DuPont de Nemours, Inc. 10-K

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s discussion and analysis of financial condition and results of operations is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and related notes to enhance the understanding of the Company’s operations and present business environment. Components of management’s discussion and analysis of financial condition and results of operations include: • Overview • Analysis of Operations • Result of Operations • Supplemental Unaudited Pro Forma Combined Financial Information • Segment Results • Outlook • Liquidity and Capital Resources • Recent Accounting Pronouncements • Critical Accounting Estimates • Long-Term Employee Benefits • Environmental Matters OVERVIEW As of December 31, 2021, the Company has $3.8 billion of net working capital and over $2 billion in cash and cash equivalents. The Company expects its cash and cash equivalents, cash generated from operations, and ability to access the debt capital markets to provide sufficient liquidity and financial flexibility to meet the liquidity requirements associated with its continued operations. The Company continually assesses its liquidity position, including possible sources of incremental liquidity, in light of the current economic environment, capital market conditions and Company performance. DWDP Merger & Distributions Effective August 31, 2017, the Dow Chemical Company ("TDCC") and E. I. du Pont de Nemours and Company ("EID") each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, TDCC and EID became subsidiaries of DowDuPont (the "DWDP Merger"). Except as otherwise indicated by the context, the term "TDCC" includes TDCC and its consolidated subsidiaries and "EID" includes EID and its consolidated subsidiaries. DowDuPont completed a series of internal reorganizations and realignment steps in order to separate into three, independent, publicly traded companies - one for each of its agriculture, materials science and specialty products businesses. On April 1, 2019, the Company completed the separation of the materials science business through the spin-off of Dow Inc., (“Dow”) including Dow’s subsidiary TDCC (the “Dow Distribution”). On June 1, 2019, the Company completed the separation of the agriculture business through the spin-off of Corteva, Inc. (“Corteva”) including Corteva’s subsidiary EID, (the “Corteva Distribution and together with the Dow Distribution, the “DWDP Distributions”). Following the Corteva Distribution, the Company holds the specialty products business. On June 1, 2019, DowDuPont changed its registered name from “DowDuPont Inc.” to “DuPont de Nemours, Inc.” doing business as “DuPont” (the “Company”). Beginning on June 3, 2019, the Company's common stock is traded on the NYSE under the ticker symbol “DD.” The results of operations of DuPont for the 2019 period presented reflects the historical financial results of Dow and Corteva as discontinued operations, as applicable. The cash flows and comprehensive income related to Dow and Corteva have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income, respectively, for the applicable period. Unless otherwise indicated, the information in the notes to the Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow or Corteva. N&B Transaction On February 1, 2021, the Company completed the divestiture of the Nutrition & Biosciences (“N&B”) business to International Flavors & Fragrance Inc. (“IFF”) in a Reverse Morris Trust transaction (the “N&B Transaction”) that resulted in IFF issuing shares to DuPont stockholders. In connection with the N&B Transaction, N&B made a one-time cash payment of approximately $7.3 billion (the “Special Cash Payment”) to DuPont. 30 Table of Contents The results of operations of DuPont for all periods presented reflect the historical financial results of N&B as discontinued operations. The cash flows and comprehensive income related to N&B have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income, respectively, for the applicable period. Unless otherwise indicated, the information in the notes to the Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of N&B. 2021 Segment Realignment Effective February 1, 2021, in conjunction with the closing of the N&B Transaction, the Company changed its management and reporting structure (the “2021 Segment Realignment”). DuPont’s worldwide operations are managed through global businesses, which are currently reported in three reportable segments: Electronics & Industrial; Water & Protection; and Mobility & Materials. The changes became effective February 1, 2021 and have been retrospectively reflected in the segment results for all periods presented. 31 Table of Contents ANALYSIS OF OPERATIONS COVID-19 Update The novel coronavirus (“COVID-19”) and its variants continue to adversely impact the broader global economy, including certain of the Company’s customers and suppliers. During 2021, the Company benefited from strong demand in certain key end-markets, principally in electronics, water filtration and continued recovery within the automotive markets and commercial construction. Although results reflect notable improvement, the COVID-19 pandemic has caused widespread supply chain challenges due to labor, raw material and component shortages. In addition, logistic challenges have increased significantly in the second half of 2021. Intended Rogers Acquisition On November 2, 2021, the Company announced that it had entered into a definitive agreement to acquire all the outstanding shares of Rogers Corporation (“Rogers”) for about $5.2 billion (the “Intended Rogers Acquisition”). The acquisition is expected to close by the end of the second quarter of 2022, pending receipt of regulatory approvals and satisfaction of customary closing conditions. When complete, the acquisition of Rogers, is expected to broaden the Company’s presence in the electronic materials market. Rogers is complementary to and aligned strategically with the Company’s existing Electronics & Industrial segment. The completion of the acquisition is subject to regulatory approvals and other customary closing conditions. Mobility & Materials Segment Intended Divestiture On November 2, 2021 the Company announced that it has initiated a divestiture process related to a substantial portion of the Mobility & Materials segment, which predominantly includes the Engineering Polymers and Performance Resins lines of business (the “In-Scope M&M Businesses”). The outcome of which, including the entry into a definitive agreement, is subject to the approval of the DuPont Board of Directors. The scope of the intended divestiture excludes certain product lines including Auto Adhesives and Multibase TM . The divestiture of the In-Scope M&M Businesses may include a full or partial separation of the businesses from the Company. The Mobility & Materials segment will remain in its current management and reporting structure while these strategic alternatives are considered. Laird Performance Materials On July 1, 2021, DuPont completed the acquisition of Laird Performance Materials ("Laird PM") from Advent International (“Laird PM Acquisition”) for cash consideration of $2.404 billion, which reflects adjustments, primarily for acquired cash and net working capital. See Note 3 to the Consolidated Financial Statements for additional information. Divestitures On December 31, 2021, the Company completed the sale of its Clean Technologies business unit, which is part of Corporate. Total consideration related to the sale of the business is approximately $510 million, with cash proceeds of about $500 million reflecting adjustments for customary closing costs as defined within the purchase agreement. For the year ended December 31, 2021, a pre-tax loss of $3 million ($39 million loss net of tax, primarily driven by nondeductible goodwill) on the disposition was recorded in "Sundry income (expense) - net" in the Company's Consolidated Statements of Operations. In the second quarter of 2021, the Company completed the sale of its Solamet® business unit, which was part of Corporate. Total consideration received related to the sale of the business was approximately $190 million. The sale resulted in a pre-tax gain of $140 million ($105 million net of tax) which was recorded in "Sundry income (expense) - net" in the Company's Consolidated Statements of Operations. In the fourth quarter of 2020, the Company entered into a definitive agreement to sell its Biomaterials business unit, which includes the Company's equity method investment in DuPont Tate & Lyle Bio Products. The sale of the Biomaterials business unit is subject to customary closing conditions and is expected to close by mid-year 2022. In the third quarter of 2020, the Company completed the sale of its trichlorosilane business (“TCS Business”) along with its equity ownership interest in DC HSC Holdings LLC and Hemlock Semiconductor L.L.C. (the "HSC Group,” and together with the TCS Business, the “TCS/HSC Disposal Group” and the sale of the TCS/HSC Disposal Group, the “TCS/HSC Disposal”) to the HSC Group, both of which were part of the Non-Core segment. The TCS/HSC Disposal resulted in a net pre-tax benefit of $396 million ($236 million net of tax) which was recorded in “Sundry income (expense) – net” in the Company’s Consolidated Statements of Operations. In the first quarter of 2020, the Company completed the sale of its Compound Semiconductor Solutions business unit, a part of the Electronics & Industrial segment, to SK Siltron, for approximately $420 million. The sale resulted in a pre-tax gain of $197 million ($102 million net of tax) recorded in "Sundry income (expense) - net" in the Company's Consolidated Statements of Operations. See Note 4 of the Consolidated Financial Statements for additional information. 32 Table of Contents Joint Settlement Agreement On January 22, 2021, the Company, Corteva, EID and Chemours entered into a binding Memorandum of Understanding (the “MOU”), pursuant to which the parties have agreed to share certain costs associated with potential future liabilities related to alleged historical releases of certain PFAS arising out of pre-July 1, 2015 conduct (“eligible PFAS costs”) until the earlier to occur of (i) December 31, 2040, (ii) the day on which the aggregate amount of qualified spend (as defined in the MOU) is equal to $4 billion or (iii) a termination in accordance with the terms of the MOU. The parties have agreed that, during the term of this sharing arrangement, Chemours will bear 50% of any qualified spend and the Company and Corteva shall together bear 50% of any qualified spend. As of December 31, 2021, the Company has recorded an indemnification liability of $126 million in connection with the cost sharing arrangement related to future eligible PFAS costs. Total pre-tax charges of $98 million ($76 million after-tax) and $86 million ($66 million after-tax) related to the MOU are reflected as a loss from discontinued operations for the year ended December 31, 2021 and 2020, respectively, in the Company's Consolidated Statements of Operations. See Note 16 of the Consolidated Financial Statements for additional information. Goodwill, Long-Lived Asset and Indefinite-Lived Asset Impairments During the third quarter of 2020, multiple triggering events occurred requiring the Company to perform impairment analyses associated with its Mobility & Materials segment and corporate businesses. As a result of the analyses performed, the Company recorded aggregate pre-tax, non-cash goodwill impairment charges of $183 million recognized in "Goodwill impairment charges" within its corporate businesses and aggregate pre-tax, non-cash asset impairment charges of $318 million within its Mobility & Materials segment and $52 million within corporate businesses both recognized in “Restructuring and asset related charges - net” in the Consolidated Statements of Operations. During the second quarter of 2020, demand weakness in global automotive production resulting from the COVID-19 pandemic, along with revised views of recovery, served as a triggering event requiring the Company to perform an impairment analysis of the goodwill associated with its Mobility & Materials and Industrial Solutions reporting units. As a result of the analysis performed, the Company recorded pre-tax, non-cash goodwill impairment charges of $2,498 million recognized in "Goodwill impairment charges" in the Consolidated Statements of Operations. In connection with the Mobility & Materials impairment analysis, the Company also recorded pre-tax, non-cash impairment charges of $21 million related to indefinite-lived intangible assets recognized in “Restructuring and asset related charges - net” in the Consolidated Statements of Operations. During the first quarter of 2020, the Company was required to perform interim impairment tests of its goodwill and long-lived assets as expectations of proceeds related to certain potential divestitures related to the businesses held in Corporate gave rise to fair value indicators and, thus, served as triggering events. As a result of the analysis performed, the Company recorded pre-tax, non-cash impairment charges related to goodwill of $533 million. The charges were recognized in "Goodwill impairment charge" in the Consolidated Statements of Operations. The Company also recorded pre-tax, non-cash impairment charges of $270 million related to long-lived assets. The charges were recognized in “Restructuring and asset related charges - net” in the Consolidated Statements of Operations. During the second quarter of 2019, the Company was required to perform interim impairment tests of its goodwill due to the internal distribution of the specialty products legal entities from EID to DowDuPont (the "Internal SP Distribution") and changes made to its management and reporting structure. As a result of the analyses performed, the Company recorded pre-tax, non-cash impairment charges during the year ended December 31, 2019 of $242 million impacting Corporate. The charges were recognized in "Goodwill impairment charges" in the Consolidated Statements of Operations. See Notes 6 and 14 of the Consolidated Financial Statements for additional information. 