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Corteva, Inc. - Quarter Report: 2020 September (Form 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-38710
Corteva, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 82-4979096
(State or other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
974 Centre Road,Wilmington,Delaware19805 (302)485-3000
(Address of Principal Executive Offices) (Zip Code)(Registrant’s Telephone Number, including area code)
Commission File Number 1-815
E. I. du Pont de Nemours and Company
(Exact Name of Registrant as Specified in Its Charter)
Delaware 51-0014090
(State or other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
974 Centre Road,Wilmington,Delaware19805 (302)485-3000
(Address of Principal Executive Offices) (Zip Code)(Registrant’s Telephone Number, including area code)


Securities registered pursuant to Section 12(b) of the Act for Corteva, Inc.:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareCTVANew York Stock Exchange

Securities registered pursuant to Section 12(b) of the Act for E. I. du Pont de Nemours and Company:
Title of each classTrading Symbol(s)Name of each exchange on which registered
$3.50 Series Preferred Stock CTAPrANew York Stock Exchange
$4.50 Series Preferred StockCTAPrBNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  
Corteva, Inc.                                          Yes  x   No  o
E. I. du Pont de Nemours and Company                          Yes  x   No  o


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 Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)  
Corteva, Inc.                                       Yes  x   No  o
E. I. du Pont de Nemours and Company                           Yes  x   No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Corteva, Inc.
Large Accelerated Filerx
Accelerated Filer o
Non-Accelerated Filero
Smaller reporting company o
Emerging growth company o
E. I. du Pont de Nemours and Company
Large Accelerated Filero
Accelerated Filer o
Non-Accelerated Filer
x

Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Corteva, Inc.                                                 
E. I. du Pont de Nemours and Company                                  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 
Corteva, Inc.                                          Yes     No  x
E. I. du Pont de Nemours and Company                          Yes     No  x

Corteva, Inc. had 745,016,000 shares of common stock, par value $0.01 per share, outstanding at October 29, 2020.
E. I. du Pont de Nemours and Company had 200 shares of common stock, par value $0.30 per share, outstanding at October 29, 2020, all of which are held by Corteva, Inc.    

E. I. du Pont de Nemours and Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q (as modified by a grant of no-action relief dated February 12, 2018) and is therefore filing this form with reduced disclosure format.


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CORTEVA, INC.
E. I. DU PONT DE NEMOURS AND COMPANY

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Explanatory Note

On June 1, 2019, Corteva, Inc. ("Corteva" or "the company") became an independent, publicly traded company through the previously announced separation (the “Separation”) of the agriculture business of DowDuPont (defined below). The separation was effectuated through a pro rata distribution (the “Corteva Distribution”) of all of the then-issued and outstanding shares of common stock, par value $0.01 per share, of Corteva, Inc., which was then a wholly-owned subsidiary of DowDuPont, to holders of record of DowDuPont common stock as of the close of business on May 24, 2019.

Corteva owns 100% of the outstanding common stock of EID (defined below), and EID owns, directly or indirectly, 100% of DAS (defined below). EID is a subsidiary of Corteva, Inc. and continues to be a reporting company, subject to the requirements of the Securities Exchange Act of 1934, as amended.

Unless otherwise indicated or the context otherwise requires, references in this Quarterly Report on Form 10-Q to:

    • "Corteva" or "the company" refers to Corteva, Inc. and its consolidated subsidiaries (including EID);
• "EID" refers to E. I. du Pont de Nemours and Company and its consolidated subsidiaries or E. I. du Pont de Nemours and Company excluding its consolidated subsidiaries, as the context may indicate;
    • "DowDuPont" refers to DowDuPont Inc., and its subsidiaries prior to the Separation of Corteva (defined below);
• "Historical Dow" refers to the Dow Chemical Company and its consolidated subsidiaries prior to the Internal Reorganization (defined below);
    • "Historical DuPont" refers to EID prior to the Internal Reorganization (defined below);
• "Internal Reorganizations" refers to the series of internal reorganization and realignment steps undertaken by Historical DuPont and Historical Dow to realign its business into three groups: agriculture, materials science and specialty products.  These steps include:
1.the April 1, 2019 transfer of the assets and liabilities aligned with EID’s material science businesses including EID’s ethylene and ethylene copolymers business, excluding its ethylene acrylic elastomers business, (“EID ECP”) to DowDuPont, which were ultimately conveyed by DowDuPont to Dow;
2.the May 1, 2019 distribution of EID legal entities containing the assets and liabilities of EID’s specialty products business (the “EID Specialty Products Entities”) to DowDuPont;
3.the May 2, 2019 conveyance of Historical Dow's agriculture business ("Dow Ag Entities") to EID; and
4.the May 31, 2019 contribution of EID to Corteva, Inc.  Refer to the company’s Annual Report on Form 10-K for the year ended December 31, 2019 for further information.
• "Dow Distribution" refers to the separation of DowDuPont's materials science business into a separate and independent public company, effective as of 5:00 pm ET on April 1, 2019, by way of a distribution of Dow Inc. through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Dow’s common stock, par value $0.01 per share, to holders of DowDuPont's common stock, as of the close of business on March 21, 2019;
    • "Distributions" refers to the Dow Distribution and the Corteva Distribution;
• "Merger” refers to the all-stock merger of equals strategic combination between Historical Dow and EID;
• "Merger Effectiveness Time” refers to August 31, 2017 at 11:59 pm ET;
    • "Dow" refers to Dow Inc. after the Dow Distribution;
    • "DuPont" refers to DuPont de Nemours, Inc. after the Separation of Corteva (on June 1, 2019, DowDuPont Inc. changed its registered name to DuPont de Nemours, Inc.; and
    • "DAS" refers to the agriculture business of Historical Dow AgroSciences.

Beginning on June 3, 2019, Corteva's common stock is traded on the New York Stock Exchange under the ticker symbol "CTVA". 

This Quarterly Report on Form 10-Q is a combined report being filed separately by Corteva, Inc. and EID.  The information in this Quarterly Report on Form 10-Q is equally applicable to Corteva, Inc. and EID, except where otherwise indicated.

The separate EID financial statements and footnotes for areas that differ from Corteva, are included within this Quarterly Report on Form 10-Q and begin on page 76. Footnotes of EID that are identical to that of Corteva are cross-referenced accordingly.
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PART I.  FINANCIAL INFORMATION 

Item 1.CONSOLIDATED FINANCIAL STATEMENTS

Corteva, Inc.
Consolidated Statements of Operations (Unaudited)
(In millions, except per share amounts) Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Net sales$1,863 $1,911 $11,010 $10,863 
Cost of goods sold
1,297 1,349 6,395 6,607 
Research and development expense
284 289 837 857 
Selling, general and administrative expenses
597 646 2,319 2,318 
Amortization of intangibles
162 100 501 314 
Restructuring and asset related charges - net
49 46 298 167 
Integration and separation costs
— 152 — 694 
Other income - net30 59 120 90 
Loss on early extinguishment of debt
— — — 13 
Interest expense
11 19 35 112 
(Loss) income from continuing operations before income taxes(507)(631)745 (129)
(Benefit from) provision for income taxes on continuing operations(117)(104)88 99 
(Loss) income from continuing operations after income taxes(390)(527)657 (228)
Income (loss) from discontinued operations after income taxes— 22 (695)
Net (loss) income(390)(505)658 (923)
Net income (loss) attributable to noncontrolling interests(11)18 15 
Net (loss) income attributable to Corteva$(392)$(494)$640 $(938)
Basic (loss) earnings per share of common stock:
Basic (loss) earnings per share of common stock from continuing operations$(0.52)$(0.69)$0.85 $(0.32)
Basic earnings (loss) per share of common stock from discontinued operations— 0.03 — (0.93)
Basic (loss) earnings per share of common stock$(0.52)$(0.66)$0.85 $(1.25)
Diluted earnings (loss) per share of common stock:
Diluted (loss) earnings per share of common stock from continuing operations$(0.52)$(0.69)$0.85 $(0.32)
Diluted earnings (loss) per share of common stock from discontinued operations— 0.03 — (0.93)
Diluted (loss) earnings per share of common stock$(0.52)$(0.66)$0.85 $(1.25)

See Notes to the Consolidated Financial Statements beginning on page 9.
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Corteva, Inc.
Consolidated Statements of Comprehensive (Loss) Income (Unaudited)
(In millions) Three Months Ended
September 30,
Nine Months Ended September 30,
2020201920202019
Net (loss) income $(390)$(505)$658 $(923)
Other comprehensive income (loss) - net of tax:
Cumulative translation adjustments
68 (297)(507)(471)
Adjustments to pension benefit plans
— (6)13 
Adjustments to other benefit plans
— (86)
Derivative instruments
(20)— (16)23 
Total other comprehensive income (loss)49 (292)(526)(521)
Comprehensive (loss) income (341)(797)132 (1,444)
Comprehensive income (loss) attributable to noncontrolling interests - net of tax(11)18 15 
Comprehensive (loss) income attributable to Corteva$(343)$(786)$114 $(1,459)

See Notes to the Consolidated Financial Statements beginning on page 9.

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Corteva, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(In millions, except share amounts)September 30, 2020December 31, 2019September 30, 2019
Assets  
Current assets  
Cash and cash equivalents$2,768 $1,764 $1,980 
Marketable securities152 117 
Accounts and notes receivable - net5,627 5,528 6,574 
Inventories4,374 5,032 4,403 
Other current assets1,167 1,190 1,043 
Total current assets14,088 13,519 14,117 
Investment in nonconsolidated affiliates62 66 70 
Property, plant and equipment - net of accumulated depreciation (September 30, 2020 - $3,712; December 31, 2019 - $3,326; September 30, 2019 - $3,186)4,273 4,546 4,503 
Goodwill10,110 10,229 10,168 
Other intangible assets10,914 11,424 11,667 
Deferred income taxes289 287 270 
Other assets1,954 2,326 2,440 
Total Assets
$41,690 $42,397 $43,235 
Liabilities and Equity  
Current liabilities  
Short-term borrowings and finance lease obligations$2,142 $$3,604 
Accounts payable2,994 3,702 3,014 
Income taxes payable168 95 126 
Accrued and other current liabilities2,430 4,434 2,249 
Total current liabilities
7,734 8,238 8,993 
Long-Term Debt1,102 115 116 
Other Noncurrent Liabilities
Deferred income tax liabilities
740 920 1,328 
Pension and other post employment benefits - noncurrent
5,904 6,377 5,405 
Other noncurrent obligations
1,864 2,192 2,132 
Total noncurrent liabilities
9,610 9,604 8,981 
Commitments and contingent liabilities
Stockholders’ equity  
Common stock, $0.01 par value; 1,666,667,000 shares authorized;
issued at September 30, 2020 - 747,492,000; December 31, 2019 - 748,577,000; and September 30, 2019 - 748,390,000
Additional paid-in capital27,895 27,997 28,072 
Accumulated deficit— (425)(397)
Accumulated other comprehensive loss(3,796)(3,270)(2,667)
Total Corteva stockholders’ equity
24,106 24,309 25,015 
Noncontrolling interests
240 246 246 
Total equity
24,346 24,555 25,261 
Total Liabilities and Equity
$41,690 $42,397 $43,235 
See Notes to the Consolidated Financial Statements beginning on page 9.
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Corteva, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)Nine Months Ended September 30,
2020
20191
Operating activities
Net income (loss)$658 $(923)
Adjustments to reconcile net income (loss) to cash used for operating activities:
Depreciation and amortization868 1,310 
Benefit from deferred income tax(153)(427)
Net periodic pension benefit(306)(208)
Pension contributions(53)(109)
Net loss (gain) on sales of property, businesses, consolidated companies and investments29 (69)
Restructuring and asset related charges - net298 284 
Amortization of inventory step-up— 272 
Goodwill impairment charge— 1,102 
Loss on early extinguishment of debt— 13 
Other net loss240 184 
Changes in operating assets and liabilities - net(2,818)(3,732)
Cash used for operating activities(1,237)(2,303)
Investing activities 
Capital expenditures(301)(1,015)
Proceeds from sales of property, businesses and consolidated companies - net of cash divested22 142 
Acquisitions of businesses - net of cash acquired— (9)
Investments in and loans to nonconsolidated affiliates(1)(10)
Proceeds from sales of ownership interests in nonconsolidated affiliates— 21 
Purchases of investments(656)(133)
Proceeds from sales and maturities of investments498 42 
Other investing activities - net(7)(2)
Cash used for investing activities(445)(964)
Financing activities 
Net change in borrowings (less than 90 days)1,582 1,729 
Proceeds from debt2,434 1,001 
Payments on debt(879)(6,803)
Repurchase of common stock(83)(25)
Proceeds from exercise of stock options19 43 
Dividends paid to stockholders(291)(97)
Payment for acquisition of subsidiary's interest from the non-controlling interest(60)— 
Distributions to DowDuPont— (317)
Cash transferred to DowDuPont at Internal Reorganizations— (2,053)
Contributions from Dow and DowDuPont— 7,396 
Debt extinguishment costs— (79)
Other financing activities(27)(34)
Cash provided by financing activities2,695 761 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(64)(118)
Increase (decrease) in cash, cash equivalents and restricted cash949 (2,624)
Cash, cash equivalents and restricted cash at beginning of period2,173 5,024 
Cash, cash equivalents and restricted cash at end of period2
$3,122 $2,400 
1. The cash flows for the nine months ended September 30, 2019 includes cash flows of EID's ECP and Specialty Products Entities.
2. See page 20 for reconciliation of cash and cash equivalents and restricted cash presented in interim Condensed Consolidated Balance Sheets to total cash, cash equivalents and restricted cash presented in the interim Condensed Consolidated Statements of Cash Flows.

