x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 51-0014090 | |
(State or other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification No.) |
Large Accelerated Filer x | Accelerated Filer o | |
Non-Accelerated Filer o | Smaller reporting company o |
Page | |||
Unregistered Sales of Equity Securities and Use of Proceeds: Issuer Purchases of Equity Securities | |||
Item 1. | CONSOLIDATED FINANCIAL STATEMENTS |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Net sales | $ | 9,844 | $ | 9,917 | $ | 20,252 | $ | 20,097 | ||||
Other income, net | 159 | 291 | 251 | 305 | ||||||||
Total | 10,003 | 10,208 | 20,503 | 20,402 | ||||||||
Cost of goods sold | 6,057 | 5,844 | 12,250 | 11,779 | ||||||||
Other operating charges | 941 | 1,246 | 1,853 | 2,127 | ||||||||
Selling, general and administrative expenses | 983 | 972 | 1,966 | 1,927 | ||||||||
Research and development expense | 542 | 533 | 1,063 | 1,041 | ||||||||
Interest expense | 115 | 117 | 232 | 231 | ||||||||
Total | 8,638 | 8,712 | 17,364 | 17,105 | ||||||||
Income from continuing operations before income taxes | 1,365 | 1,496 | 3,139 | 3,297 | ||||||||
Provision for income taxes on continuing operations | 335 | 397 | 722 | 789 | ||||||||
Income from continuing operations after income taxes | 1,030 | 1,099 | 2,417 | 2,508 | ||||||||
Income from discontinued operations after income taxes | 4 | 76 | 1,972 | 171 | ||||||||
Net income | 1,034 | 1,175 | 4,389 | 2,679 | ||||||||
Less: Net income attributable to noncontrolling interests | 4 | 9 | 11 | 21 | ||||||||
Net income attributable to DuPont | $ | 1,030 | $ | 1,166 | $ | 4,378 | $ | 2,658 | ||||
Basic earnings per share of common stock: | ||||||||||||
Basic earnings per share of common stock from continuing operations | $ | 1.11 | $ | 1.16 | $ | 2.59 | $ | 2.66 | ||||
Basic earnings per share of common stock from discontinued operations | — | 0.08 | 2.13 | 0.18 | ||||||||
Basic earnings per share of common stock | $ | 1.11 | $ | 1.24 | $ | 4.73 | $ | 2.84 | ||||
Diluted earnings per share of common stock: | ||||||||||||
Diluted earnings per share of common stock from continuing operations | $ | 1.10 | $ | 1.15 | $ | 2.58 | $ | 2.63 | ||||
Diluted earnings per share of common stock from discontinued operations | — | 0.08 | 2.12 | 0.18 | ||||||||
Diluted earnings per share of common stock | $ | 1.11 | $ | 1.23 | $ | 4.69 | $ | 2.81 | ||||
Dividends per share of common stock | $ | 0.45 | $ | 0.43 | $ | 0.88 | $ | 0.84 |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Net income | $ | 1,034 | $ | 1,175 | $ | 4,389 | $ | 2,679 | ||||
Other comprehensive income (loss), before tax: | ||||||||||||
Cumulative translation adjustment | (14 | ) | (412 | ) | (223 | ) | (242 | ) | ||||
Net revaluation and clearance of cash flow hedges to earnings: | ||||||||||||
Additions and revaluations of derivatives designated as cash flow hedges | (8 | ) | 38 | (24 | ) | 36 | ||||||
Clearance of hedge results to earnings | (18 | ) | (23 | ) | (28 | ) | (55 | ) | ||||
Net revaluation and clearance of cash flow hedges to earnings | (26 | ) | 15 | (52 | ) | (19 | ) | |||||
Pension benefit plans: | ||||||||||||
Net gain (loss) | — | 4 | 56 | (19 | ) | |||||||
Prior service benefit | — | — | — | 22 | ||||||||
Reclassifications to net income: | ||||||||||||
Amortization of prior service cost | 3 | 3 | 6 | 7 | ||||||||
Amortization of loss | 239 | 220 | 480 | 439 | ||||||||
Curtailment / settlement loss | — | — | 153 | — | ||||||||
Pension benefit plans, net | 242 | 227 | 695 | 449 | ||||||||
Other benefit plans: | ||||||||||||
Net gain | 28 | — | 45 | — | ||||||||
Reclassifications to net income: | ||||||||||||
Amortization of prior service benefit | (46 | ) | (30 | ) | (94 | ) | (60 | ) | ||||
Amortization of (gain) loss | (2 | ) | 22 | 25 | 44 | |||||||
Curtailment / settlement gain | — | — | (153 | ) | — | |||||||
Other benefit plans, net | (20 | ) | (8 | ) | (177 | ) | (16 | ) | ||||
Net unrealized gain on securities | 3 | 1 | 1 | 2 | ||||||||
Other comprehensive income (loss), before tax | 185 | (177 | ) | 244 | 174 | |||||||
Income tax expense related to items of other comprehensive income | (67 | ) | (76 | ) | (142 | ) | (140 | ) | ||||
Other comprehensive income (loss), net of tax | 118 | (253 | ) | 102 | 34 | |||||||
Comprehensive income | 1,152 | 922 | 4,491 | 2,713 | ||||||||
Less: Comprehensive income attributable to noncontrolling interests | 4 | 34 | 11 | 48 | ||||||||
Comprehensive income attributable to DuPont | $ | 1,148 | $ | 888 | $ | 4,480 | $ | 2,665 |
June 30, 2013 | December 31, 2012 | |||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 6,685 | $ | 4,284 | ||
Marketable securities | 211 | 123 | ||||
Accounts and notes receivable, net | 8,985 | 5,452 | ||||
Inventories | 6,373 | 7,565 | ||||
Prepaid expenses | 196 | 204 | ||||
Deferred income taxes | 787 | 613 | ||||
Assets held for sale | — | 3,076 | ||||
Total current assets | 23,237 | 21,317 | ||||
Property, plant and equipment, net of accumulated depreciation (June 30, 2013 - $19,494; December 31, 2012 - $19,085) | 12,698 | 12,741 | ||||
Goodwill | 4,561 | 4,616 | ||||
Other intangible assets | 4,942 | 5,126 | ||||
Investment in affiliates | 1,143 | 1,163 | ||||
Deferred income taxes | 3,864 | 3,936 | ||||
Other assets | 904 | 960 | ||||
Total | $ | 51,349 | $ | 49,859 | ||
Liabilities and Equity | ||||||
Current liabilities | ||||||
Accounts payable | $ | 3,613 | $ | 4,853 | ||
Short-term borrowings and capital lease obligations | 3,315 | 1,275 | ||||
Income taxes | 796 | 343 | ||||
Other accrued liabilities | 4,166 | 5,997 | ||||
Liabilities related to assets held for sale | — | 1,084 | ||||
Total current liabilities | 11,890 | 13,552 | ||||
Long-term borrowings and capital lease obligations | 10,765 | 10,465 | ||||
Other liabilities | 14,443 | 14,687 | ||||
Deferred income taxes | 896 | 856 | ||||
Total liabilities | 37,994 | 39,560 | ||||
Commitments and contingent liabilities | ||||||
Stockholders’ equity | ||||||
Preferred stock | 237 | 237 | ||||
Common stock, $0.30 par value; 1,800,000,000 shares authorized; Issued at June 30, 2013 - 1,010,299,000; December 31, 2012 - 1,020,057,000 | 303 | 306 | ||||
Additional paid-in capital | 10,870 | 10,655 | ||||
Reinvested earnings | 17,156 | 14,383 | ||||
Accumulated other comprehensive loss | (8,544 | ) | (8,646 | ) | ||
Common stock held in treasury, at cost (87,041,000 shares at June 30, 2013 and December 31, 2012) | (6,727 | ) | (6,727 | ) | ||
Total DuPont stockholders’ equity | 13,295 | 10,208 | ||||
Noncontrolling interests | 60 | 91 | ||||
Total equity | 13,355 | 10,299 | ||||
Total | $ | 51,349 | $ | 49,859 |
Six Months Ended | ||||||
June 30, | ||||||
2013 | 2012 | |||||
Operating activities | ||||||
Net income | $ | 4,389 | $ | 2,679 | ||
Adjustments to reconcile net income to cash used for operating activities: | ||||||
Depreciation | 644 | 702 | ||||
Amortization of intangible assets | 193 | 198 | ||||
Other operating charges and credits - net | 185 | 314 | ||||
Gain on sale of business | (2,682 | ) | — | |||
Contributions to pension plans | (176 | ) | (692 | ) | ||
Change in operating assets and liabilities - net | (5,184 | ) | (4,318 | ) | ||
Cash used for operating activities | (2,631 | ) | (1,117 | ) | ||
Investing activities | ||||||
Purchases of property, plant and equipment | (757 | ) | (696 | ) | ||
Investments in affiliates | (31 | ) | (14 | ) | ||
Proceeds from sale of business - net | 4,815 | — | ||||
Proceeds from sales of assets - net | 88 | 166 | ||||
Net (increase) decrease in short-term financial instruments | (99 | ) | 388 | |||
Forward exchange contract settlements | 58 | 80 | ||||
Other investing activities - net | 8 | (7 | ) | |||
Cash provided by (used for) investing activities | 4,082 | (83 | ) | |||
Financing activities | ||||||
Dividends paid to stockholders | (823 | ) | (788 | ) | ||
Net increase in borrowings | 2,369 | 2,406 | ||||
Repurchase of common stock | (1,000 | ) | (400 | ) | ||
Proceeds from exercise of stock options | 384 | 406 | ||||
Payments for noncontrolling interest | — | (447 | ) | |||
Other financing activities - net | 74 | 27 | ||||
Cash provided by financing activities | 1,004 | 1,204 | ||||
Effect of exchange rate changes on cash | (149 | ) | (84 | ) | ||
Increase / (decrease) in cash and cash equivalents | $ | 2,306 | $ | (80 | ) | |
Cash and cash equivalents at beginning of period | 4,379 | 3,586 | ||||
Cash and cash equivalents at end of period | $ | 6,685 | $ | 3,506 |
Three Months Ended June 30, 2013 | Six Months Ended June 30, 2013 | ||||||||||||||||||
As reported | As reported under LIFO | Change: (Decrease)/Increase | As reported | As reported under LIFO | Change: (Decrease)/Increase | ||||||||||||||
Cost of goods sold | $ | 6,057 | $ | 6,067 | $ | (10 | ) | $ | 12,250 | $ | 12,271 | $ | (21 | ) | |||||
Income from continuing operations before income taxes | 1,365 | 1,355 | 10 | 3,139 | 3,118 | 21 | |||||||||||||
Provision for income taxes on continuing operations | 335 | 332 | 3 | 722 | 716 | 6 | |||||||||||||
Income from continuing operations after income taxes | 1,030 | 1,023 | 7 | 2,417 | 2,402 | 15 | |||||||||||||
Income from discontinued operations after income taxes | 4 | 4 | — | 1,972 | 1,972 | — | |||||||||||||
Net income | $ | 1,034 | $ | 1,027 | $ | 7 | $ | 4,389 | $ | 4,374 | $ | 15 |
Three Months Ended June 30, 2012 | Six Months Ended June 30, 2012 | ||||||||||||||||||
As reported | As reported under LIFO | Change: (Decrease)/Increase | As reported | As reported under LIFO | Change: (Decrease)/Increase | ||||||||||||||
Cost of goods sold | $ | 5,844 | $ | 5,830 | $ | 14 | $ | 11,779 | $ | 11,771 | $ | 8 | |||||||
Income from continuing operations before income taxes | 1,496 | 1,510 | (14 | ) | 3,297 | 3,305 | (8 | ) | |||||||||||
Provision for income taxes on continuing operations | 397 | 400 | (3 | ) | 789 | 792 | (3 | ) | |||||||||||
Income from continuing operations after income taxes | 1,099 | 1,110 | (11 | ) | 2,508 | 2,513 | (5 | ) | |||||||||||
