Company Quick10K Filing
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DuPont
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-31 Control
8-K 2019-05-01 M&A, Exhibits
8-K 2019-03-22 Other Events
8-K 2018-10-12 Impairments
HON Honeywell 124,000
KLAC KLA Tencor 18,450
DHI Horton D R 16,280
PVTL Pivotal Software 5,780
WAFD Washington Federal 2,620
MANT ManTech International 1,680
RARX RA Pharmaceuticals 1,010
RESI Front Yard Residential 590
BWB Bridgewater Bancshares 333
SGBX SG Blocks 5
DD 2019-03-31
Part I. Financial Information
Item 1. Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Note 2 - Recent Accounting Guidance
Note 3 - Divestitures and Other Transactions
Note 4 - Revenue
Note 5 - Restructuring and Asset Related Charges - Net
Note 6 - Related Parties
Note 7 - Supplementary Information
Note 8 - Income Taxes
Note 9 - Inventories
Note 10 - Other Intangible Assets
Note 11 - Leases
Note 12 - Short-Term Borrowings, Long-Term Debt and Available Credit Facilities
Note 13 - Commitments and Contingent Liabilities
Note 14 - Stockholders' Equity
Note 15 - Pension Plans and Other Post Employment Benefits
Note 16 - Financial Instruments
Note 17 - Fair Value Measurements
Note 18 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 5. Other Information
Item 6. Exhibits
EX-31.1 dd-3312019xex311.htm
EX-31.2 dd-3312019xex312.htm
EX-32.1 dd-3312019xex321.htm
EX-32.2 dd-3312019xex322.htm

DuPont Earnings 2019-03-31

DD 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 dd-331201910xq.htm 10-Q Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2019
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
974 Centre Road, Wilmington, Delaware 19805
(Address of Principal Executive Offices)
 
(302) 774-1000
(Registrant’s Telephone Number)
 
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.  Yes  x   No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files.)  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.
Large Accelerated Filer 
 
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.  o
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes  o   No  x

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
$3.50 Series Preferred Stock
DDPrA
New York Stock Exchange
$4.50 Series Preferred Stock
DDPrB
New York Stock Exchange
The Registrant had 100 shares of common stock, $0.30 par value, outstanding at March 31, 2019, all of which are held by DowDuPont Inc.
The Registrant 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.



E. I. DU PONT DE NEMOURS AND COMPANY

Table of Contents
 
The terms “Historical DuPont” or the “company” as used herein refer to E. I. du Pont de Nemours and Company and its consolidated subsidiaries, or to E. I. du Pont de Nemours and Company, as the context may indicate. 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


1


PART I.  FINANCIAL INFORMATION 

Item 1.
CONSOLIDATED FINANCIAL STATEMENTS

E. I. du Pont de Nemours and Company
Consolidated Statements of Operations (Unaudited)
 
(In millions)
Three Months Ended March 31,
 
2019
2018
Net sales
$
6,288

$
6,699

Cost of goods sold
4,235

4,847

Research and development expense
355

382

Selling, general and administrative expenses
970

959

Amortization of intangibles
320

315

Restructuring and asset related charges - net
55

97

Integration and separation costs
405

255

Sundry income - net
157

47

Interest expense
56

80

Income (loss) from continuing operations before income taxes
49

(189
)
(Benefit from) provision for income taxes on continuing operations
(40
)
27

Income (loss) from continuing operations after income taxes
89

(216
)
Loss from discontinued operations after income taxes

(5
)
Net income (loss)
89

(221
)
Net income attributable to noncontrolling interests
4

7

Net income (loss) attributable to Historical DuPont
$
85

$
(228
)
See Notes to the Consolidated Financial Statements beginning on page 8.

2


E. I. du Pont de Nemours and Company
Consolidated Statements of Comprehensive Income (Unaudited)

(In millions)
Three Months Ended March 31,
 
2019
2018
Net income (loss)
$
89

$
(221
)
Other comprehensive (loss) income - net of tax:
 
 
Cumulative translation adjustments
(68
)
957

Adjustments to pension benefit plans
(6
)
4

Derivative instruments
1

11

Total other comprehensive (loss) income
(73
)
972

Comprehensive income
16

751

Comprehensive income attributable to noncontrolling interests - net of tax
4

7

Comprehensive income attributable to Historical DuPont
$
12

$
744

See Notes to the Consolidated Financial Statements beginning on page 8.

3


E. I. du Pont de Nemours and Company
Condensed Consolidated Balance Sheets (Unaudited)
(In millions, except share amounts)
March 31, 2019
December 31, 2018
Assets
 

 

Current assets
 

 

Cash and cash equivalents
$
3,796

$
4,466

Marketable securities
18

34

Accounts and notes receivable - net
6,768

5,534

Inventories
7,147

7,407

Other current assets
1,515

1,165

Total current assets
19,244

18,606

Investment in nonconsolidated affiliates
1,366

1,381

Property, plant and equipment - net of accumulated depreciation (March 31, 2019 - $2,111; December 31, 2018 - $1,720)
12,083

12,186

Goodwill
40,638

40,686

Other intangible assets
25,724

26,053

Deferred income taxes
306

303

Other assets
2,476

1,810

Total Assets
$
101,837

$
101,025

Liabilities and Equity
 

 

Current liabilities
 

 

Short-term borrowings and finance lease obligations
$
3,205

$
2,160

Accounts payable
4,200

4,982

Income taxes payable
137

66

Accrued and other current liabilities
4,400

4,233

Total current liabilities
11,942

11,441

Long-Term Debt
6,320

5,812

Other Noncurrent Liabilities
 
 
Deferred income tax liabilities
5,164

5,381

Pension and other post employment benefits - noncurrent
6,524

6,683

Other noncurrent obligations
2,052

1,620

Total noncurrent liabilities
20,060

19,496

Commitments and contingent liabilities
 
 
Stockholders’ equity
 

 

Preferred stock, without par value – cumulative; 23,000,000 shares authorized;
     issued at March 31, 2019 and December 31, 2018:
 
 
$4.50 Series – 1,673,000 shares (callable at $120)
169

169

$3.50 Series – 700,000 shares (callable at $102)
70

70

Common stock, $0.30 par value; 1,800,000,000 shares authorized;
issued at March 31, 2019 and December 31, 2018 - 100


Additional paid-in capital
79,843

79,790

Accumulated deficit
(7,906
)
(7,669
)
Accumulated other comprehensive loss
(2,576
)
(2,503
)
Total Historical DuPont stockholders’ equity
69,600

69,857

Noncontrolling interests
235

231

Total equity
69,835

70,088

Total Liabilities and Equity
$
101,837

$
101,025

See Notes to the Consolidated Financial Statements beginning on page 8.

4


E. I. du Pont de Nemours and Company
Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)
Three Months Ended March 31,
 
2019
2018
Operating activities
 
 
Net income (loss)
$
89

$
(221
)
Adjustments to reconcile net income (loss) to cash used for operating activities:




Depreciation and amortization
678

647

(Benefit from) provision for deferred income tax
(233
)
35

Net periodic pension benefit
(70
)
(79
)
Pension contributions
(50
)
(70
)
Net gain on sales of property, businesses, consolidated companies, and investments
(55
)
(2
)
Restructuring and asset related charges - net
55

97

Amortization of inventory step-up
205

703

Other net loss
72

258

Changes in operating assets and liabilities - net
(2,113
)
(3,343
)
Cash used for operating activities
(1,422
)
(1,975
)
Investing activities
 

 
Capital expenditures
(625
)
(355
)
Proceeds from sales of property, businesses, and consolidated companies - net of cash divested
100

18

Purchases of investments
(16
)
(201
)
Proceeds from sales and maturities of investments
32

922

Other investing activities - net
(5
)
(2
)
Cash (used for) provided by investing activities
(514
)
382

Financing activities
 

 
Change in short-term (less than 90 days) borrowings
815

(97
)
Proceeds from issuance of long-term debt
1,000

253

Payments on long-term debt
(283
)
(31
)
Proceeds from exercise of stock options
35

45

Dividends paid to stockholders
(2
)
(2
)
Distributions to DowDuPont
(317
)
(830
)
Other financing activities
(22
)
(32
)
Cash provided by (used for) financing activities
1,226

(694
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
20

108

Decrease in cash, cash equivalents and restricted cash
(690
)
(2,179
)
Cash, cash equivalents and restricted cash at beginning of period
4,966

7,808

Cash, cash equivalents and restricted cash at end of period
$
4,276

$
5,629

See Notes to the Consolidated Financial Statements beginning on page 8.


5


E. I. du Pont de Nemours and Company
Consolidated Statements of Equity (Unaudited)

(In millions)
Preferred Stock
Additional Paid-in Capital
Retained Earnings (Accumulated Deficit)
Accumulated Other Comp Inc (Loss)
Non-controlling Interests
Total Equity
Balance at January 1, 2018
$
239

$
74,727

$
175

$
(381
)
$
172

$
74,932

Net income


(228
)

7

(221
)
Other comprehensive income



972


972

Preferred dividends ($4.50 Series - $1.125 per share, $3.50 Series - $0.875 per share)


(2
)


(2
)
Distributions to DowDuPont


(831
)


(831
)
Issuance of DowDuPont stock

45




45

Stock-based compensation

11




11

Other


5


55

60

Balance at March 31, 2018
$
239

$
74,783

$
(881
)
$
591

$
234

$
74,966



(In millions)
Preferred Stock
Additional Paid-in Capital
Accumulated Deficit
Accumulated Other Comp Loss
Non-controlling Interests
Total Equity
Balance at January 1, 2019
$
239

$
79,790

$
(7,669
)
$
(2,503
)
$
231

$
70,088

Net income


85


4

89

Other comprehensive loss



(73
)

(73
)
Preferred dividends ($4.50 Series - $1.125 per share, $3.50 Series - $0.875 per share)


(2
)


(2
)
Distributions to DowDuPont


(317
)


(317
)
Issuance of DowDuPont stock

35




35

Stock-based compensation

18




18

Other


(3
)


(3
)
Balance at March 31, 2019
$
239

$
79,843

$
(7,906
)
$
(2,576
)
$
235

$
69,835

See Notes to the Consolidated Financial Statements beginning on page 8.


6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


 
E.I. du Pont de Nemours and Company
 
 
Notes to the Consolidated Financial Statements (Unaudited)
 


Table of Contents





7

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, 2018, collectively referred to as the “2018 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.

Principles of Consolidation and Basis of Presentation
DowDuPont Inc. ("DowDuPont") was formed on December 9, 2015 to effect an all-stock, merger of equals strategic combination between The Dow Chemical Company ("Historical Dow") and Historical DuPont (the "Merger Transaction"). On August 31, 2017 at 11:59 pm ET, (the "Merger Effectiveness Time") pursuant to the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017 (the "Merger Agreement"), Historical Dow and Historical DuPont each merged with wholly owned subsidiaries of DowDuPont ("Mergers") and, as a result of the Mergers, Historical Dow and Historical DuPont became subsidiaries of DowDuPont (collectively, the "Merger"). Prior to the Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the Merger Agreement. DowDuPont intends to pursue, subject to certain customary conditions, including, among others, the effectiveness of registration statements filed with the U.S. Securities and Exchange Commission ("SEC") and approval by the Board of Directors of DowDuPont, the separation of the combined company's agriculture business, specialty products business and materials science business through a series of tax-efficient transactions (collectively, the "Intended Business Separations" and the transactions to accomplish the Intended Business Separations, the "separations").

On February 26, 2018, DowDuPont announced the corporate brand names that each company plans to assume once the Intended Business Separations occur. Materials science is called Dow, agriculture will be called CortevaTM Agriscience, and specialty products will be called DuPont.

Effective as of 5:00 pm ET on April 1, 2019, DowDuPont completed the previously announced separation of its materials science business into a separate and independent public company by way of a distribution of Dow Inc. (“Dow”) 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 (the “Dow Common Stock”), to holders of DowDuPont's common stock, par value $0.01 per share (the “DowDuPont Common Stock”), as of the close of business on March 21, 2019 (the “Dow Distribution”). DowDuPont expects to complete the previously announced intended separation of its agriculture business into a separate and independent public company on June 1, 2019 by way of a distribution of Corteva, Inc., a Delaware corporation and wholly-owned subsidiary of DowDuPont (“Corteva”), through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Corteva’s common stock, par value $0.01 per share, to holders of DowDuPont Common Stock as of a record date to be set by DowDuPont’s Board of Directors (the “Corteva Distribution” and, together with the Dow Distribution, the “Distributions”). Refer to Notes 3 and 18 for additional information.

Transactions between Historical DuPont and DowDuPont, Historical Dow and their affiliates and other associated companies are reflected in the Consolidated Financial Statements and disclosed as related party transactions when material. Related party transactions with Historical Dow and DowDuPont are included in Note 6.

As a condition of the regulatory approval for the Merger Transaction, the company was required to divest certain assets related to its crop protection business and research and development ("R&D") organization, specifically the company’s Cereal Broadleaf Herbicides and Chewing Insecticides portfolios, including Rynaxypyr®, Cyazypyr® and Indoxacarb as well as the crop protection R&D pipeline and organization, excluding seed treatment, nematicides, and late-stage R&D programs. On March 31, 2017, the company entered into a definitive agreement (the "FMC Transaction Agreement") with FMC Corporation ("FMC"). Under the FMC Transaction Agreement, FMC would acquire the crop protection business and R&D assets that Historical DuPont was required to divest in order to obtain European Commission ("EC") approval of the Merger Transaction as described above, (the "Divested Ag Business") and Historical DuPont agreed to acquire certain assets relating to FMC’s Health and Nutrition segment, excluding its Omega-3 products (the "H&N Business") (collectively, the "FMC Transactions").


8

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


On November 1, 2017, the company completed the FMC Transactions through the disposition of the Divested Ag Business and the acquisition of the H&N Business. The sale of the Divested Ag Business meets the criteria for discontinued operations and as such, results of operations are presented as discontinued operations and have been excluded from continuing operations for the three months ended March 31, 2018. The comprehensive income and cash flows related to the Divested Ag Business have not been segregated and are included in the interim Consolidated Statements of Comprehensive Income and interim Condensed Consolidated Statements of Cash Flows, respectively, for the three months ended March 31, 2018. Amounts related to the Divested Ag Business 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 for additional information.

Significant Accounting Policies
The company has updated its leasing policy since the issuance of its 2018 Annual Report as a result of the adoption of ASU No. 2016-02, Leases (Topic 842) in the first quarter 2019. See Notes 2 and 11 for additional information. See Note 1, "Summary of Significant Accounting Policies," in the 2018 Annual Report for more information on Historical DuPont's other significant accounting policies.

Leases
The company determines whether an arrangement is a lease at the inception of the arrangement based on the terms and conditions in the contract. A contract contains a lease if there is an identified asset and the company has the right to control the asset. Operating lease right-of-use ("ROU") assets are included in other assets on the company’s Consolidated Balance Sheets. Operating lease liabilities are included in accrued and other current liabilities and other noncurrent obligations on the company’s Consolidated Balance Sheets. Finance lease assets are included in property, plant and equipment on the company’s Consolidated Balance Sheets. Finance lease liabilities are included in short-term borrowings and finance lease obligations and long-term debt on the company’s Consolidated Balance Sheets.  

Operating lease ROU assets represent the company’s right to use an underlying asset for the lease term and lease liabilities represent the company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of the company’s leases do not provide the lessor's implicit rate, the company uses its incremental borrowing rate at the commencement date in determining the present value of lease payments. Lease terms include options to extend the lease when it is reasonably certain those options will be exercised. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The company recognizes lease expense for these leases on a straight-line basis over the lease term.

The company has lease agreements with lease and non-lease components, which are accounted for as a single lease component for all asset classes. In the Consolidated Statements of Operations, lease expense for operating lease payments is recognized on a straight-line basis over the lease term. For finance leases, interest expense is recognized on the lease liability and the ROU asset is amortized over the lease term.

NOTE 2 - RECENT ACCOUNTING GUIDANCE

Recently Adopted Accounting Guidance
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), and associated ASUs related to Topic 842, which requires organizations that lease assets to recognize on their balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance requires that a lessee recognize assets and liabilities for leases, and recognition, presentation and measurement in the financial statements will depend on its classification as a finance or operating lease. In addition, the new guidance requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. Lessor accounting remains largely unchanged from previous U.S. GAAP but does contain some targeted improvements to align with the new revenue recognition guidance issued in 2014 (Topic 606).

The company adopted this standard in the first quarter of 2019, which allows for a modified retrospective transition approach, applying the new standard to all leases existing at the date of initial adoption. An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statement as its date of initial application. The company has elected to apply the transition requirements at the January 1, 2019 effective date rather than at the beginning of the earliest comparative period presented. This approach allows for a cumulative effect adjustment in the period of adoption, and prior periods are not restated and continue to be reported in accordance with historic accounting under ASC 840 (Leases). In addition, the company has elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, does not require reassessment of prior conclusions related to contracts containing a lease, lease classification, and initial direct lease costs. As an accounting policy election, the company chose to not apply the standard to certain existing land easements, excluded short-term leases (term of 12 months or less) from the balance sheet and will account for nonlease and lease components in a contract as a single component for all asset classes.

9

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


The following table summarizes the impact of adoption to the company’s interim Condensed Consolidated Balance Sheet:
(In millions)
As Reported
December 31, 2018
Effect of Adoption of ASU 2016-02
Updated
January 1, 2019
Assets
 
 
 
Property, plant and equipment - net of accumulated depreciation
$
12,186

$
9

$
12,195

Other assets
$
1,810

$
758

$
2,568

 
 
 
 
Liabilities and Equity
 
 
 
Current liabilities
 
 
 
Short-term borrowings and finance lease obligations
$
2,160

$
1

$
2,161

Accrued and other current liabilities
$
4,233

$
234

$
4,467

 
 
 
 
Long-Term Debt
$
5,812

$
8

$
5,820

Other noncurrent obligations
$
1,620

$
524

$
2,144

The adoption of the new guidance did not have a material impact on the company's interim Consolidated Statement of Operations and had no impact on the interim Condensed Consolidated Statement of Cash Flows.

NOTE 3 - DIVESTITURES AND OTHER TRANSACTIONS

The Intended Business Separations
As discussed in the company’s 2018 Annual Report and in Note 1, DowDuPont announced its intent to pursue the separation of the combined company's agriculture business, specialty products business and materials science business through a series of tax-efficient transactions. Refer to Note 18 for additional information on the Intended Business Separations and the separations.

Integration and Separation Costs
Integration and separation costs have been and are expected to be significant. These costs primarily have consisted of financial advisory, information technology, legal, accounting, consulting, and other professional advisory fees associated with the preparation and execution of activities related to the Merger and the Intended Business Separations. These costs are recorded within integration and separation costs within the interim Consolidated Statements of Operations.
 
Three Months Ended March 31,
(In millions)
2019
2018
Integration and separation costs
$
405

$
255


Merger Remedy - Divested Ag Business
On March 31, 2017, the company and FMC entered into the FMC Transaction Agreement. Under the FMC Transaction Agreement, and effective upon the closing of the transaction on November 1, 2017, FMC acquired the Divested Ag Business that Historical DuPont was required to divest in order to obtain EC approval of the Merger Transaction and Historical DuPont acquired the H&N Business. See further discussion of the FMC Transactions in Note 1. The sale of the Divested Ag Business met the criteria for discontinued operations and as such, earnings were included within loss from discontinued operations after income taxes for all periods presented.

For the three months ended March 31, 2018, the company recorded a loss from discontinued operations before income taxes related to the Divested Ag Business of $10 million ($5 million after tax).


10

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Performance Chemicals
On July 1, 2015, Historical DuPont 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, the company and The Chemours Company ("Chemours") entered into a Separation Agreement (as amended, the "Chemours Separation Agreement"). Pursuant to the Chemours Separation Agreement, as discussed below, Chemours indemnifies Historical DuPont 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. In 2017, Historical DuPont and Chemours amended the Chemours Separation Agreement to provide for a limited sharing of potential future perfluorooctanoic acid (“PFOA”) liabilities for a period of five years beginning July 6, 2017. In connection with the recognition of liabilities related to these matters, the company records an indemnification asset when recovery is deemed probable. At March 31, 2019, the indemnification assets are $84 million within accounts and notes receivable - net and $289 million within other assets along with the corresponding liabilities of $84 million within accrued and other current liabilities and $289 million within other noncurrent obligations in the interim Condensed Consolidated Balance Sheet. See Note 13 for further discussion of the amendment to the Chemours Separation Agreement and certain litigation and environmental matters indemnified by Chemours.

NOTE 4 - REVENUE

Revenue Recognition
Products
Substantially all of Historical DuPont's revenue is derived from product sales. Product sales consist of sales of Historical DuPont's products to supply manufacturers, distributors, and farmers. Historical DuPont 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.

Licenses of Intellectual Property
Historical DuPont enters into licensing arrangements with customers under which it licenses its intellectual property, such as patents and trademarks. Revenue from the majority of intellectual property licenses is derived from sales-based royalties. The company estimates the expected amount of sales-based royalties based on historical sales by customer. 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.

Contract Balances
Contract liabilities primarily reflect deferred revenue from prepayments under agriculture product line contracts with customers where the company receives advance payments for products to be delivered in future periods. Historical DuPont 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 within the industrial biosciences product line. Accounts receivable are recorded when the right to consideration becomes unconditional.

Contract Balances
March 31, 2019
December 31, 2018
(In millions)
Accounts and notes receivable - trade1
$
5,619

$
4,130

Contract assets - current2
$
36

$
48

Deferred revenue - current3
$
2,033

$
1,927

Deferred revenue - noncurrent4
$
28

$
30

1. 
Included in accounts and notes receivable - net in the Consolidated Balance Sheets.
2. 
Included in other current assets in the Consolidated Balance Sheets.
3. 
Included in accrued and other current liabilities in the Consolidated Balance Sheets.
4. 
Included in other noncurrent obligations in the Consolidated Balance Sheets.

The change in deferred revenue from December 31, 2018 to March 31, 2019 was substantially due to the receipt of customer prepayments under agriculture product line contracts, partially offset by agriculture seed deliveries to customers for the North America growing season, which were delayed due to weather conditions. Revenue recognized during the three months ended March 31, 2019 from amounts included in deferred revenue - current at the beginning of the period was approximately $460 million.


11

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Disaggregation of Revenue
Effective with the Merger, Historical DuPont’s business activities are components of DowDuPont’s business operations. Historical DuPont’s business activities, including the assessment of performance and allocation of resources, are reviewed and managed by DowDuPont. Information used by the chief operating decision maker of Historical DuPont relates to the company in its entirety. Accordingly, there are no separate reportable business segments for Historical DuPont under ASC 280 “Segment Reporting” and Historical DuPont's business results are reported in this Form 10-Q as a single operating segment.

The company has one reportable segment with the following principal product lines: agriculture, packaging and specialty plastics, electronics and imaging, nutrition and health, industrial biosciences, transportation and advanced polymers, and safety and construction. The company believes disaggregation of revenue by principal product line best depicts the nature, amount, timing, and uncertainty of its revenue and cash flows. Net sales by principal product line are included below:

 
Three Months Ended March 31,
(In millions)
2019
2018
Agriculture
$
2,108

$
2,343

Packaging and Specialty Plastics
363

419

Electronics and Imaging
455

527

Nutrition and Health
1,014

1,024

Industrial Biosciences
376

406

Transportation and Advanced Polymers
1,071

1,121

Safety and Construction
899

855

Other
2

4

Total
$
6,288

$
6,699


Sales are attributed to geographic regions based on customer location. Net sales by geographic region are included below:

 
Three Months Ended March 31,
(In millions)
2019
2018
U.S. & Canada
$
2,250

$
2,515

EMEA1
2,110

2,166

Asia Pacific
1,459

1,535

Latin America
469

483

Total
$
6,288

$
6,699

1. 
Europe, Middle East, and Africa ("EMEA").

NOTE 5 - RESTRUCTURING AND ASSET RELATED CHARGES - NET

DowDuPont Cost Synergy Program
In September and November 2017, DowDuPont and the company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the “Synergy Program”), adopted by the DowDuPont Board of Directors. The Synergy Program is designed to integrate and optimize the organization following the Merger and in preparation for the Intended Business Separations. Based on all actions approved to date under the Synergy Program, Historical DuPont expects to record total pre-tax restructuring charges of $695 million to $755 million, comprised of approximately $420 million to $440 million of severance and related benefits costs; $125 million to $145 million of costs related to contract terminations; and $150 million to $170 million of asset related charges.


12

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


The below is a summary of charges incurred related to the Synergy Program for the three months ended March 31, 2019 and 2018:
 
Three Months Ended March 31,
(In millions)
2019
2018
Severance and related benefit costs
$
40

$
68

Contract termination charges

29

Asset related charges
16


Total restructuring and asset related charges - net1
$
56

$
97

1. 
The charge for the three months ended March 31, 2019 includes $55 million which was recognized in restructuring and asset related charges - net and $1 million which was recognized in sundry income - net in the company's Condensed Consolidated Statement of Operations.

Historical DuPont recorded pre-tax restructuring charges of $565 million inception-to-date under the Synergy Program, consisting of severance and related benefit costs of $412 million, contract termination costs of $71 million, and asset write-downs and write-offs of $82 million. Actions associated with the Synergy Program, including employee separations, are expected to be substantially complete by the end of 2019.

Historical DuPont account balances and activity for the Synergy Program are summarized below:
(In millions)
Severance and Related Benefit Costs
Contract Termination Charges
Asset Related Charges
Total
Balance at December 31, 2018
$
229

$
18

$

$
247

Charges to income from continuing operations for the three months ended March 31, 2019
40


16

56

Payments
(43
)
(7
)

(50
)
Asset write-offs


(15
)
(15
)
Balance at March 31, 2019
$
226

$
11

$
1

$
238


DowDuPont Agriculture Division Restructuring Program
The company expects to record total pre-tax charges of approximately $65 million, comprised of approximately $55 million of severance and related benefits costs; $8 million of asset related charges, and $2 million of costs related to contract terminations, related to the DowDuPont Agriculture Division Restructuring Program.

From inception-to-date, Historical DuPont has recorded total pre-tax restructuring charge of $62 million, comprised of $54 million of severance and related benefit costs and $8 million of asset related charges. For the three months ended March 31, 2019, Historical DuPont recorded a pre-tax charge of $3 million for asset related charges in restructuring and asset related charges - net in the company's interim Consolidated Statement of Operations. The company expects actions related to this program to be substantially complete by mid-2019.

Historical DuPont account balances and activity for the DowDuPont Agriculture Division Restructuring Program are summarized below:
(In millions)
Severance and Related Benefit Costs
Asset Related Charges
Total
Balance at December 31, 2018
$
54

$

$
54

Charges to income from continuing operations for the three months ended March 31, 2019

3

3

Payments
(7
)

(7
)
Asset write-offs

(3
)
(3
)
Balance at March 31, 2019
$
47

$

$
47



13

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 6 - RELATED PARTIES

Services Provided by and to Historical Dow and its affiliates
Following the Merger, Historical DuPont reports transactions with Historical Dow and its affiliates as related party transactions. Historical DuPont sells to and procures from Historical Dow and its affiliates certain feedstocks and raw materials that are consumed in each company's manufacturing process, as well as finished goods. Historical DuPont also provides to Historical Dow and its affiliates certain seed production and distribution services.  The following table presents amounts due to or due from Historical Dow and its affiliates at March 31, 2019 and December 31, 2018:

(In millions)
March 31, 2019
December 31, 2018
Accounts and notes receivable - net
$
112

$
201

Accounts payable
$
201

$
288


The table below presents revenue earned and expenses incurred in transactions with Historical Dow and its affiliates for the three months ended March 31, 2019 and 2018:

 
Three Months Ended March 31,
(In millions)
2019
2018
Net sales
$
115

$
44

Cost of goods sold 
$
109

$
24


For the three months ended March 31, 2019 and 2018, respectively, purchases from Historical Dow and its affiliates were $106 million and $43 million, respectively. Historical DuPont also received transfers of certain feedstocks and energy from Historical Dow and its affiliates at cost which totaled $82 million and $79 million for the three months ended March 31, 2019 and 2018, respectively,

Transactions with DowDuPont
In November 2017, DowDuPont's Board of Directors authorized an initial $4,000 million share repurchase program to buy back shares of DowDuPont common stock. The $4,000 million share repurchase program was completed in the third quarter of 2018. In February 2019 and 2018, the Board declared first quarter dividends per share of DowDuPont common stock payable on March 15, 2019 and March 15, 2018, respectively. For the three months ended March 31, 2019 and 2018, Historical DuPont declared and paid distributions to DowDuPont of about $317 million and $830 million, respectively, primarily to fund a portion of DowDuPont's dividend payments for these periods, and, specific to 2018, to fund a portion of DowDuPont's share repurchases.

In addition, at March 31, 2019 and December 31, 2018, Historical DuPont had a payable to DowDuPont of $103 million included in accounts payable in the interim Condensed Consolidated Balance Sheets related to its estimated tax liability for the period beginning with the Merger through the date of the Dow Distribution, during which time the parties filed a consolidated US tax return. See Note 8 for additional information.


14

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 7 - SUPPLEMENTARY INFORMATION
Sundry Income - Net
Three Months Ended March 31,
(In millions)
2019
2018
Interest income
$
23

$
28

Equity in earnings of affiliates - net
13

14

Net gain on sales of businesses and other assets1
55

2

Net exchange losses
(32
)
(132
)
Non-operating pension and other post employment benefit credit2
66

92

Miscellaneous income and expenses - net3
32

43

Sundry income - net
$
157

$
47

 
1.
The three months ended March 31, 2019 includes a gain on sale of assets within the electronics and imaging product line.
2.
Includes non-service related components of net periodic benefit credits (costs) (interest cost, expected return on plan assets, and amortization of unrecognized loss). 
3.
Miscellaneous income and expenses - net, includes gains related to litigation settlements and other items. 

