significantly increased through higher amortization of the
prepaid royalty.
In connection with the departure from these traits in the company's product
portfolio, beginning January 1, 2020 the company presents and discloses the
accelerated prepaid royalty amortization expense as a component of restructuring
and asset related charges - net in the Consolidated Statement of Operations. The
accelerated prepaid royalty amortization expense represents the difference
between the rate of amortization based on the revised number of units expected
to contain the Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® trait
technology and the per unit cash rate per the Roundup Ready 2 License Agreement.
For the year ended December 31, 2022 , the company recognized $109 million in
restructuring and asset related charges - net in the Consolidated Statement of
Operations from non-cash accelerated prepaid royalty amortization expense. The
expected non-cash accelerated prepaid royalty amortization expense estimated for
2023 is approximately $75 million , aggregating to approximately $130 million
over the subsequent two years.
Further changes in factors and assumptions associated with usage of the trait
platform licensed under the Roundup Ready 2 License Agreement, including the
Transition Plan, could further impact the rate of recognition of the prepaid
royalty and Consolidated Statement of Operations presentation of the accelerated
prepaid royalty amortization expense.
Off-Balance Sheet Arrangements
Certain Guarantee Contracts
Information with respect to the company's guarantees is included in Note 15 -
Commitments and Contingent Liabilities, to the Consolidated Financial
Statements. Historically, the company has not made significant payments to
satisfy guarantee obligations; however, the company believes it has the
financial resources to satisfy these guarantees.
MOU Escrow Contributions
On January 22, 2021 , Chemours, DuPont, Corteva and EIDP entered into a binding
memorandum of understanding containing a settlement to resolve legal disputes
originating from the Delaware Litigation and Pending Arbitration, and to
establish a cost sharing arrangement for potential future legacy per- and
polyfluoroalkyl substances ("PFAS") liabilities arising out of pre-July 1, 2015
conduct (the "MOU"). Under the terms of the MOU, Corteva's estimated aggregate
share of the potential $2 billion is approximately $600 million . In order to
support and manage any potential future PFAS liabilities, the parties have also
agreed to establish an escrow account ("MOU Escrow Account"). The MOU provides
that contributions to the MOU Escrow Account will be made by Chemours, DuPont
and Corteva , annually over an eight-year period through 2028. Over this period,
Chemours will deposit a total of $500 million in the account and DuPont and
Corteva , together, will deposit an additional $500 million pursuant to the terms
of the Letter Agreement. Additionally, if on December 31, 2028 , the balance of
the MOU Escrow Account (including interest) is less than $700 million , Chemours
will make 50% of the deposits and DuPont and Corteva , together, will make 50% of
the deposits necessary to restore the balance of the escrow account to $700
million pursuant to the terms of the Letter Agreement.
The company made its annual installment deposits due to the MOU Escrow Account
through December 31, 2022 . Refer to Note 15 - Commitments and Contingent
Liabilities, to the Consolidated Financial Statements, for further details on
the MOU and funding of the MOU Escrow Account.
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Contractual Obligations Our principal commitments consist of long-term debt, operating and finance lease obligations and environmental remediation obligations. Refer to further Note 14 - Long-Term Debt and Available Credit Facilities, Note 13 - Leases, and Note 15 - Commitments and Contingent Liabilities, to the Consolidated Financial Statements, respectively, for further discussion.
Information related to the company's other significant contractual obligations are summarized in the following table:
Payments Due In
Total at 2024 and
(Dollars in millions) December 31, 2022 2023 beyond
Expected cumulative cash requirements for interest
payments
through maturity $ 237 $ 52 $ 185
Purchase obligations1 2,023 789 1,234
License agreements2, 3 168 123 45
Other liabilities2, 4 275 26 249
Total 5 $ 2,703 $ 990 $ 1,713
1.Represents enforceable and legally binding agreements in excess of $1 million
to purchase goods or services that specify fixed or minimum quantities; fixed,
minimum or variable price provisions; and the approximate timing of the
agreement.
2.Included in the Consolidated Financial Statements.
3. Represents undiscounted remaining payments under Pioneer license agreements
(approximately $150 million on a discounted basis).
