DuPont de Nemours (DD) 10-Q2020 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

The registrant had 733,797,258 shares of common stock, $0.01 par value, outstanding at May 1, 2020.

DuPont de Nemours, Inc.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

Throughout this Quarterly Report on Form 10-Q, except as otherwise noted by the context, the terms "DuPont" or "Company" used herein mean DuPont de Nemours, Inc. and its consolidated subsidiaries. On June 1, 2019, DowDuPont Inc. changed its registered name to DuPont de Nemours, Inc. (“DuPont”) (for certain events prior to June 1, 2019, the Company may be referred to as DowDuPont). Beginning on June 3, 2019, the Company's common stock is traded on the New York Stock Exchange under the ticker symbol "DD".

On April 1, 2019, the Company completed the separation of its materials science business into a separate and independent public company by way of a distribution of Dow Inc. (“Dow”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Dow’s common stock (the “Dow Distribution”). On June 1, 2019, the Company completed the separation of its agriculture business into a separate and independent public company by way of a distribution of Corteva, Inc. (“Corteva”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Corteva’s common stock (the “Corteva Distribution”).

Following the Corteva Distribution, DuPont holds the specialty products business as continuing operations. The results of operations of DuPont for the three months ended March 31, 2019 present the historical financial results of Dow and Corteva as discontinued operations. The cash flows and comprehensive income related to Dow and Corteva have not been segregated and are included in the interim Consolidated Statements of Cash Flows and Consolidated Statements of Comprehensive Income, respectively, for the applicable period. Unless otherwise indicated, the information in the notes to the interim Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow or Corteva.

On December 15, 2019, DuPont and International Flavors & Fragrances Inc. ("IFF") announced entry into definitive agreements to combine DuPont’s Nutrition & Biosciences business (the "N&B Business") with IFF in a transaction that would result in IFF issuing shares to DuPont shareholders. The transaction is expected to close by the end of the first quarter of 2021, subject to approval by IFF shareholders and other customary closing conditions, including regulatory approvals and receipt by DuPont of an opinion of tax counsel.

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

Forward-looking statements address matters that are, to varying degrees, uncertain and subject to risks, uncertainties and assumptions, many of which that are beyond DuPont's control, that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements are not guarantees of future results. Some of the important factors that could cause DuPont's actual results to differ materially from those projected in any such forward-looking statements include, but are not limited to: (i) the parties’ ability to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction with IFF; changes in relevant tax and other laws, (ii) failure to obtain necessary regulatory approvals, approval of IFF’s shareholders, anticipated tax treatment or any required financing or to satisfy any of the other conditions to the proposed transaction with IFF, (iii) the possibility that unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, future prospects, business and management strategies that could impact the value, timing or pursuit of the proposed transaction with IFF, (iv) risks and costs and pursuit and/or implementation of the separation of the N&B Business, including timing anticipated to complete the separation, any changes to the configuration of businesses included in the separation if implemented, (v) risks and costs related to the Dow Distribution and the Corteva Distribution (together, the “Distributions”) including (a) with respect to achieving all expected benefits from the Distributions; (b) the incurrence of significant costs in connection with the Distributions, including costs to service debt incurred by the Company to establish the relative credit profiles of Corteva, Dow and DuPont and increased costs related to supply, service and other arrangements that, prior to the Dow Distribution, were between entities under the common control of DuPont; (c) indemnification of certain legacy liabilities of E. I. du Pont de Nemours and Company ("Historical EID") in connection with the Corteva Distribution; and (d) potential liability arising from fraudulent conveyance and similar laws in connection with the Distributions; (vi) failure to effectively manage acquisitions, divestitures, alliances, joint ventures and other portfolio changes, including meeting conditions under the Letter Agreement entered in connection with the Corteva Distribution, related to the transfer of certain levels of assets and businesses; (vii) uncertainty as to the long-term value of DuPont common stock; (viii) potential inability or reduced access to the capital markets or increased cost of borrowings, including as a result of a

The accompanying unaudited interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the interim statements reflect all adjustments (including normal recurring accruals) which are considered necessary for the fair statement of the results for the periods presented. Results from interim periods should not be considered indicative of results for the full year. These interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, collectively referred to as the “2019 Annual Report.” The interim Consolidated Financial Statements include the accounts of the Company and all of its subsidiaries in which a controlling interest is maintained.

Effective August 31, 2017, pursuant to the merger of equals transaction contemplated by the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017 ("Merger Agreement"), The Dow Chemical Company ("Historical Dow") and E. I. du Pont de Nemours and Company ("Historical EID") each merged with subsidiaries of DowDuPont Inc. ("DowDuPont") and, as a result, Historical Dow and Historical EID became subsidiaries of DowDuPont (the "Merger"). Prior to the Merger, DowDuPont did not conduct any business activities other than those required for its formation and matters contemplated by the Merger Agreement. Historical Dow was determined to be the accounting acquirer in the Merger.

Except as otherwise indicated by the context, the term "Historical Dow" includes Historical Dow and its consolidated subsidiaries, "Historical EID" includes Historical EID and its consolidated subsidiaries, and "Dow Silicones" means Dow Silicones Corporation, a wholly owned subsidiary of Historical Dow.

Effective as of 5:00 p.m. on April 1, 2019, the Company completed the separation of its materials science business into a separate and independent public company by way of a distribution of Dow Inc. (“Dow”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Dow’s common stock (the “Dow Common Stock”), to holders of the Company’s common stock (the “DowDuPont common stock”), as of the close of business on March 21, 2019 (the “Dow Distribution”).

Effective as of 12:01 a.m. on June 1, 2019, the Company completed the separation of its agriculture business into a separate and independent public company by way of a distribution of Corteva, Inc. (“Corteva”) through a pro rata dividend in-kind of all of the then-issued and outstanding shares of Corteva’s common stock (the “Corteva Common Stock”), to holders of the Company’s common stock as of the close of business on May 24, 2019 (the “Corteva Distribution” and, together with the Dow Distribution, the “Distributions”).

Following the Corteva Distribution, DuPont holds the specialty products business. On June 1, 2019, DowDuPont changed its registered name from "DowDuPont Inc." to "DuPont de Nemours, Inc." doing business as "DuPont." Beginning on June 3, 2019, the Company's common stock is traded on the NYSE under the ticker symbol "DD".

 

The results of operations of DuPont for the three months ended March 31, 2019 present the historical financial results of Dow and Corteva as discontinued operations. The cash flows and comprehensive income related to Dow and Corteva have not been segregated and are included in the interim Consolidated Statements of Cash Flows and interim Consolidated Statements of Comprehensive Income, respectively, for the applicable period. Unless otherwise indicated, the information in the notes to the interim Consolidated Financial Statements refer only to DuPont's continuing operations and do not include discussion of balances or activity of Dow or Corteva.

On December 15, 2019, the Company entered into definitive agreements to separate and combine the Nutrition & Biosciences business segment (the "N&B Business") with International Flavors & Fragrances Inc. ("IFF") in a tax-efficient Reverse Morris Trust transaction, (the "Proposed N&B Transaction"). The transaction is expected to close by the end of the first quarter of 2021, subject to approval by IFF shareholders and other customary closing conditions, including regulatory approvals and receipt by

DuPont of an opinion of tax counsel. The financial results of the N&B Business are included in continuing operations for the periods presented.

In connection with the Dow Distribution and the Corteva Distribution, the Company entered into certain agreements that, among other things, effected the separations, provides for the allocation of assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) among DuPont, Dow, and Corteva (together, the “Parties” and each a “Party”), and provides a framework for DuPont’s relationship with Dow and Corteva following the Distributions. Effective April 1, 2019, the Parties entered into the following agreements: the Separation and Distribution Agreement; the Tax Matters Agreement; the Employee Matters Agreement; and the Intellectual Property Cross-License Agreement (the “DuPont-Dow IP Cross-License Agreement”). In addition to the agreements above, DuPont has entered into certain various supply agreements with Dow. These agreements provide for different pricing than the historical intercompany and intracompany practices prior to the Distributions.

Effective June 1, 2019, in connection with the Corteva Distribution, DuPont and Corteva entered into the following agreements: the Intellectual Property Cross-License Agreement (the “DuPont-Corteva IP Cross-License Agreement”); the Letter Agreement; and the Amended and Restated Tax Matters Agreement.

On April 1, 2019, DowDuPont completed the separation of its Materials Science businesses, including the businesses and operations that comprised the Company's former Performance Materials & Coating, Industrial Intermediates & Infrastructure and the Packaging & Specialty Plastics segments, (the "Materials Science Division") through the consummation of the Dow Distribution.

On April 1, 2019, prior to the Dow Distribution, the Company contributed $2,024 million in cash to Dow.

The following table presents depreciation, amortization, and capital expenditures of the discontinued operations related to the Materials Science Division:

On June 1, 2019, the Company completed the separation of its Agriculture business, including the businesses and operations that comprised the Company's former Agriculture segment (the "Agriculture Division"), through the consummation of the Corteva Distribution.

In 2019, prior to the distribution of Corteva, the Company contributed $7,139 million in cash to Corteva, a portion of which was used to retire indebtedness of Historical EID.

The results of operations of the Agriculture Division are presented as discontinued operations as summarized below:

The following table presents depreciation, amortization, and capital expenditures of the discontinued operations related to the Agriculture Division:

In connection with the Distributions, Dow and Corteva indemnify the Company against, and DuPont indemnifies Dow and Corteva against certain litigation, environmental, income taxes, workers' compensation and other liabilities that arose prior to the Distributions, as applicable. The term of this indemnification is indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. At March 31, 2020, the indemnified assets were $134 million within "Accounts and notes receivable, net" and $141 million within "Deferred charges and other assets" and indemnified liabilities were $80 million within "Accrued and other current liabilities" and $95 million within "Other noncurrent obligations."

Refer to Note 13 for additional information regarding treatment of litigation and environmental related matters under the Separation and Distribution Agreement and the Letter Agreement.

In the first quarter of 2020, the Company completed the sale of its Compound Semiconductor Solutions business unit, a part of the Electronics & Imaging segment, to SK Siltron. The proceeds received in the first quarter of 2020 related to the sale of the business were approximately $420 million. The sale resulted in a pre-tax gain of $197 million ($102 million net of tax) recorded in "Sundry income (expense) - net" in the Company's interim Consolidated Statements of Operations for the three months ended March 31, 2020.

