-----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, PQ6jCr8aTmvAISbUgFHTVIu8bNnxCwcwzYYnSGmPXZGIA7iLEhXice+jmUgbiDcF 7pXLejRnAQKgBtt/kE6Ztg== 0001036050-01-500529.txt : 20010511 0001036050-01-500529.hdr.sgml : 20010511 ACCESSION NUMBER: 0001036050-01-500529 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010510 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: 1627992 BUSINESS ADDRESS: STREET 1: 1007 MARKET ST CITY: WILMINGTON STATE: DE ZIP: 19898 BUSINESS PHONE: 3027741000 MAIL ADDRESS: STREET 1: 1007 MARKET ST CITY: WILMINGTON STATE: DE ZIP: 19898 10-Q 1 d10q.txt FORM 10-Q - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 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 ___ --- 1,042,806,896 shares (excludes 87,041,427 shares of treasury stock) of common stock, $0.30 par value, were outstanding at April 30, 2001. - -------------------------------------------------------------------------------- 1 Form 10-Q E. I. DU PONT DE NEMOURS AND COMPANY Table of Contents
Page(s) ------- Part I Financial Information Item 1. Financial Statements Consolidated Income Statement 3 Consolidated Statement of Cash Flows 4 Consolidated Balance Sheet 5 Notes to Financial Statements 6-13 Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements 14-15 Results of Operations: Financial Results 15-16 Segment Performance 16-17 Outlook 18 Financial Condition 18-19 Other Items: Targeted Reductions To Improve Competitiveness 19 Exit From Benlate(R) Business 20 Pioneer Roundup Ready(R) Soybean Activities 20 Purchased In-Process Research and Development 20 Part II Other Information Item 1. Legal Proceedings 21-22 Item 4. Submission of Matters to a Vote of Security Holders 22-23 Item 6. Exhibits and Reports on Form 8-K 23-24 Signature 25 Exhibit Index 26-27 Exhibit 10.7 - Company's Salary Deferral And Savings Restoration Plan 28 Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges 29
2 Form 10-Q Part I. Financial Statements Item 1. FINANCIAL STATEMENTS E. I. DU PONT DE NEMOURS AND COMPANY AND CONSOLIDATED SUBSIDIARIES
Three Months Ended CONSOLIDATED INCOME STATEMENT(a) March 31 ------------------------- (Dollars in millions, except per share) 2001 2000 ------- ------- SALES(b) $ 6,859 $ 7,593 Other Income(c) 170 348 ------- ------- Total 7,029 7,941 ------- ------- Cost of Goods Sold and Other Operating Charges(d) 4,486 4,856 Selling, General and Administrative Expenses 757 757 Depreciation 327 351 Amortization of Goodwill and Other Intangible Assets 112 107 Research and Development Expense 410 421 Interest and Debt Expense 178 201 Purchased In-Process Research and Development(e) -- (11) ------- ------- Total 6,270 6,682 ------- ------- INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 759 1,259 Provision for Income Taxes 272 439 Minority Interests in Earnings of Consolidated Subsidiaries 3 17 ------- ------- INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE(b) 484 803 Cumulative Effect of a Change in Accounting Principle, Net of Income Taxes(f) 11 -- ------- ------- NET INCOME $ 495 $ 803 ======= ======= - ----------------------------------------------------------------------------------------------------------------------------------- BASIC EARNINGS PER SHARE OF COMMON STOCK(g) Income before Cumulative Effect of a Change in Accounting Principle $ .46 $ .76 Cumulative Effect of a Change in Accounting Principle .01 -- ------- ------- Net Income $ .47 $ .76 ======= ======= DILUTED EARNINGS PER SHARE OF COMMON STOCK(g) Income before Cumulative Effect of a Change in Accounting Principle $ .46 $ .76 Cumulative Effect of a Change in Accounting Principle .01 -- ------- ------- Net Income $ .47 $ .76 ======= ======= DIVIDENDS PER SHARE OF COMMON STOCK $ .35 $ .35 ======= ======= - -----------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 3 Form 10-Q
Three Months Ended CONSOLIDATED STATEMENT OF CASH FLOWS(a) March 31 - ---------------------------------------------------------------------------------------------------------------- (Dollars in millions) 2001 2000 - ---------------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED FOR) OPERATIONS: Net Income $ 495 $ 803 Adjustments to Reconcile Net Income to Cash: Cumulative Effect of a Change in Accounting Principle, Net of Tax(f) (11) -- Depreciation 327 351 Amortization of Goodwill and Other Intangible Assets 112 107 Purchased In-Process Research and Development(e) -- (11) Other Noncash Charges and Credits - Net 138 199 Change in Operating Assets and Liabilities - Net (1,583) (1,114) ------- ------- Cash Provided by (Used for) Operations (522) 335 ------- ------- INVESTMENT ACTIVITIES: Purchases of Property, Plant and Equipment (316) (434) Investment in Affiliates (7) (9) Payments for Businesses Acquired (Net of Cash Acquired) (22) (23) Proceeds from Sales of Assets 6 191 Net Decrease (Increase) in Short-Term Financial Instruments 61 (118) Miscellaneous - Net 8 (28) ------- ------- Cash Used for Investment Activities (270) (421) ------- ------- FINANCING ACTIVITIES Dividends Paid to Stockholders (368) (369) Net Increase in Borrowings 1,030 1,871 Acquisition of Treasury Stock (50) -- Proceeds from Exercise of Stock Options 79 34 ------- ------- Cash Provided by Financing Activities 691 1,536 ------- ------- Effect of Exchange Rate Changes on Cash (94) (72) ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (195) $ 1,378 ======= ======= - ----------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 4 Form 10-Q
CONSOLIDATED BALANCE SHEET(a) March 31 December 31 - -------------------------------------------------------------------------------------------------------------- (Dollars in millions, except per share) 2001 2000 - -------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 1,345 $ 1,540 Marketable Securities 15 77 Accounts and Notes Receivable 5,360 4,552 Inventories(h) 4,737 4,658 Prepaid Expenses 315 228 Deferred Income Taxes 636 601 -------- -------- Total Current Assets 12,408 11,656 PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation (March 31, 2001 - $20,763; December 31, 2000 - $20,468) 14,114 14,182 GOODWILL AND OTHER INTANGIBLE ASSETS 8,277 8,365 INVESTMENT IN AFFILIATES 2,198 2,206 OTHER ASSETS 3,424 3,017 -------- -------- TOTAL $ 40,421 $ 39,426 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable $ 2,150 $ 2,731 Short-Term Borrowings and Capital Lease Obligations 4,349 3,247 Income Taxes 377 250 Other Accrued Liabilities 3,050 3,027 -------- -------- Total Current Liabilities 9,926 9,255 LONG-TERM BORROWINGS AND CAPITAL LEASE OBLIGATIONS 6,531 6,658 OTHER LIABILITIES 7,659 7,729 DEFERRED INCOME TAXES 2,514 2,105 -------- -------- Total Liabilities 26,630 25,747 -------- -------- MINORITY INTERESTS 373 380 -------- -------- STOCKHOLDERS' EQUITY(i) Preferred Stock 237 237 Common Stock, $.30 par value; 1,800,000,000 shares authorized; shares issued at March 31, 2001 - 1,129,783,629; December 31, 2000 - 1,129,973,354 339 339 Additional Paid-In Capital 7,593 7,659 Reinvested Earnings 12,240 12,153 Accumulated Other Comprehensive Income (Loss) (264) (188) Common Stock Held in Treasury at Cost (Shares: March 31, 2001 - 87,041,427; December 31, 2000 - 87,041,427) (6,727) (6,727) Common Stock Held in Trust for Unearned Employee Compensation and Benefits (Flexitrust), at Market (Shares: March 31, 2001 - 0; December 31, 2000 - 3,601,199) -- (174) -------- -------- Total Stockholders' Equity 13,418 13,299 -------- -------- TOTAL $ 40,421 $ 39,426 ======== ======== - --------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements. 5 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (a) These statements are unaudited, but 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.