See Notes to the Consolidated Financial Statements beginning on page 9.
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Corteva, Inc.
Consolidated Statements of Equity (Unaudited)
(In millions)Common StockAdditional Paid-in Capital "APIC"Divisional EquityRetained Earnings (Accumulated deficit)Accumulated Other Comp (Loss) IncomeNon-controlling InterestsTotal Equity
2019
Balance at January 1, 2019
$— $— $78,020 $— $(3,360)$493 $75,153 
Net income
164 12 176 
Other comprehensive loss
(74)(74)
Distributions to DowDuPont
(317)(317)
Issuance of DowDuPont stock
35 35 
Share-based compensation
18 18 
Contributions from Dow
88 88 
Other - net
(3)(2)(5)
Balance at March 31, 2019
$— $— $78,005 $— $(3,434)$503 $75,074 
Net (loss) income(805)197 14 (594)
Other comprehensive loss(155)(155)
Common dividends ($0.13 per share)(97)(97)
Contributions from DowDuPont7,308 7,308 
Issuance of DowDuPont stock
Share-based compensation11 44 55 
Impact of Internal Reorganizations(56,479)1,214 (231)(55,496)
Reclassification of Divisional Equity to APIC28,070 (28,077)— 
Other
(3)(29)(32)
Balance at June 30, 2019$$28,081 $— $97 $(2,375)$257 $26,067 
Net loss$(494)$(11)$(505)
Other comprehensive loss$(292)(292)
Issuance of Corteva common stock
Share-based compensation12 12 
Common Stock Repurchase(25)(25)
Balance at September 30, 2019$$28,072 $(397)$(2,667)$246 $25,261 
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(In millions)Common StockAdditional Paid-in Capital "APIC"Divisional Equity(Accumulated deficit) Retained EarningsAccumulated Other Comp (Loss) IncomeNon-controlling InterestsTotal Equity
2020
Balance at January 1, 2020
$$27,997 $(425)$(3,270)$246 $24,555 
Net income
272 10 282 
Other comprehensive loss
(663)(663)
Common dividends ($0.13 per share)
(97)(97)
Issuance of Corteva stock
14 14 
Share-based compensation
Common Stock Repurchase
(50)(50)
Other - net
40 (2)(2)36 
Balance at March 31, 2020
$$27,906 $(155)$(3,933)$254 $24,079 
Net income
760 766 
Other comprehensive income
88 88 
Common dividends ($0.13 per share)
(97)(97)
Issuance of Corteva stock
Share-based compensation
19 19 
Acquisition of a noncontrolling interest in consolidated subsidiaries(37)(15)(52)
Other - net
(5)(5)
Balance at June 30, 2020
$$27,891 $508 $(3,845)$240 $24,801 
Net (loss) income $(392)(390)
Other comprehensive income49 49 
Share-based compensation
16(1)15 
Common dividends ($.13 per share)(97)(97)
Common Stock Repurchase
(15)(18)(33)
Issuance of Corteva stock
2
Other - net
1(2)(1)
Balance at September 30, 2020
$$27,895 $— $(3,796)$240 $24,346 


See Notes to the Consolidated Financial Statements beginning on page 9.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Corteva, Inc.
Notes to the Consolidated Financial Statements (Unaudited)


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements
The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included.  Results for interim periods should not be considered indicative of results for a full year.  These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto contained in the company’s Annual Report on Form 10-K for the year ended December 31, 2019, collectively referred to as the “2019 Annual Report.”  The interim Consolidated Financial Statements include the accounts of the company and all of its subsidiaries in which a controlling interest is maintained.

Basis of Presentation
On April 1, 2019, EID completed the transfer of the assets and liabilities aligned with EID’s materials science business, including EID’s ethylene and ethylene copolymers business, excluding its ethylene acrylic elastomers business, (“EID ECP”) to separate legal entities (the “Materials Science Entities”) that were ultimately conveyed by DowDuPont to Dow. On May 1, 2019, EID completed the transfer of the assets and liabilities aligned with the EID’s specialty products business to separate legal entities (“EID Specialty Products Entities”), which were then distributed to DowDuPont.

In accordance with GAAP, the financial position and results of operations of EID ECP and the EID Specialty Products Entities are presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for the three and nine months ended September 30, 2019. The cash flows, comprehensive (loss) income, and equity related to EID ECP and the EID Specialty Products Entities have not been segregated and are included in the interim Condensed Consolidated Statements of Cash Flows, Consolidated Statements of Comprehensive Income (Loss), and Consolidated Statements of Equity, respectively, the three and nine months ended September 30, 2019. Amounts related to EID ECP and the EID Specialty Products Entities are consistently included or excluded from the Notes to the interim Consolidated Financial Statements based on the respective financial statement line item. See Note 3 - Divestitures and Other Transactions, for additional information.

Prior to the Corteva Distribution, the combined financial statements were derived from the consolidated financial statements and accounting records of EID as well as the carve-out financial statements of DAS. The DAS carve-out financial statements reflect the historical results of operations, financial position, and cash flows of Historical Dow's Agricultural Sciences Business and include allocations of certain expenses for services from Historical Dow, including, but not limited to, general corporate expenses related to finance, legal, information technology, human resources, ethics and compliance, shared services, employee benefits and incentives, insurance, and stock-based compensation. These expenses were allocated on the basis of direct usage when identifiable, with the remainder allocated under the basis of headcount or other measures. Beginning in the second quarter 2019, the financial statements are presented on a consolidated basis.

The company's interim Condensed Consolidated Balance Sheets for all periods presented consist of Corteva, Inc. and its consolidated subsidiaries.

The company's Consolidated Statements of Operations (the "Consolidated Statements of Operations") for all periods prior to April 30, 2019 consist of the combined results of operations for Historical EID and DAS. The Consolidated Statements of Operations for all periods after May 1, 2019 represent the consolidated balances of the company. Intercompany balances and transactions with Historical EID and DAS have been eliminated.

During the first quarter 2020, the company recorded an increase of $40 million to APIC relating to net assets recorded as transferred as part of the 2019 Internal Reorganizations that were retained. 

Goodwill and indefinite lived intangibles impairment testing
As a result of changes in the company's long-term projections driven largely by the impacts of the novel coronavirus pandemic ("COVID 19") on the mid-term forecasted cash flows of the business, including, but not limited to currency fluctuations, expectations of future planted area (as influenced by consumer demand, ethanol markets and government policies and regulations) and relative commodity prices, the company determined a triggering event had occurred during the second quarter of 2020 that required an interim impairment assessment for its seed and crop protection reporting units and its tradename indefinite lived intangible asset.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Based on the impairment analysis performed over the company’s tradename indefinite lived intangible asset it was determined fair value approximates carrying value, and no impairment charge was necessary.  However, this intangible asset is at higher risk to have impairment charges in future periods, if significant assumptions were to deteriorate. Estimates based on the significant assumptions used to determine fair values may differ significantly from actual results and it is reasonably possible that changes to these estimates could occur. Changes in factors, circumstances and assumptions used in assessing potential impairments can have a significant impact on the existence, magnitude and timing of impairments, if any, as well as the time in which such impairments are recognized.

NOTE 2 - RECENT ACCOUNTING GUIDANCE

Recently Adopted Accounting Guidance
In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326): Credit Losses - Measurement of Credit Losses on Financial Statements, which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. The amortized cost basis of financial assets should be reduced by expected credit losses to present the net carrying value in the financial statements at the amount expected to be collected. The measurement of expected credit losses is based on past events, historical experience, current conditions and forecasts that affect the collectability of the financial assets. Additionally, credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses.

The company adopted the guidance in the first quarter of 2020. The primary impact of adoption related to the credit losses on accounts and notes receivable, which is applied using a cumulative-effect adjustment in the period of adoption, and prior periods are not restated. The adoption of ASU 2016-13 did not have a material impact on the company’s financial position, results of operations or cash flows. See Note 10 - Accounts and Notes Receivable - Net for additional information.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, which provides guidance on whether certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. Accordingly, this amendment added unit of account guidance in Topic 606 when an entity is assessing whether the collaborative arrangement, or a part of the arrangement, is within the scope of Topic 606. In addition, the amendment provides certain guidance on presenting the collaborative arrangement transaction together with Topic 606. ASU 2018-18 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years and early adoption is permitted. This ASU is to be applied retrospectively to the date of initial application of Topic 606. The company adopted this guidance on January 1, 2020 and it did not have a material impact on the company’s financial position, results of operations or cash flows.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848), which provides companies with optional financial reporting alternatives to reduce the cost and complexity associated with the accounting for contracts and hedging relationships affected by reference rate reform. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. The adoption of ASU 2020-04 did not have a material impact on the company's financial position, results of operations or cash flows, and will apply to future changes.

Accounting Guidance Issued But Not Adopted as of September 30, 2020
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which was part of the FASB’s Simplification Initiative to identify, evaluate, and improve areas of U.S. GAAP for which cost and complexity can be reduced, while maintaining or improving the usefulness of the information provided to users of financial statements. This ASU amends ASC 740, Income Taxes, by removing certain exceptions to the general principles, and clarifying and amending current guidance. The new standard is effective for fiscal years, and periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, however all amended guidance must be adopted in the same period and should be reflected as of the beginning of the annual period if initially adopted and applied during an interim period. The company is currently evaluating the impact of adopting this guidance and does not expect it will have a material impact on the company's financial position, results of operations, or cash flows.







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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 3 - DIVESTITURES AND OTHER TRANSACTIONS

Separation Agreements
In connection with the Distributions, DuPont, Corteva, and Dow (together, the “Parties” and each a “Party”) have entered into certain agreements to effect the Separation, provide for the allocation of DowDuPont’s assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) among the Parties, and provide a framework for Corteva's relationship with Dow and DuPont following the separations and Distributions (collectively, the "Separation Agreements"). For further details on the Separation Agreements, refer to the 2019 Annual Report. For additional information see Note 14 - Commitments and Contingent Liabilities.

DuPont
Pursuant to the Separation Agreements, DuPont and Corteva indemnifies the other against certain litigation, environmental, tax, workers' compensation and other liabilities that arose prior to the Corteva Distribution. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. In connection with the recognition of liabilities related to these matters, the company records an indemnification asset when recovery is deemed probable. At September 30, 2020, the indemnification assets are $22 million within accounts and notes receivable - net and $50 million within other assets in the interim Condensed Consolidated Balance Sheet. At September 30, 2020, the indemnification liabilities are $8 million within accrued and other current liabilities and $71 million within other noncurrent obligations in the interim Condensed Consolidated Balance Sheet.

Dow
Pursuant to the Separation Agreements, Dow and Corteva indemnifies the other against certain litigation, environmental, tax and other liabilities that arose prior to the Corteva Distribution. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. In connection with the recognition of liabilities related to these matters, the company records an indemnification asset when recovery is deemed probable. At September 30, 2020, the indemnification assets are $15 million within accounts and notes receivable - net in the interim Condensed Consolidated Balance Sheet. At September 30, 2020, the indemnification liabilities are $102 million within accrued and other current liabilities and $13 million within other noncurrent obligations in the interim Condensed Consolidated Balance Sheet.

