Delaware | 1-815 | 51-0014090 | ||
(State or Other Jurisdiction | (Commission | (I.R.S. Employer | ||
Of Incorporation) | File Number) | Identification No.) |
E. I. DU PONT DE NEMOURS AND COMPANY | |
(Registrant) | |
/s/ Jeanmarie F. Desmond | |
Jeanmarie F. Desmond | |
Vice President and Controller |
Exhibit 99.1 | |||||
January 24, 2017 | Media Contact: | Dan Turner | |||
WILMINGTON, Del. | 302-996-8372 | ||||
daniel.a.turner@dupont.com | |||||
Investor Contact: | 302-774-4994 |
• | GAAP1 earnings per share totaled $0.29 versus a loss of $(0.26) per share in prior year. Operating earnings2 per share nearly doubled to $0.51 from $0.27 in prior year. |
• | Sales of $5.2 billion decreased 2 percent. Local price declined by 2 percent while currency benefited sales by 1 percent. Volume declined 1 percent as growth in Performance Materials, Electronics & Communications and Industrial Biosciences was more than offset by declines in Agriculture, due to timing of fourth-quarter seed sales primarily due to the southern U.S. route-to-market change. Excluding this timing change, sales would have increased 2 percent. |
• | Segment operating margins expanded by 305 basis points. |
• | GAAP operating costs3 decreased by 5 percent. Operating costs2, excluding significant items and non-operating pension/OPEB benefits, declined by 9 percent versus prior year. |
• | GAAP1 earnings per share increased 36 percent to $2.85 from $2.09 in prior year. Operating earnings2 per share increased 21 percent to $3.35 from $2.77 in prior year. |
• | Sales of $24.6 billion decreased 2 percent. Local price and currency each lowered sales by 1 percent. Volume was flat as growth in Performance Materials, Nutrition & Health and Industrial Biosciences was offset by declines in the other segments. Excluding the change in timing of fourth-quarter seed sales in Agriculture, sales decreased 1 percent. |
• | Total company gross margin expanded 60 basis points, excluding a 70-basis-point benefit from a non-operating pension/OPEB curtailment gain. Segment operating margins expanded about 200 basis points, with increases in all reportable segments. |
• | GAAP operating costs3 decreased by 5 percent. Operating costs2, excluding significant items and non-operating pension/OPEB costs, declined 11 percent, exceeding the 2016 cost savings commitment. |
• | Free cash flow4 improved $1.6 billion primarily due to higher earnings, lower capital expenditures, lower tax payments, and working capital improvements. |
• | DuPont expects first-quarter 2017 GAAP1 earnings per share to decrease about 18 percent versus prior year. First-quarter 2017 operating earnings2 per share are expected to increase about 8 percent versus prior year. |
Three Months Ended | |||||||||||||||||||
December 31, 2016 | Percentage Change Due to: | ||||||||||||||||||
(Dollars in millions) | $ | % Change | Local Price and Product Mix | Currency | Volume | Portfolio/Other | |||||||||||||
U.S. & Canada | $ | 1,676 | (11 | ) | (7 | ) | — | (4 | ) | — | |||||||||
EMEA* | 1,183 | (1 | ) | — | (1 | ) | — | — | |||||||||||
Asia Pacific | 1,543 | 9 | — | 1 | 9 | (1 | ) | ||||||||||||
Latin America | 809 | — | 2 | 7 | (9 | ) | — | ||||||||||||
Total Consolidated Net Sales | $ | 5,211 | (2 | ) | (2 | ) | 1 | (1 | ) | — | |||||||||
Twelve Months Ended | |||||||||||||||||||
December 31, 2016 | Percentage Change Due to: | ||||||||||||||||||
(Dollars in millions) | $ | % Change | Local Price and Product Mix | Currency | Volume | Portfolio/Other | |||||||||||||
U.S. & Canada | $ | 10,413 | (3 | ) | (2 | ) | — | — | (1 | ) | |||||||||
EMEA* | 5,739 | (5 | ) | 1 | (3 | ) | (2 | ) | (1 | ) | |||||||||
Asia Pacific | 5,801 | 3 | (1 | ) | (1 | ) | 4 | 1 | |||||||||||
Latin America | 2,641 | (3 | ) | 2 | (2 | ) | (2 | ) | (1 | ) | |||||||||
Total Consolidated Net Sales | $ | 24,594 | (2 | ) | (1 | ) | (1 | ) | — | — | |||||||||
* Europe, Middle East & Africa |
Three Months Ended | |||||||||||||||||||
December 31, 2016 | Percentage Change Due to: | ||||||||||||||||||
(Dollars in millions) | $ | % Change | Local Price and Product Mix | Currency | Volume | Portfolio/Other | |||||||||||||
Agriculture | $ | 1,393 | (10 | ) | (4 | ) | 4 | (9 | ) | (1 | ) | ||||||||
Electronics & Communications | 521 | 6 | — | — | 6 | — | |||||||||||||
Industrial Biosciences | 401 | 1 | (1 | ) | (1 | ) | 2 | 1 | |||||||||||
Nutrition & Health | 809 | — | — | — | — | — | |||||||||||||
Performance Materials | 1,331 | 4 | (2 | ) | — | 7 | (1 | ) | |||||||||||
Protection Solutions | 717 | — | — | — | — | — | |||||||||||||
Other | 39 | ||||||||||||||||||
Consolidated Net Sales | $ | 5,211 | (2 | ) | (2 | ) | 1 | (1 | ) | — |
Twelve Months Ended | |||||||||||||||||||
December 31, 2016 | Percentage Change Due to: | ||||||||||||||||||
(Dollars in millions) | $ | % Change | Local Price and Product Mix | Currency | Volume | Portfolio/Other | |||||||||||||
Agriculture | $ | 9,516 | (3 | ) | — | (2 | ) | (1 | ) | — | |||||||||
Electronics & Communications | 1,960 | (5 | ) | (2 | ) | — | (3 | ) | — | ||||||||||
Industrial Biosciences | 1,500 | 1 | — | (2 | ) | 2 | 1 | ||||||||||||