33 Table of Contents Dividends On February 18, 2021, the Board of Directors declared a first quarter dividend of $0.30 per share, paid on March 15, 2021, to shareholders of record on March 1, 2021. On April 28, 2021, the Board of Directors declared a second quarter dividend of $0.30 per share, paid on June 15, 2021, to shareholders of record on May 28, 2021. On June 17, 2021, the Board of Directors declared a third quarter dividend of $0.30 per share, paid on September 15, 2021, to shareholders of record on July 30, 2021. On October 14, 2021, the Board of Directors declared a fourth quarter dividend of $0.30 per share, paid on December 15, 2021, to shareholders of record on November 30, 2021. The DuPont Board of Directors on February 7, 2022, declared a first quarter 2022 dividend of $0.33 per share, a ten percent per share increase versus the first quarter 2021 dividend, payable on March 15, 2022, to holders of record at the close of business on February 28, 2022. Share Buyback Program In the first quarter of 2021, the Company's Board of Directors authorized a $1.5 billion share buyback program, which expires on June 30, 2022 (the "2021 Share Buyback Program"). As of December 31, 2021, the Company had repurchased and retired a total of 14.5 million shares for $1.1 billion under the 2021 Share Buyback Program. On June 1, 2019, the Company's Board of Directors approved a $2 billion share buyback program, which expired on June 1, 2021. At the expiry of the 2019 Share Buyback Program, the Company had repurchased and retired a total of 29.9 million shares at a cost of $2 billion. In February 2022, the Company's Board of Directors authorized an additional $1.0 billion share buyback program which expires on March 31, 2023, (the “2022 Share Buyback Program”).This authorization enables the Company to repurchase shares following the expected completion of the remaining authorization under its 2021 Share Buyback Program. Restructuring Programs 2021 Restructuring Actions In October 2021, the Company approved targeted restructuring actions to capture near term cost reductions (the "2021 Restructuring Actions"). For the year ended December 31, 2021, DuPont recorded a pre-tax charge related to the 2021 Restructuring Actions in the amount of $46 million, recognized in "Restructuring and asset related charges - net" in the Company's Consolidated Statements of Operations, comprised of $26 million of severance and related benefit costs and $20 million of asset related charges. At December 31, 2021, total liabilities related to the 2021 Restructuring Actions were $25 million for severance and related benefits. The Company expects actions related to this program to be substantially complete by the first half of 2022. 2020 Restructuring Program During the first quarter of 2020, the Company approved restructuring actions designed to capture near-term cost reductions and to further simplify certain organizational structures in anticipation of the N&B Transaction (the "2020 Restructuring Program"). The Company recorded pre-tax restructuring charges of $180 million inception-to-date, consisting of severance and related benefit costs of $128 million and asset related charges of $52 million, recognized in "Restructuring and asset related charges - net" in the Company's Consolidated Statements of Operations. At December 31, 2021, total liabilities related to the program were $15 million, which represents expected future cash payments related to this program for the payment of severance and related benefits. The 2020 Restructuring Program is considered substantially complete. 2019 Restructuring Program During the second quarter of 2019 and in connection with the ongoing integration activities, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the DWDP Distributions (the "2019 Restructuring Program"). The Company recorded pre-tax restructuring charges of $125 million inception-to-date, consisting of severance and related benefit costs of $98 million and asset related charges of $27 million, recognized in "Restructuring and asset related charges - net" in the Company's Consolidated Statements of Operations. At December 31, 2021, total liabilities related to the program were $2 million, which represents expected future cash payments related to this program for the payment of severance and related benefits. The 2019 Restructuring Program is considered substantially complete. 34 Table of Contents RESULTS OF OPERATIONS Summary of Sales Results For the Years Ended December 31, In millions 2021 2020 2019 Net sales $ 16,653 $ 14,338 $ 15,436 Sales Variances by Segment and Geographic Region - As Reported For the Year Ended December 31, 2021 For the Year Ended December 31, 2020 Percentage change from prior year Local Price & Product Mix Currency Volume Portfolio & Other Total Local Price & Product Mix Currency Volume Portfolio & Other Total Electronics & Industrial — % 1 % 12 % 6 % 19 % (1) % — % 6 % — % 5 % Water & Protection 2 1 8 — 11 2 — (8) 2 (4) Mobility & Materials 12 2 12 — 26 (4) — (11) — (15) Corporate 3 1 4 (33) (25) 2 — (23) (18) (39) Total 4 % 2 % 10 % — % 16 % (1) % — % (6) % — % (7) % U.S. & Canada 4 % — % 7 % (2) % 9 % (1) % — % (11) % (1) % (13) % EMEA 1 3 4 13 1 21 (1) — (13) — (14) Asia Pacific 5 1 11 1 18 (1) — 3 — 2 Latin America 4 (1) 13 1 17 1 (4) (14) (1) (18) Total 4 % 2 % 10 % — % 16 % (1) % — % (6) % — % (7) % 1. Europe, Middle East and Africa. 2021 versus 2020 The Company reported net sales for the year ended December 31, 2021 of $16.7 billion, up 16 percent from $14.3 billion for the year ended December 31, 2020, due to a 10 percent increase in volume, a 4 percent increase due to local price and product mix, and a 2 percent favorable currency impact. Portfolio and other changes was flat. Volume grew across all geographic regions and across all segments, most notably Electronics & Industrial and Mobility & Materials (both up 12 percent). Local price and product mix increased across all regions and all segments with the exception of Electronics & Industrial where it was flat. Currency was up 2 percent compared with the same period last year, driven primarily by EMEA (up 4 percent) and Asia Pacific (up 1 percent). Portfolio and other changes were flat overall as the acquisition of Laird PM in Electronics & Industrial (up 6 percent) was offset by the decline within Corporate (down 33 percent) due to the sale of businesses. 2020 versus 2019 The Company reported net sales for the year ended December 31, 2020 of $14.3 billion, down 7 percent from $15.4 billion for the year ended December 31, 2019, due to a 6 percent decrease in volume and a 1 percent decline due to local price and product mix. Portfolio and other changes and currency were flat. Volume declined across all geographic regions with the exception of Asia Pacific where it increased 3 percent. Volume gains in Electronics & Industrial (up 6 percent) were more than offset by declines in Mobility & Materials (down 11 percent) and Water & Protection (down 8 percent). Local price increased in Latin America (up 1 percent) and Water & Protection (up 2 percent). Portfolio and other changes were flat overall. The divestitures in Corporate (down 18 percent) were offset by Water & Protection (up 2 percent). Currency was flat compared with the same period last year in all segments. Cost of Sales Cost of sales was $10.8 billion for the year ended December 31, 2021, up from $9.5 billion for the year ended December 31, 2020. Cost of sales increased for the year ended December 31, 2021 primarily due to increased sales volume, currency impacts, and higher raw materials and logistics costs. The increase was partially offset by the absence of approximately $230 million of charges in the prior year associated with temporarily idling several manufacturing plants to align supply with demand due to COVID-19. Cost of sales as a percentage of net sales for the year ended December 31, 2021 was 64.9 percent compared with 66.3 percent for the year ended December 31, 2020. 35 Table of Contents For the year ended December 31, 2020, cost of sales was $9.5 billion, down from $10.0 billion for the year ended December 31, 2019. Cost of sales decreased for the year ended December 31, 2020 primarily due to lower sales volume, cost synergies, and the absence in 2020 of costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205 and therefore remained as costs of continuing operations for periods prior to the DWDP Distributions, offset by approximately $230 million of charges associated with temporarily idling several manufacturing plants to align supply with demand due to COVID-19, driven primarily by the Mobility & Materials segment. Cost of sales as a percentage of net sales for the year ended December 31, 2020 was 66.3 percent compared with 65.0 percent for the year ended December 31, 2019. Research and Development Expense ("R&D") R&D expense was $618 million for the year ended December 31, 2021, down from $625 million for the year ended December 31, 2020, and $689 million for the year ended December 31, 2019. R&D as a percentage of net sales was 4 percent for the years ended December 31, 2021, 2020, and 2019. R&D expense in 2021 compared to 2020 was relatively consistent, the slight decline was primarily due to productivity actions. The decrease in R&D costs in 2020 compared to 2019 was due to productivity actions as well as the absence of R&D costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205 and therefore remained as a cost of continuing operations for periods prior to the DWDP Distributions. Selling, General and Administrative Expenses ("SG&A") For the year ended December 31, 2021, SG&A expenses totaled $1,855 million, up from $1,701 million in the year ended December 31, 2020 and down from $2,057 million for the year ended December 31, 2019. SG&A as a percentage of net sales was 11 percent, 12 percent, and 13 percent for the years ended December 31, 2021, 2020, and 2019, respectively. The increase in SG&A costs in 2021 compared with 2020 was primarily due to incremental costs from higher personnel related expenses, currency fluctuations, and six months of consolidating Laird PM. The decrease in SG&A costs in 2020 compared to 2019 was due to productivity actions, temporarily reducing costs due to COVID-19 restrictions, overall reduced spending, and the absence of SG&A costs previously allocated to the materials science and agriculture businesses that did not meet the definition of expenses related to discontinued operations in accordance with ASC 205 and therefore remained as costs of continuing operations for periods prior to the DWDP Distributions. Amortization of Intangibles Amortization of intangibles was $725 million, $696 million, and $701 million for the years ended December 31, 2021, 2020, and 2019, respectively. The increase in amortization of intangibles in 2021 compared to 2020 was primarily due to the amortization of the intangible assets acquired in the Laird PM Acquisition, partially offset by lower amortization due to the sale of the trichlorosilane business ("TCS Business") in the third quarter of 2020, as well as the classification of the Biomaterials and Clean Technologies business units as held for sale in the third quarter of 2020. Amortization expense in 2020 compared to 2019 was relatively flat. See Note 14 to the Consolidated Financial Statements for additional information on intangible assets. Restructuring and Asset Related Charges - Net Restructuring and asset related charges - net were $55 million, $845 million, and $152 million for the years ended December 31, 2021, 2020 and 2019, respectively. The activity for the year ended December 31, 2021 included a $46 million charge related to the 2021 Restructuring Actions, a $12 million charge related to the 2020 Restructuring Program, a $1 million charge related to the 2019 Restructuring Program and a $4 million credit related to the DowDuPont Cost Synergy Program. The charges for the year ended December 31, 2020 included a $270 million impairment charge related to long-lived assets and a $52 million impairment charge related to indefinite-lived intangible assets in Corporate, a $318 million impairment charge related to long-lived assets and a $21 million impairment charge related to indefinite-lived intangible assets in the Mobility & Materials segment, a $168 million charge related to the 2020 Restructuring Program, a $5 million charge related to the 2019 Restructuring Program and a $11 million charge related to the DowDuPont Cost Synergy Program. The charges for the year ended December 31, 2019 included a charge of $119 million related to the 2019 Restructuring Program and a $33 million charge to the DowDuPont Cost Synergy Program. See Note 6 to the Consolidated Financial Statements for additional information. 