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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) January 27, 2009
E. I. du Pont de Nemours and Company
(Exact Name of Registrant as Specified in Its Charter)
         
Delaware   1-815   51-0014090
(State or Other Jurisdiction   (Commission   (I.R.S. Employer
Of Incorporation)   File Number)   Identification No.)
1007 Market Street
Wilmington, Delaware 19898
(Address of principal executive offices)
Registrant’s telephone number, including area code: (302) 774-1000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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))
 
 

 

 

Section 2 — Financial Information
Item 2.02 Results of Operations and Financial Condition
     On January 27, 2009, the Registrant announced its consolidated financial results for the quarter ended December 31, 2008. A copy of the Registrant’s earnings news release is furnished on Form 8-K. The information contained in Item 2.02 of this report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed by the Registrant under the Securities Act of 1933, as amended, or the Exchange Act.

2

 

SIGNATURE
     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
  E. I. DU PONT DE NEMOURS AND COMPANY
(Registrant)
 		  
  /s/ Barry J. Niziolek    
  Barry J. Niziolek   
  Vice President and Controller   
 
January 27, 2009

3

 

         
JANUARY 27, 2009
  Media Contact:   Lori Captain
WILMINGTON, Del.
      302-773-3551
 
      lori.a.captain@usa.dupont.com
 
        
 
  Investor Contact:   Karen Fletcher
 
      302-774-0001
 
      karen.fletcher@usa.dupont.com
DuPont Enters 2009 with Strong Cash Position; Drives Productivity and Cash-Generating Actions
Company’s Fourth Quarter 2008 Results in Line with Guidance
Highlights
  •   In a challenging environment, DuPont ended 2008 with a strong balance sheet, delivering solid cash performance of $1.1 billion free cash flow, in line with company targets.
 
  •   DuPont reported a fourth quarter 2008 loss of $.70 per share. Excluding a $.42 per share charge from a previously announced restructuring program, the fourth quarter loss was $.28 per share, in line with guidance.
 
  •   As anticipated, declines in construction, motor vehicle sales and consumer spending, magnified by inventory destocking across most supply chains during the fourth quarter, caused a steep decline in global industrial production. These conditions precipitated a sharp downturn in demand and the company’s sales volume. Agriculture fundamentals remain strong.
 
  •   Weak industrial economic conditions are expected to continue in 2009. The company revised its full-year 2009 earnings outlook to a range of $2.00 to $2.50 per share. The previously provided full-year outlook was $2.25 to $2.75 per share.
 
  •   Full year 2008 earnings were $2.20 per share versus $3.22 in 2007. Excluding significant items, 2008 earnings were $2.78 per share versus $3.28 in the prior year.
          “DuPont enters 2009 addressing challenging economic conditions head-on,” said DuPont CEO Ellen J. Kullman. “We are intensely focused on productivity, while generating earnings and cash. Our market-leading businesses and internal discipline generated solid cash performance in 2008. We do not underestimate the difficulties presented by the current environment. We will rigorously guard our financial strength and flexibility, while carefully preserving our science-driven competitive advantage to assure that the company is well-positioned for an eventual improvement in global markets.”

 

2

Global Consolidated Sales and Net Income
          Consolidated net sales in the fourth quarter of $5.8 billion were 17 percent lower than prior year, reflecting 20 percent lower volume, 7 percent higher local prices, 3 percent negative impact from currency and a 1 percent net reduction from portfolio changes. Weaker demand across most markets led to significantly lower global sales volume. Local pricing gains in all regions and in all segments were more than offset by declines in volume and unfavorable currency. Sales were down in all regions, including a 16 percent decline in emerging markets. The table below shows worldwide and regional sales performance of fourth quarter 2008 versus fourth quarter 2007.
                                                 
    Three Months Ended    
    December 31, 2008   Percentage Change Due to:
                    Local            
            %   Currency   Currency        
(dollars in billions)   $   Change   Price   Effect   Volume   Portfolio/Other
U.S.
   $ 1.9       (15 )     7       —       (22 )     —  
Europe
     1.7       (20 )     5       (6 )     (19 )     —  
Asia Pacific
     1.2       (16 )     6       —       (20 )     (2 )
Canada & Latin America
     1.0       (13 )     12       (6 )     (19 )     —  
Total Consolidated Sales
   $ 5.8       (17 )     7       (3 )     (20 )     (1 )
          Net loss for the fourth quarter 2008 was $629 million versus income of $545 million in the prior year. Excluding significant items, fourth quarter 2008 net loss was $249 million versus income of $522 million in the prior year. (See schedules B and D.)

 

3
Earnings (Loss) Per Share
     The table below shows the variances in fourth quarter 2008 earnings (loss) per share (EPS) versus fourth quarter 2007.
EPS Analysis
         
    EPS  
4th Quarter 2007
   $ 0.60  
Exclude: Significant items (schedule B)
     0.03  
 
      
 
        
4th Quarter 2007 - excluding significant items
   $ 0.57  
 
        
Variances:
        
Local prices
     0.44  
Variable costs*
     (0.48 )
Volume
     (0.55 )
Low capacity utilization**
     (0.21 )
Fixed costs*
     0.02  
Currency
     (0.04 )
Income taxes
     0.09  
Exchange loss
     (0.07 )
Other (Incl. $.02 Pharmaceuticals benefit)
     (0.05 )
 
      
 
        
4th Quarter 2008 — excluding significant items
   $ (0.28 )
Include: Restructuring Charge (schedule B)
     (0.42 )
 
      
 
        
4th Quarter 2008
   $ (0.70 )
 
*   Excludes volume and currency impact
 
**   Fixed manufacturing cost, normally reflected in inventory, expensed in the fourth quarter as a result of low production volumes

 

 

4
Business Segment Performance
          Segment sales and related variances versus the fourth quarter of 2007 are shown in the table below:
                                         
SEGMENT SALES*   Three Months Ended   Percentage Change
(Dollars in billions)   December 31, 2008   Due to:
    $   % Change   USD Price   Volume   Portfolio and Other
Agriculture & Nutrition
   $ 1.2       (2 )     8       (9 )     (1 )
Coatings & Color Technologies
     1.3       (21 )     1       (22 )     —  
Electronic & Communication Technologies
     0.8       (13 )     1       (15 )     1  
Performance Materials
     1.2       (30 )     3       (32 )     (1 )
Safety & Protection
     1.3       (10 )     7       (15 )     (2 )
 
*   Segment sales include transfers
          Segment pre-tax loss was $595 million versus income of $804 million in the fourth quarter 2007. Excluding significant items, fourth quarter 2008 total segment pre-tax loss was $60 million versus income of $937 million in the prior year as shown in the table below.
PRE-TAX OPERATING INCOME (LOSS) EXCLUDING SIGNIFICANT ITEMS*
                 
    Three Months Ended  
    Dec 31, 2008  
(Dollars in millions)   2008     2007  
Agriculture & Nutrition
   $ (164 )   $ (89 )
Coatings & Color Technologies
     (65 )     216  
Electronic & Communication Technologies
     9       156  
Performance Materials
     (129 )     186  
Safety & Protection
     105       277  
 
            
Total Growth Platforms
     (244 )     746  
Pharmaceuticals
     265       246  
Other
     (81 )     (55 )
 
            
 
                
Total Segments
   $ (60 )   $ 937  
 
*   See schedules B and C for a listing of significant items and their impact by segment.

 

 

5

          DuPont delivered $425 million in fixed cost reduction programs in 2008, which surpassed the original goal of $400 million. Each business segment has taken additional actions in the fourth quarter to reduce cost and capital in line with demand. The actions include: surpassing the goal of eliminating 4,000 contractors by the end of December; redeploying resources to working capital reduction projects; addressing underperforming assets; broad-based supplier negotiations; and delivering on restructuring milestones.
          The following are business segment highlights comparing sales and PTOI (loss) excluding significant items for fourth quarter 2008 versus fourth quarter 2007.
Agriculture & Nutrition
•   Fourth quarter sales were $1.2 billion, down $26 million or 2 percent, with increased USD pricing in all regions and seed market share gains in Latin America, offset by volume declines in crop protection and food ingredient products.
•   The seasonal underlying pre-tax loss of $164 million reflects growth investments, variable cost increases driven by higher commodity and other raw material costs and less favorable crop protection products volume and mix. Fourth quarter 2007 included a gain from an asset sale.
Coatings & Color Technologies
•   Sales of $1.3 billion were down 21 percent. Higher USD prices were more than offset by a substantial decline in volume in all businesses and regions.
•   The underlying pre-tax loss of $65 million reflects lower volume including charges for low capacity utilization and rising raw material costs that were not fully offset by higher USD selling prices.
Electronic & Communication Technologies
•   Sales of $834 million were down 13 percent with weakness in consumer electronics, motor vehicles and industrial markets offsetting strength in photovoltaics and pricing gains in fluoroproducts.
•   Underlying PTOI of $9 million reflects weak demand across all businesses, charges for low capacity utilization and higher raw material costs in fluoroproducts. Fourth quarter 2007 included a gain on sale of land.
Performance Materials
•   Sales of $1.2 billion were down 30 percent as weak global demand drove volume down 32 percent, partially offset by higher USD prices.
•   The underlying pre-tax loss of $129 million reflects lower volume across all businesses, charges for low capacity utilization, weaker sales mix and the impact of the higher raw material costs that were not fully covered by higher USD selling prices.
Safety & Protection
•   Sales of $1.3 billion were down 10 percent. Pricing gains, particularly in aramids and chemical products, were more than offset by lower demand as all businesses experienced the impact of the global economic slowdown and destocking in the supply chain.

 

6

•   Underlying PTOI of $105 million reflects lower volume, charges for low capacity utilization and increased raw material prices partially offset by higher USD selling prices.
Additional information on segment performance is available on the DuPont Investor Center website at www.dupont.com.
Outlook
          The company expects that global macroeconomic conditions for first quarter 2009 will be similar to fourth quarter 2008, with very weak demand in most of the company’s key markets, excluding agriculture. Earnings growth for the Agriculture & Nutrition segment is expected to be more than offset by lower earnings in the other segments. DuPont expects first quarter 2009 earnings to be in the range of $.50 to $.70 per share.
          For 2009, the company’s earnings outlook is a range of $2.00 to $2.50 per share, anticipating that the current global recession will continue in 2009. While favorable conditions in global agriculture markets are expected in 2009, lower demand for non-agriculture products and the impact of currency is expected to limit the company’s revenue growth. The company expects to continue an appropriate level of spending for high-growth, high-margin businesses, including seed products and photovoltaics.
          “We are acutely focused on executing with a sense of urgency across the company,” Kullman said. “To enhance our strong financial position, we implemented additional cash-generating actions during the fourth quarter, including reduced spending and restructuring to better align capital expenditures and costs with lower global demand. For 2009, we will deliver about $730 million in fixed cost reductions and about $1 billion in reduced working capital, and we will capitalize on opportunities that emerge in the current environment.”
Use of Non-GAAP Measures
          Management believes that certain non-GAAP measurements, such as income excluding significant items, 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 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.

 

7

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. The company undertakes no duty to update any forward-looking statements as a result of future developments or new information.
# # #
1/27/09

 

 

 8
E. I. du Pont de Nemours and Company
Consolidated Income Statements
(Dollars in millions, except per share amounts)
SCHEDULE A
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2008     2007     2008     2007  
Net sales
   $ 5,820     $ 6,983     $ 30,529     $ 29,378  
Other income, net (a)
     250       230       1,307       1,275  
 
                        
Total
     6,070       7,213       31,836       30,653  
Cost of goods sold and other operating charges (a)
     5,785       5,389       24,083       21,746  
Selling, general and administrative expenses
     799       862       3,593       3,396  
Research and development expense
     343       359       1,393       1,338  
Interest expense
     104       110       376       430  
 
                        
Total
     7,031       6,720       29,445       26,910  
Income (loss) before income taxes and minority interests
     (961 )     493       2,391       3,743  
Provision for (benefit from) income taxes
     (325 )     (54 )     381       748  
Minority interests in earnings (loss) of consolidated subsidiaries
     (7 )     2       3       7  
 
                        
 
                                
Net income (loss)
   $ (629 )   $ 545     $ 2,007     $ 2,988  
 
                        
Basic earnings (loss) per share of common stock
   $ (0.70 )   $ 0.60     $ 2.21     $ 3.25  
 
                        
Diluted earnings (loss) per share of common stock
   $ (0.70 )   $ 0.60     $ 2.20     $ 3.22  
 
                        
Dividends per share of common stock
   $ 0.41     $ 0.41     $ 1.64     $ 1.52  
 
                        
 
                                
Average number of shares outstanding used in earnings per share (EPS) calculation:                        
Basic
     903,265,000       899,847,000       902,415,000       917,132,000  
Diluted
     903,265,000       906,479,000       907,371,000       925,402,000  
 
(a)   See Schedules of Significant Items for additional information.

 

9

E. I. du Pont de Nemours and Company
Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
SCHEDULE A (continued)
                 
    December 31,     December 31,  
    2008     2007  
Assets
                
Current assets
                
Cash and cash equivalents
   $ 3,645     $ 1,305  
Marketable securities
     59       131  
Accounts and notes receivable, net
     5,140       5,683  
Inventories
     5,681       5,278  
Prepaid expenses
     143       199  
Income taxes
     643       564  
 
            
Total current assets
     15,311       13,160  
 
                
Property, plant and equipment, net of accumulated depreciation (December 31, 2008 - $16,800; December 31, 2007 - $15,733)
     11,154       10,860  
Goodwill
     2,135       2,074  
Other intangible assets
     2,710       2,856  
Investment in affiliates
     844       818  
Other assets
     4,055       4,363  
 
            
Total
   $ 36,209     $ 34,131  
 
            
 
                
Liabilities and Stockholders’ Equity
                
Current liabilities
                
Accounts payable
   $ 3,128     $ 3,172  
Short-term borrowings and capital lease obligations
     2,012       1,370  
Income taxes
     110       176  
Other accrued liabilities
     4,460       3,823  
 
            
Total current liabilities
     9,710       8,541  
 
                
Long-term borrowings and capital lease obligations
     7,638       5,955  
Other liabilities
     11,169       7,255  
Deferred income taxes
     140       802  
 
            
Total liabilities
     28,657       22,553  
 
            
 
                
Minority interests
     427       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 December 31, 2008 - 989,415,000; December 31, 2007 - 986,330,000
     297       296  
Additional paid-in capital
     8,380       8,179  
Reinvested earnings
     10,456       9,945  
Accumulated other comprehensive loss
     (5,518 )     (794 )
Common stock held in treasury, at cost (87,041,000 shares at December 31, 2008 and 2007)
     (6,727 )     (6,727 )
 
            
Total stockholders’ equity
     7,125       11,136  
 
            
Total
   $ 36,209     $ 34,131  
 
            

 

10

E. I. du Pont de Nemours and Company
Condensed Consolidated Statements of Cash Flows
(Dollars in millions)
SCHEDULE A (continued)
                 
    Twelve Months Ended  
    December 31,  
    2008     2007  
Cash provided by operating activities
   $ 3,129     $ 4,290  
 
            
 
                
Investing activities
                
Purchases of property, plant and equipment
     (1,978 )     (1,585 )
Investments in affiliates
     (55 )     (113 )
Payments for Businesses (Net of Cash Acquired)
     (144 )     (13 )
Other investing activities — net
     567       (39 )
 
            
Cash used for investing activities
     (1,610 )     (1,750 )
 
                
Financing activities
                
Dividends paid to stockholders
     (1,496 )     (1,409 )
Net increase (decrease) in borrowings
     2,089       (343 )
Repurchase of common stock
     —       (1,695 )
Other financing activities — net
     285       378  
 
            
Cash provided by (used for) financing activities
     878       (3,069 )
 
                
Effect of exchange rate changes on cash
     (57 )     20  
 
            
 
                
Increase (decrease) in cash and cash equivalents
     2,340       (509 )
 
                
Cash and cash equivalents at beginning of period
     1,305       1,814  
 
            
 
                
Cash and cash equivalents at end of period
   $ 3,645     $ 1,305  
 
            

 

11

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 — Total (a)
   $ —     $ (52 )   $ —     $ (52 )   $ —     $ (0.06 )
 
                                    
2nd Quarter- Total
   $ —     $ —     $ —     $ —     $ —     $ —  
 
                                    
3rd Quarter
                                                
Hurricane charges (b)
     (227 )     —       (146 )     —       (0.16 )     —  
Litigation related item (c)
     —       (40 )     —       (26 )     —       (0.03 )
 
                                    
3rd Quarter — Total
   $ (227 )   $ (40 )   $ (146 )   $ (26 )   $ (0.16 )   $ (0.03 )
 
                                    
4th Quarter
                                                
2008 Restructuring charges (d)
   $ (535 )   $ —     $ (380 )   $ —     $ (0.42 )   $ —  
Impairment charge — Performance Materials (e)
     —       (165 )     —       (135 )     —       (0.15 )
Reversal of litigation accrual — Performance Materials (f)
     —       32       —       46       —       0.05  
Reversal of accruals related to tax settlements and valuation allowances and reversal of interest on tax settlements (g)
     —       6       —       112       —       0.13  
 
                                    
4th Quarter — Total
   $ (535 )   $ (127 )   $ (380 )   $ 23     $ (0.42 )   $ 0.03  
 
                                    
 
Full Year — Total
   $ (762 )   $ (219 )   $ (526 )   $ (55 )   $ (0.58 )   $ (0.06 )
 
                                    
 
(a)   First quarter and full year 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.
 