Integration and separation costs for continuing operations to date primarily have consisted of financial advisory, information technology, legal, accounting, consulting, and other professional advisory fees associated with the preparation and execution of activities related to the Merger, post-Merger integration, the Distributions, and beginning in the fourth quarter of 2019, the intended separation of the Nutrition & Biosciences business.

These costs are recorded within "Integration and separation costs" within the interim Consolidated Statements of Operations.

Substantially all of DuPont's revenue is derived from product sales. Product sales consist of sales of DuPont's products to supply manufacturers and distributors. DuPont considers purchase orders, which in some cases are governed by master supply agreements, to be a contract with a customer. Contracts with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year.

The Company disaggregates its revenue from contracts with customers by segment and business or major product line and geographic region, as the Company believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows.

From time to time, the Company enters into arrangements in which it receives payments from customers based upon contractual billing schedules. The Company records accounts receivables when the right to consideration becomes unconditional. Contract assets include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Contract liabilities primarily reflect deferred revenue from advance payment for product that the Company has received from customers. The Company classifies deferred revenue as current or noncurrent based on the timing of when the Company expects to recognize revenue.

Revenue recognized in the first three months of 2020 from amounts included in contract liabilities at the beginning of the period was approximately $14 million (approximately $10 million in the first three months of 2019). The amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional was insignificant. The Company did not recognize any asset impairment charges related to contract assets during the period.

Charges for restructuring programs and asset related charges, which includes other asset impairments, were $404 million for the three months ended March 31, 2020 ($71 million for the three ended March 31, 2019). These charges were recorded in "Restructuring and asset related charges - net" in the interim Consolidated Statements of Operations. The total liability related to restructuring programs was $230 million at March 31, 2020 ($162 million at December 31, 2019). Restructuring activity consists of the following:

In the first quarter of 2020, the Company approved restructuring actions designed to capture near-term cost reductions and to further simplify certain organizational structures in anticipation of the expected closure of the Proposed N&B Transaction (the "2020 Restructuring Program"). As a result of these actions, the Company expects to record total pre-tax restructuring charges up to $180 million, comprised of $125 million of severance and related benefit costs, $50 million of asset related charges, and $5 million of costs related to contract terminations. For the three months ended March 31, 2020, DuPont recorded a pre-tax charge related to the 2020 Restructuring Program in the amount of $111 million, recognized in "Restructuring and asset related charges - net" in the Company's interim Consolidated Statement of Operations, comprised of $96 million of severance and related benefit costs and $15 million of asset related charges. At March 31, 2020, total liabilities related to the 2020 Restructuring Program were $96 million for severance and related benefit costs, recognized in "Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets.

The following table summarizes the charges incurred by segment related to the 2020 Restructuring Program:

The Company expects actions related to this program to be substantially complete by the end of 2020.

During the second quarter 2019 and in connection with the ongoing integration activities, DuPont approved restructuring actions to simplify and optimize certain organizational structures following the completion of the Distributions (the "2019 Restructuring Program"). The Company has recorded pre-tax restructuring charges of $156 million inception-to-date, consisting of severance and related benefit costs of $122 million and asset related charges of $34 million.

The Company incurred charges for severance and related benefit costs of $18 million related to the 2019 Restructuring Program during the three months ended March 31, 2020. These charges consisted of $1 million related to the Transportation & Industrial segment and $17 million related to Corporate.

The following table summarizes the activities related to the 2019 Restructuring Program:

At March 31, 2020, the $75 million for severance and related benefit costs was included in "Accrued and other current liabilities" ($86 million at December 31, 2019) in the interim Condensed Consolidated Balance Sheets. The Company expects actions related to this program to be substantially complete in the second quarter of 2020.

In September and November 2017, the Company approved post-merger restructuring actions under the DowDuPont Cost Synergy Program, which was designed to integrate and optimize the organization following the Merger and in preparation for the Distributions of Dow and Corteva. The portions of the charges, costs and expenses attributable to integration and optimization within the Agriculture and Materials Science Divisions are reflected in discontinued operations. The Company has recorded pre-tax restructuring charges attributable to the continuing operations of DuPont of $490 million inception-to-date, consisting of severance and related benefit costs of $215 million, asset related charges of $209 million and contract termination charges of $66 million related to charges.

The following tables summarize the charges incurred related to the DowDuPont Cost Synergy Program:

Charges for the three months ended March 31, 2020 and 2019 include $5 million and $71 million, respectively, recognized in "Restructuring and asset related charges - net." The charge for the three months ended March 31, 2019 also includes $1 million recognized in "Equity in earnings of nonconsolidated affiliates" in the interim Consolidated Statements of Operations.

The following table summarizes the activities related to the DowDuPont Cost Synergy Program:

At March 31, 2020, the $59 million was included in "Accrued and other current liabilities" ($76 million at December 31, 2019) in the interim Condensed Consolidated Balance Sheets. The DowDuPont Cost Synergy Program is considered substantially complete at March 31, 2020.

The Company reviews and evaluates its long-lived assets for impairment when events and changes in circumstances indicate that the related carrying amount of such assets may not be recoverable and may exceed their fair value. For purposes of determining impairment, assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

In the first quarter of 2020, expectations of proceeds related to certain potential divestitures within the Non-Core segment gave rise to fair value indicators and, thus, triggering events requiring the Company to perform a recoverability assessment related to its biomaterials business unit. The Company performed a long-lived asset impairment test and determined that, based on undiscounted cash flows, the carrying amount of certain long-lived assets was not recoverable. Accordingly, the Company estimated the fair value of these assets using a market approach utilizing Level 3 unobservable inputs. As a result, the Company recognized a $270 million pre-tax impairment charge recorded within “Restructuring and asset related charges - net” in the interim Consolidated Statements of Operation for the three months ended March 31, 2020 with the charge impacting definite-lived intangible assets and property, plant, and equipment.

From time to time, the Company is required to set aside funds for various activities that arise in the normal course of business. These funds typically have legal restrictions associated with them and are deposited in an escrow account or held in a separately identifiable account by the Company. Historical EID entered into a trust agreement in 2013 (as amended and restated in 2017), establishing and requiring Historical EID to fund a trust (the "Trust") for cash obligations under certain non-qualified benefit and deferred compensation plans upon a change in control event as defined in the Trust agreement. Under the Trust agreement, the consummation of the Merger was a change in control event. After the distribution of Corteva, the Trust assets related to Corteva employees were transferred to a new trust for Corteva (the "Corteva Trust"). As a result, the Trust currently held by DuPont relates to funding obligations to DuPont employees. At March 31, 2020, the Company had restricted cash of $34 million ($37 million at December 31, 2019) included in "Other current assets" in the interim Condensed Consolidated Balance Sheets which was completely attributed to the Trust.

"Accrued and other current liabilities" in the interim Condensed Consolidated Balance Sheets were $1,434 million at March 31, 2020 and $1,342 million at December 31, 2019. No component of "Accrued and other current liabilities" was more than 5 percent of total current liabilities at March 31, 2020. Accrued payroll, which is a component of "Accrued and other current liabilities," was $479 million at December 31, 2019. No other component of "Accrued and other current liabilities" was more than 5 percent of total current liabilities at December 31, 2019.

For periods between the Merger and the Distributions, DuPont's consolidated federal income tax group and consolidated tax return included the Dow and Corteva entities. Generally, the consolidated tax liability of the DuPont U.S. tax group for each year was apportioned among the members of the consolidated group in accordance with the terms of the Amended and Restated Tax Matters Agreement. DuPont, Corteva and Dow intend that to the extent Federal and/or State corporate income tax liabilities are reduced through the utilization of tax attributes of the other, settlement of any receivable and payable generated from the use of the other party’s sub-group attributes will be in accordance with the Amended and Restated Tax Matters Agreement.

The Company's effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax attributes. The effective tax rate on continuing operations for the first quarter of 2020 was (7.8) percent, compared with an effective tax rate of 55.2 percent for the first quarter of 2019. The effective tax rate for the first quarter of 2020 was principally the result of the non-tax-deductible goodwill impairment charge impacting the Non-core segment. See Note 11 for more information regarding the goodwill impairment charge.

Each year the Company files hundreds of tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the tax authorities. Positions challenged by the tax authorities may be settled or appealed by the Company. As a result, there is an uncertainty in income taxes recognized in the Company’s financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. The ultimate resolution of such uncertainties is not expected to have a material impact on the Company's results of operations.

The following tables provide earnings per share calculations for the three months ended March 31, 2020 and 2019:

The Company's investments in companies accounted for using the equity method ("nonconsolidated affiliates"), by classification in the interim Condensed Consolidated Balance Sheets, are shown in the following table:

The Company maintained an ownership interest in 21 nonconsolidated affiliates at March 31, 2020. The following table reflects the Company's principal nonconsolidated affiliates and its ownership interest (direct and indirect) for each at March 31, 2020:

Sales to nonconsolidated affiliates represented less than 3 percent of total net sales for the three months ended March 31, 2020 and 2019. Sales to nonconsolidated affiliates are primarily related to the sale of trichlorosilane, a raw material used in the production of polycrystalline silicon, to the HSC Group. Sales of this raw material to the HSC Group are reflected in Non-Core. Purchases from nonconsolidated affiliates represented approximately 2 percent of “Cost of sales” for the three months ended March 31, 2020 and 2019.

The following table reflects the carrying value of the HSC Group investments at March 31, 2020 and December 31, 2019:

The Company tests goodwill for impairment annually during the fourth quarter as of October 1, or more frequently when events or changes in circumstances indicate that fair value is below carrying value. As a result of the related acquisition method of accounting in connection with the Merger, 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 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.

Expectations of proceeds related to certain potential divestitures within the Non-Core segment gave rise to fair value indicators and, thus, served as triggering events requiring the Company to perform impairment analyses related to goodwill. As part of the analysis, the Company determined that the fair value of its Photovoltaic and Advanced Materials (“PVAM”) reporting unit was below its carry value resulting in an impairment charge to goodwill. Valuations of the PVAM reporting unit under a combination of the market approach and income approach reflect softening conditions in photovoltaics markets as compared to prior estimates. In connection with this analysis, the Company recorded a pre-tax, non-cash impairment charge of $533 million for the three months ended March 31, 2020 impacting the Non-Core segment.

