DuPont Reports Second-Quarter 2016 Results

Three Months Ended

June 30, 2016

Percent Change Due to:

%

Local Price and

Portfolio /

$

Change

Product Mix**

Currency

Volume**

Other

(Dollars in millions)

     U.S. & Canada

$    3,550

(1)

(1)

-

1

(1)

     EMEA *

1,418

(4)

-

-

(3)

(1)

     Asia Pacific 

1,557

3

(2)

(2)

6

1

     Latin America

536

(1)

(1)

(6)

7

(1)

Total Consolidated Sales

$    7,061

(1)

(1)

(1)

2

(1)

*  Europe, Middle East & Africa

** Organic sales growth is defined as the sum of local price and product mix and volume.

Three Months Ended

June 30, 2016

Percent Change Due to:

%

Local Price and

$

Change

Product Mix

Currency

Volume

Other

(Dollars in millions)

Agriculture

$    3,218

-

-

(2)

3

(1)

Electronics & Communications

494

(6)

(2)

-

(4)

-

Industrial Biosciences

355

(1)

-

(1)

-

-

Nutrition & Health

835

1

(1)

(1)

3

-

Performance Materials

1,335

-

(4)

-

4

-

Protection Solutions

786

(2)

-

-

(2)

-

Other

38

Consolidated Net Sales

7,061

(1)

(1)

(1)

2

(1)

Change vs. 2015

(Dollars in millions)

2Q16

2Q15

Agriculture

$        865

$        772

$           93

12%

Electronics & Communications

93

89

4

4%

Industrial Biosciences

62

50

12

24%

Nutrition & Health

130

100

30

30%

Performance Materials

325

301

24

8%

Protection Solutions

188

181

7

4%

Other

(50)

(46)

(4)

-9%

Total segment operating earnings ⁽²⁾ 

1,613

1,447

166

11%

Exchange gains (losses) ^(2),(3)

(15)

11

(26)

nm

Corporate expenses ⁽²⁾ 

(83)

(148)

65

-44%

Interest expense⁽²⁾

(93)

(74)

(19)

26%

Operating earnings before income taxes ⁽¹⁾

1,422

1,236

186

15%

Provision for income taxes on operating earnings ⁽¹⁾

(325)

(237)

(88)

Less: Net income attributable to noncontrolling interests 

4

5

(1)

Operating earnings ⁽¹⁾

$      1,093

$        994

$           99

10%

Operating earnings per share ⁽¹⁾

$        1.24

$       1.09

$        0.15

14%

GAAP earnings per share

$        1.16

$       1.06

$        0.10

9%

(1) See Schedules A, C and D for reconciliations of non-GAAP measures.

(2) See Schedules B and C for listing of significant items.

(3) See Schedule D for additional information on exchange gains and losses.

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,

2016

2015

2016

2015

Net sales

$

7,061

$

7,121

$

14,466

$

14,958

Cost of goods sold

3,990

4,103

8,232

8,619

Other operating charges ⁽¹⁾

143

174

328

322

Selling, general and administrative expenses ⁽¹⁾

1,211

1,274

2,339

2,494

Research and development expense

432

495

850

974

Other income, net ⁽¹⁾

(51)

(255)

(423)

(454)

Interest expense ⁽¹⁾

93

94

185

178

Employee separation / asset related charges, net ⁽¹⁾

(90)

2

(13)

40

Income from continuing operations before income taxes

1,333

1,234

2,968

2,785

Provision for income taxes on continuing operations ⁽¹⁾

306

260

712

790

Income from continuing operations after income taxes

1,027

974

2,256

1,995

Loss from discontinued operations after income taxes

(3)

(29)

—

(15)

Net income

1,024

945

2,256

1,980

Less:  Net income attributable to noncontrolling interests

4

5

10

9

Net income attributable to DuPont

$

1,020

$

940

$

2,246

$

1,971

Basic earnings (loss) per share of common stock:

Basic earnings per share of common stock from continuing operations

$

1.17

$

1.07

$

2.56

$

2.19

Basic loss per share of common stock from discontinued operations

—

(0.03)

—

(0.02)

Basic earnings per share of common stock ⁽²⁾

$

1.16

$

1.04

$

2.56

$

2.17

Diluted earnings (loss) per share of common stock:

Diluted earnings per share of common stock from continuing operations

$

1.16

$

1.06

$

2.55

$

2.17

Diluted loss per share of common stock from discontinued operations

—

(0.03)

—

(0.02)

