Delaware
(State or other jurisdiction of incorporation)
|
001-38196
(Commission file number)
|
81-1224539
(IRS Employer Identification No.)
|
c/o The Dow Chemical Company
|
|
c/o E. I. du Pont de Nemours and Company
|
2030 Dow Center, Midland, MI 48674
|
|
974 Centre Road, Wilmington, DE 19805
|
(989) 636-1000
|
|
(302) 774-1000
|
(a)
|
Financial Statements of Business Acquired.
|
(b)
|
Pro Forma Financial Information.
|
(d)
|
Exhibits.
|
Exhibit No.
|
Description
|
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm for DuPont.
|
|
Audited consolidated balance sheets of DuPont at December 31, 2016 and December 31, 2015 and the related audited consolidated income statements, consolidated statements of equity and consolidated statements of cash flows for each of the three years ended December 31, 2016, 2015 and 2014, all of which are incorporated by reference to DuPont’s Form 10-K filed with the Commission on February 2, 2017 (applicable pages are 57 (Financial Statement Schedule) and F1 - F63 (Financial Statements and Footnotes)).
|
|
Unaudited consolidated balance sheets of DuPont at June 30, 2017 and December 31, 2016, the related unaudited consolidated income statements for the three- and six-month periods ended June 30, 2017 and June 30, 2016 and unaudited consolidated statements of cash flows for the six-month periods ended June 30, 2017 and June 30, 2016, all of which are incorporated by reference to DuPont’s Form 10-Q filed with the Commission on July 25, 2017 (applicable pages are 3 - 29).
|
|
Unaudited pro forma combined financial information.
|
By:
|
/s/ JEANMARIE F. DESMOND
|
|
By:
|
/s/ RONALD C. EDMONDS
|
Name:
|
Jeanmarie F. Desmond
|
|
Name:
|
Ronald C. Edmonds
|
Title:
|
Co-Controller
|
|
Title:
|
Co-Controller
|
City:
|
Wilmington
|
|
City:
|
Midland
|
State:
|
Delaware
|
|
State:
|
Michigan
|
In millions
|
Historical Dow
|
Historical DuPont
|
Reclass (Note 3)
|
Divest. (Note 8)
|
Pro Forma Adj.
|
Note 6 Ref.
|
Pro Forma
|
||||||||||||
Assets
|
|
|
|
|
|
|
|
||||||||||||
Current Assets
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash equivalents
|
$
|
6,218
|
|
$
|
3,254
|
|
$
|
—
|
|
$
|
274
|
|
$
|
(1,017
|
)
|
Q / R
|
$
|
8,729
|
|
Marketable securities
|
—
|
|
2,974
|
|
—
|
|
—
|
|
—
|
|
|
2,974
|
|
||||||
Accounts and notes receivable, net
|
—
|
|
8,562
|
|
(8,562
|
)
|
—
|
|
—
|
|
|
—
|
|
||||||
Accounts and notes receivable - Trade, net
|
5,307
|
|
—
|
|
6,802
|
|
(84
|
)
|
(35
|
)
|
P
|
11,990
|
|
||||||
Accounts and notes receivable - Other
|
5,557
|
|
—
|
|
1,694
|
|
(22
|
)
|
—
|
|
|
7,229
|
|
||||||
Inventories
|
8,163
|
|
4,856
|
|
—
|
|
(471
|
)
|
3,601
|
|
C
|
16,149
|
|
||||||
Prepaid expenses
|
—
|
|
476
|
|
(476
|
)
|
—
|
|
—
|
|
|
—
|
|
||||||
Other current assets
|
690
|
|
—
|
|
542
|
|
(1
|
)
|
(122
|
)
|
D
|
1,109
|
|
||||||
Assets held for sale
|
—
|
|
—
|
|
—
|
|
1,229
|
|
2,385
|
|
E
|
3,614
|
|
||||||
Total current assets
|
25,935
|
|
20,122
|
|
—
|
|
925
|
|
4,812
|
|
|
51,794
|
|
||||||
Noncurrent Assets
|
|
|
|
|
|
|
|
||||||||||||
Investment in nonconsolidated affiliates
|
3,665
|
|
698
|
|
—
|
|
—
|
|
988
|
|
F
|
5,351
|
|
||||||
Other investments
|
2,985
|
|
—
|
|
61
|
|
—
|
|
—
|
|
|
3,046
|
|
||||||
Noncurrent receivables
|
755
|
|
—
|
|
91
|
|
—
|
|
—
|
|
|
846
|
|
||||||
Net property
|
24,116
|
|
8,959
|
|
—
|
|
(478
|
)
|
3,439
|
|
G
|
36,036
|
|
||||||
Goodwill
|
15,439
|
|
4,232
|
|
—
|
|
(155
|
)
|
41,165
|
|
O
|
60,681
|
|
||||||
Other intangible assets, net
|
5,812
|
|
3,623
|
|
—
