Corteva(CTVA) - 2023 Q3 - Quarterly Report

Part I Financial Information This section provides the unaudited interim consolidated financial statements and management's discussion and analysis of the company's financial performance and condition Item 1. Consolidated Financial Statements (Unaudited) This section presents Corteva, Inc.'s unaudited interim consolidated financial statements for the periods ended September 30, 2023 and 2022 Consolidated Statements of Operations This statement provides a summary of the company's revenues, expenses, and net income or loss for the specified periods Consolidated Statements of Operations Highlights (Unaudited) | Indicator (In millions, except per share) | Three Months Ended Sep 30, 2023 (Millions USD) | Three Months Ended Sep 30, 2022 (Millions USD) | Nine Months Ended Sep 30, 2023 (Millions USD) | Nine Months Ended Sep 30, 2022 (Millions USD) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $2,590 | $2,777 | $13,519 | $13,630 | | Income (loss) from continuing operations | $(315) | $(322) | $1,172 | $1,257 | | Net income (loss) attributable to Corteva | $(321) | $(331) | $988 | $1,202 | | Diluted earnings (loss) per share | $(0.45) | $(0.46) | $1.39 | $1.66 | Consolidated Balance Sheets This statement presents the company's financial position, including assets, liabilities, and equity, at specific points in time Consolidated Balance Sheet Highlights (Unaudited) | Indicator (In millions) | Sep 30, 2023 (Millions USD) | Dec 31, 2022 (Millions USD) | | :--- | :--- | :--- | | Total current assets | $16,333 | $16,795 | | Total Assets | $43,110 | $42,618 | | Total current liabilities | $10,348 | $10,744 | | Total Liabilities | $17,643 | $17,077 | | Total Corteva stockholders' equity | $25,226 | $25,302 | Consolidated Statements of Cash Flows This statement details the cash inflows and outflows from operating, investing, and financing activities for the specified periods Consolidated Statement of Cash Flows Highlights (Unaudited, Nine Months Ended) | Indicator (In millions) | Sep 30, 2023 (Millions USD) | Sep 30, 2022 (Millions USD) | | :--- | :--- | :--- | | Cash used for operating activities | $(2,604) | $(2,146) | | Cash used for investing activities | $(1,773) | $(439) | | Cash provided by financing activities | $3,603 | $663 | | Decrease in cash, cash equivalents | $(842) | $(2,217) | Notes to the Interim Consolidated Financial Statements (Unaudited) This section provides detailed explanations and disclosures supporting the interim consolidated financial statements Note 3 - Business Combinations This note details the acquisitions of Stoller Group and Symborg, completed in March 2023, aimed at expanding the company's Biologicals portfolio - Completed acquisitions of Stoller for $1.22 billion and Symborg for $370 million on March 1, 2023, to expand its Biologicals business[98] Preliminary Purchase Price Allocation (in millions) | Acquired Company | Goodwill (Millions USD) | Other Intangible Assets (Millions USD) | Net Assets Acquired (Millions USD) | | :--- | :--- | :--- | :--- | | Stoller | $374 | $645 | $1,220 | | Symborg | $122 | $311 | $370 | Note 4 - Revenue This note outlines revenue recognition policies and disaggregates net sales by major product line and geographic region Net Sales by Segment (Nine Months Ended Sep 30, in millions) | Segment | 2023 (Millions USD) | 2022 (Millions USD) | | :--- | :--- | :--- | | Seed | $7,837 | $7,333 | | Crop Protection | $5,682 | $6,297 | | Total | $13,519 | $13,630 | Contract Balances (in millions) | Balance Type | Sep 30, 2023 (Millions USD) | Dec 31, 2022 (Millions USD) | Sep 30, 2022 (Millions USD) | | :--- | :--- | :--- | :--- | | Accounts receivable - trade | $5,320 | $4,261 | $4,875 | | Deferred revenue - current | $552 | $3,388 | $860 | Note 5 - Restructuring and Asset Related Charges - Net This note details restructuring actions initiated in 2022, including the withdrawal from Russia, and associated charges - The company has incurred $350 million in charges inception-to-date under the 2022 Restructuring Actions, which includes the exit from Russia[113] 2022 Restructuring Charges (in millions) | Period | Three Months Ended Sep 30 (Millions USD) | Nine Months Ended Sep 30 (Millions USD) | | :--- | :--- | :--- | | 2023 | $1 | $19 | | 2022 | $146 | $202 | - Cash payments related to the 2022 restructuring are anticipated to be $180 million to $210 million, with approximately $140 million paid through September 30, 2023[89] Note 12 - Short-Term Borrowings, Long-Term Debt and Available Credit Facilities This note provides