# EIDP, Inc.: Form 10-Q for the period ended Mar 31, 2018

- Company: [EIDP, Inc.](/companies/cta-pb.md) (CIK 30554)
- Form: 10-Q
- Filed: 2018-05-04
- Accepted by EDGAR: May 4, 2018, 12:50 ET
- Period: 2018-03-31
- Accession: 0000030554-18-000005
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/30554/000003055418000005/dd-331201810xq.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/30554/000003055418000005/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2018-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Cash and equivalents | at 2018-03-31 | $5.09bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2018-03-31 | $21.68bn | us-gaap:AssetsCurrent |
| Total assets | at 2018-03-31 | $111.89bn | us-gaap:Assets |
| Current liabilities | at 2018-03-31 | $11.96bn | us-gaap:LiabilitiesCurrent |
| Current portion of debt | at 2018-03-31 | $3.41bn | us-gaap:DebtCurrent |
| Shareholders' equity | at 2018-03-31 | $74.73bn | us-gaap:StockholdersEquity |
| Shares outstanding | at 2018-03-31 | 100 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 33,332 characters.

### Cautionary Statements About Forward-Looking Statements

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

On December 11, 2015, The Dow Chemical Company (“Dow”) and E. I. du Pont de Nemours and Company (“DuPont”) announced entry into an Agreement and Plan of Merger, as amended on March 31, 2017, (the “Merger Agreement”) under which the companies would combine in an all-stock merger of equals transaction (the “Merger”). Effective August 31, 2017, the Merger was completed and each of Dow and DuPont became subsidiaries of DowDuPont Inc. (“DowDuPont”).

Forward-looking statements by their nature address matters that are, to varying degrees, uncertain, including the intended separation, subject to approval of the DowDuPont Board of Directors and customary closing conditions, of DowDuPont’s agriculture, materials science and specialty products businesses in one or more tax efficient transactions on anticipated terms (the “Intended Business Separations”). Forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events which may not be realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond the control of DuPont and its parent company. Some of the important factors that could cause DuPont’s actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) costs to achieve and achieving the successful integration of the respective agriculture, materials science and specialty products businesses of Dow and DuPont, anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, productivity actions, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies for the management, expansion and growth of the combined operations; (ii) costs to achieve and achievement of the anticipated synergies by the combined agriculture, materials science and specialty products businesses; (iii) risks associated with the Intended Business Separations, including conditions which could delay, prevent or otherwise adversely affect the proposed transactions, including possible issues or delays in obtaining required regulatory approvals or clearances related to the Intended Business Separations, associated cost, disruptions in the financial markets or other potential barriers; (iv) disruptions or business uncertainty, including from the Intended Business Separations, could adversely impact DuPont’s business or financial performance and its ability to retain and hire key personnel; and (v) risks to DuPont’s business, operations and results of operations from: the availability of and fluctuations in the cost of energy and raw materials; 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; delays or failures in obtaining or retaining regulatory approvals, delayed product launches, lack of market acceptance, product discontinuation, changes in the regulatory environment and litigation resulting from concerns and claims regarding the safe use of seeds with biotechnology traits and crop protection products potential impact on health and the environment, and the perceived impacts of biotechnology on health and the environment; impact of unpredictable seasonal and weather factors could impact sales and earnings from agriculture products; 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 DuPont, adversely impact demand or production; ability to discover, develop and protect new technologies and to protect and enforce the DuPont’s intellectual property rights; failure to effectively manage acquisitions, divestitures, alliances, joint ventures and other portfolio changes; unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities, as well as management’s response to any of the aforementioned factors. While the list of factors presented here is, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, financial loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DuPont’s consolidated financial condition, results of operations, credit rating or liquidity. DuPont does not assume any obligation to publicly provide revisions or updates to any forward-looking statements whether as a result of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.

For further discussion of some of the important factors that could cause the company's actual results to differ materially from those projected in any such forward-looking statements, see the Risk Factors discussion set forth under Part I, Item 1A of the company's 2017 Annual Report and in the section titled "Risk Factors" (Part II, Item 1A of this Form 10-Q).

