DuPont Grows Second Quarter Earnings 8 Percent to $1.48 Ex-items

WILMINGTON, Del., July 24, 2012 /PRNewswire/ --

Highlights:

• Second-quarter 2012 earnings were $1.48 per share versus $1.37 per share in the prior year, excluding significant items from both periods.  Reported second-quarter earnings were $1.25 per share versus $1.29 per share in the prior year.

• Sales increased 7 percent to $11.0 billion reflecting 6 percent higher local prices and a 5 percent increase from portfolio changes, partially offset by a 3 percent reduction from currency and 1 percent lower sales volume.  Sales in developing markets grew 11 percent.

• Segment pre-tax operating income, excluding pharmaceuticals and significant items, increased 13 percent, principally attributable to higher earnings from Agriculture and Performance Materials and a prior-year acquisition benefiting Nutrition & Health and Industrial Biosciences.

• For the first half of 2012, Agriculture delivered 15 percent sales growth and 16 percent higher pre-tax operating income excluding significant items, reflecting strong northern-hemisphere business performance across both seed and crop protection product lines.

• The company is on track versus its full-year 2012 productivity targets for fixed costs and working capital.  Year-to-date fixed cost productivity totals $190 million.

• DuPont expects full-year earnings to be toward the lower end of its existing outlook range of $4.20 to $4.40 per share, excluding significant items, due to uncertainties associated with macros and currency as well as a higher tax rate related to earnings mix.  Prior year earnings were $3.93 per share on a comparable basis.

"Our agriculture, food and bioscience businesses are performing exceptionally well globally, and our advanced materials businesses are achieving solid results despite slower growth in some key markets and continued weakness in Europe," said DuPont Chair and CEO Ellen Kullman.  "Our global teams continue to execute well in a dynamic environment, while investing for growth driven by science-powered innovation and collaboration."

Global Consolidated Sales and Net Income

Second-quarter 2012 consolidated net sales of $11.0 billion were 7 percent higher than the prior year reflecting 6 percent higher local prices and a 5 percent net increase from portfolio changes, partly offset by a 3 percent negative currency impact and 1 percent lower volume.

The table below shows regional sales and variances versus the second quarter 2011.

Second-quarter 2012 net income attributable to DuPont was $1,179 million versus $1,218 million in 2011. Excluding significant items, net income attributable to DuPont of $1,394 million increased $95 million, or 7 percent, from $1,299 million in the second quarter 2011. 

Earnings Per Share

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

Business Segment Performance

The table below shows second quarter 2012 segment sales and related variances versus the prior year.

Segment pre-tax operating income (PTOI) for second quarter 2012 was $1,898 million compared to second quarter 2011 PTOI of $1,943 million.   Excluding significant items, PTOI was $2,178 million, up 9 percent from $1,993 million in the prior year, as shown in the table below.

The following is a summary of business results for each of the company's reportable segments, comparing second quarter 2012 with second quarter 2011, 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 $3.4 billion were up $0.4 billion, or 13 percent, with 7 percent price and 6 percent volume gains.  Pioneer seed maintained its momentum delivering 12 percent sales growth on agriculture macros and strong business performance in North America corn and soybeans.  Crop Protection sales growth of 15 percent was underpinned by strong demand across all product lines.   PTOI of $926 million improved 12 percent on strong sales performance partially offset by input cost increases in seeds, unfavorable currency impact and higher investments in Right Product Right Acre commercial and R&D activities.

First half sales of $7.5 billion were up $1.0 billion, or 15 percent, with 8 percent volume and 7 percent price gains.  Pioneer seed sales growth of 16 percent reflects strong northern hemisphere performance with global price and volume gains on new product penetration. Crop Protection sales growth of 11 percent reflects continued strong demand in all product lines with standout performance in insect control products.  PTOI for the first half of $2.2 billion improved 16 percent on higher volume and price partially offset by input cost increases in seeds, unfavorable currency impact and higher spending for growth investments.

Electronics & Communications – Sales of $795 million were down 11 percent on 6 percent lower volume and 5 percent lower selling prices, primarily pass-through of lower metals prices.  Sales reflect continued soft demand for photovoltaic materials, though up sequentially from first quarter.  Volume decline in photovoltaics was partially offset by increased demand for smart phones and tablets.  PTOI of $75 million declined $28 million from lower volume and plant utilization.  Additionally, PTOI in the prior year included a $20 million reduction due to extreme volatility in metals prices.

Industrial Biosciences – Sales of $300 million were up $177 million, primarily due to two months acquisition benefit from the Danisco enzyme business. Biomaterial sales into apparel and carpeting accounted for a 10 percent volume increase.  PTOI of $44 million was up $34 million benefiting from the acquisition and realization of cost synergies.  PTOI includes $5 million of amortization expense associated with the fair value step-up of acquired intangible assets.

