DowDuPont Annual Report 2017

19.4 MB·English

UNLOCKING VALUE
CREATING THREE WORLD-LEADING COMPANIES
2017 ANNUAL REPORT
AGRICULTURE MATERIALS SCIENCE SPECIALTY PRODUCTS
FINANCIAL HIGHLIGHTS
In millions, except amounts per share 2017 2016 (cid:86)YoY
Net sales $62,484 $48,158 $14,326
Pro forma net sales1 $79,535 $70,894 $8,641
Income from continuing operations, net of tax $1,669 $4,404 $(2,735)
Pro forma operating EBITDA1, 2 $16,166 $14,114 $2,052
Earnings per common share from continuing operations – diluted $0.95 $3.52 $(2.57)
Pro forma adjusted earnings per common share from continuing operations – diluted1, 3 $3.40 $2.79 $0.61
All year-over-year comparisons are on a pro forma basis and exclude significant items.
1 Pro forma information was prepared in accordance with Article 11 of Regulation S-X.
2 Pro forma Operating EBITDA is defined as earnings (i.e., “Pro forma income from continuing operations before income taxes”) before interest, depreciation, amortization and foreign exchange gains (losses), excluding the impact of significant items.
3 Pro forma adjusted earnings per share is defined as “Pro forma earnings per common share from continuing operations – diluted” excluding the after-tax impact of pro forma significant items and the after-tax impact of pro forma amortization expense associated with
DuPont’s intangible assets.
Dear DowDuPont Shareholders,
In 2017, we took significant steps forward to create Strengthening our Foundation
new value for you, our fellow shareholders. First and Immediately following the DowDuPont transaction
foremost, we closed the historic merger of Dow close, our Board and management, with input
and DuPont, with a clear purpose to combine our from a range of stakeholders and outside advisors,
highly complementary portfolios and create three completed a thorough review of the portfolios
industry-leading growth companies in Agriculture, of each of the three intended companies.
Materials Science, and Specialty Products. The outcome was unanimous approval of targeted
adjustments between the Materials Science and
Specialty Products divisions. Together, these
moves, which account for more than $8 billion in
sales and approximately $2.4 billion in operating
EBITDA, further secure each intended company’s
industry-leading position and better equip both
to deliver greater value-added solutions and
to capitalize on enhanced growth opportunities.
We are on track to launch these three world-class
companies, with Materials Science separating by
the end of the first quarter of 2019, followed
shortly after by Agriculture and Specialty Products,
by June 1, 2019.
Andrew N. Liveris Edward D. Breen
Capturing Value & Growth Synergies
By year-end, the portfolios for these intended new
A critical element of the integration work underway is
companies were well aligned, with our teams moving
delivering on our cost synergies commitment. By the
quickly to integrate, begin capturing synergies and
end of 2017, we had already achieved annual run-
prepare for the spins. Importantly, we also continued
rate savings of more than $800 million – exceeding
to report strong results after becoming a merged
our commitment of $500 million of run-rate savings.
entity – building on solid performance from both
Based on this quick value capture, we recently
legacy organizations and demonstrating our team’s
increased our cost synergy commitment from
ability to focus on customers as we also prepare
$3 billion to $3.3 billion. At the same time, we see the
for the future.
opportunity to capture $1 billion in growth synergies
– a prime focus for our teams. As the intended
Having achieved this important progress, we are
companies grow with highly focused strategies in
now firmly focused on developing three growth
their respective industries, we expect each will be a
businesses. Through the merger and intended
vibrant contributor to all of its communities, given the
separations, we are enabling these businesses to
growth profiles we are creating for each business.
allocate capital more effectively, apply powerful
innovation capabilities that are more focused and
more productive and expand value-added products
and solutions to more customers worldwide.
With lower cost structures, increased agility and
distinctive investment profiles, each will be better
positioned to grow and to thrive over the long
term, as they reinvest in science and innovation
to deliver significant value for shareholders.
1
2017 Performance Highlights A Bright Future Ahead
• In Agriculture, new product growth enabled the Our confidence in the future comes, in large measure,
division to deliver a solid year despite several from the energy and passion of our people, coupled
market headwinds. Innovative products including with the shared values of our respective heritage
ARYLEX™ herbicide, LEPTRA® corn hybrids, companies. These guideposts will enable us to
VESSARYA™ fungicide and ISOCLAST™ insecticide continue to anticipate and quickly adapt to change
continued to generate growth. We also launched and maintain our leadership positions – connecting
ENLIST™ cotton in the U.S., and received import science to the marketplace and creating new
approval from China to enable the full launch of opportunities to help our customers solve the
ENLIST™ corn in the U.S. and Canada for the 2018 world’s challenges.
