United states securities and exchange commission
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- Bu səhifədəki naviqasiya:
- Safety Construction Outlook for 2018
- 2017 Versus 2016
- 2016 Versus 2015
- LIQUIDITY AND CAPITAL RESOURCES
- Cash Flow Summary
- Net Working Capital at Dec 31
- Free Cash Flow
- Reconciliation of "Cash Provided by Operating Activities" to Free Cash Flow
2016 Versus 2015 Safety & Construction net sales were $1,877 million in 2016, down from $1,938 million in 2015. Net sales decreased 3 percent compared with 2015, with volume down 2 percent and local price and product mix down 1 percent. Volume decreased in all geographic regions, except Latin America, primarily in response to soft demand for reverse osmosis membranes used in industrial applications. Price was down in all geographic regions, primarily in response to lower raw material costs. Operating EBITDA was $415 million in 2016, compared with $400 million in 2015. Operating EBITDA increased in 2016 as lower operating expenses more than offset the impact of lower selling prices and decreased sales volume. Safety & Construction Outlook for 2018 Safety & Construction's 2018 Operating EBITDA is expected to increase notably as compared with 2017 pro forma Operating EBITDA, driven by lower pension/OPEB costs, improved plant performance, the favorable impacts of cost synergies and improved volumes. For 2018, the Company anticipates increased demand across all regions in industrial, construction and water filtration markets with demand for aramids and thermal apparel remaining strong. These market increases are expected to contribute to improved volumes, primarily in TYVEK® protective materials, building solutions and water filtration. CORPORATE Corporate includes certain enterprise and governance activities (including insurance operations, environmental operations, geographic management, etc.); business incubation platforms; non-business aligned joint ventures; gains and losses on the sales of financial assets; severance costs; non-business aligned litigation expenses; discontinued or non-aligned businesses and pre commercial activities.
2017 Versus 2016 Net sales for Corporate, which primarily relate to insurance operations, were $387 million in 2017, up from $281 million in 2016. Pro forma net sales for 2017 were $393 million, up from $294 million in 2016. Pro forma Operating EBITDA in 2017 was a loss of $843 million, compared with a loss of $812 million in 2016. Compared with 2016, pro forma Operating EBITDA decreased, primarily due to lower gains on asset sales and higher discontinued business costs, which were partially offset by lower pre-commercial expenses. 2016 Versus 2015 Net sales for Corporate were $281 million in 2016, down from $349 million in 2015. Net sales declined in 2016, primarily due to the divestiture of the AgroFresh business in the third quarter of 2015. Operating EBITDA in 2016 was a loss of $173 million, compared with a loss of $257 million in 2015. Operating EBITDA improved in 2016 as lower asbestos-related defense costs resulting from a change in accounting policy and lower performance-based compensation costs more than offset the absence of earnings from the divestiture of the AgroFresh business. 58
Table of Contents LIQUIDITY AND CAPITAL RESOURCES The Company had cash and cash equivalents and marketable securities of $14,394 million at December 31, 2017 and $6,607 million at December 31, 2016 , of which $12,177 million at December 31, 2017 and $4,890 million at December 31, 2016 , was held by subsidiaries in foreign countries, including United States territories. For each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States. The Tax Cuts and Jobs Act (“The Act”) requires companies to pay a one-time transition tax on the earnings of foreign subsidiaries, a portion of which were previously considered permanently reinvested by the Company (see Note 8 to the Consolidated Financial Statements for additional details on The Act). The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the Subsidiaries' operational activities and future foreign investments. The Company is currently evaluating the impact of The Act on its permanent reinvestment assertion. In addition to the one-time transition tax, a deferred tax liability for withholding taxes has been accrued on a portion of unrepatriated earnings at December 31, 2017. At December 31, 2017, management believed that sufficient liquidity was available in the United States. In the event that additional foreign funds are needed in the United States, the Company has the ability to repatriate additional funds. The repatriation could result in an adjustment to the tax liability due to contributing factors such as withholding taxes, income taxes and the impact of foreign currency movements. As such, it is not practicable to calculate the unrecognized deferred tax liability on undistributed foreign earnings. The Company’s cash flows from operating, investing and financing activities, as reflected in the consolidated statements of cash flows, are summarized in the following table:
Cash Flows from Operating Activities Cash provided by operating activities increased in 2017 compared with 2016 , primarily driven by higher cash earnings, advance payments from customers in the Agriculture segment and customers with long-term ethylene supply agreements, a tax refund related to a voluntary pension contribution, and a one-time cash receipt related to the Nova patent infringement award. These items were partially offset by a reduction in balances in accounts receivable securitization facilities, increased pension contributions resulting from a change in control provision in a Dow non-qualified U.S. pension plan, higher integration and separation costs and a cash payment related to the Bayer CropScience arbitration matter. Cash provided by operating activities decreased in 2016 compared with 2015 , primarily due to cash payments related to the settlement of the urethane matters class action lawsuit and opt out cases, increased integration and separation costs, a cash payment related to the settlement of an uncertain tax position and a one-time payment related to the termination of a terminal use agreement.