### Recent Developments

#### DowDuPont Merger of Equals

DowDuPont Inc. ("DowDuPont") was formed on December 9, 2015 to effect an all-stock, merger of equals strategic combination between The Dow Chemical Company ("Dow") and DuPont (the "Merger Transaction"). On August 31, 2017 at 11:59 pm ET, (the "Merger Effectiveness Time") pursuant to the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017 (the "Merger Agreement"), Dow and DuPont each merged with wholly owned subsidiaries of DowDuPont ("Mergers") and, as a result of the Mergers, Dow and DuPont became subsidiaries of DowDuPont (collectively, the "Merger"). Prior to the Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the Merger Agreement. DowDuPont intends to pursue, subject to the receipt of approval by the Board of Directors of DowDuPont and customary closing conditions, the separation of the combined company's agriculture business, specialty products business and materials science business through a series of tax-efficient transactions (collectively, the "Intended Business Separations"). DowDuPont anticipates materials science separating by the end of the first quarter of 2019, and expects agriculture and specialty products to separate by June 1, 2019.

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

As a condition of the regulatory approval for the Merger Transaction, the company was required to divest certain assets related to its crop protection business and research and development ("R&D") organization (the "Divested Ag Business"). On March 31, 2017, the company entered into a definitive agreement (the "FMC Transaction Agreement") with FMC Corporation ("FMC"). Under the FMC Transaction Agreement, and effective upon the closing of the transaction on November 1, 2017, FMC acquired the Divested Ag Business and DuPont acquired certain assets relating to FMC’s Health and Nutrition segment (the "H&N Business") (collectively, the "FMC Transactions"). On November 1, 2017, the company completed the FMC Transactions through the disposition of the Divested Ag Business and the acquisition of the Acquired H&N Business. See Note 3 for further information regarding the divestiture. The sale of the Divested Ag Business meets the criteria for discontinued operations and as such, earnings are included within income from discontinued operations after income taxes in the interim Consolidated Statements of Operations for all periods presented.

#### Tax Reform

On December 22, 2017, the Tax Cuts and Jobs Act (“The Act”) was enacted. The Act reduces the U.S. federal corporate income tax rate from 35 percent to 21 percent, requires companies to pay a one-time transition tax (“transition tax”) on earnings of foreign subsidiaries that were previously tax deferred, creates new provisions related to foreign sourced earnings, eliminates the domestic manufacturing deduction and moves to a territorial system. In the fourth quarter of 2017, the company recorded a net benefit in provision for taxes on continuing operations of $2,001 million, which consisted of a provisional net benefit of $2,716 million due to the reduction of the U.S. federal corporate income tax rate, partially offset by a provisional charge of $715 million due to the transition tax. At March 31, 2018, the company had not yet completed its accounting for the tax effects of enactment of the Act; however, in the first quarter of 2018, the company recorded a charge of $48 million to provision for income taxes on continuing operations with respect to the remeasurement of the company's deferred tax balance. In addition, the company recorded a $16 million charge associated with an indirect impact of The Act related to certain inventory. The company continues to refine its calculations as additional information and guidance becomes available.

#### DowDuPont Cost Synergy Program

In September and November 2017, DowDuPont and the company approved post-merger restructuring actions to achieve targeted cost synergies under the DowDuPont Cost Synergy Program (the “Synergy Program”), adopted by the DowDuPont Board of Directors. The plan is designed to integrate and optimize the organization following the Merger and in preparation for the Intended Business Separations. Based on all actions approved to date under the Synergy Program, DuPont expects to record total pre-tax restructuring charges of $430 million to $600 million, comprised of approximately $320 million to $360 million of severance and related benefits costs; $110 million to $140 million of costs related to contract terminations; and up to $100 million of asset related charges. The Synergy Program includes certain asset actions that are reflected in the preliminary fair value measurement of DuPont’s assets as of the merger date. Current estimated total pre-tax restructuring charges could be impacted by future adjustments to the preliminary fair value of DuPont’s assets. Substantially all of the remaining restructuring charges are expected to be incurred in 2018 and the related actions, including employee separations, associated with this plan are expected to be substantially complete by the end of 2019.

Future cash payments related to this program are anticipated to be approximately $360 million to $430 million, primarily related to the payment of severance and related benefits and contract termination costs. It is possible that additional charges and future cash payments could occur in relation to the restructuring actions. The company anticipates including savings associated with these actions within DowDuPont's cost synergy commitment of $3.3 billion associated with the Merger Transaction.