EID ECP Divestiture
As discussed in Note 1 - Summary of Significant Accounting Policies, on April 1, 2019, EID completed the transfer of the entities and related assets and liabilities of EID ECP to Dow.

As a result, the financial results of EID ECP are reflected as discontinued operations, as summarized below:
(In millions)Nine Months Ended
September 30, 2019
Net sales$362 
Cost of goods sold
259 
Research and development expense
Selling, general and administrative expenses
Amortization of intangibles
23 
Restructuring and asset related charges - net
Integration and separation costs
44 
Other income - net
Income from discontinued operations before income taxes23 
Provision for income taxes on discontinued operations
Income from discontinued operations after income taxes$19 

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The following table presents the depreciation, amortization of intangibles, and capital expenditures of the discontinued operations related to EID ECP:
(In millions)Nine Months Ended
September 30, 2019
Depreciation$28 
Amortization of intangibles$23 
Capital expenditures
$16 

EID Specialty Products Divestiture
As discussed in Note 1 - Summary of Significant Accounting Policies, on May 1, 2019, the company completed the transfer of the entities and related assets and liabilities of EID Specialty Products Entities to DowDuPont.

As a result, the financial results of the EID Specialty Products Entities are reflected as discontinued operations, as summarized below:
(In millions)Nine Months Ended
September 30, 2019
Net sales$5,030 
Cost of goods sold
3,352 
Research and development expense
204 
Selling, general and administrative expenses
573 
Amortization of intangibles
267 
Restructuring and asset related charges - net
115 
Integration and separation costs
253 
Goodwill impairment
1,102 
Other income - net
38 
Loss from discontinued operations before income taxes(798)
Provision for income taxes on discontinued operations
82 
Loss from discontinued operations after income taxes$(880)

For the three months ended September 30, 2019, the company recorded income from discontinued operations after income taxes of $22 million related to the adjustment of certain prior year tax positions.

EID Specialty Products Impairment

As a result of the Merger and related acquisition method of accounting, Historical EID’s assets and liabilities were measured at fair value resulting in increases to the company’s goodwill and other intangible assets. The fair value valuation increased the risk that any declines in financial projections, including changes to key assumptions, could have a material, negative impact on the fair value of the company’s reporting units and assets, and therefore could result in an impairment.

As a result of the Internal Reorganization, in the second quarter of 2019, EID assessed the recoverability of the goodwill within the electronics and communications, protection solutions, nutrition and health, transportation and advanced polymers, packaging and specialty plastics, industrial biosciences, and clean technologies reporting units, and the overall carrying value of the net assets in the disposal group that was distributed to DowDuPont on May 1, 2019. As a result of this analysis, the company determined that the fair value of certain reporting units related to the EID specialty products businesses were below carrying value resulting in pre-tax, non-cash goodwill impairment charges totaling $1,102 million reflected in loss from discontinued operations after income taxes. Revised financial projections reflect unfavorable market conditions, driven by slowed demand in the biomaterials business unit, coupled with challenging conditions in U.S. bioethanol markets. These revised financial projections resulted in a reduction in the long-term forecasts of sales and profitability as compared to prior projections.
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The company’s analyses above using discounted cash flow models (a form of the income approach) utilized Level 3 unobservable inputs. The company’s significant assumptions in these analyses include, but are not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate, and the tax rate. The company’s estimates of future cash flows are based on current regulatory and economic climates, recent operating results, and planned business strategies. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the company’s estimates. The company also used a form of the market approach (utilizes Level 3 unobservable inputs), which is derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services. As such, the company believes the current assumptions and estimates utilized are both reasonable and appropriate.

In addition, the company performed an impairment analysis related to the equity method investments held by the EID specialty products businesses, as of May 1, 2019. The company applied the net asset value method under the cost approach to determine the fair value of the equity method investments in the EID specialty products businesses. Based on updated projections, the company determined the fair value of an equity method investment was below the carrying value and had no expectation the fair value would recover in the short-term due to the current economic environment. As a result, management concluded the impairment was other-than-temporary and recorded an impairment charge of $63 million, reflected in loss from discontinued operations after income taxes. Additionally, this impairment is reflected within restructuring and asset related charges - net in the nine months ended September 30, 2019, within the table above.

The following table presents the depreciation, amortization of intangibles, and capital expenditures of the discontinued operations related to the EID Specialty Products Entities:
(In millions)Nine Months Ended
September 30, 2019
Depreciation$281 
Amortization of intangibles$267 
Capital expenditures
$481 

Merger Remedy - Divested EID Ag Business
Refer to the 2019 Annual Report for further details on the Divested Ag Business. For the nine months ended September 2019, the company recorded income from discontinued operations after incomes taxes of $80 million related to changes in accruals for certain prior year tax positions.

Other Discontinued Operations Activity
For the nine months ended September 2019, the company recorded income from discontinued operations after income taxes of $86 million, respectively, related to the adjustment of certain unrecognized tax benefits for positions taken on items from prior years from previously divested businesses.

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NOTE 4 - REVENUE

Revenue Recognition
Products
Substantially all of Corteva's revenue is derived from product sales. Product sales consist of sales of Corteva's products to farmers, distributors, and manufacturers. Corteva considers purchase orders, which in some cases are governed by master supply agreements, to be a contract with a customer. Contracts with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year. However, the company has some long-term contracts which can span multiple years.

Licenses of Intellectual Property
Corteva enters into licensing arrangements with customers under which it licenses its intellectual property. Revenue from the majority of intellectual property licenses is derived from sales-based royalties. Revenue for licensing agreements that contain sales-based royalties is recognized at the later of (i) when the subsequent sale occurs or (ii) when the performance obligation to which some or all of the royalty has been allocated is satisfied.

Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to unsatisfied or partially unsatisfied performance obligations. At September 30, 2020, the company had remaining performance obligations related to material rights granted to customers for contract renewal options of $114 million ($108 million at both December 31, 2019 and September 30, 2019, respectively). The company expects revenue to be recognized for the remaining performance obligations over the next 1 year to 6 years.

Contract Balances
Contract liabilities primarily reflect deferred revenue from prepayments under contracts with customers where the company receives advance payments for products to be delivered in future periods. Corteva classifies deferred revenue as current or noncurrent based on the timing of when the company expects to recognize revenue. Contract assets primarily include amounts related to contractual rights to consideration for completed performance not yet invoiced. Accounts receivable are recorded when the right to consideration becomes unconditional.
Contract BalancesSeptember 30, 2020December 31, 2019September 30, 2019
(In millions)
Accounts and notes receivable - trade1
$4,638 $4,396 $5,372 
Contract assets - current2
$21 $20 $20 
Contract assets - noncurrent3
$52 $49 $49 
Deferred revenue - current4
$402 $2,584 $441 
Deferred revenue - noncurrent5
$106 $108 $117 
1.Included in accounts and notes receivable - net in the interim Condensed Consolidated Balance Sheets.
2.Included in other current assets in the interim Condensed Consolidated Balance Sheets.
3.Included in other assets in the interim Condensed Consolidated Balance Sheets.
4.Included in accrued and other current liabilities in the interim Condensed Consolidated Balance Sheets.
5.Included in other noncurrent obligations in the interim Condensed Consolidated Balance Sheets.

Revenue recognized during the nine months ended September 30, 2020 from amounts included in deferred revenue at the beginning of the period was $2,195 million ($2,013 million in the nine months ended September 30, 2019).
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Disaggregation of Revenue
Corteva's operations are classified into two reportable segments: Seed and Crop Protection. The company disaggregates its revenue by major product line and geographic region, as the company believes it best depicts the nature, amount and timing of its revenue and cash flows. Net sales by major product line are included below:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)2020201920202019
    Corn$303 $372 $4,224 $4,149 
    Soybean116 168 1,382 1,297 
    Other oilseeds62 44 529 469 
    Other42 97 381 432 
Seed523 681 6,516 6,347 
    Herbicides1
583 574 2,315 2,338 
    Insecticides1
395 330 1,218 1,158 
    Fungicides1
261 245 714 767 
    Other1
101 81 247 253 
Crop Protection1,340 1,230 4,494 4,516 
Total$1,863 $1,911 $11,010 $10,863 
1.Prior periods have been reclassified to conform to current period presentation.

Sales are attributed to geographic regions based on customer location. Net sales by geographic region and segment are included below:
SeedThree Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)2020201920202019
North America1
$97 $226 $4,290 $4,238 
EMEA2
117 122 1,262 1,200 
Latin America246 271 668 636 
Asia Pacific63 62 296 273 
Total$523 $681 $6,516 $6,347 
Crop ProtectionThree Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)2020201920202019
North America1
$390 $397 $1,528 $1,562 
EMEA2
198 183 1,163 1,136 
Latin America559 491 1,086 1,144 
Asia Pacific193 159 717 674 
Total$1,340 $1,230 $4,494 $4,516 
1.Represents U.S. & Canada.
2.Europe, Middle East, and Africa ("EMEA").

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NOTE 5 - RESTRUCTURING AND ASSET RELATED CHARGES - NET

Execute to Win Productivity Program
During the first quarter of 2020, Corteva approved restructuring actions designed to improve productivity through optimizing certain operational and organizational structures primarily related to the Execute to Win Productivity Program. As a result of these actions, the company expects to record total pre-tax restructuring charges of approximately $185 million, comprised of approximately $125 million of asset related charges (of which $30 million relates to asset retirement obligations), and $60 million of severance and related benefit costs. Of the $185 million, approximately $110 million relates to crop protection, $15 million relates to seed, and $60 million relates to corporate expenses. Future cash payments related to this charge are anticipated to be approximately $85 million, primarily related to the payment of severance and related benefits and asset retirement obligations.

The Execute to Win Productivity Program charges related to the segments, as well as corporate expenses, were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)20202020
Seed$— $
Crop Protection30 85 
Corporate expenses— 46 
Total$30 $134 

The below is a summary of charges incurred related to the Execute to Win Productivity Program for the three and nine months ended September 30, 2020:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)20202020
Severance and related benefit costs$— $46 
Asset related charges30 88 
Total restructuring and asset related charges - net$30 $134 

A reconciliation of the December 31, 2019 to the September 30, 2020 liability balances related to the Execute to Win Productivity Program is summarized below:
(In millions)Severance and Related Benefit CostsAsset RelatedTotal
Balance at December 31, 2019$— $— $— 
Charges to income from continuing operations for the nine months ended September 30, 202046 88 134 
Payments(5)(3)(8)
Asset write-offs— (82)(82)
Balance at September 30, 2020$41 $$44 

In addition to the above, the company has recorded asset retirement obligations of $29 million as of September 30, 2020. The asset retirement obligations relate to the company’s required demolition and removal for buildings and equipment at third party leased sites and will be recognized as asset related charges over the remaining useful lives of the related assets.  The company’s leases require these assets be removed from leased land within 12-24 months of operations being ceased. The company expects operations will cease in 2020 and the assets will be removed within the contractual timeframe.
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DowDuPont Cost Synergy Program
In September and November 2017, DowDuPont and EID approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the “Synergy Program”), adopted at the time by the DowDuPont Board of Directors. The Synergy Program was designed to integrate and optimize the organization following the Merger and in preparation for the Distributions. The company recorded pre-tax restructuring charges of $851 million inception-to-date under the Synergy Program, consisting of severance and related benefit costs of $319 million, contract termination costs of $193 million, and asset write-downs and write-offs of $339 million. The company does not anticipate any additional material charges under the Synergy Program. Actions associated with the Synergy Program, including employee separations, were substantially complete by the end of 2019.

The Synergy Program charges (benefits) related to the segments, as well as corporate expenses, were as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)2020201920202019
Seed$(1)$(7)$(7)$66 
Crop Protection10 (1)13 28 
Corporate expenses— — — 20 
Total$$(8)$$114 

The below is a summary of charges (benefits) incurred related to the Synergy Program for the three and nine months ended September 30, 2020 and 2019:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)2020201920202019
Severance and related benefit costs$— $— $— $14 
Contract termination charges— — — 69 
Asset related (benefits) charges(8)31 
Total restructuring and asset related charges (benefits) - net$$(8)$$114 

A reconciliation of the December 31, 2019 to the September 30, 2020 liability balances related to the Synergy Program is summarized below:
(In millions)Severance and Related Benefit Costs
Costs Associated with Exit and Disposal Activities1
Asset RelatedTotal
Balance at December 31, 2019$29 $40 $— $69 
Charges to income from continuing operations for the nine months ended September 30, 2020— — 
Payments(16)(8)(22)
Asset write-offs— — (11)(11)
Balance at September 30, 2020$13 $32 $— $45 
1.Relates primarily to contract terminations charges.

