Document
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
 
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-815
 
E. I. du Pont de Nemours and Company
(Exact Name of Registrant as Specified in Its Charter)
Delaware
 
51-0014090
(State or other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
974 Centre Road, Wilmington, Delaware 19805
(Address of Principal Executive Offices)
 
(302) 774-1000
(Registrant’s Telephone Number)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x   No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files.)  Yes  x   No  o
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
Large Accelerated Filer x
 
Accelerated Filer o
 
 
 
Non-Accelerated Filer o
 
Smaller reporting company o
 
Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes  o   No  x

The Registrant had 869,342,000 shares (excludes 87,041,000 shares of treasury stock) of common stock, $0.30 par value, outstanding at October 17, 2016.
 
 

Table of Contents

E. I. DU PONT DE NEMOURS AND COMPANY

Table of Contents
 
The terms “DuPont” or the “company” as used herein refer to E. I. du Pont de Nemours and Company and its consolidated subsidiaries, or to E. I. du Pont de Nemours and Company, as the context may indicate. 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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Table of Contents

PART I.  FINANCIAL INFORMATION
 
Item 1.
CONSOLIDATED FINANCIAL STATEMENTS
 
E. I. du Pont de Nemours and Company
Consolidated Income Statements (Unaudited)
(Dollars in millions, except per share)
 
 
Three Months Ended
Nine Months Ended
 
September 30,
September 30,
 
2016
2015
2016
2015
Net sales
$
4,917

$
4,873

$
19,383

$
19,831

Cost of goods sold
3,090

3,084

11,322

11,703

Other operating charges
176

91

504

413

Selling, general and administrative expenses
1,016

1,046

3,355

3,540

Research and development expense
410

441

1,260

1,415

Other (loss) income, net
(16
)
98

407

552

Interest expense
93

82

278

260

Employee separation / asset related charges, net
172

—

159

40

(Loss) income from continuing operations before income taxes
(56
)
227

2,912

3,012

(Benefit from) provision for income taxes on continuing operations
(69
)
96

643

886

Income from continuing operations after income taxes
13

131

2,269

2,126

(Loss) income from discontinued operations after income taxes
(7
)
104

(7
)
89

Net income
6

235

2,262

2,215

Less: Net income attributable to noncontrolling interests
4

—

14

9

Net income attributable to DuPont
$
2

$
235

$
2,248

$
2,206

Basic earnings (loss) per share of common stock:
 
 
 
 
Basic earnings per share of common stock from continuing operations
$
0.01

$
0.14

$
2.57

$
2.34

Basic (loss) earnings per share of common stock from discontinued operations
(0.01
)
0.12

(0.01
)
0.10

Basic earnings per share of common stock
$
—

$
0.26

$
2.56

$
2.44

Diluted earnings (loss) per share of common stock:
 
 
 
 
Diluted earnings per share of common stock from continuing operations
$
0.01

$
0.14

$
2.56

$
2.33

Diluted (loss) earnings per share of common stock from discontinued operations
(0.01
)
0.12

(0.01
)
0.10

Diluted earnings per share of common stock
$
—

$
0.26

$
2.55

$
2.43

Dividends per share of common stock
$
0.38

$
0.38

$
1.14

$
1.34

 
See Notes to the Consolidated Financial Statements beginning on page 7.



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E. I. du Pont de Nemours and Company
Consolidated Statements of Comprehensive Income (Unaudited)
(Dollars in millions, except per share)

 
Three Months Ended
Nine Months Ended
 
September 30,
September 30,
 
2016
2015
2016
2015
Net income
$
6

$
235

$
2,262

$
2,215

Other comprehensive income (loss), before tax:
 
 
 
 
      Cumulative translation adjustment
114

(125
)
187

(1,405
)
      Net revaluation and clearance of cash flow hedges to earnings:
 
 
 
 
      Additions and revaluations of derivatives designated as cash flow hedges
(3
)
(22
)
34

(36
)
      Clearance of hedge results to earnings
—

—

18

12

      Net revaluation and clearance of cash flow hedges to earnings
(3
)
(22
)
52

(24
)
      Pension benefit plans:
 
 
 
 
      Net (loss) gain
(228
)
634

(2,700
)
628

      Effect of foreign exchange rates
4

54

36

92

      Reclassifications to net income:
 
 
 
 
                Amortization of prior service benefit
(2
)
(3
)
(5
)
(6
)
                Amortization of loss
229

172

605

591

                Curtailment / settlement loss, net
21

37

125

46

      Pension benefit plans, net
24

894

(1,939
)
1,351

      Other benefit plans:
 
 
 
 
      Net loss
—

(73
)
(265
)
(73
)
      Effect of foreign exchange rates
(2
)
(1
)
(2
)
(1
)
      Reclassifications to net income:
 
 
 
 
                Amortization of prior service benefit
(36
)
(39
)
(111
)
(143
)
                Amortization of loss
21

20

56

58

                Curtailment gain, net
—

(274
)
(33
)
(274
)
      Other benefit plans, net
(17
)
(367
)
(355
)
(433
)
      Net unrealized gain on securities
5

—

11

—

Other comprehensive income (loss), before tax
123

380

(2,044
)
(511
)
      Income tax (expense) benefit related to items of other comprehensive income (loss)
(33
)
(176
)
773

(312
)
Other comprehensive income (loss), net of tax
90

204

(1,271
)
(823
)
Comprehensive income
96

439

991

1,392

      Less: Comprehensive income attributable to noncontrolling interests
4

—

14

9

Comprehensive income attributable to DuPont
$
92

$
439

$
977

$
1,383


See Notes to the Consolidated Financial Statements beginning on page 7.


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E. I. du Pont de Nemours and Company
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in millions, except per share) 
 
September 30,
2016
December 31,
2015
Assets
 

 

Current assets
 

 

Cash and cash equivalents
$
4,452

$
5,300

Marketable securities
1,080

906

Accounts and notes receivable, net
7,073

4,643

Inventories
5,168

6,140

Prepaid expenses
525

398

Total current assets
18,298

17,387

Property, plant and equipment, net of accumulated depreciation
   (September 30, 2016 - $14,895; December 31, 2015 - $14,346)
9,654

9,784

Goodwill
4,267

4,248

Other intangible assets
3,787

4,144

Investment in affiliates
687

688

Deferred income taxes
4,466

3,799

Other assets
1,322

1,116

Total
$
42,481

$
41,166

Liabilities and Equity
 

 

Current liabilities
 

 

Accounts payable
$
2,627

$
3,398

Short-term borrowings and capital lease obligations
3,242

1,165

Income taxes
109

173

Other accrued liabilities
3,132

5,580

Total current liabilities
9,110

10,316

Long-term borrowings and capital lease obligations
8,114

7,642

Other liabilities
14,927

12,591

Deferred income taxes
376

417

Total liabilities
32,527

30,966

Commitments and contingent liabilities




Stockholders’ equity
 

 

Preferred stock
237

237

Common stock, $0.30 par value; 1,800,000,000 shares authorized;
   Issued at September 30, 2016 - 956,356,000; December 31, 2015 - 958,388,000
287

288

Additional paid-in capital
11,214

11,081

Reinvested earnings
15,407

14,510

Accumulated other comprehensive loss
(10,667
)
(9,396
)
Common stock held in treasury, at cost
(87,041,000 shares at September 30, 2016 and December 31, 2015)
(6,727
)
(6,727
)
Total DuPont stockholders’ equity
9,751

9,993

Noncontrolling interests
203

207

Total equity
9,954

10,200

Total
$
42,481

$
41,166

 
See Notes to the Consolidated Financial Statements beginning on page 7.

