2015
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
____________________________________________________________________________
Commission file number 1-815
E. I. DU PONT DE NEMOURS AND COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
51-0014090
(I.R.S. Employer Identification No.)
974 Centre Road
Wilmington, Delaware 19805
(Address of principal executive offices)
Registrant's telephone number, including area code: 302-774-1000
Securities registered pursuant to Section 12(b) of the Act
(Each class is registered on the New York Stock Exchange, Inc.):
Title of Each Class
__________________________________________________
Common Stock ($.30 par value)
Preferred Stock
(without par value-cumulative)
$4.50 Series
$3.50 Series
No securities are registered pursuant to Section 12(g) of the Act.
_____________________________________________________
No
No
Indicate by check mark whether the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities Act).
Yes
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition
of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
No
No
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of voting stock held by nonaffiliates of the registrant (excludes outstanding shares beneficially owned
by directors and officers and treasury shares) as of June 30, 2015, was approximately $57.8 billion.
As of January 29, 2016, 871,681,000 shares (excludes 87,041,000 shares of treasury stock) of the company's common stock, $0.30
par value, were outstanding.
No
Documents Incorporated by Reference
(Specific pages incorporated are indicated under the applicable Item herein):
The company's Proxy Statement in connection with the Annual Meeting of Stockholders to be held on April 27, 2016.
Incorporated
By Reference
In Part No.
III
E. I. du Pont de Nemours and Company
Form 10-K
Table of Contents
The terms "DuPont" or the "company" as used herein refer to E. I. du Pont de Nemours and Company and its consolidated
subsidiaries, or to E. I. du Pont de Nemours and Company, as the context may indicate.
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
PART II
Item 5.
Item 6.
Item 7.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
SIGNATURES
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Page
2
10
17
17
18
19
21
22
49
50
50
50
50
51
52
53
54
54
55
58
Note on Incorporation by Reference
Information pertaining to certain Items in Part III of this report is incorporated by reference to portions of the company's definitive
2015 Annual Meeting Proxy Statement to be filed within 120 days after the end of the year covered by this Annual Report on
Form 10-K, pursuant to Regulation 14A (the Proxy).
1
ITEM 1. BUSINESS
Part I
DuPont was founded in 1802 and was incorporated in Delaware in 1915. Today, DuPont is creating higher growth and higher
value by extending the company’s leadership in agriculture and nutrition, strengthening and growing capabilities in advanced
materials and leveraging cross-company skills to develop a world-leading bio-based industrial business. Through these strategic
priorities, DuPont helps customers find solutions to capitalize on areas of growing global demand — enabling more, safer, nutritious
food; creating high-performance, cost-effective and energy efficient materials for a wide range of industries; and increasingly
delivering renewably sourced bio-based materials and fuels. Total worldwide employment at December 31, 2015 was about 52,000
people. The company has operations in about 90 countries worldwide and 60 percent of consolidated net sales are made to customers
outside the United States of America (U.S.). See Note 21 to the Consolidated Financial Statements for additional details on the
location of the company's sales and property.
Subsidiaries and affiliates of DuPont conduct manufacturing, seed production or selling activities and some are distributors of
products manufactured by the company. As a science and technology based company, DuPont competes on a variety of factors
such as product quality and performance or specifications, continuity of supply, price, customer service and breadth of product
line, depending on the characteristics of the particular market involved and the product or service provided. Most products are
marketed primarily through the company's sales force, although in some regions, more emphasis is placed on sales through
distributors. The company utilizes numerous suppliers as well as internal sources to supply a wide range of raw materials, energy,
supplies, services and equipment. To ensure availability, the company maintains multiple sources for fuels and many raw materials,
including hydrocarbon feedstocks. Large volume purchases are generally procured under competitively priced supply contracts.
DuPont Dow Merger of Equals
On December 11, 2015, DuPont and The Dow Chemical Company (Dow) announced entry into an Agreement and Plan of Merger
(the Merger Agreement), under which the companies will combine in an all-stock merger of equals. The merger transaction is
expected to close and become effective (the Effective Time) in the second half of 2016, subject to customary closing conditions,
including regulatory approvals and approvals by both DuPont and Dow shareholders. The combined company will be named
DowDuPont.
DuPont and Dow intend to pursue, subject to the receipt of approval by the board of directors of DowDuPont, the separation of
the combined company’s agriculture business, specialty products business and material science business through a series of one
or more tax-efficient transactions (collectively, the Business Separations.)
Subject to the terms and conditions of the Merger Agreement, each share of common stock, par value $0.30 per share, of DuPont
(DuPont Common Stock) issued and outstanding immediately prior to the Effective Time, excluding any shares of DuPont Common
Stock that are held in treasury, will be converted into the right to receive 1.2820 shares of common stock, par value $0.01 per
share, of DowDuPont (DowDuPont Common Stock), for each share of DuPont Common Stock with cash in lieu of any fractional
share of DowDuPont. Each share of DuPont Preferred Stock-$4.50 Series and DuPont Preferred Stock-$3.50 Series, in each case
issued and outstanding immediately prior to the Effective Time, shall remain issued and outstanding and be unaffected by the
merger.
Subject to the terms and conditions set forth in the Merger Agreement, at the Effective Time, each share of common stock, par
value $2.50 per share, of Dow (the Dow Common Stock) issued and outstanding immediately prior to the Effective Time, excluding
any shares of Dow Common Stock that are held in treasury, will be converted into the right to receive one share of DowDuPont
Common Stock and each share of Cumulative Convertible Perpetual Preferred Stock, Series A, par value $1.00 per share, of Dow
(the Dow Preferred) issued and outstanding immediately prior to the Effective Time will be automatically canceled and each holder
of shares of Dow Preferred will be deemed to hold the same number of shares of preferred stock of DowDuPont on equivalent
terms.
See the discussion entitled Dow DuPont Merger of Equals Part I, Item 1A, Risk Factors, and Part II, Item 7 Management’s
Discussion and Analysis of Financial Condition and Results of Operations, and Note 2 to the Consolidated Financial Statements
for further details and a discussion of some of the risks related to the transaction. Additional information about the Merger
Agreement is set forth in the company's Current Report on Form 8-K filed with the SEC on December 11, 2015.
2
ITEM 1. BUSINESS, continued
Part I
Spin-off of Performance Chemicals
On July 1, 2015, DuPont completed the separation of its Performance Chemicals segment through the spin-off of all of the issued
and outstanding stock of The Chemours Company (Chemours). In accordance with generally accepted accounting principles in
the U.S. (GAAP), the financial position and results of operations of the Performance Chemicals segment are presented as
discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented.
Additional details related to the separation can be found in Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations, on page 24 of this report and Note 3 to the Consolidated Financial Statements.
Productivity and Cost Savings Initiatives
On December 11, 2015, DuPont announced a 2016 global cost savings and restructuring plan designed to reduce $730 million in
costs in 2016 compared with 2015, which represents a reduction of operating costs on a run-rate basis of about $1.0 billion by end
of 2016. As part of the plan, the company committed to take 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. In connection
with the restructuring actions, the company recorded a pre-tax charge to earnings of $798 million in the fourth quarter 2015,
comprised of $656 million of severance and related benefit costs, $109 million of asset related charges, and $33 million of contract
termination costs. Additional details related to this plan can be found in Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, on page 23 of this report and Note 4 to the Consolidated Financial Statements.
In June 2014, DuPont announced its global, multi-year initiative to redesign its global organization and operating model to reduce
costs and improve productivity and agility across all businesses and functions. DuPont commenced a restructuring plan to realign
and rebalance staff function support, enhance operational efficiency, and to reduce residual costs associated with the separation
of its Performance Chemicals segment. As a result, during the years ended December 31, 2015 and 2014, pre-tax (benefits) charges
of $(21) million and $541 million, respectively, were recorded. Additional details related to this plan can be found in Item 7,
Management's Discussion and Analysis of Financial Condition and Results of Operations, on page 24 of this report and Note 4 to
the Consolidated Financial Statements.
Business Segments
The company consists of 10 businesses which are aggregated into 6 reportable segments based on similar economic characteristics,
the nature of the products and production processes, end-use markets, channels of distribution and regulatory environment. The
company's reportable segments are Agriculture, Electronics & Communications, Industrial Biosciences, Nutrition & Health,
Performance Materials and Safety & Protection. The company includes certain businesses not included in the reportable segments,
such as pre-commercial programs, nonaligned businesses and pharmaceuticals in Other. Additional information with respect to
business segment results is included in Item 7, Management's Discussion and Analysis of Financial Condition and Results of
Operations, on page 30 of this report and Note 22 to the Consolidated Financial Statements.
In November 2015, DuPont announced the consolidation of the DuPont Packaging & Industrial Polymers business with the DuPont
Performance Polymers business within the Performance Materials segment, as well as the consolidation of the DuPont Protection
Technologies business with the DuPont Building Innovations business within the Safety & Protection segment. Both consolidations
will be effective on January 1, 2016. The consolidations will create greater efficiency and enhanced capabilities in the two segments
where these businesses operate, the Performance Materials segment and the Safety & Protection segment, respectively. These
changes will not result in a change in reportable segments.
DuPont Sustainable Solutions, within the company's Safety & Protection segment, is comprised of two business units: clean
technologies and consulting solutions. Effective January 1, 2016, the clean technologies business unit will become part of the
Industrial Biosciences segment with the focus on working with customers to improve the performance, productivity and
sustainability of their products and processes. The company will explore a range of options to maximize the growth of the consulting
solutions business unit which effective January 1, 2016 will be reported within Other. Sustainable solutions net sales accounted
for about 2 percent of the company's total consolidated net sales for the years ended December 31, 2015, 2014 and 2013, respectively.
3
ITEM 1. BUSINESS, continued
Part I
Agriculture
Agriculture businesses, DuPont Pioneer (Pioneer) and DuPont Crop Protection (Crop Protection), leverage the company's
technology, customer relationships and industry knowledge to improve the quantity, quality and safety of the global food supply
and the global production agriculture industry. Land available for worldwide agricultural production is increasingly limited so
production growth will need to be achieved principally through improving crop yields and productivity rather than through increases
in planted area. The segment's businesses deliver a broad portfolio of products and services that are specifically targeted to achieve
gains in crop yields and productivity, including Pioneer® brand seed products and well-established brands of insecticides, fungicides
and herbicides. Research and development focuses on leveraging technology to increase grower productivity and to enhance the
value of grains and oilseeds through improved seed traits, superior seed germplasm and effective use of insecticides, herbicides
and fungicides. Agriculture accounted for approximately 55 percent of the company's total research and development expense in
2015.
Sales of the company's products in this segment are affected by the seasonality of global agriculture markets and weather patterns.
Sales and earnings performance in the Agriculture segment are significantly stronger in the first versus second half of the year
reflecting the northern hemisphere planting season. As a result of the seasonal nature of its business, Agriculture's inventory is at
its highest level at the end of the calendar year and is sold down in the first and second quarters. Trade receivables in the Agriculture
segment are at a low point at year-end and increase through the northern hemisphere selling season to peak at the end of the second
quarter.
Pioneer is a world leader in developing, producing and marketing corn hybrids and soybean varieties which improve the productivity
and profitability of its customers. Additionally, Pioneer develops, produces and markets canola, sunflower, sorghum, inoculants,
wheat and rice. As the world's population grows and the middle class expands, the need for crops for animal feed, food, biofuels
and industrial uses continues to increase. The business competes with other seed and plant biotechnology companies. Pioneer
seed sales amounted to 27 percent, 27 percent and 28 percent of the company's total consolidated net sales for the years ended
December 31, 2015, 2014 and 2013, respectively.
Pioneer's research and development focuses on integrating high yielding germplasm with value added proprietary and/or licensed
native and biotechnology traits with local environment and service expertise. Pioneer uniquely develops integrated products for
specific regional application based on local product advancement and testing of the product concepts. Research and development
in this arena requires long-term commitment of resources, extensive regulatory efforts and collaborations, partnerships and business
arrangements to successfully bring products to market. To protect its investment, the business employs the use of patents covering
germplasm and native and biotechnology traits in accordance with country laws. Pioneer holds multiple long-term biotechnology
trait licenses from third parties as a normal course of business. The biotechnology traits licensed by Pioneer from third parties
are contained in a variety of Pioneer crops, including corn hybrids and soybean varieties. The majority of Pioneer’s corn hybrids
and soybean varieties sold to customers contain biotechnology traits licensed from third parties under these long term licenses.
Pioneer is actively pursuing the development of innovations for corn hybrids, soybean varieties, canola, sunflower, wheat and rice
based on market assessments of the most valuable opportunities. In corn seeds, programs include innovations for drought and
nitrogen efficiency and insect protection. In soybean seeds, programs include products with enhanced end-use value and insect
protection.
Pioneer has seed production facilities located throughout the world. Seed production is performed directly by the business or
contracted with independent growers and conditioners. Pioneer's ability to produce seeds primarily depends upon weather
conditions and availability of reliable contract growers.
Pioneer markets and sells seed product primarily under the Pioneer® brand but also sells and distributes products utilizing additional
brand names. Pioneer promotes its products through multiple marketing channels around the world. In the corn and soybean
markets of the U.S. Corn Belt, Pioneer® brand products are sold primarily through a specialized force of independent sales
representatives. Outside of North America, Pioneer's products are marketed through a network of subsidiaries, joint ventures and
independent producer-distributors.
4
ITEM 1. BUSINESS, continued
Part I
Crop Protection serves the global production agriculture industry with crop protection products for field crops such as wheat, corn,
soybean and rice and specialty crops such as fruit, nut, vine and vegetables. Principle crop protection products are weed control,
disease control and insect control offerings for foliar application or as a seed treatment. Crop Protection products are marketed
and sold to growers and other end users through a network of wholesale distributors and crop input retailers. Sales for the business'
insect control portfolio is led by DuPontTM Rynaxypyr® insecticide, a product that is used across a broad range of core agricultural
crops.
The major commodities, raw materials and supplies for the Agriculture segment include: benzene derivatives, other aromatics and
carbamic acid related intermediates, corn and soybean seeds, insect control products, natural gas and seed treatments.
Agriculture net sales outside the U.S. accounted for 50 percent of the segment's total sales in 2015.
Electronics & Communications
Electronics & Communications (E&C) is a leading supplier of differentiated materials and systems for photovoltaics (PV),
consumer electronics, displays and advanced printing that enable superior performance and lower total cost of ownership for
customers. The segment leverages the company's strong materials and technology base to target attractive growth opportunities
in PV materials, circuit and semiconductor fabrication and packaging materials, display materials, packaging graphics, and ink-
jet printing. In the growing PV market, E&C continues to be an industry-leading innovator and supplier of metallization pastes
and backsheet materials that improve the efficiency and lifetime of solar cells and solar modules. Solar modules, which are made
up of solar cells and other materials, are installed to generate power. DuPont is a leading global supplier of materials to the PV
industry.
In the consumer electronics markets, E&C materials add value across multiple devices, with growth driven largely by smart phones
and tablets. The segment has a portfolio of materials for semiconductor fabrication and packaging, as well as innovative materials
for circuit applications, to address critical needs of electronic component and device manufacturers. In packaging graphics, E&C
is a leading supplier of flexographic printing systems, including Cyrel® photopolymer plates and platemaking systems. The segment
is investing in new products to strengthen its market leadership position in advanced printing markets. The segment supplies
pigmented inks used in digital printing applications for commercial and home office use. In the displays market, E&C has developed
solution-process technology, which it licenses, and a growing range of materials for active matrix organic light emitting diode
(AMOLED) television displays.
The major commodities, raw materials and supplies for E&C include: acrylic monomers, acetoxystyrene monomer, black and
color pigments, styrenic block copolymers, color dyes, copper foil, difluoroethane, diglycolamine, DMAC, hydroxylamine,
monomers and polymer resins, oxydianiline, polyester film, polymer films, precious metals and pyromellitic dianhydride.
E&C net sales outside the U.S. accounted for 80 percent of the segment's total sales in 2015.
Industrial Biosciences
Industrial Biosciences is a leader in developing and manufacturing a broad portfolio of bio-based products. The segment's enzymes
add value and functionality to processes and products across a broad range of markets such as animal nutrition, detergents, food
manufacturing, ethanol production and industrial applications. The result is cost and process benefits, better product performance
and improved environmental outcomes. Industrial Biosciences also makes DuPontTM Sorona® PTT renewably sourced polymer
for use in carpet and apparel fibers.
The segment includes a joint venture with Tate & Lyle PLC, DuPont Tate & Lyle Bio Products Company, LLC, to produce
BioPDOTM 1,3 propanediol using a proprietary fermentation and purification process. BioPDOTM is the key building block for
DuPontTM Sorona® PTT polymer.
The major commodities, raw materials and supplies for the Industrial Biosciences segment include: terephthalic acid, processed
grains (including dextrose and glucose), and glycols.
Industrial Biosciences net sales outside the U.S. accounted for 57 percent of the segment's total sales in 2015.
5
ITEM 1. BUSINESS, continued
Part I
Nutrition & Health
Nutrition & Health offers a wide range of sustainable, bio-based ingredients and advanced molecular diagnostic solutions, providing
innovative solutions for specialty food ingredients, food nutrition, health and safety. The segment's product solutions include the
wide-range of DuPont™ Danisco® food ingredients such as cultures and probiotics, notably Howaru®, emulsifiers, texturants,
natural sweeteners such as Xivia® and Supro®soy-based food ingredients. These ingredients hold leading market positions based
on industry leading innovation, knowledge and experience, relevant product portfolios and close-partnering with the world's food
manufacturers. Nutrition & Health serves various end markets within the food industry including dairy, bakery, meat and beverage
segments. Nutrition & Health has research, production and distribution operations around the world.
Nutrition & Health products are marketed and sold under a variety of brand names and are distributed primarily through its direct
route to market. The direct route to market focuses on strong customer collaborations and insights with multinational customers
and regional customers alike.
The major commodities, raw materials and supplies for the Nutrition & Health segment include: cellulose, gelatin, glycerol, guar,
organic oils, peels, saccharides, seaweed, soybeans, sugars and yeasts.
Nutrition & Health net sales outside the U.S. accounted for 66 percent of the segment's total sales in 2015.
Performance Materials
DuPont Performance Materials (Performance Materials) includes DuPont Performance Polymers (Performance Polymers) and
DuPont Packaging & Industrial Polymers (Packaging & Industrial Polymers) and provides its customers with innovative polymer
science solutions and expert application development assistance to enhance the performance, reduce the total system cost and
optimize the sustainability of their products. Solutions include productive, higher performance polymers, elastomers, films, parts,
and systems and solutions which improve the uniqueness, functionality and profitability of its customers' offerings. Key market
segments include automotive and transportation, packaging for food and beverages, electrical/electronic components, material
handling, healthcare, construction, semiconductor and aerospace. The segment has several large customers, primarily in the motor
vehicle OEM industry supply chain. The company has long-standing relationships with these customers and they are considered
to be important to the segment's operating results.
Performance Materials product portfolio includes elastomers and thermoplastic and thermoset engineering polymers which are
used by customers to fabricate components for mechanical, chemical and electrical systems. The main products include: DuPontTM
Zytel® long chain polymers, Zytel® HTN nylon resins, Zytel® nylon resins, Crastin® PBT polymer resins, Rynite® polymer resins,
Delrin® acetal resins, Hytrel® polyester thermoplastic elastomer resins, Vespel® parts and shapes, Vamac® ethylene acrylic elastomer
and Kalrez® perfluoroelastomer.
Performance Materials also specializes in resins and films used in packaging and industrial polymer applications, sealants and
adhesives and sporting goods. Key brands include: DuPontTM Surlyn® ionomer resins, Bynel® coextrudable adhesive resins, Elvax®
EVA resins, Nucrel® Elvaloy®polymer modifiers and Elvaloy® copolymer resins. Performance Materials product portfolio also
includes the DuPont Teijin Films joint venture, whose primary products are Mylar® and Melinex® polyester films.
In November 2013, DuPont entered into a definitive agreement to sell Glass Laminating Solutions/Vinyls (GLS/Vinyls), a part of
Packaging & Industrial Polymers, to Kuraray Co. Ltd. In June 2014, the sale was completed which resulted in a pre-tax gain of
$391 million ($273 million net of tax). The gain was recorded in other income, net in the company's Consolidated Income Statements
for the year ended December 31, 2014. GLS/Vinyls specializes in interlayers for laminated safety glass and its key brands include
SentryGlas® and Butacite® laminate interlayers.
The major commodities, raw materials and supplies for the Performance Materials segment include: acetic acid, acrylic monomers,
adipic acid, butanediol, dimethyl terephthalate, dodecanedioic acid, ethane, fiberglass, hexamethylene diamine, methanol,
methacrylic acid, methylacrylate, natural gas, paraxylene, perfluoromethylvinyl ether, polytetramethylene glycol, polyethylene,
polyolefin resin,purified terephthalic acid, and vinyl acetate monomer.
Performance Materials net sales outside the U.S. accounted for 69 percent of the segment's total sales in 2015.
6
ITEM 1. BUSINESS, continued
Part I
Safety & Protection
Safety & Protection businesses, DuPont Protection Technologies (Protection Technologies), DuPont Building Innovations
(Building Innovations) and DuPont Sustainable Solutions (Sustainable Solutions), satisfy the growing global needs of businesses,
governments and consumers for solutions that make life safer, healthier and more secure. By uniting market-driven science with
the strength of highly regarded brands, the segment delivers products and services to a large number of markets, including
construction, transportation, communications, industrial chemicals, oil and gas, electric utilities, automotive, manufacturing,
defense, homeland security and safety consulting.
Protection Technologies is focused on scientifically engineered products and systems to protect people and the environment. With
highly recognized brands like DuPont™ Kevlar® high strength material, Nomex® thermal resistant material and Tyvek® protective
material, the business has a broad portfolio with strong positions in many diverse global markets which include: aerospace, life
protection, automotive, energy, personal protection, medical, graphics, packaging and other industrial markets.
Building Innovations is committed to the science behind increasing the performance of building systems, helping reduce operating
costs and creating more sustainable structures. The business is a market leader of solid surfaces through its DuPontTM Corian®
and Montelli® lines of products which offer durable and versatile materials for residential and commercial purposes. DuPont™
Tyvek® offers industry leading solutions for the protection and energy efficiency of buildings and the business also offers Geotextiles
for Professional Landscaping applications.
Sustainable Solutions continues to help organizations worldwide reduce workplace injuries and fatalities while improving operating
costs, productivity and quality. Sustainable Solutions is a leader in the safety consulting field, selling training products, as well
as consulting services. Additionally, Sustainable Solutions is dedicated to clean air, clean fuel and clean water with offerings that
help reduce sulfur and other emissions, formulate cleaner fuels, or dispose of liquid waste. Its goal is to help maintain business
continuity and environmental compliance for companies in the refining and petrochemical industries, as well as for government
entities. In addition, the business is a leading global provider of process technology, proprietary specialty equipment and technical
services to the sulfuric acid industry.
The major commodities, raw materials and supplies for the Safety & Protection segment include: alumina trihydrate, benzene,
high density polyethylene, isophthaloyl chloride, metaphenylenediamine, methyl methacrylate, paraphenylenediamine, polyester
resin, terephthaloyl chloride and quartz.
Safety & Protection net sales outside the U.S. accounted for 59 percent of the segment's total sales in 2015.
Backlog
In general, the company does not manufacture its products against a backlog of orders and does not consider backlog to be a
significant indicator of the level of future sales activity. Production and inventory levels are based on the level of incoming orders
as well as projections of future demand. Therefore, the company believes that backlog information is not material to understanding
its overall business and should not be considered a reliable indicator of the company's ability to achieve any particular level of
revenue or financial performance.
Intellectual Property
As a science and technology based company, DuPont believes that securing intellectual property is an important part of protecting
its research. Some DuPont businesses operate in environments in which the availability and protection of intellectual property
rights affect competition. (Information on the importance of intellectual property rights to Pioneer is included in Item 1 Agriculture
business discussion beginning on page 4 of this report.)
Trade secrets are an important element of the company's intellectual property. Many of the processes used to make DuPont products
are kept as trade secrets which, from time to time, may be licensed to third parties. DuPont vigilantly protects all of its intellectual
property including its trade secrets. When the company discovers that its trade secrets have been unlawfully taken, it reports the
matter to governmental authorities for investigation and potential criminal action, as appropriate. In addition, the company takes
measures to mitigate any potential impact, which may include civil actions seeking redress, restitution and/or damages based on
loss to the company and/or unjust enrichment.
7
ITEM 1. BUSINESS, continued
Part I
Patents & Trademarks: DuPont continually applies for and obtains U.S. and foreign patents and has access to a large patent
portfolio, both owned and licensed. DuPont’s rights under these patents and licenses, as well as the products made and sold under
them, are important to the company in the aggregate. The protection afforded by these patents varies based on country, scope of
individual patent coverage, as well as the availability of legal remedies in each country. This significant patent estate may be
leveraged to align with the company’s strategic priorities within and across segments. At December 31, 2015, the company owned
over 21,300 patents with various expiration dates over the next 20 years. In addition to its owned patents, the company owns over
12,400 patent applications.
The company owns or licenses many trademarks that have significant recognition at the consumer retail level and/or business to
business level. Ownership rights in trademarks do not expire if the trademarks are continued in use and properly protected.
Research and Development
DuPont conducts research and development (R&D) programs across multiple fields including agriculture, biology, chemistry,
engineering, and materials science in support of the company's strategic priorities of Agriculture & Nutrition, Bio-based Industrials,
and Advanced Materials. DuPont accelerates market introductions and increases the impact of its offerings through collaboration
with partners in the commercial sector (customers and value chain partners) and by working with governments, academia, and
local communities around the world. DuPont’s R&D objectives are to leverage the company's unique world-class science and
technology capabilities with its deep understanding of markets and value chains to drive revenue and profit growth for the company
thereby delivering sustainable returns to our shareholders. DuPont's R&D investment is focused on delivering value to its customers
while extending its leadership across the high-value, science-driven segments of the agriculture and food value chains, strengthening
its lead as provider of differentiated, high-value advanced industrial materials, and building transformational new bio-based
industrial businesses. Each business in the company undertakes R&D activities to support its objectives. In addition, the company
directs R&D to support science-intensive new growth opportunities additive to the existing business portfolios. The R&D portfolio
is managed by senior business and R&D leaders to ensure consistency with the corporate and business strategies and to capitalize
on the application of emerging science. Additional information with respect to R&D related to Agriculture is included on page
4.
The company continues to protect its R&D investment through its intellectual property strategy. See discussion under "Intellectual
Property".
Additional information with respect to R&D, including the amount incurred during each of the last three fiscal years, is included
in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, on page 26 of this report.
Environmental Matters
Information related to environmental matters is included in several areas of this report: (1) Environmental Proceedings beginning
on page 18, (2) Management's Discussion and Analysis of Financial Condition and Results of Operations beginning on pages 41,
46-48 and (3) Notes 1 and 16 to the Consolidated Financial Statements.
Available Information
The company is subject to the reporting requirements under the Securities Exchange Act of 1934. Consequently, the company is
required to file reports and information with the Securities and Exchange Commission (SEC), including reports on the following
forms: annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.
The public may read and copy any materials the company files with the SEC at the SEC's Public Reference Room at 100 F Street,
NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC also maintains an Internet site at http://www.sec.gov that contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the SEC.
The company's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports are also accessible on the company's website at http://www.dupont.com by clicking on the section labeled "Investors",
then on "Filings & Reports" and then on "SEC Filings." These reports are made available, without charge, as soon as is reasonably
practicable after the company files or furnishes them electronically with the SEC.
8
ITEM 1. BUSINESS, continued
Part I
Executive Officers of the Registrant
Information related to the company's Executive Officers is included in Item 10, Directors, Executive Officers and Corporate
Governance, beginning on page 51 of this report.
9
ITEM 1A. RISK FACTORS
Part I
Risks relating to the Mergers
As described in Item 1, Part 1 Business, on December 11, 2015, DuPont and The Dow Chemical Company (Dow) agreed, subject
to the terms and conditions of the Merger Agreement, to effect a strategic combination of their respective businesses by: (i) forming
Diamond-Orion HoldCo, Inc., a corporation, organized under the laws of the State of Delaware and jointly owned by DuPont and
Dow (HoldCo), (ii) Dow merging with a newly formed, wholly owned direct subsidiary of HoldCo, with Dow surviving such
merger as a direct wholly owned subsidiary of HoldCo (the Dow Merger), and (iii) DuPont merging with a newly formed, wholly
owned direct subsidiary of HoldCo, with DuPont surviving such merger as a direct, wholly owned subsidiary of HoldCo (the
DuPont Merger and, together with the Dow Merger, the Mergers). Following the consummation of the Mergers, DuPont and Dow
intend to pursue, subject to the receipt of approval by the board of directors of HoldCo, the separation of the combined company’s
agriculture business, specialty products business and material science business through a series of one or more tax-efficient
transactions (collectively, the Business Separations).
The risk factors below should be read in conjunction with the risk factors related to the company’s operations set forth below and
other information contained in this report. HoldCo will file a registration statement on Form S-4 with the SEC that will include a
joint proxy statement/prospectus relating to the Mergers. DuPont urges you to read the registration statement on Form S-4 once
it becomes available because it will contain important information about the Mergers, including relevant risk factors.
The consummation of the Mergers is contingent upon the satisfaction of a number of conditions, including stockholder
and regulatory approvals, that are outside of DuPont’s and/or Dow’s control and that DuPont and/or Dow may be unable
to obtain. The process to obtain regulatory approvals could prevent, or substantially delay, the consummation of the Mergers
and DuPont cannot predict if regulators will impose additional conditions on HoldCo that may have an adverse effect on
the combined company’s business or results of operations. As a result, one or more conditions to closing of the Mergers
may not be satisfied and the Mergers may not be completed.
The ability to consummate the Mergers is subject to risks and uncertainties, including, but not limited to, the risks that the conditions
to the Mergers are not satisfied, or if possible, waived including, among others (i) the adoption of the Merger Agreement by the
stockholders of the common stock of each of DuPont and Dow; (ii) the receipt of certain domestic and foreign approvals under
competition laws; (iii) DuPont and Dow reasonably determining that the DuPont Merger and the Dow Merger do not constitute
an acquisition of a 50% or greater interest in DuPont and Dow, respectively, under the principles of Section 355(e) of the Internal
Revenue Code; and (iv) the absence of governmental restraints or prohibitions preventing the consummation of either of the
Mergers. The obligation of each of DuPont and Dow to consummate the Mergers is also conditioned on, among other things, the
receipt of a tax opinion from the tax counsel as to the tax-free nature of each of the Mergers. DuPont cannot provide any assurance
that the Mergers will be completed or that there will not be a delay in the completion of the Mergers. Additionally, if the Merger
Agreement is terminated, DuPont may incur substantial fees in connection with the termination of the transaction and DuPont will
not recognize the anticipated benefits of the Mergers. Regulatory authorities may refuse to permit the Mergers or may impose
restrictions or conditions on the Mergers that may harm the combined company if the Mergers are completed. Failure to consummate
the Mergers substantially as contemplated in the Merger Agreement on or before March 15, 2017 or if certain antitrust-related
conditions to the closing have not been satisfied and the parties therefore elect to extend, June 15, 2017, could have a material
adverse effect on the company’s stock price and results of operations.
10
ITEM 1A. RISK FACTORS, continued
Part I
There can be no assurance that the expected benefits of the Mergers, including the Business Separations, will occur or be
fully or timely realized.
The success of the Mergers will depend, in part, on the combined company’s ability to successfully combine the businesses of
DuPont and Dow. If the combined company is not able to successfully combine the businesses of DuPont and Dow in an efficient
and effective manner, including if the intended Business Separations are delayed or ultimately not consummated, the anticipated
benefits, synergies operational efficiencies and cost savings may not be realized fully or at all, or may take longer to realize than
expected, and the value of common stock, the revenues, levels of expenses and results of operations of the combined company
may be adversely affected.
The combination of two independent businesses is a complex, costly and time consuming process, and the management of the
combined company may face significant challenges in implementing such integration, including, without limitation:
•
•
•
•
•
•
the diversion of management’s attention from ongoing business concerns and performance shortfalls at one or both of
the companies as a result of the devotion of management’s attention to the Mergers;
ongoing diversion of the attention of management from the operation of the combined company’s business as a result of
the intended business separations;
difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects;
challenges of managing a larger combined company addressing differences in business culture and retaining key personnel;
the possibility of faulty assumptions underlying expectations regarding the integration process, including with respect to
the intended Business Separations;
unanticipated issues in integrating information technology, communications programs, financial procedures and
operations, and other systems, procedures and policies;
unanticipated changes in applicable laws and regulations;
•
• managing tax costs or inefficiencies associated with integrating the operations of the combined company and the intended
Business Separations;
coordinating geographically separate organizations; and
unforeseen expenses or delays associated with the Mergers.
•
•
Some of these factors will be outside of the control of management and any one of them could result in increased costs and diversion
of management’s time and energy, as well as decreases in the amount of expected revenues which could materially impact the
company’s business, financial conditions and results of operations. Difficulties in the integration process and other disruptions
resulting from the Mergers, could adversely affect the combined company’s relationships with employees, suppliers, customers,
distributors, licensors, and other stakeholders and could harm the reputations of DuPont, Dow and the combined company.
If the combined company is not able to adequately address integration challenges, the combined company may be unable to
integrate successfully DuPont’s and Dow’s operations, effect the intended business separations or to realize the anticipated benefits
of the transactions. In addition, the actual integration may result in additional and unforeseen expenses, and the anticipated benefits
of the integration plan may not be realized. Actual growth and cost savings, if achieved, may be lower and may take longer to
achieve than anticipated.
DuPont will be subject to business uncertainties and contractual restrictions until the Mergers are consummated.
Uncertainty about the effect of the Mergers on employees, suppliers, customers, distributors, licensors and licensees as well as
regulatory permits, licenses, contracts and other agreements, particularly for which the Mergers could be deemed a “change-in-
control” under the applicable terms and conditions may have an adverse effect on DuPont, Dow and consequently on the combined
company. Changes to existing business relationships, including termination or modification, could negatively affect each of
DuPont’s and/or Dow's revenues, earnings and cash flow, as well as the market price of its common stock. These uncertainties
may impair each party’s ability to attract, retain and motivate key personnel until the consummation of the Mergers, and could
cause suppliers, customers and others that deal with the parties to seek to change existing business relationships with them.
Retention of employees could be challenging during the pendency of the Mergers due to uncertainty about their future roles. If
key employees depart because of issues related to the uncertainty and difficulty of integration or a desire not to remain with the
businesses, the combined company’s business following the consummation of the Mergers could be negatively impacted. Further,
no assurance can be given that the combined company will be able to attract or retain key management personnel and other key
employees of DuPont and Dow to the same extent that DuPont and Dow have previously been able to attract or retain their
employees.
11
ITEM 1A. RISK FACTORS, continued
Part I
In addition, the Merger Agreement restricts each of DuPont and Dow, without the consent of the other party, from making certain
acquisitions and divestitures, entering into certain contracts, incurring certain indebtedness and expenditures, paying dividends
in excess of certain thresholds, repurchasing or issuing securities outside of existing share repurchase and equity award programs,
and taking other specified actions until the earlier of the completion of the mergers or the termination of the merger agreement.
These restrictions may prevent or delay pursuit of strategic corporate or business opportunities that may arise prior to the
consummation of the Mergers. Adverse effects arising during the pendency of the Mergers could be exacerbated by any delays in
consummation of the Mergers or termination of the Merger Agreement.
DuPont expects to incur substantial transaction-related costs in the connection with the Mergers.
DuPont expects to incur significant costs, expenses and fees for professional services and other transaction costs in connection
with the transaction. The substantial majority of these costs will be non-recurring expenses relating to the Mergers and the intended
Business Separations, including costs relating to integration and separation planning. These costs could adversely affect the
financial condition and results of operation of DuPont prior to the Mergers and of the combined company following the Mergers.
Risks Related to the Company’s Operations
The company's operations could be affected by various risks, many of which are beyond its control. Based on current information,
the company believes that the following identifies the most significant risk factors that could affect its businesses. Past financial
performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or
trends in future periods.
The company’s operations outside the United States are subject to risks and restrictions, which could negatively affect our
results of operations, financial condition, and cash flows.
The company’s operations outside the United States are subject to risks and restrictions, including fluctuations in currency values
and foreign-currency exchange rates; exchange control regulations; changes in local political or economic conditions; import and
trade restrictions; import or export licensing requirements and trade policy and other potentially detrimental domestic and foreign
governmental practices or policies affecting U.S. companies doing business abroad. Although DuPont has operations throughout
the world, sales outside the U.S. in 2015 were principally to customers in Eurozone countries, China, Brazil, and Japan. Further,
the company’s largest currency exposures are the European Euro, Brazilian Real, the Chinese Yuan, and the Japanese Yen. Market
uncertainty or an economic downturn in these geographic areas could reduce demand for the company’s products and result in
decreased sales volume, which could have a negative impact on DuPont’s results of operations. In addition, changes in exchange
rates may affect the company’s results from operations, financial condition and cash flows in future periods. The company actively
manages currency exposures that are associated with net monetary asset positions, committed currency purchases and sales, foreign
currency-denominated revenues and other assets and liabilities created in the normal course of business.
Volatility in energy and raw materials costs could have a significant impact on the company's sales and earnings.
The company's manufacturing processes consume significant amounts of energy and raw materials, the costs of which are subject
to worldwide supply and demand as well as other factors beyond the control of the company. Significant variations in the cost of
energy, which primarily reflect market prices for oil, natural gas, and raw materials affect the company's operating results from
period to period. Legislation to address climate change by reducing greenhouse gas emissions and establishing a price on carbon
could create increases in energy costs and price volatility.
When possible, the company purchases raw materials through negotiated long-term contracts to minimize the impact of price
fluctuations. Additionally, the company enters into over-the-counter and exchange traded derivative commodity instruments to
hedge its exposure to price fluctuations on certain raw material purchases. The company takes actions to offset the effects of higher
energy and raw material costs through selling price increases, productivity improvements and cost reduction programs. Success
in offsetting higher raw material costs with price increases is largely influenced by competitive and economic conditions and could
vary significantly depending on the market served. If the company is not able to fully offset the effects of higher energy and raw
material costs, it could have a significant impact on the company's financial results.
12
ITEM 1A. RISK FACTORS, continued
Part I
The company's results of operations and financial condition could be seriously impacted by business disruptions and
security breaches, including cybersecurity incidents.
Business and/or supply chain disruptions, plant and/or power outages and information technology system and/or network
disruptions, regardless of cause including acts of sabotage, employee error or other actions, geo-political activity, weather events
and natural disasters could seriously harm the company's operations as well as the operations of its customers and suppliers. Failure
to effectively prevent, detect and recover from security breaches, including attacks on information technology and infrastructure
by hackers; viruses; breaches due to employee error or actions; or other disruptions could result in misuse of the company's assets,
business disruptions, loss of property including trade secrets and confidential business information, legal claims or proceedings,
reporting errors, processing inefficiencies, negative media attention, loss of sales and interference with regulatory compliance.
Like most major corporations, the company is the target of industrial espionage, including cyber-attacks, from time to time. The
company has determined that these attacks have resulted, and could result in the future, in unauthorized parties gaining access to
at least certain confidential business information. However, to date, the company has not experienced any material financial impact,
changes in the competitive environment or business operations that it attributes to these attacks. Although management does not
believe that the company has experienced any material losses to date related to security breaches, including cybersecurity incidents,
there can be no assurance that it will not suffer such losses in the future. The company actively manages the risks within its control
that could lead to business disruptions and security breaches. As these threats continue to evolve, particularly around cybersecurity,
the company may be required to expend significant resources to enhance its control environment, processes, practices and other
protective measures. Despite these efforts, such events could have a material adverse effect on the company's business, financial
condition or results of operations.
Unpredictable seasonal and weather factors could impact sales and earnings from the company’s Agriculture segment.
The agriculture industry is subject to seasonal and weather factors, which can vary unpredictably from period to period. Weather
factors can affect the presence of disease and pests on a regional basis and, accordingly, can positively or adversely affect the
demand for crop protection products, including the mix of products used. The weather also can affect the quality, volume and cost
of seeds produced for sale as well as demand and product mix. Seed yields can be higher or lower than planned, which could lead
to higher inventory and related-write-offs and affect ability to supply.
Inability to discover, develop and protect new technologies and enforce the company's intellectual property rights could
adversely affect the company's financial results.
The company competes with major global companies that have strong intellectual property estates, including intellectual property
rights supporting the use of biotechnology to enhance products, particularly agricultural and bio-based products. Speed in
discovering, developing and protecting new technologies and bringing related products to market is a significant competitive
advantage. Failure to predict and respond effectively to this competition could cause the company's existing or candidate products
to become less competitive, adversely affecting sales. Competitors are increasingly challenging intellectual property positions and
the outcomes can be highly uncertain. If challenges are resolved adversely, it could negatively impact the company's ability to
obtain licenses on competitive terms, commercialize new products and generate sales from existing products.
Intellectual property rights, including patents, plant variety protection, trade secrets, confidential information, trademarks,
tradenames and other forms of trade dress, are important to the company's business. The company endeavors to protect its intellectual
property rights in jurisdictions in which its products are produced or used and in jurisdictions into which its products are imported.
However, the company may be unable to obtain protection for its intellectual property in key jurisdictions. Further, changes in
government policies and regulations, including changes made in reaction to pressure from non-governmental organizations, could
impact the extent of intellectual property protection afforded by such jurisdictions.
The company has designed and implemented internal controls to restrict access to and distribution of its intellectual property.
Despite these precautions, the company's intellectual property is vulnerable to unauthorized access through employee error or
actions, theft and cybersecurity incidents, and other security breaches. When unauthorized access and use or counterfeit products
are discovered, the company reports such situations to governmental authorities for investigation, as appropriate, and takes measures
to mitigate any potential impact. Protecting intellectual property related to biotechnology is particularly challenging because theft
is difficult to detect and biotechnology can be self-replicating. Accordingly, the impact of such theft can be significant. See Part I,
Item 1 for additional details on the company's intellectual property.
13
ITEM 1A. RISK FACTORS, continued
Part I
Market acceptance, government policies, rules, regulations and competition could affect the company's ability in certain
markets to generate and sustain sales or affect profitability from products based on biotechnology.
The company is using biotechnology to create and improve products, particularly in its Agriculture and Industrial Biosciences
segments. The company is also using biotechnology in the development of certain products and pre-commercial programs in Other.
These products enable cost and process benefits, better product performance and functionality, and improve environmental
outcomes in a broad range of products, technologies and processes such as seeds, enzymes, animal nutrition, detergents, food
ingredients, ethanol production and industrial applications. The company's ability to generate and sustain sales from such products
could be impacted by market acceptance, including perception of benefits and costs relative to products based on conventional
technologies, as well as governmental policies, laws and regulations that affect the development, manufacture and
commercialization of products, particularly the testing and planting of seeds containing biotechnology traits and the import of
grains, food and food ingredients and other products derived from those seeds.
In order to maintain its right to produce or sell existing products or to commercialize new products containing biotechnology traits,
particularly seed products, the company must be able to demonstrate its ability to satisfy the requirements of regulatory agencies.
Sales into and use of seeds with biotechnology traits in jurisdictions where cultivation has been approved could be affected if key
import markets have not approved the import of grains, food and food ingredients and other products derived from those seeds.
If import of grains, food and food ingredients and other products derived from those seeds containing such biotechnology traits
occurs in these markets, it could lead to disruption in trade and potential liability for the company.
In addition, the company’s regulatory compliance could be affected by the detection of low level presence of biotechnology traits
in conventional seed or products produced from such seed. Furthermore, the detection of biotechnology traits not approved in the
country of cultivation may affect the company’s ability to supply product and could affect exports of products produced from such
seeds and even result in crop destruction or product recalls.
DuPont’s ability to obtain and maintain regulatory approval for some of its products in the Agriculture segment could
limit sales or affect profitability in certain markets.
In most jurisdictions, the company must test the safety, efficacy and environmental impact of its Agricultural products to satisfy
regulatory requirements and obtain the necessary approvals. In certain jurisdictions the company must periodically renew its
approvals which may require it to demonstrate compliance with then-current standards. The regulatory environment is lengthy,
complex and in some markets unpredictable, with requirements that can vary by product, technology, industry and country. The
regulatory environment may be impacted by the activities of non-governmental organizations and special interest groups and
stakeholder reaction to actual or perceived impacts of new technology, products or processes on safety, health and the environment.
Obtaining and maintaining regulatory approvals requires submitting a significant amount of information and data, which may
require participation from technology providers. Regulatory standards and trial procedures are continuously changing. The pace
of change together with the lack of regulatory harmony could result in unintended noncompliance.
Responding to these changes and meeting existing and new requirements may involve significant costs or capital expenditures or
require changes in business practice that could result in reduced profitability. The failure to receive necessary permits or approvals
could have near- and long-term effects on the company’s ability to produce and sell some current and future products.
The company might not realize all of the expected benefits from cost and productivity initiatives to the extent and as
anticipated.
In connection with its ongoing review of costs, working capital performance and capital spending, in December 2015, the
company announced a global cost savings and restructuring plan designed to reduce costs in 2016 by $730 million as compared
with 2015. Also in connection with this review, the company has elected to defer certain projects including the design, testing
and deployment of a multi-year, phased implementation of an enterprise resource planning (ERP) system to integrate, simplify
and standardize processes and systems for information technology, sourcing and finance functions. The company has no current
intention to abandon the ERP implementation. However, depending on the length of the deferment and future implementation
plans, the company’s current investment could become impaired and significant additional investment could be required.
Failure to effectively implement cost and productivity initiatives, including the 2016 global cost savings and restructuring plan
as planned could adversely affect the company’s financial results.
14
ITEM 1A. RISK FACTORS, continued
Part I
Failure to effectively manage acquisitions, divestitures, alliances and other portfolio actions could adversely impact our
future results.
From time to time, the company evaluates acquisition candidates that may strategically fit its business and/or growth objectives.
If the company is unable to successfully integrate and develop acquired businesses, the company could fail to achieve anticipated
synergies and cost savings, including any expected increases in revenues and operating results, which could have a material adverse
effect on the company’s financial results. The company continually reviews its portfolio of assets for contributions to the company’s
objectives and alignment with its growth strategy. However, the company may not be successful in separating underperforming
or non-strategic assets and gains or losses on the divestiture of, or lost operating income from, such assets may affect the company’s
earnings. Moreover, the company might incur asset impairment charges related to acquisitions or divestitures that reduce its
earnings.
The company's business, including its results of operations and reputation, could be adversely affected by process safety
and product stewardship issues.
Failure to appropriately manage safety, human health, product liability and environmental risks associated with the company's
products, product life cycles and production processes could adversely impact employees, communities, stakeholders, the
environment, the company's reputation and its results of operations. Public perception of the risks associated with the company's
products and production processes could impact product acceptance and influence the regulatory environment in which the company
operates. While the company has procedures and controls to manage process safety risks, issues could be created by events outside
of its control including natural disasters, severe weather events, acts of sabotage and substandard performance by the company's
external partners.
As a result of the company's current and past operations, including operations related to divested businesses, the company
could incur significant environmental liabilities.
The company is subject to various laws and regulations around the world governing the environment, including the discharge of
pollutants and the management and disposal of hazardous substances. As a result of its operations, including its past operations
and operations of divested businesses, the company could incur substantial costs, including remediation and restoration costs. The
costs of complying with complex environmental laws and regulations, as well as internal voluntary programs, are significant and
will continue to be so for the foreseeable future. The ultimate costs under environmental laws and the timing of these costs are
difficult to predict. The company's accruals for such costs and liabilities may not be adequate because the estimates on which the
accruals are based depend on a number of factors including the nature of the matter, the complexity of the site, site geology, the
nature and extent of contamination, the type of remedy, the outcome of discussions with regulatory agencies and other Potentially
Responsible Parties (PRPs) at multi-party sites and the number and financial viability of other PRPs.
At December 31, 2015, the company had recognized a liability of $492 million related to the matters. Since considerable uncertainty
exists, under adverse changes in circumstances, the potential liability may range up to $1.0 billion above the amount accrued at
December 31, 2015. As described in Note 3 to the Consolidated Financial Statements, DuPont and Chemours entered a Separation
Agreement in connection with the spin-off of Chemours on July 1, 2015. Pursuant to the Separation Agreement, the company is
indemnified by Chemours for certain environmental matters that have an estimated liability of $291 million as of December 31,
2015 and a potential exposure that ranges up to approximately $610 million above the amount accrued. As such, the company
has recorded an indemnification asset of $291 million corresponding to the company’s accrual balance related to these matters at
December 31, 2015. If based on the actions, results of operations or financial position of Chemours, it were no longer probable
that the Chemours’ indemnification obligations would be satisfied, then the company could not continue to recognize the related
indemnification asset adversely impacting DuPont’s financial position.
Additional details on the company’s risks associated with environmental laws, regulations and environmental liabilities can be
found in Part I, Item 1, Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations,
on page 46 of this report and Note 16 to the Consolidated Financial Statements.
15
ITEM 1A. RISK FACTORS, continued
Part I
The company's results of operations could be adversely affected by litigation and other commitments and contingencies.
The company faces risks arising from various unasserted and asserted litigation matters, including, but not limited to, product
liability, patent infringement, antitrust claims, and claims for third party property damage or personal injury stemming from alleged
environmental torts. The company has noted a nationwide trend in purported class actions against chemical manufacturers generally
seeking relief such as medical monitoring, property damages, off-site remediation and punitive damages arising from alleged
environmental torts without claiming present personal injuries. The company also has noted a trend in public and private nuisance
suits being filed on behalf of states, counties, cities and utilities alleging harm to the general public. Various factors or developments
can lead to changes in current estimates of liabilities such as a final adverse judgment, significant settlement or changes in applicable
law. A future adverse ruling or unfavorable development could result in future charges that could have a material adverse effect
on the company. An adverse outcome in any one or more of these matters could be material to the company's financial results.
In the ordinary course of business, the company may make certain commitments, including representations, warranties and
indemnities relating to current and past operations, including those related to divested businesses and issue guarantees of third
party obligations. If the company were required to make payments as a result, they could exceed the amounts accrued, thereby
adversely affecting the company's results of operations.
Pursuant to the Separation Agreement, Chemours indemnifies DuPont against certain litigation, environmental, workers'
compensation and other liabilities that arose prior to the distribution. The term of this indemnification is indefinite and includes
defense costs and expenses, as well as monetary and non-monetary settlements and judgments. If based on the actions, results of
operations or financial position of Chemours, it were no longer probable that the Chemours’ indemnification obligations would
be satisfied, then the company could not continue to recognize the related indemnification asset adversely impacting DuPont’s
financial position.
16
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Part I
The company's corporate headquarters are located in Wilmington, Delaware. The company's manufacturing, processing, marketing
and research and development facilities, as well as regional purchasing offices and distribution centers are located throughout the
world. Additional information with respect to the company's property, plant and equipment and leases is contained in Notes 10,
16 and 21 to the Consolidated Financial Statements.
The company has investments in property, plant and equipment related to global manufacturing operations. Collectively there are
approximately 290 principal sites in total. The number of sites used by their applicable segment(s) by major geographic area around
the world is as follows:
Asia Pacific
EMEA2
Latin America
U.S. & Canada
Number of Sites
Agriculture
Electronics &
Communications
Industrial
Biosciences
Nutrition &
Health
Performance
Materials
Safety &
Protection
Total 1
23
26
22
61
132
10
3
—
17
30
1
7
1
7
16
13
26
10
16
65
13
6
1
12
32
9
4
3
11
27
69
72
37
124
302
1.
2.
Sites that are used by multiple segments are included more than once in the figures above.
Europe, Middle East, and Africa (EMEA).
The company's plants and equipment are well maintained and in good operating condition. The company believes it has sufficient
production capacity to meet demand in 2016. Properties are primarily owned by the company; however, certain properties are
leased. No title examination of the properties has been made for the purpose of this report and certain properties are shared with
other tenants under long-term leases.
DuPont recognizes that the security and safety of its operations are critical to its employees, community and to the future of the
company. As such, the company has merged chemical site security into its safety core value where it serves as an integral part of
its long standing safety culture. Physical security measures have been combined with process safety measures (including the use
of inherently safer technology), administrative procedures and emergency response preparedness into an integrated security plan.
The company has conducted vulnerability assessments at operating facilities in the U.S. and high priority sites worldwide and
identified and implemented appropriate measures to protect these facilities from physical and cyber-attacks. DuPont is working
with carriers, including railroad, shipping and trucking companies, to secure chemicals in transit.
17
ITEM 3. LEGAL PROCEEDINGS
Part I
The company is subject to various litigation matters, including, but not limited to, product liability, patent infringement, antitrust
claims, and claims for third party property damage or personal injury stemming from alleged environmental torts. Information
regarding certain of these matters is set forth below and in Note 16 to the Consolidated Financial Statements.
Litigation
Imprelis® Herbicide Claims Process
Information related to this matter is included in Note 16 to the Consolidated Financial Statements under the heading Imprelis®.
PFOA: Environmental and Litigation Proceedings
For purposes of this report, the term PFOA means collectively perfluorooctanoic acid and its salts, including the ammonium salt
and does not distinguish between the two forms. Information related to this matter is included in Note 16 to the Consolidated
Financial Statements under the heading PFOA.
Environmental Proceedings
LaPorte Plant, LaPorte, Texas
The U.S. Environmental Protection Agency (EPA) conducted a multimedia inspection at the LaPorte facility in January 2008.
DuPont, EPA and the Department of Justice (DOJ) began discussions in the Fall 2011 relating to the management of certain
materials in the facility's waste water treatment system, hazardous waste management, flare and air emissions. These negotiations
continue.
LaPorte Plant, LaPorte, Texas - Crop Protection
On November 15, 2014 there was a release of methyl mercaptan at the company’s LaPorte facility. The release occurred at the
site’s Crop Protection unit resulting in four employee fatalities inside the unit. DuPont is continuing its investigation into the
incident. Several governmental agencies also are conducting their own investigations. DuPont is cooperating with these agency
reviews. In May 2015, the Occupational Safety & Health Administration (OSHA) cited the company for eight serious and one
repeat violation with an associated penalty of $99,000. The company is contesting OSHA’s findings.
LaPorte Plant, LaPorte, Texas - OSHA Process Safety Management (PSM) Audit
In 2015, OSHA conducted a PSM audit of the Crop Protection and Fluoroproducts units at the LaPorte Plant. In July 2015, OSHA
cited the company for three willful, one repeat and four serious PSM violations and placed the company in its Severe Violator
Enforcement Program. OSHA has proposed a penalty of $273,000. The company is contesting OSHA’s findings.
Sabine Plant, Orange, Texas
In June 2012, DuPont began discussions with DOJ and EPA related to a multimedia inspection that EPA conducted at the Sabine
facility in March 2009. The discussions involve the management of materials in the facility's waste water treatment system,
hazardous waste management, flare and air emissions, including leak detection and repair.
18
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market for Registrant's Common Equity and Related Stockholder Matters
The company's common stock is listed on the New York Stock Exchange, Inc. (symbol DD) and certain non-U.S. exchanges. The
number of record holders of common stock was approximately 62,000 at January 29, 2016.
Holders of the company's common stock are entitled to receive dividends when they are declared by the Board of Directors. While
it is not a guarantee of future conduct, the company has continuously paid a quarterly dividend since the fourth quarter 1904.
Dividends on common stock and preferred stock are usually declared in January, April, July and October. When dividends on
common stock are declared, they are usually paid mid-March, June, September and December. Preferred dividends are paid on
or about the 25th of January, April, July and October. The Stock Transfer Agent and Registrar is Computershare Trust
Company, N.A.
The company's quarterly high and low trading stock prices and dividends per common share for 2015 and 2014 are shown below.
2015
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
2014
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Market Prices1
High
Low
Per Share
Dividend
Declared
$
$
75.72 $
61.93
75.80
80.65
75.82 $
72.92
69.75
67.95
47.43 $
47.11
63.55
70.19
64.55 $
63.70
64.35
59.35
0.38 2
0.38 2
0.49
0.47
0.47
0.47
0.45
0.45
1.
2.
Historical market prices do not reflect any adjustment for the impact of the spin-off of Chemours.
Per share dividend declared includes impact of the spin-off of Chemours.
Issuer Purchases of Equity Securities
In January 2014, the company's Board of Directors authorized a $5 billion share buyback plan. There is no required completion
date for purchases under this plan.
In the first quarter 2015, DuPont announced its intention to buy back shares of about $4 billion using the distribution proceeds
received from Chemours. In connection with the completion of the spin-off of Chemours, the Board of Directors authorized the
use of the distribution proceeds to buy back shares of the company's common stock as follows: $2 billion to be purchased and
retired by December 31, 2015 with the remainder to be purchased and retired by December 31, 2016 . In August 2015, the company
entered an accelerated share repurchase (ASR) agreement. Under the terms of the ASR agreement, the company paid $2 billion
to the financial institution and received and retired 35 million shares at an average price of $57.16 per share.
DuPont’s objective continues to be to complete the remaining $2 billion stock buyback by year end December 31, 2016. However,
as a result of the planned merger of equals with Dow, the company expects it will have limited opportunities to enter the market
prior to the shareholder vote on the merger. After the vote, the company plans to make repurchases.
See Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, on page 37 of this
report and Note 17 to the Consolidated Financial Statements for additional information.
19
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES, continued
The following table summarizes information with respect to the company's purchase of its common stock during the three months
ended December 31, 2015:
Month
Total Number of Shares
Purchased
Average Price
Paid per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Program
Approximate Value
of Shares that May
Yet Be Purchased
Under the Programs(1)
(Dollars in millions)
December:
ASR(2)
Total
6,208,599
6,208,599
$57.16
6,208,599
6,208,599 $
4,647
1.
2.
Represents approximate value of shares that may yet be purchased under the 2014 and 2015 plans.
Shares purchased in December 2015 include the final share delivery amount under the August ASR agreement.
Stock Performance Graph
The following graph presents the cumulative five-year total shareholder return for the company's common stock compared with
the S&P 500 Stock Index and the Dow Jones Industrial Average.
12/31/2010
12/31/2011
12/31/2012
12/31/2013
12/31/2014
12/31/2015
DuPont
S&P 500 Index
Dow Jones Industrial Average
$
100 $
100
100
95 $
102
108
96 $
118
119
144 $
157
155
168 $
178
170
164
181
171
The graph assumes that the values of DuPont common stock, the S&P 500 Stock Index and the Dow Jones Industrial Average
were each $100 on December 31, 2010 and that all dividends were reinvested.
20
Part II
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in millions, except per share)
Summary of operations1
Net sales
Employee separation / asset related charges, net
2015
2014
2013
2012
2011
$ 25,130 $ 28,406 $ 28,998 $ 27,610 $ 25,883
$
810 $
476 $
112 $
457 $
53
Income from continuing operations before income taxes
$ 2,591 $ 4,313 $ 2,566 $ 1,290 $ 1,715
Provision for income taxes on continuing operations
$
696 $ 1,168 $
360 $
122 $
59
Net income attributable to DuPont
$ 1,953 $ 3,625 $ 4,848 $ 2,755 $ 3,559
Basic earnings per share of common stock from continuing operations
$
2.10 $
3.42 $
2.36 $
1.21 $
2.09 $
3.39 $
2.34 $
1.20 $
1.73
1.71
Diluted earnings per share of common stock from continuing operations $
Financial position at year-end
Working capital2
Total assets
$ 7,402 $ 8,517 $ 10,541 $ 7,173 $ 6,452
$ 41,166 $ 50,490 $ 52,142 $ 50,339 $ 49,062
Borrowings and capital lease obligations
Short-term
Long-term
Total equity
General
For the year
Purchases of property, plant & equipment and investments in
affiliates
Depreciation1
Research and development expense1
Weighted-average number of common shares outstanding (millions)
Basic
Diluted
Dividends per common share
At year-end
Employees (thousands)3
Closing stock price
Common stockholders of record (thousands)
$ 1,165 $ 1,422 $ 1,721 $ 1,275 $
817
$ 7,642 $ 9,233 $ 10,699 $ 10,429 $ 11,691
$ 10,200 $ 13,378 $ 16,286 $ 10,299 $ 9,208
$ 1,705 $ 2,062 $ 1,940 $ 1,890 $ 1,910
$
978 $ 1,006 $ 1,027 $ 1,065 $
941
$ 1,898 $ 1,958 $ 2,037 $ 2,001 $ 1,843
894
900
915
922
926
933
933
942
928
941
$
1.72 $
1.84 $
1.78 $
1.70 $
1.64
52
54
55
61
61
$ 66.60 $ 73.94 $ 64.97 $ 44.98 $ 45.78
63
66
70
74
78
1.
Information has been restated to reflect the impact of discontinued operations, as applicable. See Note 1, Basis of Presentation, to the Consolidated Financial
Statements for further information.
2. Working capital has been restated to exclude the assets and liabilities related to the Performance Chemicals segment. The assets and liabilities related to the
Performance Chemicals business are presented as assets of discontinued operations and liabilities of discontinued operations, respectively, in the Consolidated
Balance Sheets for all periods presented. At December 31, 2012, working capital included approximately $2 billion of net assets related to the Performance
Coatings business, of which approximately $1.3 billion was previously considered to be noncurrent and was classified as held for sale as of December 31,
2012. Working capital at December 31, 2013 includes cash received from the sale of the Performance Coatings business. See Note 3 to the Consolidated
Financial Statements for further information.
Number of employees excludes employees associated with the Performance Chemicals segment for all periods presented.
3.
21
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CAUTIONARY STATEMENTS ABOUT FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements which may be identified by their use of words like “plans,” “expects,” “will,”
“anticipates,” “believes,” “intends,” “projects,” “estimates” or other words of similar meaning. All statements that address
expectations or projections about the future, including statements about the company's strategy for growth, product development,
regulatory approval, market position, anticipated benefits of recent acquisitions, timing of anticipated benefits from restructuring
actions, outcome of contingencies, such as litigation and environmental matters, expenditures, financial results, and timing of, as
well as expected benefits, including synergies, from the proposed merger with The Dow Chemical Company (Dow) and intended
post-merger separations, are forward-looking statements.
Forward-looking statements are based on certain assumptions and expectations of future events which may not be accurate or
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:
• Risks related to the agreement between DuPont and Dow to effect an all-stock merger of equals, including the completion
of the proposed transaction on anticipated terms and timing, the ability to fully and timely realize the expected benefits
of the proposed transaction and risks related to the intended business separations contemplated to occur after the completion
of the proposed transaction;
• Volatility in energy and raw material prices;
•
• Outcome of significant litigation and environmental matters, including those related to divested businesses, including
Failure to develop and market new products and optimally manage product life cycles;
realization of associated indemnification assets, if any;
Failure to appropriately manage process safety and product stewardship issues;
•
• Ability to obtain and maintain regulatory approval for its products especially in the Agriculture segment;
•
Failure to realize all of the expected benefits from cost and productivity initiatives to the extent and as anticipated;
• Effect of changes in tax, environmental and other laws and regulations or political conditions in the United States of
America (U.S.) and other countries in which the company operates;
• Conditions in the global economy and global capital markets, including economic factors such as inflation, deflation,
•
•
fluctuation in currency rates, interest rates and commodity prices;
Failure to appropriately respond to market acceptance, government rules, regulations and policies affecting products
based on biotechnology;
Impact of business disruptions, including supply disruptions, and security threats, regardless of cause, including acts of
sabotage, cyber-attacks, terrorism or war, natural disasters and weather events and patterns which could affect demand
as well as availability of product, particularly in the Agriculture segment;
• Ability to discover, develop and protect new technologies and enforce the company's intellectual property rights; and
•
Successful integration of acquired businesses and separation of underperforming or non-strategic assets or businesses.
For 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, see the Risk Factors discussion set forth under Part I, Item 1A beginning on page 10.
Overview
DuPont Dow Merger of Equals On December 11, 2015, DuPont and Dow announced entry into an Agreement and Plan of
Merger (the Merger Agreement), under which the companies will combine in an all-stock merger of equals. The merger transaction
is expected to close in the second half of 2016, subject to customary closing conditions, including regulatory approvals and approvals
by both DuPont and Dow shareholders. The combined company will be named DowDuPont.
DuPont and Dow intend to pursue, subject to the receipt of approval by the board of directors of DowDuPont, the separation of
the combined company’s agriculture business, specialty products business and material science business through a series of one
or more tax-efficient transactions (collectively, the Business Separations.)
In connection with the planned merger, the company incurred $10 million in transaction related costs, which were recorded in
selling, general and administrative expenses in the Consolidated Income Statement for the year ended December 31, 2015.
22
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
See the discussion entitled Dow DuPont Merger of Equals under Part 1, Item 1 Business of this report, Part 1, Item 1A, Risk
Factors, and Note 2 to the Consolidated Financial Statements for further details and a discussion of some of the risks related to
the transaction.
Purpose DuPont’s businesses serve markets where the increasing demand for more and healthier food, renewably sourced
materials and fuels, and advanced industrial materials is creating substantial growth opportunities. The company’s unique
combination of sciences, proven research and development (R&D) engine, broad global reach, and deep market penetration are
distinctive competitive advantages that position the company to continue capitalizing on this enormous potential.
Strategy DuPont’s near term focus is to deliver earnings growth while positioning the businesses to compete successfully over
the long term; continue to improve capital allocation and working capital performance; and complete the proposed merger of equals
with Dow.
DuPont has dramatically refined its portfolio to focus investment in areas of significant opportunity and secular growth; enhanced
its innovation platform to deliver substantial revenues from new products; increased focus on efficiency, cost discipline, and
accountability; and expanded markets geographically. The company is better connecting its laboratories and the marketplace, and
striving for faster, more effective execution in delivering innovative solutions for customers.
The goal is to increase agility and responsiveness to market conditions, a necessity to win in a globally competitive environment,
and drive growth across three strategic priorities: extending leadership in agriculture and nutrition, strengthening and growing
advanced materials capabilities, and leveraging science to develop a world leading bio-based industrial business.
The company is committed to maintaining a strong balance sheet and to return excess cash to shareholders unless there is a
compelling opportunity to invest for growth.
Results Net sales of $25.1 billion, were down 12 percent versus prior year, principally reflecting 7 percent negative impact from
currency, 3 percent lower volume and 2 percent negative impact from portfolio changes. Income from continuing operations after
income taxes declined from $3.1 billion to $1.9 billion, reflecting lower segment operating earnings, the absence of prior year
gains on businesses and other assets, and higher restructuring charges, partially offset by costs savings associated with the 2014
redesign initiative and restructuring plan. Total pre-tax segment operating earnings of $4.2 billion, were 16 percent below last year,
principally due to the negative impact of currency of about $785 million and lower volumes driven by weakness in agriculture
markets, partially offset by costs savings associated with the 2014 operational redesign initiative and restructuring plan.
Analysis of Operations
2016 Global Cost Savings and Restructuring Plan On December 11, 2015, DuPont announced a 2016 global cost savings and
restructuring plan designed to reduce $730 million in costs in 2016 compared with 2015, which represents a reduction of operating
costs on a run-rate basis of about $1.0 billion by end of 2016. As part of the plan, the company committed to take 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. In connection with the restructuring actions, the company recorded a pre-tax charge to earnings
of $798 million in the fourth quarter 2015, comprised of $656 million of severance and related benefit costs, $109 million of asset
related charges, and $33 million of contract termination costs. Future cash expenditures related to this charge are anticipated to
be approximately $680 million, primarily related to the payment of severance and related benefits. The restructuring actions
associated with this charge are expected to impact approximately 10 percent of DuPont’s workforce and to be substantially complete
in 2016. The company anticipates additional charges could occur in relation to the restructuring actions, which it cannot reasonably
estimate at this time.
23
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
Redesign Initiative and 2014 Restructuring Plan In June 2014, DuPont announced its global, multi-year initiative to redesign
its global organization and operating model to reduce costs and improve productivity and agility across all businesses and functions.
DuPont commenced a restructuring plan to realign and rebalance staff function support, enhance operational efficiency, and to
reduce residual costs associated with the separation of its Performance Chemicals segment. As a result, during the years ended
December 31, 2015 and 2014 pre-tax (benefits) charges of $(21) million and $541 million, respectively, were recorded. Cost
reductions from the 2014 operational redesign are essentially complete and for full year 2015, the company delivered incremental
cost savings of approximately $0.40 per share year over year. Additional details related to this plan can be found in Note 4 to the
Consolidated Financial Statements.
Separation of Performance Chemicals In October 2013, DuPont announced its intention to separate its Performance Chemicals
segment through a U.S. tax-free spin-off to shareholders, subject to customary closing conditions. In July 2015, DuPont completed
the separation of its Performance Chemicals segment through the spin-off of all of the issued and outstanding stock of The Chemours
Company (Chemours).
Divestiture of Performance Coatings In August 2012, the company entered into a definitive agreement with Flash Bermuda
Co. Ltd., a Bermuda exempted limited liability company formed by affiliates of The Carlyle Group (collectively referred to as
"Carlyle") in which Carlyle agreed to purchase certain subsidiaries and assets comprising the company's Performance Coatings
business. In February 2013, the sale was completed resulting in a pre-tax gain of approximately $2.7 billion ($2.0 billion net of
tax). The gain was recorded in income from discontinued operations after income taxes in the Consolidated Income Statement for
the year ended December 31, 2013.
24
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
(Dollars in millions)
NET SALES
2015
2014
2013
$
25,130 $
28,406 $
28,998
2015 versus 2014 The table below shows a regional breakdown of 2015 consolidated net sales based on location of customers
and percentage variances from prior year:
(Dollars in billions)
Worldwide
U.S. & Canada
EMEA1
Asia Pacific
Latin America
Percent Change Due to:
2015
Net Sales
Percent
Change vs.
2014
Local
Price and
Product Mix
Currency
Volume
Portfolio and
Other
$
25.1
10.8
6.0
5.6
2.7
(12)
(6)
(17)
(9)
(23)
—
(2)
2
(2)
2
(7)
(1)
(15)
(3)
(15)
(3)
(2)
(2)
(2)
(9)
(2)
(1)
(2)
(2)
(1)
1.
Europe, Middle East, and Africa (EMEA).
Net sales of $25.1 billion were down 12 percent versus prior year reflecting a 7 percent negative impact from weaker currencies,
particularly the Brazilian Real and the European Euro, 3 percent lower volume and a 2 percent negative impact from the absence
of sales from divested businesses. Lower volume principally reflects a 6 percent decline in Agriculture that was primarily driven
by lower seed volume and reduced demand for insect control products in Latin America, and a 7 percent decline in volumes for
Electronics & Communications, primarily driven by competitive pressures impacting sales of Solamet® paste. These declines more
than offset volume growth for Performance Materials, Nutrition & Health, and Industrial Biosciences. Portfolio and other reflects
the impact of the prior year sales of Glass Laminating Solutions/Vinyls within the Performance Materials segment and Sontara®
within the Safety & Protection segment. The impact from local prices and product mix was about even with prior year as 3 percent
higher Agriculture prices were offset primarily by lower prices in Performance Materials and Electronics & Communications. Net
sales in developing markets were $8.2 billion, 33 percent of total company net sales versus 34 percent in 2014, representing a
slight decline principally due to lower Agriculture volume in Latin America. Developing markets include China, India, countries
located in Latin America, Eastern and Central Europe, Middle East, Africa and South East Asia.
2014 versus 2013 The table below shows a regional breakdown of 2014 consolidated net sales based on location of customers
and percentage variances from 2013:
(Dollars in billions)
Worldwide
U.S. & Canada
EMEA1
Asia Pacific
Latin America
Percent Change Due to:
2014
Net Sales
Percent
Change vs.
2013
Local
Price and
Product Mix
Currency
Volume
Portfolio and
Other
$
28.4
11.4
7.3
6.2
3.5
(2)
(3)
2
(2)
(7)
—
—
1
(1)
(1)
(1)
—
—
(2)
(3)
—
(2)
2
3
(2)
(1)
(1)
(1)
(2)
(1)
1.
Europe, Middle East, and Africa (EMEA).
Net sales of $28.4 billion were 2 percent below prior year including a 1 percent reduction from portfolio changes, primarily in the
Performance Materials Segment, and a 1 percent negative currency impact reflecting the stronger U.S. dollar versus most currencies.
Local prices were flat as 1 percent higher Agriculture prices were offset by lower prices in Electronics & Communication, primarily
from lower metals prices. In developing markets, sales declined 1 percent to $9.7 billion. Sales in developing markets represented
34 percent of total company sales in 2014 and 2013.
25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
Part II
OPERATIONS, continued
(Dollars in millions)
COST OF GOODS SOLD
As a percent of net sales
2015
2014
2013
$
15,112
$
17,023
$
17,642
60%
60%
61%
2015 versus 2014 Cost of goods sold (COGS) decreased $1.9 billion, or 11 percent, principally reflecting declines from currency
due to the strengthening of the U.S. dollar verses global currencies, productivity improvements, impacts of portfolio changes,
lower volume and lower raw material costs. COGS as a percent of sales was unchanged from prior year at 60 percent as the benefit
of productivity improvements offset the negative impact of currency which decreased sales by 7 percent and COGS by 4 percent.
2014 versus 2013 COGS decreased 4 percent to $17.0 billion and decreased as a percentage of sales by 1 percent, principally
due to portfolio changes, lower pension and OPEB costs and lower costs for metals and other raw materials.
(Dollars in millions)
OTHER OPERATING CHARGES
As a percent of net sales
2015
2014
2013
$
459
$
2%
645
$
1,222
2%
4%
2015 versus 2014 Other operating charges decreased $186 million, or 29 percent, principally reflecting $130 million reduction
in the estimated liability related to Imprelis® herbicide claims, cost savings from the company's operational redesign initiative
partially offset by lower insurance recoveries year over year related to Imprelis® herbicide claims.
2014 versus 2013 Other operating charges decreased $577 million to $645 million, and decreased as a percentage of sales by 2
percent, principally due to the absence of prior year charges for Imprelis® herbicide claims and current year insurance recoveries.
See Note 16 to the Consolidated Financial Statements for more information related to the the Imprelis® matter.
(Dollars in millions)
2015
2014
2013
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
$
4,615
$
4,891
$
5,342
As a percent of net sales
18%
17%
18%
2015 versus 2014 The $276 million decrease was primarily due to the strengthening of the U.S. dollar versus global currencies,
cost savings from the company's operational redesign initiative, and lower selling and commission expense, mainly within the
Agriculture segment, partially offset by an increase in pension and OPEB costs. Selling, general and administrative expenses as
a percentage of net sales increased by 1 percent, primarily due to lower sales and higher pension and OPEB costs.
2014 versus 2013 The $451 million decrease was largely attributable to lower pension and OPEB costs and lower sales
commissions within the Agriculture segment. Selling, general and administrative expenses as a percentage of net sales decreased
by 1 percent, primarily due to lower pension and OPEB costs.
(Dollars in millions)
2015
2014
2013
RESEARCH AND DEVELOPMENT EXPENSE
$
1,898
$
1,958
$
2,037
As a percent of net sales
8%
7%
7%
2015 versus 2014 The $60 million decrease was primarily due to the strengthening of the U.S. dollar versus global currencies,
cost savings from the company's operational redesign initiative, partially offset by higher pension and OPEB costs. Research and
development expense as a percent of sales increased due to lower sales.
2014 versus 2013 The $79 million decrease was primarily attributable to lower pension and OPEB costs and lower spending
for Agriculture and Electronic & Communications programs.
26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
Part II
OPERATIONS, continued
(Dollars in millions)
OTHER INCOME, NET
2015
2014
2013
$
(697) $
(1,277) $
(371)
2015 versus 2014 The $580 million decrease was primarily due to the absence of prior year gains on sales of businesses and
other assets, including a $391 million gain on the sale of GLS/Vinyls, within the Performance Materials segment, and a $240
million gain on the sale of copper fungicides and land management businesses, both within the Agriculture segment, partially
offset by gains on sales of businesses and assets in 2015, primarily in the Agriculture and Performance Materials segments. In
addition, pre-tax exchange gains decreased $166 million compared to prior year driven by lower gains on foreign currency exchange
contracts. See Note 5 and 20 to the Consolidated Financial Statements for further discussion of the company's policy of hedging
the foreign currency-denominated monetary assets and liabilities. These decreases were partially offset by $145 million gain
associated with the company's settlement of a legal claim related to the Safety & Protection segment and $85 million increase in
equity in earnings of affiliates, primarily due to the absence of $65 million for charges associated with the restructuring actions
of a joint venture within the Performance Materials segment recorded in 2014.
2014 versus 2013 The $906 million increase was primarily due to $710 million of gains on sales of businesses and other assets,
including a $391 million gain on the sale of GLS/Vinyls, within the Performance Materials segment, and a $240 million gain on
the sale of copper fungicides and land management businesses, both within the Agriculture segment. There were additional net
exchange gains of $297 million, partially offset by $65 million for charges associated with the restructuring actions of a joint
venture within the Performance Materials segment and the absence of the $26 million re-measurement gain on equity method
investment in 2013.
Additional information related to the company's other income, net is included in Note 5 to the Consolidated Financial Statements.
(Dollars in millions)
INTEREST EXPENSE
2015
2014
2013
$
342 $
377 $
448
The $35 million decrease in 2015 was primarily due to lower average borrowings partially offset by slightly higher average interest
rates compared to prior year.
The $71 million decrease in 2014 was due to lower average borrowings as average interest rates were essentially unchanged in
each year.
(Dollars in millions)
2015
2014
2013
EMPLOYEE SEPARATION/ASSET RELATED CHARGES, NET
$
810 $
476 $
112
The $810 million in charges recorded during 2015 in employee separation / asset related charges, net consist of a $793 million
charge related to the 2016 restructuring plan discussed below, a $38 million impairment charge discussed below, partly offset by
a $21 million net benefit related to the 2014 restructuring plan. The $21 million net benefit was recorded to adjust the estimated
costs associated with the 2014 restructuring program due to lower than estimated individual severance costs and workforce
reductions achieved through non-severance programs, offset by the identification of additional projects in certain segments.
On December 11, 2015, DuPont announced a 2016 global cost savings and restructuring plan designed to reduce $730 million in
costs compared to 2015. As part of the plan, the company committed to take 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. As a result, during the year ended December 31, 2015, a pre-tax charge of $798 million was recorded, consisting of $793
million of employee separation / asset related charges, net and $5 million in other income, net. The charges consisted of $656
million in severance and related benefit costs, $109 million in asset related charges, and $33 million in contract termination charges.
Future cash expenditures related to this charge are anticipated to be approximately $680 million, primarily related to the payment
of severance and related benefits. The restructuring actions associated with this charge are expected to impact approximately 10
percent of DuPont’s workforce and to be substantially complete in 2016.
27
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
The $476 million in charges recorded during 2014 in employee separation / asset related charges, net related to the 2014 global,
multi-year initiative to redesign its global organization and operating model to improve productivity and agility across all businesses
and functions. DuPont commenced a restructuring plan to realign and rebalance staff function support, enhance operational
efficiency, and to reduce residual costs associated with the separation of its Performance Chemicals segment. As a result, during
the year ended December 31, 2014, a pre-tax charge of $541 million was recorded, consisting of $476 million in employee
separation / asset related charges, net and $65 million in other income, net. The charges consisted of $301 million severance and
related benefit costs, $17 million of other non-personnel costs, and $223 million of asset related costs, including $65 million of
costs associated with the restructuring actions of a joint venture within the Performance Materials segment. The actions associated
with this charge and all related payments are substantially complete.
The $112 million in charges recorded during 2013 in employee separation / asset related charges, net consisted of a net $17 million
restructuring benefit and a $129 million asset impairment charge discussed below. The net $17 million restructuring benefit
consisted of a $26 million benefit associated with prior year restructuring programs offset by a $9 million charge resulting from
restructuring actions related to a joint venture within the Performance Materials segment. The majority of the $26 million benefit
was due to the achievement of work force reductions through non-severance programs associated with the 2012 restructuring
program.
Asset Impairments
During 2015, the company recorded an impairment charge of $38 million in the Other segment, the majority relating to an
impairment of a cost basis investment.
During 2013, the company recorded an asset impairment charge of $129 million to write-down the carrying value of an asset
group, within the Electronics & Communications segment, to fair value.
Additional details related to the restructuring programs and asset impairments discussed above can be found in Note 4 to the
Consolidated Financial Statements.
Below is a summary of the net impact related to items recorded in employee separation / asset related charges, net:
(Dollars in millions)
Agriculture
Electronics & Communications
Industrial Biosciences
Nutrition & Health
Performance Materials
Safety & Protection
Other
Corporate expenses
Total Charges
2015 (Charges)
and Credits
2014 (Charges)
and Credits
2013 (Charges)
and Credits
$
(164) $
(134) $
(78)
(52)
(50)
(58)
(49)
(40)
(84)
(13)
(15)
(34)
(52)
(22)
$
(319)
(810) $
(122)
(476) $
1
(131)
1
6
(6)
4
1
12
(112)
(Dollars in millions)
PROVISION FOR INCOME TAXES ON CONTINUING OPERATIONS $
Effective income tax rate
2015
2014
2013
696
$
1,168
$
26.9%
27.1%
360
14.0%
In 2015, the company recorded a tax provision on continuing operations of $0.7 billion, reflecting a $0.5 billion decrease from
2014. The decrease was largely due to the impact associated with the company’s policy of hedging the foreign currency-denominated
monetary assets and liabilities of its operations, the absence of 2014 gains on sales of businesses and other assets in the Performance
Materials and Agriculture segments, as well as increased tax benefits on employee separation/asset related charges.
In 2014, the company recorded a tax provision on continuing operations of $1.2 billion, reflecting a $0.8 billion increase from
2013, largely due to the impact associated with the company’s policy of hedging the foreign currency-denominated monetary
28
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
assets and liabilities of its operations, gains on sales of businesses and other assets in the Performance Materials and Agriculture
segments, and the impact of Imprelis® charges in 2013 versus additional insurance recoveries in 2014. These impacts were partially
offset by increased tax benefits on employee separation/asset related charges. The higher effective tax rate principally reflects the
impact of foreign exchange losses on net monetary assets for which no corresponding tax benefit is realized, in addition to the
impact of the Venezuelan bolivar devaluation which is also nondeductible.
See Note 6 to the Consolidated Financial Statements for additional details related to the provision for income taxes on continuing
operations, as well as items that significantly impact the company's effective income tax rate.
(Dollars in millions)
INCOME FROM CONTINUING OPERATIONS AFTER INCOME
TAXES
2015
2014
2013
$
1,895 $
3,145 $
2,206
Income from continuing operations after income taxes for 2015 was $1.9 billion compared to $3.1 billion in 2014 and $2.2 billion
in 2013. The changes between periods were due to the reasons noted above.
Corporate Outlook
Current difficult global economic conditions in agriculture and slower growth in emerging markets are expected to continue
challenging the company’s sales growth in 2016. The company expects headwinds from currency due to the continued strengthening
of the U.S. dollar which is expected to be most significant in the first half of 2016. Growth in emerging markets is expected to
slow, leading to a shift in the company’s earnings mix to higher tax jurisdictions. The company expects income from continuing
operations in 2016 will benefit from $730 million reduction in costs as a result of the 2016 global cost savings and restructuring
plan. These cost reductions will be weighted toward the second half of 2016 reflecting implementation of specific actions during
the first and second quarters. In addition, the company expects income from continuing operations in 2016 to be impacted by
transaction related costs associated with the proposed merger with Dow. See additional information regarding 2016 outlook under
"Segment Reviews" beginning on page 30.
Recent Accounting Pronouncements
See Note 1 to the Consolidated Financial Statements for a description of recent accounting pronouncements.
29
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
Segment Reviews
Segment operating earnings is defined as income (loss) from continuing operations before income taxes excluding significant pre-
tax benefits (charges), non-operating pension and other postretirement employee benefit costs, exchange gains (losses), corporate
expenses and interest. Non-operating pension and other postretirement employee benefit costs includes all of the components of
net periodic benefit cost from continuing operations with the exception of the service cost component. Reclassifications of prior
year data have been made to conform to current year classifications. See Note 22 to the Consolidated Financial Statements for
details related to significant pre-tax benefits (charges) excluded from segment operating earnings. All references to prices are on
a U.S. dollar (USD) basis, including the impact of currency, unless otherwise noted.
A reconciliation of segment operating earnings to income from continuing operations before income taxes for 2015, 2014 and
2013 is included in Note 22 to the Consolidated Financial Statements.
DuPont Sustainable Solutions, within the company's Safety & Protection segment, is comprised of two business units: clean
technologies and consulting solutions. Effective January 1, 2016, the clean technologies business unit will become part of the
Industrial Biosciences segment with the focus on working with customers to improve the performance, productivity and
sustainability of their products and processes. The company will explore a range of options to maximize the growth of the consulting
solutions business unit which effective January 1, 2016 will be reported within Other. Sustainable solutions net sales accounted
for about 2 percent of the company's total consolidated net sales for the years ended December 31, 2015, 2014 and 2013, respectively.
Segment results and 2016 segment outlook information are not reflective of the 2016 reporting change.
30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
Part II
OPERATIONS, continued
AGRICULTURE
(Dollars in millions)
Net sales
Operating earnings
Operating earnings margin
Change in net sales from prior period due to:
Local Price and Product Mix
Currency
Volume
Portfolio and Other
Total change
2015
2014
2013
$
$
9,798
1,646
$
$
17%
11,296
2,352
$
$
11,728
2,480
21%
21%
2015
2014
3 %
(9)%
(6)%
(1)%
(13)%
1 %
(2)%
(3)%
— %
(4)%
2015 versus 2014 Full year 2015 segment net sales of $9.8 billion decreased $1.5 billion, or 13 percent, primarily due to the
negative impact of currency and lower seed and crop protection volumes, primarily in Brazil and North America, which were
partly offset by higher local corn seed prices. In Brazil, lower corn seed volume reflects the impact of a reduction in summer
planted hectares of corn and fall armyworm resistance impacting performance of certain corn hybrids. In North America, lower
soybean volume reflects between 1 and 2 points of share loss and lower soybean planted area; lower corn planted area was partially
offset by higher local corn seed prices. Lower crop protection volume is primarily due to low expected insect pressure, the adoption
of insect protected soybean varieties, higher inventories, and a challenging macro environment. Insect control volumes were also
impacted by the shutdown of the LaPorte manufacturing facility in Texas.
2015 operating earnings and operating earnings margin decreased primarily due to the negative impact of currency of $538 million,
lower sales, and an approximately $120 million negative impact of the shutdown of the LaPorte manufacturing facility and the
absence of prior year impacts from performance-based compensation adjustments, partially offset by cost reductions and continued
productivity improvements.
2014 versus 2013 Full year 2014 segment net sales of $11.3 billion decreased $0.4 billion, or 4 percent, primarily due to lower
corn seed volumes in Brazil and North America and the negative impact of currency, which was partly offset by an increase in
crop protection volumes and higher local corn seed prices. In Brazil, corn seed market share and price were lower reflecting the
impact of fall armyworm resistance and a reduction in planted hectares of corn. Higher volumes in insecticides were driven by
continued growth in Rynaxypyr® insecticide and from successful launches of Cyazypyr® insecticide and new seed treatments in
several markets.
2014 operating earnings decreased primarily due to lower corn seed volumes and the negative impact of currency which were
partially offset by higher crop protection volumes, lower performance-based compensation expense of approximately $110 million,
higher local seed prices and lower seed input costs. Operating earnings margin was about the same in each period.
Outlook Farmer net returns for row crops continue to trend down as land and rent prices have lagged the transition on lower
commodity prices as grain stocks remain at elevated levels. The company expects the economic environment in the agriculture
sector to remain challenged with corn and soybean commodity prices at the low end of normal until demand accelerates or there
is a disruption in global production. Volatile currency markets are expected to continue to present headwinds given the size of
DuPont Agriculture's businesses in Europe and Latin America. As farmers look to relative economics between crop alternatives,
the company expects a slight year over year increase in Brazil Safrinha and North America corn area, provided weather cooperates
during planting. Pioneer's order book in North America suggests a modest improvement in corn demand at the expense of soybeans
in a highly competitive seed market. In crop protection, continued weak demand for foliar-applied insecticides in Brazil and
elevated distributor inventories will continue to present challenges.
31
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
For the first half of 2016, which reflects the majority of the northern hemisphere season, the company expects Agriculture sales
to be mid-single digits percent lower with operating earnings in the low-teens percent below 2015 as local price gains and the
benefit of cost actions are more than offset by lower insecticide and soybean volumes and currency. Crop protection's volume
forecast assumes a continued impact from the shutdown of the LaPorte manufacturing facility. Volumes will be more challenged
in the first quarter, due to the strong start in North America corn seed which benefited the fourth quarter of 2015, and due to crop
protection in Brazil.
Full year 2016 segment net sales are expected to be down mid-single digits percent and full year operating earnings are expected
to be about flat as local price gains and cost actions are offset by currency headwinds and lower volumes.
ELECTRONICS & COMMUNICATIONS
(Dollars in millions)
Net sales
Operating earnings
Operating earnings margin
Change in net sales from prior period due to:
Local Price and Product Mix
Currency
Volume
Portfolio and Other
Total change
2015
2014
2013
$
$
2,070
359
$
$
17%
2,381
336
$
$
14%
2,534
314
12%
2015
2014
(4)%
(2)%
(7)%
— %
(13)%
(7)%
(1)%
2 %
— %
(6)%
2015 versus 2014 Full year 2015 segment net sales of $2.1 billion decreased $0.3 billion, or 13 percent, primarily due to competitive
pressures impacting Solamet® paste and lower pricing from the pass-through of lower metals prices and the negative impact of
currency, partially offset by volume growth in Tedlar® film photovoltaics and products for the consumer electronics market.
2015 operating earnings and operating earnings margin increased as cost reductions and continued productivity improvements
more than offset lower sales.
2014 versus 2013 Full year 2014 segment net sales of $2.4 billion decreased $0.2 billion, or 6 percent, as volume growth in
several product lines was more than offset by pass-through of lower metals prices and by competitive pressures impacting Solamet®
paste.
2014 operating earnings and operating earnings margin increased due to volume growth and productivity improvements. These
were partly offset by the absence of $20 million of OLED technology licensing income realized during 2013.
Outlook In 2016 the company expects the photovoltaic market to remain strong with module installations forecasted to increase
mid-teens percent driving strong growth in Tedlar® film in photovoltaics. Segment results are expected to continue to be negatively
impacted by declines in Solamet® paste with the impact lessening in the second half of the year due to more favorable year-over-
year comparisons and expected new product introductions. The company anticipates consumer electronics markets will have a
weaker start to the year but strengthen in the second half as channel inventories are worked off.
Full year 2016 segment net sales are expected to be about flat as strong volume growth in Tedlar® film for photovoltaics is offset
by lower sales of Solamet® paste and lower metals pricing. Full year operating earnings are expected to be in the low-twenty
percent range higher from increased volume and cost reductions and continued productivity improvements.
32
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
Part II
OPERATIONS, continued
INDUSTRIAL BIOSCIENCES
(Dollars in millions)
Net sales
Operating earnings
Operating earnings margin
Change in net sales from prior period due to:
Local Price and Product Mix
Currency
Volume
Portfolio and Other
Total change
2015
2014
2013
$
$
1,171
203
$
$
17%
1,244
192
$
$
15%
1,211
151
12%
2015
2014
(3)%
(6)%
3 %
— %
(6)%
1%
—%
2%
—%
3%
2015 versus 2014 Full year 2015 segment net sales of $1.2 billion decreased 6 percent, primarily due to the negative impact of
currency, lower prices and demand for biomaterials, partially offset by volume growth in enzymes, principally for home and
personal care, food markets and ethanol production.
2015 operating earnings and operating earnings margin increased primarily due to cost reductions and continued productivity
improvements, partially offset by lower sales.
2014 versus 2013 Full year 2014 segment net sales of $1.2 billion increased 3 percent, primarily due to increased enzyme demand,
principally for ethanol production, food and animal nutrition, driven by new product offerings. In 2014, ethanol industry
fundamentals were adjusting to a lower energy cost environment but demand for the company's novel enzymes and other functional
bio products designed to increase production rates, yield and efficiency remained steady.
2014 operating earnings and operating earnings margin increased from higher volumes and improved product mix as discussed
above.
Outlook Full year 2016 segment net sales are expected to increase in the low-single digits percent, driven by volume improvement,
pricing and the impact of new product introductions in bioactives, including increased penetration in food markets. Full year
operating earnings are expected to be about flat, reflecting cost savings and productivity improvements offset by higher product
costs and currency.
33
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
Part II
OPERATIONS, continued
NUTRITION & HEALTH
(Dollars in millions)
Net sales
Operating earnings
Operating earnings margin
Change in net sales from prior period due to:
Local Price and Product Mix
Currency
Volume
Portfolio and Other
Total change
2015
2014
2013
$
$
3,256
373
$
$
11%
3,529
369
$
$
10%
3,473
286
8%
2015
2014
— %
(9)%
2 %
(1)%
(8)%
1 %
(2)%
3 %
— %
2 %
2015 versus 2014 Full year 2015 segment net sales of $3.3 billion decreased 8 percent, primarily due to the negative impact of
currency. Volume growth in probiotics, ingredient systems, texturants and cultures was partially offset by lower volumes in specialty
proteins due to competitive challenges.
2015 operating earnings and operating earnings margin increased as cost reductions and continued productivity improvements and
volume gains were mostly offset by the negative impact from currency of $53 million and the absence of the prior year $18 million
gain from the termination of a distribution agreement.
2014 versus 2013 Full year 2014 segment net sales of $3.5 billion increased 2 percent, as volume growth in specialty proteins,
cultures and probiotics, was partially offset by a negative impact from currency.
2014 operating earnings and operating earnings margin increased from improved product mix, volume growth, productivity
improvements and a gain of $18 million from the termination of a distribution agreement, partially offset by the negative impact
from currency.
Outlook In 2016, market conditions are expected to remain challenging with currency headwinds persisting, primarily in Europe
and Latin America. Full year 2016 segment net sales are expected to be down low-single digits percent as volume growth, driven
by investments in probiotics and cultures, is more than offset by the negative impact of currency. Full year operating earnings are
expected to be up high-teens percent benefiting from cost reductions and productivity improvements, further expanding operating
margins.
34
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
Part II
OPERATIONS, continued
PERFORMANCE MATERIALS
(Dollars in millions)
Net sales
Operating earnings
Operating earnings margin
Change in net sales from prior period due to:
Local Price and Product Mix
Currency
Volume
Portfolio and Other
Total change
2015
2014
2013
$
$
5,305
1,216
$
$
23%
6,059
1,267
$
$
21%
6,166
1,249
20%
2015
2014
(4)%
(6)%
1 %
(3)%
(12)%
1 %
(1)%
2 %
(4)%
(2)%
2015 versus 2014 Full year 2015 segment net sales of $5.3 billion decreased $0.8 billion, or 12 percent, primarily due to the
negative impact of currency, lower ethylene pricing and the portfolio impact of the sale of Glass Laminating Solutions/Vinyls
(GLS/Vinyls) in June 2014 (see Note 3 to the Consolidated Financial Statements for additional information). Partially offsetting
the declines are increased ethylene volumes due to the prior year scheduled outage at the ethylene unit in Orange, Texas and
increased demand for Performance Polymers offerings in automotive markets, primarily in the U.S. and Europe in the second half
of 2015.
2015 operating earnings decreased as cost reductions and continued productivity improvements were more than offset by the
negative impact of currency of $132 million and lower selling prices. 2015 operating earnings includes $49 million of benefits,
comprised of a net benefit from a joint venture, the sale of a business and the realization of tax benefits associated with a
manufacturing site. Operating earnings margin increased due primarily to cost reductions and continued productivity improvements.
2014 versus 2013 Full year 2014 segment net sales of $6.1 billion decreased $0.1 billion, or 2 percent, due primarily to the
impact of the sale of GLS/Vinyls and decreased ethylene volumes as a result of the second quarter scheduled outage at the Orange,
Texas ethylene unit. This was partially offset by increased demand in automotive markets, primarily in China, Europe and North
America.
2014 operating earnings and operating earnings margin increased due primarily to increased automotive demand, partially offset
by the portfolio impact of the sale of GLS/Vinyls.
Outlook Full year 2016 segment net sales are expected to be down in the low-single digits percent and full year operating earnings
are expected to be down about 10 percent as volume growth will be more than offset by lower ethylene price and the negative
impact of currency.
35
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
Part II
OPERATIONS, continued
SAFETY & PROTECTION
(Dollars in millions)
Net sales
Operating earnings
Operating earnings margin
Change in net sales from prior period due to:
Local Price and Product Mix
Currency
Volume
Portfolio and Other
Total change
2015
2014
2013
$
$
3,527
704
$
$
20%
3,892
772
$
$
20%
3,880
664
17%
2015
2014
— %
(4)%
(1)%
(4)%
(9)%
(1)%
— %
3 %
(2)%
— %
2015 versus 2014 Full year 2015 segment net sales of $3.5 billion decreased $0.4 billion, or 9 percent, primarily due to the
negative impact of currency, the portfolio impact of the Sontara® divestiture, and lower volume. Decreased demand for Sustainable
Solution offerings, Nomex® thermal resistant fiber and Kevlar® high strength materials was driven by a weakened oil and gas
industry and military spending delays, partially offset by volume growth for Tyvek® protective material, including medical
packaging.
2015 operating earnings decreased $68 million, or 9 percent, as cost reductions and continued productivity improvements were
more than offset by the negative impact of currency of $53 million and lower sales. 2015 operating earnings margin was flat from
prior year as cost reductions and continued productivity improvements were offset by lower sales.
2014 versus 2013 Full year 2014 segment net sales of $3.9 billion were essentially equal to prior year, as increased demand for
Nomex® thermal resistant fiber and Kevlar® high strength materials was offset by impact of portfolio changes and lower sales for
clean technologies offerings.
2014 operating earnings and operating earnings margin increased, due primarily to the above mentioned increase in volumes,
productivity improvements and lower product costs, partially offset by lower sales from clean technologies offerings, a negative
currency impact, and the portfolio impact of the Sontara® divestiture.
Outlook Full year 2016 segment net sales are expected to be up by the low single digits percent with volume growth partially
offset by the negative impact of currency. Full year operating earnings are expected to be up by the mid teens percent, on cost
reductions and productivity improvements, leading to operating margin expansion for the year.
36
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
Part II
OPERATIONS, continued
Liquidity & Capital Resources
(Dollars in millions)
Cash, cash equivalents and marketable securities
Total debt
December 31,
2015
2014
$
6,206 $
8,807
7,034
10,655
Pursuant to its cash discipline policy, the company seeks first to maintain a strong balance sheet and second, to return excess cash
to shareholders unless the opportunity to invest for growth is compelling. The company continually reviews its sources of liquidity
and debt portfolio and occasionally may make adjustments to one or both to ensure adequate liquidity and an optimum debt maturity
schedule.
The company's credit ratings impact its access to the debt capital markets and cost of capital. The company remains committed
to a strong financial position and strong investment-grade rating. The company's long-term and short-term credit ratings are as
follows:
Standard & Poor's
Moody’s Investors Service
Fitch Ratings
Long-term
Short-term
Outlook
A-
A3
A
A-2
P-2
F1
Credit Watch Negative
Negative
Rating Watch Negative
In May 2015, Moody's Investor Service (Moody's) downgraded the company's long-term rating to A3 from A2, and the short-term
rating to P-2 from P-1. In October 2015, Standard and Poor's Rating Services (Standard and Poor's) downgraded the company's
long-term rating to A- from A, and the short-term rating to A-2 from A-1. In December 2015 following the announcement of the
Merger Agreement with Dow, Standard and Poor's and Fitch Ratings placed the outlook on the company's long-term and the short-
term rating on negative watch and Moody’s placed the company on negative outlook.
The company believes its ability to generate cash from operations and access to capital markets will be adequate to meet anticipated
cash requirements to fund working capital, capital spending, dividend payments, share repurchases, debt maturities and other cash
needs and that its current strong financial position, liquidity and credit ratings continue to provide access as needed to the capital
markets. While the company expects that capacity for its commercial paper could be reduced as a result of its current short-term
credit ratings, the company's liquidity needs can continue to be met through a variety of sources, including cash provided by
operating activities, cash and cash equivalents, marketable securities, commercial paper, syndicated credit lines, bilateral credit
lines, long-term debt markets, bank financing, committed receivable repurchase facilities and asset sales.
The company has access to approximately $4.9 billion in unused credit lines, which includes a $4 billion revolving credit facility
to support its commercial paper program, with several major financial institutions. These unused credit lines provide additional
support to meet short-term liquidity needs and general corporate purposes including letters of credit.
In February 2016, in line with seasonal agricultural working capital requirements, the company entered into a committed receivable
repurchase agreement of up to $1 billion (the repurchase facility) that expires on November 30, 2016. Under the facility, the
company may sell a portfolio of available and eligible outstanding customer notes receivables within the Agriculture segment to
participating institutions and simultaneously agree to repurchase at a future date. See further discussion of this facility in Item
9B, Other Information and Note 24 to the Consolidated Financial Statements.
37
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
The company's cash, cash equivalents and marketable securities at December 31, 2015 and 2014 are $6.2 billion and $7.0 billion,
respectively. Cash, cash equivalents and marketable securities held outside of the U.S. of $4.2 billion and $4.5 billion at
December 31, 2015 and 2014, respectively, are generally utilized to fund local operating activities and capital expenditure
requirements and are expected to support non-U.S. liquidity needs for the next 12 months and the foreseeable future thereafter.
The company expects domestic liquidity needs, for at least the next 12 months and the foreseeable future thereafter, will be met
through existing cash, cash equivalents and marketable securities held in the U.S. and the various sources of liquidity discussed
above. Therefore, the company believes that it has sufficient sources of domestic liquidity to support its assumption that undistributed
earnings at December 31, 2015 can be considered reinvested indefinitely.
(Dollars in millions)
2015
2014
2013
Cash provided by operating activities
$
2,316 $
3,712 $
3,179
Cash provided by operating activities decreased $1.4 billion in 2015 compared to 2014 primarily due to the absence of Chemours
in the second half of 2015 compared with a full year of results in 2014 for an impact of approximately $1.0 billion and a lower
cash earnings contribution from continuing operations of approximately $0.3 billion.
Cash provided by operating activities increased $0.5 billion in 2014 compared to 2013 due to lower year over year income tax
payments associated with the sale of businesses and higher insurance recoveries and lower claims payments related to Imprelis®
(See Note 16 to the Consolidated Financial Statements for additional information).
(Dollars in millions)
2015
2014
2013
Cash (used for) provided by investing activities
$
(1,828) $
(337) $
2,945
Cash used for investing activities in 2015 increased by $1.5 billion compared to 2014. The change was primarily due to lower
proceeds received from the sale of businesses in 2015 compared to 2014 and increase purchases of marketable securities in 2015
compared to 2014. This was partially offset by lower purchases of property, plant and equipment, mainly due to the absence of
Chemours in the second half of 2015 which accounted for $0.3 billion. See Note 20 for further discussion of marketable securities
outstanding at December 31, 2015 and 2014.
Cash used for investing activities in 2014 decreased $3.3 billion compared to 2013. The change was primarily due to lower proceeds
received from the sale of businesses in 2014 compared to 2013.
Purchases of property, plant and equipment totaled $1.6 billion, $2.0 billion and $1.9 billion in 2015, 2014, and 2013, respectively.
The company expects 2016 purchases of property, plant and equipment to about $1.1 billion.
(Dollars in millions)
Cash used for financing activities
2015
2014
2013
$
(1,823) $
(5,074) $
(1,474)
The $3.3 billion decrease in cash used for financing activities in 2015 was primarily due to the distribution of Chemours borrowings
to the company as part of the separation, partially offset by a reduction in short term borrowings, and an increase in the repurchase
of common stock.
The $3.6 billion increase in cash used for financing activities in 2014 was primarily due to lower borrowings and higher payments
for the repurchase of common stock.
Dividends paid to common and preferred shareholders were $1.5 billion, $1.7 billion, and $1.7 billion in 2015, 2014, and 2013,
respectively. Dividends per share of common stock were $1.72, $1.84, and $1.78 in 2015, 2014, and 2013, respectively. In January
2016, the Board of Directors declared a first quarter common stock dividend of $0.38 per share. With the first quarter 2016 dividend,
the company has paid quarterly consecutive dividends since the company’s first dividend in the fourth quarter 1904.
38
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
In the first quarter 2015, DuPont announced its intention to buy back shares of about $4 billion using the distribution proceeds
received from Chemours. In connection with the completion of the spin-off of Chemours, the Board of Directors authorized the
use of the distribution proceeds to buy back shares of the company's common stock as follows: $2 billion to be purchased and
retired by December 31, 2015 with the remainder to be purchased and retired by December 31, 2016. In August 2015, the company
entered an accelerated share repurchase (ASR) agreement. Under the terms of the August 2015 ASR agreement, the company
paid $2 billion to the financial institution and received and retired 35 million shares at an average price of $57.16 per share. See
Part I, Item 5 Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities and
Note 17 to the Consolidated Financial Statements for additional information.
DuPont’s objective continues to be to complete the remaining $2 billion stock buyback by year end December 31, 2016. However,
as a result of the planned merger of equals with Dow, the company expects it will have limited opportunities to enter the market
prior to the shareholder vote on the merger. After the vote, the company plans to make repurchases.
In January 2014, the company's Board of Directors authorized a $5 billion share buyback plan. In February and August 2014, the
company entered into two separate ASR agreements. The February 2014 ASR agreement was completed in the second quarter of
2014, under which the company purchased and retired 15.1 million shares for $1 billion. The August 2014 ASR agreement was
completed in the fourth quarter of 2014, under which the company purchased and retired 10.4 million shares for $700 million. In
addition to the ASR agreements, in 2014, the company repurchased and retired 4.7 million shares in the open market for a total
cost of $300 million. In 2015, the company repurchased and retired 4.6 million shares in the open market for a total cost of $353
million. As a result, the company has completed $2.4 billion of repurchases as of December 31, 2015. The remainder of the $5
billion share buyback will be purchased in future periods as there is no required completion date for purchases under the 2014
plan.
In December 2012, the company's Board of Directors authorized a $1 billion share buyback plan. In 2013, the company entered
into an ASR agreement with a financial institution under which the company used $1 billion of the proceeds from the sale of
Performance Coatings for the purchase and retirement 20.4 million shares of common stock.
See Note 17 Consolidated Financial Statements for additional information relating to the above share buyback plans.
(Dollars in millions)
Cash provided by operating activities
Purchases of property, plant and equipment
Free cash flow
2015
2014
2013
$
$
2,316 $
(1,629)
687 $
3,712 $
(2,020)
1,692 $
3,179
(1,882)
1,297
Free cash flow is a measurement not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP
measures of performance. All companies do not calculate non-GAAP financial measures in the same manner and, accordingly, the
company's free cash flow definition may not be consistent with the methodologies used by other companies. The company defines
free cash flow as cash provided by operating activities less purchases of property, plant and equipment, and therefore indicates
operating cash flow available for payment of dividends, other investing activities and other financing activities. Free cash flow is
useful to investors and management to evaluate the company's cash flow and financial performance, and is an integral financial
measure used in the company's financial planning process.
For further information relating to the change in cash provided by operating activities, see discussion above under cash provided
by operating activities.
39
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
Critical Accounting Estimates
The company's significant accounting policies are more fully described in Note 1 to the Consolidated Financial Statements.
Management believes that the application of these policies on a consistent basis enables the company to provide the users of the
financial statements with useful and reliable information about the company's operating results and financial condition.
The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts, including, but not limited to, receivable and inventory valuations, impairment of
tangible and intangible assets, long-term employee benefit obligations, income taxes, restructuring liabilities, environmental
matters and litigation. Management's estimates are based on historical experience, facts and circumstances available at the time
and various other assumptions that are believed to be reasonable. The company reviews these matters and reflects changes in
estimates as appropriate. Management believes that the following represents some of the more critical judgment areas in the
application of the company's accounting policies which could have a material effect on the company's financial position, liquidity
or results of operations.
Long-term Employee Benefits
Accounting for employee benefit plans involves numerous assumptions and estimates. Discount rate and expected return on plan
assets are two critical assumptions in measuring the cost and benefit obligation of the company's pension and other long-term
employee benefit plans. Management reviews these two key assumptions annually as of December 31st. These and other
assumptions are updated periodically to reflect the actual experience and expectations on a plan specific basis as appropriate. As
permitted by GAAP, actual results that differ from the assumptions are accumulated on a plan by plan basis and to the extent that
such differences exceed 10 percent of the greater of the plan's benefit obligation or the applicable plan assets, the excess is amortized
over the average remaining service period of active employees.
About 80 percent of the company's benefit obligation for pensions and essentially all of the company's other long-term employee
benefit obligations are attributable to the benefit plans in the U.S. In the U.S. the discount rate is developed by matching the
expected cash flow of the benefit plans to a yield curve constructed from a portfolio of high quality fixed-income instruments
provided by the plan's actuary as of the measurement date. For non-U.S. benefit plans, the company utilizes prevailing long-term
high quality corporate bond indices to determine the discount rate, applicable to each country, at the measurement date.
Within the U.S., the company establishes strategic asset allocation percentage targets and appropriate benchmarks for significant
asset classes with the aim of achieving a prudent balance between return and risk. Strategic asset allocations in other countries are
selected in accordance with the laws and practices of those countries. Where appropriate, asset-liability studies are also taken into
consideration. The long-term expected return on plan assets in the U.S. is based upon historical real returns (net of inflation) for
the asset classes covered by the investment policy, expected performance, and projections of inflation and interest rates over the
long-term period during which benefits are payable to plan participants. Consistent with prior years, the long-term expected return
on plan assets in the U.S. reflects the asset allocation of the plan and the effect of the company's active management of the plans'
assets.
In determining annual expense for the principal U.S. pension plan, the company uses a market-related value of assets rather than
its fair value. The market-related value of assets is calculated by averaging market returns over 36 months. Accordingly, there
may be a lag in recognition of changes in market valuation. As a result, changes in the fair value of assets are not immediately
reflected in the company's calculation of net periodic pension cost. The following table shows the market-related value and fair
value of plan assets for the principal U.S. pension plan:
(Dollars in billions)
Market-related value of assets
Fair value of plan assets
2015
2014
2013
$
15.1 $
14.4
15.9 $
15.8
15.5
16.1
For plans other than the principal U.S. pension plan, pension expense is determined using the fair value of assets.
40
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
The company changed the method it used to estimate the 2016 service cost and interest cost components of net periodic benefit
cost for the U.S. benefit plans. For these plans, the company has historically estimated these service and interest cost components
utilizing a single weighted-average discount rate derived from the yield curve and cash flow for measurement of the benefit
obligation at the beginning of the period. The company will utilize a full yield curve approach in the estimation of these 2016
components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the
relevant projected cash flows. The company made this change as it believes it is a more precise measurement of service and
interest costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. The
company considers this a change in estimate, and, accordingly, will account for it prospectively starting in 2016. This change
does not affect the measure of the total benefit obligation. See information with the respect to the impact of the change in method
on 2016 pension expense under "Long-term Employee Benefits" beginning on page 45.
The following table highlights the potential impact on the company's pre-tax earnings due to changes in certain key assumptions
with respect to the company's pension and other long-term employee benefit plans, based on assets and liabilities at December 31,
2015:
Pre-tax Earnings Benefit (Charge)
(Dollars in millions)
Discount rate
Expected rate of return on plan assets
1/2 Percentage
Point
Increase
1/2 Percentage
Point
Decrease
$
72 $
88
(74)
(88)
In October 2014, the Society of Actuaries released final reports of new mortality tables and a mortality improvement scale for
measurement of retirement program obligations in the U.S. The company adopted these tables in measuring the 2014 long-term
employee benefit obligations. This adoption increased the benefit obligation at December 31, 2014 by approximately $1.7 billion.
The effect of this adoption was amortized into net periodic benefit cost beginning in 2015. In October 2015, the Society of Actuaries
released an updated mortality improvement scale reflecting a decline in longevity projection from the October 2014 release. This
release was adopted by the company in measuring the 2015 long-term employee benefit obligations in the U.S. This adoption
decreased the benefit obligation at December 31, 2015 by approximately $0.4 billion. The effect of this adoption will be amortized
into net periodic benefit cost beginning in 2016.
Additional information with respect to pension and other long-term employee benefits expenses, liabilities and assumptions is
discussed under "Long-term Employee Benefits" beginning on page 45 and in Note 18 to the Consolidated Financial Statements.
Environmental Matters
DuPont accrues for remediation activities when it is probable that a liability has been incurred and a reasonable estimate of the
liability can be made. The company has recorded a liability of $492 million as of December 31, 2015; these accrued liabilities
exclude claims against third parties and are not discounted. As remediation activities vary substantially in duration and cost from
site to site, it is difficult to develop precise estimates of future site remediation costs. The company's estimates are based on a
number of factors, including the complexity of the geology, the nature and extent of contamination, the type of remedy, the outcome
of discussions with regulatory agencies and other Potentially Responsible Parties (PRPs) at multi-party sites and the number of
and financial viability of other PRPs. Therefore, considerable uncertainty exists with respect to environmental remediation costs
and, under adverse changes in circumstances, the potential liability may range up to $1.0 billion above the amount accrued as of
December 31, 2015.
41
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
Legal Contingencies
The company's results of operations could be affected by significant litigation adverse to the company, including product liability
claims, patent infringement and antitrust claims, and claims for third party property damage or personal injury stemming from
alleged environmental torts. The company records accruals for legal matters when the information available indicates that it is
probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Management makes adjustments
to these accruals to reflect the impact and status of negotiations, settlements, rulings, advice of counsel and other information and
events that may pertain to a particular matter. Predicting the outcome of claims and lawsuits and estimating related costs and
exposure involves substantial uncertainties that could cause actual costs to vary materially from estimates. In making determinations
of likely outcomes of litigation matters, management considers many factors. These factors include, but are not limited to, the
nature of specific claims including unasserted claims, the company's experience with similar types of claims, the jurisdiction in
which the matter is filed, input from outside legal counsel, the likelihood of resolving the matter through alternative dispute
resolution mechanisms and the matter's current status. Considerable judgment is required in determining whether to establish a
litigation accrual when an adverse judgment is rendered against the company in a court proceeding. In such situations, the company
will not recognize a loss if, based upon a thorough review of all relevant facts and information, management believes that it is
probable that the pending judgment will be successfully overturned on appeal. A detailed discussion of significant litigation
matters is contained in Note 16 to the Consolidated Financial Statements.
Indemnification Assets
Pursuant to the Separation Agreement discussed in Note 3 to the Consolidated Financial Statements, the company is indemnified
by Chemours against certain litigation, environmental, workers' compensation and other liabilities that arose prior to the distribution.
The term of this indemnification is indefinite and includes defense costs and expenses, as well as monetary and non-monetary
settlements and judgments. In connection with the recognition of liabilities related to these indemnified matters, the company
records an indemnification asset when recovery is deemed probable. In assessing the probability of recovery, the company considers
the contractual rights under the Separation Agreement and any potential credit risk. Future events, such as potential disputes
related to recovery as well as solvency of Chemours, could cause the indemnification assets to have a lower value than anticipated
and recorded. The company evaluates the recovery of the indemnification assets recorded when events or changes in circumstances
indicate the carrying values may not be fully recoverable.