The Company's analysis uses the discounted cash flow model (a form of the income approach) utilizing Level 3 unobservable inputs. The Company’s significant assumptions in this analysis include, but are 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 are 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. If the Company’s ongoing estimates of future cash flows are not met, the Company may have to record additional impairment charges in future periods. As referenced, the Company also uses a form of the market approach. As such, the Company believes the current assumptions and estimates utilized are both reasonable and appropriate.

COVID-19 continues to adversely impact the broader global economy and has caused significant volatility in financial markets. If there is a of lack of recovery or further global softening in certain markets, mainly in which the Transportation & Industrial segment operates in such as automotive, oil & gas and select industrial end-markets, or a sustained decline in the value of the Company's common stock, the Company may be required to perform additional impairment assessments for its goodwill, other intangibles, and long-lived assets, the results of which could result in material impairment charges.

During the first quarter of 2020, the Company recorded non-cash impairment charges related to definite-lived intangible assets impacting the Non-Core segment. See Note 5 for further discussion.

The following table provides the net carrying value of other intangible assets by segment:

The following table provides information regarding amortization expense related to other intangible assets:

Total estimated amortization expense for the remainder of 2020 and the five succeeding fiscal years is as follows:

In June 2019, the Company entered into a $750 million, 364-day revolving credit facility (the "Old 364-Day Revolving Credit Facility"). In March 2020, the Company drew down on the Old 364-Day Revolving Credit Facility in the aggregate principal amount of $250 million. In April 2020, the Company repaid the $250 million draw on the Old 364-Day Revolving Credit Facility with interest. On and effective as of April 16, 2020, the Company entered into a new $1.0 billion 364-day revolving credit facility (the “$1B Revolving Credit Facility"). As of the effectiveness of the $1B Revolving Credit Facility, the Old 364-Day Revolving Credit Facility was terminated.

As of March 31, 2020, the Company had recorded liabilities of $24 million associated with litigation matters and $77 million associated with environmental matters. These recorded liabilities include the Company’s indemnification obligations to each of Dow and Corteva.

Under the Separation and Distribution Agreement, liabilities, including cost and expenses, associated with litigation and environmental matters that primarily related to the materials science business, the agriculture business or the specialty products business were generally allocated to or retained by Dow, Corteva or the Company, respectively, through retention, assumption or indemnification. Related to the foregoing, at March 31, 2020, DuPont has recorded (i) a liability of $35 million (although it is reasonably possible that the ultimate cost could range up to $108 million above the amount accrued) for retained or assumed environmental liabilities, (ii) a liability of $3 million for retained or assumed litigation liabilities, and (iii) an indemnification liability related to legal and environmental matters of $58 million. Liabilities associated with discontinued and/or divested operations and businesses of Historical Dow generally were allocated to or retained by Dow. The allocation of liabilities associated with the discontinued and/or divested operations and businesses of Historical EID is discussed below.

Under the Separation and Distribution Agreement and the Letter Agreement between Corteva and DuPont, DDOB liabilities of Historical EID primarily related to Historical EID’s agriculture business were allocated to or retained by Corteva and those primarily related to Historical EID’s specialty products business were allocated to or retained by the Company. Historical EID DDOB liabilities not primarily related to Historical EID’s agriculture business or specialty products business (“Stray Liabilities”), are allocated as follows:

While DuPont believes it is probable that it will incur a liability related to Non-PFAS Stray Liabilities, such liability is not reasonably estimable at March 31, 2020. Therefore, at March 31, 2020, DuPont has not recorded an accrual related to Non-PFAS Liabilities.

DuPont expects to continue to incur costs and expenses such as attorneys’ fees and expenses and court costs in connection with the matters described below, which the Company will expense as incurred in accordance with its accounting policy for litigation matters.

On July 1, 2015, Historical EID completed the separation of Historical EID’s Performance Chemicals segment through the spinoff of all the issued and outstanding stock of The Chemours Company (“Chemours”) to holders of Historical EID common stock. In connection with the spin, Historical EID and Chemours entered into a Separation Agreement (as amended, the "Chemours Separation Agreement"). Pursuant to the Chemours Separation Agreement, Chemours is obligated to indemnify Historical EID, including its current or former affiliates, against certain litigation, environmental and other liabilities that arose prior to the Chemours Separation. 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 2017, Historical EID and Chemours amended the Chemours Separation Agreement to provide for a limited sharing of potential future PFOA liabilities for a five-year period that began on July 6, 2017. The amended agreement provides that during that five-year period, Chemours will annually pay the first $25 million of future PFOA liabilities and, if that amount is exceeded, Historical EID will pay any excess amount up to the next $25 million, with Chemours annually bearing any excess liabilities above that amount. If Historical EID were required to pay PFOA liabilities pursuant to the amended agreement, fifty percent of such obligation would be borne by the Company in accordance with the Letter Agreement. In connection with the foregoing, the Company has not recorded or paid a PFOA liability. At the end of the five-year period, this limited sharing agreement will expire, and Chemours’ indemnification obligations under the Chemours Separation Agreement will continue unchanged.

