-----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, GaCbunS9fYPtZ9fBw26o0oe+QCjyCRdjhgnm4Jg1LAGq9spLxpY8uFhrSE3cpAbd 9UQzAT+g52y7ltbMmpGKWQ== 0000030554-99-000052.txt : 19990811 0000030554-99-000052.hdr.sgml : 19990811 ACCESSION NUMBER: 0000030554-99-000052 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990810 FILED AS OF DATE: 19990810 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: 99682334 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 June 30, 1999 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-815 E. I. du Pont de Nemours and Company (Exact Name of Registrant as Specified in Its Charter) Delaware 51-0014090 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1007 Market Street, Wilmington, Delaware 19898 (Address of Principal Executive Offices) (302) 774-1000 (Registrant's Telephone Number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No 1,130,311,035 shares (excludes 9,203,119 shares held by DuPont's Flexitrust) of common stock, $0.30 par value, were outstanding at July 31, 1999. 1 Form 10-Q E. I. DU PONT DE NEMOURS AND COMPANY Table of Contents Page(s) ------- Part I Financial Information Item 1. Financial Statements Consolidated Income Statement ............................... 3 Consolidated Statement of Cash Flows ........................ 4 Consolidated Balance Sheet .................................. 5 Notes to Financial Statements ............................... 6-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements ................................ 12-13 Results of Operations: Financial Results ......................................... 14-15 Segment Performance ....................................... 15-17 Financial Condition ....................................... 17-18 Other Items: Year 2000 Readiness Disclosure ............................ 18-20 Purchased In-Process Research and Development ............. 20-23 Pioneer Merger ............................................ 23-24 Conoco Split-Off .......................................... 24 Part II Other Information Item 1. Legal Proceedings .................................... 25 Item 5. Other Information .................................... 25-26 Item 6. Exhibits and Reports on Form 8-K ..................... 27-28 Signature ....................................................... 29 Exhibit Index ................................................... 30 Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges ................................................. 31 Exhibit 12.1 - Computation of Ratio of Earnings to Fixed Charges - Pro Forma ..................................... 32 2 Form 10-Q PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS E. I. DU PONT DE NEMOURS AND COMPANY AND CONSOLIDATED SUBSIDIARIES
Three Months Ended Six Months Ended CONSOLIDATED INCOME STATEMENT June 30 June 30 - ----------------------------------------------------------------------------------------------------------------------- (Dollars in millions, except per share) 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------------------------- SALES .................................................... $6,994 $6,432 $13,289 $12,626 Other Income ............................................. 235 192 253 489 ------ ------ ------- ------- Total .................................................... 7,229 6,624 13,542 13,115 ------ ------ ------- ------- Cost of Goods Sold and Other Expenses .................... 4,381 4,057 8,254 8,106 Selling, General and Administrative Expenses ................. 625 506 1,160 985 Depreciation and Amortization ................................ 373 367 708 699 Research and Development ..................................... 387 274 745 538 Interest Expense ............................................. 117 129 213 256 Purchased In-Process Research and Development ............ - - 40 60 Employee Separation Costs and Write-Down of Assets ....... 62 68 62 186 ------ ------ ------- ------- Total .................................................... 5,945 5,401 11,182 10,830 ------ ------ ------- ------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND AND MINORITY INTERESTS ...................................... 1,284 1,223 2,360 2,285 Provision for Income Tax Expenses ............................ 418 416 850 833 Minority Interests in Earnings of Consolidated Subsidiaries .. 20 13 36 21 ------ ------ ------- ------- INCOME FROM CONTINUING OPERATIONS......................... 846 794 1,474 1,431 DISCONTINUED OPERATIONS Income from Operations of Discontinued Business, Net of Income Taxes ...................................... - 165 - 434 Gain on Disposal of Discontinued Business, Net of Income Taxes ...................................... 71 - 106 - ------ ------ ------- ------- NET INCOME ................................................... $ 917 $ 959 $ 1,580 $ 1,865 ====== ====== ======= ======= BASIC EARNINGS PER SHARE OF COMMON STOCK Continuing Operations ...................................... $ .75 $ .70 $ 1.30 $ 1.26 Discontinued Operations .................................... .06 .15 .10 .39 ------ ------ ------- ------- Net Income ................................................. $ .81 $ .85 $ 1.40 $ 1.65 ====== ====== ======= ======= DILUTED EARNINGS PER SHARE OF COMMON STOCK Continuing Operations ...................................... $ .74 $ .69 $ 1.29 $ 1.24 Discontinued Operations .................................... .06 .14 .09 .38 ------ ------ ------- ------- Net Income ................................................. $ .80 $ .83 $ 1.38 $ 1.62 ====== ====== ======= ======= DIVIDENDS PER SHARE OF COMMON STOCK .......................... $ .35 $ .35 $ .70 $ .665 ====== ====== ======= ======= See Notes to Financial Statements.
3 Form 10-Q
Six Months Ended CONSOLIDATED STATEMENT OF CASH FLOWS June 30 - --------------------------------------------------------------------------------------------- (Dollars in millions) 1999 1998 - --------------------------------------------------------------------------------------------- CASH PROVIDED BY CONTINUING OPERATIONS Net Income ..................................................... $ 1,580 $ 1,865 Adjustments to Reconcile Net Income to Cash Provided by Continuing Operations: Net Income from Discontinued Operations .................... (106) (434) Depreciation and Amortization .............................. 708 699 Purchased In-Process Research and Development .............. 40 60 Other Noncash Charges and Credits - Net .................... 60 (34) Change in Operating Assets and Liabilities - Net ........... (591) (712) ------- ------- Cash Provided by Continuing Operations ................... 1,691 1,444 ------- ------- INVESTMENT ACTIVITIES OF CONTINUING OPERATIONS Purchases of Property, Plant and Equipment ..................... (981) (1,026) Investment in Affiliates ....................................... (24) (55) Payments for Businesses Acquired (Net of Cash Acquired) ........ (1,624) (698) Proceeds from Sales of Assets .................................. 62 265 Investments in Short-Term Financial Instruments - Net .......... (30) (381) Miscellaneous - Net ............................................ (7) (50) ------- ------- Cash Used for Investment Activities of Continuing Operations ............................................. (2,604) (1,945) ------- ------- FINANCING ACTIVITIES Dividends Paid to Stockholders ................................. (794) (754) Net (Decrease) Increase in Borrowings .......................... (2,737) 3,970 Acquisition of Treasury Stock .................................. (44) (309) Proceeds from Exercise of Stock Options ........................ 90 217 Increase in Minority Interests ................................. 80 - ------- ------- Cash Provided by (Used for) Financing Activities ......... (3,405) 3,124 ------- ------- Net Cash Flow from Discontinued Operations ....................... 4,733 (260) ------- ------- Effect of Exchange Rate Changes on Cash .......................... (96) 3 ------- ------- INCREASE IN CASH AND CASH EQUIVALENTS ............................ $ 319(i) $ 2,366 ======= ======= See Notes to Financial Statements.
4 Form 10-Q
CONSOLIDATED BALANCE SHEET June 30 December 31 - ------------------------------------------------------------------------------------------------------------------- (Dollars in millions, except per share) 1999 1998 - ------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and Cash Equivalents ........................................................ $ 1,501 $ 1,059 Marketable Securities ............................................................ 39 10 Accounts and Notes Receivable .................................................... 5,446 4,201 Inventories .................................................................. 3,388 3,129 Prepaid Expenses ................................................................. 215 192 Deferred Income Taxes ............................................................ 548 645 ------- ------- Total Current Assets ........................................................... 11,137 9,236 PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation and amortization (June 30, 1999 - $20,748; December 31, 1998 - $20,597) ........................... 14,888 14,131 INVESTMENT IN AFFILIATES ........................................................... 1,988 1,796 OTHER ASSETS ....................................................................... 5,730 4,956 NET ASSETS OF DISCONTINUED OPERATIONS .......................................... 3,572 8,417 ------- ------- TOTAL ...................................................................... 37,315 38,536 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable ................................................................. 1,844 1,929 Short-Term Borrowings and Capital Lease Obligations .............................. 3,536 6,629 Income Taxes ..................................................................... 353 130 Other Accrued Liabilities ........................................................ 3,181 2,922 ------- ------- Total Current Liabilities ...................................................... 8,914 11,610 LONG-TERM BORROWINGS AND CAPITAL LEASE OBLIGATIONS ................................. 4,934 4,495 OTHER LIABILITIES .................................................................. 7,741 7,640 DEFERRED INCOME TAXES .............................................................. 512 430 ------- ------- Total Liabilities .............................................................. 22,101 24,175 ------- ------- MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES .................................... 474 407 ------- ------- STOCKHOLDERS' EQUITY Preferred Stock .................................................................. 237 237 Common Stock, $.30 par value; 1,800,000,000 shares authorized; shares issued at June 30, 1999 - 1,139,154,154; December 31, 1998 - 1,140,354,154 ............ 342 342 Additional Paid-In Capital ....................................................... 7,917 7,854 Reinvested Earnings .............................................................. 7,453 6,705 Accumulated Other Comprehensive Loss ............................................. (523) (432) Common Stock Held in Trust for Unearned Employee Compensation and Benefits (Flexitrust), at Market (Shares: June 30, 1999 - 10,050,727; December 31, 1998 - 14,167,867) ................................................ (686) (752) ------- ------- Total Stockholders' Equity ..................................................... 14,740 13,954 ------- ------- TOTAL .......................................................................... $37,315 $38,536 ======= ======= 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. The company's petroleum business is reported as discontinued operations and is discussed in Notes (b) and (k). Discontinued Operations: On September 28, 1998, the company announced that the Board of Directors had approved a plan to divest the company's 100 percent-owned petroleum business (Conoco Inc.). On October 21, 1998, the company's interest in Conoco was reduced to 69.5 percent following an initial public offering of Conoco Class A Common Stock. In July 1999, the company announced the terms of the tax-free split-off to complete the divestiture by exchanging the remaining Conoco shares held by the company. On August 9, 1999, the company announced the successful completion of its exchange offer of Conoco Class B Common Stock for DuPont common stock. The company has not recognized a deferred tax liability for the difference between the book basis and tax basis of its investment in Conoco's common stock because this basis difference will not be subject to tax. The company's consolidated financial statements and notes report its petroleum business as discontinued operations. Prior periods have been restated. Results reported separately by Conoco are reported on a stand-alone basis and may differ from results based on discontinued operations reporting. In addition, beginning October 22, 1998, the company's results from discontinued operations reflect minority interests of 30.5 percent. Discussion of the exchange offer is on page 24. 6 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (Continued)
CONSOLIDATED SEGMENT INFORMATION - Three Months Ended Six Months Ended CONTINUING OPERATIONS June 30 June 30 ------------------------------------------------------------------------------------------------------------------ (Dollars in millions) 1999 1998 1999 1998 ----------------------------------------------------------------------------------------------------------------- SEGMENT SALES ------------- Agriculture & Nutrition .......................... $1,092 $1,231 $ 1,872 $ 2,001 Nylon Enterprise ................................. 1,149 1,162 2,252 2,335 Performance Coatings & Polymers .................. 1,656 1,190 2,806 2,338 Pharmaceuticals .............................. 380 193 789 410 Pigments & Chemicals ............................. 949 939 1,815 1,859 Polyester Enterprise ............................. 667 759 1,291 1,493 Specialty Fibers ................................. 857 828 1,720 1,679 Specialty Polymers ............................... 1,072 1,055 2,074 2,089 Other ............................................ 107 109 209 282 ------ ------ ------- ------- Total Segment Sales ............................ 7,929 7,466 14,828 14,486 Elimination of Intersegment Transfers ............ (234) (182) (407) (386) Elimination of Equity Affiliate Sales ............ (701) (852) (1,132) (1,474) ------ ------ ------- ------- SALES .......................................... $6,994 $6,432 $13,289 $12,626 ====== ====== ======= ======= AFTER-TAX OPERATING INCOME (LOSS) --------------------------------- Agriculture & Nutrition .......................... $ 206 $ 236 $ 297 $ 265 Nylon Enterprise ................................. 104 85 206 90 Performance Coatings & Polymers .................. 160 128 260 250 Pharmaceuticals .................................. 49 25 124 75 Pigments & Chemicals ............................. 158 137 304 294 Polyester Enterprise ............................. (53) 1 (59) 5 Specialty Fibers ................................. 168 161 349 349 Specialty Polymers ............................... 164 162 328 320 Other ............................................ 12 (5) 22 40 ------ ------ ------- ------- Total Segment ATOI ............................. 968 930 1,831 1,688 Interest & Exchange Gains and Losses ............. (48) (82) (211) (152) Corporate Expenses ............................... (74) (54) (146) (105) ------ ------ ------- ------- INCOME FROM CONTINUING OPERATIONS .............. $ 846 $ 794 $ 1,474 $ 1,431 ====== ====== ======= ======= June 30 December 31 SIGNIFICANT CHANGE IN SEGMENT ASSETS 1999 1998 --------- ----------- Performance Coatings & Polymers .................. $4,205 $2,214 ====== ======
