10-K 1 a2017dwdp10-k.htm 10-K Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number: 001-38196
DOWDUPONT INC.
(Exact name of registrant as specified in its charter)
Delaware
81-1224539
State or other jurisdiction of incorporation or organization
(I.R.S. Employer Identification No.)
c/o The Dow Chemical Company
 
c/o E. I. du Pont de Nemours and Company
2030 Dow Center, Midland, MI 48674
 
974 Centre Road, Wilmington, DE 19805
(989) 636-1000
 
(302) 774-1000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No

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. þ Yes ¨ No

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 the registrant was required to submit and post such files). þ Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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 the 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
 
þ
 
Accelerated filer
 
¨
 
Non-accelerated filer
 
¨
(Do not check if a smaller reporting company)
Smaller reporting company
 
¨
 
 
 
 
 
Emerging growth company
 
¨

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. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes þ No

The aggregate market value of the common equity held by non-affiliates of the registrant as of June 30, 2017, (the last day of the registrant's most recently completed second fiscal quarter), was approximately $76.9 billion based on the last reported closing price of $63.07 per share of Dow common stock, as reported on the New York Stock Exchange on such date. For purposes of this computation, it is assumed that the shares of voting stock held by Directors and Officers would be deemed to be stock held by affiliates. Non-affiliated common stock outstanding at June 30, 2017, was 1,219,870,092 shares. As of September 1, 2017, Dow common stock was not publicly traded.

Total DowDuPont common stock outstanding at January 31, 2018 was 2,329,023,478 shares.

DOCUMENTS INCORPORATED BY REFERENCE
Part III: Proxy Statement for the Annual Meeting of Stockholders to be held on April 25, 2018.



DowDuPont Inc.

ANNUAL REPORT ON FORM 10-K
For the fiscal year ended December 31, 2017

TABLE OF CONTENTS

 
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2


DowDuPont Inc. and Subsidiaries

Throughout this Annual Report on Form 10-K, except as otherwise noted by the context, the terms "Company" or "DowDuPont" used herein mean DowDuPont Inc. and its consolidated subsidiaries.

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,” and similar expressions and variations or negatives of these words.

On December 11, 2015, The Dow Chemical Company (“Dow”) and E. I. du Pont de Nemours and Company (“DuPont”) entered into an Agreement and Plan of Merger, as amended on March 31, 2017, (the “Merger Agreement”) under which the companies would combine in an all-stock merger of equals transaction (the “Merger”). Effective August 31, 2017, the Merger was completed and each of Dow and DuPont became subsidiaries of DowDuPont (Dow and DuPont, and their respective subsidiaries, collectively referred to as the "Subsidiaries").
Forward-looking statements by their nature address matters that are, to varying degrees, uncertain, including the intended separation, subject to approval of the Company’s Board of Directors, of DowDuPont’s agriculture, materials science and specialty products businesses in one or more tax efficient transactions on anticipated terms (the “Intended Business Separations”). Forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events which may not be realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond the Company’s control. Some of the important factors that could cause DowDuPont’s, Dow’s or DuPont’s actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) costs to achieve and achieving the successful integration of the respective agriculture, materials science and specialty products businesses of Dow and DuPont, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, productivity actions, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the combined operations; (ii) costs to achieve and achievement of the anticipated synergies by the combined agriculture, materials science and specialty products businesses; (iii) risks associated with the Intended Business Separations, including conditions which could delay, prevent or otherwise adversely affect the proposed transactions, including possible issues or delays in obtaining required regulatory approvals or clearances related to the Intended Business Separations, associated costs, disruptions in the financial markets or other potential barriers; (iv) disruptions or business uncertainty, including from the Intended Business Separations, could adversely impact DowDuPont’s business (either directly or as conducted by and through Dow or DuPont), or financial performance and its ability to retain and hire key personnel; (v) uncertainty as to the long-term value of DowDuPont common stock; and (vi) risks to DowDuPont’s, Dow’s and DuPont’s business, operations and results of operations from: the availability of and fluctuations in the cost of energy and feedstocks; 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, 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 the Company, adversely impact demand or production; ability to discover, develop and protect new technologies and to protect and enforce the Company’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. 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 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 DowDuPont’s, Dow’s or DuPont’s consolidated financial condition, results of operations, credit rating or liquidity. None of DowDuPont, Dow or DuPont assumes any 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. A detailed discussion of some of the significant risks and uncertainties which may cause results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” (Part I, Item 1A of this Form 10-K).

3


 
DowDuPont Inc.
 
 
PART I
 

ITEM 1. BUSINESS

THE COMPANY
DowDuPont is a holding company comprised of The Dow Chemical Company ("Dow") and E. I. du Pont de Nemours and Company ("DuPont") with the intent to form strong, independent, publicly traded companies in the agriculture, materials science and specialty products sectors that will lead their respective industries through productive, science-based innovation to meet the needs of customers and help solve global challenges. DowDuPont is a Delaware corporation formed on December 9, 2015, for the purpose of effecting an all-stock merger of equals transactions between Dow and DuPont. Pursuant to the Agreement and Plan of Merger, dated December 11, 2015, as amended on March 31, 2017, Dow and DuPont each merged with subsidiaries of DowDuPont and, as a result, became subsidiaries of DowDuPont.

The Company's principal executive offices are located at:

c/o The Dow Chemical Company
2030 Dow Center
Midland, Michigan 48674

c/o E. I. du Pont de Nemours and Company
974 Centre Road
Wilmington, Delaware 19805

Available Information
The Company's annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge through the Investor Relations section of the Company's website (www.dow-dupont.com/investors), as soon as reasonably practicable after the reports are electronically filed or furnished with the U.S. Securities and Exchange Commission (“SEC”). The SEC maintains a website that contains these reports as well as proxy statements and other information regarding issuers that file electronically. The SEC's website is at www.sec.gov. The Company's website and its content are not deemed incorporated by reference into this report.

BUSINESS SEGMENTS AND PRODUCTS
DowDuPont’s worldwide operations are managed through global businesses, which are reported in eight reportable segments: Agriculture; Performance Materials & Coatings; Industrial Intermediates & Infrastructure; Packaging & Specialty Plastics; Electronics & Imaging; Nutrition & Biosciences; Transportation & Advanced Polymers; and, Safety & Construction. Corporate contains the reconciliation between the totals for the reportable segments and the Company’s totals. See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 24 to the Consolidated Financial Statements for additional information concerning the Company’s operating segments.

In the following business descriptions, unaudited pro forma net sales by segment has been included. Pro forma adjustments used in the calculation of pro forma net sales were determined in accordance with Article 11 of Regulation S-X and were based on the historical consolidated financial statements of Dow and DuPont, adjusted to give effect to the Merger as if it had been consummated on January 1, 2016. For additional information on the pro forma adjustments made, see Supplemental Unaudited Pro Forma Combined Financial Information in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

AGRICULTURE
The Agriculture segment leverages the Company’s technology, customer relationships and industry knowledge to improve the quantity, quality and safety of the global food supply and the global agriculture industry. Land available for worldwide agricultural production is increasingly limited so production growth will need to be achieved principally through improving crop yields and productivity. The segment’s two global businesses, Seed and Crop Protection, deliver a broad portfolio of products and services that are specifically targeted to achieve gains in crop yields and productivity, including well-established brands of seed products, crop chemicals, seed treatment, agronomy and digital services. Research and development ("R&D") focuses on leveraging germplasm and plant science technology to increase farmer productivity and to enhance the value of grains and oilseeds through improved seed traits, superior seed germplasm and effective use of crop protection solutions.

4


Seed
Seed is a global leader in developing and supplying advanced plant genetic products and technologies. The Seed business is a global leader in developing, producing and marketing hybrid corn seed and soybean seed varieties, primarily under the PIONEER® brand name, which improve the productivity and profitability of its customers. Additionally, the Seed business develops, produces and markets canola, cotton, sunflower, sorghum, wheat and rice seed, as well as silage inoculants.

Crop Protection
Crop Protection serves the global agriculture industry with crop protection products for field crops such as wheat, corn, soybean and rice, and specialty crops such as fruit, nut, vine and vegetables. Principle crop protection products are weed control, disease control and insect control offerings for foliar or soil application or as a seed treatment.

Merger Remedies - Dow and DuPont
As a condition of regulatory approval for the Merger, in addition to other requirements, Dow was required to divest a portion of Dow AgroSciences’ Brazil Corn Seed business and DuPont was required to divest certain assets related to its crop protection business and R&D organization, as discussed below.

Dow Merger Remedy - Divestiture of a Portion of Dow AgroSciences' Brazil Corn Seed Business
On July 11, 2017, Dow announced it had entered into a definitive agreement with CITIC Agri Fund to sell a select portion of Dow AgroSciences' corn seed business in Brazil, including four corn seed production sites and four research centers, a copy of Dow AgroSciences' Brazilian corn germplasm bank, certain commercial and pipeline hybrids, the MORGAN™ trademark and a license to the DOW SEMENTES™ trademark for 12 months (the "DAS Divested Ag Business"). On November 30, 2017, the sale was completed. See Note 4 to the Consolidated Financial Statements for further information regarding the divestiture.

DuPont Merger Remedy - Divested Agriculture Business
DuPont was required to divest certain assets related to its Crop Protection business and R&D organization. On March 31, 2017, DuPont entered into a definitive agreement (the "FMC Transaction Agreement") with FMC Corporation ("FMC"), under which and effective upon the closing of the transaction on November 1, 2017, FMC acquired DuPont’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 (the "Divested Ag Business"), and DuPont acquired certain assets relating to FMC’s Health and Nutrition segment, excluding its Omega-3 products (the "H&N Business") (collectively, the "FMC Transactions"). See Notes 3 and 4 to the Consolidated Financial Statements for further information regarding the acquisition and divestiture, respectively. The sale of the Divested Ag Business meets the criteria for discontinued operations and as such, earnings are included within income from discontinued operations after income taxes in the Consolidated Statements of Income for all periods subsequent to the Merger.

Details on Agriculture's 2017 net sales, by geographic region, are as follows:

chart-6dwdp201710k.jpg chart-7dwdp201710k.jpg
*
Europe, Middle East and Africa.

5


Products
Key product lines, including crop application, are listed below:

 
Crop Application
Key Product Lines
Canola
Cereals
Corn
Cotton
Range and Pasture
Rice
Soybeans
Sunflower
Trees, Fruits and Vegetables
Others
Seeds
x
x
x
x
 
x
x
x
 
x
Insecticides
x
x
x
x
 
x
x
x
x
x
Fungicides
 
x
x
 
 
x
x
 
x
x
Herbicides
x
x
x
x
x
x
x
x
x
x
Other
x
 
x
x
 
 
 
 
 
 

Major brands and technologies, by key product line, are listed below:

Key Product Lines
Brands and Technologies
Seed Brands
AGROMEN™ 1; DOW™ Seeds; MYCOGEN™ Seeds; NEXERA™; Omega-9 Healthier Oils; OPTIMUM®AQUAMAX® hybrids; PHYTOGEN™; PIONEER® brand corn hybrids; Pioneer Premium Seed Treatment; PIONEER® brand T Series soybeans; PIONEER® brand soybeans with the PLENISH® high oleic trait; PIONEER® brand sunflowers with DUPONT™ EXPRESSSUN® trait; Pioneer PROTECTOR® resistance trait for canola and sunflower; Pioneer MAXIMUS® rapeseed hybrids; and PROPOUND™
Seed Traits and Technologies
ENCIRCA™ Services; ENLIST™; ENLIST DUO™; EXZACT™ Precision Technology; HERCULEX® Insect Protection; GRANULAR®; ACREVALUE™; LEPTRA® hybrids; POWERCORE™ Insect Trait Technology 2; OPTIMUM® ACREMAX™ Family of products; REFUGE ADVANCED™ powered by SMARTSTAX® 2; and SMARTSTAX® Insect Trait Technology 2
Insecticides
ISOCLAST™; LORSBAN™; OPTIMUM® INTRASECT® insect protection products RADIANT™; SENTRICON™; and TRACER™
Fungicides
DITHANE™; INATREQ™; Penthiopyrad family of disease control products - FONTELIS®, VERTISAN®, TREORIS®, FRELIZON®, AYLORA®, INTELLIS®, ORLIAN™, REFINZAR™; and ZORVEC®
Herbicides
ARIGO®; ARYLEX™; BROADWAY™; CLINCHER™; DURANGO™; FENCER™; GARLON™; INSTIGATE®; LONTREL™; MILESTONE™; PANZER™; PRIMUS™; RESICORE™; RINSKOR™; SPIDER™; STARANE™; SURESTART™; and TORDON™
Other
INSTINCT®; LUMIGEN™ Seed Sense family of seed treatment products - LUMIDERM™ and LUMIVIA™; N-SERVE™ Nitrogen Stabilizer; and TELONE™
1.
AGROMEN™ trademark used under license from Agromen Sementes Agricolas Ltda.
2.
SMARTSTAX® and POWERCORE multi-event technology developed by Dow AgroSciences LLC and Monsanto Technology LLC. SMARTSTAX®, the SMARTSTAX® logo, POWERCORE and the POWERCORE logo are trademarks of Monsanto Technology LLC.

U.S. federal regulatory approvals have been obtained for the commercialization of ENLIST™ Corn, Soybeans and Cotton, including the U.S. Environmental Protection Agency's registration of ENLIST DUO™ and ENLIST ONE™ for use with ENLIST™ Corn, Soybeans and Cotton in 34 states. The Company has also secured approvals of ENLIST E3™ Soybeans, ENLIST™ Soybean Seeds and ENLIST™ Corn Seeds in Brazil and Canada and registration of ENLIST E3™ Soybeans in Argentina and Uruguay. The Company received import approval for ENLIST™ Corn from China, and is proceeding with the full launch of ENLIST™ Corn in the U.S. and Canada in 2018.  A successful full system launch of ENLIST™ Cotton occurred in the U.S. in 2017 with an increase in adoption taking place in 2018.  ENLIST™ Corn, ENLIST™ Soybeans and ENLIST E3™ Soybeans are all approved for import into the European Union.  Regulatory approvals for ENLIST™ products in certain other countries are still pending.

Distribution
The Agriculture segment has a diverse worldwide network which markets and distributes the Company's brands to customers globally. This network consists of the Company's sales and marketing organization partnering with distributors, independent retailers and farmers, cooperatives and agents throughout the world.

Key Raw Materials
The major commodities, raw materials and supplies for the Agriculture segment include: benzene derivatives, other aromatics and carbamic acid related intermediates, corn and soybean seeds, insect control products, natural gas and seed treatments.

6


Patents, Trademarks and Licenses
The Agriculture segment has significant technology driven growth, propelled by seed/plant biotechnology and crop protection products and technologies, urban pest management solutions and healthy oils. As a result, the Company uses patents, trademarks, licenses and registrations to protect its investment in germplasm, traits and proprietary chemistries and formulations. The Company also licenses plant biotechnology traits from third parties and engages in research collaborations.

Seasonality
The Company's ability to produce seeds can be materially impacted by weather conditions, local political conditions and the availability of reliable contract farmers. Sales and Operating EBITDA are strongest in the first half of the year, aligning with the planting and growing season in the northern hemisphere. Accounts receivable tends to be higher during the first half of the year, consistent with the peak sales period in the northern hemisphere.

Competition
The Agriculture segment competes with producers of seed/plant biotechnology and crop protection products on a global basis. The Company competes on the basis of technology and trait leadership, price, quality and cost competitiveness. Key competitors include BASF, Bayer, FMC, Monsanto and Syngenta, as well as companies trading in generic crop protection chemicals and regional seed companies.

PERFORMANCE MATERIALS & COATINGS
The Performance Materials & Coatings segment consists of two global businesses - Coatings & Performance Monomers and Consumer Solutions. Using silicones, acrylics and cellulosics-based technology platforms, these businesses serve the needs of the coatings, home care, personal care, appliance and industrial end-markets. The segment has broad geographic reach with R&D and manufacturing facilities located in key geographic regions.

Coatings & Performance Monomers
Coatings & Performance Monomers consists of two businesses: Coating Materials and Performance Monomers. The Coating Materials business leads innovation in technologies that help advance the performance of paints and coatings. Its water-based acrylic emulsion technology revolutionized the global paint industry. The business offers innovative and sustainable product solutions to accelerate paint and coatings performance across diverse market segments, including architectural paints and coatings, as well as industrial coatings applications used in paper, leather, wood, metal packaging, traffic markings, maintenance and protective industries. The Performance Monomers business manufactures critical building blocks needed for the production of coatings, textiles, and home and personal care products. Included in this portfolio is the Plastics Additives business, a worldwide supplier of additives used in a large variety of applications ranging from packaging to consumer appliances and office equipment.

Consumer Solutions
Consumer Solutions consists of three businesses: Home & Personal Care; Silicone Feedstocks & Intermediates; and Performance Silicones. The Home & Personal Care business collaborates closely with global and regional brand owners to deliver innovative solutions for creating new and unrivaled consumer benefits and experiences. Silicone Feedstocks & Intermediates provides standalone silicone and acrylic-based materials that are used in a wide range of applications including adhesion promoters, coupling agents, crosslinking agents, dispersing agents and surface modifiers. Performance Silicones uses innovative, versatile silicone-based technology to provide solutions and ingredients to customers in personal care, consumer goods, silicone elastomers and the pressure sensitive industry.

Ownership Restructure of Dow Corning Corporation
On June 1, 2016, Dow Corning Corporation ("Dow Corning"), previously a 50:50 joint venture with Corning Incorporated ("Corning"), became a wholly owned subsidiary of Dow as a result of an ownership restructure. Dow and Corning continue to maintain their historical proportional equity interest in the HSC Group. See Note 3 to the Consolidated Financial Statements for additional information.


