EIDP Inc

Results of Operations

Net Sales

Net sales were $6,112 million and $6,045 million for the three months ended June 30, 2024 and 2023, respectively. The increase was primarily driven by a 2 percent increase in price, partially offset by a 1 percent unfavorable impact of portfolio and other. Pricing gains were driven by continued execution on the company’s price for value strategy and improved product mix in Seed, partially offset by a competitive price environment in Crop Protection. The portfolio and other impact was driven by strategic product and geographic exits. Volume was flat overall, with increases in Crop Protection from demand for new products and spinosyns being offset by Seed declines driven by seasonal timing.

1. Represents U.S. & Canada.

2. Europe, Middle East and Africa ("EMEA").

Net sales were $10,604 million and $10,929 million for the six months ended June 30, 2024 and 2023, respectively. The decrease was primarily driven by a 4 percent decrease in volume and a 1 percent unfavorable impact from currency, partially offset by a 2 percent increase in price. Volume declines were driven by unfavorable weather conditions, destocking impacts and reduced planted area in EMEA, as well as just-in-time Crop Protection purchasing behavior in North America. Price gains were driven by continued execution on the company’s price for value strategy in Seed, partially offset by the broad-based competitive price environment in Crop Protection. The currency headwind was primarily driven by the Turkish Lira. Portfolio and other impact was neutral, driven by strategic product and geographic exits in EMEA partially offset by the favorable impact of the Biologicals acquisitions.

Cost of Goods Sold ("COGS")

COGS was $2,918 million (48 percent of net sales) and $3,137 million (52 percent of net sales) for the three months ended June 30, 2024 and 2023, respectively, and $5,468 million (52 percent of net sales) and $5,908 million (54 percent of net sales) for the six months ended June 30, 2024 and 2023, respectively. The decrease wasprimarily driven by ongoing cost and productivity actions and reduction of royalty expense, partially offset by higher commodity and input costs. In addition, the six months ended June 30, 2024 were also favorably impacted by volume declines and unfavorable impacts of currency.

Research and Development Expense ("R&D")

R&D expense was $357 million (6 percent of net sales) and $329 million (5 percent of net sales) for the three months ended June 30, 2024 and 2023, respectively, and $689 million (6 percent of net sales) and $645 million (6 percent of net sales) for the six months ended June 30, 2024 and 2023, respectively. The increase in R&D expense is in support of the company’s long-term investment plans and was primarily driven by an increase in salaries due to higher headcount, as well as additional spending on field, lab and facilities, and third-party research costs.

Selling, General and Administrative Expenses

SG&A expenses were $1,054 million (17 percent of net sales) and $1,045 million (17 percent of net sales) for the three months ended June 30, 2024 and 2023, respectively. The increase was primarily driven by an increase in bad debt expense, partially offset by a favorable currency impact and a decrease in consulting and professional fees.

SG&A expenses were $1,790 million (17 percent of net sales) and $1,771 million (16 percent of net sales) for the six months ended June 30, 2024 and 2023, respectively. The increase was primarily driven by an increase in commissions, bad debt expense, and the effects of the Biologicals acquisitions, partially offset by a decrease in selling expense, consulting and professional fees, and favorable impact from certain benefits costs.

Amortization of Intangibles

Intangible asset amortization was $174 million and $174 million for the three months ended June 30, 2024 and 2023, respectively, and $351 million and $334 million for the six months ended June 30, 2024 and 2023, respectively. The increase was primarily driven by the impact of amortization relating to the intangible assets recognized in connection with the Stoller and Symborg acquisitions, which were completed on March 1, 2023.

Restructuring and Asset Related Charges - Net

Restructuring and asset related charges - net were $92 million and $60 million for the three months ended June 30, 2024 and 2023, respectively, and $167 million and $93 million for the six months ended June 30, 2024 and 2023, respectively. The charges in the second quarter and first half of 2024 were primarily related to charges associated with the Crop Protection Operations Strategy Restructuring Program consisting of severance and related benefit costs and asset related charges. The charges in the second quarter and first half of 2023 were primarily related to costs associated with the 2022 Restructuring Actions. The charges in the second quarter and first half of 2024 and 2023 also include non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits and previous restructuring programs.

See Note 5 - Restructuring and Asset Related Charges - Net, to the interim Consolidated Financial Statements, for additional information.

