DD, §1A diff (2017 → 2018)

ITEM 1A. RISK FACTORS The factors described below represent the Company's principal risks. DowDuPont may be unable to achieve all the benefits that it expects to achieve from the Merger and the Intended Business Separations. The success of the Merger ultimately depends on, among other things, DowDuPont's ability to combine and separate the Historical DuPont and Historical Dow businesses in a manner that facilitates the Intended Business Separations and realizes anticipated synergies. Since the Merger, DowDuPont has benefited from and expects to continue to benefit from significant cost synergies at both the business and corporate levels through the DowDuPont Cost Synergy Program (the "Synergy Program") which is designed to integrate and optimize the organization including through the achievement of production cost efficiencies, enhancement of the agricultural supply chain, elimination of duplicative agricultural research and development programs, optimization of the combined Company’s global footprint across manufacturing, sales and research and development, optimizing manufacturing processes in the electronics space, the reduction of corporate and leveraged services costs, and the realization of significant procurement synergies. In connection with the Synergy Program, DowDuPont expects to record total pretax restructuring charges of approximately $2 billion of which $1,747 million has been recorded inception-to-date through December 31, 2018, comprised of approximately $895 million to $975 million of severance and related benefit costs of which $933 million has been recorded inception-to-date through December 31, 2018; $525 million to $615 million of asset write-downs and write-offs of which $579 million has been recorded inception-to-date through December 31, 2018; and $370 million to $410 million of costs associated with exit and disposal activities of which $235 million has been recorded inception-to-date through December 31, 2018. Management also expects to achieve growth synergies and other meaningful savings and benefits as a result of the Intended Business Separations. Combining Historical DuPont and Historical Dow's independent businesses and preparing for the Intended Business Separations, including through the Internal Reorganization, are complex, costly and time-consuming processes and the management of DowDuPont may face significant implementation challenges, many of which may be beyond the control of management, including, without limitation: • ongoing diversion of the attention of management from the operation of the combined Company’s business as a result of the Intended Business Separations; • impact of portfolio changes between materials science and specialty products on integration and separation preparation activities; • difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects; • the possibility of faulty assumptions underlying expectations regarding the integration or separation process, including with respect to the intended tax efficient transactions; • unanticipated issues in integrating, replicating or separating information technology, communications programs, financial procedures and operations, and other systems, procedures and policies; • difficulties in managing a larger combined company, addressing differences in business culture and retaining key personnel; • unanticipated changes in applicable laws and regulations; • managing tax costs or inefficiencies associated with integrating the operations of the combined Company and the intended tax efficient separation transactions; and • coordinating geographically separate organizations. Some of these factors will be outside of the control of DowDuPont and any one of them could result in increased costs and diversion of management’s time and energy, as well as decreases in the amount of expected revenue which could materially impact DowDuPont's business, financial condition and results of operations. The Internal Reorganization and Intended Business Separation processes and other disruptions may also adversely affect the combined Company’s relationships with employees, suppliers, customers, distributors, licensors and others with whom Historical DuPont and Historical Dow have business or other dealings, and difficulties in integrating the businesses or regulatory functions of Historical DuPont and Historical Dow could harm the reputation of DowDuPont. If the anticipated benefits and cost savings, including from the Synergy Program, of the Merger (including the Intended Business Separations) are not realized fully or take longer to realize than expected, the value of DowDuPont common stock, its revenues, levels of expenses and results of operations may be affected adversely. A variety of factors may adversely affect the Company's ability to fully and timely realize the currently expected synergies, savings and other benefits of the Merger, including failure to successfully optimize the combined Company's facilities footprint, the failure to take advantage of the combined Company's global supply chain, the failure to identify and eliminate duplicative programs, and the failure to otherwise integrate DuPont's or Dow's respective businesses, including their technology platforms. DowDuPont has incurred significant costs, and expects to incur additional costs, in connection with the integration of Historical DuPont and Historical Dow and the Intended Business Separations. There are many processes, policies, procedures, operations, technologies and systems that were integrated following the Merger and must be replicated, transferred or separated in connection with the Intended Business Separations. These costs primarily consist of financial advisory, information technology, legal, consulting and other professional advisory fees associated with preparation and execution of these activities. While DowDuPont has assumed a certain level of expense would be incurred in connection with these activities, there