EX-99.1 2 a123114enr.htm EX-99.1 12.31.14 ENR

 
 
 
 
 
Exhibit 99.1
 
 
 
 
 
 
 
 
 
 
January 27, 2015
 
 
 
Media Contact:
Dan Turner
WILMINGTON, Del.
 
 
 
 
302-774-0081
 
 
 
 
 
daniel.a.turner@dupont.com
 
 
 
 
Investor Contact:
302-774-4994

DuPont Reports 4Q and Full-Year 2014 Operating EPS of $0.71 and $4.01;
4Q and Full-Year EPS in Line with Company Expectations Despite Macroeconomic Headwinds
 
Increases Total Expected Cost Savings from Operational Redesign to at Least $1.3 Billion; Accelerates Year End 2015 Annual Run Rate to $1 Billion
 
Expects to Return to Shareholders All or Substantially All of Anticipated Chemours One-Time Dividend Proceeds, Currently Estimated at $4 Billion, via Share Repurchases Within 12 to 18 months of the Mid-Year Separation
        
WILMINGTON, Del., Jan. 27, 2015 - DuPont today announced fourth quarter 2014 operating earnings of $0.71 per share compared to $0.59 per share in the prior year. GAAP1 earnings from continuing operations were $668 million or $0.73 per share, versus $183 million or $0.19 per share last year. Fourth quarter results reflect a 20-percent increase in operating earnings per share year-over-year realized from a number of company actions, including strategic portfolio initiatives, continued productivity improvements related to the company’s operational redesign, reductions in performance-based compensation, and share repurchases.
For the full year 2014, DuPont delivered operating earnings of $4.01 per share compared to $3.88 per share in the prior year. GAAP1 earnings from continuing operations were $3.90 per share, versus $3.04 per share last year.
Volume, margins and earnings grew in the majority of segments, despite significant market and macroeconomic challenges, including a weaker Ag economy, a stronger dollar and a difficult market pricing environment.
"Our 2014 results demonstrate continued progress on our strategic plan to deliver higher growth and higher value, including ongoing portfolio refinement through several strategic portfolio actions and steady progress on the planned Chemours separation, substantial cost reductions from our operational redesign and productivity initiatives, and the continued return of capital to our shareholders through $2 billion of share repurchases and an increase in the common stock dividend of 4 percent," Kullman said.
"Rapid progress in our redesign initiative has enabled us to achieve a $1 billion run-rate target by year end 2015, well ahead of schedule, and we have identified at least $300 million of additional opportunities to streamline our operations and reduce costs. This initiative remains a priority and we expect to see further results over time," Kullman added. "In 2015, we remain focused on generating superior returns for our shareholders, including through return of capital from the expected Chemours dividend, while positioning DuPont for our next stage of growth."

1Generally Accepted Accounting Principles (GAAP)
E.I. du Pont de Nemours and Company




Company Increases Cost Reduction Commitment and Outlines Expectations for Return of Capital From Chemours One-Time Dividend

The company has increased its cost reduction commitment from its operational redesign by approximately $300 million to at least $1.3 billion of total expected savings by 2017. Additionally, by the end of 2015, the company now expects annual run-rate savings of approximately $1 billion, significantly ahead of its previously announced schedule.
In addition the company said it expects to return all or substantially all of the one-time dividend proceeds from Chemours to DuPont shareholders via share repurchases over the 12 to 18 months following the separation of Chemours. Based on the target BB credit rating of Chemours, this amount is anticipated to be approximately $4 billion, pending the final credit ratings and underlying business conditions for Chemours.



Fourth Quarter Highlights

•
Sales were $7.4 billion versus $7.7 billion in the same period last year, down 5 percent primarily due to portfolio changes and negative currency impacts.

•
Volume grew in all segments except for Electronics & Communications.

•
Segment operating earnings were $1,014 million, reflecting disciplined execution despite macroeconomic headwinds, including a weaker Ag economy and the impact from a stronger U.S. dollar.

•
Cost reductions from operational redesign contributed $0.05 per share to operating earnings in the quarter.



Full Year Highlights

•
Sales were $34.7 billion versus $35.7 billion last year, down 3 percent due to weakness in Ag markets, portfolio changes and negative currency impacts. A 1-percent increase in volume was offset by price.

•
Segment operating earnings of $6.0 billion increased 1 percent versus $5.9 billion last year as the negative impact of portfolio changes and currency were more than offset by continued productivity improvements, lower performance-based compensation and gains from business divestitures.
 
•
Continued to execute on our plan to deliver higher growth and higher value for our shareholders:

◦
Cost reductions from operational redesign contributed $0.07 per share to operating earnings in 2014;

◦
Completed 10 strategic portfolio actions during the year;

◦
Completed a $2 billion share buyback; and

◦
Increased the common stock dividend 4 percent in July 2014.
 
•
The Chemours separation remains on track, as highlighted by the initial Form 10 filing on December 18.

2
3

Global Consolidated Net Sales - 4th Quarter
Fourth quarter 2014 net sales of $7.4 billion decreased 5 percent versus last year, reflecting a 4-percent impact from portfolio changes, 1-percent lower local selling prices and a 3-percent negative currency impact, partially offset by 3-percent higher volume. The table below shows fourth quarter regional sales and variances versus fourth quarter 2013.
 
 
Three Months Ended
 
 
 
 
 
 
December 31, 2014
Percentage Change Due to:
(Dollars in millions)
 
$
 
% Change
 
Local Price
 
Currency Effect
 
Volume
 
Portfolio/ Other
U.S. & Canada
 
$
2,580

 
(3
)
 
(3
)
 
—

 
6

 
(6
)
EMEA*
 
1,672

 
(5
)
 
2

 
(6
)
 
3

 
(4
)
Asia Pacific
 
1,910

 
(4
)
 
(2
)
 
(2
)
 
2

 
(2
)
Latin America
 
1,216

 
(10
)
 
(3
)
 
(5
)
 
(1
)
 
(1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Consolidated Sales
 
$
7,378

 
(5
)
 
(1
)
 
(3
)
 
3

 
(4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
* Europe, Middle East & Africa
 
 
 
 
 
 
 
 
 
 
 
 


























4

Segment Sales - 4th Quarter
The table below shows fourth quarter 2014 segment sales with related variances versus the fourth quarter 2013.
 
