E I DU PONT DE NEMOURS AND CO WILMINGTON, Del., July 25, 2017 /PRNewswire/ --
Second-Quarter Highlights
-- GAAP(1) earnings per share decreased 16 percent to $0.97 from $1.16 in
prior year. Operating earnings(2) per share increased 11 percent to
$1.38 from $1.24 in prior year.
-- Sales of $7.4 billion increased 5 percent on a 6-percent benefit from
volume partially offset by a 1-percent decline in local price. Volume
grew in all reportable segments, primarily led by Agriculture,
Electronics & Communications and Protection Solutions.
-- Segment operating margins expanded by about 80 basis points, led by
improvements in Electronics & Communications, Industrial Biosciences and
Agriculture.
First-Half Highlights
-- GAAP(1) earnings per share decreased 2 percent to $2.50 from $2.55 in
prior year. Operating earnings(2) per share increased 21 percent to
$3.02 from $2.50 in prior year.
-- Sales of $15.2 billion increased 5 percent driven by volume growth.
Sales grew in most segments, led by Agriculture, Performance Materials
and Electronics & Communications.
-- Agriculture sales increased 5 percent on a 5-percent benefit from volume
and a 1-percent benefit from local price, partially offset by a
1-percent negative impact from portfolio. Volume growth was driven by a
benefit from the timing of seed deliveries, including the
route-to-market change in the southern U.S., increased insecticide and
fungicide sales, higher soybean sales in North America, and increased
sunflower and corn seed sales in Europe. This growth was partially
offset by the expected decline in corn volume related to reduced corn
area in North America.
-- Total company gross margin expanded by 45 basis points. Segment
operating margins expanded by about 170 basis points, led by
improvements in Electronics & Communications, Performance Materials and
Agriculture.
-- Free cash flow(3) improved by about $200 million, excluding about $2.8
billion of increased pension contributions.
DuPont (NYSE: DD), a science company that brings world-class, innovative products, materials, and services to the global marketplace, today announced second-quarter 2017 GAAP(1) earnings from continuing operations of $0.97 per share and operating earnings(2) of $1.38 per share. Prior year GAAP(1) and operating earnings(2) were $1.16 per share and $1.24 per share, respectively. Refer to Schedule B for details of significant items excluded from operating earnings per share.
For first-half 2017, DuPont delivered GAAP(1) earnings from continuing operations of $2.50 per share and operating earnings(2) of $3.02 per share. Prior-year GAAP(1) and operating earnings(2) per share were $2.55 and $2.50, respectively.
Second-quarter sales totaled $7.4 billion, up 5 percent versus prior year on a 6-percent benefit from volume partially offset by a 1-percent decline in local price. Volume grew in all reportable segments, led by Agriculture, Electronics & Communications and Protection Solutions. First-half sales of $15.2 billion increased 5 percent versus prior year on a 5-percent benefit from volume. Sales grew in most segments, led by Agriculture, Performance Materials and Electronics & Communications. Agriculture sales were positively impacted by the change in timing of seed deliveries, including the southern U.S. route-to-market change, which benefitted first-half sales by approximately $200 million, or about 1 percent.
"Our increased operating earnings per share and strong sales growth of 5 percent were driven by volume growth from our highly productive innovation pipeline," said Ed Breen, chairman and CEO of DuPont. "We continue to see the results of the focus, efficiency and productivity our teams are delivering as we move toward the expected August closing of the merger with Dow. Our integration planning will enable us to begin implementation quickly, including launching the projects to achieve our $3 billion cost synergies target, and move toward standing up the strong, independent companies we intend to create."
Global Consolidated Net Sales - 2nd Quarter
Three Months Ended
June 30, 2017 Percent Change Due to:
------------- ----------------------
% Local Price and Portfolio /
$ Change Product Mix Currency Volume Other
--- ------ ----------- -------- ------ -----
(Dollars in millions)
U.S. & Canada $3,769 6 - - 6 -
EMEA * 1,428 1 - (2) 3 -
Asia Pacific 1,705 10 (1) - 11 -
Latin America 522 (3) (4) 2 (1) -
---
Total Consolidated Sales $7,424 5 (1) - 6 -
* Europe, Middle East & Africa
Global Consolidated Net Sales - First Half
Six Months Ended
June 30, 2017 Percent Change Due to:
------------- ----------------------
% Local Price and Portfolio /
$ Change Product Mix Currency Volume Other
--- ------ ----------- -------- ------ -----
(Dollars in millions)
U.S. & Canada $7,345 3 - - 3 -
EMEA * 3,538 3 1 (3) 6 (1)
Asia Pacific 3,156 11 (1) - 13 (1)
Latin America 1,128 6 1 7 (2) -
-----
Total Consolidated Sales $15,167 5 - - 5 -
* Europe, Middle East & Africa
Segment Net Sales - 2nd Quarter
Three Months Ended
June 30, 2017 Percent Change Due to:
------------- ----------------------
Local Price and Portfolio /
$ % Change Product Mix Currency Volume Other
--- -------- ----------- -------- ------ -----
(Dollars in millions)
Agriculture $3,446 7 (1) - 8 -
Electronics & Communications 546 11 (1) (1) 13 -
Industrial Biosciences 395 11 3 (1) 9 -
Nutrition & Health 818 (2) (1) (1) 1 (1)
Performance Materials 1,381 3 2 (1) 2 -
Protection Solutions 801 2 (2) (1) 5 -