Income Taxes
The breadth of the company's operations and the global complexity of tax regulations require assessments of uncertainties and
judgments in estimating taxes the company will ultimately pay. The final taxes paid are dependent upon many factors, including
negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation and resolution of disputes arising from
federal, state and international tax audits in the normal course of business. The resolution of these uncertainties may result in
adjustments to the company's tax assets and tax liabilities. It is reasonably possible that net reductions to the company’s global
unrecognized tax benefits could be in the range of $225 million to $250 million within the next 12 months with the majority due
to the settlement of uncertain tax positions with various tax authorities.
Deferred income taxes result from differences between the financial and tax basis of the company's assets and liabilities and are
adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred
tax assets when it is more likely than not that a tax benefit will not be realized. Significant judgment is required in evaluating the
need for and magnitude of appropriate valuation allowances against deferred tax assets. The realization of these assets is dependent
on generating future taxable income, as well as successful implementation of various tax planning strategies. For example, changes
in facts and circumstances that alter the probability that the company will realize deferred tax assets could result in recording a
valuation allowance, thereby reducing the deferred tax asset and generating a deferred tax expense in the relevant period. In some
situations these changes could be material.
At December 31, 2015, the company had a deferred tax asset balance of $3.4 billion, net of valuation allowance of $1.5 billion.
Realization of these assets is expected to occur over an extended period of time. As a result, changes in tax laws, assumptions with
respect to future taxable income, and tax planning strategies could result in adjustments to these assets. See Note 6 to the
Consolidated Financial Statements for additional details related to the deferred tax asset balance.
42
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
Valuation of Assets
The assets and liabilities of acquired businesses are measured at their estimated fair values at the dates of acquisition. The excess
of the purchase price over the estimated fair value of the net assets acquired, including identified intangibles, is recorded as
goodwill. The determination and allocation of fair value to the assets acquired and liabilities assumed is based on various
assumptions and valuation methodologies requiring considerable management judgment, including estimates based on historical
information, current market data and future expectations. The principal assumptions utilized in the company's valuation
methodologies include revenue growth rates, operating margin estimates, royalty rates, and discount rates. Although the estimates
were deemed reasonable by management based on information available at the dates of acquisition, those estimates are inherently
uncertain.
Assessment of the potential impairment of property, plant and equipment, goodwill, other intangible assets, investments in affiliates
and other assets is an integral part of the company's normal ongoing review of operations. Testing for potential impairment of
these assets is significantly dependent on numerous assumptions and reflects management's best estimates at a particular point in
time. The dynamic economic environments in which the company's diversified businesses operate, and key economic and business
assumptions with respect to projected selling prices, market growth and inflation rates, can significantly affect the outcome of
impairment tests. Estimates based on these assumptions may differ significantly from actual results. Changes in factors and
assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments,
as well as the time in which such impairments are recognized. In addition, the company continually reviews its diverse portfolio
of assets to ensure they are achieving their greatest potential and are aligned with the company's growth strategy. Strategic decisions
involving a particular group of assets may trigger an assessment of the recoverability of the related assets. Such an assessment
could result in impairment losses.
Based on the results of the company's annual goodwill impairment test, completed in the third quarter 2015, we determined that
the fair value of each of the reporting units substantially exceeded its carrying value, and therefore there were no indications of
impairment. The company's methodology for estimating the fair value of its reporting units is using the income approach based
on the present value of future cash flows. The income approach has been generally supported by additional market transaction
analyses. There can be no assurance that the company's estimates and assumptions regarding forecasted cash flow and revenue
and operating income growth rates made for purposes of the annual goodwill impairment test will prove to be accurate predictions
of the future. The company believes the current assumptions and estimates utilized are both reasonable and appropriate.
In the fourth quarter 2015, the company elected to defer further testing and deployment of a multi-year, phased implementation
of an enterprise resource planning (ERP) system. At December 31, 2015, the company has capitalized costs associated with the
ERP system of approximately $435 million which have not yet been placed in service. It remains probable that the ERP system
will be completed and placed in service.
43
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
Off-Balance Sheet Arrangements
Certain Guarantee Contracts
Information with respect to the company's guarantees is included in Note 16 to the Consolidated Financial Statements. Historically,
the company has not had to make significant payments to satisfy guarantee obligations; however, the company believes it has the
financial resources to satisfy these guarantees.
Contractual Obligations
Information related to the company's significant contractual obligations is summarized in the following table:
(Dollars in millions)
Long-term debt obligations1
Expected cumulative cash requirements for
interest payments through maturity
Capital leases1
Operating leases
Purchase obligations2
Information technology infrastructure & services
Raw material obligations3
Utility obligations
Human resource services
License agreements4
Other
Total purchase obligations
Other liabilities1,5,6
Workers' compensation
Asset retirement obligations
Environmental remediation
Legal settlements
Other7
Total other long-term liabilities
Total contractual obligations8
Total at
December 31,
2015
2016
2017 –
2018
2019 –
2020
2021 and
beyond
Payments Due In
$
8,777 $
1,115 $
1,353 $
1,506 $
3,213
13
1,238
157
1,524
196
40
1,545
165
3,627
91
49
492
14
165
811
371
1
248
56
561
118
30
351
79
649
2
411
68
468
33
9
474
47
1,195
1,099
16
2
125
1
53
197
39
6
134
4
23
206
435
2
303
33
296
25
1
370
25
750
17
3
82
4
15
121
$
17,679 $
3,127 $
3,720 $
3,117 $
4,803
1,758
8
276
—
199
20
—
350
14
583
19
38
151
5
74
287
7,715
1.
2.
3.
4.
5.
6.
7.
8.
Included in the Consolidated Financial Statements.
Represents enforceable and legally binding agreements in excess of $1 million to purchase goods or services that specify fixed or minimum quantities; fixed,
minimum or variable price provisions; and the approximate timing of the agreement.
Includes raw material obligations related to supply agreements with Koch Industries, Inc. (INVISTA).
Primarily represents remaining minimum payments under DuPont Pioneer license agreements.
Pension and other long-term employee benefit obligations have been excluded from the table above. Expected 2016 funding for the principal U.S. pension
plan and non-U.S. plans with plan assets is disclosed below within Long Term Employee Benefits. Contributions beyond 2016 are expected to be made,
however, the amount of contributions are dependent on the future economic environment, investment returns on pension trust assets, as well as rules and
regulations of the respective country in which the plans operate. The company’s remaining pension plans with no plan assets and other long-term employee
benefits plans are paid from operating cash flows. The benefit payments for these plans are excluded from the table above as the timing and amounts of
benefit payments are uncertain. The estimated benefit payments in 2016 for these plans are disclosed below within Long Term Employee Benefits. Refer to
Note 18 to the Consolidated Financial Statements for further information regarding the pension and other long-term employee benefit plans.
The company's contractual obligations do not reflect an offset for recoveries associated with indemnifications by Chemours in accordance with the Separation
Agreement. Refer to Note 3 and 16 to the Consolidated Financial Statements for additional detail related to the indemnifications.
Primarily represents employee-related benefits other than pensions and other long-term employee benefits.
Due to uncertainty regarding the completion of tax audits and possible outcomes, the timing of certain payments of obligations related to unrecognized tax
benefits cannot be made and have been excluded from the table above. See Note 6 to the Consolidated Financial Statements for additional detail.
The company expects to meet its contractual obligations through its normal sources of liquidity and believes it has the financial
resources to satisfy these contractual obligations.
44
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
Long-term Employee Benefits
The company has various obligations to its employees and retirees. The company maintains retirement-related programs in many
countries that have a long-term impact on the company's earnings and cash flows. These plans are typically defined benefit pension
plans, as well as medical, dental and life insurance benefits for pensioners and survivors and disability benefits for employees
(other long-term employee benefits). Approximately 80 percent of the company's worldwide benefit obligation for pensions and
essentially all of the company's worldwide other long-term employee benefit obligations are attributable to the U.S. benefit plans.
Pension coverage for employees of the company's non-U.S. consolidated subsidiaries is provided, to the extent deemed appropriate,
through separate plans. The company regularly explores alternative solutions to meet its global pension obligations in the most
cost effective manner possible as demographics, life expectancy and country-specific pension funding rules change. Where
permitted by applicable law, the company reserves the right to change, modify or discontinue its plans that provide pension, medical,
dental, life insurance and disability benefits.
The majority of employees hired in the U.S. on or after January 1, 2007 are not eligible to participate in the pension and post-
retirement medical, dental and life insurance plans, but receive benefits in the defined contribution plans.
Benefits under defined benefit pension plans are based primarily on years of service and employees' pay near retirement. Pension
benefits are paid primarily from trust funds established to comply with applicable laws and regulations. Unless required by law,
the company does not make contributions that are in excess of tax deductible limits. The actuarial assumptions and procedures
utilized are reviewed periodically by the plans' actuaries to provide reasonable assurance that there will be adequate funds for the
payment of benefits. No contributions were made to the principal U.S. pension plan in 2015 and the company expects to contribute
$230 million to this plan in 2016.
Funding for each pension plan other than the principal U.S. pension plan is governed by the rules of the sovereign country in which
it operates. Thus, there is not necessarily a direct correlation between pension funding and pension expense. In general, however,
improvements in plans' funded status tends to moderate subsequent funding needs. The company contributed $164 million to its
pension plans other than the principal U.S. pension plan in 2015.
U.S. pension benefits that exceed federal limitations are covered by separate unfunded plans and these benefits are paid to pensioners
and survivors from operating cash flows. The company's remaining pension plans with no plan assets are paid from operating
cash flows. The company made benefit payments of $144 million to its unfunded plans in 2015.
The company's other long-term employee benefits are unfunded and the cost of the approved claims is paid from operating cash
flows. Pre-tax cash requirements to cover actual net claims costs and related administrative expenses were $237 million,
$233 million and $207 million for 2015, 2014 and 2013, respectively. Changes in cash requirements reflect the net impact of higher
per capita health care costs, demographic changes, plan amendments and changes in participant premiums, co-pays and deductibles.
In 2016, the company expects to contribute about the same as 2015 for pension plans other than the principal U.S. pension plan,
its remaining plans with no plan assets and its other long-term employee benefit plans.
The company's income can be significantly affected by pension and defined contribution benefits as well as other long-term
employee benefits. The following table summarizes the extent to which the company's income over each of the last 3 years was
affected by pre-tax charges related to long-term employee benefits:
(Dollars in millions)
Long-term employee benefit plan charges 1
2015
2014
2013
$
616 $
715 $
1,153
1.
The long-term employee benefit plan charges include discontinued operations of $(245), $96 and $113 for 2015, 2014 and 2013, respectively.
The above charges for pension and other long-term employee benefits are determined as of the beginning of each year. The decrease
in long-term employee benefit expense in 2015 is due to a curtailment gain partially offset by a decrease in discount rate. The
decrease in long-term employee benefit expense in 2014 is primarily related to higher discount rates and better than expected
pension asset returns. See "Long-term Employee Benefits" under the Critical Accounting Estimates section beginning on page 40
of this report for additional information on determining annual expense.
45
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
The company's key assumptions used in calculating its pension and other long-term employee benefits are the expected return on
plan assets, the rate of compensation increases and the discount rate (see Note 18 to the Consolidated Financial Statements). For
2016, long term employee benefits expense from continuing operations is expected to decrease by about $230 million due to the
adoption of the full yield curve approach and a higher discount rate which will be partially offset by a lower expected return on
plan assets for the US pension plan from 8.5% to 8.0%. The adoption of the full yield curve approach will reduce 2016 expense
by $210 million as a result of a $10 million and $200 million reduction in service and interest cost components, respectively. The
estimated 2016 long term employee benefit expense from continuing operations does not include the impact of any settlement
losses or curtailment gains resulting from actions associated with the 2016 global cost savings and restructuring program, as it
cannot be estimated at this time.
Environmental Matters
The company operates global manufacturing, product handling and distribution facilities that are subject to a broad array of
environmental laws and regulations. Such rules are subject to change by the implementing governmental agency, and the company
monitors these changes closely. Company policy requires that all operations fully meet or exceed legal and regulatory requirements.
In addition, the company implements voluntary programs to reduce air emissions, minimize the generation of hazardous waste,
decrease the volume of water use and discharges, increase the efficiency of energy use and reduce the generation of persistent,
bioaccumulative and toxic materials. Management has noted a global upward trend in the amount and complexity of proposed
chemicals regulation. The costs to comply with complex environmental laws and regulations, as well as internal voluntary programs
and goals, are significant and will continue to be significant for the foreseeable future.
Pre-tax environmental expenses charged to current operations are summarized below:
(Dollars in millions)
Environmental operating costs
Increase in remediation accrual
2015
2014
2013
$
$
380 $
118
498 $
380 $
95
475 $
375
90
465
About 75 percent of total pre-tax environmental expenses charged to current operations in 2015 resulted from operations in the
U.S. Based on existing facts and circumstances, management does not believe that year over year changes, if any, in environmental
expenses charged to current operations will have a material impact on the company's financial position, liquidity or results of
operations. Annual expenditures are not expected to vary significantly from the range of such expenditures experienced in the past
few years. Longer term, expenditures are subject to considerable uncertainty and may fluctuate significantly.
Environmental Operating Costs
As a result of its operations, the company incurs costs for pollution abatement activities including waste collection and disposal,
installation and maintenance of air pollution controls and wastewater treatment, emissions testing and monitoring, and obtaining
permits. The company also incurs costs related to environmental related research and development activities including
environmental field and treatment studies as well as toxicity and degradation testing to evaluate the environmental impact of
products and raw materials.
Remediation Accrual
Changes in the remediation accrual balance are summarized below:
(Dollars in millions)
Balance at December 31, 2013
Remediation payments
Increase in remediation accrual
Balance at December 31, 2014
Remediation payments
Increase in remediation accrual
Balance at December 31, 2015
46
$
$
$
458
(75)
95
478
(104)
118
492
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
Considerable uncertainty exists with respect to environmental remediation costs, and, under adverse changes in circumstances,
the potential liability may range up to $1.0 billion above the amount accrued as of December 31, 2015. However, based on existing
facts and circumstances, management does not believe that any loss, in excess of amounts accrued, related to remediation activities
at any individual site will have a material impact on the financial position, liquidity or results of operations of the company.
Pursuant to the Separation Agreement discussed in Note 3 to the Consolidated Financial Statements, the company is indemnified
by Chemours for certain environmental matters, included in the liability of $492 million, that have an estimated liability of $291
million as of December 31, 2015 and a potential exposure that ranges up to approximately $610 million above the amount accrued.
As such, the company has recorded an indemnification asset of $291 million corresponding to the company's accrual balance
related to these matters at December 31, 2015.
As of December 31, 2015, the company has been notified of potential liability under the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA or Superfund) or similar state laws at about 500 sites around the U.S., including
approximately 100 sites for which DuPont does not believe it has liability based on current information. Active remediation is
under way at approximately 140 of these sites. In addition, the company has resolved its liability at approximately 190 sites, either
by completing remedial actions with other PRPs or by participating in "de minimis buyouts" with other PRPs whose waste, like
the company's, represented only a small fraction of the total waste present at a site. The company received notice of potential
liability at one new site during 2015 compared with three and five similar notices in 2014 and 2013, respectively.
Environmental Capital Expenditures
In 2015, the company spent approximately $20 million on environmental capital projects either required by law or necessary to
meet the company's internal environmental goals. The company currently estimates expenditures for environmental-related capital
projects to be about $40 million in 2016. In the U.S., additional capital expenditures are expected to be required over the next
decade for treatment, storage and disposal facilities for solid and hazardous waste and for compliance with the Clean Air Act
(CAA). Until all CAA regulatory requirements are established and known, considerable uncertainty will remain regarding estimates
for future capital expenditures. However, management does not believe that the costs to comply with these requirements will have
a material impact on the financial position or liquidity of the company.
Climate Change
The company believes that climate change is an important global issue that presents risks and opportunities. Expanding upon
significant global greenhouse gas (GHG) emissions and other environmental footprint reductions made in the period 1990-2010,
as of 2014 the company reduced its environmental footprint, achieving reductions of 9 percent in GHG emissions intensity and 8
percent in water consumption versus a 2010 baseline. In addition, as of 2014, the company achieved an 11 percent reduction in
energy intensity from non-renewable resources versus a 2010 baseline. The company continuously evaluates opportunities for
existing and new product and service offerings in light of the anticipated demands of a low-carbon economy.
The company is actively engaged in efforts to develop constructive public policies to reduce GHG emissions and encourage lower
carbon forms of energy. Such policies may bring higher operating costs as well as greater revenue and margin opportunities.
Legislative efforts to control or limit GHG emissions could affect the company's energy source and supply choices as well as
increase the cost of energy and raw materials derived from fossil fuels. Such efforts are also anticipated to provide the business
community with greater certainty for the regulatory future, help guide investment decisions, and drive growth in demand for low-
carbon and energy-efficient products, technologies, and services. Similarly, demand is expected to grow for products that facilitate
adaptation to a changing climate.
There are existing efforts to address GHG emissions at the national and regional levels. Several of the company's facilities in the
European Union (EU) are regulated under the EU Emissions Trading Scheme. China has begun pilot programs for carbon taxes
and trading of GHG emissions in selected areas. The current unsettled policy environment in the U.S., where many company
facilities are located, adds an element of uncertainty to business decisions, particularly those relating to long-term capital
investments.
47
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, continued
In 2010, the U.S. Environmental Protection Agency (EPA) launched a phased-in scheme to regulate GHG emissions first from
large stationary sources under the existing CAA permitting requirements administered by state and local authorities. Large capital
investments may be required to install Best Available Control Technology on major new or modified sources of GHG emissions.
In 2015, the EPA promulgated regulations for carbon dioxide emissions from new and reconstructed/modified Electric Generating
Units (EGU's). In 2015, the EPA also promulgated new regulations for carbon dioxide emissions from existing EGUs that would
be based on individual state emission reduction programs. These regulations are currently being challenged in the U.S. federal
court. If the regulations survive these challenges, they may affect the long term price and supply of electricity and natural gas and
demand for products that contribute to energy efficiency and renewable energy. The precise impact of the aforementioned regulations
is uncertain due to the flexibility provided to the states in developing their programs and anticipated legal challenges to this
regulatory approach. A comprehensive national policy that addresses climate change by relying on market-based mechanisms to
drive reductions in greenhouse gases is likely to be more economically efficient than the facility-by-facility controls that would
result from implementation of recently promulgated rules under EPA’s existing authorities.
At the international level, significant differences in regional or national approaches could present challenges in a global marketplace,
highlighting the need for coordinated global policy actions. An effective global climate policy framework will help drive the
market changes that are needed to stimulate and efficiently deploy new innovations in science and technology, while maintaining
open and competitive global markets.
48
Part II
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company’s global operations are exposed to financial market risks relating to fluctuations in foreign currency exchange rates,
commodity prices, and interest rates. The company has established a variety of programs including use of derivative instruments
and other financial instruments to manage the exposure to financial market risks as to minimize volatility of financial results. In
the ordinary course of business, the company enters into derivative instruments to hedge its exposure to foreign currency, interest
rate and commodity price risks under established procedures and controls. For additional information on these derivatives and
related exposures, see Note 20 to the Consolidated Financial Statements. Decisions regarding whether or not to hedge a given
commitment are made on a case-by-case basis, taking into consideration the amount and duration of the exposure, market volatility
and economic trends. Foreign currency exchange contracts are also used, from time to time, to manage near-term foreign currency
cash requirements.
Foreign Currency Exchange Rate Risks
The company has significant international operations resulting in a large number of currency transactions that result from
international sales, purchases, investments and borrowings. The primary currencies for which the company has an exchange rate
exposure are the European Euro (EUR), Brazilian Real, Chinese Yuan, and Japanese Yen. The company uses forward exchange
contracts to offset its net exposures, by currency, related to the foreign currency denominated monetary assets and liabilities of its
operations. In addition to the contracts disclosed in Note 20 to the Consolidated Financial Statements, from time to time, the
company will enter into foreign currency exchange contracts to establish with certainty the USD amount of future firm commitments
denominated in a foreign currency.
Certain foreign entities of the company held USD denominated marketable securities, mainly US government securities, at
December 31, 2015. The USD/EUR is the primary foreign exchange exposure for these nonfunctional currency denominated
marketable securities. These marketable securities are classified as “available-for-sale” and as such, fluctuations in foreign exchange
are recorded in accumulated other comprehensive loss (AOCI) within the Consolidated Statements of Equity. These fluctuations
are subsequently reclassified from AOCI to earnings in the period in which the marketable securities are sold.
The following table illustrates the fair values of outstanding foreign currency contracts and nonfunctional currency denominated
marketable securities at December 31, 2015 and 2014, and the effect on fair values of a hypothetical adverse change in the foreign
exchange rates that existed at December 31, 2015 and 2014. The sensitivities for foreign currency contracts and nonfunctional
currency denominated marketable securities are based on a 10 percent adverse change in foreign exchange rates.
(Dollars in millions)
Foreign currency contracts
Marketable securities
2015
2014
2015
2014
$
(6) $
788
192 $
—
(738) $
(110)
(870)
—
Fair Value
Asset/(Liability)
Fair Value
Sensitivity
Since the company's risk management programs are highly effective, the potential loss in value for each risk management portfolio
described above would be largely offset by changes in the value of the underlying exposure.
Concentration of Credit Risk
The company maintains cash and cash equivalents, marketable securities, derivatives and certain other financial instruments with
various financial institutions. These financial institutions are generally highly rated and geographically dispersed and the company
has a policy to limit the dollar amount of credit exposure with any one institution.
As part of the company's financial risk management processes, it continuously evaluates the relative credit standing of all of the
financial institutions that service DuPont and monitors actual exposures versus established limits. The company has not sustained
credit losses from instruments held at financial institutions.
The company's sales are not materially dependent on any single customer. As of December 31, 2015, no one individual customer
balance represented more than five percent of the company's total outstanding receivables balance. Credit risk associated with its
receivables balance is representative of the geographic, industry and customer diversity associated with the company's global
businesses.
The company also maintains strong credit controls in evaluating and granting customer credit. As a result, it may require that
customers provide some type of financial guarantee in certain circumstances. Length of terms for customer credit varies by industry
and region.
49
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Part II
The financial statements and supplementary data required by this Item are included herein, commencing on page F-1 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
The company maintains a system of disclosure controls and procedures to give reasonable assurance that information required to
be disclosed in the company's reports filed or submitted under the Securities Exchange Act of 1934 (Exchange Act) is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the SEC. These controls and
procedures also give reasonable assurance that information required to be disclosed in such reports is accumulated and
communicated to management to allow timely decisions regarding required disclosures.
As of December 31, 2015, the company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO), together with
management, conducted an evaluation of the effectiveness of the company's disclosure controls and procedures pursuant to
Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, the CEO and CFO concluded that these disclosure
controls and procedures are effective.
There has been no change in the company's internal control over financial reporting that occurred during the fourth quarter of
2015 that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.
The company has completed its evaluation of its internal controls and has concluded that the company's system of internal controls
over financial reporting was effective as of December 31, 2015 (see page F-2).
ITEM 9B. OTHER INFORMATION
On February 3, 2016, the company entered into a committed receivable repurchase agreement of up to $1 billion (the repurchase
facility) that expires on November 30, 2016. Under the repurchase facility, the company may sell a portfolio of available and
eligible outstanding customer notes receivables within the Agriculture segment to participating institutions and simultaneously
agree to repurchase at a future date. The repurchase facility is considered a secured borrowing with the customer notes receivables,
inclusive of those that are sold and repurchased, equal to 105% of the outstanding amounts borrowed utilized as collateral.
Borrowings under the repurchase facility will have an interest rate of LIBOR + 0.75%.
50
Part III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to this Item is incorporated herein by reference to the Proxy, including information within the sections
entitled, "Election of Directors," "Governance of the Company-Committees of the Board," "Governance of the Company-
Committee Membership," "Section 16(a) Beneficial Ownership Reporting Compliance," and “Stockholder Nominations for
Election of Directors.”
The company has adopted a Code of Ethics for its CEO, CFO, and Controller that may be accessed from the company's website
at www.dupont.com by clicking on "Investors" and then "Corporate Governance." Any amendments to, or waiver from, any
provision of the code will be posted on the company's website at the above address.
Executive Officers of the Registrant
The following is a list, as of February 4, 2016, of the company's Executive Officers:
Chair of the Board of Directors and Chief Executive Officer:
Edward D. Breen
Other Executive Officers:
Benito Cachinero-Sánchez
Senior Vice President - Human Resources
James C. Collins
Executive Vice President
C. Marc Doyle
Executive Vice President
Nicholas C. Fanandakis
Executive Vice President and Chief Financial Officer
Stacy L. Fox
Senior Vice President and General Counsel
Douglas Muzyka
Senior Vice President and Chief Science & Technology Officer
Executive
Officer
Since
2015
2011
2014
2015
2009
2014
2014
Age
59
57
53
46
59
62
61
The company's Executive Officers are elected or appointed for the ensuing year or for an indefinite term and until their successors
are elected or appointed.
Edward D. Breen joined the DuPont Board of Directors in February 2015, was named Interim Chair of the Board and Chief
Executive Officer (CEO) in October 2015, and assumed his current role as Chair of the Board and CEO in November 2015. Mr.
Breen served as Chairman and CEO of Tyco International plc (Tyco) from July 2002 until September 2012. Prior to joining Tyco,
Mr. Breen held several senior management positions at Motorola from 2000 to 2002, including as President and Chief Operating
Officer. From December 1997 to January 2000, he served as Chairman, President and Chief Executive Officer of General Instrument
Corporation. Between 1994 and 1997, Mr. Breen was President of the Broadband Networks Group for General Instrument,
President of Eastern Operations for the Communications Division and served as Executive Vice President of Terrestrial Systems.
Mr. Breen currently serves as Chairman of Tyco and a Director of Comcast Corporation. He also serves as a member of the advisory
board of New Mountain Capital LLC, a private equity firm.
Benito Cachinero-Sánchez joined DuPont in April 2011 as Senior Vice President - Human Resources. Prior to joining DuPont,
he was Corporate Vice President of Human Resources at Automatic Data Processing (ADP). Prior to ADP, he was Vice President,
Human Resources for the Medical Devices & Diagnostics Group of Johnson & Johnson.
51
Part III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE, continued
James C. Collins joined DuPont in 1984 as an engineer. He has held positions in engineering, supervision and plant management
at a variety of manufacturing sites. In 1993, he joined the Agriculture Sales & Marketing Group where he served in a variety of
roles across the globe supporting DuPont’s seed and crop protection businesses. From 2004 to 2010, he was responsible for DuPont
Crop Protection as Vice President and General Manager and then President. In January 2011, he was appointed Vice President
for Acquisition & Integration of Danisco, and was named President of DuPont Industrial Biosciences in May of that year. Beginning
in September 2013, he assumed additional business and functional responsibilities as Senior Vice President. In December 2014,
he was named Executive Vice President and had responsibility for the Electronics & Communications, Industrial Biosciences,
Performance Materials segments as well as regional management for Europe, Middle East, Africa and Canada and Corporate
Communications. Effective January 2016, Mr. Collins has responsibility for the Agriculture businesses.
C. Marc Doyle joined DuPont in 1995 as a research scientist within DuPont Central Research & Development. He has held
positions in business development, marketing and business management, including strategic planning manager, global displays
business manager and regional business director of the Asia Pacific region for the Microcircuit Materials business. In February
2008, he became the Global Business Director for DuPont Photovoltaic Solutions within the DuPont Electronics & Communications
business. He was named Global Market and Product Director for DuPont Protection Technologies in September 2011. In this role,
Mr. Doyle had been responsible for the Kevlar® and Nomex® product lines globally. In June 2013 he was named President of
DuPont Protection Technologies. In July 2015 he was named Senior Vice President and assumed responsibility for the Safety &
Protection businesses. Effective January 2016, he has been named Executive Vice President and assumed responsibility for the
Electronics & Communications, Protection Solutions, Industrial Biosciences, Nutrition & Health, Sustainable Solutions and
Performance Materials businesses.
Nicholas C. Fanandakis joined DuPont in 1979 as an accounting and business analyst. Since then, Mr. Fanandakis served in a
variety of plant, marketing, and product management and business director roles. Mr. Fanandakis served as Vice President and
General Manager—DuPont Chemical Solutions Enterprise from 2003 until February 2007 when he was named Vice President—
Corporate Plans. In January 2008, Mr. Fanandakis was named Group Vice President—DuPont Applied BioSciences. In November
2009, he was named Senior Vice President and Chief Financial Officer. In August 2010, he was named Executive Vice President
and Chief Financial Officer.
Stacy L. Fox joined DuPont in October 2014 as Senior Vice President and General Counsel. Effective January 2016, she also has
responsibility for Corporate Communications. Prior to joining DuPont she served as Deputy Emergency Manager of the City of
Detroit. Prior to that role, she was Senior Vice President of Strategy and General Counsel of Sunoco, Inc. She also served as a
member of the Board of Directors of Sunoco Partners LLC. Earlier, she served as Executive Vice President of Corporate
Transactions and Legal Affairs for Visteon. Ms. Fox is also a founder and principal of the Roxbury Group.
Douglas Muzyka joined the company in 1985 as a research scientist and held a variety of research and research management roles.
In 1994, he was named Director of Technology and New Business Development for DuPont Nylon, Asia Pacific. In 1998, he was
named Global Business Director for the Nylon Industrial Specialties business. In 2001, Mr. Muzyka was then named President
and General Manager of DuPont Mexico. In January 2003, he was named President and Chief Executive Officer of DuPont Canada
Inc. and in September 2003, concurrently Vice President and General Manager - DuPont Nutrition & Health. In July 2006, he
assumed the role of President - DuPont Greater China. In September 2010, he was named Senior Vice President and Chief Science
and Technology Officer. Effective January 2016, he also has responsibility for engineering technologies and regional leadership.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this Item is incorporated herein by reference to the Proxy, including information within the sections
entitled, "Compensation Discussion and Analysis," "Compensation of Executive Officers," "Directors' Compensation,"
"Compensation Committee Interlocks and Insider Participation" and "Compensation Committee Report."
52
Part III
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information with respect to this Item is incorporated herein by reference to the Proxy, including information within the section
entitled "Ownership of Company Stock."
Securities authorized for issuance under equity compensation plans as of December 31, 2015
(Shares in thousands, except per share)
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not
approved by security holders
Total
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights2
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans3
22,928 1
$
14 4
22,942
$
54.89
—
54.89
39,815
— 5
39,815
1.
2.
3.
4.
5.
Includes stock-settled time-vested and performance-based restricted stock units granted and stock units deferred under the company's Equity and Incentive
Plan, Stock Performance Plan, Variable Compensation Plan and the Stock Accumulation and Deferred Compensation Plan for Directors. Performance-based
restricted stock units reflect the maximum number of shares to be awarded at the conclusion of the performance cycle (200 percent of the original grant).
The actual award payouts can range from 0 to 200 percent of the original grant.
Represents the weighted-average exercise price of the outstanding stock options only; the outstanding stock-settled time-vested and performance-based
restricted stock units and deferred stock units are not included in this calculation.
Reflects shares available pursuant to the issuance of stock options, restricted stock, restricted stock units or other stock-based awards under the amended
Equity and Incentive Plan approved by the shareholders in April 2011 (see Note 19 to the company's Consolidated Financial Statements). The maximum
number of shares of stock reserved for the grant or settlement of awards under the Equity and Incentive Plan (Share Limit) shall be 110,000 and shall be
subject to adjustment as provided therein; provided that each share in excess of 30,000 issued under the Equity and Incentive Plan pursuant to any award
settled in stock, other than a stock option or stock appreciation right, shall be counted against the foregoing Share Limit as four and one-half shares for every
one share actually issued in connection with such award. (For example, if 32,000 shares of restricted stock are granted under the Equity and Incentive Plan,
39,000 shall be charged against the Share Limit in connection with that award.)
Includes 14 deferred stock units resulting from base salary and short-term incentive (STIP) deferrals under the Management Deferred Compensation Plan
(MDCP). Under the MDCP, a select group of management or highly compensated employees can elect to defer the receipt of their base salary, STIP or Long
Term Incentive (LTI) award. LTI deferrals are included in footnote 1 to the above chart. The company does not match deferrals under the MDCP. There are
seven core investment options under the MDCP for base salary and STIP deferrals, including deferred stock units with dividend equivalents credited as
additional stock units. In general, deferred stock units are distributed in the form of DuPont common stock and may be made in the form of lump sum at a
specified future date prior to retirement or a lump sum or annual installments after separation from service. Shareholder approval of the MDCP was not
required under the rules of the New York Stock Exchange.
There is no limit on the number of shares that can be issued under the MDCP and no further shares are available for issuance under the other equity compensation
arrangements described in footnote 4 to the above chart.
53
Part III
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information with respect to this Item is incorporated herein by reference to the Proxy, including information within the sections
entitled, "Governance of the Company-Review and Approval of Transactions with Related Persons" and "Governance of the
Company-Corporate Governance Guidelines," "Governance of the Company-Committees of the Board," "Governance of the
Company-Committee Membership" and "Election of Directors."
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to this Item is incorporated herein by reference to the Proxy, including information within the section
entitled "Ratification of Independent Registered Public Accounting Firm."
54
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
Financial Statements, Financial Statement Schedules and Exhibits:
Part IV
1.
2.
Financial Statements (See the Index to the Consolidated Financial Statements on page F-1 of this report).
Financial Statement Schedules
Schedule II—Valuation and Qualifying Accounts
(Dollars in millions)
Year Ended December 31,
Accounts Receivable—Allowance for Doubtful Receivables
2015
2014
2013
Balance at beginning of period
Additions charged to cost and expenses
Deductions from reserves1
Balance at end of period
Inventory—Obsolescence Reserve
Balance at beginning of period
Additions charged to expenses
Deductions from reserves2
Balance at end of period
Deferred Tax Assets—Valuation Allowance
Balance at beginning of period
Net (benefits) charges to income tax expense
(Deductions) additions to other comprehensive income (loss)
Balance at end of period
$
$
$
$
$
$
235 $
58
(68)
225 $
180 $
391
(334)
237 $
1,704 $
(71)
(104)
1,529 $
262 $
58
(85)
235 $
212 $
386
(418)
180 $
1,711 $
(47)
40
1,704 $
237
70
(45)
262
250
304
(342)
212
1,861
29
(179)
1,711
1. Deductions include write-offs, recoveries and currency translation adjustments.
2. Deductions include disposals and currency translation adjustments.
Financial Statement Schedules listed under SEC rules but not included in this report are omitted because they are not applicable
or the required information is shown in the Consolidated Financial Statements or notes thereto incorporated by reference.
55
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES, continued
3.
Exhibits
Part IV
The following list of exhibits includes both exhibits submitted with this Form 10-K as filed with the SEC and those incorporated
by reference to other filings:
Exhibit
Number
3.1
3.2
4
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
Description
Company's Restated Certificate of Incorporation (incorporated by reference to Exhibit 99.2 to the company’s Annual
Report on Form 8-K (Commission file number 1-815) dated June 1, 2015).
Company’s Bylaws, as last amended effective October 22, 2015 (incorporated by reference to Exhibit 3.2 to the
company’s Quarterly Report on Form 10-Q (Commission file number 1-815) for the period ended September 30,
2015).
The company agrees to provide the Commission, on request, copies of instruments defining the rights of holders of
long-term debt of the company and its subsidiaries.
The DuPont Stock Accumulation and Deferred Compensation Plan for Directors, as last amended effective January 1,
2009 (incorporated by reference to Exhibit 10.1 to the company's Annual Report on Form 10-K (Commission file
number 1-815) for the year ended December 31, 2013).
Company’s Supplemental Retirement Income Plan, as last amended effective December 18, 1996 (incorporated by
reference to Exhibit 10.2 to the company's Annual Report on Form 10-K (Commission file number 1-815) for the
year ended December 31, 2011).
Company’s Pension Restoration Plan, as last amended effective June 29, 2015 (incorporated by reference to Exhibit
10.3 to the company's Quarterly Report on Form 10-Q (Commission file number 1-815) for the period ended June
30, 2015).
Company’s Rules for Lump Sum Payments, as last amended effective May 15, 2014 (incorporated by reference to
Exhibit 10.4 to the company’s Quarterly Report on Form 10-Q (Commission file number 1-815) for the period ended
June 30, 2015).
Company’s Stock Performance Plan, as last amended effective January 25, 2007 (incorporated by reference to Exhibit
10.5 to the company's Annual Report on Form 10-K (Commission file number 1-815) for the year ended December
31, 2011).
Company’s Equity and Incentive Plan, as amended October 23, 2014 (incorporated by reference to Exhibit 10.06 to
the company's Quarterly Report on Form 10-Q (Commission file number 1-815) for the period ended September 30,
2014).
Form of Award Terms under the company’s Equity and Incentive Plan (incorporated by reference to Exhibit 10.7 to
the company’s Quarterly Report on Form 10-Q (Commission file number 1-815) for the period ended June 30, 2013).
Company’s Retirement Savings Restoration Plan, as last amended effective May 15, 2014 (incorporated by reference
to Exhibit 10.08 to the company's Quarterly Report on Form 10-Q (Commission file number 1-815) for the period
ended June 30, 2014).
Company’s Retirement Income Plan for Directors, as last amended January 2011 (incorporated by reference to Exhibit
10.9 to the company's Quarterly Report on Form 10-Q (Commission file number 1-815) for the period ended March
31, 2012).
Company's Senior Executive Severance Plan, as amended and restated effective December 10, 2015. The company
agrees to furnish supplementally a copy of any omitted schedules to the Commission upon request.
Supplemental Deferral Terms for Deferred Long Term Incentive Awards and Deferred Variable Compensation Awards
(incorporated by reference to Exhibit 10.12 to the company's Annual Report on Form 10-K (Commission file number
1-815) for the year ended December 31, 2013).
Form of 2014 Award Terms under the Company's Equity and Incentive Plan (incorporated by reference to Exhibit
10.13 to the company's Quarterly Report on Form 10-Q (Commission file number 1-815) for the period ended March
31, 2014).
Company’s Management Deferred Compensation Plan, as last amended effective April 15, 2014 (incorporated by
reference to Exhibit 10.13 to the company's Quarterly Report on Form 10-Q (Commission file number 1-815) for
the period ended June 30, 2014).
56
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES, continued
Part IV
10.14*
10.15*
10.16*
10.17**
10.18
10.19**
10.20**
10.21**
12
21
23
31.1
31.2
32.1
32.2
Separation Agreement dated October 5, 2015, by and between E.I. du Pont Nemours and Company and Ellen J.