are many factors beyond the combined Company’s control that could affect the total amount or the timing of anticipated expenses. There may also be additional unanticipated significant costs incurred in connection with the Intended Business Separations that DowDuPont may not recoup that could reduce the benefits and additional income DowDuPont expects to achieve from the Merger. Although DowDuPont expects that these benefits will offset the transaction expenses and implementation costs over time, this net benefit may not be achieved in the near term or at all. The determination to proceed with the Intended Business Separations is a decision of the DowDuPont Board of Directors and the expected benefits of such transactions, if they occur, will be uncertain. In the event that the DowDuPont Board of Directors ("Board") determines to proceed with the Intended Business Separations, it is currently anticipated that any such Intended Business Separation transaction would be effectuated through the distribution of Dow followed by the distribution of Corteva in separate pro-rata spin-off transactions, in which DowDuPont stockholders, at such time, would receive a pro-rata dividend of the shares of capital stock of Dow Holdings Inc. and Corteva, Inc., resulting in three independent, public companies. The Board may ultimately determine to abandon one or more of the Intended Business Separation transactions, and such determination could have an adverse impact on DowDuPont, including that DowDuPont will be required to redeem each series of DowDuPont Notes at a redemption price equal to 101 percent of the principal amount of such series of DowDuPont Notes, plus accrued and unpaid interest. There are many factors that could, prior to the determination by the Board to proceed with the Intended Business Separations, impact the structure or timing of, the anticipated benefits from, or determination to ultimately proceed with, the Intended Business Separations, 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, a full or partial shutdown of the U.S. federal government, 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. Such changes could adversely impact the value of one or more of the Intended Business Separation transactions to the combined Company’s stockholders. Additionally, to the extent the Board determines to proceed with the Intended Business Separations, the consummation of such transactions is a complex, costly and time-consuming process, and there can be no guarantee that the intended benefits of such transactions will be achieved. An inability to realize the full extent of the anticipated benefits of the Intended Business Separations, as well as any delays encountered in the process, could have an adverse effect upon the revenues, level of expenses and operating results of the agriculture business, the materials science business, the specialty products business and/or the combined Company. Inability to access the debt capital markets could impair DowDuPont's liquidity, business or financial condition. DowDuPont’s primary sources of liquidity to finance operations, including dividends on its common stock, are through Historical DuPont and Historical Dow and their respective consolidated subsidiaries, (collectively, the “Subsidiaries”). Each of Historical DuPont and Historical Dow has relied and continues to rely on access to the debt capital markets to finance their day-to-day and long-term operations. Any limitation on the part of either Historical DuPont’s or Historical Dow’s ability to raise money in the debt markets could have a substantial negative effect on their respective liquidity and the liquidity of DowDuPont. Access to the debt capital markets in amounts adequate to finance each Subsidiary’s activities could be impaired as a result of the existence of material nonpublic information about the Intended Business Separations and other potential factors, including factors that are not specific to the Subsidiaries, such as a severe disruption of the financial markets and interest rate fluctuations. Prior to the Intended Business Separations, if pursued, the level and quality of the respective earnings, operations, business and management, among other things, of each of Historical DuPont and Historical Dow will impact their respective credit ratings, costs and availability of financing and those of the combined Company. A decrease in the ratings assigned to Historical DuPont or Historical Dow by the ratings agencies may negatively impact their access to the debt capital markets and increase the combined Company’s cost of borrowing. There can be no assurance that Historical DuPont and Historical Dow will maintain their current credit worthiness or prospective credit ratings. Any actual or anticipated changes or downgrades in such credit ratings may have a negative impact on the liquidity, capital position or access to capital markets of Historical DuPont and Historical Dow and, therefore, DowDuPont. If either distribution, together with certain related transactions, were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then the Company could be subject to significant tax and indemnification liability. It is a condition to each distribution that DowDuPont receive a tax opinion from Skadden, Arps, Slate, Meagher & Flom LLP, its tax counsel, in form and substance acceptable to DowDuPont, substantially to the effect that, among other things, the applicable distribution along with certain related transactions will qualify as a tax-free transaction under Section 355 and Section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “Code,” and such opinions, collectively, the “Tax Opinions”). The Tax Opinions will rely on certain facts, assumptions, and undertakings, and certain representations from DowDuPont, Dow and Corteva, regarding the past and future conduct of each of the three businesses and other matters, including those discussed in the risk factor immediately below, as well as the IRS Ruling (as defined below). Notwithstanding the Tax Opinions and the IRS Ruling, the Internal Revenue Service (the “IRS”) could determine on audit that either, or both, of the distributions and certain related transactions should be treated as taxable transactions if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated, or that the distributions should be taxable for other reasons, including if the IRS were to disagree with the conclusions of the Tax Opinions. Since DowDuPont intends to make a protective election under Section 336(e) of the Code for Dow and each of Dow’s domestic corporate subsidiaries with respect to the distribution of Dow, in the event the distribution of Dow is ultimately determined to be taxable, the Company would recognize corporate level taxable gain to the extent the fair market value of the assets (excluding stock in any domestic corporate subsidiary) of Dow and its domestic corporate subsidiaries exceeds the basis of Dow and its corporate subsidiaries in such assets. If the distribution of Corteva ultimately is determined to be taxable, then the Company would recognize corporate level taxable gain on the distribution in an amount equal to the excess, if any, of the fair market value of Corteva common stock held by DowDuPont’s stockholders on the applicable distribution date over DowDuPont's tax basis in such stock. In addition, if certain related transactions related to the distributions fail to qualify for tax-free treatment under U.S. federal, state and local tax law and/or foreign tax law, the Company, Dow and Corteva could incur significant tax liabilities under U.S. federal, state, local and/or foreign tax law. Generally, corporate taxes resulting from the failure of a distribution to qualify for non-recognition treatment for U.S. federal income tax purposes would be imposed on the Company. Under the tax matters agreement that DowDuPont will enter into with Dow and Corteva, subject to the exceptions described below, Dow and Corteva are generally obligated to indemnify the Company against any such taxes imposed on it. However, if a distribution fails to qualify for non-recognition treatment for U.S. federal income tax purposes for certain reasons relating to the overall structure of the Merger and the distributions, then under the tax matters agreement, the Company and Dow would share the tax liability resulting from such failure in accordance with their relative equity values on the first full trading day following the distribution of Dow. The Company's responsibility for any such taxes is expected to be shared between the Company and Corteva, following the distribution of Corteva, in accordance with a fixed percentage to be agreed by the parties (though absent any such agreement, following the distribution of Corteva, the Company would be responsible for all such liabilities). Furthermore, under the terms of the tax matters agreement, the Company also generally will be responsible for any taxes imposed on Corteva or Dow that arise from the failure of either distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code or the failure of certain related transactions to qualify for tax-free treatment, to the extent such failure to qualify is attributable to actions, events or transactions relating to DowDuPont's, or DowDuPont's affiliates’, stock, assets or business, or any breach of the Company's representations made in connection with the IRS Ruling or in any representation letter provided to a tax advisor in connection with certain tax opinions, including the Tax Opinions, regarding the tax-free status of the distributions and certain related transactions. Prior to the distribution of Corteva, the Company and Corteva are expected to reach an agreement regarding the sharing of responsibility for all liabilities of the Company described in the preceding sentence as a result of actions or transactions of the Company preceding the distribution of Corteva. Absent any such agreement, following the distribution of Corteva, the Company will be responsible for all such liabilities. Dow and Corteva will be separately responsible for any taxes imposed on the Company that arise from the failure of a distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code or the failure of certain related transactions to qualify for tax-free treatment, to the extent such failure to qualify is attributable to actions, events or transactions relating to such company’s or its affiliates’ stock, assets or business, or any breach of such company’s representations made in connection with the IRS Ruling or in any representation letter provided to a tax advisor in connection with certain tax opinions, including the Tax Opinions, regarding the tax-free status of the distributions and certain related transactions. Events triggering an indemnification obligation under the tax matters agreement include events occurring after the distribution that cause the Company, Dow or Corteva to recognize gain under Section 355(e) of the Code, as discussed further below. Such tax amounts could be significant. To the extent that the Company is responsible for any liability under the tax matters agreement, there could be a material adverse impact on the Company's business, financial condition, results of operations and cash flows in future reporting periods. The IRS may assert that the Merger causes the distributions and other related transactions to be taxable to DowDuPont. Even if a distribution otherwise constitutes a tax-free transaction to stockholders under Section 355 of the Code, the Company may be required to recognize corporate level tax on such distribution and certain related transactions under Section 355(e) of the Code if, as a result of the Merger or other transactions considered part of a plan with such distribution, there is a 50 percent or greater change in ownership in DowDuPont, Dow or Corteva, as relevant. In connection with the Merger, DowDuPont sought and received a private letter ruling from the IRS regarding the proper time, manner and methodology for measuring common ownership in the stock of DowDuPont, Historical DuPont and Historical Dow for purposes of determining whether there has been a 50 percent or greater change of ownership under Section 355(e) of the Code as a result of the Merger (the “IRS Ruling”). The Tax Opinions will rely on the continued validity of the IRS Ruling, as well as certain factual representations from DowDuPont as to the extent of common ownership of the stock of Historical Dow and Historical DuPont immediately prior to the Merger. In addition, it is a condition to the distributions that the IRS has not revoked the IRS Ruling. Based on the representations made by DowDuPont as to the common ownership of the stock of Historical Dow and Historical DuPont immediately prior to the Merger and assuming the continued validity of the IRS Ruling, the Tax Opinions will conclude that there was not a 50 percent or greater change of ownership in DowDuPont, Historical Dow or Historical DuPont for purposes of Section 355(e) as a result of the Merger. Notwithstanding the Tax Opinions and the IRS Ruling, the IRS could determine that a distribution or a related transaction should nevertheless be treated as a taxable transaction to the Company if it determines that any of the Company’s facts, assumptions, representations or undertakings is not correct or that a distribution should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the Tax Opinions that are not covered by the IRS Ruling. The separations and distributions may expose the Company to potential liabilities arising out of state and federal fraudulent conveyance laws and legal distribution requirements. Although DowDuPont will receive solvency opinions from an investment bank confirming that DuPont, Dow and Corteva will each be adequately capitalized following the separations and distributions, the separations and distributions could be challenged under various state and federal fraudulent conveyance laws. Fraudulent conveyances or transfers are generally defined to include transfers made or obligations incurred with the actual intent to hinder, delay or defraud current or future creditors or transfers made or obligations incurred for less than reasonably equivalent value when the debtor was insolvent, or that rendered the debtor insolvent, inadequately capitalized or unable to pay its debts as they become due. Any unpaid creditor could claim that the Company did not receive fair consideration or reasonably equivalent value in the separations and distributions, and that the separations and distributions left the Company insolvent or with unreasonably small capital or that it intended or believed the Company would incur debts beyond its ability to pay such debts as they mature. If a court were to agree with such a plaintiff, then such court could void the separations and distributions as a fraudulent transfer or impose substantial liabilities on the Company, which could adversely affect DowDuPont's financial condition and results of operations. The distributions are also subject to review under state corporate distribution statutes. Under the Delaware General Corporation Law, a corporation may only pay dividends to its stockholders either (i) out of its surplus (net assets minus capital) or (ii) if there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Although the Board intends to make the distributions out of DowDuPont’s surplus and will receive an opinion that DowDuPont has adequate surplus under Delaware law to declare the dividends of Corteva and Dow common stock in connection with the distributions, there can be no assurance that a court will not later determine that some or all of the distributions were unlawful. The Company may be required to redeem the DowDuPont Notes which could adversely impact its financial position, results of operations and liquidity. If each of the separations and distributions has not been completed on or before May 1, 2020, or, if prior to such date, DowDuPont has abandoned any of the separations or distributions, the Company will be required to redeem each series of DowDuPont Notes at a redemption price equal to 101 percent of the principal amount of such series of DowDuPont Notes, plus accrued and unpaid interest to, but excluding, the redemption date. The Company is not required to retain any of the net proceeds from the DowDuPont Notes and has stated its intent to use the net proceeds of the DowDuPont Notes, together with borrowings under the Term Loan Facilities, to (i) reduce outstanding liabilities that would otherwise be allocable to Dow and Corteva; (ii) repurchase up to $3.0 billion of DowDuPont’s common stock pursuant to DowDuPont’s previously announced share repurchase program and (iii) pay any related premiums, fees and expenses. Accordingly, the Company would fund any special mandatory redemption using proceeds that it has voluntarily retained or from other sources of liquidity. In the event of a special mandatory redemption, the Company may not have sufficient funds to purchase all of the DowDuPont Notes. DowDuPont is exposed to the risks related to international sales and operations. The Company’s businesses each derive a large portion of their total sales and revenues from operations outside of the United States. Therefore, DowDuPont will have exposure to risks of operating in many foreign countries, including: • difficulties and costs associated with complying with a wide variety of complex laws, treaties and regulations; • unexpected changes in political or regulatory environments; • labor compliance and costs associated with a global workforce; • earnings and cash flows that may be subject to tax withholding requirements or the imposition of tariffs; • exchange controls or other restrictions; • restrictions on, or difficulties and costs associated with, the repatriation of cash from foreign countries to the United States; • political and economic instability; • import and