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Divestitures and Other Transactions | 9 Months Ended
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Sep. 30, 2019
Discontinued Operations and Disposal Groups [Abstract] |
Disposal Groups, Including Discontinued Operations, Disclosure [Text Block] | DIVESTITURES AND OTHER TRANSACTIONS Separation Agreements In connection with the Distributions, DuPont, Corteva, and Dow (together, the “Parties” and each a “Party”) have entered into certain agreements to 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 the Parties, and provide a framework for Corteva's relationship with Dow and DuPont following the separations and Distributions (collectively, the "Separation Agreements"). The Parties entered into, among other agreements, the following agreements:
• | Separation and Distribution Agreement - Effective April 1, 2019, 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 "Corteva Separation Agreement").
• | Tax Matters Agreement - The Parties entered into an agreement effective as of April 1, 2019 as amended on June 1, 2019 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 Agreement - Effective as of April 1, 2019 between Corteva and Dow, and effective June 1, 2019 between Corteva and DuPont entered into Intellectual Property Cross-License Agreements. 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 Corteva Separation Agreement.
• | Letter Agreement - DuPont and Corteva entered into a Letter Agreement. The Letter Agreement sets forth certain additional terms and conditions related to the Separation, including certain limitations on each party’s ability to transfer certain businesses and assets to third parties without assigning certain of such party’s indemnification obligations under the Corteva Separation Agreement to the other party to the transferee of such businesses and assets or meeting certain other alternative conditions.
DuPont Pursuant to the Separation Agreements, DuPont and Corteva indemnifies the other against certain litigation, environmental, tax, workers' compensation and other liabilities that arose prior to the Corteva Distribution. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. In connection with the recognition of liabilities related to these matters, the company records an indemnification asset when recovery is deemed probable. At September 30, 2019, the indemnification assets are $36 million within accounts and notes receivable - net and $57 million within other assets in the interim Condensed Consolidated Balance Sheet. At September 30, 2019, the indemnification liabilities are $15 million within accrued and other current liabilities and $71 million within other noncurrent obligations in the interim Condensed Consolidated Balance Sheet. Dow Pursuant to the Separation Agreements, Dow and Corteva indemnifies the other against certain litigation, environmental, tax and other liabilities that arose prior to the Corteva Distribution. The term of this indemnification is generally indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. In connection with the recognition of liabilities related to these matters, the company records an indemnification asset when recovery is deemed probable. At September 30, 2019, the indemnification assets are $43 million within accounts and notes receivable - net and $1 million within other assets in the interim Condensed Consolidated Balance Sheet. At September 30, 2019, the indemnification liabilities are $87 million within accrued and other current liabilities and $109 million within other noncurrent obligations in the interim Condensed Consolidated Balance Sheet. EID ECP Divestiture As discussed in Note 1 - Background and Basis of Presentation, on April 1, 2019, EID completed the transfer of the entities and related assets and liabilities of EID ECP to Dow. As a result, the financial results of EID ECP are reflected as discontinued operations, as summarized below:
| Three Months Ended September 30, | Nine Months Ended September 30,
(In millions) | 2018 | 2019 | 2018
Net sales | $ | 386 |  | $ | 362 |  | $ | 1,214 |
Cost of goods sold | 277 |  | 259 |  | 827 |
Research and development expense | 6 |  | 4 |  | 19 |
Selling, general and administrative expenses | 10 |  | 9 |  | 34 |
Amortization of intangibles | 24 |  | 23 |  | 72 |
Restructuring and asset related charges - net | 4 |  | 2 |  | 6 |
Integration and separation costs | 35 |  | 44 |  | 88 |
Other income - net | 1 |  | 2 |  | 12 |
Income from discontinued operations before income taxes | 31 |  | 23 |  | 180 |
Provision for income taxes on discontinued operations | 16 |  | 4 |  | 45 |
Income from discontinued operations after income taxes | $ | 15 |  | $ | 19 |  | $ | 135 |
The following table presents the depreciation and capital expenditures of the discontinued operations related to EID ECP:
| Three Months Ended September 30, | Nine Months Ended September 30,