7


Details on Performance Materials & Coatings' 2017 net sales, by geographic region, are as follows:

chart-2dwdp201710k.jpg chart-10dwdp201710k.jpg

Products
Major applications/market segments and products are listed below by business:

Business
Applications/Market Segments
Major Products/Technologies
Coatings & Performance Monomers
Acrylic binders for architectural paints and coatings, industrial coatings and paper; acrylic sheets; adhesives; coatings; dispersants; flocculants and detergents; impact modifiers; inks and paints; molding compounds; opacifiers and surfactants for both architectural and industrial applications; plastics additives; processing aids; protective and functional coatings; rheology modifiers; super absorbents; and textiles
ACOUSTICRYL™ liquid-applied sound damping technology; acrylates; ACRYSOL™ Rheology Modifiers; AVANSE™ acrylic binders; EVOQUE™ Pre-Composite Polymer; foam cell promoters; FORMASHIELD™ acrylic binder; high-quality impact modifiers; MAINCOTE™ acrylic epoxy hybrid; methacrylates; PARALOID™ Edge ISO-free technology; processing aids; RHOPLEX™ acrylic resin; TAMOL™ Dispersants; vinyl acetate monomers; and weatherable acrylic capstock compounds for thermoplastic and thermosetting materials
Consumer Solutions
Personal care, color cosmetics, baby care, home care and specialty applications with a key focus on hair care, skin care, sun care, cleansing, as well as fabric, dish, floor, hard surface and air care applications; commercial glazing; electrical and high-voltage insulation; lamp and luminaire modules assembly; oil and gas; paints and inks; release liners, specialty films and tapes; sporting goods; and 3D printing
Adhesives and sealants; antifoams and surfactants; coatings and controlled release; coupling agents and crosslinkers; EVOLV3D™ printing technology; fluids, emulsions and dispersions; formulating and processing aids; granulation and binders; oils; polymers and emollients; opacifiers; reagents; resins, gels and powders; rheology modifiers; rubber; silicone elastomers; silicon-based materials; solubility enhancers; aerospace composites; surfactants and solvents; XIAMETER® silicones; and DOWSIL™ high-performance silicone-based building products


Key Raw Materials
The major commodities, raw materials and supplies for the Performance Materials & Coatings segment include: acetone, butyl acrylate, aqueous hydrochloric acid, chlorine, methanol, methyl methacrylate, propylene, silica, silicon metal and styrene.

Competition
Performance Materials & Coatings experiences competition in each business within the segment. Competitors include large multinational chemical firms as well as a number of regional and local competitors. Key competitors include Ashland, BASF, Bayer, Owens-Corning, Oxea, Shin-Etsu, Momentive and Wacker.

Joint Ventures
The Performance Materials & Coatings segment includes the Company's share of the results of the HSC Group, a U.S.-based group of companies that manufacture and sell polycrystalline silicon products.


8


INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE
The Industrial Intermediates & Infrastructure segment consists of four global businesses: Construction Chemicals, Energy Solutions, Industrial Solutions, and Polyurethanes & CAV. These customer-centric global businesses develop and market customized materials using advanced technology and unique chemistries. These businesses serve the needs of market segments as diverse as appliance, infrastructure and oil and gas. The segment has broad geographic reach with R&D and manufacturing facilities located in key geographic regions.

Construction Chemicals
Construction Chemicals combines its deep application know-how, materials science and formulation competence to offer manufacturers key building blocks for formulating efficient and differentiated building and construction materials. With a broad range of technologies - including cellulose ethers, redispersible latex powders, silicones and acrylic emulsions - the business is a leading supplier to customers around the world and addresses the specific requirements of the industry across many market segments and applications, from roofing to flooring, and gypsum-, cement-, concrete- or dispersion-based building materials. Construction Chemicals' chemistries are designed to help advance the performance, durability and aesthetics of buildings and infrastructure.

Energy Solutions
Energy Solutions supplies smart, innovative and customized solutions to enhance productivity and efficiency in the oil, gas and mining markets. This business is aligned with all markets of the oil and gas industry - including exploration, production (including enhanced oil recovery), refining, gas processing and gas transmission.

Industrial Solutions
The Industrial Solutions business provides a broad portfolio of sustainable solutions that address world needs by enabling and improving the manufacture of consumer and industrial goods and services. Business solutions include products and innovations that minimize friction and heat in mechanical processes, manage the oil and water interface, deliver active ingredients for maximum effectiveness, facilitate dissolvability, enable product identification and provide the foundational building blocks for the development of chemical technologies. The business supports manufacturers associated with a large variety of end-markets, notably better crop protection offerings in agriculture, coatings, detergents and cleaners, solvents for electronics processing, inks and textiles. Industrial Solutions is also the world’s largest producer of purified ethylene oxide.

Polyurethanes & CAV
The Polyurethanes & CAV business group consists of two businesses: Polyurethanes and Chlor-Alkali & Vinyl ("CAV"). The Polyurethanes business is the world’s largest producer of propylene oxide and propylene glycol, a leading producer of polyether polyols and aromatic isocyanates that serve energy efficiency, consumer comfort and industrial market sectors, and an industry leader in the development of fully formulated polyurethane systems. Propylene oxide is produced using the chlorohydrin process as well as hydrogen peroxide to propylene oxide manufacturing technology 1. The CAV business provides cost advantaged chlorine and caustic soda supply and markets caustic soda, a valuable co-product of the chlor-alkali manufacturing process, and ethylene dichloride and vinyl chloride monomer.

Divestitures
On January 30, 2015, Dow sold its global Sodium Borohydride business to Vertellus Performance Chemicals LLC; on February 2, 2015, Dow sold ANGUS Chemical Company to Golden Gate Capital; and, on October 5, 2015, Dow completed the split-off of its U.S. Gulf Coast Chlor-Alkali and Vinyl, Global Chlorinated Organics and Global Epoxy businesses to Olin Corporation in a tax-efficient Reverse Morris Trust transaction. See Notes 4 and 6 to the Consolidated Financial Statements for additional information.











1.
Hydrogen peroxide to propylene oxide manufacturing technology is utilized by MTP HPPO Manufacturing Company Limited, a Thailand-based consolidated variable interest entity ultimately owned 50 percent by the Company and 50 percent by SCG Chemicals Co. Ltd.; and BASF DOW HPPO Production B.V.B.A., a Belgium-based joint venture ultimately owned 100 percent by HPPO Holding & Finance C.V., which is owned 50 percent by the Company and 50 percent by BASF.

9


Details on Industrial Intermediates & Infrastructure's 2017 net sales, by geographic region, are as follows:

chart-13dwdp201710k.jpg chart-14dwdp201710k.jpg

Products
Major applications/market segments and products are listed below by business:

Business
Applications/Market Segments
Major Products/Technologies
Construction Chemicals
Caulks and sealants, cement-based tile adhesives, concrete solutions, elastomeric roof coatings, exterior insulation and finish systems, industrial non-wovens, plasters and renders, roof tiles and siding, sport grounds and tape joint compounds
AQUASET™ acrylic thermosetting resins,
DOW™ latex powder, LIQUID ARMOR™ flashing and sealant, RHOPLEX™ and PRIMAL™ acrylic emulsion polymers, WALOCEL™ cellulose ethers, WEATHERMATE™ house wrap
Energy Solutions
Helping customers in exploration, production, transmission, refining, mining and gas processing to optimize supply, improve efficiencies and manage emissions
Demulsifiers, drilling and completion fluids, heat transfer fluids, rheology modifiers, scale inhibitors, shale inhibitors, specialty amine solvents, surfactants, water clarifiers, frothing separating agents
Industrial Solutions
Broad range of products for specialty applications, including agriculture crop protection offerings, aircraft deicing, coatings, heat transfer fluids for concentrated solar power, construction, solvents for electronics processing, food preservation, fuel markers, home and personal care, infrastructure, lubricant additives, paper, transportation and utilities
Acetone derivatives, butyl glycol ethers, VERSENE™ Chelants, UCAR™ Deicing Fluids, ethanolamines, ethylene oxide, ethyleneamines, UCON™ Fluids, glycol ethers, UCARTHERM™ Heat Transfer Fluids, higher glycols, isopropanolamines, low-VOC solvents, methoxypolyethylene glycol, methyl isobutyl, polyalkylene glycol, CARBOWAX™ SENTRY™ Polyethylene Glycol, TERGITOL™ and TRITON™ Surfactants
Polyurethanes & CAV
Aircraft deicing fluids, alumina, pulp and paper, appliances, automotive, bedding, building and construction, flooring, footwear, heat transfer fluids, hydraulic and brake fluids, infrastructure, packaging, textiles and transportation
Aniline, caustic soda, ethylene dichloride, methylene diphenyl diisocyanate (“MDI”), polyether polyols, propylene glycol, propylene oxide, polyurethane systems, toluene diisocyanate (“TDI”), vinyl chloride monomer

Key Raw Materials
The major commodities, raw materials and supplies for the Industrial Intermediates & Infrastructure segment include: acetone, aniline, aqueous hydrochloric acid, chlorine, electric power, ethylene, methanol, natural gas, propylene, styrene and hydrogen peroxide, which is produced internally and procured through a consolidated variable interest entity and a joint venture.

Competition
Competitors of the Industrial Intermediates & Infrastructure segment include many large multinational chemical firms, chemical divisions of major national and international oil companies, and regional and local competitors. The segment's products have unique performance characteristics that are required by customers who demand a high level of customer service and expertise from our sales force and scientists. Key competitors include Arkema, Ashland, BASF, Bayer, Eastman, Elementis, Huntsman, Hexion, INEOS, Olin, Owens-Corning and Oxea.


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Joint Ventures
The Industrial Intermediates & Infrastructure segment includes a portion of the Company's share of the results of the following joint ventures:

EQUATE Petrochemical Company K.S.C. ("EQUATE") - a Kuwait-based company that manufactures ethylene, polyethylene and ethylene glycol, and manufactures and markets monoethylene glycol, diethylene glycol and polyethylene terephthalate resins; owned 42.5 percent by the Company.
The Kuwait Olefins Company K.S.C. ("TKOC") - a Kuwait-based company that manufactures ethylene and ethylene glycol; owned 42.5 percent by the Company.
Map Ta Phut Olefins Company Limited - effective ownership is 32.77 percent of which the Company directly owns 20.27 percent (aligned with Industrial Intermediates & Infrastructure) and indirectly owns 12.5 percent through its equity interest in Siam Polyethylene Company Limited and Siam Synthetic Latex Company Limited (both part of The SCG-Dow Group and aligned with Packaging & Specialty Plastics). This Thailand-based company manufactures propylene and ethylene.
Sadara Chemical Company ("Sadara") - a Saudi Arabian company that manufactures chlorine, ethylene, propylene and aromatics for internal consumption and manufactures and sells polyethylene, ethylene oxide and propylene oxide derivative products, and isocyanates; owned 35 percent by the Company.

Dow is responsible for marketing a majority of Sadara products outside of the Middle East zone through Dow’s established sales channels. As part of this arrangement, Dow purchases and sells Sadara products for a marketing fee.

PACKAGING & SPECIALTY PLASTICS
The Packaging & Specialty Plastics segment is a market-oriented portfolio composed of two global businesses: Hydrocarbons & Energy and Packaging and Specialty Plastics. The segment is advantaged through its low cost position into key feedstocks and broad geographic reach, with manufacturing facilities located in all geographic regions. It also benefits from R&D expertise to deliver leading-edge technology that provides a competitive benefit to customers in food packaging and other high-growth end-use markets like transportation and consumer durables. Taken together, the businesses in this segment represent the world's leading plastics franchise.

Hydrocarbons & Energy
The Hydrocarbons & Energy business is one of the largest global producers of ethylene, an internal feedstock that is consumed primarily within the Packaging & Specialty Plastics segment. In addition to ethylene, the business is a leading producer of propylene and aromatics products that are used to manufacture materials that consumers use every day. It also produces and procures the power used by the Company's manufacturing sites. The business leverages its global scale, operational discipline and feedstock flexibility to create a cost-advantaged foundation for the Company’s downstream, market-driven businesses. In the U.S. & Canada, the increased supplies of natural gas and natural gas liquids (“NGLs”) remain a key cost-competitive advantage for the Company's ethane- and propane-based production. The Company's U.S. and European ethylene production facilities have the flexibility to use different feedstocks in response to price conditions.

Packaging and Specialty Plastics
Packaging and Specialty Plastics serves high-growth, high-value sectors using world-class technology and a rich innovation pipeline that creates competitive advantages for customers and the entire value chain. The business is also a leader in polyolefin elastomers and ethylene propylene diene monomer elastomers. Market growth is expected to be driven by major shifts in population demographics; improving socioeconomic status in emerging geographies; consumer and brand owner demand for increased functionality; global efforts to reduce food waste; growth in telecommunications networks; global development of electrical transmission and distribution infrastructure; and renewable energy applications.

Acquisition and Divestiture
On September 1, 2017, Dow sold its global Ethylene Acrylic Acid copolymers and ionomers business to SK Global Chemical Co., Ltd. On May 5, 2015, Univation Technologies, LLC, previously a 50:50 joint venture between Dow and ExxonMobil Chemical Company, became a wholly owned subsidiary of Dow. See Notes 3 and 4 to the Consolidated Financial Statements for further information.


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Details on Packaging & Specialty Plastics' 2017 net sales, by geographic region, are as follows:

chart-5dwdp201710k.jpg chart-8dwdp201710k.jpg

Products
Major applications/market segments and products are listed below by business:

Business
Applications/Market Segments
Major Products
Hydrocarbons & Energy
Purchaser of feedstocks; production of cost competitive hydrocarbon monomers utilized by derivative businesses; and energy, principally for use in the Company's global operations
Ethylene, propylene, benzene, butadiene, octene, aromatics co-products, power, steam, other utilities

Advantaged feedstock positions in the United States, Canada, Argentina and the Middle East
Packaging and Specialty Plastics
Adhesives, construction, cosmetics, electrical transmission and distribution, food and supply chain packaging, footwear, housewares, health and hygiene, industrial specialties, irrigation pipe, photovoltaic, sporting goods, telecommunications infrastructure, and toys and infant products
Acrylics, bio-based plasticizers, elastomers, ethylene copolymer resins, ethylene propylene diene monomer elastomers ("EPDMs"), ethylene vinyl acetate copolymer, methacrylic acid copolymer resins, polyethylene, high-density polyethylene, low-density polyethylene, linear low-density polyethylene, polyolefin plastomers, resin additives and modifiers, semiconductive and jacketing compound solutions and wire and cable insulation

Key Raw Materials
The major commodities, raw materials and supplies for the Packaging & Specialty Plastics segment include: benzene, butane, condensate, electric power, ethane, ethylene, hexene, naphtha, octene, propane, propylene and pygas.

Competition
Competition for the Packaging & Specialty Plastics segment includes chemical divisions of major national and international oil companies, which compete in the United States and abroad. The Company competes worldwide on the basis of product quality, product supply, technology, price and customer service. Packaging & Specialty Plastics will continue to benefit from an advantaged feedstock position, including favorable shale gas dynamics in the United States, which will further strengthen the Company's low-cost position and enhance global cost competitiveness. Key competitors include BASF, Borealis, Braskem, CP Chem, ExxonMobil, INEOS, LyondellBasell, Mitsui, SABIC, Solvay and Westlake.

Joint Ventures
Joint ventures play an integral role within the Packaging & Specialty Plastics segment by dampening earnings cyclicality and improving earnings growth. Principal joint ventures impacting the Packaging & Specialty Plastics segment are noted in the following section:

Aligned 100 percent with Packaging & Specialty Plastics:
The Kuwait Styrene Company K.S.C. - a Kuwait-based company that manufactures styrene monomer; owned 42.5 percent by the Company.
The SCG-Dow Group consists of Siam Polyethylene Company Limited; Siam Polystyrene Company Limited; Siam Styrene Monomer Co., Ltd.; and Siam Synthetic Latex Company Limited. These Thailand-based companies manufacture polyethylene, polystyrene, styrene and latex; owned 50 percent by the Company.


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Packaging & Specialty Plastics includes a portion of the results of:
EQUATE - a Kuwait-based company that manufactures ethylene, polyethylene and ethylene glycol; and manufactures and markets monoethylene glycol, diethylene glycol and polyethylene terephthalate resins; owned 42.5 percent by the Company.
TKOC - a Kuwait-based company that manufactures ethylene and ethylene glycol; owned 42.5 percent by the Company.
Map Ta Phut Olefins Company Limited - effective ownership is 32.77 percent of which the Company directly owns 20.27 percent (aligned with Industrial Intermediates & Infrastructure) and indirectly owns 12.5 percent through its equity interest in Siam Polyethylene Company Limited and Siam Synthetic Latex Company Limited (both part of The SCG-Dow Group and aligned with Packaging & Specialty Plastics). This Thailand-based company manufactures propylene and ethylene.
Sadara - a Saudi Arabian company that manufactures chlorine, ethylene, propylene and aromatics for internal consumption and manufactures and sells polyethylene, ethylene oxide and propylene oxide derivative products, and isocyanates; owned 35 percent by the Company.

Dow is responsible for marketing a majority of Sadara products outside of the Middle East zone through Dow’s established sales channels. As part of this arrangement, Dow purchases and sells Sadara products for a marketing fee.

Current and Future Investments
Dow announced a number of investments in the U.S. Gulf Coast to take advantage of increasing supplies of low-cost natural gas and NGLs derived from shale gas including: the restart of the St. Charles Operations ("SCO-2") ethylene production facility in December 2012; construction of a new on-purpose propylene production facility, which commenced operations in December 2015; an expansion in December 2016 of an ethylene production facility in Plaquemine, Louisiana, by up to 250 kilotonnes per annum ("KTA") and modifications to enable full ethane cracking flexibility; and, construction of a new world-scale ethylene production facility in Freeport, Texas, which commenced operations in the third quarter of 2017, and a capacity expansion project which will bring the facility's total ethylene capacity to 2,000 KTA. As a result of these investments, the Company’s exposure to purchased ethylene and propylene is expected to decline, offset by increased exposure to ethane- and propane-based feedstocks. The Company's global ethylene production capabilities are expected to increase by more than 25 percent relative to the 2012 baseline.

In 2016, Dow completed an expansion of a gas-phase polyethylene production facility in Seadrift, Texas. Expansion projects are currently underway at Dow’s gas-phase polyethylene units in St. Charles, Louisiana, with expected start-up in mid-2018. In May 2017, Dow announced the construction of a world-scale 600 KTA polyethylene production facility in the U.S. Gulf Coast and a series of incremental debottleneck projects which will result in 350 KTA of additional polyethylene, the majority of which will be in the U.S. & Canada; and construction of a new world-scale 450 KTA polyolefins production facility in Europe. Dow is also building four new production facilities on the U.S. Gulf Coast to leverage an advantaged feedstock position to support profitable growth of the Company’s high value performance plastics franchise, which include: an ELITE™ Polymer production facility, which commenced operations in 2017 in coordination with the new ethylene production facility; a Low Density Polyethylene ("LDPE") production facility and a NORDEL™ Metallocene EPDM production facility, which are expected to start-up in early 2018; and a High Melt Index ("HMI") specialty and conventional Polyolefin Elastomers production facility, which is expected to start-up in late 2018.