Kullman (incorporated by reference to Exhibit 10.1 to the company's Current Report on Form 8-K (Commission file
number 1-815) dated October 5, 2015).
Form of 2015 Award Terms under the Company's Equity and Incentive Plan (incorporated by reference to Exhibit
10.15 to the company's Quarterly Report on Form 10-Q (Commission file number 1-815) for the period ended March
31, 2015).
Letter Agreement dated January 4, 2016, by and between the Company and Mr. James C. Borel (incorporated by
reference to Exhibit 10.1 to the company's Current Report on Form 8-K (Commission file number 1-815) dated
January 22, 2016).
Separation Agreement by and between the Company and The Chemours Company (incorporated by reference to
Exhibit 2.1 to the company's Current Report on Form 8-K (Commission file number 1-815) dated July 8, 2015).
Tax Matters Agreement by and between the Company and The Chemours Company (incorporated by reference to
Exhibit 2.2 to the company's Current Report on Form 8-K (Commission file number 1-815) dated July 8, 2015).
Agreement and Plan of Merger by and between the Company and The Dow Chemical Company, dated as of December
11, 2015 (incorporated by reference to Exhibit 2.1 to the company's Current Report on Form 8-K (Commission file
number 1-815) dated December 11, 2015).
Master Repurchase Agreement with Cooperatieve Rabobank, U.A. (New York Branch) and The Bank of Tokyo
Mitsubishi UFJ Ltd. (New York Branch) dated as of February 3, 2016.
Master Framework Agreement with Cooperatieve Rabobank, U.A. (New York Branch) and The Bank of Tokyo
Mitsubishi UFJ Ltd. (New York Branch) dated as of February 3, 2016.
Computation of Ratio of Earnings to Fixed Charges.
Subsidiaries of the Registrant.
Consent of Independent Registered Public Accounting Firm.
Rule 13a-14(a)/15d-14(a) Certification of the company’s Principal Executive Officer.
Rule 13a-14(a)/15d-14(a) Certification of the company’s Principal Financial Officer.
Section 1350 Certification of the company’s Principal Executive Officer. The information contained in this
Exhibit shall not be deemed filed with the Securities and Exchange Commission nor incorporated by reference in
any registration statement filed by the registrant under the Securities Act of 1933, as amended.
Section 1350 Certification of the company’s Principal Financial Officer. The information contained in this
Exhibit shall not be deemed filed with the Securities and Exchange Commission nor incorporated by reference in
any registration statement filed by the registrant under the Securities Act of 1933, as amended.
101.INS
XBRL Instance Document
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
*
**
Management contract or compensatory plan or arrangement.
DuPont hereby undertakes to furnish supplementally a copy of any omitted schedule or exhibit to such agreement to the U.S. Securities and Exchange
Commission upon request.
57
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Signatures
February 4, 2016
E. I. DU PONT DE NEMOURS AND COMPANY
By:
/s/ Nicholas C. Fanandakis
Nicholas C. Fanandakis
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
_____________________________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant in the capacities and on the dates indicated:
Signature
Title(s)
Date
/s/ E.D. Breen
E. D. Breen
/s/ L. Andreotti
L. Andreotti
/s/ R.A. Brown
R. A. Brown
/s/ A.M. Cutler
A. M. Cutler
/s/ E.I. du Pont, II
E. I. du Pont, II
/s/ J. L. Gallogly
J. L. Gallogly
/s/ M.A. Hewson
M. A. Hewson
/s/ L.D. Juliber
L. D. Juliber
/s/ U. M. Schneider
U. M. Schneider
/s/ L. M. Thomas
L. M. Thomas
/s/ P. J. Ward
P. J. Ward
February 4, 2016
February 4, 2016
February 4, 2016
February 4, 2016
February 4, 2016
February 4, 2016
February 4, 2016
February 4, 2016
February 4, 2016
February 4, 2016
February 4, 2016
Chair of the Board of Directors and
Chief Executive Officer and Director
(Principal Executive Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
58
E.I. du Pont de Nemours and Company
Index to the Consolidated Financial Statements
Consolidated Financial Statements:
Management's Reports on Responsibility for Financial Statements and Internal Control over
Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Income Statements for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013
Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014
Consolidated Statements of Equity for the years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013
Notes to the Consolidated Financial Statements
Page(s)
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-1
Management's Reports on Responsibility for Financial Statements and
Internal Control over Financial Reporting
Management's Report on Responsibility for Financial Statements
Management is responsible for the Consolidated Financial Statements and the other financial information contained in this Annual
Report on Form 10-K. The financial statements have been prepared in accordance with generally accepted accounting principles
in the United States of America (GAAP) and are considered by management to present fairly the company's financial position,
results of operations and cash flows. The financial statements include some amounts that are based on management's best estimates
and judgments. The financial statements have been audited by the company's independent registered public accounting firm,
PricewaterhouseCoopers LLP. The purpose of their audit is to express an opinion as to whether the Consolidated Financial
Statements included in this Annual Report on Form 10-K present fairly, in all material respects, the company's financial position,
results of operations and cash flows in conformity with GAAP. Their report is presented on the following page.
Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The company's internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with GAAP. The company's internal control over financial reporting
includes those policies and procedures that:
i.
ii.
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles and that receipts and expenditures of the company are
being made only in accordance with authorization of management and directors of the company; and
iii.
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition
of the company's assets that could have a material effect on the financial statements.
Internal control over financial reporting has certain inherent limitations which may not prevent or detect misstatements. In addition,
changes in conditions and business practices may cause variation in the effectiveness of internal controls.
Management assessed the effectiveness of the company's internal control over financial reporting as of December 31, 2015, based
on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-
Integrated Framework (2013). Based on its assessment and those criteria, management concluded that the company maintained
effective internal control over financial reporting as of December 31, 2015.
PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of the company's
internal control over financial reporting as of, as stated in their report, which is presented on the following page.
Edward D. Breen
Chair of the Board and
Chief Executive Officer
February 4, 2016
Nicholas C. Fanandakis
Executive Vice President
and Chief Financial Officer
F-2
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
E. I. du Pont de Nemours and Company:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, comprehensive
income, equity and cash flows present fairly, in all material respects, the financial position of E. I. du Pont de Nemours and
Company and its subsidiaries at December 31, 2015 and 2014, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a) (2)
presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated
financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for
these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in "Management's Report on Internal
Control over Financial Reporting" appearing on page F-2. Our responsibility is to express opinions on these financial statements,
on the financial statement schedule and on the Company's internal control over financial reporting based on our integrated audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement and whether effective internal control over financial reporting was maintained in all material
respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 4, 2016
F-3
E. I. du Pont de Nemours and Company
Consolidated Financial Statements
CONSOLIDATED INCOME STATEMENTS
(Dollars in millions, except per share)
For the year ended December 31,
Net sales
Cost of goods sold
Other operating charges
Selling, general and administrative expenses
Research and development expense
Other income, net
Interest expense
Employee separation / asset related charges, net
Income from continuing operations before income taxes
Provision for income taxes on continuing operations
Income from continuing operations after income taxes
Income from discontinued operations after income taxes
Net income
Less: Net income attributable to noncontrolling interests
Net income attributable to DuPont
Basic earnings per share of common stock:
Basic earnings per share of common stock from continuing operations
Basic earnings per share of common stock from discontinued operations
Basic earnings per share of common stock
Diluted earnings per share of common stock:
Diluted earnings per share of common stock from continuing operations
Diluted earnings per share of common stock from discontinued operations
Diluted earnings per share of common stock
Dividends per share of common stock
2015
2014
2013
$
25,130 $
28,406 $
15,112
459
4,615
1,898
(697)
342
810
2,591
696
1,895
64
1,959
6
17,023
645
4,891
1,958
(1,277)
377
476
4,313
1,168
3,145
491
3,636
11
$
$
$
$
$
$
1,953 $
3,625 $
2.10 $
0.07
2.17 $
2.09 $
0.07
2.16 $
1.72 $
3.42 $
0.54
3.95 $
3.39 $
0.53
3.92 $
1.84 $
28,998
17,642
1,222
5,342
2,037
(371)
448
112
2,566
360
2,206
2,656
4,862
14
4,848
2.36
2.87
5.22
2.34
2.85
5.18
1.78
See Notes to the Consolidated Financial Statements beginning on page F-9.
F-4
E. I. du Pont de Nemours and Company
Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in millions, except per share)
For the year ended December 31,
Net income
Other comprehensive (loss) income, before tax:
Cumulative translation adjustment
Net revaluation and clearance of cash flow hedges to earnings:
Additions and revaluations of derivatives designated as cash flow hedges
Clearance of hedge results to earnings
Net revaluation and clearance of cash flow hedges to earnings
Pension benefit plans:
Net (loss) gain
Prior service benefit
Effect of foreign exchange rates
Reclassifications to net income:
Amortization of prior service (benefit) cost
Amortization of loss
Curtailment / settlement loss
Pension benefit plans, net
Other benefit plans:
Net gain (loss)
Prior service benefit
Effect of foreign exchange rates
Reclassifications to net income:
Amortization of prior service benefit
Amortization of loss
Curtailment / settlement gain
Other benefit plans, net
Net unrealized (loss) gain on securities
Other comprehensive (loss) income, before tax
Income tax (expense) benefit related to items of other comprehensive income
Other comprehensive (loss) income, net of tax
Comprehensive income
Less: Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to DuPont
2015
2014
2013
$
1,959 $
3,636 $
4,862
(1,605)
(876)
(37)
12
(25)
(57)
—
119
(9)
768
70
891
4
—
(1)
(182)
78
(274)
(375)
(19)
(1,133)
(175)
(1,308)
651
6
645 $
$
53
15
68
(4,131)
44
—
2
601
11
(3,473)
(280)
50
—
(214)
57
—
(387)
—
(4,668)
1,403
(3,265)
371
12
359 $
25
(58)
(25)
(83)
3,293
62
—
8
957
153
4,473
513
211
—
(195)
76
(153)
452
1
4,868
(1,665)
3,203
8,065
12
8,053
See Notes to the Consolidated Financial Statements beginning on page F-9.
F-5
E. I. du Pont de Nemours and Company
Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except per share)
December 31,
Assets
Current assets
Cash and cash equivalents
Marketable securities
Accounts and notes receivable, net
Inventories
Prepaid expenses
Deferred income taxes
Assets of discontinued operations
Total current assets
Property, plant and equipment
Less: Accumulated depreciation
Net property, plant and equipment
Goodwill
Other intangible assets
Investment in affiliates
Deferred income taxes
Other assets
Total
Liabilities and Equity
Current liabilities
Accounts payable
Short-term borrowings and capital lease obligations
Income taxes
Other accrued liabilities
Liabilities of discontinued operations
Total current liabilities
Long-term borrowings and capital lease obligations
Other liabilities
Deferred income taxes
Total liabilities
Commitments and contingent liabilities
Stockholders' Equity
Preferred stock, without par value – cumulative; 23,000,000 shares authorized;
issued at December 31, 2015 and 2014:
$4.50 Series – 1,673,000 shares (callable at $120)
$3.50 Series – 700,000 shares (callable at $102)
Common stock, $.30 par value; 1,800,000,000 shares authorized;
issued at December 31, 2015 – 958,388,000; 2014 – 992,020,000
Additional paid-in capital
Reinvested earnings
Accumulated other comprehensive loss
Common stock held in treasury, at cost
(Shares: December 31, 2015 and 2014 – 87,041,000)
Total DuPont stockholders' equity
Noncontrolling interests
Total equity
Total
2015
2014
$
$
$
$
5,300 $
906
4,643
6,140
248
518
—
17,755
24,130
14,346
9,784
4,248
4,144
688
3,431
1,116
41,166 $
3,398 $
1,165
210
5,580
—
10,353
7,642
12,591
380
30,966
167
70
288
11,081
14,510
(9,396)
(6,727)
9,993
207
10,200
41,166 $
6,910
124
5,238
6,787
264
532
6,227
26,082
23,773
13,765
10,008
4,332
4,569
762
3,734
1,003
50,490
3,786
1,422
534
5,596
2,467
13,805
9,233
13,615
459
37,112
167
70
298
11,174
16,894
(8,556)
(6,727)
13,320
58
13,378
50,490
See Notes to the Consolidated Financial Statements beginning on page F-9.
F-6
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in millions, except per share)
E. I. du Pont de Nemours and Company
Consolidated Financial Statements
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Reinvested
Earnings
Accumulated
Other
Compre-
hensive
Loss
Treasury
Stock
Non-
controlling
Interests
Total
Equity
2013
Balance January 1, 2013
$
237 $
306 $
10,655 $
14,232 $
(8,495) $
(6,727) $
91 $
10,299
Sale of a majority interest in a consolidated
subsidiary
Acquisitions of a noncontrolling interest in
consolidated subsidiaries
Net income
Other comprehensive income (loss)
Common dividends ($1.78 per share)
Preferred dividends
Common stock issued - compensation plans
Common stock repurchased
Common stock retired
4
628
4,848
(1,658)
(10)
3,205
(215)
(779)
(1,000)
1,000
4
(6)
(34)
(34)
14
(2)
(12)
4
4,862
3,203
(1,670)
(10)
632
(1,000)
—
Balance December 31, 2013
$
237 $
304 $
11,072 $
16,633 $
(5,290) $
(6,727) $
57 $
16,286
2014
Sale of a majority interest in a consolidated
subsidiary
Net income
Other comprehensive (loss) income
Common dividends ($1.84 per share)
Preferred dividends
Common stock issued - compensation plans
Common stock repurchased
Common stock retired
3,625
(1,695)
(10)
(3,266)
3
(9)
434
(332)
(1,659)
(2,000)
2,000
(5)
11
1
(6)
(5)
3,636
(3,265)
(1,701)
(10)
437
(2,000)
—
Balance December 31, 2014
$
237 $
298 $
11,174 $
16,894 $
(8,556) $
(6,727) $
58 $
13,378
2015
Consolidation of a joint venture
Net income
Other comprehensive loss
Common dividends ($1.72 per share)
Preferred dividends
(1)
Common stock issued - compensation plans
2
359
Common stock repurchased
Common stock retired
Spin-off of Chemours
(12)
(451)
1,953
(1,542)
(10)
(1,890)
(895)
(1,308)
151
6
(4)
(2,353)
2,353
468
(4)
150
1,959
(1,308)
(1,546)
(10)
361
(2,353)
—
(431)
Balance December 31, 2015
$
237 $
288 $
11,081 $
14,510 $
(9,396) $
(6,727) $
207 $
10,200
See Notes to the Consolidated Financial Statements beginning on page F-9.
F-7
E. I. du Pont de Nemours and Company
Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)
For the year ended December 31,
Operating activities
Net income
Adjustments to reconcile net income to cash provided by operating activities:
2015
2014
2013
$
1,959 $
3,636 $
4,862
Depreciation
Amortization of intangible assets
Net periodic pension benefit cost
Contributions to pension plans
Gain on sales of businesses
Other operating activities – net
(Increase) decrease in operating assets:
Accounts and notes receivable
Inventories and other operating assets
Increase (decrease) in operating liabilities:
Accounts payable and other operating liabilities
Accrued interest and income taxes
Cash provided by operating activities
Investing activities
Purchases of property, plant and equipment
Investments in affiliates
Payments for businesses – net of cash acquired
Proceeds from sales of businesses - net
Proceeds from sales of assets – net
Purchases of short-term financial instruments
Proceeds from maturities and sales of short-term financial instruments
Foreign currency exchange contract settlements
Other investing activities – net
Cash (used for) provided by investing activities
Financing activities
Dividends paid to stockholders
Net (decrease) increase in short-term (less than 90 days) borrowings
Long-term and other borrowings:
Receipts
Payments
Repurchase of common stock
Proceeds from exercise of stock options
Payments for noncontrolling interest
Cash transferred to Chemours at spin-off
Other financing activities – net
Cash used for financing activities
Effect of exchange rate changes on cash
(Decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental cash flow information:
Cash paid during the year for
Interest, net of amounts capitalized
Income taxes
1,104
1,254
362
591
(308)
(59)
253
(448)
164
(1,063)
(239)
2,316
363
406
(311)
(726)
366
(88)
(318)
(1,064)
194
3,712
(1,629)
(2,020)
(76)
(152)
139
17
(1,897)
1,121
615
34
(1,828)
(1,546)
(1)
3,679
(1,537)
(2,353)
274
(1)
(250)
(88)
(1,823)
(275)
(1,610)
6,910
(42)
—
1,058
34
(936)
950
430
189
(337)
(1,696)
(11)
104
(1,794)
(2,000)
327
—
—
(4)
(5,074)
(332)
(2,031)
8,941
5,300 $
6,910 $
1,280
323
953
(313)
(2,687)
170
(976)
(519)
240
(154)
3,179
(1,882)
(58)
(133)
4,841
142
(497)
452
40
40
2,945
(1,661)
16
2,013
(1,312)
(1,000)
536
(65)
—
(1)
(1,474)
(88)
4,562
4,379
8,941
341 $
885
394 $
1,016
489
1,323
$
$
See Notes to the Consolidated Financial Statements beginning on page F-9.
F-8
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements
(Dollars in millions, except per share)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The company follows generally accepted accounting principles in the United States of America (GAAP). The significant accounting
policies described below, together with the other notes that follow, are an integral part of the Consolidated Financial Statements.
Preparation of Financial Statements
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Basis of Consolidation
The Consolidated Financial Statements include the accounts of the company, subsidiaries in which a controlling interest is
maintained and variable interest entities (VIEs) for which DuPont is the primary beneficiary. For those consolidated subsidiaries
in which the company's ownership is less than 100 percent, the outside stockholders' interests are shown as noncontrolling interests.
Investments in affiliates over which the company has significant influence but not a controlling interest are carried on the equity
method. At December 31, 2015 and 2014, the assets, liabilities and operations of VIEs for which DuPont is the primary beneficiary
were not material to the Consolidated Financial Statements of the company.
The company is also involved with certain joint ventures accounted for under the equity method of accounting that are VIEs. The
company is not the primary beneficiary, as the nature of the company's involvement with the VIEs does not provide it the power
to direct the VIEs significant activities. Future events may require these VIEs to be consolidated if the company becomes the
primary beneficiary. At December 31, 2015 and 2014, the maximum exposure to loss related to the unconsolidated VIEs is not
considered material to the Consolidated Financial Statements of the company.
Basis of Presentation
Certain reclassifications of prior year's data have been made to conform to current year's presentation.
On July 1, 2015, the company completed the separation of its Performance Chemicals segment through the spin-off of all of the
issued and outstanding stock of The Chemours Company (Chemours). In accordance with GAAP, the financial position and results
of operations of the Performance Chemicals segment are presented as discontinued operations and, as such, have been excluded
from continuing operations and segment results for all periods presented. 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. The assets and liabilities related to the Performance Chemicals segment are presented as assets of discontinued operations
and liabilities of discontinued operations in the Consolidated Balance Sheets for all periods presented. The cash flows and
comprehensive income related to the Performance Chemicals segment have not been segregated and are included in the
Consolidated Statements of Cash Flows and Comprehensive Income, respectively, for all periods presented. Amounts related to
the Performance Chemicals segment are consistently included or excluded from the Notes to the Consolidated Financial Statements
based on the respective financial statement line item. See Note 3 for additional information.
The company revised accumulated other comprehensive loss at January 1, 2013 to adjust for currency translation of $97 and
pension settlement charges of $54 that should have been recorded in prior years. The revision resulted in a $151 decrease in
accumulated other comprehensive loss with a corresponding reduction in reinvested earnings. The currency translation was related
to an adjustment to the exchange rates used by a foreign subsidiary in the translation of the financial statements to U.S. dollar
(USD) in prior years. See further discussion of the pension settlement charges in Note 18. The impact of these adjustments is not
material to the company's current or previously issued financial statements.
In February 2013, the company sold its Performance Coatings business (which represented a reportable segment). In accordance
with GAAP, the results of Performance Coatings are presented as discontinued operations and, as such, have been excluded from
continuing operations and segment results for all periods presented. The cash flows and comprehensive income related to the
Performance Coatings business have not been segregated and are included in the Consolidated Statements of Cash Flows and
Comprehensive Income, respectively, for all periods presented. See Note 3 for additional information.
F-9
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Revenue Recognition
The company recognizes revenue when the earnings process is complete. The company's revenues are from the sale of a wide
range of products to a diversified base of customers around the world. Revenue for product sales is recognized upon delivery,
when title and risk of loss have been transferred, collectability is reasonably assured and pricing is fixed or determinable. A majority
of product sales are sold FOB (free on board) shipping point or, with respect to non United States of America (U.S.) customers,
an equivalent basis. Accruals are made for sales returns and other allowances based on the company's experience. The company
accounts for cash sales incentives as a reduction in sales and noncash sales incentives as a charge to cost of goods sold or selling
expense, depending on the nature of the incentive. Amounts billed to customers for shipping and handling fees are included in net
sales and costs incurred by the company for the delivery of goods are classified as cost of goods sold in the Consolidated Income
Statements. Taxes on revenue-producing transactions are excluded from net sales.
The company periodically enters into prepayment contracts with customers in the Agriculture segment and receives advance
payments for product to be delivered in future periods. These advance payments are recorded as deferred revenue (classified as
other accrued liabilities) or debt, depending on the nature of the program. Revenue associated with advance payments is recognized
as shipments are made and title, ownership and risk of loss pass to the customer.
Licensing and royalty income is recognized in accordance with agreed upon terms, when performance obligations are satisfied,
the amount is fixed or determinable and collectability is reasonably assured.
Cost of Goods Sold
Cost of goods sold primarily includes the cost of manufacture and delivery, ingredients or raw materials, direct salaries, wages
and benefits and overhead.
Other Operating Charges
Other operating charges includes product claim charges and recoveries, non-capitalizable costs associated with capital projects
and other operational expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expenses primarily include selling and marketing expenses, commissions, functional costs,
and business management expenses.
Cash and Cash Equivalents
Cash equivalents represent investments with maturities of three months or less from time of purchase. They are carried at cost
plus accrued interest.
Marketable Securities
Marketable securities represent investments in fixed and floating rate financial instruments with maturities greater than three
months and up to twelve months at time of purchase. Investments classified as held-to-maturity are recorded at amortized cost.
The carrying value approximates fair value due to the short-term nature of the investment. Investments classified as available-
for-sale are carried at estimated fair value with unrealized gains and losses recorded as a component of accumulated other
comprehensive loss.
F-10
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Fair Value Measurements
Under the accounting for fair value measurements and disclosures, a fair value hierarchy was established that prioritizes the inputs
to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3
measurements). A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is
significant to the fair value measurement.
The company uses the following valuation techniques to measure fair value for its assets and liabilities:
Level 1
Level 2
Level 3
–
–
–
Quoted market prices in active markets for identical assets or liabilities;
Significant other observable inputs (e.g. quoted prices for similar items in active markets, quoted prices for
identical or similar items in markets that are not active, inputs other than quoted prices that are observable
such as interest rate and yield curves, and market-corroborated inputs);
Unobservable inputs for the asset or liability, which are valued based on management's estimates of
assumptions that market participants would use in pricing the asset or liability.
Inventories
The company's inventories are valued at the lower of cost or market. Elements of cost in inventories include raw materials, direct
labor and manufacturing overhead. Stores and supplies are valued at cost or market, whichever is lower; cost is generally determined
by the average cost method.
As of December 31, 2015 approximately 55, 30 and 15 percent of the company’s inventories were accounted for under the first-
in first out (FIFO), average cost and last-in first out (LIFO) methods, respectively. As of December 31, 2014 approximately 60,
25 and 15 percent of the company’s inventories were accounted for under the FIFO, average cost and LIFO methods, respectively.
Inventories accounted for under the FIFO method are primarily comprised of products with shorter shelf lives such as seeds, certain
food-ingredients and enzymes.
The company establishes allowances for obsolescence of inventory based upon quality considerations and assumptions about
future demand and market conditions.
Property, Plant and Equipment
Property, plant and equipment is carried at cost and is depreciated using the straight-line method. Substantially all equipment and
buildings are depreciated over useful lives ranging from 15 to 25 years. Capitalizable costs associated with computer software for
internal use are amortized on a straight-line basis over 5 to 7 years. When assets are surrendered, retired, sold or otherwise disposed
of, their gross carrying values and related accumulated depreciation are removed from the accounts and included in determining
gain or loss on such disposals.
Maintenance and repairs are charged to operations; replacements and improvements are capitalized.
Goodwill and Other Intangible Assets
Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not
individually identified and separately recognized. Goodwill and indefinite-lived intangible assets are tested for impairment at least
annually; however, these tests are performed more frequently when events or changes in circumstances indicate that the asset may
be impaired. Impairment exists when carrying value exceeds fair value. The company's fair value methodology is based on prices
of similar assets or other valuation methodologies including discounted cash flow techniques.
Definite-lived intangible assets, such as purchased and licensed technology, patents and customer lists are amortized over their
estimated useful lives, generally for periods ranging from 1 to 20 years or amortized based on units of production. The company
continually evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they are removed
from the Consolidated Balance Sheets.
F-11
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Impairment of Long-Lived Assets
The company evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances
indicate the carrying value may not be recoverable. The carrying value of a long-lived asset group is considered impaired when
the total projected undiscounted cash flows from the assets are separately identifiable and are less than its carrying value. In that
event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. The
company's fair value methodology is an estimate of fair market value which is made based on prices of similar assets or other
valuation methodologies including present value techniques. Long-lived assets to be disposed of other than by sale are classified
as held for use until their disposal. Long-lived assets to be disposed of by sale are classified as held for sale and are reported at
the lower of carrying amount or fair market value less cost to sell. Depreciation is discontinued for long-lived assets classified as
held for sale.
Research and Development
Research and development costs are expensed as incurred. Research and development expense includes costs (primarily consisting
of employee costs, materials, contract services, research agreements, and other external spend) relating to the discovery and
development of new products, enhancement of existing products and regulatory approval of new and existing products.
Royalty Expense
The company’s Agriculture segment currently has certain third party biotechnology trait license agreements, which require up-
front and variable payments subject to the licensor meeting certain conditions. These payments are reflected as prepaid expenses
and other assets and are amortized to cost of goods sold as seeds containing the respective trait technology are utilized over the
life of the license. The company evaluates the carrying value of the prepaid royalties when events or changes in circumstances
indicate the carrying value may not be recoverable.
Environmental
Accruals for environmental matters are recorded in operating expenses when it is probable that a liability has been incurred and
the amount of the liability can be reasonably estimated. Accrued liabilities do not include claims against third parties and are not
discounted.
Costs related to environmental remediation and restoration are charged to expense. Other environmental costs are also charged to
expense unless they increase the value of the property or reduce or prevent contamination from future operations, in which case,
they are capitalized.
Asset Retirement Obligations
The company records asset retirement obligations at fair value at the time the liability is incurred. Accretion expense is recognized
as an operating expense using the credit-adjusted risk-free interest rate in effect when the liability was recognized. The associated
asset retirement obligations are capitalized as part of the carrying amount of the long-lived asset and depreciated over the estimated
remaining useful life of the asset, generally for periods ranging from 1 to 25 years.
Litigation
The company accrues for liabilities related to litigation matters when the information available indicates that it is probable that a
liability has been incurred and the amount of the liability can be reasonably estimated. Legal costs such as outside counsel fees
and expenses are charged to expense in the period incurred.
Insurance/Self-Insurance
The company self-insures certain risks where permitted by law or regulation, including workers' compensation, vehicle liability
and employee related benefits. Liabilities associated with these risks are estimated in part by considering historical claims
experience, demographic factors and other actuarial assumptions. For other risks, the company uses a combination of insurance
and self-insurance, reflecting comprehensive reviews of relevant risks. A receivable for an insurance recovery is generally
recognized when the loss has occurred and collection is considered probable.
F-12
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Income Taxes
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this
approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities
are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change
in deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of the company's assets
and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded
to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Provision has been made for
income taxes on unremitted earnings of subsidiaries and affiliates, except for subsidiaries in which earnings are deemed to be
indefinitely invested. Investment tax credits or grants are accounted for in the period earned (the flow-through method). Interest
accrued related to unrecognized tax benefits is included in miscellaneous income and expenses, net, within other income, net.
Income tax related penalties are included in the provision for income taxes.
Foreign Currency Translation
The company's worldwide operations utilize the U.S. dollar (USD) or local currency as the functional currency, where applicable.
The company identifies its separate and distinct foreign entities and groups the foreign entities into two categories: 1) extension
of the parent (USD functional currency) and 2) self-contained (local functional currency). If a foreign entity does not align with
either category, factors are evaluated and a judgment is made to determine the functional currency.
For foreign entities where the USD is the functional currency, all foreign currency-denominated asset and liability amounts are
re-measured into USD at end-of-period exchange rates, except for inventories, prepaid expenses, property, plant and equipment,
goodwill and other intangible assets, which are re-measured at historical rates. Foreign currency income and expenses are re-
measured at average exchange rates in effect during the year, except for expenses related to balance sheet amounts re-measured
at historical exchange rates. Exchange gains and losses arising from re-measurement of foreign currency-denominated monetary
assets and liabilities are included in income in the period in which they occur.
For foreign entities where the local currency is the functional currency, assets and liabilities denominated in local currencies are
translated into USD at end-of-period exchange rates and the resultant translation adjustments are reported, net of their related tax
effects, as a component of accumulated other comprehensive income (loss) in equity. Assets and liabilities denominated in other
than the local currency are re-measured into the local currency prior to translation into USD and the resultant exchange gains or
losses are included in income in the period in which they occur. Income and expenses are translated into USD at average exchange
rates in effect during the period.
The company changes the functional currency of its separate and distinct foreign entities only when significant changes in economic
facts and circumstances indicate clearly that the functional currency has changed. As a result of the separation of its Performance
Chemicals segment, coupled with the company’s redesign initiative, the functional currency at certain of the company’s foreign
entities was re-evaluated which, in some cases, has resulted in a change in the foreign entities' functional currency during 2015.
Venezuelan Foreign Currency
Venezuela is considered a highly inflationary economy under GAAP and the USD is the functional currency for the company's
subsidiaries in Venezuela. The official exchange rate continues to be set through the National Center for Foreign Commerce
(CENCOEX, previously CADIVI). Based on its evaluation of the restrictions and limitations affecting the availability of specific
exchange rate mechanisms, management concluded in the second quarter of 2014 that the Alternative Currency Exchange System
(SICAD 2) auction process would be the most likely mechanism available. As a result, in the second quarter of 2014, the company
changed from the official exchange rate to the SICAD 2 exchange rate, which resulted in a pre-tax charge of $58. The charge is
recorded within other income, net in the company's Consolidated Income Statements for the year ended December 31, 2014.
During the first quarter of 2015, the Venezuelan government enacted additional changes to the country's foreign exchange systems
including the introduction of the Foreign Exchange Marginal System (SIMADI) auction process. Management has concluded
that the SIMADI auction process would be the most likely exchange mechanism available. As a result, effective in the first quarter
of 2015, the company changed from the SICAD 2 to the SIMADI exchange rate, to re-measure its Bolivar Fuertes (VEF)
denominated net monetary assets which resulted in a pre-tax charge of $3. The charge is recorded within other income, net in the
company's Consolidated Income Statements for the year ended December 31, 2015. The remaining net monetary assets and non-
monetary assets are immaterial at December 31, 2015.
F-13
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Hedging and Trading Activities
Derivative instruments are reported in the Consolidated Balance Sheets at their fair values. For derivative instruments designated
as fair value hedges, changes in the fair values of the derivative instruments will generally be offset in the income statement by
changes in the fair value of the hedged items. For derivative instruments designated as cash flow hedges, the effective portion of
any hedge is reported in accumulated other comprehensive income (loss) until it is cleared to earnings during the same period in
which the hedged item affects earnings. The ineffective portion of all hedges is recognized in current period earnings. Changes
in the fair values of derivative instruments that are not designated as hedges are recorded in current period earnings.
In the event that a derivative designated as a hedge of a firm commitment or an anticipated transaction is terminated prior to the
maturation of the hedged transaction, gains or losses realized at termination are deferred and included in the measurement of the
hedged transaction. If a hedged transaction matures, or is sold, extinguished, or terminated prior to the maturity of a derivative
designated as a hedge of such transaction, gains or losses associated with the derivative through the date the transaction matured
are included in the measurement of the hedged transaction and the derivative is reclassified as for trading purposes. Derivatives
designated as a hedge of an anticipated transaction are reclassified as for trading purposes if the anticipated transaction is no longer
probable.
Cash flows from derivative instruments accounted for as either fair value hedges or cash flow hedges are reported in the same
category as the cash flows from the items being hedged. Cash flows from all other derivative instruments are generally reported
as investing activities in the Consolidated Statements of Cash Flows. See Note 20 for additional discussion regarding the company's
objectives and strategies for derivative instruments.
Recent Accounting Pronouncements
Accounting Pronouncements Implemented in 2015
In April 2014, the Financial Accounting Standards Board (FASB) issued authoritative guidance amending existing requirements
for reporting discontinued operations. Under the new guidance, discontinued operations reporting will be limited to disposal
transactions that represent strategic shifts having a major effect on operations and financial results. The amended guidance also
enhances disclosures and requires assets and liabilities of a discontinued operation to be classified as such for all periods presented
in the financial statements. Public entities will apply the amended guidance prospectively to all disposals occurring within annual
periods beginning on or after December 15, 2014 and interim periods within those years. The company adopted this standard on
January 1, 2015. Due to the change in requirements for reporting discontinued operations described above, presentation and
disclosures of disposal transactions after adoption may be different than under previous standards.
New Accounting Pronouncements to be Implemented
In November 2015, the FASB issued Accounting Standard Update (ASU) No. 2015-17, Income Taxes (Topic 740), Balance Sheet
Classification of Deferred Taxes. The amendments under the new guidance require that deferred tax liabilities and assets be
classified as noncurrent in a classified statement of financial position. The guidance is effective for financial statements issued for
annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted
for all entities as of the beginning of an interim or annual reporting period. The amendments in this ASU may be applied either
prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The company is early adopting
this guidance effective January 1, 2016 on a retrospective basis.
In May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820), Disclosures for Investments in Certain
Entities that Calculate Net Asset Value per Share or its Equivalent. This guidance removes the requirement to categorize within
the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient.
The guidance also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair
value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the
entity has elected to measure the fair value using that practical expedient. The guidance is effective for fiscal years beginning
after December 15, 2015, and interim periods within those fiscal years. A reporting entity should apply the amendments
retrospectively to all periods presented and early adoption is permissible. The company anticipates that this guidance will only
impact disclosure and will not impact the company's financial position or results of operations.
F-14
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
In February 2015, the FASB issued ASU No. 2015-02 Consolidation (Topic 810), Amendments to the Consolidation Analysis.
The amendments under the new guidance modify the evaluation of whether limited partnerships and similar legal entities are VIEs
or voting interest entities and eliminate the presumption that a general partner should consolidate a limited partnership. The ASU
is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December
15, 2015. Early adoption is permitted, including adoption in an interim period. A reporting entity also may apply the amendments
retrospectively. The company does not expect this guidance to have a material impact on its financial position or results of
operations.
In May 2014, the FASB and the International Accounting Standards Board (IASB) jointly issued ASU No. 2014-9, Revenue from
Contracts with Customers (Topic 606), which clarifies the principles for recognizing revenue and develops a common revenue
standard for GAAP and International Financial Reporting Standards (IFRS). The core principle of the guidance is that an entity
should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods and services. In July 2015, the FASB approved
a deferral of the ASU effective date from annual and interim periods beginning after December 15, 2016 to annual and interim
periods beginning after December 15, 2017. The company is currently evaluating the impact of adopting this guidance on its
financial position and results of operations.
2. PROPOSED MERGER WITH DOW CHEMICAL
On December 11, 2015, DuPont and The Dow Chemical Company (Dow) announced entry into an Agreement and Plan of Merger
(the Merger Agreement), under which the companies will combine in an all-stock merger of equals. The companies anticipate
that the merger will close and become effective (the Effective Time), in the second half of 2016 and at that time the combined
company will be named DowDuPont. Following the consummation of the merger, DuPont and Dow intend to pursue, subject to
the receipt of approval by the board of directors of DowDuPont, the separation of the combined company’s agriculture business,
specialty products business and material science business through a series of one or more tax-efficient transactions (collectively,
the Business Separations.)
Subject to the terms and conditions of the Merger Agreement, each share of common stock, par value $0.30 per share, of DuPont
(DuPont Common Stock) issued and outstanding immediately prior to the Effective Time, excluding any shares of DuPont Common
Stock that are held in treasury, will be converted into the right to receive 1.2820 shares common stock, par value $0.01 per share,
of DowDuPont (DowDuPont Common Stock), for each share of DuPont Common Stock with cash in lieu of any fractional share
of DowDuPont. Each share of DuPont Preferred Stock-$4.50 Series and DuPont Preferred Stock-$3.50 Series, in each case issued
and outstanding immediately prior to the Effective Time, shall remain issued and outstanding and be unaffected by the merger.
Subject to the terms and conditions set forth in the Merger Agreement, at the Effective Time, each share of common stock, par
value $2.50 per share, of Dow (the Dow Common Stock) issued and outstanding immediately prior to the Effective Time, excluding
any shares of Dow Common Stock that are held in treasury, will be converted into the right to receive one share of DowDuPont
Common Stock and each share of Cumulative Convertible Perpetual Preferred Stock, Series A, par value $1.00 per share, of Dow
(the Dow Preferred) issued and outstanding immediately prior to the Effective Time will be automatically canceled and each holder
of shares of Dow Preferred will be deemed to hold the same number of shares of preferred stock of DowDuPont on equivalent
terms.
The aforementioned 1.2820 exchange ratio set forth in the Merger Agreement is expected to result in DuPont common stockholders
and Dow common stockholders each owning approximately 50% of the outstanding shares of DowDuPont Common Stock
following the Effective Time.
F-15
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Conditions to the Mergers
The completion of the merger is subject to the satisfaction or waiver of certain conditions, including (i) the adoption of the Merger
Agreement by the affirmative vote of the holders of a majority of all outstanding shares of DuPont Common Stock entitled to vote
thereon; (ii) the adoption of the Merger Agreement by the affirmative vote of the holders of a majority of all outstanding shares
of Dow Common Stock entitled to vote thereon; (iii) the receipt of certain domestic and foreign approvals under competition laws;
(iv) DuPont and Dow reasonably determining that the merger does not constitute an acquisition of a 50% or greater interest in
DuPont and Dow, respectively, under the principles of Section 355(e) of the Internal Revenue Code; (v) the absence of governmental
restraints or prohibitions preventing the consummation of the merger; (vi) the effectiveness of the Form S-4 and absence of any
stop order or proceedings by the SEC; and (vii) the approval of the shares of DowDuPont Common Stock to be issued in the merger
for listing on the NYSE. The obligation of each of DuPont and Dow to consummate the merger is also conditioned on, among
other things, the receipt of a tax opinion from the tax counsel as to the tax-free nature of the merger, and the truth and correctness
of the representations and warranties made by the other party as of the closing date (subject to certain “materiality” and “material
adverse effect” qualifiers).