On May 13, 2019, Chemours filed suit in the Delaware Court of Chancery against Historical EID, Corteva and the Company in an attempt to limit its responsibility for the litigation and environmental liabilities allocated to and assumed by Chemours under the Chemours Separation Agreement. Chemours is asking the court to rewrite the Chemours Separation Agreement by either limiting Chemours’ liabilities or, alternatively, ordering the return to Chemours of all or a portion of a $3.91 billion dividend that Chemours paid to Historical EID, Chemours’ then-sole-shareholder, just prior to the spin of Chemours. DuPont and Corteva, acting jointly, filed a motion to dismiss the lawsuit for lack of subject matter jurisdiction and initiated an arbitration of the dispute as required under the Chemours Separation Agreement. In December 2019, following argument, the Delaware Court of Chancery stayed arbitration pending resolution of the motion to dismiss. On March 30, 2020, the Court of Chancery granted the motion to dismiss and rejected Chemours’ arguments in their entirety. Chemours filed a notice of appeal on April 17, 2020 and may file a motion to stay the arbitration process pending consideration of such an appeal by the Delaware Supreme Court. In the interim, the confidential arbitration process will proceed.

Indemnifiable Losses related to the Chemours suit are PFAS Stray Liabilities subject to the sharing arrangement between DuPont and Corteva, described above. The Company believes the probability of a final unappealable judgment of liability with respect to the Chemours suit to be remote; the defendants continue to vigorously defend full indemnity rights as set forth in the Chemours Separation Agreement. 

Historical EID is a party to legal proceedings relating to the use of PFOA and PFCs by its former Performance Chemicals segment. Indemnifiable Losses related to PFAS liabilities allocated to and assumed by Chemours under the Chemours Separation Agreement generally are PFAS Stray Liabilities subject to the sharing arrangement between DuPont and Corteva, described above.

Generally, Chemours, with reservations, including as to alleged fraudulent conveyance and voidable transactions, is defending and indemnifying Historical EID in the PFAS Matters discussed below. Although Chemours has refused the tender of the Company’s defense in the actions in which the Company has been named, DuPont believes it is remote that it will ultimately incur a liability in connection with these PFAS Matters.

DuPont, which was formed after the spin-off of Chemours, is not named in the personal injury and other PFAS actions discussed below.

In 2004, Historical EID settled a West Virginia state court class action, Leach v. DuPont, which alleged that PFOA from Historical EID’s former Washington Works facility had contaminated area drinking water supplies and affected the health of area residents. Historical EID has residual liabilities under the Leach settlement related to providing PFOA water treatment to six area water districts and private well users and to fund, through an escrow account, up to $235 million for a medical monitoring program for eligible class members.

Members of the Leach class have standing to pursue personal injury claims for just six health conditions that an expert panel appointed under the Leach settlement reported in 2012 had a “probable link” (as defined in the settlement) with PFOA: pregnancy-induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and diagnosed high cholesterol. In 2017, Chemours and Historical EID each paid $335 million to settle the multi-district litigation in the U.S. District Court for the Southern District of Ohio (“Ohio MDL”), thereby resolving claims of about 3,550 plaintiffs alleging injury from exposure to PFOA in drinking water. The 2017 settlement did not resolve claims of Leach class members who did not have claims in the Ohio MDL or whose claims are based on diseases first diagnosed after February 11, 2017. About 80 claims alleging personal injury, including kidney and testicular cancer claims, have been filed since the 2017 settlement. These claims are currently pending in the Ohio MDL. The first two cases, one captioned “Abbott v E. I. du Pont de Nemours and Company” and the other “Swartz v. E. I. du Pont de Nemours and Company”, involving a testicular cancer and a kidney cancer claim, respectively, proceeded to trial in January 2020. In the Abbott case, the jury returned a verdict in March 2020 against Historical EID, awarding $50 million in compensatory damages to the plaintiff and his wife, who claimed that exposure to PFOA in drinking water caused him to develop testicular cancer. Historical EID will appeal the verdict. The plaintiffs also sought but were not awarded punitive damages. In the Swartz matter, the jury could not reach a verdict. Therefore, the court declared a mistrial and the matter will be retried at a later date. The trials in the cases originally scheduled for June 2020 have been postponed to August 2020 due to the COVID-19 pandemic.

In addition to the actions described above, there are about 100 cases alleging damages to natural resources, the environment and/or property as well as various other allegations. DuPont is named as a defendant in certain of these actions as discussed below.

Since May 2017, a number of municipal water districts and state attorneys general have filed lawsuits against Historical EID, Chemours, 3M, and others, claiming contamination of public water systems by certain PFAS compounds. Such actions are currently pending in Ohio, Michigan, New Jersey, New Hampshire, New York, and Vermont. Generally, the states seek economic impact damages for alleged harm to natural resources, punitive damages, and present and future costs to cleanup contamination from certain PFAS compounds and to abate the alleged nuisance.