Nutrition & Health – Sales of $885 million were up $399 million, or 82 percent, primarily reflecting two months acquisition benefit from the Danisco specialty food ingredients business.  Higher volume reflects continued strong demand in Solae specialty soy products.  PTOI of $112 million was up $74 million benefiting from the acquisition, realization of cost synergies and favorable product mix in Solae.  PTOI includes $20 million of amortization expense associated with the fair value step-up of acquired intangible assets.

Performance Chemicals – Sales of $2.0 billion were down 1 percent, with 10 percent lower volume partially offset by 9 percent higher selling prices.  Higher selling prices more than offset higher ore costs.  Lower volume reflects continued softness in titanium dioxide, particularly in Asia Pacific and Europe, and weakening demand in fluoropolymers.  PTOI of $538 million increased $35 million on higher selling prices and continued productivity actions.

Performance Coatings – Sales of $1.1 billion were down 1 percent, with 2 percent lower volume partially offset by 1 percent higher selling prices.  OEM volume growth in North America and Asia Pacific was more than offset by lower refinish and powder coatings volume, particularly in European markets.  Higher local selling prices across all regions and market segments were partially offset by the impact of unfavorable currency.  PTOI of $92 million increased $19 million on higher selling prices, mix enrichment and continued productivity actions, partially offset by unfavorable currency. 

Performance Materials – Sales of $1.7 billion were down 3 percent, primarily reflecting a 3 percent reduction from a portfolio change and 1 percent lower selling prices, partially offset by 1 percent higher volume.  The lower selling prices were primarily affected by unfavorable currency.  Volume growth in packaging markets and continued strong demand in the automotive market, particularly in North America, were partially offset by softness in the industrial and electronic markets.  PTOI of $317 million increased $63 million due to lower feedstock costs and higher volume, partially offset by unfavorable currency. 

Safety & Protection – Sales of $986 million were down 4 percent, with 5 percent lower volume partially offset by 1 percent higher selling prices.  Volume declined due to lower public sector demand and continued softness in industrial markets.  Higher local selling prices from value-based pricing were partially offset by the impact of unfavorable currency.  PTOI of $127 million decreased $16 million on weaker mix, unfavorable currency and higher spending for growth initiatives, partially offset by value-based pricing actions. 

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

Outlook 

DuPont expects full-year earnings to be toward the lower end of its existing outlook range of $4.20 to $4.40 per share, excluding significant items, due to uncertainties associated with macros and currency as well as a higher tax rate related to earnings mix.  Prior year earnings were $3.93 per share on a comparable basis.

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 (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:  This news release contains forward-looking statements which may be identified by their use of words like "plans," "expects," "will," "anticipates," "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.

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)
		2012		2011		2012		2011		2012		2011
1st Quarter
Customer claims charge (a)		$        (50)		$            -		$        (32)		$            -		$      (0.04)		$               -
1st Quarter - Total		$        (50)		$            -		$        (32)		$            -		$      (0.04)		$               -
2nd Quarter
Customer claims charge (a)		$       (265)		$            -		$       (169)		$            -		$      (0.18)		$               -
Litigation settlement (b)		(137)		-		(123)		-		(0.13)		-
Gain on the sale of equity
	method investment (c)	122		-		77		-		0.08		-
Transition costs related to the
	acquisition of Danisco (d)	-		(103)		-		(81)		-		(0.08)
2nd Quarter - Total		$       (280)		$       (103)		$       (215)		$        (81)		$      (0.23)		$        (0.08)
Year-to-date - Total (e)		$       (330)		$       (103)		$       (247)		$        (81)		$      (0.26)		$        (0.09)
(a)	First quarter and second quarter 2012 included charges of $50 and $265, respectively, recorded in Cost of goods sold and other operating charges associated with the company's process to fairly resolve claims related to the use of Imprelis® herbicide, bringing the total charges to $490 at June 30, 2012.  The company will continue to evaluate reported claim damage as additional information becomes available. It is reasonably possible that additional charges could result from this evaluation. While there is a high degree of uncertainty, total charges could range as high as $575. The company has submitted, and will continue to submit, requests for payment to its insurance carriers for costs associated with this matter in excess of $100.  This matter relates to the Agriculture segment.
(b)	Second quarter 2012 included a charge of $137 recorded in Cost of goods sold and other operating charges primarily related to the company's settlement of litigation with Invista.  This matter relates to Other.
(c)	Second quarter 2012 included a pre-tax gain of $122 recorded in Other income, net associated with the sale of an equity method investment in the Electronics & Communications segment.
(d)	Second quarter 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), Nutrition & Health - $(33), and Corporate expenses - $(53).
(e)	Earnings per share for the year may not equal the sum of quarterly earnings per share due to changes in average share calculations.
See Schedule C for detail by segment.

