EIDP, Inc.: Form 10-Q for the period ended Mar 31, 2019

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

Cautionary Statements About Forward-Looking Statements

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

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

For further discussion of some of the important factors that could cause the company's actual results to differ materially from those projected in any such forward-looking statements, see the Risk Factors discussion set forth under Part I, Item 1A of the company's 2018 Annual Report.

Recent Developments

DowDuPont Merger of Equals and the Intended Business Separations

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

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

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

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

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

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

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

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

Separation Agreements

In connection with the Dow Distribution and the intended Corteva Distribution, DowDuPont has entered into or will enter into certain agreements that will effect the separation, provide for the allocation of DowDuPont’s assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) among DowDuPont, Dow, and Corteva (together, the “Parties” and each a “Party”) , and provide a framework for DowDuPont’s relationship with Dow and Corteva following the separations and Distributions. Effective April 1, 2019, the Parties entered into the following agreements:

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

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

Debt Redemption and Revolving Credit Facilities

On March 22, 2019, Historical DuPont issued notices of redemption in full of all of its outstanding notes (the “Make Whole Notes”) listed in the table below:

(in millions)

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

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

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

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

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

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

Capacity Expansions Kapton®

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

DowDuPont Cost Synergy Program

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

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

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

Selected Financial Data

In millions

Results of Operations

Net Sales

Net sales were $6.3 billion and $6.7 billion for the three months ended March 31, 2019 and 2018, respectively. The decrease was primarily driven by volume declines in North America and Asia Pacific, principally in the agriculture and transportation and advanced polymers product lines, respectively. Sales also decreased in EMEA driven primarily by unfavorable currency impacts from the Euro. These decreases were partially offset by local pricing gains across all regions.

Cost of Goods Sold ("COGS")

COGS was $4.2 billion and $4.8 billion for the three months ended March 31, 2019 and 2018, respectively. The decrease was primarily driven by the amortization of the inventory step-up of $205 million for the three months ended March 31, 2019 compared with $703 million for the three months ended March 31, 2018.

COGS as a percentage of net sales was 67 percent and 72 percent for the three months ended March 31, 2019 and 2018, respectively. The amortization of inventory step-up was 3 percent and 10 percent of net sales for the three months ended March 31, 2019 and 2018, respectively. The remaining COGS change as a percentage of net sales for the three months ended March 31, 2019 was primarily related to higher input and raw material costs, primarily in the agriculture, nutrition and health, and safety and construction product lines.

Research and Development Expense

R&D expense was $355 million and $382 million for the three months ended March 31, 2019 and 2018, respectively. The decrease was primarily driven by cost synergies and a decrease in R&D expense for the agriculture product line.

R&D as a percentage of net sales was 6 percent for the three months ended March 31, 2019 and 2018.

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

SG&A expenses were $970 million and $959 million for the three months ended March 31, 2019 and 2018, respectively. The increase was primarily driven by higher performance-based compensation and the settlement of a legal matter in the agriculture product line. These increases were largely offset by cost synergies and favorable currency impacts in the agriculture product line.

SG&A as a percentage of net sales was 15 percent and 14 percent for the three months ended March 31, 2019 and 2018, respectively.

Amortization of Intangibles

Intangible asset amortization was $320 million and $315 million for the three months ended March 31, 2019 and 2018, respectively. See Note 10 to the interim Consolidated Financial Statements for additional information on intangible assets.

Restructuring and Asset Related Charges - Net

Restructuring and asset related charges - net were $55 million and $97 million for the three months ended March 31, 2019 and 2018, respectively. The charges in the first quarter of 2019 related to a $55 million charge related to DowDuPont Cost Synergy Program, a $3 million charge related to the DowDuPont Agriculture Division Restructuring Program, and a ($3) million benefit from reversals of prior programs. The charges in the first quarter of 2018 related to the DowDuPont Cost Synergy Program.

