filings.toolsItem 6. [RESERVED]
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Item 6. [RESERVED]
Not applicable.
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 about the company’s financial results or outlook; strategy for growth; product development; regulatory approvals; market position; capital allocation strategy; liquidity; sustainability commitments and strategies; 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 beyond the company'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 the company's business, results of operations and financial condition. Some of the important factors that could cause the company'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 of the company's products; (ii) failure to successfully develop and commercialize the company's pipeline; (iii) effect of the degree of public understanding and acceptance or perceived public acceptance of the company'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 in the company's industry; (ix) competitor’s establishment of an intermediary platform for distribution of the company's products; (x) risk related to geopolitical and military conflict; (xi) effect of volatility in the company's input costs; (xii) risks related to the company's global operations; (xiii) effect of industrial espionage and other disruptions to the company'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 of Corteva; (xv) impact of the company's dependence on third parties with respect to certain of its raw materials or licenses and commercialization; (xvi) failure of the company's customers to pay their debts to the company, including customer financing programs; (xvii) failure to effectively manage acquisitions, divestitures, alliances, restructurings, cost savings initiatives, and other portfolio actions; (xviii) failure to raise capital through the capital markets or short-term borrowings on terms acceptable to the company; (xix) increases in pension and other post-employment benefit plan funding obligations; (xx) risks related to pandemics or epidemics; (xxi) EIDP's material weakness; (xxii) capital markets sentiment towards sustainability matters; (xxiii) the company's intellectual property rights or defense against intellectual property claims asserted by others; (xxiv) effect of counterfeit products; (xxv) the company's dependence on intellectual property cross-license agreements; and (xxvi) other risks related to the Separation from DowDuPont.
Additionally, there may be other risks and uncertainties that the company is unable to currently identify or that the company 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 of the company'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. The company 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).
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
Overview
The following is a summary of results from continuing operations for the year ended December 31, 2024:
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The company reported net sales of $16,908 million, a decrease of 2 percent versus the year ended December 31, 2023, reflecting a 1 percent decrease in price, and a 3 percent unfavorable currency impact, partially offset by a 2 percent increase in volume.
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Cost of goods sold ("COGS") totaled $9,529 million, down from $9,920 million for the year ended December 31, 2023, primarily driven by favorable currency effects, ongoing cost and productivity actions, Crop Protection raw material deflation and a reduction in Seed royalty expense, with a partial offset from increased commodity prices.
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Restructuring and asset related charges - net were $288 million, a decrease from $336 million for the year ended December 31, 2023. The charges for the year ended December 31, 2024 primarily relate to asset related charges, severance and related benefit costs, contract termination charges, and decommissioning and demolition costs associated with the Crop Protection Operations Strategy Restructuring Program and non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits.
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Income from continuing operations after income taxes was $863 million, as compared to $941 million for the year ended December 31, 2023.
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Operating EBITDA was $3,376 million, down from $3,381 million for the year ended December 31, 2023, primarily driven by competitive Crop Protection pricing and continued investment in Seed research and development, partially offset by Seed pricing gains, the reduction of royalty expense and ongoing cost and productivity actions. Refer to page 44 for further discussion of the company's Non-GAAP financial measures.
In addition to the financial highlights above, the following events occurred during the year ended December 31, 2024:
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The company returned approximately $1.5 billion to shareholders during the year ended December 31, 2024 under its previously announced share repurchase programs and through common stock dividends.
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On July 29, 2024, the company's Board of Directors approved a 6.25 percent increase in the quarterly common stock dividend from $0.16 per share to $0.17 per share.
Priorities
The company believes the following priorities will continue to create significant value for its customers and shareholders over the mid-term:
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Focus on Execution** – the company will focus on a value creation framework and its four key catalysts: (1) the delivery of top tier technology in our prioritized core markets and crops while achieving best-in-class cost performance; (2) a continued move towards Seed royalty neutrality; (3) a continued improvement in our product mix to strengthen focus on differentiation and yield advantage; and (4) operational improvements focused on driving price and productivity improvements.
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Deliver Innovation to Farmers, Faster** – Corteva aims to deliver greater value and productivity to growers through more differentiated and sustainably advantaged solutions, which in turn promise to strengthen global food security and help farmers address the impacts of climate change.
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Deploy capital with discipline** – the company aims to prioritize investment, growth, M&A opportunities and returning cash to shareholders.
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
Analysis of Operations
Acquisitions
On March 1, 2023, Corteva completed its acquisitions of all the outstanding equity interests in Stoller Group Inc. (“Stoller”), one of the largest independent companies in the Biologicals industry, and Quorum Vital Investment, S.L. and its affiliates (“Symborg”), an expert in microbiological technologies. The purchase price for Stoller and Symborg was $1,220 million, inclusive of a working capital adjustment, and $370 million, respectively. These acquisitions supplement the Crop Protection business with additional biological tools that complement evolving farming practices. See Note 4 - Business Combinations, to the Consolidated Financial Statements, for additional information.
