DuPont 2005 Annual Report Download - page 34

Part II
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations–Continued
Segment
Sales PTOI
(Dollars in billions) (Dollars in millions)
2005 $6.8 $523
2004 6.6 295
2003 5.4 410
Performance Materials provides customers with more productive, higher performance polymer materials, systems and solutions
to improve the uniqueness, functionality and profitability of their product offerings. Performance Materials delivers a broad
polymer-based materials product portfolio, including engineering polymers that are primarily used by customers to fabricate
components for mechanical and electrical systems, as well as specialized resins and films used in various packaging and
industrial applications. These applications include food packaging, sealants and adhesives, sporting goods, and interlayers for
laminated safety glass. Key brands include DuPont Zytel nylon resins, Delrin acetal resins, Hytrel polyester thermoplastic
elastomer resins, Tynex filaments, Surlyn resins, SentryGlas Plus and Butacite laminate interlayers, Mylar and Melinex
polyester films, and Viton fluoroelastomers.
The key markets served by the segment include the automotive OEM and associated after-market industries, as well as
electrical, electronics, packaging, construction, and consumer durable goods.
The segment’s core competency is applied materials science, focusing on substituting traditional materials with new materials
that offer advantages such as performance, durability, aesthetics, and weight reduction. New applications and processing
materials into innovative parts and systems are also areas of focus. A recent example of this core innovation capability is
SentryGlas Expressions, which links DuPont polymer materials with ink jet technologies to develop specialty decorative
interlayers for architectural applications.
In 2004, the segment expanded its operations in China adding compounding capacity in both Shenzhen and Shanghai, and
completed the shutdown of one of its production facilities in the Netherlands, relocating some of the assets to higher growth
regions.
On June 30, 2005, DuPont completed a transaction with Dow related to DDE, a 50/50 joint venture. Dow acquired from DDE
certain assets related to the Engage, Nordel and Tyrin businesses. Upon the completion of this transaction, the remaining
elastomers business became a wholly owned subsidiary of DuPont and was renamed DuPont Performance Elastomers, LLC. For
some time, the company had been evaluating both its response to a long-term declining demand for the neoprene products
and the anticipated capital investment requirements at the Louisville, Kentucky facility. The company now plans to consolidate
production at its upgraded LaPlace, Louisiana, facility by the end of March 2007 at which time neoprene production will cease
at the Louisville site. In 2005, the company recorded a restructuring charge of $34 million, reflecting severance and related
costs for approximately 275 employees. Annual cost reductions related to ceasing neoprene production at Louisville and
consolidating production at LaPlace are expected to offset reduced revenue related to declining demand. Cash payouts of
$25 million are largely expected to be paid in 2007 (see Note 13 to the Consolidated Financial Statements for further discussion
of these matters).
2005 versus 2004 Sales of $6.8 billion were 2 percent higher than 2004, reflecting 8 percent higher USD selling prices, partly
offset by 6 percent lower sales volumes. Sales volumes declined due to the business interruption caused by the hurricanes,
the aforementioned change in the elastomers business and exiting the DMT business, pricing actions to improve mix and
margins, and lower demand from markets tied to motor vehicle production in the United States and Europe.
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PERFORMANCE MATERIALS