United states securities and exchange commission

Liquidity & Financial Flexibility

The Company’s primary source of incremental liquidity is cash provided by operating activities. The generation of cash from operations and each of Dow's and DuPont's (the "Subsidiaries") ability to access the commercial paper market, the long-term debt market, syndicated credit lines, bilateral credit lines and bank financing, including committed repurchase facilities, are expected to meet the Company’s cash requirements for working capital, capital expenditures, debt maturities, dividend payments, share repurchases, contributions to pension plans and other needs. The Company’s primary liquidity sources are through the Subsidiaries as discussed below. Management expects that the Company and each of the Subsidiaries will continue to have sufficient liquidity and financial flexibility to meet respective business obligations as they come due.

Dow's Liquidity Sources

Credit Ratings

At January 31, 2018, Dow's credit ratings were as follows:

Credit Ratings	Long-Term Rating	Short-Term Rating	Outlook
Standard & Poor’s	BBB	A-2	Stable
Moody’s Investors Service	Baa2	P-2	Stable
Fitch Ratings	BBB	F2	Watch Positive

Downgrades in Dow's credit ratings would increase borrowing costs on certain indentures and could impact its ability to access credit markets.

Commercial Paper - Dow

Dow issues promissory notes under U.S. and Euromarket commercial paper programs. At December 31, 2017, Dow had $231 million of commercial paper outstanding (zero at December 31, 2016). Dow maintains access to the commercial paper market at competitive rates. Amounts outstanding under Dow's commercial paper programs during the period may be greater, or less, than the amount reported at the end of the period. Subsequent to December 31, 2017, Dow issued approximately $700 million of commercial paper that remains outstanding at February 15, 2018.

Committed Credit Facilities - Dow

In the event the Company has short-term liquidity needs, it can access liquidity through Dow's committed and available credit facilities. At December 31, 2017, Dow had total committed credit facilities of $10.9 billion and available credit facilities of $6.4 billion . See Note 15 to the Consolidated Financial Statements for additional information on committed and available credit facilities.

In connection with the Dow Corning ownership restructure, on May 31, 2016, Dow Corning incurred $4.5 billion of indebtedness under a certain third party credit agreement ("DCC Term Loan Facility"). Dow subsequently guaranteed the obligations of Dow Corning under the DCC Term Loan Facility and, as a result, the covenants and events of default applicable to the DCC Term Loan Facility are substantially similar to the covenants and events of default set forth in Dow's Five Year Competitive Advance and Revolving Credit Facility. In the second quarter of 2017, Dow Corning exercised a 364-day extension option making amounts borrowed under the DCC Term Loan Facility repayable on May 29, 2018, and amended the DCC Term Loan Facility to include an additional 19-month extension option, at Dow Corning's election, upon satisfaction of certain customary conditions precedent. On February 8, 2018, Dow Corning delivered a notice of intent to exercise the 19-month extension option on the DCC Term Loan Facility.
Uncommitted Credit Facilities and Outstanding Letters of Credit - Dow

Dow had uncommitted credit facilities in the form of unused bank credit lines of approximately $2,853 million at December 31, 2017 . These lines can be used to support short-term liquidity needs and general purposes, including letters of credit. Dow had outstanding letters of credit of $433 million at December 31, 2017 . These letters of credit support commitments made in the ordinary course of business.

Accounts Receivable Securitization Facilities - Dow

Dow has access to committed accounts receivable securitization facilities in the United States and Europe, from which amounts available for funding are based upon available and eligible accounts receivable within each of the facilities. Dow renewed the United States facility in June 2015 for a term that extends to June 2018. The Europe facility was renewed in July 2015 for a term that extends to July 2018.

61


Table of Contents
In the fourth quarter of 2017, Dow suspended further sales of trade accounts receivable through these facilities and began reducing outstanding balances under these facilities through collections of trade accounts receivable previously sold to such conduits. Dow has the ability to resume such sales to the conduits, subject to certain prior notice requirements, at the discretion of Dow. See Note  14 to the Consolidated Financial Statements for further information.
DuPont's Liquidity Sources

Credit Ratings

At January 31, 2018, DuPont's credit ratings were as follows:

Credit Ratings	Long-Term Rating	Short-Term Rating	Outlook
Standard & Poor’s	A-	A-2	Stable
Moody’s Investors Service	A3	P-2	Negative
Fitch Ratings	A	F1	Watch Negative

Downgrades in DuPont's credit ratings would increase borrowing costs on certain indentures and could impact its ability to access debt capital markets.