Crop Protection Operations Strategy Restructuring Program
On November 5, 2023, management of the company approved a plan to further optimize its Crop Protection network of manufacturing and external partners (the "Crop Protection Operations Strategy Restructuring Program"). The plan includes the exit of the company’s production activities at its site in Pittsburg, California, as well as ceasing operations in select manufacturing lines at other locations. In October 2024, management of the company amended the Crop Protection Operations Strategy Restructuring Program to include updates to its previous estimates and decommissioning and demolition costs associated with the ceasing of operations, primarily at the Pittsburg, California site.
The company expects to record aggregate pre-tax restructuring and asset related charges of $650 million to $700 million, comprised of $85 million to $105 million of severance and related benefit costs, $320 million to $340 million of asset-related and impairment charges, and $245 million to $255 million of costs related to exiting the company's production activities and ceasing operations (inclusive of contract terminations and decommissioning and demolition costs). Decommissioning and demolition costs are expensed on an as-incurred basis. Reductions in workforce are subject to local regulatory requirements. Through the year ended December 31, 2024, the company recorded net pre-tax restructuring and asset related charges of $461 million inception-to-date under the Crop Protection Operations Strategy Restructuring Program, consisting of $91 million of severance and related benefit costs, $327 million of asset-related and impairment charges, $10 million of decommissioning and demolition costs and $33 million of costs related to contract terminations.
Cash payments related to these charges are anticipated to be $330 million to $360 million, which primarily relate to the payment of severance and related benefits, decommissioning and demolition costs and contract terminations. Through December 31, 2024, the company paid $64 million associated with these charges. The restructuring actions associated with these charges are expected to be substantially complete by the end of 2026.
The Crop Protection Operations Strategy Restructuring Program is expected to contribute to the company’s ongoing cost and productivity improvement efforts through achieving an estimated $180 million of savings on a run rate basis by 2027. Future actions by the company or changes in circumstances from current assumptions, including any site disposition gains or losses, may cause actual results and future cash payments to differ. See Note 6 - Restructuring and Asset Related Charges - Net, to the Consolidated Financial Statements, for additional information.
2022 Restructuring Actions
In connection with the company’s shift to a global business unit model during 2022, 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 committed to restructuring actions during the second quarter of 2022, which included the company’s separate announcement to withdraw from Russia ("Russia Exit") (collectively the “2022 Restructuring Actions”). The actions associated with this program are substantially complete.
The remaining cash payments related to the 2022 Restructuring Actions is $30 million, and primarily relate to the payment of severance and related benefits and contract terminations.
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 6 - Restructuring and Asset Related Charges - Net, to the Consolidated Financial Statements, for additional information.
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
Share Buyback Plan
On November 19, 2024, Corteva, Inc. announced that its Board of Directors authorized a $3 billion share repurchase program to purchase Corteva, Inc.'s common stock, par value $0.01 per share, without an expiration date ("2024 Share Buyback Plan"). The timing, price and volume of purchases will be based on market conditions, relevant securities laws and other factors.
On September 13, 2022, Corteva, Inc. announced that its Board of Directors authorized a $2 billion share repurchase program to purchase Corteva, Inc.'s common stock, par value $0.01 per share, without an expiration date ("2022 Share Buyback Plan"). The timing, price and volume of purchases will be based on market conditions, relevant securities laws and other factors. In connection with the 2022 Share Buyback Plan, the company repurchased and retired 17,909,000 and 10,026,000 shares in the open market and through privately-negotiated transactions for a cost (excluding excise taxes) of $1 billion and $500 million during the years ended December 31, 2024 and 2023, respectively.
On August 5, 2021, Corteva, Inc. announced that its Board of Directors authorized a $1.5 billion share repurchase program to purchase Corteva, Inc.'s common stock, par value $0.01 per share, without an expiration date ("2021 Share Buyback Plan"). The company completed the 2021 Share Buyback Plan during the first quarter of 2023 and repurchased and retired 4,098,000, 17,425,000 and 5,572,000 shares in the open market for a total cost of $250 million, $1 billion, and $250 million during the years ended December 31, 2023, 2022 and 2021, respectively.
Results of Operations
Net Sales
| For the Year Ended December 31, | |||||||||||
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Net sales | $ | 16,908 | $ | 17,226 | $ | 17,455 |
2024 versus 2023
Net sales were $16,908 million for the year ended December 31, 2024, compared to $17,226 million for the year ended December 31, 2023. The decrease was primarily driven by a 1 percent decrease in price and a 3 percent unfavorable currency impact, partially offset by a 2 percent increase in volume. Lower pricing reflects the continued competitive price environment in Crop Protection, particularly in Latin America, partially offset by improvement in Seed pricing driven by strong demand for top technology offerings and operational execution globally. Crop Protection volume growth was the result of demand recovery in Latin America and growth of new products. Seed volume growth was driven by the expected recovery in Brazil Safrinha corn and North America soybeans and cotton, which more than offset corn area reduction and challenges in other geographies. The unfavorable currency impacts were led by the Brazilian Real and Turkish Lira.