ELECTRONICS & IMAGING
Electronics & Imaging is a leading global supplier of differentiated materials and systems for a broad range of consumer electronics including mobile devices, television monitors, personal computers and electronics used in a variety of industries. The segment is a leading supplier of key materials for the manufacturing of photovoltaics ("PV"), solar cells and of materials and printing systems to the advanced printing industry and of materials and solutions for the fabrication of semiconductors and integrated circuits addressing both front-end and back-end of the manufacturing process. By providing chemical mechanical planarization ("CMP") pads and slurries, photoresists and advanced coatings for lithography, removers and cleaners, dielectric and metallization solutions for back-end-of-line advanced chip packaging, along with silicones for light emitting diode ("LED") packaging and semiconductor applications, the segment offers the broadest portfolio of semiconductor and advanced packaging materials in the market. Electronics & Imaging also provides permanent and process chemistries for the fabrication of printed circuit boards to include laminates and substrates, electroless and electrolytic metallization solutions, as well as patterning solutions and materials and innovative metallization processes for metal finishing, decorative, and industrial applications. Electronics & Imaging is a leading global supplier of innovative metallization pastes and back sheet materials for the production of solar cells and solar modules for the PV industry (solar modules, which are made up of solar cells and other materials, are installed to generate power) and in the packaging graphics industry providing flexographic printing inks, photopolymer plates, and platemaking systems used in digital printing applications for textile, commercial and home-office use. In addition, the segment provides cutting-edge materials for the manufacturing of rigid and flexible displays for liquid crystal displays ("LCD"), advanced-matrix organic light emitting diode ("AMOLED"), and quantum dot ("QD") applications. Electronics & Imaging addresses all of these markets by leveraging a strong science and technology base to provide the critical materials and solutions for creating a more connected and digital world.


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Divestitures
On June 30, 2017, Dow sold its ownership interest in the SKC Haas Display Films group of companies ("SKC Haas Display Films") and in January 2017 DuPont divested its Authentications business.

Ownership Restructure of Dow Corning Corporation
On June 1, 2016, Dow Corning, previously a 50:50 joint venture with Corning, became a wholly owned subsidiary of Dow as a result of an ownership restructure. See Note 3 to the Consolidated Financial Statements for additional information.

Details on Electronics & Imaging's 2017 net sales, by geographic region, are as follows:

chart-16dwdp201710k.jpg chart-9dwdp201710k.jpg

Products
Major applications/market segments and technologies are listed below by major product line:

Major Product Line
Applications/Market Segments
Technologies
Semiconductor Technologies
Integrated circuit fabrication for memory and logic and semiconductor fabrication
CMP consumables, photolithography materials, semiconductor fabrication materials, fabrication cleaners and removers, advanced chip packaging materials and thermal management materials

Circuit & Industrial Technologies
Printed circuit board, electronic and industrial finishing
Circuit packaging materials, Interconnect metallization and imaging process chemistries, dry film laminates, and flexible circuit materials
Photovoltaic and Advanced Materials
Photovoltaics, aerospace/aircraft, automotive, military and consumer electronics
Metallization pastes, thick film pastes, polyvinyl fluoromaterials, silicone encapsulants and silane precursors
Advanced Printing
Flexographic printing and inkjet printing
Flexographic printing plates and materials and digital inks
Display Technologies
Display materials
OLED materials, Cd-free quantum dots, diplay process chemistries, LED encapsulants and display enhancement solutions


Key Raw Materials
The major commodities, raw materials and supplies for the Electronics & Imaging segment include: acrylic monomers, acetoxystyrene monomer, black and color pigments, styrenic block copolymers, color dyes, copper, difluoroethane, diglycolamine, dimethylacetamide ("DMAC"), hydrogen chloride, hydroxylamine, nickel, oxydianiline, photoactive compounds, polyester and other polymer films, precious metals, polyurethane resins, pyromellitic dianhydride, silicon metal, solvents and tin.


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Competition
Electronics & Imaging's competitors include many large multinational firms as well as a number of regional and local competitors. The segment's products have unique performance characteristics that are required by customers who demand a high-level of customer service and technical expertise from the Company's sales force and scientists; therefore, the Company is well positioned to withstand competitive threats. Key competitors include Cabot Microsystems, JSR Micro, Platform Specialty Products, EMerck, Huntsman, LONGi Green Energy, ShinEtsu and 3M.

NUTRITION & BIOSCIENCES
Nutrition & Biosciences is an innovation-driven and customer-focused segment that provides solutions for the global food and beverage, pharma, personal care, energy and animal nutrition markets. It consists of two operating segments: Nutrition & Health and Industrial Biosciences.

Industrial Biosciences
The Industrial Biosciences business is an industry pioneer and innovator that works with customers to improve the performance, productivity and sustainability of their products and processes through biotechnology and engineering solutions including enzymes, biomaterials, biocides and antimicrobial solutions and process technology. Industrial Biosciences offers better, cleaner and safer solutions to a wide range of industries including animal nutrition, biofuels, apparel and textiles, food and beverages, cleaning, personal care, fertilizers, and oil and gas.

Nutrition & Health
The Nutrition & Health business is one of the world’s largest producers of specialty food ingredients, developing and manufacturing solutions for the global food and beverage market. Its innovative and broad portfolio of natural-based ingredients marketed under the DuPont DANISCO® brand serves to improve health and nutrition as well as taste and texture in a wide range of dairy, beverage, bakery and dietary supplement applications. Its probiotics portfolio, including the HOWARU® brand, is world famous for its extensively documented strains that deliver consumers benefits in digestive and immune health. In addition to serving the global food and beverage market, the Nutrition & Health business is one of the world's largest producers of cellulosic- and alginates-based pharma excipients, used to improve the functionality and delivery of pharmaceuticals, and enabling the development of more effective pharma solutions.

Divestiture
In February 2017, DuPont completed the sale of its global food safety diagnostic business, a part of the Nutrition & Health business, to Hygiena LLC.

Acquisition of Health and Nutrition Business
On March 31, 2017, DuPont entered into the FMC Transaction Agreement with FMC, under which and effective upon the closing of the transaction on November 1, 2017, FMC acquired the Divested Ag Business as required in order to obtain European Commission ("EC") approval of the Merger and 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"). The H&N Business will be integrated into the Nutrition & Biosciences segment to enhance the Company’s position as a leading provider of sustainable, bio-based food ingredients and allow for expanded capabilities in the pharma excipients space.  See further discussion of this acquisition in Note 3 to the Consolidated Financial Statements.

Details on Nutrition & Biosciences' 2017 net sales, by geographic region, are as follows:

chart-1dwdp201710k.jpg chart-15dwdp201710k.jpg

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Products
Major applications and products are listed below by business:

Business
Applications
Major Products
Industrial Biosciences
Animal nutrition, detergents, biofuels production, food and beverage, carpet and apparel fiber, sulfuric acid, oil refining, phosphate fertilizer and providing expertise and localized solutions for microbial control for well souring, industrial cooling water, fabric odor elimination and in-can preservation and dry film protection
Enzymes, BIO-PDO™ propanediol, SORONA® PTT polymer, yeast, betaine, direct-fed microbials, MECS® sulfuric acid technology, BELCO® clean air technologies, STRATCO® alkylation technology, ISOTHERMING® hydroprocessing, SILVADUR™ antimicrobial, glutaraldehyde
Nutrition & Health
Food and beverage, dietary supplements, child nutrition, sports nutrition and oral dosage pharmaceuticals excipients
Cellulosic and other technologies help bring new classes of medicines to market and enable foods that are healthier (gluten-free, reduced oil/fat content). Notable technologies include excipients and active pharmaceutical ingredients, solubility enhancers, reagents, granulation and binders, as well as coatings and controlled release.

Other major products include probiotics, soy protein, fibers, cultures, antioxidants, antimicrobials, emulsifiers, texturants, ingredient systems and sweeteners.

Key Raw Materials
The major commodities, raw materials and supplies for the Nutrition & Biosciences segment include: terephthalic acid, gelatin, glycols, cellulose processed grains (including dextrose and glucose), guar, organic oils, peels, saccharides, seaweed, soybeans, sugars and yeasts.

Competition
Nutrition & Biosciences' competitors include many large multinational nutrition and biosciences companies as well as a number of regional and local competitors. The segment's products have unique performance characteristics that are required by customers who demand a high-level of customer service and technical expertise from the Company's sales force and scientists; therefore, the Company is well positioned to withstand competitive threats. Key competitors include Novozymes A/S, Royal DSM, Chr. Hansen and BASF.

Current and Future Investments
In November 2016, DuPont announced an investment to expand probiotics production capacity in the United States. The investment is the second phase of a broader probiotics expansion project due to the rapidly growing global demand for probiotics. Phase one, supporting current growth, in Madison, Wisconsin, and Rochester, New York, is complete as of the end of 2017. The second phase, scheduled to span two-years, represents an investment of approximately $100 million, and increases DuPont's probiotics production capacity by an additional 70 percent. Construction is underway in 2017, and production will be optimized with the installation of new, high-volume fermenters and other processing equipment.

TRANSPORTATION & ADVANCED POLYMERS
Transportation & Advanced Polymers provides high-performance engineering resins, adhesives, lubricants and parts to engineers and designers in the transportation, electronics, medical, industrial and consumer end-markets to enable systems solutions for demanding applications and environments.

The segment delivers a broad range of polymer-based high-performance materials in its product portfolio, including elastomers and thermoplastic and thermoset engineering polymers which are used by customers to fabricate components for mechanical, chemical and electrical systems. The segment produces innovative and differentiated adhesive technologies to meet customer specifications for durability, crash performance and healthcare applications. Transportation & Advanced Polymers also targets the performance plastics and fluid solutions markets by developing technologies that differentiate customers’ products with improved performance characteristics.


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Pending Divestiture
On October 10, 2017, DuPont, along with Teijin Limited, entered into an agreement to sell DuPont Teijin Films to Indorama Ventures Public Company Limited, a global chemical producer. The transaction is expected to be completed in the first half of 2018, subject to regulatory approvals. 

Ownership Restructure of Dow Corning Corporation
On June 1, 2016, Dow Corning, previously a 50:50 joint venture with Corning, became a wholly owned subsidiary of Dow as a result of an ownership restructure. See Note 3 to the Consolidated Financial Statements for additional information.

Details on Transportation & Advanced Polymers' 2017 net sales, by geographic region, are as follows:

chart-4dwdp201710k.jpg chart-11dwdp201710k.jpg

Products
Major applications and products are listed below by major product line, all which serve the transportation industry and electronics, medical, industrial and consumer end-markets.

Major Product Line
Major Products
Performance Resins

HYTREL® polyester thermoplastic elastomer resins, DELRIN® acetal resins, VAMAC® ethylene acrylic elastomer, and MULTIBASE™ TPSiV™ silicones for thermoplastics
Nylon & Polyesters

DUPONT™ ZYTEL® nylon resins, CRASTIN® PBT thermoplastic polyester resin, RYNITE® PET polyester resin and TYNEX® filaments
Performance Solutions
KALREZ® perfluoroelastomer, VESPEL® parts and shapes, MOLYKOTE® lubricants, DOW CORNING® silicone solutions for healthcare, BETASEAL™, BETAMATE™ and BETAFORCE™ structural and elastic adhesives

Key Raw Materials
The major commodities, raw materials and supplies for the Transportation & Advanced Polymers segment include: Adipic acid, butanediol, carbon black, dimethyl terephthalate, epoxy resins, fiberglass, flame retardants, hexamethylene diamine, methanol, polyethylene terephthalate, purified terephthalic acid and silicones.

Competition
Transportation & Advanced Polymers' competitors include many large multinational chemical firms as well as a number of regional and local competitors. The segment's products have unique performance characteristics that are required by customers who demand a high-level of customer service and technical expertise from the Company's sales force and scientists; therefore, the Company is well positioned to withstand competitive threats. Key competitors include BASF, Celanese, Royal DSM N.V., EMS, Henkel, Kluber, Mitsubishi, Sika and Wacker.

SAFETY & CONSTRUCTION
Safety & Construction is the global leader in providing innovative engineered products and integrated systems for a number of industries including construction, worker safety, energy, oil and gas, transportation, medical devices and water purification and separation. Safety & Construction addresses the growing global needs of businesses, governments and consumers for solutions that make life safer, healthier and better.


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Innovation is the business imperative. By uniting market-driven science with the strength of highly regarded brands including DUPONT™ KEVLAR® high-strength material, NOMEX® thermal-resistant material, CORIAN® solid surfaces, TYVEK® selective barriers, Dow FILMTEC™ reverse osmosis elements, Dow STYROFOAM™ insulation and Dow GREAT STUFF™ do it yourself products, the segment strives to bring new products and solutions to solve customers' needs faster, better and more cost effectively. Safety & Construction is investing in future growth initiatives such as the protection of perishable and temperature-sensitive foods and pharmaceutical products, new roofing products, flame resistant cargo containers, protective clothing with much higher levels of arc protection for utilities, more comfortable and higher particulate protection hoods for firefighters and high recovery reverse osmosis elements. Through the sustainable solutions product line, the segment is a leader in safety consulting, selling training products as well as consulting services, to improve the safety, productivity and sustainability of organizations across a range of industries.

Details on Safety & Construction's 2017 net sales, by geographic region, are as follows:

chart-3dwdp201710k.jpg chart-12dwdp201710k.jpg

Products
Major applications and products are listed below by major product line:

Major Product Line
Applications / Market Segments
Major Products / Technologies
Protection Solutions
Industrial personnel protection, military and emergency response, medical devices, automotive, aerospace, oil and gas and solid surfaces
DUPONT™ KEVLAR® fiber; DUPONT™ NOMEX® fiber and paper; DUPONT™ TYVEK® protective materials; DUPONT™ TYCHEM® protective suits; DUPONT™ CORIAN® solid and quartz surfaces
Building Solutions
Rigid and spray foam insulation, weatherization, waterproofing and air sealing, caulks and sealants and roof coatings
DUPONT™ TYVEK® weatherization products, STYROFOAM™ brand insulation products, THERMAX™ exterior insulation, WALOCEL™ cellulose ethers, WEATHERMATE™ house wrap, XENERGY™ high performance insulation, LIQUIDARMOR™ flashing and sealant, GREAT STUFF™ insulating foam sealants and adhesives
Water Solutions
Water filtration and purification technology for residential and industrial use. Key industries include municipal, power, electronics, pharmaceuticals, food and beverage, mining and oil and gas applications
DOWEX™ and AMBERLITE™ ion exchange resins, DOW FILMTEC™ reverse osmosis and nanofiltration elements, INTEGRAFLUX™ ultrafiltration modules and FORTILIFE™ challenging water reverse osmosis membranes

Key Raw Materials
The major commodities, raw materials and supplies for the Safety & Construction segment include: alumina trihydrate, aniline, benzene, calcium chloride, carbon monoxide, chlorine, divinyl benzene monomers, high-density polyethylene, isophthalic acid, metaphenylenediamine, methyl methacrylate, methylpentanediol, polyester resin, polypropylene, polystyrene, sulfuric acid and terephthalic acid.

Competition
Safety & Construction's competitors include many large multinational chemical firms as well as a number of regional and local competitors. The segment's products have unique performance characteristics that are required by customers who demand a high level of customer service and expertise from its sales force and scientists; therefore, the Company is well positioned to withstand

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competitive threats. Key competitors include 3M, Honeywell, Toray, Teijin, DSM, Kingspan, Owens-Corning, Hydranautics, Lanxess and Purolite.

CORPORATE
Corporate includes certain enterprise and governance activities (including insurance operations, environmental operations, geographic management, etc.); business incubation platforms; non-business aligned joint ventures; gains and losses on the sales of financial assets; severance costs; non-business aligned litigation expenses; discontinued or non-aligned businesses and pre-commercial activities.

Divestiture
On July 31, 2015, Dow sold its AgroFresh business to Boulevard Acquisition Corp., which was subsequently renamed AgroFresh Solutions, Inc. (“AFSI”).

RAW MATERIALS
The Company operates in an integrated manufacturing environment. Basic raw materials are processed through many stages to produce a number of products that are sold as finished goods at various points in those processes. The major raw material stream that feeds the production of the Company’s finished goods, primarily in its materials science businesses, is hydrocarbon-based raw materials. The Company purchases hydrocarbon raw materials including ethane, propane, butane, naphtha and condensate as feedstocks. These raw materials are used in the production of both saleable products and energy. The Company also purchases certain monomers, primarily ethylene and propylene, to supplement internal production. The Company purchases natural gas, primarily to generate electricity, and purchases electric power to supplement internal generation. The Company also produces a portion of its electricity needs in Delaware, Louisiana, New Jersey, Texas and Virginia; Alberta, Canada; the Netherlands; and Germany.

The Company had adequate supplies of raw materials during 2017, and expects to continue to have adequate supplies of raw materials in 2018.

INDUSTRY SEGMENTS AND GEOGRAPHIC REGION RESULTS
See Note 24 to the Consolidated Financial Statements for information regarding total net sales, pro forma net sales, pro forma Operating EBITDA and total assets by segment, as well as sales and total assets by geographic region.

SIGNIFICANT CUSTOMERS AND PRODUCTS
All products and services are marketed primarily through the Company’s sales force, although in some instances more emphasis is placed on sales through distributors. In 2017, no significant portion of the Company's sales was dependent upon a single customer.

RESEARCH AND DEVELOPMENT
The Company is engaged in a continuous program of basic and applied research to develop new products and processes, to improve and refine existing products and processes and to develop new applications for existing products. Research and development expenses were $2,110 million in 2017, $1,584 million in 2016 and $1,598 million in 2015.