Nutrition & Health | 3,268 | — | — | (2 | ) | 2 | — | ||||||||||||
Performance Materials | 5,249 | (1 | ) | (3 | ) | (1 | ) | 3 | — | ||||||||||
Protection Solutions | 2,954 | (3 | ) | (1 | ) | — | (2 | ) | — | ||||||||||
Other | 147 | ||||||||||||||||||
Consolidated Net Sales | $ | 24,594 | (2 | ) | (1 | ) | (1 | ) | — | — |
Operating Earnings - 4th Quarter and Full Year | ||||||||||||||||
Change vs. 2015 | ||||||||||||||||
(Dollars in millions) | 4Q16 | 4Q15 | $ | % | ||||||||||||
Agriculture | $ | (19 | ) | $ | (54 | ) | $ | 35 | 65 | % | ||||||
Electronics & Communications | 98 | 87 | 11 | 13 | % | |||||||||||
Industrial Biosciences | 67 | 78 | (11 | ) | -14 | % | ||||||||||
Nutrition & Health | 135 | 85 | 50 | 59 | % | |||||||||||
Performance Materials | 328 | 281 | 47 | 17 | % | |||||||||||
Protection Solutions | 142 | 147 | (5 | ) | -3 | % | ||||||||||
Other | (48 | ) | (71 | ) | 23 | 32 | % | |||||||||
Total segment operating earnings (5) | 703 | 553 | 150 | 27 | % | |||||||||||
Exchange gains (losses)(6) | 106 | (24 | ) | 130 | nm | |||||||||||
Corporate expenses (5) | (88 | ) | (160 | ) | 72 | -45 | % | |||||||||
Interest expense | (92 | ) | (82 | ) | (10 | ) | 12 | % | ||||||||
Operating earnings before income taxes (2) | 629 | 287 | 342 | 119 | % | |||||||||||
Provision for income taxes on operating earnings (2) | (180 | ) | (51 | ) | (129 | ) | ||||||||||
Less: Net loss attributable to noncontrolling interests | (2 | ) | (3 | ) | 1 | |||||||||||
Operating earnings (2) | $ | 451 | $ | 239 | $ | 212 | 89 | % | ||||||||
Operating earnings per share (2) | $ | 0.51 | $ | 0.27 | $ | 0.24 | 89 | % | ||||||||
GAAP earnings per share | $ | 0.29 | $ | (0.26 | ) | $ | 0.55 | 212 | % |
Operating Earnings - 4th Quarter and Full Year, Continued | ||||||||||||||||
Change vs. 2015 | ||||||||||||||||
(Dollars in millions) | YTD 2016 | YTD 2015 | $ | % | ||||||||||||
Agriculture | $ | 1,758 | $ | 1,646 | $ | 112 | 7 | % | ||||||||
Electronics & Communications | 358 | 359 | (1 | ) | — | % | ||||||||||
Industrial Biosciences | 270 | 243 | 27 | 11 | % | |||||||||||
Nutrition & Health | 504 | 373 | 131 | 35 | % | |||||||||||
Performance Materials | 1,297 | 1,216 | 81 | 7 | % | |||||||||||
Protection Solutions | 668 | 641 | 27 | 4 | % | |||||||||||
Other | (215 | ) | (235 | ) | 20 | 9 | % | |||||||||
Total segment operating earnings (5) | 4,640 | 4,243 | 397 | 9 | % | |||||||||||
Exchange gains (losses) (5)(6) | (106 | ) | 93 | (199 | ) | nm | ||||||||||
Corporate expenses (5) | (340 | ) | (573 | ) | 233 | -41 | % | |||||||||
Interest expense | (370 | ) | (322 | ) | (48 | ) | 15 | % | ||||||||
Operating earnings before income taxes (2) | 3,824 | 3,441 | 383 | 11 | % | |||||||||||
Provision for income taxes on operating earnings (2) | (861 | ) | (932 | ) | 71 | |||||||||||
Less: Net income attributable to noncontrolling interests | 12 | 6 | 6 | |||||||||||||
Operating earnings (2) | $ | 2,951 | $ | 2,503 | $ | 448 | 18 | % | ||||||||
Operating earnings per share (2) | $ | 3.35 | $ | 2.77 | $ | 0.58 | 21 | % | ||||||||
GAAP earnings per share | $ | 2.85 | $ | 2.09 | $ | 0.76 | 36 | % | ||||||||
(5) See Schedules B and C for listing of significant items and their impact by segment. | ||||||||||||||||
(6) See Schedule D for additional information on exchange gains and losses. |
SCHEDULE A | |||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net sales | $ | 5,211 | $ | 5,299 | $ | 24,594 | $ | 25,130 | |||||||
Cost of goods sold | 3,147 | 3,409 | 14,469 | 15,112 | |||||||||||
Other operating charges (1) | 182 | 46 | 686 | 459 | |||||||||||
Selling, general and administrative expenses (1) | 964 | 1,075 | 4,319 | 4,615 | |||||||||||
Research and development expense | 381 | 483 | 1,641 | 1,898 | |||||||||||
Other income, net (1) | (301 | ) | (145 | ) | (708 | ) | (697 | ) | |||||||
Interest expense (1) | 92 | 82 | 370 | 342 | |||||||||||
Employee separation / asset related charges, net (1) | 393 | 770 | 552 | 810 | |||||||||||
Income (loss) from continuing operations before income taxes | 353 | (421 | ) | 3,265 | 2,591 | ||||||||||
Provision for (benefit from) income taxes on continuing operations (1) | 101 | (190 | ) | 744 | 696 | ||||||||||
Income (loss) from continuing operations after income taxes | 252 | (231 | ) | 2,521 | 1,895 | ||||||||||
Income (loss) from discontinued operations after income taxes | 11 | (25 | ) | 4 | 64 | ||||||||||
Net income (loss) | 263 | (256 | ) | 2,525 | 1,959 | ||||||||||
Less: Net (loss) income attributable to noncontrolling interests | (2 | ) | (3 | ) | 12 | 6 | |||||||||
Net income (loss) attributable to DuPont | $ | 265 | $ | (253 | ) | $ | 2,513 | $ | 1,953 | ||||||
Basic earnings (loss) per share of common stock: | |||||||||||||||
Basic earnings (loss) per share of common stock from continuing operations | $ | 0.29 | $ | (0.26 | ) | $ | 2.86 | $ | 2.10 | ||||||
Basic earnings (loss) per share of common stock from discontinued operations | 0.01 | (0.03 | ) | — | 0.07 | ||||||||||
Basic earnings (loss) per share of common stock (2) | $ | 0.30 | $ | (0.29 | ) | $ | 2.87 | $ | 2.17 | ||||||
Diluted earnings (loss) per share of common stock: | |||||||||||||||
