UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): May 4, 2021
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction | (Commission | (I.R.S. Employer | ||||||||||||
| of Incorporation) | File Number) | Identification No.) | ||||||||||||
(Address of principal executive offices)(Zip Code)
(302 ) 485-3000
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition
On May 4, 2021, Corteva, Inc. (the "Company") announced its consolidated financial results for the quarter ended March 31, 2021. A copy of the Company’s press release and financial statement schedules are furnished herewith on Form 8-K as Exhibits 99.1 and 99.2, respectively. The information contained in this report, including Exhibits 99.1 and 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. In addition, the information contained in this report shall not be deemed to be incorporated by reference into any registration statement or other document filed by the Company under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
| Press Release dated May 4, 2021 | |||||
| Financial Statement Schedules dated May 4, 2021 | |||||
| 104 | The cover page from the Company’s Current Report on Form 8-K, formatted in Inline XBRL | ||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CORTEVA, INC. | |||||
| (Registrant) | |||||
| /s/ Brian Titus | |||||
| Brian Titus | |||||
| Vice President and Controller | |||||
May 4, 2021
1 News Release 1Q 2021 Corteva Reports Strong Results for First Quarter 2021 – Increases Net Sales Guidance WILMINGTON, Del., May 4, 2021 – Corteva, Inc. (NYSE: CTVA) (“Corteva” or the “Company”) today reported financial results for the three months ended March 31, 2021. 1Q 2021 Results Overview Net Sales Income from Cont. Ops (After Tax) EPS GAAP $4.18B $613M $0.81 vs. 1Q 2020 +6% +118% +125% Organic1 Sales Operating EBITDA1 Operating EPS1 NON-GAAP $4.20B $904M $0.79 vs. 1Q 2020 +6% +14% +34% First Quarter 2021 Highlights • Ongoing penetration of new products, coupled with favorable overall market fundamentals, drove volume and price gains globally. First quarter 2021 net sales and organic1 sales both increased 6% versus prior year. Gains were reported in most regions, led by double-digit growth in Latin America. • Sales of new and differentiated products drove volume and price gains in Crop Protection. Net sales and organic1 sales both grew 12%, with double-digit net sales increases in every region. New product sales in Crop Protection increased more than $120 million compared to prior year. • Seed net sales rose 2% and organic1 sales grew 3% year over year, driven by continued new product penetration and local price gains which more than offset the impact of seasonal timing of seed deliveries in North America2. • GAAP income and earnings per share (EPS) from continuing operations were $613 million and $0.81 per share for the first quarter 2021, respectively. • Strong price execution and volume gains, which collectively more than offset cost headwinds, drove an Operating EBITDA1 increase of 14% to $904 million versus the same quarter last year. • The Company experienced market-driven cost headwinds in the quarter, including cost increases in freight and logistics, as well as raw materials. These headwinds were partially offset by the Company’s ongoing execution on its productivity programs. • SG&A expense as a percentage of sales improved approximately 160 basis points. • Management increased full year 2021 net sales guidance3 to a range of $14.6 to $14.8 billion – and affirmed full year 2021 Operating EBITDA1 guidance in the range of $2.4 billion to $2.5 billion. 1. Organic Sales, Operating EPS and Operating EBITDA are non-GAAP measures. See page A-5 for further discussion. 2. North America is defined as U.S. and Canada. EMEA is defined as Europe, Middle East and Africa. 3. Corteva is not able to reconcile its forward-looking non-GAAP financial measures to its most comparable U.S. GAAP financial measures, as it is unable to predict with reasonable certainty items outside of its control, such as Significant Items, without unreasonable effort. 1Q 1Q % % ($ in millions, except where noted) 2021 2020 Change Organic1 Change Net Sales $4,178 $3,956 6% 6% North America $1,743 $1,765 (1)% (2)% EMEA2 $1,602 $1,467 9% 6% Latin America $518 $434 19% 38% Asia Pacific $315 $290 9% 9%
News Release 1Q 2021 2 “Building on the momentum from the finish in 2020, the first quarter 2021 results reflect continued strong execution from our global teams. Corteva delivered increased sales across both Seed and Crop Protection, substantial Operating EBITDA1 growth and margin expansion. This performance demonstrates demand for the innovative and differentiated technology that we bring to the market and the ongoing cost and productivity performance, while also managing externally driven cost headwinds. The first quarter results further demonstrate our commitment to delivering value for our shareholders, which is reflected in the return of approximately $450 million in the first quarter via share repurchases and dividends. We expect to complete the majority of our $1 billion authorized share repurchase program by the end of the first half of 2021. We are encouraged by a strengthening agriculture outlook, while maintaining agility given market volatility from the variations in the pace and path of recovery across global economies, including rising input costs. We are closely monitoring these factors and remain focused on driving revenue growth while continuing to deliver on our productivity and margin expansion commitments through the remainder of the year.” Jim Collins Chief Executive Officer Company Update Accelerating Capital Return to Shareholders The Company returned approximately $450 million to shareholders in the form of dividends and repurchases during the first quarter. Corteva remains on an accelerated pace to complete its authorized share repurchase program in 2021, with the majority expected to be completed in the first half. Strengthening Position in High-Value Biologicals Market Sector The Company took actions in the first quarter to strengthen its access and position in the high-margin biologicals market sector – and announced three new collaboration agreements during the period. Through this expanded technology access, the Company aims to further accelerate Corteva’s pace of innovation and existing leadership position in this high-value sector to meet the increasing market demand for naturally derived products. Taken together with its diverse and balanced portfolio of new and differentiated Crop Protection technologies – such as supply-constrained naturally derived Qalcova™ and Jemvelva™ insecticides, as well as Inatreq™ fungicide – these agreements are expected to provide a complementary portfolio of sustainable solutions to help farmers address pressing crop protection challenges. Driving Sustainability Commitments In connection with its 10-year sustainability targets introduced in 2020, recently, the Company introduced a Carbon and Ecosystem Services portfolio, focused on improving the carbon sequestration process and creating additional solutions to help farmers increase profitability while enabling climate resilience.