Certain Other Terms of the Merger Agreement
The Merger Agreement contains mutual customary representations and warranties made by each of DuPont and Dow, and also
contains mutual customary pre-closing covenants, including covenants, among others, (i) to operate its businesses in the ordinary
course consistent with past practice and to refrain from taking certain actions without the other party’s consent, (ii) not to solicit,
initiate, knowingly encourage or knowingly take any other action designed to facilitate, and, subject to certain exceptions, not to
participate in any discussions or negotiations, or cooperate in any way with respect to, any inquiries or the making of, any proposal
of an alternative transaction, (iii) subject to certain exceptions, not to withdraw, qualify or modify the support of its Board of
Directors for the Merger Agreement and the merger, as applicable, and (iv) to use their respective reasonable best efforts to obtain
governmental, regulatory and third party approvals, including by agreeing to any required divestiture of assets or business. In
addition, the Merger Agreement contains covenants that require each of DuPont and Dow to call and hold a special stockholder
meeting and, subject to certain exceptions, require each of the Board of Directors of DuPont and Dow to recommend to its
stockholders to approve the merger and adopt the Merger Agreement.
The Merger Agreement contains certain termination rights for each of DuPont and Dow, including in the event that (i) the merger
is not consummated on or before March 15, 2017, subject to each party having the right to unilaterally extend the terminate date
of the Merger Agreement until June 15, 2017 (the Outside Date) in the event that the regulatory closing conditions have not been
satisfied, (ii) the approval of the merger and the adoption of the Merger Agreement by the stockholders of DuPont or the stockholders
of Dow is not obtained at the respective stockholder meetings or (iii) if any restraint having the effect of preventing the consummation
of the merger shall have become final and non-appealable or if any governmental entity that must grant a requisite regulatory
approval has denied approval of the merger. In addition, DuPont and Dow can each terminate the Merger Agreement prior to the
stockholder meeting of the other party if, among other things, the other party’s Board of Directors has changed its recommendation
that its stockholders approve the merger, as applicable, and adopt the Merger Agreement, or has failed to make or reaffirm such
recommendation in certain circumstances.
The Merger Agreement further provides that, upon termination of the Merger Agreement under specified circumstances, including
(i) a change in the recommendation of the Board of Directors of DuPont and Dow or (ii) a termination of the Merger Agreement
by DuPont and Dow, because of a failure of the stockholders of the other party to adopt the Merger Agreement at the stockholder
meeting, a material breach by the other party or because the merger is not consummated by the Outside Date, in each case set forth
in this clause (ii) at a time when there was an offer or proposal for an alternative transaction with respect to such party and such
party enters into or consummates an alternative transaction within 12 months following such date of termination, DuPont and
Dow, as the case may be, will pay to the other party a termination fee equal to $1,900 in cash.
F-16
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
3. DIVESTITURES AND OTHER TRANSACTIONS
Performance Chemicals
On July 1, 2015 (the Distribution Date), DuPont completed the separation of its Performance Chemicals segment through the spin-
off of all of the issued and outstanding stock of Chemours (the Separation). To effect the spin-off, DuPont distributed to its
stockholders one share of Chemours common stock, par value $0.01 per share, for every five shares of DuPont common stock,
par value $0.30 per share, (the Distribution) outstanding as of 5:00 p.m. June 23, 2015, the record date for the Distribution. In
lieu of fractional shares of Chemours, stockholders of DuPont received cash, which generally was taxable. In connection with
the Separation, the company and Chemours entered into a Separation Agreement and a Tax Matters Agreement, discussed below,
and certain ancillary agreements, including an employee matters agreement, agreements related to transition and site services, and
intellectual property cross licensing arrangements. In addition, the companies have entered into certain supply agreements. In
January 2016, the company agreed in principle to prepay $190 for certain goods and services expected to be delivered by Chemours
over the next twelve to fifteen months.
Separation Agreement
The company and Chemours entered into a Separation Agreement that sets forth, among other things, the agreements between the
company and Chemours regarding the principal transactions necessary to effect the Separation and also sets forth ancillary
agreements that govern certain aspects of the company’s relationship with Chemours after the separation. Among other matters,
the Separation Agreement and the ancillary agreements provide for the allocation between DuPont and Chemours of assets,
employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities)
attributable to periods prior to, at and after the completion of the Separation.
Pursuant to the Separation Agreement, Chemours indemnifies DuPont against certain litigation, environmental, workers'
compensation and other liabilities that arose prior to the distribution. The term of this indemnification is indefinite and includes
defense costs and expenses, as well as monetary and non-monetary settlements and judgments. In connection with the recognition
of liabilities related to these matters, the company records an indemnification asset when recovery is deemed probable. At
December 31, 2015, the indemnified assets are $99 within accounts and notes receivable, net and $394 within other assets along
with the corresponding liabilities of $99 within other accrued liabilities and $394 within other liabilities.
Tax Matters Agreement
The company and Chemours entered into a Tax Matters Agreement that governs the parties’ respective rights, responsibilities and
obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits
and other tax proceedings and other matters regarding taxes. In general, under the agreement, the company is responsible for any
U.S. federal, state and local taxes (and any related interest, penalties or audit adjustments) reportable on a consolidated, combined
or unitary return that includes the company or any of its subsidiaries (and Chemours and/or any of its subsidiaries) for any periods
or portions thereof ending on or prior to the date of the Separation and Chemours is responsible for any U.S. federal, state, local
and foreign taxes (and any related interest, penalties or audit adjustments) that are imposed on Chemours and/or any of its
subsidiaries for all tax periods, whether before or after the date of the distribution. Neither party’s obligations under the agreement
are limited in amount or subject to any cap. Additionally, Chemours generally agrees to indemnify DuPont and its affiliates against
any and all tax-related liabilities incurred by them relating to the distribution and certain other aspects of the separation to the
extent caused by an acquisition of Chemours’ stock or assets or by certain other action undertaken by Chemours.
F-17
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
The results of operations of the Performance Chemicals segment are presented as discontinued operations as summarized below:
For the year ended December 31,
Net sales
Cost of goods sold
Other operating charges
Selling, general and administrative expenses
Research and development expense
Other income, net
Interest expense
Employee separation / asset related charges, net
Income from discontinued operations before income taxes
Provision for income taxes
2015
2014
2013
$
2,810 $
2,215
6,317 $
4,680
6,736
4,905
386
(87)
40
(27)
32
59
192
106
422
453
109
(46)
—
21
678
202
338
491
116
(39)
—
2
923
266
657
Income from discontinued operations after income taxes
$
86 $
476 $
As a result of the separation, the company recorded an other long-term employee benefit plan curtailment gain of $274 and a
pension curtailment gain of $7. See Note 18 for further discussion.
During the years ended December 31, 2015 and 2014, the company incurred $306 and $175 of costs, respectively, in connection
with the transaction primarily related to professional fees associated with preparation of regulatory filings and separation activities
within finance, tax, legal, and information system functions. Income from discontinued operations during the years ended
December 31, 2015 and 2014, includes $260 and $142 of these costs, respectively. Income from continuing operations during the
years ended December 31, 2015 and 2014, includes $26 and $33 of these costs, respectively, recorded in other operating charges
in the company's Consolidated Income Statements. Income from continuing operations during the year ended December 31, 2015
also included $20 of transaction costs incurred for a premium associated with the early retirement of DuPont debt. The company
exchanged notes received from Chemours in May 2015 (as part of a dividend payment) for DuPont debt that it then retired. These
costs were reported in interest expense in the company's Consolidated Income Statements.
Income from discontinued operations during the year ended December 31, 2015, included a restructuring charge of $59, consisting
of severance and related benefit costs associated with the Performance Chemicals segment to achieve fixed cost and operational
productivity improvements for Chemours post-spin.
F-18
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
The carrying amount of the major classes of assets and liabilities classified as assets and liabilities of discontinued operations at
December 31, 2014 related to Performance Chemicals consisted of the following:
Accounts and notes receivable, net
Inventories
Prepaid expenses
Deferred income taxes - current
Property, plant and equipment, net of accumulated depreciation
Goodwill
Other intangible assets
Investment in affiliates
Deferred income taxes - noncurrent
Other assets - noncurrent
Total assets of discontinued operations
Accounts payable
Income taxes
Other accrued liabilities
Other liabilities - noncurrent
Deferred income taxes - noncurrent
Total liabilities of discontinued operations
December 31,
2014
887
1,054
15
53
3,378
197
11
124
42
466
6,227
1,036
9
373
616
433
2,467
$
$
$
$
In connection with the spin-off, the company received a dividend from Chemours in May 2015 of $3,923 comprised of a cash
distribution of $3,416 and a distribution in-kind of $507 of 7% senior unsecured notes due 2025 (Chemours Notes Received).
Chemours financed the dividend payment through issuance of approximately $4,000 of debt, including the Chemours Notes
Received (Chemours' Debt). Net assets of $431 were transferred to Chemours on July 1, 2015, including the $4,000 of Chemours'
Debt. The Separation Agreement sets forth a process to true-up cash and working capital transferred to Chemours at Separation
to certain target amounts with the net differences payable by year-end 2015. In January 2016, closure was reached between the
parties without exchanging funds.
The following table presents the depreciation, amortization and purchases of property, plant and equipment of the discontinued
operations related to Performance Chemicals:
For the year ended December 31,
Depreciation
Amortization of intangible assets
Purchases of property, plant and equipment
2015
2014
2013
$
126 $
2
235
248 $
3
525
253
6
429
Glass Laminating Solutions/Vinyls
In June 2014, the company sold Glass Laminating Solutions/Vinyls (GLS/Vinyls), a part of the Performance Materials segment,
to Kuraray Co. Ltd. The sale resulted in a pre-tax gain of $391 ($273 net of tax). The gain was recorded in other income, net in
the company's Consolidated Income Statements for the year ended December 31, 2014.
Performance Coatings
In February 2013, the company sold its Performance Coatings business to Flash Bermuda Co. Ltd., a Bermuda exempted limited
liability company formed by affiliates of The Carlyle Group (collectively referred to as "Carlyle"). The sale resulted in
approximately $4,200 in after-tax proceeds and a pre-tax gain of $2,687 ($1,962 net of tax). The gain was recorded in income
from discontinued operations after income taxes in the company's Consolidated Income Statements for the year ended December 31,
2013.
F-19
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
The results of discontinued operations are summarized below:
For the year ended December 31,
Net sales
(Loss) income from discontinued operations before income taxes1
(Benefit from) provision for income taxes2
(Loss) income from discontinued operations after income taxes
2015
2014
2013
$
$
$
— $
(23) $
(1)
(22) $
— $
— $
(15)
15 $
331
2,717
718
1,999
1.
2.
The year ended December 31, 2015 includes a net charge of $(23) related to a postretirement settlement charge and other employee related settlement
adjustments.
The year ended December 31, 2014 includes a tax benefit of $(15) related to a change in estimate of income taxes resulting from the filing of various tax
returns impacted by the sale of Performance Coatings.
F-20
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
4. EMPLOYEE SEPARATION/ASSET RELATED CHARGES, NET
2016 Global Cost Savings and Restructuring Program
In December 2015, DuPont committed to take 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 as part of a 2016 global cost
savings and restructuring plan.
As a result, during the year ended December 31, 2015, a pre-tax charge of $798 was recorded, consisting of $793 of employee
separation / asset related charges, net and $5 in other income, net. The charges consisted of $656 in severance and related benefit
costs, $109 in asset related charges, and $33 in contract termination charges. The restructuring actions associated with this charge
are expected to impact approximately 10 percent of DuPont’s workforce and to be substantially complete in 2016. The company
anticipates additional charges could occur in relation to the restructuring actions, which it cannot reasonably estimate at this time.
The restructuring program charges related to the segments, as follows, for the year ended December 31, 2015: Agriculture - $161,
Electronics & Communications - $93, Industrial Biosciences - $51, Nutrition & Health - $47, Performance Materials - $61, Safety
& Protection - $53, Other - $2, as well as Corporate expenses - $330.
At December 31, 2015, total liabilities related to the restructuring program were $680.
Account balances and activity for the restructuring program are summarized below:
Severance
and Related
Benefit
Costs
Asset
Related
Charges
Other Non-
Personnel
Charges1
Total
Charges to income from continuing operations for the year ended December 31, 2015 $
656 $
109 $
33 $ 798
Charges to accounts:
Payments
Asset write-offs and adjustments
Balance at December 31, 2015
(2)
(6)
648 $
—
(109)
(3)
(1)
— (115)
— $
32 $ 680
$
1.
Other non-personnel charges consist of contractual obligation costs.
2014 Restructuring Program
In June 2014, DuPont announced its global, multi-year initiative to redesign its global organization and operating model to reduce
costs and improve productivity and agility across all businesses and functions. DuPont commenced a restructuring plan to realign
and rebalance staff function support, enhance operational efficiency, and to reduce residual costs associated with the separation of
its Performance Chemicals segment.
During the year ended December 31, 2015, a net benefit of $(21) was recorded to adjust the estimated costs associated with the
2014 restructuring program in employee separation / asset related charges, net in the company's Consolidated Income Statements.
This was primarily due to lower than estimated individual severance costs and workforce reductions achieved through non-severance
programs, offset by the identification of additional projects in certain segments. The adjustments related to the segments for the
year ended December 31, 2015 as follows: Agriculture - $3, Electronics & Communications - $(15), Industrial Biosciences - $1,
Nutrition & Health - $3, Performance Materials - $1, Safety & Protection - $(4), Other - $1, as well as Corporate expenses $(11).
During the year ended December 31, 2014 a pre-tax charge of $541 was recorded, consisting of $476 in employee separation / asset
related charges, net and $65 in other income, net in the company's Consolidated Income Statements. The charges consisted of $301
of severance and related benefit costs, $17 of other non-personnel charges, and $223 of asset related charges, including $65 of
charges associated with the restructuring actions of a joint venture within the Performance Materials segment.
The 2014 restructuring program charges related to the segments, as follows, for the year ended December 31, 2014: Agriculture -
$134, Electronics & Communications -$84, Industrial Biosciences - $13, Nutrition & Health - $15, Performance Materials - $99,
Safety & Protection - $52, Other - $10, as well as Corporate expenses - $134.
F-21
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
At December 31, 2015, total liabilities related to the 2014 restructuring program were $78. The actions associated with this charge
and all related payments are substantially complete.
Account balances and activity for the 2014 restructuring program are summarized below:
Charges to income from continuing operations for the year ended December 31, 2014 $
301 $
223 $
17 $ 541
Severance
and Related
Benefit
Costs
Asset
Related
Charges
Other Non-
Personnel
Charges1
Total2
Charges to accounts:
Payments
Net translation adjustment
Asset write-offs and adjustments
Balance at December 31, 2014
Payments
Net translation adjustment
Other adjustments
Balance at December 31, 2015
(43)
(6)
—
252 $
(152)
(3)
(21)
76 $
$
$
—
—
(223)
— $
—
—
—
(13)
—
(56)
(6)
— (223)
4 $ 256
(2)
—
(154)
(3)
— (21)
— $
2 $ 78
1. Other non-personnel charges consist of contractual obligation costs.
2.
Table above excludes activity related to Performance Chemicals, presented as a discontinued operation in the company's Consolidated Income Statement.
During 2014, the company recorded a charge of $21 related to Performance Chemicals, of which the company made payments of $13 prior to separation and
transferred a liability of $2 to Chemours at separation on July 1, 2015.
Asset Impairments
During the first quarter 2015, a $38 pre-tax impairment charge was recorded in employee separation / asset related charges, net
within the Other segment in the company's Consolidated Income Statements. The majority relates to a cost basis investment in
which 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. One of the primary investors communicated that they would
not fund the revised operating plan of the investee. As a result, the carrying value of DuPont's 6 percent cost basis investment in
this venture exceeds its fair value by $37, such that an impairment charge was recorded.
In the fourth quarter 2013, as a result of strategic decisions related to the thin film photovoltaic market, the company determined
that impairment triggering events had occurred and that assessments of the asset group related to its thin film photovoltaic modules
and systems were warranted. These assessments determined that the carrying value of the asset group exceeded its fair value. As
a result of the impairment tests, $129 of pre-tax impairment charges were recorded during 2013 within the Electronics &
Communications segment.
F-22
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
5. OTHER INCOME, NET
Royalty income
Interest income
Equity in earnings (loss) of affiliates, net
Gain on sale of equity method investment
Net gains on sales of businesses and other assets
Net exchange gains (losses)1
Cozaar®/Hyzaar® income
Miscellaneous income and expenses, net2
Other income, net
2015
2014
2013
138 $
129
49
—
92
30
—
259
697 $
156 $
129
(36)
—
710
196
—
122
1,277 $
163
136
22
9
21
(101)
14
107
371
$
$
1.
The $30 net exchange gain for the year ended December 31, 2015, includes $(58) and $(40) exchange loss associated with the devaluation of the Ukrainian
hryvnia and the Argentina peso, respectively. The $196 net exchange gain for the year ended December 31, 2014, includes a $(58), $(46), and $(14) exchange
losses, associated with the devaluation of the Venezuelan bolivar, Ukranian hryvnia, and Argentinian peso, respectively. The $(101) net exchange loss for
the year ended December 31, 2013, includes a $(33) exchange loss, associated with the devaluation of the Venezuelan bolivar.
2. Miscellaneous income and expenses, net, includes interest items, certain insurance recoveries, litigation settlements and other items.
The following table summarizes the impacts of the company's foreign currency hedging program on the company's results from
operations for the years ended December 31, 2015, 2014 and 2013. The company routinely uses foreign currency exchange
contracts to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets and liabilities. 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 on net monetary asset positions. The hedging program gains are largely taxable in
the U.S., whereas the offsetting exchange losses on the re-measurement of the net monetary asset positions are often not tax
deductible in their local jurisdictions. The net pre-tax exchange gains (losses) are recorded in other income, net and the related
tax impact is recorded in provision for income taxes on continuing operations on the Consolidated Income Statements.
Subsidiary/Affiliate Monetary Position Gain (Loss)
Pretax exchange loss1
Local tax (expenses) benefits
Net after-tax impact from subsidiary exchange loss
Hedging Program Gain (Loss)
Pretax exchange gain
Tax expenses
Net after-tax impact from hedging program exchange gain
Total Exchange Gain (Loss)
Pretax exchange gain (loss)
Tax (expenses) benefits
Net after-tax exchange loss
1. Excludes equity affiliates.
2015
2014
2013
$
$
$
$
$
$
(404) $
(61)
(465) $
434 $
(157)
277 $
30 $
(218)
(188) $
(410) $
(207) $
(617) $
607 $
(212) $
395 $
196 $
(419) $
(223) $
(136)
47
(89)
35
(12)
23
(101)
35
(66)
F-23
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
6. PROVISION FOR INCOME TAXES
Current tax expense on continuing operations:
U.S. federal
U.S. state and local
International
Total current tax expense on continuing operations
Deferred tax expense (benefit) on continuing operations:
U.S. federal
U.S. state and local
International
Total deferred tax expense (benefit) on continuing operations
2015
2014
2013
$
218 $
656 $
7
466
691
139
4
(138)
5
38
449
1,143
91
(42)
(24)
25
Provision for income taxes on continuing operations
$
696 $
1,168 $
The significant components of deferred tax assets and liabilities at December 31, 2015 and 2014, are as follows:
32
(7)
598
623
(205)
(65)
7
(263)
360
2015
2014
Asset
Liability
Asset
Liability
Depreciation
Accrued employee benefits
Other accrued expenses
Inventories
Unrealized exchange gains/losses
Tax loss/tax credit carryforwards/backs
Investment in subsidiaries and affiliates
Amortization of intangibles
Other
Valuation allowance
Net deferred tax asset
$
$
$
— $
4,812
563
125
—
2,124
133
187
215
(1,529)
6,630 $
3,418
953 $
374
—
99
224
—
154
1,331
77
—
3,212 $
$
— $
5,376
555
151
—
2,409
151
154
258
(1,704)
7,350 $
3,633
An analysis of the company's effective income tax rate (EITR) on continuing operations is as follows:
Statutory U.S. federal income tax rate
Exchange gains/losses1
Domestic operations
Lower effective tax rates on international operations-net2
Tax settlements
Sale of a business
U.S. research & development credit 2
2015
2014
2013
35.0%
8.0
(2.8)
(11.1)
(0.7)
(0.2)
(1.3)
26.9%
35.0%
8.1
(2.8)
(11.4)
(0.6)
(0.4)
(0.8)
27.1%
1,003
746
—
137
173
—
195
1,353
110
—
3,717
35.0%
1.0
(4.1)
(14.7)
(0.3)
—
(2.9)
14.0%
1.
2.
Principally reflects the impact of foreign exchange losses on net monetary assets for which no corresponding tax benefit is realized. Further information
about the company's foreign currency hedging program is included in Note 5 and Note 20 under the heading Foreign Currency Risk.
On January 2, 2013, U.S. tax law was enacted which extended through 2013 (and retroactive to 2012) several expired or expiring temporary business tax
provisions. In accordance with GAAP, this extension was taken into account in the quarter in which the legislation was enacted (i.e. first quarter 2013).
F-24
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Consolidated income from continuing operations before income taxes for U.S. and international operations was as follows:
U.S. (including exports)
International
Income from continuing operations before income taxes
2015
2014
2013
$
$
1,397 $
1,194
2,591 $
2,537 $
1,776
4,313 $
504
2,062
2,566
The decrease in pre-tax earnings from continuing operations from 2014 to 2015 is primarily driven by lower worldwide sales
volume, the absence of 2014 gains on sales of businesses primarily in the U.S., higher employee separation/asset related charges,
as well as the results of the company’s hedging program.
In 2015 and 2014, the U.S. recorded a net exchange gain associated with the hedging program of $434 and $607, respectively.
While the taxation of the amounts reflected on the chart above does not correspond precisely to the jurisdiction of taxation (due
to taxation in multiple countries, exchange gains/losses, etc.), it represents a reasonable approximation of the income before income
taxes split between U.S. and international jurisdictions. See Note 20 for additional information regarding the company's hedging
program.
Under the tax laws of various jurisdictions in which the company operates, deductions or credits that cannot be fully utilized for
tax purposes during the current year may be carried forward or back, subject to statutory limitations, to reduce taxable income or
taxes payable in future or prior years. At December 31, 2015, the tax effect of such carryforwards/backs, net of valuation allowance
approximated $946. Of this amount, $785 has no expiration date, $7 expires after 2015 but before the end of 2020 and $154 expires
after 2020.
At December 31, 2015, unremitted earnings of subsidiaries outside the U.S. totaling $16,053 were deemed to be indefinitely
reinvested. No deferred tax liability has been recognized with regard to the remittance of such earnings. It is not practicable to
estimate the income tax liability that might be incurred if such earnings were remitted to the U.S.
Each year the company files hundreds of tax returns in the various national, state and local income taxing jurisdictions in which
it operates. These tax returns are subject to examination and possible challenge by the tax authorities. Positions challenged by the
tax authorities may be settled or appealed by the company. As a result, there is an uncertainty in income taxes recognized in the
company's financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes.
It is reasonably possible that net reductions to the company’s global unrecognized tax benefits could be in the range of $225 to
$250 within the next 12 months with the majority due to the settlement of uncertain tax positions with various tax authorities.
F-25
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
The company and/or its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and non-U.S.
jurisdictions. With few exceptions, the company is no longer subject to U.S. federal, state and local, or non-U.S. income tax
examinations by tax authorities for years before 2004. A reconciliation of the beginning and ending amounts of unrecognized tax
benefits is as follows:
Total unrecognized tax benefits as of January 1
Gross amounts of decreases in unrecognized tax benefits as a result of tax positions
taken during the prior period
Gross amounts of increases in unrecognized tax benefits as a result of tax positions
taken during the prior period
Gross amounts of increases in unrecognized tax benefits as a result of tax positions
taken during the current period
Amount of decreases in the unrecognized tax benefits relating to settlements with taxing
authorities
Reduction to unrecognized tax benefits as a result of a lapse of the applicable statute of
limitations
Exchange gain
Total unrecognized tax benefits as of December 31
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate
Total amount of interest and penalties recognized in the Consolidated Income Statements
Total amount of interest and penalties recognized in the Consolidated Balance Sheets
2015
2014
2013
$
986 $
901 $
805
(98)
(50)
(28)
13
69
84
92
(58)
(15)
(30)
(36)
846 $
651 $
5 $
(3)
(23)
986 $
818 $
5 $
100 $
117 $
76
92
(19)
(6)
(19)
901
778
16
122
$
$
$
$
F-26
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
7. EARNINGS PER SHARE OF COMMON STOCK
Set forth below is a reconciliation of the numerator and denominator for basic and diluted earnings per share calculations for the
periods indicated:
Numerator:
Income from continuing operations after income taxes attributable to DuPont $
Preferred dividends
Income from continuing operations after income taxes available to DuPont
common stockholders
Income from discontinued operations after income taxes
Net income available to common stockholders
Denominator:
$
$
$
2015
2014
2013
1,889 $
(10)
3,135 $
(10)
2,193
(10)
1,879 $
3,125 $
2,183
64 $
490 $
2,655
1,943 $
3,615 $
4,838
Weighted-average number of common shares outstanding – Basic
893,992,000
914,752,000
925,984,000
Dilutive effect of the company's equity compensation plans
5,535,000
7,121,000
7,163,000
Weighted-average number of common shares outstanding – Diluted
899,527,000
921,873,000
933,147,000
The weighted-average number of common shares outstanding in 2015 and 2014 decreased as a result of the company's repurchase
and retirement of its common stock, partially offset by the issuance of new shares from the company's equity compensation plans
(see Notes 17 and 19, respectively).
The following average number of stock options are antidilutive and therefore, are not included in the diluted earnings per share
calculation:
Average number of stock options
2015
2014
2013
4,715,000
3,000
2,596,000
The change in the average number of stock options that were antidilutive in 2015 and 2014 was due to changes in the company's
average stock price.
8. ACCOUNTS AND NOTES RECEIVABLE, NET
December 31,
Accounts receivable – trade1
Notes receivable – trade1,2
Other3
2015
2014
3,435 $
301
907
4,643 $
3,690
243
1,305
5,238
$
$
1.
2.
3.
Accounts and notes receivable – trade are net of allowances of $225 at 2015 and $235 at 2014. Allowances are equal to the estimated uncollectible amounts.
That estimate is based on historical collection experience, current economic and market conditions, and review of the current status of customers' accounts.
Notes receivable – trade primarily consists of receivables within the Agriculture segment for deferred payment loan programs for the sale of seed products
to customers. These loans have terms of one year or less and are primarily concentrated in North America. The company maintains a rigid pre-approval
process for extending credit to customers in order to manage overall risk and exposure associated with credit losses. As of December 31, 2015 and 2014,
there were no significant past due notes receivable, nor were there any significant impairments related to current loan agreements.
Other includes receivables in relation to fair value of derivative instruments, indemnification assets, value added tax, general sales tax and other taxes.
Accounts and notes receivable are carried at amounts that approximate fair value.
F-27
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
9. INVENTORIES
December 31,
Finished products
Semi-finished products
Raw materials, stores and supplies
Adjustment of inventories to a LIFO basis
10. PROPERTY, PLANT AND EQUIPMENT
December 31,
Buildings
Equipment
Land
Construction
2015
2014
3,779 $
1,780
783
6,342
(202)
6,140 $
4,011
2,277
739
7,027
(240)
6,787
2015
2014
4,468 $
17,410
506
1,746
24,130 $
4,502
17,219
550
1,502
23,773
$
$
$
$
11. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
The following table summarizes changes in the carrying amount of goodwill for the years ended December 31, 2015 and 2014,
by reportable segment:
Agriculture
Electronics & Communications
Industrial Biosciences
Nutrition & Health
Performance Materials
Safety & Protection
Total
Balance as of
December 31,
2015
$
336 $
149
839
2,092
383
449
$
4,248 $
Goodwill
Adjustments
and
Acquisitions
Balance as of
December 31,
2014
Goodwill
Adjustments
and
Acquisitions
Balance as of
December 31,
2013
18 $
—
(8)
(101)
8
(1)
(84) $
318 $
(12) $
149
847
2,193
375
450
4,332 $
—
(51)
(122)
—
2
(183) $
330
149
898
2,315
375
448
4,515
Changes in goodwill in 2015 and 2014 primarily relate to currency translation adjustments. In 2015 and 2014, the company
performed impairment tests for goodwill and determined that no goodwill impairments existed.
F-28
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Other Intangible Assets
The following table summarizes the gross carrying amounts and accumulated amortization of other intangible assets by major
class:
December 31, 2015
December 31, 2014
Gross
Accumulated
Amortization
Net
Gross
Accumulated
Amortization
Net
Intangible assets subject to amortization
(Definite-lived)
Customer lists
Patents
Purchased and licensed technology
Trademarks
Other1
Intangible assets not subject to amortization
(Indefinite-lived)
In-process research and development
Microbial cell factories2
Pioneer germplasm3
Trademarks/tradenames
$
1,621 $
454
1,173
26
180
3,454
72
306
1,048
747
2,173
Total
$
5,627 $
(529) $
(220)
(649)
(13)
(72)
(1,483)
1,092 $
1,699 $
234
524
13
108
474
1,783
26
202
1,971
4,184
—
—
—
—
—
(1,483) $
72
306
1,048
747
2,173
29
306
1,064
800
2,199
4,144 $
6,383 $
(465) $
(184)
(1,069)
(12)
(84)
(1,814)
—
—
—
—
—
(1,814) $
1,234
290
714
14
118
2,370
29
306
1,064
800
2,199
4,569
Primarily consists of sales and grower networks, marketing and manufacturing alliances and noncompetition agreements.
1.
2. Microbial cell factories, derived from natural microbes, are used to sustainably produce enzymes, peptides and chemicals using natural metabolic processes.
The company recognized the microbial cell factories as an intangible asset upon the acquisition of Danisco. This intangible asset is expected to contribute
to cash flows beyond the foreseeable future and there are no legal, regulatory, contractual, or other factors which limit its useful life.
Pioneer germplasm is the pool of genetic source material and body of knowledge gained from the development and delivery stage of plant breeding. The
company recognized germplasm as an intangible asset upon the acquisition of Pioneer. This intangible asset is expected to contribute to cash flows beyond
the foreseeable future and there are no legal, regulatory, contractual, or other factors which limit its useful life.
3.
The aggregate pre-tax amortization expense from continuing operations for definite-lived intangible assets was $360, $360 and
$317 for 2015, 2014 and 2013, respectively. The estimated aggregate pre-tax amortization expense from continuing operations
for 2016, 2017, 2018, 2019 and 2020 is $329, $205, $207, $200 and $177, respectively.
12. SHORT-TERM BORROWINGS AND CAPITAL LEASE OBLIGATIONS
December 31,
Other loans - various currencies
Long-term debt payable within one year
Capital lease obligations
2015
2014
49 $
1,115
1
1,165 $
17
1,405
—
1,422
$
$
The estimated fair value of the company's short-term borrowings, including interest rate financial instruments, was determined
using level 2 inputs within the fair value hierarchy, as described in Note 1 to the Consolidated Financial Statements. Based on
quoted market prices for the same or similar issues, or on current rates offered to the company for debt of the same remaining
maturities, the fair value of the company's short-term borrowings was $1,190 and $1,424 at December 31, 2015 and 2014,
respectively.
F-29
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Unused bank credit lines were approximately $4,900 at December 31, 2015 and 2014, respectively. These lines are available to
support short-term liquidity needs and general corporate purposes including letters of credit and have a remaining life of up to
three years. Outstanding letters of credit were $203 and $349 at December 31, 2015 and 2014, respectively. These letters of credit
support commitments made in the ordinary course of business.
The weighted-average interest rate on short-term borrowings outstanding at December 31, 2015 and 2014 was 4.1% and 1.7%,
respectively. The increase in the interest rate for 2015 was primarily due to long-term debt maturing within one year.
13. OTHER ACCRUED LIABILITIES
December 31,
Compensation and other employee-related costs
Deferred revenue
Employee benefits (Note 18)
Discounts and rebates
Derivative instruments (Note 20)
Accrual for restructuring programs (Note 4)
Miscellaneous
2015
2014
$
699 $
2,519
364
284
91
758
865
$
5,580 $
701
2,892
341
296
120
171
1,075
5,596
Deferred revenue principally includes advance customer payments within the Agriculture segment. Miscellaneous other accrued
liabilities principally includes accrued plant and operating expenses, accrued litigation costs, the estimated value of certain
guarantees and accrued environmental remediation costs.
F-30
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
14. LONG-TERM BORROWINGS AND CAPITAL LEASE OBLIGATIONS
December 31,
U.S. dollar:
Medium-term notes due 2038 – 20411
3.25% notes due 20152,3
4.75% notes due 20152
1.95% notes due 20162
2.75% notes due 20162
5.25% notes due 20162
6.00% notes due 20184
5.75% notes due 2019
4.625% notes due 2020
3.625% notes due 2021
4.25% notes due 2021
2.80% notes due 2023
6.50% debentures due 2028
5.60% notes due 2036
4.90% notes due 2041
4.15% notes due 2043
Other loans2,5
Other loans- various currencies2
Less short-term portion of long-term debt
Less debt issuance costs
Capital lease obligations
Total
2015
2014
$
111 $
—
—
348
223
541
114
1,001
400
499
500
600
1,314
1,338
499
998
999
499
499
998
999
499
1,250
1,250
299
396
494
749
25
32
8,777
1,115
7,662
32
7,630
12
$
7,642 $
299
396
494
749
29
—
10,664
1,405
9,259
38
9,221
12
9,233
1.
2.
3.
4.
5.
Average interest rates on medium-term notes were 0.1% and 0.0% at December 31, 2015 and 2014, respectively.
Includes long-term debt due within one year.
At December 31, 2014, the company had outstanding interest rate swap agreements with gross notional amounts of $1,000 that matured in 2015. The fair
value of outstanding swaps was an asset of $1 at December 31, 2014.
During 2008, the interest rate swap agreement associated with these notes was terminated. The gain will be amortized over the remaining life of the bond,
resulting in an effective yield of 3.85%.
Average interest rates on other loans were 4.3% and 4.2% at December 31, 2015 and 2014, respectively.
In connection with the spin-off of Chemours, as discussed in Note 3, the company received a dividend from Chemours in May
2015 of $3,923 comprised of a cash distribution of $3,416 and a distribution in-kind of $507 of 7% senior unsecured notes due
2025.
In 2015, DuPont exchanged the Chemours Notes Received for $488 of company debt due in 2016 as follows: $152 of 1.95%
notes, $277 of 2.75% notes, and $59 of 5.25% notes. The company paid a premium of $20, recorded in interest expense in the
company's Consolidated Income Statements in 2015, in connection with the early retirement of the $488 of 2016 notes. This debt
for debt exchange was considered an extinguishment.
Maturities of long-term borrowings are $4, $1,349, $503 and $1,003 for the years 2017, 2018, 2019 and 2020, respectively, and
$4,803 thereafter.
F-31
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
The estimated fair value of the company's long-term borrowings, was determined using level 2 inputs within the fair value hierarchy,
as described in Note 1 to the Consolidated Financial Statements. Based on quoted market prices for the same or similar issues, or
on current rates offered to the company for debt of the same remaining maturities, the fair value of the company's long-term
borrowings was $7,860 and $9,970 at December 31, 2015 and 2014, respectively.
15. OTHER LIABILITIES
December 31,
Employee benefits:
Accrued other long-term benefit costs (Note 18)
Accrued pension benefit costs (Note 18)
Accrued environmental remediation costs
Miscellaneous
2015
2014
$
$
2,524 $
8,478
367
1,222
2,655
9,017
362
1,581
12,591 $
13,615
Miscellaneous includes asset retirement obligations, litigation accruals, tax contingencies, royalty payables, non-current portion
of employee separation accruals and certain obligations related to divested businesses.
16. COMMITMENTS AND CONTINGENT LIABILITIES
Guarantees
Indemnifications
In connection with acquisitions and divestitures, the company has indemnified respective parties against certain liabilities that
may arise in connection with these transactions and business activities prior to the completion of the transaction. The term of these
indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. In addition, the
company indemnifies its duly elected or appointed directors and officers to the fullest extent permitted by Delaware law, against
liabilities incurred as a result of their activities for the company, such as adverse judgments relating to litigation matters. If the
indemnified party were to incur a liability or have a liability increase as a result of a successful claim, pursuant to the terms of the
indemnification, the company would be required to reimburse the indemnified party. The maximum amount of potential future
payments is generally unlimited.
Obligations for Equity Affiliates & Others
The company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates,
customers and suppliers. At December 31, 2015, the company had directly guaranteed $337 of such obligations. This amount
represents the maximum potential amount of future (undiscounted) payments that the company could be required to make under
the guarantees. The company would be required to perform on these guarantees in the event of default by the guaranteed party.
The company assesses the payment/performance risk by assigning default rates based on the duration of the guarantees. These
default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical
default history for counterparties that do not have published credit ratings. For counterparties without an external rating or available
credit history, a cumulative average default rate is used.
F-32
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
In certain cases, the company has recourse to assets held as collateral, as well as personal guarantees from customers and suppliers.
Assuming liquidation, these assets are estimated to cover approximately 24 percent of the $113 of guaranteed obligations of
customers and suppliers. Set forth below are the company's guaranteed obligations at December 31, 2015:
Obligations for customers and suppliers1:
Bank borrowings (terms up to 6 years)
Leases on equipment and facilities (terms up to 3 years)
Obligations for equity affiliates2:
Bank borrowings (terms up to 1 year)
Obligations for Chemours3:
Chemours' purchase obligations (final expiration - 2018)
Total
Short-Term
Long-Term
Total
$
$
87 $
—
178
11
276 $
25 $
1
—
35
61 $
112
1
178
46
337
Existing guarantees for customers and suppliers, as part of contractual agreements.
1.
2. Existing guarantees for equity affiliates' liquidity needs in normal operations.
3.
Guarantee for Chemours' raw material purchase obligations under agreement with third party supplier.
Operating Leases
The company uses various leased facilities and equipment in its operations. The terms for these leased assets vary depending on
the lease agreement.