See Note 5 to the interim Consolidated Financial Statements for additional information.

Integration and Separation Costs

Integration and separation costs were $405 million and $255 million for the three months ended March 31, 2019 and 2018, respectively. These costs primarily have consisted of financial advisory, information technology, legal, accounting, consulting, and other professional advisory fees associated with the preparation and execution of activities related to the Merger and the Intended Business Separations. The company expects Integration and separation costs to continue to be significant in 2019.

Sundry Income - Net

Sundry income - net was $157 million and $47 million for the three months ended March 31, 2019 and 2018, respectively. The three months ended March 31, 2019 included a gain on sale of assets within the electronics and imaging product line, non-operating pension and other post employment benefit credit of $66 million, and interest income of $23 million offset by exchange losses of $32 million. The three months ended March 31, 2018 included exchange losses of $132 million, partially offset by a non-operating pension and other post employment benefit credit of $92 million and interest income of $28 million. 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 7 to the interim Consolidated Financial Statements for additional information.

Interest Expense

Interest expense was $56 million and $80 million for the three months ended March 31, 2019 and 2018, respectively. The change was primarily driven by lower debt balances during the first quarter of 2019 compared to the first quarter of 2018.

(Benefit from) Provision for Income Taxes on Continuing Operations

The company’s benefit from income taxes on continuing operations was $(40) million for the first quarter of 2019 on pre-tax income from continuing operations of $49 million, resulting in an effective tax rate of (81.6) percent. The effective tax rate was favorably impacted by a benefit of $102 million related to an internal legal entity restructuring associated with the Intended Business Separations. The effective tax rate was unfavorably impacted by non-tax-deductible amortization of the fair value step-up in Historical DuPont’s inventories as a result of the Merger as well as the impact of integration and separation costs.

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 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 Historical 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 Tax Cuts and Jobs Act (“The Act”).

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 2018 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, 2019.

(Dollars in millions)

The company's cash, cash equivalents and marketable securities at March 31, 2019 and December 31, 2018 were $3.8 billion and $4.5 billion, respectively. The decrease of approximately $0.7 billion was primarily due to funding the company’s seasonal working capital needs, capital expenditures and distributions to DowDuPont.

Total debt at March 31, 2019 and December 31, 2018 was $9.5 billion and $8.0 billion, respectively. The increase was primarily due to increased borrowings from commercial paper and new borrowings under the Term Loan Facility, described below, partially offset by the maturity of debt. The increase in debt was used primarily to fund seasonal working capital needs, capital expenditures and distributions to DowDuPont.

The company believes its ability to generate cash from operations and to access capital markets will be adequate to meet anticipated cash requirements to fund its operations, including seasonal working capital, capital spending, debt maturities in the ordinary course, pension obligations as well as distributions and other transfers to DowDuPont. Historical 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.

The company had access to approximately $6.3 billion and $6.1 billion in committed and uncommitted unused credit lines at March 31, 2019 and December 31, 2018, respectively. 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.

Debt Redemptions/Repayments

On March 22, 2019, Historical DuPont issued notices of redemption in full of all of its outstanding notes (the “Make Whole Notes”) listed in the table below:

(in millions)

The Make Whole Notes were redeemed on April 22, 2019 at the make-whole redemption prices set forth in the respective Make Whole Notes. On and after the date of redemption, the Make Whole Notes were no longer deemed outstanding, interest on the Make Whole Notes ceased to accrue and all rights of the holders of the Make Whole Notes were terminated. For further information on the Make Whole Notes, see Note 18 to the interim Consolidated Financial Statements and Recent Developments.

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 $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, 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. On May 7, 2019, DowDuPont publicly announced the record date in connection with the intended Corteva Distribution. For further information on the record date announcement and required notice of redemption, see Note 18 to the interim Consolidated Financial Statements and Recent Developments.