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 United States ("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 sundry income - net and the related tax impact is recorded in (benefit from) provision for income taxes on continuing operations in the interim Consolidated Statements of Operations.
(In millions)
Three Months Ended March 31,
 
2019
2018
Subsidiary Monetary Position (Losses) Gains
 
 
Pre-tax exchange (losses) gains
$
(23
)
$
49

Local tax benefits

32

Net after-tax impact from subsidiary exchange (losses) gains
$
(23
)
$
81

 
 
 
Hedging Program Losses
 
 
Pre-tax exchange losses1
$
(9
)
$
(181
)
Tax benefits
2

42

Net after-tax impact from hedging program exchange losses
$
(7
)
$
(139
)
 
 
 
Total Exchange Losses
 
 
Pre-tax exchange losses
$
(32
)
$
(132
)
Tax benefits
2

74

Net after-tax exchange losses
$
(30
)
$
(58
)
 
1.
Includes a $50 million foreign exchange loss for the three months ended March 31, 2018 related to adjustments to foreign currency exchange contracts as a result of U.S. tax reform.


15

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


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)
March 31, 2019
December 31, 2018
Cash and cash equivalents
$
3,796

$
4,466

Restricted cash
480

500

Total cash, cash equivalents and restricted cash
$
4,276

$
4,966


Historical DuPont entered into a trust agreement in 2013 (as amended and restated in 2017), establishing and requiring Historical DuPont 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 March 31, 2019 and December 31, 2018 is related to the Trust.

NOTE 8 - INCOME TAXES

On December 22, 2017, the Tax Cuts and Jobs Act (“The Act”) was enacted. The Act reduces the U.S. federal corporate income tax rate from 35 percent to 21 percent, requires companies to pay a one-time transition tax (“transition tax”) on earnings of foreign subsidiaries that were previously tax deferred, creates new provisions related to foreign sourced earnings, eliminates the domestic manufacturing deduction and moves towards a territorial system. At December 31, 2018, the company had completed its accounting for the tax effects of The Act.

As a result of The Act, the company remeasured its U.S. federal deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent. In the first quarter of 2018, the company recorded a $48 million charge to provision for income taxes on continuing operations in the company's interim Consolidated Statements of Operations to adjust the provisional amount related to the remeasurement of the company's deferred tax balance.

In the first quarter of 2018, the company recognized a charge of $16 million to provision for income taxes on continuing operations in the company's interim Consolidated Statements of Operations as a result of an indirect impact of the Act related to certain inventory.

Historical DuPont and its subsidiaries are 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 will be apportioned among the members of the consolidated group based on each member’s separate taxable income.  Historical DuPont and Historical 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 sharing agreement and/or tax matters agreement.

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 first and second quarters of 2019, in connection with the Intended Business Separations, the company has and expects to continue repatriating certain funds from its foreign subsidiaries that are not needed to finance local operations or separation activities. During the three months ended March 31, 2019, the company recorded tax expense of $13 million associated with these repatriation activities. Beyond these expected repatriations, the company is still asserting indefinite reinvestment related to certain investments in foreign subsidiaries.

During the three months ended March 31, 2019, the company recorded a tax benefit of $102 million related to an internal legal entity restructuring associated with the Intended Business Separations.


16

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 9 - INVENTORIES

(In millions)
March 31,
2019
December 31,
2018
Finished products
$
4,390

$
4,204

Semi-finished products
1,338

1,769

Raw materials
523

481

Stores and supplies
385

441

Total
$
6,636

$
6,895

Adjustment of inventories to a last-in, first out ("LIFO") basis
511

512

Total inventories
$
7,147

$
7,407


As a result of the Merger, a fair value step-up of $3,840 million was recorded for inventories. Of this amount, $205 million and $641 million was recognized in cost of goods sold within income from continuing operations in the interim Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018, respectively.

NOTE 10 - OTHER INTANGIBLE ASSETS

Other Intangible Assets
The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows: 
(In millions)
March 31, 2019
December 31, 2018
 
Gross
Accumulated
Amortization
Net
Gross
Accumulated
Amortization
Net
Intangible assets subject to amortization (Definite-lived):
 

 

 

 

 

 

Customer-related
$
9,310

$
(884
)
$
8,426

$
9,325

$
(744
)
$
8,581

Developed technology1
4,926

(735
)
4,191

4,506

(628
)
3,878

Trademarks/trade names
1,083

(135
)
948

1,084

(114
)
970

Favorable supply contracts
493

(136
)
357

475

(111
)
364

Microbial cell factories
384

(26
)
358

386

(22
)
364

Other2
376

(37
)
339

377

(32
)
345

Total other intangible assets with finite lives
16,572

(1,953
)
14,619

16,153

(1,651
)
14,502

 
 
 
 
 
 
 
Intangible assets not subject to amortization (Indefinite-lived):
 

 

 

 

 

 

IPR&D1
100


100

545


545

Germplasm3
6,265


6,265

6,265


6,265

Trademarks / trade names
4,740


4,740

4,741


4,741

Total other intangible assets
11,105


11,105

11,551


11,551

Total
$
27,677

$
(1,953
)
$
25,724

$
27,704

$
(1,651
)
$
26,053

1. 
During the first quarter of 2019, the company announced an expanded launch of its Qrome® corn hybrids following the receipt of regulatory approval from China. As a result, the company reclassified the amounts from indefinite-lived IPR&D to developed technology.
2. 
Primarily consists of sales and farmer networks, marketing and manufacturing alliances and noncompetition agreements.
3. 
Germplasm is the pool of genetic source material and body of knowledge gained from the development and delivery stage of plant breeding. This intangible asset is expected to contribute to cash flows beyond the foreseeable future and there are no legal, regulatory, contractual, or other factors which limit its useful life.

The aggregate pre-tax amortization expense from continuing operations for definite-lived intangible assets was $320 million and $315 million for the three months ended March 31, 2019 and 2018, respectively. The estimated aggregate pre-tax amortization expense from continuing operations for the remainder of 2019 and each of the next five years is approximately $1,029 million, $1,270 million, $1,257 million, $1,235 million, $1,120 million and $1,044 million, respectively.


17

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 11 - LEASES

The company has operating and finance leases for real estate, airplanes, railcars, fleet, certain machinery and equipment, and information technology assets. The company’s leases have remaining lease terms of 1 year to 50 years. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend the lease when it is reasonably certain that the company will exercise that option. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the initial ROU asset or lease liability.

Certain of the company's leases include residual value guarantees. These residual value guarantees are based on a percentage of the lessor's asset acquisition price and the amount of such guarantee declines over the course of the lease term. The portion of residual value guarantees that are probable of payment are included in the related lease liability on the accompanying Consolidated Balance Sheet other than certain finance leases that include the maximum residual value guarantee amount in the measurement of the related liability given the election to use the package of practical expedients at the date of adoption. At March 31, 2019, the company has future maximum payments for residual value guarantees in operating leases of $46 million with final expirations through 2028. The company's lease agreements do not contain any material restrictive covenants.

The components of lease cost were as follows:
(In millions)
Three Months Ended March 31, 2019
Operating lease cost
54

Finance lease cost
 
Amortization of right-of-use assets
35

Interest on lease liabilities
1

Total finance lease cost
36

Short-term lease cost
5

Variable lease cost
4

Sublease income
(8
)
Total lease cost
91


New leases entered into during the three months ended March 31, 2019 were not considered material. Supplemental cash flow information related to leases was as follows:
(In millions)
Three Months Ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
56

Operating cash flows from finance leases
$
1

Financing cash flows from finance leases
$
20



18

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Supplemental balance sheet information related to leases was as follows:
(In millions)
March 31, 2019
Operating Leases
 

Operating lease right-of-use assets1
$
703

Current operating lease liabilities2
213

Noncurrent operating lease liabilities3
494

Total operating lease liabilities
$
707

 
 
Finance Leases
 

Property, plant, and equipment, gross
152

Accumulated depreciation
(38
)
Property, plant, and equipment, net
$
114

Short-term borrowings and finance lease obligations
43

Long-Term Debt
83

Total finance lease liabilities
$
126

1.
Included in other assets in the interim Condensed Consolidated Balance Sheet.
2.
Included in accrued and other current liabilities in the interim Condensed Consolidated Balance Sheet.
3.
Included in other noncurrent obligations in the interim Condensed Consolidated Balance Sheet.

Historical DuPont utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable.
Lease Term and Discount Rate
March 31, 2019
Weighted-average remaining lease term (years)
 
Operating leases
5.31

Finance leases
2.58

Weighted average discount rate


Operating leases
3.37
%
Finance leases
3.25
%

Maturities of lease liabilities were as follows:
Maturity of Lease Liabilities at March 31, 2019
Operating Leases
Finance Leases
(In millions)
2019
$
184

$
36

2020
171

30

2021
132

27

2022
107

27

2023
55

9

2024 and thereafter
129

6

Total lease payments
$
778

$
135

Less: Interest
71

9

Present value of lease liabilities
$
707

$
126



19

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Future minimum lease payments for operating leases accounted for under ASC 840, "Leases," with remaining non-cancelable terms in excess of one year at December 31, 2018 were as follows:
Minimum Lease Commitments at December 31, 2018
(In millions)
2019
$
242

2020
128

2021
90

2022
66

2023
44

2024 and thereafter
85

Total
$
655


NOTE 12 - SHORT-TERM BORROWINGS, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES

Repurchase Facility
In February 2019, the company entered into a new committed receivable repurchase facility of up to $1,300 million (the "2019 Repurchase Facility") which expires in December 2019. From time to time, the company and the banks modify the monthly commitment amounts to better align with working capital requirements. Under the 2019 Repurchase Facility, Historical DuPont may sell a portfolio of available and eligible outstanding agriculture product line customer notes receivables to participating institutions and simultaneously agree to repurchase at a future date. The 2019 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 2019 Repurchase Facility have an interest rate of LIBOR + 0.75 percent.