Other Asset Related Charges
During the three and nine months ended September 30, 2020, the company recognized $10 million and $158 million, respectively, in restructuring and asset related charges, net in the interim consolidated statement of operations, from non-cash accelerated prepaid royalty amortization expense related to Roundup Ready 2 Yield® and Roundup Ready 2 Xtend® herbicide tolerance traits.

Asset Impairments
During the three months ended September 30, 2019, and in connection with strategic product and portfolio reviews, the company determined that the fair value of certain intangible assets classified as developed technology, other intangible assets and in-process research and development ("IPR&D") within the Seed segment that primarily relate to heritage DAS intangibles previously acquired from Cooperativa Central de Pesquisa Agrícola's ("Coodetec"), was less than the carrying value. As a
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result, the company recorded a pre-tax, non-cash intangible asset impairment charge of $54 million ($41 million after-tax), which is reflected in restructuring and asset related charges - net, in the company's Consolidated Statements of Operations. Refer to Note 12 - Other Intangible Assets, and Note 18 - Fair Value Measurements, for further information.

NOTE 6 - RELATED PARTIES

Services Provided by and to Historical Dow and its affiliates
Following the Merger and prior to the Dow Distribution, Corteva reported transactions with Historical Dow and its affiliates as related party transactions. Purchases from Historical Dow and its affiliates were $42 million for the nine months ended September 30, 2019.

Transactions with DowDuPont
Following the Merger and prior to the Corteva Distribution, Corteva reported transactions with DowDuPont as related party transactions. In February 2019, the DowDuPont Board declared first quarter dividends per share of DowDuPont common stock payable on March 15, 2019. EID declared and paid distributions to DowDuPont of $317 million for the nine months ended September 30, 2019, primarily to fund a portion of DowDuPont's dividend payment.

NOTE 7 - SUPPLEMENTARY INFORMATION
Other Income - NetThree Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)2020201920202019
Interest income$11 $13 $38 $46 
Equity in losses of affiliates - net— (3)(3)(8)
Net gain (loss) on sales of businesses and other assets1
(29)(9)
Net exchange losses2
(67)(11)(127)(70)
Non-operating pension and other post employment benefit credit3
93 47 275 144 
Miscellaneous income (expenses) - net4
(8)11 (34)(13)
Other income - net$30 $59 $120 $90 
 
1.The nine months ended September 30, 2020 includes a loss of $(53) million relating to the expected sale of the La Porte site, for which the company signed an agreement in 2020. The nine months ended September 30, 2019 includes a loss of $(24) million relating to DAS’s sale of a joint venture related to synergy actions.
2.Includes net pre-tax exchange losses of $(26) million and $(56) million for the three and nine months ended September 30, 2020, respectively, and $(33) million and $(42) million for the three and nine months ended September 30, 2019, respectively, associated with the devaluation of the Argentine peso.
3.Includes non-service related components of net periodic benefit credits (costs) (interest cost, expected return on plan assets, amortization of unrecognized (gain) loss, amortization of prior service benefit and settlement (loss) gain).
4.Miscellaneous income (expenses) - net, includes losses related to loss on sale of receivables, bank charges and other items.
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The following table summarizes the impacts of the company's foreign currency hedging program on the company's results of operations. The company routinely uses foreign currency exchange contracts to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets and liabilities. The objective of this program is to maintain an approximately balanced position in foreign currencies in order to minimize, on an after-tax basis, the effects of exchange rate changes on net monetary asset positions. The hedging program gains (losses) are largely taxable (tax deductible) in the U.S., whereas the offsetting exchange gains (losses) on the remeasurement of the net monetary asset positions are often not taxable (tax deductible) in their local jurisdictions. The net pre-tax exchange gains (losses) are recorded in other income - net and the related tax impact is recorded in provision for (benefit from) income taxes on continuing operations in the Consolidated Statements of Operations.
(In millions)Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Subsidiary Monetary Position (Losses) Gains
Pre-tax exchange losses1
$(61)$(66)$(300)$(59)
Local tax benefits (expenses) 16 44 (2)
Net after-tax impact from subsidiary exchange losses$(45)$(65)$(256)$(61)
Hedging Program (Losses) Gains
Pre-tax exchange (losses) gains$(6)$55 $173 $(11)
Tax benefits (expenses)(13)(41)
Net after-tax impact from hedging program exchange (losses) gains$(4)$42 $132 $(9)
Total Exchange (Losses) Gains
Pre-tax exchange losses1
$(67)$(11)$(127)$(70)
Tax benefits (expenses)18 (12)— 
Net after-tax exchange losses$(49)$(23)$(124)$(70)
1.Includes net pre-tax exchange losses of $(26) million and $(56) million for the three and nine months ended September 30, 2020, respectively, and $(33) million and $(42) million for the three and nine months ended September 30, 2019, respectively, associated with the devaluation of the Argentine peso.

Cash, cash equivalents and restricted cash
The following table provides a reconciliation of cash and cash equivalents and restricted cash (included in other current assets) presented in the interim Condensed Consolidated Balance Sheets to the total cash, cash equivalents and restricted cash presented in the interim Condensed Consolidated Statements of Cash Flows.
(In millions)September 30, 2020December 31, 2019September 30, 2019
Cash and cash equivalents$2,768 $1,764 $1,980 
Restricted cash354 409 420 
Total cash, cash equivalents and restricted cash$3,122 $2,173 $2,400 

EID entered into a trust agreement in 2013 (as amended and restated in 2017), establishing and requiring EID to fund a trust (the "Trust") for cash obligations under certain non-qualified benefit and deferred compensation plans upon a change in control event as defined in the Trust agreement. Under the Trust agreement, the consummation of the Merger was a change in control event. Restricted cash at September 30, 2020, December 31, 2019, and September 30, 2019 is related to the Trust.

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NOTE 8 - INCOME TAXES

For periods between the Merger Effectiveness Time and the Corteva Distribution, Corteva and its subsidiaries were included in DowDuPont's consolidated federal income tax group and consolidated tax return.  Generally, the consolidated tax liability of the DowDuPont U.S. tax group for each year was apportioned among the members of the consolidated group based on each member’s separate taxable income.  Corteva, DuPont and Dow intend that to the extent Federal and/or State corporate income tax liabilities are reduced through the utilization of tax attributes of the other, settlement of any receivable and payable generated from the use of the other party’s sub-group attributes will be in accordance with a tax matters agreement. See Note 3 - Divestitures and Other Transactions, for further information related to indemnifications between Corteva, Dow and DuPont.

Each year the company files hundreds of tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the tax authorities. Positions challenged by the tax authorities may be settled or appealed by the company. As a result, there is an uncertainty in income taxes recognized in the company's financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. The ultimate resolution of such uncertainties is not expected to have a material impact on the company's results of operations.

During the nine months ended September 30, 2020, the company recognized a tax benefit of $51 million to provision for income taxes on continuing operations related to a return to accrual adjustment associated with an elective change in accounting method for the 2019 tax year impact of the 2017 Tax Cuts and Jobs Act 's (“The Act”) foreign tax provisions.

During the nine months ended September 30, 2020 the company recognized a tax benefit of $14 million to provision for income taxes on continuing operations related to a return to accrual adjustment to reflect a change in estimate on the impact of a tax law enactment in a foreign jurisdiction.

During the three and nine months ended September 30, 2019, the company recognized an aggregate net tax benefit of $38 million to benefit from income taxes on continuing operations related to the enactment of Switzerland’s Federal Act on Tax Reform and AHV Financing (TRAF) (i.e., “Swiss Tax Reform”).

During the three and nine months ended September 30, 2019, the company recognized a net tax benefit of $13 million and a net tax charge of $83 million, respectively to (benefit from) provision for income taxes on continuing operations related to application of the Act's foreign tax provisions.

During the nine months ended September 30, 2019, the company recognized net tax charge of $146 million and a tax benefit of $102 million to provision for income taxes on continuing operations related to U.S. state blended tax rate changes associated with the Internal Reorganizations and an internal legal entity restructuring associated with the Internal Reorganizations.

During the nine months ended September 30, 2019, the company recognized an aggregate tax benefit of $21 million to provision for income taxes on continuing operations, respectively, associated with changes in accruals for certain prior year tax positions and reductions in the company's unrecognized tax benefits due to the closure of various tax statutes of limitations.

The company routinely uses foreign currency exchange contracts to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets and liabilities. The objective of the program, which resides in the U.S., is to maintain an approximately balanced position in foreign currencies in order to minimize, on an after-tax basis, the effects of exchange rate changes on net monetary asset positions, which can drive material impacts on the company's effective tax rate. For further discussion of pre-tax and after-tax impacts of the company's foreign currency hedging program and net monetary asset programs, refer to Note 7 - Supplementary Information.

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NOTE 9 - EARNINGS PER SHARE OF COMMON STOCK

On June 1, 2019, the date of the Corteva Distribution, 748,815,000 shares of the company’s common stock were distributed to DowDuPont shareholders of record as of May 24, 2019.

The following tables provide earnings per share calculations for the periods indicated below:
Net (Loss) Income for Earnings Per Share Calculations - Basic and DilutedThree Months Ended
September 30
Nine Months Ended
September 30
(In millions)2020201920202019
(Loss) income from continuing operations after income taxes$(390)$(527)$657 $(228)
Net income (loss) attributable to continuing operations noncontrolling interests(11)18 10 
(Loss) income from continuing operations available to Corteva common stockholders(392)(516)639 (238)
(Loss) income from discontinued operations, net of tax— 22 (695)
Net income attributable to discontinued operations noncontrolling interests— — — 
Income (loss) from discontinued operations available to Corteva common stockholders— 22 (700)
Net (loss) income available to common stockholders$(392)$(494)$640 $(938)
(Loss) Earnings Per Share Calculations - BasicThree Months Ended
September 30
Nine Months Ended
September 30
(Dollars per share)2020201920202019
(Loss) earnings per share of common stock from continuing operations
$(0.52)$(0.69)$0.85 $(0.32)
Earnings (loss) per share of common stock from discontinued operations— 0.03 — (0.93)
(Loss) earnings per share of common stock$(0.52)$(0.66)$0.85 $(1.25)
(Loss) Earnings Per Share Calculations - DilutedThree Months Ended
September 30
Nine Months Ended
September 30
(Dollars per share)2020201920202019
(Loss) earnings per share of common stock from continuing operations$(0.52)$(0.69)$0.85 $(0.32)
Earnings (loss) per share of common stock from discontinued operations — 0.03 — (0.93)
(Loss) earnings per share of common stock$(0.52)$(0.66)$0.85 $(1.25)
Share Count InformationThree Months Ended
September 30
Nine Months Ended
September 30
(Shares in millions)2020201920202019
Weighted-average common shares - basic1
749.5 749.5 749.5 749.4 
Plus dilutive effect of equity compensation plans2
— — 2.5 — 
Weighted-average common shares - diluted749.5 749.5 752.0 749.4 
Potential shares of common stock excluded from EPS calculations3
14.6 13.8 9.7 13.8 
1.Share amounts for all periods prior to the Corteva Distribution were based on 748.8 million shares of Corteva, Inc. common stock distributed to holders of DowDuPont's common stock on June 1, 2019, plus 0.6 million of additional shares in which accelerated vesting conditions have been met.
2.Diluted earnings per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect.
3.These outstanding potential shares of common stock relating to stock options, restricted stock units and performance-based restricted stock units were excluded from the calculation of diluted earnings per share because the effect of including them would have been anti-dilutive.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 10 - ACCOUNTS AND NOTES RECEIVABLE - NET
(In millions)September 30, 2020December 31, 2019September 30, 2019
Accounts receivable – trade1
$3,231 $4,225 $3,969 
Notes receivable – trade1,2
1,407 171 1,403 
Other3
989 1,132 1,202 
Total accounts and notes receivable - net$5,627 $5,528 $6,574 
1.Accounts receivable – trade and notes receivable - trade are net of allowances of $210 million at September 30, 2020, $174 million at December 31, 2019, and $170 million at September 30, 2019. The allowance at September 30, 2020 is equal to the expected credit losses and was developed using a loss-rate method. The allowance at December 31, 2019 and September 30, 2019 is equal to the estimated uncollectible amounts and is based on historical collection experience, current economic and market conditions, and review of the current status of customers' accounts.
2.Notes receivable – trade primarily consists of receivables for deferred payment loan programs for the sale of seed products to customers. These loans have terms of one year or less and are primarily concentrated in North America. The company maintains a rigid pre-approval process for extending credit to customers in order to manage overall risk and exposure associated with credit losses. As of September 30, 2020, December 31, 2019, and September 30, 2019 there were no significant impairments related to current loan agreements.
3.Other includes receivables in relation to indemnification assets, value added tax, general sales tax and other taxes. No individual group represents more than 10 percent of total receivables. In addition, Other includes amounts due from nonconsolidated affiliates of $92 million, $119 million, and $127 million as of September 30, 2020, December 31, 2019, and September 30, 2019, respectively.

