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DuPont Delivers Strong Results in Third Quarter
Company Reports $.45 Earnings Per Share
WILMINGTON, Del., Oct. 20 /PRNewswire-FirstCall/ --
Highlights:
- DuPont's third quarter 2009 earnings were $.45 per share, compared to third quarter 2008 earnings of $.40 per share which included a $.16 per share hurricane-related significant item charge (see Schedule B.)
- Total company sales for third quarter 2009 were $6.0 billion, with sales in emerging markets rebounding from significantly lower levels in the first and second quarters. Pricing discipline contributed to segment pre-tax margins returning to prior year levels.
- Companywide fixed cost reduction and productivity actions boosted third quarter pre-tax earnings by about $300 million. This brings year-to-date program cost reductions to $900 million versus the company's full-year goal of $1 billion.
- Raw material, energy and freight costs adjusted for currency and volume were 12 percent lower versus 2008. The company expects these costs for the full year will be about 5 to 6 percent lower than 2008.
- The company revised its full year 2009 earnings outlook to a range of $1.95 to $2.05 per share, excluding significant items. This reflects a narrowing toward the upper end of the company's previous range of $1.70 to $2.10 per share. The full-year free cash flow outlook remains $2.5 billion.
"We delivered on our commitment to shareholders, while navigating through some very difficult business conditions," said DuPont (NYSE: DD) CEO Ellen Kullman. "We see overall sequential improvement in our industrial businesses as market conditions begin to firm. With a more streamlined organization, permanent fixed cost reductions, and increased productivity, DuPont is well-positioned to capitalize as markets improve. We will continue to leverage our market-driven science across the company to deliver products customers want around the world. We are focused on growth and our rigorous operational discipline in order to deliver continued earnings improvement."
Net Income and Global Consolidated Sales
Net income attributable to DuPont for the third quarter 2009 was $409 million versus $367 million in the prior year. The prior year included a $146 million after-tax hurricane-related charge. Net income reflects the benefit of significantly lower costs, partly offset by lower sales volume. Third quarter 2009 consolidated net sales of $6.0 billion were 18 percent lower than prior year, reflecting 12 percent lower volume, 2 percent lower local prices, a 3 percent negative impact from currency exchange rates and a net 1 percent reduction due to portfolio changes. While year-over-year volume declines have slowed, lower sales volume continued to reflect generally weaker economic conditions than prior year. The table below shows regional sales and variances versus third quarter 2008.
Three Months Ended
Sept 30, 2009 Percentage Change Due to:
-------------- ------------------------
Local
% Currency Currency Portfolio/
(dollars in billions) $ Change Price Effect Volume Other
--- ------ -------- -------- ------ --------
U.S. $1.9 (21) (4) - (15) (2)
EMEA* 1.6 (27) (1) (8) (18) -
Asia Pacific 1.4 (5) (3) - (2) -
Canada & Lat.
America 1.1 (14) 1 (5) (9) (1)
Total Consolidated
Sales $6.0 (18) (2) (3) (12) (1)
* Europe, Middle East & Africa
Earnings Per Share
The table below shows year-over-year earnings per share (EPS) variances for the third quarter. Earnings principally reflect lower variable and fixed costs, lower sales volume and the impact of the stronger dollar. Capacity utilization has significantly improved versus prior quarters this year.
EPS ANALYSIS
-------------
3Q
--
EPS - 2008 $.40
Significant items (Schedule B) (.16)
-----
EPS - 2008 Excluding Significant items $.56
Local prices (.14)
Variable costs* .44
Volume (.32)
Low Capacity Utilization** (.03)
Fixed costs * .04
Currency (.06)
Other*** (.02)
Tax (.02)
EPS - 2009 $.45
*Excluding volume & currency impact.
**Fixed manufacturing cost, normally reflected
in inventory, expensed as a result of low
production volumes.
***Includes net interest (.02), lower net
exchange loss .03, and other income (.03).
Business Segment Performance
The table below shows third quarter 2009 segment sales and related variances versus prior year.