As of March 31, 2019, $20 million of notes receivable, recorded in accounts and notes receivable - net, were pledged as collateral against outstanding borrowings under the 2019 Repurchase Facility of $19 million, recorded in short-term borrowings and finance lease obligations on the interim Condensed Consolidated Balance Sheet.

Term Loan and Revolving Credit Facilities
In March 2016, the company entered into a credit agreement that provides for a three-year, senior unsecured term loan facility in the aggregate principal amount of $4,500 million (the "Term Loan Facility") under which Historical DuPont may make up to seven term loan borrowings and amounts repaid or prepaid are not available for subsequent borrowings. The proceeds from the borrowings under the Term Loan Facility were used for the company's general corporate purposes including debt repayment, working capital and funding a portion of DowDuPont's costs and expenses. At March 31, 2019, the company had made six term loan borrowings in an aggregate principal amount of $3,000 million and had unused commitments of $1,500 million under the Term Loan Facility. See Note 18 for further discussion on the repayment of the term loan in May 2019.

NOTE 13 - COMMITMENTS AND CONTINGENT LIABILITIES

Guarantees
Indemnifications
In connection with acquisitions and divestitures as of March 31, 2019, 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.

Obligations for Equity Affiliates & Others
The company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates, and customers. At March 31, 2019 and December 31, 2018, the company had directly guaranteed $239 million and $259 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. The company would be required to perform on these guarantees in the event of default by the guaranteed party.


20

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


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.

In certain cases, the company has recourse to assets held as collateral, as well as personal guarantees from customers. Assuming liquidation, these assets are estimated to cover approximately 7 percent of the $73 million of guaranteed obligations of customers. Set forth below are the company's guaranteed obligations at March 31, 2019.

The following table provides a summary of the final expiration year and maximum future payments for each type of guarantee:
Guarantees at March 31, 2019
Final Expiration Year
Maximum Future Payments
(In millions)
Obligations for customers1:
 
 
Bank borrowings
2022
$
73

Obligations for non-consolidated affiliates2:



Bank borrowings
2019
166

Total guarantees
 
$
239

1.
Existing guarantees for select customers, as part of contractual agreements. The terms of the guarantees are equivalent to the terms of the customer loans that are primarily made to finance customer invoices.  Of the total maximum future payments, $72 million had terms less than a year.
2.   
Existing guarantees for non-consolidated affiliates' liquidity needs in normal operations.

Litigation
The company is subject to various legal proceedings arising out of the normal course of its current and former business operations, including product liability, intellectual property, commercial, environmental and antitrust lawsuits. 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 in the period recognized.

PFOA Liabilities
Historical DuPont is a party to legal proceedings relating to the use of PFOA (collectively, perfluorooctanoic acids and its salts, including the ammonium salt) by its former Performance Chemicals segment, which separated from Historical DuPont in July 2015 through the spin-off of all the issued and outstanding stock of Chemours. While it is reasonably possible that the company could incur liabilities related to PFOA, any such liabilities are not expected to be material. As discussed in Note 3 and below, the company is indemnified by Chemours under the Chemours Separation Agreement, as amended. The company has recorded a liability of $22 million and an indemnification asset of $22 million at March 31, 2019, primarily related to testing drinking water in and around certain historic company 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
Historical DuPont has residual liabilities under its 2004 settlement of a West Virginia state court class action, Leach v. DuPont, which alleged that PFOA from Historical DuPont’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 Historical DuPont 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 March 31, 2019, approximately $2 million had been disbursed from the account since its establishment in 2012 and the remaining balance is approximately $1 million.

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 expert 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 Historical DuPont (without indemnification from Chemours) each paying half.


21

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


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 March 31, 2019, approximately 57 lawsuits were pending alleging personal injury, including kidney and testicular cancer, thyroid disease and ulcerative colitis, from exposure to PFOA through air or water, only 3 of which are not part of the MDL or were not otherwise filed on behalf of Leach class members.

Other PFOA Actions
Historical DuPont is a party to other PFOA lawsuits that do not involve claims for personal injury. Chemours, pursuant to the Chemours Separation Agreement, is defending and indemnifying, with reservation, the company in these lawsuits.

New York. Historical DuPont is a defendant in about 52 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 Historical DuPont and 3M supplied some of the materials used at these facilities. Historical DuPont is also one of more than ten defendants in a lawsuit brought by the Town of East Hampton, New York alleging PFOA and perfluorooctanesulfonic acid ("PFOS") contamination of the town’s well water.

New Jersey. At December 31, 2018, two lawsuits were pending, one brought by a local water utility and the second a putative class action, against Historical DuPont alleging that PFOA from Historical DuPont’s former Chambers Works facility contaminated drinking water sources. The putative class action was dismissed without prejudice by the plaintiffs.

In late March of 2019, the New Jersey State Attorney General (the “NJAG”) filed four lawsuits against the company, Chemours, 3M and others alleging that former Historical DuPont operations at the Chambers Works, Pompton Lakes Works, Parlin and Repauno sites in New Jersey, caused damage to the State’s natural resources.  Two of these lawsuits (those involving the Chambers Works and Parlin sites) allege contamination from per- and polyfluoroalkyl substances (“PFAS”). The lawsuit related to Parlin names an additional DowDuPont subsidiary. The Ridgewood Water District in New Jersey filed suit in the first quarter 2019 against Historical DuPont alleging losses related to the investigation, remediation and monitoring of polyfluorinated surfactants (“PFS”), including PFOA, in water supplies.

Alabama. Historical DuPont is one of more than thirty defendants in one lawsuit by a local water utility alleging contamination from perfluorinated chemicals and compounds (“PFCs”), including PFOA, used by co-defendant carpet manufacturers to make their products more stain and grease resistant.

Ohio. Historical DuPont 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 perfluorinated chemicals, including PFOA, in their blood, and an action by the City of Dayton claiming losses related to the investigation, remediation and monitoring of PFAS, including PFOA, in water supplies.

Other. Dozens of cases have been filed against 3M and other defendants primarily alleging property damage from contamination in connection with the use of firefighting foams that contain PFOS.  At March 31, 2019, Historical DuPont was named in 4 of these cases. Historical DuPont did not make firefighting foam and has never made or supplied PFOS or products that contained PFOS.

Chemours Separation Agreement Amendment
As discussed in Note 3, concurrent with the MDL Settlement, Historical DuPont and Chemours amended the Chemours Separation Agreement to provide for a limited sharing of potential future PFOA liabilities for a five-year period that began on July 6, 2017. During that five-year period, Chemours will annually pay the first $25 million of future PFOA liabilities and, if that amount is exceeded, Historical DuPont 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-year period, 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 Historical DuPont under this arrangement through March 31, 2019.


22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Fayetteville Works Facility, North Carolina
Prior to the separation of Chemours, the company 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. In 2017, the facility became and continues to be the subject of inquiries and government investigations relating to the alleged discharge of GenX and certain similar compounds into the air and Cape Fear River.

In August 2017, the U.S. Attorney’s Office for the Eastern District of North Carolina served the company with a grand jury subpoena for testimony and documents related to these discharges. Historical DuPont was served with additional subpoenas relating to the same issue and in the second quarter 2018, received a subpoena expanding the scope to any PFCs discharged from the Fayetteville Works facility into the Cape Fear River. It is possible that these ongoing inquiries and investigations, including the grand jury subpoena, could result in penalties or sanctions, or that additional litigation will be instituted against Chemours, the company, or both.

At March 31, 2019, several actions are pending in federal court against Chemours and the company. One of these actions 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 addition, an action is pending in North Carolina state court 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.

While it is reasonably possible that the company could incur liabilities related to the actions described above, any such liabilities are not expected to be material.

The company has an indemnification claim against Chemours with respect to current and future inquiries and claims, including lawsuits, related to the foregoing. At March 31, 2019, Chemours, with reservations, is defending and indemnifying the company in the pending civil actions.

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 March 31, 2019, the company had accrued obligations of $384 million for probable environmental remediation and restoration costs, including $54 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 Sheets. 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 $790 million above the amount accrued at March 31, 2019. 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.

Pursuant to the Chemours Separation Agreement, the company is indemnified by Chemours for certain environmental matters, included in the liability of $384 million, that have an estimated liability of $185 million as of March 31, 2019, and a potential exposure that ranges up to approximately $355 million above the amount accrued. As such, the company has recorded an indemnification asset of $185 million corresponding to the company’s accrual balance related to these matters at March 31, 2019, including $35 million related to the Superfund sites.


23

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 14 - STOCKHOLDERS' EQUITY

Other Comprehensive (Loss) Income
The changes and after-tax balances of components comprising accumulated other comprehensive (loss) income are summarized below:
(In millions)
Cumulative Translation Adjustment1
Derivative Instruments
Pension Benefit Plans
Other Benefit Plans
Total
2018
 
 
 
 
 
Balance January 1, 2018
$
(454
)
$
(2
)
$
128

$
(53
)
$
(381
)
Other comprehensive income before reclassifications
957

12

4


973

Amounts reclassified from accumulated other comprehensive loss

(1
)


(1
)
Net other comprehensive income
957

11

4


972

Balance March 31, 2018
$
503

$
9

$
132

$
(53
)
$
591

 
 
 
 
 
 
2019
 

 

 

 

 

Balance January 1, 2019
$
(1,966
)
$
(26
)
$
(590
)
$
79

$
(2,503
)
Other comprehensive (loss) income before reclassifications
(68
)
4

(7
)

(71
)
Amounts reclassified from accumulated other comprehensive (loss) income

(3
)
1


(2
)
Net other comprehensive (loss) income
(68
)
1

(6
)

(73
)
Balance March 31, 2019
$
(2,034
)
$
(25
)
$
(596
)
$
79

$
(2,576
)
1. 
The cumulative translation adjustment gain for the three months ended March 31, 2018 was primarily driven by the weakening of the U.S. Dollar ("USD") against the European Euro ("EUR"), as well as the Danish Kroner. The cumulative translation adjustment loss for the three months ended March 31, 2019 was primarily driven by strengthening of the USD against the EUR and the Brazilian Real.