DuPont is a named party in the New Jersey suit related to its site in Parlin, New Jersey. In addition, the New Jersey Attorney General and New Jersey State Department of Environmental Protection filed two directives, one of which names DuPont. The directives seek information on the historical and current use of PFAS. DuPont is also a named party to the Vermont suit and the Michigan suit. The amended complaints in the New Jersey and Vermont cases and the complaint filed by Michigan include additional causes of action based on allegations that the transfer by Historical EID of certain PFAS liabilities to Chemours prior to spinning off Chemours resulted in a fraudulent conveyance or voidable transaction.

Lawsuits have been filed by residents and several water districts against Historical EID and Chemours in New York federal and state courts, including a putative class action, alleging exposure to PFOA from third-party defendant manufacturing operations and seeking compensatory, consequential and punitive damages, medical monitoring and attorneys’ fees, expenses and interest.

There are several actions pending in federal court against Historical EID and Chemours, relating to discharges of PFCs, including GenX, into the Cape Fear River. GenX is a polymerization processing aid and a replacement for PFOA introduced by Historical EID which Chemours continues to manufacture at its Fayetteville Works facility in Bladen County, North Carolina. One of these actions is a consolidated putative class action that asserts claims for damages and other relief on behalf of putative classes of property owners and residents in areas near or who draw drinking water from the Cape Fear River. Another action is a consolidated action brought by various North Carolina water authorities, including the Cape Fear Public Utility Authority and Brunswick County, that seek actual and punitive damages as well as injunctive relief. In addition, an action is pending in North Carolina state court on behalf of about 100 plaintiffs who own wells and property near the Fayetteville Works facility. The plaintiffs seek damages for nuisance allegedly caused by releases of certain PFCs from the site.

Beginning in April 2019, several dozen lawsuits involving water contamination arising from the use of PFAS-containing aqueous firefighting foams (“AFFF”) were filed against Historical EID, Chemours, 3M and other AFFF manufacturers and in different parts of the country. Most were consolidated in multi-district litigation docket in federal district court in South Carolina (the “SC MDL”). Many of those cases also name DuPont as a defendant. Those actions largely seek remediation of the alleged PFAS contamination in and around military bases and airports as well as medical monitoring of affected residents.

As of the latter part of April 2020, approximately 600 personal injury cases have been filed directly in the SC MDL and assert claims on behalf of individual firefighters and others who allege that exposure to PFAS in firefighting foam caused them to develop cancer, including kidney and testicular cancer. DuPont has been named as a defendant in approximately 565 personal injury AFFF cases. DuPont is seeking the dismissal of DowDuPont and DuPont from these actions. Historical EID and the Company have never made or sold aqueous film forming foam, PFOS or PFOS containing products.

Additionally, a case filed by a former firefighter is pending in the Southern District of Ohio seeking certification of a nationwide class of individuals who have detectable levels of PFAS in their blood serum. The suit was filed against 3M and several other defendants in addition to Chemours and Historical EID. The complaint specifically seeks, among other things, the creation of a “PFAS Science Panel” to study the effects of PFAS, but expressly states that the class does not seek compensatory damages for personal injuries. In February 2020, the court denied the defendants' motion to transfer this case to the SC MDL.

In addition to the specific matters described above, the Company is party to other claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, governmental regulation, contract and commercial litigation, and other actions. Certain of these actions may purport to be class actions and seek damages in very large amounts. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of the Company.

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. At March 31, 2020, the Company had accrued obligations of $77 million for probable environmental remediation and restoration costs, inclusive of $35 million retained and assumed following the Distributions and $42 million of indemnified liabilities. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the interim Condensed Consolidated Balance Sheets. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to $171 million above the amount accrued at March 31, 2020. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the Company’s results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration. At December 31, 2019, the Company had accrued obligations of $77 million for probable environmental remediation and restoration costs.

Pursuant to the Separation and Distribution Agreement, the Company is required to indemnify certain clean-up responsibilities and associated remediation costs. The accrued environmental obligations of $77 million as of March 31, 2020 includes amount for which the Company indemnifies Dow and Corteva. At March 31, 2020, the Company has indemnified Dow and Corteva $8 million and $34 million, respectively.

The Company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates and customers. At March 31, 2020 and December 31, 2019, the Company had directly guaranteed $185 million and $187 million, respectively, of such obligations. These amounts represent the maximum potential amount of future (undiscounted) payments that the Company could be required to make under the guarantees. The Company would be required to perform on these guarantees in the event of default by the guaranteed party.

The Company assesses the payment/performance risk by assigning default rates based on the duration of the guarantees. These default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical default history for counterparties that do not have published credit ratings. For counterparties without an external rating or available credit history, a cumulative average default rate is used.

Operating lease costs for the three months ended March 31, 2020 and 2019 were $42 million and $44 million, respectively. Operating cash flows from operating leases were $42 million and $41 million for the three months ended March 31, 2020 and 2019, respectively.

Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. New operating lease assets and liabilities entered into during the three months ended March 31, 2020 were $57 million and immaterial for the three months ended March 31, 2019. Supplemental balance sheet information related to leases was as follows:

On June 1, 2019, the Company's Board of Directors approved a new $2 billion share buyback program, which expires on June 1, 2021. During the first quarter, the Company repurchased and retired 6.1 million shares for $232 million. At March 31, 2020, the Company had repurchased and retired 16.9 million shares under this program at a total cost of $982 million.