SEGMENT SALES* Three Months Ended Percentage Change
(Dollars in billions) September 30, 2009 Due to:
------------------ ------------------
Portfolio
% USD and
$ Change Price Volume Other
---- ------ ----- ------ -----
Agriculture & Nutrition $1.2 (5) (1) (4) -
Coatings & Color Technologies 1.5 (16) (3) (13) -
Electronic & Communication
Technologies 0.9 (13) (3) (10) -
Performance Materials 1.3 (24) (8) (14) (2)
Safety & Protection 1.0 (32) (10) (22) -
* Segment sales include transfers
Pre-tax operating income (PTOI) of $757 million compares to prior year $682 million, which includes a $227 million hurricane-related significant item charge.
PRE-TAX OPERATING INCOME (LOSS)
Three Months Ended
September 30
------------
% change
(Dollars in millions) 2009 2008 vs. 2008
---- ---- --------
Agriculture & Nutrition $(113) $(21) nm
Coatings & Color Technologies 182 190 (4)
Electronic & Communication
Technologies 125 137 (9)
Performance Materials 230 (91) * nm
Safety & Protection 93 251 (63)
-- ---
Total Growth Platforms 517 466 11
Pharmaceuticals 266 260 2
Other (26) (44) nm
--- --- --
Total Segments $757 $682 11
*Includes a $216 million hurricane charge; see Schedule C for detail by
segment
The following is a summary of business results for each of the company's operating segments, comparing the third quarter 2009 with third quarter 2008, for sales and PTOI. All references to selling price changes are on a U.S. dollar basis, including the impact of currency.
Agriculture & Nutrition
- Sales of $1.2 billion were down 5 percent, reflecting unfavorable currency impact, partly offset by agriculture market share gains and strong seed pricing.
- Seasonal third quarter pre-tax loss was $113 million versus a loss of $21 million in the prior year, which included a $49 million gain on the settlement of soybean contracts. Current quarter earnings reflected continued spending for growth initiatives and higher input costs.
Coatings & Color Technologies
- Sales of $1.5 billion were down 16 percent, primarily reflecting continued weakness in motor vehicle markets.
- PTOI of $182 million was 4 percent lower, reflecting lower sales volumes and unfavorable currency, partly offset by lower variable costs, fixed cost reductions and pricing gains.
Electronic & Communication Technologies
- Sales of $919 million were down 13 percent, reflecting 10 percent lower volume and 3 percent lower selling prices. Weak demand in consumer and general industrial markets offset increased demand in photovoltaics and packaging graphics.
- PTOI of $125 million was down 9 percent, reflecting lower volumes and lower costs.
Performance Materials
- Sales of $1.3 billion were down 24 percent, reflecting weak demand in major markets in all regions, particularly in general industrial and motor vehicle markets.
- PTOI of $230 million was up versus a prior year loss of $91 million, which included hurricane-related charges of $216 million. The improvement also reflected lower cost partly offset by lower sales volume, unfavorable product mix and currency. Current quarter included $24 million of insurance recoveries related to the hurricane.
Safety & Protection
- Sales of $1.0 billion were down 32 percent, reflecting a 22 percent volume decline primarily in industrial and construction markets. Pricing decreases reflected the pass-through of lower chemicals raw material costs.
- PTOI of $93 million principally reflected lower market demand, partly offset by lower raw material costs, fixed cost reductions and pricing actions. Current quarter included a $26 million asset impairment charge.
Additional information on segment performance is available on the DuPont Investor Center website at www.dupont.com.
Outlook
DuPont revised its full-year 2009 earnings outlook to a range of $1.95 to $2.05 per share, excluding significant items. The full-year free cash flow target remains $2.5 billion. The outlook anticipates improving demand across key markets. The company expects lower raw material costs and currency exchange rates will be a benefit to earnings in the fourth quarter versus the prior year. Aggressive actions to reduce costs and capital expenditures will continue as the company maintains an appropriate level of investment for high-growth, high-margin businesses including seed products and photovoltaics.
Use of Non-GAAP Measures
Management believes that certain non-GAAP measurements, such as free cash flow, 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.
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.