News Release 1Q 2021 3 Crop Protection Summary Crop Protection net sales were $1.7 billion in the first quarter of 2021, up 12% from $1.5 billion in the first quarter of 2020. Gains were driven by 6% increases in both volume and price and a 1% favorable impact from currency, partially offset by a 1% impact from portfolio. Volume gains were driven by strong demand for new products globally, including ArylexTM, EnlistTM and RinskorTM herbicides and IsoclastTM and PyraxaltTM insecticides. These volume gains were partially offset by an approximate $70 million impact from our decision to phase out select low-margin, generic products. Local price rose due to increases in Latin America, coupled with favorable product mix globally and strategic price increases in North America. Favorable currency impacts primarily from the Euro more than offset unfavorable impacts from the Brazilian Real. The portfolio impact was driven by prior-year divestitures in Asia Pacific. Segment operating EBITDA was $321 million in the first quarter of 2021, up 35% from $238 million in the first quarter of 2020. Price and volume gains and ongoing cost and productivity actions more than offset higher input costs, including raw materials costs. Segment operating EBITDA margin improved by more than 300 basis points versus prior-year. 1Q 1Q % % ($ in millions, except where noted) 2021 2020 Change Organic1 Change North America $533 $475 12% 11% EMEA $655 $586 12% 7% Latin America $244 $218 12% 28% Asia Pacific $254 $222 14% 14% Total 1Q Crop Protection Net Sales $1,686 $1,501 12% 12% Seed Summary Seed net sales were up 2% compared with the first quarter of 2020. Gains were driven by a 2% increase in local price and a 1% increase in volume, partially offset by a 1% impact from currency. Pricing gains were driven by strong adoption of new Seed technology, including price execution in EMEA and Latin America, with corn price up 2% globally. Volume growth was driven by record corn and sunflower volume in EMEA due to a shift in customer demand on local supply concerns and an early start to the spring, coupled with strong Safrinha sales in Brazil and early demand in other parts of Latin America. Gains were partially offset by the impact of seasonal timing of deliveries in North America. Unfavorable currency impacts, led by the Brazilian Real, were partially offset by favorable impacts from the Euro. Segment operating EBITDA was $617 million in the first quarter of 2021, up 6% from $581 million in the first quarter of 2020. Price execution, lower SG&A and ongoing cost and productivity actions more than offset higher input costs from unfavorable yields on European corn, higher freight costs and the unfavorable impact of currency. Segment operating EBITDA margin improved by more than 100 basis points versus the prior-year period. 1Q 1Q % % ($ in millions, except where noted) 2021 2020 Change Organic1 Change North America $1,210 $1,290 (6)% (7)% EMEA $947 $881 7% 5% Latin America $274 $216 27% 48% Asia Pacific $61 $68 (10)% (7)% Total 1Q Seed Net Sales $2,492 $2,455 2% 3%
News Release 1Q 2021 4 Outlook The Company increased its previously provided net sales guidance3 for the full year 2021 and now expects net sales in the range of $14.6 to $14.8 billion, which at the mid-point represents expected net sales growth of 3-4% for the year and organic sales growth of 3% for the year. Corteva affirmed its previously provided earnings guidance. Operating EBITDA is expected to be in the range of $2.4 billion to $2.5 billion and operating EPS range is expected to be between $1.85 and $1.95 per share. Corteva is not able to reconcile its forward-looking non-GAAP financial measures to its most comparable U.S. GAAP financial measures, as it is unable to predict with reasonable certainty items outside of its control, such as Significant Items, without unreasonable effort. First Quarter Conference Call The Company will host a live webcast of its first quarter earnings conference call with investors to discuss its results and outlook tomorrow, May 5, 2021, at 9:00 a.m. ET. The slide presentation that accompanies the conference call is posted on the Company’s Investor Events and Presentations page. A replay of the webcast will also be available on the Investor Events and Presentations page. About Corteva Corteva, Inc. (NYSE: CTVA) is a publicly traded, global pure-play agriculture company that provides farmers around the world with the most complete portfolio in the industry – including a balanced and diverse mix of seed, crop protection and digital solutions focused on maximizing productivity to enhance yield and profitability. With some of the most recognized brands in agriculture and an industry-leading product and technology pipeline well positioned to drive growth, the Company is committed to working with stakeholders throughout the food system as it fulfills its promise to enrich the lives of those who produce and those who consume, ensuring progress for generations to come. Corteva became an independent public company on June 1, 2019 and was previously the Agriculture Division of DowDuPont. More information can be found at www.corteva.com. Follow Corteva on Facebook, Instagram, LinkedIn, Twitter and YouTube. Cautionary Statement About Forward-Looking Statements This communication contains 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 “guidance”, “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 about Corteva’s strategy for growth, product development, regulatory approval, market position, anticipated benefits of recent acquisitions, timing of anticipated benefits from restructuring actions, outcome of contingencies, such as litigation and environmental matters, expenditures, and financial results, as well as expected benefits from, the separation of Corteva from DowDuPont, are forward looking statements. Forward-looking statements are based on certain assumptions and expectations of future events which may not be accurate or realized. Forward- looking statements also involve risks and uncertainties, many of which are beyond Corteva’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 on Corteva’s business, results of operations and financial condition. Some of the important factors that could cause Corteva’s actual results to differ materially from those projected in any such forward-looking statements include: i) failure to obtain or maintain the necessary regulatory approvals for some Corteva’s products; (ii) failure to successfully develop and commercialize Corteva’s pipeline; (iii) effect of the degree of public understanding and acceptance or perceived public acceptance of Corteva’s biotechnology and other agricultural