36 Table of Contents Goodwill Impairment Charges There were no goodwill impairment charges for the year ended December 31, 2021. Goodwill impairment charges were $3,214 million and $242 million for the years ended December 31, 2020 and 2019, respectively. For the year ended December 31, 2020, goodwill impairment charges related to a business reported in Corporate and the Mobility & Materials and Industrial Solutions reporting units. For the year ended December 31, 2019, goodwill impairment charges related to businesses reported in Corporate. See Note 14 to the Consolidated Financial Statements for additional information. Acquisition, Integration and Separation Costs Acquisition, integration and separation costs were $133 million, $177 million and $1,257 million for the years ended December 31, 2021, 2020 and 2019, respectively. Acquisition, integration and separation costs primarily consist of financial advisory, information technology, legal, accounting, consulting, and other professional advisory fees. For the year-ended December 31, 2021 these costs were primarily associated with the execution of strategic initiatives, including the acquisition of Laird PM, the planned divestiture of the In-Scope M&M Businesses, the Intended Rogers Acquisition, and the completed and planned divestitures of the held for sale businesses included within Corporate. For the years ended December 31, 2020 and December 31, 2019 these costs were primarily associated with the preparation and execution of activities related to the DWDP Merger, post-DWDP Merger integration, and the DWDP Distributions. Equity in Earnings of Nonconsolidated Affiliates The Company's share of the earnings of nonconsolidated affiliates was $94 million, $187 million, and $85 million for the years ended December 31, 2021, 2020 and 2019, respectively. The decrease in earnings of nonconsolidated affiliates for the year ended December 31, 2021 compared to the prior year is primarily due to the sale of DC HSC Holdings LLC and Hemlock Semiconductor L.L.C. (the "HSC Group") in the third quarter of 2020. The increase in earnings of nonconsolidated affiliates for the year ended December 31, 2020 compared to the year ended December 31, 2019 is due to higher HSC Group equity earnings in the first half of 2020, driven mainly by customer settlements in the second quarter of 2020. Sundry Income (Expense) - Net Sundry income (expense) - net includes a variety of income and expenses such as foreign currency exchange gains or losses, interest income, dividends from investments, gains and losses on sales of investments and assets, non-operating pension and other post-employment benefit plan credits or costs, and certain litigation matters. Sundry income (expense) - net for the year ended December 31, 2021 was $163 million compared with $667 million and $144 million in the years ended December 31, 2020 and 2019, respectively. The year ended December 31, 2021 included a net pre-tax benefit of $140 million associated with the sale of the Solamet® business unit within Corporate, a pre-tax gain of $28 million related to the sale of assets within the Electronics & Industrial segment, income related to non-operating pension and other post-employment benefit plans of $52 million, partially offset by foreign currency exchange losses of $53 million, and miscellaneous expenses of $11 million. The year ended December 31, 2020 included a net pre-tax benefit of $396 million associated with the TCS/HSC Disposal, a pre-tax gain of $197 million related to the sale of the Compound Semiconductor Solutions business unit in the Electronics & Industrial segment, miscellaneous income of $32 million, and income related to non-operating pension and other post-employment benefit plans of $30 million, partially offset by foreign currency exchange losses of $39 million. The year ended December 31, 2019 included a net gain on sale of assets and investments of $144 million, income related to non-operating pension and other post-employment benefit plans of $72 million and interest income of $56 million, partially offset by foreign currency exchange losses of $104 million and miscellaneous expenses of $24 million which includes a $48 million charge reflecting a reduction in gross proceeds from lower withholding taxes related to a prior year legal settlement. The net gain on sale of assets includes income of $92 million related to a sale of assets within the Electronics & Industrial segment and as well as a gain of $28 million related to the sale of the Sustainable Solutions business unit included in Corporate. See Note 7 to the Consolidated Financial Statements for additional information. 37 Table of Contents Interest Expense Interest expense was $525 million, $672 million, and $667 million for the years ended December 31, 2021, 2020, and 2019, respectively. The decrease in interest expense in 2021 compared to 2020 primarily relates to the maturity of the November 2020 Notes, the early repayment of the $3.0 billion Term Loan Facilities in February 2021, and significant reduction of commercial paper borrowings, partially offset by structuring fees and the amortization of commitment fees related to the Intended Rogers Acquisition financing agreements. The increase in interest expense in 2020 compared to 2019 primarily relates to financing costs associated with the May 2020 Debt Offering, partially offset by reduced borrowing rates on floating rate debt. Refer to Note 15 to the Consolidated Financial Statements for additional information. Provision for (Benefit from) Income Taxes on Continuing Operations The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attributes. For the year ended December 31, 2021, the Company's effective tax rate was 17.9 percent on pre-tax income from continuing operations of $2,196 million. The effective tax rate differential for the year ended December 31, 2021, was principally the result of a $59 million tax benefit related to the step-up in tax basis in the goodwill of the Company’s European regional headquarters legal entity. For the year ended December 31, 2020, the Company's effective tax rate was (7.1) percent on a pre-tax loss from continuing operations of $2,246 million. The effective tax rate differential was principally the result of the non-tax-deductible goodwill impairment charge impacting Corporate in the first and third quarter and a non-tax-deductible goodwill impairment charge impacting the Mobility & Materials and Electronics & Industrial segments in the second quarter, coupled with an allocation of non-tax-deductible goodwill related to the TCS/HSC Disposal. For the year ended December 31, 2019, the Company's effective tax rate was 1.6 percent on a pre-tax loss from continuing operations of $126 million. The effective tax rate differential was principally the result of the non-tax-deductible goodwill impairment charges impacting Corporate. The underlying factors affecting the Company’s overall tax rate are summarized in Note 8 to the Consolidated Financial Statements. 38 Table of Contents SUPPLEMENTAL UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The following supplemental unaudited pro forma financial information (the “unaudited pro forma financial statements”) was derived from DuPont’s Consolidated Financial Statements, adjusted to give effect to certain events directly attributable to the DWDP Distributions. In contemplation of the DWDP Distributions and to achieve the respective credit profiles of each of the current companies, in the fourth quarter of 2018, DowDuPont borrowed $12.7 billion under the 2018 Senior Notes and entered the Term Loan Facilities with an aggregate principal amount of $3.0 billion. Additionally, DuPont issued approximately $1.4 billion in commercial paper in May 2019 in anticipation of the Corteva Distribution (the “Funding CP Issuance” together with the 2018 Senior Notes and the Term Loan Facilities, the "DWDP Financings"). The unaudited pro forma financial statements below were prepared in accordance with Article 11 of Regulation S-X. The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the DWDP Distributions and the DWDP Financings (collectively the "DWDP Transactions"), (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the results. The unaudited pro forma statements of operations for the years ended December 31, 2019 give effect to the pro forma events as if the DWDP Transactions had occurred on January 1, 2018. There were no pro forma adjustments for the years ended December 31, 2021 and 2020. Restructuring or integration activities or other costs following the DWDP Distributions that may be incurred to achieve cost or growth synergies of DuPont are not reflected. The unaudited pro forma statements of operations provides shareholders with summary financial information and historical data that is on a basis consistent with how DuPont reports current financial information. The unaudited pro forma financial statements are presented for informational purposes only, and do not purport to represent what DuPont's results of operations or financial position would have been had the DWDP Transactions occurred on the dates indicated, nor do they purport to project the results of operations or financial position for any future period or as of any future date. Unaudited Pro Forma Combined Statement of Operations 2019 In millions, except per share amounts DuPont 1 Pro Forma Adjustments 2 Pro Forma Net sales $ 15,436 $ — $ 15,436 Cost of sales 10,026 16 10,042 Research and development expenses 689 — 689 Selling, general and administrative expenses 2,057 — 2,057 Amortization of intangibles 701 — 701 Restructuring and asset related charges - net 152 — 152 Goodwill impairment charges 242 — 242 Integration and separation costs 1,257 (173) 1,084 Equity in earnings of nonconsolidated affiliates 85 — 85 Sundry income (expense) - net 144 — 144 Interest expense 667 29 696 (Loss) Income from continuing operations before income taxes (126) 128 2 Provision for income taxes on continuing operations (2) 31 29 (Loss) Income from continuing operations, net of tax (124) 97 (27) Net income attributable to noncontrolling interests of continuing operations 29 — 29 Net (loss) income from continuing operations attributable to DuPont $ (153) $ 97 $ (56) Per common share data: (Loss) Income per common share from continuing operations - basic $ (0.21) $ (0.08) (Loss) Income per common share from continuing operations - diluted $ (0.21) $ (0.08) Weighted-average common shares outstanding - basic 746.3 746.3 Weighted-average common shares outstanding - diluted 746.3 746.3 1. See the Company's historical U.S. GAAP Consolidated Statements of Operations. 2. Certain pro forma adjustments were made to illustrate the estimated effects of the DWDP Transactions, assuming that the DWDP Transactions had occurred on January 1, 2018. The adjustments include the impact to "Cost of sales" of different pricing than historical intercompany and intracompany practices related to various supply agreements entered into with the Dow Distribution, adjustments to "Integration and separation costs" to eliminate one time transaction costs directly attributable to the DWDP Distributions, and adjustments to "Interest expense" to reflect the impact of the Financings. 39 Table of Contents SEGMENT RESULTS The Company's measure of profit/loss for segment reporting purposes is Operating EBITDA as this is the manner in which the Company's chief operating decision maker ("CODM") assesses performance and allocates resources. The Company defines Operating EBITDA as earnings (i.e., “Income from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / other post-employment benefits (“OPEB”) / charges, and foreign exchange gains / losses, adjusted for significant items. Prior to April 1, 2019, the Company's measure of profit / loss for segment reporting purposes was pro forma Operating EBITDA as this was the manner in which the Company's chief operating decision maker ("CODM") assessed performance and allocated resources. The Company defines pro forma Operating EBITDA as pro forma earnings (i.e. pro forma "Income (loss) from continuing operations before income taxes") before interest, depreciation, amortization, non-operating pension / OPEB benefits / charges, and foreign exchange gains/losses, excluding the impact of costs historically allocated to the materials science and agriculture businesses that did not meet the criteria to be recorded as discontinued operations and adjusted for significant items. Pro forma adjustments were determined in accordance with Article 11 of Regulation S-X. Pro forma financial information is based on the Consolidated Financial Statements of DuPont, adjusted to give effect to the impact of certain items directly attributable to the DWDP Distributions, and the Term Loan Facilities, the 2018 Senior Notes and the Funding CP Issuance (together, the "DWDP Financings"), including the use of proceeds from such Financings (collectively the "DWDP Transactions"). The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the DWDP Transactions, (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the results. Events that are not expected to have a continuing impact on the combined results are excluded from the pro forma adjustments. Those pro forma adjustments include the impact of various supply agreements entered into in connection with the Dow Distribution ("supply agreements") and are adjustments to "Cost of sales." The impact of these supply agreements are reflected in pro forma Operating EBITDA for the year ended December 31, 2019 as they are included in the measure of profit/loss reviewed by the CODM in order to show meaningful comparability among periods while assessing performance and making resource allocation decisions. Refer to the Supplemental Unaudited Pro Forma Combined Financial Information section for further information. 40 Table of Contents ELECTRONICS & INDUSTRIAL The Electronics & Industrial segment is a leading global supplier of differentiated materials and systems for a broad range of consumer electronics including mobile devices, television monitors, personal computers and electronics used in a variety of industries. The segment is a leading provider of materials and solutions for the fabrication and packaging of semiconductors and integrated circuits, and provides innovative solutions for thermal management and electromagnetic shielding as well as metallization processes for metal finishing, decorative, and industrial applications. Electronics & Industrial is a leading provider of platemaking systems and photopolymer plates for the packaging graphics industry, digital printing inks and cutting-edge materials for the manufacturing of displays for organic light emitting diode ("OLED"). In addition, the segment produces high performance elastomer and polyimide parts, medical silicones and specialty lubricants. Electronics & Industrial For the Years Ended December 31, In millions 2021 2020 2019 Net sales $ 5,554 $ 4,674 $ 4,446 Operating EBITDA 1 $ 1,758 $ 1,468 $ 1,454 Equity earnings $ 41 $ 34 $ 24 1. For the year ended December 31, 2019 operating EBITDA is on a pro forma basis. Electronics & Industrial For the Years Ended December 31, Percentage change from prior year 2021 2020 Change in Net Sales from Prior Period due to: Local price & product mix — % (1) % Currency 1 — Volume 12 6 Portfolio & other 6 — Total 19 % 5 % 2021 Versus 2020 Electronics & Industrial net sales were $5,554 million for the year ended December 31, 2021, up 19 percent from $4,674 million for the year ended December 31, 2020. Net sales increased due to a 12 percent increase in volume, a 6 percent portfolio and other increase and a 1 percent favorable currency impact. Local price and product mix were flat. Volume growth was driven by Industrial Solutions primarily due to increased demand in consumer electronics and healthcare markets. Semiconductor Technologies volume growth was led by new technology ramps at advanced nodes within logic and foundry and growth in high performance computing and 5G communications markets. Within Interconnect Solutions, the increase was driven by the July 1, 2021 acquisition of Laird PM, increases in consumer electronics, and continued volume recovery within industrial applications. Operating EBITDA was $1,758 million for the year ended December 31, 2021, up 20 percent compared with $1,468 million for the year ended December 31, 2020 driven by strong volume growth and the acquisition of Laird PM and partially offset by higher raw material and logistic costs. The years ended December 31, 2021 and 2020 include income of $28 million and $40 million, respectively, related to the sale of assets. 2020 Versus 2019 Electronics & Industrial net sales were $4,674 million for the year ended December 31, 2020, up from $4,446 million for the year ended December 31, 2019. Net sales increased due to a 6 percent volume increase partially offset by a 1 percent decrease in local price. Volume growth was driven by Semiconductor Technologies with continued strength and new technology in logic and foundry and increased demand in the memory segment. Volume growth within Interconnect Solutions was driven by increased material content in next-generation smartphones. Within Industrial Solutions, volume growth in KALREZ® for electronics applications, OLED materials for displays and digital printing inks for the consumer segment offset weakness in flexographic plates and declines in the automotive and aerospace end markets. Volume grew significantly in Asia Pacific. Operating EBITDA was $1,468 million for the year ended December 31, 2020, up 1 percent compared with pro forma Operating EBITDA of $1,454 million for the year ended December 31, 2019 as volume growth, productivity and higher equity income more than offset higher raw material logistic costs and lower gains related to asset sales. 41 Table of Contents WATER & PROTECTION Water & Protection is the global leader in providing innovative engineered products and integrated systems for a number of industries including, worker safety, water purification and separation, transportation, energy, medical packaging and building materials. Water & Protection addresses the growing global needs of businesses, governments and consumers for solutions that make life safer, healthier and better. By uniting market-driven science and engineering with the strength of highly regarded brands, the segment strives to bring new products and solutions to solve customers' needs faster, better and more cost effectively. Water & Protection For the Years Ended December 31, In millions 2021 2020 2019 Net sales $ 5,552 $ 4,993 $ 5,201 Operating EBITDA 1 $ 1,385 $ 1,313 $ 1,370 Equity earnings $ 36 $ 26 $ 27 1. For the year ended December 31, 2019 operating EBITDA is on a pro forma basis. Water & Protection For the Years Ended December 31, Percentage change from prior year 2021 2020 Change in Net Sales from Prior Period due to: Local price & product mix 2 % 2 % Currency 1 — Volume 8 (8) Portfolio & other — 2 Total 11 % (4) % 2021 Versus 2020 Water & Protection net sales were $5,552 million for the for the year ended December 31, 2021, up 11 percent from $4,993 million for the year ended December 31, 2020 due to an 8 percent increase in volume, a 2 percent increase in local price, and a 1 percent favorable currency impact. Portfolio was flat. Volume growth across the segment was driven by ongoing recovery of end markets following the COVID-19 pandemic. Volume gains in Safety Solutions were driven by continued recovery in end-markets for aramid fibers most notably in NOMEX® and KEVLAR®. Within Shelter Solutions, volume growth was driven by the ongoing recovery of commercial construction and continued demand in residential construction and do-it-yourself applications. Water Solutions volume gains reflect strong demand for water technologies led by reverse osmosis membranes in industrial and desalination markets. Operating EBITDA was $1,385 million for the year ended December 31, 2021, up 5 percent compared with $1,313 million for the year ended December 31, 2020 as volume gains and the absence of costs associated with temporarily idling several manufacturing facilities were partially offset by higher raw material and logistics costs. 2020 Versus 2019 Water & Protection net sales were $4,993 million for the year ended December 31, 2020, down from $5,201 million for the year ended December 31, 2019 as a 2 percent increase in local price and 2 percent increase in portfolio were more than offset by a 8 percent volume decline. The portfolio impact reflects the recent acquisitions in the Water Solutions business. Volume growth in the segment was led by gains in Water Solutions and TYVEK® protective garment sales within Safety Solutions which were more than offset by weakened demand in end markets for NOMEX® and KEVLAR®. Shelter Solutions volume declined due to the COVID-19 pandemic and the resulting impact on commercial construction activity. Operating EBITDA was $1,313 million for the year ended December 31, 2020, down 4 percent compared with pro forma Operating EBITDA of $1,370 million for the year ended December 31, 2019 due to lower volumes, the absence of licensing income, and costs associated with idling facilities more than offsetting pricing gains, improved product mix, and productivity actions. 42 Table of Contents MOBILITY & MATERIALS The Mobility & Materials segment provides high-performance engineering thermoplastics and advanced solutions to engineers and designers in the transportation, electronics, industrial, consumer and renewable energy end-markets to enable systems solutions for demanding applications and environments. The segment delivers a broad range of polymer-based high-performance materials in its product portfolio, including elastomers and thermoplastic and thermoset engineering polymers which are used by customers to fabricate components for mechanical, chemical and electrical systems. In addition, the segment supplies key materials for the manufacturing of photovoltaic cells and panels, including backsheet materials and silicone encapsulates and adhesives. The segment provides specialty pastes and films used in consumer electronics, automotive, and aerospace markets. Mobility & Materials is a global leader of advanced materials that provides technologies that differentiate customers’ products with improved performance characteristics enabling the transition to hybrid-electric-connected vehicles and high speed high frequency connectivity. Mobility & Materials For the Years Ended December 31, In millions 2021 2020 2019 Net sales $ 5,045 $ 4,005 $ 4,690 Operating EBITDA 1 $ 1,082 $ 588 $ 954 Equity earnings $ 9 $ 19 $ 4 1. For the year ended December 31, 2019 operating EBITDA is on a pro forma basis. Mobility & Materials For the Years Ended December 31, Percentage change from prior year 2021 2020 Change in Net Sales from Prior Period due to: Local price & product mix 12 % (4) % Currency 2 — Volume 12 (11) Portfolio & other — — Total 26 % (15) % 2021 Versus 2020 Mobility & Materials net sales were $5,045 million for the year ended December 31, 2021, up 26 percent from $4,005 million for the year ended December 31, 2020. Net sales increased due to a 12 percent increase in local price and product mix, a 12 percent increase in volume and a 2 percent favorable currency impact. The local price increase reflects actions taken to offset higher raw material costs and higher metals pricing. Volume growth was attributable to the continued recovery of key end markets, primarily the global automotive market. Operating EBITDA was $1,082 million for the year ended December 31, 2021, up 84 percent compared with $588 million for the year ended December 31, 2020 driven by higher volumes, pricing gains, and the absence of $170 million of charges recorded in the prior year associated with temporarily idling several manufacturing facilities which offset higher raw material and logistic costs. 2020 Versus 2019 Mobility & Materials net sales were $4,005 million for the year ended December 31, 2020, down from $4,690 million for the year ended December 31, 2019 due to a 11 percent decrease in volume and a 4 percent decrease in local price. Volume declines were due to the impact of the COVID-19 pandemic on the automotive industry and the other key industrial markets. Operating EBITDA was $588 million for the year ended December 31, 2020, down 38 percent compared with pro forma Operating EBITDA of $954 million for the year ended December 31, 2019 driven primarily by price and volume declines due to the COVID-19 pandemic and approximately $170 million in charges associated with temporarily idling several manufacturing plants to align supply with demand. 