The tax expense on the net activity related to each component of other comprehensive loss was as follows:
(In millions)
Three Months Ended March 31,
 
2019
2018
Derivative instruments
$
(3
)
$
(4
)
Pension benefit plans - net
(7
)
(2
)
Provision for income taxes related to other comprehensive loss items
$
(10
)
$
(6
)

A summary of the reclassifications out of accumulated other comprehensive loss is provided as follows:
(In millions)
Three Months Ended March 31,
Income Classification
 
2019
2018
Derivative Instruments:
$
(4
)
$
(1
)
(1)
Tax expense
1


(2)
After-tax
$
(3
)
$
(1
)
 
Amortization of pension benefit plans:
 
 
 
  Actuarial losses
1


(3)
Total before tax
$
1

$

 
Tax benefit


(2)
After-tax
$
1

$

 
Total reclassifications for the period, after-tax
$
(2
)
$
(1
)
 
1. 
Cost of goods sold.
2. 
Provision for income taxes from continuing operations.
3. 
These accumulated other comprehensive loss components are included in the computation of net periodic benefit (credit) cost of the company's pension and other benefit plans. See Note 15 for additional information.


24

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 15 - PENSION PLANS AND OTHER POST EMPLOYMENT BENEFITS

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 March 31,
(In millions)
2019
2018
Defined Benefit Pension Plans:
 
 
Service cost
$
19

$
34

Interest cost
206

190

Expected return on plan assets
(296
)
(303
)
Amortization of unrecognized loss
1


Net periodic benefit credit
$
(70
)
$
(79
)
Other Post Employment Benefits:
 
 
Service cost
$
2

$
2

Interest cost
23

21

Net periodic benefit cost
$
25

$
23


NOTE 16 - FINANCIAL INSTRUMENTS

At March 31, 2019, the company had $2,750 million ($3,551 million at December 31, 2018) of held-to-maturity securities (primarily time deposits and money market funds) classified as cash equivalents, as these securities had maturities of three months or less at the time of purchase; and $18 million ($34 million at December 31, 2018) 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 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, interest rate 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 and major commodity exchanges. 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)
March 31, 2019
December 31, 2018
Derivatives designated as hedging instruments:
 
 
Commodity contracts
$
351

$
525

Derivatives not designated as hedging instruments:




Foreign currency contracts
$
1,442

$
2,057

Commodity contracts
$
125

$
9



25

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


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. 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 and cash flows.

The company routinely uses forward 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 foreign currency-denominated revenues so that gains and losses on these contracts offset changes in the USD value of the related foreign currency-denominated revenues. The objective of the hedge program is to reduce earnings and cash flow volatility related to changes in foreign currency exchange rates.

Commodity Price Risk
Commodity price risk management programs serve to reduce exposure to price fluctuations on purchases of inventory such as corn, soybeans, soybean oil and soybean meal. The company enters into over-the-counter and exchange-traded derivative commodity instruments to hedge the commodity price risk associated with agricultural commodity exposures.

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-year period. 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 cash flow hedges on accumulated other comprehensive loss:
 
Three Months Ended March 31,
(In millions)
2019
2018
Beginning balance
$
(26
)
$
(2
)
Additions and revaluations of derivatives designated as cash flow hedges
4

12

Clearance of hedge results to earnings
(3
)
(1
)
Ending balance
$
(25
)
$
9


At March 31, 2019, an after-tax net loss of $10 million is expected to be reclassified from accumulated other comprehensive loss into earnings over the next twelve months.

Derivatives not Designated in Hedging Relationships
Foreign Currency Contracts
The company routinely uses forward 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 certain foreign currency-denominated revenues so that gains and losses on the contracts offset changes in the USD value of the related foreign currency-denominated revenues.

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, soybeans, soybean oil and soybean meal.


26

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


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:
 
 
March 31, 2019
(In millions)
Balance Sheet Location
Gross
Counterparty and Cash Collateral Netting1
Net Amounts Included in the Interim Condensed Consolidated Balance Sheet
Asset derivatives:
 
 
 
 
Derivatives not designated as hedging instruments:
 
 

 
 
Foreign currency contracts
Other current assets
$
58

$
(16
)
$
42

Total asset derivatives
 
$
58

$
(16
)
$
42

 
 
 
 
 
Liability derivatives:
 
 

 
 
Derivatives not designated as hedging instruments:
 
 

 
 

Foreign currency contracts
Accrued and other current liabilities
$
17

$
(14
)
$
3

Total liability derivatives
 
$
17

$
(14
)
$
3


 
 
December 31, 2018
(In millions)
Balance Sheet Location
Gross
Counterparty and Cash Collateral Netting1
Net Amounts Included in the Interim Condensed Consolidated Balance Sheet
Asset derivatives:
 
 
 
 
Derivatives not designated as hedging instruments:
 
 

 
 
Foreign currency contracts
Other current assets
$
72

$
(35
)
$
37

Total asset derivatives
 
$
72

$
(35
)
$
37

 
 
 
 
 
Liability derivatives:
 
 

 
 
Derivatives not designated as hedging instruments:
 
 

 
 

Foreign currency contracts
Accrued and other current liabilities
$
21

$
(15
)
$
6

Total liability derivatives
 
$
21

$
(15
)
$
6

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.

27

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



Effect of Derivative Instruments
 
Amount of Gain Recognized in OCI1 - Pre-Tax
 
Three Months Ended March 31,
(In millions)
2019
2018
Derivatives designated as hedging instruments:
 
 
Cash flow hedges:
 
 
Commodity contracts
$
8

$
16

Total derivatives designated as hedging instruments
8

16

Total derivatives
$
8

$
16

1. 
OCI is defined as other comprehensive (loss) income.

 
Amount of Gain (Loss) Recognized in Income - Pre-Tax1
(In millions)
Three Months Ended March 31,
 
2019
2018
Derivatives designated as hedging instruments:
 
 
Cash flow hedges:
 
 
Commodity contracts2
$
4

$
1

Total derivatives designated as hedging instruments
4

1

Derivatives not designated as hedging instruments:
 
 
Foreign currency contracts3
(9
)
(181
)
Commodity contracts2
7

(3
)
Total derivatives not designated as hedging instruments
(2
)
(184
)
Total derivatives
$
2

$
(183
)
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. 
Gain recognized in sundry income - net was partially offset by the related gain on the foreign currency-denominated monetary assets and liabilities of the company's operations. See Note 7 for additional information.
     

28

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 17 - FAIR VALUE MEASUREMENTS

The following tables summarize the basis used to measure certain assets and liabilities at fair value on a recurring basis:
March 31, 2019
Significant Other Observable Inputs (Level 2)
(In millions)
Assets at fair value:
 
Cash equivalents and restricted cash equivalents1
$
2,750

Marketable securities
18

Derivatives relating to:2
 
Foreign currency
58

Total assets at fair value
$
2,826

Liabilities at fair value:
 
Long-term debt
$
6,865

Derivatives relating to:2
 
Foreign currency
17

Total liabilities at fair value
$
6,882


December 31, 2018
Significant Other Observable Inputs (Level 2)
(In millions)
Assets at fair value:
 
Cash equivalents and restricted cash equivalents1
$
3,551

Marketable securities
34

Derivatives relating to:2
 
Foreign currency
72

Total assets at fair value
$
3,657

Liabilities at fair value:
 
Long-term debt
$
6,100

Derivatives relating to:2


Foreign currency
21

Total liabilities at fair value
$
6,121

1.
Time deposits included in cash and cash equivalents and money market funds included in other current assets in the interim Condensed Consolidated Balance Sheets are held at amortized cost, which approximates fair value.
2.
See Note 16 for the classification of derivatives in the interim Condensed Consolidated Balance Sheets.


29

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 18 - SUBSEQUENT EVENTS

Intended Business Separations
Prior to the Dow Distribution, Historical Dow conveyed or transferred the assets and liabilities aligned with Historical Dow’s agriculture business to separate legal entities (“DAS”) and the assets and liabilities associated with its specialty products business to separate legal entities (the “SP Entities”). On April 1, 2019, DAS and the SP Entities were transferred and conveyed to DowDuPont.

In furtherance of the Intended Business Separations, the company engaged in a series of internal reorganization and realignment steps (the “Internal Reorganization”) to realign its businesses into three subgroups: agriculture, materials science and specialty products. As part of the Internal Reorganization:

the assets and liabilities aligned with the company’s materials science business, including Historical DuPont’s ethylene and ethylene copolymers business, excluding its ethylene acrylic elastomers business, (“ECP”) were transferred or conveyed to separate legal entities (the “Materials Science Entities”) that were ultimately conveyed by DowDuPont to Dow;

the assets and liabilities aligned with the company’s specialty products business were transferred or conveyed to separate legal entities (“Specialty Products Entities”);

on April 1, 2019, Historical DuPont transferred and conveyed its Materials Science Entities to DowDuPont;

on May 1, 2019, Historical DuPont distributed its Special Products Entities to DowDuPont; and

on May 2, 2019, DowDuPont conveyed DAS to the company; in connection with the foregoing, the company issued additional shares of its Common Stock to DowDuPont.

As a result of the foregoing, at May 2, 2019, the company holds all or substantially all the assets and liabilities associated with DowDuPont’s combined agriculture business.

Beginning in the second quarter of 2019, ECP’s financial results for periods prior to April 1, 2019 will be reflected in Historical DuPont's Consolidated Financial Statements as a discontinued operation. Historical DuPont’s specialty products businesses financial results for periods prior to May 1, 2019, will also be reflected in the company’s Consolidated Financial Statements as a discontinued operation beginning in the second quarter of 2019.