E. I. du Pont de Nemours and Company
Consolidated Income Statements
(Dollars in millions, except per share amounts)
SCHEDULE A
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2009 2008 2009 2008
---- ---- ---- ----
Net sales $5,961 $7,297 $19,690 $24,709
Other income, net 195 420 824 1,057
--- --- --- -----
Total 6,156 7,717 20,514 25,766
Cost of goods sold and
other operating
charges (a) 4,560 5,916 14,752 18,298
Selling, general and
administrative
expenses 770 873 2,584 2,794
Research and
development expense 335 360 989 1,050
Interest expense 100 98 312 272
Employee separation /
asset related charges,
net (a) - - 265 -
--- --- --- ---
Total 5,765 7,247 18,902 22,414
Income before income
taxes 391 470 1,612 3,352
Provision for (benefit
from) income taxes (23) 98 288 706
--- -- --- ---
Net income 414 372 1,324 2,646
Less: Net income
attributable to
noncontrolling
interests 5 5 10 10
-- -- -- --
Net income
attributable to DuPont $409 $367 $1,314 $2,636
==== ==== ====== ======
Basic earnings per
share of common stock $0.45 $0.40 $1.44 $2.91
===== ===== ===== =====
Diluted earnings per
share of common stock $0.45 $0.40 $1.44 $2.89
===== ===== ===== =====
Dividends per share of
common stock $0.41 $0.41 $1.23 $1.23
===== ===== ===== =====
Average number of shares
outstanding used in
earnings per share (EPS)
calculation:
Basic 904,615,000 903,134,000 904,350,000 902,131,000
Diluted 910,291,000 907,950,000 907,996,000 908,073,000
(a) See Schedule B for detail of significant items.
E. I. du Pont de Nemours and Company
Condensed Consolidated Balance Sheets
(Dollars in millions, except per share amounts)
SCHEDULE A (continued)
September 30, December 31,
2009 2008
---- ----
Assets
Current assets
Cash and cash equivalents $2,249 $3,645
Marketable securities 906 59
Accounts and notes receivable, net 7,126 5,140
Inventories 4,392 5,681
Prepaid expenses 125 143
Income taxes 558 643
--- ---
Total current assets 15,356 15,311
Property, plant and equipment, net of
accumulated depreciation
(September 30, 2009 - $17,590;
December 31, 2008 - $16,800) 11,080 11,154
Goodwill 2,138 2,135
Other intangible assets 2,582 2,710
Investment in affiliates 991 844
Other assets 4,021 4,055
----- -----
Total $36,168 $36,209
======= =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $2,554 $3,128
Short-term borrowings and capital lease
obligations 3,525 2,012
Income taxes 138 110
Other accrued liabilities 3,345 4,460
----- -----
Total current liabilities 9,562 9,710
Long-term borrowings and capital lease
obligations 7,545 7,638
Other liabilities 10,830 11,169
Deferred income taxes 148 140
--- ---
Total liabilities 28,085 28,657
------ ------
Commitments and contingent liabilities
Stockholders' equity
Preferred stock 237 237
Common stock, $0.30 par value; 1,800,000,000
shares authorized; issued at September 30, 2009
- 990,770,000; December 31, 2008 - 989,415,000 297 297
Additional paid-in capital 8,463 8,380
Reinvested earnings 10,644 10,456
Accumulated other comprehensive loss (5,267) (5,518)
Common stock held in treasury, at cost
(87,041,000 shares at September 30, 2009 and
December 31, 2008) (6,727) (6,727)
------ ------
Total DuPont stockholders' equity 7,647 7,125
----- -----
Noncontrolling interests 436 427
--- ---
Total equity 8,083 7,552
----- -----
Total $36,168 $36,209
======= =======
E. I. du Pont de Nemours and Company
Condensed Consolidated Statements of Cash Flows
(Dollars in millions)
SCHEDULE A (continued)
Nine Months
Ended
September 30,
-------------
2009 2008
---- ----
Cash provided by operating activities $923 $494
---- ----
Investing activities
Purchases of property, plant and equipment (990) (1,406)
Investments in affiliates (105) (53)
Payments for businesses (net of cash acquired) (12) (72)
Other investing activities - net (1,518) (151)
------ ----
Cash used for investing activities (2,625) (1,682)
Financing activities
Dividends paid to stockholders (1,119) (1,123)