7 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (Continued) [FN] Footnotes to Note (c) - --------------------- Certain reclassifications of segment data have been made, consistent with internal reporting, to reflect changes in organizational structure. Includes pro rata equity affiliate sales and intersegment transfers. The increase in sales reflects the current 100 percent ownership of the pharmaceuticals business versus 50 percent in 1998. In addition, effective first quarter 1999, revenues from contract manufacturing are reclassified from Other Income to Sales, and prior periods have been restated. These revenues are $21 and $48 for second quarter and year-to-date 1999, respectively, versus $20 and $35 for the comparable periods of 1998. Includes a charge of $60 for revision, based on finalization of the purchase price allocation in conjunction with the purchase of Protein Technologies International, related to the value assigned to research and development in progress at the time of purchase for which technological feasibility has not yet been established and no alternative future use is anticipated. Includes charges of $45 for the quarter and $130 for the year-to-date related to rationalization of global Nylon operations, primarily shutdown of certain manufacturing facilities and employee separation costs. Includes an estimated charge of $40 based on preliminary purchase price allocations in conjunction with the purchase of Herberts, the automotive coatings business of Hoechst AG, related to the value assigned to research and development in progress at the time of purchase for which technological feasibility has not yet been established and no alternative future use is anticipated. Includes a charge of $40 related to employee separation costs for about 850 employees within the Polyester Enterprise. Includes an exchange loss of $81 on forward exchange contracts purchased in 1998 to lock in the U.S. dollar cost of the acquisition of Herberts. The purchase price for Herberts was negotiated in German marks. The change is primarily the result of the purchase of Herberts. The preliminary purchase price allocation to assets acquired and liabilities assumed is discussed on pages 20 to 22. 8 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (Continued) [FN] Amortization of intangible assets is principally reported in Cost of Goods Sold and Other Expenses. Amortization for companies accounted for under the equity method is reported in Other Income. Total amortization of intangible assets was $61 and $107 for the second quarter and year-to-date 1999, respectively. Amounts for comparable periods of 1998 were $23 and $58, respectively. Includes an exchange loss of $131 on forward exchange contracts purchased in 1998 to lock in the U.S. dollar cost of the acquisition of Herberts, the automotive coatings business of Hoechst AG. The purchase price for Herberts was negotiated in German marks. Purchased in-process research and development represents the value assigned in a purchase business combination to research and development projects of the acquired business that were in progress at the time of purchase for which technological feasibility has not yet been established and no alternative future use is anticipated. Year-to-date 1999 represents an estimated charge that was recorded in the first quarter in conjunction with the purchase of Herberts based on preliminary alloca- tions of purchase price that are subject to revision upon completion of valuations and purchase accounting allocations. Year-to-date 1998 represents a charge for revision, based on finalization of the purchase price allocation in conjunction with the purchase of Protein Technologies International. Second quarter 1999 charges of $62 result from employee separation costs for about 850 employees within the Polyester Enterprise. Second quarter 1998 charges of $68 result from employee separation costs for about 950 people within the Nylon Enterprise. Year-to-date 1998 charges also include $40 of employee separation costs within the Nylon Enterprise related to the termination of about 550 employees and $78 for the shutdown of related manufacturing facilities. 9 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (Continued) [FN] Basic earnings per share is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares (the denominator) for the period. The numerator for both income from continuing operations and net income is reduced by preferred dividends of $2.5 and $5.0 for the three- and six-month periods, respectively. For diluted earnings per share, the numerator is adjusted to recognize reduced share of earnings assuming options in subsidiary company stock are exercised if the effect of this adjustment is dilutive. The denominator is based on the following weighted-average number of common shares and includes the additional common shares that would have been outstanding if potentially dilutive common shares had been issued: Three Months Ended Six Months Ended June 30 June 30 ------------------------------ ------------------------------ Basic Diluted Basic Diluted ------------- ------------- ------------- ------------- 1999 1,129,006,814 1,144,189,906 1,128,051,977 1,141,147,812 1998 1,129,926,272 1,151,784,525 1,129,175,175 1,148,733,824 The difference between basic and diluted weighted-average common shares outstanding results from the assumption that dilutive stock options outstanding were exercised. The following average stock options are antidilutive, and therefore are not included in the diluted earnings per share calculation since the exercise price is greater than the average market price: Three Months Ended Six Months Ended June 30 June 30 --------------------- --------------------- 1999 1998 1999 1998 --------- --------- --------- --------- Average Stock Options 3,060,038 2,536,563 5,818,219 3,767,540 Compensation expense recognized in income for stock-based employee com- pensation awards was $23 and $26 for the three months and $30 and $60 for the six months ended June 30, 1999 and 1998, respectively. Shares held by the Flexitrust are not considered outstanding in comput- ing the foregoing weighted-average number of common shares. Includes the change in cash and cash equivalents classified in the Consolidated Balance Sheet within "Net Assets of Discontinued Operations." 10 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (Continued) [FN] June 30 December 31 Inventories 1999 1998 ----------- ------- ----------- Finished Products ......................... $2,408 $2,209 Semifinished Products ..................... 840 836 Raw Materials and Supplies ................ 813 749 ------ ------ 4,061 3,794 Less: Adjustment of Inventories to a Last-In, First-Out (LIFO) Basis ......... 673 665 ------ ------ Total ................................. $3,388 $3,129 ====== ====== June 30 December 31 Net Assets of Discontinued Operations 1999 1998 ------------------------------------- -------- ----------- Cash and Cash Equivalents ................. $ 252 $ 375 Other Current Assets ...................... 2,831 2,864 Property, Plant and Equipment - Net ....... 11,221 11,438 Other Assets .............................. 2,131 2,011 Current Liabilities ....................... (3,277) (2,473) Other Liabilities ......................... (7,885) (4,115) Minority Interests ........................ (1,701) (1,683) ------- ------- Net Assets of Discontinued Operations ... $ 3,572 $ 8,417 ======= ======= The reduction in net assets reflects outside financing obtained by Conoco in the second quarter 1999 to repay intercompany debt to DuPont. The following sets forth the company's total comprehensive income for the periods shown: Three Months Ended Six Months Ended June 30 June 30 ------------------ ------------------- 1999 1998 1999 1998 ----- ----- ------- ------- Net Income ........... $917 $959 $1,580 $1,865 Other Comprehensive Income (Loss), Net of Tax ......... 3 (7) (91) (27) ---- ---- ------ ------ Total Comprehensive Income ............. $920 $952 $1,489 $1,838 ==== ==== ====== ====== The components of other comprehensive income are unrealized holding gains on available-for-sale securities, cumulative translation adjustments, and minimum pension liability. 11 Form 10-Q Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements -------------------------- This report contains forward-looking statements which may be identified by their use of words like "plans," "expects," "will," "anticipates," "intends," "projects," "estimates" or other words of similar meaning. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, market position, expenditures, financial results and the company's efforts to remediate Year 2000 issues, are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The company cannot guarantee that these assumptions and expectations are accurate or will be realized. In addition to the factors discussed in this report, the following are some of the important factors that could cause the company's actual results to differ materially from those projected in any such forward-looking statements: o The company operates in approximately 65 countries world- wide and derives about half of its revenues from sales outside the United States. Changes in the laws or policies of other governmental and quasi-governmental activities in the countries in which the company operates could affect its business in the country and the company's results of operations. In addition, economic factors (including inflation and fluctuations in interest rates and foreign currency exchange rates) and competitive factors (such as greater price competition or a decline in U.S. or European industry sales from slowing economic growth) in those countries could affect the company's revenues, expenses and results. o The company's growth objectives are largely dependent on its ability to renew its pipeline of new products and to bring those products to market. This ability may be adversely affected by difficulties or delays in product development including, but not limited to, the inability to identify viable new products; successfully complete clinical trials of new pharmaceuticals; obtain relevant regulatory approvals, which may include approval from the U.S. Food and Drug Administration; the ability to obtain adequate intellectual property protection; or gain market acceptance of the new products. 12 Form 10-Q o As part of its strategy for growth, the company has made and may continue to make acquisitions, divestitures and alliances. There can be no assurance that these will be completed or beneficial to the company. o The company has undertaken and may continue to undertake pro- ductivity initiatives, including organizational restructur- ings, to improve performance and generate cost savings. There can be no assurance that these will be completed or beneficial to the company. Also there can be no assurance that any estimated cost savings from such activities will be realized. o The company has articulated and updated in its periodic reports filed with the Securities and Exchange Commission on Forms 10-Q and 10-K its timetable and assessment of costs to become Year 2000-capable. The failure of the company or third parties with which it conducts business to become Year 2000-capable could have a material adverse affect on the company's financial condition, results of operation and liquidity. o The company's facilities are subject to a broad array of environmental laws and regulations. The costs of complying with complex environmental laws and regulations as well as internal voluntary programs, are significant and will con- tinue to be so for the foreseeable future. The company's accruals for such costs and liabilities may not be adequate since the estimates on which the accruals are based depend on a number of factors including the nature of the allega- tion, the complexity of the site, the nature of the remedy, the outcome of discussions with regulatory agencies and other potentially responsible parties (PRPs) at multi-party sites, and the number and financial viability of other PRPs. o The company's results of operations could be affected by significant litigation adverse to the company including product liability claims, patent infringement claims and antitrust claims. o The profitability of the company's petroleum business (Conoco Inc.), currently reported as discontinued operations, will be affected by the prices for crude oil, natural gas and refined products. These prices are subject to wide fluctuations in response to changes in global and regional supply over which the company has no control, including political developments and the ability of the Organization of Petroleum Exporting Countries and other producing nations to set and maintain production levels and prices. The foregoing list of important factors does not include all such factors nor necessarily presents them in order of importance. 13 Form 10-Q (a) Results of Operations (1) Financial Results: DuPont's second quarter 1999 diluted earnings per share from continuing operations before nonrecurring items of $.78 were up 7 percent from second quarter earnings of $.73 last year. Includ- ing discontinued operations and nonrecurring items, diluted earnings per share were $.80 compared to $.83 in 1998. Results From Continuing Operations ---------------------------------- Sales in the quarter were $7.0 billion, up 9 percent from $6.4 billion in the second quarter of 1998, with acquisitions adding 13 percent to top-line growth. Excluding acquisitions, worldwide volumes declined about 1 percent, while prices were down 3 percent. Adverse currency effect from a stronger dollar was less than 1 percent. The Asia Pacific region turned in a strong performance with a sales increase of 16 percent on 20 percent volume growth, reflecting gains in nearly all business units. European sales were up 20 percent, with volumes up 24 percent. Excluding the Herberts acquisition, volumes were down 2 percent, while prices, reflecting a stronger dollar, declined 4 percent. U.S. volumes were down 3 percent compared to last year's second quarter. Excluding the adverse volume impact resulting from weakness in the crop protection products business, U.S. volume was up 1 percent. Prices were down 3 percent, adversely affected by significantly lower polyester fiber prices. Excluding nonrecurring items, income from continuing opera- tions for the second quarter 1999 was $886 million, compared to $839 million in 1998. Nonrecurring charges totaling $40 million and $45 million were taken in 1999 and 1998, respectively. The current quarter's nonrecurring item relates to employee separation costs for Polyester Enterprise staffing reductions as described in the notes to the financial statements. Second quarter 1998 non- recurring charges were for employee separation costs recorded in connection with rationalization of the global Nylon Enterprise. Results From Discontinued Operations ------------------------------------ The company is in the process of completing the divestiture of Conoco Inc. with a tax-free split off by exchanging its remaining Conoco shares (69.5 percent) for DuPont shares during the third quarter 1999. DuPont's consolidated financial statements and notes report its petroleum business as discontinued operations. Prior 14 Form 10-Q periods have been restated. Results reported separately by Conoco are reported on a stand-alone basis and may differ from results based on discontinued operations. In addition, beginning October 22, 1998, the company's results from discontinued operations reflect minority interest of 30.5 percent. Further discussion of the exchange offer is on page 24. Income from discontinued operations was $71 million compared to $165 million in last year's second quarter, down 57 percent principally reflecting lower natural gas prices and lower downstream margins, partly offset by higher oil prices. These factors, combined with the reduction of the company's ownership to 69.5 percent, resulted in a significant earnings decline. (2) Segment Performance: The following text compares second quarter 1999 results with second quarter 1998, for sales and earnings of each segment, excluding the earnings impact of nonrecurring items described in the footnotes to the "Consolidated Segment Information - Continuing Operations" table at Note (c) on pages 7 and 8. Segment results include intersegment transfers and a pro rata ownership share of the sales and earnings of equity affiliates. Total segment underlying after-tax operating income was $1,008 million compared to $975 million last year. Total segment sales were $7.9 billion, compared to $7.5 billion last year. o Agriculture & Nutrition segment earnings were down 13 percent, principally reflecting weakness in the U.S. crop protection business for corn and soybeans, partly offset by better results for Nutrition & Health. Segment sales declined 11 percent reflecting a significant volume decrease in the United States and eastern European crop protection products markets. o Nylon Enterprise segment earnings were down 20 percent reflecting lower sales as higher volumes were more than offset by lower prices. Apparel and industrial markets continue to show weakness, while residential flooring remains strong in North America. o Performance Coatings & Polymers segment earnings were up 25 percent reflecting higher earnings across all business units. Sales were up 39 percent reflecting the addition of the Herberts acquisition and an average of 5 percent higher sales volume in the remaining businesses. 