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Table of Contents

E. I. du Pont de Nemours and Company
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions)
 
 
Nine Months Ended
 
September 30,
 
2016
2015
Operating activities
 
 
Net income
$
2,262

$
2,215

Adjustments to reconcile net income to cash used for operating activities:
 

 

Depreciation
707

856

Amortization of intangible assets
272

307

Net periodic pension benefit cost
474

445

Contributions to pension plans
(427
)
(260
)
Gain on sale of businesses and other assets
(385
)
(48
)
Other operating activities - net
668

89

Change in operating assets and liabilities - net
(4,648
)
(5,449
)
Cash used for operating activities
(1,077
)
(1,845
)
Investing activities
 

 

Purchases of property, plant and equipment
(759
)
(1,291
)
Investments in affiliates
(2
)
(59
)
Payments for businesses - net of cash acquired
—

(77
)
Proceeds from sale of businesses and other assets - net
240

79

Purchases of short-term financial instruments
(1,462
)
(928
)
Proceeds from maturities and sales of short-term financial instruments
1,294

676

Foreign currency exchange contract settlements
(370
)
543

Other investing activities - net
(16
)
12

Cash used for investing activities
(1,075
)
(1,045
)
Financing activities
 

 

Dividends paid to stockholders
(1,004
)
(1,210
)
Net increase in short-term (less than 90 days) borrowings
2,624

1,161

Long-term and other borrowings:
 
 
Receipts
783

3,630

Payments
(831
)
(1,529
)
Repurchase of common stock
(416
)
(2,353
)
Proceeds from exercise of stock options
140

208

Cash transferred to Chemours at spin-off
—

(250
)
Other financing activities - net
(16
)
(87
)
Cash provided by (used for) financing activities
1,280

(430
)
Effect of exchange rate changes on cash
24

(266
)
Decrease in cash and cash equivalents
$
(848
)
$
(3,586
)
Cash and cash equivalents at beginning of period
5,300

6,910

Cash and cash equivalents at end of period
$
4,452

$
3,324

 
See Notes to the Consolidated Financial Statements beginning on page 7.


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Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)


Note 1.  Summary of Significant Accounting Policies
Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (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, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included.  Results for interim periods should not be considered indicative of results for a 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, 2015, collectively referred to as the “2015 Annual Report”.  The Consolidated Financial Statements include the accounts of the company and all of its subsidiaries in which a controlling interest is maintained, as well as variable interest entities (VIEs) for which DuPont is the primary beneficiary.

Basis of Presentation
Certain reclassifications of prior year's data have been made to conform to current year's presentation. On July 1, 2015, the company completed the separation of its Performance Chemicals segment through the spin-off of all of the issued and outstanding stock of The Chemours Company (Chemours). In accordance with GAAP, the financial position and results of operations of the Performance Chemicals segment are presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented. The sum of the individual earnings per share amounts from continuing operations and discontinued operations may not equal the total company earnings per share amounts due to rounding. The cash flows and comprehensive income related to the Performance Chemicals segment have not been segregated and are included in the Condensed Consolidated Statements of Cash Flows and Comprehensive Income, respectively, for all periods presented. Amounts related to the Performance Chemicals segment are consistently included or excluded from the Notes to the interim Consolidated Financial Statements based on the respective financial statement line item. See Note 3 for additional information.

Recent Accounting Pronouncements
Accounting Pronouncements Implemented in 2016
In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-17, Income Taxes (Topic 740), Balance Sheet Classification of Deferred Taxes. The amendments under the new guidance require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments in this ASU may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The company adopted this guidance effective January 1, 2016 on a retrospective basis. As a result of the adoption, $368 and $37 of deferred tax assets and liabilities, respectively, were reclassified from current to noncurrent assets and liabilities, respectively, as of December 31, 2015.

In May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820), Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share or its Equivalent. This guidance removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The guidance also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The guidance is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. A reporting entity should apply the amendments retrospectively to all periods presented and early adoption is permissible. The company adopted this guidance effective January 1, 2016. The guidance only impacts disclosure and did not impact the company's financial position or results of operations.

New Accounting Pronouncements to be Implemented
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The new guidance will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The new guidance will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The company is currently evaluating the impact this guidance will have on the Consolidated Financial Statements and related disclosures.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)


In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. The ASU was issued as part of the FASB Simplification Initiative and involves several aspects of accounting for shared-based payment transactions, including the income tax consequences, forfeitures and classification on the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The company is currently evaluating the impact this guidance will have on the Consolidated Financial Statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments under the new guidance will require lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability, other than leases that meet the definition of a short- term lease. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. The new leasing standard will be effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, requiring application at the beginning of the earliest comparative period presented. The company is currently evaluating the impact of adopting this guidance on its financial position and results of operations.

In May 2014, the FASB and the International Accounting Standards Board (IASB) jointly issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which was further updated in March, April, and May 2016. The new guidance clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards (IFRS). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. In July 2015, the FASB approved a deferral of the ASU effective date from annual and interim periods beginning after December 15, 2016 to annual and interim periods beginning after December 15, 2017. The company is currently evaluating the impact of adopting this guidance on its financial position and results of operations.

Note 2. Proposed Merger with Dow Chemical
On December 11, 2015, DuPont and The Dow Chemical Company (Dow) announced entry into an Agreement and Plan of Merger (the Merger Agreement), under which the companies will combine in an all-stock merger of equals (the Merger Transaction) subject to satisfaction of customary closing conditions, including receipt of regulatory approval. The combined company will be named DowDuPont Inc. (DowDuPont). Following the consummation of the Merger Transaction, DuPont and Dow intend to pursue, subject to the receipt of approval by the board of directors of DowDuPont, the separation of the combined company’s agriculture business, specialty products business and material science business through a series of tax-efficient transactions (collectively, the Business Separations.)

Additional information about the Merger Agreement and the Business Separations is set forth in the company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the SEC) on December 11, 2015; the company’s 2015 Annual Report filed with the SEC on February 4, 2016 and the registration statement on Form S-4 (File No. 333-209869) (as amended, the Registration Statement) filed by DowDuPont and declared effective by the SEC on June 9, 2016. The Registration Statement constitutes a prospectus of DowDuPont and a joint proxy statement of Dow and DuPont. The joint proxy statement relates to the separate special meetings of the companies’ respective common stock shareholders of record as of the close of business on June 2, 2016, to adopt the Merger Agreement and related matters. DuPont's special meeting of stockholders was held on July 20, 2016, which resulted in a vote for adoption of the Merger Agreement and approval of related matters.

On August 11, 2016, DuPont and Dow confirmed that the European Commission had initiated a Phase II review of the proposed merger under the European Union Merger Regulation. Phase II generally provides the Commission with 90 working days to review the pending transaction. On September 2, 2016, DuPont and Dow mutually agreed to grant the European Commission an extension of 10 working days in connection with its Phase II review. The European Commission subsequently announced that it suspended its review pending receipt of additional information. After receiving the additional information, the European Commission resumed its review in late September 2016. As a result, the European Commission could take until early February 2017 to complete its review. DuPont and Dow continue to work constructively with regulators to address questions and obtain approval, and to prepare for closing as soon as possible after closing conditions have been met. Consummation of the Merger Transaction is contingent on satisfaction of customary closing conditions, including the receipt of regulatory approval from the U.S., European Union, China, Brazil and Canada. In the event that regulators in key jurisdictions utilize their respective full allotted time to complete review and approval of the Merger Transaction, closing would be expected to occur in the first quarter of 2017.

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Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)


During the three and nine months ended September 30, 2016, the company incurred $122 and $222, respectively, of costs in connection with the planned merger with Dow. These costs were recorded in selling, general and administrative expenses in the company's interim Consolidated Income Statements and primarily include financial advisory, legal, accounting, consulting and other advisory fees and expenses.


