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 June 30, 1997
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
1,130,851,004 shares (excludes 24,431,024 shares held by DuPont's
Flexitrust) of common stock, $0.30 par value, were outstanding at
July 30, 1997.
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 ............................... 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Results ........................................... 8
Industry Segment Performance ................................ 9-10
Consolidated Industry Segment Information ................... 11
Financial Condition ......................................... 12-14
Other Item .................................................. 14
Part II
Item 1. Legal Proceedings .................................... 14-16
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 Six Months Ended
CONSOLIDATED INCOME STATEMENT<Fa><Fb> June 30 June 30
- -------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES ...................................................... $11,402 $11,148 $22,613 $21,917
Other Income ............................................... 313 391 652 753
------- ------- ------- -------
Total .................................................. 11,715 11,539 23,265 22,670
------- ------- ------- -------
Cost of Goods Sold and Other Expenses ...................... 8,328 8,282 16,603 16,267
Selling, General and Administrative Expenses ............... 719 718 1,351 1,458
Depreciation, Depletion and Amortization ................... 584 605 1,188 1,258
Exploration Expenses, Including Dry Hole Costs
and Impairment of Unproved Properties .................... 101 68 192 147
Interest and Debt Expense .................................. 155 172 304 376
------- ------- ------- -------
Total .................................................. 9,887 9,845 19,638 19,506
------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES ............................... 1,828 1,694 3,627 3,164
Provision for Income Taxes ................................. 688 693 1,467 1,284
------- ------- ------- -------
NET INCOME ................................................. $ 1,140 $ 1,001 $ 2,160 $ 1,880
======= ======= ======= =======
EARNINGS PER SHARE OF COMMON STOCK<Fc> ..................... $ 1.01 $ .89 $ 1.91 $ 1.68
======= ======= ======= =======
DIVIDENDS PER SHARE OF COMMON STOCK ........................ $ .315 $ .285 $ 0.60 $ .545
======= ======= ======= =======
See Notes to Financial Statements.
</TABLE>
3
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<TABLE>
Form 10-Q
<CAPTION>
Six Months Ended
CONSOLIDATED STATEMENT OF CASH FLOWS<Fa> June 30
- ---------------------------------------------------------------------------------------------
(Dollars in millions) 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY OPERATIONS
Net Income ...................................................... $ 2,160 $ 1,880
Adjustments to Reconcile Net Income to Cash
Provided by Operations:
Depreciation, Depletion and Amortization .................... 1,188 1,258
Dry Hole Costs and Impairment of Unproved Properties ........ 67 46
Other Noncash Charges and Credits - Net ..................... 68 (436)
Change in Operating Assets and Liabilities - Net ............ (1,308) (392)
------- -------
Cash Provided by Operations ............................... 2,175 2,356
------- -------
INVESTMENT ACTIVITIES
Purchases of Property, Plant and Equipment ...................... (2,471) (1,442)
Investment in Affiliates ........................................ (306) (159)
Payments for Businesses Acquired ................................ (41) (11)
Proceeds from Sales of Assets ................................... 185 1,158
Investments in Short-Term Financial Instruments - Net ........... (302) (191)
Miscellaneous - Net ............................................. 72 (21)
------- -------
Cash Used for Investment Activities ....................... (2,863) (666)
------- -------
FINANCING ACTIVITIES
Dividends Paid to Stockholders .................................. (683) (615)
Net Increase (Decrease) in Borrowings ........................... 2,204 (1,074)
Purchase of Treasury Stock ...................................... (181) -
Proceeds from Exercise of Stock Options ......................... 86 205
Changes to Minority Interests ................................... (52) 363
------- -------
Cash Provided by (Used for) Financing Activities .......... 1,374 (1,121)
------- -------
Effect of Exchange Rate Changes on Cash ........................... (115) (50)
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS ............................. $ 571 $ 519
======= =======
See Notes to Financial Statements.
</TABLE>
4
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Form 10-Q
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET<Fa><Fb> June 30 December 31
- -------------------------------------------------------------------------------------------------------------------
(Dollars in millions, except per share) 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents ........................................................ $ 1,637 $ 1,066
Marketable Securities ............................................................ 557 253
Accounts and Notes Receivable .................................................... 6,082 5,193
Inventories<Fd> .................................................................. 3,967 3,706
Prepaid Expenses ................................................................. 420 297
Deferred Income Taxes ............................................................ 580 588
------- -------
Total Current Assets ........................................................... 13,243 11,103
PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation, depletion and
amortization (June 30, 1997 - $29,880; December 31, 1996 - $29,336) .............. 22,083 21,213
INVESTMENT IN AFFILIATES ........................................................... 2,578 2,278
OTHER ASSETS ....................................................................... 3,505 3,393
------- -------
TOTAL .......................................................................... $41,409 $37,987
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable ................................................................. $ 2,566 $ 2,757
Short-Term Borrowings and Capital Lease Obligations .............................. 6,430 3,910
Income Taxes ..................................................................... 559 526
Other Accrued Liabilities ........................................................ 3,618 3,794
------- -------
Total Current Liabilities ...................................................... 13,173 10,987
LONG-TERM BORROWINGS AND CAPITAL LEASE OBLIGATIONS ................................. 4,767 5,087
OTHER LIABILITIES .................................................................. 8,453 8,451
DEFERRED INCOME TAXES .............................................................. 2,332 2,133
------- -------
Total Liabilities .............................................................. 28,725 26,658
------- -------
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES .................................... 606 620
------- -------
STOCKHOLDERS' EQUITY
Preferred Stock .................................................................. 237 237
Common Stock, $.30 par value; 1,800,000,000 shares authorized; shares issued
at June 30, 1997 - 1,155,282,028; December 31, 1996 - 1,158,085,450 ............. 347 347
Additional Paid-In Capital ....................................................... 6,957 6,676
Reinvested Earnings .............................................................. 6,247 4,931
Cumulative Translation Adjustments ............................................... (142) (23)
Common Stock Held in Trust for Unearned Employee Compensation and Benefits,
at Market (Shares: June 30, 1997 - 24,936,831; December 31,
1996 - 30,991,590) ............................................................. (1,568) (1,459)
------- -------
Total Stockholders' Equity ..................................................... 12,078 10,709
------- -------
TOTAL .......................................................................... $41,409 $37,987
======= =======
See Notes to Financial Statements.
</TABLE>
5
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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. Certain reclassifications of 1996 data have been made
to conform to 1997 classifications.
A review of the company's stated accounting policies for derivatives and
other financial instruments was made in light of new Security and
Exchange Commission disclosure rules in this area. In addition to the
related disclosures set forth in the company's Annual Report on
Form 10-K for the year ended December 31, 1996, the company's policy on
termination of hedges is as follows:
In the event that a derivative designated as a hedge of a
firm commitment or anticipated transaction is terminated
prior to the maturation of the hedged transaction, gains or
losses realized at termination are deferred and included in
the measurement of the hedged transaction. If a hedged
transaction matures, or is sold, extinguished or terminated
prior to the maturity of a derivative designated as a hedge
of such transaction, gains or losses associated with the
derivative through the date the transaction matured are
included in the measurement of the hedged transaction and
the derivative is reclassified as for trading purposes.
Derivatives designated as a hedge of an anticipated trans-
action are reclassified as for trading purposes if the
anticipated transaction is no longer likely to occur.
In June 1997, DuPont formed alliances with Computer Science Corporation
(CSC) and Andersen Consulting. CSC will operate a majority of DuPont's
global information systems and technology infrastructure and will
provide selected applications and software services. Andersen
Consulting will provide chemical business solutions designed to enhance
DuPont's manufacturing, marketing, distribution and customer service.
The total dollar value of the contracts is in excess of $4,000 over 10
years. Minimum payments due under the contracts are: $195, $336, $275,
$221, and $182 for the years 1997, 1998, 1999, 2000 and 2001,
respectively, and a total of $885 thereafter.
<Fb>All per share data and common stock information reflect the 2-for-1
common stock split that became effective May 15, 1997.
6
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Form 10-Q
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(Continued)
[FN]
<Fc>Earnings per share are calculated on the basis of the following average
number of common shares outstanding:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1997 1,129,508,955 1,129,531,826
1996 1,121,092,814 1,118,257,590
The 24,936,831 shares held by the Flexitrust at June 30, 1997, are not
considered outstanding in computing the foregoing average shares out-
standing. 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. The
effect of the Financial Accounting Standards Board, "Statement of
Financial Accounting Standards No. 128, Earnings Per Share," is
discussed on page 8.
<Fd>Inventories June 30 December 31
----------- 1997 1996
------- -----------
Chemicals ........................... $ 307 $ 281
Fibers .............................. 681 692
Polymers ............................ 693 620
Petroleum ........................... 1,427 1,270
Life Sciences ....................... 557 561
Diversified Businesses .............. 302 282
------ ------
Total ............................. $3,967 $3,706
====== ======
7
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Form 10-Q
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(a) Results of Operations
(1) Financial Results:
The company reported net income of $1.1 billion for the
second quarter 1997, the highest for any quarter in DuPont's
history. Ten percent volume growth in Chemicals and Specialties
businesses and continued strong Petroleum results increased
earnings 14 percent from last year. Net income for the first six
months of 1997 was $2.2 billion, or $1.91 per share, compared to
$1.9 billion, or $1.68 per share, in the same period last year.
Earnings per share were $1.01, also a record, compared
to $.89 earned in 1996. Per share data reflect the 2-for-1
stock split that became effective May 15, 1997. Excluding a net
nonrecurring charge of $.03 per share in the second quarter
1996, net income and earnings per share are both up 10 percent.
The second quarter's results reflect record earnings from the
Fibers and Polymers segments combined with continued strong
performance by Petroleum, particularly in downstream operations.
In addition, the agricultural products business had a strong
quarter, and was a key contributor to sales volume growth in
Chemicals and Specialties.
In February 1997, the Financial Accounting Standards Board
issued "Statement of Financial Accounting Standards No. 128,
Earnings Per Share." This Standard becomes effective for the
company in the fourth quarter 1997 and requires two presentations
of earnings per share -- "basic" and "diluted." Had this Standard
been in effect for the second quarter 1997, earnings per share on a
pro forma basis would have been:
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1997
------------------ ----------------
Basic (same as
reported) $1.01 $1.91
Diluted $ .99 $1.88
"Diluted Earnings Per Share" is less than "Basic Earnings Per
Share," principally due to the assumed increase in the number of
average shares outstanding resulting from outstanding options where
the average market price of the company's common stock during the
three- and six-month periods ended June 30, 1997, was in excess of
related option prices.
8
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Form 10-Q
(2) Industry Segment Performance:
The following text and accompanying "Consolidated
Industry Segment Information" table compares second quarter 1997
results with second quarter 1996, for each industry segment,
excluding the earnings impact of 1996 nonrecurring items.
Sales for the second quarter totaled $11.4 billion,
2 percent higher than last year. Chemicals and Specialties sales
were $6.5 billion, up 6 percent, reflecting 10 percent higher
volumes partly offset by 4 percent lower average selling prices.
Lower selling prices principally reflect a 7 percent decline in
prices outside the United States, largely due to the stronger
dollar. Excluding currency effects, selling prices were 1 percent
lower. Sales volumes grew 10 percent in the United States and
11 percent in the rest of the world.
Petroleum segment sales for the quarter were $4.9 billion,
down 2 percent from last year. Crude oil prices averaged $17.78
per barrel for the period, 7 percent lower than last year. World-
wide gas prices increased 3 percent to $2.10 per thousand cubic
feet while U.S. natural gas prices were essentially flat averaging
$1.72 per thousand cubic feet. Crude oil production decreased
5 percent while natural gas deliveries were down 2 percent.
First half sales totaled $22.6 billion, up 3 percent.
o Chemicals segment earnings were $137 million, down
17 percent from last year principally reflecting lower
white pigments earnings. Segment sales increased
3 percent as 10 percent higher sales volume was partly
offset by 7 percent lower selling prices, primarily due to
lower selling prices for white pigments.
o Fibers segment earnings of $245 million were up 18 percent
from $208 million last year, principally reflecting
increased earnings for "Lycra" brand spandex, "Dacron"
polyester and nonwovens. Segment sales were 7 percent
higher, reflecting 10 percent higher volume partly offset
by 3 percent lower prices.
o Polymers segment earnings were $259 million, up 6 percent
from $244 million in 1996. Improved results principally
reflect higher earnings from packaging and industrial
polymers, the DuPont Dow Elastomers joint venture and
automotive products. Segment sales were up 4 percent,
reflecting 7 percent higher volumes partly offset by
3 percent lower prices.
9
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Form 10-Q
o Petroleum segment earnings of $246 million, a second
quarter record, were up 13 percent from $218 million in
1996. Upstream earnings were $158 million, down
10 percent, largely reflecting lower crude oil prices and
higher exploration costs, partly offset by higher gas
production outside the United States and lower taxes.
Downstream earnings were $88 million, up 105 percent,
reflecting higher worldwide refined product margins. U.S.
downstream accounted for most of the improvement, while
outside the United States, results were affected by two
months of scheduled maintenance turnaround at the Humber
refinery in the United Kingdom.
o Life Sciences segment earnings were $244 million, slightly
lower than the $249 million earned in 1996. Excluding the
higher allocation of operating income to DuPont in 1996
from the DuPont Merck joint venture, earnings from
agricultural products and pharmaceutical operations were
up about 20 percent. Agricultural products sales were up
18 percent, reflecting 19 percent higher volume and
1 percent lower prices.
o Diversified Businesses segment earnings totaled
$84 million, up $33 million or 65 percent. Earnings
reflect smaller losses from printing and publishing and
the absence of losses from medical products businesses
divested in 1996, partly offset by lower earnings from
films. After adjusting for divestiture of medical
products businesses, segment sales were flat as 9 percent
higher volume was offset by 9 percent lower selling
prices. The decline in selling prices reflects the effect
of a stronger dollar as well as lower prices in polyester
films and printing and publishing.
10
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<TABLE>
Form 10-Q
E. I. DU PONT DE NEMOURS AND COMPANY AND CONSOLIDATED SUBSIDIARIES
<CAPTION>
Three Months Ended Six Months Ended
CONSOLIDATED INDUSTRY SEGMENT INFORMATION June 30 June 30
- -------------------------------------------------------------------------------------------------------------
(Dollars in millions) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES
- -----
Chemicals ...................................... $ 1,113 $ 1,081 $ 2,119 $ 2,075
Fibers ......................................... 1,950 1,822 3,863 3,566
Polymers ....................................... 1,788 1,714 3,418 3,498
Petroleum ...................................... 4,861 4,963 10,221 9,620
Life Sciences .................................. 958 811 1,583 1,478
Diversified Businesses ......................... 732 757 1,409 1,680
------- ------- ------- -------
Total ...................................... $11,402 $11,148 $22,613 $21,917
======= ======= ======= =======
AFTER-TAX OPERATING INCOME
- --------------------------
Chemicals ...................................... $ 137 $ 165 $ 280 $ 287<Fa>
Fibers ......................................... 245 208 478 355<Fa>
Polymers ....................................... 259 299<Fb> 467 497<Fb>
Petroleum ...................................... 246 177<Fc> 577 391<Fc>
Life Sciences .................................. 244 186<Fd> 385 409<Fd>
Diversified Businesses ......................... 84 66<Fe> 140 159<Fe><Ff>
------- ------- ------- -------
Total ...................................... 1,215 1,101 2,327 2,098
Interest and Other Corporate
Expenses Net of Tax .......................... (75) (100) (167) (218)
------- ------- ------- -------
NET INCOME ..................................... $ 1,140 $ 1,001 $ 2,160 $ 1,880
- ---------- ======= ======= ======= =======
<FN>
<Fa> The Chemicals and Fibers segments include a charge of $21 and $32,
respectively, principally for employee separation costs in the United
States.
<Fb> Includes a gain of $55 associated with the formation of the DuPont Dow
Elastomers joint venture.
<Fc> Includes charges of $63 for write-down 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.
<Fd> Includes a charge of $63 associated with "Benlate" 50 DF fungicide
recall.
<Fe> Includes a gain of $41 from the sale of certain medical products
businesses and a charge of $26, principally, employee separation costs
outside the United States, associated with the printing and publishing
business.
<Ff> Includes a gain of $33 related to sale of stock received in connection
with the previously sold connector systems business.
</TABLE>
11
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Form 10-Q
(b) Financial Condition at June 30, 1997
DuPont recorded a net cash inflow from operations of $2.2 billion
for the first half of 1997, as compared with $2.4 billion for the same
period in 1996. Other noncash charges and credits in 1996 of $436 million
were principally due to higher undistributed earnings from affiliates,
primarily The DuPont Merck Pharmaceutical Company, and higher gains on sales
of assets versus 1997. Investment in net operating assets and liabilities
increased $1.3 billion in the first half of 1997, as compared to a
$0.4 billion increase for the same period in 1996. The $0.9 billion
increase in 1997 versus 1996 is due to several factors including greater
investment in inventories, higher forward exchange contract receivable
balances associated with the company's foreign currency coverage program and
certain accruals required in 1996 for litigation and business restructuring.
Year-to-date capital expenditures (purchases of property, plant and
equipment and investment in affiliates) were $2.8 billion, up $1.2 billion
from the same period last year. The $1.0 billion increase in purchases of
property, plant and equipment reflects $0.9 billion for the purchase of gas
producing properties in South Texas, as well as increased spending in
Chemical and Specialty businesses in support of global growth initiatives.
The outlook for capital expenditures for the year 1997, excluding potential
payments for businesses acquired, is $5.1 billion (includes $0.9 billion for
the South Texas properties), up $1.4 billion from 1996.
In May 1997, DuPont acquired one hundred percent of the capital
stock of Pfister Hybrid Corn Company (Pfister) in exchange for 509,778
shares of DuPont Common Stock. The transaction was completed directly
between DuPont and Pfister, and the shares were issued to the Pfister
shareholders. The DuPont shares were exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended. A Notice of Sale of
Securities on Form D was filed with the Securities and Exchange Commission
and the Illinois Secretary of State. The transaction, with a value of
approximately $27 million, was accounted for under the purchase method of
accounting.
In July 1997, DuPont announced its agreement with ICI to acquire,
subject to regulatory approvals, ICI's white pigment business outside North
America, its worldwide polyester films, resins and intermediates businesses
and all related technologies for about $3 billion. The current expectation
is that 1997 will include a payment of approximately $1.4 billion for
certain of these businesses in the fourth quarter.
In July 1997, Genstar Capital LLC purchased DuPont's NEN Life
Science Products division for about $118 million. This transaction will not
have a material impact on the company's net income.
In July 1997, DuPont signed letters of intent to sell its worldwide
hydrogen peroxide business to Degussa and acquire Degussa's 1,3 propanediol
(PDO) technology for polyester manufacture. Subject to final agreements and
government approvals, closing is expected in the fourth quarter. The
12
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Form 10-Q
planned hydrogen peroxide sale includes manufacturing facilities in Memphis,
Tennessee; Maitland, Ontario; and Gibbons, Alberta. Subject to joint
venture partners' approval, DuPont's share of joint ventures in Indonesia
and New Zealand is also included.
DuPont and the Agfa-Gevaert Group, which is part of the Bayer
Group, signed a letter of intent in May 1997 to negotiate the acquisition of
DuPont's graphics films and offset printing plates businesses by Agfa. On
August 1, 1997, DuPont and Agfa announced that they signed an agreement for
this transaction, which is anticipated to take place in January 1998.
DuPont will continue to operate its core photopolymer proofing and "Cyrel"
flexographic plates businesses. DuPont's 1996 sales in graphics films,
offset printing plates, and associated chemicals and equipment totaled
nearly $600 million. The transaction is subject to final agreement by
DuPont and Agfa and regulatory agencies in the United States and Europe.
While specific information is not available at this time, DuPont expects to
record a nonrecurring charge against earnings in connection with the
proposed transaction.
In February 1997, the company announced a program to purchase
shares of DuPont common stock on the open market to offset any ownership
dilution due to shares issued under compensation programs. During the first
half of 1997, the company spent $181 million to purchase shares under this
program; immediately after purchase, these shares were retired. Share
purchases are planned for the second half of the year in accordance with the
program.
Borrowings at June 30, 1997, totaled $11.1 billion and were
$2.2 billion above year-end 1996, reflecting increases in commercial paper
issued. The additional funds were used, in part, for the South Texas gas
producing properties acquisition and contributed to the $0.9 billion
increase in cash and cash equivalents and marketable securities.
In June 1997, Petrozuata C.A., a joint venture between Conoco and
Maraven S.A., a wholly owned subsidiary of Venezuela's national petroleum
company, sold $1.0 billion in bonds. The venture was formed for what will
ultimately be a $2.4 billion project to produce extra-heavy crude oil that
will be upgraded to synthetic crude. Total debt financing for the venture
will be $1.45 billion. DuPont has executed a guarantee to Petrozuata of
Conoco Inc.'s obligations to complete the project or repay its pro rata
share of the project's debt if the project is not completed.
Certain ratios are shown below:
At 6/30/97 At 12/31/96
---------- -----------
Cash Flow to Debt (previous
12 months cash provided by
operations to total debt) 55% 71%
Current Ratio (current assets to
current liabilities) 1.0 1.0
Earnings to Fixed Charges 8.2 6.8
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Form 10-Q
The Cash Flow to Debt ratio was down in the first half 1997 versus
year-end primarily due to the $2.2 billion increase in borrowings in the
first half. Days' sales outstanding averaged 32 days in the second quarter,
down 1 day from the first quarter, and down 2 days from the second quarter
of 1996.
(c) Other Item
On July 30, Charles O. Holliday, Jr., a DuPont executive vice
president and chairman - DuPont Asia Pacific, was elected a member of the
board of directors of E. I. du Pont de Nemours and Company. Concurrent with
Holliday's election, the number of DuPont directors was increased from 13 to
14. Holliday becomes the third employee member of the board, joining
President and Chief Executive Officer John A. Krol and Executive Vice
President Archie W. Dunham.
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 damage. 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. Approximately 70
lawsuits are pending against the company; the rest having been disposed of
by trial, dismissal or settlement. The remaining docket of "Benlate" 50 DF
cases includes alleged personal injury cases, alleged crop damage cases, and
cases alleging discovery abuse and fraud. Among the remaining personal
injury cases is the pending appeal of a June 1996 verdict of $3,980,000
against DuPont. Four personal injury cases filed in West Virginia in
December 1996 remain pending. Two personal injury cases have been filed
recently in Delaware state court. The same plaintiffs' attorney who filed
these Delaware cases has indicated that he intends to file additional
personal injury cases. DuPont won two jury trials in crop cases tried in
June and July of 1997 in Florida. One appeal from an adverse jury verdict
in a crop case is still pending. In 1997, three putative "Benlate" 50 DF
class actions alleging crop damage and asserting fraud claims were filed:
one in Florida state court on behalf of growers of ornamental plants in
Florida; another in Hawaii state court on behalf of Hawaii growers; and a
third in Alabama state court seeking a nationwide class. All three have
since been removed to federal court, although motions to remand the cases to
the state courts have been filed or are expected to be filed in each case.
14
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Form 10-Q
The Alabama case has received conditional class certification. The United
States Court of Appeals for the Eleventh Circuit has reversed and remanded a
sanctions order by a federal district court in Georgia which had found that
DuPont had engaged in discovery abuse during the first "Benlate" 50 DF crop
case to go to trial. The Eleventh Circuit ordered that a different judge
shall preside over the matter on remand. DuPont has filed a petition for
writ of certiorari in the United States Supreme Court, which remains pend-
ing, seeking review of certain aspects of the Eleventh Circuit's decision.
A shareholder derivative action filed in the same Georgia federal district
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 sanctions order mentioned above. A
securities fraud class action filed in September 1995 by a shareholder in
federal district court in Florida against the company and the Chairman is
also still pending. The plaintiff in this case alleges that DuPont made
false and misleading statements and omissions about "Benlate" 50 DF, with
the alleged effect of inflating the price of DuPont's stock between June 19,
1993, and January 27, 1995. The district court has certified the case as a
class action and has denied a motion to dismiss filed by DuPont. Discovery
is proceeding. Certain plaintiffs who have previously settled with the
company have filed cases alleging fraud and other misconduct relating to the
litigation and settlement of "Benlate" 50 DF claims. One such lawsuit was
filed in federal district court in Georgia by five growers alleging fraud
(including civil racketeering claims) based generally on the assertion that
at the time of their settlements with DuPont, these plaintiffs were unaware
of alleged discovery abuse by DuPont. Five cases based on similar allega-
tions were filed in Hawaii: three in Hawaii state courts; two in Hawaii
federal court (one of which has since been transferred to federal court in
Georgia). In the one such federal case remaining in Hawaii, the district
court recently granted DuPont's motion for judgment on the pleadings,
holding that the release plaintiffs executed when they originally settled
barred their attempt to seek additional money from DuPont. In the two cases
pending in federal court in Georgia, the Court granted DuPont's motions to
dismiss on similar grounds finding the settlement release to bar such
claims. DuPont continues to believe that "Benlate" 50 DF fungicide did not
cause the damages alleged in these cases and intends to defend against such
allegations in ongoing matters.
The company's balance sheets reflect accruals for estimated costs
associated with this matter. Adverse changes in estimates of such costs
could result in additional future charges.
On May 30, 1995, DuPont received a complaint from the Environmental
Protection Agency (EPA) alleging that in 24 instances between 1990 and 1991,
DuPont distributed or sold certain benomyl fungicide products in violation
of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA). The EPA
proposed a civil penalty of $120,000. EPA's allegations are based on the
contention that an analysis by EPA in 1994 indicated that an impurity, which
15
<PAGE>
Form 10-Q
is part of DuPont's statement of formula, had slightly exceeded an upper
certified limit established by the EPA. On January 6, 1997, the Adminis-
trative Law Judge issued an Order ruling in DuPont's favor. Appeal was not
pursued by the EPA. This matter is closed.
On July 26, 1995, the Region V office of the EPA filed an Adminis-
trative Complaint/Assessment of Penalty against DuPont's East Chicago plant
alleging nineteen recordkeeping and reporting violations of sections 311 and
312 of the Emergency Planning and Community Right to Know Act (EPCRA)
between 1987 and 1991. The complaint sought penalties of $262,260 for
alleged failures to file or for the filing of incomplete Tier II Chemical
Inventory forms. On May 1, 1997, DuPont and the EPA entered a Consent
Agreement and Consent Order to settle this matter. DuPont agreed to pay a
penalty of $57,141 and to provide a Supplemental Environmental Project
valued at $190,834. The project consists of training and supplying equip-
ment to local emergency response agencies. This matter is closed.
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 April 23, 1997, 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 April 23, 1997, was filed.
2. On June 13, 1997, 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 5. "Other
Events," the Registrant filed its Restated Charter, as
last amended May 29, 1997.
3. On July 16, 1997, 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 7. "Financial
Statements and Exhibits," the Registrant's Press Release
dated July 13, 1997, was filed announcing agreement to
16
<PAGE>
Form 10-Q
acquire ICI's white pigment business outside North
America, its worldwide polyester films, resins and
intermediates businesses and all related technologies.
4. On July 23, 1997, 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 July 23, 1997, 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: August 1, 1997
-----------------------------------------
By /s/K. M. Landgraf
-----------------------------------------
K. M. Landgraf
Senior Vice President - DuPont Finance
(As Duly Authorized Officer and Principal
Financial and 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>
Years Ended December 31
Six Months Ended -------------------------------------------------
June 30, 1997 1996 1995 1994 1993 1992
---------------- --------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Income ......................................... $2,160 $3,636 $3,293 $2,727 $ 566<Fa> $ 975<Fa>
Provision for Income Taxes ......................... 1,467 2,345 2,097 1,655 392 836
Minority Interests in Earnings of Consolidated
Subsidiaries ..................................... 39 59 30 18 5 10
Adjustment for Companies Accounted for
by the Equity Method ............................. 24 81 41 18 41 6
Capitalized Interest ............................... (82) (144) (170) (143) (194) (194)
Amortization of Capitalized Interest ............... 65<Fb> 191<Fb> 154 154 144 101
------ ------ ------ ------ ------ ------
3,673 6,168 5,445 4,429 954 1,734
------ ------ ------ ------ ------ ------
Fixed Charges:
Interest and Debt Expense ........................ 314 729 758 559 594 643
Adjustment for Companies Accounted for by the
Equity Method - Interest and Debt Expense ...... 52 70 71 55 42 62
Capitalized Interest ............................. 82 144 170 143 194 194
Rental Expense Representative of Interest
Factor ......................................... 59 118 113 118 143 151
------ ------ ------ ------ ------ ------
507 1,061 1,112 875 973 1,050
------ ------ ------ ------ ------ ------
Total Adjusted Earnings Available for Payment of
Fixed Charges .................................... $4,180 $7,229 $6,557 $5,304 $1,927 $2,784
====== ====== ====== ====== ====== ======
Number of Times Fixed Charges are Earned ........... 8.2 6.8 5.9 6.1 2.0 2.7
====== ====== ====== ====== ====== ======
<FN>
<Fa>Income Before Extraordinary Item and Transition Effect of Accounting
Changes.
<Fb>Includes write-off of capitalized interest associated with divested
businesses.
</TABLE>
20
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted From
Form 10-Q For The Quarterly Period Ended June 30, 1997, And Is
Qualified In its Entirety By Reference To Such Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<CURRENCY> US$
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> [BLANK]
<CASH> 1,637
<SECURITIES> 557
<RECEIVABLES> 6,082<F1>
<ALLOWANCES> 0
<INVENTORY> 3,967
<CURRENT-ASSETS> 13,243
<PP&E> 51,963
<DEPRECIATION> 29,880
<TOTAL-ASSETS> 41,409
<CURRENT-LIABILITIES> 13,173
<BONDS> 4,767
0
237
<COMMON> 347
<OTHER-SE> 11,494
<TOTAL-LIABILITY-AND-EQUITY> 41,409
<SALES> 22,613
<TOTAL-REVENUES> 23,265
<CGS> 16,603<F2>
<TOTAL-COSTS> 19,334<F3>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 304
<INCOME-PRETAX> 3,627
<INCOME-TAX> 1,467
<INCOME-CONTINUING> 2,160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,160
<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>
