UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-815
E. I. du Pont de Nemours and Company
(Exact Name of Registrant as Specified in Its Charter)
Delaware 51-0014090
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1007 Market Street, Wilmington, Delaware 19898
(Address of Principal Executive Offices)
(302) 774-1000
(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
562,976,998 shares (excludes 16,065,727 shares held by DuPont's
Flexitrust) of common stock, $0.60 par value, were outstanding at
October 31, 1996.
1
<PAGE>
Form 10-Q
E. I. DU PONT DE NEMOURS AND COMPANY
Table of Contents
Page(s)
-------
Part I
Item 1. Financial Statements
Consolidated Income Statement ............................... 3
Consolidated Statement of Cash Flows ........................ 4
Consolidated Balance Sheet .................................. 5
Notes to Financial Statements ............................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Results ........................................... 7
Industry Segment Performance ................................ 7-9
Consolidated Industry Segment Information ................... 10-11
Financial Condition ......................................... 12-13
Part II
Item 1. Legal Proceedings .................................... 14-16
Item 5. Other Information .................................... 16
Item 6. Exhibits and Reports on Form 8-K ..................... 16-17
Signature ....................................................... 18
Exhibit Index ................................................... 19
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges .. 20
2
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<TABLE>
Form 10-Q
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
E. I. DU PONT DE NEMOURS AND COMPANY AND CONSOLIDATED SUBSIDIARIES
<CAPTION>
Three Months Ended Nine Months Ended
CONSOLIDATED INCOME STATEMENT<Fa><Fb> September 30 September 30
- ------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share) 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES ................................................... $10,486 $10,200 $32,403 $31,778
Other Income ............................................ 328 220 1,103 805
------- ------- ------- -------
Total ............................................... 10,814 10,420 33,506 32,583
------- ------- ------- -------
Cost of Goods Sold and Other Expenses ................... 7,776 7,502 24,065 23,136
Selling, General and Administrative Expenses ............ 648 723 2,106 2,245
Depreciation, Depletion and Amortization ................ 628 647 1,886 1,937
Exploration Expenses, Including Dry Hole Costs
and Impairment of Unproved Properties ................. 88 79 235 221
Interest and Debt Expense ............................... 171 205 547 561
------- ------- ------- -------
Total ............................................... 9,311 9,156 28,839 28,100
------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES ............................ 1,503 1,264 4,667 4,483
Provision for Income Taxes .............................. 605 495 1,889 1,817
------- ------- ------- -------
NET INCOME .............................................. $ 898 $ 769 $ 2,778 $ 2,666
======= ======= ======= =======
EARNINGS PER SHARE OF COMMON STOCK<Fc> .................. $ 1.60 $ 1.38 $ 4.95 $ 4.47
======= ======= ======= =======
DIVIDENDS PER SHARE OF COMMON STOCK ..................... $ .57 $ .52 $ 1.66 $ 1.51
======= ======= ======= =======
See page 6 for Notes to Financial Statements.