Commercial Paper - DuPont

DuPont issues promissory notes under U.S. commercial paper programs. At December 31, 2017 , DuPont had $1,436 million of commercial paper outstanding. DuPont maintains access to the commercial paper market at competitive rates.

Committed Credit Facilities - DuPont

In the event the Company has short-term liquidity needs, it can access liquidity through DuPont's committed and available credit facilities. At December 31, 2017 , DuPont had total committed credit facilities of $7.5 billion under its Term Loan Facility and amended revolving credit facility (the "RCF") with remaining available credit facilities of $6.0 billion. See Note 15 to the Consolidated Financial Statements for additional information.

Term Loan Facility - DuPont

In March 2016, DuPont entered into a credit agreement that provides for a three-year, senior unsecured term loan facility in the aggregate principal amount of $4.5 billion (the "Term Loan Facility") under which DuPont may make up to seven term loan borrowings and amounts repaid or prepaid are not available for subsequent borrowings. The facility was amended in 2017 to extend the date on which the commitment to lend terminates to July 27, 2018. The proceeds from the borrowings under the Term Loan Facility will be used for DuPont's general corporate purposes including debt repayment, working capital and funding a portion of DowDuPont's costs and expenses. The Term Loan Facility matures in March 2019, unless extended by mutual agreement, at which time all outstanding borrowings, including accrued but unpaid interest, become immediately due and payable. At December 31, 2017, DuPont had made three term loan borrowings in an aggregate principal amount of $1.5 billion and had unused commitments of $3 billion under the Term Loan Facility.

Uncommitted Credit Facilities and Outstanding Letters of Credit - DuPont

DuPont had uncommitted credit facilities in the form of unused bank credit lines of approximately $731 million at December 31, 2017 . These lines can be used to support short-term liquidity needs and general corporate purposes, including letters of credit. DuPont had outstanding letters of credit of $177 million at December 31, 2017 . These letters of credit support commitments made in the ordinary course of business.

Debt

The Company’s public debt instruments and primary, private credit agreements (collectively "Debt Instruments") reside with the Subsidiaries. See Note 15 to the Consolidated Financial Statements for information related to the Subsidiaries' notes payable and long-term debt activity, including debt retired and issued. The following table reflects the debt of the Subsidiaries:

Total Debt	Dec 31, 2017									Dec 31, 2016
In millions	Dow			DuPont			Total
Notes payable	$	484		$	1,464		$	1,948		$	272
Long-term debt due within one year	752			1,315			2,067			635
Long-term debt	19,765			10,291			30,056			20,456
Total debt	$	21,001		$	13,070		$	34,071		$	21,363

62

Table of Contents
The Debt Instruments of the Subsidiaries contain, among other provisions, certain customary restrictive covenant and default provisions. Dow’s Five Year Competitive Advance and Revolving Credit Facility contains a financial covenant that Dow must maintain its ratio of consolidated indebtedness to its consolidated capitalization at no greater than 0.65 to 1.00 at any time the aggregate outstanding amount of loans under the Five Year Competitive Advance and Revolving Credit Facility equals or exceeds $500 million. The ratio of Dow’s consolidated indebtedness to its consolidated capitalization was 0.43 to 1.00 at December 31, 2017 . DuPont’s Term Loan Facility and RCF contain a financial covenant requiring that the ratio of total indebtedness to total capitalization for DuPont and its consolidated subsidiaries not exceed 0.6667 to 1.00. At December 31, 2017 , management believes each of the Subsidiaries were in compliance with all of their respective covenants and default provisions. For information on the Subsidiaries' covenants and default provisions, see Note 15 to the Consolidated Financial Statements.