products; (iv) effect of changes in agricultural and related policies of governments and international organizations; (v) effect of competition and consolidation in Corteva’s industry; (vi) effect of competition from manufacturers of generic products; (vii) costs of complying with evolving regulatory requirements and the effect of actual or alleged violations of environmental laws or permit requirements; (viii) effect of climate change and unpredictable seasonal and weather factors; (ix) risks related to oil and commodity markets; (x) competitor’s establishment of an intermediary platform for distribution of Corteva’s products; (xi) impact of Corteva’s dependence on third parties with respect to certain of its raw materials or licenses and commercialization; (xii) effect of industrial espionage and other disruptions to Corteva’s supply chain, information technology or network systems; (xiii) effect of volatility in Corteva’s input costs; (xiv) failure to realize the anticipated benefits of the internal reorganizations taken by DowDuPont in connection with the spin-off of Corteva and other cost savings initiatives; (xv) failure to raise capital through the capital markets or short-term borrowings on terms acceptable to Corteva; (xvi) failure of Corteva’s customers to pay their debts to Corteva, including customer financing programs; (xvii) increases in pension and other post-employment benefit plan funding obligations; (xviii) risks related to the indemnification obligations of legacy EID liabilities in connection with the separation of Corteva; (xix) effect of compliance with laws and requirements and adverse judgments on litigation; (xx) risks related to Corteva’s global operations; (xxi) failure to effectively manage acquisitions, divestitures, alliances and other portfolio actions; failure to enforce; (xxii) risks related to COVID-19; (xxiii) risks related to activist stockholders; (xxiv) Corteva’s intellectual property rights or defend against intellectual property claims asserted by others; (xxv) effect of counterfeit products; (xxvi) Corteva’s dependence on intellectual property cross-license agreements; and (xxvii) other risks related to the Separation from DowDuPont. Additionally, there may be other risks and uncertainties that Corteva is unable to currently identify or that Corteva does not currently expect to have a material impact on its business. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of Corteva’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 or other estimates is included in the “Risk Factors” section of Corteva’s Annual Report on Form 10-K, as modified by subsequent Quarterly Reports on Forms 10-Q and Current Reports on Form 8-K.
News Release 1Q 2021 5 Regulation G (Non-GAAP Financial Measures) This earnings release includes information that does not conform to U.S. GAAP and are considered non-GAAP measures. These measures may include organic sales, organic growth (including by segment and region), operating EBITDA, operating earnings per share, and base tax rate. 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 additional, useful information to investors as they provide insight with respect to ongoing operating results of the Company and a useful comparison of year over year results. These non- GAAP measures supplement the Company’s U.S. GAAP disclosures and should not be viewed as an alternative to U.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 to U.S. GAAP are provided in the Selected Financial Information and Non-GAAP Measures starting on page A-5 of the Financial Statement Schedules. Corteva is not able to reconcile its forward-looking non-GAAP financial measures to their most comparable U.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. For Significant items reported in the periods presented, refer to page A-8 of the Financial Statement Schedules. Beginning January 1, 2020, the Company presents accelerated prepaid royalty amortization expense as a significant item. Accelerated prepaid royalty amortization represents the noncash charge associated with the recognition of upfront payments made to Monsanto in connection with the Company’s non-exclusive license in the United States and Canada for Monsanto’s Genuity® Roundup Ready 2 Yield® Roundup Ready 2 Xtend® herbicide tolerance traits. During the five-year ramp-up period of Enlist E3TM, Corteva is expected 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 after the completion of the ramp-up. Additionally, on February 1, 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. Corteva expects to record total pre-tax restructuring and asset-related charges of approximately $130 million to $170 million. The restructuring actions associated with this charge are expected to be substantially complete in 2021. Organic sales is defined as price and volume and excludes currency and portfolio impacts. Operating EBITDA is defined as earnings (i.e., income from continuing operations before income taxes) before interest, depreciation, amortization, non-operating benefits, net, foreign exchange gains (losses) net, 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 (including goodwill impairment charges). Non-operating benefits, net consists of non-operating pension and other post-employment benefit (OPEB) credits, tax indemnification adjustments, environmental remediation and legal costs associated with legacy businesses and sites of Historical DuPont. Tax indemnification adjustments relate to changes in indemnification balances, as a result of the application of the terms of the Tax Matters Agreement, between Corteva and Dow and/or DuPont that are recorded by the Company as pre-tax income or expense. Operating earnings per share are defined as “Earnings per common share from continuing operations - diluted” excluding the after-tax impact of significant items (including goodwill impairment charges), the after tax impact of non-operating benefits, net, 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 net gain (loss) from the changes in fair value of the non-qualified foreign currency derivative contracts will be reported in 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. Base tax rate is defined as the effective tax rate excluding the impacts of foreign exchange gains (losses) net, non-operating benefits, net, amortization of intangibles as of the Separation from DowDuPont, and significant items (including goodwill impairment charges). ® TM Corteva Agriscience and its affiliated companies. 05/04/21 Media Contact Gregg M. Schmidt +1 302-485-3260 gregg.m.schmidt@corteva.com Investor Contact Jeff Rudolph +1 302-485-3704 jeff.rudolph@corteva.com investors.corteva.com
A-1
Corteva, Inc.
