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Executive Summary

E. I duPont de Nemours & Co. Inc. Michelle E. Ruffini ACG2021-Financial Accounting Spring 2004 0 Section - 080. Executive Summary. Dupont continues to remain a leader in the chemical industry. It leads in many areas including Safety and Protection Agriculture

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Executive Summary

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  1. E. I duPont de Nemours & Co. Inc.Michelle E. RuffiniACG2021-Financial AccountingSpring 2004 0 Section - 080

  2. Executive Summary Dupont continues to remain a leader in the chemical industry. It leads in many areas including Safety and Protection Agriculture Coatings and color technologies in the automotive industry

  3. Executive Summary • It’s recent years of expanding its business into the semiconductor industry is beginning to pay off. • With the planned sell of the Textiles and Interiors department which has been a high energy cost and lower yield, the company is moving ahead into the future of biochemistry.

  4. Executive Summary • Its financial health is positive with good growth potential. • The chemical industry for 2003 will be flat but the continuing growth in housing starts and automotive sells should be positive. • Dupont is now over 200 years old.

  5. Annual Report Link Instructions • The Annual Report is a pdf file. To get to the page following this link • http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=DD&script=11902&item_id='index.htm‘ • Then look to the right of the screen and select Annual Report. That will automatically begin a download of the pdf file.

  6. Part A. Introduction • Chad Holliday – Chairman & Chief Executive Office • Home Office Address, phone number, & web site • 1007 Market Street • Wilmington, DE 19898 • Phone: 302-774-1000 • Website: www.dupont.com • Ending date of latest fiscal year – 12/31/02

  7. Part A. IntroductionPrincipal products or services • Biotechnology • Production Agriculture;Food Processing

  8. Part A. IntroductionPrincipal products or services • Dupont Coatings & Color Technologies • Automotive; Collision Repair, Paper, Industrial Coatings; Digital Printing; Architectural Coatings;Plastics

  9. Part A. IntroductionPrincipal products or services • Dupont Electronic & Communication Technologies • Semiconductors; Printed Circuit Boards and Components; Communications; Display and Imaging

  10. Part A. IntroductionPrincipal products or services • Dupont Performance Materials • Automotive; Electrical and Electronics; Packaging; Construction

  11. Part A. IntroductionPrincipal products or services • Dupont Safety & Protection • Construction; Personal Protection – Industrial and First Responders; Medical; Process Industries; Safety and Operations Services

  12. Part A. IntroductionPrincipal products or services • Dupont Textiles & Interiors • Apparel; Carpet; Interior and Industrial Uses; and Nylon, Polyester and Elastane Intermediates; and related Specialties

  13. Part A. IntroductionMain geographic area of activity • International Company • Operates in 75 countries • ½ revenue from sales comes from outside US

  14. Part A. Audit Report • Auditors - PricewaterhouseCoopers LLP • Two Commerce Square, Suite 1700 • 2001 Market Street • Philadelphia, Pennsylvania 19103

  15. Part A. Audit Report • PricewaterhouseCoopers LLP reported Dupont’s Form 10-K the following: • “In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of E. I. du Pont de Nemours and company and its subsidiaries at December 21, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ending December 31, 2002 in conformity with accounting principles generally accepted in the United Sates of America.”

  16. Part A. Audit Report • My opinion of the report from Pricewaterhousecoopers, LLP • This statement does not tell you anything about the company’s health present or past. It does not give any insights to problems in the accounting practices or future issues negative or positive.

  17. Part A. Stock Market Information • Most recent price of the company’s stock • Opened 2/19/04 at 45.40 • Dividend per share - $1.40 • Date: 2/19/04 • Your opinion about the company stock as an investment? BUY/SELL/HOLD - HOLD

  18. Part A. Stock Information • Average Number of shares(millions) –diluted • 2002 999 • 2001 1,041 • Shares outstanding – year-end(millions) • 2002 994 • 2001 1,002

  19. Part A. Stock Market Prices • Market Price • year–end close • 2002 $42.40 • 2001 $42.51 • High-low range • 2002 $49.80 - $35.02 • 2001 $49.88-$32.64

  20. Part B. Industry Situation and Company Plans • Chemical Industry Outlook In 2003 the outlook for the industry was to remain flat. Source: Chemical Manufacturers Association & Standard and Poor’s • Note: This powerpoint presentation was done in February of 2004. The annual report for Dupont is not due till March 2004. It was difficult to trace back to 2003 outlooks since that year is now completed.

