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, 1996 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 561,057,690 shares (excludes 17,985,035 shares held by DuPont's Flexitrust) of common stock, $0.60 par value, were outstanding at July 30, 1996. 1 Form 10-Q E. I. DU PONT DE NEMOURS AND COMPANY Table of Contents Page(s) ------- Part I Item 1. Financial Statements Consolidated Income Statement ............................... 3 Consolidated Statement of Cash Flows ........................ 4 Consolidated Balance Sheet .................................. 5 Notes to Financial Statements ............................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Results ........................................... 7 Industry Segment Performance ................................ 7-9 Consolidated Industry Segment Information ................... 10 Financial Condition ......................................... 11 Part II Item 1. Legal Proceedings .................................... 12-13 Item 6. Exhibits and Reports on Form 8-K ..................... 13-14 Signature ....................................................... 15 Exhibit Index ................................................... 16 Exhibit 10.3 - DuPont Stock Accumulation and Deferred Compensation Plan for Directors ............................... 17-23 Exhibit 10.12 - Warrant Repurchase Agreement .................... 24-27 Exhibit 11 - Computation of Earnings Per Share .................. 28 Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges .. 29 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><Fb> June 30 June 30 - ------------------------------------------------------------------------------------------------------------ (Dollars in millions, except per share) 1996 1995 1996 1995 - ------------------------------------------------------------------------------------------------------------ SALES ................................................... $11,148 $11,076 $21,917 $21,578 Other Income ............................................ 405 247 775 585 ------- ------- ------- ------- Total ............................................... 11,553 11,323 22,692 22,163 ------- ------- ------- ------- Cost of Goods Sold and Other Expenses ................... 8,296 8,031 16,289 15,634 Selling, General and Administrative Expenses ............ 718 805 1,458 1,522 Depreciation, Depletion and Amortization ................ 605 642 1,258 1,290 Exploration Expenses, Including Dry Hole Costs and Impairment of Unproved Properties ................. 68 88 147 142 Interest and Debt Expense ............................... 172 236 376 356 ------- ------- ------- ------- Total ............................................... 9,859 9,802 19,528 18,944 ------- ------- ------- ------- EARNINGS BEFORE INCOME TAXES ............................ 1,694 1,521 3,164 3,219 Provision for Income Taxes .............................. 693 583 1,284 1,322 ------- ------- ------- ------- NET INCOME .............................................. $ 1,001 $ 938 $ 1,880 $ 1,897 ======= ======= ======= ======= EARNINGS PER SHARE OF COMMON STOCK<Fc>................... $ 1.78 $ 1.70 $ 3.35 $ 3.07 ======= ======= ======= ======= DIVIDENDS PER SHARE OF COMMON STOCK ..................... $ .57 $ .52 $ 1.09 $ .99 ======= ======= ======= ======= See page 6 for Notes to Financial Statements. 3 Form 10-Q Six Months Ended CONSOLIDATED STATEMENT OF CASH FLOWS<Fa><Fb> June 30 - --------------------------------------------------------------------------------------------- (Dollars in millions) 1996 1995 - --------------------------------------------------------------------------------------------- CASH PROVIDED BY OPERATIONS Net Income ........................................................ $ 1,880 $ 1,897 Adjustments to Reconcile Net Income to Cash Provided by Operations: Depreciation, Depletion and Amortization ...................... 1,258 1,290 Dry Hole Costs and Impairment of Unproved Properties .......... 46 50 Other Noncash Charges and Credits - Net ....................... (436) (47) Change in Operating Assets and Liabilities - Net .............. (392) (862) ------- ------- Cash Provided by Operations ................................. 2,356 2,328 ------- ------- INVESTMENT ACTIVITIES Purchases of Property, Plant and Equipment ........................ (1,442) (1,482) Investment in Affiliates .......................................... (159) (87) Proceeds from Sales of Assets ..................................... 1,224 185 Investments in Short-Term Financial Instruments - Net ............. (191) 249 Miscellaneous - Net ............................................... (32) (26) ------- ------- Cash Used for Investment Activities ......................... (600) (1,161) ------- ------- FINANCING ACTIVITIES Dividends Paid to Stockholders .................................... (615) (613) Net Increase (Decrease) in Borrowings ............................. (1,074) 6,022 Purchase of Treasury Stock ........................................ - (8,347) Proceeds from Issuance of Common Stock Through Public and Private Offerings .................................... - 1,747 Common Stock Issued in Connection with Compensation Plans ......... 205 35 Additions to Minority Interests ................................... 297 - ------- ------- Cash Used for Financing Activities .......................... (1,187) (1,156) ------- ------- Effect of Exchange Rate Changes on Cash ............................. (50) 70 ------- ------- INCREASE IN CASH AND CASH EQUIVALENTS ............................... $ 519 $ 81 ======= ======= See page 6 for Notes to Financial Statements. 4 Form 10-Q CONSOLIDATED BALANCE SHEET<Fa><Fb> June 30 December 31 - ------------------------------------------------------------------------------------------------------------------- (Dollars in millions, except per share) 1996 1995 - ------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and Cash Equivalents .......................................................... $ 1,927 $ 1,408 Marketable Securities .............................................................. 238 47 Accounts and Notes Receivable ...................................................... 5,670 4,912 Inventories<Fd> .................................................................... 3,621 3,737 Prepaid Expenses ................................................................... 338 276 Deferred Income Taxes .............................................................. 538 575 ------- ------- Total Current Assets ............................................................. 12,332 10,955 PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation, depletion and amortization (June 30, 1996 - $28,353; December 31, 1995 - $29,044) ................ 20,635 21,341 INVESTMENT IN AFFILIATES ............................................................. 2,356 1,846 OTHER ASSETS ......................................................................... 3,163 3,170 ------- ------- TOTAL ............................................................................ $38,486 $37,312 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable ................................................................... $ 2,485 $ 2,636 Short-Term Borrowings and Capital Lease Obligations ................................ 5,249 6,157 Income Taxes ....................................................................... 792 470 Other Accrued Liabilities ........................................................... 3,731 3,468 ------- ------- Total Current Liabilities ........................................................ 12,257 12,731 LONG-TERM BORROWINGS AND CAPITAL LEASE OBLIGATIONS ................................... 5,515 5,678 OTHER LIABILITIES .................................................................... 8,400 8,454 DEFERRED INCOME TAXES ................................................................ 1,858 1,783 ------- ------- Total Liabilities ................................................................ 28,030 28,646 ------- ------- MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES ...................................... 601 230 ------- ------- STOCKHOLDERS' EQUITY Preferred Stock .................................................................... 237 237 Common Stock, $.60 par value; 900,000,000 shares authorized; shares issued at June 30, 1996 - 735,042,725; December 31, 1995 - 735,042,724 .................. 441 441 Additional Paid-In Capital ......................................................... 8,730 8,689 Reinvested Earnings ................................................................ 10,768 9,503 Cumulative Translation Adjustment<Fe> .............................................. (98) - Common Stock Held in Trust for Unearned Employee Compensation and Benefits, at Market (Shares: June 30, 1996 - 18,123,543; December 31, 1995 - 23,546,176) ..... (1,434) (1,645) Common Stock Held in Treasury, at Cost (Shares: June 30, 1996 and December 31, 1995 - 156,000,000) ................................................. (8,789) (8,789) ------- ------- Total Stockholders' Equity ....................................................... 9,855 8,436 ------- ------- TOTAL ............................................................................ $38,486 $37,312 ======= ======= See page 6 for 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. Certain reclassifications of 1995 data have been made to conform to 1996 classifications. <Fb>Subsequent Event - On July 24, 1996, DuPont repurchased from Seagram for $500 warrants to purchase 156 million shares of DuPont common stock. These are all of the warrants that were issued to Seagram in April 1995 in connection with DuPont's redemption of 156 million shares of its common stock from Seagram. The repurchase was funded with private placement commercial paper borrowings of the company. Coincident with the repurchase, the company retired 156 million shares of common stock held in treasury. <Fc>Earnings per share are calculated on the basis of the following average number of common shares outstanding: Three Months Ended Six Months Ended June 30 June 30 ------------------- ---------------- 1996 560,546,407 559,128,795 1995 550,445,989 615,537,673 The 18,123,543 shares held by the Flexitrust at June 30, 1996 are not considered outstanding in computing the foregoing average shares outstanding. Earnings per share calculations that reflect the impact of common stock equivalents in the periods presented do not result in materially dilutive primary or fully diluted earnings per share. <Fd>Inventories June 30 December 31 ----------- 1996 1995 ------- ----------- Chemicals ............................... $ 251 $ 248 Fibers .................................. 583 569 Polymers ................................ 503 573 Petroleum ............................... 1,352 1,293 Diversified Businesses .................. 932 1,054 ------ ------ Total ................................. $3,621 $3,737 ====== ====== <Fe>Effective January 1, 1996, local currency was designated as functional currency for the company's integrated European petroleum operations, while the U.S. dollar continued as the functional currency for the company's other worldwide operations. The amount of the cumulative translation adjustment on January 1, 1996, was a reduction in stock- holders' equity of $68. 6 Form 10-Q Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a) Results of Operations (1) Financial Results: The company reported earnings of $1.78 per share for the second quarter of 1996, exceeding the previous record of $1.70 per share earned in the second quarter of 1995. Excluding nonrecurring items from both periods, second quarter results were $1.84 per share, up 5 percent from 1995. Net income totaled $1 billion compared to $938 million earned in 1995, and marks the first time quarterly net income exceeded $1 billion. Chemicals and Specialties sales volumes from continuing operations increased 4 percent compared to last year. Lower selling prices, principally due to the stronger U.S. dollar largely offset these volume gains, resulting in Chemicals and Specialties earnings before nonrecurring items equal to last year. Results from the Petroleum segment continued strong, with earnings before nonrecurring items up 15 percent, benefiting from higher oil and gas prices. Nonrecurring items were recorded in both second quarter periods -- a net after-tax charge of $34 million, or $.06 per share in 1996, and a charge of $29 million, or $.05 per share, in 1995. Current period charges include an additional accrual for crop damage claims and legal expenses related to the recall of "Benlate" 50 DF fungicide, the writedown of certain petroleum assets and employee separation costs, partly offset by gains on asset sales and insurance recoveries. For the first six months of 1996, earnings per share were $3.35 compared to $3.07 in 1995 with net income of $1.9 billion, equal to last year. Sales totaled $21.9 billion, up 2 percent. Excluding nonrecurring items and adjusting for interest expense associated with debt incurred to finance the 1995 redemption of stock from Seagram, earnings were 3 percent higher than last year. Average shares outstanding in the first half were 9 percent lower than last year as a result of last year's stock redemption. (2) Industry Segment Performance: The following text compares second quarter 1996 results with the prior year for each industry segment, excluding non- recurring items and reflecting certain reclassifications as described in the footnotes to the "Consolidated Industry Segment Information" table. 7 Form 10-Q Sales for the second quarter were $11.1 billion, up 1 percent from last year. Petroleum segment sales were up 9 percent, reflecting higher worldwide oil and natural gas prices and volumes. Combined sales for Chemicals and Specialties segments were down 5 percent before adjusting for changes in business composition. After adjusting to reflect the absence of elastomers sales, now part of the DuPont Dow Elastomers joint venture, and the divestiture of medical products businesses, Chemicals and Specialties sales were up 1 percent, reflecting 4 percent higher volume offset by 3 percent lower selling prices. Volumes were up in all regions, with the United States up 3 percent, Europe up 2 percent, and Asia, Latin America and Mexico, on average, up more than 8 percent. o Chemicals segment earnings were $165 million, down $5 million, or 3 percent, as better earnings for fluoro- chemicals and specialty chemicals were offset by lower results for white pigments. Segment sales decreased 1 percent reflecting 6 percent lower selling prices, partly offset by 5 percent higher sales volume. o Fibers segment earnings of $208 million were up $5 million, or 2 percent. Higher earnings for "Lycra" brand spandex were partly offset by lower results for nylon in apparel markets, and for aramids. Segment sales were 1 percent lower, reflecting flat volumes and 1 percent lower prices. o Polymers segment earnings were $244 million, up $17 million, or 7 percent, reflecting improved earnings from fluoropolymers, automotive products and packaging and industrial polymers. Partly offsetting these improvements were lower earnings in elastomers due to DuPont's reduced ownership interest resulting from the formation of the DuPont Dow Elastomers venture. Segment sales were up 5 percent, reflecting higher sales in all business units except automotive products. Segment sales volume was up 6 percent, partly offset by 1 percent lower prices. o Petroleum segment earnings were $218 million, up $29 million, or 15 percent. Upstream earnings were $175 million, up 41 percent, reflecting higher worldwide crude oil and U.S. natural gas prices as well as increased volumes outside the United States. Downstream earnings were $43 million, down 34 percent from $65 million earned in the prior year, principally attributable to lower product prices outside the United States, partly offset by improved U.S. marketing margins. 8 Form 10-Q o Diversified Businesses segment earnings totaled $300 million, down $17 million or 5 percent. Higher earnings from a more favorable allocation to DuPont of DuPont Merck Pharmaceutical venture results were offset by lower earnings from printing and publishing and agri- cultural products, and the loss of ongoing earnings from medical products businesses that were divested. Segment sales increased 1 percent, reflecting 5 percent higher volume, partly offset by 4 percent lower selling prices. 9 Form 10-Q E. I. DU PONT DE NEMOURS AND COMPANY AND CONSOLIDATED SUBSIDIARIES Three Months Ended Six Months Ended CONSOLIDATED INDUSTRY SEGMENT INFORMATION June 30 June 30 - --------------------------------------------------------------------------------------------------------------- (Dollars in millions) 1996 1995 1996 1995 - --------------------------------------------------------------------------------------------------------------- SALES - ----- Chemicals .................................... $ 1,081 $ 1,088 $ 2,075 $ 2,123 Fibers ....................................... 1,822 1,832 3,566 3,686 Polymers ..................................... 1,714 1,844 3,498 3,621 Petroleum .................................... 4,963 4,556 9,620 8,809 Diversified Businesses ....................... 1,568 1,756 3,158 3,339 ------- ------- ------- ------- Total .................................... $11,148 $11,076 $21,917 $21,578 ======= ======= ======= ======= AFTER-TAX OPERATING INCOME<Fa> - -------------------------- Chemicals .................................... $ 165 $ 177<Fb> $ 287<Fc> $ 342<Fb> Fibers ....................................... 208 230<Fb> 355<Fc> 430<Fb> Polymers ..................................... 299<Fd> 227 497<Fd> 459 Petroleum .................................... 177<Fe> 189 391<Fe> 366 Diversified Businesses ....................... 252<Ff><Fg> 254<Fg> 568<Ff><Fg><Fh> 489<Fg> ------- ------- ------- ------- Total .................................... $ 1,101 $ 1,077 $ 2,098 $ 2,086 Interest and Other Corporate Expenses Net of Tax ........................ (100) (139) (218) (189) ------- ------- ------- ------- NET INCOME ................................... $ 1,001 $ 938 $ 1,880 $ 1,897 - ---------- ======= ======= ======= ======= <FN> <Fa>Effective in the first quarter of 1996, the amortization of capitalized interest associated with property, plant and equipment is included in After-Tax Operating Income versus the previous practice of including such amortization in Interest and Other Corporate Expenses Net of Tax. Prior period data have been reclassified for comparative purposes. This change has no effect on Net Income. <Fb>The Chemicals and Fibers segments include a benefit of $7 and $27, respectively, principally an adjustment of estimates associated with the third quarter 1993 restructuring charge. <Fc>The Chemicals and Fibers segments include a charge of $21 and $32, respectively, principally for employee separation costs in the United States. <Fd>Includes a gain of $55 associated with the formation of the DuPont Dow Elastomers joint venture. <Fe>Includes charges of $63 for writedown of investment in a European natural gas marketing joint venture, and $22, principally, for employee separation costs in the United States, partly offset by a net benefit of $44 related to environmental insurance recoveries. <Ff>Includes a gain of $41 from the sale of certain medical products businesses and a charge of $26, principally employee separation costs outside the United States, associated with the printing and publishing business. <Fg>Includes a charge of $63 in quarters ended June 30, 1996 and 1995, associated with "Benlate" 50 DF fungicide recall. <Fh>Includes a gain of $33 related to sale of stock received in connection with the previously sold connector systems business. 10 Form 10-Q (b) Financial Condition at June 30, 1996 DuPont recorded a net cash inflow from operations of $2.4 billion for the first half of 1996, as compared with $2.3 billion for the same period in 1995. Cash from operations for the first half includes a larger decrease for Other Noncash Charges and Credits - Net versus 1995, as is shown on the Consolidated Statement of Cash Flows. This change is princi- pally due to higher undistributed earnings from affiliates, primarily the DuPont Merck Pharmaceutical Company, and higher gains on sales of assets. The statement of cash flows also shows that net operating assets and liabilities increased by a smaller amount than during the same period last year, notably smaller increases in inventory for ongoing businesses. Year-to-date capital expenditures for plant, property and equipment and investments in equity affiliates were $1.6 billion, up 2 percent from the same period last year. The company currently expects capital expendi- tures for the year of about $3.8 billion. Proceeds from sales of assets during the first half were $1.2 billion and included the sales of Medical Products businesses, sales of assets to DuPont Dow Elastomers (a newly formed joint venture with the Dow Chemical Company), the sale of a 30 percent interest in the Photomask business, as well as the sale of various petroleum properties. Cash flows from financing activities for the first half included $297 million from outside investors in certain upstream petroleum proper- ties. This investment is reflected as minority interest