|
|
—
|
|
24,289
|
|
H / T
|
33,724
|
|
||||||
Deferred income tax assets
|
2,922
|
|
2,841
|
|
—
|
|
—
|
|
(2,606
|
)
|
D / I
|
3,157
|
|
||||||
Deferred charges and other assets
|
618
|
|
2,731
|
|
(152
|
)
|
(5
|
)
|
(652
|
)
|
D / J
|
2,540
|
|
||||||
Total noncurrent assets
|
56,312
|
|
23,084
|
|
—
|
|
(638
|
)
|
66,623
|
|
|
145,381
|
|
||||||
Total Assets
|
$
|
82,247
|
|
$
|
43,206
|
|
$
|
—
|
|
$
|
287
|
|
$
|
71,435
|
|
|
$
|
197,175
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
||||||||||||
Current Liabilities
|
|
|
|
|
|
|
|
||||||||||||
Notes payable
|
$
|
480
|
|
$
|
—
|
|
$
|
3,471
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
3,951
|
|
Short-term borrowings and capital lease obligations
|
—
|
|
3,473
|
|
(3,473
|
)
|
—
|
|
—
|
|
|
—
|
|
||||||
Long-term debt due within one year
|
955
|
|
—
|
|
2
|
|
—
|
|
—
|
|
|
957
|
|
||||||
Accounts payable
|
—
|
|
2,756
|
|
(2,756
|
)
|
—
|
|
—
|
|
|
—
|
|
||||||
Accounts payable - Trade
|
4,623
|
|
—
|
|
2,407
|
|
(99
|
)
|
(35
|
)
|
P
|
6,896
|
|
||||||
Accounts payable - Other
|
3,113
|
|
—
|
|
704
|
|
—
|
|
—
|
|
|
3,817
|
|
||||||
Income taxes payable
|
531
|
|
153
|
|
—
|
|
12
|
|
—
|
|
|
696
|
|
||||||
Dividends payable
|
559
|
|
—
|
|
(559
|
)
|
—
|
|
—
|
|
|
—
|
|
||||||
Accrued and other current liabilities
|
3,168
|
|
4,060
|
|
204
|
|
(55
|
)
|
167
|
|
F/L/Q/S/T
|
7,544
|
|
||||||
Liabilities held for sale
|
—
|
|
—
|
|
—
|
|
184
|
|
—
|
|
|
184
|
|
||||||
Total current liabilities
|
13,429
|
|
10,442
|
|
—
|
|
42
|
|
132
|
|
|
24,045
|
|
||||||
Other Noncurrent Liabilities
|
|
|
|
|
|
|
|
|
|||||||||||
Long-term debt
|
20,072
|
|
10,086
|
|
—
|
|
—
|
|
570
|
|
K
|
30,728
|
|
||||||
Other liabilities
|
—
|
|
9,718
|
|
(9,718
|
)
|
—
|
|
—
|
|
|
—
|
|
||||||
Deferred income tax liabilities
|
916
|
|
366
|
|
—
|
|
76
|
|
8,933
|
|
M
|
10,291
|
|
||||||
Pension and other postretirement benefits - noncurrent
|
11,195
|
|
—
|
|
7,495
|
|
(9
|
)
|
(225
|
)
|
N / Q
|
18,456
|
|
||||||
Asbestos-related liabilities - noncurrent
|
1,301
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
1,301
|
|
||||||
Other noncurrent obligations
|
5,745
|
|
—
|
|
2,223
|
|
(17
|
)
|
—
|
|
|
7,951
|
|
||||||
Total other noncurrent liabilities
|
39,229
|
|
20,170
|
|
—
|
|
50
|
|
9,278
|
|
|
68,727
|
|
||||||
Stockholders' Equity
|
|
|
|
|
|
|
|
||||||||||||
Preferred stock
|
—
|
|
237
|
|
—
|
|
—
|
|
(237
|
)
|
U
|
—
|
|
||||||
Common stock
|
3,107
|
|
286
|
|
—
|
|
—
|
|
(3,370
|
)
|
U
|
23
|
|
||||||
Additional paid-in capital
|
4,202
|
|
11,424
|
|
—
|
|
—
|
|
65,307
|
|
U
|
80,933
|
|
||||||
Retained earnings
|
31,417
|
|
16,233
|
|
—
|
|
195
|
|
(17,103
|
)
|
U
|
30,742
|
|
||||||
Accumulated other comprehensive loss
|
(9,074
|
)
|
(9,065
|
)
|
—
|
|
—
|
|
9,455
|
|
U
|
(8,684
|
)
|
||||||
Unearned ESOP shares
|
(198
|
)
|
—
|
|
—
|
|
—
|
|
—
|
|
|
(198
|
)
|
||||||
Treasury stock at cost
|
(1,033
|
)
|
(6,727
|
)
|
—
|
|
—
|
|
7,760
|
|
U
|
—
|
|
||||||
DowDuPont's stockholders' equity
|
28,421
|
|
12,388
|
|
—
|
|
195
|
|
61,812
|
|
|
102,816
|
|
||||||
Noncontrolling interests
|
1,168
|
|
206
|
|
—
|
|
—
|
|
213
|
|
A / B / U
|
1,587
|
|
||||||
Total equity
|
29,589
|
|
12,594
|
|
—
|
|
195
|
|
62,025
|
|
|
104,403
|
|
||||||
Total Liabilities and Equity
|
$
|
82,247
|
|
$
|
43,206
|
|
$
|
—
|
|
$
|
287
|
|
$
|
71,435
|
|
|
$
|
197,175
|
|
In millions, except per share amounts
|
Historical Dow
|
Historical DuPont
|
Reclass (Note 3)
|
Divest. (Note 8)
|
Pro Forma Adj.
|
Note 7 Ref.
