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, 2000 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 1,042,578,365 shares (excludes 4,894,362 shares held by DuPont's Flexitrust and 87,041,427 shares of treasury stock) of common stock, $0.30 par value, were outstanding at July 31, 2000. 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 ......................................... 16-18 Segment Performance ....................................... 18-20 Financial Condition ......................................... 21-22 Other Items: Asset Securitization ...................................... 23 Healtheon/WebMD Warrants .................................. 23 Polyester Enterprise ...................................... 23 Purchased In-Process Research and Development ............. 24 Part II Other Information Item 1. Legal Proceedings .................................... 24-25 Item 6. Exhibits and Reports on Form 8-K ..................... 25-26 Signature ....................................................... 27 Exhibit Index ................................................... 28-29 Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges ................................................. 30 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<Fa> June 30 June 30 - ------------------------------------------------------------------------------------------------------------- (Dollars in millions, except per share) 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------- SALES<Fb> ................................................... $7,914 $7,024 $15,507 $13,319 Other Income<Fc> ............................................ 218 235 566 253 ------ ------ ------- ------- Total ..................................................... 8,132 7,259 16,073 13,572 ------ ------ ------- ------- Cost of Goods Sold and Other Operating Charges<Fd> .......... 5,028 4,360 9,884 8,200 Selling, General and Administrative Expenses ................ 809 625 1,566 1,160 Depreciation ................................................ 353 373 704 708 Amortization of Goodwill and Other Intangible Assets<Fe> .... 109 51 216 84 Research and Development Expense ............................ 460 387 881 745 Interest Expense ............................................ 210 117 411 213 Purchased In-Process Research and Development<Ff> ........... - - (11) 40 Employee Separation Costs and Write-Down of Assets<Fg> ...... 98 62 98 62 ------ ------ ------- ------- Total ..................................................... 7,067 5,975 13,749 11,212 ------ ------ ------- ------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTERESTS ........................................ 1,065 1,284 2,324 2,360 Provision for Income Taxes .................................. 355 418 794 850 Minority Interests in Earnings of Consolidated Subsidiaries . 22 20 39 36 ------ ------ ------- ------- INCOME FROM CONTINUING OPERATIONS<Fb> ....................... 688 846 1,491 1,474 DISCONTINUED OPERATIONS Gain on Disposal of Discontinued Business, Net of Income Taxes<Fh> ................................. - 71 - 106 ------ ------ ------- ------- NET INCOME .................................................. $ 688 $ 917 $ 1,491 $ 1,580 ====== ====== ======= ======= BASIC EARNINGS PER SHARE OF COMMON STOCK<Fi> Continuing Operations ..................................... $ .66 $ .75 $ 1.42 $ 1.30 Discontinued Operations ................................... - .06 - .10 ------ ------ ------- ------- Net Income ................................................ $ .66 $ .81 $ 1.42 $ 1.40 ====== ====== ======= ======= DILUTED EARNINGS PER SHARE OF COMMON STOCK<Fi> Continuing Operations ..................................... $ .65 $ .74 $ 1.41 $ 1.29 Discontinued Operations ................................... - .06 - .09 ------ ------ ------- ------- Net Income ................................................ $ .65 $ .80 $ 1.41 $ 1.38 ====== ====== ======= ======= DIVIDENDS PER SHARE OF COMMON STOCK ......................... $ .35 $ .35 $ .70 $ .70 ====== ====== ======= ======= - ------------------------------------------------------------------------------------------------------------- See Notes to Financial Statements 3 Form 10-Q Six Months Ended CONSOLIDATED STATEMENT OF CASH FLOWS<Fa> June 30 - ------------------------------------------------------------------------------------------------ (Dollars in millions) 2000 1999 - ------------------------------------------------------------------------------------------------ CASH PROVIDED BY CONTINUING OPERATIONS Net Income .......................................................... $1,491 $ 1,580 Adjustments to Reconcile Net Income to Cash Provided by Continuing Operations: Net Income from Discontinued Operations<Fh> ..................... - (106) Depreciation .................................................... 704 708 Amortization of Goodwill and Other Intangible Assets ............ 216 84 Purchased In-Process Research and Development ................... (11) 40 Other Noncash Charges and Credits - Net<Fd> ..................... 407 60 Change in Operating Assets and Liabilities - Net ................ (833) (675) ------ ------- Cash Provided by Continuing Operations ........................ 1,974 1,691 ------ ------- INVESTMENT ACTIVITIES OF CONTINUING OPERATIONS Purchases of Property, Plant and Equipment .......................... (909) (981) Investment in Affiliates ............................................ (59) (24) Payments for Businesses Acquired (Net of Cash Acquired) ............. (41) (1,624) Proceeds from Sales of Assets ....................................... 241 62 Net Decrease (Increase) in Short-Term Financial Instruments ......... 59 (30) Miscellaneous - Net ................................................. (47) (7) ------ ------- Cash Used for Investment Activities of Continuing Operations .................................................. (756) (2,604) ------ ------- FINANCING ACTIVITIES Dividends Paid to Stockholders ...................................... (738) (794) Net Increase (Decrease) in Borrowings ............................... 106 (2,737) Acquisition of Treasury Stock ....................................... (250) (44) Proceeds from Exercise of Stock Options ............................. 