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Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 3. Divestitures and Other Transactions
DuPont (Shenzhen) Manufacturing Limited
In March 2016, the company recognized the sale of its 100 percent ownership interest in DuPont (Shenzhen) Manufacturing Limited to the Feixiang Group. The sale of the entity, which held certain buildings and other assets, resulted in a pre-tax gain of $369 ($214 net of tax). The gain was recorded in other (loss) income, net in the company's interim Consolidated Income Statements for the nine months ended September 30, 2016 and reflected as a Corporate item.
Performance Chemicals
On July 1, 2015 (the Distribution Date), DuPont completed the separation of its Performance Chemicals segment through the spin-off of all of the issued and outstanding stock of Chemours (the Separation). To effect the spin-off, DuPont distributed to its stockholders one share of Chemours common stock, par value $0.01 per share, for every five shares of DuPont common stock, par value $0.30 per share, (the Distribution) outstanding as of 5:00 p.m. June 23, 2015, the record date for the Distribution. In lieu of fractional shares of Chemours, stockholders of DuPont received cash, which generally was taxable. In connection with the Separation, the company and Chemours entered into a Separation Agreement, discussed below, and a Tax Matters Agreement and certain ancillary agreements, including an employee matters agreement, agreements related to transition and site services, and intellectual property cross licensing arrangements. In addition, the companies have entered into certain supply agreements. In the first quarter 2016, the company prepaid $190 for certain goods and services expected to be delivered by Chemours over twelve to fifteen months. As of September 30, 2016, the balance of the prepayment was $94 recorded within prepaid expenses on the Condensed Consolidated Balance Sheet.
Separation Agreement
The company and Chemours entered into a Separation Agreement that sets forth, among other things, the agreements between the company and Chemours regarding the principal transactions necessary to effect the Separation and also sets forth ancillary agreements that govern certain aspects of the company’s relationship with Chemours after the separation. Among other matters, the Separation Agreement and the ancillary agreements provide for the allocation between DuPont and Chemours of assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after the completion of the Separation.
Pursuant to the Separation Agreement, Chemours indemnifies DuPont against certain litigation, environmental, workers' compensation and other liabilities that arose prior to the distribution. The term of this indemnification is indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. At September 30, 2016, the indemnified assets are $82 within accounts and notes receivable, net and $391 within other assets offset by the corresponding liabilities of $82 within other accrued liabilities and $391 within other liabilities.

The results of operations of the Performance Chemicals segment are presented as discontinued operations as summarized below:
 
Three Months Ended
Nine Months Ended
 
September 30,
September 30,
 
2016
2015
2016
2015
Net sales
$
—

$
—

$
—

$
2,810

Cost of goods sold
—

—

—

2,215

Other operating charges
10

59

30

369

Selling, general and administrative expenses
—

(277
)
—

(87
)
Research and development expense
—

—

—

40

Other (loss) income, net
—

—

—

27

Interest expense
—

—

—

32

Employee separation / asset related charges, net
—

—

—

59

(Loss) income from discontinued operations before income taxes
(10
)
218

(30
)
209

(Benefit from) provision for income taxes
(3
)
108

(11
)
114

(Loss) income from discontinued operations after income taxes
$
(7
)
$
110

$
(19
)
$
95



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

During the three and nine months ended September 30, 2016, and the three and nine months ended September 30, 2015, the company incurred $10 and $30, and $68 and $289 of costs, respectively, in connection with the transaction primarily related to professional fees associated with preparation of regulatory filings and separation activities within finance, tax, legal, and information system functions. Loss (income) from discontinued operations during the three and nine months ended September 30, 2016, and the three and nine months ended September 30, 2015, includes $10 and $30, and $59 and $243 of these costs, respectively. Income from continuing operations during the three and nine months ended September 30, 2015, includes $9 and $26 of these costs, respectively, recorded in other operating charges in the company's interim Consolidated Income Statements. Income from continuing operations during the nine months ended September 30, 2015 also included $20 of transaction costs incurred for a premium associated with the early retirement of DuPont debt. The company exchanged notes received from Chemours in May 2015 (as part of a dividend payment) for DuPont debt that it then retired. These costs were reported in interest expense in the company's interim Consolidated Income Statements.
As a result of the separation, the company recorded an other long-term employee benefit plan curtailment gain of $274 and re-measured the associated plans as of July 1, 2015. The company also recorded a pension curtailment gain of $7 and re-measured the principal U.S. pension plan as of July 1, 2015. See Note 14 for further discussion.
Income from discontinued operations during the nine months ended September 30, 2015, included a restructuring charge of $59, consisting of severance and related benefit costs associated with the Performance Chemicals segment to achieve fixed cost and operational productivity improvements for Chemours post-spin.
The following table presents depreciation, amortization and purchases of property, plant and equipment of the discontinued operations related to Performance Chemicals:
 
Nine Months Ended
 
September 30,
 
2015
Depreciation
$
126

Amortization of intangible assets
2

Purchases of property, plant and equipment
235




11
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 4. Employee Separation / Asset Related Charges, Net
La Porte Plant, La Porte, Texas
In March 2016, DuPont announced its decision to not re-start the Agriculture segment’s insecticide manufacturing facility at the La Porte site located in La Porte, Texas.  The facility manufactures Lannate® and Vydate® insecticides and has been shut down since November 2014.  As a result of this decision, during the nine months ended September 30, 2016, a pre-tax charge of $75 was recorded in employee separation / asset related charges, net which included $41 of asset related charges, $18 of contract termination costs, and $16 of employee severance and related benefit costs.                                                                                                                                                                             

2016 Global Cost Savings and Restructuring Plan
At September 30, 2016, total liabilities related to the program were $199. A complete discussion of restructuring initiatives is included in the company's 2015 Annual Report in Note 4, "Employee Separation / Asset Related Charges, Net."

Account balances and activity for the restructuring program are summarized below:
 
Severance and Related Benefit Costs
Asset Related Charges
Other Non-Personnel Charges1
Total
Balance at December 31, 2015
$
648

$
—

$
32

$
680

Payments
(335
)
—

(25
)
(360
)
Net translation adjustment
3

—

—

3

  Other adjustments
(135
)
53

11

(71
)
Asset write-offs
—

(53
)
—

(53
)
Balance as of September 30, 2016
$
181

$
—

$
18

$
199


1. 
Other non-personnel charges consist of contractual obligation costs.

During the three months ended September 30, 2016, a net charge of $17 was recorded, consisting of $14 of employee separation / asset related charges, net and $3 in other (loss) income, net. The charge was associated with the identification of additional asset related projects in certain segments. During the nine months ended September 30, 2016, a net (benefit) charge of $(71) was recorded, consisting of $(74) in employee separation / asset related charges, net and $3 in other (loss) income, net. This was primarily due to a reduction in severance and related benefit costs partially offset by the identification of additional projects in certain segments. The reduction in severance and related benefit costs was driven by the elimination of positions at a lower cost than expected as a result of redeployments and attrition as well as lower than estimated individual severance costs.

The net charge (benefit) related to the segments for the three and nine months ended September 30, 2016 was as follows:
 
Three Months Ended
Nine Months Ended
 
September 30,
September 30,
 
2016
2016
Agriculture
$
13

$
29

Electronics & Communications
2

(13
)
Industrial Biosciences
—

(4
)
Nutrition & Health
1

(12
)
Performance Materials
(2
)
(7
)
Protection Solutions
—

(10
)
Other
—

3

Corporate expenses
3

(57
)
 
$
17

$
(71
)



12
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

2014 Restructuring Program
At September 30, 2016, total liabilities related to the program were $33. A complete discussion of restructuring initiatives is included in the company's 2015 Annual Report in Note 4, "Employee Separation / Asset Related Charges, Net."

Account balances and activity related to the program are summarized below:
 
Severance and Related Benefit Costs
Other Non-Personnel Charges 1
Total
Balance at December 31, 2015
$
76

$
2

$
78

Payments
(45
)
—

(45
)
Balance as of September 30, 2016
$
31

$
2

$
33


1. 
Other non-personnel charges consist of contractual obligation costs.

During the nine months ended September 30, 2015, a $2 net adjustment to the estimated costs associated with the 2014 restructuring program was recorded in employee separation / asset related charges, net in the company's interim Consolidated Income Statements. This was primarily due to the identification of additional projects in certain segments, offset by lower than estimated individual severance costs and workforce reductions achieved through non-severance programs. The adjustments related to the segments for the nine months ended September 30, 2015 were as follows: Agriculture - $4, Electronics & Communications - $(11), Industrial Biosciences - $1, Nutrition & Health - $4, Performance Materials - $2, Protection Solutions - $(1), and Other - $3.