on the company's consolidated balance sheet. Also, $205 million was received through stock options exercised by employees, principally under the company's corporate sharing programs. As indicated in Note (b) to the Consolidated Financial Statements, on July 24, 1996, DuPont repurchased warrants from Seagram. The cash required to fund this transaction came from private placement commercial paper borrowings. Following the repurchase, Standard & Poor's (S&P) affirmed its ratings of the company's senior debt and preferred stock (AA-) and commercial paper (A-1+). S&P's ratings outlook remains negative. Certain ratios are shown below: At 6/30/96 At 12/31/95 ---------- ----------- Debt Ratio (total debt to total capitalization) 51% 58% Current Ratio (current assets to current liabilities) 1.0:1 0.9:1 Earnings to Fixed Charges Ratio 7.1 5.9 Days' sales outstanding averaged 34 days in the second quarter, down two days from the prior quarter and down four days from second quarter of 1995. The company's goal is to reduce the debt ratio to about 45 percent by year-end 1996 through a combination of internally generated funds and additional proceeds from asset sales of about $500 million. 11 Form 10-Q PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS In 1991, DuPont began receiving claims by growers that use of "Benlate" 50 DF fungicide had caused crop damages. Based on the belief that "Benlate" 50 DF would be found to be a contributor to the claimed damage, DuPont began paying crop damage claims. In 1992, however, after 18 months of extensive research, DuPont concluded that "Benlate" 50 DF was not responsible for plant damage reports received since March 1991, and concurrent with those research findings, DuPont stopped paying claims. To date, DuPont has been served with more than 700 lawsuits by growers who allege plant damage from using "Benlate" 50 DF fungicide. About 60 of the lawsuits brought against the company since 1991 remain, the rest having been disposed of by trial, dismissal or settlement. Two appeals from adverse jury verdicts in crop damage cases are still pending. The appeal of an order by a federal district court in Georgia finding that DuPont had engaged in discovery abuse during the first "Benlate" 50 DF case to go to trial has been argued before the United States Court of Appeals for the Eleventh Circuit and remains pending. A shareholder derivative action filed in the same court alleging that DuPont's Board of Directors breached various duties in its role in the "Benlate" 50 DF litigation has been stayed pending the resolution of DuPont's appeal of the Georgia court's order. A putative class action filed by a shareholder in Federal District Court for the Southern District of Florida against the company and the Chairman in September 1995 is also still pending. A June 1996 jury verdict of $3,980,000 against DuPont in a personal injury action involving "Benlate" 50 DF brought in Florida state court is also on appeal. DuPont continues to believe that "Benlate" 50 DF fungicide did not cause the alleged damages and intends to prove this in ongoing matters. Since 1989, DuPont has been named as a defendant in homeowner lawsuits in numerous state and federal courts alleging damages as a result of leaks in certain polybutylene plumbing systems. Class actions alleging the same damages have also been filed in a number of jurisdictions. In most cases, DuPont is a codefendant with Shell, Hoechst-Celanese, and parts manu- facturers. 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, Shell and Hoechst-Celanese continue to coordinate the terms of several class action settlements. Under those settlements DuPont will contribute 10 percent of the cost of repairs to plumbing systems up to a total DuPont contribution of $120 million. Several dozen cases involving individual or groups of homeowners who have opted out of the class action litigation remain pending. The company's balance sheets reflect accruals for estimated costs associated with both of these matters. Adverse changes in estimates of such costs could result in additional future charges. 12 Form 10-Q 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 Substances Control Act (TSCA). Agreement participa- tion 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 were issued at that time. A second phase of the audit, set to begin after EPA's issuance of new reporting criteria (delayed since 1991), was cancelled in June 1996 by the EPA. The EPA has not issued a consent order/agreement containing its findings. On January 19, 1995, EPA Region IV issued a "Notice of Violation and Opportunity to Show Cause" against the Wurtland, Kentucky, sulphuric acid plant for 192 alleged violations of release reporting obligations under the Emergency Planning and Community Right to Know Act. The EPA has proposed to reduce its civil penalty to $550,800, and the parties are attempting to negotiate certain Supplemental Environmental Projects for DuPont to undertake in order to resolve the matter. On July 17, 1996, DuPont's Belle, West Virginia, plant entered into a Final Order with the West Virginia Department of Environmental Protection (WVDEP), resolving certain alleged violations at the Belle Plant noted by the WVDEP during a series of audits. The violations cited centered on certain training and recordkeeping practices as well as the handling of a solvent characterized by the WVDEP as a hazardous waste. Under the terms of the Order, DuPont will pay a fine of $274,075 and undertake several Supple- mental Environmental Projects with an expected cost of $174,500. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits The exhibit index filed with this Form 10-Q is on page 16. (b) Reports on Form 8-K 1. On April 24, 1996, 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. 33-48128, No. 33-53327 and No. 33-61339). Under Item 7. "Financial Statements and Exhibits," the Registrant's Earnings Press Release, dated April 24, 1996, was filed. 2. On July 24, 1996, 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. 33-48128, No. 33-53327, No. 33-61339 and No. 33-60069). Under Item 7. "Financial Statements and Exhibits," the Registrant's Earnings Press Release, dated July 24, 1996, was filed. 13 Form 10-Q 3. On July 24, 1996, the company filed a Current Report on Form 8-K in connection with Debt and/or Equity Securities that may be offered on a delayed or continuous basis under Registration Statements on Form S-3 (No. 33-53327, No. 33-61339 and No. 33-60069). Under Item 5. "Other Events," the Registrant announced the repurchase of warrants from Seagram. 14 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 2, 1996 ----------------------------------------- By /s/ C. L. Henry ----------------------------------------- C. L. Henry Executive Vice President - DuPont Finance (As Duly Authorized Officer and Principal Financial and Accounting Officer) 15 Form 10-Q EXHIBIT INDEX Exhibit Number Description - ------- ----------- 10.3* The DuPont Stock Accumulation and Deferred Compensation Plan for Directors, formerly the Deferred Compensation Plan for Directors, as last amended effective January 1, 1996, and approved by shareholders at the company's 1996 Annual Meeting of Shareholders. (Previously filed as Exhibit 10.12 to the company's Quarterly Report on Form 10-Q for the Period Ended March 31, 1996.) 