-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U8GVPwUvvXER4E/Vp1OSk6ubWbe+rzIcK+Mh0E3wn2oiNx7luZUoKYmnoBACfHTY aMiaFpgsZhuxpxWdETgUeA== 0000030554-97-000045.txt : 19971104 0000030554-97-000045.hdr.sgml : 19971104 ACCESSION NUMBER: 0000030554-97-000045 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19971103 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DUPONT E I DE NEMOURS & CO CENTRAL INDEX KEY: 0000030554 STANDARD INDUSTRIAL CLASSIFICATION: PLASTIC MAIL, SYNTH RESIN/RUBBER, CELLULOS (NO GLASS) [2820] IRS NUMBER: 510014090 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00815 FILM NUMBER: 97706364 BUSINESS ADDRESS: STREET 1: 1007 MARKET ST CITY: WILMINGTON STATE: DE ZIP: 19898 BUSINESS PHONE: 3027741000 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-815 E. I. du Pont de Nemours and Company (Exact Name of Registrant as Specified in Its Charter) Delaware 51-0014090 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1007 Market Street, Wilmington, Delaware 19898 (Address of Principal Executive Offices) (302) 774-1000 (Registrant's Telephone Number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No 1,131,577,141 shares (excludes 23,704,887 shares held by DuPont's Flexitrust) of common stock, $0.30 par value, were outstanding at October 27, 1997. 1 Form 10-Q E. I. DU PONT DE NEMOURS AND COMPANY Table of Contents Page(s) ------- Part I Item 1. Financial Statements Consolidated Income Statement ............................... 3 Consolidated Statement of Cash Flows ........................ 4 Consolidated Balance Sheet .................................. 5 Notes to Financial Statements ............................... 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Results ........................................... 8 Industry Segment Performance ................................ 9-10 Consolidated Industry Segment Information ................... 11 Financial Condition ......................................... 12-14 Other Item .................................................. 14 Part II Item 1. Legal Proceedings .................................... 15-16 Item 6. Exhibits and Reports on Form 8-K ..................... 16-18 Signature ....................................................... 19 Exhibit Index ................................................... 20 Exhibit 3.2 - Company's Bylaws, as last revised September 1, 1997 .............................................. 21 Exhibit 10.7 - Company's Variable Compensation Plan, as last amended effective April 30, 1997 ......................... 22 Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges .. 23 2 Form 10-Q E. I. DU PONT DE NEMOURS AND COMPANY AND CONSOLIDATED SUBSIDIARIES
Three Months Ended Nine Months Ended CONSOLIDATED INCOME STATEMENT September 30 September 30 - ---------------------------------------------------------------------------------------------------------------- (Dollars in millions, except per share) 1997 1996 1997 1996 - --------------------------------------------------------------------------------------------------------------- SALES ...................................................... $11,136 $10,486 $33,749 $32,403 Other Income ............................................... 410 319 1,062 1,072 ------- ------- ------- ------- Total .................................................. 11,546 10,805 34,811 33,475 ------- ------- ------- ------- Cost of Goods Sold and Other Expenses ...................... 8,455 7,767 25,058 24,034 Selling, General and Administrative Expenses ............... 644 648 1,995 2,106 Depreciation, Depletion and Amortization ................... 597 628 1,785 1,886 Exploration Expenses, Including Dry Hole Costs and Impairment of Unproved Properties .................... 129 88 321 235 Interest and Debt Expense .................................. 155 171 459 547 Purchased In-Process Research and Development........... 850 - 850 - Write-down of Assets and Related Costs ................. 340 - 340 - ------- ------- ------- ------- Total .................................................. 11,170 9,302 30,808 28,808 ------- ------- ------- ------- EARNINGS BEFORE INCOME TAXES ............................... 376 1,503 4,003 4,667 Provision for Income Taxes ................................. 393 605 1,860 1,889 ------- ------- ------- ------- NET INCOME (LOSS) .......................................... $ (17) $ 898 $ 2,143 $ 2,778 ======= ======= ======= ======= EARNINGS (LOSS) PER SHARE OF COMMON STOCK .............. $ (.02) $ .80 $ 1.89 $ 2.47 ======= ======= ======= ======= DIVIDENDS PER SHARE OF COMMON STOCK ........................ $ .315 $ .285 $ .915 $ .83 ======= ======= ======= ======= See Notes to Financial Statements.
3 Form 10-Q
Nine Months Ended CONSOLIDATED STATEMENT OF CASH FLOWS September 30 - --------------------------------------------------------------------------------------------- (Dollars in millions) 1997 1996 - --------------------------------------------------------------------------------------------- CASH PROVIDED BY OPERATIONS Net Income ...................................................... $ 2,143 $ 2,778 Adjustments to Reconcile Net Income to Cash Provided by Operations: Depreciation, Depletion and Amortization .................... 1,785 1,886 Dry Hole Costs and Impairment of Unproved Properties ........ 111 74 Purchase of In-Process R&D .................................. 850 - Other Noncash Charges and Credits - Net ..................... 195 (654) Change in Operating Assets and Liabilities - Net ............ (1,138) 48 ------- ------- Cash Provided by Operations ............................... 3,946 4,132 ------- ------- INVESTMENT ACTIVITIES Purchases of Property, Plant and Equipment ...................... (3,451) (2,212) Investment in Affiliates ........................................ (2,121) (279) Payments for Businesses Acquired ................................ (41) (75) Proceeds from Sales of Assets ................................... 631 1,249 Investments in Short-Term Financial Instruments - Net ........... (458) (351) Miscellaneous - Net ............................................. 119 63 ------- ------- Cash Used for Investment Activities ....................... (5,321) (1,605) ------- ------- FINANCING ACTIVITIES Dividends Paid to Stockholders .................................. (1,042) (937) Net Increase (Decrease) in Borrowings ........................... 3,063 (1,030) Purchase of Treasury Stock ...................................... (181) - Proceeds from Exercise of Stock Options ......................... 104 260 Changes to Minority Interests ................................... (54) 363 Repurchase of Warrants .......................................... - (504) ------- ------- Cash Provided by (Used for) Financing Activities .......... 1,890 (1,848) ------- ------- Effect of Exchange Rate Changes on Cash ........................... (96) (37) ------- ------- INCREASE IN CASH AND CASH EQUIVALENTS ............................. $ 419 $ 642 ======= ======= See Notes to Financial Statements.
4 Form 10-Q
CONSOLIDATED BALANCE SHEET September 30 December 31 - ------------------------------------------------------------------------------------------------------------------- (Dollars in millions, except per share) 1997 1996 - ------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and Cash Equivalents ........................................................ $ 1,485 $ 1,066 Marketable Securities ............................................................ 708 253 Accounts and Notes Receivable .................................................... 5,858 5,193 Inventories .................................................................. 4,005 3,706 Prepaid Expenses ................................................................. 398 297 Deferred Income Taxes ............................................................ 593 588 ------- ------- Total Current Assets ........................................................... 13,047 11,103 PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation, depletion and amortization (September 30, 1997 - $29,621; December 31, 1996 - $29,336) ......... 21,994 21,213 INVESTMENT IN AFFILIATES ........................................................... 3,597 2,278 OTHER ASSETS ....................................................................... 3,714 3,393 ------- ------- TOTAL .......................................................................... $42,352 $37,987 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable ................................................................. $ 2,571 $ 2,757 Short-Term Borrowings and Capital Lease Obligations .............................. 6,271 3,910 Income Taxes ..................................................................... 572 526 Other Accrued Liabilities ........................................................ 4,084 3,794 ------- ------- Total Current Liabilities ...................................................... 13,498 10,987 LONG-TERM BORROWINGS AND CAPITAL LEASE OBLIGATIONS ................................. 5,786 5,087 OTHER LIABILITIES .................................................................. 8,450 8,451 DEFERRED INCOME TAXES .............................................................. 2,345 2,133 ------- ------- Total Liabilities .............................................................. 30,079 26,658 ------- ------- MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES .................................... 605 620 ------- ------- STOCKHOLDERS' EQUITY Preferred Stock .................................................................. 237 237 Common Stock, $.30 par value; 1,800,000,000 shares authorized; shares issued at September 30, 1997 - 1,155,282,028; December 31, 1996 - 1,158,085,450 ....... 347 347 Additional Paid-In Capital ....................................................... 6,850 6,676 Reinvested Earnings .............................................................. 5,871 4,931 Cumulative Translation Adjustments ............................................... (170) (23) Common Stock Held in Trust for Unearned Employee Compensation and Benefits (Flexitrust), at Market (Shares: September 30, 1997 - 23,822,433; December 31, 1996 - 30,991,590) ................................................ (1,467) (1,459) ------- ------- Total Stockholders' Equity ..................................................... 11,668 10,709 ------- ------- TOTAL .......................................................................... $42,352 $37,987 ======= ======= See Notes to Financial Statements.