4. Includes liabilities related to employee-related benefits other than pension
and other post employment benefits, asset retirement obligations and other
noncurrent liabilities.
5. Due to uncertainty regarding the completion of tax audits and possible
outcomes, the timing of certain payments of obligations related to unrecognized
tax benefits cannot be made and have been excluded from the table above. See
Note 7 - Income Taxes, to the Consolidated Financial Statements for additional
detail.
The company expects to meet its contractual obligations through its normal sources of liquidity and believes it has the financial resources to satisfy the contractual obligations that arise in the ordinary course of business.
Long-Term Employee Benefits
The company has various obligations to its employees and retirees. The company
maintains retirement-related programs in many countries that have a long-term
impact on the company's earnings and cash flows. These plans are typically
defined benefit pension plans, as well as medical, dental and life insurance
benefits for pensioners and survivors and disability benefits for employees
("other post employment benefits" or "OPEB"). Substantially all of the company's
worldwide benefit obligation for pensions and OPEB obligations are attributable
to the U.S. benefit plans.
Pension coverage for employees of the company's non-U.S. consolidated
subsidiaries is provided, to the extent deemed appropriate, through separate
plans. The company regularly explores alternative solutions to meet its global
pension obligations in the most cost effective manner possible as demographics,
life expectancy and country-specific pension funding rules change. Where
permitted by applicable law, the company reserves the right to change, modify or
discontinue its plans that provide pension, medical, dental, life insurance and
disability benefits.
Benefits under defined benefit pension plans are based primarily on years of
service and employees' pay near retirement. In November 2016 , the company
announced changes to the U.S. pension and OPEB plans, and on November 30, 2018 ,
the company froze the pay and service amounts used to calculate pension benefits
for active employees who participate in the U.S. pension plans, resulting in the
participants no longer accruing additional benefits. In addition to the changes
to the U.S. pension plans, OPEB eligible employees who were under the age of 50
as of November 30, 2018 will not receive post employment medical, dental and
life insurance benefits. The majority of employees hired in the U.S. on or after
January 1, 2007 are not eligible to participate in the pension and post
employment medical, dental and life insurance plans, but receive benefits in the
defined contribution plans.
In December 2020 , the company amended its retiree medical, dental and life
insurance plans resulting in the company no longer providing retiree dental and
life insurance benefits effective January 1, 2022 and Corteva's portion of the
cost of non-Medicare retiree medical coverage no longer being adjusted for cost
increases, which capped the Corteva cost at the level as of December 31, 2021
("2020 OPEB Plan Amendments"). As a result of these changes, the company
recorded a $939 million decrease in OPEB benefit obligations as of December 31,
2020 with a corresponding prior service benefit within other comprehensive
income (loss) for the year ended December 31, 2020 . During 2021, a substantial
amount of the prior service benefit within other
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comprehensive income (loss) in 2020 was recognized in other income (expense) - net in the Consolidated Statement of Operations.