10.12 Warrant Repurchase Agreement dated as of July 24, 1996, among the company, The Seagram Company Ltd. and JES Developments, Inc. 11 Computation of Earnings Per Share. 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-K. 16 Form 10-Q EXHIBIT 10.3 The DuPont Stock Accumulation and Deferred Compensation Plan for Directors, formerly the Deferred Compensation Plan for Directors, as last amended, effective January 1, 1996, and approved by the shareholders of E. I. du Pont de Nemours and Company on April 24, 1996. E. I. DU PONT DE NEMOURS AND COMPANY STOCK ACCUMULATION AND DEFERRED COMPENSATION PLAN FOR DIRECTORS 1. PURPOSE OF THE PLAN The purpose of the DuPont Stock Accumulation and Deferred Compensation Plan for Directors (the "Plan") is (1) to further the identity of interests of members of the Board of Directors of E. I. du Pont de Nemours and Company (the "Company") with those of the Company's stockholders generally through the grant of common stock of the Company (the "Stock"); (2) to permit Directors to defer the payment of all or a specified part of their compensation, including any grant of Stock by the Company, for services performed as Directors; and (3) to provide for a grant of stock options to Edgar S. Woolard, Jr. in connection with his service as Chairman of the Board of Directors. 2. ELIGIBILITY Members of the Board of Directors of the Company who are not employees of the Company or any of its subsidiaries or affiliates and who do not receive a form of compensation for Board service in lieu of customary Directors' fees shall be eligible to receive grants of Stock under the Plan. Members of the Board of Directors of the Company who are not employees of the Company or any of its subsidiaries or affiliates shall be eligible under this Plan to defer compensation for services performed as Directors. 3. ADMINISTRATION AND AMENDMENT The Plan shall be administered by the Compensation and Benefits Committee of the Board of Directors (the "Committee"). The decision of the Committee with respect to any questions arising as to the interpretation of this Plan, including the severability of any and all of the provisions thereof, shall be final, conclusive and binding. The Board of Directors of the Company reserves the right to modify the Plan from time to time, or to repeal the Plan entirely, provided, however, that (1) no modification of the Plan shall operate to annul an election already in effect for the current calendar year or any preceding calendar year; and (2) to the extent required under Section 16 of the Securities Exchange Act of 1934 ("Exchange Act"), Plan provisions relating to the amount, price and timing of stock grants and options shall not be amended more than once every six months, except that the foregoing shall not preclude any amendment necessary to conform to changes in the Internal Revenue Code or the Employee Retirement Income Security Act. 17 Form 10-Q EXHIBIT 10.3 The Committee is authorized, subject to the provisions of the Plan, from time to time to establish such rules and regulations as it deems appropriate for the proper administration of the Plan, and to make such determinations and take such steps in connection therewith as it deems necessary or advisable. 4. COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT/CHANGE IN LAW It is the Company's intent that the Plan comply in all respects with Rule 16b-3 of the Exchange Act, or its successor, and any regulations promulgated thereunder. If any provision of this Plan is found not to be in compliance with such rule and regulations, the provision shall be deemed null and void, and the remaining provisions of the Plan shall continue in full force and effect. All transactions under this Plan shall be executed in accordance with the requirements of Section 16 of the Exchange Act and regulations promulgated thereunder. The Board of Directors may, in its sole discretion, modify the terms and conditions of this Plan in response to and consistent with any changes in applicable law, rule or regulation. 5. ANNUAL STOCK GRANT Effective with the 1996 Annual Meeting and annually thereafter, each Director eligible under Article 2 hereof shall be awarded an annual grant of two hundred (200) shares of Stock following his/her election to the Board of Directors at the Annual Meeting of Stockholders. A Director elected to the Board at a time other than at the Annual Meeting shall receive a grant of two hundred (200) shares of Stock following his/her first attendance at a Board Meeting, provided, however, that no Director shall receive more than two hundred (200) shares of Stock in any calendar year. A Director may use shares of Stock granted hereunder to satisfy withholding taxes related to grants under this Plan in accordance with terms and conditions established by the Committee. 6. ELECTION TO DEFER On or before December 31 of any year, a Director may elect to defer, until a specified year or retirement as a Director of the Company, the receipt of the Stock granted under Article 5 or the payment of all or a specified part of all fees payable to the Director for services as a Director during the calendar year following the election and succeeding calendar years in the form of cash or stock units, provided, however, that Stock may only be deferred as stock units. Any person who shall become a Director during any calendar year, and who was not a Director of the Company on the preceding December 31, may elect, within thirty days after election to the Board, to defer in the same manner the receipt of the Stock granted under Article 5 or the payment of all or a specified part of fees not yet earned for the remainder of that calendar year and for succeeding calendar years in the form of cash or stock units. Elections shall be made by written notice delivered to the Secretary of the Committee. 18 Form 10-Q EXHIBIT 10.3 7. DIRECTORS' ACCOUNTS Fees deferred in the form of cash shall be held in the general funds of the Company and shall be credited to an account in the name of the Director. On the first day of each quarter, interest shall be credited to each account calculated on the basis of the cash balance in each account on the first day of each month of the preceding quarter at the Prime Rate of Morgan Guaranty Trust Company of New York (or at such other rate as may be specified by the Committee from time to time) in effect on the first day of each month. Stock granted under Article 5 to be deferred in the form of stock units, or fees to be deferred in the form of stock units, shall be allocated to each Director's account based on the closing price of the Company's common stock as reported on the Composite Tape of the New York Stock Exchange ("Stock Price") on the effective date of the Stock grant or the date the fees would otherwise have been paid. The Company shall not be required to reserve or otherwise set aside shares of common stock for the payment of its obligations hereunder, but shall make available as and when required a sufficient number of shares of common stock to meet the needs of the Plan. An amount equal to any cash dividends (or the fair market value of dividends paid in property other than dividends payable in common stock of the Company) payable on the number of shares represented by the number of stock units in each Director's account will be allocated to each Director's account in the form of stock units based upon the Stock Price on the dividend payment date. Any stock dividends payable on such number of shares will be allocated in the form of stock units. If adjustments are made to outstanding shares of common stock as a result of split-ups, recapitalizations, mergers, consolidations and the like, an appropriate adjustment will also be made in the number of stock units in a Director's account. Stock units shall not entitle any person to rights of a stockholder unless and until shares of Company common stock have been issued to that person with respect to stock units as provided in Article 8. 