Income from discontinued operations after income taxes | 76 | 78 | (2 | ) | 171 | 175 | (4 | ) | |||||||||||
Net income | $ | 1,175 | $ | 1,188 | $ | (13 | ) | $ | 2,679 | $ | 2,688 | $ | (9 | ) |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Net sales | $ | — | $ | 1,089 | $ | 331 | $ | 2,139 | ||||
(Loss) income before income taxes | $ | (2 | ) | $ | 124 | $ | 2,713 | $ | 268 | |||
(Benefit from) provision for income taxes | (6 | ) | 48 | 741 | 97 | |||||||
Income from discontinued operations after income taxes | $ | 4 | $ | 76 | $ | 1,972 | $ | 171 |
December 31, 2012 | |||
Cash and cash equivalents | $ | 95 | |
Accounts and notes receivable, net | 783 | ||
Inventories | 488 | ||
Prepaid expenses | 6 | ||
Deferred income taxes - current | 32 | ||
Property, plant and equipment, net of accumulated depreciation | 749 | ||
Goodwill | 808 | ||
Other intangible assets | 67 | ||
Deferred income taxes - noncurrent | 14 | ||
Other assets - noncurrent | 34 | ||
Total assets held for sale | $ | 3,076 | |
Accounts payable | $ | 408 | |
Income taxes | 17 | ||
Other accrued liabilities | 237 | ||
Other liabilities - noncurrent | 388 | ||
Deferred income taxes - noncurrent | 34 | ||
Total liabilities related to assets held for sale | $ | 1,084 |
Employee Separation Costs | Other Non-Personnel Charges1 | Total | |||||||
Balance at December 31, 2012 | $ | 154 | $ | 7 | $ | 161 | |||
Payments | (44 | ) | (3 | ) | (47 | ) | |||
Net translation adjustment | (2 | ) | — | (2 | ) | ||||
Balance as of June 30, 2013 | $ | 108 | $ | 4 | $ | 112 |
1 | Other non-personnel charges consist of contractual obligation costs. |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Cozaar®/Hyzaar® income | $ | 12 | $ | 14 | $ | 14 | $ | 39 | ||||
Royalty income | 50 | 22 | 87 | 62 | ||||||||
Interest income | 45 | 37 | 72 | 60 | ||||||||
Equity in (loss) earnings of affiliates, excluding exchange gains/losses | (7 | ) | 21 | (14 | ) | 31 | ||||||
Gain on sale of equity method investment | 9 | 122 | 9 | 122 | ||||||||
Net gain on sales of other assets | 5 | 5 | 10 | 10 | ||||||||
Net exchange gains (losses) 1 | 35 | 50 | 46 | (31 | ) | |||||||
Miscellaneous income and expenses, net 2 | 10 | 20 | 27 | 12 | ||||||||
Other income, net | $ | 159 | $ | 291 | $ | 251 | $ | 305 |
1 | The company routinely uses foreign currency exchange contracts to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets and liabilities. The objective of this program is to maintain an approximately balanced position in foreign currencies in order to minimize, on an after-tax basis, the effects of exchange rate changes on net monetary asset positions. The net pre-tax exchange gains (losses) are recorded in other income, net and the related tax impact is recorded in provision for income taxes on continuing operations on the interim Consolidated Income Statements. The $35 and $46 net exchange gain for the three and six months ended June 30, 2013, includes a $3 exchange gain and a $(33) exchange (loss), respectively, associated with the devaluation of the Venezuelan bolivar. |
2 | Miscellaneous income and expenses, net, generally includes interest items, insurance recoveries, litigation settlements and other items. |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Numerator: | ||||||||||||
Income from continuing operations after income taxes attributable to DuPont | $ | 1,026 | $ | 1,090 | $ | 2,406 | $ | 2,487 | ||||
Preferred dividends | (2 | ) | (2 | ) | (5 | ) | (5 | ) | ||||
Income from continuing operations after income taxes available to DuPont common stockholders | $ | 1,024 | $ | 1,088 | $ | 2,401 | $ | 2,482 | ||||
Income from discontinued operations after income taxes | $ | 4 | $ | 76 | $ | 1,972 | $ | 171 | ||||
Net income available to common stockholders | $ | 1,028 | $ | 1,164 | $ | 4,373 | $ | 2,653 | ||||
Denominator: | ||||||||||||
Weighted-average number of common shares outstanding - Basic | 922,684,000 | 934,057,000 | 925,500,000 | 933,982,000 | ||||||||
Dilutive effect of the company’s employee compensation plans | 6,796,000 | 8,775,000 | 6,811,000 | 9,551,000 | ||||||||
Weighted-average number of common shares outstanding - Diluted | 929,480,000 | 942,832,000 | 932,311,000 | 943,533,000 |
Three Months Ended | Six Months Ended | |||||||
June 30, | June 30, | |||||||
2013 | 2012 | 2013 | 2012 | |||||
Average number of stock options | — | 12,750,000 | 5,192,000 | 11,737,000 |
June 30, 2013 | December 31, 2012 | |||||
Finished products | $ | 3,841 | $ | 4,449 | ||
Semifinished products | 1,828 | 2,407 | ||||
Raw materials, stores and supplies | 1,315 | 1,313 | ||||
6,984 | 8,169 | |||||
Adjustment of inventories to a last-in, first-out (LIFO) basis | (611 | ) | (604 | ) | ||
Total | $ | 6,373 | $ | 7,565 |
June 30, 2013 | December 31, 2012 | |||||||||||||||||
Gross | Accumulated Amortization | Net | Gross | Accumulated Amortization | Net | |||||||||||||
Intangible assets subject to amortization (Definite-lived): | ||||||||||||||||||
Customer lists | $ | 1,816 | $ | (370 | ) | $ | 1,446 | $ | 1,847 | $ | (330 | ) | $ | 1,517 | ||||
Patents | 523 | (149 | ) | 374 | 525 | (127 | ) | 398 | ||||||||||
Purchased and licensed technology | 1,939 | (1,121 | ) | 818 | 1,929 | (1,016 | ) | 913 | ||||||||||
Trademarks | 57 | (30 | ) | 27 | 57 | (29 | ) | 28 | ||||||||||
Other 1 | 213 | (103 | ) | 110 | 206 | (98 | ) | 108 | ||||||||||
4,548 | (1,773 | ) | 2,775 | 4,564 | (1,600 | ) | 2,964 | |||||||||||
Intangible assets not subject to amortization(Indefinite-lived): | ||||||||||||||||||
In-process research and development | 52 | — | 52 | 62 | — | 62 | ||||||||||||
Microbial cell factories 2 | 306 | — | 306 | 306 | — | 306 | ||||||||||||
Pioneer germplasm 3 | 975 | — | 975 | 975 | — | 975 | ||||||||||||
Trademarks/tradenames | 834 | — | 834 | 819 | — | 819 | ||||||||||||
2,167 | — | 2,167 | 2,162 | — | 2,162 | |||||||||||||
Total | $ | 6,715 | $ | (1,773 | ) | $ | 4,942 | $ | 6,726 | $ | (1,600 | ) | $ | 5,126 |
1 | Primarily consists of sales and grower networks, marketing and manufacturing alliances and noncompetition agreements. |
2 | Microbial cell factories, derived from natural microbes, are used to sustainably produce enzymes, peptides and chemicals using natural metabolic processes. The company recognized the microbial cell factories as an intangible asset upon the acquisition of Danisco. This intangible asset is expected to contribute to cash flows beyond the foreseeable future and there are no legal, regulatory, contractual, or other factors which limit its useful life. |
3 | Pioneer germplasm is the pool of genetic source material and body of knowledge gained from the development and delivery stage of plant breeding. The company recognized germplasm as an intangible asset upon the acquisition of Pioneer. This intangible asset is expected to contribute to cash flows beyond the foreseeable future and there are no legal, regulatory, contractual, or other factors which limit its useful life. |
Short-Term | Long-Term | Total | |||||||
Obligations for customers and suppliers1: | |||||||||
Bank borrowings (terms up to 8 years) | $ | 174 | $ | 141 | $ | 315 | |||
Leases on equipment and facilities (terms up to 4 years) | — | 1 | 1 | ||||||
Obligations for equity affiliates2: | |||||||||
Bank borrowings (terms up to 2 years) | 182 | 1 | 183 | ||||||
Total | $ | 356 | $ | 143 | $ | 499 |
1 | Existing guarantees for customers and suppliers arose as part of contractual agreements. |
2 | Existing guarantees for equity affiliates arose for liquidity needs in normal operations. |
Three Months Ended | Three Months Ended | Affected Line Item in Consolidated Income Statements1 | |||||||||||||||||
June 30, 2013 | June 30, 2012 | ||||||||||||||||||
Pre-Tax | Tax | After-Tax | Pre-Tax | Tax | After-Tax | ||||||||||||||
Cumulative translation adjustment | $ | (14 | ) | $ | — | $ | (14 | ) | $ | (412 | ) | $ | — | $ | (412 | ) | |||
Net revaluation and clearance of cash flow hedges to earnings: | |||||||||||||||||||
Additions and revaluations of derivatives designated as cash flow hedges | (8 | ) | 2 | (6 | ) | 38 | (15 | ) | 23 | See (2) below | |||||||||
Clearance of hedge results to earnings: | |||||||||||||||||||
Foreign currency contracts | (7 | ) | 3 | (4 | ) | (3 | ) | 1 | (2 | ) | Net Sales | ||||||||
Commodity contracts | (11 | ) | 4 | (7 | ) | (20 | ) | 9 | (11 | ) | Cost of goods sold | ||||||||
Net revaluation and clearance of cash flow hedges to earnings | (26 | ) | 9 | (17 | ) | 15 | (5 | ) | 10 | ||||||||||
Pension benefit plans: | |||||||||||||||||||
Net gain | — | — | — | 4 | 7 | 11 | See (2) below | ||||||||||||
Prior service cost | — | — | — | — | (1 | ) | (1 | ) | See (2) below | ||||||||||
Reclassifications to net income: | |||||||||||||||||||
Amortization of prior service cost | 3 | (1 | ) | 2 | 3 | (1 | ) | 2 | See (3) below | ||||||||||
Amortization of loss | 239 | (82 | ) | 157 | 220 | (77 | ) | 143 | See (3) below | ||||||||||
Pension benefit plans, net | 242 | (83 | ) | 159 | 227 | (72 | ) | 155 | |||||||||||
Other benefit plans: | |||||||||||||||||||
Net gain | 28 | (9 | ) | 19 | — | — | — | See (2) below | |||||||||||
Reclassifications to net income: | |||||||||||||||||||
Amortization of prior service benefit | (46 | ) | 17 | (29 | ) | (30 | ) | 9 | (21 | ) | See (3) below | ||||||||
Amortization of (gain) loss | (2 | ) | — | (2 | ) | 22 | (7 | ) | 15 | See (3) below | |||||||||
Other benefit plans, net | (20 | ) | 8 | (12 | ) | (8 | ) | 2 | (6 | ) | |||||||||
Net unrealized gain on securities | 3 | (1 | ) | 2 | 1 | (1 | ) | — | |||||||||||
Other comprehensive income (loss) | $ | 185 | $ | (67 | ) | $ | 118 | $ | (177 | ) | $ | (76 | ) | $ | (253 | ) |
Six Months Ended | Six Months Ended | Affected Line Item in Consolidated Income Statements1 | |||||||||||||||||
June 30, 2013 | June 30, 2012 | ||||||||||||||||||
Pre-Tax | Tax | After-Tax | Pre-Tax | Tax | After-Tax | ||||||||||||||
Cumulative translation adjustment | $ | (223 | ) | $ | — | $ | (223 | ) | $ | (242 | ) | $ | — | $ | (242 | ) | |||