The transfer or conveyance of DAS to Historical DuPont will be treated as a transfer of entities under common control. As such, Historical DuPont will record the assets, liabilities, and equity of DAS on its balance sheet at their historical basis. Transfers of businesses between entities under common control requires the financial statements to be presented as if the transaction had occurred at the point at which common control first existed (the "Effective Time of the Merger"). Beginning in the second quarter of 2019, Historical DuPont’s historical financial statements and related notes will be revised to include the historical balances of DAS as of September 1, 2017.

Separation Agreements
In connection with the Dow Distribution and the intended Corteva Distribution, DowDuPont has entered into or will enter into certain agreements that will 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 DowDuPont, Dow, and Corteva (together, the “Parties” and each a “Party”) , and provide a framework for DowDuPont’s relationship with Dow and Corteva following the separations and Distributions. Effective April 1, 2019, the Parties entered into the following agreements:

Separation and Distribution Agreement - The Parties entered into an agreement that sets forth, among other things, the agreements among the Parties regarding the principal transactions necessary to effect the Distributions. It also sets forth other agreements that govern certain aspects of the Parties’ ongoing relationships after the completion of the Distributions (the "Separation and Distribution Agreement").

Tax Matters Agreement - The Parties entered into an agreement that governs their respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.


30

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Employee Matters Agreement - The Parties entered into an agreement that identifies employees and employee-related liabilities (and attributable assets) to be allocated (either retained, transferred and accepted, or assigned and assumed, as applicable) to the Parties as part of the Distributions and describes when and how the relevant transfers and assignments will occur.

Intellectual Property Cross-License Agreements - Dow and Corteva entered into an Intellectual Property Cross-License Agreement (the “Dow-Corteva IP Cross-License Agreement”). The Intellectual Property Cross-License Agreements set forth the terms and conditions under which the applicable Parties may use in their respective businesses, following each of the Distributions, certain know-how (including trade secrets), copyrights, and software, and certain patents and standards, allocated to another Party pursuant to the Separation and Distribution Agreement.

In connection with the intended Corteva Distribution, DowDuPont expects to enter into additional agreements, including an intellectual property cross-license agreement with Corteva. This agreement will set forth the terms and conditions under which DowDuPont and Corteva may use, in their respective businesses following the Corteva Distribution, certain know-how (including trade secrets), copyrights, and software, and certain patents and standards, allocated to another Party pursuant to the Separation and Distribution Agreement.

Debt Redemptions/Repayments
On March 22, 2019, Historical DuPont issued notices of redemption in full of all of its outstanding notes (the “Make Whole Notes”) listed in the table below:
(in millions)
Amount
4.625% Notes due 2020
$
474

3.625% Notes due 2021
296

4.250% Notes due 2021
163

2.800% Notes due 2023
381

6.500% Debentures due 2028
57

5.600% Senior Notes due 2036
42

4.900% Notes due 2041
48

4.150% Notes due 2043
69

Total
$
1,530


The Make Whole Notes were redeemed on April 22, 2019 at the make-whole redemption prices set forth in the respective Make Whole Notes. On and after the date of redemption, the Make Whole Notes were no longer deemed outstanding, interest on the Make Whole Notes ceased to accrue and all rights of the holders of the Make Whole Notes were terminated.

On May 2, 2019 Historical DuPont terminated its Term Loan Facility and repaid the aggregate outstanding principal amount of $3 billion plus accrued and unpaid interest through and including May 1, 2019.

In connection with the foregoing, Historical DuPont paid a total of $4.6 billion, which included breakage fees and accrued and unpaid interest on the Make Whole Notes and Term Loan Facility. The company funded the payments with cash from operations and a related party revolving loan of $4.1 billion from Corteva, Inc. with an interest rate of 4.275%, repayable in 5 years. Corteva, Inc. funded its loan to the company with contributions from DowDuPont.

Historical DuPont anticipates the loss on the early extinguishment of debt to be approximately $18 million related to the difference between the redemption price and the par value of the Make Whole Notes and Term Loan Facility, partially offset by the write-off of unamortized step-up related to the fair value step-up of Historical DuPont’s debt.


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


On May 7, 2019, DowDuPont publicly announced the record date in connection with the intended Corteva Distribution. In connection with such announcement, the company will be required to mail a notice of redemption to holders of the $1,250 million aggregate principal amount of 2.200% Notes due 2020 and $750 million aggregate principal amount of Floating Rate Notes due 2020 (collectively, the “SMR Notes”) setting forth the date of redemption of the SMR Notes. The date of redemption will be on or before May 24, 2019. On the date of redemption, the company will be required to redeem all of the SMR Notes at a redemption price equal to 100% of the aggregate principal amount of the SMR Notes plus accrued and unpaid interest, if any, up to but excluding the date of redemption. Following the redemption, the SMR Notes will no longer be outstanding and will cease to bear interest and all rights of the holders of the SMR Notes will terminate. Historical DuPont believes the redemption will be funded with a draw down on the related party revolving loan from Corteva, however, the actual redemption could be funded through a combination of the related party loan and contributions.


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Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Effective as of 5:00 p.m. on April 1, 2019, DowDuPont Inc. (“DowDuPont”) completed the previously announced separation of its materials science business into a separate and independent public company by way of a distribution of Dow Inc. (“Dow”) 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 (the “Dow Common Stock”), to holders of the Company’s common stock, par value $0.01 per share (the “DowDuPont Common Stock”), as of the close of business on March 21, 2019 (the “Dow Distribution”). DowDuPont expects to complete the previously announced intended separation of its agriculture business into a separate and independent public company on June 1, 2019 by way of a distribution of Corteva, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Corteva”), through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Corteva’s common stock, par value $0.01 per share, to holders of DowDuPont Common Stock as of a record date to be set by the Company’s Board of Directors (the “Corteva Distribution” and, together with the Dow Distribution, the “Distributions”).

Cautionary Statements About Forward-Looking Statements
This communication contains “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “will,” “would,” “target,” similar expressions, and variations or negatives of these words.

Forward-looking statements by their nature address matters that are, to varying degrees, uncertain, including statements about the intended Corteva Distribution. Forward-looking statements, including those related to DowDuPont’s ability to complete, or to make any filing or take any other action required to be taken to complete, the Corteva Distribution, are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements also involve risks and uncertainties, many of which that are beyond DowDuPont’s and Historical DuPont’s control. Some of the important factors that could cause Historical DuPont’s actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) ability and costs to achieve all the expected benefits from the Distributions; (ii) restrictions under intellectual property cross license agreements entered into or to be entered into in connection with the Corteva Distribution and the Dow Distribution; (iii) ability to receive third-party consents required under the Separation Agreement entered into in connection with the Corteva Distribution and the Dow Distribution; (iv) non-compete restrictions under the Separation Agreement entered into in connection with the Corteva Distribution and the Dow Distribution; (v) the incurrence of significant costs in connection with the separations and Distributions; (vi) risks outside the control of Historical DuPont which could impact the decision of the DowDuPont Board of Directors to proceed with the Corteva Distribution, including, among others, global economic conditions, instability in credit markets, declining consumer and business confidence, fluctuating commodity prices and interest rates, volatile foreign currency exchange rates, tax considerations, other challenges that could affect the global economy, specific market conditions in one or more of the industries of the businesses proposed to be separated, and changes in the regulatory or legal environment and the requirement to redeem $12.7 billion of DowDuPont notes if the Corteva Distribution is abandoned or delayed beyond May 1, 2020; (vii) potential liability arising from fraudulent conveyance and similar laws in connection with the Corteva Distribution and/or the Dow Distribution; (viii) disruptions or business uncertainty, including from the Corteva Distribution, could adversely impact business or financial performance and the ability to retain and hire key personnel; (ix) potential inability to access the capital markets; and (x) risks to business, operations and results of operations from: the availability of and fluctuations in the cost of feedstocks and energy; balance of supply and demand and the impact of balance on prices; failure to develop and market new products and optimally manage product life cycles; ability, cost and impact on business operations, including the supply chain, of responding to changes in market acceptance, rules, regulations and policies and failure to respond to such changes; outcome of significant litigation, environmental matters and other commitments and contingencies; failure to appropriately manage process safety and product stewardship issues; global economic and capital market conditions, including the continued availability of capital and financing, as well as inflation, interest and currency exchange rates; changes in political conditions, including trade disputes and retaliatory actions; business or supply disruptions; security threats, such as acts of sabotage, terrorism or war, natural disasters and weather events and patterns which could result in a significant operational event for DowDuPont, adversely impact demand or production; ability to discover, develop and protect new technologies and to protect and enforce DowDuPont’s intellectual property rights; failure to effectively manage acquisitions, divestitures, alliances, joint ventures and other portfolio changes; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management’s response to any of the aforementioned factors. These risks are and will be more fully discussed in Historical DuPont’s current, quarterly and annual reports and other filings made with the U.S. Securities and Exchange Commission, in each case, as may be amended from time to time in future filings with the SEC. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those

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anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on the company’s consolidated financial condition, results of operations, credit rating or liquidity. The company assumes no obligation to publicly provide revisions or updates to any forward-looking statements whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.
 
For further discussion of some of the important factors that could cause the company's actual results to differ materially from those projected in any such forward-looking statements, see the Risk Factors discussion set forth under Part I, Item 1A of the company's 2018 Annual Report.

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Recent Developments

DowDuPont Merger of Equals and the Intended Business Separations
DowDuPont Inc. ("DowDuPont") was formed on December 9, 2015 to effect an all-stock, merger of equals strategic combination between The Dow Chemical Company ("Historical Dow") and Historical DuPont (the "Merger Transaction"). On August 31, 2017 at 11:59 pm ET, (the "Merger Effectiveness Time") pursuant to the Merger Agreement, Historical Dow and Historical DuPont each merged with wholly owned subsidiaries of DowDuPont (the "Mergers") and, as a result of the Mergers, Historical Dow and Historical DuPont became subsidiaries of DowDuPont (collectively, the "Merger"). Prior to the Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the Merger Agreement.

