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 • Segment Results • Outlook • Liquidity and Capital Resources • Recent Accounting Pronouncements • Critical Accounting Estimates • Long-Term Employee Benefits • Environmental Matters OVERVIEW As of December 31, 2022, the Company has $6.4 billion of net working capital and $3.7 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. Mobility & Materials Divestitures On November 1, 2022, DuPont completed the previously announced divestiture (the "Transaction Date") of the majority of the historic Mobility & Materials segment, including the Engineering Polymers business line and select product lines within the Advanced Solutions and Performance Resins business lines (the “M&M Divestiture”). The Company had previously entered into a Transaction Agreement (the "Transaction Agreement") with Celanese Corporation ("Celanese") on February 17, 2022 for a purchase price of $11.0 billion in cash. Cash received on the Transaction Date, as adjusted for preliminary and other adjustments was $11.0 billion. These adjustments include approximately $0.5 billion of cash transferred with the M&M Divestiture for which DuPont was reimbursed at closing resulting in net proceeds of $10.5 billion. On February 18, 2022, the Company announced that its Board of Directors approved of the divestiture of the Delrin® acetal homopolymer (H-POM) business (the "Delrin® Divestiture"), subject to entry into a definitive agreement and satisfaction of closing conditions. The Delrin® Divestiture together with the M&M Divestiture (collectively the "M&M Divestitures" and the businesses in scope for the M&M Divestitures collectively the "M&M Businesses") represent a strategic shift that has a major impact on DuPont's operations and results. The financial position of DuPont as of December 31, 2022 presents the assets and liabilities of the Delrin® Divestiture as held for sale, presented as discontinued operations. In the comparative period, the assets and liabilities of both the M&M Divestiture and the Delrin® Divestiture are presented as held for sale, presented as discontinued operations. The results of operations for the years ended December 31, 2022, 2021 and 2020 present the financial results of the M&M Businesses, including the M&M Divestiture through the Transaction Date, as discontinued operations. The cash flows and comprehensive income of the M&M Businesses have not been segregated and are included in the Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income, respectively, for all periods presented. 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 the M&M Businesses. See Note 4 to the Consolidated Financial Statements for additional information. The Auto Adhesives & Fluids, Multibase TM and Tedlar® product lines, previously reported within the historic Mobility & Materials segment, (the "Retained Businesses") are not included in the scope of the M&M Divestitures. Effective with the signing of the Transaction Agreement, the Retained Businesses were realigned to Corporate & Other. The reporting changes have been retrospectively applied for all periods presented. 30 Table of Contents Terminated Intended Rogers Acquisition On November 1, 2022, the Company announced the termination of the previously announced agreement to acquire the outstanding shares of Rogers Corporation (“Rogers”) as DuPont and Rogers were unable to obtain timely clearance from all the required regulators ("Terminated Intended Rogers Acquisition"). 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. 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. See Note 4 to the Consolidated Financial Statements for additional information. 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 $2.4 billion, which reflects adjustments, primarily for acquired cash and net working capital. See Note 3 to the Consolidated Financial Statements for additional information. Other Divestitures In May 2022, the Company completed the sale of its Biomaterials business unit, which included the Company's equity method investment in DuPont Tate & Lyle Bio Products, to the Huafon Group. Total consideration received related to the sale was approximately $240 million. In May 2022, a pre-tax gain of $26 million ($21 million net of tax) was recorded in "Sundry income (expense) - net" in the Company's Consolidated Statements of Operations. The results of operations of the Biomaterials business unit are reported in Corporate & Other for all periods presented. On December 31, 2021, the Company completed the sale of its Clean Technologies business unit, which is part of Corporate & Other. 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 & Other. 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. Other Discontinued Operations Tax Matter Subsequent to the Company’s earnings announcement on February 7, 2023, the Company recorded an adjustment to the provision for income taxes related to Discontinued Operations and deferred income tax liabilities of Discontinued Operations (the “Tax Adjustment”). The Tax Adjustment resulted in an increase of $70 million in “Income (loss) from discontinued operations, net of tax” and a decrease of $70 million in “Liabilities of discontinued operations” as of and for the year ended December 31, 2022, and a corresponding impact on net income. The Tax Adjustment did not impact the results of Continuing Operations. The Consolidated Financial Statements and other financial information included in this annual report on Form 10-K reflect the Tax Adjustment. 31 Table of Contents ANALYSIS OF OPERATIONS Macroeconomic Conditions Certain macroeconomic factors, including the inflationary cost environment and supply chain disruptions, along with the novel coronavirus (“COVID-19”) and its variants, continue to adversely impact the global economy, including certain suppliers of the Company’s key raw materials. As a result of COVID-19, the Company qualified for a tax credit of payroll taxes under the Employee Retention Credit (“ERC”) pursuant to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act as enhanced by the Consolidated Appropriations Act and American Rescue Plan Act. In the third quarter of 2022, the Company recorded approximately $59 million of benefit to the ERC for full year 2020 and Q1 2021 payroll taxes previously paid. The benefit was recorded as an offset to the Cost of Sales, Research and Development Expenses ("R&D") and Selling, General and Administrative Expenses ("SG&A"), with a portion, approximately $7 million, of the benefit relating to discontinued operations. The Company anticipates receiving a refund of the credit in 2023. With respect to the war in the Ukraine, the Company’s business and operational environment is impacted by, among other things, responsive governmental actions including sanctions imposed by the U.S. and other governments. In the second quarter of 2022, the Company exited substantially all business operations in Russia, the net sales from which were less than one percent of DuPont’s consolidated net sales in 2021. The Company does not have operations in the Ukraine. In 2022, DuPont experienced supply chain challenges and increased logistics, raw material and energy costs due in part to the negative impact on the global economy from the ongoing war in Ukraine. The extent to which the conflict may continue to impact DuPont in future periods will depend on future developments, including the severity and duration of the conflict, its