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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 March 31, 2002
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 |
993,193,766 shares (excludes 87,041,427 shares of treasury stock) of common stock, $0.30 par value, were outstanding at April 30, 2002.
1
Form 10-Q |
E. I. DU PONT DE NEMOURS AND COMPANY
Table of Contents
Page(s) |
|
Part I Financial Information |
|
Item 1. Financial Statements |
|
Consolidated Income Statement |
3 |
Consolidated Statement of Cash Flows |
4 |
Consolidated Balance Sheet |
5 |
Notes to Financial Statements |
6-13 |
Item 2. Management's Discussion and Analysis of Financial |
|
Condition and Results of Operations |
|
Forward-Looking Statements |
14-15 |
Results of Operations: |
|
Financial Results |
15-16 |
Segment Performance |
16-17 |
Outlook |
17 |
Liquidity & Capital Resources |
18-19 |
Other Items: |
|
Textiles & Interiors to Take Actions to Increase Competitiveness |
19 |
Pioneer Intellectual Property Disputes |
19-20 |
Acquisition of Liqui-Box Corporation |
20 |
Part II Other Information |
|
Item 1. Legal Proceedings |
20-21 |
Item 4. Submission of Matters to a Vote of Security Holders |
21-22 |
Item 6. Exhibits and Reports on Form 8-K |
22-23 |
Signature |
24 |
Exhibit Index |
25-26 |
2
Form 10-Q |
Part I. Financial Information
Item 1. FINANCIAL STATEMENTS
E. I. DU PONT DE NEMOURS AND COMPANY AND CONSOLIDATED SUBSIDIARIES
Three Months Ended |
|||
CONSOLIDATED INCOME STATEMENT(a) |
March 31 |
||
(Dollars in millions, except per share) |
2002 |
2001 |
|
SALES(b) |
$6,142 |
$6,859 |
|
Other Income(c) |
57 |
170 |
|
Total |
6,199 |
7,029 |
|
|
|||
Cost of Goods Sold and Other Operating Charges(d) |
3,984 |
4,486 |
|
Selling, General and Administrative Expenses |
645 |
757 |
|
Depreciation |
305 |
327 |
|
Amortization of Goodwill and Other Intangible Assets(e) |
51 |
112 |
|
Research and Development Expense |
287 |
410 |
|
Interest Expense |
90 |
178 |
|
Employee Separation Costs and Write-Down of Assets(f) |
9 |
- |
|
Total |
5,371 |
6,270 |
|
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS |
828 |
759 |
|
Provision for Income Taxes |
328 |
272 |
|
Minority Interests in Earnings of Consolidated Subsidiaries |
21 |
3 |
|
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE |
479 |
484 |
|
Cumulative Effect of a Change in Accounting Principle, Net of Income Taxes(g) |
- |
|
11 |
NET INCOME |
$ 479 |
$ 495 |
|
BASIC EARNINGS PER SHARE OF COMMON STOCK(h) |
|||
Income before Cumulative Effect of a Change in Accounting Principle |
$ .48 |
$ .46 |
|
Cumulative Effect of a Change in Accounting Principle |
- |
.01 |
|
Net Income |
$ .48 |
$ .47 |
|
DILUTED EARNINGS PER SHARE OF COMMON STOCK(h) |
|||
Income before Cumulative Effect of a Change in Accounting Principle |
$ .48 |
$ .46 |
|
Cumulative Effect of a Change in Accounting Principle |
- |
.01 |
|
Net Income |
$ .48 |
$ .47 |
|
DIVIDENDS PER SHARE OF COMMON STOCK |
$ .35 |
$ .35 |
See Notes to Financial Statements.
3
Form 10-Q |
Three Months Ended |
||
CONSOLIDATED STATEMENT OF CASH FLOWS(a) |
March 31 |
|
(Dollars in millions) |
2002 |
2001 |
|
||
CASH PROVIDED BY (USED FOR) OPERATIONS: |
||
Net Income |
$ 479 |
$ 495 |
Adjustments to Reconcile Net Income to Cash Provided by (Used for) Operations: |
||
Cumulative Effect of a Change in Accounting Principle, Net of Tax(g) |
- |
(11) |
Depreciation |
305 |
327 |
Amortization of Goodwill and Other Intangible Assets(e) |
51 |
112 |
Other Noncash Charges and Credits - Net |
215 |
138 |
Change in Operating Assets and Liabilities - Net |
(2,120) |
(1,583) |
Cash Used for Operations |
(1,070) |
(522) |
INVESTMENT ACTIVITIES: |
||
Purchases of Property, Plant and Equipment |
(253) |
(316) |
Investment in Affiliates |
(20) |
(7) |
Payments for Businesses Acquired (Net of Cash Acquired) |
(17) |
(22) |
Proceeds from Sales of Assets |
9 |
6 |
Net Cash Flows Related to Sale of DuPont Pharmaceuticals |
(33) |
- |
Net (Increase) Decrease in Short-Term Financial Instruments |
(230) |
61 |
Miscellaneous - Net |
- |
8 |
Cash Used for Investment Activities |
(544) |
(270) |
FINANCING ACTIVITIES: |
||
Dividends Paid to Stockholders |
(351) |
(368) |
Net (Decrease) Increase in Borrowings |
(69) |
1,030 |
Acquisition of Treasury Stock |
(470) |
(50) |
Proceeds from Exercise of Stock Options |
24 |
79 |
Minority Interests |
(5) |
- |
Cash (Used for) Provided by Financing Activities |
(871) |
691 |
Effect of Exchange Rate Changes on Cash |
(33) |
(94) |
DECREASE IN CASH AND CASH EQUIVALENTS |
$(2,518) |
$ (195) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
5,763 |
1,540 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ 3,245 |
$ 1,345 |
See Notes to Financial Statements.
4
Form 10-Q |
CONSOLIDATED BALANCE SHEET(a) |
March 31 |
December 31 |
(Dollars in millions, except per share) |
2002 |
2001 |
ASSETS |
||
CURRENT ASSETS |
||
Cash and Cash Equivalents |
$ 3,245 |
$ 5,763 |
Marketable Debt Securities |
316 |
85 |
Accounts and Notes Receivable |
4,862 |
3,903 |
Inventories(i) |
4,052 |
4,215 |
Prepaid Expenses |
236 |
217 |
Deferred Income Taxes |
540 |
618 |
Total Current Assets |
13,251 |
14,801 |
PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation |
||
(March 31, 2002 - $20,718; December 31, 2001 - $20,491) |
13,192 |
13,287 |
GOODWILL(e) |
3,805 |
3,746 |
OTHER INTANGIBLE ASSETS(e) |
3,009 |
3,151 |
INVESTMENT IN AFFILIATES |
2,013 |
2,045 |
OTHER ASSETS |
3,391 |
3,289 |
TOTAL |
$38,661 |
$40,319 |
|
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||
CURRENT LIABILITIES |
||
Accounts Payable |
$ 2,172 |
$ 2,219 |
Short-Term Borrowings and Capital Lease Obligations |
1,622 |
1,464 |
Income Taxes |
280 |
1,295 |
Other Accrued Liabilities |
2,797 |
3,089 |
Total Current Liabilities |
6,871 |
8,067 |
LONG-TERM BORROWINGS AND CAPITAL LEASE OBLIGATIONS |
5,144 |
5,350 |
OTHER LIABILITIES |
7,314 |
7,336 |
DEFERRED INCOME TAXES |
2,745 |
2,690 |
Total Liabilities |
22,074 |
23,443 |
MINORITY INTERESTS |
2,391 |
2,424 |
COMMITMENTS AND CONTINGENT LIABILITIES(j) |
||
STOCKHOLDERS' EQUITY(k) |
||
Preferred Stock |
237 |
237 |
Common Stock, $.30 par value; 1,800,000,000 shares authorized; |
||
Issued at March 31, 2002 - 1,080,174,547; |
||
December 31, 2001 - 1,088,994,789 |
324 |
327 |
Additional Paid-In Capital |
7,350 |
7,371 |
Reinvested Earnings |
13,252 |
13,517 |
Accumulated Other Comprehensive Loss |
(240) |
(273) |
Common Stock Held in Treasury, at Cost (Shares: March 31, 2002 |
||
and December 31, 2001 - 87,041,427) |
(6,727) |
(6,727) |
Total Stockholders' Equity |
14,196 |
14,452 |
TOTAL |
$38,661 |
$40,319 |
|
See Notes to Financial Statements.
5
Form 10-Q |
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(a) These statements are unaudited, but in the opinion of management, include all adjustments (consisting of normal
recurring adjustments) necessary to provide a fair presentation of the financial position, results of operations and cash flows for the dates and periods covered. Results for interim periods should not be considered indicative of results for a full year. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the registrant's Annual Report on Form 10-K for the year ended December 31, 2001. Certain reclassifications of prior years' data have been made to conform to current year classifications.
(b) INDUSTRY SEGMENT INFORMATION(1)
Three Months Ended |
|||
March 31 |
|||
2002 |
2001 |
||
SEGMENT SALES (2) |
|||
Agriculture & Nutrition |
$1,587 |
$1,520 |
|
Coatings & Color Technologies |
1,137 |
1,205 |
|
Electronic & Communication Technologies |
578 |
784 |
|
Performance Materials |
1,152 |
1,207 |
|
Pharmaceuticals |
- |
205 |
|
Safety & Protection |
828 |
965 |
|
Textiles & Interiors |
1,450 |
1,697 |
|
Other |
26 |
52 |
|
Total Segment Sales |
6,758 |
7,635 |
|
Elimination of Transfers |
(95) |
(146) |
|
Elimination of Equity Affiliate Sales |
(523) |
(628) |
|
Miscellaneous |
2 |
(2) |
|
CONSOLIDATED SALES |
$6,142 |
$6,859 |
|
|
|||
AFTER-TAX OPERATING INCOME (LOSS) (3) |
|||
Agriculture & Nutrition(4) |
$ 323 |
$ 172 |
|
Coatings & Color Technologies |
85 |
140 |
|
Electronic & Communication Technologies |
45 |
115 |
|
Performance Materials |
85 |
95 |
|
Pharmaceuticals |
51 |
(64) |
|
Safety & Protection |
103 |
132 |
|
Textiles & Interiors(5) |
19 |
64 |
|
Other |
(20) |
(3) |
|
Total Segment ATOI |
691 |
651 |
|
Interest & Exchange Gains and Losses(6) |
(122) |
(97) |
|
Corporate Expenses |
(78) |
(70) |
|
Corporate Minority Interest(7) |
(12) |
- |
|
Income from Operations |
479 |
484 |
|
Cumulative Effect of a Change in Accounting Principle |
- |
11 |
|
NET INCOME |
$ 479 |
$ 495 |
6
Form 10-Q |
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
Footnotes To Note (b):
(1) |
Segment data for 2001 has been reclassified to reflect the creation of Textile & Interiors and the company's realignment of its other businesses into five market- and technology-focused growth platforms. The company also retained its Pharmaceuticals segment. |
(2) |
Includes pro rata share of equity affiliate sales and transfers. Excludes sales of intermediates by DuPont to joint ventures within the Textiles & Interiors segment. |
(3) |
Effective January 1, 2002, the company adopted Statement on Financial Accounting Standards (SFAS) No. 142. See Note (e). |
(4) |
First quarter 2001 includes a charge of $83 resulting from the sale of acquired Pioneer inventories. |
(5) |
First quarter 2002 includes a charge of $29 to withdraw from a polyester joint venture in China. This charge is partly offset by a $19 gain resulting principally from a favorable litigation settlement associated with exiting a nylon joint venture in China. |
(6) |
First quarter 2002 includes an exchange loss of $63 resulting from the mandatory conversion of the company's U.S. dollar-denominated trade receivables to Argentine pesos and moving from a preferential to a free-market exchange rate. |
(7) |
Represents a rate of return to minority interest investors who made capital contributions during 2001 to consolidated subsidiaries. |
(c) First quarter 2002 includes an exchange loss of $63 resulting from the mandatory conversion of the
company's U.S. dollar-denominated trade receivables to Argentine pesos and moving from a preferential to a free-market exchange rate.
(d) First quarter 2001 includes a charge of $133 resulting from the sale of acquired Pioneer inventories
which, in accordance with purchase accounting rules, were recorded at estimated fair value on October 1, 1999.
7
Form 10-Q |
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
(e) Goodwill and Other Intangible Assets
On January 1, 2002, the company adopted SFAS No. 142, "Goodwill and Other Intangible Assets," which requires that goodwill and indefinite-lived intangible assets no longer be amortized; amortization expense of $45 (pretax) and $41 (after-tax) was recorded in the first quarter of 2001 for such assets. Segment detail related to this amount (after-tax) is shown below:
Three Months Ended |
|
March 31, 2001 |
|
|
|
Agriculture & Nutrition |
$27 |
Coatings & Color Technologies |
10 |
Electronic & Communication Technologies |
1 |
Performance Materials |
- |
Safety & Protection |
- |
Textiles & Interiors |
2 |
Pharmaceuticals |
1 |
|
|
$41 |
|
|
The following table provides a reconciliation of reported net income to adjusted net income and adjusted earnings per share amounts for the periods ended March 31, 2002 and 2001 as if the nonamortization provisions of SFAS No. 142 had been applied:
Three Months Ended |
||
March 31, |
||
|
||
2002 |
2001 |
|
|
||
Reported net income |
$479 |
$495 |
Add back: Goodwill amortization |
- |
34 |
Add back: Equity method goodwill amortization |
- |
2 |
Add back: Indefinite-lived intangible asset amortization |
- |
5 |
|
||
Adjusted net income |
$479 |
$536 |
|
||
Basic Earnings Per Share |
||
Reported net income |
$0.48 |
$0.47 |
Add back: Goodwill amortization |
- |
0.03 |
Add back: Equity method goodwill amortization |
- |
0.00 |
Add back: Indefinite-lived intangible asset amortization |
- |
0.01 |
|
||
|
$0.48 |
$0.51 |
Diluted Earnings Per Share |
||
Reported net income |
$0.48 |
$0.47 |
Add back: Goodwill amortization |
- |
0.03 |
Add back: Equity method goodwill amortization |
- |
0.00 |
Add back: Indefinite-lived intangible asset amortization |
- |
0.01 |
|
||
$0.48 |
$0.51 |
|
|
8
Form 10-Q |
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
In accordance with SFAS No. 142, the company has completed its initial impairment test of indefinite-lived intangible assets and has determined that no impairment currently exists.
Under the new standard, the company must also measure by the end of 2002 the amount, if any, of goodwill impairment. The company currently expects to complete the necessary tests and finalize the amount of any impairment charges by no later than the end of the third quarter 2002. Based on work to-date, preliminary indications are that a potential impairment exists in two reporting units, Pioneer Hi-Bred International Inc., which is in the Agricultural & Nutrition segment, and DuPont Flooring Systems Inc., which is in the Textiles & Interiors segment. The recorded goodwill in these units totaled approximately $2,900 at March 31, 2002. First quarter 2002 results will be restated to include a "Change in Accounting Principle" adjustment for any goodwill impairment charges as required by SFAS No. 142.
The gross carrying amounts and accumulated amortization in total and by major class of other intangible assets are as follows:
March 31, 2002 |
|||
|
Accumulated |
||
Gross |
Amortization |
Net |
|
|
|||
Definite-lived: |
|||
Purchased Technology |
$2,350 |
$(648) |
$1,702 |
Patents |
57 |
(26) |
31 |
Trademarks |
52 |
(8) |
44 |
Other |
189 |
(89) |
100 |
|
|||
2,648 |
(771) |
1,877 |
|
|
|||
Indefinite-lived: |
|||
Other (Principally |
|||
Pioneer Germplasm) |
1,132* |
- |
1,132 |
|
|||
1,132 |
- |
1,132 |
|
|
|||
Total Other Intangible Assets |
$3,780 |
$(771) |
$3,009 |
|
* |
Represents carrying value at adoption of SFAS No. 142. |
Other definite-lived intangible assets primarily consists of sales and grower networks, customer lists, marketing and manufacturing alliances, mineral rights and noncompetition agreements. The estimated aggregate pretax amortization expense for total definite-lived intangible assets for 2002 and each of the next five years is approximately $200, $200, $200, $195, $180 and $170.
9
Form 10-Q |
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
The changes in the carrying amount of goodwill for the quarter ended March 31, 2002 are as follows:
Balance as of January 1, 2002 |
$3,746 |
Reclassification of Assembled Workforce |
|
Intangible Assets |
55 |
Acquisitions |
4 |
|
|
Balance as of March 31, 2002 |
$3,805 |
|
(f) Employee Separation Costs and Write-Down of Assets
During the first quarter of 2002, the company recorded a net charge of $9 related to exiting joint ventures in China. Of this net charge, $39 was recorded to withdraw from a polyester joint venture due to depressed market conditions. This charge was partly offset by a $30 gain resulting principally from a favorable litigation settlement associated with the company's exit from a nylon joint venture in 1999.
During the first quarter of 2002, there were no other changes to estimates related to the company's reserves established for restructuring initiatives in prior years. A complete discussion of these restructuring activities is contained in Item 8 of the company's Annual Report on Form 10-K for the period ended December 31, 2001 at Note 6 "Employee Separation Costs and Write-Down of Assets." As of March 31,2002, approximately 4,950 employees had been terminated relating to the 2001 restructuring programs with the remaining terminations to be essentially completed by June of 2002, thereby completing this portion of the program. The tables listed below summarize the amounts settled and charged against the related liabilities during the three months ended March 31, 2002 for the 2001 and 2000 programs.
Employee |
|||
Separation |
Other |
||
2001 Activities |
Costs |
Exit Costs |
Total |
|
|||
Balance at December 31, 2001 |
$215 |
$ 71 |
$286 |
Changes to accounts: |
|||
Employee separation settlements |
(86) |
- |
(86) |
Other expenditures |
- |
(20) |
(20) |
|
|||
Balance at March 31, 2002 |
$129 |
$ 51 |
$180 |
|
|||
2000 Activities |
|||
|
|||
Balance at December 31, 2001 |
$ 7 |
$ - |
$ 7 |
Changes to accounts: |
|||
Employee separation settlements |
(5) |
- |
(5) |
|
|||
Balance at March 31, 2002 |
$ 2 |
$ - |
$ 2 |
|
10
Form 10-Q |
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
(g) On January 1, 2001, the company adopted SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended. The adoption of SFAS No. 133 resulted in a pretax cumulative-effect-type adjustment to income of $19 ($11 after-tax) during the quarter ended March 31, 2001. The company's objectives and strategies for holding derivative instruments are included within the company's Annual Report on Form 10-K for the period ended December 31, 2001.
During the quarter ended March 31, 2002, there was no hedge ineffectiveness reported in earnings, no hedge gains or losses excluded from the assessment of hedge effectiveness or reclassifications to earnings for forecasted transactions that did not occur related to cash flow hedges. The table below summarizes the effect of cash flow hedges on accumulated other comprehensive income (loss) for the period:
Accumulated Other Comprehensive |
Three Months Ended |
||
Income (Loss) |
March 31, 2002 |
||
(Cash Flow Hedge Portion Only) |
Pretax |
Tax |
After-Tax |
|
|||
Beginning balance* |
$(42) |
$ 16 |
$(26) |
Additions and revaluations of derivatives |
|||
designated as cash flow hedges |
58 |
(22) |
36 |
Less: Clearance of hedge results to earnings |
(17) |
6 |
(11) |
Ending balance |
$ 33 |
$(12) |
$ 21 |
|
|||
Portion of ending balance expected to be |
|||
reclassified into earnings over the next |
|||
twelve months |
$ 23 |
$ (9) |
$ 14 |
|
* |
Includes cumulative effect of adopting SFAS No. 133. |
(h) Basic earnings per share is computed by dividing income available to common stockholders (the
Three Months Ended |
||
March 31 |
||
|
||
|
Basic |
Diluted |
2002 |
995,776,462 |
1,001,260,784 |
2001 |
1,042,168,259 |
1,047,973,561 |
11
Form 10-Q |
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
The difference between basic and diluted weighted-average common shares outstanding generally results from the assumption that dilutive stock options outstanding were exercised. The following average stock options are antidilutive, and therefore, are not included in the diluted earnings per share calculation since the exercise price is greater than the average market price:
Three Months Ended |
||
March 31 |
||
|
||
2002 |
2001 |
|
|
||
Average Stock Options |
37,497,729 |
35,344,478 |
Compensation expense (benefit) recognized in income for stock-based employee compensation awards was not material for the three months ended March 31, 2002, and 2001.
(i) Inventories
March 31, |
December 31, |
|
2002 |
2001 |
|
|
||
Finished Products |
$2,761 |
$2,652 |
Semifinished Products |
882 |
1,185 |
Raw Materials and Supplies |
883 |
844 |
4,526 |
4,681 |
|
Less: Adjustment of Inventories to a |
||
Last-In, First-Out (LIFO) Basis |
474 |
466 |
Total |
$4,052 |
$4,215 |
|
(j) Contingencies
The company is subject to various lawsuits and claims with respect to such matters as product liabilities, governmental regulations and other actions arising out of the normal course of business. While the effect on future financial results is not subject to reasonable estimation due to uncertainty, the ultimate liabilities resulting from such lawsuits and claims may be significant to the results of operations in the period recognized but management does not anticipate they will have a material adverse effect on the company's consolidated financial position or liquidity.
BenlateÒ
Since 1991 DuPont has been served with several hundred lawsuits alleging property damage, including damage to shrimping operations from various forms of BenlateÒ
fungicide. A small number of cases allege personal injuries. Many of these cases include allegations of fraud and misconduct. The majority of these lawsuits were disposed of by trial, settlement or dismissal. However, certain plaintiffs who previously settled with the company have filed cases alleging fraud and other misconduct relating to the litigation and settlement of BenlateÒ
claims. There are approximately 110 cases pending. DuPont believes that BenlateÒ
did not cause the damages alleged in these cases and denies the allegations of fraud and misconduct. DuPont intends to defend itself in these cases.
12
Form 10-Q |
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
Pioneer Intellectual Property Disputes
Pioneer had been involved in several lawsuits, both as plaintiff and defendant, concerning intellectual property rights related to corn and soybean products. On April 2, 2002, the company reached an agreement that included the settlement of all of these outstanding lawsuits, which did not result in a material adverse effect on the company's consolidated operations, financial position or liquidity.
Environmental
The company is also subject to contingencies pursuant to environmental laws and regulations that in the future may require the company to take further action to correct the effects on the environment of prior disposal practices or releases of chemical or petroleum substances by the company or other parties. The company has accrued for certain environmental remediation activities consistent with the company's policies as set forth in Note 1 to the company's consolidated financial statements included in Item 8 of the company's Annual Report on Form 10-K for the period ended December 31, 2001. At March 31, 2002, such accrual amounted to $384 and, in management's opinion, is appropriate based on existing facts and circumstances. Under adverse changes in circumstances, potential liability may exceed amounts accrued. In the event that future remediation expenditures are in excess of amounts accrued, they may be significant to results of operations in the period recognized but managem
ent does not anticipate that they will have a material adverse effect on the company's consolidated financial position or liquidity.
Other
The company has directly guaranteed various debt obligations under agreements with certain affiliated and other companies to provide specified minimum revenues from shipments or purchases of products. At December 31, 2001, the company had directly guaranteed $953 of the obligations of certain affiliated companies and others. This amount has not changed significantly through the end of the first quarter of 2002 and no material loss is anticipated by reason of such agreements and guarantees. In addition, the company has historically guaranteed certain obligations of Conoco Inc., its subsidiary and affiliate, which totaled $960, plus interest, at December 31, 2001. As of March 31, 2002, $693 of the $960 obligation had become nonrecourse, relieving the company of this portion of the guarantee.
(k) The following sets forth the company's Total Comprehensive Income (Loss) for the periods shown:
Three Months Ended |
||
March 31 |
||
|
||
2002 |
2001 |
|
|
||
Net Income |
$479 |
$495 |
Cumulative Translation Adjustment |
(10) |
(32) |
Cumulative Effect of a Change in |
||
Accounting Principle |
- |
6 |
Net Revaluation and Clearance of |
||
Cash Flow Hedges to Earnings |
47 |
(14) |
Net Unrealized Gains (Losses) on |
||
Available for Sale Securities |
(4) |
(36) |
Total Comprehensive Income |
$512 |
$419 |
|
13
Form 10-Q |
Item 2. MANAGEMENT"S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This report contains forward-looking statements which may be identified by their use of words like "plans," "expects," "will," "anticipates," "intends," "projects," "estimates" or other words of similar meaning. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, market position, expenditures and financial results are forward-looking statements.
Forward-looking statements are based on certain assumptions and expectations of future events. The company cannot guarantee that these assumptions and expectations are accurate or will be realized. In addition to the factors discussed in this report and in Management's Discussion and Analysis in the company's latest Annual Report, the following are some of the important factors that could cause the company's actual results to differ materially from those projected in any such forward-looking statements:
14
Form 10-Q |
The foregoing list of factors is not inclusive, or necessarily in order of importance.
(a) Results of Operations
(1) Financial Results:
First quarter 2002 consolidated sales totaled $6.1 billion compared to $6.9 billion for the same period in 2001. Segment sales, including transfers and a pro rata share of sales by equity affiliates, were $6.8 billion, down 11 percent from $7.6 billion in 2001.
Segment sales and related variances for the first quarter 2002 compared with the first quarter 2001 are summarized below:
Segment Sales |
% Change Due To |
|||||
|
||||||
|
1Q'02 $B |
% Change vs. 1Q'01 |
Local Price |
Currency Effect |
Volume |
Acquisition/ Divestiture* |
|
||||||
Worldwide |
6.8 |
(11) |
(4) |
(2) |
(2) |
(3) |
U.S. |
3.4 |
(11) |
(4) |
0 |
(2) |
(5) |
Europe |
1.8 |
(14) |
(4) |
(4) |
(2) |
(4) |
Asia Pacific |
1.0 |
(12) |
(5) |
(4) |
(2) |
(1) |
Canada, Mexico, South America |
0.6 |
(10) |
(3) |
(2) |
(2) |
(3) |
* |
Includes impact of the sale of DuPont Pharmaceuticals and selected polyester businesses and withdrawal from the BenlateÒ fungicide business. |
15
Form 10-Q |
Net income including one-time items was $479 million in the first quarter of 2002, compared to $495 million in the first quarter of 2001, resulting in earnings per share of $.48 compared to $.47 last year.
Net income before one-time items was $552 million versus $567 million in 2001, resulting in earnings per share of $.55 compared to $.54 last year. Average outstanding shares decreased 4 percent. Earnings before one-time items reflect higher Agriculture & Nutrition and Pharmaceuticals segment results offset by reduced earnings across the company's other segments. Excluding Agriculture & Nutrition and Pharmaceuticals, results versus prior year principally reflect lower local selling prices, a stronger U.S. dollar and weaker volumes, partly offset by lower raw material costs. Improved Agriculture & Nutrition results reflect in part a benefit from the absence of goodwill amortization as the result of new accounting rules adopted in 2002. One-time items are described in the notes to the accompanying financial statements and are summarized in the table below:
ONE-TIME ITEMS
$MM Pretax |
$MM After-Tax |
($ Per Share) |
||||
|
||||||
2002 |
2001 |
2002 |
2001 |
2002 |
2001 |
|
Argentina - Dollar to Peso Conversion |
(63) |
(63) |
(.06) |
|||
Withdrawal from Textiles & Interiors |
(39) |
(29) |
(.03) |
|||
Polyester JV |
||||||
Litigation Settlement - Textiles & Interiors |
30 |
19 |
.02 |
|||
Nylon JV |
||||||
Adoption of SFAS 133* |
19 |
11 |
.01 |
|||
Purchase Accounting - Pioneer |
(133) |
(83) |
(.08) |
|||
|
||||||
1st Quarter - Total |
(72) |
(114) |
(73) |
(72) |
(.07) |
(.07) |
|
* |
Reflects the cumulative effect of a change in accounting principle. Effective January 1, 2001, the company adopted SFAS No. 133 - "Accounting for Derivative Instruments and Hedging Activities," as amended. |
(2) Segment Performance:
The following compares first quarter 2002 with first quarter 2001, for sales and after-tax operating income (ATOI) of each segment, excluding the earnings impact of one-time items described in the table above. Segment results include transfers and a pro rata ownership share of the sales and earnings of equity affiliates.
16
Form 10-Q |
(3) Outlook:
The company expects business conditions in the United States, and possibly in Europe, to continue to improve, bringing sequential volume increases in the second quarter to most of its businesses. The company has not changed its view that a significant period of demand growth is needed to absorb capacity before pricing strengthens in the manufacturing sector.
Therefore, the company expects sequential volume momentum and year-over-year lower raw materials costs to benefit results. These positives will likely be mitigated by a continued strong dollar and difficult price environment.
Taking all of these factors into account, the company anticipates second quarter underlying earnings per share to show double-digit improvement versus the prior year and to be about equal to first quarter 2002 underlying earnings per share of $0.55.
17
Form 10-Q |
(b) Liquidity & Capital Resources
From December 31, 2001 to March 31, 2002, the company's consolidated net debt (borrowings and capital lease obligations less cash and cash equivalents and marketable debt securities) increased $2.2 billion from $966 million to $3.2 billion. The table below summarizes the changes in the company's consolidated net debt for this period:
2002 |
|
(Dollars in millions) |
|
|
|
Net Debt - January 1, 2002 |
$ (966) |
|
|
Cash Used for Operations |
(1,070) |
Purchases of Property, Plant and Equipment |
|
and Investment in Affiliates |
(273) |
Net Payments for Businesses Acquired |
(17) |
Proceeds from Sales of Assets |
9 |
Dividends Paid to Stockholders |
(351) |
Repurchases of Stock |
(470) |
Net Change in Minority Interest |
(5) |
Other |
(62) |
|
|
Total Increase in Net Debt |
$(2,239) |
|
|
Net Debt - March 31, 2002 |
$(3,205) |
|
Cash used in the company's operations totaled approximately $1.1 billion for the quarter. This primarily consisted of a $2 billion tax payment attributable to the 2001 gain on sale of DuPont Pharmaceuticals and seasonal working capital builds, which more than offset net income of $479 million for the quarter.
In addition, $273 million was used in the quarter for purchases of property, plant and equipment and investments in affiliates. Total 2002 purchases of property, plant and equipment and investments in affiliates (excluding any potential acquisitions) are not expected to exceed $1.6 billion.
Dividends paid to stockholders during the quarter totaled $351 million. The company purchased and retired $470 million of DuPont common stock, completing the DuPont common stock repurchase program that was approved by the Board of Directors in 1998 and increased in July 2000. The company's Board of Directors authorized a new $2 billion share buyback plan in June 2001. Management has not established a timeline for the buyback of stock under this plan.
As discussed in the Management's Discussion and Analysis in the company's most recent annual report, the company had guaranteed certain financial obligations of Conoco totaling $960 million. As of March 31, 2002, $693 of these obligations had become nonrecourse, relieving the company of this portion of the guarantee.
In March 2002, the company implemented a commercial paper conduit financing program to reduce the financing costs of the receivables securitization and synthetic lease programs by gaining direct access to the asset-backed commercial paper market. The receivables securitization program and the synthetic lease program are fully described in the company's Annual Report on Form 10-K for the period ended December 31, 2001. As of March 31, 2002, there had not been any change in the amount of assets under either of these programs. The conduit issues notes secured by the receivable interests and the equipment and real estate under synthetic leases. In addition, the notes are backed by liquidity support. The company is committed to provide up to $119 million of such support.
18
Form 10-Q |
Management believes that the company's ability to generate cash from operations and its capacity to issue short-term and long-term debt will be adequate to meet anticipated future cash requirements to fund working capital, capital spending, dividend payments and other cash needs in the foreseeable future.
(c) Other Items
Textiles & Interiors to Take Actions to Increase Competitiveness
On April 29, 2002, the company announced actions to advance its progress in the Textiles & Interiors segment toward becoming a more competitive integrated enterprise. As part of its drive to capitalize on the strength of its newly combined businesses in response to rapidly accelerating industry structural changes, the company plans to reduce more than 2,000 Textiles & Interiors' employees worldwide, or 10 percent of its global work force. More than two-thirds of the reductions are in manufacturing facilities and offices in the United States, with most of the balance in Europe. In the United States, the company plans to shut down its TerathaneÒ
PTMEG manufacturing unit at Niagara Falls, NY and less competitive portions of the spandex operation at Waynesboro, VA.
DuPont expects to achieve annual pretax cost savings of about $120 million as a result of these actions, realizing about 30 percent of these savings in 2002, with the remainder in 2003. The company expects to take a one-time second quarter after-tax charge of $.12-$.16 per share, with about two-thirds due to employee separation costs and the balance for asset shutdowns. Current plans call for more than half of the affected employees to leave the company by July 31, 2002.
The company announced in February that it planned to create DuPont Textiles & Interiors as a new wholly owned subsidiary and separate it from DuPont by year-end 2003, market conditions permitting. The company is evaluating a range of separation options, including an initial public offering. The Textiles & Interiors segment includes the nylon fibers, polyester fibers, LycraÒ
brand fiber and spandex businesses, plus their intermediates and joint ventures. In addition, the company continues to assess actions to optimize its investment in its various Textiles & Interiors businesses.
Pioneer Intellectual Property Disputes
On April 2, 2002, the company, together with the Monsanto Company, announced that they had reached a business agreement that includes the settlement of all pending lawsuits between them. The agreement gives both companies cross-licenses to enabling technologies that enhance the performance of corn, canola, and soybean crops, and improve the farmer's productivity and efficiency. The agreement includes the following:
19
Form 10-Q |
On October 1, 1999, the company acquired the approximately 80 percent of Pioneer not previously owned for $7,684 million. In accordance with purchase accounting rules, intangible assets were recorded to recognize the value of 1992 and 1993 license agreements between Monsanto and Pioneer which granted Pioneer the right to produce and market MON810 YieldGardÒ
corn and Roundup ReadyÒ
glyphosate tolerant soybeans. The April 2, 2002 agreement did not result in an impairment in the value of these intangible assets.
Acquisition of Liqui-Box Corporation
DuPont Canada (a majority-owned subsidiary of the company) and Liqui-Box Corporation of Worthington, Ohio, have signed an agreement for DuPont Canada's wholly owned subsidiary, Enhance Packaging Technologies, Inc., to acquire all of Liqui-Box's outstanding common shares in a cash transaction at $67 per share, for a total purchase price of approximately $333 million. The transaction is expected to close in the second quarter, subject to approvals from regulatory authorities and Liqui-Box shareholders.
PART
II. OTHER INFORMATIONItem 1. LEGAL PROCEEDINGS
In 1991, DuPont began receiving claims by growers that use of BenlateÒ
50 DF fungicide had caused crop damage. DuPont has since been served with several hundred lawsuits most of which were disposed of by trial, dismissal or settlement. Approximately 110 cases are pending. Some of these lawsuits were filed by growers who allege plant damage from using BenlateÒ
50 DF, and, in some cases, BenlateÒ
WP. Some include claims for alleged damage to shrimping operations from BenlateÒ
OD, and a small number of cases include claims for alleged personal injuries. Also, many of these cases include allegations of fraud and misconduct, as well as violations of Federal and State racketeering laws. In August 2001, a Florida jury found DuPont liable under Florida's racketeering statute and for product defects involving alleged crop damage. In March 2002, pursuant to DuPont's motion, the judge withdrew the jury's finding of liability under the racketeering statute and entered judgment for the plaintiffs in the approximate amount of $29 million. DuPont will appeal.
In addition, a securities fraud class action was filed in September 1995 by a shareholder in federal district court in Florida against the company and the then-Chairman. This action is still pending. The plaintiff in this case alleges that DuPont made false and misleading statements and omissions about BenlateÒ
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. Discovery is proceeding.
20
Form 10-Q |
Certain plaintiffs who previously settled with the company have filed cases alleging fraud and other misconduct relating to the litigation and settlement of BenlateÒ
50 DF claims. Approximately 47 such cases were filed. Recently, the Florida Federal Court dismissed the lead case of 25 cases pending before it. Plaintiffs have appealed. The remaining cases are in various stages of development in trial and appellate courts in Florida and Hawaii.
A shareholder derivative action was filed in August of 2001 in Florida. The suit alleges the Board of Directors breached various duties in connection with BenlateÒ
litigation and asserts claims under the Federal and State racketeering laws. This case has been dismissed by the plaintiff.
Twenty-eight cases are pending against the company in State Court in Broward County, Florida. These cases were brought by Ecuadorian shrimp farmers alleging that BenlateÒ
OD applied to banana plantations in Ecuador ran-off and was deposited in plaintiffs' shrimp farms, causing massive numbers of shrimp to die. Two cases were tried in the fall of 2000 and in early 2001, which resulted in adverse judgments of approximately $14 million and $16 million, respectively. The company has appealed both cases. DuPont contends that the deaths of the shrimp are attributable to a virus, Taura Syndrome Virus, and in no way involve BenlateÒ
OD. The untried cases are on hold awaiting resolution by the appellate court of the case tried in 2000.
DuPont believes that BenlateÒ
did not cause the damages alleged in these cases and denies the allegations of fraud and misconduct. DuPont continues to defend itself in ongoing matters. The ultimate liabilities from the BenlateÒ
lawsuits discussed above may be significant to the results of operations of the company in the period recognized, but management does not anticipate that they will have a material adverse effect on the company's consolidated financial position or liquidity.
The company's consolidated balance sheet reflects accruals for estimated costs associated with this matter. Adverse changes in estimates for such liabilities could result in additional future charges.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Business transacted at the annual meeting:
A total of 775,599,470 shares of common stock were voted in person or by proxy at the annual meeting of stockholders on April 24, 2002, or 78.1 percent of the shares entitled to be voted. The following are the voting results on proposals considered and voted upon at the meeting, all of which are described in the proxy statement.
1. ELECTION OF DIRECTORS: The 13 nominees listed below were elected to serve on the Board
of Directors for the ensuring year. The vote tabulation with respect to each nominee follows:
Votes |
Votes Cast Against |
|
Director |
Cast For |
or Withheld |
|
||
A. J. P. Belda |
764,223,526 |
11,375,944 |
R. H. Brown |
764,593,469 |
11,006,001 |
C. J. Crawford |
760,864,394 |
14,735,076 |
L. C. Duemling |
764,739,148 |
10,860,322 |
E. B. du Pont |
762,162,956 |
13,436,514 |
C. O. Holliday, Jr. |
762,799,023 |
12,800,447 |
D. C. Hopkins |
760,228,496 |
15,370,974 |
L. D. Juliber |
764,224,682 |
11,374,788 |
G. Lindahl |
765,059,461 |
10,540,009 |
M. Naitoh |
761,064,919 |
14,534,551 |
W. K. Reilly |
765,131,679 |
10,467,791 |
H. R. Sharp, III |
758,242,156 |
17,357,314 |
C. M. Vest |
761,115,091 |
14,484,379 |
21
Form 10-Q |
2. RATIFICATION OF INDEPENDENT ACCOUNTANTS: The proposal to ratify the appointment
of PricewaterhouseCoopers LLP as independent accountants for 2002 was approved by a vote of 743,180,486 shares for, 29,972,125 shares against, and 2,446,859 abstentions.
3. RATIFICATION OF VARIABLE COMPENSATION PLAN: The proposal requesting that
stockholders approve the company's Variable Compensation Plan was approved by a vote of 720,172,066 shares for, 50,793,461 shares against and 4,633,943 abstentions.
4. DIRECTORS BOARD SERVICE: A stockholder proposal recommending that the DuPont
Board of Directors take the necessary steps so that future outside directors serve for no more than six years was defeated by a vote of 601,905,147 shares against, 18,386,853 shares for, and 155,307,470 abstentions and broker nonvotes.
5. INTERNATIONAL WORKPLACE STANDARDS: A stockholder proposal recommending that
DuPont adopt, implement and enforce the workplace Code of Conduct as based on the International Labor Organization's Conventions 29, 87, 98, 100, 105, 111, 135 and 138 on workplace human rights was defeated by a vote of 556,057,133 shares against, 38,377,221 shares for, and 181,165,116 abstentions and broker nonvotes.
6. EMPLOYMENT MATTERS: A stockholder proposal requesting that the Board of Directors
prepare a report in response to the Glass Ceiling Commission's business recommendations was defeated by a vote of 480,356,177 shares against, 123,215,685 shares for, and 172,027,608 abstentions and broker nonvotes.
7. CONSIDERING POTENTIAL EMPLOYEES: A stockholder proposal requesting that the DuPont
Board of Directors give consideration to including a wage roll employee as a nominee to the Board of Directors was defeated by a vote of 596,285,743 shares against, 21,709,983 shares for and 157,603,744 abstentions and broker nonvotes.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibit index filed with this Form 10-Q is on pages 25 and 26.
(b) Reports on Form 8-K
1. On January 23, 2002, a Current Report on Form 8-K, pursuant to Regulation FD,
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, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the Registrant filed a news release, dated January 23, 2002, entitled "DuPont Reports Fourth Quarter and Full-Year 2001 Earnings."
2. On February 11, 2002, 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, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the Registrant filed a news release, dated February 11, 2002, entitled "DuPont Aligns Businesses By Markets, Technologies, Forms Textiles & Interiors Subsidiary."
22
Form 10-Q |
3. On April 3, 2002, a Current Report on 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, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the Registrant filed a news release, dated April 3, 2002, entitled "DuPont Updates Outlook For First Quarter Earnings."
4. On April 3, 2002, a Current Report on 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, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the registrant filed a news release, dated April 2, 2002, entitled "DuPont and Monsanto Reach Agreement That Brings New Technologies To Growers Worldwide."
5. On April 23, 2002, a Current Report on 8-K, pursuant to Regulation FD, 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, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the registrant filed a news release, dated April 23, 2002, entitled "DuPont Reports First Quarter 2002 Earnings."
23
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: May 9, 2002 |
By: /s/ Gary M. Pfeiffer |
Gary M. Pfeiffer |
Senior Vice President - Chief Financial Officer |
(As Duly Authorized Officer and |
Principal Financial and Accounting Officer) |
24
Form 10-Q |
EXHIBIT INDEX
Exhibit |
|
Number |
Description |
|
|
3.1 |
Company's Restated Certificate of Incorporation, filed May 29, 1997 (incorporated by |
reference to the company's filing on Form 8-K on June 13, 1997.) |
|
3.2 |
Company's Bylaws, as last revised January 1, 1999 (incorporated by reference to |
Exhibit 3.2 of the company's Annual Report on Form 10-K for the year ended |
|
December 31, 1998). |
|
4 |
The company agrees to provide the Commission, on request, copies of instruments |
defining the rights of holders of long-term debt of the company and its subsidiaries. |
|
10.1* |
Company's Salary Deferral & Savings Restoration Plan effective April 26, 1994, as |
last amended September 20, 2000, effective January 1, 2000 (incorporated by |
|
reference to Exhibit 10.7 of the company's Quarterly Report on Form 10-Q for the |
|
quarter ended March 31, 2001). |
|
10.2 |
Company's 1995 Corporate Sharing Plan, adopted by the Board of Directors on |
January 25, 1995 (incorporated by reference to Exhibit 10.8 of the company's Annual |
|
Report on Form 10-K for the year ended December 31, 1999). |
|
10.3* |
Company's Retirement Income Plan for Directors, as last amended August 1995 |
(incorporated by reference to Exhibit 10.12 of the company's Quarterly Report on |
|
Form 10-Q for the quarter ended March 31, 1997). |
|
10.4* |
Company's Supplemental Retirement Income Plan, as last amended effective June 4, 1996 (incorporated by reference to Exhibit 10.3 of the company's Annual Report on Form 10-K for the year ended December 31, 2001). |
10.5* |
Company's Pension Restoration Plan, as last amended effective June 4, 1996 |
(incorporated by reference to Exhibit 10.4 of the company's Annual Report on |
|
Form 10-K for the year ended December 31, 2001). |
|
10.6 |
Company's 1997 Corporate Sharing Plan, adopted by the Board of Directors on |
January 29, 1997 (incorporated by reference to Exhibit 10.9 of the company's Annual |
|
Report on Form 10-K for the year ended December 31, 2001). |
|
10.7* |
Company's Variable Compensation Plan, as last amended effective April 30, 1997 |
(incorporated by reference to pages A1-A3 of the company's Annual Meeting Proxy |
|
Statement dated March 21, 2002). |
|
* |
Management contract or compensatory plan or arrangement |
required to be filed as an exhibit to this Form 10-Q. |
25
Form 10-Q |
EXHIBIT INDEX
(continued)
Exhibit |
|
Number |
Description |
|
|
10.8* |
Company's Stock Performance Plan, as last amended effective January 28, 1998 (incorporated by reference to Exhibit 10.1 of the company's Quarterly Report on Form 10-Q for the period ended March 31, 1998). |
10.9* |
Letter Agreement and Employee Agreement, dated as of April 22, 1999, between the |
Company and R. R. Goodmanson (incorporated by reference to Exhibit 10.1 of the |
|
Company's Annual Report on Form 10-K for the year ended December 31, 1999). |
|
10.10 |
Company's purchase Agreement dated June 7, 2001, by and among the company, |
DuPont Pharma, Inc., DuPont Pharmaceuticals Company, DuPont Electronic |
|
Materials, Inc., DuPont Diagnostics, Inc., and Bristol-Myers Squibb Company |
|
(incorporated by reference to Exhibit 10.13 of the company's Quarterly Report on |
|
Form 10-Q for the quarter ended June 30, 2001). |
|
10.11 |
Amendment to Purchase Agreement dated as of October 1, 2001, to the Purchase |
Agreement, dated June 7, 2001, by and among E. I. du Pont de Nemours and |
|
Company, DuPont Pharma, Inc., DuPont Pharmaceuticals Company, DuPont |
|
Electronic Materials, Inc., DuPont Diagnostics, Inc., and Bristol-Myers Squibb |
|
Company (incorporated by reference to Exhibit 10.14 of the company's quarter ended |
|
September 30, 2001). |
|
10.12 |
Company's Bicentennial Corporate Sharing Plan adopted by the Board of Directors on December 12, 2001 and effective January 9, 2002. |
10.13* |
The DuPont Stock Accumulation and Deferred Compensation Plan for Directors, as |
last amended January 23, 2002. |
|
12 |
Computation of Ratio of Earnings to Fixed Charges. |
* |
Management contract or compensatory plan or arrangement |
required to be filed as an exhibit to this Form 10-Q. |
26
Form 10-Q |
Exhibit 10.12 |
2002 BICENTENNIAL CORPORATE SHARING PLAN
I. PURPOSE
The purpose of this 2002 Bicentennial Corporate Sharing Plan (the "Plan") is to offer employees a favorable opportunity to share in the success of E. I. du Pont de Nemours and Company (the "Company") through stock options, thereby giving them a stake in the growth and prosperity of the Company and benefiting the Company.
II. FORM OF GRANTS
Grants under this Plan will be in the form of nonqualified stock options to purchase shares of the Company's common stock.
III. LIMITATIONS ON GRANTS
1. The aggregate number of shares of the Company's stock which may be made subject to
stock options granted under this Plan shall not exceed 18,000,000. The limitations set forth above shall be subject to adjustment as provided in Article XII hereof.
2. No grants may be made under this Plan after December 31, 2002.
IV. ADMINISTRATION
1. Except as otherwise specifically provided, the Plan shall be administered by the
Compensation Committee of the Company's Board of Directors.
2. The Compensation Committee is authorized, subject to the provisions of the Plan, from
time to time to establish such rules and regulations as it deems appropriate for the proper administration of the Plan, and to make such determinations and take such steps in connection therewith as it deems necessary or advisable, including amending the Terms and Conditions.
3. The decision of the Compensation Committee with respect to any questions arising as to
interpretation of this Plan, including the severability of any or all of the provisions thereof, shall be final, conclusive and binding.
4. Nothing in this Plan shall be deemed to give any employee, or any employee's legal
representatives or assigns, any right to participate in the Plan except to such extent, if any, as the Compensation Committee may have determined or approved pursuant to the provisions of this Plan.
V. ELIGIBILITY FOR GRANTS
1. Grants under this Plan may be made to employees of the Company as determined by the
Board of Directors.
27
Form 10-Q |
Exhibit 10.12 |
V. ELIGIBILITY FOR GRANTS - (Cont'd)
2. The term "employee" may include an employee of a corporation or other business entity in
which this Company shall directly or indirectly own fifty percent or more of the outstanding voting stock or other ownership interest (the term "sharing plan company" as used in this Plan shall mean a business entity whose employees are eligible for grants under this Plan), but shall exclude any director who is not also an officer or a full-time employee of a sharing plan company. The term "optionee" as used in this Plan means an employee to whom a stock option award has been granted under this Plan or, where appropriate, his or her successor in interest upon death.
VI. GRANTS
1. Any grant made to an employee shall be made by the Board of Directors which shall take
final action on any such grant.
2. Grants may be made at any time on or before December 31, 2002 under this Plan and in the
form provided in Article II hereof.
3. The date on which a grant shall be deemed to have been made under this Plan shall be the
date of the Board of Directors authorization of the grant or such later date as may be determined by the Board of Directors at the time the grant is authorized. Each optionee shall be advised in writing by the Company of a grant and the terms and conditions thereof, which terms and conditions, as the Board of Directors from time to time shall determine, shall not be inconsistent with the provisions of this Plan.
VII. GRANT PRICE
The price per share of the Company's common stock which may be purchased upon exercise of a stock option granted under this Plan shall be determined by the Board of Directors, but shall in no event be less than the fair market value of such share on the date the stock option is granted, and in no event less than the par value thereof. For purposes of the grant price, fair market value shall be the average of the high and low prices of the Company's common stock as reported on the "NYSE-Composite Transactions Tape" on the date of grant of a stock option, or if no sales of such stock were reported on said Tape on such date, the average of the high and low prices of such stock on the next preceding day on which sales were reported on said Tape. Such price shall be subject to adjustment as provided in Article XII hereof.
VIII. OPTION TERM
The term of each stock option granted under this Plan shall be for such period as the Board of Directors shall determine, but not for more than ten years from date of grant.
IX. EXERCISE OF OPTIONS
1. Subject to the provisions of this Plan, each stock option granted hereunder shall be
exercisable on such date or dates and during such period and for such number of shares as the Board of Directors may determine. However, in no event shall a stock option be exercisable prior to six months from date of grant. The Board of Directors may fix from time to time a minimum number of shares which must be purchased at the time a stock option is exercised.
28
Form 10-Q |
Exhibit 10.12 |
IX. EXERCISE OF OPTIONS - (Cont'd)
2. An optionee electing to exercise a stock option shall at the time of exercise pay the
Company the full purchase price of the shares he or she has elected to purchase. Payment of the purchase price shall be made in cash. At its election, the Company may appoint a third party administrator to process option exercises. With respect to shares of the Company's common stock to be delivered upon exercise of a stock option, the Compensation Committee shall periodically determine whether, and to what extent, such stock shall be in the form of a new common stock issued for such purposes, or common stock acquired by the Company.
X. NONTRANSFERABILITY OF GRANTS
Except as provided under conditions defined by the Compensation Committee, during an optionee's lifetime no stock option granted under this Plan shall be transferable and stock options may be exercised only by the optionee.
XI. TERMINATION OF EMPLOYMENT
The Board of Directors shall determine the rules relating to rights under stock options upon termination of employment.
XII. ADJUSTMENTS
1. In the event of any stock dividend, split-up, reclassification or other analogous change in
capitalization, the Compensation Committee shall make an equitable adjustment, in the light of the change, in -
(a) the number of shares and prices per share applicable to outstanding stock options,
(b) The aggregate limitation set forth in Article III with respect to the number of shares
which may be made subject to options.
Furthermore, in the event of a distribution to common stockholders other than interim or year-end dividends declared as such by the Board of Directors, the Compensation Committee shall make an equitable adjustment, in the light of the distribution, in respect of the items described in (a) above.
2. Any fractional shares resulting from adjustments made pursuant to this Article shall be
eliminated.
XIII. AMENDMENTS
The Company reserves the right to change this Plan in its discretion by action of the Compensation Committee or discontinue this Plan in its discretion by action of the Board of Directors.
29
Form 10-Q |
Exhibit 10.13 |
E. I. DU PONT DE NEMOURS AND COMPANY
STOCK ACCUMULATION AND DEFERRED
COMPENSATION PLAN FOR DIRECTORS
(As last amended, January 23, 2002)
1. PURPOSE OF THE PLAN
The purpose of the DuPont Stock Accumulation and Deferred Compensation Plan for Directors (the "Plan") is (1) to further the identity of interests of members of the Board of Directors of E. I. du Pont de Nemours and Company (the "Company") with those of the Company's stockholders generally through the grant of options to purchase shares of common stock of the Company, and (2) to permit Directors to defer the payment of all or a specified part of their compensation, including any grant of stock by the Company, for services performed as Directors.
2. ELIGIBILITY
Members of the Board of Directors of the Company who are not employees of the Company or any of its subsidiaries or affiliates and who do not receive a form of compensation for Board service in lieu of customary Directors' fees shall be eligible to receive option grants under the Plan. Members of the Board of Directors of the Company who are not employees of the Company or any of its subsidiaries or affiliates shall be eligible under this Plan to defer compensation for services performed as Directors.
3. ADMINISTRATION AND AMENDMENT
The Plan shall be administered by the Compensation Committee of the Board of Directors (the "Committee"). The decision of the Committee with respect to any questions arising as to the interpretation of this Plan, including the severability of any and all of the provisions thereof, shall be final, conclusive and binding. The Board of Directors of the Company reserves the right to modify the Plan from time to time, or to repeal the Plan entirely, provided, however, that (1) no modification of the Plan shall operate to annul an election already in effect for the current calendar year or any preceding calendar year; and (2) to the extent required under Section 16 of the Securities Exchange Act of 1934 ("Exchange Act"), Plan provisions relating to the amount, price and timing of stock option grants shall not be amended more than once every six months, except that the foregoing shall not preclude any amendment necessary to conform to
changes in applicable law, including, but not limited to, changes in the Internal Revenue Code.
The Committee is authorized, subject to the provisions of the Plan, from time to time to establish such rules and regulations as it deems appropriate for the proper administration of the Plan, and to make such determinations and take such steps in connection therewith as it deems necessary or advisable.
30
Form 10-Q |
Exhibit 10.13 |
4. COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT / CHANGE IN LAW
It is the Company's intent that the Plan comply in all respects with Rule 16b-3 of the Exchange Act, or its successor, and any regulations promulgated thereunder. If any provision of this Plan is found not to be in compliance with such rule and regulations, the provision shall be deemed null and void, and the remaining provisions of the Plan shall continue in full force and effect. All transactions under this Plan shall be executed in accordance with the requirements of Section 16 of the Exchange Act and the regulations promulgated thereunder.
The Board of Directors may, in its sole discretion, modify the terms and conditions of this Plan in response to and consistent with any changes in applicable law, rule or regulation.
5. OPTION GRANTS
a. Annual Grant: Subject to action by the Board of Directors, and effective upon such date as the
Board of Directors may determine, each Director eligible under Article 2 hereof shall be awarded an annual grant of nonqualified options to purchase shares of common stock of the Company, with each such grant having a Black-Scholes value of $85,000. A director elected to the Board at a time after an annual stock option grant is made shall, without further action by the Board of Directors, receive a grant of nonqualified options to purchase shares of common stock of the Company, with any such grant having a Black-Scholes value of $85,000, following his/her first attendance at a Board Meeting. Any such grant shall be subject to the terms and conditions applicable to the annual grant, and shall be effective on the first business day of the month following the month in which the Director attends his/her first Board Meeting. Under no circumstances shall a Director receive more than one option grant in any calendar year under this Plan.
b. Option Price: The price per share of common stock which may be purchased upon exercise of
a stock option granted hereunder shall be determined by the Board of Directors, but shall in no event be less than the fair market value of such share on the date the stock option is granted, and in no event less than the par value thereof. For purposes of this Plan, fair market value shall be the average of the high and low prices of the stock as reported on the "NYSE-Composite Transactions Tape" on the date of grant of a stock option, or if no sales of such stock were reported on said Tape on such date, the average of the high and low prices of such stock on the next preceding day on which sales were reported on said Tape. Such price shall be subject to adjustment as provided in paragraph 5(g) hereof.
c. Option Term: The term of each stock option granted under this Plan shall be for such period
as the Board of Directors shall determine, but not for more than ten (10) years from the date of grant.
d. Exercise of Options/Delivery of Shares: (i) Subject to the provisions of this Plan, each stock
option granted hereunder shall be exercisable on such date or dates and during such period and for such number of shares as the Board of Directors may determine. However, in no event shall a stock option be exercisable prior to six months from the date of grant. The Committee may fix from time to time a minimum number of shares that must be purchased at the time a stock option is exercised.
31
Form 10-Q |
Exhibit 10.13 |
(ii) At the time he or she elects to exercise a stock option, a grantee shall pay the Company the full purchase price of the shares he or she has elected to purchase. Payment of the purchase price shall be made in cash, stock (valued at fair market value on the date of exercise), or a combination thereof, as the Committee may determine from time to time. With respect to stock to be delivered upon exercise of a stock option, such stock shall be delivered only from stock held in the company's treasury, unless otherwise provided by the Board of Directors.
e. Tax Withholding: Grantees may use shares of stock to satisfy withholding taxes relating to
the grants under this Plan to the extent provided in terms and conditions established by the Committee.
f. Terminations of Options: (i) The Board of Directors shall, subject to the provisions of the Plan,
determine the rules relating to the rights of a grantee in the event a grantee ceases to be a Director of the Company or in the event of his or her death.
(ii) A grantee shall forfeit all rights under stock options granted hereunder if the Board of Directors, after a hearing at which the grantee shall be entitled to be present, shall find that the grantee has willfully engaged in any activity harmful to the interest of the Company or any of its subsidiaries or affiliates provided, however, that such stock options may continue in effect to such extent and under such circumstances as the Board of Directors may determine.
g. Adjustment: (i) In the event of any stock dividend, split-up, reclassification or other analogous
change in capitalization, the Committee shall make such adjustments, in light of the change, as it deems to be equitable, both to the grantee and to the Company, in the number of shares and prices per share applicable to outstanding options. Furthermore, in the event of a distribution to common stockholders other than interim or year-end dividends declared as such by the Board of Directors, the Committee shall make such adjustments, in light of the distribution, as it deems to be equitable, both to the grantee and to the Company, in respect to the item described herein.
(ii) any fractional shares resulting from adjustments made pursuant to this subparagraph shall be eliminated.
6. ELECTION TO DEFER
On or before December 31 of any year, a Director may elect to defer, until a specified year or retirement as a Director of the Company, the payment of all or a specified part of all fees payable to the Director for services as a Director during the calendar year following the election and succeeding calendar years in the form of cash or stock units. Any person who shall become a Director during any calendar year, and who was not a Director of the Company on the preceding December 31, may elect, within thirty days after election to the Board, to defer in the same manner the receipt of the payment of all or a specified part of fees not yet earned for the remainder of that calendar year and for succeeding calendar years in the form of cash or stock units. Elections shall be made by written notice delivered to the Secretary of the Committee.
32
Form 10-Q |
Exhibit 10.13 |
7. DIRECTORS' ACCOUNTS
Fees deferred in the form of cash shall be held in the general funds of the Company and shall be credited to an account in the name of the Director. On the first day of each quarter, interest shall be credited to each account calculated on the basis of the cash balance in each account on the first day of each month of the preceding quarter at the Prime Rate of Morgan Guaranty Trust Company of New York (or at such other rate as may be specified by the Committee from time to time) in effect on the first day of each month. Fees to be deferred in the form of stock units shall be allocated to each Director's account based on the closing price of the Company's common stock as reported on the Composite Tape of the New York Stock Exchange ("Stock Price") on the date the fees would otherwise have been paid. The Company shall not be required to reserve or otherwise set aside shares of common stock for the payment of its obligations
hereunder, but shall make available as and when required a sufficient number of shares of common stock to meet the needs of the Plan. An amount equal to any cash dividends (or the fair market value of dividends paid in property other than dividends payable in common stock of the Company) payable on the number of shares represented by the number of stock units in each Director's account will be allocated to each Director's account in the form of stock units based upon the Stock Price on the dividend payment date. Any stock dividends payable on such number of shares will be allocated in the form of stock units. If adjustments are made to outstanding shares of common stock as a result of split-ups, recapitalizations, mergers, consolidations and the like, an appropriate adjustment shall also be made in the number of stock units in a Director's account. Stock units shall not entitle any person to rights of a stockholder unless and until shares of Company common stock have been issued to that person with resp
ect to stock units as provided in Article 8.
8. PAYMENT FROM DIRECTORS' ACCOUNTS
The aggregate amount of deferred fees, together with interest and dividend equivalents accrued thereon, shall be paid in the year specified or after a Director ceases to be a Director of the Company. Amounts deferred to a specified year shall only be paid in a lump sum and shall be paid promptly at the beginning of that specified year. Amounts deferred to retirement shall be paid in a lump sum, or, if the Director elects prior to retirement, either (1) in a lump sum in a specified year after retirement; (2) in substantially equal annual installments over a period of years specified by the Director; or (3) in a lump sum upon the Director's death. The delivery election must be made by written notice delivered to the Secretary of the Committee prior to the date of retirement, and the first installment (or lump sum payment upon retirement or in a specified year thereafter) shall be paid promptly at the beginning of the following calend
ar year. Subsequent installments shall be paid promptly at the beginning of each succeeding calendar year until the entire amount credited to the Director's account shall have been paid. Amounts credited to a Director's account in cash shall be paid in cash and amounts credited in stock units shall be paid in one share of common stock of the Company for each stock unit, except that a cash payment will be made with any final installment for any fraction of a stock unit remaining in the Director's account. Such fractional share shall be valued at the closing Stock Price on the date of settlement.
9. PAYMENT IN EVENT OF DEATH
A Director may file with the Secretary of the Committee a written designation of a beneficiary for his or her account under the Plan on such form as may be prescribed by the Committee, and may, from time to time, amend or revoke such designation. If a Director should die before all deferred amounts credited to the Director's account have been distributed, the balance of any deferred fees and interest and dividend equivalents then in the Director's account shall be paid promptly to the Director's designated beneficiary. If the Director did not designate a beneficiary, or in the event that the beneficiary designated by the Director shall have predeceased the Director, the balance in the Director's account shall be paid promptly to the Director's estate.
33
Form 10-Q |
Exhibit 10.13 |
10. TERMINATION OF ELECTION
A Director may terminate his/her election to defer payment of fees in cash or stock units by written notice delivered to the Secretary of the Committee. Termination shall become effective as of the end of the calendar year in which notice of termination is given with respect to fees payable for services as a Director during subsequent calendar years. Amounts credited to the account of a Director prior to the effective date of termination shall not be affected thereby and shall be paid only in accordance with Articles 7 and 8.
11. ONE-TIME ELECTION TO CONVERT CASH BALANCES TO STOCK UNITS
The Committee may in its discretion establish terms and conditions under which a Director may make a one-time election to convert into stock units all or a portion of the fees and dividend equivalents the Director has deferred in cash.
12. NONASSIGNABILITY
During a Director's lifetime, the right to any stock option, or the right to any deferred fees, including interest and dividend equivalents thereon, shall not be transferable or assignable, and stock options may be exercised only by the grantee, except as may otherwise be provided in rules established by the Committee.
13. GOVERNING LAW
The validity and construction of the Plan shall be governed by the laws of the State of Delaware.
14. EFFECTIVE DATE
This Plan shall become effective as of January 1, 1996, provided it is approved by stockholders at the Company's 1996 Annual Meeting, and shall continue in full force and effect until terminated by the Board of Directors.
34
Form 10-Q |
Exhibit 12
E. I. DU PONT DE NEMOURS AND COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Three Months |
Years Ended December 31 |
|||||
|
Ended |
|||||
|
March 31, 2002 |
2001 |
2000 |
1999 |
1998 |
1997 |
Income from Continuing Operations |
||||||
Before Extraordinary Item and |
||||||
Cumulative Effect of Change In |
||||||
Accounting Principle |
$479 |
$4,328(a) |
$2,314 |
$ 219 |
$1,648 |
$1,432 |
Provision for Income Taxes |
328 |
2,467 |
1,072 |
1,410 |
941 |
1,354 |
Minority Interests in Earnings of |
||||||
Consolidated Subsidiaries |
21 |
49 |
61 |
61 |
24 |
43 |
Adjustment for Companies Accounted |
||||||
for by the Equity Method |
5 |
93 |
(109) |
33 |
(39) |
936(b) |
Capitalized Interest |
(12) |
(62) |
(69) |
(107) |
(120) |
(80) |
Amortization of Capitalized Interest |
15 |
61 |
65 |
88(c) |
65(c) |
82 (c) |
|
||||||
836 |
6,936 |
3,334 |
1,704 |
2,519 |
3,767 |
|
|
||||||
Fixed Charges: |
||||||
Interest and Debt Expense - |
||||||
Continuing Operations |
90 |
590 |
810 |
535 |
520 |
389 |
Discontinued Operations(c) |
- |
- |
- |
180 |
304 |
252 |
Capitalized Interest - |
||||||
Continuing Operations |
12 |
62 |
69 |
107 |
120 |
80 |
Discontinued Operations(c) |
- |
- |
- |
3 |
78 |
90 |
Rental Expense Representative of |
||||||
Interest Factor |
19 |
78 |
70 |
66 |
71 |
83 |
121 |
730 |
949 |
891 |
1,093 |
894 |
|
|
||||||
Total Adjusted Earnings Available for |
||||||
Payment of Fixed Charges |
$957 |
$7,666 |
$4,283 |
$2,595 |
$3,612 |
$4,661 |
|
||||||
Number of Times Fixed Charges Earned |
7.9 |
10.5 |
4.5 |
2.9 |
3.3 |
5.2 |
|
|
|
(a) |
Includes $3,866 after-tax gain on the sale of DuPont Pharmaceuticals to Bristol-Myers Squibb. |
(b) |
Includes write-off of Purchased In-Process Research and Development |
associated with acquisition of 20% interest in Pioneer Hi-Bred International, Inc. |
|
(c) |
Includes write-off of capitalized interest associated with divested businesses. |
(d) |
Divestiture of Conoco Inc. was completed August 6, 1999. |
35
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