|
Pro Forma
|
||||||||||||
Net sales
|
$
|
27,064
|
|
$
|
15,167
|
|
$
|
73
|
|
$
|
(994
|
)
|
$
|
(126
|
)
|
A
|
$
|
41,184
|
|
Cost of sales
|
20,961
|
|
8,563
|
|
271
|
|
(417
|
)
|
52
|
|
A/C/I
|
29,430
|
|
||||||
Other operating charges
|
—
|
|
380
|
|
(380
|
)
|
—
|
|
—
|
|
|
—
|
|
||||||
Research and development expenses
|
821
|
|
857
|
|
(20
|
)
|
(78
|
)
|
14
|
|
C
|
1,594
|
|
||||||
Selling, general and administrative expenses
|
1,722
|
|
2,608
|
|
(610
|
)
|
(102
|
)
|
22
|
|
C
|
3,640
|
|
||||||
Other income, net
|
—
|
|
285
|
|
(285
|
)
|
—
|
|
—
|
|
|
—
|
|
||||||
Amortization of intangibles
|
312
|
|
—
|
|
108
|
|
—
|
|
443
|
|
D
|
863
|
|
||||||
Restructuring and asset related charges - net
|
(13
|
)
|
312
|
|
—
|
|
—
|
|
—
|
|
|
299
|
|
||||||
Integration and separation costs
|
—
|
|
—
|
|
631
|
|
(15
|
)
|
(78
|
)
|
B
|
538
|
|
||||||
Equity in earnings of nonconsolidated affiliates
|
250
|
|
—
|
|
42
|
|
—
|
|
(11
|
)
|
E
|
281
|
|
||||||
Sundry income (expense) - net
|
(171
|
)
|
—
|
|
182
|
|
(11
|
)
|
—
|
|
|
—
|
|
||||||
Interest income
|
47
|
|
—
|
|
(47
|
)
|
—
|
|
—
|
|
|
—
|
|
||||||
Interest expense and amortization of debt discount
|
445
|
|
183
|
|
—
|
|
—
|
|
(60
|
)
|
F
|
568
|
|
||||||
Income from continuing operations before income taxes
|
$
|
2,942
|
|
$
|
2,549
|
|
$
|
(35
|
)
|
$
|
(393
|
)
|
$
|
(530
|
)
|
|
$
|
4,533
|
|
Provision for income taxes on continuing operations
|
668
|
|
352
|
|
(35
|
)
|
(78
|
)
|
(186
|
)
|
G
|
721
|
|
||||||
Income from continuing operations, net of tax
|
$
|
2,274
|
|
$
|
2,197
|
|
$
|
—
|
|
$
|
(315
|
)
|
$
|
(344
|
)
|
|
$
|
3,812
|
|
Net income attributable to noncontrolling interests
|
65
|
|
15
|
|
—
|
|
—
|
|
5
|
|
H
|
85
|
|
||||||
Net income from continuing operations attributable to DowDuPont Inc.
|
$
|
2,209
|
|
$
|
2,182
|
|
$
|
—
|
|
$
|
(315
|
)
|
$
|
(349
|
)
|
|
$
|
3,727
|
|
Preferred stock dividends
|
—
|
|
5
|
|
—
|
|
—
|
|
(5
|
)
|
H
|
—
|
|
||||||
Net income from continuing operations available for DowDuPont Inc. common stockholders
|
$
|
2,209
|
|
$
|
2,177
|
|
$
|
—
|
|
$
|
(315
|
)
|
$
|
(344
|
)
|
|
$
|
3,727
|
|
|
|
|
|
|
|
|
|
||||||||||||
Per common share data:
|
|
|
|
|
|
|
|
||||||||||||
Earnings per common share from continuing operations - basic
|
$
|
1.82
|
|
|
|
|
|
|
$
|
1.60
|
|
||||||||
Earnings per common share from continuing operations - diluted
|
$
|
1.79
|
|
|
|
|
|
|
$
|
1.59
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||||||
Weighted-average common shares outstanding - basic
|
1,207.2
|
|
|
|
|
|
|
2,320.4
|
|
||||||||||
Weighted-average common shares outstanding - diluted
|
1,225.5
|
|
|
|
|
|
|
2,344.4
|
|
In millions, except per share amounts
|
Historical Dow
|
Historical DuPont
|
Reclass (Note 3)
|
Divest. (Note 8)
|
Pro Forma Adj.
|
Note 7 Ref.