Pension benefits are paid primarily from trust funds established to comply with applicable laws and regulations. The actuarial assumptions and procedures utilized are reviewed periodically by the plans' actuaries to provide reasonable assurance that there will be adequate funds for the payment of benefits. The company did not make contributions to the principalU.S. pension plan for the years endedDecember 31, 2022 , 2021 or 2020. Funding for each pension plan other than the principalU.S. pension plan is governed by the rules of the sovereign country in which it operates. Thus, there is not necessarily a direct correlation between pension funding and pension expense. In general, however, improvements in plans' funded status tends to moderate subsequent funding needs. The company contributed$6 million ,$8 million , and$9 million to its funded pension plans other than the principalU.S. pension plan for the years endedDecember 31, 2022 , 2021 and 2020, respectively.U.S. pension benefits that exceed federal limitations are covered by separate unfunded plans and these benefits are paid to pensioners and survivors from operating cash flows. The company's remaining pension plans with no plan assets are paid from operating cash flows. The company made benefit payments of$53 million ,$41 million , and$53 million to its unfunded plans for the years endedDecember 31, 2022 , 2021 and 2020, respectively. The company's OPEB plans are unfunded and the cost of the approved claims is paid from operating cash flows. Pre-tax cash requirements to cover actual net claims costs and related administrative expenses were$122 million ,$198 million , and$207 million for the years endedDecember 31, 2022 , 2021 and 2020, respectively. Changes in cash requirements reflect the net impact of per capita health care cost, demographic changes, plan amendments and changes in participant premiums, co-pays and deductibles. In 2023, the company expects to contribute approximately$50 million to its pension plans other than the principalU.S. pension plan and approximately$135 million to its OPEB plans. The company does not anticipate making contributions to its principalU.S. pension plan in 2023. The company's income can be significantly affected by pension and defined contribution benefits as well as OPEB costs. The following table summarizes the extent to which the company's income (loss) from continuing operations before income taxes for the years endedDecember 31, 2022 , 2021 and 2020 was affected by pre-tax charges related to long-term employee benefits: For the Year Ended December 31, (Dollars in millions) 2022 2021 2020 Net periodic benefit (credit) cost - pension and OPEB$ (142) $ (1,292) $ (340) Defined contributions 133 125 127 Long-term employee benefit plan (credit) charges - continuing operations$ (9) $ (1,167) $ (213) The above (credit) charges for pension and OPEB are determined as of the beginning of each period. Long-term employee benefit plan credits were$(9) million and$(1,167) million for the years endedDecember 31, 2022 and 2021, respectively. The change is due to the 2020 OPEB Plan amendments. See "Pension Plans and Other Post Employment Benefits" under the Critical Accounting Estimates section beginning on page 51 of this report for additional information on determining annual expense. For 2023, long-term employee benefit costs are expected to increase by about$300 million . The change is mainly due to an increase in discount rates and a decrease in asset returns due to lower pension plan assets. Environmental Matters The company operates global manufacturing, product handling and distribution facilities that are subject to a broad array of environmental laws and regulations. Such rules are subject to change by the implementing governmental agency, and the company monitors these changes closely. Company policy requires that all operations fully meet or exceed legal and regulatory requirements. In addition, the company implements voluntary programs to reduce air emissions, minimize the generation of hazardous waste, decrease the volume of water use and discharges, increase the efficiency of energy use and reduce the generation of persistent, bioaccumulative and toxic materials. Management has noted a global upward trend in the amount and 58
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complexity of proposed chemicals regulation. The costs to comply with complex environmental laws and regulations, as well as internal voluntary programs and goals, are significant and will continue to be significant for the foreseeable future.
Pre-tax environmental expenses charged to income (loss) from continuing operations before income taxes are summarized below:
For the Year Ended December 31,
(Dollars in millions) 2022 2021 2020
Environmental operating costs $ 154 $
144
Environmental remediation costs1 84 46 63
$ 238 $ 190 $ 201
1.Environmental remediation costs include costs that are subject to the $200
million threshold and sharing arrangements as discussed in Note 15 - Commitments
and Contingent Liabilities, to the Consolidated Financial Statements, under the
header Corteva Separation Agreement.
Environmental Operating Costs
As a result of its operations, the company incurs costs for pollution abatement
activities including waste collection and disposal, installation and maintenance
of air pollution controls and wastewater treatment, emissions testing and
monitoring, and obtaining permits. The company also incurs costs related to
environmental related research and development activities including
environmental field and treatment studies as well as toxicity and degradation
testing to evaluate the environmental impact of products and raw materials.
About 85 percent of total pre-tax environmental operating costs charged to
income (loss) from continuing operations for the year ended December 31, 2022
resulted from operations in the U.S. Based on existing facts and circumstances,
management does not believe that year-over-year changes, if any, in
environmental operating costs charged to current operations will have a material
impact on the company's financial position, liquidity or results of operations.
Annual expenditures in the near term are not expected to vary significantly from
the range of such expenditures experienced in the past few years. Longer term,
expenditures are subject to considerable uncertainty and may fluctuate
significantly.