 
Three Months Ended
 
Percentage Change
 
 
December 31, 2014
Due to:
(Dollars in millions)
 
$
 
% Change
 
USD Price
 
Volume
 
Portfolio/Other
Agriculture
 
$
1,732

 
(4
)
 
(8
)
 
5

 
(1
)
Electronics & Communications
 
573

 
(11
)
 
(6
)
 
(5
)
 
—

Industrial Biosciences
 
322

 
(1
)
 
(3
)
 
2

 
—

Nutrition & Health
 
843

 
(3
)
 
(4
)
 
1

 
—

Performance Chemicals
 
1,564

 
(6
)
 
(4
)
 
3

 
(5
)
Performance Materials
 
1,461

 
(4
)
 
—

 
4

 
(8
)
Safety & Protection
 
943

 
(3
)
 
(1
)
 
3

 
(5
)
Other
 
1

 
 
 
 
 
 
 
 
Total segment sales
 
7,439

 
 
 
 
 
 
 
 
Elimination of transfers
 
(61
)
 
 
 
 
 
 
 
 
Consolidated net sales
 
$
7,378

 
 
 
 
 
 
 
 


Operating Earnings - 4th Quarter

 
 
 
 
 
 
 Change vs. 2013
(Dollars in millions)
 
4Q14
 
4Q13
 
$
 
%
Agriculture
 
$
129

 
$
88

 
$
41

 
47
 %
Electronics & Communications
 
97

 
93

 
4

 
4
 %
Industrial Biosciences
 
49

 
40

 
9

 
23
 %
Nutrition & Health
 
82

 
81

 
1

 
1
 %
Performance Chemicals (1)
 
228

 
230

 
(2
)
 
-1
 %
Performance Materials (1)
 
332

 
294

 
38

 
13
 %
Safety & Protection
 
209

 
209

 
—

 
—
 %
Other
 
(112
)
 
(96
)
 
(16
)
 
-17
 %
Total segment operating earnings (2)
 
1,014

 
939

 
75

 
8
 %
 
 
 
 
 
 
 
 

Exchange gains (losses) (3)
 
122

 
(73
)
 
195

 


Corporate expenses
 
(144
)
 
(191
)
 
47

 

Interest expense
 
(87
)
 
(108
)
 
21

 

Operating earnings before income taxes
 
905

 
567

 
338

 
60
 %
 
 
 
 
 
 
 
 

Provision for income taxes on operating earnings
 
(256
)
 
(9
)
 
(247
)
 


Net income attributable to noncontrolling interests
 
—

 
—

 
—

 

Operating earnings
 
$
649

 
$
558

 
$
91

 
16
 %
 
 
 
 
 
 
 
 

Operating earnings per share
 
$
0.71

 
$
0.59

 
$
0.12

 
20
 %
 
 
 
 
 
 
 
 
 
(1) Prior period reflects the reclassifications of the Viton® fluoroelastomer product line from Performance Materials to Performance Chemicals.
(2)  See Schedules B and C for listing of significant items and their impact by segment.
(3)  See Schedule D for additional information on exchange gains and losses.


5

Global Consolidated Net Sales - Full Year
Full-year 2014 net sales of $34.7 billion decreased 3 percent versus last year, reflecting a 2-percent impact from portfolio changes, 1-percent lower local selling prices and a 1-percent negative currency impact, partially offset by 1-percent higher volume. The table below shows full-year regional sales and variances versus full year 2013.
 
 
12 Months Ended
 
 
 
 
 
 
December 31, 2014
Percentage Change Due to:
(Dollars in millions)
 
$
 
% Change
 
Local Price
 
Currency Effect
 
Volume
 
Portfolio/ Other
U.S. & Canada
 
$
14,054

 
(5
)
 
(1
)
 
—

 
(1
)
 
(3
)
EMEA*
 
8,483

 
1

 
—

 
—

 
2

 
(1
)
Asia Pacific
 
7,703

 
(1
)
 
(2
)
 
(2
)
 
4

 
(1
)
Latin America
 
4,483

 
(6
)
 
(1
)
 
(3
)
 
(1
)
 
(1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Consolidated Sales
 
$
34,723

 
(3
)
 
(1
)
 
(1
)
 
1

 
(2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
* Europe, Middle East & Africa
 
 
 
 
 
 
 
 
 
 
 
 
    
Segment Sales - Full Year
The table below shows full-year 2014 segment sales with related variances versus the prior year.
 
 
12 Months Ended
 
Percentage Change
 
 
December 31, 2014
Due to:
(Dollars in millions)
 
$
 
% Change
 
USD Price
 
Volume
 
Portfolio/Other
Agriculture
 
$
11,304

 
(4
)
 
(1
)
 
(3
)
 
—

Electronics & Communications
 
2,393

 
(6
)
 
(8
)
 
2

 
—

Industrial Biosciences
 
1,258

 
3

 
1

 
2

 
—

Nutrition & Health
 
3,529

 
2

 
(1
)
 
3

 
—

Performance Chemicals
 
6,497

 
(6
)
 
(4
)
 
2

 
(4
)
Performance Materials
 
6,129

 
(2
)
 
—

 
2

 
(4
)
Safety & Protection
 
3,896

 
—

 
(1
)
 
3

 
(2
)
Other
 
5

 
 
 
 
 
 
 
 
Total segment sales
 
35,011

 
 
 
 
 
 
 
 
Elimination of transfers
 
(288
)
 
 
 
 
 
 
 
 
Consolidated net sales
 
$
34,723

 
 
 
 
 
 
 
 



















6

Operating Earnings - Full Year

 
 
 
 
 
 
 Change vs. 2013
(Dollars in millions)
 
FY 2014
 
FY 2013
 
$
 
%
Agriculture
 
$
2,352

 
$
2,483

 
$
(131
)
 
-5
 %
Electronics & Communications
 
355

 
334

 
21

 
6
 %
Industrial Biosciences
 
211

 
169

 
42

 
25
 %
Nutrition & Health
 
380

 
299

 
81

 
27
 %
Performance Chemicals (1)
 
934

 
1,015

 
(81
)
 
-8
 %
Performance Materials (1)
 
1,298

 
1,280

 
18

 
1
 %
Safety & Protection
 
794

 
690

 
104

 
15
 %
Other
 
(369
)
 
(345
)
 
(24
)
 
-7
 %
Total segment operating earnings (2)
 
5,955

 
5,925

 
30

 
1
 %
 
 
 
 
 
 
 
 
 
Exchange gains (losses) (2), (3)
 
193

 
(128
)
 
321

 
 