### Selected Financial Data

*In millions, except per share amounts*

|  | Successor Three Months Ended March 31, 2018 | Predecessor Three Months Ended March 31, 2017 |
| --- | ---: | ---: |
| Net sales | $6,699 | $7,319 |
| Cost of goods sold | $4,847 | $4,152 |
| Percent of net sales | 72.4% | 56.7% |
| Research and development expenses | $382 | $368 |
| Percent of net sales | 5.7% | 5.0% |
| Selling, general and administrative expenses | $959 | $1,190 |
| Percent of net sales | 14.3% | 16.3% |
| Effective tax rate on continuing operations | (14.3)% | 14.3% |
| Net (loss) income | $(221) | $1,121 |
| Net income available for common stockholders |  | $1,111 |
| Basic earnings per share of common stock from continuing operations |  | $1.35 |
| Diluted earnings per share of common stock from continuing operations |  | $1.34 |

### Results of Operations

### Note on Financial Presentation

For purposes of DowDuPont's financial statement presentation, Dow was determined to be the accounting acquirer in the Merger and DuPont's assets and liabilities are reflected at fair value as of the Merger Effectiveness Time. In connection with the Merger and the related accounting determination, the company has elected to apply push-down accounting and reflect in its financial statements, the fair value of its assets and liabilities. DuPont's Consolidated Financial Statements for periods following the close of the Merger are labeled “Successor” and reflect DowDuPont’s basis in the fair values of the assets and liabilities of DuPont. All periods prior to the closing of the Merger reflect the historical accounting basis in DuPont's assets and liabilities and are labeled “Predecessor.” The interim Consolidated Financial Statements and Footnotes include a black line division between the columns titled "Predecessor" and "Successor" to signify that the amounts shown for the periods prior to and following the Merger are not comparable. In addition, the company has elected to make certain changes in presentation to harmonize its accounting and reporting with that of DowDuPont in the Successor period. See Note 1, "Summary of Significant Accounting Policies" in the company's 2017 Annual Report for further discussion of these changes and Note 3 for additional information on the Merger.

### Net Sales

Net sales were $6.7 billion and $7.3 billion for the three months ended March 31, 2018 and 2017, respectively. The change was primarily driven by 28 percent lower sales in the U.S. and Canada, mainly driven by timing in seed deliveries in the agriculture product line, partly offset by sales increases in EMEA and Asia Pacific of 15 percent and 12 percent, respectively, from higher volume and currency benefits in those regions.

In the interim Consolidated Statement of Operations, royalty income is included within net sales in the Successor Period and is included in sundry income - net in the Predecessor Periods. Royalty income does not have a significant impact on any period presented.

|  | Successor Three Months Ended March 31, 2018 Net Sales ($ Billions)% |  | Predecessor Three Months Ended March 31, 2017 Net Sales ($ Billions)% |  |
| --- | ---: | ---: | ---: | ---: |
| Worldwide | $6.7 | 100 | $7.3 | 100 |
| U.S. & Canada | 2.5 | 38 | 3.5 | 48 |
| Europe, Middle East & Africa (EMEA) | 2.2 | 32 | 1.9 | 26 |
| Asia Pacific | 1.5 | 23 | 1.4 | 19 |
| Latin America | 0.5 | 7 | 0.5 | 7 |

### Cost of Goods Sold ("COGS")

COGS was $4.8 billion and $4.2 billion for the three months ended March 31, 2018 and 2017, respectively. The change was primarily driven by the amortization of the inventory step-up of $703 million during the first quarter of 2018 as well as increased expenses due to the elimination of the other operating charges financial statement line item in the Successor period and higher depreciation related to the fair value step up of property, plant and equipment, partially offset by lower sales volume.

COGS as a percentage of net sales was 72 percent and 57 percent for the three months ended March 31, 2018 and 2017, respectively. The amortization of the inventory step-up was 10 percent of net sales in the Successor period. The remaining COGS increase as a percentage of net sales in the Successor period is due to the items discussed above.

See Note 3 for additional information regarding the Merger, including the valuation of inventory.

### Other Operating Charges

Other operating charges were $200 million for the three months ended March 31, 2017. In the Successor period, other operating charges are included primarily in COGS, as well as selling, general and administrative expenses and amortization of intangibles.

### Research and Development Expense ("R&D")

R&D expense was $382 million and $368 million for the three months ended March 31, 2018 and 2017, respectively. R&D as a percentage of net sales was 6 percent and 5 percent for the three months ended March 31, 2018 and 2017, respectively. The change was primarily driven by an increase in R&D expense for the agriculture and health and nutrition product lines.