Net working capital increased from December 31, 2016 to December 31, 2017, primarily related to the impact of the Merger. See Note 3 to the Consolidated Financial Statements for additional information on the Merger. 59
Cash provided by investing activities in 2017 was primarily from cash acquired in the Merger, proceeds from sales and maturities of investments and divestitures, including the divestitures of the DAS Divested Ag Business, the EAA Business and certain assets related to DuPont's crop protection business and R&D organization. These items were partially offset by capital expenditures, purchases of investments, payments to a trust related to certain non-qualified benefit and deferred compensation plans as a result of the Merger and loans to nonconsolidated affiliates, primarily with Sadara. Cash used for investing activities in 2016 was primarily for capital expenditures as well as investments in and loans to nonconsolidated affiliates, primarily with Sadara, which were partially offset by net cash acquired in the Dow Corning ownership restructure. Cash used for investing activities in 2015 was primarily for capital expenditures; purchases of investments, including the repayment of outstanding loans issued under company-owned life insurance policies; and investments in and loans made to nonconsolidated affiliates, primarily with Sadara. This was partially offset by proceeds received from divestitures, including the divestitures of ANGUS Chemical Company and the AgroFresh business, proceeds from the sale of Dow's interest in MEGlobal and proceeds from sales and maturities of investments. In 2017, Dow loaned $735 million to Sadara and converted $718 million to equity. Dow had a note receivable from Sadara of $275 million at December 31, 2017. Dow loaned $1,015 million to Sadara and converted $1,230 million to equity during 2016, and had a note receivable from Sadara of $258 million at December 31, 2016. All or a portion of the outstanding loan to Sadara could potentially be converted to equity in future periods. Dow expects to loan between zero and $200 million to Sadara in 2018. See Note 12 to the Consolidated Financial Statements for additional information. On August 28, 2017, Dow and Saudi Aramco announced a non-binding Memorandum of Understanding that sets forth a process for Dow to acquire an additional 15 percent ownership interest in Sadara from Saudi Aramco. The current equity ownership split is 65 percent Saudi Aramco and 35 percent Dow. If the potential transaction is concluded as presently proposed, Dow and Saudi Aramco would each hold a 50 percent equity stake in Sadara. The Company's capital expenditures, including capital expenditures of consolidated variable interest entities, were $3,570 million in 2017, $3,804 million in 2016 and $3,703 million in 2015. The Company expects capital spending in 2018 to be approximately $4.2 billion to $4.4 billion. In addition, the Company expects approximately $600 million of additional capital spending for targeted cost synergy and business separation projects. Cash Flows from Financing Activities Cash used for financing activities in 2017 included dividends paid to stockholders, repurchases of DowDuPont common stock and payments of notes payable and long-term debt. Cash used for financing activities in 2016 included dividends paid to stockholders (including the accelerated payment of the fourth quarter preferred dividend), repurchases of Dow common stock and payments of long-term debt. Cash used for financing activities in 2015 included dividends paid to stockholders, repurchases of Dow common stock and payments of long-term debt, including the early redemption of International Notes ("InterNotes") which was partially offset by proceeds from the issuance of long-term debt, including debt related to the split-off of the chlorine value chain. See Notes 15 and 17 to the Consolidated Financial Statements for additional information related to the issuance or retirement of debt and the share repurchase program, respectively, and Note 6 for information on the split-off of the chlorine value chain. Free Cash Flow The Company defines free cash flow as cash provided by operating activities less capital expenditures. Under this definition, free cash flow represents the cash that remains available to the Company, after investing in its asset base, to fund obligations using the Company's primary source of incremental liquidity - cash provided by operating activities. Free cash flow is an integral financial measure used in the Company's financial planning process. This financial measure is not recognized in accordance with U.S. GAAP and should not be viewed as an alternative to U.S. GAAP financial measures of performance. All companies do not calculate non-GAAP financial measures in the same manner and, accordingly, the Company's free cash flow definition may not be consistent with the methodologies used by other companies. For further information relating to the change in cash provided by operating activities, see the discussion above under the section entitled "Cash Flows from Operating Activities."
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