Corporate expenses
 
(702
)
 
(762
)
 
60

 
 
Interest expense
 
(377
)
 
(448
)
 
71

 
 
Operating earnings before income taxes
 
5,069

 
4,587

 
482

 
11
 %
 
 
 
 
 
 
 
 
 
Provision for income taxes on operating earnings
 
(1,355
)
 
(941
)
 
(414
)
 
 
Net income attributable to noncontrolling interests
 
11

 
14

 
(3
)
 
 
Operating earnings
 
$
3,703

 
$
3,632

 
$
71

 
2
 %
 
 
 
 
 
 
 
 
 
Operating earnings per share
 
$
4.01

 
$
3.88

 
$
0.13

 
3
 %
 
 
 
 
 
 
 
 
 
(1) Prior period reflects the reclassifications of the Viton® fluoroelastomer product line from Performance Materials to Performance Chemicals.
(2)  See Schedules B and C for listing of significant items and their impact by segment.
(3)  See Schedule D for additional information on exchange gains and losses.








    


















7

The following is a summary of business results for each of the company’s reportable segments comparing fourth quarter with the prior year, unless otherwise noted. References to selling price are on a U.S. dollar basis, including the impact of currency.

Fourth quarter results included about $175 million of year-over-year lower performance-based compensation. The impact by segment is as follows: Agriculture - $90 million, Electronics & Communications - $10 million, Industrial Biosciences - $5 million, Nutrition & Health - $10 million, Performance Chemicals - $30 million, Performance Materials - $15 million, and Safety & Protection - $15 million.
    
Full year results included a year-over-year benefit of about $200 million due to lower performance-based compensation, of which $110 million impacted Agriculture.

Agriculture - Operating earnings of $129 million increased $41 million, or 47 percent. Lower corn seed sales in Brazil and a negative currency impact were more than offset by lower costs, gains from the sale of businesses of $36 million and the timing of seed shipments.

Full year 2014 operating earnings of $2.4 billion decreased $0.1 billion, or 5 percent, on lower corn seed volumes and the negative impact of currency, partially offset by higher crop protection volumes, higher local seed prices, and lower costs, including seed inputs.

Electronics & Communications - Operating earnings of $97 million increased $4 million, or 4 percent, as lower costs and productivity improvements were offset by lower Solamet® paste volumes due to the impact of competitive pressures.

Full year 2014 operating earnings of $355 million increased $21 million, or 6 percent, on volume growth and productivity gains, partially offset by the absence of $20 million in OLED licensing income realized during 2013.

Industrial Biosciences - Operating earnings of $49 million increased $9 million, or 23 percent, primarily from improved product mix, lower costs and productivity improvements.

Full year 2014 operating earnings of $211 million increased $42 million, or 25 percent, on increased enzyme demand, principally for ethanol production, and productivity improvements.

Nutrition & Health - Operating earnings of $82 million were essentially flat with prior year as the negative impact of currency and product mix were offset by higher volumes, a gain on termination of a distribution agreement of $18 million, and lower costs.

Full year 2014 operating earnings of $380 million increased $81 million, or 27 percent, from improved product mix, volume growth, productivity and a gain on termination of a distribution agreement of $18 million, partially offset by the negative impact of currency.

Performance Chemicals - Operating earnings of $228 million decreased $2 million as lower prices for titanium dioxide and fluoroproducts were essentially offset by volume increases, lower costs, and a gain from the sale of a business of $23 million.

Full year 2014 operating earnings of $934 million decreased $81 million, or 8 percent, as lower prices for refrigerants, titanium dioxide, and fluoroproducts were partially offset by volume increases, lower costs, and a gain from the sale of a business of $23 million.

Performance Materials - Operating earnings of $332 million increased $38 million, or 13 percent, due primarily to increased ethylene and performance polymer volumes, productivity improvements, and lower costs.

Full year 2014 operating earnings of $1.3 billion were essentially equal to prior year, as increased automotive demand was offset by the impact of the sale of GLS/Vinyls.

Safety & Protection - Operating earnings of $209 million were flat with prior year as lower local prices, currency, and portfolio changes associated with the sale of Sontara® were offset by increased demand for Nomex® thermal resistant products, Kevlar® high strength materials and Tyvek® protective material, and lower costs.

Full year 2014 operating earnings of $794 million increased $104 million, or 15 percent, from higher volumes driven by increased demand for Nomex® and Kevlar®, productivity improvements, and lower product costs, partially offset by lower sales from clean technologies offerings, a negative currency impact, and portfolio changes.

Additional information is available on the DuPont Investor Center website at http://www.investors.dupont.com.

8

Outlook
The company expects 2015 operating earnings of $4.00 to $4.20 per share, including the full-year outlook for the Performance Chemicals segment.  This estimate includes an approximately $0.60 per share negative currency impact due to the recent strengthening of the dollar based upon an average basket of exchange rates for our business at January 23.  The currency impact is expected to be most significant in the first half of the year due to the seasonality of operating earnings from Agriculture in the northern hemisphere. In 2015, the company anticipates that the increase in the base tax rate from prior year will be about a $0.15 per share headwind. The company also expects that the operational redesign will deliver savings of about $0.35 per share in 2015.
The 2015 outlook does not reflect the planned separation of the Performance Chemicals segment or the impact of the expected return of capital related to the separation.
DuPont will hold a conference call and webcast on Tuesday, January 27, 2015, at 9:00 AM EDT to discuss this news release.  The webcast and additional presentation materials can be accessed by visiting the company’s investor website (Events & Presentations) at www.investors.dupont.com.  A replay of the conference call webcast will be available for 90 days by calling 1-630-652-3042, Passcode 38251527#.  For additional information see the investor center at http://www.dupont.com.
Use of Non-GAAP Measures
Management believes that certain non-GAAP measurements 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 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 A, C and D.
DuPont (NYSE: DD) has been bringing world-class science and engineering to the global marketplace in the form of innovative products, materials, and services since 1802. The company believes that by collaborating with customers, governments, NGOs, and thought leaders we can help find solutions to such global challenges as providing enough healthy food for people everywhere, decreasing dependence on fossil fuels, and protecting life and the environment. For additional information about DuPont and its commitment to inclusive innovation, please visit http://www.dupont.com.