15 Form 10-Q o Pharmaceuticals segment earnings were up 96 percent, primarily due to earnings improvements from "Sustiva" (efavirenz) and "Cozaar" (antihypertensive drug) as well as the current 100 percent ownership, increased from 50 percent. Partly offsetting these improvements were higher research and development costs and expected lower sales of "Coumadin" (anticoagulant). o Pigments and Chemicals segment earnings were up 15 percent, reflecting increased earnings for white pigments and fluorochemicals. Fluorochemicals benefited from increased sales of CFC alternative products, and white pigments from growing volumes in Asia Pacific and lower raw material costs. o Polyester Enterprise segment posted a loss of $13 million versus earnings of $1 million last year. Sales were down 12 percent reflecting both excess capacity and intense competitive pressures in the industry. o Specialty Fibers segment sales and earnings each increased 4 percent, reflecting better results for "Lycra" spandex and nonwovens. "Lycra" volumes remain strong but average prices were adversely affected due to a combination of competitive pricing and currency weakness in Europe and South America. o Specialty Polymers segment earnings were essentially flat as earnings improvements in Photopolymers and Electronic Materials and DuPont "Corian" were offset by declines for Packaging and Industrial Polymers and Fluoropolymers. o The Other segment earnings were $12 million versus a loss of $5 million last year. This principally reflects the absence of staff employee separation costs incurred last year, and a benefit from internal service billings to businesses exceeding actual costs for staff services, consistent with internal segment reporting. This billing difference will be eliminated by year end. In July, the company announced plans to streamline opera- tions, consolidate manufacturing and implement workforce reductions to improve performance in the Crop Protection Products and Performance Coatings businesses. The Crop Protection Products restructuring will result in a nonrecurring charge against third quarter earnings. The Performance Coatings restructuring, which largely relates to exiting certain activities of the Herberts' business, will be reflected in the determination of the fair value of 16 Form 10-Q net assets acquired, and therefore, will not result in a material charge to 1999 earnings. Estimated annual pretax savings of approximately $200 million and $100 million, respectively, are expected to result from these initiatives. (b) Financial Condition at June 30, 1999 Cash provided by continuing operations was $1.7 billion for the first half of 1999, as compared with $1.4 billion for the same period in 1998. Income from continuing operations of $1.5 billion in 1999 was in line with the prior year. Noncash charges for depreciation and amortization and for the write-off of purchased in-process research and development were also compar- able year to year. Other noncash charges and credits - net were higher in 1999 primarily reflecting the absence of the timing difference between affiliate income and dividends for DuPont Merck Pharmaceuticals. Net operat- ing assets increased $591 million in 1999 and $712 in 1998, reflecting a typical pattern of seasonal working capital builds in a number of businesses. Seasonal increases in working capital are usually reversed by year end. Year-to-date capital investments for purchases of property, plant, and equipment and investments in affiliates were $1.0 billion, as compared to $1.1 billion spent in 1998. Payments for businesses acquired in 1999 totaled $1.6 billion and primarily reflect the acquisition of Herberts, the automotive coatings business of Hoechst AG. This acquisition also included the assumption of $0.2 billion in Herberts' debt. First half 1998 payments for businesses acquired include $0.7 billion for acquisition of ICI's polyester films business. Proceeds from the sale of assets in the first half of 1999 totaled $62 million, none of which were individually significant. Proceeds from the sale of assets in the first half of 1998 totaled $265 million, and included the sale of certain hydrogen peroxide properties for $160 million, and the sale of the Printing and Publishing business totaling $86 million. Year-to-date 1999 the company spent $44 million to purchase and retire 840,000 shares of DuPont common stock. These purchases were part of the program initiated in 1997 to purchase and retire up to 20 million shares of DuPont common stock to offset dilution from shares issued under compensa- tion programs. In first half 1998, the company spent $374 million to purchase and retire 6 million shares, and not related to the shares buyback program, the company received $65 million as a final settlement payment associated with 16 million shares repurchased in a private placement trans- action in December 1997. Increase in minority interests in 1999 includes $79 million for sale of an approximate 14 percent interest in the DuPont Photomasks, Inc. business, further reducing DuPont's ownership to approximately 55 percent. 17 Form 10-Q Total debt, including capital lease obligations, at June 30, 1999, was $8.5 billion, as compared to $11.1 billion at year-end 1998. The decrease primarily reflects the retirement of commercial paper. During the second quarter, Conoco paid off all outstanding intercompany debt to DuPont. Conoco's debt to DuPont totaled $4.6 billion at year-end 1998. The proceeds from Conoco, together with cash provided by continuing operations, were used to finance the $2.6 billion spent on investment activities, pay dividends, and reduce borrowings. Certain Statistics - Continuing Operations ------------------------------------------ At 6/30/99 At 12/31/98 ---------- ----------- Cash Flow to Total Debt (previous 12 months cash provided by operations to total debt) .................. 52% 37% Current Ratio (current assets to current liabilities) ...... 1.2:1 0.8:1 Earnings to Fixed Charges ...... 5.9 3.3 Earnings to Fixed Charges - Pro Forma*.................... 8.3 4.5 ------------------ *Pro Forma statistics reflect the ratio of earnings to fixed charges on a continuing operations basis, excluding interest and debt expense which has been allocated to or incurred by discontinued operations. The Cash Flow to Total Debt ratio increased as of June 1999 versus year-end 1998 primarily due to the decrease in total debt. Days' sales outstanding averaged 55 days in the second quarter, a decrease of 4 days from first quarter 1999, and an increase of 3 days from the second quarter of 1998. (c) Other Items Year 2000 Readiness Disclosure ------------------------------ This update on the status of the company's program to become Year 2000-capable should be read in conjunction with the Year 2000 Readiness Disclosure in the company's 1998 annual report on Form 10-K. The inventory, assessment, remediation, testing and return to production phases of the company's Year 2000 Project have been substantially completed across all 18 Form 10-Q businesses. Except for those acquired by the company during its acquisition of Herberts, the company's critical and significant systems are expected to be remediated on the following schedule: Status As Of Systems Time Frame 6/30/99 ------- ------------ ------------ Telecommunications ....................... 11/98 - 3/99 Completed* Mainframe Corporate Data Centers ......... 4/99 Completed* Mid-Range Computers ...................... 10/98 - 6/99 Completed* Corporate (e.g., Payroll and Electronic Mail) .... 1/99 - 6/99 Completed* Business (e.g., Inventory Processing) ........... 12/98 - 4Q99 94%** Manufacturing, Process Control and Equipment .............................. 4Q98 - 4Q99 Completed* - ----------------------- *"Completed" means that the remediation phase is substantially completed for systems in the indicated category. Continuous monitoring is necessary, and therefore, further remediation may be required because of system updates. **The percent represents the percent of systems which have been remediated in the indicated category as measured by the businesses and functional units. Since Herberts' Year 2000 Program is configured differently from the company's, Herberts' systems are not included in the foregoing remediation timetable. Herberts has identified all of its critical and significant systems which require remediation to be Year 2000-capable. Herberts expects to complete the remediation of all of these systems by the end of October 1999. The company is continuing its Business Partner 2000 Program with key suppliers and major customers. As of the end of the second quarter, the company assessed 7 percent of its key suppliers and 29 percent of its major customers as at a high risk of not becoming Year 2000-capable on a timely basis. While the company expects minimal disruptions as a result of the Year 2000 Problem, the company's individual businesses have completed over 1,900 contingency plans to address potential interruptions in internal systems which may be caused by the Year 2000 Problem as well as in the supply chain due to the failure of key suppliers and major customers to become Year 2000-capable 19 Form 10-Q identifiable assets acquired and liabilities assumed, based on their estimated fair values, which was recorded in the first quarter of 1999, is as follows (dollars in millions): Current Assets ................................. $ 744 Property, Plant and Equipment .................. 605 Completed Technology ........................... 65 In-Process Research and Development ............ 40 Other Assets ................................... 96 Liabilities .................................... (681) ----- Total Identifiable Assets Less Liabilities ... $ 869 The $745 million excess of purchase price over the fair value of the identifiable assets less liabilities was recorded as goodwill which is being amortized over 20 years. The company continues to obtain data to support the purchase price allocation, principally in respect of the cost of exiting certain activities of the Herberts business, and valuation of tangible and intangible assets. In addition, adjustments to the purchase price continue to be negotiated with Hoechst AG. Finalization of purchase accounting is not expected to have a material impact on 1999 reported earnings. Purchased in-process research and development represents the value assigned in a purchase business combination to research and development projects of the acquired business that were commenced, but not yet completed, at the date of acquisition and which, if unsuccessful, have no alternative future use in research and development activities or otherwise. At the date of the acquisition, Herberts had 29 research and development projects meeting the criteria for purchased in-process research and development. These projects were of two principal types (dollars in millions): Number of Preliminary Project Type Projects Fair Value ------------ --------- ----------- New Product Development ........ 25 $31 New Manufacturing Processes .... 4 $ 9 The fair values of these projects are based on estimates prepared by management utilizing procedures that DuPont has adopted for other business acquisitions. These procedures utilize explicit assumptions about the range of possible estimated cash flows and their respective probabilities to 21 Form 10-Q determine the expected cash flow for each project. Under this approach, projected cash flows are adjusted for risks prior to being discounted to present value. Risks so addressed include completion risk, competitive risk, and timing risk. A Probability of Technical and Commercial Success factor is used to adjust for the risk that a project may not be successfully completed. It is based on scientific judgment regarding the results achieved to date, the com- plexity of successfully completing the project, and the business' historical experience with similar types of research and development projects. Histor- ical experience is also used to probability adjust projected future revenues for the effects of competition and other events that could cause variations in the amount and timing of future cash flows. Other than reflecting the future benefits associated with planned cost reduction initiatives, the project cash flows do not anticipate any material changes from historical pricing, margins and expense levels. New Product Development projects have as their goal the discovery and development of new formulations and/or significant modifications of product formulations. Management estimates the Probability of Technical and Commercial Success for these projects ranges from 20 percent to 85 percent. These projects are expected to be completed in the period 1999 to 2004. The New Manufacturing Processes projects have as their goal the design and development of new manufacturing processes. Management estimates the Probability of Technical and Commercial Success for these projects ranges from 25 percent to 70 percent. These projects are expected to be completed in the period 1999 to 2005. Successful completion of a project is deemed to occur when the new product or process has been defined and technological feasibility has been objectively demonstrated. Given the unique nature of these projects, they do not have alternative future use. However, if none of these projects were successfully completed, there would not be a material impact on the future operations of the company. The risk-adjusted cost to complete these 29 projects is estimated to total $24 million over the period 1999 to 2006. Cash flows were discounted to present value using a discount rate aligned with the estimated weighted average cost of capital for this business. This was deemed by management to be appropriate given the extensive historical knowledge and experience regarding these types of research and development projects and this line of business. 22 Form 10-Q Prior Acquisitions ------------------ The following summarizes significant developments with respect to in-process research and development acquired in 1997 and 1998: DuPont Pharmaceuticals ---------------------- "Sustiva" (efavirenz) received full marketing authorization from the European Commission on June 1, 1999, and "Innohep" (tinzaparin) was submitted for FDA approval on June 30, 1999. The timing of these events was consistent with expectations at the date of acquisition. Polyester Films, Resins, Intermediates and Fibers ------------------------------------------------- As previously announced, the company intends to form joint ventures with Sabanci of Turkey for polyester intermediates, resins and fibers in Greater Europe and with Teijin for films globally. In-process research and development projects acquired from ICI that are still in process at the date these ventures are formed will be contributed to the ventures and will no longer be controlled by DuPont. Failure to complete these projects would not be expected to materially alter the expected investment return to the company, or the results of operations or financial condition of the company. Pioneer Hi-Bred International ----------------------------- Since the company's 1997 purchase of an approximate 20 percent interest in Pioneer Hi-Bred International, the Pioneer projects that con- stituted acquired in-process research and development at the date of acquisi- tion have reached varying levels of development. Significant changes since 1997 include the successful commercialization of first generation European corn borer resistant corn hybrids, as well as successful commercialization of record numbers of new high performance hybrids of corn and varieties of soybeans. Significant progress has been made in connection with the develop- ment of new corn hybrids containing improved agronomic traits. The develop- ment of premium value seed products containing multiple quality traits is progressing slower than previously anticipated. In addition, weak commodity prices have contributed to increased uncertainty over the size of the market for quality trait products and the value of that market. If these development and market conditions persist, the future value of these projects to the company could be adversely affected. Pioneer Merger -------------- In March, DuPont and Pioneer Hi-Bred International, Inc. executed a definitive agreement for a stock and cash merger that will result in the company's complete ownership of Pioneer. The company currently has a 20 percent equity interest in Pioneer. Under the terms of the agreement, Pioneer shareholders will receive $40.00 per share, with 45 percent of the shares to be exchanged for cash and 55 percent of the shares receiving 23 Form 10-Q DuPont common stock. The total equity value of the transaction is estimated to be approximately $7.7 billion for the 80 percent of Pioneer not currently owned by DuPont. Pioneer shareholders will have certain rights to elect which form of consideration they will receive. The merger is expected to close later this year subject to approval of Pioneer's shareholders. The merger has received nonobjection from the relevant antitrust regulatory authorities. Pioneer's preliminary proxy was filed on July 2, 1999, and is currently under review by the Securities and Exchange Commission. Conoco Split-Off ---------------- On September 28, 1998, the company announced that the Board of Directors had approved a plan to divest the company's 100 percent-owned petroleum business (Conoco Inc.). On October 21, 1998, the company's interest in Conoco was reduced to 69.5 percent following an initial public offering of Conoco Class A Common Stock. In connection with the separation from DuPont, Conoco and DuPont entered into a tax sharing agree- ment. Several matters under the tax sharing agreement are currently in dispute between Conoco and DuPont. DuPont's obligations to Conoco arising out of the most significant of these matters could range from zero to up to approximately $160 million, depending on the outcome of the dispute. DuPont believes that any settlement of the dispute will not be material to its financial position or to the anticipated gain on disposal of discontinued business. On July 9, 1999, DuPont set the exchange ratio for the offer to its shareholders to exchange one share of DuPont common stock for 2.95 shares of the Conoco Class B Common Stock currently held by DuPont up to a maximum of 148 million shares of DuPont common stock. The exchange offer was available only to DuPont shareholders who are United States persons, as defined in the Offering Circular-Prospectus, and the exchange offer commenced on July 12, and it expired at 12:00 midnight, New York City time, on August 6, 1999. On August 9, 1999, DuPont announced that it has accepted approxi- mately 148 million shares of DuPont common stock in exchange for approximately 436.5 million shares of Conoco Class B Common Stock. Based on preliminary results, which indicate the offer is oversubscribed, DuPont anticipates that approximately 41 percent of the DuPont shares tendered will be accepted for exchange. The estimated 41 percent proration factor is subject to change. It is expected that DuPont will have approximately 982 million shares of common stock outstanding after completion of the exchange. Also on July 14, 1999, DuPont commenced an offer to its shareholders who are non-United States persons to sell some or all of their shares to DuPont for $80.76 for each share of DuPont common stock up to a maximum of 8 million shares of DuPont common stock. Only non-United States persons as defined in the Offer to Purchase are eligible to participate in the cash offer. The cash offer expires at 12:00 midnight, New York City time, on August 10, 1999, unless extended. 24 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 760 lawsuits, most by growers who allege plant damage from using "Benlate" 50 DF fungicide. Approximately 61 crop lawsuits are still pending against the company, as are approximately 40 additional "Benlate" 50 DF cases based on alleged personal injury and based on alleged damage to shrimp farming operations. In addition, 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 still pending. The plaintiff in this case alleges that DuPont made false and misleading statements and omissions about "Benlate" 50 DF, with the alleged effect of inflating the price of DuPont's stock between June 19, 1993, and January 27, 1995. The district court has certified the case as a class action. Discovery is proceeding. A shareholder derivative action filed in Georgia federal district court, alleging that DuPont's Board of Directors breached various duties in connection with the "Benlate" 50 DF litigation, also remains pending. A motion to dismiss the complaint has recently been filed. Certain plaintiffs who previously settled with the company have filed cases alleging fraud and other misconduct relating to the litigation and settlement of "Benlate" 50 DF claims. Approximately 41 such cases are pending. These cases are in various stages of proceedings in trial and appellate courts in Florida, Hawaii, and Delaware. 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 these estimated costs could result in additional future charges. Item 5. OTHER INFORMATION Changes in DuPont's Board of Directors - -------------------------------------- Goran Lindahl, president and CEO of ABB, was elected a member of DuPont's Board of Directors effective July 28, 1999. Lindahl, 54, assumed his present position in 1997. He is a member of the boards of directors of ABB Ltd. and LM Ericsson AB. Goran Lindahl joined Asea in 1971 in Ludvika, Sweden, and has held senior level managerial assignments in engineering, 25 Form 10-Q research and development, manufacturing and sales and marketing. He was named president of Asea Transmission in 1985 and executive vice president of ASEA AB a year later. After the 1988 merger of Asea and BBC Brown Boveri to create ABB, Lindahl became executive vice president and a member of the group executive committee. ABB is a globalized technology and engineering company serving customers in power transmission and distribution; automation; oil, gas and petrochemicals; industrial products and contracting; and in financial services. Power generation customers are served by a joint venture ABB ALSTOM POWER. The ABB Group employs about 160,000 people in more than 100 countries. Separately, Goro Watanabe retired from DuPont's Board of Directors on June 30, 1999. DuPont Realigns Senior Leadership Responsibilities; Sets Pioneer Hi-Bred International Inc., Post-Merger Executive Roles - -------------------------------------------------------------------- On July 30, 1999, the company announced that two senior executives will realign responsibilities to better focus on major priorities related to the company's evolving pharmaceuticals, agriculture and nutrition strategy. The company also outlined senior executive roles for certain officers of Pioneer Hi-Bred International, Inc., pending completion of the merger which is subject to approval by the shareholders of Pioneer. Kurt M. Landgraf, executive vice president and chief operating officer, will focus primarily on leading and implementing the company's pharmaceuticals strategy. DuPont announced in March that it planned to actively seek strategic alliances with other strong partners in the pharmaceutical industry to bring DuPont Pharmaceuticals to the critical mass necessary to ensure long-term success. Richard R. Goodmanson, executive vice president and chief operating officer, will assume responsibility for the business and research units in the Agriculture and Nutrition business segment currently reporting to Landgraf. He also will have overall responsibility for the integration of Pioneer into DuPont. Goodmanson will retain responsibility for the Asia Pacific region and for businesses in the Specialty Fibers and Performance Coatings and Polymers segments. Following the expected closing of the merger with Pioneer, the company plans to appoint Charles S. Johnson, currently chairman, president and chief executive officer of Pioneer, to the position of DuPont executive vice president and member of the Office of the Chief Executive, reporting to the company's chairman and CEO. Succeeding Johnson as president and chief executive officer of Pioneer would be Jerry L. Chicoine, currently Pioneer's executive vice president and chief operating officer. He would report to Goodmanson. 26 Form 10-Q Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The exhibit index filed with this Form 10-Q is on page 30. (b) Reports on Form 8-K 1. On April 16, 1999, 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 Consolidated Industry Segment Information (Quarterly) of Continuing Operations for the years ending December 31, 1998 and 1997. 2. On April 27, 1999, a Current Report on Form 8-K was filed in connection with Debt Securities that may be offered on a delayed or continuous basis under its Registration Statements on Form S-3 (No. 33-53327, No. 33-61339, and No. 33-60069). Under Item 7. "Financial Statements and Exhibits," the Registrant's Earnings Press Release, dated April 27, 1999, was filed. 3. On June 14, 1999, 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 press release entitled, "DuPont Announces Polyester Restructurings." 4. On July 2, 1999, 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 press release entitled, "DuPont to Restructure Crop Protection Business." 5. On July 12, 1999, 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 three press releases entitled, "DuPont Sets Ratio for Exchange Offer for 27 Form 10-Q Conoco Inc. Class B Common Stock," "SEC Declares Registration Statement for Exchange Offer Effective," and "DuPont Commences Exchange Offer for Conoco Inc. Class B Common Stock." 6. On July 14, 1999, 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 press release entitled, "DuPont Commences Cash Offer for DuPont Common Stock." 7. On July 28, 1999, a Current Report on Form 8-K was filed in connection with Debt Securities that may be offered on a delayed or continuous basis under its 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 28, 1999, was filed. 8. On August 2, 1999, 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 press release entitled, "DuPont Realigns Senior Leadership Responsibilities; Sets Pioneer Hi-Bred International Inc., Post-Merger Executive Roles," dated July 30, 1999. 9. On August 9, 1999, 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 press release entitled, "DuPont Exchange Offer for Conoco Inc. Class B Common Stock Successful." 28 Form 10-Q SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. E. I. DU PONT DE NEMOURS AND COMPANY (Registrant) Date: August 10, 1999 ----------------------------------------- By /s/ G. M. Pfeiffer ----------------------------------------- G. M. Pfeiffer Senior Vice President - DuPont Finance (As Duly Authorized Officer and Principal Financial and Accounting Officer) 29 Form 10-Q EXHIBIT INDEX Exhibit Number Description - ------- ----------- 12 Computation of Ratio of Earnings to Fixed Charges. 12.1 Computation of Ratio of Earnings to Fixed Charges - Pro Forma. 27* Financial Data Schedule - quarter ended June 30, 1999. - -------------- *Filed electronically only. 30 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 Six Months Ended ----------------------------------------------------- June 30, 1999 1998 1997 1996 1995 1994 ---------------- --------- --------- --------- ------- ------- Income from Continuing Operations Before Extraordinary Item .............................. $1,474 $1,648 $1,432 $2,931 $2,858 $2,205 Provision for Income Taxes ........................ 850 941 1,354 1,416 1,432 1,164 Minority Interests in Earnings of Consolidated Subsidiaries .................................... 36 24 43 40 29 15 Adjustment for Companies Accounted for by the Equity Method ............................ (85) (39) 936 82 126 (33) Capitalized Interest .............................. (59) (120) (80) (70) (76) (83) Amortization of Capitalized Interest .............. 35 65 82 127 81 77 ------ ------ ------ ------ ------ ------ 2,251 2,519 3,767 4,526 4,450 3,345 ------ ------ ------ ------ ------ ------ Fixed Charges: Interest and Debt Expense - Continuing Operations .................................... 213 520 389 409 449 343 Interest and Debt Expense - Discontinued Operations .................................... 153 304 252 304 308 216 Capitalized Interest - Continuing Operations .... 59 120 80 70 76 83 Capitalized Interest - Discontinued Operations .................................... 3 78 90 73 95 59 Rental Expense Representative of Interest Factor ........................................ 36 71 83 80 80 83 ------ ------ ------ ------ ------ ------ 464 1,093 894 936 1,008 784 ------ ------ ------ ------ ------ ------ Total Adjusted Earnings Available for Payment of Fixed Charges ................................... $2,715 $3,612 $4,661 $5,462 $5,458 $4,129 ====== ====== ====== ====== ====== ====== Number of Times Fixed Charges are Earned .......... 5.9 3.3 5.2 5.8 5.4 5.3 ====== ====== ====== ====== ====== ====== - -------------------------------- 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.
31 Form 10-Q Exhibit 12.1 E. I. DU PONT DE NEMOURS AND COMPANY PRO FORMA COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions) Ratio of earnings to fixed charges on a continuing operations basis excluding interest allocated to or incurred by Conoco Inc., which is reported as discontinued operations.
Years Ended December 31 Six Months Ended ----------------------------------------------------- June 30, 1999 1998 1997 1996 1995 1994 ---------------- --------- --------- --------- ------- ------- Income from Continuing Operations Before Extraordinary Item .............................. $1,474 $1,648 $1,432 $2,931 $2,858 $2,205 Provision for Income Taxes ........................ 850 941 1,354 1,416 1,432 1,164 Minority Interests in Earnings of Consolidated Subsidiaries .................................... 36 24 43 40 29 15 Adjustment for Companies Accounted for by the Equity Method ............................ (85) (39) 936 82 126 (33) Capitalized Interest .............................. (59) (120) (80) (70) (76) (83) Amortization of Capitalized Interest .............. 35 65 82 127 81 77 ------ ------ ------ ------ ------ ------ 2,251 2,519 3,767 4,526 4,450 3,345 ------ ------ ------ ------ ------ ------ Fixed Charges: Interest and Debt Expense ................... 213 520 389 409 449 343 Capitalized Interest ............................ 59 120 80 70 76 83 Rental Expense Representative of Interest Factor ........................................ 36 71 83 80 80 83 ------ ------ ------ ------ ------ ------ 308 711 552 559 605 509 ------ ------ ------ ------ ------ ------ Total Adjusted Earnings Available for Payment of Fixed Charges ................................. $2,559 $3,230 $4,319 $5,085 $5,055 $3,854 ====== ====== ====== ====== ====== ====== Number of Times Fixed Charges are Earned .... 8.3 4.5 7.8 9.1 8.4 7.6 ====== ====== ====== ====== ====== ====== - ----------------------------- 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. Excludes interest and debt expense which has been allocated to or incurred by discontinued operations.
32 EX-27 2
5 This Schedule Contains Summary Financial Information Extracted From Form 10-Q For The Quarterly Period Ended June 30, 1999, And Is Qualified In Its Entirety By Reference To Such Financial Statements 1,000,000 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 1,501 39 5,446 0 3,388 11,137 35,636 20,748 37,315 8,914 4,934 0 237 342 14,161 37,315 13,289 13,542 8,254 10,969 0 0 213 2,360 850 1,474 106 0 0 1,580 1.40 1.38 Includes Other Accounts In Addition To Notes and Accounts Receivable-Trade. Includes Other Expenses. Cost of Goods Sold and Other Expenses; Depreciation and Amortization; Research and Development; Selling, General and Administrative Expenses; Purchased In-Process Research and Development; and Employee Separation Costs and Write-Down of Assets.
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