43 Table of Contents Corporate Corporate includes certain enterprise and governance activities including non-allocated corporate overhead costs and support functions, leveraged services, non-business aligned litigation expenses and other costs not absorbed by reportable segments. The sales and activity of to be divested and previously divested businesses including the operations of Biomaterials, Clean Technologies, and Solamet® business units, and the TCS Business along with its equity ownership interest in DC HSC Holdings LLC and Hemlock Semiconductor L.L.C. (the "HSC Group”) are reflected as Corporate activity. To date, the following divestitures of businesses held within Corporate have occurred: • Clean Technologies on December 31, 2021; • Solamet® in the third quarter 2021; • the TCS Business and HSC Group in the third quarter 2020; and • the Sustainable Solutions business in third quarter 2019. Corporate net sales related to the divested businesses were $502 million, $666 million, and $1,099 million for the years ended December 31, 2021, 2020, and 2019, respectively. The decrease in sales for the year ended December 31, 2021, was driven by the timing of portfolio actions, discussed above, offset by volume growth driven by demand in carpet and apparel markets within Biomaterials and pricing gains. For the year ended December 31, 2020, sales declined due to the portfolio actions discussed above and volume declines which were led by lower demand in Biomaterials due to weakened demand in carpet and apparel markets and lower volumes in Clean Technologies. Operating EBITDA was $(55) million and $70 million for the year ended December 31, 2021 and 2020, respectively and pro forma Operating EBITDA was $366 million for the years ended December 31, 2019. The decrease in EBITDA both years was primarily the result of portfolio actions and declines in customer settlements. OUTLOOK In 2022, the Company expects demand to remain strong across all segments led by on-going strength in semiconductors, along with continued demand in industrial technologies, smartphone sales, water filtration and residential construction. The Company anticipates raw material and logistic costs will remain at elevated levels in 2022. The anticipated strong demand, productivity actions and Laird PM acquisition synergies along with benefits from continued pricing actions in response to incremental cost increases, are expected to deliver earnings improvement versus 2021. The Company continues to closely monitor macroeconomic and geopolitical developments. 44 Table of Contents LIQUIDITY & CAPITAL RESOURCES The Company continually reviews its sources of liquidity and debt portfolio and may make adjustments to one or both to ensure adequate liquidity and increase the Company’s optionality and financing efficiency as it relates to financing cost and balancing terms/maturities. The Company’s primary source of incremental liquidity is cash flows from operating activities. COVID-19 continues to impact the broader global economy. Management expects the generation of cash from operations and the ability to access the debt capital markets and other sources of liquidity will continue to provide sufficient liquidity and financial flexibility to meet the Company’s and its subsidiaries obligations as they come due. However, DuPont is unable to predict the extent of COVID-19 related impacts which depend on uncertain and unpredictable future developments. In light of this uncertainty, the Company has taken steps to further ensure liquidity and capital resources, as discussed below. In millions December 31, 2021 December 31, 2020 Cash and cash equivalents 1 $ 2,011 $ 2,544 Total debt $ 10,782 $ 15,612 1. The net proceeds of approximately $6.2 billion received from an offering of senior unsecured notes associated with the N&B Transaction were recorded within non-current “Restricted cash” in the Consolidated Balance Sheets at December 31, 2020 and thus are not included in "Cash and cash equivalents" as presented in the table above. The Company's cash and cash equivalents at December 31, 2021 and December 31, 2020 were $2.0 billion and $2.5 billion, respectively, of which $1.4 billion at December 31, 2021 and $1.8 billion at December 31, 2020 were held by subsidiaries in foreign countries, including United States territories. For each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States. Total debt at December 31, 2021 and December 31, 2020 was $10.8 billion and $15.6 billion, respectively. The decrease was primarily due to the termination and repayment of the Company's $3.0 billion term loan facilities in the first quarter of 2021, and the redemption of the May 2020 Notes in the second quarter of 2021, described further below, in accordance with a special mandatory redemption feature. As of December 31, 2021, the Company is contractually obligated to make future cash payments of $10.7 billion and $5.9 billion associated with principal and interest, respectively, on debt obligations. Related to the principal, all payments will be due subsequent to 2022. Related to interest, $503 million will be due in the next twelve months and the remainder will be due subsequent to 2022. The majority of interest obligations will be due in 2027 or later. Term Loan and Revolving Credit Facilities In November 2018, the Company entered into a term loan agreement that establishes two term loan facilities in the aggregate principal amount of $3.0 billion, (the “Term Loan Facilities”) as well as a five-year $3.0 billion revolving credit facility (the “Five-Year Revolving Credit Facility”). Effective May 2, 2019, the Company fully drew the two Term Loan Facilities in the aggregate principal amount of $3.0 billion and the Five-Year Revolving Credit Facility became effective and available. The Five-Year Revolving Credit Facility is generally expected to remain undrawn, and serve as a backstop to the Company’s commercial paper and letter of credit issuance. On February 1, 2021, the Company terminated its fully drawn $3.0 billion Term Loan Facilities. The termination triggered the repayment of the aggregate outstanding principal amount of $3.0 billion, plus accrued and unpaid interest through and including January 31, 2021. The Company funded the repayment with proceeds from the Special Cash Payment. On April 15, 2021, the Company entered into an updated $1.0 billion 364-day revolving credit facility (the “2021 $1B Revolving Credit Facility") as the $1.0 billion 364-day revolving credit facility entered in April 2020 (the “2020 $1B Revolving Credit Facility") expired mid-April. As of the effectiveness of the 2021 $1B Revolving Credit Facility, the 2020 $1B Revolving Credit Facility was terminated. The 2021 $1B Revolving Credit facility may be used for general corporate purposes. The Company intends to renew the 364-Day Revolving Credit Facility on or prior to expiration. May 2020 Debt Offering On May 1, 2020, the Company completed an underwritten public offering of senior unsecured notes (the “May 2020 Notes”) in the aggregate principal amount of $2.0 billion of 2.169 percent fixed rate notes due May 1, 2023 (the “May 2020 Debt Offering”). Upon consummation of the N&B Transaction, the special mandatory redemption feature of the May 2020 Debt Offering was triggered, requiring the Company to redeem all of the May 2020 Notes at a redemption price equal to 100% of the aggregate principal amount of the May 2020 Notes plus accrued and unpaid interest. The Company redeemed the May 2020 Notes on May 13, 2021 and funded the redemption with proceeds from the Special Cash Payment. 45 Table of Contents Laird Performance Materials On July 1, 2021, the Company completed the acquisition of Laird PM from Advent International for aggregate consideration of $2.4 billion, which reflects adjustments, including for acquired cash and net working capital. The acquisition is part of the Interconnect Solutions business within the Electronics & Industrial segment. The Company paid for the acquisition from existing cash balances. Intended Rogers Acquisition On November 2, 2021, the Company announced that it had entered into a definitive agreement to acquire all the outstanding shares of Rogers for about $5.2 billion. The acquisition is expected to close by the end of the second quarter of 2022 subject to regulatory approvals and other customary closing conditions. Concurrent with the signing of the definitive agreement, the Company entered into a Bridge Commitment Letter (the “Bridge Letter”) in an aggregate principal amount of $5.2 billion to secure committed financing for the Intended Rogers Acquisition. On November 22, 2021, the Company entered into a two-year senior unsecured committed term loan agreement in the amount of $5.2 billion (the "2021 Term Loan Facility"). The 2021 Term Loan Facility is intended to fund the Intended Rogers Acquisition and will be drawn upon contemporaneously with the close of the Intended Rogers Acquisition. The 2021 Term Loan Facility is required to be repaid upon completion of the intended divestiture of the In-Scope M&M Businesses. Commensurate with the entry into the 2021 Term Loan Facility, the commitments under the Bridge Letter were terminated. Commercial Paper In April 2019, DuPont authorized a $3.0 billion commercial paper program (the “DuPont Commercial Paper Program”). At December 31, 2021 the Company has $150 million of commercial paper issued and outstanding. Credit Ratings The Company's credit ratings impact its access to the debt capital markets and cost of capital. The Company remains committed to maintaining a strong financial position with a balanced financial policy focused on maintaining a strong investment-grade rating and driving shareholder value and remuneration. At January 31, 2022, DuPont's credit ratings were as follows: Credit Ratings Long-Term Rating Short-Term Rating Outlook Standard & Poor’s BBB+ A-2 Stable Moody’s Investors Service Baa1 P-2 Negative Fitch Ratings BBB+ F-2 Stable The Company's indenture covenants include customary limitations on liens, sale and leaseback transactions, and mergers and consolidations, subject to certain limitations. The senior unsecured notes (the "2018 Senior Notes") also contain customary default provisions. The 2021 Term Loan Facility, the Five-Year Revolving Credit Facility and the 2021 $1B Revolving Credit Facility contain a financial covenant, typical for companies with similar credit ratings, requiring that the ratio of Total Indebtedness to Total Capitalization for the Company and its consolidated subsidiaries not exceed 0.60. At December 31, 2021, the Company was in compliance with this financial covenant. Summary of Cash Flows The Company’s cash flows from operating, investing and financing activities, as reflected in the Consolidated Statements of Cash Flows, are summarized in the following table. The cash flows related to N&B have not been segregated and are included in the Consolidated Statements of Cash Flows for all periods presented, while cash flows related to the materials science and agriculture businesses are included in the Consolidated Statements of Cash Flows for the year ended December 31, 2019. Cash Flow Summary 2021 2020 2019 In millions Cash provided by (used for): Operating activities $ 2,281 $ 4,095 $ 1,409 Investing activities $ (2,401) $ (202) $ (2,313) Financing activities $ (6,507) $ 3,238 $ (11,550) Effect of exchange rate changes on cash, cash equivalents and restricted cash $ (72) $ 67 $ 9 Cash, cash equivalents and restricted cash in discontinued operations $ — $ 8 $ 8 46 Table of Contents Cash Flows from Operating Activities Cash provided by operating activities was $2,281 million, $4,095 million and $1,409 million for the years ended December 31, 2021, 2020 and 2019, respectively. Cash provided by operating activities decreased in 2021 compared with 202 0, primarily due to the use of cash from accounts and notes receivable and inventories in 2021 compared to the release of cash from those same balance sheet assets in 2020. In 2021, these changes were driven by economic recovery resulting in sales growth/higher accounts receivable and supply chain challenges resulting in higher inventory levels. Cash provided by operating activities increased in 2020 compared with 2019, largely due t o a release of cash from net working capital in 2020 versus a use of cash for net working capital in the prior period, partially offset by lower earnings versus the prior period. Activity related to the N&B business is included in the full year of the 2020 comparative period and the first month of 2021. Net Working Capital 1 December 31, 2021 December 31, 2020 In millions (except ratio) Current assets $ 8,065 $ 8,349 Current liabilities 4,262 3,616 Net working capital $ 3,803 $ 4,733 Current ratio 1.89:1 2.31:1 1. Net working capital at December 31, 2020 has been presented to exclude the assets and liabilities related to the N&B Transaction. The assets and liabilities related to the N&B Transaction are presented as assets of discontinued operations and liabilities of discontinued operations, respectively, in the Consolidated Balance Sheets. Cash Flows from Investing Activities Cash used for investing activities in 2021 was $2,401 million compared to cash used for investing of $202 million in 2020. The increase in cash used was primarily attributable to the acquisition of Laird PM, and decrease in cash proceeds received from the sales of Solamet ® and Clean Technologies businesses in 2021 compared to the cash proceeds received from the sales of the TCS Business and Compound Semiconductor Solutions business units in 2020 partially offset by lower capital expenditures in 2021. Cash used for investing activities in 2019 was $2,313 million primarily driven by capital expenditures and purchases of investments, which were partially offset by proceeds from sales and maturities of investments and proceeds from sales of property and business. Activity related to the N&B business is included in the full year of the comparative period and the first month of 2021. Capital expenditures totaled $891 million, $1,194 million and $2,472 million for the years ended December 31, 2021, 2020 and 2019, respectively. The Company expects 2022 capital expenditures to be about $900 million. The Company may adjust its spending throughout the year as economic conditions develop. Cash Flows from Financing Activities Cash used for financing activities in 2021 was $6,507 million compared to cash provided by financing activities of $3,238 million in 2020. The difference in cash flows from financing activities in 2021 versus the prior year is primarily driven by the use of cash in repayment of long-term debt, repurchases of common stock and significant reduction in issuances of long-term debt, which was partially offset by cash provided by increase in short-term notes payable and reduction in dividends paid to stockholders due to less shares outstanding. Cash used for financing activities in 2019 was $11,550 million, primarily driven by repurchases of common stock and impact of the DWDP Distributions of the materials science and agriculture businesses to cash balances. Activity related to the N&B business is included in the full year of the comparative period and the first month of 2021. 