Forward-Looking Statements: This news release contains forward-looking statements which may be identified by their use of words like “plans,” “expects,” “will,” “believes,” “intends,” “estimates,” “anticipates” or other words of similar meaning. All statements that address expectations or projections about the future, including statements about the company’s growth strategy, product development, regulatory approval, market position, anticipated benefits of acquisitions, outcome of contingencies, such as litigation and environmental matters, expenditures and financial results, are forward-looking statements. Forward-looking statements are not guarantees of future performance and are based on certain assumptions and expectations of future events which may not be realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond the company’s control. Some of the important factors that could cause the company’s actual results to differ materially from those projected in any such forward-looking statements are: fluctuations in energy and raw material prices; failure to develop and market new products and optimally manage product life cycles; significant litigation and environmental matters; failure to appropriately manage process safety and product stewardship issues; changes in laws and regulations or political conditions; global economic and capital markets conditions, such as inflation, interest and currency exchange rates; business or supply disruptions; security threats, such as acts of sabotage, terrorism or war, weather events and natural disasters; ability to protect and enforce the company's intellectual property rights; successful integration of acquired businesses and separation of underperforming or non-strategic assets or businesses and successful completion of the proposed spinoff of the Performance Chemicals segment including ability to fully realize the expected benefits of the proposed spinoff. The company undertakes no duty to update any forward-looking statements as a result of future developments or new information.

ADDITIONAL INFORMATION AND WHERE TO FIND IT
DuPont intends to file a proxy statement with the U.S. Securities and Exchange Commission (the "SEC") with respect to the 2015 Annual Meeting. DUPONT STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ ANY SUCH PROXY STATEMENT, THE ACCOMPANYING WHITE PROXY CARD AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.

DuPont, its directors, executive officers and other employees may be deemed to be participants in the solicitation of proxies from DuPont stockholders in connection with the matters to be considered at DuPont’s 2015 Annual Meeting. Information about DuPont’s directors and executive officers is available in DuPont’s proxy statement, dated March 14, 2014, for its 2014 Annual Meeting. To the extent holdings of DuPont’s securities by such directors or executive officers have changed since the amounts printed in the 2014 proxy statement, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. More detailed information regarding the identity of potential participants, and their direct or indirect interests, by security holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with the SEC in connection with DuPont’s 2015 Annual Meeting. Stockholders will be able to obtain any proxy statement, any amendments or supplements to the proxy statement and other documents filed by DuPont with the SEC free of charge at the SEC's website at www.sec.gov. Copies will also be available free of charge at DuPont’s website at www.dupont.com or by contacting DuPont Investor Relations at (302) 774-4994.
# # #
01/27/15

9
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,
 
2014
 
2013
 
2014
 
2013
Net sales
$
7,378

 
$
7,747

 
$
34,723

 
$
35,734

Other income, net (a)
541

 
89

 
1,323

 
410

Total
7,919

 
7,836

 
36,046

 
36,144

 
 
 
 
 
 
 
 
Cost of goods sold
4,823

 
5,132

 
21,703

 
22,547

Other operating charges (a)
158

 
460

 
1,067

 
1,560

Selling, general and administrative expenses
1,164

 
1,350

 
5,344

 
5,833

Research and development expense
490

 
550

 
2,067

 
2,153

Interest expense
87

 
108

 
377

 
448

Employee separation / asset related charges, net (a)
234

 
114

 
497

 
114

Total
6,956

 
7,714

 
31,055

 
32,655

 
 
 
 
 
 
 
 
Income from continuing operations before income taxes
963

 
122

 
4,991

 
3,489

Provision for (benefit from) income taxes on continuing operations (a)
295

 
(61
)
 
1,370

 
626

Income from continuing operations after income taxes
668

 
183

 
3,621

 
2,863

Income from discontinued operations after taxes
15

 
2

 
15

 
1,999

 
 
 
 
 
 
 
 
Net income
683

 
185

 
3,636

 
4,862

 
 
 
 
 
 
 
 
Less: Net income attributable to noncontrolling interests
—

 
—

 
11

 
14

 
 
 
 
 
 
 
 
Net income attributable to DuPont
$
683

 
$
185

 
$
3,625

 
$
4,848

 
 
 
 
 
 
 
 
Basic earnings per share of common stock (b):
 
 
 
 
 
 
 
Basic earnings per share of common stock from continuing operations
$
0.73

 
$
0.19

 
$
3.94

 
$
3.07

Basic earnings per share of common stock from discontinued operations
0.02

 
—

 
0.02

 
2.16

Basic earnings per share of common stock
$
0.75

 
$
0.20

 
$
3.95

 
$
5.22

 
 
 
 
 
 
 
 
Diluted earnings per share of common stock (b):
 
 
 
 
 
 
 
Diluted earnings per share of common stock from continuing operations
$
0.73

 
$
0.19

 
$
3.90

 
$
3.04

Diluted earnings per share of common stock from discontinued operations
0.02

 
—

 
0.02

 
2.14

Diluted earnings per share of common stock
$
0.74

 
$
0.20

 
$
3.92

 
$
5.18

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends per share of common stock
$
0.47

 
$
0.45

 
$
1.84

 
$
1.78

Average number of shares outstanding used in earnings per share (EPS) calculation:
 
 
 
 
 
 
 
  Basic
906,339,000

 
927,279,000

 
914,752,000

 
925,984,000

  Diluted
913,650,000

 
934,949,000

 
921,873,000

 
933,147,000

 
 
 
 
 
 
 
 
(a) See Schedule B for detail of significant items.
 
 
 
 
 
 
 
(b) The sum of the individual earnings per share amounts may not equal the total due to rounding.
 
 
Reconciliation of Non-GAAP Measures
 
 
 
 
 
 
 
 
 
 
 
Summary of Earnings Comparison
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
2014
 
2013
 
%
Change
 
2014
 
2013
 
%
Change
Income from continuing operations after income taxes (GAAP)
$
668

 
$
183

 
265
%
 
$
3,621

 
$
2,863

 
26
%
Less: Significant items charge (benefit) included in income from continuing
       operations after income taxes (per Schedule B)
39

 
(294
)
 
 
 
(9
)
 
(423
)
 
 
Non-operating pension/OPEB costs included in income from continuing
    operations after income taxes
(20
)
 
(81
)
 
 
 
(84
)
 
(360
)
 
 
Net income attributable to noncontrolling interest
—

 
—

 
 
 
11

 
14

 
 
Operating earnings (Non-GAAP)
$
649

 
$
558

 
16
%
 
$
3,703

 
$
3,632

 
2
%
 
 
 
 
 
 
 
 
 
 
 