Future minimum lease payments (including residual value guarantee amounts) under non-cancelable operating leases are $248,
$217, $194, $170 and $133 for the years 2016, 2017, 2018, 2019 and 2020, respectively, and $276 for subsequent years and are
not reduced by non-cancelable minimum sublease rentals due in the future in the amount of $4. Net rental expense under operating
leases was $271, $249 and $241 in 2015, 2014 and 2013, respectively.
Asset Retirement Obligations
The company has recorded asset retirement obligations primarily associated with closure, reclamation and removal costs for mining
operations related to the production of titanium dioxide in Performance Chemicals. The company's asset retirement obligation
liabilities were $49 and $52 at December 31, 2015 and 2014. Pursuant to the Separation Agreement discussed in Note 3, the
company is indemnified by Chemours for the majority of the outstanding asset retirement obligations. As a result, the company
has recorded an indemnification asset of $41 corresponding to the company's accrual balance related to these matters at December
31, 2015.
Imprelis®
The company has received claims and has been served with multiple lawsuits alleging that the use of Imprelis® herbicide caused
damage to certain trees. Sales of Imprelis® were suspended in August 2011 and the product was last applied during the 2011 spring
application season. The lawsuits seeking class action status were consolidated in multidistrict litigation in federal court in
Philadelphia, Pennsylvania. In February 2014, the court entered the final order dismissing these lawsuits as a result of the class
action settlement.
As part of the settlement, DuPont paid about $7 in plaintiffs' attorney fees and expenses. DuPont also provided a warranty, which
expired on May 31, 2015, against new damage, if any, caused by the use of Imprelis® on class members' properties. In the third
quarter of 2014, the company settled the majority of claims from class members that opted out of the class action settlement. As
of December 31, 2015, the company has substantially completed the processing of the warranty claims and has resolved substantially
all of the opt-out actions. Based on the claim settlements and evaluation of the remaining warranty claims and opt-out actions,
the company recorded a $130 reduction to the estimated liability resulting in an accrual balance of $41 at December 31, 2015,
representing the company’s best estimate of the liability associated with resolving the remaining matters. The reduction was
recorded within other operating charges in the company’s consolidated income statement for the year ended December 31, 2015.
F-33
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
DuPont recorded income of $185 and $210 for insurance recoveries, within other operating charges, for the years ended
December 31, 2015 and 2014, respectively. The year ended December 31, 2013 included net charges of $352, consisting of a
$425 charge offset by $73 of insurance recoveries. Insurance recoveries are recognized when collection of payment is considered
probable. The remaining coverage under the insurance program is $50 for costs and expenses. DuPont has submitted requests for
payment related to its remaining coverage.
Litigation
The company is subject to various legal proceedings arising out of the normal course of its business including product liability,
intellectual property, commercial, environmental and antitrust lawsuits. It is not possible to predict the outcome of these various
proceedings. Although considerable uncertainty exists, management does not anticipate that the ultimate disposition of these
matters will have a material adverse effect on the company's results of operations, consolidated financial position or liquidity.
However, the ultimate liabilities could be material to results of operations in the period recognized.
PFOA
DuPont used PFOA (collectively, perfluorooctanoic acids and its salts, including the ammonium salt), as a processing aid to
manufacture some fluoropolymer resins at various sites around the world including its Washington Works plant in West Virginia.
At December 31, 2015, DuPont has an accrual balance of $20 related to the PFOA matters discussed below. Pursuant to the
Separation Agreement discussed in Note 3, the company is indemnified by Chemours for the PFOA matters discussed below. As
a result, the company has recorded an indemnification asset of $20 corresponding to the accrual balance as of December 31, 2015.
The accrual includes charges related to DuPont's obligations under agreements with the U.S. Environmental Protection Agency
and voluntary commitments to the New Jersey Department of Environmental Protection. These obligations and voluntary
commitments include surveying, sampling and testing drinking water in and around certain company sites and offering treatment
or an alternative supply of drinking water if tests indicate the presence of PFOA in drinking water at or greater than the national
Provisional Health Advisory.
Drinking Water Actions
In August 2001, a class action, captioned Leach v DuPont, was filed in West Virginia state court alleging that residents living near
the Washington Works facility had suffered, or may suffer, deleterious health effects from exposure to PFOA in drinking water.
DuPont and attorneys for the class reached a settlement in 2004 that binds about 80,000 residents. In 2005, DuPont paid the
plaintiffs’ attorneys’ fees and expenses of $23 and made a payment of $70, which class counsel designated to fund a community
health project. The company funded a series of health studies which were completed in October 2012 by an independent science
panel of experts (the C8 Science Panel). The studies were conducted in communities exposed to PFOA to evaluate available
scientific evidence on whether any probable link exists, as defined in the settlement agreement, between exposure to PFOA and
human disease.
The C8 Science Panel found probable links, as defined in the settlement agreement, between exposure to PFOA and pregnancy-
induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and diagnosed
high cholesterol.
In May 2013, a panel of three independent medical doctors released its initial recommendations for screening and diagnostic
testing of eligible class members. In September 2014, the medical panel recommended follow-up screening and diagnostic testing
three years after initial testing, based on individual results. The medical panel has not communicated its anticipated schedule for
completion of its protocol. The company is obligated to fund up to $235 for a medical monitoring program for eligible class
members and, in addition, administrative costs associated with the program, including class counsel fees. In January 2012, the
company put $1 in an escrow account to fund medical monitoring as required by the settlement agreement. The court appointed
Director of Medical Monitoring has established the program to implement the medical panel's recommendations and the registration
process, as well as eligibility screening, is ongoing. Diagnostic screening and testing has begun and associated payments to service
providers are being disbursed from the escrow account.
In addition, under the settlement agreement, the company must continue to provide water treatment designed to reduce the level
of PFOA in water to six area water districts, including the Little Hocking Water Association (LHWA), and private well users.
F-34
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Class members may pursue personal injury claims against DuPont only for those human diseases for which the C8 Science Panel
determined a probable link exists. At December 31, 2015, there were approximately 3,500 lawsuits filed in various federal and
state courts in Ohio and West Virginia, an increase of about 600 over year end 2014. These lawsuits are consolidated in multi-
district litigation in Ohio federal court (MDL). Based on the information currently available to the company, the majority of the
lawsuits allege personal injury claims associated with high cholesterol and thyroid disease from exposure to PFOA in drinking
water. There are 37 lawsuits alleging wrongful death. In 2014, six plaintiffs from the MDL were selected for the individual trial.
The jury awarded $1.6 in compensatory damages in the first individual trial, captioned Bartlett v DuPont, which was tried to a
verdict in October 2015. The plaintiff alleged that exposure to PFOA in drinking water had caused kidney cancer. DuPont, through
Chemours, is appealing the decision. The second trial, captioned Wolf v DuPont, was scheduled to begin in March 2016 and
involves allegations that exposure to PFOA in drinking water caused ulcerative colitis. A confidential settlement for an
inconsequential amount was reached in January 2016. In January 2016, the court determined that 40 cases, most of which are
expected to involve allegations that exposure to PFOA in drinking water caused cancer, would be scheduled for trial in 2017,
beginning in April of that year. DuPont, through Chemours, denies the allegations in these lawsuits and is defending itself vigorously.
Additional Actions
An Ohio action brought by the LHWA claims, “imminent and substantial endangerment to health and or the environment” under
the Resource Conservation and Recovery Act (RCRA) in addition to general claims of PFOA contamination of drinking water.
Pursuant to the order of the U.S. District Court for the Southern District of Ohio, the case, scheduled for trial in January 2016,
was removed from the trial docket.
PFOA Summary
While it is probable that the company will incur liabilities related to funding the medical monitoring program, such liabilities
cannot be reasonably estimated due to uncertainties surrounding the level of participation by eligible class members and the scope
of testing. DuPont believes that it is reasonably possible that it could incur additional liabilities related to the other PFOA matters
discussed above; however, a range of such liabilities, if any, cannot be reasonably estimated at this time, due to the uniqueness of
the individual MDL plaintiff's claims and the company's defenses to those claims both as to potential liability and damages on an
individual claims basis, among other factors. As noted above, the company is indemnified by Chemours for these PFOA matters.
Environmental
The company is also subject to contingencies pursuant to environmental laws and regulations that in the future may require the
company to take further action to correct the effects on the environment of prior disposal practices or releases of chemical or
petroleum substances by the company or other parties. The company accrues for environmental remediation activities consistent
with the policy set forth in Note 1. Much of this liability results from the Comprehensive Environmental Response, Compensation
and Liability Act (CERCLA, often referred to as Superfund), RCRA and similar state and global laws. These laws require the
company to undertake certain investigative, remediation and restoration activities at sites where the company conducts or once
conducted operations or at sites where company-generated waste was disposed. The accrual also includes estimated costs related
to a number of sites identified by the company for which it is probable that environmental remediation will be required, but which
are not currently the subject of enforcement activities.
Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated costs, depend
on the mix of unique site characteristics, evolving remediation technologies, diverse regulatory agencies and enforcement policies,
as well as the presence or absence of potentially responsible parties. At December 31, 2015, the Consolidated Balance Sheet
included a liability of $492, relating to these matters and, in management's opinion, is appropriate based on existing facts and
circumstances. The average time frame, over which the accrued or presently unrecognized amounts may be paid, based on past
history, is estimated to be 15-20 years. Considerable uncertainty exists with respect to these costs and, under adverse changes in
circumstances, the potential liability may range up to $1,000 above the amount accrued as of December 31, 2015. Pursuant to
the Separation Agreement discussed in Note 3, the company is indemnified by Chemours for certain environmental matters,
included in the liability of $492, that have an estimated liability of $291 as of December 31, 2015 and a potential exposure that
ranges up to approximately $610 above the amount accrued. As such, the company has recorded an indemnification asset of $291
corresponding to the company's accrual balance related to these matters at December 31, 2015.
F-35
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
17. STOCKHOLDERS' EQUITY
Share Repurchase Program
2015 Share Buyback Plan
In the first quarter 2015, DuPont announced its intention to buy back shares of about $4,000 using the distribution proceeds received
from Chemours. In connection with the completion of the spin-off of Chemours, the Board of Directors authorized the use of the
distribution proceeds to buy back shares of the company's common stock as follows: $2,000 to be purchased and retired by
December 31, 2015 with the remainder to be purchased and retired by December 31, 2016. In August 2015, the company entered
an accelerated share repurchase (ASR) agreement. Under the terms of the August 2015 ASR agreement, the company paid $2,000
to the financial institution and received and retired 35 million shares at an average price of $57.16 per share.
2014 Share Buyback Plan
In January 2014, the company's Board of Directors authorized a $5,000 share buyback plan. There is no required completion date
for purchases under this plan. In February and August 2014, the company entered two separate accelerated share repurchase (ASR)
agreements. The February 2014 ASR agreement was completed in the second quarter of 2014, under which the company purchased
and retired 15.1 million shares for $1,000. The August 2014 ASR agreement was completed in the fourth quarter of 2014, under
which the company purchased and retired 10.4 million shares for $700. In addition to the ASR agreements, for the years ended
December 31, 2015 and 2014, the company repurchased and retired 4.6 million and 4.7 million shares in the open market for a
total cost of $353 and $300, respectively. As of December 31, 2015 the company has purchased 34.7 million shares at a total cost
of $2,353 under the plan. There is no required completion date for the remaining stock purchases.
2012 Share Buyback Plan
In December 2012, the company's Board of Directors authorized a $1,000 share buyback plan. In 2013, the company entered into
an ASR agreement with a financial institution under which the company used $1,000 of the proceeds from the sale of Performance
Coatings for the purchase and retirement 20.4 million shares of common stock.
Common stock held in treasury is recorded at cost. When retired, the excess of the cost of treasury stock over its par value is
allocated between reinvested earnings and additional paid-in capital.
Set forth below is a reconciliation of common stock share activity for the years ended December 31, 2015, 2014 and 2013:
Shares of common stock
Balance January 1, 2013
Issued
Repurchased
Retired
Balance December 31, 2013
Issued
Repurchased
Retired
Balance December 31, 2014
Issued
Repurchased
Retired
Balance December 31, 2015
Issued
Held In Treasury
1,020,057,000
14,370,000
—
(20,400,000)
1,014,027,000
8,103,000
—
(30,110,000)
992,020,000
5,932,000
—
(39,564,000)
958,388,000
(87,041,000)
—
(20,400,000)
20,400,000
(87,041,000)
—
(30,110,000)
30,110,000
(87,041,000)
—
(39,564,000)
39,564,000
(87,041,000)
Noncontrolling Interest
In September 2015, the company obtained a controlling interest in a joint venture included in the Performance Materials segment.
Accordingly, the company consolidated the entity at December 31, 2015 and recorded the fair value of the noncontrolling interest
in the amount of $151 in the Consolidated Balance Sheet.
F-36
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Other Comprehensive Income
A summary of the pre-tax, tax, and after-tax effects of the components of other comprehensive (loss) income for the years ended
December 31, 2015, 2014, and 2013 is provided as follows:
For the year ended December 31,
2015
Tax
Pre-
Tax
After-
Tax
Pre-
Tax
2014
Tax
After-
Tax
Pre-
Tax
2013
Tax
After-
Tax
Affected Line
Item in
Consolidated
Income
Cumulative translation adjustment(1)
$ (1,605) $ — $ (1,605) $
(876) $ — $
(876) $
25 $ — $
25
Amortization of prior service (benefit) cost
(9)
2
Net revaluation and clearance of cash flow
hedges to earnings:
Additions and revaluations of derivatives
designated as cash flow hedges
Clearance of hedge results to earnings:
Foreign currency contracts
Commodity contracts
Net revaluation and clearance of cash flow
hedges to earnings
Pension benefit plans:
Net (loss) gain
Prior service benefit
Effect of foreign exchange rates
Reclassifications to net income:
Amortization of loss
Curtailment (gain) loss
Settlement loss
Pension benefit plans, net
Other benefit plans:
Net gain (loss)
Prior service benefit
Effect of foreign exchange rates
Reclassifications to net income:
Amortization of prior service benefit
Amortization of loss
Curtailment gain
Settlement loss
Other benefit plans, net
Net unrealized (loss) gain on securities:
Unrealized (loss) gain on securities arising
during the period
Reclassification of gain realized in net
income
Net unrealized (loss) gain on securities
(10)
22
(25)
(57)
—
119
4
(9)
7
10
—
(33)
768
(273)
(6)
76
891
4
—
(1)
(182)
78
(274)
—
3
(26)
(317)
(1)
—
1
64
(27)
98
—
(37)
12
(25)
53
(20)
33
(58)
(6)
13
(18)
(15)
30
68
5
(11)
(26)
(10)
19
42
(1)
(24)
(83)
22
—
10
32
(36) See (2) below
(1) Net sales
(14) Cost of goods sold
(51)
(47)
(4,131)
1,497
(2,634)
3,293
(1,136)
2,157 See (2) below
—
86
(7)
495
(3)
50
44
—
2
(11)
—
—
601
(209)
4
7
(1)
(2)
33
—
2
392
3
5
62
—
8
957
1
152
(22)
—
(2)
(331)
—
(45)
40 See (2) below
— See (2) below
6 See (3) below
626 See (3) below
1 See (3) below
107 See (3) below
574
(3,473)
1,274
(2,199)
4,473
(1,536)
2,937
(280)
100
(180)
3
—
—
50
—
(118)
(214)
51
(176)
—
57
—
—
(1)
—
76
(20)
—
—
49
—
37
—
—
(138)
(195)
513
211
—
76
(154)
1
452
1
—
1
(184)
329 See (2) below
(72)
—
69
(27)
54
—
139 See (2) below
— See (2) below
(126) See (3) below
49 See (3) below
(100) See (3) below
1 See (3) below
(160)
292
(1)
—
(1)
— See (4) below
— Other income, net
—
(375)
135
(240)
(387)
155
(232)
(17)
(2)
(19)
—
—
—
(17)
(2)
(19)
—
—
—
—
—
—
—
—
—
Other comprehensive (loss) income
$ (1,133) $ (175) $ (1,308) $ (4,668) $ 1,403 $ (3,265) $ 4,868 $(1,665) $ 3,203
1.
2.
3.
4.
The increase in currency translation adjustment losses over prior year for the years ended December 31, 2015 and 2014, is driven by the strengthening USD
against primarily the Euro and Brazilian Real. For the year ended December 31, 2015, the increase over prior year is also due to changes in certain foreign
entity's functional currency as described in Note 1.
These amounts represent changes in accumulated other comprehensive (loss) income excluding changes due to reclassifying amounts to the Consolidated
Income Statements.
These accumulated other comprehensive income components are included in the computation of net periodic benefit cost of the company's pension and other
long-term employee benefit plans. See Note 18 for additional information.
The unrealized loss on securities during the year ended December 31, 2015 is due to the re-measurement of USD denominated marketable securities held
by certain foreign entities at December 31, 2015 with a corresponding offset to cumulative translation adjustment.
F-37
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Tax (expense) benefit recorded in Stockholders' Equity was $(138), $1,461 and $(1,617) for the years 2015, 2014 and 2013,
respectively. Included in these amounts were tax benefits of $37, $58 and $48 for the years 2015, 2014 and 2013, respectively,
associated with stock compensation programs. The remainder consists of amounts recorded within other comprehensive income
as shown in the table above.
The changes and after-tax balances of components comprising accumulated other comprehensive loss are summarized below:
Cumulative
Translation
Adjustment
Net Revaluation
and Clearance of
Cash Flow Hedges
to Earnings
Pension Benefit
Plans
Other Benefit
Plans
Unrealized Gain
(Loss) on
Securities
Total
(70) $
3 $
(8,632) $
202 $
2 $
(8,495)
(36)
2,197
468
(15)
(48) $
740
(5,695) $
(176)
494 $
33
(2,601)
(131)
9
(6) $
401
(7,895) $
(101)
262 $
—
—
2 $
2,656
549
(5,290)
—
—
2 $
(3,575)
309
(8,556)
(25)
7
—
(24) $
39
535
278
(7,043) $
3
(17)
(1,605)
(243)
—
22 $
(2)
(1)
(18) $
297
468
(9,396)
$
$
2013
Balance January 1, 2013
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from accumulated
other comprehensive income (loss)
Balance December 31, 2013
2014
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from accumulated
other comprehensive income (loss)
Balance December 31, 2014
2015
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from accumulated
other comprehensive income (loss)
Spin-off of Chemours
27
—
(43) $
(876)
—
$
(919) $
(1,605)
—
191
Balance December 31, 2015
$
(2,333) $
F-38
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
18. LONG-TERM EMPLOYEE BENEFITS
The company offers various long-term benefits to its employees. Where permitted by applicable law, the company reserves the
right to change, modify or discontinue the plans.
Defined Benefit Pensions
The company has both funded and unfunded noncontributory defined benefit pension plans covering a majority of the U.S.
employees. Most employees hired on or after January 1, 2007 are not eligible to participate in the U.S. defined benefit pension
plans. The benefits under these plans are based primarily on years of service and employees' pay near retirement. The company's
funding policy is consistent with the funding requirements of federal laws and regulations. Pension coverage for employees of
the company's non-U.S. consolidated subsidiaries is provided, to the extent deemed appropriate, through separate plans. Obligations
under such plans are funded by depositing funds with trustees, covered by insurance contracts, or remain unfunded.
The company recorded a charge of $32 ($21 after-tax) during the year ended December 31, 2015, which related to settlements
that occurred in prior periods. In addition, accumulated other comprehensive loss at January 1, 2013 has been revised to adjust
for $54, after-tax, for settlement charges that should have been recorded in previous periods with a corresponding reduction in
reinvested earnings. The settlement charges were related to the company's Pension Restoration Plan which provides for lump sum
payments to certain eligible retirees. The company recognizes pension settlements when lump sum payments exceed the sum of
service and interest cost components of net periodic pension cost of the plan for the year. The impact of these adjustments is not
material to the company's current or previously issued financial statements.
Other Long-term Employee Benefits
The parent company and certain subsidiaries provide medical, dental and life insurance benefits to pensioners and survivors. The
associated plans for retiree benefits are unfunded and the cost of the approved claims is paid from company funds. Essentially all
of the cost and liabilities for these retiree benefit plans are attributable to the U.S. benefit plans. The non-Medicare eligible retiree
medical plan is contributory with pensioners and survivors' contributions adjusted annually to achieve a 50/50 target sharing of
cost increases between the company and pensioners and survivors. In addition, limits are applied to the company's portion of the
retiree medical cost coverage. For Medicare eligible pensioners and survivors, the company provides a company-funded Health
Reimbursement Arrangement (HRA). Beginning January 1, 2015, eligible employees who retire on and after that date will receive
the same life insurance benefit payment, regardless of age. The majorities of U.S. employees hired on or after January 1, 2007 are
not eligible to participate in the post-retirement medical, dental and life insurance plans.
The company also provides disability benefits to employees. Employee disability benefit plans are insured in many countries.
However, primarily in the U.S., such plans are generally self-insured. Obligations and expenses for self-insured plans are reflected
in the figures below.
F-39
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Summarized information on the company's pension and other long-term employee benefit plans is as follows:
Obligations and Funded Status at December 31,
Change in benefit obligation
Pension Benefits
Other Benefits
2015
2014
2015
2014
Benefit obligation at beginning of year
$
29,669
$
26,289
$
2,889
$
2,754
Service cost
Interest cost
Plan participants' contributions
Actuarial (gain) loss
Benefits paid
Amendments
Effect of foreign exchange rates
Net effects of acquisitions/divestitures
Spin-off of Chemours
Benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual gain on plan assets
Employer contributions
Plan participants' contributions
Benefits paid
Effect of foreign exchange rates
Net effects of acquisitions/divestitures
Spin-off of Chemours
Fair value of plan assets at end of year
Funded status
U.S. plan with plan assets
Non-U.S. plans with plan assets
All other plans
Plans of discontinued operations
Total
Amounts recognized in the Consolidated Balance
Sheets consist of:
Assets of discontinued operations
Other assets
Other accrued liabilities (Note 13)
Liabilities of discontinued operations
Other liabilities (Note 15)
Net amount recognized
$
$
$
$
$
$
$
232
1,084
19
(1,404)
(1,761)
—
(456)
(52)
(1,237)
26,094
20,446
88
308
19
(1,761)
(330)
(47)
(1,226)
17,497
(6,662)
(748)
(1,187)
—
(8,597)
$
$
$
$
$
1
— $
11
(130)
—
(8,478)
(8,597)
$
241
1,162
21
3,672
(1,651)
(44)
—
(21)
—
29,669
20,614
1,163
311
21
(1,651)
—
(12)
—
20,446
(7,072)
(747)
(1,357)
(47)
(9,223)
92
(28)
(118)
(152)
(9,017)
(9,223)
$
$
$
$
$
$
$
1
1.
Includes pension plans maintained around the world where funding is not customary.
15
112
45
(4)
(282)
—
(6)
—
(11)
2,758
$
— $
—
237
45
(282)
—
—
—
— $
— $
—
(2,758)
—
(2,758)
$
— $
—
(234)
—
(2,524)
(2,758)
$
17
121
37
280
(270)
(50)
—
—
—
2,889
—
—
233
37
(270)
—
—
—
—
—
—
(2,878)
(11)
(2,889)
—
—
(223)
(11)
(2,655)
(2,889)
F-40
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
The pre-tax amounts recognized in accumulated other comprehensive loss are summarized below:
December 31,
Net loss
Prior service benefit
Pension Benefits
Other Benefits
2015
2014
2015
2014
$
$
(10,803) $
54
(10,749) $
(12,164) $
59
(12,105) $
(787) $
811
24 $
(870)
1,269
399
The accumulated benefit obligation for all pension plans was $24,984 and $27,923 at December 31, 2015 and 2014, respectively.
Information for pension plans with projected benefit obligation in excess of plan assets
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
Information for pension plans with accumulated benefit obligations in excess of plan assets
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
$
$
2015
2014
25,769 $
24,715
17,162
28,079
26,498
18,792
2015
2014
25,515 $
24,508
16,930
27,892
26,367
18,638
F-41
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Components of net periodic benefit cost (credit) and amounts recognized in other
comprehensive income
Net periodic benefit cost
Service cost
Interest cost
Expected return on plan assets
Amortization of loss
Amortization of prior service (benefit) cost
Curtailment (gain) loss
Settlement loss
Net periodic benefit cost - Total
Less: Discontinued operations
Net period benefit cost - Continuing operations
Changes in plan assets and benefit obligations recognized in other
comprehensive income
Net loss (gain)
Amortization of loss
Prior service benefit
Amortization of prior service benefit (cost)
Curtailment gain (loss)
Settlement loss
Effect of foreign exchange rates
Spin-off of Chemours
Total (benefit) loss recognized in other comprehensive income
Noncontrolling interest
Total (benefit) loss recognized in other comprehensive income, attributable to
DuPont
Total recognized in net periodic benefit cost and other comprehensive income
Pension Benefits
2015
2014
2013
$
232 $
241 $
1,084
(1,554)
768
(9)
(6)
76
591 $
(5)
596 $
57 $
(768)
—
9
6
(76)
(119)
(382)
(1,273) $
—
(1,273) $
(682) $
1,162
(1,611)
601
2
4
7
406 $
40
366 $
4,131 $
(601)
(44)
(2)
(4)
(7)
—
—
3,473 $
1
3,474 $
3,880 $
$
$
$
$
$
$
271
1,088
(1,524)
957
8
1
152
953
50
903
(3,293)
(957)
(62)
(8)
(1)
(152)
—
—
(4,473)
—
(4,473)
(3,520)
The estimated pre-tax net loss and prior service benefit for the defined benefit pension plans that will be amortized from accumulated
other comprehensive loss into net periodic benefit cost during 2016 are $689 and $(6), respectively. These estimates do not include
any potential losses from settlements as a result of the 2016 global cost savings and restructuring plan.
F-42
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Components of net periodic benefit cost (credit) and amounts recognized in other
comprehensive income
Net periodic benefit cost
Other Benefits
2015
2014
2013
Service cost
Interest cost
Amortization of loss
Amortization of prior service benefit
Curtailment gain1
Settlement loss
Net periodic benefit credit - Total
Less: Discontinued operations
Net periodic benefit cost (credit) - Continuing operations
Changes in plan assets and benefit obligations recognized in other
comprehensive income
Net (gain) loss
Amortization of loss
Prior service benefit
Amortization of prior service benefit
Curtailment gain1
Settlement loss
Effect of foreign exchange rates
Total loss (benefit) recognized in other comprehensive income, attributable to
DuPont
Total recognized in net periodic benefit cost and other comprehensive income
$
$
$
$
$
$
15 $
112
78
(182)
(274)
—
(251) $
(272)
21 $
(4) $
(78)
—
182
274
—
1
375 $
124 $
17 $
121
57
(214)
—
—
(19) $
3
(22) $
280 $
(57)
(50)
214
—
—
—
387 $
368 $
29
130
76
(195)
(154)
1
(113)
5
(118)
(513)
(76)
(211)
195
154
(1)
—
(452)
(565)
1.
As a result of the separation of the Performance Chemicals segment, the company recorded an other long-term employee benefit plans curtailment gain of
$274.
The estimated pre-tax net loss and prior service benefit for the other long-term employee benefit plans that will be amortized from
accumulated other comprehensive loss into net periodic benefit cost during 2016 are $69 and $(156), respectively. These estimates
do not include any potential curtailment gains as a result of the 2016 global cost savings and restructuring plan.
Weighted-average assumptions used to determine benefit obligations at December 31,
2015
2014
2015
2014
Pension Benefits
Other Benefits
Discount rate
Rate of compensation increase1
4.13%
3.94%
3.78%
4.00%
4.32%
—%
3.95%
—%
1.
The rate of compensation increase represents the single annual effective salary increase that an average plan participant would receive during the participant's
entire career at the company.
Weighted-average assumptions used to determine net
periodic benefit cost for the years ended December 31,
Discount rate
Expected return on plan assets
Rate of compensation increase
2015
2014
2013
2015
2014
2013
3.93%
8.10%
4.01%
4.55%
8.35%
4.22%
3.90%
8.39%
4.14%
4.13%
4.60%
—%
—%
—%
—%
3.85%
—%
4.40%
Pension Benefits
Other Benefits
F-43
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
For determining U.S. pension plans' net periodic benefit costs, the discount rate, expected return on plan assets and the rate of
compensation increase were 4.29 percent, 8.50 percent and 4.20 percent for 2015.
For determining U.S. pension plans' net periodic benefit costs, the discount rate, expected return on plan assets and the rate of
compensation increase were 4.90 percent, 8.75 percent and 4.50 percent for 2014.
For determining U.S. pension plans' net periodic benefit costs, the discount rate, expected return on plan assets and the rate of
compensation increase were 4.10 percent, 8.75 percent and 4.40 percent for 2013.
In the U.S., the discount rate is developed by matching the expected cash flow of the benefit plans to a yield curve constructed
from a portfolio of high quality fixed-income instruments provided by the plan's actuary as of the measurement date. For non-
U.S. benefit plans, the company utilizes prevailing long-term high quality corporate bond indices to determine the discount rate
applicable to each country at the measurement date.
The long-term rate of return on assets in the U.S. was selected from within the reasonable range of rates determined by historical
real returns (net of inflation) for the asset classes covered by the investment policy, expected performance, and projections of
inflation over the long-term period during which benefits are payable to plan participants. Consistent with prior years, the long-
term rate of return on plan assets in the U.S. reflects the asset allocation of the plan and the effect of the company's active management
of the plans' assets. For non-U.S. plans, assumptions reflect economic assumptions applicable to each country.
In October 2014, the Society of Actuaries released final reports of new mortality tables and a mortality improvement scale for
measurement of retirement program obligations in the U.S. The company has adopted these tables in measuring the 2014 long-
term employee benefit obligations. In October 2015, the Society of Actuaries released an updated mortality improvement scale
reflecting a decline in longevity projection from the October 2014 release. The company adopted the release in measuring the
2015 long-term employee benefit obligations in the U.S.
Assumed health care cost trend rates at December 31,
Health care cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
2015
2014
7%
5%
2023
7%
5%
2022
Assumed health care cost trend rates have a modest effect on the amount reported for the health care plan. A one-percentage point
change in assumed health care cost trend rates would have the following effects:
Increase (decrease) on total of service and interest cost
Increase (decrease) on post-retirement benefit obligation
1-Percentage
Point Increase
1-Percentage
Point Decrease
$
2 $
26
(2)
(25)
F-44
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Plan Assets
All pension plan assets in the U.S. are invested through a single master trust fund. The strategic asset allocation for this trust fund
is approved by management. The general principles guiding U.S. pension asset investment policies are those embodied in the
Employee Retirement Income Security Act of 1974 (ERISA). These principles include discharging the company's investment
responsibilities for the exclusive benefit of plan participants and in accordance with the "prudent expert" standard and other ERISA
rules and regulations. The company establishes strategic asset allocation percentage targets and appropriate benchmarks for
significant asset classes with the aim of achieving a prudent balance between return and risk. Strategic asset allocations in other
countries are selected in accordance with the laws and practices of those countries. Where appropriate, asset liability studies are
utilized in this process. U.S. plan assets and a portion of non-U.S. plan assets are managed by investment professionals employed
by the company. The remaining assets are managed by professional investment firms unrelated to the company. The company's
pension investment professionals have discretion to manage the assets within established asset allocation ranges approved by
management of the company. Additionally, pension trust funds are permitted to enter into certain contractual arrangements generally
described as "derivatives". Derivatives are primarily used to reduce specific market risks, hedge currency and adjust portfolio
duration and asset allocation in a cost-effective manner.
The weighted-average target allocation for plan assets of the company's U.S. and non-U.S. pension plans is summarized as follows:
Target allocation for plan assets at December 31,
U.S. equity securities
Non-U.S. equity securities
Fixed income securities
Hedge funds
Private market securities
Real estate
Cash and cash equivalents
Total
2015
2014
29%
22
32
2
9
3
3
100%
28%
21
32
2
9
5
3
100%
Global equity securities include varying market capitalization levels. U.S. equity investments are primarily large-cap companies.
Global fixed income investments include corporate-issued, government-issued and asset-backed securities. Corporate debt
investments include a range of credit risk and industry diversification. U.S. fixed income investments are weighted heavier than
non-U.S fixed income securities. Other investments include cash and cash equivalents, hedge funds, real estate and private market
securities such as interests in private equity and venture capital partnerships.
Fair value calculations may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the
company believes its valuation methods are appropriate and consistent with other market participants, the use of different
methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value
measurement at the reporting date.
F-45
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
The tables below presents the fair values of the company's pension assets by level within the fair value hierarchy, as described in
Note 1, as of December 31, 2015 and 2014, respectively.
Asset Category
Cash and cash equivalents
U.S. equity securities1
Non-U.S. equity securities
Debt – government-issued
Debt – corporate-issued
Debt – asset-backed
Hedge funds
Private market securities
Real estate
Derivatives – asset position
Derivatives – liability position
Pension trust receivables2
Pension trust payables3
Total
Asset Category
Cash and cash equivalents
U.S. equity securities1
Non-U.S. equity securities
Debt – government-issued
Debt – corporate-issued
Debt – asset-backed
Hedge funds
Private market securities
Real estate
Derivatives – asset position
Derivatives – liability position
Pension trust receivables2
Pension trust payables3
Total
Fair Value Measurements at December 31, 2015
Total
Level 1
Level 2
Level 3
$
1,962 $
1,961 $
1 $
3,843
3,480
852
291
44
—
—
98
10
1
10,580 $
10
115
1,184
2,055
786
1
17
4
48
(60)
4,161 $
3,873
3,597
2,036
2,380
831
430
1,607
703
58
(59)
17,418 $
783
(704)
17,497
—
20
2
—
34
1
429
1,590
601
—
—
2,677
Fair Value Measurements at December 31, 2014
Total
Level 15
Level 24,5
Level 34
2,310 $
2,310 $
— $
4,566
3,813
990
370
46
—
—
76
7
—
12,178 $
15
619
1,659
2,215
867
—
11
3
99
(79)
5,409 $
4,610
4,436
2,649
2,600
914
445
1,730
1,065
106
(79)
20,786 $
413
(753)
20,446
—
29
4
—
15
1
445
1,719
986
—
—
3,199
$
$
$
$
$
1.
2.
3.
4.
5.
The company's pension plans directly held $664 (4 percent of total plan assets) and $737 (4 percent of total plan assets) of DuPont common stock at
December 31, 2015 and 2014, respectively.
Primarily receivables for investment securities sold.
Primarily payables for investment securities purchased.
The company’s pension assets by fair value hierarchy table at December 31, 2014 have been revised for the following correction: increase in Level 2 - Non-
U.S. Equity Securities of $566 with a corresponding reduction in Level 3 - Private Market Securities.
The company's pension assets by fair value hierarchy table at December 31, 2014 included approximately $109 of Level 1 assets and $1,090 of Level 2
assets that were transferred to Chemours upon completion of the spin-off transaction.
F-46
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
The company's pension plans hold Level 3 assets which are primarily ownership interests in investment partnerships and trusts
that own private market securities and real estate. Fair value is generally based on the company's units of ownership and net asset
value of the investment entity or the company's share of the investment entity's total equity. The table below presents a rollforward
of activity for these assets for the years ended December 31, 2015 and 2014:
U.S.
Equity
Securities
Non-U.S.
Equity
Securities
Debt-
Corporate
Issued
Debt-
Asset-
Backed
Hedge
Funds
Private
Market
Securities
Real
Estate
Total
Level 3 Assets
Beginning balance at December 31, 2013
$
3,598 $
27 $
3 $
19 $
4 $
434 $
2,005 $
1,106
Realized gain (loss)
Change in unrealized (loss) gain
Purchases, sales and settlements, net
Transfers (out) in of Level 3
92
(90)
(393)
(8)
Ending balance at December 31, 2014
$
3,199 $
Realized (loss) gain
Change in unrealized (loss) gain
Purchases, sales and settlements, net
Transfers in (out) of Level 3
(77)
(48)
(410)
13
(5)
(14)
24
(3)
29 $
(14)
5
—
—
—
(2)
3
—
4 $
—
(3)
—
1
11
(2)
(10)
(3)
15 $
(18)
15
10
12
—
(1)
—
(2)
12
8
(9)
—
74
(93)
(267)
—
1 $
445 $
1,719 $
—
—
—
—
9
(2)
(23)
—
15
(39)
(105)
—
Ending balance at December 31, 2015
$
2,677 $
20 $
2 $
34 $
1 $
429 $
1,590 $
—
14
(134)
—
986
(69)
(24)
(292)
—
601
Cash Flow
Contributions
No contributions to its principal U.S. pension plan were made in 2013, 2014, or 2015. In 2016, contributions to the principal
U.S. pension plan are expected to be $230. The company contributed $164, $144, and $237 to its pension plans other than the
principal U.S. pension plan, its remaining plans with no plan assets and its other long-term employee benefit plans, respectively,
in 2015. The company contributed $190, $121, and $233 to its pension plans other than the principal U.S. pension plan, its
remaining plans with no plan assets and its other long-term employee benefit plans, respectively, in 2014. In 2016, the company
expects to contribute about the same as 2015 to its pension plans other than the principal U.S. pension plan, its remaining plans
with no plan assets and its other long-term employee benefit plans.
Estimated Future Benefit Payments
The following benefit payments, which reflect future service, as appropriate, are expected to be paid:
2016
2017
2018
2019
2020
Years 2021-2025
Pension
Benefits
Other Benefits
$
1,652 $
1,582
1,585
1,593
1,600
7,992
234
225
219
212
204
915
Defined Contribution Plan
The company sponsors several defined contribution plans, which cover substantially all U.S. employees. The most significant is
the U.S. Retirement Savings Plan (the Plan). This Plan includes a non-leveraged Employee Stock Ownership Plan (ESOP).
Employees are not required to participate in the ESOP and those who do are free to diversify out of the ESOP. The purpose of the
Plan is to provide retirement savings benefits for employees and to provide employees an opportunity to become stockholders of
the company. The Plan is a tax qualified contributory profit sharing plan, with cash or deferred arrangement and any eligible
employee of the company may participate. Currently, the company contributes 100 percent of the first 6 percent of the employee's
contribution election and also contributes 3 percent of each eligible employee's eligible compensation regardless of the employee's
contribution.
F-47
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
The company's contributions to the Plan were $219, $262 and $208 for the years ended December 31, 2015, 2014 and 2013,
respectively. The company's matching contributions vest immediately upon contribution. The 3 percent nonmatching company
contribution vests after employees complete three years of service. In addition, the company made contributions to other defined
contribution plans of $57, $66 and $105 for the years ended December 31, 2015, 2014 and 2013, respectively. Included in the
company's contributions are amounts related to discontinued operations of $32, $57 and $59 for the years ended December 31,
2015, 2014 and 2013, respectively. The company expects to contribute about $230 to its defined contribution plans in 2016.
19. COMPENSATION PLANS
The total stock-based compensation cost included in continuing operations within the Consolidated Income Statements was $128,
$136 and $117 for 2015, 2014 and 2013, respectively. The income tax benefits related to stock-based compensation arrangements
were $42, $45 and $39 for 2015, 2014 and 2013, respectively.
In connection with the completed separation of the Performance Chemicals segment through the spin-off of all of the issued and
outstanding stock of Chemours, the provisions of our existing compensation plans required adjustments to the number and terms
of outstanding employee stock options, stock appreciation rights (SARs), time-vested restricted stock units (RSUs) and
performance-based restricted stock units (PSUs) to preserve the intrinsic value of the awards immediately before and after the
separation. The outstanding awards will continue to vest over the original vesting period, which is generally three years from the
grant date. Outstanding awards at the time of the spin-off were converted into awards of the holder’s employer following separation.
The stock awards held as of July 1, 2015 were adjusted as follows:
• The number of stock options and stock appreciation rights were increased and the exercise price was decreased to maintain
the intrinsic value of outstanding options and rights immediately before and after the spin-off. A comparison of the fair
value of the outstanding option awards immediately before and after the spin-off resulted in $3 of incremental expense
related to fully vested stock option awards and was expensed immediately.
• The number of RSUs and PSUs were increased to preserve the intrinsic value of such awards immediately prior to
separation. The company did not record any incremental compensation expense related to the conversion of these awards.
In April 2011, the shareholders approved amendments to the DuPont Equity and Incentive Plan (EIP). The EIP provides for equity-
based and cash incentive awards to certain employees, directors, and consultants. Under the amended EIP, the maximum number
of shares reserved for the grant or settlement of awards is 110 million shares, provided that each share in excess of 30 million that
is issued with respect to any award that is not an option or stock appreciation right will be counted against the 110 million share
limit as four and one-half shares. At December 31, 2015, approximately 40 million shares were authorized for future grants under
the company's EIP. The company satisfies stock option exercises and vesting of RSUs and PSUs with newly issued shares of
DuPont common stock.
The company's Compensation Committee determines the long-term incentive mix, including stock options, RSUs and PSUs and
may authorize new grants annually.
Stock Options
The exercise price of shares subject to option is equal to the market price of the company's stock on the date of grant. Options
granted prior to 2004 expire 10 years from date of grant; options granted between 2004 and 2008 serially vested over a three-year
period and carry a six-year option term. Stock option awards granted between 2009 and 2015 expire seven years after the grant
date. The plan allows retirement eligible employees to retain any granted awards upon retirement provided the employee has
rendered at least six months of service following grant date.
For purposes of determining the fair value of stock options awards, the company uses the Black-Scholes option pricing model and
the assumptions set forth in the table below. The weighted-average grant-date fair value of options granted in 2015, 2014 and 2013
was $11.57, $13.68 and $10.40, respectively.
Dividend yield
Volatility
Risk-free interest rate
Expected life (years)
2015
2014
2013
2.5%
22.52%
1.4%
5.3
2.9%
31.33%
1.7%
5.3
3.6%
34.86%
1.0%
5.3
F-48
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
The company determines the dividend yield by dividing the current annual dividend on the company's stock by the option exercise
price. A historical daily measurement of volatility is determined based on the expected life of the option granted. The risk-free
interest rate is determined by reference to the yield on an outstanding U.S. Treasury note with a term equal to the expected life of
the option granted. Expected life is determined by reference to the company's historical experience.
For stock options outstanding prior to the spin-off, the weighted-average exercise prices in the table below reflect the historical
exercise prices. Stock option awards as of December 31, 2015, and changes during the year then ended were as follows:
Number of
Shares
(in thousands)
Weighted
Average
Exercise Price
(per share)
Weighted
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding, December 31, 2014
Granted
Exercised
Forfeited
Cancelled
Conversion for Spin-off of Chemours
Outstanding, December 31, 2015
Exercisable, December 31, 2015
18,895 $
5,812
(4,736)
(440)
(2,070)
699
18,160 $
8,632 $
48.34
73.21
41.38
62.33
58.17
53.59
54.89
45.82
4.27 $
2.93 $
232,453
179,408
The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the company's
closing stock price on the last trading day of 2015 and the exercise price, multiplied by the number of in-the-money options) that
would have been received by the option holders had all option holders exercised their in-the-money options at year end. This
amount changes based on the fair market value of the company's stock. Total intrinsic value of options exercised for 2015, 2014
and 2013 were $160, $219 and $230, respectively. In 2015, the company realized a tax benefit of $51 from options exercised.
As of December 31, 2015, $32 of total unrecognized compensation cost related to stock options is expected to be recognized over
a weighted-average period of 1.57 years.
RSUs and PSUs
The company issues RSUs that serially vest over a three-year period and, upon vesting, convert one-for-one to DuPont common
stock. A retirement eligible employee retains any granted awards upon retirement provided the employee has rendered at least six
months of service following the grant date. Additional RSUs are also granted periodically to key senior management employees.
These RSUs generally vest over periods ranging from two to five years. The fair value of all stock-settled RSUs is based upon the
market price of the underlying common stock as of the grant date.
The company also grants PSUs to senior leadership. In 2015, there were 309,042 PSUs granted. Vesting for PSUs granted in 2015
is equally based upon year over year change in operating net income relative to target and total shareholder return (TSR) relative
to peer companies. Operating net income is net income attributable to DuPont excluding income from discontinued operations
after taxes, significant after tax benefits (charges), and non-operating pension and other post-retirement employee benefit costs.
Vesting for PSUs granted in 2014 and 2013 is equally based upon corporate revenue growth relative to peer companies and TSR
relative to peer companies. Performance and payouts are determined independently for each metric. The actual award, delivered
as DuPont common stock, can range from zero percent to 200 percent of the original grant. The weighted-average grant-date fair
value of the PSUs granted in 2015, subject to the TSR metric, was $96.24, and estimated using a Monte Carlo simulation. The
weighted-average grant-date fair value of the PSUs, subject to the revenue metric, was based upon the market price of the underlying
common stock as of the grant date.
Non-vested awards of RSUs and PSUs as of December 31, 2015 and 2014 are shown below. For RSUs and PSUs awarded prior
to the spin-off, grant price information in the table below reflects historical market prices. The weighted-average grant-date fair
value of RSUs and PSUs granted during 2015, 2014 and 2013 was $71.66, $64.64 and $48.06, respectively.
F-49
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Nonvested, December 31, 2014
Granted
Vested
Forfeited
Conversion for Spin-off of Chemours
Nonvested, December 31, 2015
Number of
Shares
(in thousands)
Weighted
Average
Grant Date
Fair Value
(per share)
3,757 $
1,641
(1,289)
(300)
127
3,936 $
57.60
71.66
49.26
70.45
61.63
59.54
As of December 31, 2015, there was $68 of unrecognized stock-based compensation expense related to nonvested awards. That
cost is expected to be recognized over a weighted-average period of 1.65 years. The total fair value of stock units vested during
2015, 2014 and 2013 was $64, $75 and $75, respectively.
Other Cash-based Awards
Cash awards under the EIP plan may be granted to employees who have contributed most to the company's success, with
consideration being given to the ability to succeed to more important managerial responsibility. Such awards resulted in
compensation expense of $31, $34 and $52 for 2015, 2014 and 2013, respectively included in income from continuing operations
within the Consolidated Financial Statements. The amounts of the awards are dependent on company earnings and are subject to
maximum limits as defined under the governing plans.
In addition, the company has other variable compensation plans under which cash awards may be granted. These plans include
the company's regional and local variable compensation plans and Pioneer's Annual Reward Program. Such awards resulted in
compensation expense of $150, $137 and $290 for 2015, 2014 and 2013, respectively, included in income from continuing
operations within the Consolidated Financial Statements.
F-50
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
20. FINANCIAL INSTRUMENTS
Objectives and Strategies for Holding Derivative Instruments
In the ordinary course of business, the company enters into contractual arrangements (derivatives) to reduce its exposure to foreign
currency, interest rate and commodity price risks. The company has established a variety of derivative programs to be utilized
for financial risk management. These programs reflect varying levels of exposure coverage and time horizons based on an
assessment of risk.
Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee,
consistent with the company's financial risk management policies and guidelines. Derivative instruments used are forwards,
options, futures and swaps. The company has not designated any nonderivatives as hedging instruments.
The company's financial risk management procedures also address counterparty credit approval, limits and routine exposure
monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions and major
commodity exchanges. The company is exposed to credit loss in the event of nonperformance by these counterparties. The company
utilizes collateral support annex agreements with certain counterparties to limit its exposure to credit losses. The company's
derivative assets and liabilities are reported on a gross basis in the Consolidated Balance Sheets. The company anticipates
performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks
associated with these instruments are regularly reported to management.
The notional amounts of the company's derivative instruments were as follows:
December 31,
Derivatives designated as hedging instruments:
Interest rate swaps
Foreign currency contracts
Commodity contracts
Derivatives not designated as hedging instruments:
Foreign currency contracts
Commodity contracts
2015
2014
$
— $
10
356
8,065
70
1,000
434
388
10,586
166
Foreign Currency Risk
The company's objective in managing exposure to foreign currency fluctuations is to reduce earnings and cash flow volatility
associated with foreign currency rate changes. Accordingly, the company enters into various contracts that change in value as
foreign exchange rates change to protect the value of its existing foreign currency-denominated assets, liabilities, commitments
and cash flows.
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 primary business objective of this hedging program is to maintain
an approximately balanced position in foreign currencies so that exchange gains and losses resulting from exchange rate changes,
net of related tax effects, are minimized. The company also uses foreign currency exchange contracts to offset a portion of the
company's exposure to certain foreign currency-denominated revenues so that gains and losses on these contracts offset changes
in the USD value of the related foreign currency-denominated revenues. The objective of the hedge program is to reduce earnings
and cash flow volatility related to changes in foreign currency exchange rates.
Interest Rate Risk
The company uses interest rate swaps to manage the interest rate mix of the total debt portfolio and related overall cost of borrowing.
Interest rate swaps involve the exchange of fixed for floating rate interest payments to effectively convert fixed rate debt into
floating rate debt based on USD LIBOR. Interest rate swaps allow the company to achieve a target range of floating rate debt.
Commodity Price Risk
Commodity price risk management programs serve to reduce exposure to price fluctuations on purchases of inventory such as
corn, soybeans and soybean meal. The company enters into over-the-counter and exchange-traded derivative commodity
instruments to hedge the commodity price risk associated with agricultural commodity exposures.
F-51
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Cash Flow Hedges
Foreign Currency Contracts
The company uses foreign currency exchange instruments such as forwards and options to offset a portion of the company's
exposure to certain foreign currency-denominated revenues so that gains and losses on these contracts offset changes in the USD
value of the related foreign currency-denominated revenues. In addition, the company occasionally uses forward exchange contracts
to offset a portion of the company’s exposure to certain foreign currency-denominated transactions such as capital expenditures.
Commodity Contracts
The company enters into over-the-counter and exchange-traded derivative commodity instruments, including options, futures and
swaps, to hedge the commodity price risk associated with agriculture commodity exposures.
While each risk management program has a different time maturity period, most programs currently do not extend beyond the
next two-year period. Cash flow hedge results are reclassified into earnings during the same period in which the related exposure
impacts earnings. Reclassifications are made sooner if it appears that a forecasted transaction is not probable of occurring. The
following table summarizes the after-tax effect of cash flow hedges on accumulated other comprehensive loss for the years ended
December 31, 2015 and 2014:
December 31,
Beginning balance
Additions and revaluations of derivatives designated as cash flow hedges
Clearance of hedge results to earnings
Ending balance
2015
2014
(6) $
(25)
7
(24) $
(48)
33
9
(6)
$
$
At December 31, 2015, an after-tax net loss of $12 is expected to be reclassified from accumulated other comprehensive loss into
earnings over the next twelve months.
Derivatives not Designated in Hedging Relationships
Foreign Currency Contracts
The company routinely uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-
denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes
are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the
forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal
earnings impact, after taxes. The company also uses foreign currency exchange contracts to offset a portion of the company's
exposure to certain foreign currency-denominated revenues so that gains and losses on the contracts offset changes in the USD
value of the related foreign currency-denominated revenues.
Commodity Contracts
The company utilizes options, futures and swaps that are not designated as hedging instruments to reduce exposure to commodity
price fluctuations on purchases of inventory such as corn, soybeans and soybean meal.
F-52
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Fair Values of Derivative Instruments
The table below presents the fair values of the company's derivative assets and liabilities within the fair value hierarchy, as described
in Note 1, as of December 31, 2015 and 2014.
Asset derivatives:
Derivatives designated as hedging instruments:
Interest rate swaps1
Foreign currency contracts
Balance Sheet Location
2015
2014
Fair Value at December 31
Using Level 2 Inputs
Accounts and notes receivable, net
$
— $
Accounts and notes receivable, net
Derivatives not designated as hedging instruments:
Foreign currency contracts2
Accounts and notes receivable, net
Total asset derivatives3
Cash collateral1,2
Other accrued liabilities
Liability derivatives:
Derivatives designated as hedging instruments:
Foreign currency contracts
Other accrued liabilities
Derivatives not designated as hedging instruments:
Foreign currency contracts
Commodity contracts
Total liability derivatives3
Other accrued liabilities
Other accrued liabilities
$
$
$
$
—
—
74
74 $
7 $
— $
80
4
84
84 $
1
10
11
254
265
47
10
62
1
63
73
1.
2
3
Cash collateral held as of December 31, 2015 and 2014 represents $0 and $6, respectively, related to interest rate swap derivatives designated as hedging
instruments.
Cash collateral held as of December 31, 2015 and 2014 represents $7 and $41, respectively, related to foreign currency derivatives not designated as hedging
instruments.
The company's derivative assets and liabilities subject to enforceable master netting arrangements totaled $35 at December 31, 2015 and $67 at December 31,
2014.
F-53
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Effect of Derivative Instruments
Derivatives designated as hedging instruments:
Fair value hedges:
Interest rate swaps
Cash flow hedges:
Amount of Gain (Loss)
Recognized in OCI1
(Effective Portion)
Amount of Gain (Loss)
Recognized in Income2
2015
2014
2013
2015
2014
2013
Income Statement Classification
$ — $ — $ — $ (1) $ (28) $ (26) Interest expense3
Foreign currency contracts
(2)
27
9
10
11
1 Net sales
Foreign currency contracts
Commodity contracts
Derivatives not designated as hedging instruments:
Foreign currency contracts
Foreign currency contracts
Commodity contracts
Total derivatives
— — — —
(22)
(13)
(67)
(58)
53
26
(37)
(35)
4 —
Income from discontinued
operations after income taxes
(30)
(43)
24 Cost of goods sold
(1)
— — — 434
607
35 Other income, net4
— — —
— — —
(3) — — Net sales
(2)
— — — 429
(10) Cost of goods sold
25
$ (37) $ 53 $ (58) $ 416 $ 543 $ 24
(21)
586
1.
2.
3.
4.
OCI is defined as other comprehensive income (loss).
For cash flow hedges, this represents the effective portion of the gain (loss) reclassified from accumulated OCI into income during the period. For the years
ended December 31, 2015, 2014 and 2013, there was no material ineffectiveness with regard to the company's cash flow hedges.
Gain (loss) recognized in income of derivative is offset to $0 by gain (loss) recognized in income of the hedged item.
Gain (loss) recognized in other income, net, was partially offset by the related gain (loss) on the foreign currency-denominated monetary assets and liabilities
of the company's operations, see Note 5 for additional information.
Cash, Cash Equivalents and Marketable Securities
The company's cash, cash equivalents and marketable securities as of December 31, 2015 and 2014 are comprised of the following:
December 31, 2015
December 31, 2014
Cash
Level 1:
Cash and
Cash
Equivalents
$
1,938 $
Marketable
Securities
Total
Estimated
Fair Value
— $ 1,938 $
Cash and
Cash
Equivalents
Marketable
Securities
2,181 $
— $
Total
Estimated
Fair Value
2,181
Money market funds
U.S. Treasury securities1
$
550 $
— $
550 $
1,436 $
— $
1,436
—
788
788
—
—
—
Level 2:
Certificate of deposit / time deposits2
$
2,812 $
118 $ 2,930 $
3,293 $
124 $
3,417
Total cash, cash equivalents and marketable securities $
5,300 $
906
$
6,910 $
124
1.
2.
Available-for-sale securities are reported at estimated fair value with unrealized gains and losses reported as component of accumulated other comprehensive
loss.
Held-to-maturity investments are reported at amortized cost.
F-54
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
The estimated fair value of the company's cash equivalents, which approximates carrying value as of December 31, 2015 and
2014, was determined using level 1 and level 2 inputs within the fair value hierarchy. Level 1 measurements were based on
observed net asset values and level 2 measurements were based on current interest rates for similar investments with comparable
credit risk and time to maturity.
The estimated fair value of the held-to-maturity securities, which approximates carrying value as of December 31, 2015 and 2014,
was determined using level 2 inputs within the fair value hierarchy, as described below. Level 2 measurements were based on
current interest rates for similar investments with comparable credit risk and time to maturity. The carrying value approximates
fair value due to the short-term nature of the investments.
The estimated fair value of the available-for-sale securities as of December 31, 2015 and 2014 was determined using level 1 inputs
within the fair value hierarchy. Level 1 measurements were based on quoted market prices in active markets for identical assets
and liabilities. The available-for-sale securities as of December 31, 2015 are held by certain foreign subsidiaries in which the
USD is not the functional currency. The fluctuations in foreign exchange are recorded in accumulated other comprehensive loss
within the Consolidated Statements of Equity. These fluctuations are subsequently reclassified from accumulated other
comprehensive loss to earnings in the period in which the marketable securities are sold and the gains and losses on these securities
offset a portion of the foreign exchange fluctuations in earnings for the company.
F-55
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
21. GEOGRAPHIC INFORMATION
United States
Canada
EMEA2
France
Germany
Italy
Other
Total EMEA
Asia Pacific
China
India
Japan
Other
Total Asia Pacific
Latin America
Brazil
Mexico
Other
Total Latin America
Total
2015
Net Sales1
2014
10,021 $
10,556 $
734 $
826 $
2013
10,851
880
575
959
546
3,963
6,043 $
2,067
615
843
2,092
5,617 $
1,401
622
692
678
1,180
655
4,806
7,319 $
2,325
603
961
2,267
6,156 $
2,051
682
816
2,715 $
25,130 $
3,549 $
28,406 $
654
1,173
627
4,725
7,179
2,268
546
1,021
2,423
6,258
2,269
687
874
3,830
28,998
$
$
$
$
$
$
1.
2.
Net sales, based on the location of the customer, are generally presented for locations with greater than two percent of total net sales.
Europe, Middle East, and Africa (EMEA).
F-56
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Net Property1
2015
2014
2013
$
$
$
$
$
$
6,706 $
131 $
6,570 $
138 $
217
217
200
222
747
242
239
251
248
883
1,603 $
1,863 $
362
565
306
539
927 $
845 $
263
154
417 $
9,784 $
411
181
592 $
10,008 $
6,350
125
280
256
270
250
1,006
2,062
312
549
861
391
156
547
9,945
United States
Canada
EMEA2
Denmark
France
Spain
Luxembourg
Other
Total EMEA
Asia Pacific
China
Other
Total Asia Pacific
Latin America
Brazil
Other
Total Latin America
Total
1.
2.
Net property is presented for locations with greater than two percent of the total and includes property, plant and equipment less accumulated
depreciation.
Europe, Middle East, and Africa (EMEA).
F-57
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
22. SEGMENT INFORMATION
The company consists of 10 businesses which are aggregated into 6 reportable segments based on similar economic characteristics,
the nature of the products and production processes, end-use markets, channels of distribution and regulatory environment. The
company's reportable segments are Agriculture, Electronics & Communications, Industrial Biosciences, Nutrition & Health,
Performance Materials and Safety & Protection. The company includes certain businesses not included in the reportable segments,
such as pre-commercial programs, nonaligned businesses and pharmaceuticals in Other. Pre-commercial programs include
approximately $400 for the investment in a cellulosic biofuel facility in Nevada, Iowa which includes all material, engineering,
and technical design costs involved in construction of the facility. The facility is expected to commence production in the second
half of 2016.
Major products by segment include: Agriculture (corn hybrids and soybean varieties, herbicides, fungicides and insecticides);
Electronics & Communications (photopolymers and electronic materials); Industrial Biosciences (enzymes and bio-based
materials); Nutrition & Health (cultures, emulsifiers, texturants, natural sweeteners and soy-based food ingredients); Performance
Materials (engineering polymers, packaging and industrial polymers, films and elastomers); and Safety & Protection (nonwovens,
aramids and solid surfaces). The company operates globally in substantially all of its product lines.
In general, the accounting policies of the segments are the same as those described in Note 1. Exceptions are noted as follows and
are shown in the reconciliations below. Segment net assets includes net working capital, net property, plant and equipment, and
other noncurrent operating assets and liabilities of the segment. Depreciation and amortization includes depreciation on research
and development facilities and amortization of other intangible assets, excluding write-down of assets. Effective July 1, 2015,
certain corporate expenses will now be included in segment operating earnings. Reclassifications of prior year data have been
made to conform to current year classifications.
Segment operating earnings is defined as income (loss) from continuing operations before income taxes excluding significant pre-
tax benefits (charges), non-operating pension and other postretirement employee benefit costs, exchange gains (losses), corporate
expenses and interest. Non-operating pension and other postretirement employee benefit costs includes all of the components of
net periodic benefit cost from continuing operations with the exception of the service cost component.
F-58
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Agriculture
Electronics &
Communications
Industrial
Biosciences
Nutrition &
Health
Performance
Materials
Safety &
Protection
Other
Total
$
9,798 $
2,070 $
1,171 $
3,256
$
11,296 $
2,381 $
1,244 $
3,529 $
120
159
1,646
453
31
6,751
234
334
359
100
24
1,323
139
45
203
84
7
2,443
41
77
2,352
436
31
6,696
240
407
336
192
97
20
1,359
137
52
85
8
2,529
45
90
2,480
358
37
5,919
272
485
314
105
20
1,448
141
73
151
81
2
2,640
48
77
373
236
—
5,457
9
369
264
—
5,942
7
286
271
—
6,472
7
$
11,728 $
2,534 $
1,211 $
3,473 $
5,305
1,216
125
(8)
2,918
171
$
3,527 $
3 $
25,130
704
175
23
3,045
73
105
(258)
4,243
4
1,177
(30)
219
21
130
47
22,156
688
970
6,059
1,267
139
(77)
3,125
238
$
3,892 $
5 $
28,406
772
187
27
3,100
80
(256)
5,032
6
1,214
(46)
267
14
(37)
23,018
761
112
134
105
200
1,100
6,166
1,249
162
1
(9)
3,334
318
$
3,880 $
6 $
28,998
664
198
21
3,196
83
(238)
4,906
6
1,181
(48)
75
19
23
23,084
888
138
179
109
114
1,175
2015
Net sales
Operating earnings
Depreciation and
amortization
Equity in earnings of
affiliates
Segment net assets
Affiliate net assets
Purchases of property,
plant and equipment
2014
Net sales
Operating earnings
Depreciation and
amortization
Equity in earnings of
affiliates
Segment net assets
Affiliate net assets
Purchases of property,
plant and equipment
2013
Net sales
Operating earnings
Depreciation and
amortization
Equity in earnings of
affiliates
Segment net assets
Affiliate net assets
Purchases of property,
plant and equipment
1.
Includes assets held for sale related to GLS/Vinyls of $228 as of December 31, 2013. See Note 3 for additional information.
F-59
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Reconciliation to Consolidated Financial Statements
Segment operating earnings to income from continuing operations before income taxes
2015
2014
2013
Total segment operating earnings
Significant pre-tax (charges) benefits not included in segment operating earnings
Non-operating pension and other postretirement employee benefit costs
Net exchange gains (losses), including affiliates
Corporate expenses
Interest expense
Income from continuing operations before income taxes
Segment net assets to total assets at December 31,
Total segment net assets
Corporate assets1
Liabilities included in segment net assets
Assets related to discontinued operations2
Total assets
$
$
$
4,243 $
(38)
(374)
30
(928)
(342)
2,591 $
5,032 $
434
(128)
196
(844)
(377)
4,313 $
4,906
(486)
(533)
(101)
(772)
(448)
2,566
2015
2014
2013
22,156 $
23,018 $
11,163
7,847
—
12,889
8,356
6,227
23,084
13,884
9,462
5,712
$
41,166 $
50,490 $
52,142
1.
2.
Pension assets are included in corporate assets.
See Note 1 for additional information on the presentation of Performance Chemicals which met the criteria for discontinued operations.
Other items
2015
Depreciation and amortization
Equity in earnings of affiliates
Affiliate net assets
Purchases of property, plant and equipment
2014
Depreciation and amortization
Equity in loss of affiliates
Affiliate net assets
Purchases of property, plant and equipment
2013
Depreciation and amortization
Equity in earnings of affiliates
Affiliate net assets
Purchases of property, plant and equipment
Segment
Totals
Adjustments1
Consolidated
Totals
$
$
$
1,177 $
289 $
47
688
970
1,214 $
(37)
761
1,100
1,181 $
23
888
1,175
2
—
659
403 $
1
1
920
422 $
(1)
3
707
1,466
49
688
1,629
1,617
(36)
762
2,020
1,603
22
891
1,882
1.
Adjustments include amounts related to the Performance Chemicals and Performance Coatings businesses which met the criteria for discontinued operations
during 2015 and 2012, respectively. See Note 1 for additional information on the presentation of discontinued operations and See Note 3 for depreciation,
amortization and purchases of property, plant and equipment related to Performance Chemicals for 2015, 2014 and 2013.
F-60
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Additional Segment Details
2015 included the following significant pre-tax benefits (charges) which are excluded from segment operating earnings:
Agriculture1,2,5
Electronics & Communications1,5
Industrial Biosciences1,5
Nutrition & Health1,5
Performance Materials1,5
Safety & Protection1,3,5
Other1,4,5
$
$
148
(78)
(52)
(50)
(62)
96
(40)
(38)
1.
2.
3.
4.
5.
Included a $10 net restructuring benefit recorded in employee separation/asset related charges, net, associated with the 2014 restructuring program. These
adjustments were 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 net reduction related to segments as follows: Agriculture - $(3), Electronics &
Communications - $15, Industrial Biosciences - $(1), Nutrition & Health - $(3), Performance Materials - $(1), Safety & Protection $4 and Other - $(1). See
Note 4 for additional information.
Included $182 of net insurance recoveries recorded in other operating charges for recovery of costs for customer claims related to the use of the Imprelis®
herbicide. Included a benefit of $130 in other operating charges for reduction in the accrual for customer claims related to the use of the Imprelis® herbicide.
At December 31, 2015, the company had an accrual balance of $41 which represents the company’s best estimate associated with resolving the remaining
claims for this matter. See Note 16 for additional information.
Included a gain of $145, net of legal expenses, recorded in other income, net related to the company's settlement of a legal claim.
Included a $(37) pre-tax impairment charge recorded in employee separation / asset related charges, net for a cost basis investment. See Note 4 for additional
information.
Included a $(468) restructuring charge consisting of $(463) 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 the businesses. The charge included $(351) of severance and related benefit costs, $(103) of asset related charges,
and $(14) of contract termination costs. Pre-tax charges by segment are: Agriculture - $(161), Electronics & Communications - $(93), Industrial Biosciences
- $(51), Nutrition & Health - $(47), Performance Materials - $(61), Safety & Protection - $(53), and Other - $(2).
2014 included the following significant pre-tax benefits (charges) which are excluded from segment operating earnings:
Agriculture1,2,3
Electronics & Communications1
Industrial Biosciences1
Nutrition & Health1
Performance Materials1,4
Safety & Protection1
Other1
$
$
316
(84)
(13)
(15)
292
(52)
(10)
434
1.
2.
3.
4.
Included a $(407) restructuring charge associated with the 2014 restructuring program consisting of $(342) recorded in employee separation / asset related
charges, net and $(65) recorded in other income, net. The pre-tax charges by segment were: Agriculture - $(134), Electronics & Communications - $(84),
Industrial Biosciences - $(13), Nutrition & Health - $(15), Performance Materials - $(99), Safety & Protection - $(52); and Other - $(10). See Note 4 for
additional information.
Included income of $210 for insurance recoveries, recorded in other operating charges associated with the company's process to fairly resolve claims related
to the use of Imprelis®. See Note 16 for additional information.
Included a gain of $240 recorded in other income, net associated with the sale of the copper fungicide and land management businesses, both within the
Agriculture segment.
Included a gain of $391 recorded in other income, net associated with the sale of Glass Laminating Solutions / Vinyls. See Note 3 for additional information.
F-61
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
2013 included the following significant pre-tax benefits (charges) which are excluded from segment operating earnings:
Agriculture1,2
Electronics & Communications2,3
Industrial Biosciences2
Nutrition & Health2
Performance Materials2
Safety & Protection2
Other2
$
$
(351)
(131)
1
6
(16)
4
1
(486)
1.
2.
3.
Included charges of $(425), offset by $73 of insurance recoveries, recorded in other operating charges associated with the company's process to fairly resolve
claims related to the use of Imprelis®. See Note 16 for additional information.
Included a net $(5) restructuring adjustment consisting of a $14 benefit associated with prior year restructuring programs and a $(19) charge associated with
the restructuring actions related to a joint venture. The majority of the $14 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 & Communications -
$(2); Industrial Biosciences - $1; Nutrition & Health - $6; Performance Materials - $(16); Safety & Protection - $4; and Other - $1. See Note 4 for additional
information.
Included a $(129) impairment charge recorded in employee separation / asset related charges, net related to an asset grouping within the Electronics &
Communications segment. See Note 4 for additional information.
F-62
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
23. QUARTERLY FINANCIAL DATA
Unaudited
2015
Net sales
Cost of goods sold
Income from continuing operations before
income taxes
Net income
For the quarter ended
March 31,
June 30,
September 30,
December 31,
$ 7,837
4,516
$ 7,121
4,103
$ 4,873
3,084
$ 5,299
3,409
1,551 2,3,4,5
1,035
1,234 2,6,7
945
227 2,3
235
(421) 3,6,7,8
(256)
Basic earnings per share of common stock from continuing
operations1
Diluted earnings per share of common stock from
continuing operations1
2014
1.12
1.11
1.07
1.06
0.14
0.14
(0.26)
(0.26)
Net sales
Cost of goods sold
Income from continuing operations before
income taxes
Net income
$ 8,594
4,862
$ 8,058
4,790
$ 5,905
3,698
$ 5,849
3,673
1,610 9
1,445
1,245 9,10,11,12
1,074
634 9
434
824 9,12,13,14,15
683
Basic earnings per share of common stock from continuing
operations1
Diluted earnings per share of common stock from
continuing operations1
1.40
1.39
1.01
1.00
0.36
0.36
0.63
0.63
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Earnings per share for the year may not equal the sum of quarterly earnings per share due to changes in average share calculations.
First and third quarter 2015 included charges of $(12) and $(9), 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 $(5) recorded in other operating charges and $(20) recorded
in interest expense. See Note 3 for additional information.
First and third quarter 2015 included net insurance recoveries of $35 and $147 , respectively, recorded in other operating charges in the Agriculture segment,
for recovery of costs for customer claims related to the use of the Imprelis® herbicide. Fourth quarter 2015 included a benefit of $130 in other operating
charges for reduction in accrual for customer claims related to the use of the Agriculture segment’s Imprelis® herbicide. See Note 16 for additional information.
First quarter 2015 included a $(37) pre-tax impairment charge recorded in employee separation / asset related charges, net for a cost basis investment. See
Note 4 for additional information.
First quarter 2015 included a $(40) pre-tax charge within other income, net associated with the re-measurement of the Ukraine hyrvnia net monetary assets.
Second and fourth quarter 2015 included a $(2) and $23 restructuring (charge) benefit associated with the 2014 restructuring program, 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. See Note 4 for additional information.
Second and fourth quarter 2015 included gains of $112 and $33, 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 Safety & Protection segment.
Fourth quarter 2015 included charges of $(10) recorded in selling, general and administrative expenses related to transaction costs associated with the planned
merger with the Dow Chemical Company announced on December 11, 2015. See Note 2 for additional information.
First, second, third and fourth quarter 2014 included charges of $(3), $(4), $(10), and $(16), respectively, recorded in other operating charges associated with
transaction costs related to the separation of the Performance Chemicals segment. See Note 3 for additional information.
Second quarter 2014 included a $(58) pre-tax charge within other income, net associated with the re-measurement of Venezuelan Bolivar net monetary assets.
Second quarter 2014 included a gain of $391 recorded in other income, net associated with the sale of Glass Laminating Solutions/Vinyls. See Note 3 for
additional information.
Second and Fourth quarter 2014 included a $(244) and $(297) restructuring charge, respectively, 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. The second quarter
2014 charge is recorded in employee separation/asset related charges, net. The fourth quarter 2014 restructuring charge of $(297) consists of $(232) recorded
in employee separation/asset related charges, net, and $(65) recorded in other income, net. See Note 4 for additional information.
Fourth quarter 2014 included income of $210 for insurance recoveries, recorded within other operating charges, associated with the recovery of costs for
customer claims related to the use of Imprelis®. See Note 16 for additional information.
Fourth quarter 2014 included a gain of $240 recorded in other income, net associated with the sale of the copper fungicide and land management businesses,
both within the Agriculture segment.
Fourth quarter 2014 included a $70 adjustment to lower performance-based compensation expense.
F-63
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
24. SUBSEQUENT EVENTS
On February 3, 2016, the company entered into a committed receivable repurchase agreement of up to $1,000 (the repurchase
facility) that expires on November 30, 2016. Under the repurchase facility, the company may sell a portfolio of available and
eligible outstanding customer notes receivables within the Agriculture segment to participating institutions and simultaneously
agree to repurchase at a future date. The repurchase facility is considered a secured borrowing with the customer notes receivables,
inclusive of those that are sold and repurchased, equal to 105% of the outstanding amounts borrowed utilized as collateral.
Borrowings under the repurchase facility will have an interest rate of LIBOR + 0.75%.
F-64
Corporate Headquarters
Independent Registered Public Accounting Firm
Information for Investors
E. I. du Pont de Nemours and Company
Chestnut Run Plaza
974 Centre Road
P.O. Box 2915
Wilmington, DE 19805
Telephone: 302 774-1000
E-mail: http://www.dupont.com (click on Contact)
2016 Annual Meeting
The annual meeting of the shareholders will be held on Wednesday, April
27, in Wilmington, Delaware.
Stock Exchange Listings
DuPont common stock (Symbol DD) is listed on the New York Stock
Exchange, Inc. (NYSE) and on certain foreign exchanges. Quarterly high
and low market prices are shown in Item 5 of the Form 10-K.
DuPont preferred stock is listed on the New York Stock Exchange, Inc.
(Symbol DDPrA for $3.50 series and Symbol DDPrB for $4.50 series).
Dividends
Holders of the company's common stock are entitled to receive dividends
when they are declared by the Board of Directors. While it is not a guarantee
of future conduct, the company has continuously paid a quarterly dividend
since the fourth quarter 1904. Dividends on common stock and preferred
stock are usually declared in January, April, July and October. When
dividends on common stock are declared, they are usually paid mid-March,
June, September and December. Preferred dividends are paid on or about
the 25th of January, April, July and October.
Shareholder Services
Inquiries from shareholders about stock accounts, transfers, certificates,
dividends (including direct deposit and reinvestment), name or address
changes and electronic delivery of proxy materials may be directed to
DuPont's stock transfer agent:
Computershare Trust Company, N.A.
P.O. Box 30170
College Station, TX, 77842-3170
or call: in the United States and Canada
888 983-8766 (toll-free)
other locations-781 575-2724
for the hearing impaired-
TDD: 800 952-9245 (toll-free)
or visit Computershare's home page at
http://www.computershare.com/investor
PricewaterhouseCoopers LLP
Two Commerce Square, Suite 1800
2001 Market Street
Philadelphia, PA 19103
Investor Relations
Institutional investors and other representatives of financial institutions
should contact:
E. I. du Pont de Nemours and Company
DuPont Investor Relations
974 Centre Road, CRP730/5360-3
Wilmington, DE 19805
or call 302 774-4994
Bondholder Relations
E. I. du Pont de Nemours and Company
DuPont Finance
974 Centre Road, CRP730/4170-5
Wilmington, DE 19805
or call 302 999-4488
or 302 999-4487
DuPont on the Internet
Financial results, news and other information about DuPont can be accessed
from the company's website at http://www.dupont.com. This site includes
important information on products and services, financial reports, news
releases, environmental
information and career opportunities. The
company's periodic and current reports filed with the SEC are available on
its website, free of charge, as soon as reasonably practicable after being filed.
Product Information/Referral
From the United States and Canada:
800 441-7515 (toll-free)
From other locations: 302 774-1000
On the Internet: http://www.dupont.com (click on Contact)
Printed Reports Available to Shareholders
The following company reports may be obtained, without charge:
1. 2015 Annual Report to the Securities and Exchange Commission,
filed on Form 10-K;
2. Proxy Statement for 2016 Annual Meeting of Stockholders; and
3. Quarterly reports to the Securities and Exchange Commission,
filed on Form 10-Q
Requests should be addressed to:
DuPont Corporate Customer Care
CRP - 735 (second floor)
974 Centre Road, P.O. Box 2915
Wilmington, DE 19805
or call:
From the United States and Canada: 800-441-7515 (toll free)
From other locations: 302-774-1000
On the Internet: http://www.dupont.com (click on Contact)
Services for Shareholders
Online Account Access
Registered shareholders may access their accounts and obtain online answers
to stock transfer questions by signing up for Internet access by visiting http://
www.computershare.com/investor. Shareholders have the option to request
direct deposit of stock dividends, and electronic delivery of account
statements and 1099-DIV tax forms.
Dividend Reinvestment Plan
An automatic dividend reinvestment plan is available to all registered
shareholders. Common or preferred dividends can be automatically
reinvested in DuPont common stock. Participants also may add cash for the
purchase of additional shares. A detailed account statement is mailed after
each investment. Your account can also be viewed over the Internet if you
have Online Account Access (see above). To enroll in the plan, please contact
Computershare (listed above).
Online Delivery of Proxy Materials
Shareholders may request their proxy materials electronically in 2016 by
visiting http://enroll.icsdelivery.com/dd.
Direct Deposit of Dividends
Registered shareholders who would like their dividends directly deposited
in a U.S. bank account should contact Computershare (listed above).