10-K 1 a2018dwdp10-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, 2018
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
2211 H.H. Dow Way, 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. þ Yes ¨ 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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
 
¨
 
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, 2018, (the last day of the registrant's most recently completed second fiscal quarter), was approximately $151.8 billion based on the last reported closing price of $65.92 per share 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, 2018, was 2,303,312,652 shares.

Total DowDuPont common stock outstanding at January 31, 2019 was 2,254,762,058 shares.

DOCUMENTS INCORPORATED BY REFERENCE
Part III: Proxy Statement for the 2019 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the fiscal year covered by this Form 10-K.



DowDuPont Inc.

ANNUAL REPORT ON FORM 10-K
For the fiscal year ended December 31, 2018

TABLE OF CONTENTS

 
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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DowDuPont Inc.
 
 
PART I
 

ITEM 1. BUSINESS

THE COMPANY
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. DowDuPont is a holding company comprised of The Dow Chemical Company ("Historical Dow") and E. I. du Pont de Nemours and Company ("Historical 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 Historical Dow and Historical DuPont. Pursuant to the Agreement and Plan of Merger, dated December 11, 2015, as amended on March 31, 2017, Historical Dow and Historical 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
2211 H.H. Dow Way
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.

THE INTENDED BUSINESS SEPARATIONS
DowDuPont plans to separate into three, independent, publicly traded companies - one for each of its agriculture, materials science and specialty products businesses (the “Intended Business Separations” and the transactions to accomplish the Intended Business Separations, the “separations”). DowDuPont has formed two wholly owned subsidiaries: Dow Holdings Inc., to serve as a holding company for its materials science business, and Corteva, Inc., to serve as a holding company for its agriculture business.

In furtherance of the Intended Business Separations, DowDuPont is engaged in a series of internal reorganization and realignment steps (the “Internal Reorganization”) to realign its businesses into three subgroups: agriculture, materials science and specialty products. As part of the Internal Reorganization, the assets and liabilities aligned with the materials science business will be transferred or conveyed to legal entities that will ultimately be subsidiaries of Dow Holdings Inc. and the assets and liabilities aligned with the agriculture business will be transferred or conveyed to legal entities that will ultimately be subsidiaries of Corteva, Inc.

Following the Internal Reorganization, DowDuPont expects to distribute its materials science and agriculture businesses through two separate U.S. federal tax-free spin-offs in which DowDuPont stockholders, at the time of such spin-offs, will receive a pro rata dividend of the shares of the capital stock of Dow Holdings Inc. and of Corteva, Inc., as applicable (the “distributions”). The materials science business, after the consummation of the applicable Internal Reorganization, will be referred to as “Dow” and the agriculture business, after the consummation of the applicable Internal Reorganization, will be referred to as “Corteva.” Following the separation and distribution of Dow, which is targeted to occur on April 1, 2019, DowDuPont, as the remaining company, will continue to hold the agriculture and specialty products businesses. DowDuPont is then targeted to complete the separation and distribution of Corteva on June 1, 2019, resulting in DowDuPont holding the specialty products businesses of the combined Company. After the distribution of Corteva, it is expected that DowDuPont will become known as "DuPont."

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Prior to the distribution of Dow, DowDuPont intends to enter into a separation agreement with Corteva and Dow (the “separation agreement”) setting forth the agreement among the parties regarding the principal actions to be taken in connection with the separations. Under the separation agreement, certain environmental and legal liabilities will be allocated among DuPont, Dow and Corteva. Those liabilities primarily related to DowDuPont’s specialty products businesses, materials science business and agriculture business will generally be retained or assumed by DuPont, Dow and Corteva, respectively, unless otherwise specifically allocated.

With respect to environmental and legal liabilities from discontinued and/or divested operations and businesses, those of Historical Dow will be retained or assumed by Dow and those of Historical DuPont will be retained or assumed by Corteva or DuPont according to the terms of the separation agreement.

These liability allocations will be implemented through transfer or substitution, if possible, or indemnity.

In the fourth quarter of 2018, DowDuPont consummated a public underwritten offer of eight series of senior unsecured notes (the "DowDuPont Notes") in an aggregate principal amount of $12.7 billion. (See the discussion of the DowDuPont Notes in Liquidity and Capital Resources in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations).


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.
 
Forward-looking statements by their nature address matters that are, to varying degrees, uncertain, including statements about the Intended Business Separations, the separations and distributions. Forward-looking statements, including those related to the DowDuPont’s ability to complete, or to make any filing or take any other action required to be taken to complete, the separations and distributions, are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements also involve risks and uncertainties, many of which are beyond DowDuPont’s control. Some of the important factors that could cause DowDuPont’s, Historical Dow’s or Historical DuPont’s actual results (including DowDuPont’s agriculture business, materials science business or specialty products business as conducted by and through Historical Dow and Historical DuPont) to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) ability and costs to achieve all the expected benefits, including anticipated cost and growth synergies, from the integration of Historical Dow and Historical DuPont and the Intended Business Separations, (either directly or as conducted through Historical Dow and Historical DuPont); (ii) the incurrence of significant costs in connection with the integration of Historical Dow and Historical DuPont and the Intended Business Separations; (iii) risks outside the control of DowDuPont, Historical Dow and Historical DuPont which could impact the decision of the DowDuPont Board of Directors to 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, a full or partial shutdown of the U.S. federal government, other challenges that could affect the global economy, specific market conditions in one or more of the industries of the businesses proposed to be separated, and changes in the regulatory or legal environment and the requirement to redeem $12.7 billion of DowDuPont notes if the Intended Business Separations are abandoned or delayed beyond May 1, 2020; (iv) potential liability arising from fraudulent conveyance and similar laws in connection with the separations and distributions; (v) disruptions or business uncertainty, including from the Intended Business Separations, could adversely impact DowDuPont’s business (either directly or as conducted by and through Historical Dow or Historical DuPont), or financial performance and its ability to retain and hire key personnel; (vi) uncertainty as to the long-term value of DowDuPont common stock; (vii) potential inability to access the capital markets; and (viii) risks to DowDuPont’s, Historical Dow’s and Historical DuPont’s business, operations and results of operations from: the availability of and fluctuations in the cost of feedstocks and energy; balance of supply and demand and the impact of balance on prices; failure to develop and market new products and optimally manage product life cycles; ability, cost and impact on business operations, including the supply chain, of responding to changes in market acceptance, rules, regulations and policies and failure to respond to such changes; outcome of significant litigation, environmental matters and other commitments and contingencies; failure to appropriately manage process safety and product stewardship issues; global economic and capital market conditions, including the continued availability of capital and financing, as well as inflation, interest and currency exchange rates; changes in political conditions, including trade disputes and retaliatory actions; business or supply disruptions; security threats, such as acts of sabotage, terrorism or war, natural disasters and weather events and patterns which could result in a significant operational event for DowDuPont, adversely impact demand or production; ability to discover, develop and protect new technologies and to protect and enforce DowDuPont’s intellectual property rights; failure to effectively manage acquisitions,

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divestitures, alliances, joint ventures and other portfolio changes; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management’s response to any of the aforementioned factors. These risks are and will be more fully discussed in DowDuPont’s current, quarterly and annual reports and other filings made with the SEC as well as the preliminary registration statements on Form 10 of each of Dow and Corteva, in each case as may be amended from time to time in future filings with the SEC. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those 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, Historical Dow’s, Historical DuPont’s, Dow’s or Corteva’s consolidated financial condition, results of operations, credit rating or liquidity. 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 annual 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.

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.

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 sunflowers, wheat, alfalfa, canola, cotton, rice and sorghum, 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, sunflower, canola/oilseed rape and rice, and specialty crops such as fruit, nut, vine, sugarcane, coffee 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 - Historical Dow and Historical DuPont
As a condition of regulatory approval for the Merger, in addition to other requirements, Historical Dow was required to divest a portion of Dow AgroSciences’ Brazil Corn Seed business and Historical DuPont was required to divest certain assets related to its crop protection business and R&D organization, as discussed below.

Historical Dow Merger Remedy - Divestiture of a Portion of Dow AgroSciences' Brazil Corn Seed Business
On July 11, 2017, Historical 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 some corn seed production sites and 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 a certain period of time (the "DAS Divested Ag Business"). On November 30, 2017, the sale was completed. See Note 5 to the Consolidated Financial Statements for further information regarding the divestiture.


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Historical DuPont Merger Remedy - Divested Agriculture Business
Historical DuPont was required to divest certain assets related to its Crop Protection business and R&D organization. On March 31, 2017, Historical 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 Historical 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 Historical DuPont acquired certain assets related to FMC’s Health and Nutrition segment, excluding its Omega-3 products (the "H&N Business") (collectively, the "FMC Transactions"). See Notes 3 and 5 to the Consolidated Financial Statements for further information regarding the acquisition and divestiture, respectively. The sale of the Divested Ag Business met the criteria for discontinued operations and as such, earnings were 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 2018 net sales, by business and geographic region, are as follows:

chart-43cfe51d274c51f4b72.jpg chart-9bc9d2f5fd9a1855872a01.jpg
*
Europe, Middle East and Africa.

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
 
 
 
 
 
 


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

Key Product Lines
Brands and Technologies
Seed Brands
Pioneer®; BREVANT™ SEEDS; DAIRYLAND SEED®; MYCOGEN®; HOEGEMEYER®; NUTECH®; SEED CONSULTANTS®; TERRAL SEED®; AGVENTURE®; ALFOREX®; PHYTOGEN®; PANNAR®; VP MAXX®; RPM®; HPT®; G2®; SUPREME EX®; XL®; POWER PLUS®
Seed Traits and Technologies
ENLIST™ weed control system; ENLIST DUO® herbicide; ENLIST E3™ soybeans; EXZACT™ Precision Technology; HERCULEX® Insect Protection; Pioneer® brand hybrids with Leptra® insect protection technology offering protection against above ground pests; POWERCORE® Insect Trait Technology 1; Pioneer® brand Optimum® AcreMax® family of products offering above and below ground insect protection; REFUGE ADVANCED® powered by SMARTSTAX® 1; SMARTSTAX® Insect Trait Technology 1;NEXERA® seed offering increased canola yield potential; Omega-9 Healthier Oils; Pioneer® brand Optimum® AQUAmax® hybrids; Pioneer® brand corn hybrids; Pioneer® brand A-Series soybeans; Pioneer® brand Plenish® high oleic soybeans; Pioneer® brand sunflowers with the DuPont™ ExpressSun® trait; Pioneer Protector® products for canola and sunflower; Pioneer MAXIMUS® rapeseed hybrids; PROPOUND™
Insecticides
CLOSER®, DELEGATE®, INTREPID®, ISOCLAST®, LANNATE®, EXALT™, PEXALON™, TRANSFORM®, VYDATE®, OPTIMUM®, RADIANT™, SENTRICON®, ENTRUST® SC, GF-120® and TRACER™
Fungicides
APPROACH® PRIMA, VESSARYA™, APPROACH POWER™, TALENDO™, TALIUS™, EQUATION PRO™, EQUATION CONTACT™, ZORVEC®, DITHANE®, INATREQ™, CURZATE®, TANOS®, FONTELIS®, ACANTO™ and GALILEO™
Herbicides
ARIGO™, ARYLEX®, ENLIST DUO®, BROADWAY™, RINSKOR®, ZYPAR™, MUSTANG™, GALLANT™, VERDICT™, LANCET™, KERB®, PIXXARO™, QUELEX®, GALLERY®, CENT-7™, SNAPSHOT®, TRELLIS®, CITADEL™, CLIPPER™, GRANITE™, RAINBOW™, PINDAR® GT, VIPER™, WIDEATTACK™, BELKAR™, WIDEMATCH®, PERFECTMATCH®, CLINCHER®, DURANGO®, FENCER™, GARLON®, SONIC®, TEXARO™, KEYSTONE®, PACTO™, LIGATE, DIMENSION®, TOPSHOT™, RICER™, LOYANT®, CLASSIC®, REALM® Q, TRIVENCE®, LONTREL®, GRAZON®, PANZER™, PRIMUS™, RESICORE®, SPIDER™, STARANE®, SURESTART™ and TORDON™
Other
LumiGEN™ technologies seed treatment portfolio of offerings - LUMIDERM™ and LUMIVIA®; GRANULAR®; ACREVALUE®; Encirca® services; INSTINCT®; N-SERVE® Nitrogen Stabilizer; and N-LOCK™
1.
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 authorizations have been obtained for the commercialization of ENLIST™ corn, ENLIST E3™ soybeans and ENLIST™ 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 cultivation authorizations of ENLIST E3™ soybeans and ENLIST™ corn in Argentina, Brazil, Canada and the U.S.