5 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) [FN] These statements are unaudited, but reflect all adjustments that, in the opinion of management, are necessary to provide a fair presentation of the financial position, results of operations and cash flows for the dates and periods covered. All such adjustments are of a normal recurring nature. Certain reclassifications of 1996 data have been made to conform to 1997 classifications. Includes a benefit of $115 from the company's equity interest in the gain on the sale by The DuPont Merck Pharmaceutical Company of its generic and multisource product lines. On September 18, 1997 the company acquired a 20% interest in Pioneer Hi-Bred International, Inc. for about $1,700. The charge of $850 represents the estimated portion of the purchase price attributable to the acquisition of research and development in progress at the time of acquisition for which technological feasibility has not yet been established and no alternative future use is anticipated. Purchase price allocations are based on preliminary assumptions that are subject to revision following completion of an independent valuation by an outside appraisal firm. This charge was not tax effected because the transaction was a stock acquisition rather than an asset purchase. Represents charges associated with the pending sale of the company's global graphic arts films and offset printing plates businesses. Earnings per share are calculated on the basis of the following average number of common shares outstanding: Three Months Ended Nine Months Ended September 30 September 30 ------------------ ----------------- 1997 1,131,012,611 1,130,030,845 1996 1,122,734,872 1,119,760,912 Shares held by the Flexitrust are not considered outstanding in comput- ing the foregoing average shares outstanding. Earnings per share calculations that reflect the impact of common stock equivalents in the periods presented do not result in materially dilutive primary or fully diluted earnings per share. The effect of the Financial Accounting Standards Board, "Statement of Financial Accounting Standards No. 128, Earnings Per Share," is discussed on page 8. Earnings per share of $2.47 does not equal the sum of quarterly earnings per share due to changes in average share calculations. 6 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (Continued) [FN] Inventories September 30 December 31 ----------- 1997 1996 ------------ ----------- Chemicals ........................... $ 322 $ 281 Fibers .............................. 737 692 Polymers ............................ 742 620 Petroleum ........................... 1,348 1,270 Life Sciences ....................... 550 561 Diversified Businesses .............. 306 282 ------ ------ Total ............................. $4,005 $3,706 ====== ====== 7 Form 10-Q Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a) Results of Operations (1) Financial Results: DuPont reported third quarter earnings, before nonrecurring charges, of $.86 per share, compared to $.84 per share in the third quarter of 1996. A net loss of $17 million, or $.02 per share, was recorded after reflecting net charges for nonrecurring items of $998 million, or $.88 per share. Third quarter nonrecurring items include an after-tax one-time noncash charge of $850 million, or $.75 per share, to write-off acquired in-process research and development associated with the Pioneer Hi-Bred International, Inc. transaction, $220 million, or $.19 per share, in connection with the planned divestiture of global graphic arts films and offset printing plates businesses, and a gain of $72 million, or $.06 per share, from the sale by The DuPont Merck Pharmaceutical Company of its generic and multisource product lines. Net income, including nonrecurring items, was $2.1 billion, or $1.89 per share, for the first nine months of 1997, compared to $2.8 billion, or $2.47 per share, in the same period last year. Excluding nonrecurring items from both years, net income was $3.1 billion versus $2.9 billion last year, up 9 percent. Year-to-date sales were $33.7 billion compared to $32.4 billion for 1996. In February 1997, the Financial Accounting Standards Board issued "Statement of Financial Accounting Standards No. 128, Earnings Per Share." This Standard becomes effective for the company in the fourth quarter 1997 and requires two presentations of earnings per share -- "basic" and "diluted." Had this Standard been in effect for the third quarter 1997, earnings per share on a pro forma basis would have been: Three Months Ended Nine Months Ended September 30, 1997 September 30, 1997 ------------------ ------------------ Basic (same as reported) $(.02) $1.89 Diluted $(.02) $1.86 "Diluted Earnings Per Share" for the nine months ended September 30, 1997, is less than "Basic Earnings Per Share," principally due to the assumed increase in the number of average shares outstanding resulting from outstanding options where the average market price of the company's common stock during the nine-month period ended September 30, 1997, was in excess of related option prices. This calculation for the three-month period ended September 30, 1997, is antidilutive. 8 Form 10-Q (2) Industry Segment Performance: The following text compares third quarter 1997 results with third quarter 1996, for each industry segment, excluding the earnings impact of nonrecurring items described in the footnotes to the "Consolidated Industry Segment Information" table. Sales for the third quarter totaled $11.1 billion. Sales for Chemicals and Specialties segments were $5.8 billion, up 5 percent on an ongoing business basis, reflecting 8 percent higher volumes partly offset by 3 percent lower average selling prices. Lower selling prices result from an 8 percent decline in prices outside the United States, entirely due to the stronger dollar. Sales volumes were up 4 percent in the United States, 10 percent in Europe, 15 percent in Asia Pacific, and 18 percent in the rest of the world. Petroleum segment sales for the quarter were $5.3 billion, up 8 percent from last year. Worldwide refined product sales were up 11 percent and gas deliveries outside the United States were up 20 percent. Crude oil prices averaged $17.96 per barrel for the period, 10 percent lower than last year. Worldwide gas prices were essentially flat at $2.27 per thousand cubic feet. Crude oil production was down 6 percent. o Chemicals segment earnings were $154 million, up 12 percent from $138 million last year principally reflecting higher earnings from white pigments and specialty chemicals. Segment sales increased 4 percent as 6 percent higher sales volume was partly offset by 2 percent lower selling prices. o Fibers segment earnings of $238 million were up 16 percent from $206 million last year, principally reflecting increased earnings for "Dacron" polyester, "Lycra" brand spandex, and aramids, partly offset by lower nylon earn- ings. Nylon earnings were adversely affected by the stronger dollar and higher ingredients costs due to supply disruptions. Segment sales were 9 percent higher, reflecting 12 percent higher volume partly offset by 3 percent lower selling prices. o Polymers segment earnings were $228 million, up 7 percent from $213 million in 1996. Results principally reflect higher earnings from the DuPont Dow elastomers venture, automotive products, and packaging and industrial polymers. Segment sales were up 7 percent, reflecting 9 percent higher volume partly offset by 2 percent lower prices. 9 Form 10-Q o Petroleum segment earnings of $282 million, a third quarter record, were up 10 percent from $256 million in 1996. This is the ninth consecutive quarterly year-over- year earnings improvement. Strong U.S. Downstream margins, higher gas volumes outside the United States and lower taxes contributed to the earnings improvement, partly offset by lower crude oil prices and production, and higher exploration and refinery turnaround expenses. The quarter also included an after-tax gain from the sale of certain Norwegian producing properties that was offset by litigation settlement expenses. Upstream earnings totaled $175 million, up 7 percent, and Downstream earn- ings were $107 million, up 15 percent. o Life Sciences segment earnings were $122 million versus the $178 million earned in 1996. Excluding the higher allocation of operating income to DuPont in 1996 from the DuPont Merck joint venture, Life Sciences segment earnings were down 7 percent, with higher pharmaceutical earnings offset by lower results in agricultural products. Agri- cultural products sales were down 9 percent, compared to a seasonally stronger third quarter last year, reflecting 6 percent lower volume and 3 percent lower prices. o Diversified Businesses segment earnings totaled $52 million, up $12 million or 30 percent from $40 million in 1996. Both the current quarter and the third quarter 1996 reflect significant operating losses from the print- ing and publishing businesses to be divested. Higher earnings versus last year reflect better results from films and photopolymers and electronic materials. After adjusting for divestiture of medical products businesses, the segment had a 9 percent increase in volume offset by 8 percent lower selling prices. The decline in selling prices is attributable to lower prices for polyester films and the effect of a stronger dollar. 10 Form 10-Q E. I. DU PONT DE NEMOURS AND COMPANY AND CONSOLIDATED SUBSIDIARIES