growing season. Looking ahead, we expect our
robust pipeline to launch 10 new seed products As we look ahead, we remain focused on capitalizing
and 11 new crop protection products over on the synergies, and in particular on the significant
the next five years. growth opportunities in front of us. And we look
forward to positioning and launching three growth
• Materials Science delivered top- and bottom-line companies that will deliver long-term rewards
growth on robust consumer-led demand in core for our shareholders.
end markets where our segments hold leadership
positions today. The division also continued to Thank you for your investment in DowDuPont.
advance its long-term growth projects – most
notably on the U.S. Gulf Coast, with the startup
of its new world-scale ethylene, polyethylene and
elastomers facilities, as well as with its Sadara
joint venture in the Middle East, which achieved Andrew N. Liveris Edward D. Breen
full commercial operations for all 26 production Executive Chairman Chief Executive Officer
units, with additional value-added products across
these key chains and others including isocyanates,
propylene oxide/propylene glycol, polyols, amines
and glycol ethers. In addition, the innovation
engine in Materials Science delivered more than
2,500 new products in our target markets and
won numerous awards.
• Specialty Products also produced strong top-
and bottom-line growth on continued demand
in key end markets. Our Electronics & Imaging
business delivered strong results through
the semiconductor and consumer electronics
end markets, Transportation & Advanced
Polymers experienced robust demand from the
automotive market and broad-based demand
from electronics and industrial markets,
and the Nutrition & Biosciences businesses
performed well in the microbial control solutions,
probiotics and biomaterials end markets.
In addition, we closed our acquisition of FMC’s
Health and Nutrition business, which significantly
enhances this portfolio by expanding our
offerings and bringing access to the fast-growing
pharmaceuticals excipients market.
2
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33
MATERIALS SCIENCE:
The Premier Materials
Materials Science Sales
Solutions Provider
The future Dow will be the premier materials science solution provider,
focused on three high-growth market verticals: packaging, industrial and
infrastructure and consumer.
n Packaging & Specialty Plastics
Built on a foundation of the strongest and deepest chemistry and polymers n Performance Materials & Coatings
n Industrial Intermediates & Infrastructure
toolkit, the intended Company will have robust technology and asset
2017 Pro Forma
integration, scale and cost-competitive capabilities to enable truly differentiated
Sales:
and sustainable solutions for customers. $43,772 MM
2017 Pro Forma
Op. EBITDA:
$9,101 MM
INDUSTRY-LEADING INNOVATION AND INTEGRATION
BUILDING BLOCKS CAPABILITIES TARGET MARKETS
Advanced Back-Integration World-Class Science and Engineering Capabilities Narrower, Deeper End-Market Presence
High-Throughput High-Performance
Cellulosics Packaging
Research Computer Modeling
Catalyst Discovery and Industrial and
Acrylics Application Development
Ligand Synthesis Infrastructure
Propylene Oxide Materials Science Product Safety Consumer
Ethylene Oxide Formulation Science Formulation Expertise
Polyolefins and Elastomers Process Engineering
Silicones
Performance Materials & Coatings uses silicones, acrylics and cellulosics-based
2017 Pro Forma
technology platforms to serve the needs of the coatings, home care, personal care, appliance Sales:
$8,740 MM
and industrial end markets. The segment empowers its customers to create ingredients and
2017 Pro Forma
solutions with exceptional performance and process enhancements for consumer applications,
Op. EBITDA:
and develop solutions that advance the performance of architectural and industrial coatings. $2,121 MM
Industrial Intermediates & Infrastructure develops solutions that enable unique properties
2017 Pro Forma
in manufacturing processes, infrastructure end markets and downstream finished goods.
Sales:
The technologies in this business unit: enable the tapping of oil and gas resources; optimize $12,640 MM
manufacturing in mechanical processes; manage the oil-water interface and facilitate 2017 Pro Forma
Op. EBITDA:
dissolvability; advance energy efficiency solutions in white goods; and enable infrastructure
$2,282 MM
material properties through unique modifiers and additives.
Packaging & Specialty Plastics represents one of the world’s deepest and most 2017 Pro Forma
Sales:
differentiated performance plastics portfolios. The solutions and technologies in this unit
$22,392 MM
address consumer and brand owner demand for increased packaging convenience, reduce
2017 Pro Forma
food waste, and advance the global development of telecommunications and electrical Op. EBITDA:
$4,698 MM
transmission and distribution infrastructure.