The Company has received import approval for ENLIST™ corn and ENLIST E3™ soybeans in China, the European Union and many other countries globally. The Company expects to commercialize ENLIST E3™ soybeans during 2019 in the U.S., Canada, and Brazil. Exact timing will vary by country.

In 2017, the Company had a successful full system launch of ENLIST™ cotton and ENLIST DUO™ herbicide in the U.S. In 2018, ENLIST ONE™ herbicide was launched in the U.S., and the total number of ENLIST™ cotton acres more than doubled during the year. Finally, ENLIST™ corn was launched in both North and South America in 2018.

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.


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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 and Syngenta, as well as companies trading in generic crop protection chemicals and regional seed companies.

PERFORMANCE MATERIALS & COATINGS
Performance Materials & Coatings includes industry-leading franchises that deliver a wide array of solutions into consumer and infrastructure end-markets. The segment consists of two global businesses: Coatings & Performance Monomers and Consumer Solutions. These businesses primarily utilize the Company's acrylics-, cellulosics- and silicone-based technology platforms to serve the needs of the architectural and industrial coatings, home care and personal care end-markets. Both businesses employ materials science capabilities, global reach and unique products and technology to combine chemistry platforms to deliver differentiated offerings to customers.

Coatings & Performance Monomers
Coatings & Performance Monomers consists of two businesses: Coating Materials and Performance Monomers. The Coating Materials business makes critical ingredients and additives that help advance the performance of paints and coatings. The business offers innovative and sustainable products to accelerate paint and coatings performance across diverse market segments, including architectural paints and coatings, as well as industrial coatings applications used in maintenance and protective industries, wood, metal packaging, traffic markings, thermal paper and leather. These products enhance coatings by improving hiding and coverage characteristics, enhancing durability against nature and the elements, reducing volatile organic compounds (“VOC”) content, reducing maintenance and improving ease of application. The Performance Monomers business manufactures critical building blocks based on acrylics needed for the production of coatings, textiles, and home and personal care products.

Consumer Solutions
Consumer Solutions consists of three businesses: Performance Silicones; Silicone Feedstocks & Intermediates; and Home & Personal Care. Performance Silicones uses innovative, versatile silicone-based technology to provide ingredients and solutions to customers in high performance building, consumer goods, elastomeric applications and the pressure sensitive adhesives industry that help them meet modern consumer preferences in attributes such as texture, feel, scent, durability and consistency. The Company’s wide array of silicone-based products and solutions enables customers to: increase the appeal of their products; extend shelf life; improve performance of products under a wider range of conditions; and provide a more sustainable offering. Silicone Feedstocks & Intermediates provides standalone silicone materials that are used as intermediates in a wide range of applications including adhesion promoters, coupling agents, crosslinking agents, dispersing agents and surface modifiers. 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 in cleaning, laundry and skin and hair care applications, among others.

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


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Details on Performance Materials & Coatings' 2018 net sales, by business and geographic region, are as follows:

chart-04838d014679aae1edda01.jpg chart-be640c5108d256d4b8fa01.jpg

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

Business
Applications/Market Segments
Major Products
Coatings & Performance Monomers
Acrylic binders for architectural paints and coatings, industrial coatings and paper; adhesives; dispersants; impact modifiers; inks and paints; opacifiers and surfactants for both architectural and industrial applications; plastics additives; processing aids; protective and functional coatings; rheology modifiers

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; processing aids; RHOPLEX™ Acrylic Resin; TAMOL™ Dispersants; vinyl acetate monomers; 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; 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; solubility
enhancers; aerospace composites; surfactants and solvents; SILASTIC ™ Silicone Elastomers; DOWSIL™ Silicone Products

Key Raw Materials
The major commodities, raw materials and supplies for the Performance Materials & Coatings segment include: acetone, butyl acrylate, hydrochloric acid, 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 Arkema, BASF, Celanese, Elkem, Evonik, LyondellBasell, Momentive, Nan Ya, Owens-Corning, Shin-Etsu and Wacker Chemie.

Current and Future Investments
Historical Dow has announced investments over the next five years that are expected to enhance competitiveness, including low capital intensity, high return investments in Historical Dow’s silicones franchise. The investments include a series of incremental siloxane debottleneck and efficiency improvement projects around the world, a new hydroxyl functional siloxane polymer plant in the U.S. and a new specialty resin plant in China.

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INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE
Industrial Intermediates & Infrastructure consists of two customer-centric global businesses - Industrial Solutions and Polyurethanes & CAV - that develop important intermediate chemicals that are essential to manufacturing processes, as well as downstream, customized materials and formulations that use advanced development technologies. These businesses primarily produce and market ethylene oxide, propylene oxide derivatives, cellulose ethers, redispersible latex powders and acrylic emulsions that are aligned to market segments as diverse as appliances, coatings, infrastructure, oil and gas, and building and construction. The global scale and reach of these businesses, world-class technology and R&D capabilities and materials science expertise enable the Company to be a premier solutions provider offering customers value-add sustainable solutions to enhance comfort, energy efficiency, product effectiveness and durability across a wide range of home comfort and appliances, building and construction, adhesives and lubricant applications, among others.

Industrial Solutions
Industrial Solutions is the world’s largest producer of purified ethylene oxide. It provides a broad portfolio of solutions that address world needs by enabling and improving the manufacture of consumer and industrial goods and services. The business’ solutions minimize friction and heat in mechanical processes, manage the oil and water interface, deliver 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.

Polyurethanes & CAV
Polyurethanes & CAV consists of three businesses: Polyurethanes, Chlor-Alkali & Vinyl (“CAV”), and Construction Chemicals (“DCC”). The Polyurethanes business is the world’s largest producer of propylene oxide, propylene glycol and polyether polyols, and a leading producer of aromatic isocyanates and fully formulated polyurethane systems for rigid, semi-rigid and flexible foams, and coatings, adhesives, sealants, elastomers and composites that serve energy efficiency, consumer comfort, industrial and enhanced mobility market sectors. 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. The DCC business provides cellulose ethers, redispersible latex powders, silicones and acrylic emulsions used as key building blocks for differentiated building and construction materials across many market segments and applications ranging from roofing and flooring to gypsum-, cement-, concrete- or dispersion-based building materials.

Details on Industrial Intermediates & Infrastructure's 2018 net sales, by business and geographic region, are as follows:

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

Business
Applications/Market Segments
Major Products
Industrial Solutions
Broad range of products for specialty applications, including agriculture crop protection offerings, aircraft deicing, solvents for coatings, heat transfer fluids for concentrated solar power, construction, solvents for electronics processing, food preservation, fuel markers, home and personal care, infrastructure applications, lubricant additives, paper, transportation and utilities; energy markets including exploration, production, transmission, refining, mining and gas processing to optimize supply, improve efficiencies and manage emissions

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, demulsifiers, drilling and completion fluids, heat transfer fluids, rheology modifiers, scale inhibitors, shale inhibitors, specialty amine solvents, surfactants, water clarifiers, frothing separating agents
Polyurethanes & CAV
Aircraft deicing fluids; alumina; pulp and paper; appliances; automotive; bedding; building and construction; flooring; footwear; heat transfer fluids; hydraulic fluids; infrastructure; packaging; textiles and transportation; construction; caulks and sealants; cement-based tile adhesives;
concrete solutions; elastomeric roof coatings; industrial non-wovens; plasters and renders; roof tiles and siding; sport grounds and tape joint compounds
Aniline, caustic soda, ethylene dichloride, methylene diphenyl diisocyanate (“MDI”), polyether polyols, propylene glycol, propylene oxide, polyurethane systems, toluene diisocyanate (“TDI”), vinyl chloride monomer, AQUASET™ Acrylic Thermosetting Resins, DOW™ Latex Powder, RHOPLEX™ and PRIMAL™ Acrylic Emulsion Polymers, WALOCEL™ Cellulose Ethers


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, propylene, styrene and hydrogen peroxide.

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, Covestro, Eastman, Hexion, Huntsman, INEOS, LyondellBasell, Olin, Owens-Corning, SABIC, Sasol, Shell and Yantai Wanhua.

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.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.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 (“Map Ta Phut”) - a Thailand-based company that manufactures propylene and ethylene; the Company has an effective ownership of 32.77 percent (of which 20.27 percent is owned directly by the Company and aligned with the Industrial Intermediates & Infrastructure segment and 12.5 percent is owned indirectly through the Company’s equity interest in Siam Polyethylene Company Limited, an entity that is part of The SCG-Dow Group and aligned with the Packaging & Specialty Plastics segment).
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.

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


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PACKAGING & SPECIALTY PLASTICS
Packaging & Specialty Plastics is a world leader in plastics and consists of two highly integrated global businesses: Hydrocarbons & Energy and Packaging and Specialty Plastics. The segment employs the industry’s broadest polyolefin product portfolio, supported by the Company’s proprietary catalyst and manufacturing process technologies, to work at the customer’s design table throughout the value chain to deliver more reliable and durable, higher performing, and more sustainable plastics to customers in food and specialty packaging; industrial and consumer packaging; health and hygiene; caps, closures and pipe applications; consumer durables; and infrastructure.

The Company’s unique advantages compared with its competitors include: the Company’s extensive low-cost feedstock positions around the world; unparalleled scale, footprint, and market reach, with world-class manufacturing sites in every geography; deep customer and brand owner understanding; and market-driven application development and technical support.

The segment remains agile and adaptive by participating in the entire ethylene-to-polyethylene chain integration, enabling the Company to manage market swings, and therefore optimize returns while reducing long-term earnings volatility. The Company’s unrivaled value chain ownership, combined with its Pack Studio locations in every geography, which help customers and brand owners deliver faster and more efficient packaging product commercialization through a global network of laboratories, technical experts and testing equipment, together differentiate the Company from its competitors.

Hydrocarbons & Energy
Hydrocarbons & Energy is the largest global producer 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. The business also produces and procures the power and feedstocks used by the company’s manufacturing sites.

Packaging and Specialty Plastics
Packaging and Specialty Plastics serves growing, high-value sectors using world-class technology, broad existing product lines, and a rich product pipeline that creates competitive advantages for the entire packaging value chain. The business is also a leader in polyolefin elastomers and ethylene propylene diene monomer ("EPDM") rubber serving automotive, consumer, wire and cable and construction markets. 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.

Divestiture
On September 1, 2017, Historical Dow sold its global Ethylene Acrylic Acid copolymers and ionomers business to SK Global Chemical Co., Ltd. See Note 5 to the Consolidated Financial Statements for further information.

Details on Packaging & Specialty Plastics' 2018 net sales, by business and geographic region, are as follows:

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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 Dow 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
Packaging and Specialty Plastics
Adhesives; construction; cosmetics; electrical transmission and distribution; food and supply chain packaging; footwear; housewares; health and hygiene; industrial specialty applications using polyolefin elastomers, ethylene copolymers, and ethylene propylene diene monomer elastomers; irrigation pipe; photovoltaic encapsulants; sporting goods; telecommunications infrastructure; toys and
infant products
Acrylics, bio-based plasticizers, elastomers, ethylene copolymer resins, EPDM, ethylene vinyl acetate copolymer, methacrylic acid copolymer resins, polyethylene, high-density polyethylene, low-density polyethylene ("LDPE"), 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: butane, condensate, ethane, ethylene, hexene, naphtha, natural gas, 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 Borealis, Chevron Phillips Chemical, ExxonMobil, INEOS, Lanxess, LyondellBasell, Nova, SABIC, Shell and Sinopec.