Other 37
---
Consolidated Net Sales $7,424 5 (1) - 6 -
Segment Net Sales - First Half
Six Months Ended
June 30, 2017 Percent Change Due to:
------------- ----------------------
Local Price and Portfolio /
$ % Change Product Mix Currency Volume Other
--- -------- ----------- -------- ------ -----
(Dollars in millions)
Agriculture $7,374 5 1 - 5 (1)
Electronics & Communications 1,056 12 (1) (1) 14 -
Industrial Biosciences 763 8 2 (1) 7 -
Nutrition & Health 1,607 (2) - (1) - (1)
Performance Materials 2,749 6 1 (1) 6 -
Protection Solutions 1,548 2 (2) (1) 5 -
Other 70
---
Consolidated Net Sales $15,167 5 - - 5 -
Operating Earnings - 2nd Quarter
Change vs. 2016
---------------
(Dollars in millions) 2Q17 2Q16 $ %
---- ---- --- ---
Agriculture $963 $865 $98 11%
Electronics & Communications 116 93 23 25%
Industrial Biosciences 76 62 14 23%
Nutrition & Health 135 130 5 4%
Performance Materials 329 325 4 1%
Protection Solutions 191 188 3 2%
Other (53) (50) (3) -6%
--- --- ---
Total segment operating earnings (4) 1,757 1,613 144 9%
Exchange losses (5) (140) (15) (125) nm
Corporate expenses (4) (51) (83) 32 -39%
Interest expense (99) (93) (6) 6%
--- --- ---
Operating earnings before income taxes(2) 1,467 1,422 45 3%
Provision for income taxes on operating earnings (2) (4) (251) (325) 74
Less: Net income attributable to noncontrolling interests 7 4 3
Operating earnings (2) $1,209 $1,093 $116 11%
====== ====== ====
Operating earnings per share (2) $1.38 $1.24 $0.14 11%
===== ===== =====
GAAP (1)earnings per share $0.97 $1.16 $(0.19) -16%
===== ===== ======
Operating Earnings - First Half
Change vs. 2016
---------------
(Dollars in millions) YTD 2017 YTD 2016 $ %
-------- -------- --- ---
Agriculture $2,199 $1,966 $233 12%
Electronics & Communications 205 152 53 35%
Industrial Biosciences 151 125 26 21%
Nutrition & Health 256 234 22 9%
Performance Materials 684 598 86 14%
Protection Solutions 368 364 4 1%
Other (115) (109) (6) -6%
---- ---- ---
Total segment operating earnings (4) 3,748 3,330 418 13%
Exchange losses (5) (199) (136) (63) nm
Corporate expenses (4) (120) (169) 49 -29%
Interest expense (183) (185) 2 -1%
---- ---- ---
Operating earnings before income taxes(2) 3,246 2,840 406 14%
Provision for income taxes on operating earnings (2) (4) (589) (628) 39
Less: Net income attributable to noncontrolling interests 15 10 5
Operating earnings (2) $2,642 $2,202 $440 20%
====== ====== ====
Operating earnings per share (2) $3.02 $2.50 $0.52 21%
===== ===== =====
GAAP (1)earnings per share $2.50 $2.55 $(0.05) -2%
===== ===== ======
(4) See Schedules B and C for listing of significant items and their impact by segment.
(5) See Schedule D for additional information on exchange gains and losses.
The following is a summary of business results for each of the company's reportable segments comparing the second quarter and first half with the prior year, unless otherwise noted.
Agriculture - Second-quarter 2017 operating earnings of $963 million increased $98 million, or 11 percent, on volume growth, partially offset by declines in local price and higher product costs. Volume growth was driven by increased insecticide and fungicide sales, a benefit from the southern U.S. route-to-market change and higher soybean sales in North America, driven by the increase in planted area. Reductions in local price reflected declines in crop protection and increased product costs mainly driven by higher soybean royalties. Operating margins expanded by about 105 basis points.
First-half operating earnings of $2,199 million increased $233 million, or 12 percent, on growth in volume and local price. Volume growth was driven by a benefit from the change in timing of seed deliveries including the southern U.S. route-to-market change, increased insecticide and fungicide sales, higher soybean sales in North America, and increased sunflower and corn seed sales in Europe. Volume growth was partially offset by the expected decline in corn volume related to reduced corn area in North America. Pricing growth was realized by double-digit increases in Brazil driven by the company's newest corn hybrids and lower product cost within crop protection, partially offset by price declines in Latin America and Asia and higher soybean royalties. Operating margins expanded by about 175 basis points.
Electronics & Communications - Second-quarter 2017 operating earnings of $116 million increased $23 million, or 25 percent, as volume growth more than offset a decline in local price. Volume growth was due to increased demand in consumer electronics and semiconductor markets, as well as stronger photovoltaic sales. Operating margins expanded by about 240 basis points.
First-half operating earnings of $205 million increased $53 million, or 35 percent, on volume growth and the absence of a $16 million prior-year litigation expense, partially offset by lower local price. Operating earnings included a gain on the sale of a business offset by costs associated with a legal matter. Operating margins expanded by 335 basis points.
Industrial Biosciences - Second-quarter 2017 operating earnings of $76 million increased $14 million, or 23 percent, on volume growth and mix enrichment, partially offset by higher costs due to growth investments. Broad-based volume growth was driven by increased demand for biomaterials in apparel and carpeting, bioactives in the grain processing market, and CleanTech. Operating margins expanded by about 180 basis points.