Diluted earnings per share of common stock ⁽²⁾

$

1.16

$

1.03

$

2.55

$

2.15

Dividends per share of common stock

$

0.38

$

0.49

$

0.76

$

0.96

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

  Basic

875,013,000

905,761,000

874,269,000

906,296,000

  Diluted

879,179,000

911,681,000

878,214,000

912,748,000

Reconciliation of Non-GAAP Measures

Summary of Earnings Comparison

Three Months Ended

June 30,

Six Months Ended

June 30,

2016

2015

% Change

2016

2015

% Change

Income from continuing operations after income taxes (GAAP)

$

1,027

$

974

5%

$

2,256

$

1,995

13%

Less: Significant items benefit (charge) included in income from continuing operations after income taxes (per Schedule B)

19

32

179

(25)

Non-operating pension/OPEB costs included in income from continuing
operations after income taxes ⁽³⁾

(89)

(57)

(135)

(136)

Net income attributable to noncontrolling interest from continuing operations

4

5

10

9

Operating earnings (Non-GAAP) ⁽⁴⁾

$

1,093

$

994

10%

$

2,202

$

2,147

3%

Earnings per share from continuing operations (GAAP)

$

1.16

$

1.06

9%

$

2.55

$

2.17

18%

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

0.02

0.04

0.20

(0.02)

Non-operating pension/OPEB costs included in EPS ⁽³⁾

(0.10)

(0.07)

(0.15)

(0.16)

Operating earnings per share (Non-GAAP) ⁽⁴⁾

$

1.24

$

1.09

14%

$

2.50

$

2.35

6%

E.I. du Pont de Nemours and Company

Condensed Consolidated Balance Sheets

(Dollars in millions, except per share amounts)

SCHEDULE A (continued)

June 30,

2016

December 31,

2015

Assets

Current assets

Cash and cash equivalents

$

4,411

$

5,300

Marketable securities

742

906

Accounts and notes receivable, net

7,656

4,643

Inventories

4,756

6,140

Prepaid expenses

526

398

Total current assets

18,091

17,387

Property, plant and equipment, net of accumulated depreciation

   (June 30, 2016- $14,699; December 31, 2015 - $14,346)

9,624

9,784

Goodwill

4,245

4,248

Other intangible assets

3,967

4,144

Investment in affiliates

695

688

Deferred income taxes

4,474

3,799

Other assets

1,170

1,116

Total

$

42,266

$

41,166

Liabilities and Equity

Current liabilities

Accounts payable

$

2,244

$

3,398

Short-term borrowings and capital lease obligations

2,295

1,165

Income taxes

164

173

Other accrued liabilities

3,675

5,580

Total current liabilities

8,378

10,316

Long-term borrowings and capital lease obligations

8,119

7,642

Other liabilities

14,818

12,591

Deferred income taxes

410

417

Total liabilities

31,725

30,966

Commitments and contingent liabilities

Stockholders' equity

Preferred stock

237

237

Common stock, $0.30 par value; 1,800,000,000 shares authorized;

   Issued at June 30, 2016 - 961,258,000; December 31, 2015 - 958,388,000

288

288

Additional paid-in capital

11,212

11,081

Reinvested earnings

16,084

14,510

Accumulated other comprehensive loss

(10,757)

(9,396)

Common stock held in treasury, at cost (87,041,000 shares at June 30, 2016 and December 31, 2015)

(6,727)

(6,727)

Total DuPont stockholders' equity

10,337

9,993

Noncontrolling interests

204

207

Total equity

10,541

10,200

Total

$

42,266

$

41,166

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,

2016

2015

Total Company

Net income

$

2,256

$

1,980

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

Depreciation

473

615

Amortization of intangible assets

226

257

Net periodic pension benefit cost

320

294

Contributions to pension plans

(237)

(204)

Gain on sale of businesses and other assets

(385)

(22)

Other operating activities - net

378

59

Change in operating assets and liabilities - net

(4,534)

(5,024)

Cash used for operating activities

(1,503)

(2,045)

Investing activities

Purchases of property, plant and equipment

(507)

(938)

Investments in affiliates

(2)

(50)

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

212

(29)

Net decrease (increase) in short-term financial instruments

174

(422)

Foreign currency exchange contract settlements

(280)

443

Other investing activities - net

(15)

13

Cash used for investing activities

(418)

(983)

Financing activities

Dividends paid to stockholders

(669)

(875)

Net increase in borrowings

1,632

2,110

Repurchase of common stock

—

(353)

Proceeds from exercise of stock options

88

201

Other financing activities - net

(14)

(81)

Cash provided by financing activities

1,037

1,002

Effect of exchange rate changes on cash

(5)

(138)

Decrease in cash and cash equivalents

(889)

(2,164)

Cash and cash equivalents at beginning of period

5,300

6,910

Cash and cash equivalents at end of period

$

4,411

$

4,746

Reconciliation of Non-GAAP Measure

Calculation of Free Cash Flow - Total Company

Six Months Ended

June 30,

2016

2015

Cash used for operating activities (GAAP)

$

(1,503)

$

(2,045)

Purchases of property, plant and equipment

(507)

(938)

Free cash flow (Non-GAAP)

$

(2,010)

$

(2,983)

⁽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⁾ Year to date June 30, 2015 non-operating pension/OPEB costs includes an after-tax exchange loss on foreign pension balances of $23.

⁽⁴⁾ 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

($ Per Share)

2016

2015

2016

2015

2016

2015

1st Quarter

Transaction costs ⁽¹⁾

$

(24)

$

(12)

$

(21)

$

(11)

$

(0.02)

$

(0.01)

Customer claims adjustment/recovery ⁽²⁾

23

35

15

22

0.02

0.02

Gain on sale of entity ⁽³⁾

369

—

214

—

0.24

—

Restructuring charges, net ⁽⁴⁾

(77)

—

(48)

—

(0.06)

—

Asset impairment charge ⁽⁵⁾

—

(37)

—

(30)

—

(0.03)

Ukraine devaluation ⁽⁶⁾

—

(40)

—

(38)

—

(0.04)

1st Quarter - Total

$

291

$

(54)

$

160

$

(57)

$

0.18

$

(0.06)

2nd Quarter

Transaction costs ⁽¹⁾

$

(76)

$

(25)

$

(59)

$

(38)

$

(0.07)

$

(0.04)

Customer claims recovery ⁽²⁾

30

—

19

—

0.02

—

Restructuring adjustments / charges ⁽⁴⁾

90

(2)

59

(2)

0.07

—

Litigation settlement ⁽⁷⁾

—

112

—

72

—

0.08

2nd Quarter - Total

$

44

$

85

$

19

$

32

$

0.02

$

0.04

Year-to-date Total ⁽⁸⁾

$

335

$

31

$

179

$

(25)

$

0.20

$

(0.02)

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 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.

Second quarter 2015 included charges of $(25) associated with transaction costs related to the separation of the Performance Chemicals segment consisting of $(5) recorded in other operating charges and $(20) recorded in interest expense.  Second quarter 2015 also includes a tax charge of $(17) due to a state tax rate change associated with the separation. First quarter 2015 included charges of $(12) recorded in other operating charges associated with transaction costs related to the separation of the Performance Chemicals segment.

(2)

The company recorded insurance recoveries of $30 and $35 in the second quarter 2016 and first quarter 2015, respectively, in other operating charges for recovery of costs for customer claims related to the use of the Agriculture's segment Imprelis® herbicide.

First quarter 2016 included a benefit of $23 in other operating charges for reduction in accrual for customer claims related to the use of the Imprelis^® herbicide.

(3)

First quarter 2016 included a gain of $369 recorded in other 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 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.  The benefit impacted segment earnings as follows: Agriculture - $5, Electronics & Communications - $8, Industrial Biosciences - $3, Nutrition & Health - $12, Performance Materials - $9, Protection Solutions - $7, and Corporate expenses - $46.

First quarter 2016 included a $(2) restructuring charge recorded 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 reduction in severance and related benefit costs.  The net charge impacted segment earnings as follows: Agriculture - $(21), Electronics & Communications - $7, Industrial Biosciences - $1, Nutrition & Health - $1, Performance Materials - $(4), Protection Solutions - $3, Other - $(3), and Corporate expenses - $14.

First quarter 2016 included a $(75) restructuring charge recorded in employee separation/asset related charges, net related to the decision to not 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.

Second quarter 2015 included a $(2) restructuring charge recorded in employee separation/asset related charges, net associated with the 2014 restructuring program. These adjustments were primarily due to the identification of additional projects in certain segments, offset by lower than estimated individual severance costs and workforce reductions achieved through non-severance programs. The net reduction impacted segment earnings for the three months ended as follows: Agriculture - $(4), Electronics & Communications - $11, Industrial Biosciences - $(1), Nutrition & Health - $(4), Performance Materials - $(2), Protection Solutions - $1, and Other - $(3).

(5)

During first quarter of 2015, a $(37) pre-tax impairment charge was recorded in employee separation / asset related charges, net for a cost basis investment within the Other segment.  The assessment resulted from the venture's revised operating plan reflecting underperformance of its European wheat based ethanol facility and deteriorating European ethanol market conditions.  One of the primary investors has communicated they would not fund the revised operating plan of the investee.  As a result, the carrying value of our 6% equity investment in this venture exceeds its fair value.

(6)

First quarter 2015 included a charge of $(40) in other income, net associated with remeasuring the company's Ukrainian hryvnia net monetary assets. Ukraine's central bank adopted a decision to no longer set the indicative hryvnia exchange rate. The hryvnia became a free-floating exchange rate and lost approximately a third of its value through the quarter.