Consolidated Statements of Operations
(Dollars in millions, except per share amounts)
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Net sales | $ | 4,178 | $ | 3,956 | |||||||
| Cost of goods sold | 2,420 | 2,269 | |||||||||
| Research and development expense | 281 | 280 | |||||||||
| Selling, general and administrative expenses | 733 | 757 | |||||||||
| Amortization of intangibles | 183 | 163 | |||||||||
| Restructuring and asset related charges - net | 100 | 70 | |||||||||
| Other income — net | 337 | 1 | |||||||||
| Interest expense | 7 | 10 | |||||||||
| Income from continuing operations before income taxes | 791 | 408 | |||||||||
| Provision for income taxes on continuing operations | 178 | 127 | |||||||||
| Income from continuing operations after income taxes | 613 | 281 | |||||||||
| (Loss) income from discontinued operations after income taxes | (10) | 1 | |||||||||
| Net income | 603 | 282 | |||||||||
| Net income attributable to noncontrolling interests | 3 | 10 | |||||||||
| Net income attributable to Corteva | $ | 600 | $ | 272 | |||||||
| Basic earnings per share of common stock: | |||||||||||
| Basic earnings per share of common stock from continuing operations | $ | 0.82 | $ | 0.36 | |||||||
| Basic loss per share of common stock from discontinued operations | (0.01) | — | |||||||||
| Basic earnings per share of common stock | $ | 0.81 | $ | 0.36 | |||||||
| Diluted earnings per share of common stock: | |||||||||||
| Diluted earnings per share of common stock from continuing operations | $ | 0.81 | $ | 0.36 | |||||||
| Diluted loss per share of common stock from discontinued operations | (0.01) | — | |||||||||
| Diluted earnings per share of common stock | $ | 0.80 | $ | 0.36 | |||||||
| Average number of shares outstanding used in earnings per share (EPS) calculation (in millions) | |||||||||||
| Basic | 743.4 | 749.9 | |||||||||
| Diluted | 749.6 | 752.5 | |||||||||
A-2
Corteva, Inc.
Condensed Consolidated Balance Sheets
(Dollars in millions, except share amounts)
| March 31, 2021 | December 31, 2020 | March 31, 2020 | ||||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | 2,404 | $ | 3,526 | $ | 1,963 | ||||||||||||||
| Marketable securities | 114 | 269 | 10 | |||||||||||||||||
| Accounts and notes receivable, net | 6,792 | 4,926 | 6,775 | |||||||||||||||||
| Inventories | 4,321 | 4,882 | 4,401 | |||||||||||||||||
| Other current assets | 1,405 | 1,165 | 1,530 | |||||||||||||||||
| Total current assets | 15,036 | 14,768 | 14,679 | |||||||||||||||||
| Investment in nonconsolidated affiliates | 64 | 66 | 64 | |||||||||||||||||
| Property, plant and equipment - net of accumulated depreciation (March 31, 2021 - $3,874; December 31, 2020 - $3,857; March 31, 2020 - $3,406) | 4,299 | 4,396 | 4,358 | |||||||||||||||||
| Goodwill | 10,146 | 10,269 | 10,027 | |||||||||||||||||
| Other intangible assets | 10,584 | 10,747 | 11,241 | |||||||||||||||||
| Deferred income taxes | 433 | 464 | 273 | |||||||||||||||||
| Other assets | 1,987 | 1,939 | 2,336 | |||||||||||||||||
| Total Assets | $ | 42,549 | $ | 42,649 | $ | 42,978 | ||||||||||||||
| Liabilities and Equity | ||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Short-term borrowings and finance lease obligations | $ | 1,250 | $ | 3 | $ | 1,996 | ||||||||||||||
| Accounts payable | 3,098 | 3,615 | 3,021 | |||||||||||||||||
| Income taxes payable | 165 | 123 | 143 | |||||||||||||||||
| Deferred revenue | 2,247 | 2,662 | 1,996 | |||||||||||||||||
| Accrued and other current liabilities | 2,239 | 2,145 | 2,043 | |||||||||||||||||
| Total current liabilities | 8,999 | 8,548 | 9,199 | |||||||||||||||||
| Long-Term Debt | 1,102 | 1,102 | 614 | |||||||||||||||||
| Other Noncurrent Liabilities | ||||||||||||||||||||
| Deferred income tax liabilities | 902 | 893 | 911 | |||||||||||||||||
| Pension and other post employment benefits - noncurrent | 4,954 | 5,176 | 6,186 | |||||||||||||||||
| Other noncurrent obligations | 1,814 | 1,867 | 1,989 | |||||||||||||||||
| Total noncurrent liabilities | 8,772 | 9,038 | 9,700 | |||||||||||||||||
| Commitments and contingent liabilities | ||||||||||||||||||||
| Stockholders' equity | ||||||||||||||||||||
| Common stock, $0.01 par value; 1,666,667,000 shares authorized; issued at March 31, 2021 - 738,321,000; December 31, 2020 - 743,458,000; and March 31, 2020 - 748,369,000 | 7 | 7 | 7 | |||||||||||||||||
| Additional paid-in capital | 27,630 | 27,707 | 27,906 | |||||||||||||||||
| Retained earnings / (accumulated deficit) | 268 | — | (155) | |||||||||||||||||
| Accumulated other comprehensive loss | (3,367) | (2,890) | (3,933) | |||||||||||||||||
| Total Corteva stockholders' equity | 24,538 | 24,824 | 23,825 | |||||||||||||||||
| Noncontrolling interests | 240 | 239 | 254 | |||||||||||||||||
| Total equity | 24,778 | 25,063 | 24,079 | |||||||||||||||||
| Total Liabilities and Equity | $ | 42,549 | $ | 42,649 | $ | 42,978 | ||||||||||||||
A-3
Corteva, Inc.