 
EPS from continuing operations attributable to DuPont (GAAP)
$
0.73

 
$
0.19

 
284
%
 
$
3.90

 
$
3.04

 
28
%
Significant items charge (benefit) included in EPS (per Schedule B)
0.04

 
(0.31
)
 
 
 
(0.01
)
 
(0.45
)
 
 
Non-operating pension/OPEB costs included in EPS
(0.02
)
 
(0.09
)
 
 
 
(0.10
)
 
(0.39
)
 
 
Operating EPS (Non-GAAP)
$
0.71

 
$
0.59

 
20
%
 
$
4.01

 
$
3.88

 
3
%

10
E.I. du Pont de Nemours and Company
Condensed Consolidated Balance Sheets
(Dollars in millions, except per share amounts)

SCHEDULE A (continued)
 
 
 
 
December 31,
2014
 
December 31,
2013
Assets
 
 
 
 
Current assets
 
 
 
 
Cash and cash equivalents
 
$
6,910

 
$
8,941

Marketable securities
 
124

 
145

Accounts and notes receivable, net
 
6,005

 
6,047

Inventories
 
7,841

 
8,042

Prepaid expenses
 
279

 
206

Deferred income taxes
 
589

 
775

Assets held for sale
 
—

 
228

Total current assets
 
21,748

 
24,384

Property, plant and equipment, net of accumulated depreciation
   (December 31, 2014- $19,942; December 31, 2013 - $19,438)
 
13,386

 
12,993

Goodwill
 
4,529

 
4,713

Other intangible assets
 
4,580

 
5,096

Investment in affiliates
 
886

 
1,011

Deferred income taxes
 
3,651

 
2,353

Other assets
 
1,096

 
949

Total
 
$
49,876

 
$
51,499

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
4,822

 
$
5,180

Short-term borrowings and capital lease obligations
 
1,423

 
1,721

Income taxes
 
547

 
247

Other accrued liabilities
 
5,848

 
6,219

Total current liabilities
 
12,640

 
13,367

Long-term borrowings and capital lease obligations
 
9,271

 
10,741

Other liabilities
 
13,819

 
10,179

Deferred income taxes
 
768

 
926

Total liabilities
 
36,498

 
35,213

 
 
 
 
 
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, 2014 - 992,020,000; December 31, 2013 - 1,014,027,000
 
298

 
304

Additional paid-in capital
 
11,174

 
11,072

Reinvested earnings
 
17,045

 
16,784

Accumulated other comprehensive loss
 
(8,707
)
 
(5,441
)
Common stock held in treasury, at cost (87,041,000 shares at December 31, 2014 and December 31, 2013)
 
(6,727
)
 
(6,727
)
Total DuPont stockholders' equity
 
13,320

 
16,229

Noncontrolling interests
 
58

 
57

Total equity
 
13,378

 
16,286

Total
 
$
49,876

 
$
51,499


11
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,
 
2014
 
2013
Total Company
 
 
 
Net income
$
3,636

 
$
4,862

Adjustments to reconcile net income to cash used for operating activities:
 
 
 
Depreciation
1,254

 
1,280

Amortization of intangible assets
363

 
323

Net periodic pension benefit cost
406

 
953

Contributions to pension plans
(311
)
 
(313
)
Gain on sales of businesses
(726
)
 
(2,687
)
Other operating activities - net
362

 
177

Change in operating assets and liabilities - net
(1,272
)
 
(1,416
)
Cash provided by operating activities
3,712

 
3,179

 
 
 
 
Investing activities
 
 
 
Purchases of property, plant and equipment
(2,020
)
 
(1,882
)
Investments in affiliates
(42
)
 
(58
)
Payments for businesses - net of cash acquired
—

 
(133
)
Proceeds from sales of businesses - net
1,058

 
4,841

Proceeds from sales of assets - net
34

 
142

Net decrease (increase) in short-term financial instruments
14

 
(45
)
Foreign currency exchange contract settlements
430

 
40

Other investing activities - net
189

 
40

Cash (used for) provided by investing activities
(337
)
 
2,945

 
 
 
 
Financing activities
 
 
 
Dividends paid to stockholders
(1,696
)
 
(1,661
)
Net (decrease) increase in borrowings
(1,701
)
 
717

Repurchase of common stock
(2,000
)
 
(1,000
)
Proceeds from exercise of stock options
327

 
536

Payments for noncontrolling interest
—

 
(65
)
Other financing activities - net
(4
)
 
(1
)
Cash used for financing activities
(5,074
)
 
(1,474
)
 
 
 
 
Effect of exchange rate changes on cash
(332
)
 
(88
)
 
 
 
 
(Decrease) increase in cash and cash equivalents
(2,031
)
 
4,562

 
 
 
 
Cash and cash equivalents at beginning of period
8,941

 
4,379

 
 
 
 
Cash and cash equivalents at end of period
$
6,910

 
$
8,941

 
 
 
 
Reconciliation of Non-GAAP Measure
 
 
 
Calculation of Free Cash Flow - Total Company
 
 
 
 
Twelve Months Ended
December 31,
 
2014
 
2013
Cash provided by operating activities
$
3,712

 
$
3,179

Purchases of property, plant and equipment
(2,020
)
 
(1,882
)
Free cash flow
$
1,692

 
$
1,297



12
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 FROM CONTINUING OPERATIONS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pre-tax
 
After-tax
 
($ Per Share)
 
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
1st Quarter
 
 
 
 
 
 
 
 
 
 
 
Separation transaction costs (a)
$
(16
)
 
$
—

 
$
(12
)
 
$
—

 
$
(0.01
)
 
$
—

Customer claims charge (e)
—

 
(35
)
 
—

 
(22
)
 
—

 
(0.02
)
Income tax items (f)
—

 
—

 
—

 
42

 
—

 
0.04

1st Quarter - Total
$
(16
)
 
$
(35
)
 
$
(12
)
 
$
20

 
$
(0.01
)
 
$
0.02

 
 
 
 
 
 
 
 
 
 
 
 
 
2nd Quarter
 
 
 
 
 
 
 
 
 
 
 
Separation transaction costs (a)
$
(35
)
 
$
—

 
$
(26
)
 
$
—

 
$
(0.03
)
 
$
—

Gain on sale of business (b)
391

 
—

 
273

 
—

 
0.30

 
—

Restructuring charge (c)
(263
)
 
—

 
(182
)
 
—

 
(0.20
)
 