Diluted earnings (loss) per share of common stock from continuing operations | $ | 0.29 | $ | (0.26 | ) | $ | 2.85 | $ | 2.09 | ||||||
Diluted earnings (loss) per share of common stock from discontinued operations | 0.01 | (0.03 | ) | — | 0.07 | ||||||||||
Diluted earnings (loss) per share of common stock (2) | $ | 0.30 | $ | (0.29 | ) | $ | 2.85 | $ | 2.16 | ||||||
Dividends per share of common stock | $ | 0.38 | $ | 0.38 | $ | 1.52 | $ | 1.72 | |||||||
Average number of shares outstanding used in earnings (loss) per share (EPS) calculation: | |||||||||||||||
Basic | 867,460,000 | 876,500,000 | 872,560,000 | 893,992,000 | |||||||||||
Diluted | 872,363,000 | 881,727,000 | 877,036,000 | 899,527,000 | |||||||||||
Reconciliation of Non-GAAP Measures | |||||||||||||||||||||
Summary of Earnings Comparison | |||||||||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||
2016 | 2015 | % Change | 2016 | 2015 | % Change | ||||||||||||||||
Income (loss) from continuing operations after income taxes (GAAP) | $ | 252 | $ | (231 | ) | 209 | % | $ | 2,521 | $ | 1,895 | 33 | % | ||||||||
Less: Significant items charge included in income from continuing operations after income taxes (per Schedule B) | (384 | ) | (411 | ) | (421 | ) | (348 | ) | |||||||||||||
Non-operating pension/OPEB benefits (costs) included in income from continuing operations after income taxes (3) | 187 | (56 | ) | (21 | ) | (266 | ) | ||||||||||||||
Net (loss) income attributable to noncontrolling interest from continuing operations | (2 | ) | (3 | ) | 12 | 6 | |||||||||||||||
Operating earnings (Non-GAAP) (4) | $ | 451 | $ | 239 | 89 | % | $ | 2,951 | $ | 2,503 | 18 | % | |||||||||
Earnings (loss) per share from continuing operations (GAAP) | $ | 0.29 | $ | (0.26 | ) | 212 | % | $ | 2.85 | $ | 2.09 | 36 | % | ||||||||
Less: Significant items charge included in EPS (per Schedule B) | (0.44 | ) | (0.47 | ) | (0.48 | ) | (0.39 | ) | |||||||||||||
Non-operating pension/OPEB benefits (costs) included in EPS (3) | 0.22 | (0.06 | ) | (0.02 | ) | (0.29 | ) | ||||||||||||||
Operating earnings per share (Non-GAAP) (4) | $ | 0.51 | $ | 0.27 | 89 | % | $ | 3.35 | $ | 2.77 | 21 | % | |||||||||
SCHEDULE A (continued) | ||||||||
December 31, 2016 | December 31, 2015 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 4,605 | $ | 5,300 | ||||
Marketable securities | 1,362 | 906 | ||||||
Accounts and notes receivable, net | 4,971 | 4,643 | ||||||
Inventories | 5,673 | 6,140 | ||||||
Prepaid expenses | 506 | 398 | ||||||
Total current assets | 17,117 | 17,387 | ||||||
Property, plant and equipment, net of accumulated depreciation (December 31, 2016 - $14,736; December 31, 2015 - $14,346) | 9,231 | 9,784 | ||||||
Goodwill | 4,180 | 4,248 | ||||||
Other intangible assets | 3,664 | 4,144 | ||||||
Investment in affiliates | 649 | 688 | ||||||
Deferred income taxes | 3,308 | 3,799 | ||||||
Other assets | 1,815 | 1,116 | ||||||
Total | $ | 39,964 | $ | 41,166 | ||||
Liabilities and Equity | ||||||||
Current liabilities | ||||||||
Accounts payable | $ | 3,705 | $ | 3,398 | ||||
Short-term borrowings and capital lease obligations | 429 | 1,165 | ||||||
Income taxes | 101 | 173 | ||||||
Other accrued liabilities | 4,662 | 5,580 | ||||||
Total current liabilities | 8,897 | 10,316 | ||||||
Long-term borrowings and capital lease obligations | 8,107 | 7,642 | ||||||
Other liabilities | 12,333 | 12,591 | ||||||
Deferred income taxes | 431 | 417 | ||||||
Total liabilities | 29,768 | 30,966 | ||||||
Commitments and contingent liabilities | ||||||||
Stockholders' equity | ||||||||
Preferred stock | 237 | 237 | ||||||
Common stock, $0.30 par value; 1,800,000,000 shares authorized; Issued at December 31, 2016 - 950,044,000; December 31, 2015 - 958,388,000 | 285 | 288 | ||||||
Additional paid-in capital | 11,190 | 11,081 | ||||||
Reinvested earnings | 14,924 | 14,510 | ||||||
Accumulated other comprehensive loss | (9,911 | ) | (9,396 | ) | ||||
Common stock held in treasury, at cost (87,041,000 shares at December 31, 2016 and December 31, 2015) | (6,727 | ) | (6,727 | ) | ||||
Total DuPont stockholders' equity | 9,998 | 9,993 | ||||||
Noncontrolling interests | 198 | 207 | ||||||
Total equity | 10,196 | 10,200 | ||||||
Total | $ | 39,964 | $ | 41,166 |
SCHEDULE A (continued) | |||||||
Twelve Months Ended December 31, | |||||||
2016 | 2015 | ||||||
Total Company | |||||||
Net income | $ | 2,525 | $ | 1,959 | |||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||
Depreciation | 939 | 1,104 | |||||
Amortization of intangible assets | 319 | 362 | |||||
Net periodic pension benefit cost | 572 | 591 | |||||
Contributions to pension plans | (535 | ) | (308 | ) | |||
Gain on sale of businesses and other assets | (436 | ) | (59 | ) | |||
Asset-related charges | 682 | 147 | |||||
Other operating activities - net | 366 | 106 | |||||
Change in operating assets and liabilities - net | (1,132 | ) | (1,586 | ) | |||
Cash provided by operating activities | 3,300 | 2,316 | |||||
Investing activities | |||||||
Purchases of property, plant and equipment | (1,019 | ) | (1,629 | ) | |||
Investments in affiliates | (19 | ) | (76 | ) | |||