First-half operating earnings of $151 million increased $26 million, or 21 percent, on volume growth and mix enrichment, partially offset by higher costs due to growth investments. Volume growth was driven by increased demand for biomaterials in apparel and carpeting and bioactives in the grain processing market. Operating margins expanded by about 210 basis points.
Nutrition & Health - Second-quarter 2017 operating earnings of $135 million increased $5 million, or 4 percent, on volume growth. Increased demand in probiotics was partially offset by declines in systems and texturants and protein solutions. Operating margins expanded by about 95 basis points.
First-half operating earnings of $256 million increased $22 million, or 9 percent, on plant productivity, mix enrichment and cost savings, partially offset by a $6 million negative impact from portfolio. Volume growth in probiotics was offset by declines in systems and texturants and protein solutions. Operating margins expanded by about 165 basis points.
Performance Materials - Second-quarter 2017 operating earnings of $329 million increased $4 million, or 1 percent, as volume growth, higher local price, and the absence of costs associated with a contractual claim were largely offset by higher raw material costs and the planned turnaround of the ethylene cracker. Increased demand for polymers in automotive markets and increased demand for high-performance parts in semiconductor and aerospace markets drove the higher volumes. Operating margins contracted by about 50 basis points.
First-half operating earnings of $684 million increased $86 million, or 14 percent, driven by volume growth, cost savings and the absence of costs associated with a contractual claim, partially offset by higher raw material costs and the planned turnaround of the ethylene cracker. Volume growth was driven by increased demand for polymers in automotive markets and high-performance parts in semiconductor and aerospace markets. Operating margins expanded by about 175 basis points.
Protection Solutions - Second-quarter 2017 operating earnings of $191 million increased $3 million, or 2 percent, as volume growth more than offset lower local price and product mix and higher costs due to growth investments. Volume growth reflected improved demand for Tyvek(®) protective material in medical packaging and protective apparel and Nomex(®) thermal-resistant fiber in oil and gas markets. Operating margins contracted by about 5 basis points.
First-half operating earnings of $368 million increased $4 million, or 1 percent, as volume growth was partially offset by lower local price and product mix as well as higher raw material costs. Volume growth was primarily driven by increased demand for Nomex(®) in oil and gas markets, Kevlar(® )high-strength materials, and Tyvek(®). Operating margins contracted by about 25 basis points.
DuPont will hold a conference call and webcast on Tuesday, July 25, 2017, at 8:00 AM ET to discuss this news release. The webcast and additional presentation materials can be accessed by visiting the company's investor website (Events & Presentations) at www.investors.dupont.com. A replay of the conference call webcast will be available for 90 days by calling 1-630-652-3042, Passcode 9189324#. For additional information see the investor center at http://www.dupont.com.
Use of Non-GAAP Measures
This earnings release includes information that does not conform to U.S. generally accepted accounting principles (GAAP) and are considered non-GAAP measures. These measures include the company's consolidated results and earnings per share on an operating earnings basis, which excludes significant items and non-operating pension and other post-employment benefit costs (operating earnings and operating EPS), total segment pre-tax operating earnings, operating costs and corporate expenses on an operating earnings basis. Management uses these measures internally for planning, forecasting and evaluating the performance of the company's segments, including allocating resources and evaluating incentive compensation. From a liquidity perspective, management uses free cash flow, which is defined as cash provided by/used for operating activities less purchases of property, plant and equipment. Free cash flow is useful to investors and management to evaluate the company's cash flow and financial performance, and is an integral financial measure used in the company's financial planning process. Management believes that these non-GAAP measurements are meaningful to investors as they provide insight with respect to ongoing operating results of the company and provide a more useful comparison of year-over-year results. These non-GAAP measurements supplement our GAAP disclosures and should not be viewed as an alternative to GAAP measures of performance. Reconciliations of non-GAAP measures to GAAP are provided in schedules A, C and D. Details of significant items are provided in schedule B.
About DuPont
DuPont (NYSE: DD) has been bringing world-class science and engineering to the global marketplace in the form of innovative products, materials, and services since 1802. The company believes that by collaborating with customers, governments, NGOs, and thought leaders we can help find solutions to such global challenges as providing enough healthy food for people everywhere, decreasing dependence on fossil fuels, and protecting life and the environment. For additional information about DuPont and its commitment to inclusive innovation, please visit http://www.dupont.com.
Forward-Looking Statements:
On December 11, 2015, DuPont and The Dow Chemical Company ("Dow") announced entry into an Agreement and Plan of Merger, as amended on March 31, 2017, and as may be amended from time to time in accordance with its terms, (the "Merger Agreement") under which the companies will combine in an all-stock merger (the "Merger Transaction"), subject to satisfaction of closing conditions, including receipt of regulatory approval. Dow and DuPont have obtained conditional approval for the Merger Transaction from the antitrust regulatory authorities in the United States, Brazil, Canada and China, among others. The conditional approvals were granted based on the companies fulfilling their commitments to divest certain assets, among other conditions (the "Conditional Commitments"). In connection with the Conditional Commitments, DuPont entered into a definitive agreement (the "FMC Transaction Agreement") with FMC Corporation (FMC). Under the FMC Transaction Agreement subject to the closing of the Merger Transaction in addition to customary closing conditions, including regulatory approval, FMC will acquire certain Crop Protection business and R&D assets from DuPont and DuPont has agreed to acquire certain assets relating to FMC's Health and Nutrition segment (collectively, the "FMC Transactions"). The combined company will be DowDuPont Inc. DuPont and Dow intend, following consummation of the Merger Transaction, that DowDuPont Inc. will 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 materials science business through a series of tax-efficient transactions (collectively, the "Intended Business Separations"). For more information, please see DuPont's latest annual, quarterly and current reports on Forms 10-K, 10-Q and 8-K, as well as the joint proxy/prospectus included in the DowDuPont Registration Statement on Form S-4 filed in connection with the Merger Transaction.
