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8-K - 8-K - DUPONT E I DE NEMOURS & COa11-23071_18k.htm

Exhibit 99.1

 

 

July 28, 2011

 

 

Media Contact:

Michael Hanretta

WILMINGTON, Del.

 

 

 

302-774-4005

 

 

 

 

michael.j.hanretta@usa.dupont.com

 

 

 

Investor Contact:

302-774-4994

 

DuPont Delivers Strong Results in Second Quarter; Increases 2011 Earnings Guidance
Sales Gains in all Segments & Regions and Danisco Acquisition Underpin Growth Outlook

 

Highlights:

 

·                  Second-quarter 2011 earnings were $1.37 per share, up 17 percent versus $1.17 per share in the prior year, excluding significant items from both periods (see Schedule B). Reported second-quarter 2011 earnings were $1.29 per share, including significant item charges of $.08 per share related to the acquisition. Reported second-quarter 2010 earnings were $1.26 per share.

 

·                  Sales increased 19 percent to $10.3 billion with 11 percent higher local prices, 2 percent higher sales volume, 3 percent currency benefit and a 3 percent net increase from portfolio changes.  Sales in developing markets grew 29 percent and represent 30 percent of total sales.

 

·                  Strong performances in Agriculture, Performance Chemicals and Safety & Protection, and the acquisition of Danisco contributed to a 20 percent increase in segment pre-tax operating income, excluding significant items.

 

·                  The company is on track versus its full-year 2011 productivity targets for fixed costs and working capital.  Year-to-date fixed cost productivity totals more than $180 million.

 

·                  The company increased its full-year 2011 earnings outlook, excluding significant items, to a range of $3.90 to $4.05 per share.  The increase reflects strong second-quarter results, the expectation for continued global economic growth and about $.05 per share full-year impact from Danisco on an underlying basis.   Prior guidance was a range of $3.65 to $3.85 per share, excluding the impact of Danisco.

 

“Our strong second-quarter sales growth across all segments and regions resulted from consistent global execution and customer-focused innovation,” said DuPont Chair and CEO Ellen Kullman.  “We are increasing our earnings outlook for 2011 based on strong performance year—to-date and confidence in our business plans for the second half of the year.  Longer term, we expect additional compelling growth opportunities across our businesses stemming from science-powered innovations and collaboration, including the integration of Danisco’s world-class enzymes, fermentation and specialty food ingredients capabilities with DuPont’s strong industrial biosciences and nutrition & health offerings.”

 



 

Global Consolidated Sales and Net Income

 

Second-quarter 2011 consolidated net sales of $10.3 billion were 19 percent higher than the prior year reflecting 11 percent higher local prices, 2 percent higher volume, 3 percent favorable currency effect and a 3 percent net increase from portfolio changes.  The table below shows regional sales and variances versus the second quarter 2010.

 

 

 

Three Months Ended

 

Percentage Change Due to:

 

 

 

June 30, 2011

 

Local

 

 

 

 

 

 

 

 

 

 

 

%

 

Currency

 

Currency

 

 

 

Portfolio/

 

(Dollars in billions)

 

$

 

Change

 

Price

 

Effect

 

Volume

 

Other

 

U.S.

 

$

4.1

 

14

 

9

 

 

1

 

4

 

EMEA*

 

2.6

 

22

 

9

 

8

 

1

 

4

 

Asia Pacific

 

2.3

 

26

 

16

 

4

 

4

 

2

 

Latin America

 

0.9

 

28

 

12

 

3

 

11

 

2

 

Canada

 

0.4

 

3

 

5

 

4

 

(7

)

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Consolidated Sales

 

$

10.3

 

19

 

11

 

3

 

2

 

3

 

 


* Europe, Middle East & Africa

 

Second-quarter 2011 net income attributable to DuPont increased 5 percent to $1,218 million versus $1,159 million in 2010. Excluding significant items, net income attributable to DuPont of $1,299 million increased $227 million, or 21 percent, from $1,072 million in the second quarter 2010.  The increase principally reflects higher selling prices, increased sales volume and currency benefit, partly offset by higher raw material, energy, and freight costs.

 

2



 

Earnings Per Share

 

The table below shows year-over-year earnings per share (EPS) variances for the second quarter.