Net revaluation and clearance of cash flow hedges to earnings: | |||||||||||||||||||
Additions and revaluations of derivatives designated as cash flow hedges | (24 | ) | 9 | (15 | ) | 36 | (15 | ) | 21 | See (2) below | |||||||||
Clearance of hedge results to earnings: | |||||||||||||||||||
Foreign currency contracts | (3 | ) | 1 | (2 | ) | (6 | ) | 2 | (4 | ) | Net Sales | ||||||||
Commodity contracts | (25 | ) | 10 | (15 | ) | (49 | ) | 21 | (28 | ) | Cost of goods sold | ||||||||
Net revaluation and clearance of cash flow hedges to earnings | (52 | ) | 20 | (32 | ) | (19 | ) | 8 | (11 | ) | |||||||||
Pension benefit plans: | |||||||||||||||||||
Net gain (loss) | 56 | (14 | ) | 42 | (19 | ) | 10 | (9 | ) | See (2) below | |||||||||
Prior service benefit | — | — | — | 22 | (8 | ) | 14 | See (2) below | |||||||||||
Reclassifications to net income: | |||||||||||||||||||
Amortization of prior service cost | 6 | (2 | ) | 4 | 7 | (2 | ) | 5 | See (3) below | ||||||||||
Amortization of loss | 480 | (164 | ) | 316 | 439 | (152 | ) | 287 | See (3) below | ||||||||||
Curtailment loss | 1 | — | 1 | — | — | — | See (3) below | ||||||||||||
Settlement loss | 152 | (45 | ) | 107 | — | — | — | See (3) below | |||||||||||
Pension benefit plans, net | 695 | (225 | ) | 470 | 449 | (152 | ) | 297 | |||||||||||
Other benefit plans: | |||||||||||||||||||
Net gain | 45 | (15 | ) | 30 | — | — | — | See (2) below | |||||||||||
Reclassifications to net income: | |||||||||||||||||||
Amortization of prior service benefit | (94 | ) | 34 | (60 | ) | (60 | ) | 20 | (40 | ) | See (3) below | ||||||||
Amortization of loss | 25 | (9 | ) | 16 | 44 | (15 | ) | 29 | See (3) below | ||||||||||
Curtailment gain | (154 | ) | 54 | (100 | ) | — | — | — | See (3) below | ||||||||||
Settlement loss | 1 | — | 1 | — | — | — | See (3) below | ||||||||||||
Other benefit plans, net | (177 | ) | 64 | (113 | ) | (16 | ) | 5 | (11 | ) | |||||||||
Net unrealized gain on securities | 1 | (1 | ) | — | 2 | (1 | ) | 1 | |||||||||||
Other comprehensive income | $ | 244 | $ | (142 | ) | $ | 102 | $ | 174 | $ | (140 | ) | $ | 34 |
1 | Represents the income statement line item within the interim Consolidated Income Statement affected by the pre-tax reclassification out of other comprehensive income (loss). |
2 | These amounts represent changes in accumulated other comprehensive income excluding changes due to reclassifying amounts to the interim Consolidated Income Statements. |
3 | These accumulated other comprehensive income components are included in the computation of net periodic benefit cost of the company's pension and other long-term employee benefit plans. See Note 12 for additional information. |
Cumulative Translation Adjustment | Net Revaluation and Clearance of Cash Flow Hedges to Earnings | Pension Benefit Plans | Other Benefit Plans | Unrealized Gain (Loss) on Securities | Total | |||||||||||||
2013 | ||||||||||||||||||
Balance January 1, 2013 | $ | (167 | ) | $ | 3 | $ | (8,686 | ) | $ | 202 | $ | 2 | $ | (8,646 | ) | |||
Other comprehensive income before reclassifications | (223 | ) | (15 | ) | 42 | 30 | 1 | (165 | ) | |||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | (17 | ) | 428 | (143 | ) | (1 | ) | 267 | |||||||||
Balance June 30, 2013 | $ | (390 | ) | $ | (29 | ) | $ | (8,216 | ) | $ | 89 | $ | 2 | $ | (8,544 | ) |
Cumulative Translation Adjustment | Net Revaluation and Clearance of Cash Flow Hedges to Earnings | Pension Benefit Plans | Other Benefit Plans | Unrealized Gain on Securities | Total | |||||||||||||
2012 | ||||||||||||||||||
Balance January 1, 2012 | $ | (244 | ) | $ | 41 | $ | (8,276 | ) | $ | (274 | ) | $ | 3 | $ | (8,750 | ) | ||
Other comprehensive income before reclassifications | (242 | ) | 20 | (20 | ) | (1 | ) | — | (243 | ) | ||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | — | (32 | ) | 292 | (11 | ) | 1 | 250 | ||||||||||
Balance June 30, 2012 | $ | (486 | ) | $ | 29 | $ | (8,004 | ) | $ | (286 | ) | $ | 4 | $ | (8,743 | ) |
June 30, 2013 | December 31, 2012 | |||||
Derivatives designated as hedging instruments: | ||||||
Interest rate swaps | $ | 1,000 | $ | 1,000 | ||
Foreign currency contracts | 651 | 1,083 | ||||
Commodity contracts | 348 | 753 | ||||
Derivatives not designated as hedging instruments: | ||||||
Foreign currency contracts | 9,565 | 6,733 | ||||
Commodity contracts | 136 | 242 |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Beginning balance | $ | (12 | ) | $ | 18 | $ | 3 | $ | 41 | |||
Additions and revaluations of derivatives designated as cash flow hedges | (6 | ) | 24 | (15 | ) | 20 | ||||||
Clearance of hedge results to earnings | (11 | ) | (13 | ) | (17 | ) | (32 | ) | ||||
Ending balance | $ | (29 | ) | $ | 29 | $ | (29 | ) | $ | 29 |
Fair Value Using Level 2 Inputs | |||||||
Balance Sheet Location | June 30, 2013 | December 31, 2012 | |||||
Asset derivatives: | |||||||
Derivatives designated as hedging instruments: | |||||||
Interest rate swaps1 | Other assets | $ | 40 | $ | 55 | ||
Foreign currency contracts | Accounts and notes receivable, net | 8 | 7 | ||||
48 | 62 | ||||||
Derivatives not designated as hedging instruments: | |||||||
Foreign currency contracts2 | Accounts and notes receivable, net | 176 | 88 | ||||
Total asset derivatives3 | $ | 224 | $ | 150 | |||
Cash collateral1,2 | Other accrued liabilities | $ | 39 | $ | 44 | ||
Liability derivatives: | |||||||
Derivatives designated as hedging instruments: | |||||||
Foreign currency contracts | Other accrued liabilities | $ | 1 | $ | 10 | ||
Commodity contracts | Other accrued liabilities | 2 | — | ||||
3 | 10 | ||||||
Derivatives not designated as hedging instruments: | |||||||
Foreign currency contracts | Other accrued liabilities | 35 | 76 | ||||
Commodity contracts | Other accrued liabilities | 1 | 1 | ||||
36 | 77 | ||||||
Total liability derivatives3 | $ | 39 | $ | 87 |
1 | Cash collateral held as of June 30, 2013 and December 31, 2012 represents $20 and $13, respectively, related to interest rate swap derivatives designated as hedging instruments. |
2 | Cash collateral held as of June 30, 2013 and December 31, 2012 represents $19 and $31, respectively, related to foreign currency derivatives not designated as hedging instruments. |
3 | The company's derivative assets and liabilities subject to enforceable master netting arrangements totaled $20 at June 30, 2013 and $40 at December 31, 2012. |
Amount of Gain (Loss) Recognized in OCI1 (Effective Portion) | Amount of Gain (Loss) Recognized in Income2 | ||||||||||||
Three Months Ended June 30, | 2013 | 2012 | 2013 | 2012 | Income Statement Classification | ||||||||
Derivatives designated as hedging instruments: | |||||||||||||
Fair value hedges: | |||||||||||||
Interest rate swaps | $ | — | $ | — | $ | (8 | ) | $ | (1 | ) | Interest expense3 | ||
Cash flow hedges: | |||||||||||||
Foreign currency contracts | 2 | 27 | 7 | 4 | Net sales | ||||||||
Commodity contracts | (10 | ) | 12 | 11 | 19 | Cost of goods sold | |||||||
(8 | ) | 39 | 10 | 22 | |||||||||
Derivatives not designated as hedging instruments: | |||||||||||||
Foreign currency contracts | — | — | 90 | 238 | Other income, net4 | ||||||||
Commodity contracts | — | — | (14 | ) | (3 | ) | Cost of goods sold | ||||||
— | — | 76 | 235 | ||||||||||
Total derivatives | $ | (8 | ) | $ | 39 | $ | 86 | $ | 257 |
Amount of Gain (Loss) Recognized in OCI1 (Effective Portion) | Amount of Gain (Loss) Recognized in Income2 | ||||||||||||
Six Months Ended June 30, | 2013 | 2012 | 2013 | 2012 | Income Statement Classification | ||||||||
Derivatives designated as hedging instruments: | |||||||||||||
Fair value hedges: | |||||||||||||
Interest rate swaps | $ | — | $ | — | $ | (15 | ) | $ | (4 | ) | Interest expense3 | ||
Cash flow hedges: | |||||||||||||
Foreign currency contracts | 16 | 17 | 3 | 7 | Net sales | ||||||||
Commodity contracts | (40 | ) | 18 | 25 | 48 | Cost of goods sold | |||||||
(24 | ) | 35 | 13 | 51 | |||||||||
Derivatives not designated as hedging instruments: | |||||||||||||
Foreign currency contracts | — | — | 196 | 110 | Other income, net4 | ||||||||
Commodity contracts | — | — | (8 | ) | (14 | ) | Cost of goods sold | ||||||
— | — | 188 | 96 | ||||||||||
Total derivatives | $ | (24 | ) | $ | 35 | $ | 201 | $ | 147 |
1 | OCI is defined as other comprehensive income (loss). |
2 | For cash flow hedges, this represents the effective portion of the gain (loss) reclassified from accumulated OCI into income during the period. For the three and six months ended June 30, 2013 and 2012, there was no material ineffectiveness with regard to the company's cash flow hedges. |
3 | Gain (loss) recognized in income of derivative is offset to $0 by gain (loss) recognized in income of the hedged item. |
4 | Gain (loss) recognized in other income, net, was partially offset by the related gain (loss) on the foreign currency-denominated monetary assets and liabilities of the company's operations, which were $(55) and $(188) for the three months ended June 30, 2013 and 2012, respectively, and $(150) and $(141) for the six months ended June 30, 2013 and 2012, respectively. |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Service cost | $ | 68 | $ | 66 | $ | 139 | $ | 134 | ||||
Interest cost | 271 | 295 | 544 | 592 | ||||||||
Expected return on plan assets | (378 | ) | (379 | ) | (760 | ) | (760 | ) | ||||
Amortization of loss | 239 | 220 | 480 | 439 | ||||||||
Amortization of prior service cost | 3 | 3 | 6 | 7 | ||||||||
Curtailment loss | — | — | 1 | — | ||||||||
Settlement loss | — | — | 152 | — | ||||||||
Net periodic benefit cost | $ | 203 | $ | 205 | $ | 562 | $ | 412 |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Service cost | $ | 8 | $ | 10 | $ | 16 | $ | 19 | ||||
Interest cost | 33 | 48 | 66 | 96 | ||||||||
Amortization of (gain) loss | (2 | ) | 22 | 25 | 44 | |||||||
Amortization of prior service benefit | (46 | ) | (30 | ) | (94 | ) | (60 | ) | ||||
Curtailment gain | — | — | (154 | ) | — | |||||||
Settlement loss | — | — | 1 | — | ||||||||