2023 versus 2022
Net sales were $17,226 million for the year ended December 31, 2023, compared to $17,455 million for the year ended December 31, 2022. The decrease was primarily driven by a 10 percent decrease in volume versus the prior year and a 1 percent unfavorable impact from currency, partially offset by a 7 percent increase in price and a 3 percent favorable portfolio and other impact. Volume declines were driven by strategic product exits, Crop Protection channel inventory destocking, delayed farmer purchases, lower corn planted area in EMEA, reduced summer corn planted area and lower expected Safrinha corn planted area in Brazil, and the Russia Exit, partially offset by increased corn acres in North America. The unfavorable currency impacts were led by the Turkish Lira, Canadian Dollar and Chinese Renminbi. Price gains were driven by continued execution on the company's price for value strategy, strong demand for new technology and strong execution in response to cost inflation led by EMEA, partially offset by challenging market dynamics in Latin America and North America. The portfolio and other impact was driven by the biologicals acquisitions and the sale of seeds already under production in Russia when the decision to exit the country was made and that the company was contractually required to purchase.
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
| For the Year Ended December 31, | ||||||||||||||||||||||||||
| ($ In millions) | 2024 | 2023 | 2022 | |||||||||||||||||||||||
| Net Sales | % of Net Sales | Net Sales | % of Net Sales | Net Sales | % of Net Sales | |||||||||||||||||||||
| Worldwide | $ | 16,908 | 100 | % | $ | 17,226 | 100 | % | $ | 17,455 | 100 | % | ||||||||||||||
| North America | 8,660 | 51 | % | 8,590 | 50 | % | 8,294 | 48 | % | |||||||||||||||||
| EMEA | 3,124 | 19 | % | 3,367 | 19 | % | 3,256 | 19 | % | |||||||||||||||||
| Latin America | 3,776 | 22 | % | 3,906 | 23 | % | 4,445 | 25 | % | |||||||||||||||||
| Asia Pacific | 1,348 | 8 | % | 1,363 | 8 | % | 1,460 | 8 | % |
| Year Ended December 31, 2024 vs. 2023 | Percent Change Due To: | |||||||||||||||||||
| Net Sales Change | Price & | Portfolio / | ||||||||||||||||||
| ($ In millions) | $ | % | Product Mix | Volume | Currency | Other | ||||||||||||||
| North America | $ | 70 | 1 | % | 1 | % | — | % | — | % | — | % | ||||||||
| EMEA | (243) | (7) | % | 5 | % | (7) | % | (3) | % | (2) | % | |||||||||
| Latin America | (130) | (3) | % | (12) | % | 16 | % | (8) | % | 1 | % | |||||||||
| Asia Pacific | (15) | (1) | % | 2 | % | (1) | % | (2) | % | — | % | |||||||||
| Total | $ | (318) | (2) | % | (1) | % | 2 | % | (3) | % | — | % |
| Year Ended December 31, 2023 vs. 2022 | Percent Change Due To: | |||||||||||||||||||
| Net Sales Change | Price & | Portfolio / | ||||||||||||||||||
| ($ In millions) | $ | % | Product Mix | Volume | Currency | Other | ||||||||||||||
| North America | $ | 296 | 4 | % | 6 | % | (2) | % | — | % | — | % | ||||||||
| EMEA | 111 | 3 | % | 19 | % | (11) | % | (8) | % | 3 | % | |||||||||
| Latin America | (539) | (12) | % | 2 | % | (25) | % | 3 | % | 8 | % | |||||||||
| Asia Pacific | (97) | (7) | % | 7 | % | (9) | % | (5) | % | — | % | |||||||||
| Total | $ | (229) | (1) | % | 7 | % | (10) | % | (1) | % | 3 | % |
Cost of Goods Sold ("COGS")
| For the Year Ended December 31, | |||||||||||
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Cost of goods sold | $ | 9,529 | $ | 9,920 | $ | 10,436 |
2024 versus 2023
COGS was $9,529 million (56 percent of net sales) for the year ended December 31, 2024 compared to $9,920 million (58 percent of net sales) for the year ended December 31, 2023. The decrease was primarily driven by favorable currency effects, ongoing cost and productivity actions, Crop Protection raw material deflation, and a reduction in net royalty expense, partially offset by an increase in volumes and higher commodity costs.
2023 versus 2022
COGS was $9,920 million (58 percent of net sales) for the year ended December 31, 2023 compared to $10,436 million (60 percent of net sales) for the year ended December 31, 2022. The decrease was primarily driven by lower volumes, ongoing cost and productivity actions and a decrease in royalty expense, partially offset by higher input costs, which are primarily macro-economic driven. The macro-economic driven trends are due to inflationary pressures impacting raw material inputs, which were expected to improve in 2024.
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
Research and Development Expense ("R&D")
| For the Year Ended December 31, | |||||||||||
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Research and development expense | $ | 1,402 | $ | 1,337 | $ | 1,216 |
2024 versus 2023
R&D expense was $1,402 million (8 percent of net sales) for the year ended December 31, 2024 and $1,337 million (8 percent of net sales) for the year ended December 31, 2023. The increase in R&D expense is in support of the company’s long-term growth plans and was primarily driven by an increase in salaries due to higher headcount, variable compensation and contractor costs, partially offset by favorable currency impacts.