Consolidated Statement of Cash Flows
(Dollars in millions, except per share amounts)
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Operating activities | |||||||||||
| Net income | $ | 603 | $ | 282 | |||||||
| Adjustments to reconcile net income to cash used for operating activities: | |||||||||||
| Depreciation and amortization | 304 | 283 | |||||||||
| Provision for deferred income tax | 47 | 26 | |||||||||
Net periodic pension and OPEB benefit, net | (318) | (85) | |||||||||
| Pension and OPEB contributions | (84) | (95) | |||||||||
| Net loss on sales of property, businesses, consolidated companies, and investments | — | 46 | |||||||||
| Restructuring and asset related charges - net | 100 | 70 | |||||||||
| Other net loss | 54 | 138 | |||||||||
| Changes in assets and liabilities - net | |||||||||||
| Accounts and notes receivable | (2,012) | (1,685) | |||||||||
| Inventories | 467 | 398 | |||||||||
| Accounts Payable | (448) | (557) | |||||||||
| Deferred revenue | (401) | (575) | |||||||||
| Other assets and liabilities | (262) | (176) | |||||||||
| Cash used for operating activities | (1,950) | (1,930) | |||||||||
| Investing activities | |||||||||||
| Capital expenditures | (137) | (128) | |||||||||
| Proceeds from sales of property, businesses, and consolidated companies - net of cash divested | 20 | 11 | |||||||||
| Purchases of investments | (40) | (67) | |||||||||
| Proceeds from sales and maturities of investments | 194 | 58 | |||||||||
| Other investing activities - net | (1) | (4) | |||||||||
| Cash provided by (used for) investing activities | 36 | (130) | |||||||||
| Financing activities | |||||||||||
| Net change in borrowings (less than 90 days) | 828 | 1,619 | |||||||||
| Proceeds from debt | 419 | 875 | |||||||||
| Payments on debt | — | (1) | |||||||||
| Repurchase of common stock | (350) | (50) | |||||||||
| Proceeds from exercise of stock options | 38 | 14 | |||||||||
| Dividends paid to stockholders | (97) | (97) | |||||||||
| Other financing activities | (17) | (16) | |||||||||
| Cash provided by financing activities | 821 | 2,344 | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (50) | (117) | |||||||||
| (Decrease)/increase in cash, cash equivalents and restricted cash | (1,143) | 167 | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 3,873 | 2,173 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 2,730 | $ | 2,340 | |||||||
A-4
Corteva, Inc.
Consolidated Segment Information
(Dollars in millions, except per share amounts)
| Three Months Ended March 31, | ||||||||||||||
| SEGMENT NET SALES - SEED | 2021 | 2020 | ||||||||||||
| Corn | $ | 1,888 | $ | 1,864 | ||||||||||
| Soybean | 177 | 181 | ||||||||||||
| Other oilseeds | 296 | 248 | ||||||||||||
| Other | 131 | 162 | ||||||||||||
| Seed | $ | 2,492 | $ | 2,455 | ||||||||||
| Three Months Ended March 31, | ||||||||||||||
| SEGMENT NET SALES - CROP PROTECTION | 2021 | 2020 | ||||||||||||
| Herbicides | $ | 986 | $ | 823 | ||||||||||
| Insecticides | 385 | 378 | ||||||||||||
| Fungicides | 261 | 229 | ||||||||||||
| Other | 54 | 71 | ||||||||||||
| Crop Protection | $ | 1,686 | $ | 1,501 | ||||||||||
| Three Months Ended March 31, | ||||||||||||||
| GEOGRAPHIC NET SALES - SEED | 2021 | 2020 | ||||||||||||
North America 1 | $ | 1,210 | $ | 1,290 | ||||||||||
EMEA 2 | 947 | 881 | ||||||||||||
Latin America | 274 | 216 | ||||||||||||
Asia Pacific | 61 | 68 | ||||||||||||
Rest of World 3 | 1,282 | 1,165 | ||||||||||||
| Net Sales | $ | 2,492 | $ | 2,455 | ||||||||||
| Three Months Ended March 31, | ||||||||||||||
| GEOGRAPHIC NET SALES - CROP PROTECTION | 2021 | 2020 | ||||||||||||
North America 1 | $ | 533 | $ | 475 | ||||||||||
EMEA 2 | 655 | 586 | ||||||||||||
Latin America | 244 | 218 | ||||||||||||
Asia Pacific | 254 | 222 | ||||||||||||
Rest of World 3 | 1,153 | 1,026 | ||||||||||||
| Net Sales | $ | 1,686 | $ | 1,501 | ||||||||||
| 1. Reflects U.S. & Canada | ||||||||||||||
| 2. Reflects Europe, Middle East, and Africa | ||||||||||||||
| 3. Reflects EMEA, Latin America, and Asia Pacific | ||||||||||||||
A-5
Corteva, Inc.
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
| Three Months Ended March 31, | ||||||||||||||
| 2021 | ||||||||||||||
| Net Sales (GAAP) | $ | 4,178 | ||||||||||||
| Less: Impacts from Currency and Portfolio | (25) | |||||||||||||
| Organic Sales (Non-GAAP) | $ | 4,203 | ||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| OPERATING EBITDA | 2021 | 2020 | ||||||||||||
| Seed | $ | 617 | $ | 581 | ||||||||||
| Crop Protection | 321 | 238 | ||||||||||||
| Corporate Expenses | (34) | (25) | ||||||||||||
| Operating EBITDA (Non-GAAP) | $ | 904 | $ | 794 | ||||||||||
| RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS AFTER INCOME TAXES TO OPERATING EBITDA | Three Months Ended March 31, | |||||||||||||
| 2021 | 2020 | |||||||||||||
| Income from continuing operations after income taxes (GAAP) | $ | 613 | $ | 281 | ||||||||||
| Provision for income taxes on continuing operations | 178 | 127 | ||||||||||||
| Income from continuing operations before income taxes (GAAP) | 791 | 408 | ||||||||||||
| Depreciation and amortization | 304 | 283 | ||||||||||||
| Interest income | (21) | (18) | ||||||||||||
| Interest expense | 7 | 10 | ||||||||||||
Exchange losses - net1 | 35 | 61 | ||||||||||||
Non-operating benefits - net2 | (311) | (73) | ||||||||||||
Mark-to-market gains on certain foreign currency contracts not designated as hedges3 | (1) | |||||||||||||
Significant items charge4 | 100 | 123 | ||||||||||||
| Operating EBITDA (Non-GAAP) | $ | 904 | $ | 794 | ||||||||||
1.Refer to page A-12 for pre-tax and after tax impacts of exchange losses - net.