Net periodic benefit cost | $ | (7 | ) | $ | 50 | $ | (140 | ) | $ | 99 |
Three Months Ended June 30, | Agriculture1 | Electronics & Communications | Industrial Biosciences | Nutrition & Health | Performance Chemicals | Performance Materials | Safety & Protection | Pharm-aceuticals | Other | Total | |||||||||||||||||||||||||||||||
2013 | |||||||||||||||||||||||||||||||||||||||||
Segment sales | $ | 3,631 | $ | 653 | $ | 304 | $ | 865 | $ | 1,782 | $ | 1,670 | $ | 1,017 | $ | — | $ | 3 | $ | 9,925 | |||||||||||||||||||||
Less: Transfers | 2 | 5 | 4 | — | 53 | 16 | 1 | — | — | 81 | |||||||||||||||||||||||||||||||
Net sales | 3,629 | 648 | 300 | 865 | 1,729 | 1,654 | 1,016 | — | 3 | 9,844 | |||||||||||||||||||||||||||||||
PTOI | 861 | 2 | 95 | 43 | 61 | 264 | 336 | 172 | 18 | (73 | ) | 1,777 | |||||||||||||||||||||||||||||
2012 | |||||||||||||||||||||||||||||||||||||||||
Segment sales | $ | 3,388 | $ | 795 | $ | 300 | $ | 885 | $ | 1,968 | $ | 1,699 | $ | 986 | $ | — | $ | 1 | $ | 10,022 | |||||||||||||||||||||
Less: Transfers | 2 | 5 | 2 | — | 69 | 24 | 3 | — | — | 105 | |||||||||||||||||||||||||||||||
Net sales | 3,386 | 790 | 298 | 885 | 1,899 | 1,675 | 983 | — | 1 | 9,917 | |||||||||||||||||||||||||||||||
PTOI | 682 | 2 | 221 | 3 | 42 | 105 | 594 | 344 | 181 | 16 | (224 | ) | 4 | 1,961 |
Six Months Ended June 30, | Agriculture1 | Electronics & Communications | Industrial Biosciences | Nutrition & Health | Performance Chemicals | Performance Materials | Safety & Protection | Pharm-aceuticals | Other | Total | |||||||||||||||||||||||||||||||
2013 | |||||||||||||||||||||||||||||||||||||||||
Segment sales | $ | 8,300 | $ | 1,269 | $ | 593 | $ | 1,733 | $ | 3,367 | $ | 3,229 | $ | 1,924 | $ | — | $ | 4 | $ | 20,419 | |||||||||||||||||||||
Less: Transfers | 7 | 9 | 7 | — | 107 | 35 | 2 | — | — | 167 | |||||||||||||||||||||||||||||||
Net sales | 8,293 | 1,260 | 586 | 1,733 | 3,260 | 3,194 | 1,922 | — | 4 | 20,252 | |||||||||||||||||||||||||||||||
PTOI | 2,342 | 2 | 144 | 84 | 137 | 515 | 628 | 310 | 22 | (164 | ) | 4,018 | |||||||||||||||||||||||||||||
2012 | |||||||||||||||||||||||||||||||||||||||||
Segment sales | $ | 7,468 | $ | 1,472 | $ | 588 | $ | 1,693 | $ | 3,868 | $ | 3,299 | $ | 1,927 | $ | — | $ | 2 | $ | 20,317 | |||||||||||||||||||||
Less: Transfers | 4 | 9 | 5 | — | 146 | 50 | 6 | — | — | 220 | |||||||||||||||||||||||||||||||
Net sales | 7,464 | 1,463 | 583 | 1,693 | 3,722 | 3,249 | 1,921 | — | 2 | 20,097 | |||||||||||||||||||||||||||||||
PTOI | 1,970 | 2 | 280 | 3 | 81 | 184 | 1,165 | 621 | 340 | 43 | (300 | ) | 4 | 4,384 |
1 | As of June 30, 2013, Agriculture net assets were $9,207, an increase of $4,451 from $4,756 at December 31, 2012. The increase was primarily due to higher trade receivables due to normal seasonality in the sales and cash collections cycle. |
2 | Included charges of $(80) and $(115) during the three and six months ended June 30, 2013, respectively, and $(265) and $(315) during the three and six months ended June 30, 2012, respectively, recorded in other operating charges associated with the company's process to fairly resolve claims associated with the use of Imprelis®. See Note 9 for additional information. |
3 | Included a $122 gain recorded in other income, net related to the sale of the company's interest in an equity method investment. |
4 | Included a $(137) charge recorded in other operating charges related to the company's settlement of litigation with INVISTA. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||
Total segment PTOI | $ | 1,777 | $ | 1,961 | $ | 4,018 | $ | 4,384 | ||||
Non-operating pension and other postretirement employee benefit costs | (126 | ) | (174 | ) | (273 | ) | (350 | ) | ||||
Net exchange gains (losses), including affiliates | 35 | 50 | 46 | (31 | ) | |||||||
Corporate expenses | (206 | ) | (224 | ) | (420 | ) | (475 | ) | ||||
Interest expense | (115 | ) | (117 | ) | (232 | ) | (231 | ) | ||||
Income from continuing operations before income taxes | $ | 1,365 | $ | 1,496 | $ | 3,139 | $ | 3,297 |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Fluctuations in energy and raw material prices; |
• | Failure to develop and market new products and optimally manage product life cycles; |
• | Outcome of significant litigation and environmental matters, including those related to divested businesses; |
• | Failure to appropriately manage process safety and product stewardship issues; |
• | Effect of changes in tax, environmental and other laws and regulations or political conditions in the United States of America (U.S.) and other countries in which the company operates; |
• | Conditions in the global economy and global capital markets, including economic factors, such as inflation, deflation and fluctuations in currency exchange rates, interest rates and commodity prices, as well as regulatory requirements; |
• | Impact of business disruptions, including supply disruptions, and security threats, regardless of cause, including acts of sabotage, cyber-attacks, terrorism or war, weather events and natural disasters; |
• | Inability to protect and enforce the company's intellectual property rights; and |
• | Successful integration of acquired businesses and completion of divestitures of underperforming or non-strategic assets or businesses. |
• | Net sales were $9.8 billion, 1 percent below prior year, principally reflecting lower price in Performance Chemicals. Total company volume increased 1 percent with increases in Agriculture, Performance Chemicals, Performance Materials, and Safety & Protection, offset by decreases in Electronics & Communications and Nutrition & Health. |
• | Agriculture sales increased 7 percent from higher global pricing for seed and volume growth in insecticides and fungicides. Pre-tax operating income (PTOI) for Agriculture increased 26 percent as lower charges for Imprelis® herbicide claims were partially offset by higher seed input costs and increased operating costs resulting from cool and wet weather conditions. |
• | Total segment PTOI was $1.8 billion versus $2.0 billion, down 9 percent from the prior year, as Performance Chemicals PTOI declined $330 million, reflecting a significant reduction in global titanium dioxide prices. |
• | Net sales of $20.3 billion were up 1 percent with volume up 2 percent principally reflecting higher Agriculture volumes in U.S. & Canada, Europe and Latin America. |
• | Agriculture PTOI of $2.3 billion increased $0.4 billion on sales growth and lower charges incurred related to Imprelis® herbicide claims, partially offset by higher seed input costs. |
• | Total segment PTOI of $4.0 billion declined 8 percent as Performance Chemicals PTOI decreased $650 million or 56 percent versus the prior year. |
• | Income from continuing operations after income taxes was $2.4 billion, down 4 percent versus $2.5 billion for the same period last year. |
• | Proceeds from the sale of the Performance Coatings segment funded a $1 billion share buyback. |
• | Cost productivity gains and restructuring savings are on track to meet or exceed full-year targets. |
Three Months Ended June 30, 2013 | Percent Change Due to: | ||||||||||
Net Sales ($ Billions) | Percent Change vs. 2012 | Local Price | Currency Effect | Volume | |||||||
Worldwide | $ | 9.8 | (1 | ) | (1 | ) | (1 | ) | 1 | ||
U.S. & Canada | 4.7 | 1 | 2 | — | (1 | ) | |||||
Europe, Middle East & Africa (EMEA) | 2.1 | — | (3 | ) | (2 | ) | 5 | ||||
Asia Pacific | 2.1 | (8 | ) | (6 | ) | (2 | ) | — | |||
Latin America | 0.9 | 7 | (4 | ) | (1 | ) | 12 |
Six Months Ended June 30, 2013 | Percent Change Due to: | ||||||||||
Net Sales ($ Billions) | Percent Change vs. 2012 | Local Price | Currency Effect | Volume | |||||||
Worldwide | $ | 20.3 | 1 | — | (1 | ) | 2 | ||||
U.S. & Canada | 9.6 | 4 | 3 | — | 1 | ||||||
Europe, Middle East & Africa (EMEA) | 4.8 | — | (1 | ) | (1 | ) | 2 | ||||
Asia Pacific | 3.9 | (8 | ) | (6 | ) | (2 | ) | — | |||
Latin America | 2.0 | 5 | — | (3 | ) | 8 |
Three Months Ended | |||||||||||
June 30, 2013 | Percentage Change Due to: | ||||||||||
Segment Sales ($ Billions) | Percent Change vs. 2012 | Price | Volume | Portfolio and Other | |||||||
Agriculture | $ | 3.6 | 7 | 6 | 1 | — | |||||
Electronics & Communications | 0.7 | (18 | ) | (6 | ) | (12 | ) | — | |||
Industrial Biosciences | 0.3 | 1 | 1 | — | — | ||||||
Nutrition & Health | 0.9 | (2 | ) | 2 | (2 | ) | (2 | ) | |||
Performance Chemicals | 1.8 | (9 | ) | (15 | ) | 6 | — | ||||
Performance Materials | 1.7 | (2 | ) | (3 | ) | 2 | (1 | ) | |||
Safety & Protection | 1.0 | 3 | (2 | ) | 5 | — |
Six Months Ended | |||||||||||
June 30, 2013 | Percentage Change Due to: | ||||||||||
Segment Sales ($ Billions) | Percent Change vs. 2012 | Price | Volume | Portfolio and Other | |||||||
Agriculture | $ | 8.3 | 11 | 6 | 5 | — | |||||
Electronics & Communications | 1.3 | (14 | ) | (5 | ) | (9 | ) | — | |||
Industrial Biosciences | 0.6 | 1 | 2 | (1 | ) | — | |||||
Nutrition & Health | 1.7 | 2 | 4 | — | (2 | ) | |||||
Performance Chemicals | 3.4 | (13 | ) | (12 | ) | (1 | ) | — | |||
Performance Materials | 3.2 | (2 | ) | (3 | ) | 2 | (1 | ) | |||
Safety & Protection | 1.9 | — | (2 | ) | 2 | — |
(Dollars in millions) | June 30, 2013 | December 31, 2012 | ||||
Cash, cash equivalents and marketable securities | $ | 6,896 | $ | 4,407 | ||
Total debt | 14,080 | 11,740 |
Long-term | Short-term | Outlook | |
Standard & Poor's | A | A-1 | Stable |
Moody’s Investors Service | A2 | P-1 | Stable |
Fitch Ratings | A | F1 | Stable |
Six Months Ended | ||||||
June 30, | ||||||
(Dollars in millions) | 2013 | 2012 | ||||
Cash used for operating activities | $ | (2,631 | ) | $ | (1,117 | ) |
Purchases of property, plant and equipment | (757 | ) | (696 | ) | ||
Free cash flow | $ | (3,388 | ) | $ | (1,813 | ) |
Payments Due In | |||||||||||||||
(Dollars in millions) | Total at June 30, 2013 | Remainder 2013 | 2014 - 2015 | 2016 - 2017 | 2018 and beyond | ||||||||||
License agreements | $ | 2,235 | $ | 85 | $ | 605 | $ | 595 | $ | 950 |