Accounts and notes receivable are carried at the expected amount to be collected, which approximates fair value. The company establishes the allowance for doubtful receivables using a loss-rate method where the loss rate is developed using past events, historical experience, current conditions and forecasts that affect the collectability of the financial assets.

The following table summarizes changes in the allowance for doubtful receivables for the nine months ended September 30, 2020:
(In millions)
Balance at December 31, 2019$174 
Additions charged to expenses153 
Write-offs charged against allowance(6)
Recoveries collected(99)
Other(12)
Balance at September 30, 2020
$210 

The company enters into various factoring agreements with third-party financial institutions to sell its trade receivables under both recourse and non-recourse agreements in exchange for cash proceeds. These financing arrangements result in a transfer of the company's receivables and risks to the third-party. As these transfers qualify as true sales under the applicable accounting guidance, the receivables are derecognized from the Consolidated Balance Sheets upon transfer, and the company receives a payment for the receivables from the third-party within a mutually agreed upon time period. For arrangements involving an element of recourse, which is typically provided through a guarantee of accounts in the event of customer default, the guarantee obligation is measured using market data from similar transactions and reported as a current liability in the Consolidated Balance Sheets.

Trade receivables sold under these agreements were $44 million and $221 million for the three and nine months ended September 30, 2020, respectively, and $13 million and $97 million for the three and nine months ended September 30, 2019, respectively. The trade receivables sold that remained outstanding under these agreements which include an element of recourse as of September 30, 2020, December 31, 2019, and September 30, 2019 were $178 million, $171 million, and $61 million, respectively. The net proceeds received are included in cash provided by operating activities in the interim Condensed Consolidated Statements of Cash Flows. The difference between the carrying amount of the trade receivables sold and the sum of the cash received is recorded as a loss on sale of receivables in other income - net in the Consolidated Statements of Operations. The loss on sale of receivables was $11 million and $49 million for the three and nine months ended September 30, 2020 and $4 million and $41 million for the three and nine months ended September 30, 2019, respectively. The guarantee obligations recorded as of September 30, 2020, December 31, 2019, and September 30, 2019 in the interim Condensed Consolidated Balance Sheets were not material. See Note 14 - Commitments and Contingent Liabilities for additional information on the company’s guarantees.

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NOTE 11 - INVENTORIES
(In millions)September 30, 2020December 31, 2019September 30, 2019
Finished products$2,074 $2,684 $2,295 
Semi-finished products1,878 1,850 1,691 
Raw materials and supplies422 498 417 
Total inventories$4,374 $5,032 $4,403 

As a result of the Merger, a fair value step-up of $2,297 million was recorded for inventories. This fair value step-up was fully amortized, as of September 30, 2019. During the three and nine months ended September 30, 2019, the company recognized $15 million and $272 million of these costs in cost of goods sold within income from continuing operations before income taxes in the Consolidated Statements of Operations.

NOTE 12 - OTHER INTANGIBLE ASSETS

The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows: 
(In millions)September 30, 2020December 31, 2019September 30, 2019
 GrossAccumulated
Amortization
NetGrossAccumulated
Amortization
NetGrossAccumulated
Amortization
Net
Intangible assets subject to amortization (Definite-lived):
      
Germplasm1
$6,265 $(253)$6,012 $6,265 $(63)$6,202 
Customer-related
1,966 (352)1,614 1,977 (268)1,709 $1,969 $(238)$1,731 
Developed technology
1,463 (499)964 1,463 (370)1,093 1,463 (332)1,131 
Trademarks/trade names
161 (86)75 166 (86)80 166 (84)82 
Favorable supply contracts
475 (279)196 475 (207)268 475 (183)292 
Other2
405 (233)172 404 (213)191 401 (206)195 
Total other intangible assets with finite lives
10,735 (1,702)9,033 10,750 (1,207)9,543 4,474 (1,043)3,431 
Intangible assets not subject to amortization (Indefinite-lived):
      
IPR&D
10 — 10 10 — 10 100 — 100 
Germplasm1
6,265 — 6,265 
Tradename
1,871 — 1,871 1,871 — 1,871 1,871 — 1,871 
Total other intangible assets
1,881 — 1,881 1,881 — 1,881 8,236 — 8,236 
Total$12,616 $(1,702)$10,914 $12,631 $(1,207)$11,424 $12,710 $(1,043)$11,667 
1.Beginning on October 1, 2019, the company changed its indefinite life assertion of the germplasm assets to definite lived with a useful life of 25 years.  This change is the result of a more focused development effort of new seed products coupled with an intent to out license select germplasm on a non-exclusive basis. Prior to changing the useful life of the germplasm assets, the company tested the assets for impairment under ASC 350 - Intangibles, Goodwill and Other, concluding the assets were not impaired.
2.Primarily consists of sales and farmer networks, marketing and manufacturing alliances and noncompetition agreements.


As discussed in Note 5 - Restructuring and Asset Related Charges - Net, during the three months ended September 30, 2019, and in connection with strategic product and portfolio reviews, the company determined that the fair value of certain intangible assets classified as developed technology, other intangible assets and IPR&D within the Seed segment that primarily relate to heritage DAS intangibles previously acquired from Coodetec was less than the carrying value due to the company’s focus on advancing more competitive products and eliminating redundancy and complexity across the breeding programs.

For IPR&D and developed technology, the company concluded these projects were abandoned. For other intangible assets, the company performed an analysis of the fair value using the relief from royalty method (a form of the income approach) using Level 3 inputs within the fair value hierarchy. The key assumptions used in the calculation included projected revenue, royalty
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rates and discount rates. These key assumptions involve management judgment and estimates relating to future operating performance and economic conditions that may differ from actual cash flows. As a result, the company recorded a pre-tax, non-cash intangible asset impairment charge of $54 million ($41 million after-tax), which is reflected in restructuring and asset related charges - net, in the company's Consolidated Statements of Operations for the three and nine months ended September 30, 2019.

The aggregate pre-tax amortization expense from continuing operations for definite-lived intangible assets was $162 million and $501 million for the three and nine months ended September 30, 2020, respectively, and $100 million and $314 million for the three and nine months ended September 30, 2019, respectively. The current estimated aggregate pre-tax amortization expense from continuing operations for the remainder of 2020 and each of the next five years is approximately $160 million, $644 million, $623 million, $544 million, $530 million and $492 million, respectively.

NOTE 13 - SHORT-TERM BORROWINGS, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES

The following tables summarize Corteva's short-term borrowings and finance lease obligations and long-term debt:
Short-term borrowings and finance lease obligations
(In millions)September 30, 2020December 31, 2019September 30, 2019
Commercial paper$926 $— $2,432 
Repurchase facility1,175 — 1,129 
Other loans - various currencies39 35 
Long-term debt payable within one year
Finance lease obligations payable within one year
Total short-term borrowings and finance lease obligations$2,142 $$3,604 

The estimated fair value of the company's short-term borrowings, including interest rate financial instruments, was determined using Level 2 inputs within the fair value hierarchy. Based on quoted market prices for the same or similar issues, or on current rates offered to the company for debt of the same remaining maturities, the fair value of the company's short-term borrowings and finance lease obligations was approximately carrying value.

The weighted-average interest rate on short-term borrowings outstanding at September 30, 2020, December 31, 2019, and September 30, 2019 was 0.9%, 6.7% and 2.6%, respectively. The change in the weighted-average interest rate was primarily due to lower Commercial Paper and Repurchase Facility interest.
Long-Term Debt
(In millions)September 30, 2020December 31, 2019September 30, 2019
AmountWeighted Average RateAmountWeighted Average RateAmountWeighted Average Rate
Promissory notes and debentures:
Maturing in 2025$500 1.70 %$— — %$— — %
Maturing in 2030500 2.30 %$— — %$— — %
Other loans:
Foreign currency loans, various rates and maturities
Medium-term notes, varying maturities through 2041109 — %109 1.61 %110 1.88 %
Finance lease obligations
Less: Unamortized debt discount and issuance costs11 — — 
Less: Long-term debt due within one year
Total$1,102 $115 $116 

The fair value of the company’s long-term borrowings, including debt due within one year, was $1,164 million, $119 million, and $123 million as of September 30, 2020, December 31, 2019, and September 30, 2019, respectively, and was determined using quoted market prices for the same or similar issues, or current rates offered to the company for debt of the same remaining maturities (Level 2 inputs).

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Debt Offering
In May 2020, EID issued $500 million of 1.70 percent Senior Notes due 2025 and $500 million of 2.30 percent Senior Notes due 2030 (the May 2020 Debt Offering). The proceeds of this offering are intended to be used for general corporate purposes, which may include discretionary contributions to the company’s U.S. principal pension plan and repayment of other indebtedness.

Repurchase Facility
In February 2020, the company entered into a new committed receivable repurchase facility of up to $1.3 billion (the "2020 Repurchase Facility") which expires in December 2020. Under the 2020 Repurchase Facility, Corteva may sell a portfolio of available and eligible outstanding customer notes receivables to participating institutions and simultaneously agree to repurchase at a future date. The 2020 Repurchase Facility is considered a secured borrowing with the customer notes receivable inclusive of those that are sold and repurchased, equal to 105 percent of the outstanding amounts borrowed utilized as collateral. Borrowings under the 2020 Repurchase Facility have an interest rate of LIBOR + 0.75 percent.

As of September 30, 2020, $1,234 million of notes receivable, recorded in accounts and notes receivable - net, were pledged as collateral against outstanding borrowings under the 2020 Repurchase Facility of $1,175 million, recorded in short-term borrowings and finance lease obligations on the interim Condensed Consolidated Balance Sheet.

Revolving Credit Facilities
In November 2018, EID entered into a $3.0 billion 5-year revolving credit facility and a $3.0 billion 3-year revolving credit facility (the “Revolving Credit Facilities”). The Revolving Credit Facilities became effective May 2019. Corteva, Inc. became a party at the time of the Corteva Distribution. The Revolving Credit Facilities may serve as a substitute to the company's commercial paper program, and can be used, from time to time, for general corporate purposes including, but not limited to, the funding of seasonal working capital needs. The Revolving Credit Facilities contain customary representations and warranties, affirmative and negative covenants and events of default that are typical for companies with similar credit ratings. Additionally, the Revolving Credit Facilities contain a financial covenant requiring that the ratio of total indebtedness to total capitalization for Corteva and its consolidated subsidiaries not exceed 0.60.

In March 2020, the company drew down $500 million under the $3.0 billion 3-year revolving credit facility as a result of the volatility and increased borrowing costs of commercial paper resulting from the unstable market conditions caused by the COVID-19 pandemic and repaid that borrowing in full in June 2020. There were no additional borrowings and the unused commitments under the 3-year revolving credit facility were $3.0 billion as of September 30, 2020.

NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES

Guarantees
Indemnifications
In connection with acquisitions and divestitures as of September 30, 2020, the company has indemnified respective parties against certain liabilities that may arise in connection with these transactions and business activities prior to the completion of the transactions. The term of these indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. In addition, the company indemnifies its duly elected or appointed directors and officers to the fullest extent permitted by Delaware law, against liabilities incurred as a result of their activities for the company, such as adverse judgments relating to litigation matters. If the indemnified party were to incur a liability or have a liability increase as a result of a successful claim, pursuant to the terms of the indemnification, the company would be required to reimburse the indemnified party. The maximum amount of potential future payments is generally unlimited. See pages 12 and 28 for additional information relating to the indemnification obligations under the Chemours Separation Agreement and the Corteva Separation Agreement.