2.Non-operating benefits—net consists of non-operating pension and other post-employment benefit (OPEB) (benefits) costs, tax indemnification adjustments, environmental remediation and legal costs associated with legacy EID businesses and sites. Tax indemnification adjustments relate to changes in indemnification balances, as a result of the application of the terms of the Tax Matters Agreement, between Corteva and Dow and/or DuPont that are recorded by the company as pre-tax income or expense.
3.Effective January 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 activity in the three months ended March 31, 2020.
4.Refer to page A-8 for pre-tax and after tax impacts of significant items.
A-6
Corteva, Inc.
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
| PRICE - VOLUME - CURRENCY ANALYSIS | ||||||||||||||||||||||||||
| REGION | ||||||||||||||||||||||||||
| Q1 2021 vs. Q1 2020 | Percent Change Due To: | |||||||||||||||||||||||||
| Net Sales Change (GAAP) | Organic Change 1 (Non-GAAP) | Local Price & | Portfolio / | |||||||||||||||||||||||
| $ | % | $ | % | Product Mix | Volume | Currency | Other | |||||||||||||||||||
| North America | $ | (22) | (1) | % | $ | (30) | (2) | % | 1 | % | (3) | % | 1 | % | — | % | ||||||||||
EMEA | 135 | 9 | % | 86 | 6 | % | 3 | % | 3 | % | 3 | % | — | % | ||||||||||||
Latin America | 84 | 19 | % | 166 | 38 | % | 14 | % | 24 | % | (19) | % | — | % | ||||||||||||
Asia Pacific | 25 | 9 | % | 26 | 9 | % | 3 | % | 6 | % | 4 | % | (4) | % | ||||||||||||
| Rest of World | 244 | 11 | % | 278 | 13 | % | 5 | % | 8 | % | (1) | % | (1) | % | ||||||||||||
| Total | $ | 222 | 6 | % | $ | 248 | 6 | % | 3 | % | 3 | % | — | % | — | % | ||||||||||
| SEED | ||||||||||||||||||||||||||
| Q1 2021 vs. Q1 2020 | Percent Change Due To: | |||||||||||||||||||||||||
| Net Sales Change (GAAP) | Organic Change 1 (Non-GAAP) | Local Price & | Portfolio / | |||||||||||||||||||||||
| $ | % | $ | % | Product Mix | Volume | Currency | Other | |||||||||||||||||||
| North America | $ | (80) | (6) | % | $ | (84) | (7) | % | (1) | % | (6) | % | 1 | % | — | % | ||||||||||
EMEA | 66 | 7 | % | 47 | 5 | % | 3 | % | 2 | % | 2 | % | — | % | ||||||||||||
Latin America | 58 | 27 | % | 104 | 48 | % | 9 | % | 39 | % | (21) | % | — | % | ||||||||||||
Asia Pacific | (7) | (10) | % | (5) | (7) | % | 5 | % | (12) | % | (3) | % | — | % | ||||||||||||
| Rest of World | 117 | 10 | % | 146 | 13 | % | 5 | % | 8 | % | (3) | % | — | % | ||||||||||||
| Total | $ | 37 | 2 | % | $ | 62 | 3 | % | 2 | % | 1 | % | (1) | % | — | % | ||||||||||
| CROP PROTECTION | ||||||||||||||||||||||||||
| Q1 2021 vs. Q1 2020 | Percent Change Due To: | |||||||||||||||||||||||||
| Net Sales Change (GAAP) | Organic Change 1 (Non-GAAP) | Local Price & | Portfolio / | |||||||||||||||||||||||
| $ | % | $ | % | Product Mix | Volume | Currency | Other | |||||||||||||||||||
| North America | 58 | 12 | % | $ | 54 | 11 | % | 6 | % | 5 | % | 1 | % | — | % | |||||||||||
EMEA | 69 | 12 | % | 39 | 7 | % | 3 | % | 4 | % | 5 | % | — | % | ||||||||||||
Latin America | 26 | 12 | % | 62 | 28 | % | 18 | % | 10 | % | (16) | % | — | % | ||||||||||||
Asia Pacific | 32 | 14 | % | 31 | 14 | % | 2 | % | 12 | % | 5 | % | (5) | % | ||||||||||||
| Rest of World | 127 | 12 | % | 132 | 13 | % | 6 | % | 7 | % | — | % | (1) | % | ||||||||||||
| Total | $ | 185 | 12 | % | $ | 186 | 12 | % | 6 | % | 6 | % | 1 | % | (1) | % | ||||||||||
A-7
Corteva, Inc.