39 90 Increase in Minority Interests ...................................... - 80 ------ ------- Cash Used For Financing Activities ............................ (843) (3,405) ------ ------- Net Cash Flow from Discontinued Operations ............................ - 4,733 ------ ------- Effect of Exchange Rate Changes on Cash ............................... (126) (96) ------ ------- INCREASE IN CASH AND CASH EQUIVALENTS ................................. $ 249 $ 319 ====== ======= - ------------------------------------------------------------------------------------------------ See Notes to Financial Statements. 4 Form 10-Q CONSOLIDATED BALANCE SHEET<Fa> June 30 December 31 - ----------------------------------------------------------------------------------------------------------------- (Dollars in millions, except per share) 2000 1999 - ----------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and Cash Equivalents ........................................................ $ 1,715 $ 1,466 Marketable Securities ............................................................ 43 116 Accounts and Notes Receivable .................................................... 5,937 5,318 Inventories<Fj> .................................................................. 4,112 5,057 Prepaid Expenses ................................................................. 241 202 Deferred Income Taxes ............................................................ 437 494 ------- ------- Total Current Assets ........................................................... 12,485 12,653 PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation (June 30, 2000 - $20,310; December 31, 1999 - $20,545) ............................................ 14,171 14,871 INVESTMENT IN AFFILIATES<Fk> ....................................................... 2,263 1,459 OTHER ASSETS ....................................................................... 11,318 11,794 ------- ------- TOTAL .......................................................................... $40,237 $40,777 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable ................................................................. $ 2,001 $ 2,780 Short-Term Borrowings and Capital Lease Obligations .............................. 5,005 4,941 Income Taxes ..................................................................... 376 359 Other Accrued Liabilities ........................................................ 3,274 3,148 ------- ------- Total Current Liabilities ...................................................... 10,656 11,228 LONG-TERM BORROWINGS AND CAPITAL LEASE OBLIGATIONS ................................. 6,638 6,625 OTHER LIABILITIES .................................................................. 7,751 7,872 DEFERRED INCOME TAXES .............................................................. 1,575 1,660 ------- ------- Total Liabilities .............................................................. 26,620 27,385 ------- ------- MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES .................................... 370 517 ------- ------- STOCKHOLDERS' EQUITY<Fl> Preferred Stock .................................................................. 237 237 Common Stock, $.30 par value; 1,800,000,000 shares authorized; shares issued at June 30, 2000 - 1,134,514,154; December 31, 1999 - 1,139,514,154............ 340 342 Additional Paid-In Capital ....................................................... 7,704 7,941 Reinvested Earnings .............................................................. 12,238 11,699 Accumulated Other Comprehensive Loss ............................................. (319) (133) Common Stock Held in Treasury at Cost (Shares: June 30, 2000 - 87,041,427; December 31, 1999 - 87,041,427) ................................................ (6,727) (6,727) Common Stock Held in Trust for Unearned Employee Compensation and Benefits (Flexitrust), at Market (Shares: June 30, 2000 - 5,053,309; December 31, 1999 - 7,342,245) .............................................................. (226) (484) ------- ------- Total Stockholders' Equity ..................................................... 13,247 12,875 ------- ------- TOTAL .......................................................................... $40,237 $40,777 ======= ======= - ----------------------------------------------------------------------------------------------------------------- See Notes to Financial Statements. 5 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) [FN] <Fa> 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. <Fb> SEGMENT INFORMATION - CONTINUING Three Months Ended Six Months Ended OPERATIONS<F1> June 30 June 30 -------------------------------------------------------------------------- (Dollars in millions) 2000 1999 2000 1999 -------------------------------------------------------------------------- SEGMENT SALES<F2> ---------------- Agriculture & Nutrition .......... $ 843 $ 827 $ 1,469 $ 1,547 Nylon Enterprise ..... 1,172 1,149 2,295 2,252 Performance Coatings & Polymers ........... 1,716 1,656 3,369 2,806 Pharmaceuticals ...... 394 380 783 789 Pigments & Chemicals .......... 1,038 949 1,998 1,815 Pioneer .............. 803 265 1,724 325 Polyester Enterprise ......... 676 643 1,265 1,267 Specialty Fibers ..... 892 857 1,797 1,720 Specialty Polymers ... 1,151 1,057 2,242 2,046 Other ................ 147 122 272 237 ------ ------ ------- ------- Total Segment Sales ............ 8,832 7,905 17,214 14,804 Elimination of Intersegment Transfers .......... (177) (178) (336) (352) Elimination of Equity Affiliate Sales .............. (741) (701) (1,373) (1,132) Miscellaneous ........ - (2) 2 (1) ------ ------ ------- ------- SALES ................ $7,914 $7,024 $15,507 $13,319 ====== ====== ======= ======= 6 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) [FN] <Fb> SEGMENT INFORMATION - CONTINUING Three Months Ended Six Months Ended OPERATIONS<F1> June 30 June 30 -------------------------------------------------------------------------- (Dollars in millions) 2000 1999 2000 1999 -------------------------------------------------------------------------- AFTER-TAX OPERATING INCOME (LOSS) ------------------- Agriculture & Nutrition .......... $ 73<F3> $ 146 $ 136<F3> $ 244 Nylon Enterprise ..... 88 104 175 206 Performance Coatings & Polymers ........... 129<F4> 160 308<F4> 260 <F5> Pharmaceuticals ...... 51 49 105 124 Pigments & Chemicals .......... 186 158 350 304 Pioneer .............. 6<F6> 59 83<F6> 52 Polyester Enterprise ......... 11 (53)<F7> 20 (59)<F7> Specialty Fibers ..... 175 168 376 349 Specialty Polymers ........... 183 164 348 328 Other ................ 6 13 7 23 ------ ------ ------- ------- Total Segment ATOI ............. 908 968 1,908 1,831 Interest & Exchange Gains and Losses ... (136) (48) (259) (211)<F8> Corporate Expenses ... (84) (74) (158) (146) ------ ------ ------- ------- INCOME FROM CONTINUING OPERATIONS ......... $ 688 $ 846 $ 1,491 $ 1,474 ====== ====== ======= ======= 7 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) [FN] FOOTNOTES TO NOTE (b) - --------------------- <F1> Certain reclassifications of segment data have been made to reflect changes in organizational structure. <F2> Includes pro rata equity affiliate sales and intersegment transfers. <F3> Includes a charge of $62 to increase the company's reserve for "Benlate" 50 DF fungicide litigation. <F4> Includes a charge of $61 related to employee separation costs for about 1,000 employees within Performance Coatings, the shutdown of related manufacturing facilities and other exit costs. <F5> 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 had not yet been established and no alterna- tive future use was anticipated. <F6> Second quarter includes a noncash charge of $138 resulting from the sale of acquired Pioneer inventories which, in accordance with purchase accounting rules, were recorded at fair value on October 1, 1999. Year-to-date includes noncash charges of $353 resulting from the sale of acquired Pioneer inventories, 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 purchased in-process research and development. <F7> Includes a charge of $40 related to employee separation costs for about 850 employees within the Polyester Enterprise. <F8> 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. 8 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) [FN] <Fc> Year-to-date 2000 includes a $176 gain resulting from the sale by Pioneer of certain equity securities classified as available for sale. Year-to-date 1999 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. <Fd> 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. Second quarter and year-to- date 2000 charges were $220 and $567, respectively. These charges are reflected in "Other Noncash Charges and Credits - Net" in the Consoli- dated Statement of Cash Flows. During second quarter 2000, a charge of $100 was also recorded to increase the company's reserve for "Benlate" 50 DF fungicide litigation. <Fe> 2000 includes amortization expense associated with acquisitions of Herberts and Pioneer. Prior to October 1, 1999, the company's 20 percent ownership in Pioneer was accounted for under the equity method and results (including amortization expense) were reported as Other Income. 1999 includes amortization expense associated with the Herberts acquisition beginning in the second quarter. <Ff> Year-to-date 2000 includes a credit of $11 that 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. Year-to-date 1999 includes an estimated charge of $40 that was recorded in conjunction with the purchase of Herberts, based on preliminary allocations of purchase price. <Fg> Second quarter 2000 charges resulting from restructuring activities within Performance Coatings totaled $98. This Phase II restructuring activity was instituted to continue the consolidation of business assets and to eliminate redundancies as a result of the acquisition of Herberts in 1999. This charge included $73 related to the termination of about 1,000 employees involved in technical, manufacturing, marketing and administrative activities. Approximately 90 percent of these employee reductions will occur in Europe. Employee terminations and charges against the reserves will begin in the third quarter. Restructuring charges of $13 relate to the write-down of operating facilities that 9 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) [FN] were shutdown in the second quarter in Germany and the United States and $12 relate to the cancellation of contractual agreements principally associated with the global distribution of products. Termination of services under the contractual agreements will be completed during the second quarter of 2001; charges against the reserve will begin in third quarter 2000. The effect of these actions on second quarter operating results was not material. Second quarter 1999 charges of $62 result from employee separation costs for about 850 employees engaged primarily in manufacturing within Polyester Enterprise. The restructuring was instituted to address poor economic and intensively competitive market conditions. <Fh> Includes operating results of the company's former interest in Conoco. <Fi> 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 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 March 31 June 30 ----------------------------- ----------------------------- Basic Diluted Basic Diluted ------------- ------------- ------------- ------------- 2000 1,045,857,572 1,053,658,428 1,046,447,044 1,055,367,888 1999 1,129,006,814 1,144,189,906 1,128,051,977 1,141,147,812 The difference between basic and diluted weighted-average common shares outstanding results from the assumption that dilutive stock options outstanding were exercised. 10 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) [FN] 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 ---------------------- ---------------------- 2000 1999 2000 1999 ---------- --------- ---------- --------- Average Stock Options 35,059,358 3,060,038 24,220,698 5,818,192 Compensation expense (benefit) recognized in income for stock-based employee compensation awards was $(4) and $23 for the three months and $(29) and $30 for the six months ended June 30, 2000, and 1999, respectively. Shares held by the Flexitrust and treasury stock are not considered outstanding in computing the foregoing weighted-average number of common shares. June 30 December 31 <Fj> Inventories 2000 1999 ----------- ------- ----------- Finished Products .......................... $2,818 $3,322 Semifinished Products ...................... 