Payments for businesses - net of cash acquired | — | (152 | ) | ||||
Proceeds from sale of businesses and other assets - net | 316 | 156 | |||||
Net increase in short-term financial instruments | (452 | ) | (776 | ) | |||
Foreign currency exchange contract settlements | (385 | ) | 615 | ||||
Other investing activities - net | 45 | 34 | |||||
Cash used for investing activities | (1,514 | ) | (1,828 | ) | |||
Financing activities | |||||||
Dividends paid to stockholders | (1,335 | ) | (1,546 | ) | |||
Net (decrease) increase in borrowings | (240 | ) | 2,141 | ||||
Repurchase of common stock | (916 | ) | (2,353 | ) | |||
Proceeds from exercise of stock options | 181 | 274 | |||||
Cash transferred to Chemours at spin-off | — | (250 | ) | ||||
Other financing activities - net | (18 | ) | (89 | ) | |||
Cash used for financing activities | (2,328 | ) | (1,823 | ) | |||
Effect of exchange rate changes on cash | (153 | ) | (275 | ) | |||
Decrease in cash and cash equivalents | (695 | ) | (1,610 | ) | |||
Cash and cash equivalents at beginning of period | 5,300 | 6,910 | |||||
Cash and cash equivalents at end of period | $ | 4,605 | $ | 5,300 | |||
Reconciliation of Non-GAAP Measure | |||||||
Calculation of Free Cash Flow - Total Company | |||||||
Twelve Months Ended December 31, | |||||||
2016 | 2015 | ||||||
Cash provided by operating activities (GAAP) | $ | 3,300 | $ | 2,316 | |||
Purchases of property, plant and equipment | (1,019 | ) | (1,629 | ) | |||
Free cash flow (Non-GAAP) | $ | 2,281 | $ | 687 | |||
(1) See Schedule B for detail of significant items. | |||||||
(2) The sum of the individual earnings per share amounts from continuing operations and discontinued operations may not equal the total company earnings per share amounts due to rounding. | |||||||
(3) Fourth quarter 2016 and year to date 2016, non-operating pension/OPEB benefits / (costs) include a $382 pre-tax curtailment gain ($254 after-tax or $0.29 per share) related to the changes to the U.S. Pension Plan and U.S. OPEB benefits announced in November 2016. Year to date 2015, non-operating pension/OPEB costs includes a $23 exchange loss on foreign pension balances. | |||||||
(4) Operating earnings and operating earnings per share are defined as earnings from continuing operations excluding significant items and non-operating pension/OPEB costs. Non-operating pension/OPEB costs includes all of the components of net periodic benefit cost from continuing operations with the exception of the service cost component. |
SCHEDULE B | ||||||||||||||||||||||||
SIGNIFICANT ITEMS | ||||||||||||||||||||||||
Pre-tax | After-tax(8) | ($ Per Share) | ||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||
1st Quarter | ||||||||||||||||||||||||
Transaction costs(1) | $ | (24 | ) | $ | (12 | ) | $ | (21 | ) | $ | (11 | ) | $ | (0.02 | ) | $ | (0.01 | ) | ||||||
Customer claims adjustment/recovery(4) | 23 | 35 | 15 | 22 | 0.02 | 0.02 | ||||||||||||||||||
Gain on sale of entity(5) | 369 | — | 214 | — | 0.24 | — | ||||||||||||||||||
Restructuring charges, net(2) | (77 | ) | — | (48 | ) | — | (0.06 | ) | — | |||||||||||||||
Asset impairment charge(3) | — | (37 | ) | — | (30 | ) | — | (0.03 | ) | |||||||||||||||
Ukraine devaluation(6) | — | (40 | ) | — | (38 | ) | — | (0.04 | ) | |||||||||||||||
1st Quarter - Total | $ | 291 | $ | (54 | ) | $ | 160 | $ | (57 | ) | $ | 0.18 | $ | (0.06 | ) | |||||||||
2nd Quarter | ||||||||||||||||||||||||
Transaction costs(1) | $ | (76 | ) | $ | (25 | ) | $ | (59 | ) | $ | (38 | ) | $ | (0.07 | ) | $ | (0.04 | ) | ||||||
Customer claims recovery(4) | 30 | — | 19 | — | 0.02 | — | ||||||||||||||||||
Restructuring adjustments / charges(2) | 90 | (2 | ) | 59 | (2 | ) | 0.07 | — | ||||||||||||||||
Litigation settlement(7) | — | 112 | — | 72 | — | 0.08 | ||||||||||||||||||
2nd Quarter - Total | $ | 44 | $ | 85 | $ | 19 | $ | 32 | $ | 0.02 | $ | 0.04 | ||||||||||||
3rd Quarter | ||||||||||||||||||||||||
Transaction costs(1) | $ | (122 | ) | $ | (9 | ) | $ | (91 | ) | $ | (6 | ) | $ | (0.10 | ) | $ | (0.01 | ) | ||||||
Restructuring charges, net(2) | (17 | ) | — | (14 | ) | — | (0.02 | ) | — | |||||||||||||||
Asset impairment charge(3) | (158 | ) | — | (111 | ) | — | (0.13 | ) | — | |||||||||||||||
Customer claims adjustment/recovery(4) | — | 147 | — | 94 | — | 0.11 | ||||||||||||||||||
3rd Quarter - Total | $ | (297 | ) | $ | 138 | $ | (216 | ) | $ | 88 | $ | (0.25 | ) | $ | 0.10 | |||||||||
4th Quarter | ||||||||||||||||||||||||
Transaction costs(1) | $ | (164 | ) | $ | (10 | ) | $ | (131 | ) | $ | (7 | ) | $ | (0.15 | ) | $ | (0.01 | ) | ||||||
Restructuring adjustments / charges(2) | 42 | (775 | ) | 25 | (508 | ) | 0.03 | (0.58 | ) | |||||||||||||||
Asset impairment charge(3) | (435 | ) | — | (278 | ) | — | (0.32 | ) | — | |||||||||||||||
Litigation settlement (7) | — | 33 | — | 21 | — | 0.02 | ||||||||||||||||||
Customer claims adjustment/recovery (4) | — | 130 | — | 83 | — | 0.10 | ||||||||||||||||||
4th Quarter - Total | $ | (557 | ) | $ | (622 | ) | $ | (384 | ) | $ | (411 | ) | $ | (0.44 | ) | $ | (0.47 | ) | ||||||