2023 versus 2022
R&D expense was $1,337 million (8 percent of net sales) for the year ended December 31, 2023 and $1,216 million (7 percent of net sales) for the year ended December 31, 2022. The increase in R&D expense is in support of the company’s long-term growth plans and was primarily driven by an increase in salaries due to higher headcount and the associated spending on field, lab and facilities, and third-party research costs. The increase was partially offset by a decrease in variable compensation.
Selling, General and Administrative Expenses ("SG&A")
| For the Year Ended December 31, | |||||||||||
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Selling, general and administrative expenses | $ | 3,196 | $ | 3,176 | $ | 3,173 |
2024 versus 2023
SG&A expenses were $3,196 million (19 percent of net sales) for the year ended December 31, 2024 and $3,176 million (18 percent of net sales) for the year ended December 31, 2023. The increase was primarily driven by an increase in salaries and variable compensation, commissions, bad debt expense, legal support fees and portfolio impact from the Stoller and Symborg acquisitions, partially offset by favorable currency impacts and lower consulting and professional fees and marketing costs.
2023 versus 2022
SG&A expenses were $3,176 million (18 percent of net sales) for the year ended December 31, 2023 and $3,173 million (18 percent of net sales) for the year ended December 31, 2022. The flat results were primarily driven by incremental costs from the Stoller and Symborg acquisitions, an unfavorable impact relating to deferred compensation plans due to market improvements and an increase in bad debt expense, partially offset by a decrease in selling expense, variable compensation, functional spend, commissions and consulting fees.
Amortization of Intangibles
| For the Year Ended December 31, | ||||||||||||||
| (In millions) | 2024 | 2023 | 2022 | |||||||||||
| Amortization of intangibles | $ | 685 | $ | 683 | $ | 702 |
2024 versus 2023
Intangible asset amortization was $685 million for the year ended December 31, 2024 and $683 million for the year ended December 31, 2023. The increase was primarily driven by the impact of amortization relating to the intangible assets recognized in connection with the Stoller and Symborg acquisitions, which were completed on March 1, 2023, partially offset by lower amortization on certain intangible assets arising from the Merger that became fully amortized in 2024.
2023 versus 2022
Intangible asset amortization was $683 million for the year ended December 31, 2023 and $702 million for the year ended December 31, 2022. The decrease was primarily driven by the expiration of the favorable supply contracts in the fourth quarter of 2022, at which point the contracts became fully amortized, partially offset by amortization relating to the intangible assets recognized in connection with the Stoller and Symborg acquisitions.
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
See Note 13 - Goodwill and Other Intangible Assets, to the Consolidated Financial Statements, for additional information.
Restructuring and Asset Related Charges - Net
| For the Year Ended December 31, | |||||||||||
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Restructuring and asset related charges - net | $ | 288 | $ | 336 | $ | 363 |
2024
Restructuring and asset related charges - net were $288 million for the year ended December 31, 2024, which was primarily comprised of a $232 million charge associated with the Crop Protection Operations Strategy Restructuring Program and a $55 million net charge from non-cash accelerated prepaid royalty amortization expense related to the Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits. The $232 million charge associated with the Crop Protection Operations Strategy Restructuring Program was primarily comprised of $91 million of severance and related benefit costs, $101 million of asset related charges, $10 million in decommissioning and demolition costs and $30 million of contract termination charges.
2023
Restructuring and asset related charges - net were $336 million for the year ended December 31, 2023, which was primarily comprised of a $217 million charge related to the Crop Protection Operations Strategy Restructuring Program, a $72 million net charge related to non-cash accelerated prepaid royalty amortization expense related to the Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits and $42 million related to severance and related benefit costs, asset related charges and contract termination charges (including early lease terminations) associated with the 2022 Restructuring Actions. The $217 million net charge associated with the Crop Protection Operations Strategy Restructuring Program was primarily comprised of $214 million of asset related charges, which includes non-cash impairment charges of $152 million consisting of $92 million and $60 million related to operating lease assets and property, plant and equipment, respectively, associated with the exit of the company’s production activities at its site in Pittsburg, California.
2022
Restructuring and asset related charges - net were $336 million for the year ended December 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.
See Note 6 - Restructuring and Asset Related Charges - Net, to the Consolidated Financial Statements, for additional information.
Other Income (Expense) - Net
| For the Year Ended December 31, | |||||||||||
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Other income (expense) - net | $ | (300) | $ | (448) | $ | (60) |
2024 versus 2023
Other income (expense) - net was $(300) million and $(448) million for the years ended December 31, 2024 and 2023, respectively. Lower other expense was primarily driven by decreases in net exchange losses and charges related to estimated settlement reserves, as well as the receipt of insurance proceeds and an indemnification payment negotiated with the former Stoller owners, partially offset by a decrease in interest income.
2023 versus 2022
Other income (expense) - net was $(448) million for the year ended December 31, 2023 and $(60) million for the year ended December 31, 2022. Higher other expense was primarily driven by an increase in net exchange losses and estimated settlement reserves and an increase in non-operating pension and other post-employment costs in the current period versus a benefit in the
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
prior period. Higher other expense was partially offset by an increase in interest income and the absence of charges incurred in 2022 relating to certain legal matters and losses associated with a previously held equity investment.