details on the company's short-term borrowings, long-term debt, and available credit facilities, including recent debt issuances Debt Summary (in millions) | Debt Category | Sep 30, 2023 (Millions USD) | Dec 31, 2022 (Millions USD) | | :--- | :--- | :--- | | Short-term borrowings | $3,609 | $24 | | Long-term debt | $2,290 | $1,283 | - In May 2023, the company issued $600 million of 4.50% Senior Notes due 2026 and $600 million of 4.80% Senior Notes due 2033[191] - The company has $5.5 billion in total committed and available credit facilities as of September 30, 2023[147] Note 13 - Commitments and Contingent Liabilities This note outlines significant legal and environmental liabilities, including PFAS-related agreements and ongoing litigation concerning former products - Corteva, DuPont, and Chemours entered a Memorandum of Understanding (MOU) for a 50-50 cost split of up to $4 billion in qualified future PFAS liabilities. Corteva's estimated aggregate share is approximately $600 million[4] - The company, along with DuPont and Chemours, entered a binding agreement to resolve all PFAS-related drinking water claims from a defined class of U.S. public water systems, contributing to a $1.185 billion settlement fund[180][211] - The company faces personal injury lawsuits related to chlorpyrifos exposure, the active ingredient in its former product Lorsban®. An accrual has been established for the estimated resolution of certain claims[5] Supplier Finance Program Obligations (in millions) | Date | Outstanding Obligation (Millions USD) | | :--- | :--- | | Sep 30, 2023 | $115 | | Dec 31, 2022 | $220 | | Sep 30, 2022 | $192 | Note 14 - Stockholders' Equity This note details changes in stockholders' equity, including the completion of a prior share buyback plan and ongoing repurchases under a new program - A $2 billion share repurchase program was authorized in September 2022. During the nine months ended September 30, 2023, the company repurchased 6,330,000 shares for $330 million under this plan[250][348] - The $1.5 billion 2021 Share Buyback Plan was completed in Q1 2023, with 4,098,000 shares repurchased for $250 million during the nine months ended September 30, 2023[293][329] Note 18 - Segment Information This note provides financial performance details for the company's two reportable segments: Seed and Crop Protection Segment Performance (Nine Months Ended Sep 30, in millions) | Segment | Net Sales 2023 (Millions USD) | Operating EBITDA 2023 (Millions USD) | Net Sales 2022 (Millions USD) | Operating EBITDA 2022 (Millions USD) | | :--- | :--- | :--- | :--- | :--- | | Seed | $7,837 | $1,972 | $7,333 | $1,585 | | Crop Protection | $5,682 | $1,107 | $6,297 | $1,352 | | Total | $13,519 | $3,079 | $13,630 | $2,937 | Note 19 - Subsequent Events This note discloses post-period events, including a plan to optimize the Crop Protection manufacturing network and anticipated restructuring charges - On November 5, 2023, the company approved a plan to optimize its Crop Protection manufacturing network, including exiting its Pittsburg, CA facility[341] - The company expects to record aggregate pre-tax restructuring charges of $410 million to $460 million, with future cash payments of $90 million to $120 million[322][342] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, highlighting key drivers of sales and profitability changes Results of Operations This section analyzes the company's consolidated financial performance, including net sales, cost of goods sold, and restructuring charges Net Sales Change Analysis (Nine Months 2023 vs. 2022) | Region | Net Sales Change ($M) (Millions USD) | % Change | Price & Mix | Volume | Currency | Portfolio/Other | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | North America | $271 | 4% | 7% | (3)% | 0% | 0% | | EMEA | $102 | 4% | 20% | (11)% | (8)% | 3% | | Latin America | $(380) | (14)% | 2% | (26)% | 2% | 8% | | Asia Pacific | $(104) | (9)% | 7% | (10)% | (6)% | 0% | | Total | $(111) | (1)% | 9% | (10)% | (2)% | 2% | - For the nine months ended Sep 30, 2023, COGS decreased to $7.55 billion from $7.93 billion YoY, driven by lower volumes and cost actions, partially offset by higher input costs[354] - Restructuring charges for the nine months ended Sep 30, 2023, were $95 million, a significant decrease from $300 million in the prior-year period, primarily related to the 2022 Restructuring Actions and royalty amortization[357] Segment Reviews This section provides a detailed review of the financial performance for the Seed and Crop Protection segments Seed Segment This section