PATENTS, LICENSES AND TRADEMARKS
The Company continually applies for and obtains U.S. and foreign patents and has a substantial number of pending patent applications throughout the world. At December 31, 2017, the Company owned approximately 12,600 active U.S. patents and 39,000 active foreign patents as follows:
 
Patents Owned at Dec 31, 2017

United States
Foreign
Dow
6,100

29,100

DuPont
6,500

9,900

Total
12,600

39,000



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Remaining Life of Patents Owned at Dec 31, 2017
United States
Foreign
Within 5 years
3,100

8,200

6 to 10 years
3,200

13,600

11 to 15 years
5,100

15,900

16 to 20 years
1,200

1,300

Total
12,600

39,000

 
As a science and technology based company, DowDuPont believes that securing intellectual property is an important part of protecting its research. Some DowDuPont businesses operate in environments in which the availability and protection of intellectual property rights affect competition. The Company, through its consolidated subsidiaries, is party to a substantial number of patent licenses and other technology agreements. The Company also owns or licenses a substantial number of trademarks in the United States and in other countries. Although the Company considers that its patents, licenses and trademarks in the aggregate constitute a valuable asset, it does not regard its business as being materially dependent on any single or group of related patents, licenses or trademarks.

PRINCIPAL PARTLY OWNED COMPANIES
DowDuPont’s principal nonconsolidated affiliates at December 31, 2017, including direct or indirect ownership interest for each, are listed below:

Principal Nonconsolidated Affiliate
Ownership Interest
Business Description
EQUATE Petrochemical Company K.S.C.
42.50
%
A Kuwait-based company that manufactures ethylene, polyethylene and ethylene glycol, and manufactures and markets monoethylene glycol, diethylene glycol and polyethylene terephthalate resins
The HSC Group:
 
 
DC HSC Holdings LLC 1
50.00
%
A U.S.-based group of companies that manufactures polycrystalline silicon products
Hemlock Semiconductor L.L.C.
50.10
%
A U.S. company that sells polycrystalline silicon products
The Kuwait Olefins Company K.S.C.
42.50
%
A Kuwait-based company that manufactures ethylene and ethylene glycol
The Kuwait Styrene Company K.S.C.
42.50
%
A Kuwait-based company that manufactures styrene monomer
Map Ta Phut Olefins Company Limited 2
32.77
%
A Thailand-based company that manufactures propylene and ethylene
Sadara Chemical Company 3
35.00
%
A Saudi Arabian company that manufactures chlorine, ethylene, propylene and aromatics for internal consumption and manufactures and sells polyethylene, ethylene oxide and propylene oxide derivative products, and isocyanates
The SCG-Dow Group:
 
 
Siam Polyethylene Company Limited
50.00
%
A Thailand-based company that manufactures polyethylene
Siam Polystyrene Company Limited
50.00
%
A Thailand-based company that manufactures polystyrene
Siam Styrene Monomer Co., Ltd.
50.00
%
A Thailand-based company that manufactures styrene
Siam Synthetic Latex Company Limited
50.00
%
A Thailand-based company that manufactures latex
1.
DC HSC Holdings LLC holds an 80.5 percent indirect ownership interest in Hemlock Semiconductor Operations LLC.
2.
Dow's effective ownership of Map Ta Phut Olefins Company Limited is 32.77 percent, of which Dow directly owns 20.27 percent and indirectly owns 12.5 percent through its equity interest in Siam Polyethylene Company Limited and Siam Synthetic Latex Company Limited.
3.
Dow is responsible for marketing the majority of Sadara products outside of the Middle East zone through Dow's established sales channels. Under this arrangement, Dow purchases and sells Sadara products for a marketing fee.

See Note 12 to the Consolidated Financial Statements for additional information regarding nonconsolidated affiliates.


20


FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
In 2017, the Company derived 66 percent of its net sales and had 36 percent of its property investment outside the United States. While the Company’s international operations may be subject to a number of additional risks, such as changes in foreign currency exchange rates and geopolitical risks in emerging geographies, the Company does not regard its foreign operations, on the whole, as carrying any greater risk than its operations in the United States. Information on sales and long-lived assets by geographic region for each of the last three years appears in Note 24 to the Consolidated Financial Statements, and discussions of the Company’s risk management program for foreign currency exchange and interest rate risk management appear in Part I, Item 1A. Risk Factors; Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk; and Note 21 to the Consolidated Financial Statements.

PROTECTION OF THE ENVIRONMENT
Matters pertaining to the environment are discussed in Part I, Item 1A. Risk Factors; Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations; and Notes 1 and 16 to the Consolidated Financial Statements.

EMPLOYEES
At December 31, 2017, the Company permanently employed approximately 98,000 people on a full-time basis.

OTHER ACTIVITIES
Dow engages in the property and casualty insurance and reinsurance business primarily through its Liana Limited subsidiaries.


21


EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information related to the Company's executive officers as of February 15, 2018:

Name - Age
Present Position with Registrant
Year Elected to be an Officer
Other Business Experience since January 1, 2013
Edward D. Breen, 61
Chief Executive Officer
2017
DuPont: Board of Directors February 2015 to date; Interim Chair of the Board and CEO October 2015 to date; Immediately prior to joining DuPont, member of Comcast Corporation: Board of Directors February 2014 to date; New Mountain Capital LLC: Advisory Board Member.
James C. Collins, Jr., 55
Chief Operating Officer for the Agriculture Division
2017
DuPont: Executive Vice President Agriculture business January 2016 to date; Executive Vice President Electronics & Communications, Industrial Biosciences and Performance Materials businesses December 2014 to January 2016; Senior Vice President Performance Materials and Industrial Biosciences September 2013 to December 2014; President Industrial Biosciences and Vice President Acquisitions January 2011 to September 2013.
Jeanmarie F. Desmond, 51
Co-Controller
2017
DuPont: Vice President & Controller August 2015 to date; General Auditor and Chief Ethics & Compliance Leader September 2014 to July 2015; Director, Corporate Accounting and Reporting 2013 to 2014.
C. Marc Doyle, 48
Chief Operating Officer for the Specialty Products Division
2017
DuPont: Executive Vice President Electronics & Communications, Protection Solutions, Sustainable Solutions, Industrial Biosciences, Nutrition & Health, and Performance Materials businesses January 2016 to date; Senior Vice President Safety & Protection businesses July 2015 to December 2015; President of DuPont Protection Technologies June 2013 to June 2015.
Ronald C. Edmonds, 60
Co-Controller
2017
Dow: Controller and Vice President of Controllers and Tax February 2016 to date; Vice President and Controller 2009 to 2016.
James R. Fitterling, 56
Chief Operating Officer for the Materials Science Division
2017
Dow: President and Chief Operating Officer February 2016 to date; Vice Chairman and Chief Operating Officer October 2015 to February 2016; Vice Chairman, Business Operations October 2014 to October 2015; Executive Vice President, Feedstocks, Performance Plastics and Supply Chain December 2013 to October 2014; Executive Vice President, Feedstocks, Performance Plastics, Asia and Latin America September 2012 to December 2013.
Stacy L. Fox, 64
General Counsel and Corporate Secretary
2017
DuPont: Senior Vice President and General Counsel October 2014 to date; Corporate Communications January 2016 to date; City of Detroit: Deputy Emergency Manager October 2013 to September 2014; Roxbury Group LLC: Principal March 2005 to date.
Charles J. Kalil, 66
Special Counsellor to the Executive Chairman, General Counsel for the Materials Science Division
2017
Dow: General Counsel 2004 to date; Executive Vice President 2008 to date; Corporate Secretary 2005 to February 2015.
Andrew N. Liveris, 63
Executive Chairman
2017
Dow: Chief Executive Officer 2004 to date; Chairman 2006 to date; President 2004 to February 2016.
Howard I. Ungerleider, 49
Chief Financial Officer
2017
Dow: Vice Chairman and Chief Financial Officer October 2015 to date; Chief Financial Officer and Executive Vice President October 2014 to October 2015; Executive Vice President, Advanced Materials September 2012 to October 2014.


22


ITEM 1A. RISK FACTORS
The factors described below represent the Company's principal risks.

DowDuPont may fail to realize the anticipated benefits of the Merger. Combining the businesses of DuPont and Dow may be more difficult, costly or time-consuming than expected, which may adversely affect DowDuPont's results and negatively affect the value of DowDuPont common stock.
The success of the Merger depends on, among other things, DowDuPont's ability to combine the DuPont and Dow businesses in a manner that facilitates the intended separation of the Company's agriculture, materials science and specialty products businesses through one or more tax-efficient transactions (the "Intended Business Separations"), resulting in three independent, publicly traded companies, and realizes anticipated synergies.

DowDuPont expects to benefit from significant cost synergies at both the business and corporate levels through the DowDuPont Cost Synergy Program (the "Synergy Program") which is designed to integrate and optimize the organization following the Merger and in preparation for the Intended Business Separations, including through the achievement of production cost efficiencies, enhancement of the agricultural supply chain, elimination of duplicative agricultural research and development programs, optimization of the combined Company’s global footprint across manufacturing, sales and research and development, optimizing manufacturing processes in the electronics space, the reduction of corporate and leveraged services costs, and the realization of significant procurement synergies. In connection with the Synergy Program, DowDuPont expects to record total pretax restructuring charges of approximately $2 billion, comprised of approximately $845 million to $935 million of severance and related benefit costs; $400 million to $540 million of asset write-downs and write-offs and $400 million to $450 million of costs associated with exit and disposal activities.

Management also expects the combined Company will achieve growth synergies and other meaningful savings and benefits as a result of the Intended Business Separations.

Combining DuPont and Dow's independent businesses and preparing for the Intended Business Separations are complex, costly and time-consuming processes and the management of DowDuPont may face significant implementation challenges, many of which may be beyond the control of management, including, without limitation:

ongoing diversion of the attention of management from the operation of the combined Company’s business as a result of the Intended Business Separations;
impact of portfolio changes between materials science and specialty products on integration and separation preparation activities;
difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects;
the possibility of faulty assumptions underlying expectations regarding the integration or separation process, including with respect to the intended tax efficient transactions;
unanticipated issues in integrating, replicating or separating information technology, communications programs, financial procedures and operations, and other systems, procedures and policies;
difficulties in managing a larger combined company, addressing differences in business culture and retaining key personnel;
unanticipated changes in applicable laws and regulations;
managing tax costs or inefficiencies associated with integrating the operations of the combined Company and the intended tax efficient separation transactions; and
coordinating geographically separate organizations.

Some of these factors will be outside of the control of DowDuPont and any one of them could result in increased costs and diversion of management’s time and energy, as well as decreases in the amount of expected revenue which could materially impact DowDuPont's business, financial condition and results of operations. The integration and Intended Businesses Separation processes and other disruptions, including those from divestitures and acquisitions undertaken in connection with securing regulatory approval for the Merger, as well as those from the portfolio changes between the materials science and specialty products businesses, may also adversely affect the combined Company’s relationships with employees, suppliers, customers, distributors, licensors and others with whom DuPont and Dow have business or other dealings, and difficulties in integrating the businesses or regulatory functions of DuPont and Dow could harm the reputation of DowDuPont.

If DowDuPont is not able to successfully combine the businesses of DuPont and Dow in an efficient, cost-effective and timely manner, the anticipated benefits and cost savings, including from the Synergy Program, of the Merger (including the Intended Business Separations) may not be realized fully, or at all, or may take longer to realize than expected, and the value of DowDuPont common stock, the revenues, levels of expenses and results of operations may be affected adversely. A variety of factors may

23


adversely affect the Company's ability to realize the currently expected synergies, savings and other benefits of the Merger, including failure to successfully optimize the combined Company's facilities footprint, the failure to take advantage of the combined Company's global supply chain, the failure to identify and eliminate duplicative programs, and the failure to otherwise integrate DuPont's or Dow's respective businesses, including their technology platforms.

The determination to proceed with the Intended Business Separations is a decision of the DowDuPont Board of Directors and the expected benefits of such transactions, if they occur, will be uncertain.
In the event that the DowDuPont board determines to proceed with the Intended Business Separations, it is currently anticipated that any such Intended Business Separation transaction would be effectuated through two pro-rata spin-off transactions, in which DowDuPont stockholders, at such time, would receive shares of capital stock in the resulting spin-off companies, resulting in three independent, public companies. The DowDuPont board may ultimately determine to abandon one or more of the Intended Business Separation transactions, and such determination could have an adverse impact on DowDuPont. There are many factors that could, prior to the determination by the DowDuPont board to proceed with the Intended Business Separations, impact the structure or timing of, the anticipated benefits from, or determination to ultimately proceed with, the Intended Business Separations, 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, and 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. Such changes could adversely impact the value of one or more of the Intended Business Separation transactions to the combined Company’s stockholders. Additionally, to the extent the DowDuPont board determines to proceed with the Intended Business Separations, the consummation of such transactions is a complex, costly and time-consuming process, and there can be no guarantee that the intended benefits of such transactions will be achieved. An inability to realize the full extent of the anticipated benefits of the Intended Business Separations, as well as any delays encountered in the process, could have an adverse effect upon the revenues, level of expenses and operating results of the agriculture business, the specialty products business, the materials science business and/or the combined Company.

DowDuPont will incur significant costs in connection with the integration of DuPont and Dow and the Intended Business Separations.
There are a large number of processes, policies, procedures, operations, technologies and systems that must be integrated in connection with the Merger and replicated, transferred or separated in connection with the Intended Business Separations. While DowDuPont has assumed a certain level of expenses, including in connection with the Synergy Program, would be incurred in connection with the Merger and the Intended Business Separations, there are many factors beyond the combined Company’s control that could affect the total amount of, or the timing of, anticipated expenses with respect to the integration and implementation of the combined businesses.

There may also be additional unanticipated significant costs in connection with the Merger and the Intended Business Separations that DowDuPont may not recoup. These costs and expenses could reduce the benefits and additional income DowDuPont expects to achieve from the Merger. Although DowDuPont expects that these benefits will offset the transaction expenses and implementation costs over time, this net benefit may not be achieved in the near term or at all.

Inability to access the debt capital markets could impair DowDuPont's liquidity, business or financial condition.
DowDuPont’s primary sources of liquidity are through DuPont and Dow and their respective consolidated subsidiaries, (collectively, the “Subsidiaries”). Each of DuPont and Dow has relied and continues to rely on access to the debt capital markets to finance their day-to-day and long-term operations. In connection with the Merger, DowDuPont has not incurred debt obligations or guaranteed the debt obligations of DuPont or Dow. Any limitation on the part of either DuPont’s or Dow’s ability to raise money in the debt markets could have a substantial negative effect on their respective liquidity and the liquidity of DowDuPont. Access to the debt capital markets in amounts adequate to finance each Subsidiary’s activities could be impaired as a result of the existence of material nonpublic information about the Intended Business Separations and other potential factors, including factors that are not specific to the Subsidiaries, such as a severe disruption of the financial markets and interest rate fluctuations.

Prior to the Intended Business Separations, if pursued, the level and quality of the respective earnings, operations, business and management, among other things, of each of DuPont and Dow will impact their respective credit ratings, costs and availability of financing and those of the combined Company. A decrease in the ratings assigned to DuPont or Dow by the ratings agencies may negatively impact their access to the debt capital markets and increase the combined Company’s cost of borrowing. There can be no assurance that DuPont and Dow will maintain their current credit worthiness or prospective credit ratings. Any actual or anticipated changes or downgrades in such credit ratings may have a negative impact on the liquidity, capital position or access to capital markets of DuPont and Dow and, therefore, DowDuPont.


24


DowDuPont will be exposed to the risks related to international sales and operations.
DuPont and Dow each derive a large portion of their total sales and revenues from operations outside of the United States. Therefore, DowDuPont will have exposure to risks of operating in many foreign countries, including:

difficulties and costs associated with complying with a wide variety of complex laws, treaties and regulations;
unexpected changes in political or regulatory environments;
labor compliance and costs associated with a global workforce;
earnings and cash flows that may be subject to tax withholding requirements or the imposition of tariffs;
exchange controls or other restrictions;
restrictions on, or difficulties and costs associated with, the repatriation of cash from foreign countries to the United States;
political and economic instability;
import and export restrictions and other trade barriers;
difficulties in maintaining overseas subsidiaries and international operations;
difficulties in obtaining approval for significant transactions;
government limitations on foreign ownership;
government takeover or nationalization of business;
government mandated price controls; and
fluctuations in foreign currency exchange rates.

Any one or more of the above factors could adversely affect the international operations of the combined Company and could significantly affect the combined Company’s results of operations, financial condition and cash flows.

Availability of purchased feedstocks and energy, and the volatility of these costs, impact the Company's operating costs and add variability to earnings.
Primarily in support of its materials science businesses, the Company purchases hydrocarbon raw materials including ethane, propane, butane, naphtha and condensate as feedstocks. The Company also purchases certain monomers, primarily ethylene and propylene, to supplement internal production, as well as other raw materials. The Company purchases natural gas, primarily to generate electricity, and purchases electric power to supplement internal generation.

Feedstock and energy costs generally follow price trends in crude oil and natural gas, which are sometimes volatile. While the Company uses its feedstock flexibility and financial and physical hedging programs to help mitigate feedstock cost increases, the Company is not always able to immediately raise selling prices. Ultimately, the ability to pass on underlying cost increases is dependent on market conditions. Conversely, when feedstock and energy costs decline, selling prices generally decline as well. As a result, volatility in these costs could impact the Company’s results of operations.

The Company has a number of investments in the U.S. Gulf Coast to take advantage of increasing supplies of low-cost natural gas and NGLs derived from shale gas including: the restart of the SCO-2 ethylene production facility in December 2012; construction of a new on-purpose propylene production facility, which commenced operations in December 2015; completion of a major maintenance turnaround in December 2016 at an ethylene production facility in Plaquemine, Louisiana, which included expanding the facility’s ethylene production capacity by up to 250 KTA and modifications to enable full ethane cracking flexibility; and, construction of a new world-scale ethylene production facility in Freeport, Texas, which commenced operations in the third quarter of 2017, and a capacity expansion project which will bring the facility's total ethylene capacity to 2,000 KTA. As a result of these investments, the Company's exposure to purchased ethylene and propylene is expected to decline, offset by increased exposure to ethane- and propane-based feedstocks.

While the Company expects abundant and cost-advantaged supplies of NGLs in the United States to persist for the foreseeable future, if NGLs were to become significantly less advantaged than crude oil-based feedstocks, it could have a negative impact on the Company’s results of operations and future investments. Also, if the Company’s key suppliers of feedstocks and energy are unable to provide the raw materials required for production, it could have a negative impact on the Company's results of operations.