Joint Ventures
This segment also includes the results of the following joint ventures of the Company, as well as a portion of the results of EQUATE, TKOC, Map Ta Phut and Sadara:
The Kuwait Styrene Company K.S.C.C. (“TKSC”) - a Kuwait-based company that manufactures styrene monomer; owned 42.5 percent by the Company.
The SCG-Dow Group - a group of Thailand-based companies (consisting of Siam Polyethylene Company Limited; Siam Polystyrene Company Limited; Siam Styrene Monomer Co., Ltd.; and Siam Synthetic Latex Company Limited) that manufacture polyethylene, polystyrene, styrene, latex and specialty elastomers; owned 50 percent by the Company.

Current and Future Investments
In 2017, Historical Dow announced the startup of its new integrated world-scale ethylene production facility and its new ELITE™ Enhanced Polyethylene production facility, both located in Freeport, Texas. In 2018, Historical Dow also started up its new LDPE production facility and its new NORDEL™ Metallocene EPDM production facility, both located in Plaquemine, Louisiana. These key milestones enable Historical Dow to capture benefits from increasing supplies of U.S. shale gas to deliver differentiated downstream solutions in its core market verticals. Historical Dow also completed debottlenecking of an existing bi-modal gas phase polyethylene production facility in St. Charles, Louisiana, and started up a new High Melt Index (HMI) AFFINITY™ polymer production facility, in Freeport, Texas, in the fourth quarter of 2018.

Additionally, Historical Dow has announced investments over the next five years that are expected to enhance competitiveness. These include:
Expansion of the capacity of Historical Dow’s new ethylene production facility, bringing the facility’s total ethylene capacity to 2,000 kilotonnes per annum ("KTA") and making it the largest ethylene facility in the world.
Incremental debottleneck projects across its global asset network that will deliver approximately 350 KTA of additional polyethylene, the majority of which will be in North America.
Construction of a 600 KTA polyethylene unit on the U.S. Gulf Coast based on Historical Dow’s proprietary Solution Process technology, to meet consumer-driven demand in specialty packaging, health and hygiene, and industrial and consumer packaging applications.

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Construction of a 450 KTA polyolefins facility in Europe to maximize the value of Historical Dow’s ethylene integration in the region and serve growing demand for high-performance pressure pipes and fittings, as well as caps and closures applications.
A new catalyst production business for key catalysts licensed by Univation Technologies, LLC, a wholly-owned subsidiary of Historical Dow.

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") and 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.

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

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

Details on Electronics & Imaging's 2018 net sales, by major product line and geographic region, are as follows:

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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 semiconductor fabrication
CMP consumables, photolithography materials, semiconductor fabrication materials, fabrication cleaners and removers, advanced chip packaging materials and thermal management materials
Interconnect Solutions
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, display 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, p-acetoxystyrene, monomers, pigments and dyes, styrenic block copolymers, copper foil, difluoroethane, diglycolamine, dimethylacetamide, hydroxylamine, oxydianiline, precious metals, silicon metal, photoactive compounds, polyester and other polymer films, polyurethane resins and pyromellitic dianhydride.

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 3M, Cabot Microsystems, Element Solutions, Entegris, Green Energy, JSR Micro, LONGi, Shin-Etsu and Versum.

Joint Ventures
Electronics & Imaging 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.

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

Nutrition & Health
The Nutrition & Health business is one of the world’s largest producers of specialty ingredients, developing and manufacturing solutions for the global food and beverage, dietary supplements and pharmaceutical markets. 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 cellulosics- and alginates-based pharma excipients, used to improve the functionality and delivery of pharmaceuticals, and enabling the development of more effective pharma solutions.


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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, chemistry 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, textiles, food and beverages, cleaning, personal care, fertilizers, and oil and gas.

Divestitures
In February 2017, Historical DuPont completed the sale of its global food safety diagnostic business, a part of the Nutrition & Health business, to Hygiena LLC. In October 2018, Historical DuPont completed the sale of its heritage alginates business, a part of the Nutrition & Health business, to JRS Group. The sale of the alginates business was a requirement set out by the European Commission ("EC") upon its conditional approval of Historical DuPont’s acquisition of the H&N Business in 2017 from FMC. Historical DuPont remains active in the alginates market with the heritage FMC Health & Nutrition alginates portfolio.

Acquisition of Health and Nutrition Business
On March 31, 2017, Historical 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 EC approval of the Merger and Historical DuPont agreed to acquire certain assets relating to the H&N Business. The H&N Business has been integrated into the Nutrition & Biosciences segment. Together with the Historical Dow Pharma & Food Solutions business, which is reflected in the Nutrition & Biosciences segment, the Nutrition & Health business has become a world leader in the oral dosage pharma excipients market. See further discussion of the H&N Business acquisition in Note 3 to the Consolidated Financial Statements.

Details on Nutrition & Biosciences' 2018 net sales, by business and geographic region, are as follows:

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Products
Major applications and products are listed below by business:

Business
Applications
Major Products
Nutrition & Health
Food and beverage, dietary supplements, infant 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
Industrial Biosciences
Animal nutrition, detergents, biofuels production, food and beverage, carpet and apparel fiber, sulfuric acid, oil refining, phosphate fertilizer and microbial control solutions for oil and gas production, home and personal care, and other industrial preservation markets
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, phenoxyethanol

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, locust bean gum, organic oils, peels, saccharides, seaweed, soybeans, sugars and yeasts, and vanadium used in catalysts.

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 Chr. Hansen, CP Kelco, Croda, Kerry, Lonza, Royal DSM and Tate & Lyle.

Current and Future Investments
In November 2016, Historical 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, was complete as of the end of 2017. The second phase represents an investment of approximately $100 million, and increases Historical DuPont's probiotics production capacity by an additional 70 percent. Construction was underway in 2018, and production will be optimized with the installation of new, high-volume fermenters and other processing equipment. The probiotics capacity expansion is expected to be complete in the first quarter of 2019.

TRANSPORTATION & ADVANCED POLYMERS
Transportation & Advanced Polymers provides high-performance engineering resins, adhesives, lubricants and parts to engineers and designers in the transportation, electronics, healthcare, 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. In addition, the segment produces innovative engineering polymer solutions, high performance parts, specialty silicones and differentiated adhesive technologies to meet customer specifications in automotive, aerospace, electronics, industrial, healthcare and consumer markets. Transportation & Advanced Polymers is a global leader of advanced materials that provides technologies that differentiate customers’ products with improved performance characteristics.


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Pending Divestiture
On October 10, 2017, Historical 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 2019, subject to regulatory approvals. 

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

Details on Transportation & Advanced Polymers' 2018 net sales, by major product line and geographic region, are as follows:

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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
Engineering Polymers

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, EMS, Henkel, Kluber, Mitsubishi, Royal DSM, Sika, Victrex and Wacker Chemie.


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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.

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 services, 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 2018 net sales, by major product line and geographic region, are as follows:

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

Major Product Line
Applications / Market Segments
Major Products / Technologies
Construction
Rigid and spray foam insulation, weatherization, waterproofing and air sealing, caulks and sealants and roof coatings
STYROFOAM™ brand insulation products, THERMAX™ exterior insulation, WALOCEL™ cellulose ethers, XENERGY™ high performance insulation, LIQUIDARMOR™ flashing and sealant, GREAT STUFF™ insulating foam sealants and adhesives, DUPONT™ CORIAN® solid and quartz surfaces
Aramids
Industrial personnel protection, military and emergency response, medical devices, automotive, aerospace, oil and gas
DUPONT™ KEVLAR® fiber; DUPONT™ NOMEX® fiber and paper
TYVEK®
Enterprise

Industrial personnel protection, medical packaging, weatherization, waterproofing and roof coatings
DUPONT™ TYVEK® protective materials; DUPONT™ TYCHEM® protective suits; WEATHERMATE™ house wrap
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


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

Current and Future Investments
In June 2018, Historical DuPont announced plans to invest more than $400 million in Safety & Construction to increase capacity for the manufacture of TYVEK® nonwoven materials at its Luxembourg site due to growing global demand. The production expansion, which includes investment in a new building and a third operating line at the site, is scheduled to occur over the next three years, with commercial production expected to begin in 2021.

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; non-business aligned litigation expenses; discontinued or non-aligned businesses and pre-commercial activities.

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; Belgium, Denmark, Germany and the Netherlands.

The Company had adequate supplies of raw materials during 2018, and expects to continue to have adequate supplies of raw materials in 2019.

INDUSTRY SEGMENTS AND GEOGRAPHIC REGION RESULTS
See Note 24 to the Consolidated Financial Statements for information regarding total net sales, pro forma net sales, Operating EBITDA, pro forma Operating EBITDA and total assets by segment, as well as sales and long-lived 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 2018, no significant portion of the Company's sales was dependent upon a single customer.


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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, 2018, the Company owned approximately 13,000 active U.S. patents and 42,700 active foreign patents as follows:
 
Patents Owned at Dec 31, 2018

United States
Foreign
Historical Dow
6,500

32,200

Historical DuPont
6,500

10,500

Total
13,000

42,700


Remaining Life of Patents Owned at Dec 31, 2018
United States
Foreign
Within 5 years
3,000

8,700

6 to 10 years
3,500

14,900

11 to 15 years
5,300

17,900

16 to 20 years
1,200

1,200

Total
13,000

42,700

 
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, 2018, including direct or indirect ownership interest for each, are listed below:

Principal Nonconsolidated Affiliate
Country
Ownership Interest
Business Description
EQUATE Petrochemical Company K.S.C.C.
Kuwait
42.50
%
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
United States
50.00
%
Manufactures polycrystalline silicon products
Hemlock Semiconductor L.L.C.
United States
50.10
%
Sells polycrystalline silicon products
The Kuwait Olefins Company K.S.C.C.
Kuwait
42.50
%
Manufactures ethylene and ethylene glycol
The Kuwait Styrene Company K.S.C.C.
Kuwait
42.50
%
Manufactures styrene monomer
Map Ta Phut Olefins Company Limited 2
Thailand
32.77
%
Manufactures propylene and ethylene
Sadara Chemical Company 3
Saudi Arabia
35.00
%
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
Thailand
50.00
%
Manufactures polyethylene
Siam Polystyrene Company Limited
Thailand
50.00
%
Manufactures polystyrene
Siam Styrene Monomer Co., Ltd.
Thailand
50.00
%
Manufactures styrene
Siam Synthetic Latex Company Limited
Thailand
50.00
%
Manufactures latex and specialty elastomers
1.
DC HSC Holdings LLC holds an 80.5 percent indirect ownership interest in Hemlock Semiconductor Operations LLC.
2.
Historical Dow's effective ownership of Map Ta Phut Olefins Company Limited is 32.77 percent, of which Historical Dow directly owns 20.27 percent and indirectly owns 12.5 percent through its equity interest in Siam Polyethylene Company Limited.
3.
Historical Dow is responsible for marketing the majority of Sadara products outside of the Middle East zone through Historical Dow's established sales channels. Under this arrangement, Historical Dow purchases and sells Sadara products for a marketing fee.

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

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, 2018, the Company permanently employed approximately 98,000 people on a full-time basis.

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


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EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information related to the Company's executive officers as of February 11, 2019:

Name - Age
Present Position with Registrant
Year Elected to be an Officer
Other Business Experience since January 1, 2014 1
Edward D. Breen, 62
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., 56
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 (DANISCO) January 2011 to September 2013.
Jeanmarie F. Desmond, 52
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, 49
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, 61
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, 57
Chief Operating Officer for the Materials Science Division
2017
Dow: Chief Executive Officer July 2018 to date; President and Chief Operating Officer February 2016 to July 2018; 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.
Stacy L. Fox, 65
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.
Howard I. Ungerleider, 50
Chief Financial Officer
2017
Dow: President and Chief Financial Officer July 2018 to date; Vice Chairman and Chief Financial Officer October 2015 to July 2018; Chief Financial Officer and Executive Vice President October 2014 to October 2015; Executive Vice President, Advanced Materials September 2012 to October 2014.
1.
References to Dow and DuPont in the table above refer to The Dow Chemical Company and E. I. du Pont de Nemours and Company, respectively.



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ITEM 1A. RISK FACTORS
The factors described below represent the Company's principal risks.
DowDuPont may be unable to achieve all the benefits that it expects to achieve from the Merger and the Intended Business Separations.
The success of the Merger ultimately depends on, among other things, DowDuPont's ability to combine and separate the Historical DuPont and Historical Dow businesses in a manner that facilitates the Intended Business Separations and realizes anticipated synergies.

Since the Merger, DowDuPont has benefited from and expects to continue 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 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 of which $1,747 million has been recorded inception-to-date through December 31, 2018, comprised of approximately $895 million to $975 million of severance and related benefit costs of which $933 million has been recorded inception-to-date through December 31, 2018; $525 million to $615 million of asset write-downs and write-offs of which $579 million has been recorded inception-to-date through December 31, 2018; and $370 million to $410 million of costs associated with exit and disposal activities of which $235 million has been recorded inception-to-date through December 31, 2018.
Management also expects to achieve growth synergies and other meaningful savings and benefits as a result of the Intended Business Separations.
Combining Historical DuPont and Historical Dow's independent businesses and preparing for the Intended Business Separations, including through the Internal Reorganization, 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 Internal Reorganization and Intended Business Separation processes and other disruptions may also adversely affect the combined Company’s relationships with employees, suppliers, customers, distributors, licensors and others with whom Historical DuPont and Historical Dow have business or other dealings, and difficulties in integrating the businesses or regulatory functions of Historical DuPont and Historical Dow could harm the reputation of DowDuPont.
If the anticipated benefits and cost savings, including from the Synergy Program, of the Merger (including the Intended Business Separations) are not realized fully or take longer to realize than expected, the value of DowDuPont common stock, its revenues, levels of expenses and results of operations may be affected adversely. A variety of factors may adversely affect the Company's ability to fully and timely realize the currently expected synergies, savings and other benefits of the Merger, including failure to

24


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.
DowDuPont has incurred significant costs, and expects to incur additional costs, in connection with the integration of Historical DuPont and Historical Dow and the Intended Business Separations.
There are many processes, policies, procedures, operations, technologies and systems that were integrated following the Merger and must be replicated, transferred or separated in connection with the Intended Business Separations. These costs primarily consist of financial advisory, information technology, legal, consulting and other professional advisory fees associated with preparation and execution of these activities. While DowDuPont has assumed a certain level of expense would be incurred in connection with these activities, there are many factors beyond the combined Company’s control that could affect the total amount or the timing of anticipated expenses.
There may also be additional unanticipated significant costs incurred in connection with the Intended Business Separations that DowDuPont may not recoup that 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.
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 of Directors ("Board") determines to proceed with the Intended Business Separations, it is currently anticipated that any such Intended Business Separation transaction would be effectuated through the distribution of Dow followed by the distribution of Corteva in separate pro-rata spin-off transactions, in which DowDuPont stockholders, at such time, would receive a pro-rata dividend of the shares of capital stock of Dow Holdings Inc. and Corteva, Inc., resulting in three independent, public companies. The 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, including that DowDuPont will be required to redeem each series of DowDuPont Notes at a redemption price equal to 101 percent of the principal amount of such series of DowDuPont Notes, plus accrued and unpaid interest. There are many factors that could, prior to the determination by the 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, a full or partial shutdown of the U.S. federal government, 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 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 materials science business, the specialty products business and/or the combined Company.
Inability to access the debt capital markets could impair DowDuPont's liquidity, business or financial condition.
DowDuPont’s primary sources of liquidity to finance operations, including dividends on its common stock, are through Historical DuPont and Historical Dow and their respective consolidated subsidiaries, (collectively, the “Subsidiaries”). Each of Historical DuPont and Historical Dow has relied and continues to rely on access to the debt capital markets to finance their day-to-day and long-term operations. Any limitation on the part of either Historical DuPont’s or Historical 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 Historical DuPont and Historical 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 Historical DuPont or Historical 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 Historical DuPont and Historical 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 Historical DuPont and Historical Dow and, therefore, DowDuPont.

25


If either distribution, together with certain related transactions, were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then the Company could be subject to significant tax and indemnification liability.
It is a condition to each distribution that DowDuPont receive a tax opinion from Skadden, Arps, Slate, Meagher & Flom LLP, its tax counsel, in form and substance acceptable to DowDuPont, substantially to the effect that, among other things, the applicable distribution along with certain related transactions will qualify as a tax-free transaction under Section 355 and Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code,” and such opinions, collectively, the “Tax Opinions”). The Tax Opinions will rely on certain facts, assumptions, and undertakings, and certain representations from DowDuPont, Dow and Corteva, regarding the past and future conduct of each of the three businesses and other matters, including those discussed in the risk factor immediately below, as well as the IRS Ruling (as defined below). Notwithstanding the Tax Opinions and the IRS Ruling, the Internal Revenue Service (the “IRS”) could determine on audit that either, or both, of the distributions and certain related transactions should be treated as taxable transactions if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated, or that the distributions should be taxable for other reasons, including if the IRS were to disagree with the conclusions of the Tax Opinions.

Since DowDuPont intends to make a protective election under Section 336(e) of the Code for Dow and each of Dow’s domestic corporate subsidiaries with respect to the distribution of Dow, in the event the distribution of Dow is ultimately determined to be taxable, the Company would recognize corporate level taxable gain to the extent the fair market value of the assets (excluding stock in any domestic corporate subsidiary) of Dow and its domestic corporate subsidiaries exceeds the basis of Dow and its corporate subsidiaries in such assets. If the distribution of Corteva ultimately is determined to be taxable, then the Company would recognize corporate level taxable gain on the distribution in an amount equal to the excess, if any, of the fair market value of Corteva common stock held by DowDuPont’s stockholders on the applicable distribution date over DowDuPont's tax basis in such stock. In addition, if certain related transactions related to the distributions fail to qualify for tax-free treatment under U.S. federal, state and local tax law and/or foreign tax law, the Company, Dow and Corteva could incur significant tax liabilities under U.S. federal, state, local and/or foreign tax law.

Generally, corporate taxes resulting from the failure of a distribution to qualify for non-recognition treatment for U.S. federal income tax purposes would be imposed on the Company. Under the tax matters agreement that DowDuPont will enter into with Dow and Corteva, subject to the exceptions described below, Dow and Corteva are generally obligated to indemnify the Company against any such taxes imposed on it. However, if a distribution fails to qualify for non-recognition treatment for U.S. federal income tax purposes for certain reasons relating to the overall structure of the Merger and the distributions, then under the tax matters agreement, the Company and Dow would share the tax liability resulting from such failure in accordance with their relative equity values on the first full trading day following the distribution of Dow. The Company's responsibility for any such taxes is expected to be shared between the Company and Corteva, following the distribution of Corteva, in accordance with a fixed percentage to be agreed by the parties (though absent any such agreement, following the distribution of Corteva, the Company would be responsible for all such liabilities). Furthermore, under the terms of the tax matters agreement, the Company also generally will be responsible for any taxes imposed on Corteva or Dow that arise from the failure of either distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code or the failure of certain related transactions to qualify for tax-free treatment, to the extent such failure to qualify is attributable to actions, events or transactions relating to DowDuPont's, or DowDuPont's affiliates’, stock, assets or business, or any breach of the Company's representations made in connection with the IRS Ruling or in any representation letter provided to a tax advisor in connection with certain tax opinions, including the Tax Opinions, regarding the tax-free status of the distributions and certain related transactions. Prior to the distribution of Corteva, the Company and Corteva are expected to reach an agreement regarding the sharing of responsibility for all liabilities of the Company described in the preceding sentence as a result of actions or transactions of the Company preceding the distribution of Corteva. Absent any such agreement, following the distribution of Corteva, the Company will be responsible for all such liabilities. Dow and Corteva will be separately responsible for any taxes imposed on the Company that arise from the failure of a distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code or the failure of certain related transactions to qualify for tax-free treatment, to the extent such failure to qualify is attributable to actions, events or transactions relating to such company’s or its affiliates’ stock, assets or business, or any breach of such company’s representations made in connection with the IRS Ruling or in any representation letter provided to a tax advisor in connection with certain tax opinions, including the Tax Opinions, regarding the tax-free status of the distributions and certain related transactions. Events triggering an indemnification obligation under the tax matters agreement include events occurring after the distribution that cause the Company, Dow or Corteva to recognize gain under Section 355(e) of the Code, as discussed further below. Such tax amounts could be significant. To the extent that the Company is responsible for any liability under the tax matters agreement, there could be a material adverse impact on the Company's business, financial condition, results of operations and cash flows in future reporting periods.

The IRS may assert that the Merger causes the distributions and other related transactions to be taxable to DowDuPont.
Even if a distribution otherwise constitutes a tax-free transaction to stockholders under Section 355 of the Code, the Company may be required to recognize corporate level tax on such distribution and certain related transactions under Section 355(e) of the

26


Code if, as a result of the Merger or other transactions considered part of a plan with such distribution, there is a 50 percent or greater change in ownership in DowDuPont, Dow or Corteva, as relevant. In connection with the Merger, DowDuPont sought and received a private letter ruling from the IRS regarding the proper time, manner and methodology for measuring common ownership in the stock of DowDuPont, Historical DuPont and Historical Dow for purposes of determining whether there has been a 50 percent or greater change of ownership under Section 355(e) of the Code as a result of the Merger (the “IRS Ruling”). The Tax Opinions will rely on the continued validity of the IRS Ruling, as well as certain factual representations from DowDuPont as to the extent of common ownership of the stock of Historical Dow and Historical DuPont immediately prior to the Merger. In addition, it is a condition to the distributions that the IRS has not revoked the IRS Ruling. Based on the representations made by DowDuPont as to the common ownership of the stock of Historical Dow and Historical DuPont immediately prior to the Merger and assuming the continued validity of the IRS Ruling, the Tax Opinions will conclude that there was not a 50 percent or greater change of ownership in DowDuPont, Historical Dow or Historical DuPont for purposes of Section 355(e) as a result of the Merger. Notwithstanding the Tax Opinions and the IRS Ruling, the IRS could determine that a distribution or a related transaction should nevertheless be treated as a taxable transaction to the Company if it determines that any of the Company’s facts, assumptions, representations or undertakings is not correct or that a distribution should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the Tax Opinions that are not covered by the IRS Ruling.

The separations and distributions may expose the Company to potential liabilities arising out of state and federal fraudulent conveyance laws and legal distribution requirements.
Although DowDuPont will receive solvency opinions from an investment bank confirming that DuPont, Dow and Corteva will each be adequately capitalized following the separations and distributions, the separations and distributions could be challenged under various state and federal fraudulent conveyance laws. Fraudulent conveyances or transfers are generally defined to include transfers made or obligations incurred with the actual intent to hinder, delay or defraud current or future creditors or transfers made or obligations incurred for less than reasonably equivalent value when the debtor was insolvent, or that rendered the debtor insolvent, inadequately capitalized or unable to pay its debts as they become due. Any unpaid creditor could claim that the Company did not receive fair consideration or reasonably equivalent value in the separations and distributions, and that the separations and distributions left the Company insolvent or with unreasonably small capital or that it intended or believed the Company would incur debts beyond its ability to pay such debts as they mature. If a court were to agree with such a plaintiff, then such court could void the separations and distributions as a fraudulent transfer or impose substantial liabilities on the Company, which could adversely affect DowDuPont's financial condition and results of operations.

The distributions are also subject to review under state corporate distribution statutes. Under the Delaware General Corporation Law, a corporation may only pay dividends to its stockholders either (i) out of its surplus (net assets minus capital) or (ii) if there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Although the Board intends to make the distributions out of DowDuPont’s surplus and will receive an opinion that DowDuPont has adequate surplus under Delaware law to declare the dividends of Corteva and Dow common stock in connection with the distributions, there can be no assurance that a court will not later determine that some or all of the distributions were unlawful.