Dividends

The following table provides dividends paid to common and preferred shareholders for the years ended December 31, 2017 , 2016 and 2015 :

Dividends Paid for the years ended Dec 31
In millions, except per share amounts		2017			2016			2015
Dividends paid, per common share 1		$	2.22		$	1.84		$	1.68
Dividends paid to common stockholders 2		$	3,394		$	2,037		$	1,913
Dividends paid to preferred shareholders 3		$	—		$	425		$	340
1.	The 2017 dividend is comprised of $0.38 per share of DowDuPont dividends declared and paid in the fourth quarter of 2017 and the remaining amount relates to payments of Dow dividends declared prior to the Merger.
2.	The 2017 dividend consists of $885 million paid to DowDuPont common stockholders for dividends declared after the Merger, as well as $2,179 million paid to Dow common stockholders for dividends declared prior to the Merger, and $330 million paid to DuPont common stockholders after the Merger for dividends declared prior to the Merger.

3. Dividends paid to Dow preferred shareholders in 2016 includes payment of the fourth quarter 2016 declared dividend. On December 30, 2016, Dow converted all outstanding shares of its Dow Preferred Stock into shares of Dow's common stock. As a result of this conversion, no shares of Dow Preferred Stock are issued or outstanding.
Share Repurchase Program

On November 2, 2017, the Company announced the Board authorized an initial $4 billion share repurchase program, which has no expiration date. At December 31, 2017, the Company had spent $1 billion on repurchases of DowDuPont common stock under the program. Although there is no timeline to complete the share repurchase program, DowDuPont intends to repurchase approximately $1.0 billion of the Company's stock in the first quarter of 2018.

In connection with the Merger, Dow's $9.5 billion share repurchase program was canceled. At the time of cancellation, Dow had spent $8.1 billion on repurchases of Dow common stock under the share buyback program.
For additional information related to the share repurchase program, see Part II. Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities and Note 17 to the Consolidated Financial Statements.
Rabbi Trust

DuPont entered into a trust agreement in 2013 (as amended and restated in 2017) that established and requires DuPont 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. As a result, in November 2017, DuPont contributed $571 million to the Trust. In the fourth quarter of 2017, $13 million was distributed to DuPont according to the Trust agreement and at December 31, 2017, the balance in the Trust was $558 million.

Pension Plans

Dow and DuPont did not merge their pension plans and other postretirement benefit plans as a result of the Merger. Dow and DuPont have defined benefit pension plans in the United States and a number of other countries. Dow and DuPont’s funding policies are to contribute to defined benefit pension plans in the United States and a number of other countries based on pension funding laws and local country requirements. Contributions exceeding funding requirements may and have been made at Dow and DuPont’s discretion. In 2017 , 2016 and 2015 , Dow contributed approximately $1,676 million, $629 million and $844 million to its pension plans, respectively, including contributions to fund benefit payments for its non-qualified pension plans. DuPont contributed $68 million post-Merger to its pension plans, including contributions to fund benefit payments for its non-qualified pension plans. Dow expects to contribute approximately $500 million to its pension plans and DuPont expects to contribute approximately $200 million to its pension plans in 2018 . See Note 19 to the Consolidated Financial Statements for additional information concerning the Company’s pension plans.

63


Table of Contents
Dow

The provisions of a U.S. non-qualified pension plan for Dow require the payment of plan obligations to certain participants upon a change in control of Dow, which occurred at the time of the Merger. Certain participants could elect to receive a lump-sum payment or direct Dow to purchase an annuity on their behalf using the after-tax proceeds of the lump sum. In the fourth quarter of 2017, Dow paid $940 million to plan participants and $230 million to an insurance company for the purchase of annuities, which were included in "Pension contributions" in the consolidated statements of cash flows. Dow also paid $205 million for income and payroll taxes for participants electing the annuity option. Dow recorded a settlement charge of $687 million associated with the payout in the fourth quarter of 2017.

DuPont

Prior to the Merger, DuPont made total contributions of $2.9 billion to its principal U.S pension plan in 2017, reflecting discretionary contributions. The $2.9 billion contribution was taken as a deduction on DuPont’s 2016 federal tax return and resulted in a net operating loss for tax purposes. This loss generated an overpayment of taxes of approximately $800 million. A portion of the overpayment will be applied against the current year tax liability. The remainder of the loss generated a refund of approximately $700 million, which was received during the fourth quarter of 2017.