Asset Impairment
During the third quarter 2016, the company completed its annual goodwill and indefinite-lived intangible assets impairment tests. The company recognized a $158 pre-tax impairment charge in employee separation / asset related charges, net during the three months ended September 30, 2016 related to indefinite-lived intangible trade names within the Industrial Biosciences segment. In connection with business strategy reviews and brand realignment conducted during the third quarter 2016, the company decided to phase out the use of certain acquired trade names within the segment resulting in a change from an indefinite life to a finite useful life for these assets. As a result of these changes, the carrying value of the trade name assets exceeded the fair value.

The basis of the fair value for the charges was calculated utilizing an income approach (relief from royalty method) using Level 3 inputs within the fair value hierarchy, as described in the company’s 2015 Annual Report in Note 1, “Summary of Significant Accounting Policies.” The key assumptions used in the calculation included projected revenue, royalty rates and discount rates. These key assumptions involve management judgment and estimates relating to future operating performance and economic conditions that may differ from actual cash flows. The remaining net book value of the trade names at September 30, 2016 was approximately $28, which represents fair value.

Based on the results of the annual impairment test there were no other indicators of impairment of goodwill and indefinite-lived intangible assets at September 30, 2016.

Cost Basis Investment Impairment
During the first quarter 2015, a $38 pre-tax impairment charge was recorded in employee separation / asset related charges, net within the Other segment. The majority related to a cost basis investment in which the assessment resulted from the venture's revised operating plan reflecting underperformance of its European wheat based ethanol facility and deteriorating European ethanol market conditions. As a result, the carrying value of DuPont's 6 percent cost basis investment in this venture exceeded its fair value by $37, such that an impairment charge was recorded.


13
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 5.  Other (Loss) Income, Net 
 
Three Months Ended
Nine Months Ended
 
September 30,
September 30,
 
2016
2015
2016
2015
Royalty income
$
27

$
27

$
108

$
91

Interest income
31

33

74

98

Equity in earnings of affiliates, net
22

1

60

19

Net gain on sales of businesses and other assets1
—

43

384

74

Net exchange (losses) gains
(76
)
(36
)
(212
)
54

Miscellaneous income and expenses, net2
(20
)
30

(7
)
216

Other (loss) income, net
$
(16
)
$
98

$
407

$
552

 

1. 
Includes a pre-tax gain of $369 ($214 net of tax) for the nine months ended September 30, 2016 related to the sale of DuPont (Shenzhen) Manufacturing Limited. See Note 3 for additional information.
2.  
Miscellaneous income and expenses, net, includes interest items, gains related to litigation settlements, gains/losses on available-for-sale securities and other items.

The following table summarizes the impacts of the company's foreign currency hedging program on the company's results of operations for the three and nine months ended September 30, 2016 and 2015. The company routinely uses foreign currency exchange contracts to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets and liabilities. The objective of this program is to maintain an approximately balanced position in foreign currencies in order to minimize, on an after-tax basis, the effects of exchange rate changes on net monetary asset positions. The hedging program gains (losses) are largely taxable (tax deductible) in the U.S., whereas the offsetting exchange gains (losses) on the re-measurement of certain net monetary asset positions are not taxable (tax deductible) in their local jurisdictions. The net pre-tax exchange gains (losses) are recorded in other (loss) income, net and the related tax impact is recorded in provision for income taxes on continuing operations in the interim Consolidated Income Statements.
 
Three Months Ended
Nine Months Ended
 
September 30,
September 30,
 
2016
2015
2016
2015
Subsidiary Monetary Position Gain (Loss)
 
 
 
 
Pre-tax exchange gain (loss)
$
6

$
(210
)
$
185

$
(381
)
Local tax benefits (expenses)
18

67

(29
)
(17
)
Net after-tax impact from subsidiary exchange gain (loss)
24

(143
)
156

(398
)
 
 
 
 
 
Hedging Program Gain (Loss)
 
 
 
 
Pre-tax exchange (loss) gain
(82
)
174

(397
)
435

Tax benefits (expenses)
30

(63
)
143

(157
)
Net after-tax impact from hedging program exchange (loss) gain
(52
)
111

(254
)
278

 
 
 
 
 
Total Exchange Gain (Loss)
 
 
 
 
Pre-tax exchange (loss) gain
(76
)
(36
)
(212
)
54

Tax benefits (expenses)
48

4

114

(174
)
Net after-tax exchange loss
$
(28
)
$
(32
)
$
(98
)
$
(120
)



14
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 6.  Income Taxes 
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. It is reasonably possible that net reductions to the company’s global unrecognized tax benefits could be in the range of $100 to $120 within the next twelve months with the majority due to the settlement of uncertain tax positions with various tax authorities.

Note 7.  Earnings Per Share of Common Stock
Set forth below is a reconciliation of the numerator and denominator for basic and diluted earnings per share calculations for the periods indicated:
 
Three Months Ended
Nine Months Ended
 
September 30,
September 30,
 
2016
2015
2016
2015
Numerator:
 
 
 
 
Income from continuing operations after income taxes attributable to DuPont
$
9

$
131

$
2,255

$
2,117

Preferred dividends
(2
)
(2
)
(7
)
(7
)
Income from continuing operations after income taxes available to DuPont common stockholders
$
7

$
129

$
2,248

$
2,110

 
 
 
 
 
(Loss) income from discontinued operations after income taxes available to DuPont common stockholders
$
(7
)
$
104

$
(7
)
$
89

 
 
 
 
 
Net income available to common stockholders
$
—

$
233

$
2,241

$
2,199

 
 
 
 
 
Denominator:
 
 
 
 
Weighted-average number of common shares outstanding - Basic
874,292,000

887,275,000

874,274,000

899,883,000

Dilutive effect of the company’s employee compensation plans
5,099,000

4,011,000

4,332,000

5,639,000

Weighted-average number of common shares outstanding - Diluted
879,391,000

891,286,000

878,606,000

905,522,000


The following average number of stock options were antidilutive, and therefore not included in the dilutive earnings per share calculations:
 
Three Months Ended
Nine Months Ended
 
September 30,
September 30,
 
2016
2015
2016
2015
Average number of stock options
4,558,000

8,510,000

4,885,000

4,622,000


The change in the average number of stock options that were antidilutive in the three and nine months ended September 30, 2016 compared to the same period last year was due to changes in the company's average stock price.


15
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 8. Inventories 
 
September 30,
2016
December 31,
2015
Finished products
$
2,761

$
3,779

Semi-finished products
1,922

1,780

Raw materials, stores and supplies
677

783

 
5,360

6,342

Adjustment of inventories to a last-in, first-out (LIFO) basis
(192
)
(202
)
Total
$
5,168

$
6,140


Note 9.  Other Intangible Assets 
The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows: 
 
September 30, 2016
December 31, 2015
 
Gross
Accumulated
Amortization
Net
Gross
Accumulated
Amortization
Net
Intangible assets subject to amortization (Definite-lived):
 

 

 

 

 

 

Customer lists
$
1,625

$
(580
)
$
1,045

$
1,621

$
(529
)
$
1,092

Patents
503

(257
)
246

454

(220
)
234

Purchased and licensed technology
1,170

(815
)
355

1,173

(649
)
524

Trademarks / trade names2
54

(14
)
40

26

(13
)
13

Other1
179

(81
)
98

180

(72
)
108

 
3,531

(1,747
)
1,784

3,454

(1,483
)
1,971

 
 
 
 
 
 
 
Intangible assets not subject to amortization (Indefinite-lived):
 

 

 

 

 

 

In-process research and development
73

—

73

72

—

72

Microbial cell factories
306

—

306

306

—

306

Pioneer germplasm
1,056

—

1,056

1,048

—

1,048

Trademarks / trade names2
568

—

568

747

—

747

 
2,003

—

2,003

2,173

—

2,173

Total
$
5,534

$
(1,747
)
$
3,787

$
5,627

$
(1,483
)
$
4,144


1. 
Primarily consists of sales and grower networks, marketing and manufacturing alliances and noncompetition agreements.
2. 
The decrease in indefinite-lived intangible trademarks / trade names is the result of a $158 impairment charge recorded during the three and nine months ended September 30, 2016 associated with certain acquired trade names. The remaining net book value of the trade names are reflected in definite-lived trademarks / trade names at September 30, 2016. See Note 4 for additional information.

