{ "docId": "019dd923-622b-71dc-a6db-96363f3635d5", "docSlug": "96abbaf09d0b", "documentTitle": "E.I. du Pont de Nemours and Company (DuPont) (DD)", "authorId": "06_Trian_Partners", "authorName": "Nelson Peltz", "documentKindSlug": "activist-deck", "documentKindLabel": "Activist deck", "sourceTypeSlug": "activist_investor", "sourceTypeLabel": "Activist investor", "presentationDate": "2015-04-21 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 36, "pageCount": 87, "prevPage": 35, "nextPage": 37, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 2, "notes": "Uses a quote-based narrative to expose management obfuscation.", "elementsJson": [ "headline_text", "bullet_list", "callout_box", "footnote" ], "metadataConfidence": 1, "imagePath": null, "slideHref": "/slides/019dd923-622b-71dc-a6db-96363f3635d5/36", "deckHref": "/decks/019dd923-622b-71dc-a6db-96363f3635d5", "deckJsonHref": "/decks/019dd923-622b-71dc-a6db-96363f3635d5.json", "deckAnchorHref": "/decks/019dd923-622b-71dc-a6db-96363f3635d5#slide-36", "components": [ { "bbox": { "h": 0.12, "w": 0.78, "x": 0.11, "y": 0.74 }, "kind": "callout", "text": "At DuPont’s 2013 Investor Day, management was not transparent about reducing margin targets, suggesting that reduced margin targets were correlated to the accounting change. Were DuPont’s independent directors aware of this? Trian’s nominees will seek to ensure that the board holds management accountable.", "attrs": null, "subkind": "primary", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b817e3cd-1278-47e8-a2af-a85c0a86c014", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.8, "x": 0.1, "y": 0.28 }, "kind": "list", "text": "At its May 2013 Investor Day, DuPont gave long-term margin targets by business that differed from those given at its 2011 Investor Day", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "6fe1f540-fdd6-47b8-b212-c8cd5a9cc0e9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.8, "x": 0.1, "y": 0.35 }, "kind": "list", "text": "The Company suggested the difference between these targets was merely an accounting difference (i.e. the non-operating pension / OPEB adjustment); responding to a question about the Industrial Biosciences and Performance Materials segments, management said the following: “In terms of margins, the accounting change really accounts for the shift that you're seeing. So we have not revised up or revised down our expectations”", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "78ec3a59-56e5-44e9-86c0-312d987218d1", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.8, "x": 0.1, "y": 0.18 }, "kind": "list", "text": "In December 2012, DuPont introduced a new EPS reporting methodology, called “Operating EPS”, which adds back non-operating pension/other post-employment benefit (“OPEB”) costs to non-GAAP EPS", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "a2fe9acf-11dd-476b-a2db-589dc203e19e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.18, "w": 0.8, "x": 0.1, "y": 0.52 }, "kind": "list", "text": "It took prodding from a research analyst during the Q&A for DuPont to admit that certain margin targets were lowered: “...Safety and Protection margin [targets] that you show are 21% to 23% which is what they were 18 months ago. But you now exclude your pension cost...[which was] more than 500 basis points.” – JP Morgan analyst(1) DuPont responded: “...You're right, Jeff. The margin is lower between 400 and 500 basis points from that standpoint”", "attrs": null, "subkind": "bullet", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c1df46ed-e433-4d9b-be2a-e1d0633374bb", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "“In terms of margins, the accounting change really accounts for the shift that you're seeing. So we have not revised up or revised down our expectations” — DuPont Management. “...Safety and Protection margin [targets] that you show are 21% to 23% which is what they were 18 months ago. But you now exclude your pension cost...[which was] more than 500 basis points.” — Jeff Zekauskas, JP Morgan. “...You're right, Jeff. The margin is lower between 400 and 500 basis points from that standpoint” — DuPont Management.", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-203c-716b-be62-626ab3d28724", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.05, "w": 0.6, "x": 0.1, "y": 0.9 }, "kind": "source-note", "text": "Source: DuPont SEC filings, DuPont Investor Day transcript from May 2, 2013, Trian calculations, non-GAAP reconciliations. (1) Jeff Zekauskas, JP Morgan, DuPont 2013 Investor Day. 5/2/2013.", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f33ae5ab-73bf-4c4a-9b7a-0c46bffe20e5", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.1, "w": 0.8, "x": 0.1, "y": 0.1 }, "kind": "title", "text": "DuPont Changed Its EPS Reporting Methodology In Late 2012; Then Suggested Reduced Margin Targets Were Correlated To Its Accounting Change", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "13a3bebe-6334-4d93-88fb-fdcd3fc9a02d", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "ceo-quote-contradiction", "slug": null, "matchId": "c9d7f284-be3f-4a8a-8fb2-fc1aea7356ae", "evidence": "Contrasting management's public statement with the analyst's correction and subsequent admission.", "confidence": 0.9 } ], "arcBeats": [ { "to": 37, "from": 21, "beatId": "0a8a3a82-fba6-4f03-a8cb-8990128795d2", "arcName": "Problem-Agitate-Solution", "arcSlug": "problem-agitate-solution", "beatName": "Agitate", "beatSlug": "problem-agitate-solution-agitate-make-it-worse", "evidence": "The deck highlights the consequences of DuPont's underperformance and poor governance, including lack of transparency and value destruction.", "position": 1, "confidence": 0.8, "parentBeatName": "Development", "parentBeatSlug": "development" } ], "loops": [ { "to": 37, "from": 21, "name": "Cost Of Inaction", "slug": "27-cost-of-inaction", "bestFor": "Urgent budget requests, compliance, risk mitigation", "matchId": "3b4504be-7163-472d-958e-55a976db9700", "evidence": "The deck emphasizes the negative consequences of DuPont's underperformance and poor governance.", "position": 1, "objective": "Highlight the consequences of not taking action", "structure": "The Status Quo -> The Hidden Costs Accumulating -> The Future State of Inaction -> The Tipping Point", "confidence": 0.7, "description": "Quantify what happens if the audience does nothing" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }