Corteva, Inc. — 2020 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing. Corteva is a global agriculture company with seed and crop protection segments. The combined filing also includes E. I. du Pont de Nemours and Company (EID), a wholly owned subsidiary; figures below are for Corteva unless noted.
Financial performance
| Metric | FY 2020 | FY 2019 |
|---|---|---|
| Net sales | $14.217 billion | $13.846 billion |
| Income (loss) from continuing operations after tax | $756 million | $(270) million |
| Net income (loss) attributable to Corteva | $681 million | $(959) million |
| Diluted EPS from continuing operations | $0.98 | $(0.38) |
| Cash provided by operating activities | $2.064 billion | $1.070 billion |
| Cash used for investing activities | $(674) million | $(904) million |
| Cash provided by (used for) financing activities | $303 million | $(2.929) billion |
| Cash, cash equivalents and marketable securities at year-end | $3.795 billion | $1.769 billion |
| Total debt at year-end | $1.105 billion | $122 million |
Sales rose 3% as reported, reflecting volume growth of 5% and local price growth of 3%, partly offset by a 5% currency headwind. COGS was $8.507 billion, or 60% of sales, versus $8.575 billion, or 62%, in 2019. Operating EBITDA, a non-GAAP measure, was $2.087 billion versus $1.987 billion; management cited volume and price gains and productivity actions. Operating cash flow improved with higher net income and better working capital. Capital expenditures were $475 million; the company paid $388 million in common dividends and repurchased $275 million of stock.
At year-end, working capital was $6.220 billion and total assets were $42.649 billion. The company reported $6.0 billion of committed revolving credit availability and compliance with its debt covenant. Cash less total debt was approximately $2.7 billion, based on reported year-end balances.
Segments and changes versus prior period
- Seed: Sales were $7.756 billion, up 2%; segment operating EBITDA was $1.208 billion, up from the 2019 pro forma $1.040 billion. Volume and mix gains, including new products, supported results; currency, royalties and input costs were offsets.
- Crop protection: Sales were $6.461 billion, up 3%; segment operating EBITDA was $1.004 billion, down from the 2019 pro forma $1.066 billion. Volume and local pricing increased, but currency, higher input costs and growth investment weighed on EBITDA.
- FY 2020 included no integration and separation costs, versus $744 million in 2019. Restructuring and asset-related charges increased to $335 million from $222 million, including $159 million of non-cash accelerated amortization of prepaid royalties as Corteva transitions away from licensed Roundup Ready 2 Yield and Roundup Ready 2 Xtend soybean traits.
- Net income from discontinued operations was a loss of $55 million, compared with a loss of $671 million in 2019. The 2020 amount included charges related to legacy matters and the PFAS settlement arrangements.
For the fourth quarter of 2020, net sales were $3.207 billion, income from continuing operations after tax was $99 million, net income attributable to Corteva was $41 million, and diluted EPS from continuing operations was $0.13.
Outlook, commentary and risks
- Management’s 2021 outlook called for approximately 2% sales growth, Operating EBITDA growth of approximately 15%–20%, and Operating EPS growth of approximately 23%–30%. Drivers cited included new products and productivity, partly offset by currency and portfolio headwinds, higher input costs and expected unfavorable European yields. The outlook excluded further material COVID-19 disruptions or demand and currency shocks; the filing did not reconcile these forward-looking non-GAAP measures to GAAP.
- COVID-19 caused localized sourcing and logistics disruptions, which management said had not materially affected 2020 financial results. The filing highlights continuing uncertainty around customer demand, currency, commodity markets, supply chains and access to financing.
- In February 2021, Corteva approved additional restructuring actions, estimating $130 million–$170 million in pre-tax charges and $90 million–$110 million in future cash payments, with actions expected to be substantially complete in 2021. It expected 2021 capital expenditures of approximately $550 million and planned to repurchase the remaining $700 million under its authorization, subject to market conditions.
- Legacy environmental and litigation exposures remain significant uncertainties. Environmental remediation accruals were $329 million, with reasonably possible exposure up to $620 million above the accrual. A January 2021 MOU established PFAS cost-sharing and escrow arrangements; the company stated that potential losses beyond accrued amounts were not estimable. Corteva’s share of an agreed $83 million settlement of approximately 95 Ohio matters was $27 million.
- Other risks include regulatory approvals and acceptance of biotechnology and crop protection products, competition and generic products, weather and climate, commodity and currency volatility, third-party supply and trait licenses, customer credit, cybersecurity, and the ability to realize productivity and separation benefits. EID and a former employee were indicted in January 2021 over the 2014 La Porte plant release; Corteva said it would vigorously defend against the charges. Corteva also disclosed a Starboard Value notice to nominate eight directors for the 2021 annual meeting.
Most important facts for investors to verify
- Check the audited statements and non-GAAP reconciliations, especially the comparability of 2019 pro forma segment EBITDA with 2020 reported results.
- Assess the durability of sales, margin and cash-flow gains, including currency exposure, input costs, customer collections and seasonal working-capital needs.
- Review the assumptions behind 2021 guidance and the pace of product adoption, regulatory approvals and the Enlist E3 transition; track accelerated prepaid royalty amortization.
- Examine the PFAS MOU, related indemnification and escrow obligations, environmental accrual sensitivities, and litigation developments, including the La Porte proceedings.
- Confirm execution and cash impact of the 2021 restructuring, planned share repurchases, pension and OPEB funding, and available liquidity.