 

EPS  ANALYSIS

 

 

 

2Q

 

 

 

 

 

EPS 2010

 

$

1.26

 

Less: significant items (schedule B)

 

.09

 

EPS 2010 — Excluding significant items

 

$

1.17

 

 

 

 

 

Local prices

 

.80

 

Variable cost*

 

(.46

)

Volume

 

.06

 

Fixed cost*

 

(.19

)

Currency

 

.07

 

Other**

 

(.02

)

Higher shares outstanding

 

(.04

)

Income tax

 

(.03

)

Danisco impact***

 

.01

 

 

 

 

 

EPS 2011 — Excluding significant items

 

$

1.37

 

Significant items - (schedule B)

 

(.08

)

 

 

 

 

EPS 2011

 

$

1.29

 

 


*

Excludes volume and currency impacts

**

Principally absence of prior-year asset sales and higher interest expense, partly offset by exchange gains

***

After interest expense and additional depreciation/amortization expense related to the fair value step-up of acquired long-lived Danisco assets

 

3



 

Business Segment Performance

 

The table below shows second quarter 2011 segment sales and related variances versus the prior year.

 

 

 

 

 

Percentage Change

 

 

 

Three Months Ended

 

Due to:

 

SEGMENT SALES*

 

June 30, 2011

 

USD

 

 

 

Portfolio

 

(Dollars in billions)

 

$

 

% Change

 

Price

 

Volume

 

and Other

 

Agriculture

 

$

3.0

 

10

 

6

 

4

 

 

Electronics & Communications

 

0.9

 

36

 

27

 

9

 

 

Industrial Biosciences

 

0.1

 

nm

 

nm

 

nm

 

nm

 

Nutrition & Health

 

0.5

 

64

 

4

 

2

 

58

 

Performance Chemicals

 

2.0

 

27

 

28

 

(1

)

 

Performance Coatings

 

1.1

 

15

 

14

 

1

 

 

Performance Materials

 

1.7

 

11

 

14

 

(2

)

(1

)

Safety & Protection

 

1.0

 

21

 

6

 

7

 

8

 

 


* Segment sales include transfers

 

Segment pre-tax operating income (PTOI) for second quarter 2011 was $1,943 million compared to second quarter 2010 PTOI of $1,655 million.   Excluding significant items, PTOI was $1,993 million, a 20 percent improvement from prior year, as shown in the table below.

 

SEGMENT PTOI excluding Significant Items*

 

 

 

 

 

Change versus 2010

 

(Dollars in millions)

 

2Q 2011

 

2Q 2010

 

$

 

%

 

 

 

 

 

 

 

 

 

 

 

Agriculture

 

$

826

 

$

746

 

$

80

 

11

%

Electronics & Communications

 

103

 

108

 

(5

)

-5

%

Industrial Biosciences

 

10

 

 

10

 

nm

 

Nutrition & Health

 

38

 

16

 

22

 

138

%

Performance Chemicals

 

503

 

274

 

229

 

84

%

Performance Coatings

 

73

 

75

 

(2

)

-3

%

Performance Materials

 

254

 

261

 

(7

)

-3

%

Safety & Protection

 

143

 

121

 

22

 

18

%

Other

 

(37

)

(16

)

(21

)

nm

 

 

 

$

1,913

 

$

1,585

 

$

328

 

21

%

Pharmaceuticals

 

80

 

70

 

10

 

14

%

Total Segment PTOI

 

$

1,993

 

$

1,655

 

$

338

 

20

%

 


* See schedules B and C for listing of significant items and their impact by segment.

 

4



 

In view of the company’s expanded business portfolio following the Danisco acquisition, two new reportable segments have been added: Industrial Biosciences and Nutrition & Health.  The Industrial Biosciences segment includes Danisco’s enzyme business and DuPont Sorona® and Bio-PDOTM businesses, previously reported in Other.  The new Nutrition & Health segment contains Danisco’s food ingredients business and DuPont’s Nutrition & Health business previously reported as part of the Agriculture & Nutrition segment.  The former Agriculture & Nutrition segment, now renamed Agriculture, includes the seed and crop protection businesses.  The following is a summary of business results for each of the company’s reportable segments, comparing second quarter 2011 with second quarter 2010, for sales and PTOI excluding significant items. References to selling price are on a U.S. dollar basis, including the impact of currency.

 

Agriculture — Sales of $3.0 billion were up $264 million, or 10 percent, reflecting 6 percent price gains and 4 percent volume gains.  Pioneer seed growth was led by strong market performance in North America spanning volume, price and portfolio gains.   Crop Protection sales increased across all product lines more than offsetting the impact of divested businesses.  PTOI for the quarter of $826 million grew 11 percent on higher sales, partly offset by the impact of portfolio changes.

 

First-half sales of $6.5 billion grew 15 percent with 9 percent higher volume, 5 percent price gains and 1 percent favorable impact of portfolio changes.   Pioneer seed business delivered volume and price gains in North America and Europe.  Crop Protection sales growth was underpinned by continued strong Rynaxypyr® sales, solid herbicide and picoxystrobin fungicide growth, partly offset by the impact of divested businesses.  PTOI for the first half of $1.9 billion grew 16 percent on higher sales.

 

Electronics & Communications — Sales of $891 million were up 36 percent, with 27 percent higher selling prices, primarily pass-through of metals prices, and 9 percent higher volume.  Volume growth was fueled by strong demand for photovoltaics and consumer electronics in Asia Pacific.  PTOI of $103 million decreased $5 million reflecting increased spending for photovoltaics growth initiatives and extreme volatility of metals pricing which reduced PTOI by about $20 million.

 

Industrial Biosciences — Sales of $123 million and PTOI of $10 million primarily reflect the acquisition of Danisco’s enzyme business.  PTOI included approximately $2 million of amortization expense associated with the fair value step-up of intangible assets acquired as part of the acquisition.

 

Nutrition & Health Sales of $486 million were up $189 million, or 64 percent, with a 58 percent increase from the acquisition of Danisco’s food ingredients business, 4 percent higher selling prices and 2 percent volume growth.  PTOI of $38 million increased $22 million, primarily due to the acquisition.  PTOI included approximately $7 million of amortization expense associated with the fair value step-up of intangible assets acquired as part of the acquisition.

 

Performance Chemicals — Sales of $2.0 billion were up 27 percent, with 28 percent higher selling prices and 1 percent lower volume.  Sales increased substantially across all major regions.  Higher selling prices stemmed from strong global demand for titanium dioxide, refrigerants, fluoroproducts and industrial chemicals, and more than offset raw material increases.  Lower volume reflects weather-related supply disruptions in industrial chemicals.  PTOI was $503 million, increasing $229 million on strong sales performance.

 

Performance Coatings — Sales of $1.1 billion were up 15 percent, with 14 percent higher selling prices and 1 percent higher volume.  Higher selling prices reflect pricing actions across all market segments to offset higher raw material costs along with a favorable currency impact. Strong demand continued in industrial coatings, particularly in North American heavy-duty truck markets.  PTOI of $73 million decreased slightly as higher sales were offset by higher raw material, energy and freight costs.

 

Performance Materials — Sales of $1.7 billion were up 11 percent, with 14 percent higher selling prices, partially offset by 2 percent lower volume and a 1 percent reduction from a portfolio change.  Ongoing demand in electronic, packaging and automotive markets led to favorable pricing in all regions.  Lower

 

5



 

volume reflects supply constraints due to production outages, as well as supply chain disruptions as a result of the Japan earthquake.  PTOI of $254 million decreased slightly due to the absence of a $27 million benefit from a gain on the sale of a business and an insurance recovery in the prior year and lower volume, partially offset by higher selling prices.

 

Safety & Protection Sales of $1.0 billion were up 21 percent, with an 8 percent increase from a portfolio change as a result of the MECS acquisition, 7 percent higher volume and 6 percent higher selling prices.  Higher volume reflects continued growth from increased demand for aramid and nonwoven products in industrial and public sector markets across all major regions.  Higher selling prices primarily reflect pricing actions taken to offset increases in raw material costs.  PTOI of $143 million increased significantly, primarily driven by the portfolio change and a favorable currency impact, partially offset by higher spending for the Kevlar® expansion at Cooper River.

 

Additional information is available on the DuPont Investor Center website at www.dupont.com.

 

Outlook

 

The company increased its full-year 2011 earnings outlook, excluding significant items, to a range of $3.90 to $4.05 per share.  The increase reflects strong second-quarter results, the expectation for continued global economic growth and about $.05 per share full-year operating earnings from Danisco on an underlying basis.   Prior guidance was a range of $3.65 to $3.85 per share, excluding the impact of Danisco.

 

The company’s estimate for the impact of the Danisco acquisition on full-year reported earnings is now a reduction of $.18 to $.29 per share, versus the previous estimate of a $.30 to $.45 per share reduction. The current view is based on anticipated full-year Danisco operating earnings of about $.05 per share and significant item charges related to the acquisition estimated to be $.23 to $.34 per share. In addition to these Danisco charges, the company expects a $.03 per share significant item charge in the third quarter associated with a licensing agreement.

 

Use of Non-GAAP Measures

 

Management believes that certain non-GAAP measurements are meaningful to investors because they provide insight with respect to ongoing operating results of the company.  Such measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance.  Reconciliations of non-GAAP measures to GAAP are provided in schedules C and D.

 

DuPont (www.dupont.com) is a science-based products and services company. Founded in 1802, DuPont puts science to work by creating sustainable solutions essential to a better, safer, healthier life for people everywhere. Operating in more than 90 countries, DuPont offers a wide range of innovative products and services for markets including agriculture and food; building and construction; communications; and transportation.

 

Forward-Looking Statements:  This news release contains forward-looking statements which may be identified by their use of words like “plans,” “expects,” “will,” “believes,” “intends,” “estimates” or other words of similar meaning.  All statements that address expectations or projections about the future, including statements about the company’s growth strategy, product development, regulatory approval, market position, anticipated benefits of acquisitions, outcome of contingencies, such as litigation and environmental matters, expenditures and financial results, are 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; significant litigation and environmental matters; 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, weather events and natural disasters; inability to protect and enforce the company’s intellectual property rights; and integration of acquired businesses and completion of divestitures of underperforming or non-strategic assets or businesses.  The company undertakes no duty to update any forward-looking statements as a result of future developments or new information.

 

#   #   #

 

7/28/11

 

6



 

E. I. du Pont de Nemours and Company

Consolidated Income Statements

(Dollars in millions, except per share amounts)

 

SCHEDULE A

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Net sales

 

$

10,264

 

$

8,616

 

$

20,298

 

$

17,100

 

Other income, net (a)

 

229

 

464

 

254

 

824

 

 

 

 

 

 

 

 

 

 

 

Total

 

10,493

 

9,080

 

20,552

 

17,924

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold and other operating charges (a)

 

7,191

 

5,984

 

14,022

 

11,780

 

Selling, general and administrative expenses

 

1,136

 

1,021

 

2,163

 

2,014

 

Research and development expense

 

462

 

404

 

861

 

769

 

Interest expense

 

115

 

103

 

215

 

206

 

 

 

 

 

 

 

 

 

 

 

Total

 

8,904

 

7,512

 

17,261

 

14,769

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

1,589

 

1,568

 

3,291

 

3,155

 

Provision for income taxes (a)

 

360

 

400

 

618

 

850

 

 

 

 

 

 

 

 

 

 

 

Net income

 

1,229

 

1,168

 

2,673

 

2,305

 

 

 

 

 

 

 

 

 

 

 

Less: Net income attributable to noncontrolling interests

 

11

 

9

 

24

 

17

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to DuPont

 

$

1,218

 

$

1,159

 

$

2,649

 

$

2,288

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share of common stock

 

$

1.31

 

$

1.27

 

$

2.85

 

$

2.52

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share of common stock

 

$

1.29

 

$

1.26

 

$

2.80

 

$

2.50

 

 

 

 

 

 

 

 

 

 

 

Dividends per share of common stock

 

$

0.41

 

$

0.41

 

$

0.82

 

$

0.82

 

 

 

 

 

 

 

 

 

 

 

Average number of shares outstanding used in earnings per share (EPS) calculation:

 

 

 

 

 

 

 

 

 

Basic

 

930,798,000

 

907,099,000

 

927,860,000

 

906,289,000

 

Diluted

 

943,987,000

 

914,548,000

 

942,461,000

 

913,216,000

 

 


(a) See Schedule B for detail of significant items.

 

7



 

E. I. du Pont de Nemours and Company

Condensed Consolidated Balance Sheets

(Dollars in millions, except per share amounts)

 

SCHEDULE A (continued)

 

 

 

June 30,
2011

 

December 31,
2010

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

2,268

 

$

4,263

 

Marketable securities

 

214

 

2,538

 

Accounts and notes receivable, net

 

9,368

 

5,635

 

Inventories

 

6,049

 

5,967

 

Prepaid expenses

 

166

 

122

 

Deferred income taxes

 

638

 

534

 

Total current assets

 

18,703

 

19,059

 

Property, plant and equipment, net of accumulated depreciation (June 30, 2011 - $19,146; December 31, 2010 - $18,628)

 

13,185

 

11,339

 

Goodwill

 

5,550

 

2,617

 

Other intangible assets

 

5,494

 

2,704

 

Investment in affiliates

 

1,084

 

1,041

 

Other assets

 

3,720

 

3,650

 

Total

 

$

47,736

 

$

40,410

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

3,767

 

$

4,360

 

Short-term borrowings and capital lease obligations

 

2,336

 

133

 

Income taxes

 

516

 

225

 

Other accrued liabilities

 

3,922

 

4,671

 

Total current liabilities

 

10,541

 

9,389

 

Long-term borrowings and capital lease obligations

 

12,460

 

10,137

 

Other liabilities

 

11,059

 

11,026

 

Deferred income taxes

 

1,174

 

115

 

Total liabilities

 

35,234

 

30,667

 

 

 

 

 

 

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Preferred stock

 

237

 

237

 

Common stock, $0.30 par value; 1,800,000,000 shares authorized; issued at June 30, 2011 - 1,018,112,000; December 31, 2010 - 1,004,351,000

 

305

 

301

 

Additional paid-in capital

 

9,978

 

9,227

 

Reinvested earnings

 

13,683

 

12,030

 

Accumulated other comprehensive loss

 

(5,453

)

(5,790

)

Common stock held in treasury, at cost (87,041,000 shares at June 30, 2011 and December 31, 2010)

 

(6,727

)

(6,727

)

Total DuPont stockholders’ equity

 

12,023

 

9,278

 

Noncontrolling interests

 

479

 

465

 

Total equity

 

12,502

 

9,743

 

Total

 

$

47,736

 

$

40,410

 

 

8



 

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,

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Cash provided by (used for) operating activities

 

$

(644

)

$

(424

)

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchases of property, plant and equipment

 

(741

)

(500

)

Investments in affiliates

 

(27

)

(54

)

Payments for businesses (net of cash acquired)

 

(6,264

)

 

Net (increase) decrease in short-term financial instruments

 

2,404

 

253

 

Other investing activities - net

 

(408

)

576

 

Cash provided by (used for) investing activities

 

(5,036

)

275

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Dividends paid to stockholders

 

(767

)

(748

)

Net increase (decrease) in borrowings

 

3,823

 

(831

)

Repurchase of common stock

 

(272

)

 

Proceeds from exercise of stock options

 

768

 

33

 

Other financing activities - net

 

(22

)

2

 

Cash provided by (used for) financing activities

 

3,530

 

(1,544

)

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

155

 

(113

)

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(1,995

)

(1,806

)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

4,263

 

4,021

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

2,268

 

$

2,215

 

 

9



 

E. I. du Pont de Nemours and Company

Schedule of Significant Items

(Dollars in millions, except per share amounts)

 

SCHEDULE B

 

SIGNIFICANT ITEMS

 

 

 

Pre-tax

 

After-tax

 

($ Per Share)

 

 

 

2011

 

2010

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1st Quarter - Total

 

$

 

$

 

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2nd Quarter

 

 

 

 

 

 

 

 

 

 

 

 

 

Transaction costs related to the acquisition of Danisco (a)

 

(103

)

 

(81

)

 

(0.08

)

 

Adjustment of interest and accruals related to income tax settlements (b)

 

 

59

 

 

87

 

 

0.09

 

2nd Quarter - Total

 

$

(103

)

$

59

 

$

(81

)

$

87

 

$

(0.08

)

$

0.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-to-date - Total (c)

 

$

(103

)

$

59

 

$

(81

)

$

87

 

$

(0.09

)

$

0.10

 

 


(a)

Second quarter and full year 2011 included charges related to the Danisco acquisition of $(103) recorded in Cost of goods sold and other operating charges. These charges included $(60) of transaction costs and a $(43) charge related to the fair value step-up of inventories that were acquired from Danisco and sold in the second quarter 2011. Pre-tax charges by segment were: Industrial Biosciences - $(17) and Nutrition & Health - $(33). The remaining fair value step-up of inventories acquired from Danisco of $132 is expected to be expensed in 2011 as these inventories are sold.

(b)

Second quarter and full year 2010 includes benefits for the adjustment of accrued interest of $59 ($38 after-tax) recorded in Other income, net and the adjustment of income tax accruals of $49 associated with settlements of prior year tax contingencies.

(c)

Earnings per share for the year does not equal the sum of quarterly earnings per share due to changes in average share calculations.

 

 

See Schedule C for detail by segment.