Other Income (Expense) - Net

Other income (expense) - net was $(113) million and $(134) million for the three months ended June 30, 2024 and 2023, respectively. Lower other expense was primarily driven by a favorable tax indemnification adjustment and a decrease in net exchange losses, partially offset by a decrease in interest income.

Other income (expense) - net was $(212) million and $(205) million for the six months ended June 30, 2024 and 2023, respectively. Higher other expense was primarily driven by higher non-operating pension and other post employment benefit costs in the current period, a decrease in interest income, and an unfavorable tax indemnification adjustment, partially offset by an increase in net gain on sales of assets and the recognition of an indemnification payment negotiated with prior Stoller owners.

See Note 6 - Supplementary Information, to the interim Consolidated Financial Statements, for additional information.

Interest Expense

Interest expense was $66 million and $82 million for the three months ended June 30, 2024 and 2023, respectively, and $107 million and $113 million for the six months ended June 30, 2024 and 2023, respectively. The change was primarily driven by lower short-term borrowings offset by the interest relating to the Senior Notes issued in May 2023 and foreign currency loans.

Provision for (Benefit from) Income Taxes on Continuing Operations

The company’s provision for income taxes on continuing operations was $282 million for the three months ended June 30, 2024 on pre-tax income from continuing operations of $1,338 million, resulting in an effective tax rate of 21.1 percent. The effective tax rate was unfavorably impacted by geographic mix of earnings, as well as withholding taxes on repatriation of cash held outside of the U.S. primarily from current year earnings. Those unfavorable impacts were partially offset by net tax benefits associated with changes in accruals for certain prior year tax positions.

The company's provision for income taxes on continuing operations was $204 million for the three months ended June 30, 2023 on pre-tax income from continuing operations of $1,084 million, resulting in an effective tax rate of 18.8 percent. The effective tax rate was favorably impacted by $56 million of net tax benefits associated with changes in deferred taxes, accruals for certain prior year tax positions in various jurisdictions, stock-based compensation, as well as the impact of changes to deferred taxes associated with a tax currency change for a legal entity. Those favorable impacts were partially offset by the unfavorable tax impacts of certain net exchange losses recognized on the re-measurement of the net monetary asset positions which were not tax-deductible in their local jurisdictions, as well as geographic mix of earnings.

The company’s provision for income taxes on continuing operations was $388 million for the six months ended June 30, 2024 on pre-tax income from continuing operations of $1,820 million, resulting in an effective tax rate of 21.3 percent. The effective tax rate was unfavorably impacted by geographic mix of earnings, as well as withholding taxes on repatriation of cash held outside of the U.S. primarily from current year earnings. Those unfavorable impacts were partially offset by net tax benefits associated with changes in accruals for certain prior year tax positions.

The company's provision for income taxes on continuing operations was $373 million for the six months ended June 30, 2023 on pre-tax income from continuing operations of $1,860 million, resulting in an effective tax rate of 20.1 percent. The effective tax rate was favorably impacted by $68 million of net tax benefits associated with changes in deferred taxes, accruals for certain prior year tax positions in various jurisdictions, stock-based compensation, as well as the impact of changes to deferred taxes associated with a tax currency change for a legal entity. Those favorable impacts were partially offset by the unfavorable tax impacts of certain net exchange losses recognized on the re-measurement of the net monetary asset positions which were not tax-deductible in their local jurisdictions, as well as geographic mix of earnings.

Income (Loss) from Discontinued Operations After Tax

Income (loss) from discontinued operations after tax was $— million and $47 million for the three and six months ended June 30, 2024, respectively. The result for the three months ended June 30, 2024 was primarily driven by the de-recognition of an indemnification liability associated with the Water District Settlement Fund contribution, offset by the unfavorable settlement of a tax matter and increased environmental remediation costs for previously divested businesses. The after-tax benefits recognized during the six months ended June 30, 2024 primarily relate to a favorable adjustment of certain prior year tax positions for previously divested businesses, partially offset by charges recognized related to the MOU with Chemours and DuPont, relating to PFAS environmental remediation activities at Chemours' Fayetteville Works facility.

Income (loss) from discontinued operations after tax was $(163) million and $(171) million for the three and six months ended June 30, 2023, respectively. The after-tax charges recognized during the three and six months ended June 30, 2023 primarily related to the settlement of certain legacy PFAS related legal matters that are subject to the MOU, including the Nationwide Water District Settlement.

Refer to Note 13 - Commitments and Contingent Liabilities, to the interim Consolidated Financial Statements, for additional information.

EIDP Analysis of Operations

As discussed in Note 1 - Basis of Presentation, to the EIDP interim Consolidated Financial Statements, EIDP is a subsidiary of Corteva, Inc. and continues to be a reporting company, subject to the requirements of the Exchange Act. The below relates to EIDP only and is presented to provide an Analysis of Operations, only for the differences between EIDP and Corteva, Inc.

Interest Expense

EIDP’s interest expense was $66 million and $89 million for the three months ended June 30, 2024 and 2023, respectively, and $107 million and $133 million for the six months ended June 30, 2024 and 2023, respectively. The change was primarily driven by the items noted above, under the header "Interest Expense," partially offset by the absence of interest on the related party loan between EIDP and Corteva, Inc. during the first and second quarters of 2024 as it was fully repaid in the fourth quarter of 2023.

See Note 2 - Related Party Transactions, to the EIDP interim Consolidated Financial Statements, for further information.

Provision for (Benefit from) Income Taxes on Continuing Operations

EIDP’s provision for income taxes on continuing operations was $285 million for the three months ended June 30, 2024 on pre-tax income from continuing operations of $1,351 million, resulting in an effective tax rate of 21.1 percent. EIDP’s provision for income taxes on continuing operations was $202 million for the three months ended June 30, 2023 on pre-tax income from continuing operations of $1,077 million, resulting in an effective tax rate of 18.8 percent.

EIDP’s provision for income taxes on continuing operations was $393 million for the six months ended June 30, 2024 on pre-tax income from continuing operations of $1,840 million, resulting in an effective tax rate of 21.4 percent. EIDP’s provision for income taxes on continuing operations was $368 million for the six months ended June 30, 2023 on pre-tax income from continuing operations of $1,840 million, resulting in an effective tax rate of 20.0 percent.

EIDP’s effective tax rates for the three and six months ended June 2024 and 2023 were driven by the items noted on page 46, under the header “Provision for (Benefit from) Income Taxes on Continuing Operations”.

See Note 2 - Related Party Transactions, to the EIDP Consolidated Financial Statements for further information.

Corporate Outlook

On-farm demand for inputs remains steady and farmers continue to prioritize top-tier seed technology. Against this backdrop, our Seed business is outperforming the market, likely gaining market share while maintaining strong pricing and increasing operational efficiency. While the global Crop Protection industry volume has begun to stabilize, pricing pressures have become more pronounced due to the competitive environment and tighter farmer margins, leading to an update to full-year 2024 net sales and earnings expectations.

The company expects net sales in the range of $17.2 billion to $17.5 billion and Operating EBITDA in the range of $3.4 billion to $3.6 billion. Operating Earnings Per Share is expected to be in the range of $2.60 to $2.80 per share. Cash provided by operating activities - continuing operations is expected to be in the range of $2.1 billion to $2.6 billion. Free cash flow is expected to be in the range of $1.5 billion to $2.0 billion. Refer to further discussion of Non-GAAP metrics on page 50.

The above outlook does not contemplate any extreme weather events, operational disruptions, significant changes in customers' demand or ability to pay, or further acceleration of currency and inflation impacts resulting from macro-economic driven trends. Corteva is not able to reconcile its forward-looking non-GAAP financial measures, except Free Cash Flow, to its most comparable U.S. GAAP financial measures, as it is unable to predict with reasonable certainty items outside of the company’s control, such as Significant Items, without unreasonable effort (refer to page 52 for Significant Items recorded in the three and six months ended June 30, 2024 and 2023). However, during 2023, the company committed to restructuring activities to optimize the Crop Protection network of manufacturing and external partners, which are expected to be substantially complete in 2024. The company expects to record approximately $180 million to $230 million net pre-tax restructuring charges during 2024 for these activities. Additionally, the company expects to record approximately $60 million for non-cash accelerated prepaid royalty amortization expense as restructuring and asset related charges. See Note 5 - Restructuring and Asset Related Charges - Net, to the interim Consolidated Financial Statements, for additional information.

Reconciliation of Forward-Looking Cash Provided by (Used for) Operating Activities – Continuing Operations to Free Cash Flow 1

1. This represents the reconciliation of the company’s range provided for its forward-looking non-GAAP financial measure relating to Free Cash Flow. Refer to further discussion of Non-GAAP metrics on page 50.