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
| SEED PRODUCT LINE | ||||||||||||||||||||||||||
| Q1 2021 vs. Q1 2020 | Percent Change Due To: | |||||||||||||||||||||||||
| Net Sales Change (GAAP) | Organic Change 1 (Non-GAAP) | Local Price & | Portfolio / | |||||||||||||||||||||||
| $ | % | $ | % | Product Mix | Volume | Currency | Other | |||||||||||||||||||
| Corn | $ | 24 | 1 | % | $ | 43 | 2 | % | 2 | % | — | % | (1) | % | — | % | ||||||||||
| Soybeans | (4) | (2) | % | (7) | (4) | % | (4) | % | — | % | 2 | % | — | % | ||||||||||||
| Other oilseeds | 48 | 19 | % | 54 | 22 | % | 4 | % | 18 | % | (3) | % | — | % | ||||||||||||
| Other | (31) | (19) | % | (28) | (17) | % | (5) | % | (12) | % | (2) | % | — | % | ||||||||||||
| Total | $ | 37 | 2 | % | $ | 62 | 3 | % | 2 | % | 1 | % | (1) | % | — | % | ||||||||||
| CROP PROTECTION PRODUCT LINE | ||||||||||||||||||||||||||
| Q1 2021 vs. Q1 2020 | Percent Change Due To: | |||||||||||||||||||||||||
| Net Sales Change (GAAP) | Organic Change 1 (Non-GAAP) | Local Price & | Portfolio / | |||||||||||||||||||||||
| $ | % | $ | % | Product Mix | Volume | Currency | Other | |||||||||||||||||||
| Herbicides | $ | 163 | 20 | % | $ | 142 | 17 | % | 5 | % | 12 | % | 3 | % | — | % | ||||||||||
| Insecticides | 7 | 2 | % | 15 | 4 | % | 8 | % | (4) | % | (2) | % | — | % | ||||||||||||
| Fungicides | 32 | 14 | % | 43 | 19 | % | 5 | % | 14 | % | (1) | % | (4) | % | ||||||||||||
| Other | (17) | (24) | % | (14) | (20) | % | (1) | % | (19) | % | (4) | % | — | % | ||||||||||||
| Total | $ | 185 | 12 | % | $ | 186 | 12 | % | 6 | % | 6 | % | 1 | % | (1) | % | ||||||||||
1.Organic sales is defined as price and volume and excludes currency and portfolio impacts.
A-8
Corteva, Inc.
Significant Items
(Dollars in millions, except per share amounts)
| SIGNIFICANT ITEMS BY SEGMENT (PRE-TAX) | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Seed | $ | (21) | $ | (10) | |||||||
| Crop Protection | (32) | (71) | |||||||||
| Corporate | (47) | (42) | |||||||||
| Total significant items before income taxes | $ | (100) | $ | (123) | |||||||
| SIGNIFICANT ITEMS - PRE-TAX, AFTER TAX, AND EPS IMPACTS | ||||||||||||||||||||||||||||||||||||||
| Pre-tax | After tax4 | ($ Per Share) | ||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||||||
| 1st Quarter | ||||||||||||||||||||||||||||||||||||||
Restructuring and asset related charges, net 1 | $ | (100) | $ | (70) | $ | (77) | $ | (57) | $ | (0.10) | $ | (0.08) | ||||||||||||||||||||||||||
Loss on divestiture 2 | — | (53) | — | (43) | — | (0.06) | ||||||||||||||||||||||||||||||||
Income tax items 3 | — | — | — | (19) | — | (0.02) | ||||||||||||||||||||||||||||||||
1st Quarter — Total | $ | (100) | $ | (123) | $ | (77) | $ | (119) | $ | (0.10) | $ | (0.16) | ||||||||||||||||||||||||||
1.First quarter 2021 includes restructuring and asset related charges of $(100). The charges primarily relate to a $(89) charge associated with the 2021 Restructuring Actions and a $(7) charge related to non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits.
First quarter 2020 includes restructuring and asset related charges of $(70). The charge included a $(63) charge related to the Execute to Win Productivity Program, a $(10) charge related to non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits, and a $3 asset related benefit associated with the DowDuPont Synergy Program.
2.First quarter 2020 includes a loss of $(53) included in other income - net related to the sale of the La Porte site, for which the company signed an agreement during the first quarter 2020, and closed during the first quarter of 2021.
3.First quarter 2020 includes an after tax charge related to the impact of a state tax valuation allowance in the U.S. based on a change in judgment about the realizability of a deferred tax asset.
4.Unless specifically addressed in notes 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.
A-9
Corteva, Inc.
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
| Operating Earnings Per Share (Non-GAAP) | ||||||||||||||||||||||||||
| Operating earnings per share is defined as earnings per share from continuing operations – diluted, excluding non-operating benefits - net, amortization of intangibles (existing as of Separation), net unrealized gain or loss from mark-to-market activity on certain foreign currency derivative instruments that do not qualify for hedge accounting, and significant items. | ||||||||||||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
| $ | $ | EPS (diluted) | EPS (diluted) | |||||||||||||||||||||||
| Net income from continuing operations attributable to Corteva (GAAP) | $ | 610 | $ | 271 | $ | 0.81 | $ | 0.36 | ||||||||||||||||||
Less: Non-operating benefits - net, after tax 1 | 237 | 57 | 0.31 | 0.08 | ||||||||||||||||||||||
| Less: Amortization of intangibles (existing as of Separation), after tax | (143) | (114) | (0.19) | (0.15) | ||||||||||||||||||||||
Less: Mark-to-market gains on certain foreign currency contracts not designated as hedges, after tax2 | 1 | — | ||||||||||||||||||||||||
| Less: Significant items charge, after tax | (77) | (119) | (0.10) | (0.16) | ||||||||||||||||||||||
| Operating Earnings (Non-GAAP) | $ | 592 | $ | 447 | $ | 0.79 | $ | 0.59 | ||||||||||||||||||
1.Non-operating benefits—net consists of non-operating pension and other post-employment benefit (OPEB) benefits (costs), tax indemnification adjustments, and environmental remediation and legal costs associated with legacy EID businesses and sites. Tax indemnification adjustments relate to changes in indemnification balances, as a result of the application of the terms of the Tax Matters Agreement, between Corteva and Dow and/or DuPont that are recorded by the company as pre-tax income or expense.
2.Effective January 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 activity in the three months ended March 31, 2020.
A-10
Corteva, Inc.