(7)

Second quarter 2015 included a gain of $112, net of legal expenses, recorded in other income, net related to the company's settlement of a legal claim.  This matter relates to the Protection Solutions segment.

(8)

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

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 NET SALES ⁽¹⁾

2016

2015

2016

2015

Agriculture

$

3,218

$

3,218

$

7,004

$

7,155

Electronics & Communications

494

528

946

1,045

Industrial Biosciences

355

357

707

707

Nutrition & Health

835

826

1,636

1,639

Performance Materials

1,335

1,338

2,584

2,719

Protection Solutions

786

806

1,515

1,596

Other

38

48

74

97

Consolidated net sales

$

7,061

$

7,121

$

14,466

$

14,958

Three Months Ended

June 30,

Six Months Ended

June 30,

SEGMENT OPERATING EARNINGS ⁽¹⁾

2016

2015

2016

2015

Agriculture

$

865

$

772

$

1,966

$

1,910

Electronics & Communications

93

89

152

168

Industrial Biosciences

62

50

125

104

Nutrition & Health

130

100

234

186

Performance Materials

325

301

598

618

Protection Solutions

188

181

364

348

Other

(50)

(46)

(109)

(77)

Total segment operating earnings

1,613

1,447

3,330

3,257

Corporate expenses

(83)

(148)

(169)

(302)

Interest expense

(93)

(74)

(185)

(158)

Operating earnings before income taxes and exchange
(losses) gains

1,437

1,225

2,976

2,797

Net exchange (losses) gains ⁽²⁾

(15)

11

(136)

153

Operating earnings before income taxes (Non-GAAP)

$

1,422

$

1,236

$

2,840

$

2,950

Non-operating pension/OPEB costs ⁽³⁾

(133)

(87)

(207)

(196)

Total significant items before income taxes

44

85

335

31

Income from continuing operations before income taxes (GAAP)

$

1,333

$

1,234

$

2,968

$

2,785

Three Months Ended

June 30,

Six Months Ended

June 30,

SIGNIFICANT ITEMS BY SEGMENT (PRE-TAX) ⁽¹⁾⁽⁴⁾

2016

2015

2016

2015

Agriculture

$

35

$

(4)

$

(38)

$

31

Electronics & Communications

8

11

15

11

Industrial Biosciences

3

(1)

4

(1)

Nutrition & Health

12

(4)

13

(4)

Performance Materials

9

(2)

5

(2)

Protection Solutions

7

113

10

113

Other

—

(3)

(3)

(40)

Total significant items by segment

74

110

6

108

Corporate expenses

(30)

(5)

329

(17)

Interest expense

—

(20)

—

(20)

Net exchange gains (losses)

—

—

—

(40)

Total significant items before income taxes

$

44

$

85

$

335

$

31

E.I. du Pont de Nemours and Company

Consolidated Segment Information

(Dollars in millions)

SCHEDULE C (continued)

Reconciliation of Segment Operating Earnings and Operating Earnings EPS excluding the impact of currency (Non-GAAP)

Segment operating earnings and operating earnings per share excluding the impact of currency assumes current operating earnings results using foreign currency exchange rates in effect for the comparable prior-year period.

Three Months Ended

June 30, 2015

Three Months Ended

June 30, 2016

Segment Operating Earnings

Segment Operating Earnings

Impact of Currency

Segment Operating Earnings Excluding Currency

% Change

Agriculture

$

772

$

865

$

(36)

$

901

17%

Electronics & Communications

89

93

(1)

94

6

Industrial Biosciences

50

62

(3)

65

30

Nutrition & Health

100

130

(3)

133

33

Performance Materials

301

325

(16)

341

13

Protection Solutions

181

188

(4)

192

6

Other

(46)

(50)

—

(50)

(9)

Total segment operating earnings

$

1,447

$

1,613

$

(63)

$

1,676

16%

Three Months Ended

June 30, 2015

Three Months Ended

June 30, 2016

Operating Earnings
per share
(Non-GAAP) ⁽⁵⁾

Operating Earnings
per share
(Non-GAAP) ⁽⁵⁾

 Impact of Currency

Operating Earnings
per share excluding
currency
(Non-GAAP) ⁽⁵⁾

 % Change

Operating earnings per share (Non-GAAP) ⁽⁵⁾

$

1.09

$

1.24

$

(0.05)

$

1.29

18%

Corporate Expenses

The reconciliation below reflects GAAP corporate expenses excluding significant items.

Three Months Ended

June 30,

2016

2015

Corporate expenses (GAAP)

$

113

$

153

Significant items ⁽⁴⁾