|
Pro Forma
|
||||||||||||
Net sales
|
$
|
48,158
|
|
$
|
24,594
|
|
$
|
170
|
|
$
|
(1,812
|
)
|
$
|
(216
|
)
|
A
|
$
|
70,894
|
|
Cost of sales
|
37,641
|
|
14,469
|
|
559
|
|
(783
|
)
|
110
|
|
A/C/I
|
51,996
|
|
||||||
Other operating charges
|
—
|
|
686
|
|
(686
|
)
|
—
|
|
—
|
|
|
—
|
|
||||||
Research and development expenses
|
1,584
|
|
1,641
|
|
(40
|
)
|
(153
|
)
|
29
|
|
C
|
3,061
|
|
||||||
Selling, general and administrative expenses
|
3,304
|
|
4,319
|
|
(762
|
)
|
(203
|
)
|
43
|
|
C
|
6,701
|
|
||||||
Other income, net
|
—
|
|
708
|
|
(708
|
)
|
—
|
|
—
|
|
|
—
|
|
||||||
Amortization of intangibles
|
544
|
|
—
|
|
194
|
|
—
|
|
886
|
|
D
|
1,624
|
|
||||||
Restructuring and asset related charges - net
|
452
|
|
552
|
|
—
|
|
4
|
|
—
|
|
|
1,008
|
|
||||||
Integration and separation costs
|
—
|
|
—
|
|
735
|
|
—
|
|
(259
|
)
|
B
|
476
|
|
||||||
Asbestos-related charge
|
1,113
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
1,113
|
|
||||||
Equity in earnings of nonconsolidated affiliates
|
442
|
|
—
|
|
99
|
|
—
|
|
(25
|
)
|
E
|
516
|
|
||||||
Sundry income (expense) - net
|
1,202
|
|
—
|
|
568
|
|
(10
|
)
|
—
|
|
|
1,760
|
|
||||||
Interest income
|
107
|
|
—
|
|
(107
|
)
|
—
|
|
—
|
|
|
—
|
|
||||||
Interest expense and amortization of debt discount
|
858
|
|
370
|
|
—
|
|
—
|
|
(120
|
)
|
F
|
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
|
)
|
G
|
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
|
|
H
|
108
|
|
||||||
Net income from continuing operations attributable to DowDuPont Inc.
|
$
|
4,318
|
|
$
|
2,509
|
|
$
|
—
|
|
$
|
(527
|
)
|
$
|
(613
|
)
|
|
$
|
5,687
|
|
Preferred stock dividends
|
340
|
|
10
|
|
—
|
|
—
|
|
(10
|
)
|
H
|
340
|
|
||||||
Net income from continuing operations available for DowDuPont Inc. common stockholders
|
$
|
3,978
|
|
$
|
2,499
|
|
$
|
—
|
|
$
|
(527
|
)
|
$
|
(603
|
)
|
|
$
|
5,347
|
|
|
|
|
|
|
|
|
|
||||||||||||
Per common share data:
|
|
|
|
|
|
|
|
||||||||||||
Earnings per common share from continuing operations - basic
|
$
|
3.57
|
|
|
|
|
|
|
$
|
2.40
|
|
||||||||
Earnings per common share from continuing operations - diluted
|
$
|
3.52
|
|
|
|
|
|
|
$
|
2.37
|
|
||||||||
|
|
|
|
|
|
|
|
||||||||||||
Weighted-average common shares outstanding - basic
|
1,108.1
|
|
|
|
|
|
|
2,221.3
|
|
||||||||||
Weighted-average common shares outstanding - diluted
|
1,123.2
|
|
|
|
|
|
|
2,242.1
|
|
Balance Sheet Reclassifications
June 30, 2017
In millions
|
Reclassification Adjustments
|
|||||
DuPont Accounts and notes receivable, net (as reported)
|
$
|
8,562
|
|
|
||
Accounts and notes receivable - Trade, net
|
|
$
|
6,802
|
|
||
Accounts and notes receivable - Other
|
|
1,713
|
|
|||
Other current assets
|
|
47
|
|
|||
Total
|
|
$
|
8,562
|
|
||
Dow derivative assets in Accounts and notes receivable - Other (as reported)
|
$
|
19
|
|
|
||
DuPont Prepaid expenses (as reported)
|
476
|
|
|
|||
Other current assets
|
|
$
|
495
|
|
||
Total
|
$
|
495
|
|
|
||
DuPont Deferred charges and other assets
|
$
|
152
|
|
|
||
Other investments
|
|
$
|
61
|
|
||
Noncurrent receivables
|
|
91
|
|
|||
Total
|
|
$
|
152
|
|
||
DuPont Accounts payable (as reported)
|
$
|
2,756
|
|
|
||
Accounts payable - Trade
|
|
$
|
2,479
|
|
||
Accounts payable - Other
|
|
275
|
|
|||
Accrued and other current liabilities
|
|
2
|
|
|||
Total
|
|
$
|
2,756
|
|
||
Dow deferred revenue in Accounts payable - Trade (as reported)
|
$
|
72
|
|
|
||
Dow derivative liabilities in Accounts payable - Other (as reported)
|
161
|
|
|
|||
Dow Dividends payable (as reported)
|
559
|
|
|
|||
Accrued and other current liabilities
|
|
$
|
792
|
|
||
Total
|
$
|
792
|
|
|
||
DuPont Short-term borrowings and capital lease obligations (as reported)
|
$
|
3,473
|
|
|
||
Notes payable
|
|
$
|
3,471
|
|
||
Long-term debt due within one year
|
|
2
|
|
|||
Total
|
|
$
|
3,473
|
|
||
DuPont Other liabilities (as reported)
|
$
|
9,718
|
|
|
||
Pension and other postretirement benefits - noncurrent
|
|
$
|
7,495
|
|
||
Other noncurrent obligations
|
|
2,223
|
|
|||
Total
|
|
$
|
9,718
|
|
Income Statement Reclassifications
In millions
|
Six Months Ended
Jun 30, 2017
|
Year Ended
Dec 31, 2016
|
||||||||||
Dow Interest income (as reported)
|
$
|
47
|
|
|
$
|
107
|
|
|
||||
Sundry income (expense) - net
|
|
$
|
47
|
|
|
$
|
107
|
|
||||
DuPont Other operating charges (as reported)
|
$
|
380
|
|
|
$
|
686
|
|
|
||||
Cost of sales
|
|
$
|
287
|
|
|
$
|
569
|
|
||||
Selling, general and administrative expenses
|
|
59
|
|
|
52
|
|
||||||
Amortization of intangibles
|
|
34
|
|
|
65
|
|
||||||
Total
|
|
$
|
380
|
|
|
$
|
686
|
|
||||
DuPont Other income, net (as reported)
|
$
|
285
|
|
|
$
|
708
|
|
|
||||
Net sales
|
|