Three Months Ended Nine Months Ended CONSOLIDATED INDUSTRY SEGMENT INFORMATION September 30 September 30 - ------------------------------------------------------------------------------------------------------------- (Dollars in millions) 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------------------------ SALES - ----- Chemicals ...................................... $ 1,064 $ 1,025 $ 3,183 $ 3,100 Fibers ......................................... 1,885 1,735 5,748 5,301 Polymers ....................................... 1,688 1,573 5,106 5,071 Petroleum ...................................... 5,342 4,929 15,563 14,549 Life Sciences .................................. 474 522 2,057 2,000 Diversified Businesses ......................... 683 702 2,092 2,382 ------- ------- ------- ------- Total ...................................... $11,136 $10,486 $33,749 $32,403 ======= ======= ======= ======= AFTER-TAX OPERATING INCOME (LOSS) - --------------------------------- Chemicals ...................................... $ 154 $ 138 $ 434 $ 425 Fibers ......................................... 238 206 716 561 Polymers ....................................... 228 213 695 710 Petroleum ...................................... 282 256 859 647 Life Sciences .................................. (656) 131 (271) 540 Diversified Businesses ......................... (168) 40 (28) 199 ------- ------- ------- ------- Total ...................................... 78 984 2,405 3,082 Interest and Other Corporate Expenses Net of Tax .......................... (95) (86) (262) (304) ------- ------- ------- ------- NET INCOME (LOSS) .............................. $ (17) $ 898 $ 2,143 $ 2,778 - ----------------- ======= ======= ======= ======= The Chemicals and Fibers segments include a charge of $21 and $32, respec- tively, principally for employee separation costs in the United States. Includes a gain of $55 associated with the formation of the DuPont Dow elastomers joint venture. Includes charges of $63 for write-down of investment in a European natural gas marketing joint venture, and $22, principally for employee separation costs in the United States, partly offset by a net benefit of $44 related to environmental insurance recoveries. Includes a benefit of $72 from the company's equity interest in the sale by DuPont Merck of its generic and multisource product lines and an esti- mated charge of $850, associated with the agricultural products business, related to the acquisition of research and development in progress at the time of acquisition for which technological feasibility has not yet been established and no alternative future use is anticipated. Includes a charge of $47 in third quarter and $110 for nine months asso- ciated with "Benlate" 50 DF fungicide recall. Includes a charge of $220 for the write-down of assets held for sale and other related costs associated with the pending sale of the company's global graphic arts films and offset printing plates businesses. Includes gains of $41 from the sale of certain medical products busi- nesses and $33 related to sale of stock received in connection with the previously sold connector systems business, and a charge of $26, prin- cipally employee separation costs outside the United States, associated with the printing and publishing business.
11 Form 10-Q (b) Financial Condition at September 30, 1997 Cash Provided By Operations DuPont recorded a net cash inflow from operations of $3.9 billion for the first nine months of 1997, as compared with $4.1 billion for the same period in 1996. The $850 million adjustment for "Purchase of In-Process R&D" shown in the Consolidated Statement of Cash Flows relates to a noncash charge to Net Income in connection with the purchase of a 20% interest in Pioneer Hi-Bred International, Inc. (Pioneer) (see Note (c) to Financial Statements). "Other Noncash Charges and Credit - Net" for 1997 includes the $340 million pretax charge to Net Income taken in connection with the write-down of assets held for sale and other related costs associated with the pending sale of the company's global graphic arts films and offset printing plates businesses. "Other Noncash Charges and Credits - Net" for 1996 consists primarily of significant undistributed earnings of affiliated companies and gains on sales of assets that are reported in Investment Activities - "Proceeds from Sales of Assets." The change in Operating Assets and Liabilities - Net -- 1997 versus 1996 -- was a net outflow of $1.2 billion. This principally reflects (a) a $0.3 billion net increase in trade accounts receivable due to higher sales; (b) a $0.3 billion net increase in miscellaneous receivables resulting from increases in receivables from forward exchange contracts entered into under the company's foreign currency hedging program; and (c) a $0.4 billion net decrease in other accrued liabilities; in 1996, other accrued liabilities increased significantly primarily due to increases in reserves for litiga- tion and business divestiture activities. Investment Activities Year-to-date capital expenditures for plant, property and equipment and investments in affiliates were $5.6 billion -- $3.1 billion higher than the same period last year. The increase is principally comprised of purchases for: (a) a 20% equity interest in Pioneer at a cost of about $1.7 billion. This purchase was made as part of the agreement between DuPont and Pioneer to form a research alliance and a separate joint venture com- pany, Optimum Quality Grains L.L.C., to speed the discovery, development and delivery of new crops that benefit farmers, livestock producers and consumers worldwide; (b) a 19.8% equity interest in PT Branta Mulia, an Indonesian company, for $65 million. This affiliated company manufactures and markets nylon tire cord in Asia; and (c) oil and gas producing properties in South Texas for $0.9 billion. 12 Form 10-Q In July, DuPont announced that it had reached agreement with ICI to acquire various businesses from ICI for about $3 billion. DuPont expects that the fourth quarter 1997 will include a payment of about $1.4 billion for the purchase of ICI's polyester resins and intermediates businesses. The acquisition of ICI's tioxide and polyester films businesses is expected to be completed during the first half of 1998 at a cost of $1.6 billion. In August 1997, DuPont and Ralston Purina Company announced they had signed a letter of intent for DuPont to purchase Protein Technologies International (PTI) and its related affiliates from Ralston for $1.5 billion. Approximately 80% of the consideration will be in the form of newly issued DuPont common stock; the remainder will be paid as a result of assuming certain liabilities from Ralston. PTI is a leading worldwide supplier of soy proteins to the food and paper processing industries. Clos- ing on the PTI acquisition is expected to take place in the fourth quarter 1997. In October 1997, Conoco Inc., DuPont's petroleum subsidiary, and American Electric Power of Columbus, Ohio, announced plans to form two jointly held energy venture companies. One venture company will acquire approximately $1 billion of energy related facilities from certain DuPont industrial plants in the United States and then lease them back to DuPont. The second venture company will provide energy management services, includ- ing operations, maintenance, and conservation advice. DuPont and American Electric each plan initial investments of $125 million in the joint ventures. Both ventures will then borrow the additional funds needed to acquire further energy related assets. Capital needs for future energy projects at these sites, or for other large industrial or commercial customers, will be provided by the joint ventures. It is currently expected that cash expenditures for purchases of property, plant and equipment, investment in affiliates and payments for businesses acquired will total $8.5 billion in 1997, assuming the ICI acquisitions are completed as described. Proceeds from asset sales total $0.6 billion through September 30, 1997. The most significant proceeds were: (a) $175 million from collection of a note from The Sterling Group, Inc. received in connection with their purchase of the diagnostic imaging business last year; (b) $125 million from The DuPont Merck Pharmaceutical Company (DMPC), a joint venture between DuPont and Merck, representing DuPont's share of the proceeds DMPC received from the sale of its generic and multisource product lines, and (c) $62 million from the sale of the New England Nuclear business to Genstar Capital LLC. Sales of other Chemicals and Specialties businesses and assets total $142 million, and proceeds from sales of various petroleum properties were $127 million. 