REVENUE

Revenue Recognition

The majority of TDCC's revenue is derived from product sales. In the three months ended March 31, 2019 and 2018, 98 percent of TDCC's revenue related to product sales with the remaining balance primarily related to TDCC's insurance operations and licensing of patents and technologies. Product sales consist of sales of TDCC's products to manufacturers and distributors and considers order confirmations or purchase orders, which in some cases are governed by master supply agreements, to be contracts with a customer. TDCC enters into licensing arrangements in which it licenses certain rights of its patents and technology to customers. Revenue from TDCC’s licenses for patents and technology is derived from sales-based royalties and licensing arrangements based on billing schedules established in each contract.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price allocated to unsatisfied or partially unsatisfied performance obligations. At March 31, 2019, TDCC had remaining performance obligations related to material rights granted to customers for contract renewal options of $100 million ($102 million at December 31, 2018) and unfulfilled performance obligations for the licensing of technology of $519 million ($407 million at December 31, 2018). TDCC expects revenue to be recognized for the remaining performance obligations over the next one to six years.

The remaining performance obligations are for product sales that have expected durations of one year or less, product sales of materials delivered through a pipeline for which TDCC has elected the right to invoice practical expedient, or variable consideration attributable to royalties for licenses of patents and technology. TDCC has received advance payments from customers related to long-term supply agreements that are deferred and recognized over the life of the contract, with remaining contract terms that range up to 22 years. TDCC will have rights to future consideration for revenue recognized when product is delivered to the customer. These payments are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in TDCC's consolidated balance sheets.

Disaggregation of Revenue

TDCC disaggregates its revenue from contracts with customers by principal product group and geographic region, as TDCC believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows.



Net Trade Sales by Principal Product Group	Three Months Ended
In millions	Mar 31, 2019		Mar 31, 2018
Coatings & Performance Monomers	$	904	$	954
Consumer Solutions	1,365		1,363
Crop Protection	1,124		1,122
Electronics & Imaging	625		627
Hydrocarbons & Energy	1,380		1,779
Industrial Biosciences	119		135
Industrial Solutions ¹	1,104		1,156
Nutrition & Health	152		156
Packaging and Specialty Plastics	3,410		3,854
Polyurethanes & CAV ¹	2,297		2,557
Safety & Construction	424		444
Seed	323		371
Transportation & Advanced Polymers	284		304
Corporate	69		73
Other	2		4
Total	$	13,582	$	14,899

1. Beginning in the third quarter of 2018, the Construction Chemicals principal product group was combined with the Polyurethanes & CAV principal product group. Also, certain product lines associated with the oil and gas industry were realigned from the Industrial Solutions principal product group to Polyurethanes & CAV principal product group. These changes have been retrospectively reflected in the results presented.



Net Trade Sales by Geographic Region	Three Months Ended
In millions	Mar 31, 2019		Mar 31, 2018
U.S. & Canada	$	4,884	$	5,468
EMEA ¹	4,211		4,765
Asia Pacific	3,202		3,256
Latin America	1,285		1,410
Total	$	13,582	$	14,899

1. Europe, Middle East and Africa.

Contract Balances

TDCC receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets include amounts related to TDCC's contractual right to consideration for completed performance obligations not yet invoiced. Contract liabilities include payments received in advance of performance under the contract and are realized when the associated revenue is recognized under the contract. "Contract liabilities - current" primarily reflects deferred revenue from prepayments from customers for product to be delivered in 12 months or less. "Contract liabilities - noncurrent" includes advance payments that TDCC has received from customers related to long-term supply agreements and royalty payments that are deferred and recognized over the life of the contract.

The increase in contract liabilities from December 31, 2018 to March 31, 2019 was due to advanced payments from a customer related to long-term product supply agreements. Revenue recognized in the first three months of 2019 from amounts included in contract liabilities at the beginning of the period was approximately $65 million (approximately $75 million in the first three months of 2018). In the first three months of 2019, the amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional was $14 million (insignificant in the first three months of 2018).

The following table summarizes the contract balances at March 31, 2019 and December 31, 2018:



Contract Balances	Mar 31, 2019		Dec 31, 2018
In millions	Mar 31, 2019		Dec 31, 2018
Accounts and notes receivable - Trade	$	8,428	$	8,246
Contract assets - current ¹	$	26	$	37
Contract assets - noncurrent ²	$	47	$	47
Contract liabilities - current ³	$	233	$	165
Contract liabilities - noncurrent ⁴	$	1,739	$	1,390


1.	Included in "Other current assets" in the consolidated balance sheets.


2.	Included in "Deferred charges and other assets" in the consolidated balance sheets.


3.	Included in "Accrued and other current liabilities" in the consolidated balance sheets.


4.	Included in "Other noncurrent obligations" in the consolidated balance sheets.