Three Months Ended (b) CONSOLIDATED SEGMENT INFORMATION(1) March 31 ---------------------- 2001 2000 ---------------------- SEGMENT SALES(2) ---------------- Agriculture & Nutrition $ 609 $ 628 Nylon Enterprise 960 1,109 Performance Coatings & Polymers 1,458 1,653 Pharmaceuticals 205 389 Pigments & Chemicals 951 960 Pioneer 929 921 Polyester Enterprise 545 567 Specialty Fibers 858 905 Specialty Polymers 1,039 1,091 Other 81 123 ------- ------- Total Segment Sales 7,635 8,346 Elimination of Intersegment Transfers (146) (159) Elimination of Equity Affiliate Sales (628) (595) Miscellaneous (2) 1 ------- ------- CONSOLIDATED SALES $ 6,859 $ 7,593 ------- ------- AFTER-TAX OPERATING INCOME (LOSS) --------------------------------- Agriculture & Nutrition $ 48 $ 62 Nylon Enterprise 12 87 Performance Coatings & Polymers 132 179 Pharmaceuticals (64) 54 Pigments & Chemicals 124 164 Pioneer(3) 118 77 Polyester Enterprise (8) 9 Specialty Fibers 156 201 Specialty Polymers 130 165 Other 3 -- ------- ------- Total Segment ATOI 651 998 Interest and Exchange Gains and Losses (97) (123) Corporate Expenses (70) (72) ------- ------- INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ 484 $ 803 ======= =======
FOOTNOTES TO NOTE (b) - --------------------- (1) Certain reclassifications of segment data have been made to reflect changes in organizational structure. (2) Includes pro rata share of equity affiliate sales and intersegment transfers. Excludes sales of intermediates by DuPont to joint ventures within the Nylon Enterprise and Polyester Enterprise segments. (3) Includes noncash charges of $83 and $215 for first quarter 2001 and 2000, respectively, resulting from the sale of acquired Pioneer inventories which, in accordance with purchase accounting rules, were recorded at fair value on October 1, 1999. The first quarter 2000 charge was partly offset by a $109 gain resulting from the sale of certain equity securities classified as available for sale and a credit of $11 to reduce the preliminary purchase price allocated to acquired in-process research and development. 6 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) (c) First quarter 2000 includes a $176 gain resulting from the sale by Pioneer of certain equity securities classified as available for sale. (d) In accordance with purchase accounting rules applied to the acquisition of the remaining 80 percent ownership interest in Pioneer on October 1, 1999, Pioneer inventory was increased to fair value. This inventory step-up generates noncash charges to cost of goods sold as the inventory on hand at the acquisition date is sold. Charges in first quarter 2001 and 2000 were $133 and $347, respectively. (e) 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, for which technological feasibility has not yet been established, and which have no alternative future use in research and development activities or otherwise. During first quarter 2000, a credit of $11 was recorded based on revisions of preliminary purchase price allocations associated with the October 1, 1999, purchase of the remaining 80 percent ownership interest in Pioneer. (f) On January 1, 2001, the company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. The new standard requires that all derivative instruments be reported on the balance sheet at their fair values. For derivative instruments designated as fair value hedges, changes in the fair values of the derivative instruments will generally be offset on the income statement by changes in the fair values of the hedged items. For derivative instruments designated as cash flow hedges, the effective portion of any hedge is reported in accumulated other comprehensive income (loss) until it is cleared to earnings during the same period in which the hedged item affects earnings. The ineffective portion of all hedges is recognized in current period earnings. Changes in the fair values of derivative instruments that are not designated as hedges are recorded in current period earnings. The adoption of SFAS No. 133 resulted in a pretax cumulative-effect-type adjustment to income of $19 million ($11 million after-tax). The primary component of this gain is related to the company's position in certain stock warrants, which were previously accounted for as available-for-sale securities for which changes in fair value have been reflected in accumulated other comprehensive income. The company also recorded a pretax increase to accumulated other comprehensive income of $10 million ($6 million after-tax). The increase in accumulated other comprehensive income is primarily due to unrealized gains in agricultural commodity hedging programs. Objectives And Strategies For Holding Derivative Instruments ------------------------------------------------------------ Under procedures and controls established by the company's Financial Risk Management Framework, the company enters into contractual arrangements (derivatives) in the ordinary course of business to reduce its exposure to foreign currency, interest rate and commodity price risks. The framework has established a variety of approved derivative instruments to be utilized in each risk management program, as well as varying levels of exposure coverage and time horizons based on an assessment of risk factors related to each program. Derivative instruments utilized during the period include forwards, options, futures, and swaps. The company has not designated any nonderivatives as hedging instruments. 7 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) Fair Value Hedges ----------------- During the quarter, the company has maintained a number of interest rate swaps that involve the exchange of fixed for floating rate interest payments that allow the company to maintain a target range of floating rate debt. All interest rate swaps qualify for the shortcut method of hedge accounting, thus there is no ineffectiveness related to these hedges. Changes in the fair value of derivatives that hedge interest rate risk are recorded in interest expense each period. The offsetting changes in the fair values of the related debt are also recorded in interest expense. The company maintains no other fair value hedges. Cash Flow Hedges ---------------- The company maintains a number of cash flow hedging programs to reduce risks related to foreign currency and commodity price risk. Foreign currency programs involve hedging a portion of foreign currency- denominated revenues and major raw material purchases from vendors outside of the United States. Commodity price risk management programs serve to reduce exposure to price fluctuations on purchases of inventory such as natural gas, corn, soybeans, and soybean meal. While each risk management program has a different time horizon, no program currently extends beyond the next two-year period. The effects of hedges of foreign currency-denominated revenues are reported on the Sales line of the Consolidated Income Statement, and the effects of hedges of inventory purchases are reported as a component of Cost of Goods Sold and Other Operating Charges. Cash Flow Hedge Results During Pretax The Quarter Gain/(Loss) ------------------------------------------ ----------- Hedge ineffectiveness reported in earnings $(3) Hedge gains/(losses) excluded from assessment of hedge effectiveness (6) Reclassification to earnings for forecasted transactions that did not occur -
Accumulated Other Comprehensive Income (Loss) (Cash Flow Hedge Portion Only) Pretax Tax After-Tax ---------------------------------------------------------------- ------ ----- --------- Balance at January 1, 2001 (upon adoption of FAS 133) $ 10 $ (4) $ 6 Additions and revaluations of derivatives designated as cash flow hedges (27) 10 (17) Less: Clearance of hedge results to earnings during the quarter (4) 1 (3) ---- ---- ----- Balance at March 31, 2001 $(13) $ 5 $ (8) ==== ==== ===== Portion of ending balance expected to be reclassified into earnings over the next twelve months $(10) $ 4 $ (6)