13 Form 10-Q Financing Activities In February 1997, the company announced a program to purchase shares of DuPont common stock on the open market to offset ownership dilution due to the shares issued under compensation programs. During the first half of 1997, the company spent $181 million under this program; immediately after purchase these shares were retired. The company has announced that it will buy back shares equal to the number of shares issued to Ralston for the acquisition of PTI as discussed above. Borrowings at September 30, 1997 totaled $12.0 billion and were $3.1 billion above year-end 1996. Commercial paper borrowings were $2.2 billion higher, and in mid-September, DuPont received proceeds of $0.5 billion from the sale of five-year notes at an all-in cost of 6.80% and $0.5 billion from the sale of ten-year notes at an all-in cost of 6.95%. Cash and marketable securities increased $0.9 billion from year-end 1996. Following the announcement of the acquisitions discussed above, Moody's Investor Services and Standard & Poor's both affirmed their existing credit ratings of DuPont's debt. Certain Statistics At 9/30/97 At 12/31/96 ---------- ----------- Cash Flow to Debt (previous 12 months cash provided by operations to total debt) 51% 71% Current Ratio (current assets to current liabilities) 1.0 1.0 Earnings to Fixed Charges 7.3 6.8 The Cash Flow to Debt ratio at September 30, 1997 is down from year-end 1996 due to the increase in borrowings discussed above. Days' sales outstanding averaged 34 days in the third quarter, up one day from restated second quarter and down one day from the restated third quarter of 1996. (c) Other Item On October 29, the DuPont board of directors approved a management transition in which E. S. Woolard, 63, stepped down as board chairman, but he will remain a director. President and Chief Executive Officer (CEO) J. A. Krol, 61, became chairman and CEO, with plans to remain as CEO until February 1, 1998. The board elected C. O. Holliday, Jr., 49, to immediately succeed Krol as president and to become CEO on February 1, 1998. Krol plans to serve as chairman until December 31, 1998, when Holliday will become chairman and CEO. Holliday is currently a DuPont executive vice president and chairman - DuPont Asia Pacific and a director. 14 Form 10-Q PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS In 1991, DuPont began receiving claims by growers that use of "Benlate" 50 DF fungicide had caused crop damage. Based on the belief that "Benlate" 50 DF would be found to be a contributor to the claimed damage, DuPont began paying crop damage claims. In 1992, however, after 18 months of extensive research, DuPont scientists concluded that "Benlate" 50 DF was not responsible for plant damage reports received since March 1991, and concurrent with these research findings, DuPont stopped paying claims. To date, DuPont has been served with more than 700 lawsuits by growers who allege plant damage from using "Benlate" 50 DF fungicide. Approximately 70 lawsuits are pending against the company; the rest having been disposed of by trial, dismissal or settlement. The remaining docket of "Benlate" 50 DF cases includes alleged personal injury cases, alleged crop damage cases, and cases alleging discovery abuse and fraud. Among the remaining personal injury cases is the pending appeal of a June 1996 verdict of $3,980,000 against DuPont. Four personal injury cases are pending in West Virginia and two personal injury cases are pending in Delaware state court. The same plaintiffs' attorney who filed these Delaware cases has indicated that he intends to file additional personal injury cases. DuPont prevailed in two jury trials in crop cases in June and July of 1997 in Florida. One appeal from an adverse jury verdict in a crop case is still pending. In 1997, three putative "Benlate" 50 DF class actions alleging crop damage and asserting fraud claims were filed: one in Florida state court on behalf of growers of ornamental plants in Florida; another in Hawaii state court on behalf of Hawaii growers; and a third in Alabama state court seeking a nationwide class. All three were removed to federal court. The Florida class action has been remanded back to state court, and motions to remand the remaining cases to the state courts have been or are expected to be filed. The Alabama case has received conditional class certification. The United States Court of Appeals for the Eleventh Circuit reversed and remanded a sanctions order by a federal district court in Georgia which had found that DuPont had engaged in discovery abuse during the first "Benlate" 50 DF crop case to go to trial. The Eleventh Circuit ordered that a different judge shall preside over the matter on remand. DuPont's petition for writ of certiorari in the United States Supreme Court, seeking review of certain aspects of the Eleventh Circuit's decision, has been denied and DuPont awaits further proceedings. A shareholder derivative action pending in the same Georgia federal district court, alleging that DuPont's Board of Directors breached various duties in its role in the "Benlate" 50 DF litigation, remains stayed. A securities fraud class action filed in September 1995 by a shareholder in federal district court in Florida against the company and the then-chairman is also still pending. The plaintiff in this case alleges that DuPont made false and misleading statements and omissions about "Benlate" 50 DF, with the alleged effect of inflating the price of DuPont's stock between June 19, 1993, and January 27, 1995. The 15 Form 10-Q district court has certified the case as a class action and has denied a motion to dismiss filed by DuPont. Discovery is proceeding. Certain plaintiffs who have previously settled with the company have filed cases alleging fraud and other misconduct relating to the litigation and settlement of "Benlate" 50 DF claims. One such lawsuit was filed in federal district court in Georgia by five growers alleging fraud (including civil racketeering claims) based generally on the assertion that at the time of their settlements with DuPont, these plaintiffs were unaware of alleged discovery abuse by DuPont. The Georgia district court has granted DuPont's motion for judgment on the pleadings in this matter, holding that the release plaintiffs executed when they originally settled barred their attempt to seek additional amounts from DuPont. The court also granted a similar DuPont motion with respect to another case that had been transferred from Hawaii federal court. Four cases based on similar allegations were filed in Hawaii. Three of these matters were filed in Hawaii state courts and one is pending in Hawaii federal court. Seven additional such cases have been filed in Florida involving early settlements through DuPont's claims adjusting company. Five of these have been dismissed on the grounds that the prelitigation settlements barred their claims. DuPont continues to believe that "Benlate" 50 DF fungicide did not cause the damages alleged in these cases and intends to defend against such allegations in ongoing matters. The company's balance sheets reflect accruals for estimated costs associated with this matter. Adverse changes in estimates of such costs could result in additional future charges. On September 2, 1997, the U.S. Department of Justice (DOJ) filed suit against DuPont related to an August 1995 oleum release from DuPont's plant in Wurtland, Kentucky. DuPont previously paid a $125,000 fine and agreed to undertake supplemental environmental projects, related to the oleum release, valued at $460,000. In its complaint, the DOJ alleges violations under Section 112(r) of the Clean Air Act, Section 103(a) of the Comprehensive Environmental Response, Compensation and Liability Act and Section 304(a)(1) of the Emergency Planning and Community Right-to-Know Act. DOJ offered to settle this action for $2,700,000. DuPont denies these alleged violations, believes that DOJ's settlement offer is inappropriate and excessive and plans to contest this action by DOJ. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The exhibit index filed with this Form 10-Q is on page 20. (b) Reports on Form 8-K 1. On July 16, 1997, a Current Report on Form 8-K was filed in connection with Debt and/or Equity Securities that may be offered on a delayed or continuous basis under 16 Form 10-Q Registration Statements on Form S-3 (No. 33-53327, No. 33-61339 and No. 33-60069). Under Item 7. "Financial Statements and Exhibits," the Registrant's Press Release dated July 13, 1997, was filed announcing agreement to acquire ICI's white pigment business outside North America, its worldwide polyester films, resins and intermediates businesses and all related technologies. 2. On July 23, 1997, a Current Report on Form 8-K was filed in connection with Debt and/or Equity Securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No. 33-61339 and No. 33-60069). Under Item 7. "Financial Statements and Exhibits," the Registrant's Earnings Press Release dated July 23, 1997, was filed. 3. On August 11, 1997, a Current Report on Form 8-K was filed in connection with Debt and/or Equity Securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No. 33-61339 and No. 33-60069). Under Item 2. "Acquisition or Disposition of Assets," the Registrant's Press Release dated August 7, 1997, was filed announcing an agreement between DuPont and Pioneer Hi-Bred Inter- national, Inc. (Pioneer) to: (1) take an equity interest in Pioneer, (2) form a research alliance, and (3) form a separate joint venture company. 4. On August 22, 1997, a Current Report on Form 8-K was filed in connection with Debt and/or Equity Securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No. 33-61339 and No. 33-60069). Under Item 2. "Acquisition or Disposition of Assets," the Registrant's Press Release dated August 22, 1997, was filed announcing that DuPont and Ralston Purina Company had signed a letter of intent for DuPont to purchase Protein Tech- nologies International and its related affiliates from Ralston for $1.5 billion comprised of DuPont stock less certain liabilities. 