Materials Science Advisory Committee
Andrew N. Liveris James A. Bell Raymond J. Milchovich James M. Ringler Jacqueline K. Barton (ex officio) 
Executive Chairman, DowDuPont Former Executive Vice President, Former Chairman and CEO, Chairman, Teradata Corporation Chair, Div. of Chemistry and Chemical
(Committee Chairman) Corporate President and CFO, Foster Wheeler AG Engineering, CalTech
Ruth G. Shaw
The Boeing Company
Edward D. Breen Paul Polman Former Group Executive for Public Richard K. Davis (ex officio)
CEO, DowDuPont Jeff M. Fettig CEO, Unilever N.V. Policy and President, Duke Nuclear Chairman, US Bancorp
Chairman, Whirlpool Corporation and Unilever PLC
Ajay Banga (ex officio) Robert S. (Steve) Miller (ex officio)
Dennis H. Reilley President and CEO, Mastercard Inc. President and CEO,
Non-Executive Chairman, Intl. Automotive Components Group
4 Marathon Oil Corporation
SPECIALTY PRODUCTS:
A Technology and Customer-
Specialty Products Sales
Driven Innovation Leader
The intended Specialty Products Company will be a premier innovation leader
composed of technology-based differentiated materials, ingredients and solutions
that transform multiple industries and everyday life. It will apply its market knowledge
and deep expertise in science and application development to solve customer needs n Electronics & Imaging
n Nutrition & Biosciences
in attractive markets and accelerate the adoption of electronic functionality and n Transportation & Advanced Polymers
biotechnology into consumer and industrial applications. Bringing together science n Safety & Construction
and market insights, Specialty Products will be well positioned for growth opportunities 2017 Pro Forma
Sales:
where customer collaboration and innovation are central to value creation. $21,028 MM
2017 Pro Forma
Op. EBITDA:
• Functional materials technologies • Probiotics, nutrition, microbiome and • Advanced polymer, fiber, film, $5,297 MM
and precision patterning fermentation sciences membrane and compounded resin
technologies
• Protein and metabolic pathway engineering
Electronics & Imaging:
2017 Pro Forma
A technology leader with the broadest set of materials, knowledge and applications expertise Sales:
$4,775 MM
to solve complex problems for the semiconductor, circuit board, photovoltaic, display and
2017 Pro Forma
digital and flexographic printing industries to enable the next generation of connectivity and
Op. EBITDA:
functionality required to converge electronic capabilities into everyday life. $1,486 MM
Nutrition & Biosciences:
2017 Pro Forma
A market leader and technology pioneer collaborating with customers in food, pharma, home
Sales:
and personal care and energy markets, utilizing naturally sourced ingredients and bioscience $5,980 MM
capabilities, including protein and microbial engineering and industrial-scale fermentation, 2017 Pro Forma
Op. EBITDA:
to create higher-performing, healthier and more sustainable offerings, such as probiotics,
$1,302 MM
enzymes, antimicrobial technologies, pharma excipients and biomaterials.
Transportation & Advanced Polymers: 2017 Pro Forma
Sales:
An industry leader providing high-performance engineering resins, elastomers, adhesives, $5,131 MM
lubricants and parts to engineers and designers in the transportation, electronics, medical 2017 Pro Forma
and industrial markets to enable integrated materials solutions for demanding applications Op. EBITDA:
$1,319 MM
and environments.
Safety & Construction:
2017 Pro Forma
A global leader with category-creating, proprietary branded products, including high Sales:
$5,142 MM
performance fibers and foams, aramid papers, non-woven structures, membranes, solid
2017 Pro Forma
surfaces and filtration technologies and protective garments serving the construction, worker
Op. EBITDA:
safety, energy, oil & gas, transportation, water purification and medical markets. $1,190 MM
Specialty Products Advisory Committee (in formation)
Edward D. Breen Andrew N. Liveris
CEO, DowDuPont Executive Chairman, DowDuPont
(Committee Chairman)
5
BOARD OF DIRECTORS & LEADERSHIP
Board of Directors
Andrew N. Liveris Edward D. Breen
Executive Chairman, Chief Executive Officer,
DowDuPont DowDuPont
Lamberto Andreotti Raymond J. Milchovich
Former Chairman Former Chairman
and Chief Executive Officer, and Chief Executive Officer,
Bristol-Myers Squibb Foster Wheeler AG
Andrew N. Edward D. Lamberto James A.