Year-to-date Total (9) | $ | (519 | ) | $ | (453 | ) | $ | (421 | ) | $ | (348 | ) | $ | (0.48 | ) | $ | (0.39 | ) |
(1) | Fourth, third, second, and first quarter 2016 included charges of $(164), $(122), $(76), and $(24), respectively, and fourth quarter 2015 included charges of ($10), recorded in selling, general and administrative expenses related to costs associated with the planned merger with The Dow Chemical Company and related activities. For fourth quarter 2016 and full year 2016, the effective tax rate for the total of pre-tax charges was 32.2% and 27.0%, respectively. A significant portion of the transaction costs are in the US; however, those costs are not always tax-deductible. In addition, the Company incurred $(20) in the fourth quarter 2016 of other tax costs related to the planned merger and related activities. | |||||||||||
Third quarter and first quarter 2015 included charges of $(9) and $(12), respectively, recorded in other operating charges associated with transaction costs related to the separation of the Performance Chemicals segment. Second quarter 2015 included charges of $(25) associated with transaction costs related to the separation of the Performance Chemicals segment consisting of $(5) recorded in other operating charges and $(20) recorded in interest expense. Second quarter 2015 also includes a tax charge of $(17) due to a state tax rate change associated with the separation. | ||||||||||||
(2) | Fourth, third, second and first quarter 2016 included benefits / (charges) of $14, $(17), $90 and $(2), respectively, associated with the 2016 Global Cost Savings and Restructuring Program. The fourth and second quarter benefits were primarily due to the reduction in severance and related benefit costs due to the elimination of positions at a lower cost than expected. The charges in the third and first quarters were primarily due to identification of additional asset-related charges with the first quarter charge being offset by reduction in severance and related benefit costs. The third quarter charge consisted of $(14) recorded in employee separation/asset related charges, net and $(3) recorded to other income, net. The fourth, second and first quarter benefits / (charges) were recorded in employee separation/asset related charges, net. | |||||||||||
Fourth quarter 2015 included a $(798) restructuring charge consisting of $(793) recorded in employee separation/asset related charges, net and $(5) recorded in other income, net associated with structural actions across all businesses and staff functions globally to operate more efficiently by further consolidating businesses and aligning staff functions more closely with them. The charge included $(656) of severance and related benefit costs, $(109) of asset related charges, and $(33) of contract termination costs. | ||||||||||||
Fourth quarter 2016 included a benefit of $7 for reductions to the first quarter 2016 charge for La Porte site contract termination costs within the Agriculture segment. The first quarter 2016 included a $(75) restructuring charge related to the decision to not re-start the segment's insecticide manufacturing facility at the La Porte site located in La Porte, Texas. The first quarter charge included $(41) of asset related charges, $(18) of contract termination costs, and $(16) of employee severance and related benefit costs. The fourth quarter 2016 benefit and first quarter 2016 charge were recorded in employee separation/asset related charges, net. | ||||||||||||
Fourth quarter 2016 and fourth quarter 2015 included benefits of $21 and $23 for reductions to the previously recognized severance costs related to the 2014 restructuring program. Second quarter 2015 included a $(2) net restructuring charge primarily due to the identification of additional projects in certain segments, offset by lower than estimated individual severance costs and workforce reductions achieved through non-severance programs. The activity in 2016 and 2015 related to the 2014 restructuring program was recorded in employee separation/asset related charges, net. | ||||||||||||
(3) | During the fourth quarter 2016, a $(435) pre-tax impairment charge was recorded in employee separation / asset related charges, net related to the write-down of the company's uncompleted enterprise resource planning (ERP) system which the company had elected to defer further testing and deployment in fourth quarter 2015. The company intends to complete the ERP project, however, given the uncertainties related to timing as well as potential developments and changes to technologies in the market place at the time of restart, it can no longer be considered probable. | |||||||||||
During third quarter 2016, a $(158) pre-tax impairment charge was recorded in employee separation / asset related charges, net related to the write-down of indefinite lived intangible assets within the Industrial Biosciences segment. The third quarter charge was the result of realignment of brand marketing strategies and a determination to phase out the use of certain acquired trade names. | ||||||||||||