The aggregate pre-tax amortization expense from continuing operations for definite-lived intangible assets was $46 and $272 for the three and nine months ended September 30, 2016, and $50 and $305 for the three and nine months ended September 30, 2015, respectively. The estimated aggregate pre-tax amortization expense from continuing operations for the remainder of 2016 and each of the next five years is approximately $58, $207, $208, $211, $193 and $152, respectively.


16
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 10.  Short-Term and Long-Term Borrowings
Repurchase Facility
In February 2016, the company entered into a committed receivable repurchase agreement of up to $1,000 (the Repurchase Facility). The Repurchase Facility is structured to account for the seasonality of the agricultural business and expires on November 30, 2016. Under the Repurchase Facility, the company may sell a portfolio of available and eligible outstanding customer notes receivables within the Agriculture segment to participating institutions and simultaneously must agree to repurchase such notes receivable at a future date. The Repurchase Facility is considered a secured borrowing with the customer notes receivables utilized as collateral. The amount of collateral required equals 105% of the outstanding borrowing amounts. Borrowings under the Repurchase Facility have an interest rate of the London interbank offered rate (LIBOR) plus 0.75%.

As of September 30, 2016, $1,050 of notes receivable, recorded in accounts and notes receivable, net, were pledged as collateral against outstanding borrowings under the Repurchase Facility of $1,000, recorded in short-term borrowings and capital lease obligations.

Term Loan Facility
In March 2016, the company entered into a credit agreement that provides for a three-year, senior unsecured term loan facility in the aggregate principal amount of $4,500 (the Term Loan Facility). DuPont may make up to seven term loan borrowings within one year of the closing date and amounts repaid or prepaid are not available for subsequent borrowings. The Term Loan Facility matures in March 2019 at which time all outstanding borrowings, including accrued but unpaid interest, become immediately due and payable.

Under the Term Loan Facility, DuPont can borrow funds at LIBOR plus a spread from 0.75% to 1.25% (LIBOR Loan Rate) depending on DuPont's long term credit rating. As of September 30, 2016, the company had borrowed $500 at the LIBOR Loan Rate and had unused commitments of $4,000 under the Term Loan Facility.

DuPont has the option of obtaining a same day loan under the Term Loan Facility at an interest rate based on the higher of a) the LIBOR Loan Rate, b) the federal funds effective rate plus 0.5% plus a margin from 0.00% to 0.25% depending on DuPont's long term credit rating (Margin) or c) the prime rate plus Margin.

Note 11.  Commitments and Contingent Liabilities 
Guarantees 
Indemnifications
In connection with acquisitions and divestitures as of September 30, 2016, the company has indemnified respective parties against certain liabilities that may arise in connection with these transactions and business activities prior to the completion of the transaction. The term of these indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. In addition, the company indemnifies its duly elected or appointed directors and officers to the fullest extent permitted by Delaware law, against liabilities incurred as a result of their activities for the company, such as adverse judgments relating to litigation matters. If the indemnified party were to incur a liability or have a liability increase as a result of a successful claim, pursuant to the terms of the indemnification, the company would be required to reimburse the indemnified party. The maximum amount of potential future payments is generally unlimited.

Obligations for Equity Affiliates & Others 
The company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates, customers and suppliers. In connection with the separation, the company has directly guaranteed Chemours' purchase obligations under an agreement with a third party supplier. At September 30, 2016 and December 31, 2015, the company had directly guaranteed $319 and $337, 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.

In certain cases, the company has recourse to assets held as collateral, as well as personal guarantees from customers and suppliers. Assuming liquidation, these assets are estimated to cover 22 percent of the $105 of guaranteed obligations of customers and suppliers.

17
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Set forth below are the company's guaranteed obligations at September 30, 2016:
 
Short-Term
Long-Term
Total
Obligations for customers and suppliers1:
 

 

 

Bank borrowings (terms up to 5 years)
$
91

$
14

$
105

Obligations for equity affiliates2:
 

 

 

Bank borrowings (terms up to 1 year)
181

—

181

Obligations for Chemours3:
 
 
 
Chemours' purchase obligations (final expiration - 2018)
22

11

33

Total
$
294

$
25

$
319


1. 
Existing guarantees for customers and suppliers, as part of contractual agreements.
2.   
Existing guarantees for equity affiliates' liquidity needs in normal operations.
3. 
Guarantee for Chemours' raw material purchase obligations under agreement with third party supplier.

Litigation
The company is subject to various legal proceedings arising out of the normal course of its business including product liability, intellectual property, commercial, environmental and antitrust lawsuits. It is not possible to predict the outcome of these various proceedings. Although considerable uncertainty exists, management does not anticipate that the ultimate disposition of these matters will have a material adverse effect on the company's results of operations, consolidated financial position or liquidity.  However, the ultimate liabilities could be material to results of operations in the period recognized.

PFOA
DuPont used PFOA (collectively, perfluorooctanoic acids and its salts, including the ammonium salt), as a processing aid to manufacture some fluoropolymer resins at various sites around the world including its Washington Works plant in West Virginia.

Since 2006, DuPont has undertaken obligations under agreements with the U.S. Environmental Protection Agency (EPA) and voluntary commitments to the New Jersey Department of Environmental Protection (NJDEP).  These obligations and voluntary commitments include surveying, sampling and testing drinking water in and around certain company sites and offering treatment or an alternative supply of drinking water if tests indicate the presence of PFOA in drinking water at or greater than the national health advisory level, even if provisional, as established from time to time by EPA. A provisional health advisory level was set in 2009 at 0.4 parts per billion (ppb) for PFOA in drinking water considering episodic exposure. In May 2016, EPA announced a health advisory level of 0.07 ppb for PFOA in drinking water considering lifetime versus episodic exposure.

At September 30, 2016 DuPont had an accrual balance of $18 related to the PFOA matters discussed in this Note. The company recorded an additional $5 during the nine months ended September 30, 2016 primarily for the impact of the new health advisory level on the company's obligations to EPA which have expanded the previously established testing and water supply commitments around the Washington Works facility. Pursuant to the Separation Agreement discussed in Note 3, the company is indemnified by Chemours for PFOA matters. As a result, the company has recorded an indemnification asset of $18 corresponding to the accrual balance as of September 30, 2016.

Drinking Water Actions
In August 2001, a class action, captioned Leach v. DuPont, was filed in West Virginia state court alleging that residents living near the Washington Works facility had suffered, or may suffer, deleterious health effects from exposure to PFOA in drinking water.

DuPont and attorneys for the class reached a settlement in 2004 that binds about 80,000 residents. In 2005, DuPont paid the plaintiffs’ attorneys’ fees and expenses of $23 and made a payment of $70, which class counsel designated to fund a community health project. The company funded a series of health studies which were completed in October 2012 by an independent science panel of experts (the C8 Science Panel). The studies were conducted in communities exposed to PFOA to evaluate available scientific evidence on whether any probable link exists, as defined in the settlement agreement, between exposure to PFOA and human disease.

The C8 Science Panel found probable links, as defined in the settlement agreement, between exposure to PFOA and pregnancy-induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and diagnosed high cholesterol.


18
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

In May 2013, a panel of three independent medical doctors released its initial recommendations for screening and diagnostic testing of eligible class members. In September 2014, the medical panel recommended follow-up screening and diagnostic testing three years after initial testing, based on individual results. The medical panel has not communicated its anticipated schedule for completion of its protocol. The company is obligated to fund up to $235 for a medical monitoring program for eligible class members and, in addition, administrative costs associated with the program, including class counsel fees. In January 2012, the company established and put $1 into an escrow account to fund medical monitoring as required by the settlement agreement. Under the settlement agreement, the balance in the escrow amount must be at least $0.5; as a result, transfers of additional funds may be required periodically. The court appointed Director of Medical Monitoring has established the program to implement the medical panel's recommendations and the registration process, as well as eligibility screening, is ongoing. Diagnostic screening and testing has begun and associated payments to service providers are being disbursed from the escrow account; at September 30, 2016, less than $1 has been disbursed. While it is probable that the company will incur liabilities related to funding the medical monitoring program, such liabilities cannot be reasonably estimated due to uncertainties surrounding the level of participation by eligible class members and the scope of testing.