The Company may be required to redeem the DowDuPont Notes which could adversely impact its financial position, results of operations and liquidity.
If each of the separations and distributions has not been completed on or before May 1, 2020, or, if prior to such date, DowDuPont has abandoned any of the separations or distributions, the Company will be required to redeem each series of DowDuPont Notes at a redemption price equal to 101 percent of the principal amount of such series of DowDuPont Notes, plus accrued and unpaid interest to, but excluding, the redemption date.

The Company is not required to retain any of the net proceeds from the DowDuPont Notes and has stated its intent to use the net proceeds of the DowDuPont Notes, together with borrowings under the Term Loan Facilities, to (i) reduce outstanding liabilities that would otherwise be allocable to Dow and Corteva; (ii) repurchase up to $3.0 billion of DowDuPont’s common stock pursuant to DowDuPont’s previously announced share repurchase program and (iii) pay any related premiums, fees and expenses. Accordingly, the Company would fund any special mandatory redemption using proceeds that it has voluntarily retained or from other sources of liquidity. In the event of a special mandatory redemption, the Company may not have sufficient funds to purchase all of the DowDuPont Notes.
DowDuPont is exposed to the risks related to international sales and operations.
The Company’s businesses 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;

27


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 feedstock 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 on the U.S. Gulf Coast to take advantage of increasing supplies of low-cost natural gas and natural gas liquids ("NGLs") derived from shale gas. While the Company expects abundant and cost-advantaged supplies of NGLs in the United States to persist for the foreseeable future, if NGLs 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.
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.
The Company’s business, results of operations and reputation could be adversely affected by industry-specific risks including process safety and product stewardship/regulatory compliance issues.
The Company is subject to industry-specific risks, concerns and claims which include, but are not limited to, product safety or quality; shifting consumer preferences that include a growing trend in societal demands for increasing levels of product safety

28


and environmental protection; federal, state, and local regulations on manufacturing or labeling; environmental, health and safety regulations; and customer product liability claims. In the Agriculture segment, industry-specific risks include those associated with 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. The latter includes concerns and claims that increased use of crop protection products, drift, inversion, volatilization, and the use of biotechnology traits meant to reduce the resistance of weeds or pests to control by crop protection products, could increase or accelerate such resistance and otherwise negatively impact health and the environment. Also, the detection of biotechnology traits or chemical residues from a crop protection product not approved in the country to which the Company sells or imports it, in which the product is cultivated or to which it exports may impact the Company’s ability to supply or export agricultural products, result in crop destruction, product recalls or trade disruption.
The risks, concerns and claims affecting the industries in which the Company competes 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, termination of raw material supply agreements and legal claims. These and other concerns or claims 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 and could adversely affect the Company’s business, results of operations, financial condition and cash flows.
In most jurisdictions, the Company must test the safety, efficacy and environmental impact of its 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.
A significant operational event could negatively impact the Company's results of operations.
Disruptions in the Company’s operations or those of its supply chain and customers, the transportation of products, acts of sabotage, employee error, malfeasance or other actions, geo-political activity, cyber-attacks, or severe weather conditions and other natural phenomena (such as drought, hurricanes, earthquakes, tsunamis, floods, etc.) including hurricanes or flooding that impact coastal regions in the United States Gulf region or Asia Pacific 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.
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.
The Company has attractive information assets, including intellectual property, trade secrets and other sensitive, business critical information. Cyber-attacks or security breaches affecting the Company, its supply chain or customers could compromise confidential, business critical information, cause a disruption in the Company’s operations or harm the Company's reputation if the Company, its suppliers or customers do not effectively prevent, detect and recover from these or other security breaches.
Like most major corporations, DowDuPont and its Subsidiaries are the target of industrial espionage, including cyber-attacks, from time to time. The Company has determined that these attacks have resulted, and could result in the future, in unauthorized parties gaining access to certain confidential business information. Although management does not believe that the Company or its Subsidiaries have experienced any material losses to date related to these security breaches, including cybersecurity incidents, there can be no assurance that such losses will not be suffered in the future. 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.

29


The Company seeks to actively manage the risks within its control that could lead to business disruptions and security breaches. As these threats continue to evolve, particularly around cybersecurity, the Company may be required to expend significant resources to enhance its control environment, processes, practices and other protective measures. Despite these efforts, such events could have a material adverse effect on DowDuPont’s business, results of operations, financial condition and cash flows.

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, and joint ventures 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, changes in risk-adjusted discount rates and 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, Historical DuPont’s assets and liabilities were measured at fair value resulting in increases to the Company's goodwill and other intangible assets of $45.5 billion and $27.1 billion, respectively, and any declines in financial projections could have a material, negative impact on the fair value of the Company's reporting units and assets, particularly in the Agriculture and Specialty Products divisions. Future impairments of goodwill or intangible assets could also be recorded due to changes in other assumptions, estimates or circumstances and the magnitude of such impairments may be material to the Company, Historical DuPont or Historical Dow.
During the third quarter of 2018, in connection with strategic business reviews and assembling updated financial projections, the Company’s subsidiary, Historical DuPont, a separate U.S. Securities and Exchange Commission registrant, was required to perform an interim test of goodwill for its agriculture reporting unit. As a result of the analysis performed, Historical DuPont recorded a pretax, noncash goodwill impairment charge of $4.5 billion in its stand-alone quarterly report on Form 10-Q for the quarter ended September 30, 2018. However, the impairment charge did not survive at the DowDuPont level. Based on the analysis performed at the DowDuPont level, the fair value of the combined agriculture reporting unit exceeded its carrying value by more than 10 percent, and therefore no goodwill impairment existed for the Company. During this same time, the Company also performed an impairment test on indefinite-lived intangibles and determined that the fair value of certain in-process research and development assets had declined as a result of delays in timing of commercialization and increases to expected research and development costs. This resulted in the Company recording a pretax impairment charge of $85 million. See Part II, Item 7. Other Matters, Critical Accounting Estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 13 to the Consolidated Financial Statements for further information.
Increased obligations and expenses related to Historical DuPont's and Historical Dow's defined benefit pension plans and other postretirement benefit plans could negatively impact DowDuPont's financial condition and results of operations.
Historical DuPont and Historical Dow have defined benefit pension plans and other postretirement benefit plans (collectively, the “plans”) in the United States and a number of other countries. The assets of the Historical DuPont and Historical Dow funded plans are primarily invested in fixed income securities, equity securities of U.S. and foreign issuers, and alternative investments (including investments in real estate, private market securities and absolute return strategies). 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 Historical DuPont's and Historical 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.
Climate change and unpredictable seasonal and weather factors could impact sales and earnings of 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

30


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. Climate change may increase the frequency or intensity of extreme weather such as storms, floods, heat waves, droughts and other events that could affect the quality, volume and cost of seed produced for sale as well as demand and product mix. Climate change may also affect the availability and suitability of arable land and contribute to unpredictable shifts in the average growing season and types of crops produced.

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 users, 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, trade names 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,

31


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 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 441 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, 2018 1
Geographic Region
Agri-culture
Perf. Materials & Coatings
Ind. Interm. & Infrast.
Pack. & Spec. Plastics
Elect. & Imaging
Nutrition & Biosciences
Transp. & Adv. Polymers
Safety & Const.
U.S. & Canada
65

23

13

15

17

30

19

15

EMEA
27

17

18

8

5

45

8

12

Asia Pacific
16

19

8

5

17

18

15

13

Latin America
28

6

7

7


15

2

3

Total
136

65

46

35

39

108

44

43

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
The Company and its subsidiaries are subject to various litigation matters, including, but not limited to, product liability, patent infringement, antitrust claims, and claims for third party property damage or personal injury stemming from alleged environmental torts. Information regarding certain of these matters is set forth below and in Note 16 to the Consolidated Financial Statements.

Historical Dow
Asbestos-Related Matters of Union Carbide Corporation
Union Carbide Corporation ("Union Carbide"), a wholly owned subsidiary of Historical 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.

32


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.

Historical 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.

Fayetteville Works Facility, Fayetteville, North Carolina
In August 2017, the U.S. Attorney’s Office for the Eastern District of North Carolina served Historical DuPont with a grand jury subpoena for testimony and the production of documents related to alleged discharges of GenX from the Fayetteville Works facility into the Cape Fear River. Historical DuPont has been served with additional subpoenas relating to the same issue and in the second quarter of 2018, received a subpoena expanding the scope to any perfluorinated chemicals and compounds (“PFCs”) discharged from the Fayetteville Works facility into the Cape Fear River. Additional 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 Historical DuPont's La Porte, Texas, facility. The release occurred at the site’s Crop Protection unit resulting in four employee fatalities inside the unit. Historical 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"), which are still conducting investigations. These investigations could result in sanctions and civil or criminal penalties against Historical DuPont. In the second quarter of 2018, Historical DuPont, the DOJ and the EPA reached a resolution-in-principle, for $3.1 million, regarding certain EPA civil claims. The resolution-in-principle was approved by the court in the third quarter of 2018 and has been paid.

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.

Historical Dow
Dow Silicones Midland, Michigan Matter
In April 2012 and May 2015, Dow Silicones Corporation ("Dow Silicones"), a wholly owned subsidiary of Historical Dow, received the following notifications from the EPA, Region 5 related to Dow Silicones' Midland, Michigan, manufacturing facility (the “Facility”): 1) a Notice of Violation and Finding of Violation 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 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 Silicones are ongoing.

FilmTec Edina, Minnesota Matter
On March 14, 2017, FilmTec Corporation ("FilmTec"), a wholly owned subsidiary of Historical 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.

Freeport, Texas; Plaquemine, Louisiana; and St. Charles, Louisiana, Steam-Assisted Flares Matter
On July 5, 2018, Historical Dow received a draft consent decree from the EPA, the DOJ and the Louisiana Department of Environmental Quality (“DEQ”), relating to the operation of steam-assisted flares at Historical Dow’s olefins manufacturing facilities in Freeport, Texas; Plaquemine, Louisiana; and St. Charles, Louisiana. Discussions between the EPA, the DOJ and the DEQ are ongoing.

Freeport, Texas, Facility Matter
On July 7, 2018, Historical Dow received an informal notice that the EPA, Region 6 was contemplating filing a Notice of Violation with a proposed penalty for alleged violations uncovered during a prior inspection related to the management of hazardous wastes at Historical Dow's Freeport, Texas, manufacturing facility, pursuant to the Risk Management Plan requirements of the Clean Air Act. Discussions between the EPA and Historical Dow are ongoing.


33


Mt. Meigs, Alabama, Matter
On July 26, 2018, DC Alabama, Inc. (“DCA”), a wholly owned subsidiary of Historical Dow, received a draft consent order (“Order”) from the Alabama Department of Environmental Management (“ADEM”) relating to alleged unpermitted discharges of industrial process water and certain water quality and equipment violations at DCA’s silicon metal production facility located in Mt. Meigs, Alabama. DCA and the ADEM negotiated the terms of and executed a final Order that contains a civil penalty of $250,000 and certain additional requirements. Discussions between DCA and the ADEM are ongoing.

Union Carbide Matter
On November 27, 2018, Union Carbide signed a consent decree with the DOJ on behalf of the EPA, Region 2 relating to alleged disposal of mercury by a third party which UCC contracted with at the Port Refinery site in Rye Brook, New York. The consent decree contains a payment of $120,198 and certain additional requirements. The final consent decree is subject to a public comment period.

Historical DuPont
La Porte Plant, La Porte, Texas - EPA Multimedia Inspection
The EPA conducted a multimedia inspection at the La Porte facility in January 2008. Historical DuPont, the EPA and the DOJ began discussions in the fall of 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, Historical DuPont began discussions with the EPA and the 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.