This document contains forward-looking statements which may be identified by their use of words like "plans," "expects," "will," "believes," "intends," "estimates," "anticipates" or other words of similar meaning. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, regulatory approval, market position, anticipated benefits of recent acquisitions, timing of anticipated benefits from restructuring actions, outcome of contingencies, such as litigation and environmental matters, expenditures, financial results and timing of, as well as expected benefits, including synergies, from the Merger Transaction and the Intended Business Separations, are forward-looking statements. These and other forward-looking statements, including the failure to consummate the Merger Transaction, the Intended Business Separations, the FMC Transactions or the Conditional Commitments, to make or take any filing or other action required to consummate such transactions in a timely manner or at all, are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events which may not be realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond the company's control. Some of the important factors that could cause the company's actual results to differ materially from those projected in any such forward-looking statements are: fluctuations in energy and raw material prices; failure to develop and market new products and optimally manage product life cycles; ability to respond to market acceptance, rules, regulations and policies affecting products based on biotechnology and, in general, for products for the agriculture industry; outcome of significant litigation and environmental matters, including realization of associated indemnification assets, if any; failure to appropriately manage process safety and product stewardship issues; changes in laws and regulations or political conditions; global economic and capital markets conditions, such as inflation, interest and currency exchange rates; business or supply disruptions; security threats, such as acts of sabotage, terrorism or war, natural disasters and weather events and patterns which could affect demand as well as availability of products for the agriculture industry; ability to protect and enforce the company's intellectual property rights; successful integration of acquired businesses and separation of underperforming or non-strategic assets or businesses; and risks related to the Merger Transaction, the Intended Business Separations, the FMC Transactions and the Conditional Commitments. These risks, as well as other risks associated with the Merger Transaction, the Intended Business Separations, the FMC Transactions and the Conditional Commitments, are or will be more fully discussed in (1) DuPont's most recently filed Form 10-K, 10-Q and 8-K reports, (2) DuPont's subsequently filed Form 10-K and 10-Q reports and (3) the joint proxy statement/prospectus included in the Registration Statement filed with the SEC about the Merger Transaction. Unlisted factors may present significant additional obstacles to the realization of forward-looking statements. Consequences of material differences in results as compared with those anticipated in the forward-looking statements could include, among other things, business disruption, operational problems, monetary loss, legal liability to third parties and similar risks, any of which could have a material adverse effect on DuPont's consolidated financial condition, results of operations, credit rating or liquidity. The company assumes no obligation to publicly provide revisions or updates to any forward-looking statements, whether because of new information, future developments or otherwise, should circumstances change, except as otherwise required by securities and other applicable laws.
E.I. du Pont de Nemours and Company
Consolidated Income Statements
(Dollars in millions, except per share amounts)
SCHEDULE A
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
Net sales $7,424 $7,061 $15,167 $14,466
Cost of goods sold 4,192 3,990 8,563 8,232
Other operating charges (1) 176 143 380 328
Selling, general and administrative expenses (1) 1,348 1,211 2,608 2,339
Research and development expense 441 432 857 850
Other (loss) income, net (1) (21) 51 285 423
Interest expense 99 93 183 185
Employee separation / asset related charges, net (1) 160 (90) 312 (13)
--- --- --- ---
Income from continuing operations before income taxes 987 1,333 2,549 2,968
Provision for income taxes on continuing operations (1) 128 306 352 712
--- --- --- ---
Income from continuing operations after income taxes 859 1,027 2,197 2,256
Income (loss) from discontinued operations after income taxes 10 (3) (207) -
--- --- ---- ---
Net income 869 1,024 1,990 2,256
Less: Net income attributable to noncontrolling interests 7 4 15 10
--- --- --- ---
Net income attributable to DuPont $862 $1,020 $1,975 $2,246
==== ====== ====== ======
Basic earnings per share of common stock:
Basic earnings per share of common stock from continuing operations $0.98 $1.17 $2.51 $2.56
Basic earnings (loss) per share of common stock from discontinued operations 0.01 - (0.24) -
---- --- ----- ---
Basic earnings per share of common stock (2) $0.99 $1.16 $2.27 $2.56
===== ===== ===== =====
Diluted earnings per share of common stock:
Diluted earnings per share of common stock from continuing operations $0.97 $1.16 $2.50 $2.55
Diluted earnings (loss) per share of common stock from discontinued operations 0.01 - (0.24) -
---- --- ----- ---
Diluted earnings per share of common stock (2) $0.99 $1.16 $2.26 $2.55
===== ===== ===== =====
Dividends per share of common stock $0.38 $0.38 $0.76 $0.76