details the Seed segment's performance, highlighting sales growth driven by price increases despite volume declines Seed Segment Performance (Nine Months Ended Sep 30) | Indicator (in millions) | 2023 (Millions USD) | 2022 (Millions USD) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $7,837 | $7,333 | +7% | | Segment Operating EBITDA | $1,972 | $1,585 | +24% | - Sales growth was driven by a 14% price increase, partially offset by a 5% volume decline and a 3% unfavorable currency impact[395] Crop Protection Segment This section details the Crop Protection segment's performance, noting sales and EBITDA declines due to volume decreases and higher input costs Crop Protection Segment Performance (Nine Months Ended Sep 30) | Indicator (in millions) | 2023 (Millions USD) | 2022 (Millions USD) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $5,682 | $6,297 | -10% | | Segment Operating EBITDA | $1,107 | $1,352 | -18% | - The sales decrease was driven by a 16% volume decline, partially offset by a 4% price increase and a 4% favorable portfolio impact from Biologicals acquisitions[399] Liquidity & Capital Resources This section discusses the company's cash flow activities, including operating, investing, and financing, and their impact on liquidity - Cash used for operating activities was $(2.6) billion for the nine months ended Sep 30, 2023, compared to $(2.1) billion in the prior year, driven by changes in working capital, particularly lower accounts payable and higher usage of deferred revenue[466] - Cash used for investing activities increased to $(1.8) billion from $(0.4) billion YoY, primarily due to the acquisitions of Stoller and Symborg[440] - Cash provided by financing activities was $3.6 billion, up from $0.7 billion YoY, due to higher short-term borrowings and the May 2023 debt offering to fund working capital, acquisitions, and shareholder returns[467] Part II Other Information This section details significant legal proceedings, equity security sales, and other relevant disclosures Item 1. Legal Proceedings This section details significant legal matters, including antitrust lawsuits, personal injury claims, and ongoing patent and contract disputes - The Federal Trade Commission (FTC) and several state attorneys general filed a lawsuit alleging unfair methods of competition related to Corteva's crop protection products[205][506] - The company is defending against personal injury and remediation lawsuits related to chlorpyrifos, the active ingredient in its former product Lorsban®[454] - Corteva is involved in multiple legal disputes with Bayer, including a patent infringement lawsuit filed by Corteva regarding its Enlist® corn technology and breach of contract lawsuits filed by Bayer concerning royalties for E3® soybeans[482][507] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activities, including shares bought back and the remaining authorization under its program Issuer Purchases of Equity Securities (Q3 2023) | Month | Total Shares Purchased | Average Price Paid | Value Remaining Under Program ($M) (Millions USD) | | :--- | :--- | :--- | :--- | | July 2023 | 0 | N/A | $1,920 | | August 2023 | 2,880,522 | $50.51 | $1,774 | | September 2023 | 2,032,601 | $51.42 | $1,670 | | Total | 4,913,123 | $50.88 | $1,670 | Consolidated Financial Statements of EIDP, Inc. (Unaudited) This section presents the separate unaudited interim consolidated financial statements for EIDP, Inc., a wholly-owned subsidiary of Corteva EIDP, Inc. Financial Statements Overview This section presents the separate unaudited interim consolidated financial statements for EIDP, Inc., highlighting key differences from Corteva's consolidated results - EIDP, Inc. is a wholly-owned subsidiary of Corteva, Inc. and its financial statements are presented separately. Key differences from Corteva's consolidated statements include EIDP's outstanding preferred stock and a related-party loan from Corteva, Inc.[536][557] EIDP, Inc. Statement of Operations Highlights (Unaudited, Nine Months Ended Sep 30) | Indicator (in millions) | 2023 (Millions USD) | 2022 (Millions USD) | | :--- | :--- | :--- | | Net sales | $13,519 | $13,630 | | Interest expense | $193 | $76 | | Income from continuing operations before taxes | $1,394 | $1,596 | | Net income attributable to EIDP, Inc. | $979 | $1,185 | - EIDP has a related-party loan from Corteva, Inc. with an outstanding balance of $115 million as of September 30, 2023, down from $1.066 billion a year prior. This loan generated $22 million in interest expense for EIDP in the first nine months of 2023[559]