$
|
73
|
|
|
$
|
170
|
|
||||
Equity in earnings of nonconsolidated affiliates
|
|
42
|
|
|
99
|
|
||||||
Sundry income (expense) - net
|
|
135
|
|
|
461
|
|
||||||
Benefit (provision) for income taxes on continuing operations
1
|
|
35
|
|
|
(22
|
)
|
||||||
Total
|
|
$
|
285
|
|
|
$
|
708
|
|
||||
DuPont Amortization of intangibles:
|
|
|
|
|
||||||||
In Cost of sales (as reported)
|
$
|
15
|
|
|
$
|
9
|
|
|
||||
In Research and development expenses (as reported)
|
20
|
|
|
40
|
|
|
||||||
In Selling, general and administrative expenses (as reported)
|
39
|
|
|
80
|
|
|
||||||
Amortization of intangibles
|
|
$
|
74
|
|
|
$
|
129
|
|
||||
Total
|
$
|
74
|
|
|
$
|
129
|
|
|
||||
Dow and DuPont Integration and separation costs:
2
|
|
|
|
|
||||||||
In Cost of sales (Dow as reported)
|
$
|
1
|
|
|
$
|
1
|
|
|
||||
In Selling, general, and administrative expenses (Dow as reported)
|
244
|
|
|
348
|
|
|
||||||
In Selling, general, and administrative expenses (DuPont as reported)
|
386
|
|
|
386
|
|
|
||||||
Integration and separation costs
|
|
$
|
631
|
|
|
$
|
735
|
|
||||
Total
|
$
|
631
|
|
|
$
|
735
|
|
|
1.
|
Reflects the reclassification of interest associated with uncertain tax positions to "Provision for income taxes on continuing operations."
|
2.
|
The Company classifies expenses related to the Merger and the ownership restructure of Dow Corning as "Integration and separation costs." Merger-related costs include: costs incurred to prepare for and close the Merger, post-Merger integration expenses and costs incurred to prepare for the separation of the Company’s agriculture business, specialty products business and materials science business. The Dow Corning-related costs include: costs incurred to prepare for and close the ownership restructure as well as integration expenses. These costs primarily consist of financial advisor, information technology, legal, accounting, consulting and other professional advisory fees associated with preparation and execution of these activities.
|
Consideration
|
|||
In millions (except exchange ratio)
|
|||
DuPont Common Stock outstanding as of Aug 31, 2017
|
868.3
|
|
|
DuPont exchange ratio
|
1.2820
|
|
|
DowDuPont Common Stock issued in exchange for DuPont Common Stock
|
1,113.2
|
|
|
Fair value of DowDuPont Common Stock issued
1
|
$
|
74,195
|
|
Fair value of DowDuPont equity awards issued in exchange for outstanding DuPont equity awards
2
|
485
|
|
|
Total consideration
|
$
|
74,680
|
|
1.
|
Amount was determined based on the price per share of Dow Common Stock of $66.65 on August 31, 2017.
|
2.
|
Represents the fair value of replacement awards issued for DuPont's equity awards outstanding immediately before the Merger and attributable to the service periods prior to the Merger. The previous DuPont equity awards were converted into the right to receive 1.2820 shares of DowDuPont Common Stock.
|
Consideration and Fair Values
In millions
|
DuPont as Reclassified
|
Fair Value Adjustment
|
Fair Value
|
Goodwill Calculation
|
Note 6 Ref.
|
||||||||
Consideration
|
|
|
$
|
74,680
|
|
|
|
||||||
Noncontrolling interests
|
$
|
206
|
|
$
|
(26
|
)
|
$
|
180
|
|
|
A
|
||
Preferred stock unaffected by merger
|
237
|
|
2
|
|
239
|
|
|
B
|
|||||
Noncontrolling interests and preferred stock
|
$
|
443
|
|
$
|
(24
|
)
|
$
|
419
|
|
|
|
||
Total
|
|
|
|
$
|
75,099
|
|
|
||||||
Inventories
|
$
|
4,527
|
|
$
|
3,601
|
|
$
|
8,128
|
|
|
C
|
||
Other current assets
|
522
|
|
(122
|
)
|
400
|
|
|
D
|
|||||
Assets held for sale
1
|
830
|
|
2,385
|
|
3,215
|
|
|
E
|
|||||
Investment in nonconsolidated affiliates
|
698
|
|
988
|
|
1,686
|
|
|
F
|
|||||
Net property
|
8,585
|
|
3,439
|
|
12,024
|
|
|
G
|
|||||
Other intangible assets, net
|
3,623
|
|
24,214
|
|
27,837
|
|
|
H
|
|||||
Deferred income tax assets
|
2,841
|
|
(2,436
|
)
|
405
|
|
|
D / I
|
|||||
Deferred charges and other assets
|
2,574
|
|
(652
|
)
|
1,922
|
|
|
D / J
|
|||||
All other assets (excluding goodwill)
2
|
14,785
|
|
—
|
|
14,785
|
|
|
|
|||||
Total assets (excluding goodwill)
|
$
|
38,985
|
|
$
|
31,417
|
|
$
|
70,402
|
|
|
|
||
Accrued and other current liabilities
|
$
|
3,458
|
|
$
|
(24
|
)
|
$
|
3,434
|
|
|
F / L
|
||
Long-term debt
|
10,086
|
|
570
|
|
10,656
|
|
|
K
|
|||||
Deferred income tax liabilities
|
362
|
|
8,933
|
|
9,295
|
|
|
M
|
|||||
Pension and other postretirement benefits - noncurrent
|
7,486
|
|
598
|
|
8,084
|
|
|
N
|
|||||
All other liabilities
2
|
9,220
|
|
—
|
|
9,220
|
|
|
|
|||||
Total liabilities
|
$
|
30,612
|
|
$
|
10,077
|
|
$
|
40,689
|
|
|
|
||
Fair value of net assets (excluding goodwill)
|
|
|
|
$
|
29,713
|
|
|
||||||
DowDuPont goodwill attributable to DuPont
3
|
|
|
|
$
|
45,386
|
|
O
|
1.
|
Reflects assets related to the DuPont divestiture commitment in connection with obtaining regulatory approval for the Merger. See Note 8 for additional information.
|
2.
|
Management determined the carrying values approximated fair value.
|
A.
|
Represents the preliminary adjustment to record DuPont's noncontrolling interests at fair value.
|
B.
|
Represents the market value of DuPont’s issued and outstanding preferred stock at August 31, 2017. This preferred stock is unaffected by the Merger and is therefore reflected in "Noncontrolling interests" on the pro forma balance sheet.
|
C.
|
Represents the preliminary fair value of "Inventories," which considers replacement cost for materials and net realizable value for work-in-process and finished goods. DowDuPont will recognize the increased value of inventory in cost of sales as the inventory is sold. This increase is not reflected in the pro forma statements of income because it does not have a continuing impact.
|
D.
|
Represents the derecognition of prepaid taxes ($122 million) and deferred charges ($415 million), and recognition of deferred income tax assets ($51 million) associated with the tax effects of pre-acquisition intra-entity transactions. The fair value adjustment to "Deferred income tax assets" also includes a reduction of $2,315 million to reflect the netting of deferred income tax liabilities resulting from purchase accounting in certain tax jurisdictions.
|
E.
|
Represents the preliminary fair value adjustment to assets classified as "Assets held for sale" relating to the DuPont divestiture commitment in connection with obtaining regulatory approval for the Merger. See Note 8 for additional information.
|
F.
|
Represents the preliminary fair value of investments in companies accounted for using the equity method and resulting adjustments to increase "Investment in nonconsolidated affiliates" ($988 million) and decrease "Accrued and other current liabilities" ($10 million).
|
G.
|
Represents the preliminary fair value and resulting adjustment to "Net property." The preliminary amounts assigned to net property and estimated weighted average useful lives are as follows:
|
Property Values
In millions, except where indicated
|
Preliminary Fair Value
|
Estimated Weighted Average Useful Life (in years)
|
||
Land and land improvements
|
$
|
939
|
|
Indefinite
|
Buildings
|
2,558
|
|
19
|
|
Machinery and equipment
|
7,564
|
|
12
|
|
Construction in process
|
963
|
|
N/A
|
|
Total fair value of DuPont net property
|
$
|
12,024
|
|
|
Less: DuPont's historical net property
1
|
8,585
|
|
|
|
Pro forma adjustment
|
$
|
3,439
|
|
|
H.
|
Represents the preliminary fair value and resulting adjustment to "Other intangible assets, net." The preliminary amounts assigned to other intangible assets and estimated weighted average useful lives are as follows:
|
Other Intangible Assets Values
In millions, except where indicated
|
Preliminary Fair Value
|
Estimated Weighted Average Useful Life (in years)
|
|||
Intangible assets with finite lives:
|
|
|
|||
Developed technology
|
$
|
4,120
|
|
12
|
|
Trademarks/tradenames
|
1,073
|
|
12
|
|
|
Customer-related
|
9,430
|
|
18
|
|
|
Microbial cell factories
|
430
|
|
23
|
|
|
Other
|
295
|
|
15
|
|
|
Total other intangible assets with finite lives
|
$
|
15,348
|
|
|
|
Intangible assets with indefinite lives:
|
|
|
|||
In-process research and development
|
656
|
|
|
||
Germplasm
|
6,773
|
|
|
||
Trademarks/tradenames
|
5,060
|
|
|
||
Total other intangible assets with indefinite lives
|
$
|
12,489
|
|
|
|
Total fair value of DuPont other intangible assets
|
$
|
27,837
|
|
|
|
Less: DuPont's historical other intangible assets
|
3,623
|
|
|
||
Pro forma adjustment
|
$
|
24,214
|
|
|
I.
|
Represents the preliminary adjustments to reduce "Deferred income tax assets" ($170 million, with a corresponding decrease to "Retained earnings") and reflect purchase accounting adjustments ($172 million) associated with certain historical net operating losses that will not be fully realized as a result of the Merger.
|
J.