  21. Part B. Industry Situation and Company Plans • Dupont plans to sell the textile division. • The reason for this is due to the higher cost of energy and raw materials to produce the products in this division. • Brands include • Stainmaster carpet • Dupont Lycra • Dupont Teflon • Nylon (Dupont’s invention)

  22. Part B. Industry Situation and Company Plans • According to information from Argus Company Report dated 2/20/04 • We expect Dupont to utilize the proceeds from the Textile divisions sale (to Koch) to buy shares of the company stock, and this could give earnings a boost. We also expect some repayment of debt. • Dupont has said that it would contribute $200 million of this sale to U.S. pension plans.

  23. Part C. Income Statement Is the format most like a single-step or multistep format? The Income Statement follows the multistep format.

  24. Part C. Income Statement

  25. Part C. Income Statement

  26. Part C. Income Statement

  27. Part C. Income StatementComments • These items showed a decrease from 2001 to 2002 • Net Sales and other income • Cost of Goods Sold and other operating charges • Selling, general and administrative expenses • Amortization of goodwill and other intangible assets • Interest expense • Research and Development expense • Employee separation costs and write-down of assets • Gain on sale of Dupont Pharmaceuticals • Income from continuing operations before income taxes and minority interest • Provision for income taxes • Total Income from continuing operations • Income before extraordinary item and cumulative effect of changes in accounting principles. • I believe the reason for these changes is primarily due to the sale of the pharmaceutical business in 2001.

  28. Part C. Income StatementComments • These items showed a increase from 2001 to 2002 • Minority interests in earnings of consolidated subsidiaries • I believe the reason for this change is also due to the sale of the pharmaceutical business in 2001.

  29. Part C. Balance Sheet Current Assets

  30. Part C. Balance SheetOther Assets

  31. Part C. Balance SheetCurrent Liabilities

  32. Part C. Balance Sheet Other Liabilities

  33. Part C. Balance SheetSummary

  34. Part C. Balance Sheet Comments • These items showed a decrease from 2001 to 2002 • Assets • Total Current Assets • Goodwill • Other assets • Liabilities and Stockholders Equity • Total Current Liabilities • Deferred income taxes • Stockholder’s equity • I believe the changes to these items is due to the sale of the pharamaceutial business.

  35. Part C. Balance Sheet Comments • These items showed a increase from 2001 to 2002 • Assets • Marketable debt securities • Inventories - slightly • Income Taxes • Liabilities and Stockholders Equity • Accounts payable • Short-term borrowings and capital lease obligations – slightly • Other liabilities • I believe the changes to these items is due to the sale of the pharamaceutial business.

  36. Part C. Statement of Cash Flows Are cash flows from operations more or less than net income for the past two years? Cash flow in 2002 was $360 million. This increased from 2001 Is the company growing through investing activities, i.e., buying property, plant and equipment and other long lived assets? Yes, please read the next slides What is the company’s primary source of financing, i.e., long-term loans, stock sales? Sales and some long-term debt Overall, has cash increased or decreased over the past two years? Cash flow increased in 2002.

  37. Part C. Statement of Cash FlowsNew Investments and Joint Ventures • January • Dupont began a collaborative effort with the United Sates Conference of Mayors to survey the homeland security needs of civic leaders in more than 1,000 cities across the country. • February • The first aircraft baggage container, using Dupont Kevlar fiber as an integral component, passed the FAA’s blast resistant container test. The container is made by Telair International. • Dupont completed its previously announced $25. Billion share repurchase program by repurchasing $470 million worth of Dupont stock in January and February. • Dupont introduced “Super Solids” ultra-low emissions coating technology at the DaimlerCrysler assembly plant in Newark, Delaware, The new technology reduces volatile organic emissions of the final protective clear coat by 25% and offers a significant improvement in scratch and mar resistance.

  38. Part C. Statement of Cash FlowsNew Investments and Joint Ventures • March 2002 • Purchased an equity interest in Merrimac Industries, Inc. Dupont and Merrimac agreed to work together to better understand the dynamics of the markets for high-frequency electronic components and modules • Announced a five-year effort with the Massachusetts Institute of Technology (MIT) to develop lightweight molecular materials to equip US soldiers uniforms and gear that will help heal them, shield them and protect them against chemical and biological warfare • Established a joint venture with Asahi Kasei Corporation for the production and marketing of acetal(also known as POM) copolymer resins in China.

