DuPont Reports Fourth-Quarter and Full-Year Results

Fourth-Quarter Highlights

• GAAP¹ earnings per share totaled $0.29 versus a loss of $(0.26) per share in prior year. Operating earnings² per share nearly doubled to $0.51 from $0.27 in prior year.
  
  
• Sales of $5.2 billion decreased 2 percent. Local price declined by 2 percent while currency benefited sales by 1 percent. Volume declined 1 percent as growth in Performance Materials, Electronics & Communications and Industrial Biosciences was more than offset by declines in Agriculture, due to timing of fourth-quarter seed sales primarily due to the southern U.S. route-to-market change. Excluding this timing change, sales would have increased 2 percent.
  
  
• Segment operating margins expanded by 305 basis points.
  
  
• GAAP operating costs³ decreased by 5 percent. Operating costs², excluding significant items and non-operating pension/OPEB benefits, declined by 9 percent versus prior year.

Full-Year Highlights

• GAAP¹ earnings per share increased 36 percent to $2.85 from $2.09 in prior year. Operating earnings² per share increased 21 percent to $3.35 from $2.77 in prior year.
  
  
• Sales of $24.6 billion decreased 2 percent. Local price and currency each lowered sales by 1 percent. Volume was flat as growth in Performance Materials, Nutrition & Health and Industrial Biosciences was offset by declines in the other segments. Excluding the change in timing of fourth-quarter seed sales in Agriculture, sales decreased 1 percent.
  
  
• Total company gross margin expanded 60 basis points, excluding a 70-basis-point benefit from a non-operating pension/OPEB curtailment gain. Segment operating margins expanded about 200 basis points, with increases in all reportable segments.
  
  
• GAAP operating costs³ decreased by 5 percent. Operating costs², excluding significant items and non-operating pension/OPEB costs, declined 11 percent, exceeding the 2016 cost savings commitment.
  
  
• Free cash flow⁴ improved $1.6 billion primarily due to higher earnings, lower capital expenditures, lower tax payments, and working capital improvements.
  
  
• DuPont expects first-quarter 2017 GAAP¹ earnings per share to decrease about 18 percent versus prior year. First-quarter 2017 operating earnings² per share are expected to increase about 8 percent versus prior year.

¹

Generally Accepted Accounting Principles (GAAP)

²

See schedules A, C, and D for definitions and reconciliations of non-GAAP measures.

³

GAAP operating costs defined as other operating charges, selling, general & administrative, and research & development costs.

⁴

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. 

E. I. du Pont de Nemours and Company

Three Months Ended

December 31, 2016

Percent Change Due to:

%

Local Price and

Portfolio /

$

Change

Product Mix

Currency

Volume

Other

(Dollars in millions)

     U.S. & Canada

$    1,676

(11)

(7)

-

(4)

-

     EMEA *

1,183

(1)

-

(1)

-

-

     Asia Pacific 

1,543

9

-

1

9

(1)

     Latin America

809

-

2

7

(9)

-

Total Consolidated Sales

$    5,211

(2)

(2)

1

(1)

-

Twelve Months Ended

December 31, 2016

Percent Change Due to:

%

Local Price and

Portfolio /

$

Change

Product Mix

Currency

Volume

Other

(Dollars in millions)

     U.S. & Canada

$  10,413

(3)

(2)

-

-

(1)

     EMEA *

5,739

(5)

1

(3)

(2)

(1)

     Asia Pacific 

5,801

3

(1)

(1)

4

1

     Latin America

2,641

(3)

2

(2)

(2)

(1)

Total Consolidated Sales

$  24,594

(2)

(1)

(1)

-

-

*  Europe, Middle East & Africa

Three Months Ended

December 31, 2016

Percent Change Due to:

Local Price and

Portfolio /

$

% Change

Product Mix

Currency

Volume

Other

(Dollars in millions)

Agriculture

$    1,393

(10)

(4)

4

(9)

(1)

Electronics & Communications

521

6

-

-

6

-

Industrial Biosciences

401

1

(1)

(1)

2

1

Nutrition & Health

809

-

-

-

-

-

Performance Materials

1,331

4

(2)

-

7

(1)

Protection Solutions

717

-

-

-

-

-

Other

39

Consolidated Net Sales

5,211

(2)

(2)

1

(1)

-

Twelve Months Ended

December 31, 2016

Percent Change Due to:

Local Price and

Portfolio /

$

% Change

Product Mix

Currency

Volume

Other

(Dollars in millions)

Agriculture

$    9,516

(3)

-

(2)

(1)

-

Electronics & Communications

1,960

(5)

(2)

-

(3)

-

Industrial Biosciences

1,500

1

-

(2)

2

1

Nutrition & Health

3,268

-

-

(2)

2

-

Performance Materials

5,249

(1)

(3)

(1)

3

-

Protection Solutions

2,954

(3)

(1)

-

(2)

-

Other

147

Consolidated Net Sales

24,594

(2)

(1)

(1)

-

-

(Dollars in millions)

4Q16

4Q15

$

%

Agriculture

$        (19)

$        (54)

$           35

65%

Electronics & Communications

98

87

11

13%

Industrial Biosciences

67

78

(11)

-14%

Nutrition & Health

135

85

50

59%

Performance Materials

328

281

47

17%

Protection Solutions

142

147

(5)

-3%

Other

(48)

(71)

23

32%

Total segment operating earnings ⁽⁵⁾ 

703

553

150

27%

Exchange gains (losses) ⁽⁶⁾

106

(24)

130

nm

Corporate expenses ⁽⁵⁾ 

(88)

(160)

72

-45%

Interest expense

(92)

(82)

(10)

12%

Operating earnings before income taxes ⁽²⁾

629

287

342

119%

Provision for income taxes on operating earnings ⁽²⁾

(180)

(51)

(129)

Less: Net income attributable to noncontrolling interests 

(2)

(3)

1

Operating earnings ⁽²⁾

$        451

$        239

$         212

89%

Operating earnings per share ⁽²⁾

$0.51

$       0.27

$        0.24

89%

GAAP earnings per share

$0.29

$      (0.26)

$        0.55

212%

Change vs. 2015

(Dollars in millions)

YTD 2016

YTD 2015

Agriculture

$      1,758

$      1,646

$         112

7%

Electronics & Communications

358

359

(1)

0%

Industrial Biosciences

270

243

27

11%

Nutrition & Health

504

373

131

35%

Performance Materials

1,297

1,216

81

7%

Protection Solutions

668

641

27

4%

Other

(215)

(235)

20

9%

Total segment operating earnings ⁽⁵⁾ 

4,640

4,243

397

9%

Exchange gains (losses) ^{(5) (6)}

(106)

93

(199)

nm

Corporate expenses ⁽⁵⁾ 

(340)

(573)

233

-41%

Interest expense

(370)

(322)

(48)

15%

Operating earnings before income taxes ⁽²⁾

3,824

3,441

383

11%

Provision for income taxes on operating earnings ⁽²⁾

(861)

(932)

71

Less: Net income attributable to noncontrolling interests 

12

6

6

Operating earnings ⁽²⁾

$      2,951

$      2,503

$         448

18%

Operating earnings per share ⁽²⁾

$3.35

$       2.77

$        0.58

21%

GAAP earnings per share

$2.85

$       2.09

$        0.76

36%

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

(6) 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

December 31,

Twelve Months Ended

December 31,

2016

2015

2016

2015

Net sales

$

5,211

$

5,299

$

24,594

$

25,130

Cost of goods sold

3,147

3,409

14,469

15,112

Other operating charges ⁽¹⁾

182

46

686

459

Selling, general and administrative expenses ⁽¹⁾

964

1,075

4,319

4,615

Research and development expense

381

483

1,641

1,898

Other income, net ⁽¹⁾

(301)

(145)

(708)

(697)

Interest expense ⁽¹⁾

92

82

370

342

Employee separation / asset related charges, net ⁽¹⁾

393

770

552

810

Income (loss) from continuing operations before income taxes

353

(421)

3,265

2,591

Provision for (benefit from) income taxes on continuing operations ⁽¹⁾

101

(190)

744

696

Income (loss) from continuing operations after income taxes

252

(231)