Earnings generated by the Company's products vary based in part on the balance of supply relative to demand within the industry.
The balance of supply relative to demand within the industry may be significantly impacted by the addition of new capacity, especially for basic commodities where capacity is generally added in large increments as world-scale facilities are built. This may disrupt industry balances and result in downward pressure on prices due to the increase in supply, which could negatively impact the Company's results of operations.


25


The costs of complying with evolving regulatory requirements could negatively impact the Company's financial results. Actual or alleged violations of environmental laws or permit requirements could result in restrictions or prohibitions on plant operations, substantial civil or criminal sanctions, as well as the assessment of strict liability and/or joint and several liability.
The Company is subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment, greenhouse gas emissions, and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. Costs and capital expenditures relating to environmental, health or safety matters are subject to evolving regulatory requirements and depend on the timing of the promulgation and enforcement of specific standards which impose the requirements. Moreover, changes in environmental regulations could inhibit or interrupt the Company's operations, or require modifications to its facilities. Accordingly, environmental, health or safety regulatory matters could result in significant unanticipated costs or liabilities.

Increased concerns regarding the safe use of seeds with biotechnology traits, crop protection products, and chemicals in commerce and their potential impact on the environment as well as perceived impacts of biotechnology on health and the environment, have resulted in more restrictive regulations and could lead to new regulations.
Concerns and claims regarding the safe use of seeds with biotechnology traits, crop protection products, and chemicals, their potential impact on health and the environment, and the perceived impacts of biotechnology on health and the environment reflect a growing trend in societal demands for increasing levels of product safety and environmental protection. These concerns and claims include those that increased use of crop protection products, related drift and volatilization, and of biotechnology traits to address resistance of weeds and pests to control by crop protection products, could increase such resistance and otherwise negatively impact health and the environment. These concerns could manifest themselves in stockholder proposals, preferred purchasing, delays or failures in obtaining or retaining regulatory approvals, delayed product launches, lack of market acceptance, product discontinuation, continued pressure for and adoption of more stringent regulatory intervention and litigation. These concerns could also influence public perceptions, the viability or continued sales of certain of the Company's products, the Company's reputation and the cost to comply with regulations. These concerns could have a negative impact on the Company's results of operations.

In most jurisdictions, the Company must test the safety, efficacy and environmental impact of its agricultural products to satisfy regulatory requirements and obtain the necessary approvals. In certain jurisdictions, the Company must periodically renew its approvals which may require it to demonstrate compliance with then-current standards. The regulatory environment is lengthy, complex and in some markets unpredictable, with requirements that can vary by product, technology, industry and country. The regulatory environment may be impacted by the activities of non-governmental organizations and special interest groups and stakeholder reaction to actual or perceived impacts of new technology, products or processes on safety, health and the environment. Obtaining and maintaining regulatory approvals requires submitting a significant amount of information and data, which may require participation from technology providers. Regulatory standards and trial procedures are continuously changing. The pace of change together with the lack of regulatory harmony could result in unintended noncompliance.

Responding to these changes and meeting existing and new requirements may involve significant costs or capital expenditures or require changes in business practice that could result in reduced profitability. The failure to receive necessary permits or approvals could have near- and long-term effects on the Company’s ability to produce and sell some current and future products.

To maintain its right to produce or sell existing products or to commercialize new products containing biotechnology traits, particularly seed products, the Company must be able to demonstrate its ability to satisfy the requirements of regulatory agencies. Sales into and use of seeds with biotechnology traits in jurisdictions where cultivation has been approved could be impacted if key import markets have not approved the import of grains, food and food ingredients and other products derived from those seeds. If import of grains, food and food ingredients and other products derived from those seeds containing such biotechnology traits occurs in these markets, it could lead to disruption in trade and potential liability for the Company.

In addition, the Company’s regulatory compliance could be affected by the detection of low level presence of biotechnology traits in conventional seed or products produced from such seed. Furthermore, the detection of biotechnology traits not approved in the country of cultivation may affect the Company’s ability to supply product and could affect exports of products produced from such seeds and even result in crop destruction or product recalls.

A significant operational event could negatively impact the Company's results of operations.
The Company's operations, the transportation of products, cyber-attacks, or severe weather conditions and other natural phenomena (such as drought, hurricanes, earthquakes, tsunamis, floods, etc.) could result in an unplanned event that could be significant in scale and could negatively impact operations, neighbors or the public at large, which could have a negative impact on the Company's results of operations.


26


Major hurricanes have caused significant disruption in the Company's operations on the U.S. Gulf Coast, logistics across the region, and the supply of certain raw materials, which had an adverse impact on volume and cost for some of the Company's products. Due to the Company's substantial presence on the U.S. Gulf Coast, similar severe weather conditions or other natural phenomena in the future could negatively impact the Company's results of operations.

In addition, terrorist attacks and natural disasters have increased concerns about the security and safety of chemical production and distribution. Local, state, federal and foreign governments continue to propose new regulations related to the security of chemical plant locations and the transportation of hazardous chemicals, which could result in higher operating costs.

The risk of loss of the Company’s intellectual property, trade secrets or other sensitive business information or disruption of operations could negatively impact the Company’s financial results.
Cyber-attacks or security breaches could compromise confidential, business critical information, cause a disruption in the Company’s operations or harm the Company's reputation. The Company has attractive information assets, including intellectual property, trade secrets and other sensitive, business critical information. While the Company has a comprehensive cyber security program that is continuously reviewed, maintained and upgraded, a significant cyber-attack could result in the loss of critical business information and/or could negatively impact operations, which could have a negative impact on the Company’s financial results.

Implementing certain elements of the Company's strategy could negatively impact the Company's financial results.
The Company currently has manufacturing operations, sales and marketing activities, joint ventures, as well as proposed and existing projects of varying size in emerging geographies. Activities in these geographic regions are accompanied by uncertainty and risks including: navigating different government regulatory environments; relationships with new, local partners; project funding commitments and guarantees; expropriation, military actions, war, terrorism and political instability; sabotage; uninsurable risks; suppliers not performing as expected, resulting in increased risk of extended project timelines; and determining raw material supply and other details regarding product movement. If the manufacturing operations, sales and marketing activities, and/or implementation of these projects is not successful, it could adversely affect the Company's financial condition, cash flows and results of operations.

An impairment of goodwill or intangible assets could negatively impact the Company's financial results.
At least annually, the Company assesses both goodwill and indefinite-lived intangible assets for impairment. Intangible assets with finite lives are tested for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If testing indicates that goodwill or intangible assets are impaired, the carrying values are written down based on fair values with a charge against earnings. Where the Company utilizes discounted cash flow methodologies in determining fair values, continued weak demand for a specific product line or business could result in an impairment. Accordingly, any determination requiring the write-off of a significant portion of goodwill or intangible assets could negatively impact the Company's results of operations.

As a result of the Merger and the related acquisition method of accounting, which resulted in DuPont's assets and liabilities being measured at fair value, the Company's goodwill increased by $45.1 billion and the Company's intangible assets increased by $27.2 billion. Future impairments of either could be recorded in results of operations due to changes in assumptions, estimates or circumstances and there can be no assurance that such impairments would be immaterial to the Company, DuPont or Dow.

Increased obligations and expenses related to DuPont's and Dow's defined benefit pension plans and other postretirement benefit plans could negatively impact DowDuPont's financial condition and results of operations.
DuPont and Dow have defined benefit pension plans and other postretirement benefit plans ("OPEB") (collectively, the “plans”) in the United States and a number of other countries. The assets of the DuPont and Dow funded plans are primarily invested in fixed income and equity securities of U.S. and foreign issuers. Changes in the market value of plan assets, investment returns, discount rates, mortality rates, regulations and the rate of increase in compensation levels may affect the funded status of the plans and could cause volatility in the net periodic benefit cost, future funding requirements of the plans and the funded status of the plans. A significant increase in DuPont's and Dow's obligations or future funding requirements could have a negative impact on the Company's results of operations and cash flows for a particular period and on the Company's financial condition.

Unpredictable seasonal and weather factors could impact sales and earnings from the Company’s Agriculture segment.
The agriculture industry is subject to seasonal and weather factors, which can vary unpredictably from period to period. Weather factors can affect the presence of disease and pests on a regional basis and, accordingly, can positively or adversely affect the demand for crop protection products, including the mix of products used. The weather also can affect the quality, volume and cost of seed produced for sale as well as demand and product mix. Seed yields can be higher or lower than planned, which could lead to higher inventory and related write-offs and affect the ability to supply.


27


Inability to discover, develop and protect new technologies and enforce the Company's intellectual property rights, and to respond to new technologies, could adversely affect the Company's financial results.
The Company competes with major global companies that have strong intellectual property rights, including rights supporting the use of biotechnology to enhance products, particularly agricultural and bio-based products. Speed in discovering, developing, protecting, and responding to new technologies, including new technology-based distribution channels that could impede the Company's ability to engage with customers and end user, and bringing related products to market is a significant competitive advantage. Failure to predict and respond effectively could cause the Company's existing or candidate products to become less competitive, adversely affecting sales. Competitors are increasingly challenging intellectual property positions and the outcomes can be highly uncertain. If challenges are resolved adversely, it could negatively impact the Company's ability to obtain licenses on competitive terms, commercialize new products and generate sales from existing products.

Intellectual property rights, including patents, plant variety protection, trade secrets, confidential information, trademarks, tradenames and other forms of trade dress, are important to the Company's business. The Company endeavors to protect its intellectual property rights in jurisdictions in which its products are produced or used and in jurisdictions into which its products are imported. However, the Company may be unable to obtain protection for its intellectual property in key jurisdictions. Further, changes in government policies and regulations, including changes made in reaction to pressure from non-governmental organizations, could impact the extent of intellectual property protection afforded by such jurisdictions.

The majority of the Company’s corn hybrids and soybean varieties sold to customers contain biotechnology traits that are licensed from third parties under long-term licenses. If the Company loses its rights under such licenses, it could negatively impact the Company's ability to obtain future licenses on competitive terms, commercialize new products and generate sales from existing products.

The Company has designed and implemented internal controls to restrict access to and distribution of its intellectual property. Despite these precautions, the Company's intellectual property is vulnerable to unauthorized access through employee error or actions, theft and cybersecurity incidents, and other security breaches. When unauthorized access and use or counterfeit products are discovered, the Company reports such situations to governmental authorities for investigation, as appropriate, and takes measures to mitigate any potential impact. Protecting intellectual property related to biotechnology is particularly challenging because theft is difficult to detect and biotechnology can be self-replicating. Accordingly, the impact of such theft can be significant.

Failure to effectively manage acquisitions, divestitures, alliances and other portfolio actions could adversely impact DowDuPont's future results.
The Company made certain divestitures, primarily related to its Agriculture segment, in connection with obtaining regulatory approval for the Merger. In addition, the Company from time to time evaluates acquisition candidates that may strategically fit its business and/or growth objectives. If the Company is unable to successfully integrate and develop acquired businesses, the Company could fail to achieve anticipated synergies and cost savings, including any expected increases in revenues and operating results, which could have a material adverse effect on the Company’s financial results. The Company continually reviews its portfolio of assets for contributions to the Company’s objectives and alignment with its growth strategy. However, the Company may not be successful in separating underperforming or non-strategic assets, and gains or losses on the divestiture of, or lost operating income from, such assets may affect the Company’s earnings. Moreover, the Company might incur asset impairment charges related to acquisitions or divestitures that reduce its earnings. In addition, if the execution or implementation of acquisitions, divestitures, alliances, joint ventures and other portfolio actions is not successful, it could adversely impact the Company’s financial condition, cash flows and results of operations.

DowDuPont’s results of operations could be adversely affected by litigation and other commitments and contingencies.
The Company faces risks arising from various unasserted and asserted litigation matters, including, but not limited to, asbestos-related suits, product liability, patent infringement, antitrust claims, governmental regulations, contract and commercial litigation, claims for third party property damage or personal injury stemming from alleged environmental torts, and other actions. The Company has noted a nationwide trend in purported class actions against chemical manufacturers generally seeking relief such as medical monitoring, property damages, off-site remediation and punitive damages arising from alleged environmental torts without claiming present personal injuries. The Company also has noted a trend in public and private suits being filed on behalf of states, counties, cities and utilities alleging harm to the general public and the environment, including waterways and watersheds. An adverse outcome in any one or more of these matters could be material to the Company's financial results.

See Note 16 to the Consolidated Financial Statements for additional information on litigation and other commitments and contingencies faced by the Company.

In the ordinary course of business, the Company may make certain commitments, including representations, warranties and indemnities relating to current and past operations, including those related to divested businesses and issue guarantees of third

28


party obligations. If the Company were required to make payments as a result, they could exceed the amounts accrued, thereby adversely affecting the Company's results of operations.


ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.


ITEM 2. PROPERTIES
The Company's corporate headquarters are co-located in Midland, Michigan and Wilmington, Delaware. The Company's manufacturing, processing, marketing and research and development facilities, as well as regional purchasing offices and distribution centers are located throughout the world.

The Company has investments in property, plant and equipment related to global manufacturing operations. Collectively, the Company operates 465 manufacturing sites. The following table includes the number of manufacturing sites by reportable segment and geographic region, including consolidated variable interest entities:

Number of Manufacturing Sites at Dec 31, 2017
Geographic Region
Agri-culture
Perf. Materials & Coatings
Ind. Interm. & Infrast.
Pack. & Spec. Plastics
Elect. & Imaging
Nutrition & Biosciences
Transp. & Adv. Polymers
Safety & Const.
Total 1
U.S. & Canada
74

22

13

16

17

32

16

14

204

EMEA
31

16

18

8

5

47

8

13

146

Asia Pacific
23

20

8

5

17

18

13

13

117

Latin America
29

8

6

4

1

14

2

3

67

Total
157

66

45

33

40

111

39

43

534

1.
Sites that are used by multiple segments are included more than once in the figures above.

Properties of DowDuPont include facilities which, in the opinion of management, are suitable and adequate for their use and have sufficient capacity for the Company's current needs and expected near-term growth. All of the Company's plants are owned or leased, subject to certain easements of other persons which, in the opinion of management, do not substantially interfere with the continued use of such properties or materially affect their value. No title examination of the properties has been made for the purpose of this report. Additional information with respect to the Company's property, plant and equipment and leases is contained in Notes 11 and 16 to the Consolidated Financial Statements.


ITEM 3. LEGAL PROCEEDINGS
Dow
Asbestos-Related Matters of Union Carbide Corporation
Union Carbide Corporation ("Union Carbide"), a wholly owned subsidiary of Dow, is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-containing products located on Union Carbide's premises, and Union Carbide's responsibility for asbestos suits filed against a former Union Carbide subsidiary, Amchem Products, Inc.

For additional information, see Part II, Item 7. Other Matters, Asbestos-Related Matters of Union Carbide Corporation in Management's Discussion and Analysis of Financial Condition and Results of Operations, and Note 16 to the Consolidated Financial Statements.

DuPont
PFOA: Environmental and Litigation Proceedings
For purposes of this report, the term PFOA means collectively perfluorooctanoic acid and its salts, including the ammonium salt and does not distinguish between the two forms. Information related to this matter is included in Note 16 to the Consolidated Financial Statements under the heading PFOA.


29


Fayetteville Works Facility, Fayetteville, North Carolina
In August 2017, the U.S. Attorney’s Office for the Eastern District of North Carolina served DuPont with a subpoena for testimony and the production of documents to a grand jury. In the fourth quarter of 2017, DuPont was served with additional subpoenas relating to the same issue. Information related to this matter is included in Note 16 to the Consolidated Financial Statements under the heading "Fayetteville Works Facility, North Carolina."

La Porte Plant, La Porte, Texas - Crop Protection - Release Incident Investigations
On November 15, 2014, there was a release of methyl mercaptan at DuPont’s La Porte facility. The release occurred at the site’s Crop Protection unit resulting in four employee fatalities inside the unit. DuPont continues to cooperate with governmental agencies, including the U.S. Environmental Protection Agency ("EPA"), the Chemical Safety Board and the Department of Justice ("DOJ"), still conducting investigations. These investigations could result in sanctions and civil or criminal penalties against DuPont.

Environmental Proceedings
The Company believes it is remote that the following matters will have a material impact on its financial position, liquidity or results of operations. The descriptions are included per Regulation S-K, Item 103(5)(c) of the Securities Exchange Act of 1934.

Dow
Dow Corning Midland Matter
Dow Corning Corporation ("Dow Corning"), a wholly owned subsidiary of Dow, has received the following notifications from the EPA, Region 5 related to Dow Corning’s Midland, Michigan manufacturing facility (the “Facility”): 1) a Notice of Violation and Finding of Violation (received in April 2012) which alleges a number of violations in connection with the detection, monitoring and control of certain organic hazardous air pollutants at the Facility and various recordkeeping and reporting violations under the Clean Air Act and 2) a Notice of Violation (received in May 2015) alleging a number of violations relating to the management of hazardous wastes at the Facility pursuant to the Resource Conservation and Recovery Act. Discussions between the EPA, the DOJ and Dow Corning are ongoing.

FilmTec Edina, Minnesota Matter
On March 14, 2017, FilmTec Corporation ("FilmTec"), a wholly owned subsidiary of Dow, received notification from the EPA, Region 5 and the DOJ of a proposed penalty for alleged violations of the Clean Air Act at FilmTec’s Edina, Minnesota, manufacturing facility. Discussions between the EPA, the DOJ and FilmTec are ongoing.

DuPont
La Porte Plant, La Porte, Texas - EPA Multimedia Inspection
The EPA conducted a multimedia inspection at DuPont's La Porte facility in January 2008. DuPont, EPA and DOJ began discussions in the Fall 2011 relating to the management of certain materials in the facility's waste water treatment system, hazardous waste management, flare and air emissions. These discussions continue.

Sabine Plant, Orange, Texas - EPA Multimedia Inspection
In June 2012, DuPont began discussions with the EPA and DOJ related to a multimedia inspection that the EPA conducted at the Sabine facility in March 2009 and December 2015. The discussions involve the management of materials in the facility's waste water treatment system, hazardous waste management, flare and air emissions, including leak detection and repair. These discussions continue.


ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.


30


 
DowDuPont Inc.
 