|
Represents the elimination of deferred planned major maintenance activities as a result of the preliminary fair value adjustment to "Net property" ($237 million).
|
K.
|
Represents the preliminary adjustment of $570 million to record DuPont’s long-term debt at fair value, which includes the elimination of deferred financing costs.
|
L.
|
Represents the preliminary adjustment of $14 million to reduce DuPont’s deferred revenue to fair value.
|
M.
|
Represents the preliminary adjustment to record "Deferred income tax liabilities" of $10,702 million associated with the fair value adjustments to assets acquired and liabilities assumed and a decrease of $2,315 million for tax jurisdictions with offsetting deferred income tax assets. The preliminary adjustment was determined using statutory tax rates by jurisdiction, resulting in a blended statutory tax rate of 29.2 percent, which management believes provides a reasonable basis for the pro forma adjustments. The fair value adjustment to "Deferred income tax liabilities" also includes a preliminary adjustment of $546 million reflecting the impact of the Company's determination as to the reinvestment strategy of DuPont's acquired foreign operations.
|
N.
|
Represents the preliminary adjustment of $598 million to reflect DuPont’s pension and other postretirement benefits in accordance with ASC Topic 715, "Compensation - Retirement Benefits."
|
O.
|
Represents the excess of the consideration over the preliminary fair value of the assets acquired and liabilities assumed. Goodwill will be tested for impairment at least annually and whenever events or circumstances have occurred that may indicate a possible impairment. Goodwill is not expected to be deductible for income tax purposes.
|
P.
|
Represents the elimination of accounts receivable and accounts payable resulting from transactions between Dow and DuPont.
|
Q.
|
Represents the estimated cash payments to settle lump-sum payouts attributable to change-in-control provisions within Dow’s Executive Supplemental Retirement Plan ("ESRP") ($930 million) and Elective Deferral Plan ($62 million). For Dow’s ESRP, the short-term portion of the pension liability included in "Accrued and other current liabilities" ($37 million), the long-term portion of the pension liability ($823 million), and related accumulated other comprehensive loss ($390 million) were eliminated. The net effect of these adjustments resulted in a $522 million decrease to "Retained earnings."
|
R.
|
Represents the estimated cash payments to settle severance of $25 million attributable to change-in-control provisions within certain employee agreements.
|
S.
|
Represents one-time transaction-related expenses of $153 million incurred prior to, or concurrent with, the closing of the Merger.
|
T.
|
Represents the adjustment to record an intangible asset and current liability attributable to change-in-control provisions within certain Dow licensing agreements ($75 million).
|
U.
|
The following table summarizes the pro forma adjustments impacting equity:
|
Stockholders' Equity
In millions
|
Adjustments to Historical Equity
|
New Equity Structure
|
Other Items
|
Pro Forma Adjustments
|
||||||||
Preferred stock
|
$
|
(237
|
)
|
$
|
—
|
|
$
|
—
|
|
$
|
(237
|
)
|
Common stock
|
(286
|
)
|
(3,084
|
)
|
—
|
|
(3,370
|
)
|
||||
Additional paid-in-capital
|
(11,424
|
)
|
76,731
|
|
—
|
|
65,307
|
|
||||
Retained earnings
|
(16,233
|
)
|
—
|
|
(870
|
)
|
(17,103
|
)
|
||||
Accumulated other comprehensive loss
|
9,065
|
|
—
|
|
390
|
|
9,455
|
|
||||
Treasury stock at cost
|
6,727
|
|
1,033
|
|
—
|
|
7,760
|
|
||||
Total stockholders' equity
|
$
|
(12,388
|
)
|
$
|
74,680
|
|
$
|
(480
|
)
|
$
|
61,812
|
|
Noncontrolling interests
|
213
|
|
—
|
|
—
|
|
213
|
|
||||
Total equity
|
$
|
(12,175
|
)
|
$
|
74,680
|
|
$
|
(480
|
)
|
$
|
62,025
|
|
A.
|
Transactions between Dow and DuPont have been eliminated as if Dow and DuPont were consolidated affiliates for the periods presented. Sales and cost of sales of $126 million in the first six months of 2017 and $216 million in 2016 have been eliminated from the pro forma statements of income.
|
B.
|
Represents the elimination of one-time transaction costs directly attributable to the Merger of $78 million in the first six months of 2017 and $259 million in 2016.
|
C.
|
Represents estimated additional depreciation expense related to the preliminary fair value adjustment to net property. The table below is a summary of the information used to calculate the pro forma increase in depreciation expense. Amounts may not compute across individual lines of the table below; differences are due to rounding.
|
Depreciation Expense
|
Preliminary Fair Value
|
Estimated Weighted Average Useful Life (in years)
|
Pro Forma Depreciation Expense
|
|||||||
In millions
|
Six Months Ended
Jun 30, 2017
|
Year Ended Dec 31, 2016
|
||||||||
Land and land improvements
|
$
|
939
|
|
Indefinite
|
$
|
—
|
|
$
|
—
|
|
Buildings
|
2,558
|
|
19
|
108
|
|
219
|
|
|||
Machinery and equipment
|
7,564
|
|
12
|
536
|
|
1,085
|
|
|||
Construction in process
|
963
|
|
N/A
|
—
|
|
—
|
|
|||
Total
|
$
|
12,024
|
|
|
$
|
644
|
|
$
|
1,304
|
|
Less: DuPont's historical depreciation expense
|
|
|
445
|
|
906
|
|
||||
Total pro forma adjustment for depreciation
|
|
|
$
|
199
|
|
$
|
398
|
|
||
Pro forma adjustment allocated to:
|
|
|
|
|
||||||
Cost of sales
|
|
|
$
|
163
|
|
$
|
326
|
|
||
Research and development expenses
|
|
|
14
|
|
29
|
|
||||
Selling, general, and administrative expenses
|
|
|
22
|
|
43
|
|
||||
Total
|
|
|
$
|
199
|
|
$
|
398
|
|
D.