export restrictions and other trade barriers; • difficulties in maintaining overseas subsidiaries and international operations; • difficulties in obtaining approval for significant transactions; • government limitations on foreign ownership; • government takeover or nationalization of business; • government mandated price controls; and • fluctuations in foreign currency exchange rates. Any one or more of the above factors could adversely affect the international operations of the combined Company and could significantly affect the combined Company’s results of operations, financial condition and cash flows. Availability of purchased feedstock and energy, and the volatility of these costs, impact the Company's operating costs and add variability to earnings. Primarily in support of its materials science businesses, the Company purchases hydrocarbon raw materials including ethane, propane, butane, naphtha and condensate as feedstocks. The Company also purchases certain monomers, primarily ethylene and propylene, to supplement internal production, as well as other raw materials. The Company purchases natural gas, primarily to generate electricity, and purchases electric power to supplement internal generation. Feedstock and energy costs generally follow price trends in crude oil and natural gas, which are sometimes volatile. While the Company uses its feedstock flexibility and financial and physical hedging programs to help mitigate feedstock cost increases, the Company is not always able to immediately raise selling prices. Ultimately, the ability to pass on underlying cost increases is dependent on market conditions. Conversely, when feedstock and energy costs decline, selling prices generally decline as well. As a result, volatility in these costs could impact the Company’s results of operations. The Company has a number of investments on the U.S. Gulf Coast to take advantage of increasing supplies of low-cost natural gas and natural gas liquids ("NGLs") derived from shale gas. While the Company expects abundant and cost-advantaged supplies of NGLs in the United States to persist for the foreseeable future, if NGLs become significantly less advantaged than crude oil-based feedstocks, it could have a negative impact on the Company’s results of operations and future investments. Also, if the Company’s key suppliers of feedstocks and energy are unable to provide the raw materials required for production, it could have a negative impact on the Company's results of operations. Earnings generated by the Company's products vary based in part on the balance of supply relative to demand within the industry. The balance of supply relative to demand within the industry may be significantly impacted by the addition of new capacity, especially for basic commodities where capacity is generally added in large increments as world-scale facilities are built. This may disrupt industry balances and result in downward pressure on prices due to the increase in supply, which could negatively impact the Company's results of operations. The costs of complying with evolving regulatory requirements could negatively impact the Company's financial results. Actual or alleged violations of environmental laws or permit requirements could result in restrictions or prohibitions on plant operations, substantial civil or criminal sanctions, as well as the assessment of strict liability and/or joint and several liability. The Company is subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment, greenhouse gas emissions, and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. Costs and capital expenditures relating to environmental, health or safety matters are subject to evolving regulatory requirements and depend on the timing of the promulgation and enforcement of specific standards which impose the requirements. Moreover, changes in environmental regulations could inhibit or interrupt the Company's operations, or require modifications to its facilities. Accordingly, environmental, health or safety regulatory matters could result in significant unanticipated costs or liabilities. The Company’s business, results of operations and reputation could be adversely affected by industry-specific risks including process safety and product stewardship/regulatory compliance issues. The Company is subject to industry-specific risks, concerns and claims which include, but are not limited to, product safety or quality; shifting consumer preferences that include a growing trend in societal demands for increasing levels of product safety and environmental protection; federal, state, and local regulations on manufacturing or labeling; environmental, health and safety regulations; and customer product liability claims. In the Agriculture segment, industry-specific risks include those associated with concerns and claims regarding the safe use of seeds with biotechnology traits, crop protection products, and chemicals, their potential impact on health and the environment, and the perceived impacts of biotechnology on health and the environment. The latter includes concerns and claims that increased use of crop protection products, drift, inversion, volatilization, and the use of biotechnology traits meant to reduce the resistance of weeds or pests to control by crop protection products, could increase or accelerate such resistance and otherwise negatively impact health and the environment. Also, the detection of biotechnology traits or chemical residues from a crop protection product not approved in the country to which the Company sells or imports it, in which the product is cultivated or to which it exports may impact the Company’s ability to supply or export agricultural products, result in crop destruction, product recalls or trade disruption. The risks, concerns and claims affecting the industries in which the Company competes could manifest themselves in stockholder proposals, preferred purchasing, delays or failures in obtaining or retaining