 
PART II
 

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
On December 11, 2015, The Dow Chemical Company ("Dow") and E. I. du Pont de Nemours and Company (“DuPont”) entered into an Agreement and Plan of Merger, as amended on March 31, 2017 (the "Merger Agreement") to effect an all-stock, merger of equals strategic combination resulting in a newly formed corporation named DowDuPont Inc. ("DowDuPont"). On August 31, 2017, pursuant to the terms of the Merger Agreement, Dow and DuPont each merged with subsidiaries of DowDuPont (the "Mergers") and, as a result of the Mergers, became subsidiaries of DowDuPont (collectively, the "Merger"). See Note 3 to the Consolidated Financial Statements for additional information on the Merger.

On August 31, 2017, Dow's common stock, par value $2.50 per share, and DuPont's common stock, par value $0.30 per share, were voluntarily delisted from the New York Stock Exchange ("NYSE") in connection with the Merger and were suspended from trading on the NYSE prior to the open of trading on September 1, 2017. DowDuPont's common stock, par value $0.01 per share, commenced trading on the NYSE (the principal Market for the Company's common stock) under ticker symbol DWDP on September 1, 2017.

Quarterly market price of common stock and dividend information can be found in Note 25 to the Consolidated Financial Statements.

At December 31, 2017, there were 82,913 stockholders of record. At January 31, 2018, there were 84,402 stockholders of record.

While it is not a guarantee of future conduct, Dow and DuPont continuously paid quarterly dividends from 1912 and 1904, respectively, to the period of the Merger. On November 2, 2017, DowDuPont announced that its Board declared a fourth quarter dividend of $0.38 per share, paid on December 15, 2017, to shareholders of record on November 15, 2017.

See Part III, Item 11. Executive Compensation for information relating to the Company’s equity compensation plans.

Issuer Purchases of Equity Securities
The following table provides information regarding purchases of the Company’s common stock by the Company during the three months ended December 31, 2017:

Issuer Purchases of Equity Securities
Average price paid per share
Total number of shares purchased as part of the Company's publicly announced share repurchase
program 1
Approximate dollar value of shares that may yet be purchased under the Company's publicly announced share repurchase program 1
(In millions)
Period
Total number of shares purchased
October 2017

$


$

November 2017
7,518,052

$
70.29

7,518,052

$
3,472

December 2017
6,604,997

$
71.40

6,604,997

$
3,000

Fourth quarter 2017
14,123,049

$
70.81

14,123,049

$
3,000

1.
On November 2, 2017, the Company announced the DowDuPont Board of Directors authorized an initial $4 billion share repurchase program, which has no expiration date.



31


ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data
 
 
 
 
 
In millions, except as noted (Unaudited)
2017 1
2016
2015
2014
2013
Summary of Operations
 
 
 
 
 
Net sales
$
62,484

$
48,158

$
48,778

$
58,167

$
57,080

Income from continuing operations, net of tax 2
$
1,669

$
4,404

$
7,783

$
3,839

$
4,816

 Loss from discontinued operations, net of tax
$
(77
)
$

$

$

$

Per share of common stock (in dollars):
 
 
 
 
 
Earnings per common share from continuing operations - basic 2
$
0.97

$
3.57

$
6.45

$
2.91

$
3.72

Earnings per common share from continuing operations - diluted 2
$
0.95

$
3.52

$
6.15

$
2.87

$
3.68

Loss per common share from discontinued operations - basic
$
(0.05
)
$

$

$

$

Loss per common share from discontinued operations - diluted
$
(0.04
)
$

$

$

$

Cash dividends declared per share of common stock
$
1.76

$
1.84

$
1.72

$
1.53

$
1.28

Book value per share of common stock
$
43.30

$
21.70

$
23.06

$
19.71

$
22.59

Year-end Financial Position
 
 
 
 
 
Total assets
$
192,164

$
79,511

$
67,938

$
68,639

$
69,380

Long-term debt
$
30,056

$
20,456

$
16,215

$
18,741

$
16,732

 
 
 
 
 
 
Financial Ratios










Research and development expenses as percent of net sales
3.4
%
3.3
%
3.3
%
2.8
%
3.1
%
Income from continuing operations before income taxes as percent of net sales 2
1.9
%
9.2
%
20.4
%
9.1
%
11.9
%
Return on stockholders' equity 2
1.5
%
15.3
%
34.4
%
18.6
%
19.4
%
Debt as a percent of total capitalization
25.1
%
44.0
%
39.7
%
45.5
%
38.9
%
1.
The year ended December 31, 2017, reflects the results of Dow for the entire year and the results of DuPont for the period beginning on and after September 1, 2017. The historical periods solely reflect the results of Dow.
2.
See Notes 1, 3, 5, 7, 8, 13, 16 and 19 to the Consolidated Financial Statements for additional information on items materially impacting the results for the years ended December 31, 2017, 2016 and 2015, including the effects of the U.S. Tax Cuts and Jobs Act, enacted on December 22, 2017; Merger-related amortization of the fair value step-up of inventories; gains on divestitures; charges related to restructuring programs; goodwill impairment and other asset related charges; a charge related to payment of plan obligations to certain participants of a Dow U.S. non-qualified pension plan; and, the impact of a change in accounting policy for asbestos-related defense and processing costs. Results for the year ended December 31, 2013, reflect a $1.6 billion after-tax gain related to the K‑Dow arbitration matter.



32


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On December 11, 2015, The Dow Chemical Company ("Dow") and E. I. du Pont de Nemours and Company ("DuPont") entered into an Agreement and Plan of Merger ("Merger Agreement"), as amended on March 31, 2017, to effect an all-stock merger of equals strategic combination resulting in a newly formed corporation named DowDuPont Inc. ("DowDuPont" or the "Company"). On August 31, 2017, pursuant to the Merger Agreement, Dow and DuPont each merged with wholly owned subsidiaries of DowDuPont ("Mergers") and, as a result of the Mergers, Dow and 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. Dow was determined to be the accounting acquirer in the Merger. As a result, the historical financial statements of Dow for the periods prior to the Merger are considered to be the historical financial statements of DowDuPont. The results of DuPont are included in DowDuPont's consolidated results from the Merger date forward. See Note 3 to the Consolidated Financial Statements for additional information.

Except as otherwise indicated by the context, the term "Union Carbide" means Union Carbide Corporation, a wholly owned subsidiary of Dow; and, "Dow Corning" means Dow Corning Corporation, a wholly owned subsidiary of Dow.

Items Affecting Comparability of Financial Results
Due to the size of Dow and DuPont's businesses prior to the Merger, in this section certain supplemental unaudited pro forma financial information is provided that assumes the Merger had been consummated on January 1, 2016. For all periods presented in the unaudited pro forma financial information, adjustments have been made for (1) the preliminary purchase accounting impact, (2) accounting policy alignment, (3) the elimination of the effects of events that are directly attributable to the Merger Agreement (e.g., one-time transaction costs), (4) the elimination of the impact of transactions between Dow and DuPont, and (5) the elimination of the effect of consummated divestitures required as a condition of regulatory approval for the Merger. Events that are not expected to have a continuing impact on the combined results (e.g., inventory step-up costs) are excluded. These adjustments impacted the consolidated results as well as the reportable segments. For additional information, see the Supplemental Unaudited Pro Forma Combined Financial Information in this section.



33


ABOUT DOWDUPONT INC.
DowDuPont is a holding company comprised of Dow and DuPont with the intent to form strong, independent, publicly traded companies in the agriculture, materials science and specialty products sectors (the "Intended Business Separations") that will lead their respective industries through productive, science-based innovation to meet the needs of customers and help solve global challenges.

In 2017, 37 percent of the Company’s net sales were to customers in the U.S. & Canada; 29 percent were in Europe, Middle East and Africa ("EMEA"); 22 percent were in Asia Pacific; and 12 percent were in Latin America. On a pro forma basis, 39 percent of the Company’s net sales were to customers in the U.S. & Canada; 28 percent were in EMEA; 22 percent were in Asia Pacific; and 11 percent were in Latin America.

In 2017, the Company and its consolidated subsidiaries did not operate in countries subject to U.S. economic sanctions and export controls as imposed by the U.S. State Department or in countries designated by the U.S. State Department as state sponsors of terrorism, including Iran, Sudan and Syria. The Company has policies and procedures in place designed to ensure that it and its consolidated subsidiaries remain in compliance with applicable U.S. laws and regulations.

OVERVIEW
The following is a summary of the results from continuing operations for the year ended December 31, 2017:

The Company reported net sales for 2017 of $62.5 billion, up 30 percent from $48.2 billion in 2016, reflecting broad-based sales growth with increases across all segments and geographic regions. Portfolio actions contributed to 19 percent of the sales increase, including 15 percent from the Merger, impacting all segments except Industrial Intermediates & Infrastructure.

Local price was up 6 percent compared with last year, driven primarily by broad-based pricing actions as well as higher feedstock and raw material costs. Local price was mixed by segment as gains in Industrial Intermediates & Infrastructure (up 10 percent) and Performance Materials & Coatings and Packaging & Specialty Plastics (both up 8 percent) more than offset declines in Agriculture and Electronics & Imaging (both down 1 percent). Local price remained flat in Nutrition & Biosciences, Transportation & Advanced Polymers and Safety & Construction. Local price increased in all geographic regions, including a double-digit increase in EMEA (up 10 percent). Currency remained flat with the same period last year.

Volume increased 5 percent compared with the same period last year, with increases in all segments except Agriculture, which declined 2 percent. Volume increased in all geographic regions, except Latin America (down 1 percent).

Research and development ("R&D") expenses totaled $2,110 million in 2017, up 33 percent from $1,584 million in 2016, primarily due to the Merger.

Selling, general and administrative ("SG&A") expenses were $4,021 million in 2017, up 36 percent from $2,956 million in 2016, primarily due to the Merger.

Restructuring, goodwill impairment and asset related charges - net was $3,280 in 2017, reflecting post-merger restructuring actions under the DowDuPont Cost Synergy Program which is designed to integrate and optimize the organization following the Merger and in preparation for the Intended Business Separations; a goodwill impairment charge of $1,491 million related to the Coatings & Performance Monomers reporting unit and $939 million of pretax impairment charges related to a manufacturing facility in Brazil, other manufacturing assets, surplus facilities and an equity method investment.

Integration and separation costs were $1,101 million in 2017, up from $349 million in 2016. Integration and separation costs include costs related to the Merger, post-Merger integration and Intended Business Separation activities and costs related to the ownership restructure of Dow Corning.

In the fourth quarter of 2017, the Company recorded a net tax benefit of $1,086 million related to the recognition of the effects of new U.S. tax legislation.

On November 2, 2017, DowDuPont announced its Board of Directors declared a fourth quarter dividend of $0.38 per share, which was paid on December 15, 2017, and authorized an initial $4.0 billion share repurchase program. At December 31, 2017, $3.0 billion of the authorization remained available for repurchases. Although there is no timeline to complete the share repurchase program, DowDuPont intends to repurchase approximately $1.0 billion of the Company's stock in the first quarter of 2018.


34


Other notable events subsequent to December 31, 2017:

On February 1, 2018, the Company announced it has updated the timing and sequence of the Intended Business Separations: materials science is expected to separate by the end of the first quarter of 2019, and agriculture and specialty products are expected to separate by June 1, 2019.

On February 1, 2018, the Company announced it is increasing its cost synergy commitment from $3 billion to $3.3 billion.

RESULTS OF OPERATIONS
Summary of Sales Results
 
 
 
In millions
2017
2016
2015
Net sales
$
62,484

$
48,158

$
48,778

Pro forma net sales
$
79,535

$
70,894




Sales Variances by Segment and Geographic Region - As Reported
 
2017
2016
Percentage change from prior year
Local Price & Product Mix
Currency
Volume
Portfolio & Other 1
Total
Local Price & Product Mix
Currency
Volume 
Portfolio & Other 2
Total
Agriculture
(1
)%
%
(2
)%
25
%
22
%
1
 %
(1
)%
(2
)%
 %
(2
)%
Performance Materials & Coatings
8


2

27

37

(8
)
(1
)
(2
)
53

42

Industrial Intermediates & Infrastructure
10


7


17

(8
)
(1
)
1

(13
)
(21
)
Packaging & Specialty Plastics
8

1

5

3

17

(8
)

9

(1
)

Electronics & Imaging
(1
)

9

37

45

(3
)

3

16

16

Nutrition & Biosciences


10

178

188

(3
)

(2
)

(5
)
Transportation & Advanced Polymers


6

175

181

(1
)
(1
)
7

49

54

Safety & Construction


3

57

60

(1
)

(2
)

(3
)
Total
6
 %
%
5
 %
19
%
30
%
(6
)%
 %
3
 %
2
 %
(1
)%
U.S. & Canada
6
 %
%
4
 %
16
%
26
%
(7
)%
 %
3
 %
2
 %
(2
)%
EMEA
10

1

5

16

32

(6
)
(1
)
4

(1
)
(4
)
Asia Pacific
4


7

27

38

(6
)

6

9

9

Latin America
2


(1
)
18

19

(6
)


(1
)
(7
)
Total
6
 %
%
5
 %
19
%
30
%
(6
)%
 %
3
 %
2
 %
(1
)%
1.
Portfolio & Other reflects sales related to the Merger (impacts all segments, except Performance Materials & Coatings and Industrial Intermediates & Infrastructure), the acquisition of FMC's Health and Nutrition Business (the "H&N Business"), acquired on November 1, 2017 (impacting Nutrition & Biosciences) and the ownership restructure of Dow Corning announced on June 1, 2016 (impacts Performance Materials & Coatings, Electronics & Imaging and Transportation & Advanced Polymers). Portfolio & Other also reflects the following divestitures: a portion of Dow AgroSciences' Brazil corn seed business ("DAS Divested Ag Business"), divested on November 30, 2017 (impacting Agriculture), global Ethylene Acrylic Acid copolymers and ionomers business ("EAA Business"), divested on September 1, 2017 (impacting Packaging & Specialty Plastics) and SKC Haas Display Films group of companies, divested June 30, 2017 (impacting Electronics & Imaging).
2.
Portfolio & Other reflects sales related to the ownership restructure of Dow Corning and sales from January 1, 2016 through April 30, 2016 for the step acquisition of Univation, acquired on May 5, 2015 (Packaging & Specialty Plastics). Portfolio & Other also reflects the following divestitures: the chlorine value chain, divested on October 5, 2015 (Industrial Intermediates & Infrastructure and Packaging & Specialty Plastics), ANGUS Chemical Company, divested on February 2, 2015 and the global Sodium Borohydride business, divested on January 30, 2015 (both included in Industrial Intermediates & Infrastructure).


35


Sales Variances by Segment and Geographic Region - As Reported
 
 
 
 
 
 
2015
Percentage change from prior year
Local Price & Product Mix
Currency
Volume
Portfolio & Other 1
Total
Agriculture
(5
)%
(4
)%
(2
)%
 %
(11
)%
Performance Materials & Coatings
(14
)
(5
)
3


(16
)
Industrial Intermediates & Infrastructure
(10
)
(5
)
2

(6
)
(19
)
Packaging & Specialty Plastics
(18
)
(5
)
5


(18
)
Electronics & Imaging
(2
)
(2
)
(1
)

(5
)
Nutrition & Biosciences
(1
)
(5
)
(4
)

(10
)
Transportation & Advanced Polymers

(7
)
5


(2
)
Safety & Construction

(5
)
2


(3
)
Total
(12
)%
(5
)%
2
 %
(1
)%
(16
)%
U.S. & Canada
(13
)%
(1
)%
2
 %
(2
)%
(14
)%
EMEA
(10
)
(13
)
2

(2
)
(23
)
Asia Pacific
(9
)
(3
)
5

(2
)
(9
)
Latin America
(15
)

1

(1
)
(15
)
Total
(12
)%
(5
)%
2
 %
(1
)%
(16
)%
1.
Portfolio & Other reflects sales related to the step acquisition of Univation (Packaging & Specialty Plastics) and Cooperativa Central de Pesquisa Agrícola's, acquired on February 1, 2015 (Agriculture). Portfolio & Other also reflects the following divestitures: the chlorine value chain (Industrial Intermediates & Infrastructure and Packaging & Specialty Plastics), ANGUS Chemical Company and the global Sodium Borohydride business (both included in Industrial Intermediates & Infrastructure).

2017 versus 2016
The Company reported net sales for 2017 of $62.5 billion, up 30 percent from $48.2 billion for 2016, primarily reflecting the Merger, the addition of Dow Corning’s silicones business, increased selling prices and demand growth. Sales growth was broad-based with increases in all segments and geographic regions. Portfolio & Other changes contributed 19 percent of the sales increase and impacted all segments, except Industrial Intermediates & Infrastructure, which was flat. Local price was up 6 percent compared with the same period last year, with increases in all geographic regions, including a double-digit increase in EMEA (up 10 percent), driven by broad-based pricing actions as well as higher feedstock and raw material prices. Local price increased in Industrial Intermediates & Infrastructure (up 10 percent) and Packaging & Specialty Plastics and Performance Materials & Coatings (both up 8 percent) and declined in Agriculture and Electronics & Imaging (both down 1 percent). Local price was flat in Nutrition & Biosciences, Transportation & Advanced Polymers and Safety & Construction. Volume increased 5 percent compared with the same period last year, with increases in all segments, except Agriculture (down 2 percent), including a double-digit increase in Nutrition & Biosciences (up 10 percent). Volume increased in all geographic regions, except Latin America (down 1 percent). Currency was flat compared with the same period last year.

2016 versus 2015
The Company reported net sales for 2016 of $48.2 billion, down 1 percent from $48.8 billion for 2015. Local price decreased 6 percent compared with the same period last year, with decreases in all segments, except Agriculture (up 1 percent), and all geographic regions, due to lower feedstock and raw material prices and competitive pricing pressures. Volume increased 3 percent compared with the same period last year, as increases in Packaging & Specialty Plastics (up 9 percent), Transportation & Advanced Polymers (up 7 percent), Electronics & Imaging (up 3 percent) and Industrial Intermediates & Infrastructure (up 1 percent) more than offset decreases in Agriculture, Performance Materials & Coatings, Nutrition & Biosciences and Safety & Construction (all down 2 percent). Volume increased in all geographic regions, except Latin America, which remained flat. Portfolio & Other changes contributed 2 percent of the sales increase, primarily reflecting the addition of Dow Corning’s silicones business. See Sales Variances by Segment and Geographic Region table on the previous page for additional information on portfolio changes. Currency was flat compared with the same period last year.