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Item 1. | LEGAL PROCEEDINGS |
Month | Total Number of Shares Purchased(2) | Average Price Paid per Share(2) | Total Number of Shares Purchased as Part of Publicly Announced Program(2) | Approximate Value of Shares that May Yet Be Purchased Under the Program (Dollars in millions)(1),(2) | ||||
May | 3,459,392 | $49.02 | 3,459,392 | $ | — | |||
Total | 3,459,392 | 3,459,392 |
1 | The 2012 $1 billion share buyback plan was completed in the second quarter 2013. |
2 | Shares purchased in May 2013 include the final share delivery amount under the ASR agreement. In February 2013, the Company received 16,938,387 as an initial share delivery under the ASR agreement, which represented 80% of the $1 billion notional amount of the ASR agreement. The average price paid per share and total number of shares purchased as part of the 2012 share buyback plan was determined using the volume-weighted average price of the company's common stock over the term of the ASR agreement. The 2012 $1 billion share buyback plan was completed in the second quarter 2013 through the ASR agreement under which the company purchased and retired 20.4 million shares at an average price of $49.02 per share at a total cost of $1 billion as of June 30, 2013. |
Item 6. | EXHIBITS |
E. I. DU PONT DE NEMOURS AND COMPANY | ||
(Registrant) | ||
Date: | July 23, 2013 | |
By: | /s/ Nicholas C. Fanandakis | |
Nicholas C. Fanandakis | ||
Executive Vice President and | ||
Chief Financial Officer | ||
(As Duly Authorized Officer and | ||
Principal Financial and Accounting Officer) |
Exhibit Number | Description | |
3.1 | Company’s Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the company’s Annual Report on Form 10-K for the year ended December 31, 2012). | |
3.2 | Company’s Bylaws, as last amended effective November 1, 2009 (incorporated by reference to Exhibit 3.2 to the company’s Annual Report on Form 10-K for the year ended December 31, 2009). | |
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* | The DuPont Stock Accumulation and Deferred Compensation Plan for Directors, as last amended effective January 1, 2009 (incorporated by reference to Exhibit 10.1 to the company’s Annual Report on Form 10-K for the year ended December 31, 2008). | |
10.2* | Company’s Supplemental Retirement Income Plan, as last amended effective June 4, 1996 (incorporated by reference to Exhibit 10.2 to the company’s Annual Report on Form 10-K for the year ended December 31, 2011). | |
10.3* | Company’s Pension Restoration Plan, as restated effective July 17, 2006 (incorporated by reference to Exhibit 10.3 to the company’s Quarterly Report on Form 10-Q for the period ended June 30, 2011). | |
10.4* | Company’s Rules for Lump Sum Payments, as last amended effective December 20, 2007 (incorporated by reference to Exhibit 10.4 to the company’s Quarterly Report on Form 10-Q for the period ended June 30, 2011). | |
10.5* | Company’s Stock Performance Plan, as last amended effective January 25, 2007 (incorporated by reference to Exhibit 10.5 to the company’s Annual Report on Form 10-K for the year ended December 31, 2011). | |
10.6* | Company’s Equity and Incentive Plan as amended and restated effective March 2, 2011 and approved by the company’s shareholders on April 27, 2011 (incorporated by reference to pages B1-B15 of the company’s Annual Meeting Proxy Statement dated March 18, 2011). | |
10.7* | Form of Award Terms under the company’s Equity and Incentive Plan. | |
10.8* | Company’s Retirement Savings Restoration Plan, as last amended effective January 1, 2013 (incorporated by reference to Exhibit 10.8 to the company’s Annual Report on Form 10-K for the year ended December 31, 2012). | |
10.9* | Company’s Retirement Income Plan for Directors, as last amended January 2011 (incorporated by reference to Exhibit 10.9 to the company's Quarterly Report on Form 10-Q for the period ended March 31, 2012). |
Exhibit Number | Description | |
10.10* | Company’s Management Deferred Compensation Plan, adopted on May 2, 2008, as last amended May 12, 2010 (incorporated by reference to Exhibit 10.11 to the company’s Quarterly Report on Form 10-Q for the period ended June 30, 2010). | |
10.11* | Supplemental Deferral Terms for Deferred Long Term Incentive Awards and Deferred Variable Compensation Awards (incorporated by reference to Exhibit 10.15 to the company’s Annual Report on Form 10-K for the year ended December 31, 2008). | |
10.12* | Purchase Agreement dated as of August 30, 2012, by and between E.I. du Pont de Nemours and Company and Flash Bermuda Co. Ltd. (incorporated by reference to Exhibit 2.1 to the company's Current Report on Form 8-K filed on September 4, 2012) (the "Purchase Agreement"). The company agrees to furnish supplementally a copy of any omitted schedules to the Commission upon request. | |
10.13* | Amendment to purchase Agreement, dated as of January 31, 2013, by and between E. I. du Pont de Nemours and Company and Flash Bermuda Co. Ltd. (incorporated by reference to Exhibit 10.13 to the company's Annual Report on Form 10-K for the year ended December 31, 2012). | |
12 | Computation of Ratio of Earnings to Fixed Charges. | |
18.1 | Preferability Letter of Independent Registered Public Accounting Firm (incorporated by reference to Exhibit 18.1 to the company’s Quarterly Report on Form 10-Q for the period ended March 31, 2013). | |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of the company’s Principal Executive Officer. | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of the company’s Principal Financial Officer. | |
32.1 | Section 1350 Certification of the company’s Principal Executive Officer. The information contained in this Exhibit shall not be deemed filed with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the registrant under the Securities Act of 1933, as amended. | |
32.2 | Section 1350 Certification of the company’s Principal Financial Officer. The information contained in this Exhibit shall not be deemed filed with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the registrant under the Securities Act of 1933, as amended. | |
95 | Mine Safety Disclosures. | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
Introduction | You have been granted time-vested Restricted Stock Units under the E. I. du Pont de Nemours and Company Equity and Incentive Plan (“Plan”), subject to the following Award Terms. This grant is also subject to the terms of the Plan, which is hereby incorporated by reference. However, to the extent that an Award Term conflicts with the Plan, the Plan shall govern. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in these Award Terms, including any appendices to these Award Terms (hereinafter, collectively referred to as the “Agreement”). A copy of the Plan, and other Plan-related materials, such as the Plan prospectus, are available at: |
Grant Award Acceptance | You must expressly accept the terms and conditions of your Award as set forth in this Agreement. To accept, log on to Merrill Lynch Benefits OnLine at www.benefits.ml.com, select Equity Plan > Grant Information > Pending Acceptance. If you do not accept your Restricted Stock Units in the manner instructed by the Company, your Restricted Stock Units will be subject to cancellation. |
Dividend Equivalents | Dividends payable on the shares represented by your Restricted Stock Units (including whole and fractional Restricted Stock Units) will be allocated to your account in the form of additional Restricted Stock Units (whole and fractional) based upon the closing Stock price on the date of the dividend payment. |
Restricted Period | You may not sell, gift, or otherwise transfer or dispose of any of the Restricted Stock Units during the “Restricted Period.” The Restricted Period commences on the date of grant specified above (the “Date of Grant”) and lapses as set forth herein. |
Under 55/10 Rule | If you are an active employee for six months following the Date of Grant and terminate employment after attainment of age 55 with at least 10 years of service, the Restricted Stock Units will remain subject to the Restricted Period set forth above. |
Due to Lack of Work, Divestiture to Entity Less Than 50% Owned by DuPont, Disability, or Death | If you are an active employee for six months following the Date of Grant, the Restricted Period on all units will lapse. |
Due to Any Other Reason (such as voluntary termination) | Restricted Stock Units that are subject to a Restricted Period will be forfeited. |
Payment | Except in the case of termination due to lack of work, divestiture to an entity less than 50% owned by DuPont, disability or death, Restricted Stock Units shall be paid to you when the Restricted Period lapses in accordance with the schedule set forth under “Restricted Period.” In the case of termination due to lack of work, divestiture to an entity less than 50% owned by DuPont, disability or death, Restricted Stock Units shall be paid to you or your beneficiary (or estate if there is no beneficiary), as applicable, within sixty days of the date on which the Restricted Period lapses as a result of the termination. Restricted Stock Units are payable in one share of Stock for each whole unit and a cash payment for any fraction of a unit. The value of each fractional unit will be based on the average high and low prices of Stock as reported on the Composite Tape of the New York Stock Exchange as of the effective date of payment. |
Code Section 409A | To the extent that an amount that is considered “nonqualified deferred compensation” subject to Code Section 409A (“deferred compensation”) is payable on account of your termination of employment, no amounts shall be paid hereunder on account thereof unless such termination of employment constitutes a “separation from service,” within the meaning of Code Section 409A. If you are a “specified employee,” within the meaning of Code Section 409A, no amount that is deferred compensation shall be paid or delivered, on account of your separation from service, earlier than the date that is six months after such separation from service. Amounts otherwise payable during that six month period shall be paid on the date that is six months and one day after your separation from service. |
Restricted Conduct | If you engage in any of the conduct described in subparagraphs (i) through (v) below for any reason, in addition to all remedies in law and/or equity available to the Company or any Subsidiary or Affiliate, you shall forfeit all Restricted Stock Units. For purposes of subparagraphs (i) through (v) below, “Company” shall mean E. I. du Pont de Nemours and Company and/or any of its Subsidiaries or Affiliates. |
Recoupment Policy | This Award shall be subject to the Company's Incentive Compensation Clawback Policy (as it may be amended from time to time), the terms of which are incorporated herein by reference. |
Forfeiture | Any benefits you may receive hereunder shall be subject to repayment or forfeiture as may be required to comply with the requirements of the U.S. Securities and Exchange Commission or any applicable law, including the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or any securities exchange on which the Stock is traded, as may be in effect from time to time. |
Deferral | If you are an officer of the Company, you may defer the settlement of this Award in accordance with the procedures established by the Company for that purpose. |
Withholding | You acknowledge that the Company and/or your employer (the “Employer”) (1) make no representations or undertakings regarding the treatment of any income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Plan and legally applicable to you (“Tax-Related Items”) in connection with any aspect of the Restricted Stock Units, including, but not limited to, the grant, vesting or settlement of the Restricted Stock Units, the subsequent sale of shares of Stock acquired pursuant to such settlement and the receipt of any dividends and/or any dividend equivalents; and (2) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Restricted Stock Units to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. Further, if you are subject to Tax-Related Items in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. |
Severability | The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable. |
Waiver | You acknowledge that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by you or any other participant. |
Requirements | The Company reserves the right to impose other requirements on your participation in this Agreement, on the Restricted Stock Units and on any shares of Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. |
Introduction | You have been granted performance-based Restricted Stock Units (“Units”) under the E. I. du Pont de Nemours and Company Equity and Incentive Plan (“Plan”), subject to the following Award Terms. This grant is also subject to the terms of the Plan, which is hereby incorporated by reference. However, to the extent that an Award Term conflicts with the Plan, the Plan shall govern. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in these Award Terms, including any appendices to these Award Terms (hereinafter, collectively referred to as the “Agreement”). A copy of the Plan, and other Plan-related materials, such as the Plan prospectus, are available at: |
Grant Award Acceptance | You must expressly accept the terms and conditions of your Award as set forth in this Agreement. To accept, log on to Merrill Lynch Benefits OnLine at www.benefits.ml.com, select Equity Plan > Grant Information > Pending Acceptance. If you do not accept your Units in the manner instructed by the Company, your Units will be subject to cancellation. |
Dividend Equivalents | Dividends payable on the total number of shares represented by your Units (including whole and fractional Units) will be allocated to your account in the form of Units (whole and fractional) based upon the closing stock price on the date of the dividend payment. Dividend equivalent units will be determined after the end of the Performance Period and credited to your account at that time based on the performance-adjusted number of Units in your account. Dividend equivalent units will be calculated by taking the final performance-adjusted Units and calculating the dividend equivalent units for the first dividend payment date for the Performance Period. The resulting number of dividend equivalent units from the first dividend payment date will be added to the final performance-adjusted number of Units before calculating the dividend equivalent units for the second dividend payment date during the Performance Period. This process will be repeated for each subsequent dividend payment date during the Performance Period. |
Performance Period | January 1, 2013- December 31, 2015 |
Vesting Terms | You may not sell, gift, or otherwise transfer or dispose of any of the Units. |
Performance Metrics | The final number of Units earned is based upon the Company's revenue growth and total shareholder return relative to a group of its peer companies. |
Revenue Payout % x Target Award x 50% | + | TSR Payout % x Target Award x 50% | = | Final Award |
Revenue Growth Percentile Ranking | Percent of Target Award Earned |
≤ 25th | —% |
25th* | 25% (threshold) |
50th* | 100% (target) |
75th* | 200% (maximum) |
• | For each peer company, revenue growth is based on revenue for the fiscal year preceding the Performance Period (e.g., 12/31/2012) compared to revenue for the last fiscal year of the Performance Period (e.g., 12/31/2015) |
• | Based on the table above, the Company's percentile rank in revenue growth against its peer companies is translated into a percentage (of target) payout for 50% of the Award. |
TSR Percentile Ranking Goal | Percent of Target Award Earned |
≤ 25th | —% |
25th* | 25% (threshold) |
50th* | 100% (target) |
75th* | 200% (maximum) |
TSR = | Change in Stock Price + Dividends Paid |
Beginning Stock Price |
• | Beginning Stock Price: average closing price of the Stock over the 20 trading days immediately prior to the first day of the Performance Period. |
• | Ending Stock Price: average closing price of the Stock over the last 20 trading days of the Performance Period. |
• | Change in Stock Price: difference between the Beginning Stock Price and the Ending Stock Price. |
• | Dividends Paid: total of all dividends paid on one share of Stock during the applicable calendar quarter(s) during the Performance Period, provided that dividends shall be treated as though they are reinvested on day of payment based on closing price of the Stock on that day. |
• | Based on the table above, the Company's percentile rank in TSR against its peer companies is translated into a percentage (of target) payout for 50% of the Award. |
Payment | As soon as practicable during your first taxable year ending after the last day of the Performance Period, vested Units (including dividend equivalents accruing after the end of the Performance Period and prior to the payment date), if any, will be paid to you or your beneficiary (or estate if there is no beneficiary), as applicable, in one share of Stock for each whole Unit and a cash payment for any fraction of a Unit. The value of each fractional Unit will be based on the average high and low prices of Stock as reported on the Composite Tape of the New York Stock Exchange as of the effective date of payment. |
Code Section 409A | The Units are intended to be exempt from or compliant with Code Section 409A and the U.S. Treasury Regulations relating thereto so as not to subject you to the payment of additional taxes and interest under Code Section 409A or other adverse tax consequences. In furtherance of this intent, the provisions of this Agreement will be interpreted, operated, and administered in a manner consistent with these intentions. The Committee may modify the terms of this Agreement, the Plan or both, without your consent, in the manner that the Committee may determine to be necessary or advisable in order to comply with Code Section 409A or to mitigate any additional tax, interest and/or penalties or other adverse tax consequences that may apply under Code Section 409A if compliance is not practical. This section does not create an obligation on the part of the Company to modify the terms of this Agreement or the Plan and does not guarantee that the Units or the delivery of shares of Stock upon vesting/settlement of the Units will not be subject to taxes, interest and penalties or any other adverse tax consequences under Code Section 409A. In no event whatsoever shall the Company be liable to any party for any additional tax, interest or penalties that may be imposed on you by Code Section 409A or any damages for failing to comply with Code Section 409A. |
Under 55/10 Rule, Due to Lack of Work, Divestiture to Entity Less Than 50% Owned by DuPont, Disability, or Death | If you are an active employee for six months following the Date of Grant and terminate employment (i) after attainment of age 55 with at least 10 years of service; or due to (ii) disability; (iii) death; (iv) lack of work; or (v) divestiture to an entity less than 50% owned by the Company, the Units will remain subject to the Vesting Terms and will be paid in accordance with the Payment provisions above. However, the number of Units will be prorated based on the number of months you were employed from the Date of Grant through the end of the Performance Period. |
Due to Any Other Reason (such as voluntary termination) | Units will be forfeited as of the date on which you terminate employment. |
Restricted Conduct | If you engage in any of the conduct described in subparagraphs (i) through (v) below for any reason, in addition to all remedies in law and/or equity available to the Company or any Subsidiary or Affiliate, you shall forfeit all Units. For purposes of subparagraphs (i) through (v) below, “Company” shall mean E. I. du Pont de Nemours and Company and/or any of its Subsidiaries or Affiliates. |