8. PAYMENT FROM DIRECTORS' ACCOUNTS The aggregate amount of Stock granted under Article 5 which has been deferred and deferred fees, together with interest and dividend equivalents accrued thereon, shall be paid in the year specified or after a Director ceases to be a Director of the Company. Amounts deferred to a specified year shall only be paid in a lump sum and shall be paid promptly at the beginning of that specified year. Amounts deferred to retirement shall be paid in a lump sum or, if the Director elects, in substantially equal annual installments over a period of years specified by the Director. The delivery election must be made by written notice delivered to the Secretary of the Committee prior to the date of retirement, and the first installment (or lump sum payment) shall be paid promptly at the beginning of the following calendar year. Subsequent installments shall be paid promptly at the beginning of each succeeding calendar year until the entire amount credited to the Director's account shall have been paid. Amounts credited to 19 Form 10-Q EXHIBIT 10.3 a Director's account in cash shall be paid in cash and amounts credited in stock units shall be paid in one share of common stock of the Company for each stock unit, except that a cash payment will be made with any final installment for any fraction of a stock unit remaining in the Director's account. Such fractional share will be valued at the closing Stock Price on the date of settlement. 9. PAYMENT IN EVENT OF DEATH A Director may file with the Secretary of the Committee a written designation of a beneficiary for his or her account under the Plan on such form as may be prescribed by the Committee, and may, from time to time, amend or revoke such designation. If a Director should die before all deferred amounts credited to the Director's account have been distributed, the balance of any deferred Stock and fees and interest and dividend equivalents then in the Director's account shall be paid promptly to the Director's designated beneficiary. If the Director did not designate a beneficiary, or in the event that the beneficiary designated by the Director shall have predeceased the Director, the balance in the Director's account shall be paid promptly to the Director's estate. 10. TERMINATION OF ELECTION A Director may terminate his/her election to defer payment of fees in cash or stock units by written notice delivered to the Secretary of the Committee. Termination shall become effective as of the end of the calendar year in which notice of termination is given with respect to fees payable for services as a Director during subsequent calendar years. Amounts credited to the account of a Director prior to the effective date of termination shall not be affected thereby and shall be paid only in accordance with Articles 7 and 8. 11. NONASSIGNABILITY During the Director's lifetime, the right to any deferred Stock or fees including interest and dividend equivalents thereon shall not be transferable or assignable. 12. OPTION GRANT A. Grant In recognition of his current and future contributions to the Company as Chairman of the Board of Directors and subject to approval by the stockholders at the Company's 1996 Annual Meeting, Edgar S. Woolard, Jr. (Grantee) is granted one hundred thousand (100,000) nonqualified options to purchase shares of Stock, effective January 1, 1996. The terms and conditions of such options shall be determined by the Committee consistent with the provisions of this Plan. 20 Form 10-Q EXHIBIT 10.3 B. Non-Transferability Of Options During Grantee's lifetime, no stock options granted under this Plan shall be transferable, and stock options may be exercised only by Grantee, except as may otherwise be provided in rules established by the Committee to permit transfers or to authorize a third party to act on behalf of Grantee with respect to any such stock options. C. Option Price The price per share of Stock which may be purchased upon exercise of a stock option granted hereunder shall be determined by the Committee, but shall in no event be less than the fair market value of such share on the date the stock option is granted, and in no event less than the par value thereof. For purpose of this Plan, fair market value shall be the average of the high and low prices of the stock as reported on the "NYSE-Composite Transactions Tape" on the date of grant of a stock option or the date of exercise of a stock option, or if no sales of such Stock were reported on said Tape on such date, the average of the high and low prices of such Stock on the next preceding day on which sales were reported on said Tape. Such price shall be subject to adjustment as provided in paragraph 12(D) hereof. D. Adjustment (i) In the event of any stock dividend, split-up, reclassification or other analogous change in capitalization, the Committee shall make such adjustments, in the light of the change, as it deems to be equitable, both to Grantee and to the Company, in the number of shares and prices per share applicable to out- standing stock options. Furthermore, in the event of a distribution to common stockholders other than interim or year-end dividends declared as such by the Board of Directors, the Committee shall make such adjustments, in the light of the distribution, as it deems to be equitable, both to Grantee and to the Company, in respect to the item described herein. (ii) Any fractional shares resulting from adjustments made pursuant to this subparagraph shall be eliminated. E. Option Term The term of each stock option granted under this Plan shall be for such period as the Committee shall determine, but not for more than ten (10) years from the date of grant. 21 Form 10-Q EXHIBIT 10.3 F. Exercise of Options (i) Subject to the provisions of this Plan, each stock option granted hereunder shall be exercisable on such date or dates and during such period and for such number of shares as the Committee may determine. However, in no event shall a stock option be exercisable prior to six months from the date of grant. The Committee may fix from time to time a minimum number of shares which must be purchased at the time a stock option is exercised. (ii) At the time he elects to exercise a stock option, Grantee shall pay the Company the full purchase price of the shares he has elected to purchase. Payment of the purchase price shall be made in cash, Stock (valued at fair market value on the date of exercise), or a combination thereof, as the Committee may determine from time to time. With respect to Stock to be delivered upon exercise of a stock option, the Committee shall periodically determine whether, and to what extent, such Stock shall be in the form of new common stock issued for such purposes, or common stock acquired by the Company. G. Tax Withholding Grantee may use shares of Stock to satisfy withholding taxes relating to the grants under this Plan to the extent provided in terms and conditions established by the Committee. H. Termination of Options (i) The Committee shall, subject to the provisions of the Plan, determine the rules relating to rights of Grantee in the event Grantee ceases to be a director of the Company or in the event of his death. (ii) In the event the Committee establishes a period of time in excess of six months from date of grant for the first date of exercisability of options granted hereunder, the Board of Directors, in its sole discretion, may waive such longer period. (iii) Grantee shall forfeit all rights under stock options granted hereunder if the Committee, after a hearing at which Grantee shall be entitled to be present, shall find that Grantee has willfully engaged in any activity harmful to the interest of the Company or any of its subsidiaries or affiliates provided, however, that such stock options may continue in effect to such extent and under such conditions as the Committee may determine. 22 Form 10-Q EXHIBIT 10.3 13. GOVERNING LAW The validity and construction of the Plan shall be governed by the laws of the State of Delaware. 14. EFFECTIVE DATE This Plan shall become effective as of January 1, 1996, provided it is approved by stockholders at the Company's 1996 Annual Meeting, and shall continue in full force and effect until terminated by the Board of Directors. 23 Form 10-Q Exhibit 10.12 WARRANT REPURCHASE AGREEMENT THIS WARRANT REPURCHASE AGREEMENT (this "Agreement") is entered into this 24th day of July 1996, by and among The Seagram Company Ltd., a Canadian corporation ("Seagram"), JES Developments, Inc., a Delaware corporation and a wholly owned subsidiary of Seagram ("Subsidiary") and E. I. du Pont de Nemours and Company, a Delaware corporation (the "Company"). WHEREAS, in connection with the Warrant Agreement, dated as of April 6, 1995 (the "Warrant Agreement") and the Redemption Agreement, dated as of April 6, 1995 (the "Redemption Agreement"), Subsidiary acquired Warrants expiring October 6, 1997 to acquire 48 million shares of Common Stock, par value $0.60 per share (the "Common Stock") of the Company at $89.33 per share, Warrants expiring October 6, 1998 to acquire 54 million shares of Common Stock at $101.14 per share, and Warrants expiring October 6, 1999 to acquire 54 million shares of Common Stock at $113.63 per share (collectively, the "Warrants" and each, individually, a "Warrant"); and WHEREAS, the Company has agreed to purchase and Seagram and Subsidiary have agreed to sell all of the Warrants (the "Repurchase"), in each case in accordance with the terms set forth below. NOW THEREFORE, in consideration of the premises set forth above and the mutual promises and agreements set forth herein, Seagram, Subsidiary and the Company agree as follows: 1. Simultaneously with the execution and delivery of this Agreement, (i) the Company is paying to Subsidiary by wire transfer in immediately available funds $500 million and (ii) Subsidiary is delivering to the Company for cancellation all of the Warrants and transfer forms attached thereto, endorsed in blank or in favor of the Company, duly executed by Subsidiary. Each of Seagram and Subsidiary acknowledges and agrees that upon consummation of the Repurchase, it shall have no further rights under any of the Warrants. The purchase and sale of the Warrants pursuant to this Agreement shall be effective notwithstanding any provisions of the Redemption Agreement giving Seagram, Subsidiary or the Company the right or the obligation, under the circumstances specified therein, to purchase or sell, as the case may be, the Warrants. 2. Each of Seagram and Subsidiary hereby jointly and severally represent and warrant to the Company, and agree for the benefit of the Company, that: (i) Seagram is a corporation duly organized and validly existing under the laws of Canada and has been duly qualified for the transaction of business under the laws of the Province of Quebec; 24 Form 10-Q Exhibit 10.12 (ii) Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (iii) each of Seagram and Subsidiary has all necessary corporate power and authority to execute and deliver this Agreement and perform its obligations hereunder; (iv) the execution and delivery by each of Seagram and Subsidiary of this Agreement and the performance by each of its obligations hereunder have been duly and validly authorized by the Board of Directors of each of Seagram and Subsidiary, and by the sole stockholder of Subsidiary, and no other corporate proceedings on the part of Seagram or Subsidiary are necessary to authorize the execution, delivery or performance of this Agreement; (v) this Agreement has been duly and validly executed and delivered by each of Seagram and Subsidiary and constitutes a valid and binding agreement of each of Seagram and Subsidiary, enforceable against each in accordance with its terms; (vi) the execution and delivery by Seagram and Subsidiary of this Agreement do not and the performance by Seagram and Subsidiary of their obligations hereunder will not (a) contravene or conflict with the certificate of incorporation, by-laws or similar charter or other organizational documents of Seagram or Subsidiary or (b) contravene or conflict with or constitute a violation of or default under or give rise to a right of termination, cancellation or acceleration of any right or obligation of Seagram or Subsidiary under any provision of applicable law or regulation of the United States or Canada or any state or province thereof or of any agreement, contract, judgment, injunction, order, decree or other instrument binding upon Seagram or Subsidiary, which contravention, conflict, violation, default or right of termination, cancellation or acceleration would result in the case of this clause (b) in a material adverse effect on the business, assets, results of operations or financial condition of Seagram and its subsidiaries, taken as a whole, other than any such material adverse effect which would have no effect on this Agreement and the performance of the obligations and transactions contemplated hereby; (vii) Subsidiary has good and marketable title to all of the Warrants, free and clear of all liens, claims, options, proxies, voting agreements, security interests, charges and encumbrances other than the Redemption Agreement, and has complete and unrestricted power to transfer, assign and deliver the Warrants to the Company, and upon the transfer of the Warrants to the Company as provided herein, the Company will acquire good and marketable title to the Warrants, free and clear of all liens, claims, options, proxies, voting agreements, security interest, charges and encumbrances; and 25 Form 10-Q Exhibit 10.12 (viii) Seagram, Subsidiary and their representatives have been given the opportunity to ask questions of, and to receive answers from, the Company and its representatives concerning the business affairs, financial condition and other information relating to the Company and to obtain any additional information which Seagram, Subsidiary, or their representatives deem necessary. 