regulatory approvals, delayed product launches, lack of market acceptance, product discontinuation, continued pressure for and adoption of more stringent regulatory intervention and litigation, termination of raw material supply agreements and legal claims. These and other concerns or claims could also influence public perceptions, the viability or continued sales of certain of the Company's products, the Company's reputation and the cost to comply with regulations and could adversely affect the Company’s business, results of operations, financial condition and cash flows. In most jurisdictions, the Company must test the safety, efficacy and environmental impact of its products to satisfy regulatory requirements and obtain the necessary approvals. In certain jurisdictions, the Company must periodically renew its approvals which may require it to demonstrate compliance with then-current standards. The regulatory environment is lengthy, complex and in some markets unpredictable, with requirements that can vary by product, technology, industry and country. The regulatory environment may be impacted by the activities of non-governmental organizations and special interest groups and stakeholder reaction to actual or perceived impacts of new technology, products or processes on safety, health and the environment. Obtaining and maintaining regulatory approvals requires submitting a significant amount of information and data, which may require participation from technology providers. Regulatory standards and trial procedures are continuously changing. The pace of change together with the lack of regulatory harmony could result in unintended noncompliance. Responding to these changes and meeting existing and new requirements may involve significant costs or capital expenditures or require changes in business practice that could result in reduced profitability. The failure to receive necessary permits or approvals could have near- and long-term effects on the Company’s ability to produce and sell some current and future products. A significant operational event could negatively impact the Company's results of operations. Disruptions in the Company’s operations or those of its supply chain and customers, the transportation of products, acts of sabotage, employee error, malfeasance or other actions, geo-political activity, cyber-attacks, or severe weather conditions and other natural phenomena (such as drought, hurricanes, earthquakes, tsunamis, floods, etc.) including hurricanes or flooding that impact coastal regions in the United States Gulf region or Asia Pacific could result in an unplanned event that could be significant in scale and could negatively impact operations, neighbors or the public at large, which could have a negative impact on the Company's results of operations. In addition, terrorist attacks and natural disasters have increased concerns about the security and safety of chemical production and distribution. Local, state, federal and foreign governments continue to propose new regulations related to the security of chemical plant locations and the transportation of hazardous chemicals, which could result in higher operating costs. The risk of loss of the Company’s intellectual property, trade secrets or other sensitive business information or disruption of operations could negatively impact the Company’s financial results. The Company has attractive information assets, including intellectual property, trade secrets and other sensitive, business critical information. Cyber-attacks or security breaches affecting the Company, its supply chain or customers could compromise confidential, business critical information, cause a disruption in the Company’s operations or harm the Company's reputation if the Company, its suppliers or customers do not effectively prevent, detect and recover from these or other security breaches. Like most major corporations, DowDuPont and its Subsidiaries are the target of industrial espionage, including cyber-attacks, from time to time. The Company has determined that these attacks have resulted, and could result in the future, in unauthorized parties gaining access to certain confidential business information. Although management does not believe that the Company or its Subsidiaries have experienced any material losses to date related to these security breaches, including cybersecurity incidents, there can be no assurance that such losses will not be suffered in the future. While the Company has a comprehensive cyber security program that is continuously reviewed, maintained and upgraded, a significant cyber-attack could result in the loss of critical business information and/or could negatively impact operations, which could have a negative impact on the Company’s financial results. The Company seeks to actively manage the risks within its control that could lead to business disruptions and security breaches. As these threats continue to evolve, particularly around cybersecurity, the Company may be required to expend significant resources to enhance its control environment, processes, practices and other protective measures. Despite these efforts, such events could have a material adverse effect on DowDuPont’s business, results of operations, financial condition and cash flows. Implementing certain elements of the Company's strategy could negatively impact the Company's financial results. The Company currently has manufacturing operations, sales and marketing activities, and joint ventures in emerging geographies. Activities in these geographic regions are accompanied by uncertainty and risks including: navigating different government regulatory environments; relationships with new, local partners; project funding commitments and guarantees; expropriation, military actions, war, terrorism and political instability; sabotage; uninsurable risks; suppliers not performing as expected, resulting in increased risk of extended project timelines; and determining raw material supply