Obligations for Customers and Other Third Parties
The company has directly guaranteed various debt obligations under agreements with third parties related to customers and other third parties. At September 30, 2020, December 31, 2019 and September 30, 2019, the company had directly guaranteed $96 million, $97 million, and $80 million, respectively, of such obligations. These amounts represent the maximum potential amount of future (undiscounted) payments that the company could be required to make under the guarantees in the event of default by the guaranteed party. Of the total maximum future payments at September 30, 2020, less than $1 million had terms greater than a year. The maximum future payments include $20 million, $16 million, and $11 million of guarantees related to the various factoring agreements that the company enters into with third-party financial institutions to sell its trade receivables at September 30, 2020, December 31, 2019 and September 30, 2019, respectively. See Note 10 - Accounts and Notes Receivable, Net, for additional information.

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The maximum future payments also include agreements with lenders to establish programs that provide financing for select customers. The terms of the guarantees are equivalent to the terms of the customer loans that are primarily made to finance customer invoices. The total amounts owed from customers to the lenders relating to these agreements was $637 million, $27 million and $596 million at September 30, 2020, December 31, 2019 and September 30, 2019, respectively.

The company assesses the payment/performance risk by assigning default rates based on the duration of the guarantees. These default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical default history for counterparties that do not have published credit ratings. For counterparties without an external rating or available credit history, a cumulative average default rate is used.

Litigation
The company is subject to various legal proceedings, including, but not limited to, product liability, intellectual property, antitrust, commercial, property damage, personal injury, environmental and regulatory matters arising out of the normal course of its current businesses or legacy EID businesses unrelated to Corteva’s current businesses but allocated to Corteva as part of the separation of Corteva from DuPont. It is not possible to predict the outcome of these various proceedings. Although considerable uncertainty exists, management does not anticipate that the ultimate disposition of these matters will have a material adverse effect on the company's results of operations, consolidated financial position or liquidity.  However, the ultimate liabilities could be material to results of operations and the cash flows in the period recognized.

Indemnifications under Separation Agreements
The company has entered into various agreements where the company is indemnified for certain liabilities. In connection with the recognition of liabilities related to these matters, the company records an indemnification asset when recovery is deemed probable. See Note 3 - Divestitures and Other Transactions, for additional information related to indemnifications.

Chemours/Performance Chemicals
On July 1, 2015, EID completed the separation of its Performance Chemicals segment through the spin-off of all of the issued and outstanding stock of The Chemours Company (the "Chemours Separation"). In connection with the Chemours Separation, EID and The Chemours Company ("Chemours") entered into a Separation Agreement (the "Chemours Separation Agreement"). Pursuant to the Chemours Separation Agreement and the amendment to the Chemours Separation Agreement, Chemours indemnifies the company against certain litigation, environmental, workers' compensation and other liabilities that arose prior to the distribution. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments.

Concurrent with the MDL Settlement (as discussed below), EID and Chemours amended the Chemours Separation Agreement to provide for a limited sharing of potential future PFOA liabilities for five years, which began on July 6, 2017. During the five years, Chemours will annually pay the first $25 million of future PFOA liabilities and, if that amount is exceeded, EID will pay any excess amount up to the next $25 million, with Chemours annually bearing any excess liabilities above that amount. At the end of the five years, this limited sharing agreement will expire, and Chemours’ indemnification obligations under the Chemours Separation Agreement will continue unchanged. As part of this amendment, Chemours also agreed that it would not contest its liability for PFOA liabilities on the basis of certain ostensible defenses it had previously raised, including defenses relating to punitive damages, and would waive any such defenses with respect to PFOA liabilities.  Chemours has, however, retained defenses as to whether any particular PFOA claim is within the scope of the indemnification provisions of the Chemours Separation Agreement. There have been no charges incurred by the company under this amendment through September 30, 2020.

On May 13, 2019, Chemours filed a complaint in the Delaware Court of Chancery ("Chancery Court") against DuPont, Corteva, and EID alleging, among other things, that the litigation and environmental liabilities allocated to Chemours under the Chemours Separation Agreement were underestimated and asking that the Court either limit the amount of Chemours’ indemnification obligations or, alternatively, order the return of the $3.91 billion dividend Chemours paid to EID prior to its separation. On June 3, 2019, the defendants moved to dismiss the complaint on the grounds that the Chemours Separation Agreement requires arbitration of all disputes relating to that agreement. On March 30, 2020, the Chancery Court granted the motion to dismiss made by DuPont, Corteva, and EID. Chemours filed its appeal of the Chancery Court's decision and oral argument before the Delaware Supreme Court en Banc is scheduled for December 2, 2020. An arbitration of the indemnification matters is ongoing and proceeding in parallel with Chemours’ appeal of the Chancery Court decision. On October 13, 2020, the arbitration panel affirmed its jurisdiction to determine the arbitrability of the disputes and ruled that the disputes are arbitrable rejecting Chemours claims to the contrary. The arbitration is currently scheduled to begin June 2021. The company believes the probability of liability with respect to Chemours' suit continues to be remote. For additional information regarding environmental indemnification, see discussion on page 31.

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At September 30, 2020, the indemnification assets pursuant to the Chemours Separation Agreement are $65 million within accounts and notes receivable - net and $274 million within other assets along with the corresponding liabilities of $65 million within accrued and other current liabilities and $274 million within other noncurrent obligations in the interim Condensed Consolidated Balance Sheet.

Corteva Separation Agreement
On April 1, 2019, in connection with the Dow Distribution, Corteva, DuPont and Dow entered into the Corteva Separation Agreement, the Tax Matters Agreement, the Employee Matters Agreement, and certain other agreements (collectively, the “Corteva Separation Agreements”). The Corteva Separation Agreements allocate among Corteva, DuPont and Dow certain liabilities and obligations among the parties and provides for indemnification obligation among the parties. Under the Corteva Separation Agreements, DuPont will indemnify Corteva against certain litigation, environmental, workers' compensation and other liabilities that arose prior to the Corteva Distribution and (ii) Dow indemnifies Corteva against certain litigation and other liabilities that relate to the Historical Dow business, but were transferred over as part of DAS, and Corteva indemnifies DuPont and Dow for certain liabilities. The term of this indemnification is generally indefinite with exceptions, and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. See Note 3 - Divestitures and Other Transactions, for additional information relating to the Separation.

DuPont
Under the Corteva Separation Agreement, certain legacy EID liabilities from discontinued and/or divested operations and businesses of EID (including Performance Chemicals) (a “stray liability”) were allocated to Corteva or DuPont. For those stray liabilities allocated to Corteva (which may include a specified amount of liability associated with that liability), Corteva is responsible for liabilities in an amount up to that specified amount plus an additional $200 million and, for those stray liabilities allocated to DuPont (which may include a specified amount of liability associated with that liability), DuPont is responsible for liabilities up to a specified amount plus an additional $200 million. Once each company has met the $200 million threshold, Corteva and DuPont will share future liabilities proportionally on the basis of 29% and 71%, respectively; provided, however, that for PFAS, DuPont will manage such liabilities with Corteva and DuPont sharing the costs on a 50% - 50% basis starting from $1 and up to $300 million (with such amount, up to $150 million, to be credited to each company’s $200 million threshold) and once the $300 million threshold is met, then the companies will share proportionally on the basis of 29% and 71% respectively, subject to a $1 million de minimis requirement.

Litigation related to legacy EID businesses unrelated to Corteva’s current businesses

While it is reasonably possible that the company could incur liabilities related to the litigation related to legacy EID businesses, unrelated to Corteva's current business, as described below, any such liabilities are not expected to be material.

PFAS, PFOA, PFOS and Other Related Liabilities
For purposes of this report, the term PFOA means collectively perfluorooctanoic acid and its salts, including the ammonium salt and does not distinguish between the two forms, and PFAS, which means per- and polyfluoroalkyl substances, including PFOA, PFOS (perfluorooctanesulfonic acid), GenX and other perfluorinated chemicals and compounds ("PFCs").

EID is a party to various legal proceedings relating to the use of PFOA by its former Performance Chemicals segment. While it is reasonably possible that EID could incur liabilities related to PFOA in excess of amounts accrued, any such liabilities are not expected to be material. As discussed, EID is indemnified by Chemours under the Chemours Separation Agreement, as amended. The company has recorded a liability of $21 million and an indemnification asset of $21 million at September 30, 2020, related to testing drinking water in and around certain former EID sites and offering treatment or an alternative supply of drinking water if tests indicate the presence of PFOA in drinking water at or greater than the national health advisory level established from time to time by the EPA.

Leach Settlement and MDL Settlement
EID has residual liabilities under its 2004 settlement of a West Virginia state court class action, Leach v. EID, which alleged that PFOA from EID’s former Washington Works facility had contaminated area drinking water supplies and affected the health of area residents. The settlement class has about 80,000 members. In addition to relief that was provided to class members years ago, the settlement requires EID to continue providing PFOA water treatment to six area water districts and private well users and to fund, through an escrow account, up to $235 million for a medical monitoring program for eligible class members. As of September 30, 2020, approximately $2 million had been disbursed from the account since its establishment in 2012 and the remaining balance is approximately $1 million.


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The Leach settlement permits class members to pursue personal injury claims for six health conditions (and no others) that an expert panel appointed under the settlement reported in 2012 had a “probable link” (as defined in the settlement) with PFOA: pregnancy-induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and diagnosed high cholesterol. After the panel reported its findings, approximately 3,550 personal injury lawsuits were filed in federal and state courts in Ohio and West Virginia and consolidated in multi-district litigation in the U.S. District Court for the Southern District of Ohio (“MDL”). The MDL was settled in early 2017 for $670.7 million in cash, with Chemours and EID (without indemnification from Chemours) each paying half.

Post-MDL Settlement PFOA Personal Injury Claims
The MDL settlement did not resolve claims of plaintiffs who did not have claims in the MDL or whose claims are based on diseases first diagnosed after February 11, 2017. At September 30, 2020, approximately 58 lawsuits were pending, and another 33 threatened, alleging personal injury, mostly kidney or testicular cancer, from exposure to PFOA through air or water, with nearly all part of the MDL or were not filed on behalf of Leach class members. The first two trials concluded in February 2020. The first trial, a kidney cancer case, resulted in a hung jury, while the second, a testicular cancer case, resulted in a jury verdict of $40 million in compensatory damages and $10 million for loss of consortium. Following entry of the judgment by the court, EID intends to file post-trial motions to reduce the verdict, and to appeal the verdict on the basis of procedural and substantive legal errors made by the trial court. EID believes the merits of the appeal will be successful in reducing the jury verdict or eliminating its liability, in whole or part. Six additional cases are expected to begin trials in 2021.

Other PFOA Matters
EID is a party to other PFOA lawsuits that do not involve claims for personal injury. Chemours, pursuant to the Chemours Separation Agreement, is generally defending and indemnifying, with reservation, EID but Chemours has refused the tender of Corteva, Inc.'s defense in the limited actions in which Corteva, Inc. has been named. Chemours has refused to indemnify Corteva, Inc. and EID against any fraudulent conveyance claims associated with these matters. Corteva believes that Chemours is obligated to indemnify Corteva, Inc. under the Chemours Separation Agreement.

New York. EID is a defendant in about 50 lawsuits, including a putative class action, brought by persons who live in and around Hoosick Falls, New York. These lawsuits assert claims for medical monitoring and property damage based on alleged PFOA releases from manufacturing facilities owned and operated by co-defendants in Hoosick Falls and allege that EID and 3M supplied some of the materials used at these facilities. EID is also one of more than ten defendants in a lawsuit brought by the Town of East Hampton, New York alleging PFOA and PFOS contamination of the town’s well water. Additionally, EID, along with 3M, Chemours and Dyneon, have been named defendants in complaints filed by eight water districts in Nassau County, New York alleging that the drinking water they provide to customers is contaminated with PFAS and seeking reimbursement for clean-up costs. The water district complaints also include allegations of fraudulent transfer.

New Jersey. At September 30, 2020, two lawsuits were pending, one brought by a local water utility and the second a putative class action, against EID alleging that PFOA from EID’s former Chambers Works facility contaminated drinking water sources. The putative class action was voluntarily dismissed without prejudice by the plaintiff.

In late March of 2019, the New Jersey State Attorney General filed four lawsuits against EID, Chemours, 3M and others alleging that operations at and discharges from former EID sites in New Jersey (Chambers Works, Pompton Lakes, Parlin and Repauno) damaged the State’s natural resources. Two of these lawsuits (those involving the Chambers Works and Parlin sites) allege contamination from PFAS. The Ridgewood Water District in New Jersey filed suit in the first quarter 2019 against EID, 3M, Chemours, and Dyneon alleging losses related to the investigation, remediation and monitoring of polyfluorinated surfactants, including PFOA, in water supplies. DuPont and Corteva were subsequently added as defendants to these lawsuits.