===== ===== ===== =====
Average number of shares outstanding used in earnings per share (EPS) calculation:
Basic 868,481,000 875,013,000 867,496,000 874,269,000
Diluted 872,750,000 879,179,000 871,920,000 878,214,000
Reconciliation of Non-GAAP Measures
-----------------------------------
Summary of Earnings Comparison
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 % Change 2017 2016 % Change
---- ---- -------- ---- ---- --------
Income from continuing operations after income taxes (GAAP) $859 $1,027 (16)% $2,197 $2,256 (3)%
Less: Significant items (charge) benefit included in income from continuing operations after (290) 19 (326) 179
income taxes (per Schedule B)
Non-operating pension/OPEB costs included in income from continuing operations after income (67) (89) (134) (135)
taxes
Net income attributable to noncontrolling interest from continuing operations 7 4 15 10
--- --- ---
Operating earnings (Non-GAAP) (3) $1,209 $1,093 11% $2,642 $2,202 20%
====== ====== ====== ======
Earnings per share from continuing operations (GAAP) $0.97 $1.16 (16)% $2.50 $2.55 (2)%
Less: Significant items (charge) benefit included in EPS (per Schedule B) (0.33) 0.02 (0.37) 0.20
Non-operating pension/OPEB costs included in EPS (0.08) (0.10) (0.15) (0.15)
----- ----- ----- -----
Operating earnings per share (Non-GAAP) (3) $1.38 $1.24 11% $3.02 $2.50 21%
===== ===== ===== =====
E.I. du Pont de Nemours and Company
Condensed Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
SCHEDULE A (continued)
June 30, December 31,
2017 2016
---- ----
Assets
Current assets
Cash and cash equivalents $3,254 $4,605
Marketable securities 2,974 1,362
Accounts and notes receivable, net 8,562 4,971
Inventories 4,856 5,673
Prepaid expenses 476 506
--- ---
Total current assets 20,122 17,117
Property, plant and equipment, net of accumulated depreciation 8,959 9,231
(June 30, 2017 - $15,294 December 31, 2016 - $14,736)
Goodwill 4,232 4,180
Other intangible assets 3,623 3,664
Investment in affiliates 698 649
Deferred income taxes 2,841 3,308
Other assets 2,731 1,815
----- -----
Total $43,206 $39,964
======= =======
Liabilities and Equity
Current liabilities
Accounts payable $2,756 $3,705
Short-term borrowings and capital lease obligations 3,473 429
Income taxes 153 101
Other accrued liabilities 4,060 4,662
----- -----
Total current liabilities 10,442 8,897
Long-term borrowings and capital lease obligations 10,086 8,107
Other liabilities 9,718 12,333
Deferred income taxes 366 431
--- ---
Total liabilities 30,612 29,768
------ ------
Commitments and contingent liabilities
Stockholders' equity
Preferred stock 237 237
Common stock, $0.30 par value; 1,800,000,000 shares authorized; 286 285
Issued at June 30, 2017 - 954,703,000; December 31, 2016 - 950,044,000
Additional paid-in capital 11,424 11,190
Reinvested earnings 16,233 14,924
Accumulated other comprehensive loss (9,065) (9,911)
Common stock held in treasury, at cost (87,041,000 shares at June 30, 2017 and (6,727) (6,727)
December 31, 2016)
Total DuPont stockholders' equity 12,388 9,998
------ -----
Noncontrolling interests 206 198
--- ---
Total equity 12,594 10,196
Total $43,206 $39,964
======= =======
E.I. du Pont de Nemours and Company
Condensed Consolidated Statement of Cash Flows
(Dollars in millions)
SCHEDULE A (continued)
Six Months Ended
June 30,
2017 2016
---- ----
Total Company
Net income $1,990 $2,256
Adjustments to reconcile net income to cash used for operating activities:
Depreciation 462 473
Amortization of intangible assets 108 226
Net periodic pension benefit cost 219 320
Contributions to pension plans (2,994) (237)
Gain on sale of businesses and other assets (202) (385)
Asset-related charges 279 78
Other operating activities - net 279 300
Change in operating assets and liabilities - net (4,196) (4,491)
------ ------
Cash used for operating activities (4,055) (1,460)
Investing activities
Purchases of property, plant and equipment (524) (507)
Investments in affiliates (22) (2)
Proceeds from sale of businesses and other assets - net 296 212
Net (increase) decrease in short-term financial instruments (1,610) 174
Foreign currency exchange contract settlements (29) (280)
Other investing activities - net (43) (15)
Cash used for investing activities (1,932) (418)
Financing activities
Dividends paid to stockholders (664) (669)
Net increase in borrowings 5,041 1,632
Proceeds from exercise of stock options 203 70
Other financing activities - net (49) (39)
--- ---
Cash provided by financing activities 4,531 994
Effect of exchange rate changes on cash 105 (5)
--- ---
Decrease in cash and cash equivalents (1,351) (889)
Cash and cash equivalents at beginning of period 4,605 5,300
----- -----
Cash and cash equivalents at end of period $3,254 $4,411
====== ======
Reconciliation of Non-GAAP Measure
----------------------------------
Calculation of Free Cash Flow - Total Company
Six Months Ended June 30,
2017 2016
---- ----
Cash used for operating activities (GAAP) $(4,055) $(1,460)
Purchases of property, plant and equipment (524) (507)
Free cash flow (Non-GAAP) $(4,579) $(1,967)
======= =======
(1) See Schedule B for detail of
significant items.
(2) The sum of the individual earnings
per share amounts from continuing
operations and discontinued
operations may not equal the total
company earnings per share amounts
due to rounding.
(3) Operating earnings and operating
earnings per share are defined as
earnings from continuing
operations excluding significant
items and non-operating pension/
OPEB costs. Non-operating
pension/OPEB costs includes all
of the components of net periodic
benefit cost from continuing
operations with the exception of
the service cost component.
