DUPONT REPORTS FIRST QUARTER 2003 EARNINGS

WILMINGTON, Del.,  April 29, 2003  —   

Summary

  • First quarter 2003 earnings, before special items and cumulative effect of changes in accounting principles, were $.61 per share compared with first quarter 2002 earnings of $.55, up 11 percent.
  • First quarter 2003 income before cumulative effect of changes in accounting principles was $564 million, or $.56 per share, compared with $479 million, or $.48 per share, for the first quarter 2002.
  • Consolidated net sales for the first quarter were $7 billion, up 14 percent, driven by a 7 percent volume increase and a 6 percent benefit from the currency effect of a weaker U.S. dollar.

Earnings Comparisons *
($ per share diluted)

 

1Q'03

1Q'02

Reported

  .56

  .48

Special Items

 (.05)

 (.07)

Before Special Items

 .61

 .55

* Excludes cumulative effect of changes in accounting principles of $(.03) in 2003 and $(2.94) in 2002.

"Our sales growth in the first quarter reflects strong volume increases in each of our five growth platforms and DuPont Textiles & Interiors (DTI). This broad-based volume growth, combined with particularly strong results in Pharmaceuticals, Agriculture & Nutrition and Safety & Protection, offset the impact of higher pension, energy, and raw material costs in the first quarter," said Charles O. Holliday, Jr., chairman and CEO. "Our businesses performed well, maintaining their momentum even better than expected through the end of the quarter."

Global Consolidated Sales and Net Income
Consolidated net sales totaled $7 billion compared to $6.1 billion in first quarter 2002, up 14 percent. This includes 7 percent higher sales volume, a 2 percent benefit attributable to the net impact of acquired and divested businesses, and a 6 percent benefit from the weaker dollar, partly offset by 1 percent lower local selling prices.

First quarter net income was $535 million, compared to a loss of $2,465 million in the first quarter of 2002. Income before cumulative effect of changes in accounting principles was $564 million in the current quarter versus $479 million in the first quarter 2002, up 18 percent. The increase in income principally reflects higher sales volumes, the benefit of a weaker U.S. dollar and lower income taxes, partly offset by increases in raw material costs and pension expense.

Special items, which are described in the notes accompanying the financial statements, totaled an after-tax charge of $51 million, or $.05 per share, in the first quarter 2003 versus a net after-tax charge of $73 million, or $.07 per share, last year, as shown in the table below:

SPECIAL ITEMS

 

$MM Pretax

$MM After-Tax

($ Per Share)

 

2003

2002

2003

2002

2003

2002

Benlate® Shareholder Litigation Settlement

(78)

 

(51)

 

(.05)

 

1st Quarter Total

(78)

(72)

(51)

(73)

 (.05)

 (.07)

First Quarter Segment Sales
Worldwide and regional segment sales and related variances for the first quarter 2003 compared with the first quarter 2002 are summarized below. Segment sales include transfers and a pro rata share of equity affiliate sales.

FIRST QUARTER 2003

 

Segment Sales

% Change Due To

 

1Q'03
$B

% Change
vs. 1Q'02

Local
Price

Currency
Effect

Volume

Other *

Worldwide

7.8

15

(1)

6

7

3

   United States

3.6

8

0

0

3

5

  Europe

2.3

24

(4)

20

8

0

  Asia Pacific

1.2

25

(1)

4

22

0

  Canada, Mexico,
    S. America

0.7

10

4

1

3

2

* Net impact of acquisitions and divestitures and a change in management reporting for certain intersegment transfers.
  • Volumes increased in all segments and regions.
  • U.S. sales increased 8 percent including 3 percent volume growth and a 3 percent benefit from the net impact of acquisitions and divestitures.
  • European sales increased 24 percent on 8 percent higher volume, and 16 percent higher U.S. dollar prices driven by currency.
  • Asia Pacific sales were up 25 percent reflecting 22 percent higher volume due to continued strength in all segments.

Business Segment Performance
Summarized below are comments on individual segment sales and after-tax operating income (ATOI) for the first quarter 2003 compared with the first quarter 2002. All segments had a benefit to sales ranging from 5-8 percent resulting from the currency effect of the weaker dollar. Additional segment information is available to investors and the public via the earnings data section of the DuPont Investor Web site.