and other details regarding product movement. If the manufacturing operations, sales and marketing activities, and/or implementation of these projects is not successful, it could adversely affect the Company's financial condition, cash flows and results of operations. An impairment of goodwill or intangible assets could negatively impact the Company's financial results. At least annually, the Company assesses both goodwill and indefinite-lived intangible assets for impairment. Intangible assets with finite lives are tested for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If testing indicates that goodwill or intangible assets are impaired, the carrying values are written down based on fair values with a charge against earnings. Where the Company utilizes discounted cash flow methodologies in determining fair values, changes in risk-adjusted discount rates and continued weak demand for a specific product line or business could result in an impairment. Accordingly, any determination requiring the write-off of a significant portion of goodwill or intangible assets could negatively impact the Company's results of operations. As a result of the Merger and the related acquisition method of accounting, Historical DuPont’s assets and liabilities were measured at fair value resulting in increases to the Company's goodwill and other intangible assets of $45.5 billion and $27.1 billion, respectively, and any declines in financial projections could have a material, negative impact on the fair value of the Company's reporting units and assets, particularly in the Agriculture and Specialty Products divisions. Future impairments of goodwill or intangible assets could also be recorded due to changes in other assumptions, estimates or circumstances and the magnitude of such impairments may be material to the Company, Historical DuPont or Historical Dow. During the third quarter of 2018, in connection with strategic business reviews and assembling updated financial projections, the Company’s subsidiary, Historical DuPont, a separate U.S. Securities and Exchange Commission registrant, was required to perform an interim test of goodwill for its agriculture reporting unit. As a result of the analysis performed, Historical DuPont recorded a pretax, noncash goodwill impairment charge of $4.5 billion in its stand-alone quarterly report on Form 10-Q for the quarter ended September 30, 2018. However, the impairment charge did not survive at the DowDuPont level. Based on the analysis performed at the DowDuPont level, the fair value of the combined agriculture reporting unit exceeded its carrying value by more than 10 percent, and therefore no goodwill impairment existed for the Company. During this same time, the Company also performed an impairment test on indefinite-lived intangibles and determined that the fair value of certain in-process research and development assets had declined as a result of delays in timing of commercialization and increases to expected research and development costs. This resulted in the Company recording a pretax impairment charge of $85 million. See Part II, Item 7. Other Matters, Critical Accounting Estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 13 to the Consolidated Financial Statements for further information. Increased obligations and expenses related to Historical DuPont's and Historical Dow's defined benefit pension plans and other postretirement benefit plans could negatively impact DowDuPont's financial condition and results of operations. Historical DuPont and Historical Dow have defined benefit pension plans and other postretirement benefit plans (collectively, the “plans”) in the United States and a number of other countries. The assets of the Historical DuPont and Historical Dow funded plans are primarily invested in fixed income securities, equity securities of U.S. and foreign issuers, and alternative investments (including investments in real estate, private market securities and absolute return strategies). Changes in the market value of plan assets, investment returns, discount rates, mortality rates, regulations and the rate of increase in compensation levels may affect the funded status of the plans and could cause volatility in the net periodic benefit cost, future funding requirements of the plans and the funded status of the plans. A significant increase in Historical DuPont's and Historical Dow's obligations or future funding requirements could have a negative impact on the Company's results of operations and cash flows for a particular period and on the Company's financial condition. Climate change and unpredictable seasonal and weather factors could impact sales and earnings of the Company’s Agriculture segment. The agriculture industry is subject to seasonal and weather factors, which can vary unpredictably from period to period. Weather factors can affect the presence of disease and pests on a regional basis and, accordingly, can positively or adversely affect the demand for crop protection products, including the mix of products used. The weather also can affect the quality, volume and cost of seed produced for sale as well as demand and product mix. Seed yields can be higher or lower than planned, which could lead to higher inventory and related write-offs. Climate change may increase the frequency or intensity of extreme weather such as storms, floods, heat waves, droughts and other events that could affect the quality, volume and cost of seed produced for sale as well as demand and product mix. Climate change may also affect the availability and suitability of arable land and contribute to unpredictable shifts in the average growing season and types of crops produced. Inability to discover, develop and protect new technologies and enforce the Company's intellectual property rights, and to respond to new technologies, could adversely affect the Company's financial results. The Company competes with major global companies that have strong intellectual