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, 1994
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
679,678,463 shares of common stock, $0.60 par value, were outstanding at
April 30, 1994.
1
Form 10-Q
E. I. DU PONT DE NEMOURS AND COMPANY
Table of Contents
Page
----
Part I
Item 1. Financial Statements
Consolidated Income Statement ................................. 3
Consolidated Statement of Cash Flows .......................... 4
Consolidated Balance Sheet .................................... 5
Notes to Financial Statements ................................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Results ............................................. 7
Industry Segment Performance .................................. 7
Consolidated Industry Segment Information ..................... 9
Financial Condition ........................................... 10
Part II
Item 1. Legal Proceedings ...................................... 10
Item 4. Submission of Matters to a Vote of Security Holders .... 12
Item 6. Exhibits and Reports on Form 8-K ....................... 13
Signature ......................................................... 14
Exhibit Index ..................................................... 15
Exhibit 10.7 - Stock Performance Plan of E. I. du Pont
de Nemours and Company ......................................... 16
Exhibit 10.8 - Variable Compensation Plan of E. I. du Pont
de Nemours and Company .......................................... 27
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges .... 33
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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
CONSOLIDATED INCOME STATEMENT<Fa> March 31
- -----------------------------------------------------------------------
(Dollars in millions, except per share) 1994 1993
- ----------------------------------------------------------------------
SALES ......................................... $ 9,190 $ 9,070
Other Income .................................. 205 208
------- -------
Total ..................................... 9,395 9,278
------- -------
Cost of Goods Sold and Other Expenses ......... 6,675 6,772
Selling, General and Administrative Expenses .. 664 742
Depreciation, Depletion and Amortization ...... 703 677
Exploration Expenses, Including Dry Hole Costs
and Impairment of Unproved Properties ....... 59 56
Interest and Debt Expense ..................... 142 144
------- -------
Total ..................................... 8,243 8,391
------- -------
EARNINGS BEFORE INCOME TAXES .................. 1,152 887
Provision for Income Taxes .................... 510 394
------- -------
NET INCOME .................................... $ 642 $ 493
======= =======
EARNINGS PER SHARE OF COMMON STOCK<Fb> ........ $ .94 $ .73
======= =======
DIVIDENDS PER SHARE OF COMMON STOCK ........... $ .44 $ .44
======= =======
See page 6 for Notes to Financial Statements.
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Form 10-Q
Three Months Ended
CONSOLIDATED STATEMENT OF CASH FLOWS<Fa> March 31
- ---------------------------------------------------------------------------------------------
(Dollars in millions) 1994 1993
- ---------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATIONS
Net Income ........................................................ $ 642 $ 493
Adjustments to Reconcile Net Income to Cash
Provided by Operations:
Depreciation, Depletion and Amortization ...................... 703 677
Dry Hole Costs and Impairment of Unproved Properties .......... 18 12
Other Noncash Charges and Credits - Net ....................... (72) (14)
Change in Operating Assets and Liabilities - Net .............. (200) (405)
------ -----
Cash Provided by Operations ................................. 1,091 763
------ -----
INVESTMENT ACTIVITIES
Purchases of Property, Plant and Equipment ........................ (662) (890)
Investment in Affiliates .......................................... (30) (16)
Miscellaneous - Net ............................................... 108 308
------ -----
Cash Used for Investment Activities ......................... (584) (598)
------ -----
FINANCING ACTIVITIES
Dividends Paid to Stockholders .................................... (301) (300)
Net Increase in Borrowings ........................................ 998 955
Common Stock Issued in Connection with Compensation Plans ......... 45 11
------ -----
Cash Provided by Financing Activities ....................... 742 666
------ -----
Effect of Exchange Rate Changes on Cash ............................. 23 (35)
------ -----
INCREASE IN CASH AND CASH EQUIVALENTS ............................... $1,272 $ 796
====== =====
See page 6 for Notes to Financial Statements.
4
Form 10-Q
CONSOLIDATED BALANCE SHEET<Fa> March 31 December 31
- ---------------------------------------------------------------------------------------------
(Dollars in millions, except per share) 1994 1993
- ---------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents .................................... $ 2,512 $ 1,240
Accounts and Notes Receivable ................................ 5,216 4,848
Inventories<Fc> .............................................. 3,970 3,818
Prepaid Expenses ............................................. 335 231
Deferred Income Taxes ........................................ 627 762
------- -------
Total Current Assets ....................................... 12,660 10,899
PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation,
depletion and amortization (March 31, 1994 - $27,021;
December 31, 1993 - $26,503) ................................. 21,282 21,423
INVESTMENT IN AFFILIATES ....................................... 1,653 1,607
OTHER ASSETS ................................................... 2,917 3,124
------- -------
TOTAL ...................................................... $38,512 $37,053
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable ............................................. $ 2,408 $ 2,444
Short-Term Borrowings and Capital Lease Obligations .......... 3,929 2,796
Income Taxes ................................................. 441 321
Other Accrued Liabilities .................................... 3,777 3,878
------- -------
Total Current Liabilities .................................. 10,555 9,439
LONG-TERM BORROWINGS AND CAPITAL LEASE OBLIGATIONS ............. 6,414 6,531
OTHER LIABILITIES .............................................. 8,252 8,200
DEFERRED INCOME TAXES .......................................... 1,468 1,466
------- -------
Total Liabilities .......................................... 26,689 25,636
------- -------
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES ................ 193 187
------- -------
STOCKHOLDERS' EQUITY
Preferred Stock .............................................. 237 237
Common Stock, $.60 par value; 900,000,000 shares authorized;
shares issued at March 31, 1994 - 679,487,795;
December 31, 1993 - 677,577,437 408 407
Additional Paid-In Capital ................................... 4,718 4,660
Reinvested Earnings .......................................... 6,267 5,926
------- -------
Total Stockholders' Equity ................................. 11,630 11,230
------- -------
TOTAL ...................................................... $38,512 $37,053
======= =======
See page 6 for Notes to Financial Statements.
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Form 10-Q
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions)
[FN]
<Fa>These statements are unaudited, but reflect all adjustments that, in the
opinion of management, are necessary to provide a fair statement of the
financial position, results of operations and cash flows for the dates
and periods covered. All such adjustments are of a normal recurring
nature. Certain reclassifications of 1993 data have been made to
conform to 1994 classifications.
<Fb>Earnings per share are calculated on the basis of the following average
number of common shares outstanding.
Three Months Ended March 31:
1994 -- 678,476,595
1993 -- 675,497,105
<Fc>Inventories March 31 December 31
----------- 1994 1993
-------- -----------
Chemicals .................................. $ 303 $ 250
Fibers ..................................... 619 571
Polymers ................................... 479 550
Petroleum .................................. 1,364 1,367
Diversified Businesses ..................... 1,205 1,080
------ ------
Total $3,970 $3,818
====== ======
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Form 10-Q
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(a) Results of Operations
(1) Financial Results:
Net income for the first quarter of 1994 was $642 million,
or $.94 per share, compared with $493 million, or $.73 per share,
earned in the first quarter 1993. Excluding a prior-year
$32 million nonrecurring gain from exchange of North Sea petroleum
properties, first quarter 1994 net income was up 39 percent,
principally due to lower costs.
The first quarter earnings marked the company's best
quarterly performance since 1990. Excluding the 1993 nonrecurring
item, each industry segment posted earnings gains over last year.
Efforts to focus on businesses where we have a competitive
advantage and technological strength, combined with significant
reduction in costs, are having the desired effect on earnings. In
addition, compared to last year, the company is seeing increased
demand in key markets for a number of its businesses, including
automotive products, engineering polymers, nylon, "Lycra" spandex,
and nonwovens. Not only is demand generally improved in the United
States, but market conditions are better in Europe and Asia, where
the chemicals and specialties sales are up 15 percent and 6 percent
respectively.
(2) Industry Segment Performance:
The following text and accompanying "Consolidated Industry
Segment Information" table compare segment results for the first
quarter of 1994 with the same period last year.
Sales totaled $9.2 billion, up $120 million or 1 percent.
Despite lower worldwide crude oil prices, Petroleum segment sales
were up 2 percent versus last year on higher worldwide natural gas
prices and volumes and higher international crude oil volumes. For
combined segments other than Petroleum, sales were up 1 percent,
reflecting 5 percent higher volume, partly offset by 4 percent lower
selling prices.
o Chemicals segment earnings were $83 million, up $14 million,
or 20 percent, attributable to better results for fluoro-
chemicals and specialty chemicals. Sales decreased
1 percent, as 3 percent higher volume was more than offset
by a 4 percent decline in selling prices.
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Form 10-Q
o Fibers segment earnings of $144 million were up
$42 million, or 41 percent, as improvements in nylon and
"Lycra" spandex were partly offset by lower results for
"Dacron" polyester. Segment results reflect lower costs
and an improvement in European business from weaker
conditions a year ago. Segment sales were 14 percent
higher. After adjusting for additional sales from the
acquisition of ICI's nylon business, sales volume was up
6 percent. Prices were down 2 percent, principally from
the currency effect of a stronger dollar.
o Polymers segment earnings were $147 million, up
$70 million or 91 percent from last year. Both automotive
products and engineering polymers improved significantly,
reflecting lower costs and higher sales. Adjusting for
the absence of sales from the acrylics business divested
last year, segment sales were up 5 percent, reflecting
9 percent higher volume, partly offset by 4 percent lower
prices.
o Petroleum segment earnings were $215 million, up
$15 million, or 8 percent, excluding the prior-year
property exchange benefit. The earnings improvement is
attributable to stronger domestic downstream performance,
reflecting higher refined product margins. Upstream
earnings were down 5 percent, reflecting a drop of more
than 20 percent in crude oil prices. Higher worldwide
natural gas prices and volumes, higher crude oil volumes
outside of the United States, and lower costs were
sufficient to offset most of the impact of the lower crude
oil prices.
o Diversified Businesses segment earnings totaled
$148 million, up $41 million or 38 percent from the prior
year. This reflects earnings improvements in crop protec-
tion chemicals and printing and publishing, primarily from
lower costs. Segment sales were down 1 percent after
adjusting for prior-year divestitures of the connector
systems and sporting goods businesses, primarily reflect-
ing lower sales of crop protection chemicals and medical
products in the United States.
8
Form 10-Q
E. I. DU PONT DE NEMOURS AND COMPANY AND CONSOLIDATED SUBSIDIARIES
Three Months Ended
CONSOLIDATED INDUSTRY SEGMENT INFORMATION March 31
- ---------------------------------------------------------------------
(Dollars in millions) 1994 1993
- ---------------------------------------------------------------------
SALES
- -----
Chemicals ................................. $ 848 $ 859
Fibers .................................... 1,645 1,447
Polymers .................................. 1,483 1,460
Petroleum ................................. 3,862 3,794
Diversified Businesses .................... 1,352 1,510
------- -------
Total ................................. $ 9,190 $ 9,070
======= =======
AFTER-TAX OPERATING INCOME
- --------------------------
Chemicals ................................. $ 83 $ 69
Fibers .................................... 144 102
Polymers .................................. 147 77
Petroleum ................................. 215 232(a)
Diversified Businesses .................... 148 107
------- -------
Total ................................. 737 587
Interest and Other Corporate
Expenses Net of Tax ..................... (95) (94)
------- -------
NET INCOME ................................ $ 642 $ 493
- ---------- ======= =======
(a) Includes $32 gain from exchange of North Sea properties.
9
Form 10-Q
(b) Financial Condition at March 31, 1994
The following comments pertain to the "Consolidated Statement of
Cash Flows." In the first quarter 1994, DuPont recorded a net cash inflow
of $507 million from Operations and Investment Activities. This inflow
reflects improved business results, coupled with reductions in both
operating and capital expenditures, partly offset by increases in working
capital. The increase in working capital was mostly due to higher Accounts
Receivable-Trade and Inventories, reflecting increased business activity and
the seasonal pattern in certain businesses (principally crop protection
chemicals). Days' sales outstanding averaged 39 days in the first quarter,
down one day from the first quarter of 1993. After payment of $301 million
for dividends, the cash inflow was $206 million. This inflow, plus other
inflows totaling $68 million and borrowings of $998 million made to
accomplish a planned buildup in cash balances, resulted in a total increase
in cash for the quarter of $1,272 million.
Certain ratios are shown below:
At 3/31/94 At 12/31/93
---------- -----------
Debt Ratio (total debt to total
capitalization) 46.7% 45.0%
Current Ratio (current assets
to current liabilities) 1.2:1 1.2:1
The ratio of earnings to fixed charges is 6.2 for the first three months of
1994. The ratio is up from 2.0 for the year 1993. The 1993 ratio reflects
$1.8 billion (pretax) of restructuring charges.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In 1991, DuPont received claims by growers that use of "Benlate"
50 DF fungicide had caused crop damages. Based on the belief that "Benlate"
50 DF would be found to be a contributor to the claimed damage, DuPont paid
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 relating to those reports. To date, DuPont has been
served with more than 550 lawsuits in several jurisdictions, principally
Florida, Hawaii, and Puerto Rico, by growers who allege plant damage from
using "Benlate" 50 DF fungicide. DuPont recently settled 220 lawsuits for
various amounts totaling about $214 million. The settlement follows two
recent verdicts in a Florida trial in which a jury found "Benlate" to be
free of defects. With this settlement, about half of the lawsuits brought
against the company since 1991 have been disposed of. Excluding this
settlement, more than 75 "Benlate" cases have been disposed of by courts,
juries, and settlements, many in DuPont's favor. Even where juries have
10
Form 10-Q
awarded growers any damages, those damages have been, on average, less than
a third of what they sought, and growers have been found to share
responsibility for their claimed losses. DuPont believes that "Benlate" 50
DF fungicide did not cause the alleged damages and intends to continue to
prove this in ongoing matters.
Since 1989, DuPont has been served with approximately 60 lawsuits in
several jurisdictions, principally in Texas, Florida, Maryland and Arizona
alleging damages as a result of leaks in certain polybutylene plumbing
systems. Two nationwide class actions have been filed in state and federal
courts in Houston, Texas, but neither has been certified as of this date.
In most cases, DuPont is a codefendant with Shell, Hoechst-Celanese and
other parts manufacturers. The polybutylene plumbing systems consist of
flexible pipe extruded from polybutylene connected by fittings made from
acetal. Shell Chemical is the sole producer of polybutylene; the acetals
are provided by Hoechst-Celanese and DuPont. DuPont entered the market in
1983 and it is not known as to the number of commercial or dwelling units
that have polybutylene plumbing systems, or the number of commercial or
dwelling units that have DuPont's product in their plumbing systems. During
1994, DuPont settled a majority of the Texas lawsuits. Presently, DuPont is
active in eleven suits involving 1,028 plaintiffs. Forty-five lawsuits have
been disposed of (44 by pretrial settlements, 1 by dismissal). DuPont has
not been to trial in any case.
On June 28, 1991, DuPont entered into a voluntary agreement with the
Environmental Protection Agency (EPA) to conduct an audit of the U.S. sites
under the Toxic Substance Control Act (TSCA). Agreement participation is
not an admission of TSCA noncompliance. Maximum stipulated penalties that
DuPont could pay under the agreement are capped at $1 million. The first
phase of the audit was completed, but no findings have been issued. Subject
to the EPA's issuance of new reporting criteria, the second phase of its
audit is expected to begin at the end of 1994.
On October 18, 1991, the EPA issued an Administrative Order under the
Resource Conservation and Recovery Act (RCRA) directing Conoco Pipeline
Company (CPLC) to undertake specific remedial measures related to a former
oil reprocessing facility in Converse County, Wyoming. CPLC contested the
Administrative Order, and has taken voluntary measures at the site together
with other interested parties. On February 19, 1993, the U.S. Department of
Justice filed a lawsuit against 10 entities, including CPLC, to enforce the
Order and collect penalties. CPLC has settled this matter with the U.S.
government pending approval by the Court. CPLC along with four other com-
panies have agreed to a cleanup of this site which is estimated to cost
between $4.4 million and $8.9 million and pay as a group, $300,000 in civil
penalties. CPLC's share of this settlement is approximately 11%. CPLC
plans to seek recovery of these amounts from other nonsettling parties.
On October 15, 1993, the EPA filed a complaint in the U.S. District
Court, Eastern District of Texas (Beaumont), against DuPont alleging various
violations of the Clean Water Act at the Sabine River Works. Included are
alleged unauthorized discharges, effluent limitation violations, and
monitoring and reporting violations under the plant's NPDES permit. The
Government was seeking a civil penalty of $1.4 million. On April 20, 1994,
11
Form 10-Q
the Government and DuPont reached a settlement in this action. DuPont has
agreed to pay a civil penalty of $516,430 and to implement a Supplemental
Environmental Project with an estimated cost to DuPont of $3.2 million. A
consent decree will be drafted and agreed to by the parties contained in the
settlement as well as other requirements including reporting and stipulated
penalties. The consent order will be noticed in the Federal Register for
30 day public comment before being entered by the court.