Divested Neoprene Facility, La Place, Louisiana - EPA Compliance Inspection
In 2016, the EPA conducted a focused compliance investigation at the Denka Performance Elastomer LLC (“Denka”) neoprene manufacturing facility in La Place, Louisiana. Historical DuPont sold the neoprene business, including this manufacturing facility, to Denka in the fourth quarter of 2015. Subsequent to this inspection, the EPA, the DOJ, the DEQ, Historical DuPont and Denka began discussions in the spring of 2017 relating to the inspection conclusions and allegations of noncompliance arising under the Clean Air Act, including leak detection and repair. These discussions, which include potential settlement options, continue. 


ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.


34


 
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 ("Historical Dow") and E. I. du Pont de Nemours and Company (“Historical 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, Historical Dow and Historical 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, Historical Dow's common stock, par value $2.50 per share, and Historical 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, 2018, there were 86,671 stockholders of record. At January 31, 2019, there were 86,518 stockholders of record.

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, 2018:

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 2018

$


$

November 2018
9,957,595

$
57.94

9,957,595

$
2,423

December 2018
15,734,165

$
53.66

15,734,165

$
1,579

Fourth quarter 2018
25,691,760

$
55.32

25,691,760

$
1,579

1.
On November 1, 2018, the Company announced a new $3 billion share buyback program, which expires on March 31, 2019 - commensurate with the expected timing of the materials science spin-off.


35


Stockholder Return
The chart below illustrates the cumulative total return to DowDuPont stockholders following the completion of the Merger. The chart depicts a hypothetical $100 investment in DowDuPont common stock on September 1, 2017, and illustrates the value of that investment over time (assuming the reinvestment of dividends) until December 31, 2018, for DowDuPont common stock.

chart-2250fd8f9fdadfd7a1ca01.jpg
Cumulative Total Return
DowDuPont
S&P 500
S&P 500 Chemicals
September 1, 2017
$
100

$
100

$
100

December 29, 2017
$
107

$
109

$
110

December 31, 2018
$
82

$
104

$
98


The form of the chart presented above is in accordance with requirements of the U.S. Securities and Exchange Commission. Stockholders are cautioned against drawing any conclusions from the data contained therein, as past results are not necessarily indicative of future performance. This does not reflect the Company's forecast of future financial performance.

Following the Merger close on August 31, 2017, one share of Historical Dow common stock was converted to one share of DowDuPont common stock, and one share of Historical DuPont common stock was converted to 1.2820 shares of DowDuPont common stock.

36


ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data 1
 
 
 
 
 
In millions, except as noted (Unaudited)
2018
2017
2016
2015
2014
Summary of Operations
 
 
 
 
 
Net sales
$
85,977

$
62,484

$
48,158

$
48,778

$
58,167

Income from continuing operations, net of tax 2
$
4,004

$
1,669

$
4,404

$
7,783

$
3,839

 Loss from discontinued operations, net of tax
$
(5
)
$
(77
)
$

$

$

Per share of common stock (in dollars):
 
 
 
 
 
Earnings per common share from continuing operations - basic 2
$
1.66

$
0.97

$
3.57

$
6.45

$
2.91

Earnings per common share from continuing operations - diluted 2
$
1.65

$
0.95

$
3.52

$
6.15

$
2.87

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
$
1.52

$
1.76

$
1.84

$
1.72

$
1.53

Book value per share of common stock
$
41.80

$
43.30

$
21.70

$
23.06

$
19.71

Year-end Financial Position
 
 
 
 
 
Total assets
$
188,030

$
192,164

$
79,511

$
67,938

$
68,639

Long-term debt
$
37,662

$
30,056

$
20,456

$
16,215

$
18,741

 
 
 
 
 
 
Financial Ratios










Research and development expenses as percent of net sales 3
3.6
%
3.4
%
3.3
%
3.2
%
2.8
%
Income from continuing operations before income taxes as percent of net sales 2
6.4
%
1.9
%
9.2
%
20.4
%
9.1
%
Return on stockholders' equity 2
4.1
%
1.5
%
15.3
%
34.4
%
18.6
%
Debt as a percent of total capitalization
29.6
%
25.1
%
44.0
%
39.7
%
45.5
%
1.
The year ended December 31, 2017, reflects the results of Historical Dow for the entire year and the results of Historical DuPont for the period beginning on and after September 1, 2017. The years ended December 31, 2016, 2015 and 2014 solely reflect the results of Historical Dow.
2.
See Notes 1, 3, 6, 7, 8, 13, 15, 16 and 19 to the Consolidated Financial Statements for information on items materially impacting the results for the years ended December 31, 2018, 2017 and 2016, 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; loss on early redemption of debt; gains on divestitures; integration and separation costs; 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 Historical Dow U.S. non-qualified pension plan; and the impact of a change in accounting policy for asbestos-related defense and processing costs.
3.
The retrospective adoption of ASU 2017-07 in the first quarter of 2018 resulted in an update to this ratio for 2015. The adoption did not impact the ratio for the remaining periods.



37


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On December 11, 2015, The Dow Chemical Company ("Historical Dow") and E. I. du Pont de Nemours and Company ("Historical 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, Historical Dow and Historical DuPont each merged with wholly owned subsidiaries of DowDuPont ("Mergers") and, as a result of the Mergers, Historical Dow and Historical DuPont became subsidiaries of DowDuPont (collectively, the "Merger"). Prior to the Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the Merger Agreement. Historical Dow was determined to be the accounting acquirer in the Merger. As a result, the financial statements of Historical Dow for the periods prior to the Merger are considered to be the historical financial statements of DowDuPont. The results of Historical DuPont are included in DowDuPont's consolidated results from the Merger date forward. See Note 3 to the Consolidated Financial Statements for additional information.

DowDuPont intends to pursue, subject to the receipt of approval by the Board of Directors ("Board") of DowDuPont and customary closing conditions, the separation of the combined Company's agriculture, materials science and specialty products businesses through one or more tax-efficient transactions ("Intended Business Separations").

Except as otherwise indicated by the context, the term "Historical Dow" includes Historical Dow and its consolidated subsidiaries, "Historical DuPont" includes Historical DuPont and its consolidated subsidiaries, "Union Carbide" means Union Carbide Corporation, a wholly owned subsidiary of Historical Dow, and "Dow Silicones" means Dow Silicones Corporation (formerly known as Dow Corning Corporation, which changed its name effective as of February 1, 2018), a wholly owned subsidiary of Historical Dow.

Items Affecting Comparability of Financial Results
Due to the size of each of Historical Dow's and Historical 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. Adjustments have been made in the unaudited pro forma financial information for (1) the purchase accounting impact, (2) accounting policy alignment, (3) the elimination of the effect of events that were directly attributable to the Merger Agreement (e.g., one-time transaction costs), (4) the elimination of the impact of transactions between Historical Dow and Historical 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) were 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.



38



ABOUT DOWDUPONT INC.
DowDuPont is a holding company comprised of Historical Dow and Historical 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.

In 2018, 37 percent of the Company’s net sales were to customers in U.S. & Canada; 28 percent were in Europe, Middle East and Africa ("EMEA"); 24 percent were in Asia Pacific; and 11 percent were in Latin America.

In 2018, 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, the Democratic People's Republic of Korea (North Korea), 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, 2018:

The Company reported net sales for 2018 of $86.0 billion, up 38 percent from $62.5 billion in 2017, with broad-based sales growth across all segments and geographic regions. Portfolio & Other contributed 29 percent of the sales increase, primarily reflecting the Merger as a full year of net sales in 2018 related to Historical DuPont compared with four months in 2017, which impacted all segments except Performance Materials & Coatings and Industrial Intermediates & Infrastructure.

Volume increased 4 percent compared with the same period last year, with increases in all segments, except Performance Materials & Coatings and Transportation & Advanced Polymers (both down 2 percent) and Nutrition & Biosciences (flat). Volume increased in all geographic regions, except U.S. & Canada (flat), led by a double-digit increase in Asia Pacific (up 13 percent).

Local price was up 4 percent compared with last year, primarily in response to higher feedstock and raw material costs. Local price increased in all segments, except Electronics & Imaging (flat). Local price increased in all geographic regions.


39


Currency had a favorable impact of 1 percent on sales, driven by a favorable impact in EMEA, partially offset by an unfavorable impact in Latin America.

Research and development ("R&D") expenses totaled $3,060 million in 2018, up 43 percent from $2,141 million in 2017. Selling, general and administrative ("SG&A") expenses were $6,709 million in 2018, up 65 percent from $4,064 million in 2017. R&D and SG&A expenses increased primarily due to the Merger, as 2018 included a full year of expenses related to Historical DuPont, compared with four months in 2017.

Restructuring, goodwill impairment and asset related charges - net was $1,105 million in 2018, primarily reflecting post-merger restructuring actions under the DowDuPont Cost Synergy Program of $869 million and the DowDuPont Agriculture Division Restructuring Program of $84 million; as well as pretax impairment charges of $160 million related to certain in-process research and development, an equity method investment and capital additions made to a manufacturing facility in Brazil.

Integration and separation costs were $2,463 million in 2018, up from $1,101 million in 2017, reflecting post-Merger integration and Intended Business Separation activities.

Equity in earnings of nonconsolidated affiliates was $1,001 million in 2018, up from $764 million in 2017, as higher earnings from the Kuwait joint ventures, lower equity losses from Sadara Chemical Company ("Sadara") and higher earnings from the HSC Group were partially offset by lower equity earnings from the Thai joint ventures.

Net income available for common stockholders was $3,844 million ($1.65 per share) in 2018, compared with $1,460 million ($0.91 per share) in 2017.

In November 2018, DowDuPont consummated the offering of senior unsecured DowDuPont Notes in an aggregate principal amount of $12.7 billion, with various maturities through 2048. The net proceeds of the offering after the underwriting discount were $12.6 billion.

In November 2018, $4.4 billion aggregate principal amount of Historical DuPont's outstanding debt securities were validly tendered and accepted for payment. In exchange, Historical DuPont paid a total of $4.8 billion, which included breakage fees and all related accrued and unpaid interest on the tender notes.

In the fourth quarter of 2018, Historical Dow issued $2.0 billion of senior unsecured notes with various maturities through 2048, and tendered and redeemed $2.1 billion of notes issued by Historical Dow.

In 2018, Historical Dow and Historical DuPont each made discretionary contributions of $1,100 million to their respective principal U.S. pension plans.

On November 1, 2018, the Company announced a new $3.0 billion share buyback program, which expires on March 31, 2019 - commensurate with the expected timing of the materials science spin-off. At December 31, 2018, the Company had repurchased $1.4 billion of shares under this program. The Company intends to complete the program before March 31, 2019.

On November 1, 2018, the Company increased its cost synergy target under the DowDuPont Synergy Program to $3.6 billion.


40


RESULTS OF OPERATIONS
Beginning in the third quarter of 2018, DowDuPont realigned joint ventures, global businesses and product lines in preparation for the Intended Business Separations. The segment reporting changes were retrospectively applied to all periods presented. See Note 24 to the Consolidated Financial Statements for additional information.

Summary of Sales Results
 
 
 
In millions
2018
2017
2016
Net sales
$
85,977

$
62,484

$
48,158

Pro forma net sales
 
$
79,535

$
70,894


Sales Variances by Segment and Geographic Region - As Reported
 
2018
2017
Percentage change from prior year
Local Price & Product Mix
Currency
Volume
Portfolio & Other 1
Total
Local Price & Product Mix
Currency
Volume 
Portfolio & Other 1
Total
Agriculture
3
%
(2
)%
1
 %
88
%
90
%
(1
)%
%
(2
)%
25
%
22
%
Performance Materials & Coatings
10

1

(2
)

9

8


2

27

37

Industrial Intermediates & Infrastructure
5

1

14


20

10


7


17

Packaging & Specialty Plastics
1

1

5

5

12

8

1

5

3

17

Electronics & Imaging


2

39

41

(1
)

9

37

45

Nutrition & Biosciences
2

(1
)

143

144



11

183

194

Transportation & Advanced Polymers
6


(2
)
119

123



6

175

181

Safety & Construction
2


3

76

81



3

57

60

Total
4
%
1
 %
4
 %
29
%
38
%
6
 %
%
5
 %
19
%
30
%
U.S. & Canada
4
%
 %
 %
36
%
40
%
6
 %
%
4
 %
16
%
26
%
EMEA
5

3

2

25

35

10

1

5

16

32

Asia Pacific
2


13

30

45

4


7

27

38

Latin America
4

(3
)
5

17

23

2


(1
)
18

19

Total
4
%
1
 %
4
 %
29
%
38
%
6
 %
%
5
 %
19
%
30
%
1.
Portfolio & Other primarily reflects sales related to the Merger (impacts all segments, except Performance Materials & Coatings and Industrial Intermediates & Infrastructure). Portfolio & Other also includes sales for the acquisition of FMC Corporation's ("FMC") Health and Nutrition Business (the "H&N Business") acquired on November 1, 2017, impacting Nutrition & Biosciences. 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). In addition, Portfolio & Other in 2017 includes the ownership restructure of Dow Silicones announced on June 1, 2016 (impacts Performance Materials & Coatings, Electronics & Imaging and Transportation & Advanced Polymers).