As discussed in the company’s 2018 Annual Report, DowDuPont announced its intent to pursue, subject to the receipt of approval by the Board of Directors of DowDuPont and customary closing conditions, the separation of the combined company's agriculture business, specialty products business and materials science business through a series of tax-efficient transactions (collectively, the "Intended Business Separations" and the transactions to accomplish the Intended Business Separations, the “separations”). In connection with the separations, DowDuPont formed two wholly-owned subsidiaries: Dow Inc., to serve as a holding company for its materials science business, and Corteva, Inc., to serve as a holding company for its agriculture business. On April 1, 2019, DowDuPont completed the separation of its materials science business into a separate and independent public company by way of a pro rata dividend in-kind of Dow Inc’s common stock to holders of record of DowDuPont common stock as of the end of business on March 21, 2019, (the “Dow Distribution”). Prior to the Dow Distribution, Historical Dow conveyed or transferred the assets and liabilities aligned with Historical Dow’s agriculture business to separate legal entities (the “DAS Legal Entities”) and the assets and liabilities associated with its specialty products business to separate legal entities (the “SP Entities”). On April 1, 2019, the DAS Legal Entities and the SP Entities were transferred and conveyed to DowDuPont.

DowDuPont expects to complete the previously announced intended separation of its agriculture business into a separate and independent public company on June 1, 2019 by way of a distribution of Corteva, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Corteva”), through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Corteva’s common stock, par value $0.01 per share, to holders of DowDuPont Common Stock as of a record date to be set by the Company’s Board of Directors, (the “Corteva Distribution” and, together with the Dow Distribution, the “Distributions”).

In furtherance of the Intended Business Separations, the company engaged in a series of internal reorganization and realignment steps (the “Internal Reorganization”) to realign its businesses into three subgroups: agriculture, materials science and specialty products. As part of the Internal Reorganization:

the assets and liabilities aligned with the company’s materials science business, including Historical DuPont’s ethylene and ethylene copolymers business, excluding its ethylene acrylic elastomers business, (“ECP”) were transferred or conveyed to separate legal entities (the “Materials Science Entities”) that were ultimately conveyed by DowDuPont to Dow;
the assets and liabilities aligned with the company’s specialty products business were transferred or conveyed to separate legal entities (“Specialty Products Entities”);
on April 1, 2019, Historical DuPont transferred and conveyed its Materials Science Entities to DowDuPont;
on May 1, 2019, Historical DuPont distributed its Specialty Products Entities to DowDuPont; and
on May 2, 2019, DowDuPont conveyed DAS to the company; in connection with the foregoing, the company issued additional shares of its Common Stock to DowDuPont.

As a result of the foregoing, at May 2, 2019, the company holds all or substantially all the assets and liabilities associated with DowDuPont’s combined agriculture business.

Beginning in the second quarter of 2019, ECP’s financial results for periods prior to April 1, 2019 will be reflected in Historical DuPont's Consolidated Financial Statements as a discontinued operation. Historical DuPont’s specialty products businesses financial results for periods prior to May 1, 2019, will also be reflected in the company’s Consolidated Financial Statements as a discontinued operation beginning in the second quarter of 2019.

The transfer or conveyance of DAS to Historical DuPont will be treated as a transfer of entities under common control. As such, Historical DuPont will record the assets, liabilities, and equity of DAS on its balance sheet at their historical basis. Transfers of businesses between entities under common control requires the financial statements to be presented as if the transaction had occurred at the point at which common control first existed (the "Effective Time of the Merger"). Beginning in the second quarter of 2019, Historical DuPont’s historical financial statements and related notes will be revised to include the historical balances of DAS as of September 1, 2017.


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Separation Agreements
In connection with the Dow Distribution and the intended Corteva Distribution, DowDuPont has entered into or will enter into certain agreements that will 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 DowDuPont, Dow, and Corteva (together, the “Parties” and each a “Party”) , and provide a framework for DowDuPont’s relationship with Dow and Corteva following the separations and Distributions. Effective April 1, 2019, the Parties entered into the following agreements:

Separation and Distribution Agreement - The Parties entered into an agreement that sets forth, among other things, the agreements among the Parties regarding the principal transactions necessary to effect the Distributions. It also sets forth other agreements that govern certain aspects of the Parties’ ongoing relationships after the completion of the Distributions (the "Separation and Distribution Agreement").
Tax Matters Agreement - The Parties entered into an agreement that governs their respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.
Employee Matters Agreement - The Parties entered into an agreement that identifies employees and employee-related liabilities (and attributable assets) to be allocated (either retained, transferred and accepted, or assigned and assumed, as applicable) to the Parties as part of the Distributions and describes when and how the relevant transfers and assignments will occur.
Intellectual Property Cross-License Agreements - Dow and Corteva entered into an Intellectual Property Cross-License Agreement (the “Dow-Corteva IP Cross-License Agreement”). The Intellectual Property Cross-License Agreements set forth the terms and conditions under which the applicable Parties may use in their respective businesses, following each of the Distributions, certain know-how (including trade secrets), copyrights, and software, and certain patents and standards, allocated to another Party pursuant to the Separation and Distribution Agreement.

In connection with the intended Corteva Distribution, DowDuPont expects to enter into additional agreements, including an intellectual property cross-license agreement with Corteva. This agreement will set forth the terms and conditions under which DowDuPont and Corteva may use, in their respective businesses following the Corteva Distribution, certain know-how (including trade secrets), copyrights, and software, and certain patents and standards, allocated to another Party pursuant to the Separation and Distribution Agreement.

Debt Redemption and Revolving Credit Facilities
On March 22, 2019, Historical DuPont issued notices of redemption in full of all of its outstanding notes (the “Make Whole Notes”) listed in the table below:
(in millions)
Amount
4.625% Notes due 2020
$
474

3.625% Notes due 2021
296

4.250% Notes due 2021
163

2.800% Notes due 2023
381

6.500% Debentures due 2028
57

5.600% Senior Notes due 2036
42

4.900% Notes due 2041
48

4.150% Notes due 2043
69

Total
$
1,530


The Make Whole Notes were redeemed on April 22, 2019 at the make-whole redemption prices set forth in the respective Make Whole Notes. On and after the date of redemption, the Make Whole Notes were no longer deemed outstanding, interest on the Make Whole Notes ceased to accrue and all rights of the holders of the Make Whole Notes were terminated.

On May 2, 2019 Historical DuPont terminated its Term Loan Facility and repaid the aggregate outstanding principal amount of $3 billion plus accrued and unpaid interest through and including May 1, 2019.


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In connection with the foregoing, Historical DuPont paid a total of $4.6 billion, which included breakage fees and accrued and unpaid interest on the Make Whole Notes and Term Loan Facility. The company funded the payments with cash from operations and a related party revolving loan of $4.1 billion from Corteva, Inc. with an interest rate of 4.275%, repayable in 5 years. Corteva, Inc. funded its loan to the company with contributions from DowDuPont.

Historical DuPont anticipates the loss on the early extinguishment of debt to be approximately $18 million, primarily related to the difference between the redemption price and the par value of the Make Whole Notes and Term Loan Facility, partially offset by the write-off of unamortized step-up related to the fair value step-up of Historical DuPont’s debt.

In November 2018, Historical DuPont entered into a $3.0 billion five-year revolving credit facility and a $3.0 billion three-year revolving credit facility (the “2018 Revolving Credit Facilities”). Availability of funds was subject to a number of conditions, including Corteva becoming a party to the 2018 Credit Revolving Facilities and the consummation of the separation and distribution of Corteva. On May 2, 2019, the 2018 Revolving Credit Facilities were amended, making the 2018 Revolving Credit Facilities available for Historical DuPont, effective May 2, 2019.  Corteva, Inc will become a party to the 2018 Revolving Credit Facilities upon the separation and distribution from DowDuPont.

On May 7, 2019, DowDuPont publicly announced the record date in connection with the intended Corteva Distribution. In connection with such announcement, the company will be required to mail a notice of redemption to holders of the $1,250 million aggregate principal amount of 2.200% Notes due 2020 and $750 million aggregate principal amount of Floating Rate Notes due 2020 (collectively, the “SMR Notes”) setting forth the date of redemption of the SMR Notes. The date of redemption will be on or before May 24, 2019. On the date of redemption, the company will be required to redeem all of the SMR Notes at a redemption price equal to 100% of the aggregate principal amount of the SMR Notes plus accrued and unpaid interest, if any, up to but excluding the date of redemption. Following the redemption, the SMR Notes will no longer be outstanding and will cease to bear interest and all rights of the holders of the SMR Notes will terminate. Historical DuPont believes the redemption will be funded with a draw down on the related party revolving loan from Corteva, however, the actual redemption could be funded through a combination of the related party loan and contributions.

Capacity Expansions Kapton®
In March 2019, DuPont announced plans to invest more than $200 million in its electronics and imaging product line to increase capacity for the manufacture of Kapton® film at its Circleville, Ohio site due to growing global demand.

DowDuPont Cost Synergy Program
In September and November 2017, DowDuPont and the company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the “Synergy Program”), adopted by the DowDuPont Board of Directors. The Synergy Program is designed to integrate and optimize the organization following the Merger and in preparation for the Intended Business Separations. Based on all actions approved to date under the Synergy Program, Historical DuPont expects to record total pre-tax restructuring charges of $695 million to $755 million, comprised of approximately $420 million to $440 million of severance and related benefits costs; $125 million to $145 million of costs related to contract terminations; and $150 million to $170 million of asset related charges. Actions associated with the Synergy Program, including employee separations, are expected to be substantially complete by the end of 2019.

For the three months ended March 31, 2019, the company recorded a pre-tax charge of $56 million, of which $55 million was recognized in restructuring and asset related charges - net and $1 million was recognized in sundry income - net in the company's interim Consolidated Statements of Operations. The charge was comprised of severance and related benefit costs of $40 million and asset related charges of $16 million.

Future cash payments related to this program are anticipated to be approximately $300 million to $350 million, primarily related to the payment of severance and related benefits, lease termination costs, and contract termination costs. It is possible that additional charges and future cash payments could occur in relation to the restructuring actions. The company anticipates including savings associated with these actions within DowDuPont's cost synergy commitment of $3.6 billion associated with the Merger Transaction.