Recoupment Policy | This Award shall be subject to the Company's Incentive Compensation Clawback Policy (as it may be amended from time to time), the terms of which are incorporated herein by reference. |
Forfeiture | Any benefits you may receive hereunder shall be subject to repayment or forfeiture as may be required to comply with the requirements of the U.S. Securities and Exchange Commission or any applicable law, including the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or any securities exchange on which the Stock is traded, as may be in effect from time to time. |
Deferral | If you are an officer of the Company, you may defer the settlement of this Award in accordance with the procedures established by the Company for that purpose. |
Withholding | You acknowledge that the Company and/or your employer (the “Employer”) (1) make no representations or undertakings regarding the treatment of any income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Plan and legally applicable to you (“Tax-Related Items”) in connection with any aspect of the Units, including, but not limited to, the grant, vesting or settlement of the Units, the subsequent sale of shares of Stock acquired pursuant to such settlement and the receipt of any dividends and/or any dividend equivalent units; and (2) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Units to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. Further, if you are subject to Tax-Related Items in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. |
Severability | The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable. |
Waiver | You acknowledge that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by you or any other participant. |
Requirements | The Company reserves the right to impose other requirements on your participation in this Agreement, on the Units and on any shares of Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. |
Introduction | You have been granted stock options under the E. I. du Pont de Nemours and Company Equity and Incentive Plan (“Plan”), subject to the following Award Terms. This grant is also subject to the terms of the Plan itself, which is hereby incorporated by reference. However, to the extent that an Award Term conflicts with the Plan, the Plan shall govern. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in these Award Terms, including any appendices to these Award Terms (hereinafter, collectively referred to as the “Agreement”). A copy of the Plan, and other Plan-related materials, such as the Plan prospectus, are available at: |
Grant Award Acceptance | You must expressly accept the terms and conditions of your Award as set forth in this Agreement. To accept, log on to Merrill Lynch Benefits OnLine at www.benefits.ml.com, select Equity Plan > Grant Information > Pending Acceptance. If you do not accept your Award in the manner instructed by the Company, your Award will be subject to cancellation. |
Date of Grant | February 6, 2013 |
Exercise Price | $47.44 |
Expiration Date | Option will expire no later than February 5, 2020 or two years after the date of your death if earlier. However, the Option may expire sooner. Please refer to “Termination of Employment” below. |
Vesting Schedule | One-third (1/3) of the Options (rounded to a whole number of shares) will become exercisable on February 6, 2014. |
Under 55/10 Rule | If you are an active employee for six months following the date of grant specified above (the “Date of Grant”) and terminate employment after attainment of age 55 with at least 10 years of service, the Options will be exercisable through the Expiration Date set forth above. After that date, any unexercised Options will expire. Any unvested Options as of the date of termination will continue to vest in accordance with the Vesting Schedule set forth above. |
Due to Lack of Work, Divestiture to Entity Less Than 50% Owned by DuPont, or Disability | If you are an active employee for six months following the Date of Grant, the Options will be exercisable through the date that is one year after the date of your termination of employment, or, if earlier, the Expiration Date set forth above. After that date, any unexercised Options will expire. Any unvested Options as of the date of termination will continue to vest in accordance with the Vesting Schedule set forth above. |
Due to Death | If you are an active employee for six months following the Date of Grant, the Options will be exercisable through the date that is two years after the date of your termination of employment or, if earlier, the Expiration Date set forth above. After that date, any unexercised Options will expire. Any unvested Options as of the date of termination will be automatically vested. |
Due to Any Other Reason (such as voluntary termination) | Options must be exercised by the date on which you terminate employment. |
Restricted Conduct | If you engage in any of the conduct described in subparagraphs (i) through (v) below for any reason, in addition to all remedies in law and/or equity available to the Company or any Subsidiary or Affiliate, you shall forfeit all unvested Options. For purposes of subparagraphs (i) through (v) below, “Company” shall mean E. I. du Pont de Nemours and Company and/or any of its Subsidiaries or Affiliates. |
Recoupment Policy | This Award shall be subject to the Company's Incentive Compensation Clawback Policy (as it may be amended from time to time), the terms of which are incorporated herein by reference. |
Forfeiture | Any benefits you may receive hereunder shall be subject to repayment or forfeiture as may be required to comply with the requirements of the U.S. Securities and Exchange Commission or any applicable law, including the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or any securities exchange on which the Stock is traded, as may be in effect from time to time. |
Exercise Methods | There are four exercise methods from which to choose. Due to local legal requirements, not all methods are available in all countries. |
Withholding | You acknowledge that the Company and/or the Employer (1) make no representations or undertakings regarding the treatment of any income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Plan and legally applicable to you (“Tax-Related Items”) in connection with any aspect of the Options, including, but not limited to, the grant, vesting or exercise of the Options, the subsequent sale of shares of Stock acquired pursuant to such exercise and the receipt of any dividends; and (2) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Options to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result. Further, if you are subject to Tax-Related Items in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. |
Non-transferability | You may not transfer these Options, except by will or laws of descent and distribution. The Options are exercisable during your lifetime only by you or your guardian or legal representative. |
Severability | The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable. |
Waiver | You acknowledge that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by you or any other participant. |
Requirements | The Company reserves the right to impose other requirements on your participation in this Agreement, on the Options and on any shares of Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. |
Six Months Ended June 30, | |||||||
2013 | 2012 | ||||||
Income from continuing operations before income taxes | $ | 3,139 | $ | 3,297 | |||
Adjustment for companies accounted for by the equity method | 23 | (9 | ) | ||||
Less: Capitalized interest | (20 | ) | (19 | ) | |||
Add: Amortization of capitalized interest | 18 | 19 | |||||
3,160 | 3,288 | ||||||
Fixed charges: | |||||||
Interest and debt expense | 232 | 231 | |||||
Capitalized interest | 20 | 19 | |||||
Rental expense representative of interest factor | 60 | 51 | |||||
312 | 301 | ||||||
Total adjusted earnings available for payment of fixed charges | $ | 3,472 | $ | 3,589 | |||
Number of times fixed charges earned | 11.1 | 11.9 |
1. | I have reviewed this report on Form 10-Q for the period ended June 30, 2013 of E. I. du Pont de Nemours and Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | July 23, 2013 |
By: | /s/ Ellen J. Kullman |
Ellen J. Kullman | |
Chief Executive Officer and | |
Chair of the Board |
1. | I have reviewed this report on Form 10-Q for the period ended June 30, 2013 of E. I. du Pont de Nemours and Company; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: | July 23, 2013 |
By: | /s/ Nicholas C. Fanandakis |
Nicholas C. Fanandakis | |
Executive Vice President and | |
Chief Financial Officer |
(1) | The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Ellen J. Kullman |
Ellen J. Kullman |
Chief Executive Officer |
July 23, 2013 |
(1) | The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Nicholas C. Fanandakis |
Nicholas C. Fanandakis |
Chief Financial Officer |
July 23, 2013 |
Mine (MSHA Identification Number) | Section 104 S&S1 Citations (#) | Section104(b) Orders (#) | Section 104(d) Citations and Orders (#) | Section 110(b)(2) Violations (#) | Section 107(a) Orders (#) | Total Dollar Value of MSHA Assessments Proposed ($) | Total Number of Mining Related Fatalities (#) | Received Notice of Pattern of Violations Under Section 104(e) (yes/no) | Received Notice of Potential to Have Pattern Under Section 104(e) (yes/no) | Legal Actions Pending as of Last Day of Period (#) | Legal Actions Initiated During Period (#) | Legal Actions Resolved During Period (#) | |||||||||||||
Starke, FL (0800225) | — | — | — | — | — | $ | 670 | — | No | No | 1 | 1 | — |
1 | S&S refers to significant and substantial violations of mandatory health or safety standards under section 104 of the Mine Act. |
Financial Instruments
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Financial Instruments Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | Financial Instruments Debt The estimated fair value of the company's total debt including interest rate financial instruments was determined using level 2 inputs within the fair value hierarchy, as described in the company's 2012 Annual Report in Note 1, “Summary of Significant Accounting Policies.” Based on quoted market prices for the same or similar issues or on current rates offered to the company for debt of the same remaining maturities, the fair value of the company's debt was approximately $14,750 and $13,015 as of June 30, 2013 and December 31, 2012, respectively. The increase was primarily due to the issuance in the first quarter 2013 of $1,250 of 2.80% Notes due February 15, 2023 and $750 of 4.15% Notes due February 15, 2043 and an increase in short-term borrowings, partially offset by debt maturities and a decrease in the fair value due to changes in market interest rates during the six months ended June 30, 2013. Cash Equivalents The fair value of cash equivalents approximates its stated value. The estimated fair value of the company's cash equivalents was determined using level 1 and level 2 inputs within the fair value hierarchy, as described in the company's 2012 Annual Report in Note 1, “Summary of Significant Accounting Policies.” Level 1 measurements are based on quoted market prices and level 2 measurements are based on current interest rates for similar instruments with comparable credit risk and time to maturity. The company held $1,334 and $0 of money market funds (level 1 measurements) as of June 30, 2013 and December 31, 2012, respectively. The company held $3,467 and $2,026 of other cash equivalents (level 2 measurements) as of June 30, 2013 and December 31, 2012, respectively. Derivative Instruments Objectives and Strategies for Holding Derivative Instruments In the ordinary course of business, the company enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency, interest rate and commodity price risks. The company has established a variety of derivative programs to be utilized for financial risk management. These programs reflect varying levels of exposure coverage and time horizons based on an assessment of risk. Derivative programs have procedures and controls and are approved by the Corporate Financial Risk Management Committee, consistent with the company's financial risk management policies and guidelines. Derivative instruments used are forwards, options, futures and swaps. The company has not designated any nonderivatives as hedging instruments. The company's financial risk management procedures also address counterparty credit approval, limits and routine exposure monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions and major commodity exchanges. The company is exposed to credit loss in the event of nonperformance by these counterparties. The company utilizes collateral support annex agreements with certain counterparties to limit its exposure to credit losses. The company's derivative assets and liabilities are reported on a gross basis in the Condensed Consolidated Balance Sheets. The company anticipates performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks associated with these instruments are regularly reported to management. The notional amounts of the company's derivative instruments were as follows:
Foreign Currency Risk The company's objective in managing exposure to foreign currency fluctuations is to reduce earnings and cash flow volatility associated with foreign currency rate changes. Accordingly, the company enters into various contracts that change in value as foreign exchange rates change to protect the value of its existing foreign currency-denominated assets, liabilities, commitments and cash flows. The company routinely uses forward exchange contracts to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets and liabilities of its operations. The primary business objective of this hedging program is to maintain an approximately balanced position in foreign currencies so that exchange gains and losses resulting from exchange rate changes, net of related tax effects, are minimized. The company also uses foreign currency exchange contracts to offset a portion of the company's exposure to certain foreign currency-denominated revenues so that gains and losses on these contracts offset changes in the USD value of the related foreign currency-denominated revenues. The objective of the hedge program is to reduce earnings and cash flow volatility related to changes in foreign currency exchange rates. Interest Rate Risk The company uses interest rate swaps to manage the interest rate mix of the total debt portfolio and related overall cost of borrowing. Interest rate swaps involve the exchange of fixed for floating rate interest payments to effectively convert fixed rate debt into floating rate debt based on USD LIBOR. Interest rate swaps allow the company to achieve a target range of floating rate debt. Commodity Price Risk Commodity price risk management programs serve to reduce exposure to price fluctuations on purchases of inventory such as copper, corn, soybeans and soybean meal. The company enters into over-the-counter and exchange-traded derivative commodity instruments to hedge the commodity price risk associated with energy feedstock and agricultural commodity exposures. Fair Value Hedges Interest Rate Swaps At June 30, 2013, the company maintained a number of interest rate swaps, which were implemented at the time debt instruments were issued. All interest rate swaps qualify for the shortcut method of hedge accounting, thus there is no ineffectiveness related to these hedges. Cash Flow Hedges Foreign Currency Contracts The company uses foreign currency exchange instruments such as forwards and options to offset a portion of the company's exposure to certain foreign currency-denominated revenues so that gains and losses on these contracts offset changes in the USD value of the related foreign currency-denominated revenues. Commodity Contracts The company enters into over-the-counter and exchange-traded derivative commodity instruments, including options, futures and swaps, to hedge the commodity price risk associated with energy feedstock and agriculture commodity exposures. While each risk management program has a different time maturity period, most programs currently do not extend beyond the next two-year period. Cash flow hedge results are reclassified into earnings during the same period in which the related exposure impacts earnings. Reclassifications are made sooner if it appears that a forecasted transaction will not materialize. The following table summarizes the after-tax effect of cash flow hedges on accumulated other comprehensive income (loss) for the three and six months ended June 30, 2013 and 2012:
At June 30, 2013, the after-tax amount expected to be reclassified from accumulated other comprehensive income (loss) into earnings over the next 12 months is $(24). Derivatives not Designated in Hedging Relationships Foreign Currency Contracts The company routinely uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. The netting of such exposures precludes the use of hedge accounting; however, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary assets and liabilities intends to achieve a minimal earnings impact, after taxes. Additionally, the company has cross-currency swaps to hedge foreign currency fluctuations on long-term intercompany loans. In 2012, the company initiated a program to utilize forward exchange contracts to reduce the net exposure related to foreign currency-denominated monetary assets and liabilities of its discontinued operations. Commodity Contracts The company utilizes options, futures and swaps that are not designated as hedging instruments to reduce exposure to commodity price fluctuations on purchases of inventory such as corn, soybeans and soybean meal. Fair Values of Derivative Instruments The table below presents the fair values of the company's derivative assets and liabilities within the fair value hierarchy, as described in the company's 2012 Annual Report in Note 1, “Summary of Significant Accounting Policies.”
Effect of Derivative Instruments
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Other Income, Net
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income, Net | Other Income, Net
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Other Income, Net (Tables)
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Income | Other Income, Net
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Financial Instruments (Cash Equivalents) (Narrative) (Details) (USD $)
In Millions, unless otherwise specified |
Jun. 30, 2013
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Dec. 31, 2012
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Fair Value, Inputs, Level 1 [Member]
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Fair value of cash equivalents | $ 1,334 | $ 0 |
Fair Value, Inputs, Level 2 [Member]
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Fair value of cash equivalents | $ 3,467 | $ 2,026 |
Long-Term Employee Benefits
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General Discussion of Pension and Other Postretirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Employee Benefits | Long-Term Employee Benefits Pension Plans In February 2013, DuPont completed the sale of its Performance Coatings business. As a result of the sale, the company recorded settlement and curtailment charges of $153. See Note 2 for additional information. The following sets forth the components of the company’s net periodic benefit cost for pensions:
Other Long-Term Employee Benefit Plans In conjunction with the sale of the Performance Coating business as noted above, the company recorded a $154 curtailment gain and a $1 settlement charge. See Note 2 for additional information. The following sets forth the components of the company’s net periodic benefit cost for other long-term employee benefits:
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