—

Venezuela devaluation (d)
(58
)
 
—

 
(57
)
 
—

 
(0.06
)
 
—

Customer claims charge (e)
—

 
(80
)
 
—

 
(51
)
 
—

 
(0.05
)
Income tax items (g)
—

 
(11
)
 
—

 
(27
)
 
—

 
(0.03
)
2nd Quarter - Total
$
35

 
$
(91
)
 
$
8

 
$
(78
)
 
$
0.01

 
$
(0.08
)
 
 
 
 
 
 
 
 
 
 
 
 
 
3rd Quarter
 
 
 
 
 
 
 
 
 
 
 
Separation transaction costs (a)
$
(61
)
 
$
—

 
$
(44
)
 
$
—

 
$
(0.05
)
 
$
—

Customer claims charge (e)
—

 
(40
)
 
—

 
(24
)
 
—

 
(0.03
)
Litigation settlement (h)
—

 
(72
)
 
—

 
(47
)
 
—

 
(0.05
)
3rd Quarter - Total
$
(61
)
 
$
(112
)
 
$
(44
)
 
$
(71
)
 
$
(0.05
)
 
$
(0.08
)
 
 
 
 
 
 
 
 
 
 
 
 
 
4th Quarter
 
 
 
 
 
 
 
 
 
 
 
Separation transaction costs (a)
$
(63
)
 
$
—

 
$
(49
)
 
$
—

 
$
(0.05
)
 
$
—

Customer claims recovery (charge) (e)
210

 
(197
)
 
134

 
(129
)
 
0.14

 
(0.13
)
Gain on sale of business (b)
240

 
—

 
154

 
—

 
0.17

 
—

Restructuring charge/adjustments (c)
(299
)
 
(124
)
 
(200
)
 
(165
)
 
(0.22
)
 
(0.18
)
4th Quarter - Total
$
88

 
$
(321
)
 
$
39

 
$
(294
)
 
$
0.04

 
$
(0.31
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Full Year - Total (i)
$
46

 
$
(559
)
 
$
(9
)
 
$
(423
)
 
$
(0.01
)
 
$
(0.45
)



















13
E.I. du Pont de Nemours and Company
Schedule of Significant Items from Continuing Operations
(Dollars in millions, except per share amounts)



SCHEDULE B (continued)
 
 
 
 
 
 
 
 
 
 
(a)
Fourth, third, second and first quarter 2014 included a charge of $(63), $(61), $(35) and $(16), respectively, recorded in other operating charges associated with transaction costs related to the separation of the Performance Chemicals segment.
 
 
 
 
 
 
 
 
 
 
 
 
 
(b)
Fourth quarter 2014 included a gain of $240 recorded in other income, net associated with the sale of copper fungicides and land management businesses, both within the Agriculture segment. Second quarter 2014 included a gain of $391 recorded in other income, net associated with the sale of Glass Laminating Solutions/Vinyls in the Performance Materials segment.
 
 
 
 
 
 
 
 
 
 
 
 
 
(c)
As a result of the company's plan to reduce residual costs associated with the separation of the Performance Chemicals segment and to improve productivity across all businesses and functions, fourth quarter 2014 included a $(299) restructuring charge consisting of $(234) recorded in employee separation/asset related charges, net, and $(65) recorded in other income, net. The charges include $(153) of severance and related benefit costs, $(14) of other non-personnel charges, and $(132) of asset related charges, including $(65) of charges associated with the restructuring actions of a joint venture. Pre-tax charges by segment are: Agriculture - $(87), Electronics & Communications - $(16), Industrial Biosciences - $(11), Nutrition & Health - $(7), Performance Chemicals - $(2), Performance Materials - $(70), Safety & Protection - $(21), Other - $(20), and Corporate expenses - $(65).
 
Similarly, second quarter 2014 included a $(263) restructuring charge recorded in employee separation/asset related charges, net, consisting of $(166) of severance and related benefit costs, $(94) of asset related charges, and $(3) of other non-personnel charges. Pre-tax charges by segment are: Agriculture - $(47), Electronics & Communications - $(68), Industrial Biosciences - $(2), Nutrition & Health - $(8), Performance Chemicals - $(19), Performance Materials - $(29), Safety & Protection - $(31), Other - $(2), and Corporate expenses - $(57).
 
Fourth quarter 2013 included an impairment charge of $(129) recorded in employee separation/asset related charges, net related to an asset grouping within the Electronics & Communications segment. The fourth quarter 2013 charge was the result of strategic decisions related to the thin film photovoltaic market.
 
Fourth quarter 2013 also included a net $5 restructuring adjustment consisting of a $24 benefit associated with prior year restructuring programs and a $(19) charge associated with restructuring actions related to a joint venture. The majority of the $24 net reduction recorded in employee separation/asset related charges, net was due to the achievement of work force reductions through non-severance programs associated with the 2012 restructuring program. The charge of $(19) included $(9) recorded in employee separation/asset related charges, net and $(10) recorded in other income, net and was the result of restructuring actions related to a joint venture within the Performance Materials segment. Pre-tax amounts by segment were: Agriculture-$1, Electronics & Communication-$(2), Industrial Biosciences-$1, Nutrition & Health-$6, Performance Chemicals-$(2), Performance Materials-$(16), Safety & Protection-$4, Other-$5 and Corporate-$8.
 
 
 
 
 
 
 
 
 
 
 
 
 
(d)
Second quarter 2014 included a charge of $(58) recorded in other income, net associated with remeasuring the company's Venezuelan net monetary assets from the official exchange rate to the SICAD II exchange system.
 
 
 
 
 
 
 
 
 
 
 
 
 
(e)
The company recorded insurance recoveries of $210 in other operating charges, in fourth quarter of 2014 in the Agriculture segment, for recovery of costs for customer claims related to the use of the Imprelis® herbicide. The company had accruals of $261 related to these customer claims and insurance receivables of $35 at December 31, 2014. The company has submitted and will continue to submit requests for payment to its insurance carriers for costs associated with this matter. To date, the company has recognized and received $283 of insurance recoveries from its insurance carriers and continues to seek recovery although the timing and outcome remain uncertain.

 
Fourth, third, second and first quarter 2013 included charges of $(197), $(40), $(80) and $(35), respectively, recorded in other operating charges in the Agriculture segment associated with resolving claims related to the use of the Imprelis® herbicide.
 