Cash flow hedge results are reclassified into earnings during the same period in which the related exposure impacts earnings. Reclassifications are made sooner if it appears that a forecasted transaction will not materialize. 8 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) Hedges Of Net Investment In A Foreign Operation ----------------------------------------------- During the quarter, the company has not maintained any hedges of net investment in a foreign operation. Derivatives Not Designated In Hedging Relationships --------------------------------------------------- The company uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-denominated monetary assets and liabilities. The objective of this program is to maintain an approximately balanced position in foreign currencies so that exchange gains and losses resulting from exchange rate changes, net of related tax effects, are minimized. Several small equity affiliates have risk management programs, mainly in the area of foreign currency exposure, for which they have elected not to pursue hedge accounting. In addition, Pioneer maintains small risk management programs for commodities that do not qualify for hedge accounting treatment. Also, the company owns stock warrants in a few companies for strategic purposes. (g) 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, net income, is reduced by preferred dividends of $2.5. For diluted earnings per share, 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 March 31 --------------------------------- Basic Diluted ------------- ------------- 2001 1,042,168,259 1,047,973,561 2000 1,047,036,515 1,057,077,345 The difference between basic and diluted weighted-average common shares outstanding results from the assumption that dilutive stock options outstanding were exercised. The following stock options are antidilutive, and therefore are not included in the diluted earnings per share calculation since the exercise price is greater than the average market price: Three Months Ended March 31 ------------------------- 2001 2000 ---------- ---------- Stock Options 35,344,478 13,382,037 Compensation expense (benefit) recognized in income for stock-based employee compensation awards was $1 and $(25) for the three months ended March 31, 2001 and 2000, respectively. Treasury stock and shares previously held by the Flexitrust are not considered outstanding in computing the foregoing weighted-average number of common shares. 9 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued)
March 31 December 31 (h) Inventories 2001 2000 ----------- --------- ----------- Finished Products $ 3,332 $ 2,818 Semifinished Products 1,014 1,504 Raw Materials and Supplies 971 907 --------- ----------- 5,317 5,229 Less: Adjustment of Inventories to a Last-In, First-Out (LIFO) Basis 580 571 --------- ----------- Total $ 4,737 $ 4,658 ========= ===========
(i) The following sets forth the company's Total Comprehensive Income for the periods shown: Three Months Ended ------------------ 2001 2000 ---- ---- Net Income $495 $ 803 Cumulative Effect of a Change in Accounting Principle 6 - Net Revaluation and Reversal of Cash Flow Hedges (14) - Cumulative Translation Adjustment (32) (7) Net Unrealized Gains (Losses) on Securities (36) (129)* ----- ----- Total Comprehensive Income $419 $ 667 ===== ===== * Primarily reflects unrealized holding losses of $85 associated with the company's investment in Healtheon/WebMD and a $35 adjustment related to the sale of an equity security. (j) In the first quarter 2001, there were no changes in estimates related to reserves established for restructuring initiatives in prior years. A complete discussion of these activities is included in Item 8 of the company's Annual Report on Form 10-K for the period ended December 31, 2000, at Note 6 "Employee Separation Costs and Write-down of Assets." An update on first quarter activity is provided below under the respective prior years' activities. 10 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) 2000 Activities Performance Coatings & Polymers A restructuring program (Phase II) was instituted in the second quarter to continue the consolidation of business assets and to eliminate redundancies as a result of the acquisition of Herberts in 1999 by Performance Coatings. Charges resulting from these activities totaled $96. The charges included $71 related to termination payments to be settled over time for about 1,100 employees involved in technical, manufacturing, marketing and administrative activities. At March 31, 2001, about $41 had been settled and charged against the related liabilities and approximately 850 employees had been terminated. Restructuring charges of $13 related to the write-down of operating facilities that were shut down in the second quarter. The remaining charge of $12 relates to the cancellation of contractual agreements and, as of March 31, 2001, about $8 had been settled and charged against the related liability. Termination of services under the contractual agreements will be completed during 2001. Pigments & Chemicals A restructuring program was instituted in the third quarter to address poor economic and intensely competitive market conditions for the Chemical Solutions Enterprise. Charges resulting from this restructuring totaled $28. This charge included $24 related to the write-down of operating facilities at the New Jersey Chambers Works site that were shut down in the third quarter. The charge covers the net book value of the facilities of $15 and estimated dismantlement and removal costs less estimated proceeds from the sale of equipment and scrap of $9. At March 31, 2001, about $2 had been charged against the liability for dismantlement and removal and these activities will be completed in 2001. The remaining restructuring charge of $4 relates to employee termination payments to be settled over time for approximately 65 employees involved in manufacturing and technical activities. At March 31, 2001, essentially all employees had been terminated thereby completing the program, and about $1 in employee termination installment benefits had been settled and charged against the related liability. Account balances and activity for the 2000 restructuring programs are summarized below:
Employee Write-down Separation Other of Assets Costs Exit Costs Total ------------ ---------- ---------- --------- Balance at December 31, 2000 $ - $ 48 $ 16 $ 64 Changes to accounts Employee separation settlements (15) (15) Other expenditures (5) (5) ------------ ---------- ---------- --------- Balance at March 31, 2001 $ - $ 33 $ 11 $ 44 ============ ========== ========== =========
11 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) 1999 Activities Agriculture & Nutrition A restructuring program was instituted in the third quarter to address poor economic and intensely competitive market conditions for DuPont Crop Protection. Charges resulting from these restructuring activities totaled $124. This charge included $45 related to employee termination payments to be settled over time for approximately 800 employees involved in technical, manufacturing, marketing and administrative activities. A net benefit of $2 was subsequently recorded to reflect lower costs associated with employees who accepted other work assignments partially offset by higher costs associated with terminating employees. At December 31, 2000, approximately 730 employees had been terminated and the remaining employees have accepted other work assignments within the company thereby completing this program. At March 31, 2001, approximately $38 had been settled and charged against the related liability. The remaining restructuring charge of $79 principally related to the write-down of operating facilities that were shut down in 1999. The effect on results of removing these facilities from operations was not material. The charge covers the net book value of the facilities ($64) and estimated dismantlement and removal costs less estimated proceeds from the sale of equipment and scrap ($15). A benefit of $6 was subsequently recorded to reflect lower costs associated with dismantlement and removal. At March 31, 2001, approximately $6 in dismantlement and removal costs had been paid. Nylon Enterprise The company also recorded a charge of $28 in the third quarter associated with restructuring activities in Europe to modernize and consolidate sites. This included employee termination payments to be settled over time of $15 to about 120 employees involved principally in manufacturing activities at several locations. A charge of $2 was subsequently recorded to reflect higher costs associated with terminating employees. At December 31, 2000, essentially all employees had been terminated. At March 31, 2001, approximately $14 had been settled and charged against the related liability. Also included was $13 for a manufacturing facility that was shut down in 1999. Polyester Enterprise A restructuring program was instituted in the second quarter to address poor economic and intensely competitive market conditions. Charges of $60 relate to employee separation costs to be settled over time for about 850 employees primarily engaged in manufacturing. A net benefit of $2 was subsequently recorded to reflect lower costs associated with employees who accepted other work assignments partially offset by higher costs associated with terminating employees. At December 31, 2000, approximately 800 employees had been terminated and the remaining employees had accepted other work assignments within the company thereby completing this program. At March 31, 2001, about $54 in employee termination installment benefits had been charged against the related liability. 12 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) Account balances and activity for the 1999 restructuring programs are summarized below:
Employee Write-down Separation Other of Assets Costs Exit Costs Total ----------- ------------ ---------- ------- Balance at December 31, 2000 $ - $ 18 $ 4 $ 22 Changes to accounts Employee separation settlements (6) (6) Other expenditures (1) (1) ----------- ------------ ---------- ------- Balance at March 31, 2001 $ - $ 12 $ 3 $ 15 =========== ============ ========== =======
1998 Activities During the third quarter 1998 the company recorded a charge of $577 directly related to management decisions to implement company-wide productivity improvement initiatives. These charges included $310 related to employee separation costs to be settled over time, substantially all of which were for estimated termination payments for approximately 4,100 employees, and were based on plans that identified the number of employees to be terminated, their functions and their businesses. A net benefit of $33 was subsequently recorded to reflect changes in estimates. As of December 31, 1999, about 4,000 employees had been terminated and the remaining employees have accepted other work assignments within the company thereby completing this program. At March 31, 2001, about $272 in employee termination installment benefits had been settled and charged against the related liability. The remaining charge of $267 is related to write-downs of property, plant and equipment, principally due to the shutdown of excess production capacity, and there are no outstanding liabilities related to this shutdown. Account balances and activity for the 1998 restructuring programs are summarized below:
Employee Write-down Separation Other of Assets Costs Exit Costs Total ----------- ---------- ---------- -------- Balance at December 31, 2000 $ - $ 7 $ - $ 7 Changes to accounts Employee separation settlements (2) (2) ----------- ---------- ---------- -------- Balance at March 31, 2001 $ - $ 5 $ - $ 5 =========== ========== ========== ========
(k) On April 2, 2001, the company announced plans to further streamline operations by reducing the employee work force and shutting down certain manufacturing assets. 13 Form 10-Q Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements This report contains forward-looking statements which may be identified by their use of words like "plans," "expects," "will," "anticipates," "intends," "projects," "estimates" or other words of similar meaning. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, market position, expenditures and financial results are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The company cannot guarantee that these assumptions and expectations are accurate or will be realized. In addition to the factors discussed in this report and in Management's Discussion and Analysis in the company's latest Annual Report, the following are some of the important factors that could cause the company's actual results to differ materially from those projected in any such forward-looking statements: . The company operates in approximately 70 countries worldwide 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. . The company's ability to grow earnings will be affected by increases in the cost of raw materials, particularly petroleum-based feedstocks, natural gas and paraxylene. The company may not be able to fully offset the effects of higher raw material costs through price increases or productivity improvements. . 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 such as the inability to: identify viable new products; successfully complete research and development projects; obtain relevant regulatory approvals, which may include approval from the U.S. Food and Drug Administration; obtain adequate intellectual property protection; or gain market acceptance of the new products. . As part of its strategy for growth, the company has made and may continue to make acquisitions and divestitures and form strategic alliances. There can be no assurance that these will be completed or beneficial to the company. . To a significant degree, results in the company's Agriculture & Nutrition and Pioneer segments reflect changes in agricultural conditions, including weather and government programs. These results also reflect the seasonality of sales of agricultural products; highest sales in the United States occur in the first half of the year. In addition, demand for products produced in these segments may be affected by market acceptance of genetically enhanced products. 14 Form 10-Q . The company has undertaken and may continue to undertake productivity initiatives, including organizational restructurings and Six Sigma productivity improvement projects, 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. . 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 continue 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 allegation, the complexity of the site, the nature of the remedy, the outcome of discussions with regulatory agencies and other potentially responsible parties (PRPs) at multiparty sites, and the number and financial viability of other PRPs. . 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. The foregoing list of factors is not inclusive, or necessarily in order of importance. (a) Results of Operations (1) Financial Results: Including one-time items in both periods, diluted earnings per share for first quarter 2001 were $.47 compared to $.76 in 2000. First quarter 2001 diluted earnings per share before one-time items was $.54 per share, 36 percent below the $.85 per share earned in the first quarter of 2000. First quarter 2001 consolidated sales totaled $6.9 billion compared to $7.6 billion in 2000. Segment sales, which include intersegment transfers and a pro rata share of sales by equity affiliates, were $7.6 billion, down 9 percent from $8.3 billion in 2000. This reflects 7 percent lower volume and 2 percent lower U.S. dollar selling prices. The latter reflects 1 percent higher local selling prices that were more than offset by adverse currency effects, principally from the weaker euro and Japanese yen, which reduced worldwide segment sales by 3 percent. Regional segment sales and related variances for the first quarter 2001 compared with the first quarter 2000 are summarized below:
% Change Due To ------------------------------------------- 1Q 01 % Change Local Currency Portfolio Segment Sales $B vs. 1Q 00 Price Effect Volume Changes ------------------ -------- ----------- ----- -------- ------ --------- Worldwide 7.6 (9) 1 (3) (7) 0 U.S. 3.7 (13) 1 0 (13) (1) Europe 2.1 (3) 3 (7) 1 0 Asia Pacific 1.1 (1) 1 (4) 2 0 Canada, Mexico, S. America 0.7 (9) 2 (2) (9) 0
15 Form 10-Q . U.S. first quarter sales volume declined 13 percent versus 2000 including a 4 percent adverse impact from Pharmaceuticals, in addition to lower volumes of fibers, automotive finishes, and white pigments. . European volume was up 1 percent and local currency prices up 3 percent. However, the stronger dollar reduced European sales by 7 percent. . Asia Pacific sales decreased 1 percent, the first decline since the economic downturn in 1998. Marginally higher volume and local prices were more than offset by the negative impact of weaker currencies, particularly the Japanese yen. Including one-time items, net income was $495 million versus $803 million in 2000, resulting in earnings per share of $.47 compared to $.76 last year. The earnings decline reflects significantly lower Pharmaceuticals results and reduced earnings across the company's chemicals and materials segments. The latter resulted principally from lower U.S. sales volumes, higher raw material costs, and a stronger U.S. dollar. Net income before one-time items was $567 million, compared to $898 million in the first quarter of 2000, down $331 million or 37 percent. One-time items are described in the notes to the accompanying financial statements and are summarized in the table below:
$MM Pretax $MM After-Tax ($ Per Share) ----------- ------------- ------------ 1Q 01 1Q 00 1Q 01 1Q 00 1Q 01 1Q 00 ----- ----- ----- ------- ----- ----- Pioneer - In-Process R&D Revision 11 11 .01 Pioneer - Inventory Step-up (133) (347) (83) (215) (.08) (.20) Asset Sale - Equity Securities 176 109 .10 Adoption of SFAS 133* 19 11 .01 ---- ---- --- --- ---- ---- 1/st/ Quarter - Total (114) (160) (72) (95) (.07) (.09) ==== ==== === === ==== ====