 

10



 

E. I. du Pont de Nemours and Company

Consolidated Segment Information

(Dollars in millions)

 

SCHEDULE C

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

SEGMENT SALES (1)

 

 

 

 

 

 

 

 

 

Agriculture

 

$

2,997

 

$

2,733

 

$

6,501

 

$

5,674

 

Electronics & Communications

 

891

 

657

 

1,702

 

1,288

 

Industrial Biosciences

 

123

 

 

123

 

 

Nutrition & Health

 

486

 

297

 

810

 

598

 

Performance Chemicals

 

1,995

 

1,569

 

3,792

 

2,983

 

Performance Coatings

 

1,105

 

962

 

2,098

 

1,864

 

Performance Materials

 

1,745

 

1,576

 

3,452

 

3,110

 

Safety & Protection

 

1,025

 

845

 

1,990

 

1,634

 

Other

 

1

 

57

 

37

 

105

 

Total Segment sales

 

$

10,368

 

$

8,696

 

$

20,505

 

$

17,256

 

 

 

 

 

 

 

 

 

 

 

Elimination of transfers

 

(104

)

(80

)

(207

)

(156

)

Consolidated net sales

 

$

10,264

 

$

8,616

 

$

20,298

 

$

17,100

 

 


(1)   Sales for the reporting segments include transfers.

 

11



 

E. I. du Pont de Nemours and Company

Consolidated Segment Information

(Dollars in millions)

 

SCHEDULE C (continued)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

PRE-TAX OPERATING INCOME/(LOSS) (PTOI)

 

 

 

 

 

 

 

 

 

Agriculture

 

$

826

 

$

746

 

$

1,937

 

$

1,669

 

Electronics & Communications

 

103

 

108

 

214

 

213

 

Industrial Biosciences

 

(7

)

 

(7

)

 

Nutrition & Health

 

5

 

16

 

30

 

34

 

Performance Chemicals

 

503

 

274

 

897

 

464

 

Performance Coatings

 

73

 

75

 

138

 

120

 

Performance Materials

 

254

 

261

 

542

 

491

 

Safety & Protection

 

143

 

121

 

288

 

223

 

Pharmaceuticals

 

80

 

70

 

130

 

291

 

Other

 

(37

)

(16

)

(101

)

(47

)

Total Segment PTOI

 

1,943

 

1,655

 

4,068

 

3,458

 

 

 

 

 

 

 

 

 

 

 

Net exchange gains (losses) (1)

 

4

 

105

 

(139

)

135

 

Corporate expenses & net interest

 

(358

)

(192

)

(638

)

(438

)

Income before income taxes

 

$

1,589

 

$

1,568

 

$

3,291

 

$

3,155

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

SIGNIFICANT ITEMS BY SEGMENT (PRE-TAX) (2)

 

 

 

 

 

 

 

 

 

Agriculture

 

$

 

$

 

$

 

$

 

Electronics & Communications

 

 

 

 

 

Industrial Biosciences

 

(17

)

 

(17

)

 

Nutrition & Health

 

(33

)

 

(33

)

 

Performance Chemicals

 

 

 

 

 

Performance Coatings

 

 

 

 

 

Performance Materials

 

 

 

 

 

Safety & Protection

 

 

 

 

 

Pharmaceuticals

 

 

 

 

 

Other

 

 

 

 

 

Total significant items by segment

 

$

(50

)

$

 

$

(50

)

$

 

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

PTOI EXCLUDING SIGNIFICANT ITEMS

 

 

 

 

 

 

 

 

 

Agriculture

 

$

826

 

$

746

 

$

1,937

 

$

1,669

 

Electronics & Communications

 

103

 

108

 

214

 

213

 

Industrial Biosciences

 

10

 

 

10

 

 

Nutrition & Health

 

38

 

16

 

63

 

34

 

Performance Chemicals

 

503

 

274

 

897

 

464

 

Performance Coatings

 

73

 

75

 

138

 

120

 

Performance Materials

 

254

 

261

 

542

 

491

 

Safety & Protection

 

143

 

121

 

288

 

223

 

Pharmaceuticals

 

80

 

70

 

130

 

291

 

Other

 

(37

)

(16

)

(101

)

(47

)

Total Segment PTOI excluding significant items

 

$

1,993

 

$

1,655

 

$

4,118

 

$

3,458

 

 


(1)

 

Gains and losses resulting from the company’s hedging program are largely offset by associated tax effects.

 

 

See Schedule D for additional information.

(2)

 

See Schedule B for detail of significant items.