On April 11, 1994, the Texas Natural Resource Conservation
Commission (TNRCC) issued a Notice of Executive Director's Preliminary Report
and Petition for a TNRCC Order assessing penalties of $122,640 for alleged
violations at DuPont's Beaumont Works Plant of the Texas Solid Waste Disposal
Act, the Texas Water Code and the applicable regulations. The company's
legal counsel believes that the basis for the penalty calculations asserted
by TNRCC does not accurately reflect the facts concerning the impact on the
environment nor the significance of the allegations and, therefore a signif-
icant reduction in penalty is appropriate.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Business transacted at the Annual Meeting:
A total of 571,981,115 shares of common stock were voted in person
or by proxy at the annual meeting of stockholders on April 27, or
84.3 percent of the shares entitled to be voted. Business was transacted as
follows:
1. ELECTION OF DIRECTORS: The 16 nominees listed in the proxy
statement were elected to serve on the Board of Directors for the
ensuing year. All nominees were members of the Board. The vote
tabulation with respect to each nominee follows:
Votes Cast Votes Cast Against
Director For or Withheld
P. N. Barnevik 570,047,761 1,922,499
A. F. Brimmer 570,441,734 1,528,526
C. R. Bronfman 569,913,639 2,056,621
E. M. Bronfman 569,865,825 2,104,435
E. Bronfman, Jr. 569,872,556 2,097,704
L. C. Duemling 570,555,836 1,414,424
E. B. du Pont 570,667,441 1,302,819
C. M. Harper 570,500,297 1,469,963
J. A. Krol 570,655,305 1,314,955
M. P. MacKimm 570,631,408 1,338,852
C. S. Nicandros 570,633,275 1,336,985
W. K. Reilly 570,393,348 1,576,912
H. R. Sharp, III 570,614,964 1,355,296
C. M. Vest 570,396,262 1,573,998
J. L. Weinberg 570,403,970 1,566,290
E. S. Woolard, Jr. 570,465,377 1,504,883
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Form 10-Q
2. RATIFICATION OF INDEPENDENT ACCOUNTANTS: The proposal to ratify the
appointment of Price Waterhouse as independent accountants for 1994
was approved by a vote of 569,177,760 shares for, 761,076 shares
against and 2,042,279 abstentions and broker nonvotes.
3. AMENDMENT OF STOCK PERFORMANCE PLAN: The proposal to amend the
Stock Performance Plan was approved by a vote of 537,728,743 shares
for, 30,490,378 shares against and 3,761,994 abstentions and broker
nonvotes.
4. POLITICAL NONPARTISANSHIP: A stockholder proposal concerning
political contributions was defeated by a vote of 507,385,938 shares
against, 13,148,536 shares for and 51,446,641 abstentions and broker
nonvotes.
5. CUMULATIVE VOTING: A stockholder proposal to provide for cumulative
voting in the election of directors was defeated by a vote of
469,057,938 shares against, 61,778,504 shares for and 41,144,672
abstentions and broker nonvotes.
6. SITE LISTING: A stockholder proposal to list in the company's
annual environmental progress report each site expected to cause
environmental liabilities to accrue to the company was defeated by a
vote of 505,842,160 shares against, 15,782,471 shares for and
50,356,484 abstentions and broker nonvotes.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibit index filed with this Form 10-Q is on page 15.
(b) Reports on Form 8-K
1. The company filed a Current Report on Form 8-K, dated
January 26, 1994, in connection with Debt Securities that
may be offered on a delayed or continuous basis under
Registration Statements on Form S-3 (No. 33-39161 and
No. 33-48128). Through this Form 8-K, a copy of the
Registrant's Earnings Press Release, dated January 26,
1994, was filed under Item 7.
13
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, 1994
--------------------------------------
By /s/C. L. Henry
--------------------------------------
C. L. Henry
Senior Vice President - DuPont Finance
(As Duly Authorized Officer
and Principal Financial
and Accounting Officer)
14