impact on regional and global economic conditions, and the extent of supply chain disruptions. DuPont will continue to monitor the conflict and assess the related sanctions and other effects and may take further actions if necessary. Joint Settlement Agreement On January 22, 2021, the Company, Corteva, EIDP 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, 2022, the Company has recorded an indemnification liability of $186 million in connection with the cost sharing arrangement related to future eligible PFAS costs. Total pre-tax charges of $96 million ($74 million after-tax) and $98 million ($76 million after-tax) related to the MOU are reflected as a loss from discontinued operations for the year ended December 31, 2022 and 2021, respectively, in the Company's Consolidated Statements of Operations. See Note 16 of the Consolidated Financial Statements for additional information. Long-Lived Asset and Indefinite-Lived Asset Impairments In connection with the M&M Divestitures, in the first quarter of 2022 a portion of an equity method investment was reclassified to “Assets of discontinued operations” within the Consolidated Balance Sheet. The reclassification served as a triggering event requiring the Company to perform an impairment analysis on the retained portion of the equity method investment held within “Investments and noncurrent receivables” on the Consolidated Balance Sheet. As a result of the analysis the Company recorded an impairment charge of $94 million ($65 million net of tax) in “Restructuring and asset related charges - net” in the Consolidated Statements of Operations for the year ended December 31, 2022 related to the Electronics & Industrial segment. See Notes 6 and 14 of the Consolidated Financial Statements for additional information. Dividends During 2022, the Board of Directors authorized and paid quarterly dividends of $0.33 per share to shareholders of record in the first, second, third and fourth quarters, respectively. The DuPont Board of Directors on February 6, 2023 declared a first quarter 2023 dividend of $0.36 per share, a 9 percent per share increase versus the first quarter 2022 dividend, payable on March 15, 2023, to holders of record at the close of business on February 28, 2023. 32 Table of Contents Share Buyback Program In February 2022, the Company's Board of Directors authorized a $1.0 billion share buyback program which expires on March 31, 2023. At the end of the third quarter 2022, the Company had repurchased and retired a total of 11.9 million shares for $750 million under the 2022 Share Buyback Program, with $250 million remaining on the authorization. On November 7, 2022, DuPont’s Board of Directors approved a new share repurchase program authorizing the repurchase and retirement of up to $5 billion of common stock in addition to the $250 million remaining under the Company’s 2022 Share Buyback Program. The new repurchase program expires on June 30, 2024, unless extended or shortened by the Board of Directors. On November 10, 2022, DuPont entered into an accelerated share repurchase ("ASR") agreement (the “2022 ASR Agreement”) for the repurchase of an aggregate of approximately $3.25 billion. In accordance with the terms of the agreement, DuPont received initial deliveries of 38.8 million shares in the aggregate. The final number of shares to be repurchased will be based on the volume-weighted average stock price for DuPont common stock during the term of the ASR, less an agreed upon discount. The ASR transaction is being funded with cash on hand, from the M&M Divestiture, and is expected to be completed by the third quarter of 2023. In the first quarter of 2021, the Company's Board of Directors authorized a $1.5 billion share buyback program, which expired on June 30, 2022 (the "2021 Share Buyback Program"). In the first quarter of 2022, the Company purchased 5.1 million shares for approximately $375 million, effectively completing the program. At the expiry of the 2021 Share Buyback Program, the Company had repurchased and retired a total of 19.6 million shares for $1.5 billion under the 2021 Share Buyback Program. In the second quarter of 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. Interest Rate Swap Agreements In the second quarter of 2022, the Company entered into fixed-to-floating interest rate swap agreements with an aggregate notional principal amount totaling $1 billion to hedge changes in the fair value of the Company's long-term debt due to interest rate change movements. These swaps converted the $1 billion of the Company's $1.65 billion principal amount of fixed rate notes due 2038 into floating rate debt for the portion of their terms through 2032 with an interest rate based on the Secured Overnight Finance Rate (SOFR). Under the terms of the agreements, the Company agrees to exchange, at specified intervals, fixed for floating interest amounts based on the agreed upon notional principal amount. The interest rate swaps are designated as fair value hedges and expire on November 15, 2032. For more information see Note 21 to the Consolidated Financial Statements. Restructuring Programs 2022 Restructuring Program In October 2022, the Company approved targeted restructuring actions to capture near-term cost reductions and to further simplify certain organizational structures following the M&M Divestitures (the "2022 Restructuring Program"). For the year ended December 31, 2022, DuPont recorded a pre-tax charge related to the 2022 Restructuring Program in the amount of $61 million, recognized in "Restructuring and asset related charges - net" in the Company's Consolidated Statements of Operations, comprised of $61 million of severance and related benefit costs. At December 31, 2022, total liabilities related to the 2022 Restructuring Program were $57 million for severance and related benefit costs, recognized in "Accrued and other current liabilities" in the Consolidated Balance Sheet. 2021 Restructuring Actions In October 2021, the Company approved targeted restructuring actions to capture near term cost reductions (the "2021 Restructuring Actions"). For the years ended December 31, 2021 and December 31, 2022, DuPont recorded pre-tax charges related to the 2021 Restructuring Actions in the amount of $46 million inception-to-date, consisting of severance and related benefit costs of $26 million and asset related charges of $20 million. At December 31, 2022, total liabilities related to the 2021 Restructuring Actions were $7 million for severance and related benefits. The 2021 Restructuring Program is considered substantially complete. 33 Table of Contents RESULTS OF OPERATIONS Summary of Sales Results For the Years Ended December 31, In millions 2022 2021 2020 Net sales $ 13,017 $ 12,566 $ 11,128 Sales Variances by Segment and Geographic Region - As Reported For the Year Ended December 31, 2022 For the Year Ended December 31, 2021 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 2 % (3) % 3 % 5 % 7 % — % 1 % 12 % 6 % 19 % Water & Protection 12 (4) (1) — 7 2 1 8 — 11 Corporate & Other 1 10 (3) — (29) (22) 5 2 8 (15) — Total 7 % (3) % 1 % (1) % 4 % 1 % 2 % 10 % — % 13 % U.S. & Canada 11 % — % 3 % (3) % 11 % 3 % — % 8 % (2) % 9 % EMEA 2 8 (8) (1) (1) (2) — 4 10 1 15 Asia Pacific 4 (4) — — — 1 2 11 1 15 Latin America 9 — 6 (1) 14 3 (2) 13 2 16 Total 7 % (3) % 1 % (1) % 4 % 1 % 2 % 10 % — % 13 % 1. Corporate & Other includes activities of the Retained Businesses and certain divested businesses including Biomaterials, Clean Technologies and Solamet®. 2. Europe, Middle East and Africa. 2022 versus 2021 The Company reported net sales for the year ended December 31, 2022 of $13.0 billion, up 4 percent from $12.6 billion for the year ended December 31, 2021, due to a 7 percent increase due to local price and product mix, a 1 percent increase in volume, partially offset by a 3 percent unfavorable currency impact and a 1 percent decrease in portfolio and other. Local price and product mix increased across all operating segments, including within Water & Protection (up 12 percent), Electronics & Industrial (up 2 percent) and Corporate & Other (up 10 percent). Volume increase was driven by Electronics & Industrial (up 3 percent), partially offset by Water & Protection (down 1 percent), and Corporate & Other was flat. Portfolio and other changes declined 1 percent driven by declines within Corporate & Other (down 29 percent) due to the sale of the Biomaterials, Clean Technologies and Solamet® businesses, partially offset by the addition of Laird PM in Electronics & Industrial (up 5 percent). Currency was down 3 percent compared with the same period last year, primarily driven by EMEA (down 8 percent) and Asia Pacific (down 4 percent). 2021 versus 2020 The Company reported net sales for the year ended December 31, 2021 of $12.6 billion, up 13 percent from $11.1 billion for the year ended December 31, 2020, due to a 10 percent increase in volume and a 1 percent increase due to local price and product mix, and a 2 percent favorable currency impact. Portfolio and other changes and currency were flat. Volume grew across all geographic regions and across all segments, most notably Electronics & Industrial (up 12 percent). Local price and product mix increased across all regions and all segments with the exception of Electronics & Industrial and EMEA 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 2 percent). Portfolio and other changes were flat overall as the July 1, 2021 acquisition of Laird PM in Electronics & Industrial (up 6 percent) was offset by the decline within Corporate & Other (down 15 percent) due to the sale of the Clean Technologies and Solamet® businesses. Cost of Sales Cost of sales was $8.4 billion for the year ended December 31, 2022, up from $8.0 billion for the year ended December 31, 2021. Cost of sales increased for the year ended December 31, 2022 primarily due to higher raw materials and higher logistics and energy costs, increased sales volume and partially offset by currency impacts and a payroll tax credit recognized under the ERC of the CARES Act. Cost of sales as a percentage of net sales for the year ended December 31, 2022 was 65 percent compared with 63 percent for the year ended December 31, 2021. 34 Table of Contents For the year ended December 31, 2021, cost of sales was $8.0 billion, up from $7.1 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 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 63.4 percent compared with 63.5 percent for the year ended December 31, 2020. Research and Development Expense ("R&D") R&D expense was $536 million for the year ended December 31, 2022, down from $557 million for the year ended December 31, 2021 and $565 million for the year ended December 31, 2020. R&D as a percentage of net sales was 4 percent for the years ended December 31, 2022 and 2021 and 5 percent for the year ended December 31, 2020. R&D expense in 2022, 2021 and 2020 was relatively consistent. The slight decline in 2022 compared to 2021 was primarily due to a payroll tax credit recognized under the ERC of the CARES Act as well as currency fluctuations. The slight decline in R&D expense in 2021 compared to 2020 was primarily due to productivity actions. Selling, General and Administrative Expenses ("SG&A") For the year ended December 31, 2022, SG&A expenses totaled $1,467 million, down from $1,602 million in the year ended December 31, 2021 and $1,492 million for the year ended December 31, 2020. SG&A as a percentage of net sales was 11 percent, 13 percent, and 13 percent for the years ended December 31, 2022, 2021 and 2020, respectively. The decrease in SG&A cost in 2022 compared to 2021 was primarily due to currency fluctuations, lower personnel related expenses and a payroll tax credit recognized under the ERC of the CARES Act. 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 SG&A costs for six months of the Laird PM acquisition. Amortization of Intangibles Amortization of intangibles was $590 million, $566 million and $542 million for the years ended December 31, 2022, 2021 and 2020, respectively. The increase in amortization of intangibles in 2022 compared to 2021 was primarily due to the amortization of the intangible assets acquired in the Laird PM Acquisition in the third quarter of 2021. The increase in amortization expense 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. 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 $155 million, $50 million and $814 million for the years ended December 31, 2022, 2021 and 2020, respectively. The activity for the year ended December 31, 2022 included a pre-tax charge related to the 2022 Restructuring Program in the amount of $61 million of severance and related benefit costs and a $94 million ($65 million net of tax) impairment related to an equity method investment within the Electronics & Industrial segments. The activity for the year ended December 31, 2021 included a $46 million charge related to the 2021 Restructuring Actions and a $8 million charge related to the 2020 Restructuring 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 & Other, a $318 million impairment charge related to long-lived assets and a $150 million charge related to the 2020 Restructuring Program. See Note 6 to the Consolidated Financial Statements for additional information. Goodwill Impairment Charges For the years ended December 31, 2022 and 2021 there were no goodwill impairment charges. For the year ended December 31, 2020, goodwill impairment charges of $1,862 million related to a business reported in Corporate & Other and the Industrial Solutions reporting unit. 35 Table of Contents Acquisition, Integration and Separation Costs Acquisition, integration and separation costs were $193 million, $81 million and $177 million for the years ended December 31, 2022, 2021 and 2020, respectively. Acquisition, integration and separation costs primarily consist of financial advisory, information technology, legal, accounting, consulting, other professional advisory fees and other contractual transaction payments. For the year ended December 31, 2022 these costs were primarily related to the Terminated Intended Rogers Acquisition, specifically the $162.5 million termination fee paid, the Biomaterials business unit divestiture and the prior year acquisition of Laird PM. For the year ended December 31, 2021 these costs were primarily related to the acquisition of Laird PM and the divestitures of the Biomaterials, Clean Technologies and Solamet® business units. Comparatively, for the year ended December 31, 2020 these costs were primarily associated with the post-DWDP Merger integration. Equity in Earnings of Nonconsolidated Affiliates The Company's share of the earnings of nonconsolidated affiliates was $75 million, $85 million and $168 million for the years ended December 31, 2022, 2021 and 2020, respectively. Earnings of nonconsolidated affiliates for the year ended December 31, 2022 declined slightly compared to the prior year due to lower equity earnings. 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. 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 divestiture and 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, 2022 was $191 million compared with $145 million and $632 million in the years ended December 31, 2021 and 2020, respectively. The year ended December 31, 2022 included interest income of $50 million primarily due to higher cash on hand and marketable securities in the fourth quarter, income of $37 million related to the second quarter sale of a land use right within the Water & Protection segment, a $26 million gain on sale of the Biomaterials business unit recorded in the second quarter, income related to non-operating pension and other post-employment benefit plans of $28 million and foreign currency exchange gains of $15 million. 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 & Other, 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 $30 million, partially offset by foreign currency exchange losses of $53 million, and miscellaneous expenses of $15 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 $24 million, and income related to non-operating pension and other post-employment benefit plans of $12 million, partially offset by foreign currency exchange losses of $54 million. See Note 7 to the Consolidated Financial Statements for additional information. Interest Expense Interest expense was $492 million, $525 million, and $672 million for the years ended December 31, 2022, 2021 and 2020, respectively. The decrease in interest expense in 2022 compared to 2021 is primarily due to the redemption in the fourth quarter of 2022 of $2.5 billion of 2018 Senior Notes due in November 2023, the absence of interest in 2022 on the May 2022 Notes and the absence of the structuring fee on the term loan related to the Terminated Intended Rogers Acquisition, partially offset by increase in interest expense from commercial paper borrowings. The decrease in interest expense in 2021 compared to 2020 primarily relates to the maturity of the November 2020 Notes, the termination and repayment of the fully-drawn $3.0 billion term loan facilities in February 2021, and significant reduction in commercial paper borrowings, partially offset by structuring fees and the amortization of commitment fees related to the Terminated Intended Rogers Acquisition financing agreements. Refer to Note 15 to the Consolidated Financial Statements for additional information. 36 Table of Contents 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, 2022, the Company's effective tax rate was 26.7 percent on pre-tax income from continuing operations of $1,448 million. The effective tax rate differential for the year ended December 31, 2022, was driven by the U.S tax effect of foreign earnings and dividends, geographic mix of earnings and the tax impacts of acquisition, integration, and separation costs. For the year ended December 31, 2021, the Company's effective tax rate was 16.4 percent on a pre-tax income from continuing operations of $1,444 million. The effective tax rate differential 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 $1,259 million. The effective tax rate differential was principally the result of the non-tax-deductible goodwill impairment charges impacting Corporate & Other. The underlying factors affecting the Company’s overall tax rate are summarized in Note 8 to the Consolidated Financial Statements. SEGMENT RESULTS Effective February 2022, the revenues and certain expenses of the M&M Businesses were classified as discontinued operations in the current and historical periods. The Auto Adhesives & Fluids, MultibaseTM and Tedlar® product lines within the historic Mobility & Materials segment (the "Retained Businesses") are not in the scope of the M&M Divestitures. Effective with the signing of the Transaction Agreement, the Retained Businesses were realigned to Corporate & Other. The reporting changes have been retrospectively reflected for all periods presented. The costs of the M&M Businesses that are classified as discontinued operations include only direct operating expenses incurred prior to the November 1, 2022 M&M Divestiture and costs which the Company will no longer incur upon the close of the Delrin® Divestiture. Indirect costs, such as those related to corporate and shared service functions previously allocated to the M&M Businesses, do not meet the criteria for discontinued operations and remain reported within continuing operations. A portion of these indirect costs related to activities the Company continues to undertake post-closing of the M&M Divestiture, and for which it is and will be reimbursed (“Future Reimbursable Indirect Costs”). In addition, a portion of these indirect costs relate to activities the Company intends to perform post the close of the Delrin® Divestiture and for which it will be reimbursed. Future Reimbursable Indirect Costs are reported within continuing operations but are excluded from operating EBITDA as defined below. The remaining portion of these indirect costs are not subject to future reimbursement (“Stranded Costs”). Stranded Costs are reported within continuing operations in Corporate & Other and are included within Operating EBITDA. 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, excluding Future Reimbursable Indirect Costs, and adjusted for significant items. 37 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 innovative engineering polymer solutions, high performance parts, medical silicones and specialty lubricants. Electronics & Industrial For the Years Ended December 31, In millions 2022 2021 2020 Net sales $ 5,917 $ 5,554 $ 4,674 Operating EBITDA $ 1,836 $ 1,758 $ 1,468 Equity earnings $ 31 $ 41 $ 34 Electronics & Industrial For the Years Ended December 31, Percentage change from prior year 2022 2021 Change in Net Sales from Prior Period due to: Local price & product mix 2 % — % Currency (3) 1 Volume 3 12 Portfolio & other 5 6 Total 7 % 19 % 2022 Versus 2021 Electronics & Industrial net sales were $5,917 million for the year ended December 31, 2022, up 7 percent from $5,554 million for the year ended December 31, 2021. Net sales increased due to a 5 percent increase from portfolio changes, a 3 percent increase in volume, and a 2 percent increase in local price, and partially offset by a 3 percent unfavorable currency impact. The portfolio impact primarily reflects the July 1, 2021 acquisition of Laird PM. Volume growth was led by Semiconductor Technologies which was driven by strong end-market demand primarily due to continued transition to more advanced node technologies and high performance computing. Within Industrial Solutions, volume gains were driven by growth in healthcare and industrial-end markets as well as continued strength in electronics applications. Volumes within Interconnect Solutions, were down due to weakness in consumer electronics and smartphones. Operating EBITDA was $1,836 million for the year ended December 31, 2022, up 4 percent compared with $1,758 million for the year ended December 31, 2021 driven by strong volume growth, pricing gains, and the acquisition of Laird PM, partially offset by higher raw material, logistics and energy costs, as well as weaker product mix in Interconnect Solutions. 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 impact 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. 38 Table of Contents WATER & PROTECTION The Water & Protection segment is a leading provider of engineered products and integrated systems for a number of industries including worker safety, water purification and separation, aerospace, energy, medical packaging and building materials. The segment satisfies the growing global needs of businesses, governments, and consumers for solutions that make life safer, healthier, and better. By uniting market-driven science 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 2022 2021 2020 Net sales $ 5,957 $ 5,552 $ 4,993 Operating EBITDA $ 1,431 $ 1,385 $ 1,313 Equity earnings $ 39 $ 36 $ 26 Water & Protection For the Years Ended December 31, Percentage change from prior year 2022 2021 Change in Net Sales from Prior Period due to: Local price & product mix 12 % 2 % Currency (4) 1 Volume (1) 8 Portfolio & other — — Total 7 % 11 % 2022 Versus 2021 Water & Protection net sales were $5,957 million for the year ended December 31, 2022, up 7 percent from $5,552 million for the year ended December 31, 2021 due to a 12 percent increase in local price, partially offset by a 4 percent unfavorable currency impact and a 1 percent decrease in volume. Portfolio was flat. Local price increased across all businesses and in all regions, led by Shelter Solutions and Safety Solutions. Volume growth in Water Solutions was more than offset by a decline in Safety Solutions while Shelter Solutions was flat. Water Solutions volume gains were driven by strong global demand across all technologies led by reverse osmosis membranes and ultra filtration. Safety Solutions volume declined primarily as a result of lower demand for TYVEK® garments. Shelter Solutions was flat due to weakness in the construction market largely in North America and EMEA. Operating EBITDA was $1,431 million for the year ended December 31, 2022, up 3 percent compared with $1,385 million for the year ended December 31, 2021 as pricing actions and more disciplined cost control more than offset higher raw material, logistics and energy costs, unfavorable impact from currency, and lower volumes. 2021 Versus 2020 Water & Protection net sales were $5,552 million 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. 39 Table of Contents Corporate & Other Corporate & Other includes sales and activity of the Retained Businesses including the Auto Adhesives & Fluids, Multibase TM and Tedlar® product lines, previously reported in the historic Mobility & Materials segment. Related to the M&M Divestitures, Corporate & Other includes Stranded Costs and Future Reimbursable Indirect Costs. The results of Corporate & Other include the sales and activity of the Biomaterials, Clean Technologies, and Solamet® business units. Corporate & Other also 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. Corporate & Other For the Years Ended December 31, In millions 2022 2021 2020 Net sales $ 1,143 $ 1,460 $ 1,461 Operating EBITDA $ (6) $ 9 $ 61 Equity earnings $ 5 $ 8 $ 108 Corporate & Other net sales were $1,143 for the year ended December 31, 2022, down from $1,460 million for the year ended December 31, 2021. For the year ended December 31, 2022 net sales decreased primarily due to the divestiture of the Biomaterials business in May 2022 and Clean Technologies business in December 2021. For the year ended December 31, 2021, Corporate & Other net sales were $1,460 million which was consistent with net sales of $1,461 million for the year ended December, 31 2020. Operating EBITDA was $(6) million, $9 million and $61 million for the year ended December 31, 2022, 2021 and 2020, respectively. The decrease in EBITDA was primarily the result of portfolio actions over the three years. 2023 OUTLOOK In 2023, the Company expects continued demand strength in areas such as water and auto adhesives, along with stable demand across industrial end-markets including aerospace and healthcare. The Company expects lower volumes in consumer facing markets during the first half of the year, primarily in consumer electronics and semiconductors within the Electronics & Industrial segment. Market declines within the Water & Protection segment in construction end-markets are expected throughout 2023. The Company expects macroeconomic pressures and demand trends will begin to correct by the end of the first half for the consumer end markets served by the Electronics & Industrial segment but cannot predict the extent or length of such correction. As a result, the Company is unable to predict the extent to which these macroeconomic events may impact its consolidated results of operations or financial condition. The Company continues to closely monitor macroeconomic and geopolitical developments. 40 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. 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 macroeconomic 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, 2022 December 31, 2021 Cash, cash equivalents and marketable securities $ 4,964 $ 1,972 Total debt $ 8,074 $ 10,782 The Company's cash and cash equivalents at December 31, 2022 and December 31, 2021 were $3.7 billion and $2.0 billion, respectively, of which $1.2 billion at December 31, 2022 and $1.4 billion at December 31, 2021 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. The Company held $1,302 million in marketable securities at December 31, 2022 and none at December 31, 2021. The increase in marketable securities from the prior period is due to the investment of proceeds from the M&M Divestiture. Total debt at December 31, 2022 and December 31, 2021 was $8.1 billion and $10.8 billion, respectively. The decrease was primarily due to the redemption of 2018 Senior Notes of $2.5 billion due in 2023 during the fourth quarter of 2022, repayment of all commercial paper borrowings and mark to market impact to the fair value of an interest rate swap used to hedge changes in the fair value of the hedged item due to changes in the SOFR as of December 31, 2022. As of December 31, 2022, the Company is contractually obligated to make future cash payments of $8.2 billion and $5.3 billion associated with principal and interest, respectively, on debt obligations. Related to the principal, $300 million will be due in the next twelve months and the remainder will be due subsequent to 2023. Related to interest, $411 million will be due in the next twelve months and the remainder will be due subsequent to 2023. The majority of interest obligations will be due in 2028 or later. Revolving Credit Facilities On April 12, 2022, the Company entered into a $2.5 billion five-year revolving credit facility (the "Five-Year Revolving Credit Facility"). As of the effectiveness of the Five-Year Revolving Credit Facility, the Company's prior $3 billion five-year revolving credit facility entered in May 2019 was terminated. All material conditions and covenants in the Five-Year Revolving Credit Facility are consistent with those of the prior terminated credit facility. 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. Also on April 12, 2022, the Company entered into an updated $1.0 billion 364-day revolving credit facility (the “2022 $1B Revolving Credit Facility") as the $1.0 billion 364-day revolving credit facility entered in April 2021 (the “2021 $1B Revolving Credit Facility") had an expiration date in mid-April. As of the effectiveness of the 2022 $1B Revolving Credit Facility, the 2021 $1B Revolving Credit Facility was terminated. The 2022 $1B Revolving Credit Facility may be used for general corporate purposes. In July 2022, the Company drew down $600 million under the 364-day Revolving Credit Facility in order to facilitate certain intercompany internal restructuring steps related to the M&M Divestiture. The Company repaid the borrowing in September 2022. Repayment of Senior Notes In November 2022, the Company redeemed in full $2.5 billion in fixed-rate long term senior unsecured notes due 2023 at a redemption price equal to 100% of the aggregated principal amount plus the accrued and unpaid interest. The redemption was funded with the net proceeds from the M&M Divestiture. 41 Table of Contents Terminated Intended Rogers Acquisition In connection with the Terminated 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. In October 2022, the facility was amended to extend the lending commitment (as amended the "Amended 2021 Term Loan Facility"). On November 1, 2022, the M&M Divestiture closed and, therefore, based on the terms of the Amended 2021 Term Loan Facility, the commitment was terminated. Separately, on November 1, 2022 the Company announced the termination of the previously announced agreement to acquire the outstanding shares of Rogers. The Company paid Rogers a termination fee of $162.5 million in accordance with the agreement on November 2, 2022. The termination fee was paid with cash on hand and recorded in the "Acquisition, integration and separation costs" within the Consolidated Statement of Operations. See Note 3 to the Consolidated Financial Statements for additional information. Commercial Paper In April 2022, DuPont downsized its authorized commercial paper program from $3.0 billion to $2.5 billion (the “DuPont Commercial Paper Program”). At December 31, 2022 the Company had no commercial paper outstanding compared to $150 million outstanding at the end of 2021. Term Loan 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. 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. 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 Stable 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 Five-Year Revolving Credit Facility and the 2022 $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, 2022, 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 and the M&M Divestitures have not been segregated and are included in the Consolidated Statements of Cash Flows for all periods presented. Cash Flow Summary 2022 2021 2020 In millions Cash provided by (used for): Operating activities $ 588 $ 2,281 $ 4,095 Investing activities $ 8,923 $ (2,401) $ (202) Financing activities $ (7,667) $ (6,507) $ 3,238 Effect of exchange rate changes on cash, cash equivalents and restricted cash $ (148) $ (72) $ 67 Cash, cash equivalents and restricted cash in discontinued operations $ — $ 39 $ 42 42 Table of Contents Cash Flows provided by Operating Activities Cash provided by operating activities was $588 million, $2,281 million and $4,095 million for the years ended December 31, 2022, 2021 and 2020, respectively. The decrease in cash provided by operating activities in 2022 was primarily driven by the decrease in net income , increase in cash used in net working capital, primarily due to the use of cash from accounts payable and other assets and liabilities, net and transaction and separation related expenses. Included within the decrease of 2022 cash flow is the impact of the absence of two months of M&M and one month of N&B net income. 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. The table below reflects net working capital on a continuing operations basis: Net Working Capital 1 December 31, 2022 December 31, 2021 In millions (except ratio) Current assets $ 9,979 $ 6,639 Current liabilities 3,587 3,518 Net working capital $ 6,392 $ 3,121 Current ratio 2.78:1 1.89:1 1. Net working capital has been presented to exclude the assets and liabilities related to the M&M Divestitures. The assets and liabilities related to the M&M Divestitures are presented as assets of discontinued operations and liabilities of discontinued operations, respectively. Cash Flows provided by Investing Activities Cash provided by investing activities in 2022 was $8,923 million compared to cash used for investing of $2,401 million in 2021. The increase in cash provided from investing activities in 2022 versus the prior year is primarily attributable to the cash proceeds received from the M&M Divestiture, a decrease in cash used in acquisition of property and business partially offset by purchases of investments and the absence of proceeds from sale and maturities of investments. Cash used for investing activities in 2021 was primarily attributable to the acquisition of Laird PM and cash proceeds received from the sales of Solamet® and Clean Technologies businesses in 2021. In 2020, cash used for investing activities was $202 million primarily driven by cash used in capital expenditures partially offset by cash proceeds received from the sales of the TCS Business and Compound Semiconductor Solutions business units. Capital expenditures totaled $743 million, $891 million and $1,194 million for the years ended December 31, 2022, 2021 and 2020, respectively. The Company expects 2023 capital expenditures to be about $650 million. The Company may adjust its spending throughout the year as economic conditions develop. Cash Flows used for Financing Activities Cash used for financing activities in 2022 was $7,667 million compared to cash used for by financing activities of $6,507 million in 2021. The increase in cash used for financing activities in 2022 versus the prior year is primarily driven by the increase in cash used for repurchases of common stocks and decrease in cash proceeds from the issuance of long-term debt. Cash used in 2021 was primarily driven by the cash used for the repayment of long-term debt and repurchases of common stock. In 2020, cash provided by financing activities was $3,238 million, primarily driven by the proceeds from issuance of long-term debt partially offset by cash used for the reduction in short-term and long-term debts and repurchases of common stock. Dividends The following table provides dividends paid to common shareholders for the years ended December 31, 2022, 2021 and 2020: Dividends Paid December 31, 2022 December 31, 2021 December 31, 2020 In millions Dividends paid, per common share $ 1.32 $ 1.20 $ 1.20 Dividends paid to common stockholders 1 $ 652 $ 630 $ 882 1. The 2020 dividends include dividends paid to common stockholders prior to the closing of the N&B Transaction. The DuPont Board of Directors on February 6, 2023 declared a first quarter 2023 dividend of $0.36 per share, a 9 percent per share increase versus the first quarter 2022 dividend, payable on March 15, 2023, to holders of record at the close of business on February 28, 2023. 43 Table of Contents Share Buyback Programs On February 8, 2022, the Company's Board of Directors authorized an additional $1.0 billion share buyback program which expires on March 31, 2023. At the end of the third quarter of 2022, the Company had repurchased and retired a total of 11.9 million shares for $750 million under the 2022 Share Buyback Program. On November 7, 2022, DuPont’s Board of Directors approved a new share repurchase program authorizing the repurchase and retirement of up to $5 billion of common stock. The new repurchase authorization of up to $5 billion is in addition to the $250 million remaining under the Company’s 2022 Share Buyback Program. On November 8, 2022, the Company entered into the 2022 ASR Agreements, for the repurchase of an aggregate of approximately $3.25 billion of common stock with $250 million of such repurchases under the existing program and the remaining $3 billion under the new program. Any additional repurchases under the new share repurchase program will be made from time to time on the open market at prevailing market prices or in privately negotiated transactions off the market, which may include additional accelerated share repurchase agreements. The timing and number of shares to be repurchased will depend on factors such as the share price, economic and market conditions, and corporate and regulatory requirements. The new repurchase program terminates on June 30, 2024, unless extended or shortened by the Board of Directors. During the fourth quarter, in accordance with the terms of the 2022 ASR Agreements, the Company repurchased and retired the initial deliveries of 38.8 million shares in aggregate for $3.25 billion, approximately 3.7 million shares were repurchased for $250 million under the 2022 Share Buyback Program and the remaining 35.1 million shares were repurchased for $3 billion under the $5B Share Buyback Program. The final number of shares to be repurchased will be based on the volume-weighted average stock price for DuPont common stock during the term of the 2022 ASR Agreements, less an agreed upon discount. The ASR transaction is being funded with proceeds from the M&M Divestitures and any remaining settlement will use cash on hand or exchange shares and is expected to be completed in the third quarter 2023. 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"). At the expiry of the 2021 Share Buyback Program, the Company had repurchased and retired a total of 19.6 million shares for $1.5 billion under the 2021 Share Buyback Program. In the second quarter of 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. 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 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 $76 million to its pension plans in 2023, including plans held in discontinued operations. 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. As of December 31, 2022, the Company is contractually obligated to make future cash contributions of $593 million related to pension and other post-employment benefit plans, including plans held in discontinued operations. $76 million will be due in the next twelve months and the remainder will be due subsequent to 2023 with the majority due subsequent to 2027. Restructuring In October 2022, the Company approved targeted restructuring actions to capture near-term cost reductions and to further simplify certain organizational structures following the M&M Divestitures (the "2022 Restructuring Program"). For the year ended December 31, 2022, DuPont recorded a pre-tax charge related to the 2022 Restructuring Program in the amount of $61 million, recognized in "Restructuring and asset related charges - net" in the Company's Consolidated Statements of Operations, comprised of severance and related benefit costs. At December 31, 2022, total liabilities related to the 2022 Restructuring Program were $57 million for severance and related benefit costs, recognized in "Accrued and other current liabilities" in the Consolidated Balance Sheet. 44 Table of Contents In October 2021, the Company approved targeted restructuring actions to capture near term cost reductions (the "2021 Restructuring Actions"). For the years ended December 31, 2021 and December 31, 2022, DuPont recorded pre-tax charges inception to date related to the 2021 Restructuring Actions in the amounts 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, 2022, total liabilities related to the 2021 Restructuring Actions were $7 million for severance and related benefit costs. Actions related to the 2021 Restructuring Program are substantially complete. 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 $158 million inception-to-date, consisting of severance and related benefit costs of $106 million and asset related charges of $52 million. Actions associated with the 2020 Restructuring Program are considered substantially complete. See Note 6 to the Consolidated Financial Statements for more information on the Company's restructuring programs. Other Off-balance Sheet Arrangements 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 support and manage potential future eligible PFAS costs. Subject to the terms of the arrangement, contributions to the escrow account will be made annually by Chemours, DuPont and Corteva through 2028. 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. DuPont's aggregate escrow deposits of $100 million and $50 million at December 31, 2022 and 2021, respectively, are reflected in "Restricted cash and cash equivalents" on the Consolidated Balance Sheet. As of December 31, 2022, the Company expected to make cash payments related to qualified PFAS spend of $66 million in the next twelve months. 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 Purchase obligations represents enforceable and legally binding agreements in excess of $1 million to purchase goods or services that specify fixed or minimum quantities; fixed minimum or variable price provisions; and the approximate timing of the agreement. As of December 31, 2022, the Company is contractually obligated to make future cash payments $159 million related to purchase obligations, of which $85 million will be due in the next twelve months and the remainder will be due subsequent to 2023. Lease obligations represents future finance and operating lease payments. As of December 31, 2022, obligations of future lease payments are $480 million, of which $100 million will be due in the next twelve months and remainder will be due subsequent to 2023. Other miscellaneous obligations includes liabilities related to deferred compensation, environmental remediation, and other noncurrent liabilities. As of December 31, 2022, the Company is contractually obligated to make future cash payments of $187 million related to other miscellaneous obligations, the majority of which is due subsequent to 2023. RECENT ACCOUNTING PRONOUNCEMENTS See Note 2 to the Consolidated Financial Statements for a description of recent accounting pronouncements. 45 Table of Contents 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 on a continuing operations basis at December 31, 2022: Pre-tax Earnings Benefit (Charge) (Dollars in millions) 1/4 Percentage Point Increase 1/4 Percentage Point Decrease Discount rate $ — $ — Expected rate of return on plan assets 6 (6) 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 Commitments and 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, including its obligations under the MOU as impacted by the Letter Agreement, 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 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 46 Table of Contents 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, 2022, the Company had a net deferred tax liability balance of $1.0 billion, net of a valuation allowance of $0.7 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. The Inflation Reduction Act of 2022 ("IRA") was signed into law on August 16, 2022. The IRA introduces a new 15% corporate minimum tax, based on adjusted financial statement income of certain large corporations. Applicable corporations will be allowed to claim a credit for the