See Note 7 - Supplementary Information, to the Consolidated Financial Statements, for additional information.
Interest Expense
| For the Year Ended December 31, | |||||||||||
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Interest expense | $ | 233 | $ | 233 | $ | 79 |
2024 versus 2023
Interest expense was $233 million and $233 million for the years ended December 31, 2024 and 2023, respectively. The impact of lower short-term borrowings and lower interest rates was offset by higher interest related to the senior notes issued in 2023 and higher foreign currency borrowings.
2023 versus 2022
Interest expense was $233 million and $79 million for the years ended December 31, 2023 and 2022, respectively. The change was primarily driven by higher interest rates, the issuance of Senior Notes in connection with the May 2023 Debt Offering, and an increase in short term borrowings.
Provision for (Benefit from) Income Taxes on Continuing Operations
| For the Year Ended December 31, | |||||||||||
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Provision for (benefit from) income taxes on continuing operations | $ | 412 | $ | 152 | $ | 210 | |||||
| Effective tax rate | 32.3 | % | 13.9 | % | 14.7 | % |
2024For the year ended December 31, 2024, the company’s effective tax rate of 32.3 percent on pre-tax income from continuing operations of $1,275 million was unfavorably impacted by a $120 million charge on the establishment of a valuation allowance recorded against the net deferred tax asset position of a legal entity in Brazil, unfavorable geographic mix of earnings, a $22 million charge associated with repatriation of cash held outside of the U.S. primarily from current year earnings, and the unfavorable tax impact of certain net exchange losses recognized on the re-measurement of the net monetary asset positions. These items were partially offset by a $(59) million benefit related to U.S. tax credits for increasing research activities and $(32) million in net tax benefits associated with changes to deferred taxes and accruals for certain prior year tax positions.
2023
For the year ended December 31, 2023, the company’s effective tax rate of 13.9 percent on pre-tax income from continuing operations of $1,093 million was favorably impacted by a $(65) million benefit related to U.S. tax credits for increasing research activities, changes to deferred taxes and a tax currency change for legal entities within Switzerland in the amount of $(62) million and $(24) million, respectively, as well as favorable geographic mix of earnings. 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, a $46 million charge associated with intellectual property realignment, and a $32 million charge associated with repatriation of cash held outside of the U.S. primarily from current year earnings.
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. primarily from current year earnings.
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
Income (Loss) from Discontinued Operations After Income Taxes
| For the Year Ended December 31, | |||||||||||
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Income (loss) from discontinued operations after income taxes | $ | 56 | $ | (194) | $ | (58) |
2024
Income (loss) from discontinued operations after income taxes was $56 million for the year ended December 31, 2024. The after-tax benefit was driven by charges pursuant to the MOU with Chemours and DuPont relating to PFAS remediation activities primarily at Chemours' Fayetteville Works facility and litigation activity, which were more than offset by a favorable adjustment of certain prior year tax positions for previously divested businesses, the derecognition of an indemnification liability associated with the Water District Settlement Fund contribution, and insurance proceeds related to legacy matters.
2023
Income (loss) from discontinued operations after income taxes was $(194) million for the year ended December 31, 2023, which was primarily comprised of charges associated with the settlement of certain PFAS related legal matters that are subject to the MOU with Chemours and DuPont, including the Nationwide Water District Settlement and the State of Ohio for natural resources damage claims, and charges associated with PFAS environmental remediation activities primarily at Chemours' Fayetteville Works facility.
2022
Income (loss) from discontinued operations after income taxes was $(58) million for the year ended December 31, 2022, which was primarily comprised of 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 Note 16 - 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.
Other Income (Expense) - Net
| For the Year Ended December 31, | |||||||||||
| (In millions) | 2024 | 2023 | 2022 | ||||||||
| Other income (expense) - net | $ | (261) | $ | (448) | $ | (60) |
2024 versus 2023
Other income (expense) - net was $(261) million and $(448) million for the years ended December 31, 2024 and 2023, respectively. Lower other expense was primarily driven by the items noted on page 36, under the header “Other Income (Expense) – Net – 2024 versus 2023." In addition, EIDP earned interest income from Corteva, Inc. of $38 million under the Master In-House Banking Agreement for the year ended December 31, 2024. See EIDP Note 2 - Related Party Transactions, to the EIDP Consolidated Financial Statements, for further information.
2023 versus 2022
Other income (expense) - net was $(448) million for the year ended December 31, 2023 and $(60) million for the year ended December 31, 2022. Higher other expense was primarily driven by the items noted on page 36, under the header “Other Income (Expense) – Net – 2023 versus 2022." See EIDP Note 2 - Related Party Transactions, to the EIDP Consolidated Financial Statements, for further information.