During first quarter 2015, a $(37) pre-tax impairment charge was recorded in employee separation / asset related charges, net for a cost basis investment within the Other segment. The assessment resulted from the venture's revised operating plan reflecting underperformance of its European wheat based ethanol facility and deteriorating European ethanol market conditions. | ||||||||||||
(4) | In the second quarter 2016, third quarter 2015 and first quarter 2015, the company recorded insurance recoveries of $30, $147 and $35, respectively, in other operating charges for recovery of costs for customer claims related to the use of the Agriculture's segment Imprelis® herbicide. First quarter 2016 and fourth quarter 2015 included benefits of $23 and $130, respectively, in other operating charges for reductions in the accrual for customer claims related to the use of the Imprelis® herbicide. | |||||||||||
(5) | First quarter 2016 included a gain of $369 recorded in other income, net associated with the sale of the DuPont (Shenzhen) Manufacturing Limited entity, which held certain buildings and other assets. The gain is reflected as a Corporate item. | |||||||||||
(6) | First quarter 2015 included a charge of $(40) in other income, net associated with remeasuring the company’s Ukrainian hryvnia net monetary assets. Ukraine’s central bank adopted a decision to no longer set the indicative hryvnia exchange rate. The hryvnia became a free-floating exchange rate and lost approximately a third of its value through the quarter. | |||||||||||
(7) | Fourth and second quarter 2015 included gains of $33 and $112, respectively, net of legal expenses, recorded in other income, net related to the company's settlement of a legal claim. This matter relates to the Protection Solutions segment. | |||||||||||
(8) | Unless specifically addressed in notes above, the income tax effect on significant items is calculated based upon the enacted tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment. | |||||||||||
(9) | Earnings per share for the year may not equal the sum of quarterly earnings per share due to the changes in average share calculations. | |||||||||||
SCHEDULE C | ||||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
SEGMENT NET SALES (1) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Agriculture | $ | 1,393 | $ | 1,550 | $ | 9,516 | $ | 9,798 | ||||||||
Electronics & Communications | 521 | 493 | 1,960 | 2,070 | ||||||||||||
Industrial Biosciences | 401 | 397 | 1,500 | 1,478 | ||||||||||||
Nutrition & Health | 809 | 807 | 3,268 | 3,256 | ||||||||||||
Performance Materials | 1,331 | 1,284 | 5,249 | 5,305 | ||||||||||||
Protection Solutions | 717 | 720 | 2,954 | 3,039 | ||||||||||||
Other | 39 | 48 | 147 | 184 | ||||||||||||
Consolidated net sales | $ | 5,211 | $ | 5,299 | $ | 24,594 | $ | 25,130 | ||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
SEGMENT OPERATING EARNINGS (1) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Agriculture | $ | (19 | ) | $ | (54 | ) | $ | 1,758 | $ | 1,646 | ||||||
Electronics & Communications | 98 | 87 | 358 | 359 | ||||||||||||
Industrial Biosciences | 67 | 78 | 270 | 243 | ||||||||||||
Nutrition & Health | 135 | 85 | 504 | 373 | ||||||||||||
Performance Materials | 328 | 281 | 1,297 | 1,216 | ||||||||||||
Protection Solutions | 142 | 147 | 668 | 641 | ||||||||||||
Other | (48 | ) | (71 | ) | (215 | ) | (235 | ) | ||||||||
Total segment operating earnings | 703 | 553 | 4,640 | 4,243 | ||||||||||||
Corporate expenses | (88 | ) | (160 | ) | (340 | ) | (573 | ) | ||||||||
Interest expense | (92 | ) | (82 | ) | (370 | ) | (322 | ) | ||||||||
Operating earnings before income taxes and exchange gains (losses) | 523 | 311 | 3,930 | 3,348 | ||||||||||||
Net exchange gains (losses)(2) | 106 | (24 | ) | (106 | ) | 93 | ||||||||||
Operating earnings before income taxes (Non-GAAP) | $ | 629 | $ | 287 | $ | 3,824 | $ | 3,441 | ||||||||
Non-operating pension/OPEB benefits (costs) (3) | 281 | (86 | ) | (40 | ) | (397 | ) | |||||||||
Total significant items before income taxes | (557 | ) | (622 | ) | (519 | ) | (453 | ) | ||||||||
Income (loss) from continuing operations before income taxes (GAAP) | $ | 353 | $ | (421 | ) | $ | 3,265 | $ | 2,591 | |||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
SIGNIFICANT ITEMS BY SEGMENT (PRE-TAX) (1)(4) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Agriculture | $ | 14 | $ | (30 | ) | $ | (37 | ) | $ | 148 | ||||||
Electronics & Communications | (9 | ) | (89 | ) | 4 | (78 | ) | |||||||||
Industrial Biosciences | 2 | (60 | ) | (152 | ) | (61 | ) | |||||||||
Nutrition & Health | (3 | ) | (46 | ) | 9 | (50 | ) | |||||||||
Performance Materials | (2 | ) | (60 | ) | 5 | (62 | ) | |||||||||
Protection Solutions | 4 | (8 | ) | 14 | 105 | |||||||||||
Other | (8 | ) | — | (11 | ) | (40 | ) | |||||||||
Total significant items by segment | (2 | ) | (293 | ) | (168 | ) | (38 | ) | ||||||||
Corporate expenses | (555 | ) | (329 | ) | (351 | ) | (355 | ) | ||||||||
Interest expense | — | — | — | (20 | ) | |||||||||||
Net exchange gains (losses) | — | — | — | (40 | ) | |||||||||||
Total significant items before income taxes | $ | (557 | ) | $ | (622 | ) | $ | (519 | ) | $ | (453 | ) |