5. On September 29, 1997, a Current Report on Form 8-K was filed in connection with Debt and/or Equity Securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No.33-61339 and No. 33-60069). Under Item 5. "Other Events," the Registrant filed a notice that on April 30, 1997, the stockholders of the Company approved an amendment to the Charter to increase the number of 17 Form 10-Q authorized shares of DuPont common stock in order to effect a two-for-one stock split; and, under Item 7. "Financial Statements," the Registrant filed pro forma financial information, "Five-year Financial Review 1992 through 1996." 6. On October 22, 1997, a Current Report on Form 8-K was filed in connection with Debt and/or Equity Securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No. 33-61339 and No. 33-60069). Under Item 7. "Financial Statements and Exhibits," the Registrant's Earnings Press Release dated October 22, 1997, was filed. 18 Form 10-Q SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. E. I. DU PONT DE NEMOURS AND COMPANY (Registrant) Date: October 31, 1997 ----------------------------------------- By /s/K. M. Landgraf ----------------------------------------- K. M. Landgraf Executive Vice President - DuPont Finance (As Duly Authorized Officer and Principal Financial and Accounting Officer) 19 Form 10-Q EXHIBIT INDEX Exhibit Number Description - ------- ----------- 3.2 Company's Bylaws, as last revised September 1, 1997. 10.7 Company's Variable Compensation Plan, as last amended effective April 30, 1997. 12 Computation of Ratio of Earnings to Fixed Charges. 20 Form 10-Q EXHIBIT 3.2 BYLAWS OF E. I. DU PONT DE NEMOURS AND COMPANY Incorporated Under The Laws of Delaware AS REVISED September 1, 1997 21 Form 10-Q EXHIBIT 3.2 BYLAWS Page ---- ARTICLE I. MEETING OF STOCKHOLDERS: Section 1. Annual 1 Section 2. Special 1 Section 3. Notice 1 Section 4. Quorum 1 Section 5. Organization 1 Section 6. Voting 2 Section 7. Inspectors 2 ARTICLE II. BOARD OF DIRECTORS: Section 1. Number 2 Section 2. Term 2 Section 3. Increase of Number 2 Section 4. Resignation 2 Section 5. Vacancies 2 Section 6. Regular Meetings 2 Section 7. Special Meetings 3 Section 8. Quorum 3 Section 9. Place of Meeting, Etc. 3 Section 10. Interested Directors; Quorum 3 ARTICLE III. COMMITTEES OF THE BOARD: Section 1. Committees 4 Section 2. Procedure 4 Section 3. Reports to the Board 4 Section 4. Strategic Direction Committee 4 Section 5. Audit Committee 5 Section 6 Environmental Policy Committee 5 Section 7. Compensation Committee 5 Section 8. Corporate Governance Committee 5 ARTICLE IV. OFFICE OF THE CHIEF EXECUTIVE 5 Form 10-Q EXHIBIT 3.2 Page ---- ARTICLE V. OFFICERS: Section 1. Officers 6 Section 2. Chairman of the Board 6 Section 3. President 6 Section 4. Executive Vice Presidents 6 Section 5. Vice Presidents 6 Section 6. Executive Vice President - Finance 6 Section 7. Treasurer 6 Section 8. Assistant Treasurer 7 Section 9. Controller 7 Section 10. Assistant Controller 7 Section 11. Secretary 7 Section 12. Assistant Secretary 7 Section 13. Removal 7 Section 14. Resignation 7 Section 15. Vacancies 7 ARTICLE VI. MISCELLANEOUS: Section 1. Indemnification of Directors or Officers 8 Section 2. Certificate for Shares 8 Section 3. Transfer of Shares 9 Section 4. Regulations 9 Section 5. Record Date of Stockholders 9 Section 6. Corporate Seal 9 ARTICLE VII. AMENDMENTS 10 Form 10-Q EXHIBIT 3.2 BYLAWS OF E. I. DU PONT DE NEMOURS AND COMPANY ARTICLE I. MEETING OF STOCKHOLDERS SECTION 1. Annual. Meetings of the stockholders for the purpose of electing Directors, and transacting such other proper business as may be brought before the meeting, shall be held annually at such date, time and place, within or without the State of Delaware as may be designated by the Board of Directors ("Board"). SECTION 2. Special. Special meetings of the stockholders may be called by the Board and shall be called by the Secretary at the request in writing of the holders of record of at least twenty-five percent of the outstanding stock of the corporation entitled to vote. Special meetings shall be held within or without the State of Delaware, as the Board shall designate. SECTION 3. Notice. Written notice of each meeting of stockholders, stating the place, date and hour of the meeting, and the purpose or purposes thereof, shall be mailed not less than ten nor more than sixty days before the date of such meeting to each stockholder entitled to vote thereat. SECTION 4. Quorum. Unless otherwise provided by statute, the holders of shares of stock entitled to cast a majority of votes at a meeting, present either in person or by proxy, shall constitute a quorum at such meeting. Absence of a quorum of the holders of Common Stock or Preferred Stock at any meeting or adjournment thereof, at which under the Certificate of Incorporation the holders of Preferred Stock have the right to elect any Directors, shall not prevent the election of Directors by the other class of stockholders entitled to elect Directors as a class if the necessary quorum of stockholders of such other class shall be present in person or by proxy. SECTION 5. Organization. The Chairman of the Board or, in the Chairman's absence, the President shall preside at meetings of stockholders. The Secretary of the Company shall act as Secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint a Secretary of the meeting. The order of business for such meetings shall be determined by the Chairman of the Board, or, in the Chairman's absence, by the President. 1 Form 10-Q EXHIBIT 3.2 SECTION 6. Voting. Each stockholder entitled to vote at any meeting shall be entitled to one vote, in person or by written proxy, for each share held of record. Upon the demand of any stockholder, such stockholder shall be entitled to vote by ballot. All elections and questions shall be decided by plurality vote, except as otherwise required by statute. SECTION 7. Inspectors. At each meeting of the stockholders the polls shall be opened and closed; the proxies and ballots shall be received and be taken in charge, and all questions touching the qualification of voters and the validity of proxies, and the acceptance or rejection of votes shall be decided by three Inspectors, two of whom shall have power to make a decision. Such Inspectors shall be appointed by the Board before the meeting, or in default thereof, by the presiding officer at the meeting, and shall be sworn to the faithful performance of their duties. If any of the Inspectors previously appointed shall fail to attend or refuse or be unable to serve, substitutes shall be appointed by the presiding officer. ARTICLE II. BOARD OF DIRECTORS SECTION 1. Number. The business and affairs of the Company shall be under the direction of the Board. The number of Directors, which shall not be less than ten, shall be determined from time to time by the vote of two-thirds of the whole Board. SECTION 2. Term. Each Director shall hold office until the next annual election of Directors and until the Director's successor is elected and qualified. SECTION 3. Increase of Number. In case of any increase in the number of Directors between Annual Meetings of Stockholders, each additional Director shall be elected by the vote of two-thirds of the whole Board. SECTION 4. Resignation. A Director may resign at any time by giving written notice to the Chairman of the Board or the Secretary. The acceptance thereof shall not be necessary to make it effective; and such resignation shall take effect at the time specified therein or, in the absence of such specification, it shall take effect upon the receipt thereof. SECTION 5. Vacancies. In case of any vacancy in the Board for any cause, the remaining Directors, by vote of majority of the whole Board, may elect a successor to hold office for the unexpired term of the Director whose place is vacant. SECTION 6. Regular Meetings. Regular meetings of the Board shall be held at such times as the Board may designate. A notice of each regular meeting shall not be required. 2 Form 10-Q EXHIBIT 3.2 SECTION 7. Special Meetings. Special meetings of the Board shall be held whenever called by the direction of the Chairman of the Board, or of one-third of the Directors. The Secretary shall give notice of such special meetings by mailing the same at least two days before the meeting, or by telegraphing the same at least one day before the meeting to each Director; but such notice may be waived by any Director. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. At any meeting at which every Director shall be present, any business may be transacted, irrespective of notice. SECTION 8. Quorum. One-third of the Board shall constitute a quorum. If there be less than a quorum present at any meeting, a majority of those present may adjourn the meeting from time to time. Except as otherwise provided by law, the Certificate of Incorporation, or by these Bylaws, the affirmative vote of a majority of the Directors present at any meeting at which there is a quorum shall be necessary for the passage of any resolution. SECTION 9. Place of Meeting, Etc. The Directors shall hold the meetings, and may have an office or offices in such place or places within or outside the State of Delaware as the Board from time to time may determine. SECTION 10. Interested Directors; Quorum 1) No contract or other transaction between the Company and one or more of its Directors, or between the Company and any other corporation, partnership, association, or other organization in which one or more of the Directors of the Company is a Director or officer, or has a financial interest, shall be void or voidable, because the Director is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because such Director's vote is counted for such purpose, if: (a) the material facts as to such Director's relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (b) the material facts as to such Director's relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or 3 Form 10-Q EXHIBIT 3.2 (c) the contract or transaction is fair as to the Company as of the time it is authorized, approved or ratified, by the Board, a committee thereof, or the stockholders; and 2) Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction. ARTICLE III. COMMITTEES OF THE BOARD SECTION 1. Committees. The Board shall by the affirmative vote of a majority of the whole Board, elect from the Directors a Strategic Direction Committee, an Audit Committee, an Environmental Policy Committee, a Compensation Committee, and a Corporate Governance Committee and may, by resolution passed by a majority of the whole Board, designate one or more additional committees, each committee to consist of one or more Directors. The Board shall designate for each of these committees a Chairman, and, if desired, a Vice Chairman, who shall continue as such during the pleasure of the Board. The number of members of each committee shall be determined from time to time by the Board. SECTION 2. Procedure. Each Committee shall fix its own rules of procedure and shall meet where and as provided by such rules. A majority of a committee shall constitute a quorum. In the absence or disqualification of a member of any committee, the members of such committee present at any meeting, and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. SECTION 3. Reports To The Board. Each Committee shall keep regular minutes of its proceedings and shall periodically report to the Board summaries of the Committee's significant completed actions and such other matters as requested by the Board. SECTION 4. Strategic Direction Committee. The Strategic Direction Committee shall review the Company's strategic direction and overall objectives and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. 4 Form 10-Q EXHIBIT 3.2 SECTION 5. Audit Committee. The Audit Committee shall employ independent public accountants, subject to stockholder ratification at each annual meeting, review the adequacy of internal controls and the accounting principles employed in financial reporting, and shall have such power and perform such duties as may be assigned to it from time to time by the Board. None of the Members of the Audit Committee shall be an officer or employee of the Company or its subsidiaries. SECTION 6. Environmental Policy Committee. The Environmental Policy Committee shall review the Company's environmental policies and practices and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. SECTION 7. Compensation Committee. The Compensation Committee shall have the power and authority vested in it by the Compensation Plans of the Company and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. None of the members of the Compensation Committee shall be an officer or employee of the Company or its subsidiaries. SECTION 8. Corporate Governance Committee. The Corporate Governance Committee shall recommend to the Board nominees for election as directors of the Company. The Committee shall also have responsibility for reviewing and making recommendations to the Board related to matters on corporate governance and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. None of the members of the Corporate Governance Committee shall be an officer or employee of the Company or its subsidiaries. ARTICLE IV. OFFICE OF THE CHIEF EXECUTIVE The Board shall elect an Office of the Chief Executive whose members shall include the President and such other officers as may be designated by the Board. The Office of the Chief Executive shall have responsibility for the strategic direction and operations of all the businesses of the Company and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. All significant completed actions by the Office of the Chief Executive shall be reported to the Board at the next succeeding Board meeting, or at its meeting held in the month following the taking of such action. 5 Form 10-Q EXHIBIT 3.2 ARTICLE V. OFFICERS SECTION 1. Officers. The officers of the Company shall be a Chairman of the Board, a President, one or more Executive Vice Presidents, an Executive Vice President - Finance and a Secretary. The Board and the Office of the Chief Executive, may appoint such other officers as they deem necessary, who shall have such authority and shall perform such duties as may be prescribed, respectively, by the Board or the Office of the Chief Executive. SECTION 2. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board. The Chairman may sign and execute all authorized bonds, contracts or other obligations, in the name of the Company, and with the Treasurer may sign all certificates of the shares in the capital stock of the Company. SECTION 3. President. The President shall be the chief executive officer of the Company and, subject to the Board and the Office of the Chief Executive, shall have general charge of the business and affairs of the Company and shall perform such other duties as may be assigned to the President by the Board or the Chairman of the Board. In the absence or inability to act of the Chairman of the Board, the President shall perform the duties of the Chairman of the Board. SECTION 4. Executive Vice Presidents. Each Executive Vice President shall have such powers and perform such duties as may be assigned to such Executive Vice President by the Board or the Office of the Chief Executive. SECTION 5. Vice Presidents. The Board or the Office of the Chief Executive may appoint one or more Vice Presidents. Each Vice President shall have such title, powers and duties as may be assigned to such Vice President by the Board or the Office of the Chief Executive. SECTION 6. Executive Vice President - Finance. The Executive Vice President - Finance shall be the chief financial officer of the Company, and shall have such powers and perform such duties as may be assigned to such Executive Vice President - Finance by the Board or the Office of the Chief Executive. SECTION 7. Treasurer. The Board shall appoint a Treasurer. Under the general direction of the Executive Vice President - Finance, the Treasurer shall have such powers and perform such duties as may be assigned to such Treasurer by the Board or the Office of the Chief Executive. 6 Form 10-Q EXHIBIT 3.2 SECTION 8. Assistant Treasurer. The Board or the Office of the Chief Executive may appoint one or more Assistant Treasurers. Each Assistant Treasurer shall have such powers and shall perform such duties as may be assigned to such Assistant Treasurer by the Board or the Office of the Chief Executive. SECTION 9. Controller. The Board may appoint a Controller. Under the general direction of the Executive Vice President - Finance, the Controller shall have such powers and perform such duties as may be assigned to such Controller by the Board or the Office of the Chief Executive. SECTION 10. Assistant Controller. The Board or the Office of the Chief Executive may appoint one or more Assistant Controllers. Each Assistant Controller shall have such powers and shall perform such duties as may be assigned to such Assistant Controller by the Board or the Office of the Chief Executive. SECTION 11. Secretary. The Secretary shall keep the minutes of all the meetings of the Board and the minutes of all the meetings of the stockholders; the Secretary shall attend to the giving and serving of all notices of meetings as required by law or these Bylaws; the Secretary shall affix the seal of the Company to any instruments when so required; and the Secretary shall in general perform all the corporate duties incident to the office of Secretary, subject to the control of the Board or the Chairman of the Board, and such other duties as may be assigned to the Secretary by the Board or the Chairman of the Board. SECTION 12. Assistant Secretary. The Board or the Office of the Chief Executive may appoint one or more Assistant Secretaries. Each Assistant Secretary shall have such powers and shall perform such duties as may be assigned to such Assistant Secretary by the Board or the Chairman of the Board or the President; and such Assistant Secretary shall affix the seal of the Company to any instruments when so required. SECTION 13. Removal. All officers may be removed or suspended at any time by the vote of the majority of the whole Board. All officers, agents and employees, other than officers elected or appointed by the Board, may be suspended or removed by the committee or by the officer appointing them. SECTION 14. Resignation. Any officer may resign at any time by giving written notice to the Chairman of the Board, the President or the Secretary. Unless otherwise stated in such notice of resignation, the acceptance thereof shall not be necessary to make it effective; and such resignation shall take effect at the time specified therein or, in the absence of such specification, it shall take effect upon the receipt thereof. SECTION 15. Vacancies. A vacancy in any office shall be filled in the same manner as provided for election or appointment to such office. 7 Form 10-Q EXHIBIT 3.2 ARTICLE VI. MISCELLANEOUS SECTION 1. Indemnification of Directors or Officers. Each person who is or was a Director or officer of the Company (including the heirs, executors, administrators or estate of such person) shall be indemnified by the Company as of right to the full extent permitted by the General Corporation Law of Delaware against any liability, cost or expense asserted against such Director or officer and incurred by such Director or officer by reason of the fact that such person is or was a Director or officer. The right to indemnification conferred by this Section shall include the right to be paid by the Company the expenses incurred in defending in any action, suit or proceeding in advance of its final disposition, subject to the receipt by the Company of such undertakings as might be required of an indemnitee by the General Corporation Law of Delaware. In any action by an indemnitee to enforce a right to indemnification hereunder or by the Company to recover advances made hereunder, the burden of proving that the indemnitee is not entitled to be indemnified shall be on the Company. In such an action, neither the failure of the Company (including its Board, independent legal counsel or stockholders) to have made a determination that indemnification is proper, nor a determination by the Company that indemnification is improper, shall create a presumption that the indemnitee is not entitled to be indemnified or, in the case of such an action brought by the indemnitee, be a defense thereto. If successful in whole or in part in such an action, an indemnitee shall be entitled to be paid also the expense of prosecuting or defending same. The Company may, but shall not be obligated to, maintain insurance at its expense, to protect itself and any such person against any such liability, cost or expense. SECTION 2. Certificate for Shares. The shares of the capital stock of the Company shall be represented by certificates unless the Company provides by appropriate action that some or all of any or all classes or series of the Company's stock shall be uncertificated. Notwithstanding the Company's taking such action, to the extent required by law, every holder of stock represented by certificates and, upon request, every holder of uncertificated shares, shall be entitled to a certificate representing the number of shares in the Company owned by such stockholder in such form, not inconsistent with the Certificate of Incorporation, as shall be prescribed by the Board. Certificates representing shares of the capital stock of the Company shall be signed by the Chairman of the Board, President or an Executive Vice President and the Treasurer, Secretary or an Assistant Secretary. Any or all signatures on the certificate, including those of the Transfer Agent and Registrar, may be facsimile. The name of the person owning the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the Company's books. 8 Form 10-Q EXHIBIT 3.2 All certificates surrendered to the Company shall be cancelled, and no new certificates shall be issued until the former certificate for the same number of shares of the same class shall have been surrendered and cancelled, except that the Board may determine, from time to time, the conditions and provisions on which new certificates may be used in substitution of any certificates that may have been lost, stolen or destroyed. SECTION 3. Transfer of Shares. Shares in the capital stock of the Company shall be transferred by the record holder thereof, in person, or by any such person's attorney upon surrender and cancellation of certificates for a like number of shares. SECTION 4. Regulations. The Board also may make rules and regulations concerning the issue, transfer and registration of certificates for shares of the capital stock of the Company. The Board may appoint one or more transfer agents and one or more registrars of transfers, and may require all stock certificates to bear the signature of a transfer agent and a registrar of transfer. SECTION 5. Record Date of Stockholders. The Board may fix in advance a date, not exceeding sixty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend or other distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend or other distribution, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive any such dividend or other distribution, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Company after such record date fixed as aforesaid. SECTION 6. Corporate Seal. The seal of the Company shall be circular in form, containing the words "E. I. DU PONT DE NEMOURS AND CO." and "DELAWARE" on the circumference, surrounding the words "FOUNDED" and "SEAL," and the date "1802." The seal shall be in the custody of the Secretary. A duplicate of the seal may be kept and used by the Executive Vice President - Finance, any Vice President - DuPont Finance, the Treasurer, or by any Assistant Secretary or Assistant Treasurer. 9 Form 10-Q EXHIBIT 3.2 ARTICLE VII. AMENDMENTS The Board shall have the power to adopt, amend and repeal the Bylaws of the Company, by a vote of the majority of the whole Board, at any regular or special meeting of the Board, provided that notice of intention to adopt, amend or repeal the Bylaws in whole or in part shall have been given at the next preceding meeting, or, without any such notice, by the vote of two-thirds of the whole Board. I hereby certify that the foregoing is a true and correct copy of the Bylaws of E. I. du Pont de Nemours and Company. Witness my hand and the corporate seal of the Company this day of 199 . - ------------ ------------------ -- ---------------------------- Secretary 10 Form 10-Q Exhibit 10.7 VARIABLE COMPENSATION PLAN Last Amended - April 30, 1997 E. I. du Pont de Nemours and Company 22 Form 10-Q Exhibit 10.7 VARIABLE COMPENSATION PLAN I. PURPOSES The purposes of this Variable Compensation Plan (the "Plan") are: (a) to provide greater incentive for employees continually to exert their best efforts on behalf of E. I. du Pont de Nemours and Company (the "Company") by granting them compensation that, combined with their regular salaries, results in total compensation that is competitive based on performance; and (b) to further the identity of interests of such employees with those of the Company's stockholders generally. II. FORM OF GRANTS 1. Variable compensation under this Plan may be granted in acquired common stock of this Company, or in new common stock to be issued directly to the beneficiaries, or in cash, or in two or more of said forms. 2. The Compensation Committee shall determine the portion of each award under this Plan to be paid in cash and the portion to be delivered to the beneficiary in the form of common stock. III. LIMITATIONS ON GRANTS 1. Grants under this Plan shall be made from the Variable Compensa- tion Fund which the Company shall establish and to which shall be credited annually an amount to be determined by the Compensation Committee. This amount shall not exceed 20% of the "variable net income." For any year, the maximum amount of the individual grant under this Plan to the Chief Executive Officer or any of the four other highest compensated executive officers of the Company at year-end shown in the Company's Proxy Statement, or such other individuals as may be prescribed in rules under Section 162(m) of the Internal Revenue Code, shall not exceed 2% of the maximum amount which may be credited to the Fund for such year; however, the Compensation Committee, or the Board of Directors if the grant is made to an employee director, may in its discretion make individual grants which are less than such individual maximum amount. This Plan shall be interpreted consistent with the requirements of performance-based compensation plans under Section 162(m) of the Internal Revenue Code. 2. The term "variable net income" for any year, as used in this Plan, shall mean the amount of net income or loss as shown in the Consoli- dated Income Statement of this Company and its consolidated subsidiaries set forth in the Annual Report to the Stockholders for such year; provided, how- ever, that such net income or loss shall be adjusted to omit the effects of (i) charges and/or credits resulting from extraordinary items, accounting changes (including charges and/or credits to current year operations therefrom), and similarly disclosed amounts in the Com- pany's Consolidated Income Statement, and 1 Form 10-Q Exhibit 10.7 (ii) any charges/credits disclosed in the footnotes to Industry Segment Information for such year; and shall be further adjusted by (a) adding any amount which has been deducted in computing said net income with respect to any provision for the Variable Compensation Fund, and (b) deducting an amount equal to 6% of the "variable net capital employed," as defined in paragraph 3 of this Article. 3. The term "variable net capital employed" for any year, as used in this Plan, shall mean the average of the amounts of Stockholders' Equity as of December 31st of such year and December 31st of the preceding year, as shown in the Consolidated Balance Sheets of this Company and its subsidi- aries set forth in the Annual Reports to the Stockholders, after adjusting said amounts, however, by adding to Stockholders' Equity as stated in the later of such Balance Sheets any amount which has been deducted in computing net income with respect to any provision for the Variable Compensation Fund, as described in paragraph 2(a) of this Article. 4. Grants for each year need not have an aggregate value equal to the entire amount available in the Variable Compensation Fund. Any ungranted portion of the Fund shall be carried forward and be available for grants in a succeeding year or years, and while grants in the aggregate for any year may exceed the amount credited for that year to the Variable Com- pensation Fund, they shall not exceed the total amount in the Fund. IV. ADMINISTRATION 1. Except as otherwise specifically provided, the Plan shall be administered by the Compensation Committee of the Company's Board of Directors. The Compensation Committee shall be elected pursuant to the Bylaws of the Company, and the members thereof shall be ineligible for grants for services performed while serving on said Committee. 2. The decision of the Compensation Committee with respect to any questions arising as to interpretation of this Plan, including the sever- ability of any and all of the provisions thereof, shall be final, conclusive and binding. V. ELIGIBILITY FOR GRANTS 1. Grants under the Plan may be made to those employees who have contributed the most in a general way to the Company's success by their ability, efficiency, and loyalty, consideration being given to ability to succeed in more important managerial responsibility in the Company. Grants may also be made to: (a) a person performing services on a consultant basis, 2 Form 10-Q Exhibit 10.7 (b) an employee who retired or plans to retire pursuant to the provisions of the pension and retirement plan or policy of a plan company, (c) a former employee, and (d) the surviving spouse or estate of a deceased employee. No grant may be made to a director except for services performed as an employee of a plan company. 2. Except as set forth in subparagraphs (a) to (d) of the preceding paragraph, to be eligible for a grant an employee shall be employed by a plan company as of the date final action is taken on a grant under this Plan and shall be expected to continue in the employ of such a company. 3. For purposes of this Plan, the term "employee" shall include an employee of a corporation or other business entity in which the Company shall directly or indirectly own fifty percent or more of the outstanding voting stock or other ownership interest. The term "plan company" as used in this Plan shall mean a business entity whose employees are eligible for grants under this Plan. VI. GRANTS 1. The Compensation Committee shall determine each year the total amount of the Variable Compensation Fund to be distributed. Grants for any calendar year shall be made as soon as practicable after the close of such calendar year. 2. Employees in countries other than the United States may be granted variable compensation through plans or programs other than this Plan. VII. STOCK FOR GRANTS 1. With respect to the portion of grants under this Plan to be delivered in common stock, the Compensation Committee of the Company's Board of Directors shall determine whether, and to what extent, such portion of the grants shall be in new common stock to be issued directly to benefici- aries, or in common stock acquired by the Company. 2. The value per share at which common stock is to be granted to beneficiaries under this Plan shall be fixed and determined by the Board of Directors. Common stock to be delivered in payment of grants under this Plan shall be issued or registered in the names of beneficiaries at the time of delivery provided under Article IX hereof. 3 Form 10-Q Exhibit 10.7 VIII. RECOMMENDATIONS AND GRANTS 1. Recommendations for grants to members of the Board of Directors shall be made by the Compensation Committee. Recommendations for grants to employees who are not members of the Board of Directors shall be made to the Compensation Committee by the Office of the Chief Executive. 2. Any grant to a director shall be made in the sole discretion of the Board of Directors, a majority of whose members taking final action on any such grant shall be ineligible for grants under Article V. Any grant to an employee who is not a member of the Board of Directors shall be made in the sole discretion of the Compensation Committee which shall take final action on any such grant. No person shall have a right to a grant under this Plan until final action has been taken to make such grant. At the dis- cretion of the Compensation Committee, grants to employees of a plan company may be made subject to approval by the board of directors or other manage- ment group of such company. 3. Action to establish a minimum liability for variable compensa- tion grants under this Plan, if deemed appropriate, shall be taken by the Compensation Committee prior to year-end of the calendar year for which grants are to be made. IX. DELIVERY OF GRANTS When any stock or cash is granted under this Plan, certificates of stock, or cash, as the case may be, representing such grant, shall be delivered to the beneficiary promptly, or at such future times and under such terms and conditions as the Compensation Committee may determine. If it is determined that the grant be delivered promptly to the beneficiary, that beneficiary may be given the option to defer delivery of the grant to the extent provided in terms and conditions established by the Compensation Committee. X. AMENDMENTS While it is the present intention of the Company to make grants annually, the Board of Directors reserves the right to modify this Plan from time to time or to repeal the Plan entirely, or to direct the discontinuance of making grants either temporarily or permanently; provided, however, that no modification of this Plan shall operate to annul, without the consent of the beneficiary, a grant already made hereunder; provided, also, that no modification without approval of the stockholders shall increase the maximum amount which may be credited to the Variable Compensation Fund as herein- above provided. XI. MISCELLANEOUS All expenses and costs in connection with the operation of this Plan shall be borne by the Company and no part thereof shall be charged against the Variable Compensation Fund. 4 Form 10-Q Exhibit 12 E. I. DU PONT DE NEMOURS AND COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions)
Years Ended December 31 Nine Months Ended ------------------------------------------------- September 30, 1997 1996 1995 1994 1993 1992 ------------------ --------- ------- ------- --------- --------- Net Income ....................................... $2,143 $3,636 $3,293 $2,727 $ 566 $ 975 Provision for Income Taxes ....................... 1,860 2,345 2,097 1,655 392 836 Minority Interests in Earnings of Consolidated Subsidiaries ................................... 54 59 30 18 5 10 Adjustment for Companies Accounted for by the Equity Method ........................... 887 81 41 18 41 6 Capitalized Interest ............................. (126) (144) (170) (143) (194) (194) Amortization of Capitalized Interest ............. 97 191 154 154 144 101 ------ ------ ------ ------ ------ ------ 4,915 6,168 5,445 4,429 954 1,734 ------ ------ ------ ------ ------ ------ Fixed Charges: Interest and Debt Expense ...................... 474 729 758 559 594 643 Adjustment for Companies Accounted for by the Equity Method - Interest and Debt Expense .... 89 70 71 55 42 62 Capitalized Interest ........................... 126 144 170 143 194 194 Rental Expense Representative of Interest Factor ....................................... 89 118 113 118 143 151 ------ ------ ------ ------ ------ ------ 778 1,061 1,112 875 973 1,050 ------ ------ ------ ------ ------ ------ Total Adjusted Earnings Available for Payment of Fixed Charges .................................... $5,693 $7,229 $6,557 $5,304 $1,927 $2,784 ====== ====== ====== ====== ====== ====== Number of Times Fixed Charges are Earned ........... 7.3 6.8 5.9 6.1 2.0 2.7 ====== ====== ====== ====== ====== ====== Income Before Extraordinary Item and Transition Effect of Accounting Changes. Includes write-off of Purchased In-Process Research and Development associated with acquisition of 20% interest in Pioneer Hi-Bred International, Inc. Includes write-off of capitalized interest associated with divested businesses.
23 EX-27 2
5 This Schedule Contains Summary Financial Information Extracted From Form 10-Q For The Quarterly Period Ended September 30, 1997, And Is Qualified In Its Entirety By Reference To Such Financial Statements 1,000,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 1,485 708 5,858 0 4,005 13,047 51,615 29,621 42,352 13,498 5,786 0 237 347 11,084 42,352 33,749 34,811 25,058 30,349 0 0 459 4,003 1,860 2,143 0 0 0 2,143 0 0 Includes Other Accounts In Addition To Notes and Accounts Receivable-Trade. Includes Other Expenses. Cost of Goods Sold and Other Expenses; Depreciation, Depletion and Amortization; Exploration Expenses, Including Dry Hole Costs and Impairment of Unproved Properties; Selling, General and Administrative Expenses; Purchased In-Process Research and Development; and Write-down of Assets and Related Costs.
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