Delaware (State or Other Jurisdiction Of Incorporation) |
1-815 (Commission File Number) |
51-0014090 (I.R.S. Employer Identification No.) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition |
2
E. I. DU PONT DE NEMOURS AND COMPANY (Registrant) |
||||
/s/ Barry J. Niziolek | ||||
Barry J. Niziolek | ||||
Vice President and Controller | ||||
3
OCTOBER 23, 2007
|
Contact: | Anthony Farina | ||
WILMINGTON, Del.
|
302-774-4005 | |||
Anthony.R.Farina@usa.dupont.com |
| Third quarter 2007 earnings per share were $0.56 versus $0.52 in the third quarter 2006. Excluding significant items, earnings per share increased 20 percent to $0.59 in the current quarter from $0.49 in the third quarter 2006. |
| Sales rose 6 percent to $6.7 billion. Excluding portfolio changes, sales grew 7 percent, reflecting 3 percent volume growth, 2 percent higher local selling prices and 2 percent currency benefit. |
| Strong revenue growth in all segments outside the United States more than offset lower U.S. demand. |
| Fixed costs as a percentage of sales improved 90 basis points from the prior-year quarter. |
| Segment pre-tax operating income margin increased to 14.2 percent from 13.3 percent in the prior-year quarter, excluding significant items. |
| DuPont now expects full year 2007 earnings to be $3.15 to $3.20 per share versus its previous outlook of about $3.15 per share, excluding significant items. |
2
Three Months Ended | ||||||||||||||||||||
September 30, 2007 | Percentage Change Due to: | |||||||||||||||||||
Local | ||||||||||||||||||||
Currency | Currency | |||||||||||||||||||
(Dollars in billions) | $ | % Change* | Price | Effect | Volume* | |||||||||||||||
U.S. |
$ | 2.4 | (1 | )% | 1 | | (2 | ) | ||||||||||||
Europe |
1.9 | 11 | 2 | 6 | 3 | |||||||||||||||
Asia Pacific |
1.3 | 7 | 1 | 2 | 4 | |||||||||||||||
Canada & Latin America |
1.1 | 22 | 3 | 3 | 16 | |||||||||||||||
Total Consolidated Sales |
$ | 6.7 | 7 | % | 2 | 2 | 3 |
* | Excludes portfolio changes |
3
EPS | ||||
3rd Quarter 2006 |
$ | .52 | ||
Insurance recoveries |
(.03 | ) | ||
3rd Quarter 2006 EPS excluding significant items |
.49 | |||
Local prices |
.09 | |||
Variable costs* |
(.12 | ) | ||
Volume |
.04 | |||
Fixed costs* |
(.03 | ) | ||
Currency |
.05 | |||
Pharmaceuticals |
.02 | |||
Exchange Gain & Interest Expense |
.02 | |||
Tax |
.00 | |||
Other |
.03 | |||
3rd Quarter 2007 EPS excluding significant items |
.59 | |||
Litigation Reserve |
(.03 | ) | ||
3rd Quarter 2007 |
$ | .56 | ||
* | Excludes volume and currency impact |
4
SEGMENT SALES* | Three Months Ended | Percentage Change | ||||||||||||||
(Dollars in billions) | September 30, 2007 | Due to: | ||||||||||||||
USD | ||||||||||||||||
$ | % Change** | Price | Volume** | |||||||||||||
Agriculture & Nutrition |
1.1 | 21 | 10 | 11 | ||||||||||||
Coatings & Color Technologies |
1.6 | 3 | 3 | | ||||||||||||
Electronic & Communication Technologies |
0.9 | 5 | | 5 | ||||||||||||
Performance Materials |
1.7 | 5 | 7 | (2 | ) | |||||||||||
Safety & Protection |
1.4 | 6 | 2 | 4 |
* | Segment sales include transfers | |
** | Excludes portfolio changes |
PRE-TAX OPERATING INCOME/(LOSS) | ||||||||||||
(Dollars in millions) | Three Months Ended September 30, | |||||||||||
% Change | ||||||||||||
2007 | 2006 | vs. 2006 | ||||||||||
Agriculture & Nutrition |
$ | (96 | ) | $ | (154 | ) | 38 | % | ||||
Coatings & Color Technologies* |
204 | 281 | (27 | ) | ||||||||
Electronic & Communication Technologies |
138 | 132 | 5 | |||||||||
Performance Materials |
196 | 169 | 16 | |||||||||
Pharmaceuticals |
237 | 210 | 13 | |||||||||
Safety & Protection* |
313 | 293 | 7 | |||||||||
Other* |
(76 | ) | (31 | ) | n.m. | |||||||
$ | 916 | $ | 900 | 2 | % | |||||||
* | See Schedule B for significant items |
| Sales grew 21 percent to $1.1 billion due to strong performance in international seeds. Volume grew 11 percent and USD selling prices increased 10 percent. Significant global gains in seed corn, soybeans and canola, as well as strong fungicide sales in Latin America and Europe more than offset weak chemical sales in North America. |
| PTOI improved 38 percent to a seasonal loss of $96 million. Excluding $25 million of income resulting from a contract termination payment received in 2007, PTOI improved 21 percent with strong sales in Latin America and Europe and restructuring benefits offset by reinvestments in the companys seed business. |
5
| Sales increased 2 percent to $1.6 billion. Excluding the impact of a divested business, sales grew 3 percent. Titanium dioxide and coatings sales growth in Asia Pacific and Latin America was largely offset by continued weak U.S. markets. |
| PTOI was $204 million, compared with $281 million in the prior-year quarter. Excluding a $43 million insurance recovery in the prior year, PTOI declined 14 percent. Improved earnings in automotive OEM coatings were more than offset by lower sales into the U.S. markets. |
| Sales grew 5 percent to $935 million primarily due to volume growth in fluoroproducts and packaging graphics and pass-through of higher metals prices. Demand for electronic materials, particularly for the cell phone and semiconductor supply chains, improved in the latter part of the quarter. |
| PTOI increased 5 percent to $138 million reflecting revenue growth and fixed cost control, partially offset by higher variable costs. Earnings growth was led by packaging graphics. |
| Sales grew 6 percent to $1.7 billion. Excluding a portfolio change, sales grew 5 percent primarily due to higher USD selling prices. These gains were partially offset by lower volume, principally related to the automotive market, effects of Hurricane Humberto at the companys Orange, Texas facility and ingredient supply constraints. Sales were strong in Europe and Latin America. |
| PTOI increased 16 percent to $196 million reflecting broad-based strength across the segments primary product lines. |
| Sales grew 2 percent to $1.4 billion. Excluding a portfolio change, sales grew 6 percent reflecting strong sales in the Kevlar®, Nomex®, Tyvek® and specialty chemical products in spite of a weak U.S. residential housing market. |
| PTOI was $313 million, compared to $293 million in the prior-year quarter. Excluding a $7 million insurance recovery in the prior year, PTOI increased 9 percent reflecting the strength in Kevlar® and Nomex® product lines and solid demand for Tyvek® in multiple markets. |
6
7
8
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net sales |
$ | 6,675 | $ | 6,309 | $ | 22,395 | $ | 21,145 | ||||||||
Other income, net (a) |
365 | 336 | 1,045 | 1,002 | ||||||||||||
Total |
7,040 | 6,645 | 23,440 | 22,147 | ||||||||||||
Cost of goods sold and other
operating charges (b),
(c), (d), (e) |
5,115 | 4,762 | 16,216 | 15,326 | ||||||||||||
Selling, general and
administrative expenses |
797 | 756 | 2,512 | 2,400 | ||||||||||||
Amortization of intangible
assets |
53 | 57 | 163 | 172 | ||||||||||||
Research and development expense |
332 | 320 | 979 | 961 | ||||||||||||
Interest expense |
113 | 114 | 320 | 347 | ||||||||||||
Total |
6,410 | 6,009 | 20,190 | 19,206 | ||||||||||||
Income before income taxes and
minority interests |
630 | 636 | 3,250 | 2,941 | ||||||||||||
Provision for income taxes
(a) |
102 | 151 | 802 | 661 | ||||||||||||
Minority interests in earnings
of consolidated
subsidiaries |
2 | | 5 | 3 | ||||||||||||
Net income |
$ | 526 | $ | 485 | $ | 2,443 | $ | 2,277 | ||||||||
Basic
earnings per share of common stock |
$ | 0.57 | $ | 0.52 | $ | 2.64 | $ | 2.46 | ||||||||
Diluted
earnings per share of common stock |
$ | 0.56 | $ | 0.52 | $ | 2.61 | $ | 2.44 | ||||||||
Dividends
per share of common stock |
$ | 0.37 | $ | 0.37 | $ | 1.11 | $ | 1.11 | ||||||||
Average number of shares outstanding used in
earnings per share (EPS) calculation: |
||||||||||||||||
Basic |
921,105,750 | 922,023,399 | 922,957,576 | 921,620,506 | ||||||||||||
Diluted |
929,316,177 | 927,231,880 | 931,774,150 | 928,809,510 |
9
Pre-tax | After-tax | ($ Per Share) | ||||||||||||||||||||||
2007 | 2006 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||
1st Quarter Total |
$ | (52 | ) | $ | (128 | ) | $ | (52 | ) | $ | (50 | ) | $ | (0.06 | ) | $ | (0.05 | ) | ||||||
2nd Quarter Total |
$ | | $ | | $ | | $ | 31 | $ | | $ | 0.03 | ||||||||||||
3rd Quarter: |
||||||||||||||||||||||||
Litigation related item (b) |
(40 | ) | | (26 | ) | | (0.03 | ) | | |||||||||||||||
Insurance recoveries (d) |
| 50 | | 33 | | 0.03 | ||||||||||||||||||
3rd Quarter Total |
$ | (40 | ) | $ | 50 | $ | (26 | ) | $ | 33 | $ | (0.03 | ) | $ | 0.03 | |||||||||
Year-to-date Total |
$ | (92 | ) | $ | (78 | ) | $ | (78 | ) | $ | 14 | $ | (0.09 | ) | $ | 0.01 | ||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Agriculture & Nutrition |
$ | | $ | | $ | | $ | | ||||||||
Coatings & Color Technologies (d), (e) |
| 43 | | (92 | ) | |||||||||||
Electronic & Communication Technologies |
| | | | ||||||||||||
Performance Materials (c) |
| | (52 | ) | | |||||||||||
Safety & Protection (d) |
| 7 | | 7 | ||||||||||||
Textiles & Interiors |
| | | | ||||||||||||
Other (b) |
(40 | ) | | (40 | ) | | ||||||||||
Total (excluding Corporate) |
$ | (40 | ) | $ | 50 | $ | (92 | ) | $ | (85 | ) | |||||
10
(a) | Year-to-date 2006 includes benefits for the reversal of accrued interest of $7 ($4 after-tax) in Other income, net and the reversal of $44 of income taxes associated with favorable settlement of certain prior-year tax contingencies which had been previously reserved. Year-to-date 2006 also includes a tax benefit of $31 associated with an increase in the deferred tax assets of a European subsidiary for a tax basis investment loss recognized on the local tax return. | |
(b) | Third quarter and year-to-date 2007 includes a $40 charge in Cost of goods sold and other operating charges for existing litigation in the Other segment relating to a discontinued business. | |
(c) | Year-to-date 2007 also includes a net $52 charge in Cost of goods sold and other operating charges for existing litigation in the Performance Materials segment in connection with the elastomers antitrust matter. | |
(d) | Third quarter and year-to-date 2006 includes a $50 benefit in Cost of goods sold and other operating charges resulting from initial insurance recoveries relating to the damage suffered from Hurricane Katrina in 2005. Pretax amounts by segment were: $43 Coatings & Color Technologies and $7 Safety & Protection. | |
(e) | Year-to-date 2006 includes a restructuring charge of $135 in the Coatings & Color Technologies segment in connection with the companys plans to close and consolidate certain manufacturing and laboratory sites. Cost of goods sold and other operating charges includes employee separation charges, primarily in Europe and the U.S., for approximately 1,300 employees and other exit costs. |
11
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
SEGMENT SALES (1) | 2007 | 2006 (2) | 2007 | 2006 (2) | ||||||||||||
Agriculture & Nutrition |
$ | 1,067 | $ | 885 | $ | 5,591 | $ | 4,994 | ||||||||
Coatings & Color Technologies |
1,649 | 1,612 | 4,909 | 4,715 | ||||||||||||
Electronic & Communication Technologies |
935 | 892 | 2,834 | 2,719 | ||||||||||||
Performance Materials |
1,651 | 1,559 | 4,919 | 4,656 | ||||||||||||
Safety & Protection |
1,408 | 1,385 | 4,244 | 4,158 | ||||||||||||
Other |
43 | 47 | 136 | 141 | ||||||||||||
Total Segment sales |
$ | 6,753 | $ | 6,380 | $ | 22,633 | $ | 21,383 | ||||||||
Elimination of transfers |
(78 | ) | (71 | ) | (238 | ) | (238 | ) | ||||||||
Consolidated net sales |
$ | 6,675 | $ | 6,309 | $ | 22,395 | $ | 21,145 | ||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
PRETAX OPERATING INCOME/(LOSS) (PTOI) (3) | 2007 | 2006 (2) | 2007 | 2006 (2) | ||||||||||||
Agriculture & Nutrition |
$ | (96 | ) | $ | (154 | ) | $ | 983 | $ | 873 | ||||||
Coatings & Color Technologies |
204 | 281 | 624 | 530 | ||||||||||||
Electronic & Communication Technologies |
138 | 132 | 438 | 460 | ||||||||||||
Performance Materials |
196 | 169 | 573 | 515 | ||||||||||||
Pharmaceuticals |
237 | 210 | 703 | 579 | ||||||||||||
Safety & Protection |
313 | 293 | 922 | 869 | ||||||||||||
Other |
(76 | ) | (31 | ) | (169 | ) | (119 | ) | ||||||||
Total Segment PTOI |
$ | 916 | $ | 900 | $ | 4,074 | $ | 3,707 | ||||||||
Exchange (losses) and gains (4) |
(30 | ) | (3 | ) | (50 | ) | 5 | |||||||||
Corporate expenses & net interest |
(256 | ) | (261 | ) | (774 | ) | (771 | ) | ||||||||
Income before income taxes and
minority interests |
$ | 630 | $ | 636 | $ | 3,250 | $ | 2,941 | ||||||||
(1) | Sales for the reporting segments include transfers. | |
(2) | Certain reclassifications of 2006 segment data have been made to reflect changes in organizational structure for 2007. | |
(3) | Refer to the Notes to Schedules of Significant Items for additional information. | |
(4) | Net after-tax exchange activity for the three and nine months ended September 30, 2007 was a gain of $8 and a loss of $17, respectively. For the three and nine months ended September 30, 2006, the net after-tax exchange activity were losses of $7 and $19, respectively. Gains and losses resulting from the companys hedging program are largely offset by associated tax effects. |
12
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
% | % | |||||||||||||||||||||||
2007 | 2006 | Change | 2007 | 2006 | Change | |||||||||||||||||||
Segment PTOI |
$ | 916 | $ | 900 | 2 | % | $ | 4,074 | $ | 3,707 | 10 | % | ||||||||||||
Significant Items (benefit)/charge included in PTOI
(per Schedule B) |
40 | (50 | ) | 92 | 85 | |||||||||||||||||||
Segment PTOI excluding
Significant Items |
$ | 956 | $ | 850 | 12 | % | $ | 4,166 | $ | 3,792 | 10 | % | ||||||||||||
Net Income |
$ | 526 | $ | 485 | 8 | % | $ | 2,443 | $ | 2,277 | 7 | % | ||||||||||||
Significant Items (benefit)/charge included in Net
Income (per Schedule B) |
26 | (33 | ) | 78 | (14 | ) | ||||||||||||||||||
Net Income excluding
Significant Items |
$ | 552 | $ | 452 | 22 | % | $ | 2,521 | $ | 2,263 | 11 | % | ||||||||||||
EPS |
$ | 0.56 | $ | 0.52 | 8 | % | $ | 2.61 | $ | 2.44 | 7 | % | ||||||||||||
Significant Items (benefit)/charge included in EPS
(per Schedule B) |
0.03 | (0.03 | ) | 0.09 | (0.01 | ) | ||||||||||||||||||
EPS excluding
Significant Items |
$ | 0.59 | $ | 0.49 | 20 | % | $ | 2.70 | $ | 2.43 | 11 | % | ||||||||||||
Average number of diluted
shares outstanding |
929,316,177 | 927,231,880 | 0.2 | % | 931,774,150 | 928,809,510 | 0.3 | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
% | % | |||||||||||||||||||||||
2007 | 2006 | Change | 2007 | 2006 | Change | |||||||||||||||||||
Segment PTOI excluding
Significant Items |
$ | 956 | $ | 850 | 12 | % | $ | 4,166 | $ | 3,792 | 10 | % | ||||||||||||
Segment sales |
$ | 6,753 | $ | 6,380 | 6 | % | $ | 22,633 | $ | 21,383 | 6 | % | ||||||||||||
Segment PTOI as a percent
of segment sales |
14.2 | % | 13.3 | % | 18.4 | % | 17.7 | % |
13
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Income before income taxes and minority interests |
$ | 630 | $ | 636 | $ | 3,250 | $ | 2,941 | ||||||||
Less: Minority interest in earnings of
consolidated subsidiaries (1) |
(3 | ) | (1 | ) | (7 | ) | (4 | ) | ||||||||
Add: Net interest expense (2) |
104 | 108 | 292 | 312 | ||||||||||||
Adjusted EBIT |
731 | 743 | 3,535 | 3,249 | ||||||||||||
Add: Depreciation and amortization (3) |