|
Estimated additional amortization expense of $443 million in the first six months of 2017 and $886 million in 2016 related to the fair value adjustment to DuPont's intangible assets is reflected in "Amortization of intangibles."
|
E.
|
Represents a reduction to "Equity in earnings of nonconsolidated affiliates" of $11 million in the first six months of 2017 and $25 million in 2016 related to amortization of the fair value adjustment to DuPont's investment in nonconsolidated affiliates.
|
F.
|
Represents a reduction of interest expense of $60 million in the first six months of 2017 and $120 million in 2016 related to amortization of the fair value adjustment to DuPont’s long-term debt.
|
G.
|
Represents the income tax effect of the pro forma adjustments related to the Merger calculated using statutory tax rates by jurisdiction, resulting in a blended statutory tax rate (inclusive of state taxes) of 35.1 percent in the first six months of 2017 and 35.2 percent in 2016. Management believes the blended statutory tax rate provides a reasonable basis for the pro forma adjustments, however, the effective tax rate of DowDuPont could be significantly different depending on the mix of activities.
|
H.
|
Represents the historical dividends for DuPont Preferred Stock, which remain outstanding and unaffected by the Merger, reflected as "Noncontrolling interests" in the combined company.
|
I.
|
Represents a net increase to "Cost of sales" of $15 million in the first six months of 2017 and zero in 2016, due to conforming DuPont's accounting policy of deferring and amortizing expense for planned major maintenance activities to Dow's accounting policy of directly expensing the costs as incurred.
|
Net Income for Earnings Per Share Calculations
In millions
|
Six Months Ended
Jun 30, 2017
|
Year Ended Dec 31, 2016
|
||||
Net income from continuing operations attributable to DowDuPont Inc.
|
$
|
3,727
|
|
$
|
5,687
|
|
Preferred stock dividends
1
|
—
|
|
(340
|
)
|
||
Net income attributable to participating securities
2
|
(10
|
)
|
(22
|
)
|
||
Net income from continuing operations attributable to common stockholders - basic and diluted
|
$
|
3,717
|
|
$
|
5,325
|
|
1.
|
On December 30, 2016, Dow converted its outstanding shares of Cumulative Convertible Preferred Stock, Series A ("Dow Preferred Stock") into shares of Dow Common Stock. As a result of this conversion, no shares of Dow Preferred Stock are issued or outstanding.
|
2.
|
Reflects amounts as reported by Dow in its Quarterly Report on Form 10-Q and Annual Report on Form 10-K for the periods presented. Dow's practice of paying dividend equivalents on unvested shares for its deferred stock awards is assumed to carry forward to the DowDuPont deferred stock awards for this calculation.
|
Conversion of DuPont Common Stock to DowDuPont Common Stock
|
Aug 31, 2017
|
|
|
||
DuPont Common Stock outstanding - basic
|
868.3
|
|
Conversion ratio set forth in Merger Agreement
|
1.2820
|
|
DuPont converted common stock outstanding - basic
|
1,113.2
|
|
Conversion of Dilutive Effect of DuPont Equity Awards to DowDuPont Equity Awards
Shares in millions
|
Six Months Ended
Jun 30, 2017
|
Year Ended Dec 31, 2016
|
||
Dilutive effect of DuPont equity awards (rounded)
1
|
4.4
|
|
4.5
|
|
Conversion ratio set forth in Merger Agreement
|
1.2820
|
|
1.2820
|
|
Dilutive effect of converted DuPont equity awards (rounded)
|
5.7
|
|
5.7
|
|
DowDuPont Common Stock Outstanding - Basic and Diluted
Shares in millions
|
Six Months Ended
Jun 30, 2017
|
Year Ended Dec 31, 2016
|
||
Dow weighted-average common stock outstanding - basic
1, 2
|
1,207.2
|
|
1,108.1
|
|
DuPont converted common stock outstanding - basic
|
1,113.2
|
|
1,113.2
|
|
DowDuPont Common Stock outstanding - basic
|
2,320.4
|
|
2,221.3
|
|
Dilutive effect of Dow equity awards
1
|
18.3
|
|
15.1
|
|
Dilutive effect of converted DuPont equity awards
|
5.7
|
|
5.7
|
|
DowDuPont Common Stock outstanding - diluted
|
2,344.4
|
|
2,242.1
|
|
1.
|
Reflects amounts as reported by Dow in its Quarterly Report on Form 10-Q and Annual Report on Form 10-K for the periods presented.
|
2.
|
On December 30, 2016, Dow converted 4 million shares of Dow Preferred Stock into 96.8 million shares of Dow Common Stock. As a result of this conversion, 96.8 million shares for the period ended June 30, 2017 (0.5 million shares for the period ended December 31, 2016) are included in "Dow weighted-average common stock outstanding - basic."
|