36


Sales Variances by Segment and Geographic Region - Pro Forma Basis
 
2017
Percentage change from prior year
Local Price & Product Mix
Currency
Volume
Portfolio & Other 1
Total
Agriculture
 %
%
1
%
1
%
2
%
Performance Materials & Coatings
8


2

27

37

Industrial Intermediates & Infrastructure
10


7


17

Packaging & Specialty Plastics
8


5


13

Electronics & Imaging
(1
)

11

2

12

Nutrition & Biosciences


3

1

4

Transportation & Advanced Polymers
2


7

5

14

Safety & Construction
(1
)

4


3

Total
4
 %
%
5
%
3
%
12
%
U.S. & Canada
4
 %
%
3
%
3
%
10
%
EMEA
8

1

5

3

17

Asia Pacific
2


8

5

15

Latin America
1

1


3

5

Total
4
 %
%
5
%
3
%
12
%
1.
Pro forma net sales for Agriculture excludes sales related to the November 30, 2017, DAS Divested Ag Business for the period January 1, 2016 through August 31, 2017; sales from September 1, 2017 through November 30, 2017, are included in Portfolio & Other. Pro forma net sales also excludes sales related to the September 1, 2017, divestiture of the EAA Business for the period January 1, 2016 through August 31, 2017. Portfolio & Other includes sales for the acquisition of the H&N Business acquired on November 1, 2017, impacting Nutrition & Biosciences. Portfolio & Other also reflects sales from January 1, 2017 through May 31, 2017, related to the ownership restructure of Dow Corning on June 1, 2016 (impacts Performance Materials & Coatings, Electronics & Imaging and Transportation & Advanced Polymers); the divestitures of SKC Haas Display Films group of companies (divested June 30, 2017) and the authentication business (divested on January 6, 2017), both impacting Electronics & Imaging; and, the divestiture of the global food safety diagnostic business (divested February 28, 2017), impacting Nutrition & Biosciences.

2017 versus 2016
The Company reported pro forma net sales for 2017 of $79.5 billion, up 12 percent from $70.9 billion for 2016, primarily reflecting demand growth, increased selling prices and the addition of Dow Corning’s silicones business. Pro forma net sales increased across all segments and geographic regions. Volume increased 5 percent compared with the same period last year, with increases in all segments, including a double-digit increase in Electronics & Imaging (up 11 percent). Volume increased in all geographic regions, except Latin America, which was flat. Local price was up 4 percent compared with the same period last year, with increases in all geographic regions, driven by broad-based pricing actions as well as higher feedstock and raw material prices. Local price increases in Industrial Intermediates & Infrastructure (up 10 percent), Performance Materials & Coatings and Packaging & Specialty Plastics (both up 8 percent) and Transportation & Advanced Polymers (up 2 percent) more than offset declines in Electronics & Imaging and Safety & Construction (both down 1 percent). Local price was flat in Agriculture and Nutrition & Biosciences. Currency was flat compared with the same period last year.

Cost of Sales
Cost of sales was $50.4 billion in 2017, up from $37.6 billion in 2016. Cost of sales in 2017 was negatively impacted by a $1,469 million charge for the fair value step-up of inventories assumed in the Merger and the acquisition of the H&N Business, related to Agriculture ($424 million), Packaging & Specialty Plastics ($120 million), Electronics & Imaging ($138 million), Nutrition & Biosciences ($403 million), Transportation & Advanced Polymers ($211 million) and Safety & Construction ($173 million); a charge of $888 million related to the payment of plan obligations to certain participants of a Dow U.S. non-qualified pension plan as a result of the Merger (related to Corporate); and $49 million of transaction costs and productivity actions (related to Corporate). Excluding these significant items, cost of sales increased primarily due to the Merger, increased sales volume, higher feedstock, energy and other raw material costs, higher commissioning expenses related to Dow's U.S. Gulf Coast growth projects and the addition of Dow Corning's silicones business. Cost of sales as a percentage of sales was 80.7 percent compared with 78.2 percent in 2016. See Notes 3 and 19 to the Consolidated Financial Statements for additional information.


37


Cost of sales was $37.6 billion in 2016, down slightly from $37.7 billion in 2015. Cost of sales was negatively impacted by a $317 million charge associated with the fair value step-up of inventories assumed in the ownership restructure of Dow Corning's silicones business, related to Performance Materials & Coatings ($213 million), Electronics & Imaging ($69 million) and Transportation & Advanced Polymers ($35 million); a $295 million charge for environmental matters, related to Agriculture ($2 million), Industrial Intermediates & Infrastructure ($1 million), Packaging & Specialty Plastics ($2 million) and Corporate ($290 million); $123 million of transaction costs and productivity actions (related to Corporate); and a $117 million charge for the termination of a terminal use agreement (related to Packaging & Specialty Plastics). Excluding these significant items, cost of sales decreased compared with 2015 as lower feedstock, energy and other raw material costs and cost cutting and productivity initiatives more than offset increased sales volume and the addition of Dow Corning's silicones business. Cost of sales in 2015 was impacted by $12 million loss for the fair value step-up of inventories assumed in the step acquisition of UnivationTechnologies, LLC ("Univation") (related to Packaging & Specialty Plastics). Cost of sales as a percentage of sales was 78.2 percent in 2016 compared with 77.4 percent in 2015. See Notes 3 and 16 to the Consolidated Financial Statements for additional information.

Research and Development Expenses
Research and development expenses were $2,110 million in 2017, compared with $1,584 million in 2016 and $1,598 million in 2015. In 2017, R&D expenses increased compared with 2016, primarily due to the Merger. In 2016, R&D expenses decreased slightly compared with 2015, as increased costs from the addition of Dow Corning's silicones business were more than offset by decreased spending due to divestitures and cost reduction initiatives as well as lower performance-based compensation costs. R&D expenses as a percentage of net sales were 3.4 percent, 3.3 percent and 3.3 percent for 2017, 2016 and 2015, respectively.

Selling, General and Administrative Expenses
Selling, general and administrative expenses were $4,021 million in 2017, compared with $2,956 million in 2016 and $2,948 million in 2015. SG&A expenses in 2017 increased compared with 2016, primarily due to the Merger. SG&A expenses were essentially flat in 2016 compared with 2015, as increased costs from the addition of Dow Corning's silicones business were nearly offset by decreased spending due to divestitures and cost reduction initiatives as well as lower performance-based compensation costs. SG&A expenses as a percentage of net sales were 6.4 percent, 6.1 percent and 6.0 percent for 2017, 2016 and 2015, respectively.

Amortization of Intangibles
Amortization of intangibles was $1,013 million in 2017, $544 million in 2016 and $419 million in 2015. The increase in amortization in 2017 was primarily due to an increase in intangible assets as a result of the Merger and the addition of Dow Corning's silicones business. The increase in amortization in 2016 was primarily due to an increase in intangible assets as a result of the addition of Dow Corning's silicones business. See Notes 3 and 13 to the Consolidated Financial Statements for additional information on intangible assets.

Restructuring, Goodwill Impairment and Asset Related Charges - net
DowDuPont Cost Synergy Program
In September and November 2017, DowDuPont approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the “Synergy Program”), adopted by the DowDuPont Board of Directors. The plan 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, the Company expects to record total pretax restructuring charges of approximately $2 billion, comprised of approximately $845 million to $935 million of severance and related benefit costs; $400 million to $540 million of asset write-downs and write-offs, and $400 million to $450 million of costs associated with exit and disposal activities. The Synergy Program includes certain asset actions, including strategic decisions regarding the cellulosic biofuel unit reflected in the preliminary fair value measurement of DuPont’s assets as of the merger date. Current estimated total pretax restructuring charges could be impacted by future adjustments to the preliminary fair value of DuPont’s assets.

As a result of these actions, the Company recorded pretax restructuring charges of $874 million in 2017, consisting of severance and related benefit costs of $510 million, asset write-downs and write-offs of $290 million and costs associated with exit and disposal activities of $74 million. The restructuring charges by segment are as follows: $134 million in Agriculture, $11 million in Performance Materials & Coatings, $12 million in Industrial Intermediates & Infrastructure, $36 million in Packaging & Specialty Plastics, $86 million in Electronics & Imaging, $1 million in Nutrition & Biosciences, $2 million in Transportation & Advanced Polymers, $21 million in Safety & Construction and $571 million in Corporate. The Company expects to record the remaining restructuring charges over the next two years and expects the Synergy Program to be substantially completed by the end of 2019.

Dow 2016 Restructuring Plan
On June 27, 2016, Dow's Board of Directors ("Board") approved a restructuring plan that incorporated actions related to the ownership restructure of Dow Corning. These actions, aligned with Dow's value growth and synergy targets, will result in a global workforce reduction of approximately 2,500 positions, with most of these positions resulting from synergies related to the

38


ownership restructure of Dow Corning. These actions are expected to be substantially completed by June 30, 2018. As a result of these actions, Dow recorded pretax restructuring charges of $449 million in the second quarter of 2016, consisting of severance and related benefit costs of $268 million, asset write-downs and write-offs of $153 million and costs associated with exit and disposal activities of $28 million and related to the Company's segment results as follows: $42 million in Performance Materials & Coatings, $83 million in Industrial Intermediates & Infrastructure, $10 million in Packaging & Specialty Plastics and $314 million in Corporate.

In 2017, Dow recorded a favorable adjustment to the 2016 restructuring charge related to costs associated with exit and disposal activities of $7 million, related to Performance Materials & Coatings.

Dow 2015 Restructuring Plan
On April 29, 2015, Dow's Board approved actions to further streamline the organization and optimize Dow’s footprint as a result of the separation of a significant portion of Dow’s chlorine value chain. These actions, which further accelerated Dow’s value growth and productivity targets, resulted in a reduction of approximately 1,750 positions across a number of businesses and functions and adjustments to Dow's asset footprint to enhance competitiveness. As a result of these actions, Dow recorded pretax restructuring charges of $375 million in the second quarter of 2015 consisting of severance and related benefit costs of $196 million, asset write-downs and write-offs of $169 million and costs associated with exit and disposal activities of $10 million. In the fourth quarter of 2015, Dow recorded restructuring charge adjustments of $40 million, including severance and related benefit costs of $39 million for the separation of approximately 500 additional positions as part of Dow's efforts to further streamline the organization, and $1 million of costs associated with exit and disposal activities. The impact of these charges were related to the Company's segment results as follows: $15 million in Agriculture, $10 million in Performance Materials & Coatings, $12 million in Packaging & Specialty Plastics, $51 million in Electronics & Imaging, $16 million in Nutrition & Biosciences, $17 million in Safety & Construction and $294 million in Corporate. These actions were substantially completed at June 30, 2017.

In 2016, Dow recorded an unfavorable adjustment to the 2015 restructuring charge for additional accruals for costs associated with exit and disposal activities of $6 million and a favorable adjustment of $3 million for asset write-downs and write-offs. The net charge was included in in the Company's segment results as follows: Agriculture ($5 million charge), Nutrition & Biosciences ($1 million charge) and Safety & Construction ($3 million gain).

In 2017, the Company recorded favorable adjustments to the 2015 restructuring charge of $9 million for severance and related benefit costs, impacting Corporate, and $1 million for costs associated with exit and disposal activities related to Agriculture. See Note 5 to the Consolidated Financial Statements for details on the Company's restructuring activities.

Goodwill Impairment
Upon completion of the goodwill impairment testing in the fourth quarter of 2017, the Company determined the fair value of the Coatings & Performance Monomers reporting unit was lower than its carrying amount. As a result, the Company recorded an impairment charge of $1,491 million in the fourth quarter of 2017, related to Performance Materials & Coatings. See Note 13 to the Consolidated Financial Statements for additional information on the impairment charge.

Asset Related Charges
2017 Charges
In 2017, the Company recognized a $622 million pretax impairment charge related to a biopolymers manufacturing facility in Santa Vitoria, Minas Gerais, Brazil. Dow determined it will not pursue an expansion of the facility’s ethanol mill into downstream derivative products, primarily as a result of cheaper ethane-based production as well as Dow’s new assets coming online in the U.S. Gulf Coast which can be used to meet growing market demands in Brazil. As a result of this decision, cash flow analysis indicated the carrying amount of the impacted assets was not recoverable. The impairment charge was related to Packaging & Specialty Plastics.

The Company also recognized other pretax impairment charges of $317 million in the fourth quarter of 2017, including charges related to manufacturing assets of $230 million, an equity method investment of $81 million and other assets of $6 million. The impairment charges were related to Performance Materials & Coatings ($82 million), Industrial Intermediates & Infrastructure ($6 million), Packaging & Specialty Plastics ($57 million), Electronics & Imaging ($39 million), Safety & Construction ($32 million) and Corporate ($101 million). See Notes 5, 22 and 23 to the Consolidated Financial Statements for additional information.

2016 Charges
In 2016, Dow recognized a $143 million pretax impairment charge related to its equity interest in AgroFresh Solutions, Inc. ("AFSI") due to a decline in the market value of AFSI. The impairment charge impacted Corporate. See Notes 4, 5, 12, 22 and 23 to the Consolidated Financial Statements for additional information.

39


2015 Charges
As a result of Dow’s continued actions to optimize its footprint, Dow recognized an impairment charge of $144 million in 2015, related to manufacturing assets and facilities and an equity method investment. The impairment charge related to Performance Materials & Coatings ($71 million), Packaging & Specialty Plastics ($57 million) and Safety & Construction ($16 million). See Notes 5 and 22 to the Consolidated Financial Statements for additional information.

Integration and Separation Costs
Integration and separation costs, which reflect costs related to the Merger, post-Merger integration and Intended Business Separation activities and costs related to the ownership restructure of Dow Corning, were $1,101 million in 2017, $349 million in 2016 and $23 million in 2015, and were related to Corporate.

Asbestos-Related Charge
In 2016, Dow and Union Carbide Corporation elected to change the method of accounting for asbestos-related defense and processing costs from expensing as incurred to estimating and accruing a liability. As a result of this accounting policy change, Union Carbide recorded a pretax charge of $1,009 million for asbestos-related defense costs through the terminal year of 2049. Union Carbide also recorded a pretax charge of $104 million to increase the asbestos-related liability for pending and future claims through the terminal year of 2049. These charges were related to Corporate. See Notes 1 and 16 to the Consolidated Financial Statements for additional information on asbestos-related matters.

Equity in Earnings of Nonconsolidated Affiliates
DowDuPont’s share of the earnings of nonconsolidated affiliates in 2017 was $764 million, compared with $442 million in 2016 and $674 million in 2015. In 2017, equity earnings increased as lower equity losses from Sadara Chemical Company ("Sadara") and higher equity earnings from The Kuwait Olefins Company K.S.C. ("TKOC"), EQUATE Petrochemical Company K.S.C. ("EQUATE") and the HSC Group, which included settlements with a customer related to long-term polysilicon sales agreements, were partially offset by the impact of the Dow Corning ownership restructure and lower equity earnings from The SCG-Dow Group and Map Ta Phut Olefins Company Limited.

In 2016, equity earnings declined due to higher equity losses from Sadara related to start-up expenses, lower equity earnings from the Kuwait joint ventures due to lower monoethylene glycol prices and a reduction in the ownership of MEGlobal (now part of EQUATE), and the impact of the Dow Corning ownership restructure. Equity earnings also declined due to a charge of $22 million for a loss on early redemption of debt incurred by Dow Corning and related to Performance Materials & Coatings ($15 million), Electronics & Imaging ($5 million) and Transportation & Advanced Polymers ($2 million). These declines were partially offset by higher earnings from the HSC Group, The SCG-Dow Group and Map Ta Phut Olefins Company Limited. Equity earnings in 2015 were impacted by a $29 million charge related to AFSI's fair value step-up of its inventories and start-up costs (related to Corporate); a loss recognized by Sadara related to the write-off of design engineering work for an epoxy plant, of which the Company's share was $27 million (related to Corporate); and a pretax gain of $20 million related to a reduction in Dow Corning's implant liability (related to Performance Materials & Coatings). See Note 12 to the Consolidated Financial Statements for additional information on nonconsolidated affiliates.

Sundry Income (Expense) - Net
Sundry income (expense) – net includes a variety of income and expense items such as the gain or loss on foreign currency exchange, interest income, dividends from investments, gains and losses on sales of investments and assets and litigation. Sundry income (expense) - net for 2017 was income of $966 million, compared with income of $1,452 million in 2016 and income of $4,716 million in 2015.

In 2017, sundry income (expense) - net included a $635 million gain on the divestiture of the DAS Divested Ag Business (related to Agriculture), a $227 million gain on the divestiture of Dow's EAA Business (related to Packaging & Specialty Plastics), a $137 million gain related to Dow's patent infringement matter with Nova Chemical Corporation (related to Packaging & Specialty Plastics), a $7 million gain for post-closing adjustments on the split-off of Dow's chlorine value chain (related to Corporate), gains on sales of other assets and investments and interest income. These gains more than offset a loss of $469 million related to Dow AgroSciences' arbitration matter with Bayer CropScience (related to Agriculture) and foreign currency exchange losses. See Notes 4, 6, 7 and 16 to the Consolidated Financial Statements for additional information.

In 2016, sundry income (expense) - net included a $2,445 million gain on the Dow Corning ownership restructure (related to Performance Materials & Coatings ($1,617 million), Electronics & Imaging ($512 million) and Transportation & Advanced Polymers ($316 million)), a $6 million gain for post-closing adjustments on the split-off of Dow's chlorine value chain (related to Industrial Intermediates &Infrastructure), gains on sales of assets and investments, and interest income. These gains more than offset a $1,235 million loss related to Dow's settlement of the urethane matters class action lawsuit and the opt-out cases litigation (related to Industrial Intermediates & Infrastructure), $41 million of transaction costs and productivity actions (related to Corporate),

40


losses on divestitures and foreign currency exchange losses. See Notes 3, 4, 6, 7, 12 and 16 to the Consolidated Financial Statements for additional information.