Remediation Accrual
Changes in the remediation accrual balance are summarized below:
(Dollars in millions)
Balance at December 31, 2020 $ 329
Remediation payments (35)
Net increase in remediation accrual 1 46
Net change, indemnification 2 112
Balance at December 31, 2021 $ 452
Remediation payments (49)
Net increase in remediation accrual 1 84
Net change, indemnification 2 25
Balance at December 31, 20223 $ 512
1.Excludes indemnified remediation obligations.
2.Represents the net change in indemnified remediation obligations based on
activity as well as the removal from EIDP's accrued remediation liabilities of
obligations that have been fully transferred to Chemours and DuPont. Pursuant to
the Chemours Separation Agreement and subsequent MOU, and the Corteva Separation
Agreement, as discussed in Note 15 - Commitments and Contingent Liabilities, to
the Consolidated Financial Statements, EIDP is indemnified by Chemours and
DuPont for certain environmental matters.
3.Includes accrued obligations of $137 million due in the next twelve months
with the remainder being due subsequent to 2023.
Considerable uncertainty exists with respect to environmental remediation costs
and, under adverse changes in circumstances, the potential liability may range
up to approximately $600 million above the amount accrued as of December 31,
2022 . However, based on existing facts and circumstances, management does not
believe that any loss, in excess of amounts accrued, related to remediation
activities at any individual site will have a material impact on the financial
position, liquidity or results of operations of the company. Refer to Note 15 -
Commitments and Contingent Liabilities for further details on the company's
accrued obligations at December 31, 2022 .
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As ofDecember 31, 2022 , the company has been notified of potential liability under the Comprehensive Environmental Response, Compensation and Liability Act ("Superfund") or similar state laws at about 500 sites around theU.S. , including approximately 120 sites for which the company does not believe it has liability based on current information. Active remediation is under way at approximately 60 of the about 500 sites. In addition, the company has resolved its liability at about 210 sites, either by completing remedial actions with other PRPs or by participating in "de minimis buyouts" with other PRPs whose waste, like the company's, represented only a small fraction of the total waste present at a site. There were no new notices in 2022 or 2021. Environmental Capital Expenditures Capital expenditures for environmental projects, either required by law or necessary to meet the company's internal environmental goals, were approximately$5 million for the year endedDecember 31, 2022 . The company currently estimates expenditures for environmental-related capital projects to be approximately$10 million in 2023. Climate Change The company believes that climate change is an important global environmental concern that presents risks and opportunities, of which theSustainability and Innovation Committee of the Board of Directors maintains oversight. Management regularly assesses and manages climate-related issues. Across its business, individuals who are responsible for climate-related initiatives may have annual performance goals tied to the delivery of projects related to these initiatives. Continuing political and social attention to climate change and its impacts has resulted in regulatory and market-based approaches to limit greenhouse gas emissions. The company believes there is a way forward for sustainable climate change mitigation that both enables farmers to meet the demands of a growing population and secures the economic future for the vast majority of the world's population who depend on agriculture for their livelihoods. Extreme and volatile weather due to climate change may have an adverse impact on our customers' ability to use the company's products and seed supply, potentially reducing sales volumes, revenues and margins. The company continuously evaluates opportunities for existing and new product and service offerings to meet the anticipated demands of climate-smart agriculture and mitigate the impact of extreme and volatile weather. The company integrates processes for identifying, assessing and managing climate-related risk into its enterprise risk management program. The company completed a non-financial materiality assessment and identified short-, medium- and long-term climate-related risks and opportunities. The results of this assessment are integrated into the company's businesses, strategy and financial planning.Corteva has an established climate strategy, including commitments to reduce greenhouse gas emissions. The company is seeking ways to reduce its impact and providing tools and incentives for customers to do the same.Corteva champions climate positive agriculture, utilizing carbon storage and other means to remove more carbon from the atmosphere than it emits without sacrificing farmer productivity or ongoing profitability. WhileCorteva is working to reduce its role in the emission of greenhouse gasses it also invests in enabling innovation that can create a more resilient agriculture value chain. The company engages with multiple stakeholders and partners around the globe regarding our innovations and actionable ideas to help safeguard the health and well-being of the planet and its people. 60
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