The following table summarizes the activity related to each component of accumulated other comprehensive loss ("AOCL") for the three months ended March 31, 2020 and 2019:

The tax effects on the net activity related to each component of other comprehensive income (loss) for the three months ended March 31, 2020 and 2019 were as follows:

A summary of the reclassifications out of AOCL for the three months ended March 31, 2020 and 2019 is provided as follows:

Ownership interests in the Company's subsidiaries held by parties other than the Company are presented separately from the Company's equity in the interim Condensed Consolidated Balance Sheets as "Noncontrolling interests." The amount of consolidated net income attributable to the Company and the noncontrolling interests is both presented on the face of the interim Consolidated Statements of Operations.

The following table summarizes the activity for equity attributable to noncontrolling interests for the three months ended March 31, 2020 and 2019:

The following sets forth the components of the Company's net periodic benefit (credit) cost for defined benefit pension plans and other post employment benefits:

The continuing operations portion of the net periodic benefit (credit) cost, other than the service cost component, is included in "Sundry income (expense) - net" in the interim Consolidated Statements of Operations.

DuPont expects to make additional contributions in the aggregate of approximately $60 million by year-end 2020.

A summary of the Historical Dow and Historical DuPont stock-based compensation plans can be found in Note 21 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Historical Dow and Historical EID did not merge their equity incentive plans as a result of the Merger. The Historical Dow and Historical EID stock-based compensation plans were assumed by the Company and remained in place with the ability to grant and issue DowDuPont common stock until the Distributions.

Immediately following the Corteva Distribution, DuPont adopted the DuPont Omnibus Incentive Plan ("DuPont OIP") which provides for equity-based and cash incentive awards to certain employees, directors, independent contractors and consultants in the form of stock options, restricted stock units ("RSUs") and performance-based restricted stock units ("PSUs"). Upon adoption of the DuPont OIP, the Historical Dow and Historical EID plans were maintained and rolled into the DuPont OIP as separate subplans. The equity awards under these subplans have the same terms and conditions that were applicable to the awards under the Historical Dow and Historical EID plans immediately prior to the Distributions. All new awards will be granted by the OIP. Under the DuPont OIP, a maximum of 10 million shares of common stock are available for award as of March 31, 2020.

DuPont recognized share-based compensation expense in continuing operations of $41 million and $21 million for the three months ended March 31, 2020 and 2019, respectively. The income tax benefits related to stock-based compensation arrangements were $9 million and $4 million for the three months ended March 31, 2020 and 2019, respectively.

In the first quarter of 2020, the Company granted 1.0 million RSUs, 0.8 million stock options and 0.3 million PSUs. The weighted-average fair values per share associated with the grants were $53.49 per RSU, $8.84 per stock option and $50.23 per PSU. The stock options had a weighted-average exercise price per share of $53.50.

The following table summarizes the fair value of financial instruments at March 31, 2020 and December 31, 2019:

In the ordinary course of business, the Company enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency, interest rate and commodity price risks. The Company has established a variety of derivative programs to be utilized for financial risk management. These programs reflect varying levels of exposure coverage and time horizons based on an assessment of risk.

Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee, consistent with the Company's financial risk management policies and guidelines. Derivative instruments used are forwards, options, futures and swaps. As of the first quarter of 2020, the Company has not designated any derivatives or non-derivatives as hedging instruments.

The Company's financial risk management procedures also address counterparty credit approval, limits and routine exposure monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions and major commodity exchanges. The Company is exposed to credit loss in the event of nonperformance by these counterparties. The Company utilizes collateral support annex agreements with certain counterparties to limit its exposure to credit losses. The Company anticipates performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks associated with these instruments are regularly reported to management.

The notional amounts of the Company's derivative instruments were as follows:

The Company routinely uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal earnings impact, after taxes. The Company may use foreign currency exchange contracts to offset a portion of the Company's

exposure to certain foreign currency-denominated revenues so that gains and losses on the contracts offset changes in the USD value of the related foreign currency-denominated revenues.

The Company utilizes options, futures and swaps that are not designated as hedging instruments to reduce exposure to commodity price fluctuations on purchases of inventory such as soybeans, soybean oil and soybean meal.

Asset and liability derivatives subject to an enforceable master netting arrangement with the same counterparty are presented on a net basis in the interim Condensed Consolidated Balance Sheets. The presentation of the Company's derivative assets and liabilities is as follows:

Foreign currency derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency-denominated assets and liabilities. The amount charged on a pre-tax basis related to foreign currency derivatives not designated as a hedge, which was included in “Sundry income (expense) - net” in the interim Consolidated Statements of Operations, was a gain of $4 million for the three months ended March 31, 2020 ($47 million loss for the months ended March 31, 2019). The income statement effects of other derivatives were immaterial.

The Company does not expect to reclassify gains or losses related to foreign currency contracts from AOCL to income within the next 12 months and there are currently no such amounts included within AOCL.

The following tables summarize the basis used to measure certain assets and liabilities at fair value on a recurring basis: