10-QPeriod: Q1 FY2018

EIDP, Inc. Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 4, 2018For Securities:CTA-PBCTA-PA

Summary

E.I. du Pont de Nemours and Company (DuPont) reported a net loss of $221 million for the first quarter of 2018, a significant shift from the $1.12 billion net income reported in the same period of 2017. This loss is largely attributed to the ongoing integration and separation costs related to the DowDuPont merger, as well as a substantial increase in cost of goods sold, partly due to the amortization of inventory step-up from the merger's purchase accounting. Net sales also saw a decline, down to $6.7 billion from $7.3 billion year-over-year, influenced by seasonal timing in agriculture product deliveries and lower sales in the U.S. and Canada. Despite the net loss, the company's balance sheet remains robust, with total assets at $111.9 billion and total equity at $74.9 billion. The company continues to manage its debt effectively, with total debt at $13.2 billion. Key financial activities during the quarter included significant distributions to DowDuPont to fund share repurchases and dividends, and ongoing efforts to achieve cost synergies from the merger. Investors should monitor the progress of the planned business separations and the impact of integration costs on future profitability.

Financial Highlights

42 data points
Beta

Revenue

$6.70B

27.6% Gross Margin

Net Income

-$228.00M

-3.4% Net Margin

Total Assets

$111.89B

Cash & Equivalents

$5.63B

Free Cash Flow

-$1.98B

Financial Statements
Beta
Revenue$6.70B
Cost of Revenue$4.85B
Gross Profit$1.85B
R&D Expenses$382.00M
SG&A Expenses$959.00M
Net Income-$228.00M

Key Highlights

  • 1Net loss of $221 million in Q1 2018, compared to a net income of $1.12 billion in Q1 2017.
  • 2Net sales decreased to $6.7 billion in Q1 2018 from $7.3 billion in Q1 2017.
  • 3Cost of goods sold increased significantly, partly due to $703 million in amortization of inventory step-up from the DowDuPont merger.
  • 4Integration and separation costs were $255 million in Q1 2018.
  • 5Cash used for operating activities was $1.975 billion, a notable increase from $1.624 billion in the prior year's quarter.
  • 6The company made substantial distributions of approximately $830 million to DowDuPont in Q1 2018.
  • 7The company adopted new revenue recognition standards (ASU 2014-09) and made related balance sheet adjustments.

Frequently Asked Questions

The primary reasons for the shift from a net income of $1.12 billion in Q1 2017 to a net loss of $221 million in Q1 2018 are the substantial integration and separation costs related to the DowDuPont merger, a significant increase in the cost of goods sold (including $703 million for amortization of inventory step-up from purchase accounting), and a decrease in net sales.

The DowDuPont merger significantly impacts DuPont's financial reporting, with 'Successor' periods reflecting the fair value of assets and liabilities at the merger date (push-down accounting). The merger also drives substantial integration and separation costs, and is linked to planned business separations into distinct entities. The company is actively working to achieve cost synergies and optimize operations post-merger.

The company's cash, cash equivalents, and marketable securities decreased from $8.2 billion at the end of 2017 to $5.3 billion at the end of Q1 2018, primarily due to funding seasonal working capital needs and significant distributions to DowDuPont. Despite this decrease, the company believes it has adequate liquidity from operations and access to capital markets to meet its obligations.

The company is involved in ongoing litigation, notably concerning PFOA (perfluorooctanoic acid) matters, including environmental and personal injury claims, and investigations related to the Fayetteville Works Facility. While management states that the ultimate disposition of most matters is not expected to have a material adverse effect, there is inherent uncertainty, and some environmental liabilities could be material to results of operations in the period recognized.