minimum tax paid against regular tax in future years. While this tax law change does not have an immediate effect, the Company will continue to evaluate its impact as further information becomes available. The Inflation Reduction Act also includes an excise tax that will impose a 1% surcharge on stock repurchases, effective January 1, 2023. Assessment of Income Tax Impacts related to the M&M Divestiture In connection with the M&M Divestiture, the Company completed certain internal restructurings which resulted in estimated income tax impacts from a United States federal, state and foreign jurisdiction perspective. The estimated tax impact of certain internal restructurings was calculated using valuations of components of legal entities and intellectual property, which involved the use of the income and/or market approach and assumptions, including, projected EBITDA, the weighted average costs of capital, royalty rates, tax rate, capital expenditures, and terminal growth rates for the income approach and projected EBITDA and market multiples for the market approach. The tax effect of these internal restructurings are included in the overall tax consequences of the M&M Divestiture. During the year ended December 31, 2022, the Company recorded net income tax expense of $127 million related to the estimated tax impact of these internal restructurings from a United States and foreign jurisdiction perspective. Although the Company believes the estimated tax impacts are reasonable and appropriate, these estimates required significant judgment regarding the application of tax laws and regulations. Upon final resolution by the United States Internal Revenue Service or foreign tax authority through audit or litigation, the Company’s income tax calculations and related filing positions regarding certain elements of these transactions could be different, which could have a material impact on the Company. 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 projected revenue, gross margins, selling, administrative, research and development expenses (SARD), capital expenditures, the weighted average cost of capital, the terminal growth rates, and the forecasted tax rates for the income approach. For the market 47 Table of Contents approach, the company uses projected EBITDA and derived multiples from comparable market transactions. 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, or more frequently when events or changes in circumstances indicate that the fair value is below carrying value, 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. 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, gross margins, selling, administrative, research and development expenses (SARD), capital expenditures, the weighted average cost of capital, the terminal growth rate, and the tax rate. 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 2022, the Company performed its annual goodwill impairment testing by applying the qualitative assessment to five of its reporting units and the quantitative assessment to two 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 48 Table of Contents carrying values. For the reporting units tested under the quantitative assessment, the results indicated that, the estimated fair values of the reporting units exceeded their carrying values. The estimated fair value of one of the reporting units within Water & Protection exceeded its carrying value by approximately 10%. Given this level of fair value, the reporting unit is sensitive to changes in the significant assumptions used in the analysis. If the reporting unit does not perform to expected levels or there are adverse changes in certain macroeconomic factors, the related goodwill may be at risk for impairment in the future. 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. As part of the 2022 Segment Realignment, the Company assessed and re-defined certain reporting units effective March 1, 2022, 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. 49 Table of Contents 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 $23 million to its funded pension plans for the year ended December 31, 2022. The Company contributed $28 million to its funded pension plans for the years ended December 31, 2021 and December 31, 2020, respectively. All values within this Long-Term Employee Benefits section are inclusive of balances and activity associated with discontinued operations. 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 $56 million, $60 million, and $73 million to its unfunded plans, including OPEB plans, for the years ended December 31, 2022, December 31, 2021 and December 31, 2020, respectively. In 2023, the Company expects to contribute approximately $76 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, 2022, December 31, 2021 and December 31, 2020 was affected by pre-tax charges related to long-term employee benefits: For the Years Ended In millions December 31, 2022 December 31, 2021 December 31, 2020 Long-term employee benefit plan charges $ 98 $ 106 $ 155 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 2023, long term employee benefit expense from continuing operations is expected to increase by about $40 million compared to 2022. The increase is mainly due to higher interest costs. 50 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 include initiatives to reduce air emissions, minimize the generation of hazardous waste, decrease the volume of water used and discharged, 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 with 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 2022 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 included 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 went live in December 2022 and 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. 51 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 $12 million, $14 million and $6 million, for the years ended December 31, 2022, 2021 and 2020, respectively. Changes in the remediation accrual balance are summarized below: (Dollars in millions) 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 Remediation payments (11) Net increase in remediation accrual 12 Net change, indemnification 1 — Balance at December 31, 2022 $ 90 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 Note 16 to the Consolidated Financial Statements. This is not inclusive of the environmental accrual of $173 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 $173 million above the amount accrued as of December 31, 2022. 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 Note 16 to the Consolidated Financial Statements, the Company indemnifies Dow and Corteva for certain environmental matters. The Company has recorded an indemnification liability of $49 million corresponding to the Company's accrual balance related to these matters at December 31, 2022. The indemnification liability is included in the total remediation accrual liability of $90 million. Environmental Capital Expenditures Capital expenditures for environmental projects, either required by law or necessary to meet the Company’s internal environmental goals, were $31 million for the year ended December 31, 2022. This amount includes $17 million of expenditures used towards the Company's climate change initiatives. The Company currently estimates expenditures for environmental-related capital projects to be approximately $23 million in 2023, with $9 million estimated for climate change initiatives. 52 Table of Contents