Alabama / Others. EID is one of more than thirty defendants in a lawsuit by the Alabama water utility alleging contamination from PFCs, including PFOA, used by co-defendant carpet manufacturers to make their products more stain and grease resistant. In addition, the states of Michigan, New Hampshire, South Dakota, and Vermont recently filed lawsuits against EID, Chemours, 3M and others, claiming, among other things, PFC (including PFOA) contamination of groundwater and drinking water. The complaints seek reimbursement for past and future costs to investigate and remediate the alleged contamination and compensation for the loss of value and use of the state’s natural resources.

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Ohio. EID is a defendant in three lawsuits: an action by the State of Ohio based on alleged damage to natural resources, a putative nationwide class action brought on behalf of anyone who has detectable levels of PFAS in their blood serum, and an action by the City of Dayton claiming losses related to the investigation, remediation and monitoring of PFAS in water supplies.

Aqueous Firefighting Foams. Approximately 690 cases have been filed against 3M and other defendants, including EID and Chemours, and more recently also including Corteva and DuPont, alleging PFOS or PFOA contamination of soil and groundwater from the use of aqueous firefighting foams. Most of those cases claim some form of property damage and seek to recover the costs of responding to this contamination and damages for the loss of use and enjoyment of property and diminution in value. Most of these cases have been transferred to a multidistrict litigation proceeding in federal district court in South Carolina. Approximately 630 of these cases were filed on behalf of firefighters who allege personal injuries (primarily, thyroid disease and kidney, testicular and other cancers) as a result of aqueous firefighting foams. Most of these recent cases assert claims that the EID and Chemours separation constituted a fraudulent conveyance. While Chemours is defending EID for all claims except those for fraudulent conveyance, it has declined defense and indemnity to Corteva on all claims.

EID did not make firefighting foams, PFOS, or PFOS products. While EID made surfactants and intermediaries that some manufacturers used in making foams, which may have contained PFOA as an unintended byproduct or an impurity, EID’s products were not formulated with PFOA, nor was PFOA an ingredient of these products. EID has never made or sold PFOA as a commercial product.

Fayetteville Works Facility, North Carolina
Prior to the separation of Chemours, EID introduced GenX as a polymerization processing aid and a replacement for PFOA at the Fayetteville Works facility in Bladen County, North Carolina. The facility is now owned and operated by Chemours, which continues to manufacture and use GenX.

At September 30, 2020, several actions are pending in federal court against Chemours and EID relating to PFC discharges from the Fayetteville Works facility. One of these is a consolidated putative class action that asserts claims for medical monitoring and property damage on behalf of putative classes of property owners and residents in areas near or who draw drinking water from the Cape Fear River. Another action is a consolidated action brought by various North Carolina water authorities, including the Cape Fear Public Utility Authority and Brunswick County, that seek actual and punitive damages as well as injunctive relief. In another action over 200 property owners near the Fayetteville Works facility filed a complaint against Chemours and EID in May 2020. The plaintiffs seek compensatory and punitive damages for their claims of private nuisance, trespass, and negligence allegedly caused by release of PFAS.

In addition to the federal court actions, there is an action on behalf of about 100 plaintiffs who own wells and property near the Fayetteville Works facility. The plaintiffs seek damages for nuisance allegedly caused by releases of certain PFCs from the site. The plaintiffs’ claims for medical monitoring, punitive damages, public nuisance, trespass, unjust enrichment, failure to warn, and negligent manufacture have all been dismissed.

The company has an indemnification claim against Chemours with respect to current and future inquiries and claims, including lawsuits, related to the foregoing. At September 30, 2020, Chemours, with reservations, is defending and indemnifying EID in the pending civil actions.
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Environmental
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. At September 30, 2020, the company had accrued obligations of $342 million for probable environmental remediation and restoration costs, including $52 million for the remediation of Superfund sites. These obligations are included in accrued and other current liabilities and other noncurrent obligations in the interim Condensed Consolidated Balance Sheet. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to $610 million above the amount accrued at September 30, 2020. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the company’s results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration.

For a discussion of the allocation of environmental liabilities under the Chemours Separation Agreement and the Corteva Separation Agreement, see the previous discussion on page 28.

The above noted $342 million accrued obligations includes the following:
As of September 30, 2020
(In millions)Indemnification Asset
Accrual balance3
Potential exposure above amount accrued3
Environmental Remediation Stray Liabilities
Chemours related obligations - subject to indemnity1,2
$158 $158 $284 
Other discontinued or divested businesses obligations1
83 219 
Environmental remediation liabilities primarily related to DuPont - subject to indemnity from DuPont2
34 34 62 
Environmental remediation liabilities not subject to indemnity67 45 
Total$192 $342 $610 
1.Represents liabilities that are subject the $200 million thresholds and sharing arrangements as discussed on page 28, under Corteva Separation Agreement.
2.The company has recorded an indemnification asset related to these accruals, including $30 million related to the Superfund sites.
3.Accrual balance represents management’s best estimate of the costs of remediation and restoration, although it is reasonably possible that the potential exposure, as indicated, could range above the amounts accrued, as there are inherent uncertainties in these estimates.

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NOTE 15 - STOCKHOLDERS' EQUITY

Common Stock
On June 1, 2019, Corteva, Inc.'s common stock was distributed to DowDuPont stockholders by way of a pro rata distribution. Each DowDuPont stockholder received one share of Corteva, Inc. common stock for every three shares of DowDuPont common stock held at the close of business on May 24, 2019, the record date of distribution. Corteva, Inc.'s common stock began trading the "regular way" under the ticker symbol "CTVA" on June 3, 2019, the first business day after June 1, 2019. The number of Corteva, Inc. common shares issued on June 1, 2019 was 748,815,000 (par value of $0.01 per share). Information related to the Corteva Distribution and its effect on the company's financial statements are discussed throughout these Notes to the interim Consolidated Financial Statements.

Set forth below is a reconciliation of common stock share activity:
Shares of common stockIssued
Balance January 1, 2020748,577,000 
Issued1,940,000 
Repurchased and retired(3,025,000)
Balance September 30, 2020747,492,000 

Share Buyback Plan
On June 26, 2019, Corteva, Inc. announced that the Board of Directors of Corteva, Inc. authorized a $1 billion share repurchase program to purchase Corteva, Inc.'s common stock, par value $0.01 per share, without an expiration date. The timing, price and volume of purchases will be based on market conditions, relevant securities laws and other factors.

During the three months ended September 30, 2020, the company purchased and retired 1,160,000 shares in the open market for a total cost of $33 million. During the nine months ended September 30, 2020, the company purchased and retired 3,025,000 shares in the open market for a total cost of $83 million.

During the three months ended September 30, 2019, the company purchased and retired 824,000 shares in the open market for a total cost of $25 million.

Shares repurchased pursuant to Corteva's share buyback plan are immediately retired upon purchase. Repurchased common stock is reflected as a reduction of stockholders' equity. The company's accounting policy related to its share repurchases is to reduce its common stock based on the par value of the shares and to reduce its retained earnings for the excess of the repurchase price over the par value. When Corteva has an accumulated deficit balance, the excess over the par value is applied to additional paid-in capital. When Corteva has retained earnings, the excess is charged entirely to retained earnings.

Noncontrolling Interest
In June 2020, the company completed the acquisition of the remaining 46.5 percent interest in the Phytogen Seed Company, LLC joint venture from J. G. Boswell Company. As the purchase of the remaining interest did not result in a change of control, the difference between the carrying value of the noncontrolling interest and the consideration paid, net of taxes was recorded within equity.

Corteva, Inc. owns 100% of the outstanding common shares of EID. However, EID has preferred stock outstanding to third parties which is accounted for as a non-controlling interest in Corteva's interim Condensed Consolidated Balance Sheets. Each share of EID Preferred Stock - $4.50 Series and EID Preferred Stock - $3.50 Series issued and outstanding at the effective date of the Corteva Distribution remains issued and outstanding as to EID and was unaffected by the Corteva Distribution.

Below is a summary of the EID Preferred Stock at September 30, 2020, December 31, 2019, and September 30, 2019, which is classified as noncontrolling interests in Corteva's interim Condensed Consolidated Balance Sheets.
Shares in thousandsNumber of Shares
Authorized23,000
$4.50 Series, callable at $1201,673
$3.50 Series, callable at $102700

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Other Comprehensive (Loss) Income
The changes and after-tax balances of components comprising accumulated other comprehensive loss are summarized below:
(In millions)
Cumulative Translation Adjustment1
Derivative InstrumentsPension Benefit PlansOther Benefit PlansTotal
2019
Balance January 1, 2019
$(2,793)$(26)$(620)$79 $(3,360)
Other comprehensive (loss) income before reclassifications
(471)11 (85)(536)
Amounts reclassified from accumulated other comprehensive loss
— 12 (1)15 
Net other comprehensive (loss) income
(471)23 13 (86)(521)
Impact of Internal Reorganizations
1,123 — 91 — 1,214 
Balance September 30, 2019$(2,141)$(3)$(516)$(7)$(2,667)
2020     
Balance January 1, 2020
$(1,944)$$(1,247)$(81)$(3,270)
Other comprehensive (loss) income before reclassifications
(507)(23)(10)(538)
Amounts reclassified from accumulated other comprehensive loss
— 12 
Net other comprehensive (loss) income
(507)(16)(6)(526)
Balance September 30, 2020$(2,451)$(14)$(1,253)$(78)$(3,796)
1.The cumulative translation adjustment loss for the nine months ended September 30, 2019 was primarily driven by the strengthening of the USD against the Brazilian Real (“BRL”), the European Euro (“EUR”) and the South African Rand (“ZAR”). The cumulative translation adjustment loss for the nine months ended September 30, 2020 was primarily driven by strengthening of the USD against the Brazilian Real ("BRL") and the South African Rand ("ZAR").

The tax benefit (expense) on the net activity related to each component of other comprehensive (loss) income was as follows:
(In millions)Three Months Ended
September 30,
Nine Months Ended September 30,
2020201920202019
Derivative instruments$$$$(6)
Pension benefit plans - net— — (3)
Other benefit plans - net— — — 29 
(Provision for) benefit from income taxes related to other comprehensive (loss) income items$$$$27 


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A summary of the reclassifications out of accumulated other comprehensive loss is provided as follows:
(In millions)Three Months Ended
September 30,
Nine Months Ended September 30,
2020201920202019
Derivative Instruments1:
$(22)$$13 $13 
Tax benefit2
— (6)(1)
After-tax$(19)$$$12 
Amortization of pension benefit plans:
  Prior service benefit3
$— $— $(1)$— 
  Actuarial losses3
  Settlement loss3
— 
Total before tax
Tax benefit2
— — (1)— 
After-tax$$$$
Amortization of other benefit plans:
  Actuarial gains3
$$— $$(1)
Total before tax— (1)
Tax benefit2
— — — — 
After-tax$$— $$(1)
Total reclassifications for the period, after-tax$(17)$$12 $15 
1.Reflected in cost of goods sold.
2.Reflected in provision for (benefit from) income taxes from continuing operations.
3.These accumulated other comprehensive (loss) income components are included in the computation of net periodic benefit (credit) cost of the company's pension and other benefit plans. See Note 16 - Pension Plans and Other Post Employment Benefits, for additional information.

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NOTE 16 - PENSION PLANS AND OTHER POST EMPLOYMENT BENEFITS

In connection with the Corteva Distribution, the company retained the benefit obligations relating to EID's principal U.S. pension plan, several other U.S. and non-U.S. pension plans and other post employment benefit plans ("OPEB"). Corteva entered into an employee matters agreement with DuPont which provides that employees of DuPont no longer participate in the benefits sponsored or maintained by the company as of the date of the Corteva Distribution and transferred certain EID's pension and OPEB obligations and associated assets to DuPont. As a result of the transfer, about $5.8 billion unfunded obligations of the pension and OPEB plans remained with Corteva, of which $319 million was supported by funding under the Trust agreement.

As a result of the Corteva Distribution, the company re-measured OPEB plans as of June 1, 2019. In connection with the re-measurement, the company updated the discount rate assumed at December 31, 2018 from 4.23% to 3.64%. The re-measurement resulted in an increase of $114 million to the company’s OPEB benefit obligations with a corresponding loss effect within other comprehensive income (loss) for the nine months ended September 30, 2019.