  • Agriculture & Nutrition – Sales of $1.8 billion increased 11 percent reflecting 5 percent higher U.S. dollar selling prices, 4 percent higher volume, and a 2 percent benefit from the acquisition of Liqui-Box. ATOI was $378 million versus $323 million, up 17 percent, principally reflecting higher sales of production agriculture products, partly offset by the negative impact of higher non-cash pension expense.
  • Coatings & Color Technologies – Sales of $1.3 billion were up 12 percent reflecting 5 percent higher volume and 7 percent higher U.S. dollar selling prices. ATOI declined 13 percent to $74 million primarily due to higher TiO2 raw material costs in addition to higher non-cash pension expense.
  • Electronic & Communication Technologies – Sales of $0.7 billion were up 17 percent, principally reflecting higher sales volumes, as U.S. dollar prices were flat. ATOI was $21 million versus $45 million last year. Earnings declined due to increased R&D and start-up costs for Displays Technologies, as well as higher non-cash pension expense.
  • Performance Materials – Sales of $1.3 billion were up 15 percent due to 12 percent higher volume, 4 percent higher U.S. dollar selling prices, and a 1 percent reduction due to the divestiture of the DuPont™ Clysar® shrink film business. ATOI of $75 million was 11 percent lower due to higher raw material and non-cash pension costs.
  • Pharmaceuticals – ATOI of $95 million was up 86 percent over prior year ATOI of $51 million. A substantial portion of the increase is attributable to earnings related to a wholesaler buy-in in anticipation of a price increase for Cozaar®/Hyzaar®. Cozaar®/Hyzaar® continue to show solid growth globally, driven in part by new indications.
  • Safety & Protection – Sales of $1 billion were up 19 percent due to higher volumes, the acquisition of ChemFirst, and higher U.S. dollar selling prices. ATOI increased 24 percent to $128 million despite higher non-cash pension expense, reflecting higher earnings from nonwoven and aramid products.
  • Textiles & Interiors – Sales of $1.7 billion reflect 5 percent higher volume and 6 percent higher U.S. dollar selling prices. In addition, in preparation for the planned separation of DTI, the company changed its management reporting regarding intermediates supplied to Performance Materials to reflect market-based transfers. This change increased first quarter 2003 segment sales by 8 percent versus prior year. ATOI was a loss of $5 million. First quarter 2002 ATOI of $20 million included a net charge of $10 million for special items. The earnings decline principally reflects lower margins due to higher raw material and non-cash pension costs.

Outlook
Although the company currently expects the global economic recovery to resume its moderate pace later in 2003, the near-term economic outlook is somewhat restrained – particularly for industrial production in developed economies. In addition, for the second quarter 2003 versus the prior year:

  • The company expects significantly higher energy related raw material costs. The year over year negative impact in the second quarter is expected to be at least double what it was in the first quarter of 2003.
  • As previously announced, the company will incur higher non-cash expense in 2003, mainly related to pension. This will negatively affect earnings per share versus the prior year by approximately 10 cents per quarter throughout 2003.

Despite these challenges, the company expects its businesses to continue to perform well in the market place, driving both volume growth and price increases. Taking all of these factors into account, the company expects to deliver earnings per share for the first half of 2003 that are in line with the current First Call earnings estimate consensus of $1.16 (which excludes the impact of DuPont's first quarter special item and cumulative effect of a change in accounting principle), yielding a second quarter earnings outlook in the mid- to high 50 cents per share range. This outlook does not reflect any special items in the second quarter.

"Our leadership fully understands the near term challenges – slower economic growth and higher costs," said Holliday. "Our businesses are focused on what they can control, keeping a tight rein on cash costs and driving sales and volume growth by staying close to the customer. I am confident that we will continue to outperform our competition."

DuPont is a science company. Founded in 1802, DuPont puts science to work by solving problems and creating solutions that make people's lives better, safer and easier. Operating in more than 70 countries, the company offers a wide range of products and services to markets including agriculture, nutrition, electronics, communications, safety and protection, home and construction, transportation and apparel.

Use of Non-GAAP Measures
Management believes that earnings before special items, a "non-GAAP" measure, is meaningful to investors because it provides insight with respect to ongoing operating results of the company. Special items represent significant charges or credits that are important to an understanding of the company's ongoing operations. Such measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance.

Forward-Looking Statements:
This news release contains forward-looking statements based on management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, market position, expected expenditures and financial results are forward-looking statements. Some of the forward-looking statements may be identified by words like "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents filed with the Securities and Exchange Commission by DuPont, particularly its latest annual report on Form 10-K and quarterly report on Form 10-Q, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which the company does business; competitive pressures; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost of raw materials, research and development of new products, including regulatory approval and market acceptance; and seasonality of sales of agricultural products.

 

More information about segment results and highlights may be accessed on www.dupont.com via the "For Investors" web page.

 

Consolidated Income Statement, Consolidate Segment Information and Financial Summary Attachments (In PDF Format, Adobe Acrobat Reader required) available by clicking here.

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4/29/03

DuPont™, Benlate®, Clysar®, Cozaar® and Hyzaar® are a trademark and registered trademarks of E.I. du Pont de Nemours and Company.