SCHEDULE C (continued) |
Corporate Expenses | ||||||||||||||||
The reconciliation below reflects GAAP corporate expenses excluding significant items. | ||||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Corporate expenses (GAAP) | $ | 643 | $ | 489 | $ | 691 | $ | 928 | ||||||||
Less: Significant items charge (4) | 555 | 329 | 351 | 355 | ||||||||||||
Corporate expenses (Non-GAAP) | $ | 88 | $ | 160 | $ | 340 | $ | 573 | ||||||||
(1) Segment operating earnings is defined as income (loss) from continuing operations before income taxes excluding significant pre-tax benefits (charges), non-operating pension/OPEB costs, exchange gains (losses), corporate expenses and interest. DuPont Sustainable Solutions, previously within the company's former Safety & Protection segment (now Protection Solutions) was comprised of two business units: Clean Technologies (CleanTech) and Consulting Solutions. Effective January 1, 2016, the CleanTech business is reported in the Industrial Biosciences segment and the Consulting Solutions business unit is reported within Other. Reclassifications of prior year data have been made to conform to current year classifications. | ||||||||||||||||
(2) See Schedule D for additional information on exchange gains and losses. Year to date 2015 exchange gains, on an operating earnings basis (Non-GAAP), excludes the impact of a $23 exchange loss on non-operating pension. | ||||||||||||||||
(3) Fourth quarter 2016 and year to date 2016, non-operating pension/OPEB benefits (costs) include a $382 pre-tax curtailment gain ($254 after-tax or $0.29 per share) related to the changes to the U.S. Pension Plan and U.S. OPEB benefits announced in November 2016. Year to date 2015, non-operating pension/OPEB costs includes a $23 exchange loss on foreign pension balances. | ||||||||||||||||
(4) See Schedule B for detail of significant items. |
SCHEDULE D | |||||||||||||||||
Reconciliations of Adjusted EBIT / EBITDA to Consolidated Income Statements | |||||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||
Income (loss) from continuing operations after income taxes (GAAP) | $ | 252 | $ | (231 | ) | $ | 2,521 | $ | 1,895 | ||||||||
Add: Provision for (benefit from) for income taxes on continuing operations | 101 | (190 | ) | 744 | 696 | ||||||||||||
Income (loss) from continuing operations before income taxes | $ | 353 | $ | (421 | ) | $ | 3,265 | $ | 2,591 | ||||||||
Add: Significant items charge before income taxes(1) | 557 | 622 | 519 | 453 | |||||||||||||
Add: Non-operating pension/OPEB (benefits) costs (2) | (281 | ) | 86 | 40 | 397 | ||||||||||||
Operating earnings before income taxes (Non-GAAP) | $ | 629 | $ | 287 | $ | 3,824 | $ | 3,441 | |||||||||
Less: Net (loss) income attributable to noncontrolling interests from continuing operations | (2 | ) | (3 | ) | 12 | 6 | |||||||||||
Add: Interest expense (1) | 92 | 82 | 370 | 322 | |||||||||||||
Adjusted EBIT from operating earnings (Non-GAAP) | 723 | 372 | 4,182 | 3,757 | |||||||||||||
Add: Depreciation and amortization | 279 | 303 | 1,258 | 1,338 | |||||||||||||
Adjusted EBITDA from operating earnings (Non-GAAP) | $ | 1,002 | $ | 675 | $ | 5,440 | $ | 5,095 |
Reconciliation of Operating Costs to Consolidated Income Statement Line Items | |||||||||||||||||||||||||
GAAP operating costs is defined as other operating charges, selling, general and administrative expenses, and research and development expense. The reconciliation below reflects operating costs excluding significant items and non-operating pension/OPEB (benefits) costs. | |||||||||||||||||||||||||
Three Months Ended December 31, 2016 | Three Months Ended December 31, 2015 | ||||||||||||||||||||||||
As Reported (GAAP) | Less: Significant Items (1) | Less: Non-Operating Pension/OPEB Benefits | (Non-GAAP) | As Reported (GAAP) | Less: Significant Items (1) | Less: Non-Operating Pension/OPEB Costs | (Non-GAAP) | ||||||||||||||||||
Other operating charges | $ | 182 | $ | — | $ | — | $ | 182 | $ | 46 | $ | (130 | ) | $ | — | $ | 176 | ||||||||
Selling, general and administrative expenses | 964 | 164 | (112 | ) | 912 | 1,075 | 10 | 35 | 1,030 | ||||||||||||||||
Research and development expense | 381 | — | (42 | ) | 423 | 483 | — | 13 | 470 | ||||||||||||||||
Total | $ | 1,527 | $ | 164 | $ | (154 | ) | $ | 1,517 | $ | 1,604 | $ | (120 | ) | $ | 48 | $ | 1,676 | |||||||
Twelve Months Ended December 31, 2016 | Twelve Months Ended December 31, 2015 | ||||||||||||||||||||||||
As Reported (GAAP) | Less: Significant Items (1) | Less: Non-Operating Pension/OPEB Costs | (Non-GAAP) | As Reported (GAAP) | Less: Significant Items (1) | Less: Non-Operating Pension/OPEB Costs | (Non-GAAP) | ||||||||||||||||||
Other operating charges | $ | 686 | $ | (53 | ) | $ | — | $ | 739 | $ | 459 | $ | (286 | ) | $ | — | $ | 745 | |||||||
Selling, general and administrative expenses | 4,319 | 386 | 16 | 3,917 | 4,615 | 10 | 150 | 4,455 | |||||||||||||||||
Research and development expense | 1,641 | — | 6 | 1,635 | 1,898 | — | 56 | 1,842 | |||||||||||||||||
Total | $ | 6,646 | $ | 333 | $ | 22 | $ | 6,291 | $ | 6,972 | $ | (276 | ) | $ | 206 | $ | 7,042 |
