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DuPont Reports First Quarter Earnings Growth of Over 20 PercentSales Increase 9 Percent with Strong Growth in Agriculture and Emerging Markets
WILMINGTON, Del., April 22 /PRNewswire-FirstCall/ --
Highlights
-- First quarter 2008 earnings were $1.31 per share compared to $1.01 in
the prior year. Excluding a significant item charge in the prior year,
earnings per share increased 22 percent.
-- Sales grew 9 percent to $8.6 billion, reflecting 6 percent higher local
selling prices and 5 percent currency benefit, partly offset by
1 percent lower volume and a net 1 percent reduction principally due to
a chemical business divestiture. Local selling price gains more than
offset higher ingredient costs.
-- Sales in Agriculture & Nutrition increased 18 percent and earnings grew
21 percent, reflecting strong demand for the company's production
agriculture products.
-- Sales in emerging markets grew 25 percent, led by Brazil, China, India
and Eastern Europe.
-- Reduced demand in the United States for the company's products sold
into construction and motor vehicle markets moderated results in the
Safety & Protection and Coatings & Color Technologies segments.
-- Segment pre-tax operating income (PTOI) increased to $1.9 billion.
Excluding significant items, segment PTOI margin improved 1 percentage
point to 21 percent.
"We're off to a strong start for the year," said DuPont Chairman and CEO Charles O. Holliday, Jr. "Our investments in agriculture and emerging markets enabled us to capitalize on robust growth in those areas which, when combined with gains from our productivity improvement programs, more than offset higher ingredient costs and weakness in certain U.S. markets. We'll continue to drive faster revenue growth from science-based, high value-added products and greater productivity." "Despite the impact of weaker demand in certain U.S. markets, this quarter is a good first step toward achieving our accelerated growth objectives," Holliday said. "We're taking the right actions in attractive markets to maximize value for shareholders." Global Consolidated Sales Consolidated net sales increased 9 percent to $8.6 billion in the first quarter. Sales outside the United States represented 62 percent of total sales and increased 16 percent, while sales in the U.S. were equal to last year. A summary of first quarter 2008 worldwide and regional sales performance is shown below.
Three Months Ended
March 31, 2008 Percentage Change Due to:
Local
% Currency Currency Portfolio
(Dollars in billions) $ Change Price Effect Volume /Other
U.S. $3.3 - 6 - (5) (1)
Europe 2.9 18 5 9 4 -
Asia Pacific 1.3 11 4 4 6 (3)
Canada & Latin America 1.1 15 5 11 (1) -
Total Consolidated Sales $8.6 9 6 5 (1) (1)
Net Income and Earnings Per Share Net income for the first quarter 2008 was $1,191 million, or $1.31 per share. First quarter 2007 net income was $945 million, or $1.01 per share, including a significant item charge of $52 million, or $.06 per share. The table below shows the variances in first quarter 2008 earnings per share (EPS) versus first quarter 2007.
EPS Analysis
EPS
1st Quarter 2007 - Reported $1.01
Less: Significant items (0.06)
EPS excluding significant items 1.07
Local prices 0.36
Variable costs* (0.28)
Volume (0.01)
Fixed costs* (0.03)
Currency 0.11
Pharmaceuticals 0.01
Tax 0.03
Lower interest expense 0.02
Lower shares 0.03
1st Quarter 2008 - Reported $1.31
*Excludes volume and currency impact
The $0.03 per share variance in fixed costs, noted above, includes estimated savings from cost productivity projects during the first quarter which partially offset cost increases from growth investments and inflation. Fixed costs as a percent of sales decreased to 35.9 percent from 37.7 percent in the prior year. Business Segment Performance Segment sales and related percentage variances for first quarter 2008 versus the prior year quarter are shown in the table below.
SEGMENT SALES* Three Months Ended Percentage Change
(Dollars in billions) March 31, 2008 Due to:
USD Portfolio
$ % Change Price Volume and Other
Agriculture & Nutrition $2.9 18 15 4 (1)
Coatings & Color Technologies 1.6 6 8 (2) -
Electronic & Communication
Technologies 1.0 12 9 2 1
Performance Materials 1.7 8 12 (3) (1)
Safety & Protection 1.4 - 7 (3) (4)
* Segment sales include transfers
Segment pre-tax operating income (PTOI) for the first quarter 2008 was $1,851 million versus $1,579 million in the first quarter 2007. Excluding a prior-year significant item charge, segment PTOI increased 13 percent.
PRE-TAX OPERATING INCOME
Three Months Ended March 31, 2008
% Change vs.
(Dollars in millions) 2008 2007 2007
Agriculture & Nutrition $786 $651 21
Coatings & Color Technologies 190 194 (2)
Electronic & Communication
Technologies 175 124 41
Performance Materials* 219 150 46
Safety & Protection 272 291 (7)
Total Growth Platforms 1,642 1,410 16
Pharmaceuticals 235 225 4
Other (26) (56) NA
Total Segments $1,851 $1,579 17
* 1st quarter 2007 includes a significant item charge of $52.
The following are business segment highlights comparing first quarter 2008 results to first quarter 2007.
Agriculture & Nutrition
-- Sales increased $433 million, or 18 percent, to $2.9 billion,
reflecting strong global demand favoring seed technology and crop
protection products.
-- PTOI increased 21 percent to $786 million, reflecting increased sales
of higher value products net of planned growth investments and higher
input costs.
Coatings & Color Technologies
-- Sales increased 6 percent to $1.6 billion as weakness in North American
motor vehicle and construction markets was more than offset by higher
USD selling price outside North America.
-- PTOI was $190 million compared with $194 million in the prior-year
quarter. PTOI reflects pricing gains in refinish and industrial
coatings and benefits from cost productivity and currency. These gains
were offset by lower volumes and the absence of a prior-year quarter
$16 million hurricane-related insurance recovery.
Electronic & Communication Technologies
-- Sales grew 12 percent to $1.0 billion and PTOI increased 41 percent to
$175 million, reflecting strong demand for refrigerants and
photovoltaic products.
Performance Materials
-- Sales grew 8 percent to $1.7 billion from continued strength in Asian
and European automotive and packaging materials markets.
-- PTOI increased 46 percent to $219 million in the quarter. Excluding a
$52 million significant item charge in the prior year, PTOI increased
8 percent. Sales improvement was partially offset by higher cost
ingredients and costs associated with manufacturing process
consolidations.
Safety & Protection
-- Sales were $1.4 billion, equal to the prior-year quarter. Excluding
the impact of a chemical business divestiture, sales grew 4 percent.
The impact of positive USD pricing and growth in emerging markets was
largely offset by lower volumes in U.S. construction markets.
-- PTOI was $272 million, down 7 percent reflecting lower volume, higher
costs associated with growth investments and the impact of a divested
business.
Additional information on segment performance is available on the DuPont Investor Center website at http://www.dupont.com. Outlook The company today reaffirmed its full-year 2008 earnings outlook of $3.40 to $3.55 per share and its first half 2008 earnings outlook for growth of about 10 percent, excluding significant items. The company also said it continues to expect second quarter earnings of about $1.05 per share. For the remainder of 2008, the company expects that slowing demand in U.S. markets, including construction and motor vehicle, will offset growth in agriculture and other markets outside the United States. Use of Non-GAAP Measures Management believes that measures of income excluding significant items ("non-GAAP" information) 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 Schedule D. DuPont NYSE: DD 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 70 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 based on management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, market position, expected expenditures and financial results are forward-looking statements. Some of the forward-looking statements may be identified by words like "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents filed with the Securities and Exchange Commission by DuPont, particularly its latest annual report on Form 10-K and quarterly report on Form 10-Q, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which the company does business; competitive pressures; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost of raw materials, research and development of new products, including regulatory approval and market acceptance; seasonality of sales of agricultural products; and severe weather events that cause business interruptions, including plant and power outages, or disruptions in supplier and customer operations.
E. I. du Pont de Nemours and Company
Consolidated Income Statements
(Dollars in millions, except per share amounts)
SCHEDULE A
Three Months Ended March 31,
2008 2007
Net sales $8,575 $7,845
Other income, net 195 316
Total 8,770 8,161
Cost of goods sold and other operating
charges (a) 5,956 5,594
Selling, general and administrative expenses 934 846
Research and development expense 330 310
Interest expense 80 99
Total 7,300 6,849
Income before income taxes and minority
interests 1,470 1,312
Provision for income taxes 273 365
Minority interests in earnings of
consolidated subsidiaries 6 2
Net income $1,191 $945
Basic earnings per share of common stock $1.32 $1.02
Diluted earnings per share of common stock $1.31 $1.01
Dividends per share of common stock $0.41 $0.37
Average number of shares outstanding used
in earnings per share (EPS) calculation:
Basic 900,646,000 924,020,000
Diluted 906,193,000 933,267,000
See Schedules of Significant Items for additional information.
E. I. du Pont de Nemours and Company
Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
SCHEDULE A (continued)
March 31, December 31,
2008 2007
Assets
Current assets
Cash and cash equivalents $1,094 $1,305
Marketable securities 33 131
Accounts and notes receivable, net 7,645 5,683
Inventories 5,310 5,278
Prepaid expenses 212 199
Income taxes 567 564
Total current assets 14,861 13,160
Property, plant and equipment, net of
accumulated depreciation (March 31, 2008 -
$16,036; December 31, 2007 - $15,733) 10,905 10,860
Goodwill 2,074 2,074
Other intangible assets 2,781 2,856
Investment in affiliates 818 818
Other assets 4,789 4,363
Total $36,228 $34,131
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $3,061 $3,172
Short-term borrowings and capital
lease obligations 3,196 1,370
Income taxes 177 176
Other accrued liabilities 3,360 3,823
Total current liabilities 9,794 8,541
Long-term borrowings and capital lease
obligations 5,784 5,955
Other liabilities 7,191 7,255
Deferred income taxes 894 802
Total liabilities 23,663 22,553
Minority interests 443 442
Commitments and contingent liabilities
Stockholders' equity
Preferred stock 237 237
Common stock, $0.30 par value; 1,800,000,000
shares authorized; issued at March 31, 2008 -
987,566,000; December 31, 2007 - 986,330,000 296 296
Additional paid-in capital 8,220 8,179
Reinvested earnings 10,764 9,945
Accumulated other comprehensive loss (668) (794)
Common stock held in treasury, at cost
(87,041,000 shares at March 31, 2008
and December 31, 2007) (6,727) (6,727)
Total stockholders' equity 12,122 11,136
Total $36,228 $34,131
E. I. du Pont de Nemours and Company
Condensed Consolidated Statements of Cash Flows
(Dollars in millions)
SCHEDULE A (continued)
Three Months Ended
March 31,
2008 2007
Cash used for operating activities $(951) $(240)
Investing activities
Purchases of property, plant and equipment (410) (273)
Investments in affiliates (3) (11)
Other investing activities - net (107) 15
Cash used for investing activities (520) (269)
Financing activities
Dividends paid to stockholders (372) (347)
Net increase in borrowings 1,611 41
Other financing activities - net 23 (119)
Cash provided by (used for) financing
activities 1,262 (425)
Effect of exchange rate changes on cash (2) 3
Decrease in cash and cash equivalents (211) (931)
Cash and cash equivalents at beginning
of period 1,305 1,814
Cash and cash equivalents at end of period $1,094 $883
E. I. du Pont de Nemours and Company
Schedules of Significant Items
(Dollars in millions, except per share amounts)
SCHEDULE B
SIGNIFICANT ITEMS
Pre-tax After-tax ($ Per Share)
2008 2007 2008 2007 2008 2007
1st Quarter
Litigation related item (a) $- $(52) $- $(52) $- $(0.06)
Total $- $(52) $- $(52) $- $(0.06)
(a) First quarter 2007 includes a net $52 charge in Cost of goods sold and
other operating charges for litigation in the Performance Materials
segment in connection with the elastomers antitrust matter.
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
March 31,
SEGMENT SALES (1) 2008 2007
Agriculture & Nutrition $2,883 $2,450
Coatings & Color Technologies 1,645 1,559
Electronic & Communication Technologies 1,026 920
Performance Materials 1,713 1,589
Safety & Protection 1,365 1,370
Other 40 43
Total Segment sales $8,672 $7,931
Elimination of transfers (97) (86)
Consolidated net sales $8,575 $7,845
(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
March 31,
PRETAX OPERATING INCOME/(LOSS) (PTOI) 2008 2007
Agriculture & Nutrition $786 $651
Coatings & Color Technologies 190 194
Electronic & Communication Technologies 175 124
Performance Materials 219 150
Safety & Protection 272 291
Total Growth Platforms 1,642 1,410
Pharmaceuticals 235 225
Other (26) (56)
Total Segment PTOI $1,851 $1,579
Net exchange losses (1) (155) (28)
Corporate expenses & net interest (226) (239)
Income before income taxes and
minority interests $1,470 $1,312
Three Months Ended
March 31,
SIGNIFICANT ITEMS BY SEGMENT (PRE-TAX) (2) 2008 2007
Agriculture & Nutrition $- $-
Coatings & Color Technologies - -
Electronic & Communication Technologies - -
Performance Materials (a) - (52)
Safety & Protection - -
Other - -
Total Significant Items by segment $- $(52)
Three Months Ended
March 31,
PTOI EXCLUDING SIGNIFICANT ITEMS 2008 2007
Agriculture & Nutrition $786 $651
Coatings & Color Technologies 190 194
Electronic & Communication Technologies 175 124
Performance Materials 219 202
Safety & Protection 272 291
Total Growth Platforms 1,642 1,462
Pharmaceuticals 235 225
Other (26) (56)
Total Segment PTOI excluding
Significant Items $1,851 $1,631
(1) Net after-tax exchange activity for the three months ended March
31, 2008 and 2007 were losses of $14 and $18, respectively. Gains
and losses resulting from the company's hedging program are largely
offset by associated tax effects.
(2) Refer to the Notes to Schedules of Significant Items for additional
information.
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
March 31,
%
2008 2007 Change
Segment PTOI $1,851 $1,579 17%
Significant Items charge included in
PTOI (per Schedule B) - 52
Segment PTOI excluding Significant Items $1,851 $1,631 13%
Net Income $1,191 $945 26%
Significant Items charge included in
Net Income (per Schedule B) - 52
Net Income excluding Significant Items $1,191 $997 19%
EPS $1.31 $1.01 30%
Significant Items charge included in
EPS (per Schedule B) - 0.06
EPS excluding Significant Items $1.31 $1.07 22%
Average number of diluted shares
outstanding 906,193,000 933,267,000 -2.9%
Calculation of Segment PTOI as a Percent of Segment Sales
Three Months Ended
March 31,
%
2008 2007 Change
Segment PTOI excluding Significant Items $1,851 $1,631 13%
Segment sales 8,672 7,931 9%
Segment PTOI as a percent of segment sales 21.3% 20.6%
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 /
Adjusted EBITDA to Consolidated Income Statement
Three Months Ended
March 31,
2008 2007
Income before income taxes and
minority interests $1,470 $1,312
Less: Minority interest in earnings
of consolidated subsidiaries (1) (5) (4)
Add: Net interest expense (2) 75 87
Adjusted EBIT 1,540 1,395
Add: Depreciation and amortization (3) 326 337
Adjusted EBITDA $1,866 $1,732
(1) Excludes income taxes.
(2) Includes interest expense plus amortization of capitalized interest
less miscellaneous interest.
(3) Excludes amortization of capitalized interest.
Reconciliations of Fixed Costs as a
Percent of Sales
Three Months Ended
March 31,
2008 2007
Total charges and expenses -
consolidated income statements $7,300 $6,849
Remove:
Interest expense (80) (99)
Variable costs (1) (4,140) (3,743)
Significant Items - charge (2) - (52)
Fixed costs $3,080 $2,955
Consolidated net sales $8,575 $7,845
Fixed costs as a percent of
consolidated net sales 35.9% 37.7%
(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)
Reconciliation of Earnings Per
Share (EPS) Outlook
Year Ended Quarter Ended
December 31, June 30,
2008 2007 2008 2007
Outlook Actual Outlook Actual
Earnings per share - excluding
Significant Items $3.40 to $3.55 $3.28 ~ $1.05 $1.04
Significant Items included in EPS:
Impairment charge - Performance
Materials - (0.15) - -
Litigation related charges -
Other - (0.03) - -
Litigation related charges, net -
Performance Materials - (0.01) - -
Corporate tax-related items - 0.13 - -
Net charge for Significant Items - (0.06) - -
Reported EPS $3.40 to $3.55 $3.22 ~ $1.05 1.04
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 pretax exchange gains and losses are
recorded in Other income, net on the Consolidated Income Statements and
larger offset by the associated tax impact.
Three Months Ended March 31,
2008 2007
Subsidiary/Affiliate Monetary
Position (Gain)/Loss
Pretax exchange (gains)/losses
(includes equity affiliates) $(150) $(25)
Local tax (benefits)/expenses (34) 8
Net after-tax impact from subsidiary
exchange gains/losses $(184) $(17)
Hedging Program (Gain)/Loss
Pretax exchange (gains)/losses $305 $53
Tax (benefits)/expenses (107) (18)
Net after-tax impact from hedging
program exchange gains/losses $198 $35
Total Exchange (Gain)/Loss
Pretax exchange (gains)/losses $155 $28
Tax (benefits)/expenses (141) (10)
Net after-tax exchange (gains)/losses $14 $18
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 March 31,
2008 2007
Income before income taxes and
minority interests $1,470 $1,312
Add: Significant Items - charge - 52
Net exchange losses 155 28
Income before income taxes, Significant
Items, exchange gains/losses and
minority interests $1,625 $1,392
Provision for income taxes $273 $365
Add: Tax benefit on Significant Items - -
Tax benefit on exchange gains/losses 141 10
Provision for income taxes, excluding taxes
on Significant Items and exchange
gains/losses $414 $375
Effective income tax rate 18.6% 27.8%
Significant Items effect 0.0% (1.0)%
Tax rate before significant items 18.6% 26.8%
Exchange gains/losses effect 6.9% 0.1%
Base income tax rate 25.5% 26.9%
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