In addition, under the settlement agreement, the company must continue to provide water treatment designed to reduce the level of PFOA in water to six area water districts, including the Little Hocking Water Association (LHWA), and private well users.

Class members may pursue personal injury claims against DuPont only for those human diseases for which the C8 Science Panel determined a probable link exists. At September 30, 2016 and December 31, 2015, there were approximately 3,500 lawsuits pending in various federal and state courts in Ohio and West Virginia. These lawsuits are consolidated in multi-district litigation (MDL) in the U.S. District Court for the Southern District of Ohio (the Court). DuPont, through Chemours, denies the allegations in these lawsuits and is defending itself vigorously. As a result of plaintiffs' corrected pleadings and further discovery, in the first quarter 2016, the company revised downward to 30 the estimated number of the pending lawsuits that allege wrongful death.

In 2014, six plaintiffs from the MDL were selected for individual trial. One of these six cases was voluntarily withdrawn by plaintiffs. In the first case tried to verdict, captioned Bartlett v. DuPont, in October 2015, the jury awarded $1.6 in compensatory damages and no punitive damages. The plaintiff alleged that exposure to PFOA in drinking water had caused kidney cancer. DuPont is appealing the decision. The second matter selected for trial, Wolf v. DuPont, involved allegations that exposure to PFOA in drinking water caused ulcerative colitis; prior to trial, a confidential settlement for an immaterial amount was reached in the first quarter 2016. Two cases alleging that exposure to PFOA in drinking water caused kidney cancer were settled in the second quarter 2016, for amounts immaterial individually and in the aggregate.

In the second case to be tried to a verdict, Freeman v. DuPont, the plaintiff alleged that exposure to PFOA in drinking water caused testicular cancer. In July 2016, the jury awarded $5.1 in compensatory damages plus $0.5 in punitive damages and attorneys’ fees. The company is appealing the decision.

As a result, four of the six cases have been resolved and the two that were tried to a verdict have been or will be appealed. In January 2016, the Court determined that 40 cases asserting cancer claims, to be identified by plaintiffs' attorneys, would be scheduled for trial through 2017. In July 2016, the Court scheduled the first case for trial in November 2016 and the second case for trial in January 2017. In both of these cases, plaintiffs allege that exposure to PFOA in drinking water caused testicular cancer and high cholesterol. The Court announced that the remaining 38 trials would be scheduled to begin each week starting in May 2017.

An approximate breakdown of the about 3,500 lawsuits still pending in the MDL is shown below.

Alleged Injury
Number of Claims
Kidney cancer
200

Testicular cancer
70

Ulcerative colitis
300

Preeclampsia
200

Thyroid disease
1,430

High cholesterol
1,340



19
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

This type of litigation could take place over many years and interim results do not predict the final outcome of cases. While DuPont believes it is probable that it could incur liabilities related to the lawsuits still pending in the MDL beyond the settlements discussed above, a range of such liabilities cannot be reasonably estimated at this time. Given the wide range of outcomes associated with the six initial cases in the MDL as discussed above, including two cases that have been or will be appealed, the company does not believe activity to date provides a reasonable basis to derive a range of loss for the remaining lawsuits still pending in the MDL in total or by category of claim. The possible range of loss is unpredictable and involves significant uncertainty due to the uniqueness of the remaining, individual plaintiff's claims and the company's defenses to those claims both as to potential liability and damages on an individual claims basis, among other factors.

The Court has ordered the parties to participate in confidential, nonbinding mediation regarding global resolution of the MDL. This process is ongoing.

Additional Actions
In the first quarter 2016, a confidential settlement was reached in the Ohio action brought by the LHWA claiming, “imminent and substantial endangerment to health and or the environment” under the Resource Conservation and Recovery Act (RCRA) in addition to general claims of PFOA contamination of drinking water. The cost of the settlement was paid by Chemours.

Under the Separation Agreement, all liabilities associated with the PFOA matters discussed above, including liabilities related to judgments, including punitive damages, or settlements associated with the MDL, are subject to indemnification by Chemours.

Environmental 
The company is also subject to contingencies pursuant to environmental laws and regulations that in the future may require the company to take further action to correct the effects on the environment of prior disposal practices or releases of chemical or petroleum substances by the company or other parties. The company accrues for environmental remediation activities consistent with the policy as described in the company's 2015 Annual Report in Note 1, “Summary of Significant Accounting Policies.” Much of this liability results from the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to as Superfund), RCRA and similar state and global laws. These laws require the company to undertake certain investigative, remediation and restoration activities at sites where the company conducts or once conducted operations or at sites where company-generated waste was disposed. The accrual also includes estimated costs related to a number of sites identified by the company for which it is probable that environmental remediation will be required, but which are not currently the subject of enforcement activities.

Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated costs, depend on the mix of unique site characteristics, evolving remediation technologies, diverse regulatory agencies and enforcement policies, as well as the presence or absence of potentially responsible parties. At September 30, 2016, the Condensed Consolidated Balance Sheet included a liability of $497, relating to these matters and, in management's opinion, is appropriate based on existing facts and circumstances. The average time frame over which the accrued or presently unrecognized amounts may be paid, based on past history, is estimated to be 15-20 years. Considerable uncertainty exists with respect to these costs and, under adverse changes in circumstances, the potential liability may range up to $976 above the amount accrued as of September 30, 2016. Pursuant to the Separation Agreement discussed in Note 3, the company is indemnified by Chemours for certain environmental matters, included in the liability of $497, that have an estimated liability of $280 as of September 30, 2016, and a potential exposure that ranges up to approximately $600 above the amount accrued. As such, the company has recorded an indemnification asset of $280 corresponding to the company’s accrual balance related to these matters at September 30, 2016.


20
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 12.  Stockholders’ Equity 
Share Repurchase Program
2015 Share Buyback Plan
In the first quarter 2015, DuPont announced its intention to buy back shares of about $4,000 using the distribution proceeds received from Chemours. In connection with the completion of the spin-off of Chemours, the Board of Directors authorized the use of the distribution proceeds to buy back shares of the company's common stock as follows: $2,000 to be purchased and retired by December 31, 2015, which was completed during 2015, with the remainder to be purchased and retired by December 31, 2016. There were no share repurchases under this plan in the first and second quarter 2016. As a result of the planned merger with Dow, the company’s opportunity to repurchase shares was restricted until after the shareholder vote on the merger. The shareholder vote occurred on July 20, 2016. During the third quarter 2016, the company purchased and retired 6 million shares in the open market for a total cost of $416. As of September 30, 2016, in aggregate, the company has paid $2,416 and received and retired 41 million shares. During the fourth quarter of 2016, the company will evaluate the opportunities to enter the market and plans to make additional repurchases; however, the company will not complete the remainder of the $2,000 stock buyback by year-end 2016.

2014 Share Buyback Plan
In January 2014, the company's Board of Directors authorized a $5,000 share buyback plan that replaced the 2011 plan. During the nine months ended September 30, 2015, the company purchased and retired 4.6 million shares in the open market for a total cost of $353, which offset the dilution from employee compensation plans in the first and second quarter of 2015. There were no share repurchases under this plan in the first, second and third quarter 2016. As of September 30, 2016, in aggregate, the company has purchased 34.7 million shares at a total cost of $2,353 under the plan. There is no required completion date for the remaining stock purchases under the 2014 plan.

Noncontrolling Interest
In September 2015, the company obtained a controlling interest in a joint venture included in the Performance Materials segment. Accordingly, the company consolidated the entity at September 30, 2015 and recorded the fair value of the noncontrolling interest in the amount of $157 in the Condensed Consolidated Balance Sheet.