 
 
 
 
 
 
 
 
 
 
 
 
(f)
First quarter 2013 included a net tax benefit of $42 consisting of a $68 benefit for the 2013 extension of certain U.S business tax provisions offset by a $(26) charge related to the global distribution of Performance Coatings cash proceeds.
 
 
 
 
 
 
 
 
 
 
 
 
 
(g)
Second quarter 2013 includes a charge of $(11) in other income, net related to interest on a prior year tax position. Second quarter 2013 also includes a charge of $(49) associated with a change in accrual for a prior year tax position offset by a $33 benefit for an enacted tax law change.
 
 
 
 
 
 
 
 
 
 
 
 
 
(h)
Third quarter 2013 included a charge of $(72) recorded in other operating charges related to the company's settlement of titanium dioxide antitrust litigation. This matter relates to the Performance Chemicals segment.
 
 
 
 
 
 
 
 
 
 
 
 
 
(i)
Earnings per share for the year may not equal the sum of quarterly earnings per share due to the changes in average share calculations.


14
E.I. du Pont de Nemours and Company
Consolidated Segment Information
(Dollars in millions)


SCHEDULE C
 
 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
SEGMENT SALES (1)
2014
 
2013
 
2014
 
2013
Agriculture
$
1,732

 
$
1,806

 
$
11,304

 
$
11,739

Electronics & Communications
573

 
642

 
2,393

 
2,549

Industrial Biosciences
322

 
326

 
1,258

 
1,224

Nutrition & Health
843

 
872

 
3,529

 
3,473

Performance Chemicals (2)
1,564

 
1,671

 
6,497

 
6,932

Performance Materials (2)
1,461

 
1,521

 
6,129

 
6,239

Safety & Protection
943

 
975

 
3,896

 
3,884

Other
1

 
1

 
5

 
6

Total Segment sales
7,439

 
7,814

 
35,011

 
36,046

 
 
 
 
 
 
 
 
Elimination of transfers
(61
)
 
(67
)
 
(288
)
 
(312
)
Consolidated net sales
$
7,378

 
$
7,747

 
$
34,723

 
$
35,734

 
 
 
 
 
 
 
 
(1)  Segment sales include transfers.
(2)  Prior periods reflect the reclassifications of the Viton® product line from Performance Materials to Performance
     Chemicals.


15
E.I. du Pont de Nemours and Company
Consolidated Segment Information
(Dollars in millions)


SCHEDULE C (continued)
 
 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
INCOME FROM CONTINUING OPERATIONS (GAAP)
2014
 
2013
 
2014
 
2013
Agriculture
 
$
492

 
$
(108
)
 
$
2,668

 
$
2,132

Electronics & Communications
 
81

 
(38
)
 
271

 
203

Industrial Biosciences
 
38

 
41

 
198

 
170

Nutrition & Health
 
75

 
87

 
365

 
305

Performance Chemicals (1)
 
226

 
228

 
913

 
941

Performance Materials (1)
 
262

 
278

 
1,590

 
1,264

Safety & Protection
 
188

 
213

 
742

 
694

Other
 
(132
)
 
(91
)
 
(391
)
 
(340
)
Total Segment PTOI
 
1,230

 
610

 
6,356

 
5,369

 
 
 
 
 
 
 
 
 
Corporate expenses
 
(272
)
 
(183
)
 
(999
)
 
(765
)
Interest expense
 
(87
)
 
(108
)
 
(377
)
 
(448
)
Non-operating pension/OPEB costs
 
(30
)
 
(124
)
 
(124
)
 
(539
)
Net exchange gains (losses) (2)
 
122

 
(73
)
 
135

 
(128
)
Income before income taxes from continuing operations
 
$
963

 
$
122

 
$
4,991

 
$
3,489

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
SIGNIFICANT ITEMS BY SEGMENT (PRE-TAX) (3)
 
2014
 
2013
 
2014
 
2013
Agriculture
 
$
363

 
$
(196
)
 
$
316

 
$
(351
)
Electronics & Communications
 
(16
)
 
(131
)
 
(84
)
 
(131
)
Industrial Biosciences
 
(11
)
 
1

 
(13
)
 
1

Nutrition & Health
 
(7
)
 
6

 
(15
)
 
6

Performance Chemicals (1)
 
(2
)
 
(2
)
 
(21
)
 
(74
)
Performance Materials (1)
 
(70
)
 
(16
)
 
292

 
(16
)
Safety & Protection
 
(21
)
 
4

 
(52
)
 
4

Other
 
(20
)
 
5

 
(22
)
 
5

Total significant items by segment
 
216

 
(329
)
 
401

 
(556
)
Corporate expenses
 
(128
)
 
8

 
(297
)
 
(3
)
Net exchange gains (losses) (2)
 
—

 
—

 
(58
)
 
—

Total significant items before income taxes
 
$
88

 
$
(321
)
 
$
46

 
$
(559
)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
OPERATING EARNINGS (NON-GAAP)
 
2014
 
2013
 
2014
 
2013
Agriculture
 
$
129

 
$
88

 
$
2,352

 
$
2,483

Electronics & Communications
 
97

 
93

 
355

 
334

Industrial Biosciences
 
49

 
40

 
211

 
169

Nutrition & Health
 
82

 
81

 
380

 
299

Performance Chemicals (1)
 
228

 
230

 
934

 
1,015

Performance Materials (1)
 
332

 
294

 
1,298

 
1,280

Safety & Protection
 
209

 
209

 
794

 
690

Other
 
(112
)
 
(96
)
 
(369
)
 
(345
)
Total segment operating earnings
 
1,014

 
939

 
5,955

 
5,925

Corporate expenses
 
(144
)
 
(191
)
 
(702
)
 
(762
)
Interest expense
 
(87
)
 
(108
)
 
(377
)
 
(448
)
Operating earnings before income taxes and exchange gains (losses)
 
783

 
640

 
4,876

 
4,715

Net exchange gains (losses) (2)
 
122

 
(73
)
 
193

 
(128
)
Operating earnings before income taxes
 
$
905

 
$
567

 
$
5,069

 
$
4,587

 
 
 
 
 
 
 
 
 
(1)  Prior periods reflect the reclassifications of the Viton® product line from Performance Materials to Performance Chemicals.
(2)  See Schedule D for additional information on exchange gains and losses.
(3)  See Schedule B for detail of significant items.