Net increase in borrowings 1,408 2,974
Other financing activities - net (14) 57
--- --
Cash provided by financing activities 275 1,908
Effect of exchange rate changes on cash 31 (32)
-- ---
(Decrease) increase in cash and cash equivalents (1,396) 688
Cash and cash equivalents at beginning of period 3,645 1,305
----- -----
Cash and cash equivalents at end of period $2,249 $1,993
====== ======
E. I. du Pont de Nemours and Company
Schedules of Significant Items
(Dollars in millions, except per share amounts)
SCHEDULE B
SIGNIFICANT ITEMS
Pre-tax After-tax ($ Per Share)
------- --------- -------------
2009 2008 2009 2008 2009 2008
---- ---- ---- ---- ---- ----
1st Quarter - Total $- $- $- $- $- $-
------------------- == == == == == ==
2nd Quarter
-----------
2009 Restructuring charge
(a) $(340) $- $(227) $- $(0.25) $-
2008 Restructuring
adjustment (b) 75 - 53 - 0.06 -
Hurricane proceeds and
adjustments (c) 50 - 33 - 0.04 -
-- --- -- --- ---- ---
2nd Quarter - Total $(215) $- $(141) $- $(0.15) $-
===== == ===== == ====== ==
3rd Quarter
-----------
Hurricane charges (d) - (227) - (146) - (0.16)
--- ---- --- ---- --- -----
3rd Quarter - Total $- $(227) $- $(146) $- $(0.16)
== ===== == ===== == ======
Year-to-date - Total $(215) $(227) $(141) $(146) $(0.15) $(0.16)
===== ===== ===== ===== ====== ======
(a) Second quarter and year-to-date 2009 included a $340 restructuring
charge recorded in Employee separation / asset related charges, net
related to severance and related benefit costs, asset related
charges, and other non-personnel costs. Pre-tax amounts by segment
were: $(70) Coatings & Color Technologies, $(73) Electronic &
Communication Technologies, $(110) Performance Materials, $(86)
Safety & Protection, and $(1) Other.
(b) Second quarter and year-to-date 2009 included a $75 reduction in
estimated costs recorded in Employee separation / asset related
charges, net related to the 2008 restructuring program primarily due
to the achievement of work force reductions through non-severance
programs and redeployments. Pre-tax amounts by segment were: $(1)
Agriculture & Nutrition, $43 Coatings & Color Technologies, $1
Electronic & Communication Technologies, $28 Performance Materials,
$2 Safety & Protection, and $2 Other.
(c) Second quarter and year-to-date 2009 included a $50 benefit in Cost
of goods sold and other operating charges resulting from a reduction
of $26 from lower than estimated inventory and permanent investment
write-offs, and $24 in insurance recoveries relating to the damage
from Hurricane Ike in 2008. Total pre-tax amount relates to the
Performance Materials segment.
(d) Third quarter and year-to-date 2008 included a one-time pre-tax
charge of $227 million for costs associated with clean up,
restoration of manufacturing operations, and lost inventory resulting
from hurricanes damages. Pretax hurricane charges by segment were $4
Agriculture & Nutrition, $2 Electronic & Communication Technologies,
$216 Performance Materials and $5 Safety & Protection. These amounts
do not include the estimated impact of hurricane-related business
interruptions.
See Schedule C for detail by segment.
E. I. du Pont de Nemours and Company
Consolidated Segment Information
(Dollars in millions)
SCHEDULE C
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -----------------
SEGMENT SALES (1) 2009 2008 2009 2008
----------------- ---- ---- ---- ----
Agriculture & Nutrition $1,244 $1,303 $6,919 $6,727
Coatings & Color Technologies 1,470 1,757 4,009 5,269
Electronic & Communication Technologies 919 1,054 2,410 3,154
Performance Materials 1,303 1,708 3,332 5,231
Safety & Protection 1,036 1,529 3,067 4,477
Other 54 45 113 129
-- -- --- ---
Total Segment sales $6,026 $7,396 $19,850 $24,987
Elimination of transfers (65) (99) (160) (278)
--- --- ---- ----
Consolidated net sales $5,961 $7,297 $19,690 $24,709
====== ====== ======= =======
(1) Sales for the reporting segments include transfers.