 

12



 

E. I. du Pont de Nemours and Company

Reconciliation of Non-GAAP Measures

(Dollars in millions, except per share amounts)

 

SCHEDULE D

 

Summary of Earnings Comparisons

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

%
Change

 

2011

 

2010

 

%
Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment PTOI

 

$

1,943

 

$

1,655

 

17

%

$

4,068

 

$

3,458

 

18

%

Significant items (benefit) charge included in PTOI (per Schedule C)

 

50

 

 

 

 

50

 

 

 

 

Segment PTOI excluding significant items

 

$

1,993

 

$

1,655

 

20

%

$

4,118

 

$

3,458

 

19

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to DuPont

 

$

1,218

 

$

1,159

 

5

%

$

2,649

 

$

2,288

 

16

%

Significant items (benefit) charge included in net income attributable to DuPont (per Schedule B)

 

81

 

(87

)

 

 

81

 

(87

)

 

 

Net income attributable to DuPont excluding significant items

 

$

1,299

 

$

1,072

 

21

%

$

2,730

 

$

2,201

 

24

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EPS

 

$

1.29

 

$

1.26

 

2

%

$

2.80

 

$

2.50

 

12

%

Significant items (benefit) charge included in EPS (per Schedule B)

 

0.08

 

(0.09

)

 

 

0.09

 

(0.10

)

 

 

EPS excluding significant items

 

$

1.37

 

$

1.17

 

17

%

$

2.89

 

$

2.40

 

20

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of diluted shares outstanding

 

943,987,000

 

914,548,000

 

3.2

%

942,461,000

 

913,216,000

 

3.2

%

 

Reconciliation of Earnings Per Share (EPS) Outlook

 

 

 

Year Ended

 

 

 

December 31,

 

 

 

2011
Outlook

 

2010
Actual

 

 

 

 

 

 

 

Earnings per share - excluding significant items

 

$3.90 to $4.05

 

$

3.28

 

Danisco acquisition related costs

 

(0.23) to (0.34)

 

 

Charge related to a licensing agreement

 

(0.03)

 

(0.03

)

Adjustments of interest and accruals related to income tax settlements and tax valuation allowances

 

 

0.14

 

Loss on early extinguishment of debt

 

 

(0.13

)

Reversal of accruals related to the 2008 and 2009 restructuring reserves

 

 

0.02

 

Reported EPS

 

$3.53 to $3.79

 

$

3.28

 

 

13



 

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
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

$

1,589

 

$

1,568

 

$

3,291

 

$

3,155

 

Less: Net income attributable to noncontrolling interests

 

11

 

9

 

24

 

17

 

Add: Interest expense

 

115

 

103

 

215

 

206

 

Adjusted EBIT

 

1,693

 

1,662

 

3,482

 

3,344

 

Add: Depreciation and amortization

 

383

 

355

 

744

 

721

 

Adjusted EBITDA

 

$

2,076

 

$

2,017

 

$

4,226

 

$

4,065

 

 

Calculation of Free Cash Flow

 

 

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

Cash provided by (used for) operating activities

 

$

(644

)

$

(424

)

Less: Purchases of property, plant and equipment

 

741

 

500

 

Free cash flow

 

$

(1,385

)

$

(924

)

 

Reconciliations of Fixed Costs as a Percent of Sales

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Total charges and expenses - consolidated income statements

 

$

8,904

 

$

7,512

 

$

17,261

 

$

14,769

 

Remove:

 

 

 

 

 

 

 

 

 

Interest expense

 

(115

)

(103

)

(215

)

(206

)

Variable costs (1)

 

(4,936

)

(4,119

)

(9,658

)

(8,104

)

Significant items - benefit (charge) (2)

 

(103

)

 

(103

)

 

Fixed costs

 

$

3,750

 

$

3,290

 

$

7,285

 

$

6,459

 

 

 

 

 

 

 

 

 

 

 

Consolidated net sales

 

$

10,264

 

$

8,616

 

$

20,298

 

$

17,100

 

 

 

 

 

 

 

 

 

 

 

Fixed costs as a percent of consolidated net sales

 

36.5

%

38.2

%

35.9

%

37.8

%

 


(1)

Includes variable manufacturing costs, freight, commissions and other selling expenses which vary with the volume of sales.

(2)

See Schedule B for detail of significant items.

 

 

14



 

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

 

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 income, net on the Consolidated Income Statements and are largely offset by the associated tax impact.