2,521

1,895

Income (loss) from discontinued operations after income taxes

11

(25)

4

64

Net income (loss)

263

(256)

2,525

1,959

Less:  Net (loss) income attributable to noncontrolling interests

(2)

(3)

12

6

Net income (loss) attributable to DuPont

$

265

$

(253)

$

2,513

$

1,953

Basic earnings (loss) per share of common stock:

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

$

0.29

$

(0.26)

$

2.86

$

2.10

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

0.01

(0.03)

—

0.07

Basic earnings (loss) per share of common stock ⁽²⁾

$

0.30

$

(0.29)

$

2.87

$

2.17

Diluted earnings (loss) per share of common stock:

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

$

0.29

$

(0.26)

$

2.85

$

2.09

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

0.01

(0.03)

—

0.07

Diluted earnings (loss) per share of common stock ⁽²⁾

$

0.30

$

(0.29)

$

2.85

$

2.16

Dividends per share of common stock

$

0.38

$

0.38

$

1.52

$

1.72

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

  Basic

867,460,000

876,500,000

872,560,000

893,992,000

  Diluted

872,363,000

881,727,000

877,036,000

899,527,000

Reconciliation of Non-GAAP Measures

Summary of Earnings Comparison

Three Months Ended December 31,

Twelve Months Ended December 31,

2016

2015

% Change

2016

2015

% Change

Income (loss) from continuing operations after income taxes (GAAP)

$

252

$

(231)

209%

$

2,521

$

1,895

33%

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

(384)

(411)

(421)

(348)

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

187

(56)

(21)

(266)

Net (loss) income attributable to noncontrolling interest from continuing
operations

(2)

(3)

12

6

Operating earnings (Non-GAAP) ⁽⁴⁾

$

451

$

239

89%

$

2,951

$

2,503

18%

Earnings (loss) per share from continuing operations (GAAP)

$

0.29

$

(0.26)

212%

$

2.85

$

2.09

36%

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

(0.44)

(0.47)

(0.48)

(0.39)

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

0.22

(0.06)

(0.02)

(0.29)

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

$

0.51

$

0.27

89%

$

3.35

$

2.77

21%

E.I. du Pont de Nemours and Company

Condensed Consolidated Balance Sheets

(Dollars in millions, except per share amounts)

SCHEDULE A (continued)

December 31,

2016

December 31,

2015

Assets

Current assets

Cash and cash equivalents

$

4,605

$

5,300

Marketable securities

1,362

906

Accounts and notes receivable, net

4,971

4,643

Inventories

5,673

6,140

Prepaid expenses

506

398

Total current assets

17,117

17,387

Property, plant and equipment, net of accumulated depreciation

   (December 31, 2016 - $14,736; December 31, 2015 - $14,346)

9,231

9,784

Goodwill

4,180

4,248

Other intangible assets

3,664

4,144

Investment in affiliates

649

688

Deferred income taxes

3,308

3,799

Other assets

1,815

1,116

Total

$

39,964

$

41,166

Liabilities and Equity

Current liabilities

Accounts payable

$

3,705

$

3,398

Short-term borrowings and capital lease obligations

429

1,165

Income taxes

101

173

Other accrued liabilities

4,662

5,580

Total current liabilities

8,897

10,316

Long-term borrowings and capital lease obligations

8,107

7,642

Other liabilities

12,333

12,591

Deferred income taxes

431

417

Total liabilities

29,768

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 December 31, 2016 - 950,044,000; December 31, 2015 - 958,388,000

285

288

Additional paid-in capital

11,190

11,081

Reinvested earnings

14,924

14,510

Accumulated other comprehensive loss

(9,911)

(9,396)

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

(6,727)

(6,727)

Total DuPont stockholders' equity

9,998

9,993

Noncontrolling interests

198

207

Total equity

10,196

10,200

   Total

$

39,964

$

41,166

E.I. du Pont de Nemours and Company

Condensed Consolidated Statement of Cash Flows

(Dollars in millions)

SCHEDULE A (continued)

Twelve Months Ended

December 31,

2016

2015

Total Company

Net income

$

2,525

$

1,959

Adjustments to reconcile net income to cash provided by operating activities:

   Depreciation

939

1,104

   Amortization of intangible assets

319

362

   Net periodic pension benefit cost

572

591

   Contributions to pension plans

(535)

(308)

   Gain on sale of businesses and other assets

(436)

(59)

   Asset-related charges

682

147

   Other operating activities - net

366

106

   Change in operating assets and liabilities - net

(1,132)

(1,586)

Cash provided by operating activities

3,300

2,316

Investing activities

Purchases of property, plant and equipment

(1,019)

(1,629)

Investments in affiliates

(19)

(76)

Payments for businesses - net of cash acquired

—

(152)

Proceeds from sale of businesses and other assets - net

316

156

Net increase in short-term financial instruments

(452)

(776)

Foreign currency exchange contract settlements

(385)

615

Other investing activities - net

45

34

Cash used for investing activities

(1,514)

(1,828)

Financing activities

Dividends paid to stockholders

(1,335)

(1,546)

Net (decrease) increase in borrowings

(240)

2,141

Repurchase of common stock

(916)

(2,353)

Proceeds from exercise of stock options

181

274

Cash transferred to Chemours at spin-off

—

(250)

Other financing activities - net

(18)

(89)

Cash used for financing activities

(2,328)

(1,823)

Effect of exchange rate changes on cash

(153)

(275)

Decrease in cash and cash equivalents

(695)

(1,610)

Cash and cash equivalents at beginning of period

5,300

6,910

Cash and cash equivalents at end of period

$

4,605

$

5,300

Reconciliation of Non-GAAP Measure

Calculation of Free Cash Flow - Total Company

Twelve Months Ended December 31,

2016

2015

Cash provided by operating activities (GAAP)

$

3,300

$

2,316

Purchases of property, plant and equipment

(1,019)

(1,629)

Free cash flow (Non-GAAP)

$

2,281

$

687

⁽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⁾

Fourth quarter 2016 and year to date 2016, non-operating pension/OPEB benefits / (costs) include a $382 pre-tax curtailment gain ($254 after-tax or $0.29 per share) related to the changes to the U.S. Pension Plan and U.S. OPEB benefits announced in November 2016.  Year to date 2015, non-operating pension/OPEB costs includes a $23 exchange loss on foreign pension balances.

⁽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⁽⁸⁾

($ 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⁽⁴⁾

23

35

15

22

0.02

0.02

Gain on sale of entity⁽⁵⁾

369

—

214

—

0.24

—

Restructuring charges, net⁽²⁾

(77)

—

(48)

—

(0.06)

—

Asset impairment charge⁽³⁾

—

(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⁽⁴⁾

30

—

19

—

0.02

—

Restructuring adjustments / charges⁽²⁾

90

(2)

59

(2)

0.07

—

Litigation settlement⁽⁷⁾

—

112

—

72

—

0.08

2nd Quarter - Total

$

44

$

85

$

19

$

32

$

0.02

$

0.04

3rd Quarter

Transaction costs⁽¹⁾

$

(122)

$

(9)

$

(91)

$

(6)

$

(0.10)

$

(0.01)

Restructuring charges, net⁽²⁾

(17)

—

(14)

—

(0.02)

—

Asset impairment charge⁽³⁾

(158)

—

(111)

—

(0.13)

—

Customer claims adjustment/recovery⁽⁴⁾

—

147

—

94

—

0.11

3rd Quarter - Total

$

(297)

$

138

$

(216)

$

88

$

(0.25)

$

0.10

4th Quarter

Transaction costs⁽¹⁾

$

(164)

$

(10)

$

(131)

$

(7)

$

(0.15)

$

(0.01)

Restructuring adjustments / charges⁽²⁾

42

(775)

25

(508)

0.03

(0.58)

Asset impairment charge⁽³⁾

(435)

—

(278)

—

(0.32)

—

Litigation settlement ⁽⁷⁾

—

33

—

21

—

0.02

Customer claims adjustment/recovery ⁽⁴⁾

—

130

—

83

—

0.10

4th Quarter - Total

$

(557)

$

(622)

$

(384)

$

(411)

$

(0.44)

$

(0.47)

Year-to-date Total ⁽⁹⁾

$

(519)

$

(453)

$

(421)

$

(348)

$

(0.48)

$

(0.39)

E.I. du Pont de Nemours and Company

Schedule of Significant Items from Continuing Operations

(Dollars in millions, except per share amounts)

(1)

Fourth, third, second, and first quarter 2016 included charges of $(164), $(122), $(76), and $(24), respectively, and fourth quarter 2015 included charges of ($10), recorded in selling, general and administrative expenses related to costs associated with the planned merger with The Dow Chemical Company and related activities.  For fourth quarter 2016 and full year 2016, the effective tax rate for the total of pre-tax charges was 32.2% and 27.0%, respectively. A significant portion of the transaction costs are in the US; however, those costs are not always tax-deductible. In addition, the Company incurred $(20) in the fourth quarter 2016 of other tax costs related to the planned merger and related activities.

Third quarter and first quarter 2015 included charges of $(9) and $(12), respectively, recorded in other operating charges associated with transaction costs related to the separation of the Performance Chemicals segment. 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.

(2)

Fourth, third, second and first quarter 2016 included benefits / (charges) of $14, $(17), $90 and $(2), respectively, associated with the 2016 Global Cost Savings and Restructuring Program.   The fourth and second quarter benefits were primarily due to the reduction in severance and related benefit costs due to the elimination of positions at a lower cost than expected.  The charges in the third and first quarters were primarily due to identification of additional asset-related charges with the first quarter charge being offset by reduction in severance and related benefit costs.  The third quarter charge consisted of $(14) recorded in employee separation/asset related charges, net and $(3) recorded to other income, net.  The fourth, second and first quarter benefits / (charges) were recorded in employee separation/asset related charges, net.

Fourth quarter 2015 included a $(798) restructuring charge consisting of $(793) recorded in employee separation/asset related charges, net and $(5) recorded in other income, net associated with structural actions across all businesses and staff functions globally to operate more efficiently by further consolidating businesses and aligning staff functions more closely with them. The charge included $(656) of severance and related benefit costs, $(109) of asset related charges, and $(33) of contract termination costs.

Fourth quarter 2016 included a benefit of $7 for reductions to the first quarter 2016 charge for La Porte site contract termination costs within the Agriculture segment.   The first quarter 2016 included a $(75) restructuring charge related to the decision to not re-start the segment's insecticide manufacturing facility at the La Porte site located in La Porte, Texas. The first quarter charge included $(41) of asset related charges, $(18) of contract termination costs, and $(16) of employee severance and related benefit costs.  The fourth quarter 2016 benefit and first quarter 2016 charge were recorded in employee separation/asset related charges, net.

Fourth quarter 2016 and fourth quarter 2015 included benefits of $21 and $23 for reductions to the previously recognized severance costs related to the 2014 restructuring program.  Second quarter 2015 included a $(2) net restructuring charge 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 activity in 2016 and 2015 related to the 2014 restructuring program was recorded in employee separation/asset related charges, net.

(3)

During the fourth quarter 2016, a $(435) pre-tax impairment charge was recorded in employee separation / asset related charges, net related to the write-down of the company's uncompleted enterprise resource planning (ERP) system which the company had elected to defer further testing and deployment in fourth quarter 2015.   The company intends to complete the ERP project, however, given the uncertainties related to timing as well as potential developments and changes to technologies in the market place at the time of restart, it can no longer be considered probable.

During third quarter 2016, a $(158) pre-tax impairment charge was recorded in employee separation / asset related charges, net related to the write-down of indefinite lived intangible assets within the Industrial Biosciences segment.  The third quarter charge was the result of realignment of brand marketing strategies and a determination to phase out the use of certain acquired trade names.

During first quarter 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.

(4)

In the second quarter 2016, third quarter 2015 and first quarter 2015, the company recorded insurance recoveries of $30, $147 and $35, 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 and fourth quarter 2015 included benefits of $23 and $130, respectively, in other operating charges for reductions in the accrual for customer claims related to the use of the Imprelis® herbicide.

(5)

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.

(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.