(In millions) | 2018 | 2019 | 2018
Depreciation | $ | 34 |  | $ | 28 |  | $ | 101 |
Capital expenditures | $ | 17 |  | $ | 16 |  | $ | 59 |
The carrying amount of major classes of assets and liabilities classified as assets and liabilities of discontinued operations at December 31, 2018 and September 30, 2018 related to EID ECP consist of the following:
(In millions) | December 31, 2018 | September 30, 2018
Cash and cash equivalents | $ | 55 |  | $ | 8 |
Accounts and notes receivable - net | 194 |  | 216 |
Inventories | 465 |  | 454 |
Other current assets | 12 |  | 8 |
Total current assets of discontinued operations | 726 |  | 686 |
Investment in nonconsolidated affiliates | 108 |  | 110 |
Property, plant and equipment - net | 770 |  | 780 |
Goodwill | 3,587 |  | 3,596 |
Other intangible assets | 1,143 |  | 1,168 |
Deferred income taxes | 13 |  | 35 |
Other assets | 1 |  | 3 |
Non-current assets of discontinued operations | 5,622 |  | 5,692 |
Total assets of discontinued operations | $ | 6,348 |  | $ | 6,378 |
Short-term borrowings and finance lease obligations | 2 |  | — |
Accounts payable | 214 |  | 157 |
Accrued and other current liabilities | 36 |  | 38 |
Total current liabilities of discontinued operations | 252 |  | 195 |
Long-term Debt | 4 |  | — |
Deferred income tax liabilities | 432 |  | 499 |
Pension and other post employment benefits - noncurrent | 6 |  | 6 |
Other noncurrent obligations | 2 |  | 2 |
Non-current liabilities of discontinued operations | 444 |  | 507 |
Total liabilities of discontinued operations | $ | 696 |  | $ | 702 |
EID Specialty Products Divestiture As discussed in Note 1 - Background and Basis of Presentation, on May 1, 2019, the company completed the transfer of the entities and related assets and liabilities of EID Specialty Products Entities to DuPont. As a result, the financial results of the EID Specialty Products Entities are reflected as discontinued operations, as summarized below:
| Three Months Ended September 30, | Nine Months Ended September 30,
(In millions) | 2018 | 2019 | 2018
Net sales | $ | 3,912 |  | $ | 5,030 |  | $ | 11,922 |
Cost of goods sold | 2,599 |  | 3,352 |  | 7,985 |
Research and development expense | 150 |  | 204 |  | 467 |
Selling, general and administrative expenses | 381 |  | 573 |  | 1,199 |
Amortization of intangibles | 201 |  | 267 |  | 616 |
Restructuring and asset related charges - net | 9 |  | 115 |  | 93 |
Integration and separation costs | 80 |  | 253 |  | 203 |
Goodwill impairment | — |  | 1,102 |  | — |
Other income - net | 27 |  | 38 |  | 162 |
Income (loss) from discontinued operations before income taxes | 519 |  | (798 | ) | 1,521 |
Provision for income taxes on discontinued operations | 8 |  | 82 |  | 451 |
Income (loss) from discontinued operations after income taxes | $ | 511 |  | $ | (880 | ) | $ | 1,070 |
For the three months ended September 30, 2019, the company recorded income from discontinued operations after income taxes of $22 million related to the adjustment of certain prior year tax positions. EID Specialty Products Impairment As a result of the Merger and related acquisition method of accounting, Historical EID’s assets and liabilities were measured at fair value resulting in increases to the company’s goodwill and other intangible assets. The fair value valuation increased the risk that any declines in financial projections, including changes to key assumptions, 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, EID assessed 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. As a result of this analysis, the company determined that the fair value of certain reporting units related to the EID Specialty Products Entities were below carrying value resulting in pre-tax, non-cash goodwill impairment charges totaling $1,102 million reflected in loss from discontinued operations after income taxes in the nine months ended September 30, 2019. Revised financial projections reflected unfavorable market conditions, driven by slowed demand in the biomaterials business unit, coupled with challenging conditions in U.S. bioethanol markets. These revised financial projections resulted in a reduction in the long-term forecasts of sales and profitability as compared to prior projections. The company’s analyses above using discounted cash flow models (a form of the income approach) utilized Level 3 unobservable inputs. The company’s significant assumptions in these analyses included, but were not limited to, future cash flow projections, the weighted average cost of capital, the terminal growth rate, and the tax rate. The company’s estimates of future cash flows were based on current regulatory and economic climates, recent operating results, and planned business strategies. These estimates could be negatively affected by changes in federal, state, or local regulations or economic downturns. Future cash flow