SCHEDULE D (continued) | |||||||||
Reconciliation of Operating Earnings Per Share (EPS) Outlook | |||||||||
The reconciliation below represents the company's outlook on an operating earnings basis, defined as earnings excluding significant items and non-operating pension/OPEB costs. | |||||||||
Quarter ended March 31, | |||||||||
2017 Outlook | 2016 Actual | ||||||||
EPS from continuing operations (GAAP) | $ | 1.14 | $ | 1.39 | |||||
Significant items (1), (3) | |||||||||
Transaction costs (3) | (0.15 | ) | (0.02 | ) | |||||
Gain on sale of entity | — | 0.24 | |||||||
Restructuring charges, net | — | (0.06 | ) | ||||||
Customer claims adjustment | — | 0.02 | |||||||
Non-operating pension/OPEB costs - estimate | (0.07 | ) | (0.05 | ) | |||||
Operating EPS (Non-GAAP) | $ | 1.36 | $ | 1.26 |
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 loss, 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, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Subsidiary Monetary Position Gain (Loss) | ||||||||||||||||
Pre-tax exchange gains (losses) | $ | 13 | $ | (23 | ) | $ | 198 | $ | (320 | ) | ||||||
Local tax (expenses) benefits | (97 | ) | (44 | ) | (126 | ) | (70 | ) | ||||||||
Net after-tax impact from subsidiary exchange (losses) gains | $ | (84 | ) | $ | (67 | ) | $ | 72 | $ | (390 | ) | |||||
Hedging Program Gain (Loss) | ||||||||||||||||
Pre-tax exchange gains (losses) | $ | 93 | $ | (1 | ) | $ | (304 | ) | $ | 413 | ||||||
Tax (expenses) benefits | (33 | ) | — | 110 | (150 | ) | ||||||||||
Net after-tax impact from hedging program exchange gains (losses) | $ | 60 | $ | (1 | ) | $ | (194 | ) | $ | 263 | ||||||
Total Exchange Gain (Loss) | ||||||||||||||||
Pre-tax exchange gains (losses) (4) | $ | 106 | $ | (24 | ) | $ | (106 | ) | $ | 93 | ||||||
Tax (expenses) benefits | (130 | ) | (44 | ) | (16 | ) | (220 | ) | ||||||||
Net after-tax exchange losses | $ | (24 | ) | $ | (68 | ) | $ | (122 | ) | $ | (127 | ) | ||||
As shown above, the "Total Exchange Gain (Loss)" is the sum of the "Subsidiary Monetary Position Gain (Loss)" and the "Hedging Program Gain (Loss)." | ||||||||||||||||
SCHEDULE D (continued) | ||||||||||||||||
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, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Income (loss) from continuing operations before income taxes (GAAP) | $ | 353 | $ | (421 | ) | $ | 3,265 | $ | 2,591 | |||||||
Add: Significant items - charge (2) | 557 | 622 | 519 | 453 | ||||||||||||
Non-operating pension/OPEB (benefits) costs (1) | (281 | ) | 86 | 40 | 397 | |||||||||||
Less: Net exchange gains (losses) (4) | 106 | (24 | ) | (106 | ) | 93 | ||||||||||
Income from continuing operations before income taxes, significant items, exchange gains (losses), and non-operating pension/OPEB costs (Non-GAAP) | $ | 523 | $ | 311 | $ | 3,930 | $ | 3,348 | ||||||||
Provision for (benefit from) income taxes on continuing operations (GAAP) | $ | 101 | $ | (190 | ) | $ | 744 | $ | 696 | |||||||
Add: Tax benefits on significant items | 173 | 211 | 98 | 105 | ||||||||||||
Tax (expenses) benefits on non-operating pension/OPEB benefits/costs | (94 | ) | 30 | 19 | 131 | |||||||||||
Tax expenses on exchange gains/losses | (130 | ) | (44 | ) | (16 | ) | (220 | ) | ||||||||
Provision for income taxes on continuing earnings, excluding exchange gains(losses) (Non-GAAP) | $ | 50 | $ | 7 | $ | 845 | $ | 712 | ||||||||
Effective income tax rate (GAAP) | 28.6 | % | 45.1 | % | 22.8 | % | 26.9 | % | ||||||||
Significant items and non-operating pension/OPEB costs effect | — | % | (27.3 | )% | (0.3 | )% | 0.2 | % | ||||||||
Tax rate, from continuing operations before significant items and non-operating pension/OPEB benefits/costs | 28.6 | % | 17.8 | % | 22.5 | % | 27.1 | % | ||||||||
Exchange gains (losses) effect | (19.0 | )% | (15.5 | )% | (1.0 | )% | (5.8 | )% | ||||||||
Base income tax rate from continuing operations (Non-GAAP) | 9.6 | % | 2.3 | % | 21.5 | % | 21.3 | % | ||||||||
(1) See Schedule B for detail of significant items. | ||||||||||||||||
(2) Fourth quarter 2016 and year to date 2016, non-operating pension/OPEB (benefits) costs include a $(382) pre-tax curtailment gain ($(254) after-tax or $(0.29) per share) related to the changes to the U.S. Pension Plan and U.S. OPEB benefits announced in November 2016.Year to date December 31, 2015, non-operating pension/OPEB costs includes a $23 exchange loss on foreign pension balances. | ||||||||||||||||
(3) The 2017 first quarter outlook for significant items includes the current estimate for first quarter transaction costs associated with the planned merger with The Dow Chemical Company and related activities. It does not include expected gain related to the sale of the company's Nutrition & Health food safety diagnostics business which is expected to close during the first half of 2017 pending customary closing conditions. | ||||||||||||||||
(4) Year to date December 31, 2015 exchange gains (losses), on an operating earnings basis (Non-GAAP), excludes a $23 exchange loss on non-operating pension. |
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