</TABLE>
3
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<TABLE>
Form 10-Q
<CAPTION>
Nine Months Ended
CONSOLIDATED STATEMENT OF CASH FLOWS<Fa><Fb> September 30
- ---------------------------------------------------------------------------------------------
(Dollars in millions) 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY OPERATIONS
Net Income ........................................................ $ 2,778 $ 2,666
Adjustments to Reconcile Net Income to Cash
Provided by Operations:
Depreciation, Depletion and Amortization ...................... 1,886 1,937
Dry Hole Costs and Impairment of Unproved Properties .......... 74 77
Other Noncash Charges and Credits - Net ....................... (654) (196)
Change in Operating Assets and Liabilities - Net .............. 48 (14)
------- -------
Cash Provided by Operations ................................. 4,132 4,470
------- -------
INVESTMENT ACTIVITIES
Purchases of Property, Plant and Equipment ........................ (2,212) (2,329)
Investment in Affiliates .......................................... (279) (198)
Proceeds from Sales of Assets ..................................... 1,315 234
Investments in Short-Term Financial Instruments - Net ............. (351) 435
Miscellaneous - Net ............................................... (12) (46)
------- -------
Cash Used for Investment Activities ......................... (1,539) (1,904)
------- -------
FINANCING ACTIVITIES
Dividends Paid to Stockholders .................................... (937) (905)
Net Increase (Decrease) in Borrowings ............................. (1,030) 5,421
Repurchase of Warrants ............................................ (504) -
Purchase of Treasury Stock ........................................ - (8,350)
Proceeds from Issuance of Common Stock Through
Public and Private Offerings .................................... - 1,747
Common Stock Issued in Connection with Compensation Plans ......... 260 49
Additions to Minority Interests ................................... 297 -
------- -------
Cash Used for Financing Activities .......................... (1,914) (2,038)
------- -------
Effect of Exchange Rate Changes on Cash ............................. (37) 40
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS ............................... $ 642 $ 568
======= =======
See page 6 for Notes to Financial Statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Form 10-Q
CONSOLIDATED BALANCE SHEET<Fa><Fb> September 30 December 31
- -------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share) 1996 1995
- -------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents ........................................................ $ 2,050 $ 1,408
Marketable Securities ............................................................ 396 47
Accounts and Notes Receivable .................................................... 5,180 4,912
Inventories<Fd> .................................................................. 3,769 3,737
Prepaid Expenses ................................................................. 283 276
Deferred Income Taxes ............................................................ 437 575
------- -------
Total Current Assets ........................................................... 12,115 10,955
PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation, depletion and
amortization (September 30, 1996 - $28,782; December 31, 1995 - $29,044) ......... 20,755 21,341
INVESTMENT IN AFFILIATES ........................................................... 2,586 1,846
OTHER ASSETS ....................................................................... 3,305 3,170
------- -------
TOTAL .......................................................................... $38,761 $37,312
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable ................................................................. $ 2,387 $ 2,636
Short-Term Borrowings and Capital Lease Obligations .............................. 5,325 6,157
Income Taxes ..................................................................... 665 470
Other Accrued Liabilities ........................................................ 3,941 3,468
------- -------
Total Current Liabilities ...................................................... 12,318 12,731
LONG-TERM BORROWINGS AND CAPITAL LEASE OBLIGATIONS ................................. 5,533 5,678
OTHER LIABILITIES .................................................................. 8,406 8,454
DEFERRED INCOME TAXES .............................................................. 1,900 1,783
------- -------
Total Liabilities .............................................................. 28,157 28,646
------- -------
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES .................................... 611 230
------- -------
STOCKHOLDERS' EQUITY
Preferred Stock .................................................................. 237 237
Common Stock, $.60 par value; 900,000,000 shares authorized; shares issued
at September 30, 1996 - 579,042,725; December 31, 1995 - 735,042,724 ........... 347 441
Additional Paid-In Capital ....................................................... 6,586 8,689
Reinvested Earnings .............................................................. 4,397 9,503
Cumulative Translation Adjustment<Fe> ............................................ (84) -
Common Stock Held in Trust for Unearned Employee Compensation and Benefits,
at Market (Shares: September 30, 1996 - 16,913,339; December 31,
1995 - 23,546,176) ............................................................. (1,490) (1,645)
Common Stock Held in Treasury, at Cost (Shares: December 31, 1995 -
156,000,000) ..................................................................... - (8,789)
------- -------
Total Stockholders' Equity ..................................................... 9,993 8,436
------- -------
TOTAL .......................................................................... $38,761 $37,312
======= =======
See page 6 for Notes to Financial Statements.
</TABLE>
5
<PAGE>
Form 10-Q
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
[FN]
<Fa>These statements are unaudited, but reflect all adjustments that, in the
opinion of management, are necessary to provide a fair presentation of
the financial position, results of operations and cash flows for the
dates and periods covered. All such adjustments are of a normal
recurring nature.
<Fb>On July 24, 1996, DuPont repurchased from Seagram for $504 warrants to
purchase 156 million shares of DuPont common stock. These are all of
the warrants that were issued to Seagram in April 1995 in connection
with DuPont's redemption of 156 million shares of its common stock from
Seagram. Coincident with the repurchase, the company retired
156 million shares of common stock held in treasury.
<Fc>Earnings per share are calculated on the basis of the following average
number of common shares outstanding:
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1996 561,367,436 559,880,456
1995 554,978,850 595,129,571
The 16,913,339 shares held by the Flexitrust at September 30, 1996 are
not considered outstanding in computing the foregoing average shares
outstanding. Earnings per share calculations that reflect the impact of
common stock equivalents in the periods presented do not result in
materially dilutive primary or fully diluted earnings per share.
<Fd>Inventories September 30 December 31
----------- 1996 1995
------------ -----------
Chemicals ............................ $ 254 $ 248
Fibers ............................... 627 569
Polymers ............................. 570 573
Petroleum ............................ 1,352 1,293
Diversified Businesses ............... 966 1,054
------ ------
Total .............................. $3,769 $3,737
====== ======
<Fe>Effective January 1, 1996, local currency was designated as functional
currency for the company's integrated European petroleum operations,
while the U.S. dollar continued as the functional currency for the
company's other worldwide operations. The amount of the cumulative
translation adjustment on January 1, 1996, was a reduction in stock-
holders' equity of $68.
6
<PAGE>
Form 10-Q
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(a) Results of Operations
(1) Financial Results:
DuPont reported record third quarter earnings of $1.60 per
share, with strong upstream petroleum earnings and 6 percent volume
growth in its Chemicals and Specialties businesses. Excluding a
nonrecurring charge of $.08 per share, earnings for the quarter
were $1.68, 22 percent higher than the $1.38 per share earned in
the third quarter of 1995. Net income totaled $898 million
compared to $769 million in 1995.
Petroleum segment earnings in the current quarter were up
47 percent from last year and were the highest since the first
quarter 1991. Upstream was particularly strong, with earnings
increasing 96 percent compared to last year on higher prices and
solid production gains. Earnings for Chemicals and Specialties
businesses were mixed, with strong performances from agricultural
products, automotive products, nylon, engineering polymers, and
"Lycra" brand spandex.
The current quarter includes an after-tax nonrecurring charge
of $47 million, or $.08 per share, for crop damage claims and legal
expenses related to the recall of "Benlate" 50 DF fungicide. The
third quarter of 1995 had no earnings per share effect from
nonrecurring items, but did include $.12 per share income from
insurance recoveries related to environmental remediation.
For the first nine months of 1996, earnings per share totaled
$4.95 and exceeded by 11 percent the previous record for nine
months earnings of $4.47 per share set in 1995. Net income for the
first nine months of 1996 was $2.8 billion, up 4 percent compared
to $2.7 billion in the same period last year. Year-to-date sales
totaled $32.4 billion versus $31.8 billion last year, up 2 percent.
Sales for the third quarter were $10.5 billion versus
$10.2 billion last year, up 3 percent.
(2) Industry Segment Performance:
The following text compares third quarter 1996 results
with the prior year for each industry segment (sales adjusted for
changes in business composition) excluding the earnings impact of
nonrecurring items and reflecting certain reclassifications as
described in the footnotes to the "Consolidated Industry Segment
Information" table.
7
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Form 10-Q
Chemicals and Specialties segments sales were $5.6 billion, up
3 percent after adjusting for changes in business composition
resulting from divestitures and formation of the DuPont Dow
Elastomers joint venture. Worldwide Chemicals and Specialties
sales volume increased 6 percent: 4 percent in the United States
and 7 percent outside the United States. Worldwide Chemicals and
Specialties average selling prices were down 3 percent from last
year, about half due to the adverse effect of the stronger
dollar and the remainder primarily from lower prices for white
pigments and "Dacron" polyester fiber.
Petroleum segment sales were $4.9 billion, up 12 percent over
last year. Crude oil prices averaged $19.85 per barrel for the
period, 25 percent higher than last year. U.S. natural gas prices
were 45 percent higher averaging $1.98 per thousand cubic feet,
while worldwide gas prices increased 32 percent to $2.28 per
thousand cubic feet. Crude oil production and natural gas
deliveries increased 5 percent and 12 percent, respectively.
o Chemicals segment earnings were $138 million, down
$19 million, or 12 percent, reflecting lower earnings for
white pigments, partly offset by improved results for
specialty chemicals. Segment sales were 3 percent lower,
reflecting 10 percent lower selling prices, partly offset
by 7 percent higher sales volume.
o Fibers segment earnings of $206 million were up
$17 million, or 9 percent, principally due to better
earnings from nylon, "Lycra" and nonwovens. "Dacron"
polyester was adversely affected by weather-related plant
outages and lower polyester staple prices. Segment sales
were up less than 1 percent, as 2 percent higher volume
was offset by lower selling prices.
o Polymers segment earnings were $213 million, up
$18 million, or 9 percent, reflecting improved results in
automotive products and engineering polymers. Segment
sales grew 4 percent, reflecting 6 percent higher volume,
partly offset by 2 percent lower selling prices.
o Petroleum segment earnings were $256 million, up
$82 million from last year. Upstream earned $163 million,
almost double last year's $83 million, due to higher
prices and production, while keeping nonproduction-related
costs under control. In particular, earnings from
Upstream operations outside the United States improved
dramatically to $102 million, compared to $41 million last
year, on strong North Sea performance. Downstream earned
$93 million, up slightly from last year, despite continu-
ing weak margins aggravated by higher crude costs.
8
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Form 10-Q
o Diversified Businesses segment earnings totaled
$218 million, up $28 million or 15 percent, principally
due to higher earnings from agricultural products.
Agricultural products sales were unusually strong in the
third quarter, reflecting later-than-normal crop plantings
in North America. Segment sales were up 11 percent due to
11 percent higher sales volume. Selling prices were down
less than 1 percent.
9
<PAGE>
<TABLE>
Form 10-Q
E. I. DU PONT DE NEMOURS AND COMPANY AND CONSOLIDATED SUBSIDIARIES
<CAPTION>
Three Months Ended Nine Months Ended
CONSOLIDATED INDUSTRY SEGMENT INFORMATION September 30 September 30
- ---------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES
- -----
Chemicals ............................................... $ 1,025 $ 1,052 $ 3,100 $ 3,175
Fibers .................................................. 1,735 1,728 5,301 5,414
Polymers ................................................ 1,573 1,700 5,071 5,321
Petroleum ............................................... 4,929 4,383 14,549 13,192
Diversified Businesses .................................. 1,224 1,337 4,382 4,676
------- ------- ------- -------
Total ............................................... $10,486 $10,200 $32,403 $31,778
======= ======= ======= =======
AFTER-TAX OPERATING INCOME<Fa><Fb>
- --------------------------
Chemicals ............................................... $ 138 $ 160 $ 425<Fc> $ 502<Fd>
Fibers .................................................. 206 193 561<Fc> 623<Fd>
Polymers ................................................ 213 198 710<Fe> 657
Petroleum ............................................... 256 174 647<Ff> 540
Diversified Businesses .................................. 171<Fh> 178 739<Fg><Fh> 667<Fh>
------- ------- ------- -------
Total ............................................... 984 903 3,082 2,989
Interest and Other Corporate
Expenses Net of Tax ................................... (86) (134) (304) (323)
------- ------- ------- -------
NET INCOME .............................................. $ 898 $ 769 $ 2,778 $ 2,666
- ---------- ======= ======= ======= =======
<FN>
<Fa>Effective in the first quarter of 1996, the amortization of capitalized
interest associated with property, plant and equipment is included in
After-Tax Operating Income versus the previous practice of including such
amortization in Interest and Other Corporate Expenses Net of Tax. Prior
period data have been reclassified for comparative purposes. This change
has no effect on Net Income.
<Fb>Third quarter 1995 includes a charge of $24 for printing and publishing
operations, principally for employee separation costs in Europe, a
litigation provision of $13 related to a previously sold business, and
adjustments in estimates associated with the third quarter 1993
restructuring charge, which result in the following net (charges)/
benefits:
Chemicals $ 3
Fibers 4
Polymers 3
Diversified Businesses (12)
----
$ (2)
----
</TABLE>
10
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Form 10-Q
[FN]
<Fc>The Chemicals and Fibers segments include a charge of $21 and $32,
respectively, principally for employee separation costs in the United
States.
<Fd>The Chemicals and Fibers segments also include a benefit of $7 and $27,
respectively, principally an adjustment of estimates associated with the
third quarter 1993 restructuring charge.
<Fe>Includes a gain of $55 associated with the formation of the DuPont Dow
Elastomers joint venture.
<Ff>Includes charges of $63 for writedown of investment in a European natural
gas marketing joint venture, and $22, principally, for employee
separation costs in the United States, partly offset by a net benefit of
$44 related to environmental insurance recoveries.
<Fg>Includes gains of $41 from the sale of certain medical products
businesses and $33 related to sale of stock received in connection with
the previously sold connector systems business, and a charge of $26,
principally employee separation costs outside the United States,
associated with the printing and publishing business.
<Fh>Includes a charge of $47 in third quarter 1996, and $110 and $63,
respectively, for the nine months ended September 30, 1996 and 1995,
associated with "Benlate" 50 DF fungicide recall.
11
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Form 10-Q
(b) Financial Condition at September 30, 1996
DuPont recorded a net cash inflow from operations of $4.1 billion
for the first nine months of 1996, as compared with $4.5 billion for the
same period in 1995. Cash from operations includes a larger decrease for
Other Noncash Charges and Credits - Net versus 1995, as is shown on the
consolidated statement of cash flows. This decrease is principally due to
higher undistributed earnings from affiliates, primarily the DuPont Merck
Pharmaceutical Company (DMPC), and higher gains on sales of assets. Earn-
ings from DMPC in 1995 and 1996 include a more favorable allocation of the
venture's operating income. This allocation, which ends in December 1996,
was based on the performance of assets originally contributed to the venture
by DuPont.
Year-to-date capital expenditures for plant, property and equipment
and investments in equity affiliates were $2.5 billion and equal to the same
period last year. The company currently expects capital expenditures for
the year of about $3.8 billion. Proceeds from sales of assets year-to-date
were $1.3 billion and included the sales of Medical Products businesses,
sales of assets to DuPont Dow Elastomers (a newly formed joint venture with
the Dow Chemical Company), the sale of a 30 percent interest in the
Photomask business, as well as the sale of various petroleum properties.
Cash flows from financing activities included $297 million from
outside investors in certain upstream petroleum properties. This investment
is reflected as minority interest on the company's consolidated balance
sheet. Also, the company received $260 million from stock options exercised
by employees, principally under the company's corporate sharing programs.
On July 24, 1996, DuPont spent $504 million to repurchase warrants
from Seagram. The cash required to fund this transaction came from private
placement commercial paper borrowings. Following the repurchase, Standard &
Poor's (S&P) affirmed its ratings of the company's senior debt and preferred
stock (AA-) and commercial paper (A-1+). S&P's ratings outlook remains
negative.
Certain ratios are shown below:
At 9/30/96 At 12/31/95
---------- -----------
Debt Ratio (total debt to total
capitalization) 51% 58%
Current Ratio (current assets
to current liabilities) 1.0:1 0.9:1
Earnings to Fixed Charges Ratio 7.1 5.9
12
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Form 10-Q
Days' sales outstanding averaged 34 days in the third quarter, the
same as the prior quarter and down four days from third quarter of 1995.
The company currently expects to reduce the debt ratio to about
45 percent by year-end 1996 through internally generated funds.
13
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Form 10-Q
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In 1991, DuPont began receiving claims by growers that use of
"Benlate" 50 DF fungicide had caused crop damages. Based on the belief that
"Benlate" 50 DF would be found to be a contributor to the claimed damage,
DuPont began paying crop damage claims. In 1992, however, after 18 months
of extensive research, DuPont scientists concluded that "Benlate" 50 DF was
not responsible for plant damage reports received since March 1991, and
concurrent with these research findings, DuPont stopped paying claims. To
date, DuPont has been served with more than 700 lawsuits by growers who
allege plant damage from using "Benlate" 50 DF fungicide. About 50 of the
lawsuits brought against the company since 1991 remain, the rest having been
disposed of by trial, dismissal or settlement. These remaining cases
include both personal injury and crop damage cases. Two appeals from
adverse jury verdicts in crop damage cases are still pending. The United
States Court of Appeals for the Eleventh Circuit has reversed and remanded
an order by a federal district court in Georgia which had found that DuPont
had engaged in discovery abuse during the first "Benlate" 50 DF case to go
to trial. DuPont awaits further proceedings in that matter. A shareholder
derivative action filed in the same Georgia court alleging that DuPont's
Board of Directors breached various duties in its role in the "Benlate"
50 DF litigation has been stayed pending final resolution of DuPont's appeal
of the Georgia court's order. A putative class action filed by a share-
holder in federal district court in Florida against the company and the
Chairman in September 1995 is also still pending. A lawsuit has been filed
in federal district court in Georgia by five growers seeking to rescind
settlement agreements with DuPont on the basis that at the time of settle-
ment they were unaware of the allegations of discovery abuse which were the
subject of the appeal to the Eleventh Circuit. A similar lawsuit has been
brought by two growers in federal district court in Hawaii. The appeal of a
June 1996 verdict of $3,980,000 against DuPont in a personal injury action
involving "Benlate" 50 DF brought in Florida is still pending, as well.
DuPont continues to believe that "Benlate" 50 DF fungicide did not cause the
alleged damages and intends to prove this in ongoing matters.
Since 1989, DuPont has been named as a defendant in numerous
homeowner lawsuits in various state and federal courts alleging property
damage resulting from leaks in certain polybutylene plumbing systems. In
most cases, DuPont is a codefendant with Shell, Hoechst-Celanese, and parts
manufacturers. The polybutylene plumbing systems consist of sections of
flexible pipe extruded from polybutylene connected with fittings made from
acetal. Shell Chemical is the sole producer of polybutylene; the acetals
are provided by Hoechst-Celanese and DuPont. In 1995 DuPont settled a
national class action lawsuit involving the plumbing systems by agreeing to
contribute up to 10% of the cost of repair and replacement of the plumbing
systems. DuPont's total contribution under the settlement is capped at
$120 million. Several dozen cases involving individual or groups of home-
owners who have opted out of the class action litigation remain pending.
14
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Form 10-Q
The company's balance sheets reflect accruals for estimated costs
associated with both of these matters. Adverse changes in estimates of such
costs could result in additional future charges.
On June 28, 1991, DuPont entered into a voluntary agreement with
the Environmental Protection Agency (EPA) to conduct an audit of the U.S.
sites under the Toxic Substances Control Act (TSCA). Participation in the
audit agreement was not an admission of TSCA noncompliance. Maximum
stipulated penalties under the agreement were capped at $1 million. The
first phase of the audit was completed, but a second phase of the audit, set
to begin after EPA's issuance of new reporting criteria (delayed since
1991), was cancelled in June 1996 by the EPA. The EPA has now issued a
consent order/agreement assessing a one million dollar penalty against
DuPont. Payment of the penalty will take place in several stages to be
completed by the first quarter of 1997.
On January 19, 1995, EPA Region IV issued a "Notice of Violation
and Opportunity to Show Cause" against the Wurtland, Kentucky, sulphuric
acid plant for 192 alleged violations of release reporting obligations under
the Emergency Planning and Community Right to Know Act. DuPont has signed a
Consent Order settling the matter by payment of a fine of $75,000.
On January 31, 1995, DuPont received a Notice of Proposed
Assessment of Civil Penalty from the Region III office of the EPA, alleging
various violations of the Clean Water Act at DuPont's Edge Moor Plant in
Edge Moor, Delaware. The Proposed Assessment sought a Class II administra-
tive penalty of $121,000. DuPont has now signed a Consent Order under the
terms of which it has paid a civil penalty of $20,000 and has undertaken two
Supplemental Environmental Projects expected to cost a total of $260,000.
On April 12, 1995, the EPA Region V served on DuPont an Admini-
strative Complaint alleging the Company's Circleville, Ohio, plant had
failed to provide timely notice of a release of chlorine from the plant on
January 30, 1993. The complaint sought civil penalties of $125,000. DuPont
has reached agreement in principle with the EPA to settle the matter for a
cash payment of $10,000 and a Supplemental Environmental Project valued at
$27,000.
On December 5, 1995, the Kentucky Natural Resources and Environ-
mental Protection Cabinet filed an administrative complaint against DuPont
as a result of an oleum release at DuPont's Wurtland, Kentucky, facility on
August 20, 1995. The complaint alleged that the release was above statu-
torily reportable quantities, was not reported in a timely fashion, caused
an environmental emergency, and presented an imminent and substantial danger
to public health and welfare. The state seeks penalties of at least
$600,000 as well as reimbursement for response costs.
15
<PAGE>
Form 10-Q
In August 1996, the EPA and the Colorado Department of Health
(CDH) notified Conoco and the Colorado Refining Company (CRC) that they
intended to seek a penalty of $1,273,651 from the two companies in connec-
tion with faulty analytical work performed by an outside contractor as part
of certain remedial activities undertaken at Conoco's Denver refinery. On
October 7, 1996, CRC and Conoco signed a letter of intent with EPA and CDH
to resolve the matter. Under the terms of the letter, Conoco and CRC will
each pay a cash penalty of $95,000 and implement $380,000 in Supplemental
Environmental Projects. A final settlement is dependent upon agreement as
to language in the settlement agreement and approval of specific environ-
mental projects.
Item 5. OTHER INFORMATION
Chief Financial Officer and Executive Vice President Charles L.
Henry elected to retire in September 1996 and became chairman, president and
chief executive officer of Schuller Corporation. Kurt M. Landgraf, cur-
rently president and chief executive officer of DuPont Merck Pharmaceutical
Company, will assume the position of chief financial officer and senior vice
president of DuPont on December 1, 1996.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibit index filed with this Form 10-Q is on page 19.
(b) Reports on Form 8-K
1. On July 24, 1996, a Current Report on Form 8-K was filed
in connection with Debt and/or Equity Securities that may
be offered on a delayed or continuous basis under
Registration Statements on Form S-3 (No. 33-48128,
No. 33-53327, No. 33-61339 and No. 33-60069). Under
Item 7. "Financial Statements and Exhibits," the
Registrant's Earnings Press Release, dated July 24, 1996,
was filed.
2. On July 24, 1996, the company filed a Current Report on
Form 8-K in connection with Debt and/or Equity Securities
that may be offered on a delayed or continuous basis
under Registration Statements on Form S-3 (No. 33-53327,
No. 33-61339 and No. 33-60069). Under Item 5. "Other
Events," the Registrant announced the repurchase of
warrants from Seagram.
16
<PAGE>
Form 10-Q
3. On September 11, 1996, the company filed a Current Report
on Form 8-K in connection with Debt and/or Equity
Securities that may be offered on a delayed or continuous
basis under Registration Statements on Form S-3
(No. 33-53327, No. 33-61339 and No. 33-60069). Under
Item 5. "Other Events," the Registrant announced that
Goro Watanabe, executive vice president of Mitsui & Co.,
Ltd., was elected a member of its board of directors.
4. On October 23, 1996, a Current Report on Form 8-K was
filed in connection with Debt and/or Equity Securities
that may be offered on a delayed or continuous basis
under Registration Statements on Form S-3 (No. 33-53327,
No. 33-61339 and No. 33-60069). Under Item 7. "Financial
Statements and Exhibits," the Registrant's Earnings Press
Release, dated October 23, 1996, was filed.
17
<PAGE>
Form 10-Q
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
E. I. DU PONT DE NEMOURS AND COMPANY
(Registrant)
Date: November 6, 1996
-----------------------------------------
By /s/J. P. Jessup
-----------------------------------------
J. P. Jessup
Vice President - DuPont Finance
(As Duly Authorized Officer
and Acting Chief Accounting Officer)
18
<PAGE>
Form 10-Q
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
12 Computation of Ratio of Earnings to Fixed Charges.
19
<PAGE>
<TABLE>
Form 10-Q
Exhibit 12
E. I. DU PONT DE NEMOURS AND COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
<CAPTION>
Nine Months Ended Years Ended December 31
September 30, 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Net Income ........................................ $2,778 $3,293 $2,727 $ 566<Fa> $ 975<Fa> $1,403
Provision for Income Taxes ........................ 1,889 2,097 1,655 392 836 1,415
Minority Interests in Earnings of Consolidated
Subsidiaries .................................... 44 30 18 5 10 6
Adjustment for Companies Accounted for
by the Equity Method ............................ 50 41 18 41 6 35
Capitalized Interest .............................. (106) (170) (143) (194) (194) (197)
Amortization of Capitalized Interest .............. 151<Fb> 154 154 144 101 94
------ ------ ------ ------ ------ ------
4,806 5,445 4,429 954 1,734 2,756
------ ------ ------ ------ ------ ------
Fixed Charges:
Interest and Debt Expense - Borrowings .......... 547 758 559 594 643 752
Adjustment for Companies Accounted for by the
Equity Method - Interest and Debt Expense ..... 53 71 55 42 62 11
Capitalized Interest ............................ 106 170 143 194 194 197
Rental Expense Representative of Interest
Factor ........................................ 85 113 118 143 151 162
------ ------ ------ ------ ------ ------
791 1,112 875 973 1,050 1,122
------ ------ ------ ------ ------ ------
Total Adjusted Earnings Available for Payment of
Fixed Charges ................................... $5,597 $6,557 $5,304 $1,927 $2,784 $3,878
====== ====== ====== ====== ====== ======
Number of Times Fixed Charges are Earned .......... 7.1 5.9 6.1 2.0 2.7 3.5
====== ====== ====== ====== ====== ======
<FN>
<Fa>Income Before Extraordinary Item and Transition Effect of Accounting
Changes.
<Fb>Includes write-off of capitalized interest associated with divested
businesses.
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted From
Form 10-Q For The Quarterly Period Ended September 30, 1996, And Is
Qualified In Its Entirety By Reference To Such Financial Statements
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,050
<SECURITIES> 396
<RECEIVABLES> 5,180<F1>
<ALLOWANCES> 0
<INVENTORY> 3,769
<CURRENT-ASSETS> 12,115
<PP&E> 49,537
<DEPRECIATION> 28,782
<TOTAL-ASSETS> 38,761
<CURRENT-LIABILITIES> 12,318
<BONDS> 5,533
0
237
<COMMON> 347
<OTHER-SE> 9,409
<TOTAL-LIABILITY-AND-EQUITY> 38,761
<SALES> 32,403
<TOTAL-REVENUES> 33,506
<CGS> 24,065<F2>
<TOTAL-COSTS> 28,292<F3>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 547
<INCOME-PRETAX> 4,667
<INCOME-TAX> 1,889
<INCOME-CONTINUING> 2,778
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,778
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Includes Other Accounts In Addition To Notes and Accounts
Receivable-Trade.
<F2>Includes Other Expenses.
<F3>Cost of Goods Sold and Other Expenses; Depreciation, Depletion and
Amortization; Exploration Expenses, Including Dry Hole Costs and
Impairment of Unproved Properties; and Selling, General and
Administrative Expenses.
</FN>
</TABLE>