E.I. du Pont de Nemours and Company
Schedule of Significant Items from Continuing Operations
(Dollars in millions, except per share amounts)
SCHEDULE B
SIGNIFICANT ITEMS
Pre-tax After-tax (6) ($ Per Share)
2017 2016 2017 2016 2017 2016
---- ---- ---- ---- ---- ----
1st Quarter
-----------
Transaction costs (1) $(170) $(24) $(122) $(21) $(0.14) $(0.02)
Restructuring charges, net (2) (152) (77) (100) (48) (0.11) (0.06)
Gain on sale of business / entity (3) 162 369 86 214 0.10 0.24
Income tax items (4) 47 - 100 - 0.11 -
Customer claims adjustment / recovery (5) - 23 - 15 - 0.02
--- --- --- --- --- ----
1st Quarter - Total $(113) $291 $(36) $160 $(0.04) $0.18
===== ==== ==== ==== ====== =====
2nd Quarter
-----------
Transaction costs (1) $(216) $(76) $(159) $(59) $(0.18) $(0.07)
Restructuring charges, net (2) (160) 90 (102) 59 (0.12) 0.07
Income tax items (4) - - (29) - (0.03) -
Customer claims adjustment / recovery (5) - 30 - 19 - 0.02
--- --- --- --- --- ----
2nd Quarter - Total $(376) $44 $(290) $19 $(0.33) $0.02
===== === ===== === ====== =====
Year-to-date Total $(489) $335 $(326) $179 $(0.37) $0.20
===== ==== ===== ==== ====== =====
E.I. du Pont de Nemours and Company
Schedule of Significant Items from Continuing
Operations
(Dollars in millions, except per share amounts)
(1) Second quarter
and first
quarter 2017
included
charges of
$(216) and
$(170),
respectively,
and second
quarter and
first quarter
2016
included
charges of
$(76) and
$(24),
respectively,
recorded in
selling,
general and
administrative
expenses
related to
costs
associated
with the
planned
merger with
The Dow
Chemical
Company and
related
activities.
For second
quarter and
first quarter
2017, the
effective tax
rate for the
total of pre-
tax charges
was 26.4% and
28.2%,
respectively.
For second
quarter and
first quarter
2016, the
effective tax
rate for the
total of pre-
tax charges
was 22.4% and
12.5%,
respectively.
A
significant
portion of
the
transaction
costs are in
the US;
however,
those costs
are not
always tax-
deductible.
(2) Second quarter
and first
quarter 2017
included
restructuring
charges of
$(160) and
$(152),
respectively,
recorded in
employee
separation /
asset related
charges, net,
primarily
associated
with actions
to improve
plant
productivity.
Year-to-
date charges
included
$(33) of
severance and
related
benefit costs
and $(279) of
asset-
related
charges.
The asset-
related
charges
mainly
consists of
accelerated
depreciation
associated
with decision
to close the
company's
Protection
Solutions
Cooper River
manufacturing
site located
near
Charleston,
South
Carolina.
Second quarter
2016 included
a $90 benefit
recorded in
employee
separation /
asset related
charges, net
associated
with the 2016
Global Cost
Savings and
Restructuring
Program.
This benefit
was primarily
due to the
reduction in
severance and
related
benefit costs
due to the
elimination
of positions
at a lower
cost than
expected.
First quarter
2016 included
a $(75)
restructuring
charge
recorded in
employee
separation /
asset related
charges, net
related to
the decision
not to re-
start the
Agriculture
segment's
insecticide
manufacturing
facility at
the La Porte
site located
in La Porte,
Texas. The
charge
included
$(41) of
asset-
related
charges,
$(18) of
contract
termination
costs, and
$(16) of
employee
severance and
related
benefit
costs.
First quarter
2016 included
a $(2) charge
in employee
separation /
asset related
charges, net
associated
with the 2016
Global Cost
Savings and
Restructuring
Program. This
charge was
primarily due
to the
identification
of additional
projects in
certain
segments,
offset by a
reduction in
severance and
related
benefit costs
due to
workforce
reductions
achieved
through non-
severance
programs.
(3) First quarter
2017 included
a gain of
$162 recorded
in other
(loss)
income, net
associated
with the sale
of the
company's
global food
safety
diagnostic
business, a
part of the
Nutrition &
Health
segment. The
effective tax
rate for the
gain on sale
was 46.9% due
to
unfavorable
tax
consequences
of non-
deductible
goodwill.
First quarter
2016 included
a gain of
$369 recorded
in other
(loss)
income, net
associated
with the sale
of the DuPont
(Shenzhen)
Manufacturing
Limited
entity, which
held certain
buildings and
other assets.
The gain is
reflected as
a Corporate
item.
(4) Second quarter
2017 included
a tax charge
of $(29)
related to
the
elimination
of a tax
benefit
recorded in
2016 due to
the second
quarter 2017
principal
U.S. pension
plan
contribution.
First quarter
2017 included
a tax benefit
of $53, as
well as a $47
benefit on
associated
accrued
interest
reversals
(recorded in
other (loss)
income, net),
related to a
reduction in
the company's
unrecognized
tax benefits
due to the
closure of
various tax
statutes of
limitations.
(5) The company
recorded
insurance
recoveries of
$30 in the
second
quarter 2016
in other
operating
charges for
recovery of
costs for
customer
claims
related to
the use of
the
Agriculture's
segment
Imprelis(R)
herbicide.
First quarter
2016 included
a benefit of
$23, in other
operating
charges for
reductions in
the accrual
for customer
claims
related to
the use of
the
Imprelis(R)
herbicide.
(6) Unless
specifically
addressed in
notes above,
the income
tax effect on
significant
items was
calculated
based upon
the enacted
tax laws and
statutory
income tax
rates
applicable in
the tax
jurisdiction(s)
of the
underlying
non-GAAP
adjustment.
E.I. du Pont de Nemours and Company
Consolidated Segment Information
(Dollars in millions)
SCHEDULE C
Three Months Ended Six Months Ended
June 30, June 30,
SEGMENT NET SALES 2017 2016 2017 2016
----------------- ---- ---- ---- ----
Agriculture $3,446 $3,218 $7,374 $7,004
Electronics & Communications 546 494 1,056 946
Industrial Biosciences 395 355 763 707
Nutrition & Health 818 835 1,607 1,636
Performance Materials 1,381 1,335 2,749 2,584
Protection Solutions 801 786 1,548 1,515
Other 37 38 70 74
--- --- --- ---
Consolidated net sales $7,424 $7,061 $15,167 $14,466
====== ====== ======= =======
Three Months Ended Six Months Ended
June 30, June 30,
SEGMENT OPERATING EARNINGS (1) 2017 2016 2017 2016
----------------------------- ---- ---- ---- ----
Agriculture $963 $865 $2,199 $1,966
Electronics & Communications 116 93 205 152
Industrial Biosciences 76 62 151 125
Nutrition & Health 135 130 256 234
Performance Materials 329 325 684 598
Protection Solutions 191 188 368 364
Other (53) (50) (115) (109)
--- --- ---- ----
Total segment operating earnings 1,757 1,613 3,748 3,330
Corporate expenses (51) (83) (120) (169)
Interest expense (99) (93) (183) (185)
--- --- ---- ----
Operating earnings before income taxes and exchange losses 1,607 1,437 3,445 2,976
Exchange losses(2) (140) (15) (199) (136)
---- --- ----
Operating earnings before income taxes (Non-GAAP) $1,467 $1,422 $3,246 $2,840
Non-operating pension/OPEB costs (104) (133) (208) (207)
Total significant items before income taxes (376) 44 (489) 335
---- --- ---
Income from continuing operations before income taxes (GAAP) $987 $1,333 $2,549 $2,968
==== ====== ====== ======
Three Months Ended Six Months Ended
June 30, June 30,
SIGNIFICANT ITEMS BY SEGMENT (PRE-TAX) (3) 2017 2016 2017 2016
----------------------------------------- ---- ---- ---- ----
Agriculture $ - $35 $ - $(38)
Electronics & Communications (1) 8 (6) 15
Industrial Biosciences - 3 (6) 4
Nutrition & Health - 12 160 13
Performance Materials (2) 9 (13) 5
Protection Solutions (157) 7 (281) 10
Other - - - (3)
--- --- --- ---
Total significant items by segment (160) 74 (146) 6
Corporate expenses (216) (30) (343) 329
---- ----
Total significant items before income taxes $(376) $44 $(489) $335
===== === ===== ====
E.I. du Pont de Nemours and Company
Consolidated Segment Information
(Dollars in millions)
SCHEDULE C (continued)
Corporate Expenses
------------------
The reconciliation below reflects GAAP corporate expenses (income) excluding significant items.
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
Corporate expenses (income) (GAAP) $267 $113 $463 $(160)
Less: Significant items charge (benefit) (3) 216 30 343 (329)
Corporate expenses (Non-GAAP) $51 $83 $120 $169
=== === ==== ====
Net sales 7,424 7,061 15,167 14,466
Corporate expenses (income) (GAAP) - Percentage of net sales 3.6% 1.6% 3.1% (1.1)%
Corporate expenses (Non-GAAP) - Percentage of net sales 0.7% 1.2% 0.8% 1.2%
(1) Segment operating earnings is
defined as income from continuing
operations before income taxes
excluding significant pre-tax
benefits (charges), non-operating
pension/OPEB costs, exchange
losses, corporate expenses and
interest.
(2) See Schedule D for additional
information on exchange gains and
losses.
(3) See Schedule B for detail of
significant items.
E.I. du Pont de Nemours and Company
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
SCHEDULE D
Reconciliations of Adjusted EBIT / EBITDA to Consolidated Income Statements
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
Income from continuing operations after income taxes (GAAP) $859 $1,027 $2,197 $2,256
Add: Provision for income taxes on continuing operations 128 306 352 712
--- --- ---
Income from continuing operations before income taxes $987 $1,333 $2,549 $2,968
Add: Significant items charge (benefit) before income taxes(1) 376 (44) 489 (335)
Add: Non-operating pension/OPEB costs 104 133 208 207
--- --- --- ---
Operating earnings before income taxes (Non-GAAP) $1,467 $1,422 $3,246 $2,840
Less: Net income attributable to noncontrolling interests from continuing operations 7 4 15 10
Add: Interest expense 99 93 183 185
--- --- --- ---
Adjusted EBIT from operating earnings (Non-GAAP) $1,559 $1,511 $3,414 $3,015
Add: Depreciation and amortization 289 339 570 699
--- --- --- ---
Adjusted EBITDA from operating earnings (Non-GAAP) $1,848 $1,850 $3,984 $3,714
====== ====== ====== ======
Reconciliation of Operating Costs to Consolidated Income Statement Line Items
GAAP operating costs is defined as other operating charges, selling, general and administrative expenses, and research and development expense. The reconciliation below reflects operating costs excluding significant items and non-operating pension/OPEB costs.