E. I. du Pont de Nemours and Company
Consolidated Segment Information
(Dollars in millions)
SCHEDULE C (continued)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
PRETAX OPERATING INCOME/(LOSS) (PTOI) 2009 2008 2009 2008
------------------------------------- ---- ---- ---- ----
Agriculture & Nutrition $(113) $(21) $1,319 $1,269
Coatings & Color Technologies 182 190 269 627
Electronic & Communication Technologies 125 137 36 482
Performance Materials 230 (91) 89 351
Safety & Protection 93 251 152 825
-- --- --- ---
Total Growth Platforms 517 466 1,865 3,554
Pharmaceuticals 266 260 790 760
Other (26) (44) (113) (69)
--- --- ---- ---
Total Segment PTOI $757 $682 $2,542 $4,245
Net exchange gains (losses) (1) (128) 45 (202) (139)
Corporate expenses & net interest (238) (257) (728) (754)
---- ---- ---- ----
Income before income taxes $391 $470 $1,612 $3,352
==== ==== ====== ======
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
SIGNIFICANT ITEMS BY SEGMENT (PRE-TAX) (2) 2009 2008 2009 2008
------------------------------------------ ---- ---- ---- ----
Agriculture & Nutrition $- $(4) $(1) $(4)
Coatings & Color Technologies - - (27) -
Electronic & Communication Technologies - (2) (72) (2)
Performance Materials - (216) (32) (216)
Safety & Protection - (5) (84) (5)
Other - - 1 -
--- --- --- ---
Total significant items by segment $- $(227) $(215) $(227)
== ===== ===== =====
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
PTOI EXCLUDING SIGNIFICANT ITEMS 2009 2008 2009 2008
-------------------------------- ---- ---- ---- ----
Agriculture & Nutrition $(113) $(17) $1,320 $1,273
Coatings & Color Technologies 182 190 296 627
Electronic & Communication Technologies 125 139 108 484
Performance Materials 230 125 121 567
Safety & Protection 93 256 236 830
-- --- --- ---
Total Growth Platforms 517 693 2,081 3,781
Pharmaceuticals 266 260 790 760
Other (26) (44) (114) (69)
--- --- ---- ---
Total Segment PTOI excluding significant
items $757 $909 $2,757 $4,472
==== ==== ====== ======
(1) Gains and losses resulting from the company's hedging program are
largely offset by associated tax effects. See Schedule D for
additional information.
(2) See Schedule B for detail of significant items.
E. I. du Pont de Nemours and Company
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
SCHEDULE D
Summary of Earnings Comparisons
Three Months Nine Months
Ended Ended
September 30, September 30,
-------------- --------------
% %
2009 2008 Change 2009 2008 Change
---- ---- ------ ---- ---- ------
Segment PTOI $757 $682 11% $2,542 $4,245 -40%
Significant
items charge
included in
PTOI (per
Schedule B) - 227 215 227
--- --- --- ---
Segment PTOI
excluding
significant
items $757 $909 -17% $2,757 $4,472 -38%
==== ==== ====== ======
Net income
attributable
to DuPont $409 $367 11% $1,314 $2,636 -50%
Significant
items charge
included in
net income
attributable
to DuPont (per
Schedule B) - 146 141 146
--- --- --- ---
Net income
attributable
to DuPont
excluding
significant
items $409 $513 -20% $1,455 $2,782 -48%
==== ==== ====== ======
EPS $0.45 $0.40 13% $1.44 $2.89 -50%
Significant
items charge
included in
EPS (per
Schedule B) - 0.16 0.15 0.16
--- ---- ---- ----
EPS
excluding
significant
items $0.45 $0.56 -20% $1.59 $3.05 -48%
===== ===== ===== =====
Average
number of
diluted
shares
outstanding 910,291,000 907,950,000 0.3% 907,996,000 908,073,000 0.0%
Reconciliation of Earnings Per Share (EPS)
Outlooks
Year Ended
December 31,
-------------
2009 2008
Outlook Actual
------- ------
Earnings per share - excluding significant
items $1.95 - 2.05 $2.78
Significant items included in EPS(1):
2009 Restructuring charge (0.25) -
2008 Restructuring credit (charge) 0.06 (0.42)
Hurricane proceeds and adjustments 0.04 (0.16)
Net charge for significant items (0.15) (0.58)
----- -----
Reported EPS $1.80 - 1.90 $2.20
============ =====
(1) See Schedule B for detail of significant items.