Operating EBITDA to Operating Earnings Per Share
(Dollars in millions, except per share amounts)
| Operating EBITDA to Operating Earnings Per Share | ||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| 2021 | 2020 | |||||||||||||
Operating EBITDA (Non-GAAP)1 | $ | 904 | $ | 794 | ||||||||||
| Depreciation | (121) | (120) | ||||||||||||
| Interest Income | 21 | 18 | ||||||||||||
| Interest Expense | (7) | (10) | ||||||||||||
Provision for income taxes on continuing operations before significant items, non-operating benefits - net, amortization of intangibles (existing as of Separation), mark-to-market gains on certain foreign currency contracts not designated as hedges, and exchange gains/(losses), net (Non-GAAP)1 | (162) | (147) | ||||||||||||
Base income tax rate from continuing operations (Non-GAAP)1 | 20.3 | % | 21.6 | % | ||||||||||
Exchange losses - net, after tax2 | (40) | (78) | ||||||||||||
| Net income attributable to non-controlling interests | (3) | (10) | ||||||||||||
Operating Earnings (Non-GAAP)1 | $ | 592 | $ | 447 | ||||||||||
| Diluted Shares (in millions) | 749.6 | 752.5 | ||||||||||||
Operating Earnings Per Share (Non-GAAP)1 | $ | 0.79 | $ | 0.59 | ||||||||||
1. Refer to pages A-5 through A-9 and A-11 for Non-GAAP reconciliations.
2. Refer to page A-12 for pre-tax and after tax impacts of exchange gains (losses) - net.
A-11
Corteva, Inc.
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
| Reconciliation of Base Income Tax Rate to Effective Income Tax Rate | |||||||||||
| Base income tax rate is defined as the effective income tax rate less the effect of exchange (losses) gains, significant items, amortization of intangibles (existing as of Separation), mark-to-market gains on certain foreign currency contracts not designated as hedges, and non-operating benefits - net. | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
Income from continuing operations before income taxes (GAAP) | $ | 791 | $ | 408 | |||||||
Add: Significant items - charge 1 | 100 | 123 | |||||||||
| Non-operating benefits - net | (311) | (73) | |||||||||
| Amortization of intangibles (existing as of Separation) | 183 | 163 | |||||||||
Mark-to-market gains on certain foreign currency contracts not designated as hedges2 | (1) | ||||||||||
Less: Exchange losses, net3 | (35) | (61) | |||||||||
Income from continuing operations before income taxes, significant items, non-operating benefits - net, amortization of intangibles (existing as of Separation), mark-to-market gains on certain foreign currency contracts not designated as hedges, and exchange losses, net (Non-GAAP) | $ | 797 | $ | 682 | |||||||
Provision for income taxes on continuing operations (GAAP) | $ | 178 | $ | 127 | |||||||
Add: Tax benefits on significant items charge1 | 23 | 4 | |||||||||
| Tax expenses on non-operating benefits - net | (74) | (16) | |||||||||
| Tax benefits on amortization of intangibles (existing as of Separation) | 40 | 49 | |||||||||
Tax benefits on mark-to-market gains on certain foreign currency contracts not designated as hedges2 | — | ||||||||||
Tax expenses on exchange losses, net3 | (5) | (17) | |||||||||
Provision for income taxes on continuing operations before significant items, non-operating benefits - net, amortization of intangibles (existing as of Separation), mark-to-market gains on certain foreign currency contracts not designated as hedges, and exchange losses, net (Non-GAAP) | $ | 162 | $ | 147 | |||||||
Effective income tax rate (GAAP) | 22.5 | % | 31.1 | % | |||||||
| Significant items, non-operating benefits, amortization of intangibles (existing as of Separation), and mark-to-market gains on certain foreign currency contracts not designated as hedges effect | (0.6) | % | (4.7) | % | |||||||
| Tax rate from continuing operations before significant items, non-operating benefits - net, amortization of intangibles (existing as of Separation), and mark-to-market gains on certain foreign currency contracts not designated as hedges | 21.9 | % | 26.4 | % | |||||||
Exchange losses, net effect3 | (1.6) | % | (4.8) | % | |||||||
Base income tax rate from continuing operations (Non-GAAP) | 20.3 | % | 21.6 | % | |||||||
| 1. See Significant Items table for further detail. | |||||||||||
| 2. Effective January 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 activity in the three months ended March 31, 2020. | |||||||||||
| 3. See page A-12 for further details of exchange gains (losses). | |||||||||||
A-12
Corteva, Inc.
(Dollars in millions, except per share amounts)
| Exchange Gains/Losses | ||||||||||||||
| The company routinely uses foreign currency exchange contracts to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets and liabilities. The objective of this program is to maintain an approximately balanced position in foreign currencies in order to minimize, on an after-tax basis, the effects of exchange rate changes on net monetary asset positions. The hedging program gains (losses) are largely taxable (tax deductible) in the United States (U.S.), whereas the offsetting exchange gains (losses) on the remeasurement of the net monetary asset positions are often not taxable (tax deductible) in their local jurisdictions. The net pre-tax exchange gains (losses) are recorded in other income (expense) - net and the related tax impact is recorded in provision for (benefit from) income taxes on continuing operations in the Consolidated Statements of Operations. | ||||||||||||||
| Three Months Ended March 31, | ||||||||||||||
| 2021 | 2020 | |||||||||||||
| Subsidiary Monetary Position Loss | ||||||||||||||
| Pre-tax exchange losses | $ | (51) | $ | (226) | ||||||||||
| Local tax (expenses) benefits | (1) | 23 | ||||||||||||
| Net after tax impact from subsidiary exchange losses | $ | (52) | $ | (203) | ||||||||||
| Hedging Program Gain | ||||||||||||||
| Pre-tax exchange gains | $ | 16 | $ | 165 | ||||||||||
| Tax expenses | (4) | (40) | ||||||||||||
| Net after tax impact from hedging program exchange gains | $ | 12 | $ | 125 | ||||||||||
| Total Exchange Loss | ||||||||||||||
| Pre-tax exchange losses | $ | (35) | $ | (61) | ||||||||||
| Tax expenses | (5) | (17) | ||||||||||||
| Net after tax exchange losses | $ | (40) | $ | (78) | ||||||||||
| As shown above, the "Total Exchange Loss" is the sum of the "Subsidiary Monetary Position Loss" and the "Hedging Program Gain." | ||||||||||||||