(b)   Pre-tax hurricane charges by segment for the third quarter and full year 2008 were: $4 Agriculture & Nutrition, $2 Electronic & Communication Technologies, $216 Performance Materials and $5 Safety & Protection.
 
(c)   Third quarter and full year 2007 includes a $40 charge in Cost of goods sold and other operating charges for litigation in the Other segment relating to a discontinued business.
 
(d)   Fourth quarter and full year 2008 includes a $535 restructuring charge in Cost of good sold and other operating charges comprised of severance and related benefit costs, asset write-offs, and impairment charges. Pre-tax amounts by segment were: $18 Agriculture & Nutrition, $236 Coatings and Color Technologies, $55 Electronic & Communication Technologies, $94 Performance Materials, $101 Safety & Protection and $31 Other.
 
(e)   Fourth quarter and full year 2007 includes a $165 charge in Other income to adjust the carrying value of the company’s investment in a 50/50 polyester films joint venture which is reported in the Performance Materials segment.
 
(f)   Fourth quarter and full year 2007 includes a net $32 benefit in Cost of goods sold and other operating charges resulting from the reversal of certain litigation accruals in the Performance Materials segment established in prior periods for the elastomers antitrust matter.
 
(g)   Fourth quarter and full year 2007 includes benefits for the reversal of accrued interest of $6 ($4 after-tax) in Other income and the reversal of income tax accruals of $108 associated with favorable settlement of certain prior year tax contingencies.

 

12

E. I. du Pont de Nemours and Company
Consolidated Segment Information
(Dollars in millions)
SCHEDULE C
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2008     2007     2008     2007  
SEGMENT SALES (1)
                                
Agriculture & Nutrition
   $ 1,225     $ 1,251     $ 7,952     $ 6,842  
Coatings & Color Technologies
     1,337       1,700       6,606       6,609  
Electronic & Communication Technologies
     834       963       3,988       3,797  
Performance Materials
     1,194       1,711       6,425       6,630  
Safety & Protection
     1,252       1,397       5,729       5,641  
Other
     31       42       160       178  
 
                        
Total segment sales
   $ 5,873     $ 7,064     $ 30,860     $ 29,697  
 
                                
Elimination of transfers
     (53 )     (81 )     (331 )     (319 )
 
                        
Consolidated net sales
   $ 5,820     $ 6,983     $ 30,529     $ 29,378  
 
                        
 
(1)   Sales for the reporting segments include transfers.

 

 

13
E. I. du Pont de Nemours and Company
Consolidated Segment Information
(Dollars in millions)
SCHEDULE C (continued)
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2008     2007     2008     2007  
PRE-TAX OPERATING INCOME/(LOSS)
                                
Agriculture & Nutrition
   $ (182 )   $ (89 )   $ 1,087     $ 894  
Coatings & Color Technologies
     (301 )     216       326       840  
Electronic & Communication Technologies
     (46 )     156       436       594  
Performance Materials
     (223 )     53       128       626  
Safety & Protection
     4       277       829       1,199  
 
                        
Total Growth Platforms
     (748 )     613       2,806       4,153  
 
                                
Pharmaceuticals
     265       246       1,025       949  
Other
     (112 )     (55 )     (181 )     (224 )
 
                        
Total Segment PTOI (Loss)
   $ (595 )   $ 804     $ 3,650     $ 4,878  
 
                                
Net exchange (loss) (1)
     (116 )     (35 )     (255 )     (85 )
Corporate expenses & net interest
     (250 )     (276 )     (1,004 )     (1,050 )
 
                        
 
                                
Income (loss) before income taxes and minority interests
   $ (961 )   $ 493     $ 2,391     $ 3,743  
 
                        
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2008     2007     2008     2007  
SIGNIFICANT ITEMS BY SEGMENT (PRE-TAX) (2)
                                