331 | 343 | 1,003 | 1,014 | ||||||||||||
Adjusted EBITDA |
$ | 1,062 | $ | 1,086 | $ | 4,538 | $ | 4,263 | ||||||||
(1) | Excludes income taxes. | |
(2) | Includes interest expense plus amortization of capitalized interest less interest income. | |
(3) | Excludes amortization of capitalized interest. |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Total charges and expenses consolidated
income statements |
$ | 6,410 | $ | 6,009 | $ | 20,190 | $ | 19,206 | ||||||||
Remove: |
||||||||||||||||
Interest expense |
(113 | ) | (114 | ) | (320 | ) | (347 | ) | ||||||||
Variable costs (1) |
(3,332 | ) | (3,124 | ) | (10,856 | ) | (10,066 | ) | ||||||||
Significant Items benefit/(charge) (2) |
(40 | ) | 50 | (92 | ) | (85 | ) | |||||||||
Fixed costs |
$ | 2,925 | $ | 2,821 | $ | 8,922 | $ | 8,708 | ||||||||
Consolidated net sales |
$ | 6,675 | $ | 6,309 | $ | 22,395 | $ | 21,145 | ||||||||
Fixed costs as a percent of sales |
43.8 | % | 44.7 | % | 39.8 | % | 41.2 | % |
(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
Year Ended | ||||||||
December 31, | ||||||||
2006 | ||||||||
2007 Outlook | Actual | |||||||
Earnings per share excluding Significant Items |
$ | 3.15 to $3.20 | $ | 2.88 | ||||
Significant Items included in EPS: |
||||||||
Litigation related charges Other |
(0.03 | ) | | |||||
Litigation related charges Performance Materials |
(0.06 | ) | | |||||
Restructuring charges |
||||||||
Agriculture & Nutrition |
| (0.13 | ) | |||||
Coatings & Color Technologies |
| (0.10 | ) | |||||
American Jobs Creation Act |
| 0.02 | ||||||
Hurricane related items |
| 0.10 | ||||||
Asbestos insurance recovery |
| 0.04 | ||||||
Asset impairment Safety & Protection |
| (0.03 | ) | |||||
Sales terms and expense accrual
changes |
| (0.04 | ) | |||||
Corporate tax-related items |
| 0.64 | ||||||
Net (charge)/benefit for Significant Items |
(0.09 | ) | 0.50 | |||||
Reported EPS |
$ | 3.06 to $3.11 | $ | 3.38 | ||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Income before income taxes and minority interests |
$ | 630 | $ | 636 | $ | 3,250 | $ | 2,941 | ||||||||
Add: Significant Items (benefit)/charge |
40 | (50 | ) | 92 | 78 | |||||||||||
Net exchange losses / (gains) |
30 | 3 | 50 | (5 | ) | |||||||||||
Income before income taxes, Significant Items,
exchange gains/losses and minority interests |
$ | 700 | $ | 589 | $ | 3,392 | $ | 3,014 | ||||||||
Provision for income taxes |
$ | 102 | $ | 151 | $ | 802 | $ | 661 | ||||||||
Add: Tax (expense)/benefit on Significant Items |
14 | (17 | ) | 14 | 92 | |||||||||||
Tax benefit/(expense) on exchange
gains/losses |
38 | (4 | ) | 33 | (24 | ) | ||||||||||
Provision for income taxes, excluding
taxes on Significant Items and exchange gains |
$ | 154 | $ | 130 | $ | 849 | $ | 729 | ||||||||
Effective income tax rate |
16.2 | % | 23.7 | % | 24.7 | % | 22.5 | % | ||||||||
Base income tax rate |
22.0 | % | 22.1 | % | 25.0 | % | 24.2 | % |
15
Change in | ||||||||||||
Less: | Consolidated Sales | |||||||||||
Change in | Portfolio | Excluding Portfolio | ||||||||||
Consolidated Sales | Changes (1) | Changes | ||||||||||
U.S. |
(2 | )% | (1 | )% | (1 | )% | ||||||
Europe |
9 | (2 | ) | 11 | ||||||||
Asia Pacific |
5 | (2 | ) | 7 | ||||||||
Canada & Latin America |
22 | | 22 | |||||||||
Total Consolidated Sales |
6 | % | (1 | )% | 7 | % |
Less: | Change in Segment | |||||||||||
Change in Segment | Portfolio | Sales Excluding | ||||||||||
Sales | Changes (1) | Portfolio Changes | ||||||||||
Agriculture & Nutrition |
21 | % | | % | 21 | % | ||||||
Coatings & Color Technologies |
2 | (1 | ) | 3 | ||||||||
Electronic & Communication Technologies |
5 | | 5 | |||||||||
Performance Materials |
6 | 1 | 5 | |||||||||
Safety & Protection |
2 | % | (4 | )% | 6 | % |
(1) | Portfolio changes are historically included in percentage changes due to volume. |
16