Liveris Breen Andreotti Bell James A. Bell Paul Polman
Former Executive Vice President, Chief Executive Officer,
Corporate President Unilever N.V. and Unilever PLC
and Chief Financial Officer,
The Boeing Company Dennis H. Reilley
Non-Executive Chairman,
Robert A. Brown Marathon Oil Corporation
President,
Boston University James M. Ringler
Chairman,
Robert A. Alexander Jeff M. Marillyn A. Alexander M. Cutler Teradata Corporation
Brown M. Cutler Fettig Hewson
Co-Lead Independent Director;
Former Chairman and Ruth G. Shaw
Chief Executive Officer, Former Group Executive
Eaton for Public Policy and President,
Duke Nuclear
Jeff M. Fettig
Co-Lead Independent Director; Lee M. Thomas
Chairman, Former Chairman and
Whirlpool Corporation Chief Executive Officer,
Lois D. Raymond J. Paul Dennis H. Rayonier
Juliber Milchovich Polman Reilley Marillyn A. Hewson
Chairman, President and Patrick J. Ward
Chief Executive Officer, Chief Financial Officer,
Lockheed Martin Corporation Cummins Inc.
Lois D. Juliber
Former Vice Chairman and
Chief Operating Officer,
Colgate-Palmolive Company
James M. Ruth G. Lee M. Patrick J.
Ringler Shaw Thomas Ward
Company Leadership
Andrew N. Liveris Edward D. Breen
Executive Chairman, Chief Executive Officer,
DowDuPont DowDuPont
James C. Collins, Jr. James R. Fitterling
Chief Operating Officer Chief Operating Officer for the
for the Agriculture Division, Materials Science Division,
DowDuPont DowDuPont
Andrew N. Edward D. James C. Jeanmarie
Liveris Breen Collins, Jr. F. Desmond Jeanmarie F. Desmond Stacy L. Fox
Co-Controller, DowDuPont General Counsel and Secretary,
DowDuPont
Marc Doyle
Chief Operating Officer Charles J. Kalil
for the Specialty Special Counsellor to
Products Division, the Executive Chairman,
DowDuPont General Counsel for the
Materials Science Division,
Ronald C. Edmonds DowDuPont
Marc Doyle Ronald C. James R. Stacy L. Fox Co-Controller, DowDuPont
Edmonds Fitterling Howard I. Ungerleider
Chief Financial Officer,
DowDuPont
Charles J. Howard I.
Kalil Ungerleider
6
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXHANGE ACT OF 1934
December 31, 2017
For the fiscal year ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number: 001-38196
DOWDUPONT INC.
(Exact name of registrant as specified in its charter)
Delaware 81-1224539
State or other jurisdiction of incorporation or organization (I.R.S. Employer Identification No.)
c/o The Dow Chemical Company c/o E. I. du Pont de Nemours and Company
2030 Dow Center, Midland, MI 48674 974 Centre Road, Wilmington, DE 19805
[phone] [phone]
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, par value $0.01 per share New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging
growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The aggregate market value of the common equity held by non-affiliates of the registrant as of June 30, 2017, (the last day of the registrant's
most recently completed second fiscal quarter), was approximately $76.9 billion based on the last reported closing price of $63.07 per share of
Dow common stock, as reported on the New York Stock Exchange on such date. For purposes of this computation, it is assumed that the shares
of voting stock held by Directors and Officers would be deemed to be stock held by affiliates. Non-affiliated common stock outstanding at
June 30, 2017, was 1,219,870,092 shares. As of September 1, 2017, Dow common stock was not publicly traded.
Total DowDuPont common stock outstanding at January 31, 2018 was 2,329,023,478 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Part III: Proxy Statement for the Annual Meeting of Stockholders to be held on April 25, 2018.
DowDuPont Inc.
ANNUAL REPORT ON FORM 10-K
For the fiscal year ended December 31, 2017
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business. 4
Item 1A. Risk Factors. 23
Item 1B. Unresolved Staff Comments. 29
Item 2. Properties. 29
Item 3. Legal Proceedings. 29
Item 4. Mine Safety Disclosures. 30
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Item 5. 31
Purchases of Equity Securities.
Item 6. Selected Financial Data. 32
Management's Discussion and Analysis of Financial Condition and Results of
Item 7. 33
Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 75
Item 8. Financial Statements and Supplementary Data. 78
Changes in and Disagreements With Accountants on Accounting and Financial
Item 9. 191
Disclosure.
Item 9A. Controls and Procedures. 192
Item 9B. Other Information. 194
PART III
Item 10. Directors, Executive Officers and Corporate Governance. 195
Item 11. Executive Compensation. 195
Security Ownership of Certain Beneficial Owners and Management and Related
Item 12. 195
Stockholder Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence. 195
Item 14. Principal Accounting Fees and Services. 195
PART IV
Item 15. Exhibits, Financial Statement Schedules. 196
Item 16. Form 10-K Summary. 198
SIGNATURES 200
2