  39. Part C. Statement of Cash FlowsNew Investments and Joint Ventures • April • USDA Food Safety and Inspection Service adopted the Dupont BAX system, a genetics-based screening method, to detect Listeria monocytogenes in the nation’s meat and poultry supply. • May • Dupont Canada, Inc. acquired Liqui-Box Corporation, a leading manufacturer of packaging systems for pumpable food products for institutional applications. The acquisition complements Dupont’s Enhance flexible packaging systems for retail operations.

  40. Part C. Statement of Cash FlowsNew Investments and Joint Ventures • August • Dupont and RiTdisplay Corporation launched a mass-production line for next generation displays. The high-volume manufacturing plant will produce polymer-based OLED (organic light-emitting diode)flat-panel display modules for Dupont. • Dupont and China Nuclear Honghua Specialty Gases Company formed a joint venture for the manufacture and sale of nitrogen trifluoride(NF3), a key chamber cleaning and etch gas used in semiconductor manufacturing and flat panel displays.

  41. Part C. Statement of Cash FlowsNew Investments and Joint Ventures • September • Dupont acquired the Atofina fluortelomer surface protection and specialty surfactants business assets. With the acquistion, Dupont becomes the largest integrated producer of fluorotelomer-based specialty products for surface protection applications in North America and Europe. • October • As part of a federally-sponsored research and development initiative, Dupont, Sarnoff and Bell Labs agreed to develop new organic-tin film transistor technology on plastic substrates. • Dupont became the first major agricultural seed producer in the U.S. to be accredited by the National Seed Health System. This accreditation authorizes Pioneer to conduct plant health inspections and test sin compliance with international phytosanitary regulations, which will speed product development and the shipment of seed.

  42. Part C. Statement of Cash FlowsNew Investments and Joint Ventures • October • Dupont announced that it is part of a science-based consortium that will receive $19 million in matching funds from the U.S. Department of Energy for research leading to an innovative “bio-refinery” – capable of producing ethanol fuel and value-added chemicals from renewable resources such as corn. • November • Dupont acquired ChemFirst, Inc., which include two semiconductor fabrication materials businesses and a chemical intermediates business. With the acquisition, Dupont becomes a leading supplier of integrated circuit fabrication materials – complementing its role as a leading global supplier of ceramic and organic (rigid and flexible) packaging and circuit materials to the electronics industry.

  43. Part C. Statement of Cash FlowsNew Investments and Joint Ventures • December • The U.S. Federal Trade Commission granted approval for a new generic fiber subclass in recognition of the unique qualities of T-400, under the generic name elasterell-p, the latest innovation to be marketed under the Dupont Lycra brand • Dupont established a commercial seed business in China by forming a joint venture with one of China’s largest seed companies, Denghai Seed group. The joint venture will produce top-performing corn seed for Chinese farmers. • Dupont and Universal Display Corporation agreed to jointly develop a new generation of soluble OLED materials and technology. The joint development agreement establishes an important intellectual property collaboration aimed at combing the best elements of both small molecule OLED and solution processible OLED research.

  44. Cash Flow and Balance Sheet Statements from CEO • In a recent conference call, CEO Chad Holliday said, “our first call on cash is to maintain a strong balance sheet,’ and ‘we plan to reduce debt to maintain our rating,’

  45. Part D. Accounting Policies List the topics of the notes to the financial statements. The change required by the Federal Government was noted.

  46. Part E. Financial AnalysisLiquidity Ratios

  47. Part E. Financial AnalysisLiquidity Ratios - Comments • Dupont remains strong in its liquidity ratios. • Inventory turnover changed slightly from 2001 to 2002. • The future sale of the Textile division will assist Dupont in lowering costs for energy and raw materials.

  48. Part E. Financial AnalysisProfitability Ratios

  49. Part E. Financial AnalysisProfitability Ratios- Comments • Profitability remains high. Dupont remains the leader in the chemical industry. Its diversification helps it to solidify its bottom line and financial statements.

  50. Part E. Financial AnalysisSolvency Ratio

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