41


Sales Variances by Segment and Geographic Region - As Reported
 
 
 
 
 
 
2016
Percentage change from prior year
Local Price & Product Mix
Currency
Volume
Portfolio & Other 1
Total
Agriculture
1
 %
(1
)%
(2
)%
 %
(2
)%
Performance Materials & Coatings
(8
)
(1
)
(2
)
52

41

Industrial Intermediates & Infrastructure
(9
)
(1
)
2

(4
)
(12
)
Packaging & Specialty Plastics
(8
)

9

(1
)

Electronics & Imaging
(3
)

3

16

16

Nutrition & Biosciences
(2
)

(2
)

(4
)
Transportation & Advanced Polymers
(1
)
(1
)
7

49

54

Safety & Construction
(1
)

(2
)

(3
)
Total
(6
)%
 %
3
 %
2
 %
(1
)%
U.S. & Canada
(7
)%
 %
3
 %
2
 %
(2
)%
EMEA
(6
)
(1
)
4

(1
)
(4
)
Asia Pacific
(6
)

6

9

9

Latin America
(6
)


(1
)
(7
)
Total
(6
)%
 %
3
 %
2
 %
(1
)%
1.
Portfolio & Other reflects sales from June 1, 2016 through December 31, 2016 related to the ownership restructure of Dow Silicones (impacts Performance Materials & Coatings, Electronics & Imaging and Transportation & Advanced Polymers) and sales from January 1, 2016 through April 30, 2016 for the step acquisition of Univation Technologies, LLC, 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).

2018 versus 2017
The Company reported net sales for 2018 of $86.0 billion, up 38 percent from $62.5 billion for 2017, driven by the Merger, higher sales volume, reflecting additional capacity from U.S. Gulf Coast growth projects and increased supply from Sadara, increased local price and the favorable impact of currency. Sales growth was broad-based, with increases in all segments and geographic regions. Portfolio & Other contributed 29 percent of the sales increase, primarily reflecting the Merger. Volume increased 4 percent compared with last year, as increases in Industrial Intermediates & Infrastructure (up 14 percent), Packaging & Specialty Plastics (up 5 percent), Safety & Construction (up 3 percent), Electronics & Imaging (up 2 percent) and Agriculture (up 1 percent) more than offset declines in Performance Materials & Coatings and Transportation & Advanced Polymers (both down 2 percent). Nutrition & Biosciences volume was flat. Volume increased in most geographic regions, including a double-digit increase in Asia Pacific (up 13 percent). Local price was up 4 percent compared with last year, with increases in all geographic regions, driven by pricing initiatives in response to higher feedstock and raw material costs. Local price increased in most segments, with the most notable increases in Performance Materials & Coatings (up 10 percent), Transportation & Advanced Polymers (up 6 percent) and Industrial Intermediates & Infrastructure (up 5 percent). Currency was up 1 percent compared with last year, driven by a favorable impact in EMEA, partially offset by an unfavorable impact in Latin America.

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 the Dow Silicones business, increased local price 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 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 last year, with increases in all segments, except Agriculture (down 2 percent), including a double-digit increase in Nutrition & Biosciences (up 11 percent). Volume increased in all geographic regions, except Latin America (down 1 percent). Currency was flat compared with last year.


42


Sales Variances by Segment and Geographic Region - Pro Forma Basis
 
2018 1
2017
Percentage change from prior year
Local Price & Product Mix
Currency
Volume
Portfolio & Other 2
Total
Local Price & Product Mix
Currency
Volume
Portfolio & Other 2
Total
Agriculture
3
 %
 %
(2
)%
(1
)%
 %
 %
%
1
%
1
%
2
%
Performance Materials & Coatings
10

1

(2
)

9

8


2

27

37

Industrial Intermediates & Infrastructure
5

1

14


20

10


7


17

Packaging & Specialty Plastics
1

2

5


8

8


5


13

Electronics & Imaging
(1
)
1

1

(2
)
(1
)
(1
)

11

2

12

Nutrition & Biosciences
1

1

3

9

14



3

1

4

Transportation & Advanced Polymers
6

2

2


10

2


7

5

14

Safety & Construction
1

1

4


6

(1
)

4


3

Total
3
 %
1
 %
4
 %
 %
8
 %
4
 %
%
5
%
3
%
12
%
U.S. & Canada
3
 %
 %
 %
1
 %
4
 %
4
 %
%
3
%
3
%
10
%
EMEA
4

4

2

1

11

8

1

5

3

17

Asia Pacific
2

1

11


14

2


8

5

15

Latin America
4

(3
)
4

(1
)
4

1

1


3

5

Total
3
 %
1
 %
4
 %
 %
8
 %
4
 %
%
5
%
3
%
12
%
1.
As reported net sales in the current period compared with pro forma net sales in the prior period.
2.
Pro forma net sales for Agriculture excludes sales related to the November 30, 2017, divestiture of the 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 for Packaging & Specialty Plastics 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 the following divestitures: 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. In 2017, Portfolio & Other also reflects sales from January 1, 2017 through May 31, 2017, related to the ownership restructure of Dow Silicones on June 1, 2016 (impacts Performance Materials & Coatings, Electronics & Imaging and Transportation & Advanced Polymers).

2018 versus 2017
The Company reported net sales for 2018 of $86.0 billion, up 8 percent from pro forma net sales of $79.5 billion for 2017, with increases across most segments and all geographic regions. Double-digit net sales increases were reported in Industrial Intermediates & Infrastructure (up 20 percent), Nutrition & Biosciences (up 14 percent) and Transportation & Advanced Polymers (up 10 percent). These increases were partially offset by a decline in Electronics & Imaging (down 1 percent). Net sales increased in Asia Pacific (up 14 percent), EMEA (up 11 percent), U.S. & Canada and Latin America (both up 4 percent). Volume increased 4 percent compared with pro forma results last year, as increases in Industrial Intermediates & Infrastructure (up 14 percent), Packaging & Specialty Plastics (up 5 percent), Safety & Construction (up 4 percent), Nutrition & Biosciences (up 3 percent), Transportation & Advanced Polymers (up 2 percent) and Electronics & Imaging (up 1 percent) more than offset declines in Agriculture and Performance Materials & Coatings (both down 2 percent). Volume increased in most geographic regions, including a double-digit increase in Asia Pacific (up 11 percent). Volume was flat in U.S. & Canada. Local price was up 3 percent compared with pro forma results last year with increases in all geographic regions, driven by pricing initiatives in response to higher feedstock and raw material costs. Local price increased across most segments, including double-digit increases in Performance Materials & Coatings (up 10 percent). Currency was up 1 percent compared with last year, driven primarily by EMEA (up 4 percent) partially offset by an unfavorable impact in Latin America (down 3 percent).

2017 versus 2016
The Company reported pro forma net sales for 2017 of $79.5 billion, up 12 percent from pro forma net sales of $70.9 billion for 2016, primarily reflecting demand growth, increased local price and the addition of the Dow Silicones business. Pro forma net sales increased across all segments and geographic regions. Volume increased 5 percent compared with 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 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 increased 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), which 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 last year.

43


Cost of Sales
Cost of sales was $65.3 billion in 2018, up from $49.8 billion in 2017. Cost of sales increased in 2018 primarily due to the Merger, increased sales volume, which reflected additional capacity from U.S. Gulf Coast growth projects and increased supply from Sadara, higher feedstock and other raw material costs and increased planned maintenance turnaround costs, which more than offset lower commissioning expenses related to U.S. Gulf Coast growth projects and cost synergies. Cost of sales in 2018 was negatively impacted by a $1,628 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 ($1,554 million), Packaging & Specialty Plastics ($2 million), Nutrition & Biosciences ($67 million) and Safety & Construction ($5 million). Cost of sales as a percentage of sales was 76.0 percent compared with 79.7 percent in 2017.

Cost of sales was $49.8 billion in 2017, up from $37.7 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 $201 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 Historical Dow's U.S. Gulf Coast growth projects and the addition of the Dow Silicones business. Cost of sales as a percentage of sales was 79.7 percent compared with 78.2 percent in 2016. See Notes 3 and 19 to the Consolidated Financial Statements for additional information.

Research and Development Expenses
R&D expenses were $3,060 million in 2018, compared with $2,141 million in 2017 and $1,593 million in 2016. In 2018, R&D expenses increased primarily due to the Merger, which was partially offset by cost synergies. In 2017, R&D expenses increased primarily due to the Merger. R&D expenses as a percentage of net sales were 3.6 percent, 3.4 percent and 3.3 percent for 2018, 2017 and 2016, respectively.

Selling, General and Administrative Expenses
SG&A expenses were $6,709 million in 2018, compared with $4,064 million in 2017 and $2,953 million in 2016. SG&A expenses in 2018 increased primarily due to the Merger, which was partially offset by cost synergies. SG&A expenses in 2017 increased primarily due to the Merger. SG&A expenses as a percentage of net sales were 7.8 percent, 6.5 percent and 6.1 percent for 2018, 2017 and 2016, respectively.

Amortization of Intangibles
Amortization of intangibles was $1,903 million in 2018, $1,013 million in 2017 and $544 million in 2016. The increase in amortization in 2018 was primarily due to the Merger. The increase in amortization in 2017 was primarily due to an increase in intangible assets as a result of the Merger and the Dow Silicones ownership restructure. See Notes 3 and 13 to the Consolidated Financial Statements for additional information on intangible assets.

Restructuring, Goodwill Impairment and Asset Related Charges - Net
Restructuring, goodwill impairment and asset related charges - net was $1,105 million in 2018, $3,280 million in 2017 and $595 million in 2016, and consisted primarily of the following:

DowDuPont Agriculture Division Restructuring Program
During the fourth quarter of 2018 and in connection with the ongoing integration activities, DowDuPont approved restructuring actions to simplify and optimize certain organizational structures within the Agriculture segment in preparation for the Intended Business Separations ("Agriculture Division Program"). As a result of these actions, the Company expects to record total pretax charges of approximately $96 million, comprised of $83 million of severance and related benefit costs, $8 million of asset write-downs and write-offs and $5 million of costs associated with exit and disposal activities.

For the year ended December 31, 2018, DowDuPont recorded a pretax charge of $84 million related to this program, which was recorded in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income. This charge consisted of severance and related benefit costs of $78 million related to Corporate, and asset write-downs and write-offs of $6 million related to Agriculture. The Company expects actions related to this program to be substantially complete by mid-2019.

DowDuPont Cost Synergy Program
In September and November 2017, DowDuPont approved post-merger restructuring actions under 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. The Company expects to record total pretax restructuring charges of

44


approximately $2 billion, comprised of approximately $895 million to $975 million of severance and related benefit costs; $525 million to $615 million of asset write-downs and write-offs, and $370 million to $410 million of costs associated with exit and disposal activities.