Three Months Ended June 30, 2017 Three Months Ended June 30, 2016
As Less: Less: Non- As Less: Less: Non-
Reported Significant Operating Reported Significant Operating
(GAAP) Items (1) Pension/OPEB (Non-GAAP) (GAAP) Pension/OPEB (Non-GAAP)
Costs Items (1) Costs
----- -------- -----
Other operating charges $176 $ - $ - $176 $143 $(30) $ - $173
Selling, general and administrative 1,348 216 31 1,101 1,211 76 53 1,082
expenses
Research and development expense 441 - 16 425 432 - 20 412
--- --- --- --- --- --- ---
Total $1,965 $216 $47 $1,702 $1,786 $46 $73 $1,667
====== ==== === ====== ====== === === ======
Net sales $7,424 $7,424 $7,061 $7,061
Percentage of net sales 26.5% 22.9% 25.3% 23.6%
Six Months Ended June 30, 2017 Six Months Ended June 30, 2016
As Less: Less: Non- As Less: Less: Non-
Reported Significant Operating Reported Significant Operating
(GAAP) Items (1) Pension/OPEB (Non-GAAP) (GAAP) Items (1) Pension/OPEB (Non-GAAP)
Costs Costs
----- -----
Other operating charges $380 $ - $ - $380 $328 $(53) $ - $381
Selling, general and administrative 2,608 386 62 2,160 2,339 100 83 2,156
expenses
Research and development expense 857 - 32 825 850 - 31 819
--- --- --- --- --- --- --- ---
Total $3,845 $386 $94 $3,365 $3,517 $47 $114 $3,356
====== ==== === ====== ====== === ==== ======
Net sales $15,167 $15,167 $14,466 $14,466
Percentage of net sales 25.4% 22.2% 24.3% 23.2%
E.I. du Pont de Nemours and Company
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
SCHEDULE D (continued)
Exchange Gains/Losses on Operating Earnings
The company routinely uses forward exchange contracts to offset its net exposures, by currency, related to the foreign currency denominated monetary assets and liabilities of its operations. 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. The net pre-tax exchange gains and losses are recorded in other (loss) income, net and the related tax impact is recorded in provision
for (benefit from) income taxes on the Consolidated Income Statements.
Three Months Ended Six Months Ended
June 30,
June 30,
2017 2016 2017 2016
---- ---- ---- ----
Subsidiary Monetary Position Gain (Loss)
---------------------------------------
Pre-tax exchange (losses) gains $(54) $146 $(28) $179
Local tax benefits (expenses) 94 (60) 130 (47)
--- --- --- ---
Net after-tax impact from subsidiary exchange gains $40 $86 $102 $132
=== === ==== ====
Hedging Program Gain (Loss)
--------------------------
Pre-tax exchange losses $(86) $(161) $(171) $(315)
Tax benefits 31 58 61 113
--- --- --- ---
Net after-tax impact from hedging program exchange losses $(55) $(103) $(110) $(202)
==== ===== ===== =====
Total Exchange Gain (Loss)
-------------------------
Pre-tax exchange losses $(140) $(15) $(199) $(136)
Tax benefits (expenses) 125 (2) 191 66
--- --- --- ---
Net after-tax exchange losses $(15) $(17) $(8) $(70)
==== ==== === ====
As shown above, the "Total
Exchange Gain (Loss)" is the
sum of the "Subsidiary
Monetary Position Gain
(Loss)" and the "Hedging
Program Gain (Loss)."
E.I. du Pont de Nemours and Company
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
SCHEDULE D (continued)
Reconciliation of Base Income Tax Rate to Effective Income Tax Rate
Base income tax rate is defined as the effective income tax rate less the effect of exchange gains (losses), as defined above, significant items and non-operating pension/OPEB costs.
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
Income from continuing operations before income taxes (GAAP) $987 $1,333 $2,549 $2,968
Add: Significant items - charge (benefit) (1) 376 (44) 489 (335)
Non-operating pension/OPEB costs 104 133 208 207
Less: Exchange losses (140) (15) (199) (136)
---- --- ---- ----
Income from continuing operations before income taxes, significant items, $1,607 $1,437 $3,445 $2,976
exchange losses, and non-operating pension/OPEB costs (Non-GAAP)
===
Provision for income taxes on continuing operations (GAAP) $128 $306 $352 $712
Add: Tax benefits (expenses) on significant items 86 (25) 163 (156)
Tax benefits on non-operating pension/OPEB costs 37 44 74 72
Tax benefits (expenses) on exchange gains/losses 125 (2) 191 66
--- --- --- ---
Provision for income taxes on continuing earnings, excluding exchange losses (Non-GAAP) $376 $323 $780 $694
==== ==== ==== ====
Effective income tax rate (GAAP) 13.0% 23.0% 13.8% 24.0%
Significant items and non-operating pension/OPEB costs effect 4.1% (0.1)% 4.3% (1.9)%
--- ----- --- -----
Tax rate, from continuing operations before significant items and non-operating pension/OPEB costs 17.1% 22.9% 18.1% 22.1%
Exchange gains (losses) effect 6.3% (0.4)% 4.5% 1.2%
--- ----- --- ---
Base income tax rate from continuing operations (Non-GAAP) 23.4% 22.5% 22.6% 23.3%
==== ==== ==== ====
(1) See Schedule B for
detail of significant
items.
1 Generally Accepted Accounting
Principles (GAAP)
2 See schedules A, C, and D for
definitions and reconciliations of
non-GAAP measures.
3 Free cash flow is defined as cash
used for operating activities less
purchases of property, plant and
equipment. See schedule A for
reconciliation of non-GAAP
measure.
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SOURCE DuPont
