01—Abstract
Summary
Summary of the 10-K filed February 15, 2023. Cited figures are marked; the original filing is the authoritative source.
DuPont de Nemours, Inc. reported 2022 net sales of $13.0 billiona, up 4 percent from $12.6 billion in 2021, with income from continuing operations before income taxes of $1,448 million and net income of $5,917 million, which includes $4,856 million from discontinued operations driven largely by the M&M Divestiture.
The divestiture of the majority of the historic Mobility & Materials segment to Celanese closed on November 1, 2022 for $11.0 billionb in cash ($10.5 billion net of transferred cash). Proceeds funded a $2.5 billion early redemption of 2023 senior notes, the repayment of all commercial paper, and a $3.25 billion accelerated share repurchase agreement; year-end cash and cash equivalents were $3.7 billion and marketable securities were $1.3 billion, and total debt declined to $8.1 billion from $10.8 billion. Continuing operations are now organized into Electronics & Industrial (net sales $5.9 billion, Operating EBITDA $1.8 billion) and Water & Protection (net sales $6.0 billion, Operating EBITDA $1.4 billion), with Corporate & Other holding the retained Auto Adhesives & Fluids, MultibaseTM and Tedlar product lines along with divested businesses.
Operating cash flow fell sharply to $588 millionc from $2,281 million, reflecting working capital use and transaction costs, and capital expenditures were $743 million. The company also terminated its intended Rogers Corporation acquisition, paying a $162.5 million termination fee, and announced a $5 billion share repurchase program running through June 30, 2024, and a 9 percent increase in the first-quarter 2023 dividend to $0.36 per share.
Investors should weigh the company's large PFAS-related exposure: the filing describes a cost-sharing arrangement under which Chemours bears 50 percent of qualified spend and DuPont and Corteva share the other 50 percent, with an accrued indemnification liability of $186 milliond, and it notes that additional eligible PFAS costs could be significant. The Delrin divestiture remains pending, with closing anticipated by the end of 2023, and the auditor identified goodwill impairment analyses and internal restructuring tax effects as critical audit matters.
02—Key points
Key Highlights
- Net sales of $13.0 billion in 2022, up 4 percent versus $12.6 billion in 2021, driven by a 7 percent increase from local price and product mix and a 1 percent increase in volume.
- Completed the $11.0 billion cash M&M Divestiture to Celanese on November 1, 2022, with a pre-tax gain recorded in discontinued operations; net income of $5,917 million includes $4,856 million from discontinued operations.
- Year-end cash and cash equivalents of $3.7 billion and marketable securities of $1.3 billion, with total debt reduced to $8.1 billion from $10.8 billion after the $2.5 billion senior note redemption and commercial paper repayment.
- Operating cash flow fell to $588 million from $2,281 million in 2021, primarily due to working capital use, accounts payable reductions and transaction and separation costs.
- Share repurchases included a $3.25 billion accelerated share repurchase with 38.8 million initial shares delivered, plus a new $5 billion program terminating June 30, 2024.
- Quarterly dividend increased to $0.36 per share for the first quarter of 2023, a 9 percent increase versus the first quarter 2022 dividend.
- PFAS exposure remains significant: an indemnification liability of $186 million is recorded under the MOU cost-sharing arrangement, and the filing states that additional eligible PFAS costs could have a significant effect on financial condition and cash flows.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 15, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $13.02B$12.57B | +3.6% |
| Cost of Revenue | $8.40B$7.97B | +5.4% |
| Gross Profit | $4.62B$4.59B | +0.4% |
| R&D Expenses | $536.00M$557.00M | −3.8% |
| SG&A Expenses | $1.47B$1.60B | −8.4% |
| Net Income | $5.87B$6.47B | −9.3% |
| EPS (Basic) | $11.77$11.92 | −1.3% |
| EPS (Diluted) | $11.75$11.89 | −1.2% |
| Shares Outstanding (Basic) | 498.50M542.70M | −8.1% |
| Shares Outstanding (Diluted) | 499.40M544.20M | −8.2% |
05—Questions
Frequently Asked Questions
How much cash did DuPont receive from the M&M Divestiture and how was it used?
DuPont received $11.0 billion in cash on November 1, 2022, or $10.5 billion net after about $0.5 billion of transferred cash was reimbursed. The proceeds funded the early redemption of $2.5 billion of 2023 senior unsecured notes, the repayment of all commercial paper, and the accelerated share repurchase agreements, and the remaining cash was invested in marketable securities.
What is the status of the Delrin divestiture?
The Board approved the divestiture of the Delrin acetal homopolymer business on February 18, 2022, subject to a definitive agreement and closing conditions. As of December 31, 2022, the company anticipates a closing by the end of 2023, and the Delrin business is presented as held for sale and discontinued operations.
What are the company's main ongoing legal and environmental exposures?
The largest exposures relate to PFAS. Under the MOU with Chemours, Corteva and EIDP, costs are shared with Chemours bearing 50 percent of qualified spend up to $4 billion. DuPont faces AFFF-related multidistrict litigation with about 3,400 cases, state attorney general lawsuits, and a Dutch municipal civil summons, and the filing states that additional eligible PFAS costs could exceed amounts accrued.
What is the outlook for 2023 demand?
The company expects continued demand strength in water and auto adhesives and stable demand in aerospace and healthcare. It expects lower volumes in consumer-facing markets, primarily consumer electronics and semiconductors, during the first half of 2023, and continued construction-market declines within Water & Protection throughout 2023. It states it cannot predict the extent of the macroeconomic impacts.
How strong is the balance sheet and how is it funded?
At December 31, 2022, the company had $6.4 billion of net working capital, a current ratio of 2.78:1, and total debt of $8.1 billion. Its credit ratings were BBB+ at S&P and Fitch and Baa1 at Moody's, all with stable outlooks, and it maintained a $2.5 billion five-year revolving credit facility and a $1.0 billion 364-day facility, both undrawn at year end.
06—Continue