Agriculture & Nutrition
   $ (18 )   $ —     $ (22 )   $ —  
Coatings & Color Technologies
     (236 )     —       (236 )     —  
Electronic & Communication Technologies
     (55 )     —       (57 )     —  
Performance Materials
     (94 )     (133 )     (310 )     (185 )
Safety & Protection
     (101 )     —       (106 )     —  
Other
     (31 )     —       (31 )     (40 )
 
                        
Total significant items by segment
   $ (535 )   $ (133 )   $ (762 )   $ (225 )
 
                        
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2008     2007     2008     2007  
PTOI (LOSS) EXCLUDING SIGNIFICANT ITEMS
                                
Agriculture & Nutrition
   $ (164 )   $ (89 )   $ 1,109     $ 894  
Coatings & Color Technologies
     (65 )     216       562       840  
Electronic & Communication Technologies
     9       156       493       594  
Performance Materials
     (129 )     186       438       811  
Safety & Protection
     105       277       935       1,199  
 
                        
Total Growth Platforms
     (244 )     746       3,537       4,338  
 
                                
Pharmaceuticals
     265       246       1,025       949  
Other
     (81 )     (55 )     (150 )     (184 )
 
                        
Total Segment PTOI (Loss) excluding significant items
   $ (60 )   $ 937     $ 4,412     $ 5,103  
 
                        
 
(1)   Net after-tax exchange activity for the three months ended December 31, 2008 and 2007 was a loss of $81 and $14, respectively. Net after-tax exchange activity for the twelve months ended December 31, 2008 and 2007 were losses of $172 and $31, respectively. Gains and losses resulting from the company’s hedging program are largely offset by associated tax effects. See Schedule D for additional information.
 
(2)   Refer to the notes to schedules of significant items for additional information.

 

14

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     Twelve Months Ended  
    December 31,     December 31,  
                    %                     %  
    2008     2007     Change     2008     2007     Change  
Segment PTOI (Loss)
   $ (595 )   $ 804       N/M     $ 3,650     $ 4,878       -25 %
Significant items charge included in PTOI (Loss) (per Schedule B)
     535       133               762       225          
 
                                        
Segment PTOI (Loss) excluding significant items
   $ (60 )   $ 937       N/M     $ 4,412     $ 5,103       -14 %
 
                                        
 
                                                
Net income (loss)
   $ (629 )   $ 545       N/M     $ 2,007     $ 2,988       -33 %
Significant items included in Net income (loss) (per Schedule B)
     380       (23 )             526       55          
 
                                        
Net income (loss) excluding significant items
   $ (249 )   $ 522       N/M     $ 2,533     $ 3,043       -17 %
 
                                        
 
                                                
EPS
   $ (0.70 )   $ 0.60       N/M     $ 2.20     $ 3.22       -32 %
Significant items included in EPS (per Schedule B)
     0.42       (0.03 )             0.58       0.06          
 
                                        
EPS excluding significant items
   $ (0.28 )   $ 0.57       N/M     $ 2.78     $ 3.28       -15 %
 
                                        
 
                                                
Average number of diluted shares outstanding
     903,265,000       906,479,000       -0.4 %     907,371,000       925,402,000       -1.9 %
Calculation of Segment PTOI (Loss) as a Percent of Segment Sales
                                                 
    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
                    %                   %
    2008   2007   Change   2008   2007   Change
Segment PTOI (Loss) excluding significant items
   $ (60 )   $ 937       N/M     $ 4,412     $ 5,103       -14 %
Segment sales
     5,873       7,064       -17 %     30,860       29,697       4 %
 
Segment PTOI (Loss) as a percent of segment sales
     -1.0 %     13.3 %             14.3 %     17.2 %        
Calculation of Free Cash Flow
                 
    Year Ended  
    December 31,  
    2008     2007  
Cash provided by operating activities
   $ 3,129     $ 4,290  
Less: Purchases of Property, plant and equipment
     1,978       1,585  
Less: Investments in affiliates
     55       113  
 
            
Free cash flow
   $ 1,096     $ 2,592  
 
            

 

15

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 EBIT / EBITDA to Consolidated Income Statement
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2008     2007     2008     2007  
Income (loss) before income taxes and minority interests
   $ (961 )   $ 493     $ 2,391     $ 3,743  
Less: Minority interests in earnings (losses) of consolidated subsidiaries
     (7 )     2       3       7  
Add: Interest expense
     104       110       376       430  
 
                        
EBIT
     (850 )     601       2,764       4,166  
Add: Depreciation and amortization
     348       342       1,444       1,371  
 
                        
EBITDA
   $ (502 )   $ 943     $ 4,208     $ 5,537  
 
                        
Reconciliations of Fixed Costs as a Percent of Sales
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2008     2007     2008     2007  
Total charges and expenses — consolidated income statements
   $ 7,031     $ 6,720     $ 29,445     $ 26,910  
Remove:
                                
Interest expense
     (104 )     (110 )     (376 )     (430 )
Variable costs (1)
     (3,245 )     (3,522 )     (15,736 )     (14,378 )
Significant items (2)
     (535 )     32       (762 )     (60 )
 
                        
Fixed costs
   $ 3,147     $ 3,120     $ 12,571     $ 12,042  
 
                        
 
                                
Consolidated net sales
   $ 5,820     $ 6,983     $ 30,529     $ 29,378  
 
                                
Fixed costs as a percent of consolidated net sales
     54.1 %     44.7 %     41.2 %     41.0 %
 
(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.
     Reconciliation of Earnings Per Share (EPS)
                 
    Year Ended  
    December 31,  
    2008     2007  
    Actual     Actual  
Earnings per share — excluding Significant Items
   $ 2.78     $ 3.28  
Significant Items included in EPS:
                
Hurricane charge
     (0.16 )     —  
Restructuring charge
     (0.42 )        
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
     (0.58 )     (0.06 )
 
            
Reported EPS
   $ 2.20     $ 3.22  
 
            

 

16

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/Loss
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 are partially offset by the associated tax impact.
                                 
    Three Months Ended     Twelve Months Ended  
    December 31,     December 31,  
    2008     2007     2008     2007  
Subsidiary/Affiliate Monetary Position Gain/(Loss)
                                
Pretax exchange gains (losses) (includes equity affiliates)
   $ (286 )   $ 34     $ (396 )   $ 174  
Local tax benefits (expenses)
     93       (3 )     130       (35 )
 
                        
Net after-tax impact from subsidiary exchange gains (losses)
   $ (193 )   $ 31     $ (266 )   $ 139  
 
                        
 
                                
Hedging Program Gain/(Loss)
                                
 
                        
Pretax exchange gains (losses)
   $ 170     $ (69 )   $ 141     $ (259 )
Tax benefits (expenses)
     (58 )     24       (47 )     89  
 
                        
Net after-tax impact from hedging program exchange gains (losses)
   $ 112     $ (45 )   $ 94     $ (170 )
 
                        
 
                                
Total Exchange Gain/(Loss)
                                
 
                        
Pretax exchange gains (losses)
   $ (116 )   $ (35 )   $ (255 )   $ (85 )
Tax benefits (expenses)
     35       21       83       54  
 
                        
Net after-tax exchange gains (losses)
   $ (81 )   $ (14 )   $ (172 )   $ (31 )
 
                        
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     Twelve Months Ended  
    December 31,     December 31,  
    2008     2007     2008     2007  
Income (loss) before income taxes and minority interests
   $ (961 )   $ 493     $ 2,391     $ 3,743  
Add: Significant items
     535       127       762       219  
Less: Net exchange gains (losses)
     (116 )     (35 )     (255 )     (85 )
 
                        
Income (loss) before income taxes, significant items, exchange gains/losses and minority interests
   $ (310 )   $ 655     $ 3,408     $ 4,047  
 
                        
 
                                
Provision for (benefit from) income taxes
   $ (325 )   $ (54 )   $ 381     $ 748  
Add: Tax benefit on significant items
     150       150       231       164  
Tax (expense)/benefit on exchange gains/losses
     35       21       83       54  
 
                        
Provision for (benefit from) income taxes, excluding taxes on significant items and exchange gains/losses
   $ (140 )   $ 117     $ 695     $ 966  
 
                        
 
                                
Effective income tax rate
     33.8 %     -11.0 %     15.9 %     20.0 %
Significant items effect
     7.3 %     26.5 %     3.5 %     3.0 %
 
                        
Tax rate before significant items
     41.1 %     15.5 %     19.4 %     23.0 %
Exchange gains/losses effect
     4.1 %     2.4 %     1.0 %     0.9 %
 
                        
Base income tax rate
     45.2 %     17.9 %     20.4 %     23.9 %