property rights, including rights supporting the use of biotechnology to enhance products, particularly agricultural and bio-based products. Speed in discovering, developing, protecting, and responding to new technologies, including new technology-based distribution channels that could impede the Company's ability to engage with customers and end users, and bringing related products to market is a significant competitive advantage. Failure to predict and respond effectively could cause the Company's existing or candidate products to become less competitive, adversely affecting sales. Competitors are increasingly challenging intellectual property positions and the outcomes can be highly uncertain. If challenges are resolved adversely, it could negatively impact the Company's ability to obtain licenses on competitive terms, commercialize new products and generate sales from existing products. Intellectual property rights, including patents, plant variety protection, trade secrets, confidential information, trademarks, trade names and other forms of trade dress, are important to the Company's business. The Company endeavors to protect its intellectual property rights in jurisdictions in which its products are produced or used and in jurisdictions into which its products are imported. However, the Company may be unable to obtain protection for its intellectual property in key jurisdictions. Further, changes in government policies and regulations, including changes made in reaction to pressure from non-governmental organizations, could impact the extent of intellectual property protection afforded by such jurisdictions. The majority of the Company’s corn hybrids and soybean varieties sold to customers contain biotechnology traits that are licensed from third parties under long-term licenses. If the Company loses its rights under such licenses, it could negatively impact the Company's ability to obtain future licenses on competitive terms, commercialize new products and generate sales from existing products. The Company has designed and implemented internal controls to restrict access to and distribution of its intellectual property. Despite these precautions, the Company's intellectual property is vulnerable to unauthorized access through employee error or actions, theft and cybersecurity incidents, and other security breaches. When unauthorized access and use or counterfeit products are discovered, the Company reports such situations to governmental authorities for investigation, as appropriate, and takes measures to mitigate any potential impact. Protecting intellectual property related to biotechnology is particularly challenging because theft is difficult to detect and biotechnology can be self-replicating. Accordingly, the impact of such theft can be significant. Failure to effectively manage acquisitions, divestitures, alliances and other portfolio actions could adversely impact DowDuPont's future results. The Company made certain divestitures, primarily related to its Agriculture segment, in connection with obtaining regulatory approval for the Merger. In addition, the Company from time to time evaluates acquisition candidates that may strategically fit its business and/or growth objectives. If the Company is unable to successfully integrate and develop acquired businesses, the Company could fail to achieve anticipated synergies and cost savings, including any expected increases in revenues and operating results, which could have a material adverse effect on the Company’s financial results. The Company continually reviews its portfolio of assets for contributions to the Company’s objectives and alignment with its growth strategy. However, the Company may not be successful in separating underperforming or non-strategic assets, and gains or losses on the divestiture of, or lost operating income from, such assets may affect the Company’s earnings. Moreover, the Company might incur asset impairment charges related to acquisitions or divestitures that reduce its earnings. In addition, if the execution or implementation of acquisitions, divestitures, alliances, joint ventures and other portfolio actions is not successful, it could adversely impact the Company’s financial condition, cash flows and results of operations. DowDuPont’s results of operations could be adversely affected by litigation and other commitments and contingencies. The Company faces risks arising from various unasserted and asserted litigation matters, including, but not limited to, asbestos related suits, product liability, patent infringement, antitrust claims, governmental regulations, contract and commercial litigation, claims for third party property damage or personal injury stemming from alleged environmental torts, and other actions. The Company has noted a nationwide trend in purported class actions against chemical manufacturers generally seeking relief such as medical monitoring, property damages, off-site remediation and punitive damages arising from alleged environmental torts without claiming present personal injuries. The Company also has noted a trend in public and private suits being filed on behalf of states, counties, cities and utilities alleging harm to the general public and the environment, including waterways and watersheds. An adverse outcome in any one or more of these matters could be material to the Company's financial results. See Note 16 to the Consolidated Financial Statements for additional information on litigation and other commitments and contingencies faced by the Company. In the ordinary course of business, the Company may make certain commitments, including representations, warranties and indemnities relating to current and past operations, including those related to divested businesses and issue guarantees of third party obligations. If the Company were required to make payments as a result, they could exceed the amounts accrued, thereby adversely affecting the Company's results of operations. ITEM 1B.