21
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Other Comprehensive Income (Loss)
A summary of the changes in other comprehensive income (loss) for the three and nine months ended September 30, 2016 and 2015 is provided as follows:
 
Three Months Ended
Three Months Ended
Affected Line Item in Consolidated Income Statements
 
September 30, 2016
September 30, 2015
 
Pre-Tax
Tax
After-Tax
Pre-Tax
Tax
After-Tax
 
Cumulative translation adjustment(1)
$
114

$
—

$
114

$
(125
)
$
—

$
(125
)
 
Additions and revaluations of derivatives designated as cash flow hedges
(3
)
1

(2
)
(22
)
9

(13
)
See (2) below
Pension benefit plans:
 
 
 
 
 
 
 
Net (loss) gain
(228
)
48

(180
)
634

(228
)
406

See (2) below
Effect of foreign exchange rates
4

—

4

54

(16
)
38

See (2) below
Reclassifications to net income:
 
 
 
 
 
 
 
Amortization of prior service benefit
(2
)
1

(1
)
(3
)
1

(2
)
See (3) below
Amortization of loss
229

(81
)
148

172

(61
)
111

See (3) below
Curtailment gain, net
(1
)
(1
)
(2
)
(7
)
3

(4
)
See (3) below
Settlement loss
22

(7
)
15

44

(16
)
28

See (3) below
Pension benefit plans, net
24

(40
)
(16
)
894

(317
)
577

 
Other benefit plans:
 
 
 
 
 
 
 
Net loss
—

—

—

(73
)
27

(46
)
See (2) below
Effect of foreign exchange rates
(2
)
—

(2
)
(1
)
1

—

See (2) below
Reclassifications to net income:
 
 
 
 
 
 
 
Amortization of prior service benefit
(36
)
14

(22
)
(39
)
13

(26
)
See (3) below
Amortization of loss
21

(8
)
13

20

(7
)
13

See (3) below
Curtailment gain, net
—

—

—

(274
)
98

(176
)
See (3) below
Other benefit plans, net
(17
)
6

(11
)
(367
)
132

(235
)
 
Net unrealized gain on securities:
 
 
 
 
 
 
 
Unrealized loss on securities arising during the period
(1
)
—

(1
)
—

—

—

See (4) below
Reclassification of loss realized in net income
6

—

6

—

—

—

Other (loss) income, net
Net unrealized gain on securities
5

—

5

—

—

—

 
Other comprehensive income
$
123

$
(33
)
$
90

$
380

$
(176
)
$
204

 


22
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

 
Nine Months Ended
Nine Months Ended
Affected Line Item in Consolidated Income Statements
 
September 30, 2016
September 30, 2015
 
Pre-Tax
Tax
After-Tax
Pre-Tax
Tax
After-Tax
 
Cumulative translation adjustment(1)
$
187

$
—

$
187

$
(1,405
)
$
—

$
(1,405
)
 
Net revaluation and clearance of cash flow hedges to earnings:
 
 
 
 
 
 
 
Additions and revaluations of derivatives designated as cash flow hedges
34

(13
)
21

(36
)
12

(24
)
See (2) below
Clearance of hedge results to earnings:
 
 
 
 
 
 
 
Foreign currency contracts
—

—

—

(10
)
4

(6
)
Net sales
Commodity contracts
18

(7
)
11

22

(9
)
13

Cost of goods sold
Net revaluation and clearance of cash flow hedges to earnings
52

(20
)
32

(24
)
7

(17
)
 
Pension benefit plans:
 
 
 
 
 
 
 
Net (loss) gain
(2,700
)
931

(1,769
)
628

(226
)
402

See (2) below
Effect of foreign exchange rates
36

(7
)
29

92

(25
)
67

See (2) below
Reclassifications to net income:
 
 
 
 
 
 
 
Amortization of prior service benefit
(5
)
2

(3
)
(6
)
2

(4
)
See (3) below
Amortization of loss
605

(213
)
392

591

(210
)
381

See (3) below
Curtailment loss (gain), net
65

(23
)
42

(7
)
3

(4
)
See (3) below
Settlement loss
60

(22
)
38

53

(19
)
34

See (3) below
Pension benefit plans, net
(1,939
)
668

(1,271
)
1,351

(475
)
876

 
Other benefit plans:
 
 
 
 
 
 
 
Net loss
(265
)
95

(170
)
(73
)
27

(46
)
See (2) below
Effect of foreign exchange rates
(2
)
—

(2
)
(1
)
1

—

See (2) below
Reclassifications to net income:
 
 
 
 
 
 
 
Amortization of prior service benefit
(111
)
39

(72
)
(143
)
50

(93
)
See (3) below
Amortization of loss
56

(20
)
36

58

(20
)
38

See (3) below
Curtailment gain, net
(33
)
11

(22
)
(274
)
98

(176
)
See (3) below
Other benefit plans, net
(355
)
125

(230
)
(433
)
156

(277
)
 
Net unrealized gain on securities:
 
 
 
 
 
 
 
Unrealized loss on securities arising during the period
(8
)
—

(8
)
—

—

—

See (4) below
Reclassification of loss realized in net income
19

—

19

—

—

—

Other (loss) income, net
Net unrealized gain on securities
11

—

11

—

—

—

 
Other comprehensive loss
$
(2,044
)
$
773

$
(1,271
)
$
(511
)
$
(312
)
$
(823
)
 

1. 
The currency translation gain for the three and nine months ended September 30, 2016 is primarily driven by the modest weakening of the U.S. dollar (USD) against the European Euro (EUR) and the Brazilian real (BRL). The currency translation loss for the three months ended September 30, 2015 was driven by the strengthening of the USD against the BRL partially offset by the USD weakening against the EUR. The currency translation loss for the nine months ended September 30, 2015 was driven by the strengthening of the USD against both the BRL and the EURO.
2. 
These amounts represent changes in accumulated other comprehensive loss excluding changes due to reclassifying amounts to the interim Consolidated Income Statements. See Notes 13 and 14 for additional information.
3. 
These accumulated other comprehensive loss components are included in the computation of net periodic benefit cost of the company's pension and other long-term employee benefit plans. See Note 14 for additional information.
4. 
The unrealized gain (loss) on securities during the three and nine months ended September 30, 2016 is due to the re-measurement of USD denominated marketable securities held by certain foreign entities at September 30, 2016 with a corresponding offset to cumulative translation adjustment.



23
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

The changes and after-tax balances of components comprising accumulated other comprehensive loss are summarized below:
 
Cumulative Translation Adjustment
Net Revaluation and Clearance of Cash Flow Hedges to Earnings
Pension Benefit Plans
Other Benefit Plans
Unrealized (Loss) Gain on Securities
Total
2016
 

 

 

 

 

 

Balance January 1, 2016
$
(2,333
)
$
(24
)
$
(7,043
)
$
22

$
(18
)
$
(9,396
)
Other comprehensive income (loss) before reclassifications
187

21

(1,740
)
(172
)
(8
)
(1,712
)
Amounts reclassified from accumulated other comprehensive income (loss)
—

11

469

(58
)
19

441

Balance September 30, 2016
$
(2,146
)
$
8

$
(8,314
)
$
(208
)
$
(7
)
$
(10,667
)

 
Cumulative Translation Adjustment
Net Revaluation and Clearance of Cash Flow Hedges to Earnings
Pension Benefit Plans
Other Benefit Plans
Unrealized (Loss) Gain on Securities
Total
2015
 

 

 

 

 

 

Balance January 1, 2015
$
(919
)
$
(6
)
$
(7,895
)
$
262

$
2

$
(8,556
)
Other comprehensive income (loss) before reclassifications
(1,405
)
(24
)
469

(46
)
—

(1,006
)
Amounts reclassified from accumulated other comprehensive income (loss)
—

7

407

(231
)
—

183

Spin-off of Chemours
191

—

278

—

(1
)
468

Balance September 30, 2015
$
(2,133
)
$
(23
)
$
(6,741
)
$
(15
)
$
1

$
(8,911
)


24
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 13. Financial Instruments
Cash, Cash Equivalents and Marketable Securities
The company's cash, cash equivalents and marketable securities as of September 30, 2016 and December 31, 2015 are comprised of the following:
 
September 30, 2016
December 31, 2015
 
Cash and Cash Equivalents
Marketable Securities
Total Estimated Fair Value
Cash and Cash Equivalents
Marketable Securities
Total Estimated Fair Value
Cash
$
1,839

$
—

$
1,839

$
1,938

$
—

$
1,938

 
 
 
 
 
 
 
Level 1:
 
 
 
 
 
 
Money market funds
—

—

—

550

—

550

U.S. Treasury securities1
—

161

161

—

788

788

 
 
 
 
 
 
 
Level 2:
 
 
 
 
 
 
Certificate of deposit / time deposits2
2,613

919

3,532

2,812

118

2,930

 
 
 
 
 
 
 
Total cash, cash equivalents and marketable securities
$
4,452

$
1,080

 
$
5,300

$
906

 

1. 
Available-for-sale securities are reported at estimated fair value with unrealized gains and losses reported as component of accumulated other comprehensive loss. Proceeds from the sale of available-for-sale securities were $161 and $626 in the three and nine months ended September 30, 2016, respectively.
2. 
Held-to-maturity investments are reported at amortized cost.