47 Table of Contents Dividends The following table provides dividends paid to common shareholders for the years ended December 31, 2021, 2020, and 2019: Dividends Paid December 31, 2021 December 31, 2020 December 31, 2019 In millions Dividends paid, per common share $ 1.20 $ 1.20 $ 2.16 Dividends paid to common stockholders 1,2 $ 630 $ 882 $ 1,611 1. The 2019 dividends include dividends paid to DowDuPont common stockholders prior to the DWDP Distributions. 2. The 2020 dividends include dividends paid to common stockholders prior to the N&B Transaction. The DuPont Board of Directors on February 7, 2022, declared a first quarter 2022 dividend of $0.33 per share, a ten percent per share increase versus the first quarter 2021 dividend, payable on March 15, 2022, to holders of record at the close of business on February 28, 2022. Share Buyback Programs On June 1, 2019, the Company's Board of Directors authorized a $2.0 billion share buyback program, which expired on June 1, 2021 ("2019 Share Buyback Program"). At the expiry of the 2019 Share Buyback Program, the Company had repurchased and retired a total cost of 29.9 million shares at a cost of $2.0 billion. In the first quarter of 2021, the Company's Board of Directors authorized a $1.5 billion share buyback program, which expires on June 30, 2022 ("2021 Share Buyback Program"). As of December 31, 2021, the Company had repurchased and retired a total of 14.5 million shares for $1.1 billion under the 2021 Share Buyback Program. In February 2022, the Company's Board of Directors authorized an additional $1.0 billion share buyback program which expires on March 31, 2023, (the “2022 Share Buyback Program”). This authorization enables the Company to repurchase shares following the expected completion of the remaining authorization under its 2021 Share Buyback Program. See Part II, Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities and Note 18 to the Consolidated Financial Statements, for additional information. Pension and Other Post-Employment Plans Subsequent to the DWDP Distributions, the Company retained defined benefit pension plans in a number of other countries but does not have any qualified defined benefit pension plans in the United States. The Company's funding policy is to contribute to defined benefit pension plans based on pension funding laws and local country requirements. Contributions exceeding funding requirements may be made at the Company's discretion. The Company expects to contribute approximately $90 million to its pension plans in 2022. The amount and timing of the Company’s actual future contributions will depend on applicable funding requirements, discount rates, investment performance, plan design, and various other factors, separations and distributions. See Note 19 to the Consolidated Financial Statements for additional information concerning the Company’s pension plans. TDCC's funding policy was to contribute to plans when pension laws and/or economics either require or encourage funding. Prior to the Dow Distribution, TDCC made discretionary contributions exceeding funding requirements. During the three months of 2019, TDCC made contributions of $103 million to TDCC plans that were separated with Dow after the DWDP Distributions. As of December 31, 2021, the Company is contractually obligated to make future cash payments of $922 million related to pension and other post-employment benefit plans. $90 million will be due in the next twelve months and the remainder will be due subsequent to 2022 with the majority due subsequent to 2026. EID's funding policy was to contribute to defined benefit pension plans based on pension funding laws and local country requirements. Prior to the Corteva Distribution, EID made discretionary contributions exceeding funding requirements. During the five months of 2019, EID made $36 million contributions to plans that were separated from the Company in conjunction with the Corteva Distribution. 48 Table of Contents Restructuring In October 2021, the Company approved targeted restructuring actions to capture near term cost reductions (the "2021 Restructuring Actions"). For the year ended December 31, 2021, DuPont recorded a pre-tax charge related to the 2021 Restructuring Actions in the amount of $46 million, recognized in "Restructuring and asset related charges - net" in the Company's Consolidated Statements of Operations, comprised of $26 million of severance and related benefit costs and $20 million of asset related charges. At December 31, 2021, total liabilities related to the 2021 Restructuring Actions were $25 million for severance and related benefits. The Company expects actions related to this program to be substantially complete by the first half of 2022. In March 2020, the Company approved restructuring actions designed to capture near-term cost reductions and to further simplify certain organizational structures in anticipation of the N&B Transaction. As a result of these actions, the Company recorded pre-tax restructuring charges of $180 million inception-to-date, consisting of severance and related benefit costs of $128 million and asset related charges of $52 million. Actions associated with the 2020 Restructuring Program are considered substantially complete. Future cash payments related to the 2020 Restructuring Program are anticipated to be $15 million primarily related to the payment of severance and related benefits. In June 2019, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the DWDP Distributions. As a result of these actions, the Company has recorded pre-tax restructuring charges of $125 million inception-to-date, consisting of severance and related benefit costs of $98 million, and asset related charges of $27 million. Actions associated with this program are considered substantially complete. Future cash payments related to the 2019 Restructuring Program are anticipated to be $2 million and relate to the payment of severance and related benefits. In September and November 2017, the Company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program, which was designed to integrate and optimize the organization following the DWDP Merger and in preparation for the DWDP Distributions. The Company has recorded pre-tax restructuring charges attributable to the continuing operations of DuPont of $342 million inception-to-date, consisting of severance and related benefit costs of $136 million, asset related charges of $159 million and contract termination and other charges of $47 million. The activities related to the Synergy Program are expected to result in additional cash expenditures of $6 million and relate primarily to the payment of severance and related benefit costs. See Note 6 to the Consolidated Financial Statements for more information on the Company's restructuring programs. Other Off-balance Sheet Arrangements Certain Guarantee Contracts Guarantees arise in the ordinary course of business from relationships with nonconsolidated affiliates when the Company undertakes an obligation to guarantee the performance of others if specific triggering events occur. At December 31, 2021 and December 31, 2020, the Company had directly guaranteed $170 million and $167 million, respectively, of such obligations. Additional information related to the guarantees of the Subsidiaries can be found in the “Guarantees” section of Note 16 to the Consolidated Financial Statements. The MOU Cost Sharing Agreement In connection with the cost sharing arrangement entered into as part of the MOU, the companies agreed to establish an escrow account to address potential future PFAS costs. Subject to the terms of the arrangement, contributions to the escrow account will be made by Chemours, DuPont and Corteva, annually over an eight-year period. Over such period, Chemours will deposit a total of $500 million into the account and DuPont and Corteva, together, will deposit an additional $500 million pursuant to the terms of their existing Letter Agreement. As per the terms of the MOU, the Company deposited $50 million to the escrow account on September 30, 2021. Additional information regarding the MOU and funding of the escrow account can be found in Note 16 to the Consolidated Financial Statements. Other Contractual Obligations As of December 31, 2021, the Company is contractually obligated to make future cash payments of $861 million and $528 million related to purchase and lease obligations, respectively. Related to purchases, $294 million will be due in the next twelve months and the remainder will be due subsequent to 2022. Related to leases, $110 million will be due in the next twelve months and remainder will be due subsequent to 2022. As of December 31, 2021, the Company is contractually obligated to make future cash payments of $191 million related to other miscellaneous obligations, the majority of which is due subsequent to 2022. 49 Table of Contents RECENT ACCOUNTING PRONOUNCEMENTS See Note 2 to the Consolidated Financial Statements for a description of recent accounting pronouncements. CRITICAL ACCOUNTING ESTIMATES The Company's significant accounting policies are more fully described in Note 1 to the Consolidated Financial Statements. Management believes that the application of these policies on a consistent basis enables the Company to provide the users of the financial statements with useful and reliable information about the Company's operating results and financial condition. The preparation of the Consolidated Financial Statements in conformity with generally accepted accounting principles ("GAAP") in the United States of America requires management to make estimates and assumptions that affect the reported amounts, including, but not limited to, receivable and inventory valuations, impairment of tangible and intangible assets, long-term employee benefit obligations, income taxes, restructuring liabilities, environmental matters and litigation. Management's estimates are based on historical experience, facts and circumstances available at the time and various other assumptions that are believed to be reasonable. The Company reviews these matters and reflects changes in estimates as appropriate. Management believes that the following represent some of the more critical judgment areas in the application of the Company's accounting policies which could have a material effect on the Company's financial position, liquidity or results of operations. Pension Plans and Other Post-Employment Benefits Accounting for employee benefit plans involves numerous assumptions and estimates. Discount rate and expected return on plan assets are two critical assumptions in measuring the cost and benefit obligation of the Company's pension plans. Management reviews these two key assumptions when plans are re-measured. These and other assumptions are updated periodically to reflect the actual experience and expectations on a plan specific basis as appropriate. As permitted by GAAP, actual results that differ from the assumptions are accumulated on a plan by plan basis and to the extent that such differences exceed 10 percent of the greater of the plan's benefit obligation or the applicable plan assets, the excess is amortized over the average remaining service period of active employees or the average remaining life expectancy of the inactive participants if all or almost all of a plan’s participants are inactive. For the majority of the benefit plans, the Company utilizes the Aon AA corporate bond yield curves to determine the discount rate, applicable to each country, at the measurement date. The Company establishes strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes in accordance with the laws and practices of those countries. Where appropriate, asset-liability studies are also taken into consideration. For plans, the long-term expected return on plan assets pension expense is determined using the fair value of assets. The following table highlights the potential impact on the Company's pre-tax earnings due to changes in certain key assumptions with respect to the Company's pension plans based on assets and liabilities at December 31, 2021: Pre-tax Earnings Benefit (Charge) (Dollars in millions) 1/4 Percentage Point Increase 1/4 Percentage Point Decrease Discount rate $ (3) $ 4 Expected rate of return on plan assets 9 (9) Additional information with respect to pension plans, liabilities and assumptions is discussed under "Long-term Employee Benefits" and in Note 19 to the Consolidated Financial Statements. Legal Contingencies The Company's results of operations could be affected by significant litigation adverse to the Company, including product liability claims, patent infringement and antitrust claims, and claims for third party property damage or personal injury stemming from alleged environmental torts. The Company records accruals for legal matters when the information available indicates that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Management makes adjustments to these accruals to reflect the impact and status of negotiations, settlements, rulings, advice of counsel and other information and events that may pertain to a particular matter. Predicting the outcome of claims and lawsuits and estimating related costs and exposure involves substantial uncertainties that could cause actual costs to vary materially from estimates. In making determinations of likely outcomes of litigation matters, management considers many factors. These factors include, but are not limited to, the nature of specific claims including unasserted claims, the Company's experience with similar types of claims, the jurisdiction in which the matter is filed, input from outside legal counsel, the likelihood of resolving the 50 Table of Contents matter through alternative dispute resolution mechanisms, and the matter's current status. Considerable judgment is required in determining whether to establish a litigation accrual when an adverse judgment is rendered against the Company in a court proceeding. In such situations, the Company will not recognize a loss if, based upon a thorough review of all relevant facts and information, management believes that it is probable that the pending judgment will be successfully overturned on appeal. A detailed discussion of significant litigation matters is contained in Note 16 to the Consolidated Financial Statements. Income Taxes The breadth of the Company's operations and the global complexity of tax regulations require assessments of uncertainties and judgments in estimating taxes the Company will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation and resolution of disputes arising from federal, state and international tax audits in the normal course of business. The resolution of these uncertainties may result in adjustments to the Company's tax assets and tax liabilities. It is reasonably possible that changes to the Company’s global unrecognized tax benefits could be significant; however, due to the uncertainty regarding the timing of completion of audits and the possible outcomes, a current estimate of the range of increases or decreases that may occur within the next twelve months cannot be made. Deferred income taxes result from differences between the financial and tax basis of the Company's assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Significant judgment is required in evaluating the need for and magnitude of appropriate valuation allowances against deferred tax assets. The realization of these assets is dependent on generating future taxable income, as well as successful implementation of various tax planning strategies. For example, changes in facts and circumstances that alter the probability that the Company will realize deferred tax assets could result in recording a valuation allowance, thereby reducing the deferred tax asset and generating a deferred tax expense in the relevant period. In some situations, these changes could be material. At December 31, 2021, the Company had a net deferred tax liability balance of $1.8 billion, net of a valuation allowance of $0.8 billion. Realization of deferred tax assets is expected to occur over an extended period of time. As a result, changes in tax laws, assumptions with respect to future taxable income, and tax planning strategies could result in adjustments to deferred tax assets. See Note 8 to the Consolidated Financial Statements for additional details related to the deferred tax liability balance. Assessments of Long-Lived Assets and Goodwill The assets and liabilities of acquired businesses are measured at their estimated fair values at the dates of acquisition. The excess of the purchase price over the estimated fair value of the net assets acquired, including identified intangibles, is recorded as goodwill. The determination and allocation of fair value to the assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment, including estimates based on historical information, current market data and future expectations. The principal assumptions in these analyses include, future cash flow projections, the weighted average cost of capital, the terminal growth rate, and the tax rate for the income approach. For the market approach, the company uses metrics of publicly traded companies or historically completed transactions of comparable businesses. The estimates are deemed reasonable by management based on information available at the dates of acquisition, however, estimates are i nherently uncertain. Assessment of the potential impairment of goodwill, other intangible assets, property, plant and equipment, investments in nonconsolidated affiliates, and other assets is an integral part of the Company's normal ongoing review of operations. Testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management's best estimates at a particular point in time. The dynamic economic environments in which the Company's diversified product lines operate, and key economic and product line assumptions with respect to projected selling prices, market growth and inflation rates, can significantly affect the outcome of impairment tests. Estimates based on these assumptions may differ significantly from actual results. Ch anges in factors and assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as well as the time in which such impairments are recognized. In addition, the Company continually reviews its diverse portfolio of assets to ensure they are achieving their greatest potential and are aligned with the Company's growth strategy. Strategic decisions involving a particular group of assets may trigger an assessment of the recoverability of the related assets. Such an assessment could result in impairment losses. The Company performs its annual goodwill impairment testing during the fourth quarter at the reporting unit level which is defined as the operating segment or one level below the operating segment. One level below the operating segment, or component, is a business in which discrete financial information is available and regularly reviewed by segment management. The Company aggregates certain components into reporting units based on economic similarities. The Company has seven reporting units, of which one reporting unit has no goodwill and is reported within the held-for-sale disposal group. 51 Table of Contents For purposes of goodwill impairment testing, the Company has the option to first perform qualitative testing to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value . The qualitative evaluation is an assessment of factors, including reporting unit or asset specific operating results and cost factors, as well as industry, market and macroeconomic conditions, to determine whether it is more likely than not that the fair value of a reporting unit or asset is less than the respective carrying amount, including goodwill. If the Company chooses not to complete a qualitative assessment for a given reporting unit or if the initial assessment indicates that it is more likely than not that t he carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is required. If additional quantitative testing is performed, an impairment loss is recognized in the amount by which the carrying value of the reporting unit exceeds its fair value, limited to the amount of goodwill at the reporting unit. The Company determines fair values for each of the reporting units using a combination of the income approach and market approach. Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The Company uses internal forecasts to estimate future cash flows and includes an estimate of long-term future growth rates based on its most recent views of the long-term outlook for each reporting unit. Discounted cash flow valuations are completed using the following key assumptions: projected revenue, projected margins, discount rates, tax rates, and terminal values. These key assumptions are determined through evaluation of the Company as a whole, underlying business fundamentals and industry risk. The Company derives its discount rates using a capital asset pricing model and analyzing published rates for industries relevant to its reporting units to estimate the cost of equity financing. The Company uses discount rates that are commensurate with the risks and uncertainty inherent in the respective reporting units and in its internally developed forecasts. Under the market approach, the Company applies the Guideline Public Company Method ("GPCM"). Selected peer sets are based on close competitors, publicly traded companies and reviews of analysts' reports, public filings, and industry research. In selecting the EBIT/EBITDA multiples and determining the fair value, the Company considers the size, growth, and profitability of each reporting unit versus the relevant guideline public companies. When applicable, third party purchase offers may be utilized to measure fair value. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is reasonably possible that the judgments and estimates described above could change in future periods. In the fourth quarter of 2021, the Company performed its annual goodwill impairment testing by applying the qualitative assessment to all of its reporting units. The Company considered various qualitative factors that would have affected the estimated fair value of the reporting units, and the results of the qualitative assessments indicated that it is not more likely than not that the fair values of the reporting units were less than their carrying values. As part of the 2021 Segment Realignment, the Company assessed and re-defined certain reporting units effective February 1, 2021, including reallocation of goodwill on a relative fair value basis, as applicable, to reporting units impacted. A combination of quantitative and qualitative goodwill impairment analyses was then performed for reporting units impacted by this new structure and no impairments were identified. The Company evaluates the carrying value of long-lived assets (collectively the “asset group”) to be held and used when events or changes in circumstances indicate the carrying value may not be recoverable. The carrying value of a long-lived asset group is considered impaired when the anticipated future undiscounted cash flows to be derived from the asset group are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset group. Fair value of the asset group is determined using a combination of a discounted cash flow model and/or market approach. Long-lived assets to be disposed of by sale, if material, are classified as held for sale and reported at the lower of carrying amount or fair value less cost to sell, and depreciation is ceased. Long-lived assets to be disposed of other than by sale are classified as held and used until they are disposed of. Depreciation is recognized over the remaining useful life of the assets. 52 Table of Contents Valuation of Acquired Intangible Assets The Company engaged an independent third-party valuation specialist to assist with the allocation of the total purchase price for the acquisition of Laird Performance Materials to the fair value of the net assets acquired. This required the use of several assumptions and estimates, including, but not limited to, the customer attrition rate, the discount rate, the royalty rates, the economic life, the EBITDA margin, the contributory asset charge, and the projected revenue for the customer-related intangible asset, the discount rate, the projected revenue, the royalty rate, the obsolescence rate, and the economic life for the developed technology, and the discount rate, the projected revenue, the royalty rate, and the economic life for the trademark/tradename. Although the Company believes the assumptions and estimates made were reasonable and appropriate, these estimates require significant judgment by management and are based in part on historical experience and information obtained from Laird Performance Materials management. For further information see Note 3 to the Consolidated Financial Statements. LONG-TERM EMPLOYEE BENEFITS The Company has various obligations to its employees and retirees. The Company maintains retirement-related programs in many countries that have a long-term impact on the Company's earnings and cash flows. These plans are typically defined benefit pension plans. The Company has a few medical, dental and life insurance benefits for employees, pensioners and survivors and for employees (other post-employment benefits or "OPEB" plans). Pension coverage for employees of the Company's non-U.S. consolidated subsidiaries is provided, to the extent deemed appropriate, through separate plans. The Company regularly explores alternative solutions to meet its global pension obligations in the most cost-effective manner possible as demographics, life expectancy and country-specific pension funding rules change. Where permitted by applicable law, the Company reserves the right to change, modify or discontinue its plans that provide pension, medical, dental and life insurance. Benefits under defined benefit pension plans are based primarily on years of service and employees' pay near retirement. Pension benefits are paid primarily from trust funds established to comply with applicable laws and regulations of the sovereign country in which the pension plan operates. Unless required by law, the Company does not make contributions that are in excess of tax-deductible limits. The actuarial assumptions and procedures utilized are reviewed periodically by the plans' actuaries to provide reasonable assurance that there will be adequate funds for the payment of benefits. Thus, there is not necessarily a direct correlation between pension funding and pension expense. In general, however, improvements in plans' funded status tends to moderate subsequent funding needs. The Company contributed $28 million to its funded pension plans for the years ended December 31, 2021 and December 31, 2020, respectively. The Company contributed $497 million to its funded pension plans for the year ended December 31, 2019. The Company does maintain one U.S. pension benefit plan. This plan is a separate unfunded plan and these benefits are paid to employees from operating cash flows. The Company's remaining pension plans with no plan assets are paid from operating cash flows. The Company made benefit payments of $60 million, $73 million, and $72 million to its unfunded plans, including OPEB plans, for the years ended December 31, 2021, December 31, 2020, and December 31, 2019, respectively. In 2022, the Company expects to contribute approximately $90 million to its funded pension plans and its remaining plans with no plan assets. The amount and timing of actual future contributions will depend on applicable funding requirements, discount rates, investment performance, plan design, and various other factors. The Company's income can be significantly affected by pension and defined contribution charges/(benefits) as well as OPEB costs. The following table summarizes the extent to which the Company's income for the years ended December 31, 2021, December 31, 2020, and December 31, 2019 was affected by pre-tax charges related to long-term employee benefits: For the Years Ended In millions December 31, 2021 December 31, 2020 December 31, 2019 Long-term employee benefit plan charges $ 106 $ 155 $ 98 The above charges (benefit) for pension and OPEB are determined as of the beginning of each period. See "Pension Plans and Other Post-Employment Benefits" under the Critical Accounting Estimates section of this report for additional information on determining annual expense. For 2022, long term employee benefit expense from continuing operations is not expected to change materially as compared to 2021. 53 Table of Contents ENVIRONMENTAL MATTERS The Company operates global manufacturing, product handling and distribution facilities that are subject to a broad array of environmental laws and regulations. Such rules are subject to change by the implementing governmental agency, and the Company monitors these changes closely. Company policy requires that all operations fully meet or exceed legal and regulatory requirements. In addition, the Company implements various voluntary programs to reduce its environmental footprint, which includes initiatives to reduce air emissions, minimize the generation of hazardous waste, decrease the volume of water use and discharges, increase the efficiency of energy use, and reduce the generation of persistent, bioaccumulative and toxic materials. In October 2019 DuPont announced its sustainability strategy and 2030 Sustainability Goals. The Company’s sustainability strategy and goals prioritize global challenges such as climate change, water stewardship, advancing circular economy and processes, improving health and safety, and more. With these goals, DuPont is committed to using the Company's strength in innovation to advance progress on several of the United Nations’ Sustainable Development Goals, increasing resiliency and reducing environmental and social impacts across value chains, and ensuring people are put at the center of all the Company's work. Executive responsibility for overall sustainability performance sits with the Chief Technology & Sustainability Officer (the “CTSO”). The CTSO role was created specifically for DuPont to capitalize on the intrinsic link between sustainability and innovation in the Company’s operating model. The CTSO reports directly to the CEO, and routinely engages the Environmental, Health, Safety & Sustainability (EHS&S) Committee of the Board of Directors on matters of sustainability. DuPont’s sustainability initiatives and strategy are discussed further in its 2021 Sustainability Report, which is available under Sustainability in the "About Us" section of its website; this report is not incorporated by reference and should not be considered part of this Form 10-K. The costs to comply with complex environmental laws and regulations, as well as internal voluntary programs and goals, such as DuPont’s sustainability strategy, are significant and will continue to be significant for the foreseeable future. Based on existing facts and circumstances, management does not believe that year-over-year changes, if any, in environmental expenses charged to current operations will have a material impact on the Company's financial position, liquidity or results of operations. Annual expenditures in the near term are not expected to vary significantly from the range of such expenditures experienced in the past few years. Longer term, expenditures are subject to considerable uncertainty and may fluctuate significantly. Climate Change The Company believes that climate change is an important global environmental issue that presents risks and opportunities. The Company is continuously evaluating opportunities for existing and new product and service offerings to meet the anticipated demands of a low-carbon economy. As part of DuPont’s sustainability strategy, the Company announced an Acting on Climate Goal. The objective of the Acting on Climate goal is to reduce the Company’s greenhouse gas (GHG) emissions by 30 percent, measured from a base year of 2019, including sourcing 60 percent of electricity for operations from renewable energy and delivering carbon neutral operations by 2050. DuPont reports on its progress against these goals in its annual sustainability report. In 2022, the Company plans to include its inaugural TCFD Index in its Sustainability Report and additional climate-related disclosure in its response to the CDP Climate survey. In line with the objectives of the Acting on Climate goal, DuPont signed a virtual power purchase agreement (the “VPPA”) with a subsidiary of NextEra Energy Resources, LLC in 2021. The VPPA will deliver the equivalent of 135 megawatts of new wind power capacity or approximately 528,000 megawatt hours (MWh) of renewable electricity on an annual basis beginning in 2023. The Company is actively engaged in efforts to develop constructive public policies to reduce GHG emissions and encourage lower-carbon forms of energy. DuPont is part of several organizations, including the CEO Climate Dialogue, a collaboration between large companies and NGOs working together to advance effective climate legislation in the US. DuPont is also part of the Alliance to Save Energy, which is an organization advocating to advance federal energy efficiency policy, as well as other organizations that advocate for clean mobility and renewable fuel. Public policies may bring higher operating costs as well as greater revenue and margin opportunities. Legislative efforts to control or limit GHG emissions could affect the Company's energy source and supply choices as well as increase the cost of energy and raw materials derived from fossil fuels. Such efforts are also anticipated to provide the business community with greater certainty for the regulatory future, help guide investment decisions, and drive growth in demand for low-carbon and energy-efficient products, technologies, and services. Similarly, demand is expected to grow for products that facilitate adaptation to a changing climate. However, the current unsettled policy environment in the U.S., where many company facilities are located, adds an element of uncertainty to business decisions, particularly those relating to long-term capital investments. 54 Table of Contents In addition, significant differences in regional or national approaches could present challenges in a global marketplace. An effective global climate policy framework will help drive the market changes that are needed to stimulate and efficiently deploy new innovations in science and technology, while maintaining open and competitive global markets. Environmental Operating Costs As a result of its operations, the Company incurs costs for pollution abatement activities including waste collection and disposal, installation and maintenance of air pollution controls and wastewater treatment, emissions testing and monitoring, and obtaining permits. The Company also incurs costs related to environmental related research and development activities including environmental field and treatment studies as well as toxicity and degradation testing to evaluate the environmental impact of products and raw materials. Environmental Remediation The Company has directly incurred environmental remediation costs of $14 million, $6 million, and $28 million for the years ended December 31, 2021, 2020 and 2019, respectively. Changes in the remediation accrual balance are summarized below: (Dollars in millions) Balance at December 31, 2019 $ 77 Remediation payments (5) Net increase in remediation accrual 6 Net change, indemnification 1 2 Balance at December 31, 2020 $ 80 Remediation payments (7) Net increase in remediation accrual 14 Net change, indemnification 1 2 Balance at December 31, 2021 $ 89 1. Represents the net change in indemnified remediation obligations based on activity pursuant to the DWDP Separation and Distribution Agreement and Letter Agreement as discussed below and in Notes 4 and 16 to the Consolidated Financial Statements. This is not inclusive of the accrual of $116 million related to eligible PFAS costs associated with the MOU. Considerable uncertainty exists with respect to environmental remediation costs, and, under adverse changes in circumstances, the potential liability may range up to $166 million above the amount accrued as of December 31, 2021. However, based on existing facts and circumstances, management does not believe that any loss, in excess of amounts accrued, related to remediation activities at any individual site will have a material impact on the financial position, liquidity or results of operations of the Company. Pursuant to the DWDP Separation and Distribution Agreement and the Letter Agreement discussed in Notes 4 and 16 to the Consolidated Financial Statements, the Company indemnifies Dow and Corteva for certain environmental matters. The Company has recorded an indemnification liability of $46 million corresponding to the Company's accrual balance related to these matters at December 31, 2021. The indemnification liability is included in the total remediation accrual liability of $89 million. Environmental Capital Expenditures Capital expenditures for environmental projects, either required by law or necessary to meet the Company’s internal environmental goals, were $40 million for the year ended December 31, 2021. This amount includes $11 million of expenditures used towards the Company's climate change initiatives. The Company currently estimates expenditures for environmental-related capital projects to be approximately $48 million in 2022, with $19 million estimated for climate change initiatives. 55 Table of Contents