3. The Company hereby represents and warrants to Seagram and Subsidiary, and agrees for the benefit of Seagram and Subsidiary, that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (ii) it has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder; (iii) the execution and delivery by the Company of this Agreement and the performance by the Company of its obligations hereunder have been duly and validly authorized by the Board of Directors of the Company and no other corporate proceedings on the part of the Company are necessary to authorize the execution and delivery of this Agreement or the performance by the Company of its obligations hereunder; (iv) this Agreement has been duly and validly executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms; and (v) the execution and delivery by the Company of this Agreement do not and the performance by the Company of its obligations hereunder will not (a) contravene or conflict with the certificate of incor- poration or by-laws of the Company or (b) contravene or conflict with or constitute a violation of or default under or give rise to a right of termination, cancellation or acceleration of any right or obligation of the Company or any of the Company's subsidiaries under any provision of applicable law or regulation of the United States or any state thereof or of any agreement, contract, judgment, injunction, order, decree or other instrument binding upon the Company or any of its subsidiaries, which contravention, conflict, violation, default or right of termination, cancellation or acceleration would result in the case of this clause (b) in a material adverse effect on the business, assets, results of operations or financial condition of the Company and its subsidi- aries, taken as a whole, other than any such material adverse effect which would have no effect on this Agreement and the per- formance of the obligations and transactions contemplated thereby. 26 Form 10-Q Exhibit 10.12 4. Upon the execution and delivery of this Agreement by the parties hereto, the Redemption Agreement and all rights and obligations thereunder shall terminate. 5. The closing of the Repurchase is taking place at the offices of Skadden, Arps, Slate, Meagher & Flom, at 919 Third Avenue, New York, New York 10022, simultaneously with the execution and delivery of this Agreement. 6. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. 7. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof. 8. This Agreement may be executed in counterparts, each of which shall be a valid and binding obligation of the parties thereto, but all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed on its behalf by its representatives thereunto duly authorized, all as of the day and year first above written. E. I. DU PONT DE NEMOURS AND COMPANY By: /s/ C. L. Henry --------------------------------- Name: Title: THE SEAGRAM COMPANY LTD. By: /s/ Edgar Bronfman, Jr. --------------------------------- Name: Title: JES DEVELOPMENTS, INC. By: /s/ Daniel R. Paladino --------------------------------- Name: Title: 27 Form 10-Q Exhibit 11 E. I. DU PONT DE NEMOURS AND COMPANY COMPUTATION OF EARNINGS PER SHARE<Fa> (Dollars in millions, except per share) Primary and Fully Diluted --------------------------------------- Three Months Ended Six Months Ended June 30, 1996 June 30, 1996 ------------------ ---------------- Net income less dividends on preferred stock .................................. $ 998 $1,875 Adjustment for interest, net of income tax, determined under "Modified Treasury Stock Method" ................ 135 281 ------ ------ Earnings applicable to common stock ..... $1,133 $2,156 ====== ====== Average number of common shares outstanding (excludes treasury stock and shares held by DuPont Flexitrust) ........................... 560,546,407 559,128,795 Adjustments required for common share equivalents: (1) shares awarded but undelivered under the Variable Compensation Plan, (2) shares held by the DuPont Flexitrust, and (3) shares assumed to be issued due to stock options and warrants, net of shares acquired, as determined under "Modified Treasury Stock Method" ............................. 90,518,010 90,741,012 ----------- ----------- Adjusted average number of common shares ................................ 651,064,417 649,869,807 =========== =========== Earnings per share ...................... $ 1.74 $ 3.32 ====== ====== Earnings per share - as published ....... $ 1.78 $ 3.35 ====== ====== <FN> <Fa>1995 calculations either resulted in dilution of less than 3 percent or were antidilutive. 28 Form 10-Q Exhibit 12 E. I. DU PONT DE NEMOURS AND COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions) Six Months Ended Years Ended December 31 June 30, 1996 1995 1994 1993 1992 1991 Net Income .......................................... $1,880 $3,293 $2,727 $ 566<Fa> $ 975<Fa> $1,403 Provision for Income Taxes .......................... 1,284 2,097 1,655 392 836 1,415 Minority Interests in Earnings of Consolidated Subsidiaries ...................................... 28 30 18 5 10 6 Adjustment for Companies Accounted for by the Equity Method .............................. 32 41 18 41 6 35 Capitalized Interest ................................ (68) (170) (143) (194) (194) (197) Amortization of Capitalized Interest ................ 116<Fb> 154 154 144 101 94 ------ ------ ------ ------ ------ ------ 3,272 5,445 4,429 954 1,734 2,756 ------ ------ ------ ------ ------ ------ Fixed Charges: Interest and Debt Expense - Borrowings ............ 376 758 559 594 643 752 Adjustment for Companies Accounted for by the Equity Method - Interest and Debt Expense ....... 35 71 55 42 62 11 Capitalized Interest .............................. 68 170 143 194 194 197 Rental Expense Representative of Interest Factor .. 56 113 118 143 151 162 ------ ------ ------ ------ ------ ------ 535 1,112 875 973 1,050 1,122 ------ ------ ------ ------ ------ ------ Total Adjusted Earnings Available for Payment of Fixed Charges ..................................... $3,807 $6,557 $5,304 $1,927 $2,784 $3,878 ====== ====== ====== ====== ====== ====== Number of Times Fixed Charges are Earned ............ 7.1 5.9 6.1 2.0 2.7 3.5 ====== ====== ====== ====== ====== ====== <FN> <Fa>Income Before Extraordinary Item and Transition Effect of Accounting Changes. <Fb>Includes write-off of capitalized interest associated with divested businesses. 29