### Selling, General and Administrative Expenses ("SG&A")

SG&A expenses were $1.0 billion and $1.2 billion for the three months ended March 31, 2018 and 2017, respectively. In the Successor period, integration and separation costs and amortization of intangibles are presented as a line item on the interim Consolidated Statement of Operations. During the three months ended March 31, 2017, the company incurred $170 million of transaction costs in connection with the Merger and the Intended Business Separations.

SG&A as a percentage of net sales was 14 percent and 16 percent for the three months ended March 31, 2018 and 2017, respectively. Transaction costs were 2 percent of net sales for the three months ended March 31, 2017.

### Amortization of Intangibles

Intangible asset amortization was $315 million for the three months ended March 31, 2018. In the Predecessor periods, amortization of intangibles was included within SG&A; other operating charges; R&D; and COGS. See Note 3 for further information regarding the Merger, including the valuation of intangible assets.

### Restructuring and Asset Related Charges - Net

Restructuring and asset related charges - net were $97 million and $152 million for the three months ended March 31, 2018 and 2017, respectively. The charges in the first quarter 2018 related to the DowDuPont Cost Synergy Program. The charges in the first quarter 2017 related to the 2017 restructuring program.

See Note 6 to the interim Consolidated Financial Statements for additional information.

### Integration and Separation Costs

Integration and separation costs were $255 million for the three months ended March 31, 2018. In the Predecessor periods, integration and separation costs were included within SG&A. See Note 1 for further discussion of the changes in presentation.

### Sundry Income - Net

Sundry income - net was $47 million and $202 million for the three months ended March 31, 2018 and 2017, respectively. The three months ended March 31, 2018 included exchange losses of $132 million, partially offset by a non-operating pension benefit of $92 million. The three months ended March 31, 2017 included a net exchange loss of $59 million and non-operating pension costs of $104 million. These losses were offset by a pre-tax gain of $162 million associated with the sale of the global food safety diagnostics business, as well as the inclusion of royalty income in the Predecessor period. The non-operating pension benefit in the first quarter of 2018 was a result of the absence of the amortization of net losses from accumulated other comprehensive loss.

See Note 8 to the interim Consolidated Financial Statements for additional information.

### Interest Expense

Interest expense was $80 million and $84 million for the three months ended March 31, 2018 and 2017, respectively. The change was primarily driven by debt amortization as a result of reflecting the company's debt at fair value upon the effective date of the Merger, partially offset by higher debt balances.

### Provision for Income Taxes on Continuing Operations

The company’s provision for income taxes on continuing operations was $27 million for the first quarter 2018 on a pre-tax loss from continuing operations of $189 million, resulting in an effective tax rate of (14.3) percent. The effective tax rate was favorably impacted by the reduction of the U.S. federal corporate income tax rate from 35 percent to 21 percent, as well as the tax impact of certain net exchange gains recognized on the re-measurement of the net monetary asset positions which were not taxable in their local jurisdictions. The effective tax rate was unfavorably impacted by non-tax-deductible amortization of the fair value step-up in DuPont’s inventories as a result of the merger, in addition to an incremental net provisional charge of $48 million associated with the enactment of the Act.

The company’s provision for income taxes on continuing operations was $197 million for the first quarter 2017 on pre-tax income of $1,375 million, resulting in an effective tax rate of 14.3 percent. The effective tax rate was favorably impacted by tax benefits associated with a reduction in the company’s unrecognized tax benefits due to the closure of various tax statutes of limitations and other changes in accruals for certain prior year tax positions, the tax impact of certain net exchange gains recognized on the re-measurement of the net monetary asset positions which were not taxable in their local jurisdictions, as well as net favorable tax consequences associated with the issuance of stock compensation. Those impacts were partially offset by the unfavorable tax consequences of non-deductible goodwill associated with the gain on the sale of the company’s global food safety diagnostics business in the first quarter 2017.

### Recent Accounting Pronouncements

See Note 2 to the interim Consolidated Financial Statements for a description of recent accounting pronouncements.

### Liquidity & Capital Resources

Information related to the company's liquidity and capital resources can be found in the company's 2017 Annual Report, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources. Discussion below provides the updates to this information for the three months ended March 31, 2018.

*(Dollars in millions)*

|  | Successor March 31, 2018 | December 31, 2017 |
| --- | ---: | ---: |
| **Cash, cash equivalents and marketable securities** | $5,341 | $8,202 |
| **Total debt** | 13,153 | 13,070 |

The company's cash, cash equivalents and marketable securities at March 31, 2018 and December 31, 2017 are $5.3 billion and $8.2 billion, respectively. The decrease of $2.9 billion was primarily due to funding the company's seasonal working capital needs and distributions to DowDuPont.

Total debt at March 31, 2018 and December 31, 2017 was $13.2 billion and $13.1 billion, respectively.

The company believes its ability to generate cash from operations and access to capital markets will be adequate to meet anticipated cash requirements to fund its working capital, capital spending, debt maturities as well as distributions and other intercompany transfers to DowDuPont which relies on DuPont and Dow to fund payment of its costs and expenses. DuPont’s current strong financial position, liquidity and credit ratings continue to provide access as needed to the capital markets. The company's liquidity needs can be met through a variety of sources, including cash provided by operating activities, cash and cash equivalents, marketable securities, commercial paper, syndicated credit lines, bilateral credit lines, long-term debt markets, bank financing, committed receivable repurchase facilities and asset sales.

In May 2017, the company completed an underwritten public offering of $1.25 billion of the company's 2.20 percent Notes due 2020 and $750 million of the company's Floating Rate Notes due 2020 (the "May 2017 Debt Offering"). The proceeds from this offering were used to make a discretionary pension contribution to the company's principal U.S. pension plan.

The company's indenture covenants include customary limitations on liens, sale and leaseback transactions, and mergers and consolidations affecting manufacturing plants, mineral producing properties or research facilities located in the U.S. and the consolidated subsidiaries owning such plants, properties and facilities subject to certain limitations. The outstanding long-term debt also contains customary default provisions. In addition, the company will be required to redeem all of the Notes associated with the May 2017 Debt Offering at a redemption price equal to 100 percent of the aggregate principal amount plus any accrued and unpaid interest upon the announcement of the record date for the separation of either the agriculture or specialty products business, or the entry into an agreement to sell all or substantially all of the assets of either business to a third party.

In March 2016, the company entered into a credit agreement that provides for a three-year, senior unsecured term loan facility in the aggregate principal amount of $4.5 billion (as may be amended, from time to time, the "Term Loan Facility") under which DuPont may make up to seven term loan borrowings and amounts repaid or prepaid are not available for subsequent borrowings. The proceeds from the borrowings under the Term Loan Facility will be used for the company's general corporate purposes including debt repayment, working capital and funding a portion of DowDuPont's costs and expenses. The Term Loan Facility was amended in 2018 to extend the maturity date to June 2020, at which time all outstanding borrowings, including accrued but unpaid interest, become immediately due and payable, and to extend the date on which the commitment to lend terminates to June 2019. At March 31, 2018, the company had made three term loan borrowings in an aggregate principal amount of $1.5 billion and had unused commitments of $3.0 billion under the Term Loan Facility. In addition, in 2018 the company amended its $3 billion revolving credit facility to extend the maturity date to June 2020.

The Term Loan Facility and the revolving credit facility contain customary representations and warranties, affirmative and negative covenants, and events of default that are typical for companies with similar credit ratings and generally consistent with those applicable to DuPont’s long-term public debt. The Term Loan Facility and the revolving credit facility contain a financial covenant requiring that the ratio of Total Indebtedness to Total Capitalization for DuPont and its consolidated subsidiaries not exceed 0.6667. At March 31, 2018, the company was in compliance with this financial covenant.

The Term Loan Facility and the revolving credit facility will terminate, and the loans and other amounts thereunder would become due and payable, upon the sale, transfer, lease or other disposition of all or substantially all of the assets of the agriculture product line to DowDuPont, its shareholders or any of its non-DuPont subsidiaries.

In February 2018, in line with seasonal agricultural working capital requirements, the company entered into a committed receivable repurchase agreement of up to $1.3 billion (the "2018 Repurchase Facility") which expires in December 2018. From time to time, the company and the banks modify the monthly commitment amounts to better align with working capital requirements. Under the 2018 Repurchase Facility, the company may sell a portfolio of available and eligible outstanding customer notes receivables within the agriculture product line to participating institutions and simultaneously agree to repurchase at a future date. See further discussion of this facility in Note 13 to the interim Consolidated Financial Statements.

The company has access to approximately $7.9 billion in committed and uncommitted unused credit lines, an increase of $1.2 billion from $6.7 billion as of December 31, 2017. This increase was primarily due to the Repurchase Facility discussed above. These unused credit lines provide support to meet the company’s short-term liquidity needs and for general corporate purposes which may include funding of discretionary and non-discretionary contributions to certain benefit plans, severance payments, repayment and refinancing of debt, working capital, capital expenditures, repurchases and redemptions of securities, and funding a portion of DowDuPont's costs and expenses.

The Act requires companies to pay a one-time transition tax on earnings of foreign subsidiaries, a majority of which were previously considered permanently reinvested by the company (see Note 9 to the interim Consolidated Financial Statements for further details of The Act). The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign investments. A deferred tax liability has been accrued for the estimated U.S. federal tax on all unrepatriated earnings as of December 31, 2017 in accordance with The Act. At March 31, 2018, management believed that sufficient liquidity is available in the U.S. The company is currently evaluating the impact of The Act on its permanent reinvestment assertion. In the event that additional foreign funds are needed in the U.S., the company has the ability to repatriate additional funds. The repatriation could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or U.S. state income taxes and the impact of foreign currency movements. As such, it is not practicable to calculate the unrecognized deferred tax liability on undistributed foreign earnings.

#### Summary of Cash Flows

Cash used for operating activities was $2.0 billion for the three months ended March 31, 2018 and $1.6 billion for the three months ended March 31, 2017. The increase was due primarily to higher tax payments and higher integration and separation costs.

Cash provided by investing activities was $0.4 billion for the three months ended March 31, 2018 and cash used for investing activities was $1.3 billion for the three months ended March 31, 2017. The change was due primarily to increased net maturities of marketable securities partially offset by lower proceeds from sales of businesses and other assets.

Cash used for financing activities was $0.7 billion for the three months ended March 31, 2018 and cash provided by financing activities was $1.6 billion for the three months ended March 31, 2017. The change was due primarily to lower borrowings and increased distributions to DowDuPont to support share repurchases.

As of the consummation of the Merger, shares of DuPont common stock held publicly were redeemed and DuPont's common stock is owned solely by its parent company, DowDuPont. DuPont's preferred stock remains issued and outstanding, and DuPont continues to be responsible for dividends on its preferred stock; however, the obligation is not material to the company's liquidity. Dividend payments to shareholders of DuPont preferred stock totaled $2 million in the three months ended March 31, 2018.

DowDuPont relies on distributions and other intercompany transfers from DuPont and Dow to fund payment of its costs and expenses. In November 2017, DowDuPont's Board of Directors authorized an initial $4 billion share repurchase program to buy back shares of DowDuPont common stock. In February 2018, the Board declared a first quarter dividend per share of DowDuPont common stock payable on March 15, 2018. In the first quarter of 2018, DuPont declared and paid distributions to DowDuPont of about $830 million, primarily to fund a portion of DowDuPont’s first quarter share repurchases and dividend payment.

#### Guarantees and Off-Balance Sheet Arrangements

For detailed information related to Guarantees, Indemnifications, and Obligations for Equity Affiliates and Others, see the company's 2017 Annual Report, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Off- Balance Sheet Arrangements, and Note 14 to the interim Consolidated Financial Statements.

### Contractual Obligations

Information related to the company's contractual obligations at December 31, 2017 can be found in the company's 2017 Annual Report, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Off-Balance Sheet Arrangements.

## Market risk

As filed, 345 characters.

The Registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q (as modified by a grant of no-action relief dated February 12, 2018) and is therefore filing this form with the reduced disclosure format and has omitted the information called for by this Item pursuant to General Instruction H(2)(c) of Form 10-Q.

## Controls and procedures

As filed, 1,401 characters.

a) Evaluation of Disclosure Controls and Procedures

The company maintains a system of disclosure controls and procedures to give reasonable assurance that information required to be disclosed in the company's reports filed or submitted under the Securities Exchange Act of 1934 ("Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. These controls and procedures also give reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to management to allow timely decisions regarding required disclosures.

As of March 31, 2018, the company's Chief Executive Officer ("CEO")" and Chief Financial Officer ("CFO"), together with management, conducted an evaluation of the effectiveness of the company's disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the CEO and CFO concluded that these disclosure controls and procedures are effective.

b) Changes in Internal Control over Financial Reporting

There has been no change in the company's internal control over financial reporting that occurred during the quarter ended March 31, 2018 that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.

## Risk factors

As filed, 146 characters.

There have been no material changes in the company's risk factors discussed in Part I, Item 1A, Risk Factors, in the company's 2017 Annual Report.

Filed May 4, 2018.
Source: SEC EDGAR, the filing index for accession 0000030554-18-000005. Last ingested by Listed: Oct 24, 2026, 14:52 ET. No prices; not investment advice.