estimates are, by their nature, subjective and actual results may differ materially from the company’s estimates. The company also used a form of the market approach (utilizes Level 3 unobservable inputs), which was derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services. As such, the company believes the assumptions and estimates utilized were both reasonable and appropriate. In addition, the company performed an impairment analysis related to the equity method investments held by the EID Specialty Products Entities, as of May 1, 2019. The company applied the net asset value method under the cost approach to determine the fair value of the equity method investments in the EID Specialty Products Entities. Based on updated projections, the company determined the fair value of an equity method investment was below the carrying value and had no expectation the fair value would recover in the short-term due to the current economic environment. As a result, management concluded the impairment was other-than-temporary (utilizing Level 3 unobservable inputs) and recorded an impairment charge of $63 million, reflected in loss from discontinued operations after income taxes. Additionally, this impairment is reflected within restructuring and asset related charges - net in the nine months ended September 30, 2019, within the table above. The following table presents the depreciation and capital expenditures of the discontinued operations related to the EID Specialty Products Entities:
| Three Months Ended September 30, | Nine Months Ended September 30,
(In millions) | 2018 | 2019 | 2018
Depreciation | $ | 208 |  | $ | 281 |  | $ | 636 |
Capital expenditures | $ | 214 |  | $ | 481 |  | $ | 627 |
The carrying amount of major classes of assets and liabilities classified as assets and liabilities of discontinued operations at December 31, 2018 and September 30, 2018 related to the EID Specialty Products Entities consist of the following:
(In millions) | December 31, 2018 | September 30, 2018
Cash and cash equivalents | $ | 2,199 |  | $ | 1,957 |
Marketable securities | 29 |  | 122 |
Accounts and notes receivable - net | 2,441 |  | 2,597 |
Inventories | 3,452 |  | 3,433 |
Other current assets | 242 |  | 260 |
Total current assets of discontinued operations | 8,363 |  | 8,369 |
Investment in nonconsolidated affiliates | 1,185 |  | 1,220 |
Property, plant and equipment - net | 8,138 |  | 7,966 |
Goodwill | 28,250 |  | 28,532 |
Other intangible assets | 13,037 |  | 13,330 |
Deferred income taxes | 122 |  | 190 |
Other assets | 191 |  | 255 |
Non-current assets of discontinued operations | 50,923 |  | 51,493 |
Total assets of discontinued operations | $ | 59,286 |  | $ | 59,862 |
Short-term borrowings and finance lease obligations | 15 |  | 4 |
Accounts payable | 1,983 |  | 1,837 |
Income taxes payable | 33 |  | 31 |
Accrued and other current liabilities | 884 |  | 821 |
Total current liabilities of discontinued operations | 2,915 |  | 2,693 |
Long-term Debt | 29 |  | 11 |
Deferred income tax liabilities | 3,624 |  | 3,729 |
Pension and other post employment benefits - noncurrent | 1,125 |  | 1,013 |
Other noncurrent obligations | 262 |  | 272 |
Non-current liabilities of discontinued operations | 5,040 |  | 5,025 |
Total liabilities of discontinued operations | $ | 7,955 |  | $ | 7,718 |
Integration and Separation Costs Integration and separation costs have primarily 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 Business Separations and the integration of EID’s Pioneer and Crop Protection businesses with DAS. These costs are recorded within integration and separation costs in the Consolidated Statements of Operations.
| Three Months Ended September 30, | Nine Months Ended September 30,
(In millions) | 2019 | 2018 | 2019 | 2018
Integration and separation costs | $ | 152 |  | $ | 253 |  | $ | 694 |  | $ | 697 |
Merger Remedy - Divested EID Ag Business A complete discussion of the Divested Ag Business is included in Note 4 - "Divestitures and Other Transactions," within Exhibit 99.2 of Amendment 2 to the Form 10. For the nine months ended September 30, 2018, the company recorded a loss from discontinued operations before income taxes related to the Divested Ag Business of $10 million ($5 million after tax). For the nine months ended September 30, 2019, the company recorded income from discontinued operations after income taxes of $80 million related to changes in accruals for certain prior year tax positions. Other Discontinued Operations Activity For the nine months ended September 30, 2019, the company recorded income from discontinued operations after income taxes of $86 million related to the adjustment of certain unrecognized tax benefits for positions taken on items from prior years from previously divested businesses.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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