* Reflects the cumulative effect of a change in accounting principle. Effective January 1, 2001, the company adopted SFAS 133 -"Accounting for Derivative Instruments and Hedging Activities," as amended. (2) Segment Performance: The following text compares first quarter 2001 results with first quarter 2000, for sales and earnings of each segment, excluding the earnings impact of the one-time items described in the footnotes to the "Consolidated Segment Information" table at Note (b) on page 6. Segment results include intersegment transfers and a pro rata ownership share of the sales and earnings of equity affiliates. . Agriculture & Nutrition - Sales declined 3 percent and ATOI fell 23 percent reflecting lower earnings in both Crop Protection and Nutrition & Health. Crop Protection earnings were significantly affected by currency in Europe and Asia, and by a litigation settlement. Nutrition & Health results reflect high natural gas prices and weaker European volumes. . Nylon Enterprise - Sales decreased 13 percent and ATOI declined 86 percent, principally reflecting the impact of a 40 percent increase in raw material costs (largely natural gas related), 15 percent lower volumes, and less favorable product mix. Sales declines were principally due to lower flooring and apparel volumes, particularly in the United States. 16 Form 10-Q . Performance Coatings & Polymers - Sales were 12 percent lower than 2000 reflecting lower vehicle builds and lower refinish sales in the United States, as well as the weak euro. Increased raw material costs were a significant factor in lower results in Engineering Polymers and Elastomers, in addition to lower volumes. Segment ATOI declined 26 percent. . Pharmaceuticals - The loss of $64 million was primarily due to lower sales, as wholesaler inventories in the distribution channel continue to be reduced. Underlying demand for Sustiva(TM) efavirenz and Cardiolite(R) cardiac imaging agent grew 15 percent, and the Coumadin(R) (warfarin sodium tablets, USP) crystalline market position remains strong. The DuPont share of U.S. operating profits for Cozaar(R) (losartan) and Hyzaar(R) (losartan potassium) increased this quarter as of February 1. R&D and marketing expenses increased as planned. Major product sales are shown below: 1Q 2001 1Q 2000 ------- ------- ($ in millions) Coumadin(R) $26 $100 Sustiva(TM) 55 96 Cardiolite(R)/Miraluma(TM) 18 40 . Pigments & Chemicals - ATOI declined 24 percent on 1 percent lower sales reflecting lower earnings in all strategic business units. Three percent lower worldwide volume was partly offset by 2 percent higher U.S. dollar prices. Segment earnings were negatively affected by high chlorine and energy costs in White Pigment & Mineral Products and by a litigation settlement in DuPont Chemical Solutions Enterprise. . Pioneer - Worldwide sales increased slightly, reflecting strong early season sales in the United States and southern Europe, partly offset by lower U.S. dollar prices due to the weak euro. Earnings increased 17 percent reflecting improved margins and a more favorable product mix. . Polyester Enterprise - Sales were 4 percent lower, reflecting continuing depressed conditions in worldwide fibers markets. Margins continue to be reduced by lower prices and higher raw material and energy costs, resulting in a first quarter loss of $8 million. . Specialty Fibers - Sales and ATOI were 5 percent and 22 percent lower, respectively. Continued earnings growth from Advanced Fibers Systems only partly offset lower Lycra(R) elastane earnings, which were adversely affected by lower U.S. dollar prices, higher raw material costs, and lower volume. Earnings for Nonwovens were essentially flat on modestly higher sales. . Specialty Polymers - ATOI increases in Fluoropolymers and the Electronic Technologies unit of DuPont iTechnologies only partly offset a decline in Packaging & Industrial Polymers earnings resulting from lower volumes and higher ethane costs. Results also declined in DuPont Surfaces and the Imaging Technologies unit of DuPont iTechnologies. Segment earnings decreased 21 percent on 5 percent lower sales. 17 Form 10-Q (3) Outlook: Based on demand signals observed in the first quarter in key markets, the company now anticipates that the global economic slowdown will similarly impact the manufacturing sector through the second quarter and perhaps into the second half of 2001. In the second quarter the company expects continued volume pressure due to macroeconomic factors; stabilizing energy and raw material costs, albeit at a higher level than second quarter last year; and normal seasonality for its portfolio of businesses. . The company expects second quarter volumes to remain below 2000 levels in the United States in its chemicals and materials businesses, although sequential declines should moderate considerably. In Europe and Asia, year-over-year volume growth is approaching zero, and continued strength of the U.S. dollar will likely result in negative revenue comparisons in the second quarter. . The agriculture related segments, as expected, are operating in a difficult U.S. farm economy and experiencing negative currency impacts during the first half selling season. In addition, poor weather conditions in North America, together with high fertilizer costs, are expected to result in lower corn acreage than last year. Accordingly, the company expects the full-year operating outlook for these segments will be moderately negative versus 2000. . Pharmaceuticals segment sales and earnings should improve in the second quarter, but ATOI losses are again expected. A return to more normal levels of sales and earnings is expected in the second half of the year. The economic outlook for the second half of 2001 remains uncertain. However, key indicators suggest that declines in U.S. manufacturing and global automotive markets may be moderating. The company is encouraged by these trends, but continues to plan for a second half economy that is on balance, similarly challenging to the second half of last year. (b) Financial Condition
Three Months Ended March 31 ---------------- Selected Cash Flow Information 2001 2000 --------------------------------------------------- ------- ------- ($ in millions) Cash Provided by (Used for) Operations $(522) $ 335 Purchases of Property, Plant and Equipment (316) (434) Proceeds from Sales of Assets 6 191 Dividends Paid to Stockholders (368) (369) Acquisition of Treasury Stock (50) 0
Cash used for operations was $522 million for first quarter 2001 as compared to cash provided by operations of $335 million for the same period in 2000. Net income plus noncash charges included in net income was $1.1 billion this year, down from $1.4 billion last year reflecting a $308 million decrease in net income in the quarter. Net operating assets and liabilities increased $1.6 billion in first quarter 2001 as compared to an increase of $1.1 billion in 2000. The increase was primarily due to an increase in inventories in first quarter this year, while inventories declined in first quarter last year. Year-to-date purchases of property, plant and equipment were $316 million in 2001, as compared to $434 million spent in 2000. The lower spending level reflects management's intent to limit full year 2001 total capital spending, including purchases of property, plant and equipment, investments in affiliates, and payments for businesses acquired, to about $1.8 billion for the year. 18 Form 10-Q Proceeds from the sale of assets in the first quarter of 2001 were $6 million. Proceeds from the sale of assets in the first quarter of 2000 were $191 million primarily reflecting the sale of certain available for sale securities held by Pioneer. The per share dividend paid to stockholders in first quarter 2001 and 2000 was $.35 per share. This rate has been in effect since second quarter 1998. In each of 1997 and 1998, DuPont's Board of Directors approved programs to purchase and retire up to 20 million shares of DuPont common stock to offset dilution from shares issued under compensation programs. On July 26, 2000, the company's Board of Directors approved an increase in the amount of shares remaining to be purchased under the 1998 program from about 16 million shares to the total number of shares of DuPont common stock which can be purchased for $2.5 billion. The remaining purchases are not limited to those needed to offset dilution from shares issued under compensation programs. Under the increased July 2000 authorization, the company spent $50 million in first quarter 2001 to purchase and retire 1.2 million shares. To date under the increased July 2000 authorization, the company has spent $262 million to purchase and retire 5.7 million shares. DuPont anticipates completing this program in 2002 and for it to be largely funded through the monetization of nonstrategic assets. Debt, including capital lease obligations, net of cash and cash equivalents and marketable securities at March 31, 2001, was $9.5 billion, as compared to $8.3 billion at year-end 2000. The increase in debt primarily reflects the issuance of commercial paper. To increase the company's financial flexibility, management's intent over the course of the year is to reduce debt from the current level, ending the year with net debt below last year-end. Management believes that the company's ability to generate cash from operations and its capacity to issue short-term and long-term debt will be adequate to meet anticipated future cash requirements to fund working capital, capital spending, dividend payments and other cash needs in the foreseeable future. (c) Other Items Targeted Reductions To Improve Competitiveness ---------------------------------------------- On April 2, 2001, the company announced it will further align resources consistent with the specific missions of its individual businesses. These actions will reduce the company's global employee workforce by about 4,000, or 4 percent. DuPont will also reduce the number of contract personnel by about 1,300 and shut down less competitive manufacturing assets. Approximately 75 percent of the affected employees and contractors are in the United States. Projected annual payroll savings, including reduction in contractor costs, are on the order of $400 million pretax. DuPont expects to achieve about one-third of the projected cost benefit in 2001, and substantially all in 2002. DuPont expects to take a one-time second quarter charge of approximately 40-45 cents per share as a result of these actions. Roughly half of this estimated charge will be for employee severance costs, with the remainder principally for asset shutdowns and related dismantlement expenses. Since plans are still being finalized, the actual one-time charge to earnings will not be available until the end of the second quarter. 19 Form 10-Q Exit From Benlate(R) Business ----------------------------- On April 19, 2001, the company informed its customers around the world that it will discontinue the manufacture of its fungicide benomyl and will phase out sales of Benlate(R) in all its forms from the global market. No sales will occur after December 31, 2001, and all product is expected to clear the channels of trade by the end of 2002. DuPont advised customers that this is not a product recall, but a voluntary business decision based on a review of global market conditions and other factors. The decision is part of the recently announced restructuring to improve the overall competitiveness of its agricultural businesses. Pioneer Roundup Ready(R) Soybean Activities ------------------------------------------- In December 1999, the Monsanto Company filed suit in the U.S. District Court for the Eastern District of Missouri against Pioneer claiming that its merger with DuPont breached a 1992 license agreement granting Pioneer the right to produce and market Roundup Ready(R) glyphosate tolerant soybeans. Monsanto asked for damages for the breach and termination of the license. Monsanto's complaint also alleged claims for patent infringement and trade secret misappropriation if the license were terminated. On March 20, 2001, the court, on motions for summary judgment, found that DuPont's acquisition of Pioneer terminated the agreement. The court found no breach of contract and therefore awarded no damages on this claim. It held that any claim for damages or other relief Monsanto seeks will have to wait until the next phase of the litigation, which involves Monsanto's patent infringement and trade secret allegations. The court found that its determination involved controlling questions of law as to which there is a substantial difference of opinion and that an immediate appeal would advance the ultimate determination of this litigation. Those questions involve whether Federal common law or state merger law should control the transferability of patent licenses. The court has certified its decision for immediate appeal to the U.S. Court of Appeals for the Federal Circuit. Pioneer will pursue the appeal expeditiously. The company believes that the appellate court will ultimately find that state merger law rather than Federal common law controls in merger situations and therefore, that no prohibited license transfer took place when DuPont acquired Pioneer. Pioneer has also moved the district court to stay the next phase of the litigation pending the outcome of the appeal since a favorable ruling on appeal will reinstate the license and eliminate the infringement and trade secret claims. On October 1, 1999, the company acquired the approximately 80 percent of Pioneer not previously owned for $7,684 million. An intangible asset has been recorded to recognize the value of the 1992 license agreement. Should the ultimate outcome of this lawsuit be adverse to the company, the value of this intangible asset may become impaired, resulting in a one-time noncash charge to earnings. Management does not anticipate that the ultimate outcome of this lawsuit will have a material adverse effect on the company's consolidated financial position or liquidity, although it could be significant to the results of operations of the Pioneer segment in the period recognized. Purchased In-Process Research and Development --------------------------------------------- Unanticipated technical hurdles have adversely impacted the Pioneer research and development project to impart resistance to molds and mycotoxins that was in process at the October 1, 1999, acquisition date. As a result, the estimated completion date for the project, if successful, has been moved back to 2009 and the probability of technical and commercial success is now estimated at 40 percent. Failure to successfully complete this project would not have a material adverse impact on the company's financial condition, results of operations or liquidity. In addition, uncertainties with respect to regulatory approval may delay commercialization of technologically successful trait and technology projects by six to twelve months. No other significant changes occurred during the first quarter 2001 with respect to in-process research and development projects related to the company's acquisitions in prior years. 20 Form 10-Q PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Benlate(R) - --------- In 1991, DuPont began receiving claims by growers that use of Benlate(R) 50 DF fungicide had caused crop damage. Based on the belief that Benlate(R) 50 DF would be found to be a contributor to the claimed damage, DuPont began paying crop damage claims. In 1992, after 18 months of extensive research, DuPont scientists concluded that Benlate(R) 50 DF was not responsible for plant damage reports received since March 1991. Concurrent with these research findings, DuPont stopped paying claims. DuPont since has been served with several hundred lawsuits most of which were disposed of by trial, dismissal or settlement. Approximately 125 cases are pending. Most of these lawsuits were filed by growers who allege plant damage from using Benlate(R) 50 DF, although some include claims for alleged damage to shrimping operations from Benlate(R) 50 OD and a smaller number of cases include claims for alleged personal injuries. Also, many of these cases include general allegations of fraud and misconduct. In addition, a securities fraud class action was filed in September 1995 by a shareholder in federal district court in Florida against the company and the then-Chairman. This action is still pending. The plaintiff in this case alleges that DuPont made false and misleading statements and omissions about Benlate(R) 50 DF, with the alleged effect of inflating the price of DuPont's stock between June 19, 1993, and January 27, 1995. This district court has certified the case as a class action. Discovery is proceeding. Certain plaintiffs who previously settled with the company have filed cases alleging fraud and other misconduct relating to the litigation and settlement of Benlate(R) 50 DF claims. Approximately 47 such cases are pending. These cases are in various stages of proceedings in trial and appellate courts in Florida and Hawaii. On June 21, 2000, a jury in Texas state court awarded compensatory damages of $10.3 million, prejudgment interest, and punitive damages of $90 million to two growers who claimed Benlate(R) 50 DF failed to protect their melons and cantaloupe crops. Due to limitations on punitive damages in Texas, the total award was reduced to approximately $35 million. DuPont and the plaintiff have reached a settlement of all claims. Pending against the company in state court in Broward County, Florida, are 30 cases brought by Ecuadorian shrimp farmers alleging that Benlate(R) 50 OD, applied to banana plantations in Ecuador, ran off and was deposited in plaintiffs' shrimp farms, causing massive numbers of shrimp to die. Two cases were tried, in the fall of 2000 and in early 2001, which resulted in adverse judgments of approximately $14 million and $16 million. The company has appealed both cases. DuPont contends that the deaths of the shrimp are attributable to a virus, Taura Syndrome Virus, and in no way involve Benlate(R) 50 OD. DuPont continues to believe that Benlate(R) did not cause the damages alleged in these cases and denies the allegations of fraud and misconduct. DuPont intends to defend itself in ongoing matters and in any additional cases that may be filed or reopened. The ultimate liabilities from the Benlate(R) lawsuits discussed above may be significant to the company's results of operations, particularly in the Crop Protection business, in the period recognized, but management does not anticipate that they will have a material adverse effect on the company's consolidated financial position or liquidity. The company's balance sheet reflect accruals for estimated costs associated with this matter. Adverse changes in estimates for such liabilities could result in additional future charges. 21 Form 10-Q Environmental Proceedings - ------------------------- The Indiana Departments of Natural Resources and Environmental Management and the United States Department of Interior are in the process of conducting a natural resource damage assessment of the Grand Calumet River and the Indiana Harbor Canal System under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Oil Pollution Act (OPA). The company owned a facility in East Chicago, Indiana, which discharged industrial wastewater into these waterways. The company was identified as one of 17 potentially responsible parties (PRPs) for the cost of the assessment and any determined natural resource damages. The trustees recently indicated that their preferred remedy is to dredge the entire Grand Cal/Indiana Harbor system. DuPont has joined with eight other PRPs to contest the remedy. A settlement offer has been tendered to the trustees and negotiations are ongoing. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Business transacted at the annual meeting: A total of 860,593,610 shares of common stock were voted in person or by proxy at the annual meeting of stockholders on April 25, 2001, or 82.5 percent of the shares entitled to be voted. The following are the voting results on proposals considered and voted upon at the meeting, all of which are described in the proxy statement. 1. ELECTION OF DIRECTORS: The 12 nominees listed below were elected to serve on the Board of Directors for the ensuring year. The vote tabulation with respect to each nominee follows: Votes Votes Cast Against Director Cast For or Withheld -------------- ----------- --------------- A. J. P. Belda 851,405,763 9,187,847 C. J. Crawford 851,315,790 9,277,820 L. C. Duemling 851,084,365 9,509,245 E. B. du Pont 851,345,765 9,247,845 C. O. Holliday, Jr. 850,584,557 10,009,053 D. C. Hopkins 851,013,279 9,580,331 L. D. Juliber 851,377,939 9,215,671 G. Lindahl 851,335,753 9,257,857 M. Naitoh 851,075,494 9,518,116 W. K. Reilly 851,333,581 9,260,029 H. R. Sharp, III 851,031,792 9,561,818 C. M. Vest 851,536,147 9,057,463 2. RATIFICATION OF INDEPENDENT ACCOUNTANTS: The proposal to ratify the appointment of PricewaterhouseCoopers LLP as independent accountants for 2001 was approved by a vote of 838,315,829 shares for, 17,068,036 shares against, and 5,209,745 abstentions and broker nonvotes. 3. POLITICAL NONPARTISANSHIP: A stockholder proposal recommending that DuPont affirm its political nonpartisanship was defeated by a vote of 638,581,241 shares against, 36,001,198 for, and 186,011,171 abstentions and broker nonvotes. 22 Form 10-Q 4. EMPLOYMENT MATTERS: A stockholder proposal requesting the Board of Directors prepare a report in response to the Glass Ceiling Commission's business recommendations was defeated by a vote of 613,534,210 shares against, 57,160,583 shares for, and 189,898,817 abstentions and broker nonvotes. 5. PLANT CLOSURE: A stockholder proposal that DuPont create a committee to report to the Board of Directors regarding the impact to communities as a result of the closure of DuPont plants and alternatives that can be developed to help mitigate the impact of such closures in the future was defeated by a vote of 641,115,715 shares against, 34,300,116 shares for, and 185,177,779 abstentions and broker nonvotes. 6. INTERNATIONAL WORKPLACE STANDARDS: A stockholder proposal that DuPont adopt, implement and enforce the workplace Code of Conduct as based on the International Labor Organization's Conventions 29, 87, 98, 100, 105, 111, 135 and 138 on workplace human rights was defeated by a vote of 610,686,987 share against, 55,383,923 shares for, and 194,522,700 abstentions and broker nonvotes. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The exhibit index filed with this Form 10-Q is on pages 26 and 27. (b) Reports on Form 8-K 1. On January 24, 2001, a Current Report on Form 8-K, pursuant to Regulation FD, was filed in connection with Debt and/or Equity Securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No. 33-61339, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the Registrant filed a news release, dated January 24, 2001, entitled "DuPont Reports Fourth Quarter And Full-Year 2000 Earnings." 2. On March 26, 2001, a Current Report on Form 8-K, pursuant to Regulation FD, was filed in connection with Debt and/or Equity Securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No. 33-61339, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the Registrant filed a news release, dated March 21, 2001, entitled "DuPont Reaffirms Pioneer Hi-Bred Ability To Market Roundup Ready(R) Soybeans And Roundup Ready Canola(R)." 3. On April 2, 2001, a Current Report on Form 8-K, pursuant to Regulation FD, was filed in connection with Debt and/or Equity Securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No. 33-61339, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the Registrant filed a news release, dated April 2, 2001, entitled "DuPont Plans Targeted Reductions To Improve Competitiveness." 4. On April 19, 2001, a Current Report on Form 8-K, pursuant to Regulation FD, was filed in connection with Debt and/or Equity Securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No. 33-61339, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the Registrant filed a news release, dated April 19, 2001, entitled "DuPont To Phase Out Sale Of Benlate(R)." 23 Form 10-Q 5. On April 24, 2001, a Current Report on Form 8-K, pursuant to Regulation FD, was filed in connection with Debt and/or Equity Securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53372, No. 33-61339, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the Registrant filed a news release, dated April 24, entitled "DuPont Reports First Quarter 2001 Earnings." 24 Form 10-Q SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. E. I. DU PONT DE NEMOURS AND COMPANY (Registrant) Date: May 10, 2001 ------------------------------------ By /s/ Gary M. Pfeiffer --------------------------------------- Gary M. Pfeiffer Senior Vice President - DuPont Finance (As Duly Authorized Officer and Principal Financial and Accounting Officer) 25 Form 10-Q EXHIBIT INDEX Exhibit Number Description ------ ----------------------------------------------------------------- 3.1 Company's Restated Certificate of Incorporation, filed May 29, 1997 (incorporated by reference to the company's filing on Form 8-K on June 13, 1997.) 3.2 Company's Bylaws, as last revised January 1, 1999 (incorporated by reference to Exhibit 3.2 of the company's Annual Report on Form 10-K for the year ended December 31, 1998). 4 The company agrees to provide the Commission, on request, copies of instruments defining the rights of holders of long-term debt of the company and its subsidiaries. 10.1* Company's Corporate Sharing Plan, as last amended August 28, 1991 (incorporated by reference to Exhibit 10.1 of the company's Annual Report on Form 10-K for the year ended December 31, 1996). 10.2* The DuPont Stock Accumulation and Deferred Compensation Plan, as last amended April 29, 1998 (incorporated by reference to Exhibit 10.3 of the company's Quarterly Report on Form 10-Q for the period ended March 31, 1998). 10.3* Company's Supplemental Retirement Income Plan, as last amended effective June 4, 1996 (incorporated by reference to Exhibit 10.3 of the company's Annual Report on Form 10-K for the year ended December 31, 1996). 10.4* Company's Pension Restoration Plan, as last amended effective June 4, 1996 (incorporated by reference to Exhibit 10.4 of the company's Annual Report on Form 10-K for the year ended December 31, 1996). 10.5* Company's Stock Performance Plan, as last amended effective January 28, 1998 (incorporated by reference to Exhibit 10.1 of the company's Quarterly Report on Form 10-Q for the period ended March 31, 1998). 10.6* Company's Variable Compensation Plan, as last amended effective April 30, 1997 (incorporated by reference to Exhibit 10.7 of the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997). 10.7* Company's Salary Deferral & Savings Restoration Plan, as last amended September 20, 2000, effective January 1, 2000. 10.8* Company's 1995 Corporate Sharing Plan, adopted by the Board of Directors on January 25, 1995 (incorporated by reference to Exhibit 10.8 of the company's Annual Report on Form 10-K for the year ended December 31, 1999). 10.9* Company's 1997 Corporate Sharing Plan, adopted by the Board of Directors on January 29, 1997 (incorporated by reference to Exhibit 10.11 of the company's Annual Report on Form 10-K for the year ended December 31, 1996). - ------------------------------------------ * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-Q. 26 Form 10-Q EXHIBIT INDEX (continued) Exhibit Number Description ------ ----------------------------------------------------------------- 10.10* Company's Retirement Income Plan for Directors, as last amended August 1995 (incorporated by reference to Exhibit 10.12 of the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997). 10.11* Letter Agreement and Employee Agreement, dated as of April 22, 1999, between the company and R. R. Goodmanson (incorporated by reference to Exhibit 10.11 of the company's Annual Report on Form 10-K for the year ended December 31, 1999). 10.12 Company's Tax Sharing Agreement dated October 27, 1998, by and among the company and Conoco Inc., formerly known as Conoco Energy Company (incorporated by reference to Exhibit 10.13 of the company's Annual Report on Form 10-K for the year ended December 31, 1998). 12 Computation of Ratio of Earnings to Fixed Charges. - -------------------------------------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-Q. 27 Form 10-Q Exhibit 10.7 SALARY DEFERRAL & SAVINGS RESTORATION PLAN Originally Adopted - April 26, 1994 As Last Amended September 20, 2000, Effective January 1, 2000 E. I. du Pont de Nemours and Company 28 EX-10.7 2 dex107.txt SALARY DEFERRAL & SAVINGS RESTORATION PLAN Form 10-Q Exhibit 10.7 SALARY DEFERRAL & SAVINGS RESTORATION PLAN I. PURPOSE The purpose of this Plan is to provide an eligible employee with the opportunity to defer, until termination of employment, receipt of salary that, because of compensation limits imposed by law, is ineligible to be considered in calculating benefits within the Company's tax-qualified defined contribution plan(s) and thereby recover benefits lost because of that restriction. II. ADMINISTRATION The administration of this Plan is vested in the Board of Benefits and Pensions appointed by Company. The Board may adopt such rules as it may deem necessary for the proper administration of the Plan, and may appoint such person(s) or group(s) as may be judged necessary to assist in the administration of the Plan. The Board's decision in all matters involving the interpretation and application of this Plan shall be final. The Board shall have the discretionary right to determine eligibility for benefits hereunder and to construe the terms and conditions of this Plan. III. ELIGIBILITY An employee of the Company who is participating in the Company's tax-qualified defined contribution plan(s) and whose annual base compensation exceeds the amount prescribed in Internal Revenue Code Section 401(a)(17) shall be eligible to participate in this Plan (hereinafter "Participant"). For purposes of this Plan, the term "Company" means E. I. du Pont de Nemours and Company, any wholly owned subsidiary or part thereof and any joint venture, partnership, or other entity in which E. I. du Pont de Nemours and Company has an ownership interest, provided that such entity (1) adopts this Plan with the approval of the E. I. du Pont de Nemours and Company and (2) agrees to make the necessary financial commitment in respect of any of its employees who become Participants in this Plan. Participation in this Plan is entirely voluntary. 1 Form 10_Q IV. PARTICIPANTS' ACCOUNTS (A) Participant Contributions. A Participant may elect to defer receipt of a percentage of annual base compensation in excess of the amount prescribed in Internal Revenue Code Section 401(a)(17), and have the dollar equivalent of the deferral percentage credited to a Participant Account under this Plan. The deferral percentage elected under this Plan shall not exceed that allowed in the Savings & Investment Plan of E. I. du Pont de Nemours and Company. Except as provided below, such deferral election will be made prior to the beginning of each calendar year and will be irrevocable for that calendar year. For purposes of a Participant's first year of participation in this Plan, the compensation deferral election must be made no later than 30 days prior to the first day of the month for which compensation is deferred and will be irrevocable for the remainder of that calendar year. (B) Company Contributions. To the extent that a Participant makes a deferral election under the terms of subparagraph (A) above, the Company will credit to that Participant's Account in this Plan an amount equivalent to the company matching contribution that would be provided to that Participant under the terms of the Company's tax-qualified defined contribution plan(s) in which (s)he is participating. (C) Earnings Equivalents. Credits for Participant Contributions and Company Contributions shall be treated as having been invested in one or more of the investment options available for the ongoing deposit of new employee contributions in the Savings & investment Plan of E. I. du Pont de Nemours and Company. Additional credit (or debit) amounts will be posted to the Participant's Account in this Plan based on the performance of those investment options. The Participant shall have the right to: (1) designate which of the available investment options are to be used in valuing his/her Account under this Plan, subject to the rules governing investment direction in the Savings & Investment Plan of E.I. du Pont de Nemours and Company; and/or 2 Form 10-Q IV. PARTICIPANTS' ACCOUNTS - (Cont'd) (2) change the designated investment options used in valuing his/her Account under this Plan, subject to the rules governing investment direction and/or transfers among funds in the Savings & Investment Plan of E. I. du Pont de Nemours and Company. (D) Credits to Accounts. Participant Contributions, Company Contributions and Earnings Equivalents shall be credited (or debited) to the Participant's Account under this Plan as unfunded book entries stated as cash balances, and will not be payable to Participants until such time as employment with the Company terminates. The cash balances in Participant Accounts shall be unfunded general obligations of the Company, and no Participant shall have any claim to or security interest in any asset of the Company on account thereof. V. VESTING Participant Contributions and Company Contributions and Earnings Equivalents shall be vested at the time such amounts are credited to the Participant's Account. VI. PAYMENT OF BENEFITS Amounts payable under this Plan shall be delivered in a cash lump sum as soon as practical after termination of employment unless the Participant irrevocably elects under rules prescribed by the Board of Benefits and Pensions to receive payments in a series of annual installments. All payments under this Plan shall be made by, and all expenses of administering this Plan shall be borne by, the Company. VII. NON-ASSIGNMENT No assignment or alienation of the rights and interests of participants, beneficiaries and survivors under this Plan will be permitted or recognized under any circumstances. Plan benefits can be paid only to participants, beneficiaries or survivors. VIII. RIGHT TO MODIFY The Company reserves the right to change or discontinue this Plan in its discretion by action of the Compensation & Benefits Committee. 3 EX-12 3 dex12.txt COMPUTATION OF RATIO EARNINGS Form 10-Q Exhibit 12 E. I. DU PONT DE NEMOURS AND COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions)
Three Months Years Ended December 31 ---------------------------------------------------------------- Ended March 31, 2001 2000 1999 1998 1997 1996 -------------- ---- ---- ---- ---- ---- Income from Continuing Operations Before Extraordinary Item and Cumulative Effect of Change In Accounting Principle $ 484 $ 2,314 $ 219 $ 1,648 $ 1,432 $ 2,931 Provision for Income Taxes 272 1,072 1,410 941 1,354 1,416 Minority Interests in Earnings of Consolidated Subsidiaries 3 61 61 24 43 40 Adjustment for Companies Accounted for by the Equity Method (16) (109) 33 (39) 936(a) 82 Capitalized Interest (16) (69) (107) (120) (80) (70) Amortization of Capitalized Interest 16 65 88(b) 65(b) 82(b) 127(b) ------- ------- ------- ------- ------- ------- 743 3,334 1,704 2,519 3,767 4,526 ------- ------- ------- ------- ------- ------- Fixed Charges: Interest and Debt Expense - Continuing Operations 178 810 535 520 389 409 Interest and Debt Expense - Discontinued Operations(c) -- -- 180 304 252 304 Capitalized Interest - Continuing Operations 16 69 107 120 80 70 Capitalized Interest - Discontinued Operations(c) -- -- 3 78 90 73 Rental Expense Representative of Interest Factor 18 70 66 71 83 80 ------- ------- ------- ------- ------- ------- 212 949 891 1,093 894 936 ------- ------- ------- ------- ------- ------- Total Adjusted Earnings Available for Payment of Fixed Charges $ 955 $ 4,283 $ 2,595 $ 3,612 $ 4,661 $ 5,462 ======= ======= ======= ======= ======= ======= Number of Times Fixed Charges Earned 4.5 4.5 2.9 3.3 5.2 5.8 ======= ======= ======= ======= ======= =======
___________________________________ (a) Includes write-off of Purchased In-Process Research and Development associated with acquisition of 20% interest in Pioneer Hi-Bred International, Inc. (b) Includes write-off of capitalized interest associated with divested businesses. (c) Divestiture of Conoco Inc. was completed August 6, 1999. 29 -----END PRIVACY-ENHANCED MESSAGE-----