As a result of the Synergy Program, for the year ended December 31, 2017, the Company recorded pretax restructuring charges of $874 million, which were recorded in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and consisted 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, $86 million in Electronics & Imaging, $36 million in Packaging & Specialty Plastics, $21 million in Safety & Construction, $12 million in Industrial Intermediates & Infrastructure, $11 million in Performance Materials & Coatings, $2 million in Transportation & Advanced Polymers, $1 million in Nutrition & Biosciences and $571 million in Corporate.

For the year ended December 31, 2018, the Company recorded pretax restructuring charges of $869 million which were recorded in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income. These charges consisted of severance and related benefit costs of $419 million, asset write-downs and write-offs of $289 million, and costs associated with exit and disposal activities of $161 million. The restructuring charges by segment were as follows: $340 million in Agriculture, $29 million in Nutrition & Biosciences, $24 million in Safety & Construction, $13 million in Packaging & Specialty Plastics, $11 million in Industrial Intermediates & Infrastructure, $7 million in Performance Materials & Coatings, $2 million in Transportation & Advanced Polymers, $2 million in Electronics & Imaging, and $441 million in Corporate. The Company expects to record additional restructuring charges during 2019 and substantially complete the Synergy Program by the end of 2019.

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

In 2018, Historical Dow recorded a favorable adjustment to the 2016 restructuring charge related to severance and related benefit costs of $8 million, related to Corporate, and an unfavorable adjustment to costs associated with exit and disposal activities of $14 million, related to Performance Materials & Coatings. The 2016 restructuring activities were substantially complete at June 30, 2018, with remaining liabilities for severance and related benefit costs and costs associated with exit and disposal activities to be settled over time. See Note 6 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. There were no impairment charges in 2016 or 2018. See Note 13 to the Consolidated Financial Statements for additional information on the impairment charge.

Asset Related Charges
2018 Charges
During the third quarter of 2018, the Company recognized an $85 million pretax impairment charge in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income related to certain in-process research and development (“IPR&D") assets within the Agriculture segment. See Notes 6, 13 and 22 to the Consolidated Financial Statements for additional information.
In addition, based on updated projections for the Company’s equity method investments in joint ventures in China related to the Agriculture segment, management determined the fair values of the equity method investments were below the carrying values and had no expectation that the fair values would recover due to the continuing unfavorable regulatory environment, including lack of intellectual property protection, uncertain product registration timing and limited freedom to operate. As a result,

45


management concluded the impairment was other than temporary and in the third quarter of 2018 recorded an impairment charge of $41 million in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income. See Notes 6 and 22 to the Consolidated Financial Statements for additional information.
In 2018, the Company recognized an additional pretax impairment charge of $34 million primarily related to capital additions made to the biopolymers manufacturing facility in Santa Vitoria, Minas Gerais, Brazil, which was impaired in 2017. The impairment charge was related to Packaging & Specialty Plastics.

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. Historical Dow determined it would 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 Historical Dow’s new assets coming online on 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 6, 22 and 23 to the Consolidated Financial Statements for additional information.

2016 Charges
In 2016, Historical 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 6, 12, 22 and 23 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 Silicones, were $2,463 million in 2018, $1,101 million in 2017 and $349 million in 2016, and were related to Corporate.

Asbestos-Related Charge
In 2016, Historical 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. There was no adjustment to the asbestos-related liability for pending and future claims and defense and processing costs in 2017 or 2018. 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 2018 was $1,001 million, compared with $764 million in 2017 and $442 million in 2016. In 2018, equity earnings increased as higher earnings from the Kuwait joint ventures, lower equity losses from Sadara and higher earnings from the HSC Group, which included settlements with a customer related to long-term polysilicon sales agreements, were partially offset by lower equity earnings from the Thai joint ventures.

In 2017, equity earnings increased as lower equity losses from Sadara and higher equity earnings from the Kuwait joint ventures 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 Silicones ownership restructure and lower equity earnings from the Thai joint ventures. 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, non-operating pension and other postretirement benefit plan credits or costs, and certain litigation matters. Sundry income (expense) - net for 2018 was income of $592 million, compared with income of $417 million in 2017 and income of $1,486 million in 2016.


46


In 2018, sundry income (expense) - net included credits related to non-operating pension and other postretirement benefit plans, interest income and gains on the sales of investments and other assets, including a $20 million gain for post-closing adjustments on Historical Dow’s sale of its equity interest in MEGlobal (related to Industrial Intermediates & Infrastructure) and a $22 million gain related to Agriculture asset sales. These gains were partially offset by a $135 million loss on the early extinguishment of debt (related to Corporate), foreign currency exchange losses, including a $50 million foreign exchange loss related to adjustments to foreign currency exchange contracts for the change in the U.S. tax rate (related to Corporate), a $47 million loss for adjustments related to the Dow Silicones ownership restructure ($27 million related Electronics & Imaging and $20 million related to Performance Materials & Coatings), and a $14 million loss on the divestiture of the European XPS STYROFOAM™ business (related to Safety & Construction). See Notes 3, 5, 7, and 15 to the Consolidated Financial Statements for additional information.

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 Historical Dow's EAA Business (related to Packaging & Specialty Plastics), a $137 million gain related to Historical 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 Historical Dow's chlorine value chain (related to Corporate), gains on sales of other assets and investments and interest income. These gains more than offset non-operating pension and other postretirement benefit costs, primarily related to a settlement charge for a U.S. non-qualified pension plan of $697 million (related to Corporate), a $469 million loss related to Dow AgroSciences' arbitration matter with Bayer CropScience (related to Agriculture) and foreign currency exchange losses. See Notes 1, 2, 5, 7, 16 and 19 to the Consolidated Financial Statements for additional information.

In 2016, sundry income (expense) - net included a $2,445 million gain on the Dow Silicones 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 Historical Dow's chlorine value chain (related to Corporate), gains on sales of assets and investments, non-operating pension and other postretirement benefit credits and interest income. These gains more than offset a $1,235 million loss related to Historical 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), losses on divestitures and foreign currency exchange losses. See Notes 3, 5, 7 and 16 to the Consolidated Financial Statements for additional information.

Interest Expense and Amortization of Debt Discount
Interest expense and amortization of debt discount was $1,504 million in 2018, $1,082 million in 2017 and $858 million in 2016. The increase in 2018 was primarily related to the Merger as well as higher debt balances as a result of the DowDuPont Notes Offering. The increase in 2017 was primarily related to the Merger and the effect of the long-term debt assumed in the Dow Silicones ownership restructure. See Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes 11 and 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 certain foreign subsidiaries that were previously deferred, creates new provisions related to foreign sourced earnings, eliminates the domestic manufacturing deduction and moves towards a hybrid territorial system. At December 31, 2018, the Company had completed its accounting for the tax effects of The Act; see Note 8 to the Consolidated Financial Statements for additional information.

The "Provision (Credit) for income taxes on continuing operations" was a charge of $1,489 million in 2018, a benefit of $476 million in 2017 and a charge of $9 million in 2016. The tax rate for 2018 was favorably impacted by equity earnings as well as excess tax benefits related to equity compensation. These impacts were more than offset by the impact of geographic mix of earnings, amortization of the fair value step-up of Historical DuPont’s inventories as a result of the Merger, a $75 million tax charge associated with a valuation allowance recorded against the net deferred tax asset position of a Historical DuPont legal entity in Brazil and costs associated with the Merger (including a $74 million net tax charge on repatriation activities to facilitate the Intended Business Separations). These factors resulted in a tax rate of 27.1 percent for 2018.


47


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 Historical 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 Historical Dow in 2016 was favorably impacted by the non-taxable gain on the ownership restructure of Dow Silicones and a tax benefit on the reassessment of a deferred tax liability related to the basis difference in Historical Dow’s investment in Dow Silicones. The tax rate was also favorably impacted by the geographic mix of earnings, the availability of foreign tax credits, 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.

Loss from Discontinued Operations, Net of Tax
Loss from discontinued operations, net of tax was $5 million in 2018 and $77 million in 2017, and is related to certain Historical DuPont assets divested as a condition of the regulatory approval of the Merger. See Note 5 to the Consolidated Financial Statements for additional information.

Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests was $155 million in 2018, $132 million in 2017 and $86 million in 2016. Net income attributable to noncontrolling interests increased in 2018 compared with 2017, primarily due to the Merger and the sale of Historical Dow's ownership interests in the SKC Haas Display Films group of companies in 2017. Net income attributable to noncontrolling interests increased in 2017 compared with 2016, primarily due to higher earnings from Dow Silicones' consolidated joint ventures and improved results from a cogeneration facility in Brazil. See Notes 18 and 23 to the Consolidated Financial Statements for additional information.

Historical Dow Cumulative Convertible Preferred Stock Dividends
On December 30, 2016, Historical Dow converted all outstanding shares of its Cumulative Convertible Perpetual Preferred Stock, Series A ("Historical Dow Preferred Stock") into shares of Historical Dow's common stock. As a result of this conversion, no shares of Historical Dow Preferred Stock are issued or outstanding. On January 6, 2017, Historical 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. Historical Dow Preferred Stock dividends of $340 million were recognized in 2016. 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 $3,844 million ($1.65 per share) in 2018, compared with $1,460 million ($0.91 per share) in 2017 and $3,978 million ($3.52 per share) in 2016. See Note 9 to the Consolidated Financial Statements for details on the Company's earnings per share calculations.


48


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 below 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 Accounting Standards Codification ("ASC") Topic 805, "Business Combinations" ("ASC 805"). Pro forma adjustments have been made for (1) the 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 Historical Dow and Historical DuPont, and (5) the elimination of the effect of consummated divestitures required 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 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 stockholders 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 ASC 805, under which Historical Dow was designated as the accounting acquirer in the Merger for accounting purposes. Under ASC 805, Historical Dow accounted for the transaction by using Historical Dow financial information and accounting policies and adding the assets and liabilities of Historical DuPont as of the Merger Date at their respective fair values. The assets and liabilities of Historical DuPont were measured based on various estimates at the Merger Date using assumptions that DowDuPont believes are reasonable based on information that was 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.

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 Historical Dow and Historical DuPont Quarterly Reports on Form 10-K for the applicable periods. See Note 3 to the Consolidated Financial Statements for additional information.


49


Unaudited Pro Forma Combined
Statement of Income
Year Ended Dec 31, 2017
 
 
Adjustments
 
In millions, except per share amounts
DWDP 1, 2
Historical DuPont 2, 3
Reclass 2, 4
Divestitures 5
Pro Forma 6
Pro Forma
Net sales
$
62,484

$
18,349

$
84

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

Cost of sales
49,791

10,464

387

(523
)
65

60,184

Other operating charges

521

(521
)



Research and development expenses
2,141

1,117

(27
)
(104
)
19

3,146

Selling, general and administrative expenses
4,064

3,368

(583
)
(143
)
29

6,735

Other (loss) income, net

(106
)
106




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
417


(278
)
(12
)

127

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.
Amounts have been updated to reflect certain reclassifications required under ASU 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," which was adopted on January 1, 2018, and applied retrospectively.
3.
Reflects Historical DuPont activity for the period from January 1, 2017 to August 31, 2017.
4.
Certain reclassifications were made to conform with the presentation used for DowDuPont.
5.
Includes the following divestitures agreed to with certain regulatory agencies as a condition of approval for the Merger: Historical Dow’s EAA Business; the DAS Divested Ag Business; and Historical DuPont’s cereal broadleaf herbicides and chewing insecticides portfolio as well as its crop protection research and development pipeline and organization.
6.
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.

50


Unaudited Pro Forma Combined
Statement of Income
Year Ended Dec 31, 2016
 
 
Adjustments
 
In millions, except per share amounts
Historical Dow 1, 2
Historical DuPont 2, 3
Reclass 2, 4
Divestitures 5
Pro Forma 6
Pro Forma
Net sales
$
48,158

$
24,594

$
170

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

Cost of sales
37,668

14,451

559

(783
)
110

52,005

Other operating charges

686

(686
)



Research and development expenses
1,593

1,635

(40
)
(153
)
29

3,064

Selling, general and administrative expenses
3,302

4,303

(762
)
(203
)
43

6,683

Other (loss) income, net

668

(668
)



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
1,236


671

(10
)

1,897

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