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
Interest Expense
2024 versus 2023
EIDP’s interest expense was $233 million and $253 million for the years ended December 31, 2024 and 2023, respectively. The change was primarily driven by the items noted on page 37, under the header “Interest Expense – 2024 versus 2023,” and lower average borrowings on the related party loan between EIDP and Corteva, Inc., as the loan was repaid in the fourth quarter of 2023. See Note 2 - Related Party Transactions, to the EIDP Consolidated Financial Statements, for further information.
2023 versus 2022
EIDP’s interest expense was $253 million and $124 million for the years ended December 31, 2023 and 2022, respectively. The change was primarily driven by the items noted on page 37, under the header “Interest Expense – 2023 versus 2022,” and lower average borrowings 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.
Provision for (Benefit from) Income Taxes on Continuing Operations
2024
For the year ended December 31, 2024, EIDP had an effective tax rate of 32.0 percent on pre-tax income from continuing operations of $1,314 million, driven by the items noted on page 37, under the header “Provision for (Benefit from) Income Taxes on Continuing Operations - 2024". See Note 3 - Income Taxes, to the EIDP Consolidated Financial Statements for further information.
2023
For the year ended December 31, 2023, EIDP had an effective tax rate of 13.7 percent on pre-tax income from continuing operations of $1,073 million, driven by the items noted on page 37, under the header “Provision for (Benefit from) Income Taxes on Continuing Operations - 2023" and a tax benefit related to the interest expense incurred on the related party loan between EIDP and Corteva, Inc. See Note 3 - Income Taxes, to the EIDP Consolidated Financial Statements for further information.
2022
For the year ended December 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 37, under the header “Provision for (Benefit from) Income Taxes on Continuing Operations - 2022" and a tax benefit related to the interest expense incurred on the related party loan between EIDP and Corteva, Inc. See Note 3 - Income Taxes, to the EIDP Consolidated Financial Statements for further information.
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, pasture and range management herbicides and biologicals.
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
Summarized below are comments on individual segment net sales and segment operating EBITDA for the years ended December 31, 2024, 2023 and 2022. 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 and environmental remediation and legal costs associated with legacy 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. See Note 23 - 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 ended December 31, 2024, 2023 and 2022 is included in Note 23 - Segment Information, to the Consolidated Financial Statements.
| Seed | For the Year Ended December 31, | |||||||||||||
| (In millions) | 2024 | 2023 | 2022 | |||||||||||
| Net sales | $ | 9,545 | $ | 9,472 | $ | 8,979 | ||||||||
| Segment operating EBITDA | $ | 2,219 | $ | 2,117 | $ | 1,656 |
| Seed | 2024 vs. 2023 | Percent Change Due To: | ||||||||||||||||||
| Net Sales Change | Price & | Portfolio / | ||||||||||||||||||
| ($ In millions) | $ | % | Product Mix | Volume | Currency | Other | ||||||||||||||
| North America | $ | 265 | 5 | % | 4 | % | 1 | % | — | % | — | % | ||||||||
| EMEA | (41) | (3) | % | 9 | % | (3) | % | (5) | % | (4) | % | |||||||||
| Latin America | (114) | (7) | % | (7) | % | 8 | % | (8) | % | — | % | |||||||||
| Asia Pacific | (37) | (8) | % | 9 | % | (15) | % | (2) | % | — | % | |||||||||
| Total | $ | 73 | 1 | % | 3 | % | 1 | % | (2) | % | (1) | % |
| Seed | 2024 vs. 2023 | Percent Change Due To: | ||||||||||||||||||
| Net Sales Change | Price & | Portfolio / | ||||||||||||||||||
| ($ In millions) | $ | % | Product Mix | Volume | Currency | Other | ||||||||||||||
| Corn | $ | 49 | 1 | % | 2 | % | 2 | % | (3) | % | — | % | ||||||||
| Soybeans | 69 | 4 | % | 2 | % | 2 | % | — | % | — | % | |||||||||
| Other oilseeds | (55) | (8) | % | 8 | % | (7) | % | (4) | % | (5) | % | |||||||||
| Other | 10 | 2 | % | 8 | % | (5) | % | (1) | % | — | % | |||||||||
| Total | $ | 73 | 1 | % | 3 | % | 1 | % | (2) | % | (1) | % |
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
| Seed | 2023 vs. 2022 | Percent Change Due To: | ||||||||||||||||||
| Net Sales Change | Price & | Portfolio / | ||||||||||||||||||
| ($ In millions) | $ | % | Product Mix | Volume | Currency | Other | ||||||||||||||
| North America | $ | 590 | 11 | % | 9 | % | 3 | % | (1) | % | — | % | ||||||||
| EMEA | 13 | 1 | % | 26 | % | (19) | % | (10) | % | 4 | % | |||||||||
| Latin America | (121) | (7) | % | 11 | % | (22) | % | 4 | % | — | % | |||||||||
| Asia Pacific | 11 | 3 | % | 14 | % | (4) | % | (7) | % | — | % | |||||||||
| Total | $ | 493 | 5 | % | 13 | % | (6) | % | (2) | % | — | % |
| Seed | 2023 vs. 2022 | Percent Change Due To: | ||||||||||||||||||
| Net Sales Change | Price & | Portfolio / | ||||||||||||||||||
| ($ In millions) | $ | % | Product Mix | Volume | Currency | Other | ||||||||||||||
| Corn | $ | 492 | 8 | % | 14 | % | (4) | % | (2) | % | — | % | ||||||||
| Soybeans | 48 | 3 | % | 7 | % | (4) | % | — | % | — | % | |||||||||
| Other oilseeds | (6) | (1) | % | 23 | % | (21) | % | (7) | % | 4 | % | |||||||||
| Other | (41) | (8) | % | 7 | % | (15) | % | — | % | — | % | |||||||||
| Total | $ | 493 | 5 | % | 13 | % | (6) | % | (2) | % | — | % |
Seed
Seed net sales were $9,545 million in 2024, up 1 percent from $9,472 million in 2023. The sales increase was driven by a 3 percent increase in price and 1 percent increase in volume partially offset by a 2 percent unfavorable currency impact and a 1 percent unfavorable portfolio impact.