1,038 1,518 Raw Materials and Supplies ................. 889 823 ------ ------ 4,745 5,663 Less: Adjustment of Inventories to a Last-In, First-Out (LIFO) Basis .......... 633 606 ------ ------ Total .................................. $4,112 $5,057 ====== ====== At October 1, 1999, Pioneer inventories were stepped up to fair value in accordance with purchase accounting rules. At June 30, 2000, and December 31, 1999, these inventories include the remaining balance of the step-up of $190 and $757, respectively. <Fk> Includes the company's investment in DuPont Photomasks, Inc. which is accounted for by the equity method beginning in the second quarter 2000. 11 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) [FN] <Fl> The following sets forth the company's Total Comprehensive Income for the periods shown: Three Months Ended Six Months Ended June 30 June 30 ------------------ ------------------ 2000 1999 2000 1999 -------- ------- -------- ------- Net Income .................... $688 $917 $1,491 $1,580 Cumulative Translation Adjustment .................. (13) (11) (20) (105) Unrealized Gains (Losses) on Securities ............... (37)* 14 (166)* 14 ---- ---- ------ ------ Total Comprehensive Income .... $638 $920 $1,305 $1,489 ==== ==== ====== ====== ---------------- * Primarily reflects unrealized holding losses of $60 and $145 for the second quarter and year-to-date, respectively, associated with the company's investment in Healtheon/WebMD. The remainder relates to unrealized holding gains and losses of other equity securities. <Fm> During first quarter 2000, the company completed purchase accounting for the Herberts acquisition. In connection with the purchase of Herberts, the company has now essentially completed the initial restructuring plan that was formulated at the time of the acquisition. Under this plan, nearly 1,300 employees were to have been terminated as manufacturing facilities were shut down and other business activities were reorganized. Through June 30, 2000, approximately 1,200 employees have been terminated and about $35 in employee separation costs have been charged against the related liability. The total remaining reserve balances for terminations and other exit costs are $19 at June 30, 2000. [FN] In second quarter 2000 there were no changes in estimates related to reserves established for restructuring initiatives contained in Item 8 of the company's Annual Report on Form 10-K for the period ended December 31, 1999, at Note 5 "Employee Separation Costs and Write-Down of Assets." An update of these initiatives is discussed below under the respective prior years' activities. 1999 Activities --------------- During 1999, the company recorded restructuring charges in three segments -- Agriculture & Nutrition, Nylon Enterprise and Polyester Enterprise. 12 Form 10-Q NOTES TO FINANCIAL STATEMENTS (Dollars in millions, except per share) (continued) [FN] In Agriculture & Nutrition, by June 30, 2000, approximately $34 of employee termination payments had been settled and charged against the related liability. Approximately 670 employees have been terminated and another 70 employees have accepted other work assignments within the company. Total remaining reserve balances for employee termination payments and dismantlement and removal of facilities that were shutdown are approximately $24 at June 30, 2000. In the Nylon Enterprise, by June 30, 2000, approximately $3 of employee termination payments had been settled and charged against the related liability and approximately 30 employees had been terminated. The remaining reserve balance is approximately $12 at June 30, 2000. In the Polyester Enterprise, by June 30, 2000, $45 related to employee separation costs had been settled and charged against the related liability. Approximately 700 employees have been terminated and about 65 employees have accepted other work assignments within the company. Total remaining reserve balances are approximately $15 at June 30, 2000. 1998 Activities --------------- During 1998, the company recorded charges directly related to management decisions to implement company-wide productivity improvement initiatives. By June 30, 2000, about $268 in severance benefits have been charged against the related liability and approximately $33 in dismantlement and removal costs have been paid. Total remaining reserve balances are approximately $22 at June 30, 2000. 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 pro- jections about the future, including statements about the company's strategy for growth, product development, market position, expendi- tures 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 Manage- ment's Discussion and Analysis in the company's latest Annual Report on Form 10-K, 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 70 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 opera- tions. 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 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 improvement. 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 such as the inability to: identify viable new products; successfully complete clinical trials of new pharmaceuticals; 14 Form 10-Q 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. o 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. o To a significant degree, results in the company's Agriculture & Nutrition and Pioneer segments reflect changes in agricul- tural 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. o The company has undertaken and may continue to undertake pro- ductivity initiatives, including organizational restructur- ings 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. 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 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 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. The foregoing list of important factors is not inclusive, or necessarily presents them in order of importance. 15 Form 10-Q (a) Results of Operations (1) Financial Results: Including one-time items in both periods and discontinued operations in 1999, diluted earnings per share for the second quarter were $.65 compared to $.80 in 1999. DuPont's earnings from continu- ing operations, before one-time items were $.90 per share for the second quarter, 15 percent higher than the $.78 per share earned in last year's second quarter, and $1.75 per share for the first half 2000 versus $1.44 for the first half 1999, up 22 percent. Results From Continuing Operations ---------------------------------- Second quarter 2000 consolidated sales were $7.9 billion, 13 percent above second quarter 1999. Segment sales, which include pro rata equity affiliate sales and intersegment transfers, were $8.8 billion, up 12 percent from $7.9 billion last year. This increase is the result of 6 percent volume growth, 6 percent added from the Pioneer acquisition, and 2 percent higher local prices, partly offset by the currency effect from the stronger U.S. dollar which reduced worldwide sales by 2 percent. Regional segment sales and related variances are summarized below: % % Change Due To Chng. ------------------------------------- 2Q 00 vs. Local Currency Portfolio Segment Sales $B 2Q 99 Price Effect Volume Changes ------------- ----- ----- ----- -------- ------ --------- Worldwide 8.8 12 2 (2) 6 6 U.S. 4.7 14 1 0 4 9 Europe 2.0 (2) 0 (9) 6 1 Asia 1.2 26 3 3 18 2 Canada, Mexico, S.A. 0.9 17 7 (3) 4 9 o U.S. sales, excluding portfolio changes, were up 5 percent, reflecting 4 percent higher volume and 1 percent higher prices. o Asia Pacific region volume growth rate remained very strong at 18 percent, with local prices up 3 percent. o European sales reflect 6 percent volume growth more than offset by the impact of weaker European currencies which decreased sales in the quarter by 9 percent. 16 Form 10-Q o Portfolio changes, predominantly the Pioneer acquisition, were a significant contributor to second quarter revenue growth, particularly in the United States. Pioneer's selling season for 2000 is now essentially complete. Including one-time items, second quarter income from continu- ing operations was $688 million versus $846 million last year, result- ing in earnings per share of $.65 compared to $.74 last year. Second quarter income from continuing operations before one-time items was $949 million, compared to $886 million in the second quarter 1999, up $63 million or 7 percent. Earnings on a per-share basis were up 15 percent, reflecting 8 percent lower average shares outstanding this year. Higher sales volume, higher local selling prices and benefits from increased ownership of Pioneer more than offset the negative impact of higher raw material costs, higher interest costs and a stronger U.S. dollar. One-time items are detailed in the notes to the financial statements and are summarized below: $MM Pretax $MM After-Tax ($ Per Share) -------------- -------------- --------------- 2Q 00 2Q 99 2Q 00 2Q 99 2Q 00 2Q 99 ------ ----- ------ ----- ------ ------ "Benlate" Accrual $(100) $ (62) $(.06) Purchase Accounting - Pioneer (220) (138) (.13) Performance Coatings Restructuring (98) (61) (.06) Polyester Restructuring $(62) $(40) $(.04) ----- ---- ----- ---- ----- ----- Total $(418) $(62) $(261) $(40) $(.25) $(.04) ===== ==== ===== ==== ===== ===== Six Sigma Productivity Initiatives ---------------------------------- Six Sigma implementation remains on track. At the end of the second quarter 2000 the company had over 1,000 trained Black Belts and 2,500 active projects. The potential annualized pretax benefit from active projects at the end of the second quarter was $450 million. The actual annualized pretax benefit of completed projects at the end of the second quarter was $110 million. Corporate Outlook ----------------- The first half earnings performance positions the company to meet its 17-20 percent earnings per share growth target for the year 2000. Aggressive pricing actions, Six Sigma productivity projects 17 Form 10-Q and cost controls have been implemented to mitigate raw material cost increases. Looking at the second half of the year, the company expects: o raw material costs to remain at current high levels, which would result in an estimated negative EPS impact of $.20-$.25 versus the second half of 1999, o more than half of the strategic business units to have higher U.S. dollar selling prices than second-half 1999 levels, and o volume growth to be somewhat below the 6 percent rate of the first half. (2) Segment Performance: The following text compares second quarter 2000 results with second quarter 1999, for sales and earnings of each segment, excluding the earnings impact of one-time items described in the footnotes to the "Segment Information - Continuing Operations" table at Note (b) on pages 6-8. Segment results include intersegment transfers and a pro rata ownership share of the sales and earnings of equity affili- ates. Total segment after-tax operating income was $1,169 million compared to $1,008 million last year, up 16 percent. Total segment sales were $8.8 billion, compared to $7.9 billion last year. o Agriculture & Nutrition - A modest earnings improvement in Crop Protection Products, driven by higher volume and prices (ex-currency), was offset by Nutrition & Health losses. Crop Protection Products sales increased in the North American corn and soybean markets, which in part, benefited from the TruChoiceSM integrated offering with Pioneer. Fixed costs were also lower reflecting last year's restructuring of the business. o Nylon Enterprise - Volumes remained strong, close to last year's historically high levels. Segment earnings were 15 percent lower, reflecting significantly higher raw material costs. A global price increase was announced for DuPont Nylon Fibers and Intermediates effective August 1. o Performance Coatings & Polymers - Segment earnings were up 19 percent, reflecting continued strength in Engineering Polymers and Performance Coatings. Phase II of the Herberts integration announced during the quarter will result in the elimination of about 1,000 positions. The resulting savings will be partly realized in 2000, with the majority of the benefit in 2001, reaching an estimated annualized savings 18 Form 10-Q rate of $100 million pretax upon completion during the second quarter 2001. Engineering Polymers earnings growth continued with strong worldwide volumes offsetting a negative currency impact, principally in Europe. Several new polymer materials have been introduced to meet customer demand for reduced costs and improved performance versus metal alternatives. o Pharmaceuticals - Segment earnings and product sales