In 2015, sundry income (expense) - net included a $2,233 million gain on the split-off of Dow's chlorine value chain (related to Industrial Intermediates & Infrastructure (gain of $1,984 million), Packaging & Specialty Plastics (gain of $317 million) and Corporate (loss of $68 million)), a $723 million gain on the sale of Dow's ownership interest in MEGlobal (related to Industrial Intermediates & Infrastructure), a $682 million gain on the divestiture of ANGUS Chemical Company (related to Industrial Intermediates & Infrastructure), a $20 million gain on the divestiture of Dow's global Sodium Borohydride business (related to Industrial Intermediates & Infrastructure), a $618 million gain on the divestiture of Dow's AgroFresh business (net of an $8 million loss for mark-to-market adjustments on the fair value of warrants receivable and related to Corporate), a $361 million gain on the Univation step acquisition (related to Packaging & Specialty Plastics), gains on sales of assets and investments and interest income. These gains more than offset foreign currency exchange losses, including a $98 million loss related to the impact of the Argentine peso devaluation (related to Corporate), and $119 million of transaction costs and productivity actions (related to Corporate). See Notes 3, 4, 6, 7, 12, 15 and 22 to the Consolidated Financial Statements for additional information.

Interest Expense and Amortization of Debt Discount
Interest expense and amortization of debt discount was $1,082 million in 2017, $858 million in 2016 and $946 million in 2015. The increase in 2017 was primarily related to the Merger and the effect of the long-term debt assumed in the Dow Corning ownership restructure. The decrease in 2016 was primarily due to the impact of approximately $2.5 billion of debt retired in 2015. See Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 15 to the Consolidated Financial Statements for additional information related to debt financing activity.

Provision (Credit) for Income Taxes on Continuing Operations
The Company's effective tax rate fluctuates based on, among other factors, where income is earned, reinvestment assertions regarding foreign income and the level of income relative to tax credits available. The Company's tax rate is also influenced by the level of equity earnings, since most of the earnings from the Company's equity method investments are taxed at the joint venture level. The underlying factors affecting the Company's overall tax rate are summarized in Note 8 to the Consolidated Financial Statements.

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 on earnings of foreign subsidiaries that were previously deferred, creates new provisions related to foreign sourced earnings, eliminates the domestic manufacturing deduction and moves to a territorial system. At December 31, 2017, the Company had not completed its accounting for the tax effects of The Act; however, the Company made a reasonable estimate of the effects on its existing deferred tax balances, which resulted in a provisional benefit of $2,666 million to "Provision (Credit) for income taxes on continuing operations," and the one-time transition tax, which resulted in a provisional charge of $1,580 million to "Provision (Credit) for income taxes on continuing operations." The Company expects that it will have sufficient foreign tax credits available to offset the tax liability associated with the one-time transition tax. See Note 8 to the Consolidated Financial Statements for additional information.

The "Provision (Credit) for income taxes on continuing operations" was a benefit of $476 million in 2017, and a charge of $9 million in 2016 and $2,147 million in 2015. The tax rate for 2017 was favorably impacted by a provisional net benefit of $1,086 million that the Company recognized due to the enactment of The Act, as well as the geographic mix of earnings. In addition, the tax rate was favorably impacted by the adoption of Accounting Standards Update ("ASU") 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," which resulted in the recognition of excess tax benefits related to equity compensation in the provision for income taxes. These impacts were partially offset by a goodwill impairment recognized in the fourth quarter for which there was no corresponding tax deduction, amortization of the fair value step-up of DuPont’s inventories as a result of the Merger and certain net foreign currency exchange losses recognized on the remeasurement of the net monetary asset positions which were not tax deductible in their local jurisdictions. These factors resulted in a negative tax rate of 39.9 percent for 2017.

The tax rate for Dow in 2016 was favorably impacted by the non-taxable gain on the ownership restructure of Dow Corning's silicones business and a tax benefit on the reassessment of a deferred tax liability related to the basis difference in Dow’s investment in Dow Corning. The tax rate was also favorably impacted by the geographic mix of earnings, the availability of foreign tax credits and the deductibility of the urethane matters class action lawsuit and opt-out cases settlements and the asbestos-related charge. A reduction in equity earnings and non-deductible transaction costs and productivity actions unfavorably impacted the tax rate. These factors resulted in an effective tax rate of 0.2 percent for 2016.

The tax rate for Dow in 2015 was favorably impacted by portfolio actions, specifically the tax-efficient split-off of Dow's chlorine value chain, the non-taxable gain from the Univation step acquisition, and the sale of Dow's ownership interest in MEGlobal. The

41


geographic mix of earnings favorably impacted the tax rate with the gain from the ANGUS Chemical Company divestiture and continued profitability improvement in Europe and Asia Pacific providing most of the benefit. The tax rate was unfavorably impacted by foreign subsidiaries repatriating cash to the United States which was primarily derived from divestiture proceeds. Reduced equity earnings and continued increases in statutory income in Latin America and Canada due to local currency devaluations also unfavorably impacted the tax rate. These factors resulted in an effective tax rate of 21.6 percent for 2015.

Loss from Discontinued Operations, Net of Tax
Loss from discontinued operations, net of tax was $77 million in 2017 and is related to certain DuPont assets divested as a condition of the regulatory approval of the Merger. See Note 4 to the Consolidated Financial Statements for additional information.

Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests was $132 million in 2017, $86 million in 2016 and $98 million in 2015. Net income attributable to noncontrolling interests increased in 2017 compared with 2016, primarily due to higher earnings from Dow Corning's consolidated joint ventures and improved results from a cogeneration facility in Brazil. Net income attributable to noncontrolling interests decreased in 2016 compared with 2015, primarily due to losses incurred by a cogeneration facility in Brazil, which more than offset the addition of earnings from Dow Corning's consolidated joint ventures. In addition, 2015 was also impacted by noncontrolling interests' portion of the 2015 restructuring charge. See Notes 5, 18 and 23 to the Consolidated Financial Statements for additional information.

Dow Cumulative Convertible Preferred Stock Dividends
On December 30, 2016, Dow converted all outstanding shares of its Cumulative Convertible Perpetual Preferred Stock, Series A ("Dow Preferred Stock") into shares of Dow's common stock. As a result of this conversion, no shares of Dow Preferred Stock are issued or outstanding. On January 6, 2017, Dow filed an amendment to its Restated Certificate of Incorporation by way of a certificate of elimination with the Secretary of State of Delaware eliminating this series of preferred stock. Dow Preferred Stock dividends of $340 million were recognized in 2016 and 2015. See Note 17 to the Consolidated Financial Statements for additional information.

Net Income Available for DowDuPont Inc. Common Stockholders
Net income available for common stockholders was $1,460 million ($0.91 per share) in 2017, compared with $3,978 million ($3.52 per share) in 2016 and $7,345 million ($6.15 per share) in 2015. See Note 9 to the Consolidated Financial Statements for details on the Company's earnings per share calculations.

SUPPLEMENTAL UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following supplemental unaudited pro forma combined statements of income (the "unaudited pro forma income statements") for DowDuPont are presented to illustrate the estimated effects of the Merger, assuming that the Merger had been consummated on January 1, 2016. For the periods presented below, activity prior to August 31, 2017 (the “Merger Date”) was prepared on a pro forma basis (the “unaudited pro forma information”) and activity after the Merger Date was prepared on a combined basis under accounting principles generally accepted in the United States of America (“U.S. GAAP”). The unaudited pro forma information was prepared in accordance with Article 11 of Regulation S-X. Pro forma adjustments have been made for (1) the preliminary purchase accounting impact, (2) accounting policy alignment, (3) the elimination of the effect of events that are directly attributable to the Merger Agreement (e.g., one-time transaction costs), (4) the elimination of the impact of transactions between Dow and DuPont, and (5) the elimination of the effect of consummated divestitures agreed to with certain regulatory agencies as a condition of approval for the Merger. Events that are not expected to have a continuing impact on the combined results (e.g., inventory step‑up costs) are excluded from the unaudited pro forma information. The unaudited pro forma information for activity prior to the Merger date does not reflect restructuring or integration activities or other costs following the Merger that may be incurred to achieve cost or growth synergies of DowDuPont. The unaudited pro forma income statements provide shareholders with summary financial information and historical data that is on a basis consistent with how DowDuPont reports current financial information.

The Merger was accounted for under Accounting Standards Codification ("ASC") Topic 805, "Business Combinations" ("ASC 805"), under which Dow was designated as the accounting acquirer in the Merger for accounting purposes. Under ASC 805, Dow accounted for the transaction by using Dow historical financial information and accounting policies and adding the assets and liabilities of DuPont as of the Merger Date at their respective fair values. The assets and liabilities of DuPont were measured based on various preliminary estimates at the Merger Date using assumptions that DowDuPont believes are reasonable based on information that was currently available. The fair value estimates reflected in the unaudited pro forma information are based on those used in the Current Report on Form 8-K/A filed with the SEC on October 26, 2017, and subsequent measurement period adjustments are not reflected. DowDuPont intends to complete and finalize the allocation of consideration as soon as practicable within the measurement period in accordance with ASC 805, but no later than one year following the closing date of the Merger.

42


Differences between these preliminary estimates and the final acquisition accounting may occur and these differences could have a material impact on the accompanying unaudited pro forma income statements and DowDuPont’s future results of operations.

The unaudited pro forma information was prepared in accordance with Article 11 of Regulation S-X which is a different basis than the unaudited pro forma information presented in Note 3 to the Consolidated Financial Statements, which was prepared in accordance with the requirements of ASC 805.

The unaudited pro forma income statements have been presented for informational purposes only and are not necessarily indicative of what DowDuPont’s results of operations actually would have been had the Merger been completed on January 1, 2016. In addition, the unaudited pro forma income statements do not purport to project the future operating results of the Company. The unaudited pro forma income statements were based on and should be read in conjunction with the separate historical financial statements and accompanying notes contained in each of the Dow and DuPont Annual Reports on Form 10-K for the applicable periods. See Notes 1 and 3 to the Consolidated Financial Statements for additional information.

Unaudited Pro Forma Combined Statements of Income
Year Ended
In millions, except per share amounts
Dec 31, 2017
Dec 31, 2016
Net sales
$
79,535

$
70,894

Cost of sales
60,960

51,996

Research and development expenses
3,157

3,061

Selling, general and administrative expenses
6,776

6,701

Amortization of intangibles
1,743

1,624

Restructuring, goodwill impairment and asset related charges - net
3,593

1,151

Integration and separation costs
1,499

476

Asbestos-related charge

1,113

Equity in earnings of nonconsolidated affiliates
804

516

Sundry income (expense) - net
955

1,903

Interest expense and amortization of debt discount
1,256

1,108

Income from continuing operations before income taxes
2,310

6,083

Provision (Credit) for income taxes on continuing operations
(602
)
288

Income from continuing operations, net of tax
2,912

5,795

Net income attributable to noncontrolling interests
159

108

Net income from continuing operations attributable to DowDuPont Inc.
2,753

5,687

Preferred stock dividends

340

Net income from continuing operations available for DowDuPont Inc. common stockholders
$
2,753

$
5,347

 
 
 
Per common share data:
 
 
Earnings per common share from continuing operations - basic
$
1.18

$
2.40

Earnings per common share from continuing operations - diluted
$
1.17

$
2.37

 
 
 
Weighted-average common shares outstanding - basic
2,323.9

2,221.3

Weighted-average common shares outstanding - diluted
2,346.1

2,242.1



43


Unaudited Pro Forma Combined
Statement of Income
Year Ended Dec 31, 2017
 
 
Adjustments
 
In millions, except per share amounts
DWDP 1
Historical DuPont 2
Reclass 3
Divestitures 4
Pro Forma 5
Pro Forma
Net sales
$
62,484

$
18,349

$
84

$
(1,219
)
$
(163
)
$
79,535

Cost of sales
50,414

10,617

387

(523
)
65

60,960

Other operating charges

521

(521
)



Research and development expenses
2,110

1,159

(27
)
(104
)
19

3,157

Selling, general and administrative expenses
4,021

3,452

(583
)
(143
)
29

6,776

Other (loss) income, net

173

(173
)



Amortization of intangibles
1,013


139


591

1,743

Restructuring, goodwill impairment and asset related charges - net
3,280

323



(10
)
3,593

Integration and separation costs
1,101


605

(24
)
(183
)
1,499

Equity in earnings of nonconsolidated affiliates
764


55


(15
)
804

Sundry income (expense) - net
966


1

(12
)

955

Interest expense and amortization of debt discount
1,082

254



(80
)
1,256

Income from continuing operations before income taxes
1,193

2,196

(33
)
(437
)
(609
)
2,310

Provision (Credit) for income taxes on continuing operations
(476
)
228

(33
)
(88
)
(233
)
(602
)
Income from continuing operations, net of tax
1,669

1,968


(349
)
(376
)
2,912

Net income attributable to noncontrolling interests
132

20



7

159

Net income from continuing operations attributable to DowDuPont Inc.
1,537

1,948


(349
)
(383
)
2,753

Preferred stock dividends

7



(7
)

Net income from continuing operations available for DowDuPont Inc. common stockholders
$
1,537

$
1,941

$

$
(349
)
$
(376
)
$
2,753

 
 
 
 
 
 
 
Per common share data:
 
 
 
 
 
 
Earnings per common share from continuing operations - basic
 
 
 
$
1.18

Earnings per common share from continuing operations - diluted
 
 
 
$
1.17

 
 
 
 
 
 
 
Weighted-average common shares outstanding - basic
 
 
 
2,323.9

Weighted-average common shares outstanding - diluted
 
 
 
2,346.1

1.
See the U.S. GAAP consolidated statements of income.
2.
Reflects DuPont activity for the period from January 1, 2017 to August 31, 2017.
3.
Certain reclassifications were made to conform with the presentation used for DowDuPont.
4.
Includes the following divestitures agreed to with certain regulatory agencies as a condition of approval for the Merger: Dow’s EAA Business (for the period of January 1, 2017 through the September 1, 2017 divestiture); the DAS Divested Ag Business (for the period of January 1, 2017 through August 31, 2017); and DuPont’s cereal broadleaf herbicides and chewing insecticides portfolio as well as its crop protection research and development pipeline and organization (for the period of January 1, 2017 through August 31, 2017; activity from September 1, 2017 through the November 1, 2017 divestiture was treated as discontinued operations).
5.
Certain pro forma adjustments were made to illustrate the estimated effects of the Merger, assuming that the Merger had been consummated on January 1, 2016. Refer to Summary of Pro Forma Adjustments at the end of this section for additional details.


44


Unaudited Pro Forma Combined
Statement of Income
Year Ended Dec 31, 2016
 
 
Adjustments
 
In millions, except per share amounts
Historical Dow 1
Historical DuPont 2
Reclass 3
Divestitures 4
Pro Forma 5
Pro Forma
Net sales
$
48,158

$
24,594

$
170

$
(1,812
)
$
(216
)
$
70,894

Cost of sales
37,641

14,469

559

(783
)
110

51,996

Other operating charges

686

(686
)



Research and development expenses
1,584

1,641

(40
)
(153
)
29

3,061

Selling, general and administrative expenses
3,304

4,319

(762
)
(203
)
43

6,701

Other (loss) income, net

708

(708
)



Amortization of intangibles
544


194


886

1,624

Restructuring, goodwill impairment and asset related charges - net
452

552

143

4


1,151

Integration and separation costs


735


(259
)
476

Asbestos-related charge
1,113





1,113

Equity in earnings of nonconsolidated affiliates
442


99


(25
)
516

Sundry income (expense) - net
1,202


711

(10
)

1,903

Interest income
107


(107
)



Interest expense and amortization of debt discount
858

370



(120
)
1,108

Income from continuing operations before income taxes
4,413

3,265

22

(687
)
(930
)
6,083

Provision for income taxes on continuing operations
9

744

22

(160
)
(327
)
288

Income from continuing operations, net of tax
4,404

2,521


(527
)
(603
)
5,795

Net income attributable to noncontrolling interests
86

12



10

108

Net income attributable to DowDuPont Inc.
4,318

2,509


(527
)
(613
)
5,687

Preferred stock dividends
340

10



(10
)
340

Net income available for DowDuPont Inc. common stockholders
$
3,978

$
2,499

$

$
(527
)
$
(603
)
$
5,347

 
 
 
 
 
 
 
Per common share data:
 
 
 
 
 
 
Earnings per common share from continuing operations - basic
 
 
 
$
2.40

Earnings per common share from continuing operations - diluted
 
 
 
$
2.37

 
 
 
 
 
 
 
Weighted-average common shares outstanding - basic
 
 
 
2,221.3

Weighted-average common shares outstanding - diluted
 
 
 
2,242.1

1.
See the consolidated statements of income included in Dow's Annual Report on Form 10-K for the year ended December 31, 2016.
2.
See the consolidated statements of income included in DuPont's Annual Report on Form 10-K for the year ended December 31, 2016.
3.
Certain reclassifications were made to conform with the presentation used for DowDuPont. The reclassifications are consistent with those identified and disclosed in the Current Report on Form 8-K/A filed with the SEC on October 26, 2017. Additionally, in the fourth quarter of 2017, to improve comparability and conform to the current period presentation, the Company reclassified $143 million of asset impairment charges from "Sundry income (expense) - net" to "Restructuring, goodwill impairment and asset related charges - net."
4.
Includes the following divestitures agreed to with certain regulatory agencies as a condition of approval for the Merger: Dow’s EAA Business; the DAS Divested Ag Business; and DuPont’s cereal broadleaf herbicides and chewing insecticides portfolio as well as its crop protection research and development pipeline and organization.
5.
Certain pro forma adjustments were made to illustrate the estimated effects of the Merger, assuming that the Merger had been consummated on January 1, 2016. Refer to Summary of Pro Forma Adjustments at the end of this section for additional details.




45


Summary of Pro Forma Adjustments
Year Ended
In millions (Unaudited)
Dec 31, 2017
Dec 31, 2016
Net sales
 
 
Intercompany transactions 1
$
(163
)
$
(216
)
Cost of sales
 
 
Intercompany transactions 1
$
(163
)
$
(216
)
Policy harmonization 2
11


Depreciation expense 3
217

326

Total cost of sales
$
65

$
110

Research and development expenses
 
 
Depreciation expense 3
$
19

$
29

Selling, general and administrative expenses
 
 
Depreciation expense 3
$
29

$
43

Amortization of intangibles
 
 
Amortization expense 4
$
591

$
886

Restructuring, goodwill impairment and asset related charges - net