The increase in price was driven by improvement in many products in all regions, excluding Latin America. Global corn and soybean pricing were up 2 percent. Pricing actions more than offset currency impacts in EMEA. Volume growth was driven primarily by the expected recovery in Brazil Safrinha corn and growth in North America soybeans and cotton, partially offset by reduced planted areas in EMEA, Asia Pacific and corn in Argentina. Unfavorable currency impacts were led by the Brazilian Real and Turkish Lira.
Seed operating EBITDA was $2,219 million in 2024, up 5 percent from $2,117 million in 2023. Price execution and market share gains in North America, reduction of net royalty expense and ongoing cost and productivity actions more than offset the investment in R&D, higher commodity costs, and the unfavorable impact of currency. Segment operating EBITDA margin improved by approximately 90 basis points versus the prior-year period.
Seed net sales were $9,472 million in 2023, up 5 percent from $8,979 million in 2022. The sales increase was driven by a 13 percent increase in price, partially offset by a 6 percent decline in volume and a 2 percent unfavorable currency impact.
The increase in price was broad-based and driven by strong demand for top technology and operational execution globally, with global corn and soybean prices up 14 percent and 7 percent, respectively. Pricing actions more than offset currency impacts in EMEA. The decline in volume was driven by the 2022 decision to exit Russia, lower corn planted area in EMEA, reduced summer corn planted area and lower expected Safrinha corn planted area in Brazil, partially offset by increased corn acres in North America. Unfavorable currency impacts were led by the Turkish Lira and the Canadian Dollar.
Seed operating EBITDA was $2,117 million in 2023, up 28 percent from $1,656 million in 2022. Price execution, reduction of net royalty expense, and ongoing cost and productivity actions more than offset higher commodity and input costs, lower volumes, and the unfavorable impact of currency. Segment operating EBITDA margin improved by approximately 390 basis points versus the prior-year period.
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
| Crop Protection | For the Year Ended December 31, | |||||||||||||
| (In millions) | 2024 | 2023 | 2022 | |||||||||||
| Net sales | $ | 7,363 | $ | 7,754 | $ | 8,476 | ||||||||
| Segment operating EBITDA | $ | 1,272 | $ | 1,374 | $ | 1,684 |
| Crop Protection | 2024 vs. 2023 | Percent Change Due To: | ||||||||||||||||||
| Net Sales Change | Price & | Portfolio / | ||||||||||||||||||
| ($ In millions) | $ | % | Product Mix | Volume | Currency | Other | ||||||||||||||
| North America | $ | (195) | (7) | % | (3) | % | (4) | % | — | % | — | % | ||||||||
| EMEA | (202) | (12) | % | 1 | % | (10) | % | (3) | % | — | % | |||||||||
| Latin America | (16) | (1) | % | (15) | % | 21 | % | (8) | % | 1 | % | |||||||||
| Asia Pacific | 22 | 2 | % | (1) | % | 6 | % | (3) | % | — | % | |||||||||
| Total | $ | (391) | (5) | % | (5) | % | 3 | % | (3) | % | — | % |
| Crop Protection | 2024 vs. 2023 | Percent Change Due To: | ||||||||||||||||||
| Net Sales Change | Price & | Portfolio / | ||||||||||||||||||
| ($ In millions) | $ | % | Product Mix | Volume | Currency | Other | ||||||||||||||
| Herbicides | $ | (435) | (11) | % | (5) | % | (4) | % | (2) | % | — | % | ||||||||
| Insecticides | 117 | 7 | % | (5) | % | 17 | % | (5) | % | — | % | |||||||||
| Fungicides | (31) | (3) | % | (9) | % | 12 | % | (6) | % | — | % | |||||||||
| Biologicals | (15) | (3) | % | (8) | % | 6 | % | (7) | % | 6 | % | |||||||||
| Other | (27) | (5) | % | — | % | (3) | % | (2) | % | — | % | |||||||||
| Total | $ | (391) | (5) | % | (5) | % | 3 | % | (3) | % | — | % |
| Crop Protection | 2023 vs. 2022 | Percent Change Due To: | ||||||||||||||||||
| Net Sales Change | Price & | Portfolio / | ||||||||||||||||||
| ($ In millions) | $ | % | Product Mix | Volume | Currency | Other | ||||||||||||||
| North America | $ | (294) | (9) | % | — | % | (10) | % | — | % | 1 | % | ||||||||
| EMEA | 98 | 6 | % | 12 | % | (4) | % | (4) | % | 2 | % | |||||||||
| Latin America | (418) | (16) | % | (4) | % | (26) | % | 2 | % | 12 | % | |||||||||
| Asia Pacific | (108) | (11) | % | 4 | % | (10) | % | (5) | % | — | % | |||||||||
| Total | $ | (722) | (9) | % | 2 | % | (14) | % | (1) | % | 4 | % |
| Crop Protection | 2023 vs. 2022 | Percent Change Due To: | ||||||||||||||||||
| Net Sales Change | Price & | Portfolio / | ||||||||||||||||||
| ($ In millions) | $ | % | Product Mix | Volume | Currency | Other | ||||||||||||||
| Herbicides | $ | (557) | (12) | % | 1 | % | (12) | % | (1) | % | — | % | ||||||||
| Insecticides | (233) | (13) | % | 2 | % | (12) | % | (1) | % | (2) | % | |||||||||
| Fungicides | (338) | (23) | % | 3 | % | (25) | % | (1) | % | — | % | |||||||||