The estimated fair value of the company's cash equivalents, which approximates carrying value as of September 30, 2016 and December 31, 2015, was determined using level 1 and level 2 inputs within the fair value hierarchy. Level 1 measurements were based on observed net asset values and level 2 measurements were based on current interest rates for similar investments with comparable credit risk and time to maturity.

The estimated fair value of the held-to-maturity securities, which approximates carrying value as of September 30, 2016 and December 31, 2015, was determined using level 2 inputs within the fair value hierarchy, as described below. Level 2 measurements were based on current interest rates for similar investments with comparable credit risk and time to maturity. The carrying value approximates fair value due to the short-term nature of the investments.

The estimated fair value of the available-for-sale securities as of September 30, 2016 and December 31, 2015 was determined using level 1 inputs within the fair value hierarchy. Level 1 measurements were based on quoted market prices in active markets for identical assets and liabilities. The available-for-sale securities as of September 30, 2016 and December 31, 2015 are held by certain foreign subsidiaries in which the USD is not the functional currency. The fluctuations in foreign exchange are recorded in accumulated other comprehensive loss. These fluctuations are subsequently reclassified from accumulated other comprehensive loss to earnings in the period in which the available-for-sale securities are sold and the gains and losses on these securities offset a portion of the foreign exchange fluctuations in earnings for the company.

Debt
The estimated fair value of the company's total debt, including interest rate financial instruments, was determined using level 2 inputs within the fair value hierarchy, as described in the company's 2015 Annual Report in Note 1, “Summary of Significant Accounting Policies.” Based on quoted market prices for the same or similar issues or on current rates offered to the company for debt of the same remaining maturities, the fair value of the company's debt was approximately $12,040 and $9,050 as of September 30, 2016 and December 31, 2015, respectively.

Derivative Instruments
Objectives and Strategies for Holding Derivative Instruments
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.


25
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

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. The company has not designated any 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's derivative assets and liabilities are reported on a gross basis in the Condensed Consolidated Balance Sheets. 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:
 
September 30, 2016
December 31, 2015
Derivatives designated as hedging instruments:
 
 
Foreign currency contracts
$
—

$
10

Commodity contracts
26

356

Derivatives not designated as hedging instruments:
 
 
Foreign currency contracts
7,758

8,065

Commodity contracts
13

70


Foreign Currency Risk
The company's objective in managing exposure to foreign currency fluctuations is to reduce earnings and cash flow volatility associated with foreign currency rate changes. Accordingly, the company enters into various contracts that change in value as foreign exchange rates change to protect the value of its existing foreign currency-denominated assets, liabilities, commitments and cash flows.

The company routinely uses foreign currency exchange contracts, including forward exchange and option contracts, to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets and liabilities of its operations. The primary business objective of this hedging program is to maintain an approximately balanced position in foreign currencies so that exchange gains and losses resulting from exchange rate changes, net of related tax effects, are minimized. The company also uses 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 these contracts offset changes in the USD value of the related foreign currency-denominated revenues. The objective of the hedge program is to reduce earnings and cash flow volatility related to changes in foreign currency exchange rates.

Commodity Price Risk
Commodity price risk management programs serve to reduce exposure to price fluctuations on purchases of inventory such as corn, soybeans and soybean meal. The company enters into over-the-counter and exchange-traded derivative commodity instruments to hedge the commodity price risk associated with agricultural commodity exposures.

Cash Flow Hedges
Foreign Currency Contracts
The company uses foreign currency exchange instruments such as forwards and options to offset a portion of the company's exposure to certain foreign currency denominated revenues so that gains and losses on these contracts offset changes in the USD value of the related foreign currency denominated revenues. In addition, the company occasionally uses forward foreign currency exchange contracts to offset a portion of the company's exposure to certain foreign currency-denominated transactions such as capital expenditures.

Commodity Contracts
The company enters into over-the-counter and exchange-traded derivative commodity instruments, including options, futures and swaps, to hedge the commodity price risk associated with agriculture commodity exposures.


26
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

While each risk management program has a different time maturity period, most programs currently do not extend beyond the next two-year period. Cash flow hedge results are reclassified into earnings during the same period in which the related exposure impacts earnings. Reclassifications are made sooner if it appears that a forecasted transaction is not probable of occurring. The following table summarizes the after-tax effect of cash flow hedges on accumulated other comprehensive loss for the three and nine months ended September 30, 2016 and 2015:
 
Three Months Ended
Nine Months Ended
 
September 30,
September 30,
 
2016
2015
2016
2015
Beginning balance
$
10

$
(10
)
$
(24
)
$
(6
)
Additions and revaluations of derivatives designated as cash flow hedges
(2
)
(13
)
21

(24
)
Clearance of hedge results to earnings
—

—

11

7

Ending balance
$
8

$
(23
)
$
8

$
(23
)

At September 30, 2016, an after-tax net gain of $7 is expected to be reclassified from accumulated other comprehensive loss into earnings over the next 12 months.

Derivatives not Designated in Hedging Relationships
Foreign Currency Contracts
The company routinely uses foreign currency exchange contracts, including forward exchange and options 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 also uses foreign currency exchange contracts, including forward exchange and options contracts, to offset a portion of the company's exposure to certain foreign currency-denominated revenues so that gains and losses on these contracts offset changes in the USD value of the related foreign currency-denominated revenues.

Commodity Contracts
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 corn, soybeans and soybean meal.

Fair Values of Derivative Instruments
The table below presents the fair values of the company's derivative assets and liabilities within the fair value hierarchy, as described in the company's 2015 Annual Report in Note 1, “Summary of Significant Accounting Policies.”
 
 
Fair Value Using Level 2 Inputs
 
Balance Sheet Location
September 30, 2016
December 31, 2015
Asset derivatives:
 
 
 
Derivatives not designated as hedging instruments:
 
 

 
Foreign currency contracts
Accounts and notes receivable, net
$
31

$
74

Total asset derivatives1
 
$
31

$
74

Cash collateral
Other accrued liabilities
$
2

$
7

 
 
 
 
Liability derivatives:
 
 

 
Derivatives not designated as hedging instruments:
 
 

 

Foreign currency contracts
Other accrued liabilities
$
80

$
80

Commodity contracts
Other accrued liabilities
—

4

Total liability derivatives1
 
$
80

$
84


1. 
The company's derivative assets and liabilities subject to enforceable master netting arrangements totaled $25 at September 30, 2016 and $35 at December 31, 2015.


27
Table of Contents
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Effect of Derivative Instruments
 
Amount of Gain (Loss)
Recognized in OCI1
(Effective Portion)
Amount of Gain (Loss)
Recognized in Income2
 
Three Months Ended September 30,
2016
2015
2016
2015
Income Statement Classification
Derivatives designated as hedging instruments:
 
 
 
 
 
Cash flow hedges:
 
 
 
 
 
Commodity contracts
$
(3
)
$
(22
)
$
—

$
—

Cost of goods sold
 
(3
)
(22
)
—

—

 
Derivatives not designated as hedging instruments:
 
 
 
 
 
Foreign currency contracts
—

—

(82
)
174

Other (loss) income, net3
Commodity contracts
—

—

(1
)
(2
)
Cost of goods sold