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 amended, from time to time, the "Term Loan Facility") under which Historical DuPont may make up to seven term loan borrowings and amounts repaid or prepaid are not available for subsequent borrowings. The proceeds from the borrowings under the Term Loan Facility were used for the company's general corporate purposes including debt repayment, working capital and funding a portion of DowDuPont's costs and expenses. At March 31, 2019, the company had made six term loan borrowings in an aggregate principal amount of $3 billion and had unused commitments of $1.5 billion under the Term Loan Facility. On May 2, 2019 Historical DuPont terminated its Term Loan Facility and repaid the aggregate outstanding principal amount of $3 billion plus accrued and unpaid interest through and including May 1, 2019. For further information on the termination of the Term Loan Facility, see Note 18 to the interim Consolidated Financial Statements and Recent Developments.

The Term Loan Facility and the revolving credit facility (the "Facilities") 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 Historical DuPont’s long-term public debt. The Facilities contain a financial covenant requiring that the ratio of Total Indebtedness to Total Capitalization for Historical DuPont and its consolidated subsidiaries not exceed 0.6667. At March 31, 2019, the company was in compliance with this financial covenant.

In November 2018, Historical DuPont entered into a $3.0 billion five-year revolving credit facility and a $3.0 billion three-year revolving credit facility (the “2018 Revolving Credit Facilities”). Availability of funds was subject to a number of conditions, including Corteva becoming a party to the 2018 Credit Revolving Facilities and the consummation of the separation and distribution of Corteva. On May 2, 2019, the 2018 Revolving Credit Facilities were amended, making the 2018 Revolving Credit Facilities available for Historical DuPont, effective May 2, 2019. Corteva, Inc will become a party to the 2018 Revolving Credit Facilities upon the separation and distribution from DowDuPont. The 2018 Revolving Credit Facilities 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 Historical DuPont’s existing term loan and revolving credit facilities. The 2018 Revolving Credit Facilities also contain a financial covenant requiring that the ratio of total indebtedness to total capitalization for the company and its consolidated subsidiaries not exceed 0.60.

In February 2019, in line with seasonal agricultural working capital requirements, the company entered into a committed receivable repurchase agreement of up to $1.3 billion (the "2019 Repurchase Facility") which expires in December 2019. From time to time, the company and the banks modify the monthly commitment amounts to better align with working capital requirements. Under the 2019 Repurchase Facility, 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 12 to the interim Consolidated Financial Statements.

The company's cash, cash equivalents and marketable securities at March 31, 2019 and December 31, 2018 were $3.8 billion and $4.5 billion, respectively, of which $3.3 billion at March 31, 2019 and $3.9 billion at December 31, 2018 was held by subsidiaries in foreign countries, including United States territories.

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 8 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. The company has the ability to repatriate additional funds to the US, which 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. It is not practicable to calculate the unrecognized deferred tax liability on undistributed foreign earnings due to the complexity of the hypothetical calculation. During the first and second quarters of 2019, in connection with the Intended Business Separations, the company has and expects to continue repatriating certain funds from its foreign subsidiaries that are not needed to finance local operations or separation activities. During the three months ended March 31, 2019, the company recorded tax expense of $13 million associated with these repatriation activities.

Summary of Cash Flows

Cash used for operating activities was $1,422 million for the three months ended March 31, 2019 compared to $1,975 million for the three months ended March 31, 2018. The change was primarily due to lower tax payments and higher prepayments from customer contracts.

Cash used for investing activities was $514 million for the three months ended March 31, 2019 compared to $382 million provided by investing activities for the three months ended March 31, 2018. The change was primarily due to lower net maturities of marketable securities, as well as higher capital expenditures.

Cash provided by financing activities was $1,226 million for the three months ended March 31, 2019 and $694 million used for financing activities for the three months ended March 31, 2018. The change was primarily due to a net increase in borrowings, as well as decreased distributions to DowDuPont.

As of the consummation of the Merger, shares of Historical DuPont common stock held publicly were redeemed and Historical DuPont's common stock is owned solely by DowDuPont. Historical DuPont's preferred stock remains issued and outstanding, and Historical 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 Historical DuPont preferred stock totaled $2 million for the three months ended March 31, 2019 and 2018, respectively.

For the three months ended March 31, 2019, Historical DuPont declared and paid distributions to DowDuPont of $317 million, primarily to fund a portion of DowDuPont’s first quarter 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 2018 Annual Report, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Off- Balance Sheet Arrangements, and Note 13 to the interim Consolidated Financial Statements.

Critical Accounting Estimates

The company's significant accounting policies are more fully described in Note 1 in the company's 2018 Annual Report. Management believes that the application of these policies on a consistent basis enables the company to provide the users of the financial statements with useful and reliable information about the company's operating results and financial condition.

Valuation of Assets and Impairment Considerations

As a result of the Merger and related acquisition method of accounting, Historical DuPont’s assets and liabilities were measured at fair value, and any declines in the projected cash flows could have a material, negative impact on the fair value of the company’s reporting units and assets, and therefore could result in an impairment.

As a result of the Internal Reorganization, in the second quarter of 2019, Historical DuPont will assess the recoverability of the goodwill within the electronics and communications, protection solutions, nutrition and health, transportation and advanced polymers, packaging and specialty plastics, industrial biosciences, and clean technologies reporting units, and the overall carrying value of the net assets in the disposal group that was distributed to DowDuPont on May 1, 2019 (the “SP Distribution”). Additionally, in connection with Internal Reorganizations and the Corteva Distribution, in the second quarter of 2019, Historical DuPont will reorganize its reporting structure to align with that of Corteva and will re-allocate goodwill to the new reporting units (the “Corteva Segment Realignment”). Historical DuPont will assess the recoverability of the goodwill in the reporting unit identified both before and after the reorganization of the reporting structure.

Certain of Historical DuPont’s reporting units, industrial biosciences, electronics and imaging, and clean technologies, are at higher risk for impairment given recent unfavorable conditions in certain markets and the small margin of their respective fair values over their respective carrying values as of the date of the company’s last annual impairment test. Recent unfavorable market conditions slowed demand in biomaterials within industrial biosciences and electronics and imaging is being impacted by softness in photovoltaics and advanced materials. These legacy specialty products product lines will be reflected in Historical DuPont’s Consolidated Financial Statements as a discontinued operation beginning in the second quarter 2019.

The company will assemble and review updated financial projections, including any changes to key assumptions, in connection with the SP Distribution and Corteva Segment Realignment. In connection with this activity, the outcome of which is not currently known, it is possible that non-cash impairment charges could be recorded in second quarter 2019. There can be no assurance that such charges, if any, would not be material to the company.

The company’s goodwill and indefinite-lived intangibles by reporting unit at March 31, 2019 is shown below (in millions):

For further detailed information related to valuation of assets and impairment considerations, see the company’s 2018 Annual Report, Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Estimates.

Contractual Obligations

Information related to the company's contractual obligations at December 31, 2018 can be found in the company's 2018 Annual Report, Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, Off-Balance Sheet Arrangements. With the exception of increased borrowings under the Term Loan Facility, in the first quarter of 2019, there have been no material changes in the company's contractual obligations since December 31, 2018. See Note 12 to the interim Consolidated Financial Statements for further discussion of the company's Term Loan Facility.

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.

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, 2019, 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 have been no changes in the company's internal control over financial reporting that occurred during the quarter ended March 31, 2019 that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.

In connection with the separations and intended Corteva Distribution, there are several processes, policies, operations, technologies and information systems that were integrated following the Merger which have been or will be replicated, transferred or separated. The company continues to take steps to ensure that adequate controls are designed and maintained throughout this transition period.

There have been no material changes in the company's risk factors discussed in Part I, Item 1A, Risk Factors, in the company's 2018 Annual Report.