were both up by 4 percent, led by SustivaTM efavirenz. "Coumadin" (warfarin sodium tablets, USP) crystalline sales reflect continued generic competition. Prescription market share decline has been held to roughly one-half share point per month despite generic competitors. "Sinemet" (carbidopa- levodopa) sustained-release sales were limited by product availability. As planned, investment in R&D was increased versus prior year. During the quarter DuPont Pharmaceuticals received FDA approval for "Innohep", the first true once-a- day low molecular weight heparin approved in the United States, and signed a letter of intent with Emisphere to co-develop and market solid oral heparins. These products are an excellent strategic fit with DuPont Pharmaceuticals cardiovascular franchise. Major product sales are shown below: ($ in millions) 2Q 2000 2Q 1999 YR 1999 ----------------------- ------- ------- ------- "Coumadin" 69 91 464 SustivaTM 141 58 211 "Sinemet Brand" 37 85 331 "Cardiolite"/MiralumaTM 62 50 210 o Pigments & Chemicals - Segment earnings were up 18 percent, reflecting double-digit earnings growth in all three busi- nesses: White Pigment & Mineral Products (WPMP), Chemical Solutions and Fluorochemicals. WPMP sales grew with strong demand in all regions and volumes at record levels. Price increases announced for July will help to offset the negative impact of the stronger dollar and higher raw material costs. DuPont Chemical Solutions sales reflected substantial volume increases and Fluorochemicals continues to benefit from increased sales of CFC alternative products. o Pioneer - Pioneer earnings increased $85 million, reflecting 100 percent ownership in the current year versus 20 percent in the second quarter of 1999. Operating results reflect essentially flat corn volumes and higher soybean volumes. Prices for both corn and soybeans were up. The higher corn prices were due to an improvement in mix to new higher-priced 19 Form 10-Q products and lower discounts compared to last year. The higher soybean prices were due to a higher mix of "Roundup" Ready Soybeans. During the quarter the company received a $100 million cash payment from Cargill in settlement of patent infringement litigation, 80 percent of which was reflected in the Pioneer purchase accounting resulting in a reduction of goodwill. The remaining $20 million was largely offset by costs related to the acquisition. o Polyester Enterprise - Segment earnings improved to $11 million versus a loss of $13 million last year, a $24 million turnaround. Earnings from the specialty/branded fibers, resins & intermediates, and films sectors improved from second quarter 1999. Fixed costs continue to decline as benefits from restructuring and Six Sigma efforts are realized. The manufacturing alliance with Unifi for polyester filament started in June and is expected to improve product quality, yields, and costs. o Specialty Fibers - Segment earnings increased 4 percent based on 8 percent higher volumes. Volumes were particularly strong in "Lycra" elastane, "Kevlar" brand fiber, and "Tyvek" flexible sheet products. Segment earnings were adversely affected by higher costs associated with capacity increases and lower U.S. dollar prices, particularly "Lycra" in Europe. Revenue growth was also impacted by new generic elastane capacity in Asia. However, the "Lycra" strategy of penetrat- ing the ready-to-wear market via branding and new products remains on track. Advanced Fiber Systems earnings were strong, reflecting significant growth in the Life Protection and Protective Apparel markets. o Specialty Polymers - Segment earnings were up 12 percent, reflecting continued earnings growth from DuPont iTechnologies, Fluoropolymers, and "Corian", businesses which had double-digit sales and earnings growth. iTechnologies and Fluoropolymers both benefited from a strong electronics market while "Corian" continues to drive market penetration via new products. Earnings in the Packaging & Industrial Polymers business were down modestly due to significantly higher raw material costs. o The Other segment earnings were $6 million versus $13 million in 1999. 20 Form 10-Q (b) Financial Condition Six Months Ended June 30 ------------------ Selected Cash Flow Information 2000 1999 ------------------------------ ------ -------- ($ in millions) Cash Provided by Continuing Operations ..... $1,974 $ 1,691 Purchases of Property, Plant and Equipment and Investment in Affiliates ... (968) (1,005) Payments for Businesses Acquired ........... (41) (1,624) Proceeds from Sales of Assets .............. 241 62 Dividends Paid to Stockholders ............. (738) (794) Acquisition of Treasury Stock .............. (250) (44) Cash provided by continuing operations was $2.0 billion for the first half of 2000, as compared with $1.7 billion for the same period in 1999. Net income plus noncash charges included in net income was higher this year as compared to last year primarily reflecting contributions from the Herberts and Pioneer acquisitions. In addition, the company reduced its operating assets by $500 million as a result of cash proceeds from the securitization of accounts receivable. These sources of cash were partly offset by higher seasonal increases in working capital, primarily due to the inclusion of Pioneer in DuPont's 2000 consolidated financial statements. Strong first half 2000 results by Pioneer contributed to higher trade receivables which were only partially offset by reductions in Pioneer inventory and other net working capital items. Year-to-date capital investments for purchases of property, plant, and equipment and investments in affiliates were $968 million in 2000, as compared to $1,005 million spent in 1999. The current spending level reflects management's intention to limit capital spending to about $2.0 billion for the year. Payments for businesses acquired in the first half of 2000 totaled $41 million as compared to $1.6 billion spent in 1999, which primarily reflects the acquisition of Herberts in February 1999. Proceeds from the sale of assets in the first half of 2000 totaled $241 million primarily reflecting the first quarter sale of available-for-sale securities held by Pioneer and small asset sales. Proceeds from the sale of assets in first half 1999 totaled $62 million, and included the sale of several small operating assets as well as office real estate assets. The per share dividend paid to stockholders in second quarter 2000 was $.35 per share, the same as in 1999. The lower gross dollar dividends paid in first half 2000 as compared to 1999 reflects lower shares outstanding this year primarily due to the third quarter 1999 Conoco divestiture. 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 21 Form 10-Q from shares issued under compensation programs. In the first half of 2000, the company spent $250 million to purchase and retire 5,000,000 shares of DuPont common stock. Comparable purchases in the first half of 1999 totaled $44 million to purchase and retire 840,000 shares. As a result, DuPont has completed its authorized purchase of 20 million shares under the 1997 program and has purchased about 4 million shares under its 1998 program. 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. DuPont anticipates completing this program within two years 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 June 30, 2000, was $9.9 billion, as compared to $10.0 billion at year-end 1999. Management's intent is to reduce net debt from the current level over the second half of the year to increase the company's financial flexibility. 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. Certain Statistics - Continuing Operations ------------------------------------------ At 6/30/00 At 12/31/99 ---------- ----------- Current Ratio (current assets to current liabilities) ...... 1.2:1 1.1:1 Earnings to Fixed Charges ...... 5.7 2.9 Pioneer's days' sales outstanding reflects significant programs in the segment to provide farmers with extended harvest terms, which increases days' sales outstanding; or with discounts for cash sales, which decrease days' sales outstanding. Days' sales outstanding excluding Pioneer averaged 57 days in the second quarter, equal to fourth quarter 1999, and an increase of 2 days from the second quarter of 1999. Including Pioneer, days' sales outstanding averaged 59 days in second quarter 2000, as compared to 57 days in first quarter 2000, and 67 days in fourth quarter 1999. Fourth quarter days' sales outstanding including Pioneer reflects low seasonal sales for Pioneer in the quarter, as well as the impact of extended terms. 22 Form 10-Q (c) Other Items ASSET SECURITIZATION -------------------- During June 2000, the company entered into an ongoing program to sell an interest of up to $500 million in a revolving pool of its trade accounts receivable. Proceeds received from the initial sale of approximately $500 million have been reflected as a reduction of accounts receivable in the company's consolidated balance sheet. The company retains servicing respon- sibilities for the receivables. HEALTHEON/WEBMD WARRANTS ------------------------ DuPont owns a warrant position in Healtheon/WebMD Corp., entitling it to purchase Healtheon/WebMD common stock. As of June 30, 2000, DuPont reflected an unrealized loss on this investment of $145 million in Other Comprehensive Income. In the future, if the decline in the market value of the company's investment in the aforementioned warrants is deemed to be other than temporary, a one-time charge to earnings will be recorded. POLYESTER ENTERPRISE -------------------- In June, DuPont and Unifi, Inc. began operating their manufacturing alliance in the U.S. to produce polyester filament yarn. The alliance integrates partially oriented yarn (POY) manufacturing facilities of both companies into a single production platform. This alliance enables each company to match production with the best assets available, significantly improving product quality and yields. The alliance, which involves production only, has a combined capacity of 800 million pounds. DuPont will manage production planning and scheduling of all POY assets. Production will be realigned among DuPont's "Dacron" polyester filament plants in Wilmington, NC, and Kinston, NC, and Unifi's POY plant in Yadkinville, NC. DuPont's "Dacron" POY business and Unifi's textured yarn business will continue to operate separately. Each company will continue to own and operate its respective sites and employees will remain with their respective employers. DuPont and Unifi can terminate the alliance at any time by mutual agreement. At termination, or at any time after June 1, 2005, Unifi has the option to purchase from DuPont and DuPont has the option to sell to Unifi DuPont's U.S. polyester filament business at fair market value within a predetermined range. If Unifi exercises its option, DuPont is obligated to sell the business to Unifi and, if DuPont exercises its option, Unifi is obligated to buy the business from DuPont. Should either option not be exercised, the alliance could continue. 23 Form 10-Q PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT --------------------------------------------- With respect to the in-process research and development projects acquired in conjunction with the company's 1998 pharmaceutical acquisition, Phase 3 enrollment has begun for DMP754, further development of DMP777 has been put on hold, and FDA approval for "Innohep" has been received. No other significant changes occurred during the second quarter 2000 with respect to in-process research and development related to the company's recent acquisitions. 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, after 18 months of extensive research, DuPont scientists concluded that "Benlate" 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, dis- missal or settlement. Approximately 140 cases are pending. Most of these lawsuits were filed by growers who allege plant damage from using "Benlate" 50 DF although some include claims for alleged damage to shrimping operations 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" 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. Another shareholder derivative action which alleges that DuPont's Board of Directors breached various duties in connection with the "Benlate" 50 DF litigation was dismissed when the Federal Court for the Middle District of Georgia granted the motion to dismiss filed on behalf of the directors. The company then settled the case for nuisance value to avoid the cost of litigating an appeal by plaintiffs. 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 40 such cases are pending. These cases are in various stages of proceedings in trial and appellate courts in Florida and Hawaii. In April 2000, a jury in Texas state court awarded compensatory damages and fees of approximately $9 million, prejudgment interest, and punitive or exemplary damages of approximately 24 Form 10-Q $60 million to three pecan growers who claimed that "Benlate" 50 DF had damaged their pecan trees. Because the punitive or exemplary damages awarded were not in compliance with Texas law, the total award will be reduced to approximately $23 million. DuPont plans to appeal. On June 21, 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" 50 WP failed to protect their melons and cantaloupe crops. Due to limitations on punitive damages in Texas, the total award will be reduced to approximately $35 million. DuPont plans to appeal. DuPont continues to believe that "Benlate" 50 DF 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 "Benlate" 50 DF lawsuits and the "Benlate" 50 WP lawsuit 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 reflects reserves for estimated costs associated with this matter. Adverse changes in estimates for such costs could result in additional future charges. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The exhibit index filed with this Form 10-Q is on pages 28 and 29. (b) Reports on Form 8-K 1. On April 25, 2000, 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 State- ments on Form S-3 (No. 33-53327, No. 33-61339, No. 33-60069, and No. 333-86363). Under Item 7, "Financial Statements and Exhibits," the Registrant's Earnings Press Release, dated April 25, 2000, was filed. 2. On April 26, 2000, a Current Report on Form 8-K was filed in connection with Debt and/or Equity securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No. 33-61339, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the Registrant filed a press release, dated April 26, 2000, entitled "DuPont Commits To Specific Earnings Growth Target For 2000." 25 Form 10-Q 3. On June 29, 2000, a Current Report on Form 8-K was filed in connection with Debt and/or Equity securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No. 33-61339, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the Registrant filed a press release, dated June 29, 2000, entitled "DuPont Reaffirms Vigorous Defense of "Benlate" Lawsuits; Will Increase "Benlate" Reserve." 4. On July 26, 2000, 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, No. 33-60069, and No. 333-86363). Under Item 7, "Financial Statements and Exhibits," the Registrant's Earnings Press Release, dated July 26, 2000, was filed. 5. On July 26, 2000, a Current Report on Form 8-K was filed in connection with Debt and/or Equity securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No. 33-61339, No. 33-60069, and No. 333-86363). Under Item 5, "Other Events," the Registrant filed a press release, dated July 26, 2000, entitled "DuPont Expands Share Buyback Program." 26 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 8, 2000 ----------------------------------------- By /s/ Gary M. Pfeiffer ----------------------------------------- Gary M. Pfeiffer Senior Vice President - DuPont Finance (As Duly Authorized Officer and Principal Financial and Accounting Officer) 27 Form 10-Q EXHIBIT INDEX Exhibit Number Description - ------- ------------------------------------------------------------ 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 effective April 26, 1994 (incorporated by reference to Exhibit 10.7 of the company's Annual Report on Form 10-K for the year ended December 31, 1999). 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). - ------------------------ * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-Q. 28 Form 10-Q EXHIBIT INDEX (continued) Exhibit Number Description - ------- ------------------------------------------------------------ 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). 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. 27** Financial Data Schedule. - ------------------------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-Q. ** Filed electronically only. 29 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, 2000 1999 1998 1997 1996 1995 ---------------- --------- --------- --------- --------- ------- Income from Continuing Operations Before Extraordinary Item .............................. $1,491 $ 219 $1,648 $1,432 $2,931 $2,858 Provision for Income Taxes ........................ 794 1,410 941 1,354 1,416 1,432 Minority Interests in Earnings of Consolidated Subsidiaries .................................... 39 61 24 43 40 29 Adjustment for Companies Accounted for by the Equity Method ............................ (79) 33 (39) 936<Fa> 82 126 Capitalized Interest .............................. (36) (107) (120) (80) (70) (76) Amortization of Capitalized Interest .............. 33 88<Fb> 65<Fb> 82<Fb> 127<Fb> 81 ------ ------ ------ ------ ------ ------ 2,242 1,704 2,519 3,767 4,526 4,450 ------ ------ ------ ------ ------ ------ Fixed Charges: Interest and Debt Expense - Continuing Operations .................................... 411 535 520 389 409 449 Interest and Debt Expense - Discontinued Operations<Fc> ................................ - 180 304 252 304 308 Capitalized Interest - Continuing Operations .... 36 107 120 80 70 76 Capitalized Interest - Discontinued Operations<Fc> ................................ - 3 78 90 73 95 Rental Expense Representative of Interest Factor ........................................ 34 66 71 83 80 80 ------ ------ ------ ------ ------ ------ 481 891 1,093 894 936 1,008 ------ ------ ------ ------ ------ ------ Total Adjusted Earnings Available for Payment of Fixed Charges ................................... $2,723 $2,595 $3,612 $4,661 $5,462 $5,458 ====== ====== ====== ====== ====== ====== Number of Times Fixed Charges are Earned .......... 5.7 2.9 3.3 5.2 5.8 5.4 ====== ====== ====== ====== ====== ====== <FN> - -------------------------------- <Fa> Includes write-off of Purchased In-Process Research and Development associated with acquisition of 20% interest in Pioneer Hi-Bred International, Inc. <Fb> Includes write-off of capitalized interest associated with divested businesses. <Fc> Divestiture of Conoco Inc. was completed August 6, 1999. 30