The following sets forth the components of the company's net periodic benefit (credit) cost for defined benefit pension plans and other post employment benefits:
Three Months Ended
September 30,
Nine Months Ended September 30,
(In millions)2020201920202019
Defined Benefit Pension Plans:
Service cost$$$19 $37 
Interest cost139 185 420 592 
Expected return on plan assets(250)(253)(750)(839)
Amortization of unrecognized loss— 
Amortization of prior service benefit— — (1)— 
Settlement/curtailment loss— — 
Net periodic benefit credit - Total$(104)$(62)$(306)$(208)
Less: Discontinued operations1
— — — (17)
Net periodic benefit credit - Continuing operations$(104)$(62)$(306)$(191)
Other Post Employment Benefits:
Service cost$— $— $$
Interest cost16 20 49 65 
Amortization of unrecognized loss (gain)— (1)
Net periodic benefit cost - Continuing operations$17 $20 $51 $67 
1.    Includes non-service related components of net periodic benefit credit of $(37) million for the nine months ended September 30, 2019.

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NOTE 17 - FINANCIAL INSTRUMENTS

At September 30, 2020, the company had $1,986 million ($1,293 million and $1,568 million at December 31, 2019 and September 30, 2019, respectively) of held-to-maturity securities (primarily time deposits and money market funds) classified as cash equivalents and restricted cash equivalents, as these securities had maturities of three months or less at the time of purchase; and $152 million ($5 million and $117 million at December 31, 2019 and September 30, 2019, respectively) of held-to-maturity securities (primarily time deposits) classified as marketable securities as these securities had maturities of more than three months to less than one year at the time of purchase. The company’s investments in held-to-maturity securities are held at amortized cost, which approximates fair value. These securities are included in cash and cash equivalents, marketable securities, and other current assets in the interim Condensed Consolidated Balance Sheets.

Derivative Instruments
Objectives and Strategies for Holding Derivative Instruments
In the ordinary course of business, the company enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency and commodity price risks. The company has established a variety of derivative programs to be utilized for financial risk management. These programs reflect varying levels of exposure coverage and time horizons based on an assessment of risk.

Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee, consistent with the company's financial risk management policies and guidelines. Derivative instruments used are forwards, options, futures and swaps. The company has not designated any non-derivatives as hedging instruments.

The company's financial risk management procedures also address counterparty credit approval, limits and routine exposure monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions major commodity exchanges, and multinational grain exporters. The company is exposed to credit loss in the event of nonperformance by these counterparties. The company utilizes collateral support annex agreements with certain counterparties to limit its exposure to credit losses. The company anticipates performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks associated with these instruments are regularly reported to management.

The notional amounts of the company's derivative instruments were as follows:
Notional Amounts
(In millions)
September 30, 2020December 31, 2019September 30, 2019
Derivatives designated as hedging instruments:
Foreign currency contracts
$770 $— $— 
Commodity contracts
$51 $570 $73 
Derivatives not designated as hedging instruments:
Foreign currency contracts
$924 $582 $1,313 

Foreign Currency Risk
The company's objective in managing exposure to foreign currency fluctuations is to reduce earnings and cash flow volatility associated with foreign currency rate changes and to mitigate the exposure of certain investments in foreign subsidiaries against changes in the Euro/USD exchange rate. Accordingly, the company enters into various contracts that change in value as foreign exchange rates change to protect the value of its existing foreign currency-denominated assets, liabilities, commitments, investments and cash flows.

The company uses foreign exchange contracts to offset its net exposures, by currency, related to the foreign currency denominated monetary assets and liabilities of its operations. The primary business objective of this hedging program is to maintain an approximately balanced position in foreign currencies so that exchange gains and losses resulting from exchange rate changes, after related tax effects, are minimized. The company also uses foreign currency exchange contracts to offset a portion of the company’s exposure to certain forecasted transactions as well as the translation of foreign currency-denominated earnings. The company also uses commodity contracts to offset risks associated with foreign currency devaluation in certain countries.

Commodity Price Risk
Commodity price risk management programs serve to reduce exposure to price fluctuations on purchases of inventory such as corn and soybeans. The company enters into over-the-counter and exchange-traded derivative commodity instruments to hedge the commodity price risk associated with agricultural commodity exposures.
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Derivatives Designated as Cash Flow Hedges
Commodity Contracts
The company enters into over-the-counter and exchange-traded derivative commodity instruments, including options, futures and swaps, to hedge the commodity price risk associated with agriculture commodity exposures.

While each risk management program has a different time maturity period, most programs currently do not extend beyond the next two years. Cash flow hedge results are reclassified into earnings during the same period in which the related exposure impacts earnings. Reclassifications are made sooner if it appears that a forecasted transaction is not probable of occurring.

The following table summarizes the after-tax effect of commodity contract cash flow hedges on accumulated other comprehensive loss:
Three Months Ended
September 30,
Nine Months Ended September 30,
(In millions)2020201920202019
Beginning balance$(16)$(3)$$(26)
Additions and revaluations of derivatives designated as cash flow hedges10 (1)(34)11 
Clearance of hedge results to earnings(2)24 12 
Ending balance$(8)$(3)$(8)$(3)

At September 30, 2020, an after-tax net loss of $9 million is expected to be reclassified from accumulated other comprehensive loss into earnings over the next twelve months.

Foreign Currency Contracts
The company enters into forward contracts to hedge the foreign currency risk associated with forecasted transactions within certain foreign subsidiaries.

While each risk management program has a different time maturity period, most programs currently do not extend beyond the next two years. Cash flow hedge results are reclassified into earnings during the same period in which the related exposure impacts earnings. Reclassifications are made sooner if it appears that a forecasted transaction is not probable of occurring.

The following table summarizes the after-tax effect of foreign currency cash flow hedges on accumulated other comprehensive loss:
Three Months Ended
September 30,
Nine Months Ended September 30,
(In millions)20202020
Beginning balance$19 $— 
Additions and revaluations of derivatives designated as cash flow hedges23 
Clearance of hedge results to earnings(17)(17)
Ending balance$$

At September 30, 2020, an after-tax net gain of $6 million is expected to be reclassified from accumulated other comprehensive loss into earnings over the next twelve months.

Derivatives Designated as Net Investment Hedges
Foreign Currency Contracts
The company has designated €450 million of forward contracts to exchange EUR as net investment hedges. The purpose of these forward contracts is to mitigate FX exposure related to a portion of the company’s Euro net investments in certain foreign subsidiaries against changes in Euro/USD exchange rates. These hedges will expire and be settled in 2023, unless terminated early at the discretion of the company.

The company elected to apply the spot method in testing for effectiveness of the hedging relationship.

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Derivatives not Designated in Hedging Relationships
Foreign Currency Contracts
The company uses foreign exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal earnings impact, after taxes. The company also uses foreign currency exchange contracts to offset a portion of the company’s exposure to the translation of certain foreign currency-denominated earnings so that gains and losses on the contracts offset changes in the USD value of the related foreign currency-denominated earnings over the relevant aggregate period.

Commodity Contracts
The company utilizes options, futures and swaps that are not designated as hedging instruments to reduce exposure to commodity price fluctuations on purchases of inventory such as corn and soybeans. The company uses forward agreements, with durations less than one year, to buy and sell USD priced commodities in order to reduce its exposure to currency devaluation for a portion of its local currency cash balances. Counterparties to the forward sales agreements are multinational grain exporters and subject to the company’s financial risk management procedures.

Fair Value of Derivative Instruments
Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the interim Condensed Consolidated Balance Sheets. The presentation of the company's derivative assets and liabilities is as follows:
September 30, 2020
(In millions)Balance Sheet LocationGross
Counterparty and Cash Collateral Netting1
Net Amounts Included in the Condensed Consolidated Balance Sheet
Asset derivatives:   
Derivatives designated as hedging instruments:
Foreign currency contracts
Other current assets$24 $— $24 
Derivatives not designated as hedging instruments:
  
Foreign currency contractsOther current assets101$(75)$26 
Commodity contractsOther current assets— $
Total asset derivatives
 $126 $(75)$51 
Liability derivatives:  
Derivatives designated as hedging instruments:
Foreign currency contractsAccrued and other current liabilities12— 12
Derivatives not designated as hedging instruments:
  
Foreign currency contractsAccrued and other current liabilities84$(69)$15 
Commodity contractsAccrued and other current liabilities— $
Total liability derivatives
 $97 $(69)$28 

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December 31, 2019
(In millions)Balance Sheet LocationGross
Counterparty and Cash Collateral Netting1
Net Amounts Included in the Condensed Consolidated Balance Sheet
Asset derivatives:   
Derivatives not designated as hedging instruments:
  
Foreign currency contracts
Other current assets$25 $(18)$
Total asset derivatives
 $25 $(18)$
Liability derivatives:  
Derivatives not designated as hedging instruments:
  
Foreign currency contracts
Accrued and other current liabilities$43 $(16)$27 
Total liability derivatives
 $43 $(16)$27 
September 30, 2019
(In millions)Balance Sheet LocationGross
Counterparty and Cash Collateral Netting1
Net Amounts Included in the Condensed Consolidated Balance Sheet
Asset derivatives:   
Derivatives not designated as hedging instruments:
  
Foreign currency contracts
Other current assets$74 $(6)$68 
Total asset derivatives
 $74 $(6)$68 
Liability derivatives:  
Derivatives not designated as hedging instruments:
  
Foreign currency contracts
Accrued and other current liabilities$20 $$27 
Total liability derivatives
 $20 $$27 
1.    Counterparty and cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between the company and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty.

Effect of Derivative Instruments
Amount of (Loss) Gain Recognized in OCI1 - Pre-Tax
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions)2020201920202019
Derivatives designated as hedging instruments:
Net investment hedges:
Foreign currency contracts
$(20)$— $(16)$— 
Cash flow hedges:
Foreign currency contracts
— 27 — 
 Commodity contracts14 (2)(46)16 
Total derivatives designated as hedging instruments(2)(2)(35)16 
Total derivatives$(2)$(2)$(35)$16 
1.OCI is defined as other comprehensive income (loss).
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Amount of Gain (Loss) Recognized in Income - Pre-Tax1
(In millions)Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Derivatives designated as hedging instruments:
Cash flow hedges:
Foreign currency contracts2
$19 $— $19 $— 
 Commodity contracts2
$(1)(32)$(13)
Total derivatives designated as hedging instruments
22 (1)(13)(13)
Derivatives not designated as hedging instruments:
Foreign currency contracts3
(6)55 173 (11)
Foreign currency contracts2
— 19 — 
Commodity contracts2
— 
Total derivatives not designated as hedging instruments
(3)56 201 (2)
Total derivatives$19 $55 $188 $(15)
1.For cash flow hedges, this represents the portion of the gain (loss) reclassified from accumulated OCI into income during the period.
2.Recorded in cost of goods sold.
3.Loss recognized in other income - net was partially offset by the related loss on the foreign currency-denominated monetary assets and liabilities of the company's operations. See Note 7 - Supplementary Information, for additional information.
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NOTE 18 - FAIR VALUE MEASUREMENTS

The following tables summarize the basis used to measure certain assets and liabilities at fair value on a recurring basis:
September 30, 2020Significant Other Observable Inputs (Level 2)
(In millions)
Assets at fair value:
Cash equivalents and restricted cash equivalents1
$1,986 
Marketable securities
152 
Derivatives relating to:2
Foreign currency
125 
Commodity contracts
Total assets at fair value$2,264 
Liabilities at fair value:
Derivatives relating to:2
Foreign currency
96 
Commodity contracts
Total liabilities at fair value$97 
December 31, 2019Significant Other Observable Inputs (Level 2)
(In millions)
Assets at fair value:
Cash equivalents and restricted cash equivalents1
$1,293 
Marketable securities
Derivatives relating to:2
Foreign currency
25 
Total assets at fair value$1,323 
Liabilities at fair value:
Derivatives relating to:2
Foreign currency
43 
Total liabilities at fair value$43 
September 30, 2019Significant Other Observable Inputs (Level 2)
(In millions)
Assets at fair value:
Cash equivalents and restricted cash equivalents1
$1,568 
Marketable securities
117 
Derivatives relating to:2
Foreign currency
74 
Total assets at fair value$1,759 
Liabilities at fair value:
Derivatives relating to:2