16
E.I. du Pont de Nemours and Company
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)

SCHEDULE D
 
 
 
 
 
 
 
 
 
Reconciliations of Adjusted EBIT / EBITDA to Consolidated Income Statements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
 
 
2014
 
2013
 
2014
 
2013
Income from continuing operations before income taxes
 
$
963

 
$
122

 
$
4,991

 
$
3,489

Add: Significant items before income taxes
 
(88
)
 
321

 
(46
)
 
559

Add: Non-operating pension/OPEB costs
 
30

 
124

 
124

 
539

Operating earnings before income taxes
 
$
905

 
$
567

 
$
5,069

 
$
4,587

Less: Net income attributable to noncontrolling interests
 
—

 
—

 
11

 
14

Add: Interest expense
 
 
87

 
108

 
377

 
448

Adjusted EBIT from operating earnings
 
992

 
675

 
5,435

 
5,021

Add: Depreciation and amortization
 
379

 
387

 
1,617

 
1,603

Adjusted EBITDA from operating earnings
 
$
1,371

 
$
1,062

 
$
7,052

 
$
6,624

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Operating Earnings Per Share (EPS) Outlook
The reconciliation below represents the company's outlook on an operating earnings basis, defined as earnings from continuing operations excluding significant items and non-operating pension/OPEB costs.
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31,
 
 
 
 
 
2015 Outlook
 
2014 Actual
 
 
 
 
Operating EPS (Non-GAAP)
 
 
$4.00-$4.20

 
$
4.01

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Significant items
 
 
 
 
 
 
 
 
 
Separation transaction costs
 
 
(0.30
)
 
(0.14
)
 
 
 
 
Gain on sale of business
 
 
 
 
0.47

 
 
 
 
Restructuring charge
 
 
 
 
(0.42
)
 
 
 
 
Venezuela devaluation
 
 
 
 
(0.06
)
 
 
 
 
Tax items
 
 
 
 
—

 
 
 
 
Customer claims recovery
 
 
 
 
0.14

 
 
 
 
Restructuring charge/adjustments
 
 
 
—

 
 
 
 
Litigation settlement
 
 
 
 
—

 
 
 
 
Asset impairment charge
 
 
 
 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-operating pension/OPEB costs - estimate
 
 
(0.21
)
 
(0.10
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EPS from continuing operations (GAAP)
 
 
$3.49-$3.69

 
$
3.90

 
 
 
 
 
 
 
 
 
 
 
 
 
 











17
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 on Operating Earnings(1)
 
 
 
 
 
 
 
 
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 pre-tax exchange gains and losses are recorded in other income, net and the related tax impact is recorded in provision for (benefit from) income taxes on the Consolidated Income Statements.
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
 
2014
 
2013
 
2014
 
2013
Subsidiary/Affiliate Monetary Position Gain (Loss)
 
 
 
 
 
 
 
 
Pre-tax exchange losses (includes equity affiliates)
 
$
(198
)
 
$
(42
)
 
$
(414
)
 
$
(163
)
Local tax (expenses) benefits
 
(73
)
 
22

 
(205
)
 
54

Net after-tax impact from subsidiary exchange losses
 
$
(271
)
 
$
(20
)
 
$
(619
)
 
$
(109
)
 
 
 
 
 
 
 
 
 
Hedging Program Gain (Loss)
 
 
 
 
 
 
 
 
Pre-tax exchange gains (losses)
 
$
320

 
$
(31
)
 
$
607

 
$
35

Tax (expenses) benefits
 
(112
)
 
12

 
(212
)
 
(12
)
Net after-tax impact from hedging program exchange gains (losses)
 
$
208

 
$
(19
)
 
$
395

 
$
23

 
 
 
 
 
 
 
 
 
Total Exchange Gain (Loss)
 
 
 
 
 
 
 
 
Pre-tax exchange gains (losses)
 
$
122

 
$
(73
)
 
$
193

 
$
(128
)
Tax (expenses) benefits
 
(185
)
 
34

 
(417
)
 
42

Net after-tax exchange losses (2)
 
$
(63
)
 
$
(39
)
 
$
(224
)
 
$
(86
)
 
 
 
 
 
 
 
 
 
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)."
 
 
 
 
 
 
 
 
 
(1) See Schedule B for detail of significant items.
 
 
 
 
 
 
 
(2)  The above net after-tax exchange losses excludes losses attributable to discontinued operations of $(5) for the twelve months ended December 31, 2013.
 
 
 
 
 
 
 
 
 
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, significant items and non-operating pension/OPEB costs.
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
December 31,
 
Twelve Months Ended
December 31,
 
 
2014
 
2013
 
2014
 
2013
Income from continuing operations before income taxes
 
$
963

 
$
122

 
$
4,991

 
$
3,489

Add: Significant items - (benefit) charge (1)
 
(88
)
 
321

 
(46
)
 
559

           Non-operating pension/OPEB costs
 
30

 
124

 
124

 
539

Less: Net exchange gains (losses)
 
122

 
(73
)
 
193

 
(128
)
Income from continuing operations before income taxes, significant items,
 
 
 
 
 
 
 
    exchange gains (losses), and non-operating pension/OPEB costs
 
$
783

 
$
640

 
$
4,876

 
$
4,715

 
 
 
 
 
 
 
 
 
Provision for (benefit from) income taxes on continuing operations
 
$
295

 
$
(61
)
 
$
1,370

 
$
626

Add: Tax (expenses) benefits on significant items
 
(49
)
 
27

 
(55
)
 
136

          Tax benefits (expenses) on non-operating pension/OPEB costs
10

 
43

 
40

 
179

          Tax (expenses) benefits on exchange gains/losses
(185
)
 
34

 
(417
)
 
42

Provision for income taxes on operating earnings, excluding exchange gains (losses)
$
71

 
$
43

 
$
938

 
$
983

 
 
 
 
 
 
 
 
 
Effective income tax rate
 
30.6
 %
 
(50.0
)%
 
27.4
 %
 
17.9
%
Significant items effect and non-operating pension/OPEB costs effect
 
(2.3
)%
 
51.6
 %
 
(0.7
)%
 
2.6
%
Tax rate, from continuing operations, before significant items and non-operating pension/OPEB costs
28.3
 %
 
1.6
 %
 
26.7
 %
 
20.5
%
Exchange gains (losses) effect
 
(19.2
)%
 
5.1
 %
 
(7.5
)%
 
0.3
%
Base income tax rate from continuing operations
 
9.1
 %
 
6.7
 %
 
19.2
 %
 
20.8
%
 
 
 
 
 
 
 
 
 
(1)  See Schedule B for detail of significant items.