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,
SEGMENT SALES (1)				2012		2011		2012		2011
Agriculture				$          3,388		$          2,997		$     7,468		$     6,501
Electronics & Communications				795		891		1,472		1,702
Industrial Biosciences				300		123		588		123
Nutrition & Health				885		486		1,693		810
Performance Chemicals				1,968		1,995		3,868		3,792
Performance Coatings				1,089		1,105		2,139		2,098
Performance Materials				1,699		1,745		3,299		3,452
Safety & Protection				986		1,025		1,927		1,990
Other				1		1		2		37
Total Segment sales				11,111		10,368		22,456		20,505
Elimination of transfers				(105)		(104)		(220)		(207)
Consolidated net sales				$        11,006		$        10,264		$   22,236		$   20,298
(1)   Sales for the reporting segments include transfers.

 

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,
PRE-TAX OPERATING INCOME/(LOSS) (PTOI)		2012		2011		2012		2011
Agriculture		$                  661		$                  826		$    1,925		$   1,937
Electronics & Communications		197		103		230		214
Industrial Biosciences		44		(7)		85		(7)
Nutrition & Health		112		5		195		30
Performance Chemicals		538		503		1,050		897
Performance Coatings		92		73		179		138
Performance Materials		317		254		557		542
Safety & Protection		127		143		227		288
Pharmaceuticals		16		80		43		130
Other		(206)		(37)		(266)		(101)
Total Segment PTOI		1,898		1,943		4,225		4,068
Net exchange gains (losses) (1)		28		4		(52)		(139)
Corporate expenses & net interest		(289)		(358)		(595)		(638)
Income before income taxes		$               1,637		$               1,589		$    3,578		$   3,291
		Three Months Ended June 30,				Six Months Ended June 30,
SIGNIFICANT ITEMS BY SEGMENT (PRE-TAX) (2)		2012		2011		2012		2011
Agriculture		$                (265)		$                      -		$     (315)		$           -
Electronics & Communications		122		-		122		-
Industrial Biosciences		-		(17)		-		(17)
Nutrition & Health		-		(33)		-		(33)
Performance Chemicals		-		-		-		-
Performance Coatings		-		-		-		-
Performance Materials		-		-		-		-
Safety & Protection		-		-		-		-
Pharmaceuticals		-		-		-		-
Other		(137)		-		(137)		-
Total significant items by segment		$                (280)		$                  (50)		$     (330)		$      (50)
		Three Months Ended June 30,				Six Months Ended June 30,
PTOI EXCLUDING SIGNIFICANT ITEMS		2012		2011		2012		2011
Agriculture		$                  926		$                  826		$    2,240		$   1,937
Electronics & Communications		75		103		108		214
Industrial Biosciences		44		10		85		10
Nutrition & Health		112		38		195		63
Performance Chemicals		538		503		1,050		897
Performance Coatings		92		73		179		138
Performance Materials		317		254		557		542
Safety & Protection		127		143		227		288
Pharmaceuticals		16		80		43		130
Other		(69)		(37)		(129)		(101)
Total Segment PTOI excluding significant items		$               2,178		$               1,993		$    4,555		$   4,118
(1)  See Schedule D for additional information on exchange gains and losses.
(2)  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
Summary of Earnings Comparisons
								Three Months Ended June 30,						Six Months Ended June 30,
								2012		2011		% Change		2012		2011		% Change
Segment PTOI								$               1,898		$               1,943		-2%		$              4,225		$              4,068		4%
Significant items (benefit) charge included in PTOI (per Schedule C)								280		50				330		50
Segment PTOI excluding significant items								$               2,178		$               1,993		9%		$              4,555		$              4,118		11%
Net income attributable to DuPont								$               1,179		$               1,218		-3%		$              2,667		$              2,649		1%
Significant items (benefit) charge included in net income
attributable to DuPont (per Schedule B)								215		81				247		81
Net income attributable to DuPont
excluding significant items								$               1,394		$               1,299		7%		$              2,914		$              2,730		7%
EPS								$                 1.25		$                 1.29		-3%		$                2.82		$                2.80		1%
Significant items (benefit) charge included in EPS (per Schedule B)								0.23		0.08				0.26		0.09
EPS excluding significant items								$                 1.48		$                 1.37		8%		$                3.08		$                2.89		7%
Average number of diluted shares outstanding								942,832,000		943,987,000		-0.1%		943,533,000		942,461,000		0.1%
Reconciliation of Earnings Per Share (EPS) Outlook
								Year Ended December 31,
								2012 Outlook		2011 Actual
Earning per share - excluding significant items								$4.20 - $4.40		$                 3.93
Sale of an equity method investment								0.08		-
Danisco acquisition related costs								-		(0.22)
Customer claims charges								(0.21)		(0.12)
Charges related to a licensing agreement								-		(0.03)
Sale of a business								-		0.13
Restructuring charge/adjustments								-		(0.01)
Litigation Settlement								(0.13)		-
Reported EPS								$3.94 to $4.14		$                 3.68

 

E. I. du Pont de Nemours and Company Reconciliation of Non-GAAP Measures (Dollars in millions, except per share amounts)
SCHEDULE D (continued)
Reconciliations of Adjusted EBIT / EBITDA to Consolidated Income Statements
	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Income before income taxes	$               1,637		$          1,589		$          3,578		$          3,291
Less: Net income attributable to noncontrolling interests	9		11		21		24
Add:  Interest expense	117		115		231		215
Adjusted EBIT	1,745		1,693		3,788		3,482
Add: Depreciation and amortization	445		383		900		744
Adjusted EBITDA	$               2,190		$          2,076		$          4,688		$          4,226
Calculation of Free Cash Flow
	Six Months Ended June 30,
	2012		2011
Cash provided by (used for) operating activities	$             (1,117)		$           (644)
Less: Purchases of property, plant and equipment	696		741
Free cash flow	$             (1,813)		$        (1,385)
Reconciliations of Fixed Costs as a Percent of Sales
	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Total charges and expenses - consolidated income statements	$               9,646		$          8,904		$        18,961		$        17,261
Remove:
Interest expense	(117)		(115)		(231)		(215)
Variable costs (1)	(5,072)		(4,936)		(10,209)		(9,658)
Significant items - benefit (charge) (2)	(402)		(103)		(452)		(103)
Fixed costs	$               4,055		$          3,750		$          8,069		$          7,285
Consolidated net sales	$             11,006		$        10,264		$        22,236		$        20,298
Fixed costs as a percent of consolidated net sales	36.8%		36.5%		36.3%		35.9%
(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.

  

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 and the related tax impact is recorded in Provision for (benefit from) income taxes on the Consolidated Income Statements.
					Three Months Ended June 30,				Six Months Ended June 30,
					2012		2011		2012		2011
Subsidiary/Affiliate Monetary Position Gain (Loss)
Pre-tax exchange gains (losses) (includes equity affiliates)					$        (210)		$        55		$        (162)		$         285
Local tax benefits (expenses)					24		(10)		16		(5)
Net after-tax impact from subsidiary exchange gains (losses)					$        (186)		$        45		$        (146)		$         280
Hedging Program Gain (Loss)
Pre-tax exchange gains (losses)					$          238		$      (51)		$         110		$       (424)
Tax benefits (expenses)					(83)		17		(39)		147
Net after-tax impact from hedging program exchange gains (losses)					$          155		$      (34)		$           71		$       (277)
Total Exchange Gain (Loss)
Pre-tax exchange gains (losses)					$            28		$          4		$          (52)		$       (139)
Tax benefits (expenses)					(59)		7		(23)		142
Net after-tax exchange gains (losses)					$          (31)		$        11		$          (75)		$             3
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,
					2012		2011		2012		2011
Income before income taxes					$       1,637		$   1,589		$      3,578		$      3,291
Add:  Significant items - (benefit) charge (1)					280		103		330		103
Less:  Net exchange gains (losses)					28		4		(52)		(139)
Income before income taxes, significant items and exchange gains/losses					$       1,889		$   1,688		$      3,960		$      3,533
Provision for (benefit from) income taxes					$          449		$      360		$         890		$         618
Add:  Tax benefits (expenses) on significant items					65		22		83		22
Tax benefits (expenses) on exchange gains/losses					(59)		7		(23)		142
Provision for income taxes, excluding taxes on significant items    and exchange gains/losses					$          455		$      389		$         950		$         782
Effective income tax rate					27.4%		22.7%		24.9%		18.8%
Significant items effect					(0.6%)		(0.1%)		0.0%		0.1%
Tax rate before significant items					26.8%		22.6%		24.9%		18.9%
Exchange gains (losses) effect					(2.7%)		0.4%		(0.9%)		3.2%
Base income tax rate					24.1%		23.0%		24.0%		22.1%
(1)  See Schedule B for detail of significant items.

 

SOURCE DuPont