01—Abstract
Summary
Summary of the 10-K filed February 12, 2021. Cited figures are marked; the original filing is the authoritative source.
DuPont de Nemours, Inc. (NYSE: DD) reported 2020 net sales of $20.4 billiona, down 5 percent from $21.5 billion in 2019, driven by a 4 percent decrease in volume and a 1 percent decline from portfolio actions.
The company posted a net loss available to common stockholders of $2.95 billionb, or $(4.01) per diluted share, compared with net income of $498 million in 2019. The loss was driven primarily by $3.21 billion of goodwill impairment charges, including $2.50 billion in Transportation & Industrial and $716 million in Non-Core, along with $849 million of restructuring and asset related charges. Operating cash flow improved to $4.10 billion from $1.41 billion, and cash and cash equivalents were $2.54 billion at year-end, with $6.2 billion of N&B Notes Offering proceeds held in restricted cash.
The most significant event for investors is the February 1, 2021 completion of the separation and distribution of the Nutrition & Biosciences (N&B) business to International Flavors & Fragrances Inc. (IFF) through an exchange offer and merger. DuPont accepted approximately 197.4 million shares of its common stock in exchange for about 141.7 million shares of N&B common stock and received a one-time cash payment of approximately $7.3 billionc. The company used these proceeds to terminate its $3 billion term loan facilities and plans to redeem its $2 billion May 2020 Notes in May 2021.
The N&B business will be reported as discontinued operations beginning in the first quarter of 2021. Looking ahead, DuPont expects demand to remain strong for semiconductors, smartphones, protective garments, water and residential construction, and anticipates earnings improvement from cost actions, a lower share count from the Exchange Offer, and lower interest expense. The company also disclosed a binding memorandum of understanding with Corteva and Chemours to share future eligible PFAS costs, capped at $4 billiond of qualified spend, and it planned to sell its Clean Technologies and Solamet businesses and its Biomaterials unit for aggregate pre-tax proceeds of about $920 million, expected to close in the first half of 2021.
02—Key points
Key Highlights
- Net sales of $20.4 billion in 2020, down 5 percent from $21.5 billion, with volume down 4 percent and portfolio actions reducing sales by 1 percent.
- Net loss available to common stockholders of $2.95 billion, or $(4.01) per diluted share, versus net income of $498 million in 2019, reflecting $3.21 billion of goodwill impairment charges.
- Completed the N&B Transaction on February 1, 2021, exchanging about 197.4 million DuPont shares for about 141.7 million N&B shares and receiving a one-time cash payment of approximately $7.3 billion.
- Operating cash flow rose to $4.10 billion in 2020 from $1.41 billion in 2019, primarily from a release of net working capital.
- Total debt was $21.8 billion at December 31, 2020, including $6.25 billion of N&B Notes Offering debt that was separated from the company at the N&B closing.
- Credit ratings at January 31, 2021 were BBB+ (S&P), Baa1 (Moody's) and BBB+ (Fitch), all with stable outlooks.
- Entered a January 22, 2021 memorandum of understanding with Corteva and Chemours to share eligible future PFAS costs, with Chemours bearing 50 percent and DuPont and Corteva together bearing 50 percent, up to $4 billion of qualified spend.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 12, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $20.40B$21.51B | −5.2% |
| Cost of Revenue | $7.06B$10.03B | −29.6% |
| Gross Profit | $13.33B$11.49B | +16.1% |
| R&D Expenses | $565.00M$689.00M | −18.0% |
| SG&A Expenses | $1.49B$2.06B | −27.5% |
| Net Income | -$2.95B$498.00M | −692.6% |
| EPS (Basic) | $-4.01$0.67 | −698.5% |
| EPS (Diluted) | $-4.01$0.67 | −698.5% |
| Shares Outstanding (Basic) | 735.50M746.30M | −1.4% |
| Shares Outstanding (Diluted) | 735.50M746.30M | −1.4% |
05—Questions
Frequently Asked Questions
What did DuPont's N&B Transaction involve and how much cash did the company receive?
On February 1, 2021, DuPont completed the separation of its Nutrition & Biosciences business through an exchange offer, in which it accepted about 197.4 million shares of DuPont common stock for about 141.7 million shares of N&B common stock. N&B then merged with a subsidiary of IFF, and each N&B share converted into one share of IFF common stock. DuPont received a one-time cash payment of approximately $7.3 billion, which it used to repay its $3 billion term loan facilities and plans to use to redeem the $2 billion May 2020 Notes in May 2021.
Why did DuPont record large goodwill impairment charges in 2020?
The company recorded goodwill impairment charges of $3.21 billion in 2020. These included a $2.50 billion charge in the second quarter related to the Transportation & Industrial reporting unit, after continued near-term demand weakness in global automotive production due to COVID-19. Additional charges of $533 million in the first quarter and $183 million in the third quarter related to Non-Core reporting units, reflecting expectations of potential divestiture proceeds and softening photovoltaics and aerospace conditions.
What is DuPont's exposure to PFAS liabilities under the new arrangement?
On January 22, 2021, DuPont, Corteva, EID and Chemours entered into a binding memorandum of understanding to share certain costs of potential future eligible PFAS liabilities through December 31, 2040 or until qualified spend reaches $4 billion. Chemours will bear 50 percent of qualified spend, and DuPont and Corteva together will bear 50 percent, with DuPont and Corteva's share capped at $2 billion in the aggregate. As of December 31, 2020, the company recorded a $59 million liability related to the cost sharing arrangement, and it also recorded a $27 million indemnification liability for its share of the Ohio MDL settlement of $83 million.
What divestitures is DuPont pursuing and what proceeds are expected?
In October 2020, DuPont agreed to sell its Biomaterials business unit, including its equity method investment in DuPont Tate & Lyle Bio Products, for $240 million. In January 2021, it agreed to sell its Clean Technologies business for $510 million and entered into a separate agreement to sell its Solamet business. The divestitures are subject to regulatory approval and customary closing conditions and are expected to close in the first half of 2021, generating aggregate pre-tax cash proceeds of about $920 million.
What is DuPont's outlook and capital allocation plan for 2021?
DuPont expects demand to remain strong for semiconductors, smartphones, protective garments, water and residential construction, along with continued improvements in automotive markets, and expects these trends along with cost actions to drive earnings improvement. It expects a lower share count from the Exchange Offer and lower interest expense from paying down commercial paper, the term loan facilities and the May 2020 Notes. The company expects 2021 capital expenditures of approximately $825 million and pension contributions of about $100 million. Its $2 billion share buyback program had about $1 billion remaining at December 31, 2020 and expires June 1, 2021.
06—Continue