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Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
23
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.