Calculation of Free Cash Flow
Nine Months Ended
September 30,
-------------
2009 2008
---- ----
Cash provided by operating activities $923 $494
Less: Purchases of property, plant and
equipment 990 1,406
--- -----
Free cash flow $(67) $(912)
==== =====
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
Statements
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -----------------
2009 2008 2009 2008
---- ---- ---- ----
Income before income taxes $391 $470 $1,612 $3,352
Less: Net income attributable to
noncontrolling interests 5 5 10 10
Add: Interest expense 100 98 312 272
--- -- --- ---
Adjusted EBIT 486 563 1,914 3,614
Add: Depreciation and amortization 369 346 1,157 1,096
--- --- ----- -----
Adjusted EBITDA $855 $909 $3,071 $4,710
==== ==== ====== ======
Reconciliations of Fixed Costs as a Percent of Sales
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -----------------
2009 2008 2009 2008
---- ---- ---- ----
Total charges and expenses -
consolidated income statements $5,765 $7,247 $18,902 $22,414
Remove:
Interest expense (100) (98) (312) (272)
Variable costs (1) (2,758) (3,809) (9,528) (12,491)
Significant items - charge (2) - (227) (215) (227)
--- ---- ---- ----
Fixed costs $2,907 $3,113 $8,847 $9,424
====== ====== ====== ======
Consolidated net sales $5,961 $7,297 $19,690 $24,709
Fixed costs as a percent of
consolidated net sales 48.8% 42.7% 44.9% 38.1%
(1) Includes variable manufacturing costs, freight, commissions and
other selling expenses which vary with the volume of sales.
(2) See Schedule B for detail of significant items.
E. I. du Pont de Nemours and Company
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
SCHEDULE D (continued)
Exchange Gains/Losses
The company routinely uses forward exchange contracts to offset its net
exposures, by currency, related to the foreign currency denominated
monetary assets and liabilities of its operations. The objective of
this program is to maintain an approximately balanced position in
foreign currencies in order to minimize, on an after-tax basis, the
effects of exchange rate changes. The net pretax exchange gains and
losses are recorded in Other income, net on the Consolidated Income
Statements and are largely offset by the associated tax impact.
Three Months Nine Months
Ended Ended
September 30, September 30,
-------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Subsidiary/Affiliate Monetary
Position Gain/(Loss)
---------------------
Pretax exchange gains (losses)
(includes equity affiliates) $190 $(318) $288 $(110)
Local tax benefits (expenses) 7 40 (51) 37
--- -- --- --
Net after-tax impact from subsidiary
exchange gains (losses) $197 $(278) $237 $(73)
==== ===== ==== ====
Hedging Program Gain/(Loss)
---------------------------
Pretax exchange gains (losses) $(318) $363 $(490) $(29)
Tax benefits (expenses) 110 (125) 168 11
--- ---- --- --
Net after-tax impact from hedging
program exchange gains (losses) $(208) $238 $(322) $(18)
===== ==== ===== ====
Total Exchange Gain/(Loss)
--------------------------
Pretax exchange gains (losses) $(128) $45 $(202) $(139)
Tax benefits (expenses) 117 (85) 117 48
--- --- --- --
Net after-tax exchange gains (losses) $(11) $(40) $(85) $(91)
==== ==== ==== ====
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 Nine Months
Ended Ended
September 30, September 30,
-------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
Income before income taxes $391 $470 $1,612 $3,352
Add: Significant items - 227 215 227
Less: Net exchange gains (losses) (128) 45 (202) (139)
---- -- ---- ----
Income before income taxes, significant
items and exchange gains/losses $519 $652 $2,029 $3,718
==== ==== ====== ======
Provision for (benefit from) income
taxes $(23) $98 $288 $706
Add: Tax benefit on significant items - 81 74 81
Tax benefits (expenses) on exchange
gains/losses 117 (85) 117 48
--- --- --- --
Provision for income taxes, excluding
taxes on significant items and
exchange gains/losses $94 $94 $479 $835
=== === ==== ====
Effective income tax rate (5.9)% 20.9% 17.9% 21.1%
Significant items effect - 4.8% 1.9% 0.9%
- --- --- ---
Tax rate before significant items (5.9)% 25.7% 19.8% 22.0%
Exchange gains (losses) effect 24.0% (11.3)% 3.8% 0.5%
---- ----- --- ---
Base income tax rate 18.1% 14.4% 23.6% 22.5%
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SOURCE DuPont