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Subsidiary/Affiliate Monetary Position Gain (Loss)

 

 

 

 

 

 

 

 

 

Pre-tax exchange gains (losses) (includes equity affiliates)

 

$

55

 

$

(223

)

$

285

 

$

(408

)

Local tax benefits (expenses)

 

(10

)

(12

)

(5

)

(22

)

Net after-tax impact from subsidiary exchange gains (losses)

 

$

45

 

$

(235

)

$

280

 

$

(430

)

 

 

 

 

 

 

 

 

 

 

Hedging Program Gain (Loss)

 

 

 

 

 

 

 

 

 

Pre-tax exchange gains (losses)

 

$

(51

)

$

328

 

$

(424

)

$

543

 

Tax benefits (expenses)

 

17

 

(114

)

147

 

(189

)

Net after-tax impact from hedging program exchange gains (losses)

 

$

(34

)

$

214

 

$

(277

)

$

354

 

 

 

 

 

 

 

 

 

 

 

Total Exchange Gain (Loss)

 

 

 

 

 

 

 

 

 

Pre-tax exchange gains (losses)

 

$

4

 

$

105

 

$

(139

)

$

135

 

Tax benefits (expenses)

 

7

 

(126

)

142

 

(211

)

Net after-tax exchange gains (losses)

 

$

11

 

$

(21

)

$

3

 

$

(76

)

 

As shown above, the “Total Exchange Gain (Loss)” is the sum of the “Subsidiary/Affiliate Monetary Position Gain (Loss)” and the “Hedging Program Gain (Loss).”

 

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, and significant items.

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

$

1,589

 

$

1,568

 

$

3,291

 

$

3,155

 

Add: Significant items - (benefit) charge (1)

 

103

 

(59

)

103

 

(59

)

Less: Net exchange gains (losses)

 

4

 

105

 

(139

)

135

 

Income before income taxes, significant items and exchange gains/losses

 

$

1,688

 

$

1,404

 

$

3,533

 

$

2,961

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

$

360

 

$

400

 

$

618

 

$

850

 

Add:

Tax benefit (expenses) on significant items

 

22

 

28

 

22

 

28

 

 

Tax benefits (expenses) on exchange gains/losses

 

7

 

(126

)

142

 

(211

)

Provision for income taxes, excluding taxes on significant items and exchange gains/losses

 

$

389

 

$

302

 

$

782

 

$

667

 

 

 

 

 

 

 

 

 

 

 

Effective income tax rate

 

22.7

%

25.5

%

18.8

%

26.9

%

Significant items effect

 

(0.1

)%

2.9

%

0.1

%

1.5

%

Tax rate before significant items

 

22.6

%

28.4

%

18.9

%

28.4

%

Exchange gains (losses) effect

 

0.4

%

(6.9

)%

3.2

%

(5.9

)%

Base income tax rate

 

23.0

%

21.5

%

22.1

%

22.5

%

 


(1)  See Schedule B for detail of significant items.

 

15



 

E. I. du Pont de Nemours and Company

Danisco Opening Balance Sheet

(Dollars in millions, except per share amounts)

 

SCHEDULE E

 

The Danisco acquisition was valued at $6,417, plus net debt assumed of $617.  The following table summarizes the fair value of the assets acquired and liabilities assumed as of the acquisition date.  These amounts represent the preliminary allocation of the purchase price.  Final determination of the fair value may result in further adjustments to the values presented below.

 

Net working capital, including inventory step-up (1)

 

$

795

 

Property, plant and equipment (PP&E) (2)

 

1,720

 

Goodwill

 

2,925

 

Definite-lived intangible assets (3)

 

1,857

 

Indefinite-lived intangible assets

 

1,002

 

Net debt

 

(617

)

Deferred income taxes (4)

 

(1,060

)

Other liabilities, net of other assets

 

(205

)

Net assets acquired

 

$

6,417

 

 


(1)

The fair value of inventories acquired included a step-up in the value of $175, of which $43 was expensed to cost of goods sold and other operating charges in the second quarter and the remaining amount is expected to be expensed in 2011. The step-up in the value of inventories acquired by segment were: Industrial Biosciences - $70 and Nutrition & Health - $105.

(2)

The fair value of PP&E acquired included a step-up in the value of $607. The depreciation expense related to this step-up in value for the full-year 2011 by segment is expected to be: Industrial Biosciences - $9 and Nutrition & Health - $18.

(3)

The amortization expense related to the fair value step-up of definite-lived intangible assets for the full-year 2011 by segment is expected to be: Industrial Biosciences - $11 and Nutrition & Health - $51.

(4)

The deferred income tax liabilities assumed represent the adjustments for the tax impact of fair value adjustments, primarily relating to the definite-lived intangible assets.

 

16