| Biologicals | 428 | 683 | % | 2 | % | 17 | % | (8) | % | 672 | % | |||||||||
| Other | (22) | (4) | % | 2 | % | (8) | % | 2 | % | — | % | |||||||||
| Total | $ | (722) | (9) | % | 2 | % | (14) | % | (1) | % | 4 | % |
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
Crop Protection
Crop Protection net sales were $7,363 million in 2024, down 5 percent from $7,754 million in 2023. The sales decrease was driven by a 5 percent decrease in price and a 3 percent unfavorable impact from currency, partially offset by a 3 percent increase in volume.
The price decline was primarily due to market dynamics in Latin America. Unfavorable currency impacts were led by the Brazilian Real and Turkish Lira. The increase in volumes was driven by growth in Latin America on demand for new products and spinosyns, partially offset by unfavorable weather impacts in EMEA as well as just-in-time purchasing behavior in North America.
Segment Operating EBITDA was $1,272 million in 2024, down 7 percent from $1,374 million from 2023. Pricing pressure and the unfavorable impact of currency more than offset productivity savings, raw material deflation, and volume growth. Segment operating EBITDA margin contracted by approximately 45 basis points versus the prior-year period.
Crop Protection net sales were $7,754 million in 2023, up 9 percent from $8,476 million in 2022. The decrease was driven by a 14 percent decrease in volume and a 1 percent unfavorable impact from currency, partially offset by a 4 percent favorable impact from portfolio and a 2 percent increase in price.
The decrease in volume was driven by strategic product exits, channel inventory destocking, and delayed farmer purchases. The increase in price was led by EMEA, and mostly reflected pricing for the value of our differentiated technology, including new products, and currency in EMEA, partially offset by challenging market dynamics in Latin America and North America. Unfavorable currency impacts were led by the Turkish Lira and Chinese Renminbi. The portfolio impact was driven by the Stoller and Symborg acquisitions, which added approximately $420 million of net sales.
Segment Operating EBITDA was $1,374 million in 2023, down 18 percent from $1,684 million in 2022. Pricing execution, productivity actions, and the favorable impact from the Stoller and Symborg acquisitions were more than offset by lower volumes, higher input costs, and the unfavorable impact of currency. Segment operating EBITDA margin declined by 215 basis points versus the prior-year period.
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
Non-GAAP Financial Measures
The company presents certain financial measures that do not conform to U.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'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 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. Non-operating benefits (costs) consists of non-operating pension and OPEB credits (costs), tax indemnification adjustments and environmental remediation and legal costs associated with legacy 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. 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.
The company also uses Free Cash Flow as a non-GAAP measure to evaluate and discuss its liquidity position and ability to generate cash. Free Cash Flow is defined as cash provided by (used for) operating activities – continuing operations, less capital expenditures. Management believes that Free Cash Flow provides investors with meaningful information regarding the company’s ongoing ability to generate cash through core operations, and the company’s ability to service its indebtedness, pay dividends (when declared), make share repurchases, and meet its ongoing cash needs for its operations. During the fourth quarter of 2023, the company made the decision, which was retrospectively applied, to adjust the presentation of the Consolidated Statement of Cash Flows to separately show the cash provided by (used for) operating activities – discontinued operations, which was previously presented within cash provided by (used for) operating activities. See Note 1 – Background and Basis of Presentation, to the Consolidated Financial Statements, for additional information. As a result, the definition for Free Cash Flow was revised to utilize cash provided by (used for) operating activities – continuing operations. The change in definition did not have a material impact to prior years’ Free Cash Flow. Management made this decision to better present the liquidity generated from the company’s ongoing business operations. Under the revised definition, Free Cash Flow was $307 million for the year ended December 31, 2022.
Part II
Previous: Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES · Next: Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued