- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-815
E. I. du Pont de Nemours and Company
(Exact Name of Registrant as Specified in Its Charter)
Delaware 51-0014090
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1007 Market Street, Wilmington, Delaware 19898
(Address of Principal Executive Offices)
(302) 774-1000
(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
---
1,042,806,896 shares (excludes 87,041,427 shares of treasury stock) of common
stock, $0.30 par value, were outstanding at April 30, 2001.
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1
Form 10-Q
E. I. DU PONT DE NEMOURS AND COMPANY
Table of Contents
Page(s)
-------
Part I Financial Information
Item 1. Financial Statements
Consolidated Income Statement 3
Consolidated Statement of Cash Flows 4
Consolidated Balance Sheet 5
Notes to Financial Statements 6-13
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations
Forward-Looking Statements 14-15
Results of Operations:
Financial Results 15-16
Segment Performance 16-17
Outlook 18
Financial Condition 18-19
Other Items:
Targeted Reductions To Improve Competitiveness 19
Exit From Benlate(R) Business 20
Pioneer Roundup Ready(R) Soybean Activities 20
Purchased In-Process Research and Development 20
Part II Other Information
Item 1. Legal Proceedings 21-22
Item 4. Submission of Matters to a Vote of Security Holders 22-23
Item 6. Exhibits and Reports on Form 8-K 23-24
Signature 25
Exhibit Index 26-27
Exhibit 10.7 - Company's Salary Deferral And
Savings Restoration Plan 28
Exhibit 12 - Computation of Ratio of Earnings to
Fixed Charges 29
2
Form 10-Q
Part I. Financial Statements
Item 1. FINANCIAL STATEMENTS
E. I. DU PONT DE NEMOURS AND COMPANY AND CONSOLIDATED SUBSIDIARIES
Three Months Ended
CONSOLIDATED INCOME STATEMENT(a) March 31
-------------------------
(Dollars in millions, except per share) 2001 2000
------- -------
SALES(b) $ 6,859 $ 7,593
Other Income(c) 170 348
------- -------
Total 7,029 7,941
------- -------
Cost of Goods Sold and Other Operating Charges(d) 4,486 4,856
Selling, General and Administrative Expenses 757 757
Depreciation 327 351
Amortization of Goodwill and Other Intangible Assets 112 107
Research and Development Expense 410 421
Interest and Debt Expense 178 201
Purchased In-Process Research and Development(e) -- (11)
------- -------
Total 6,270 6,682
------- -------
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 759 1,259
Provision for Income Taxes 272 439
Minority Interests in Earnings of Consolidated Subsidiaries 3 17
------- -------
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE(b) 484 803
Cumulative Effect of a Change in Accounting Principle, Net of Income Taxes(f) 11 --
------- -------
NET INCOME $ 495 $ 803
======= =======
- -----------------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE OF COMMON STOCK(g)
Income before Cumulative Effect of a Change in Accounting Principle $ .46 $ .76
Cumulative Effect of a Change in Accounting Principle .01 --
------- -------
Net Income $ .47 $ .76
======= =======
DILUTED EARNINGS PER SHARE OF COMMON STOCK(g)
Income before Cumulative Effect of a Change in Accounting Principle $ .46 $ .76
Cumulative Effect of a Change in Accounting Principle .01 --
------- -------
Net Income $ .47 $ .76
======= =======
DIVIDENDS PER SHARE OF COMMON STOCK $ .35 $ .35
======= =======
- -----------------------------------------------------------------------------------------------------------------------------------
See Notes to Financial Statements.
3
Form 10-Q
Three Months Ended
CONSOLIDATED STATEMENT OF CASH FLOWS(a) March 31
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(Dollars in millions) 2001 2000
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CASH PROVIDED BY (USED FOR) OPERATIONS:
Net Income $ 495 $ 803
Adjustments to Reconcile Net Income to Cash:
Cumulative Effect of a Change in Accounting Principle, Net of Tax(f) (11) --
Depreciation 327 351
Amortization of Goodwill and Other Intangible Assets 112 107
Purchased In-Process Research and Development(e) -- (11)
Other Noncash Charges and Credits - Net 138 199
Change in Operating Assets and Liabilities - Net (1,583) (1,114)
------- -------
Cash Provided by (Used for) Operations (522) 335
------- -------
INVESTMENT ACTIVITIES:
Purchases of Property, Plant and Equipment (316) (434)
Investment in Affiliates (7) (9)
Payments for Businesses Acquired (Net of Cash Acquired) (22) (23)
Proceeds from Sales of Assets 6 191
Net Decrease (Increase) in Short-Term Financial Instruments 61 (118)
Miscellaneous - Net 8 (28)
------- -------
Cash Used for Investment Activities (270) (421)
------- -------
FINANCING ACTIVITIES
Dividends Paid to Stockholders (368) (369)
Net Increase in Borrowings 1,030 1,871
Acquisition of Treasury Stock (50) --
Proceeds from Exercise of Stock Options 79 34
------- -------
Cash Provided by Financing Activities 691 1,536
------- -------
Effect of Exchange Rate Changes on Cash (94) (72)
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (195) $ 1,378
======= =======
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See Notes to Financial Statements.
4
Form 10-Q
CONSOLIDATED BALANCE SHEET(a) March 31 December 31
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(Dollars in millions, except per share) 2001 2000
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ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 1,345 $ 1,540
Marketable Securities 15 77
Accounts and Notes Receivable 5,360 4,552
Inventories(h) 4,737 4,658
Prepaid Expenses 315 228
Deferred Income Taxes 636 601
-------- --------
Total Current Assets 12,408 11,656
PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation
(March 31, 2001 - $20,763; December 31, 2000 - $20,468) 14,114 14,182
GOODWILL AND OTHER INTANGIBLE ASSETS 8,277 8,365
INVESTMENT IN AFFILIATES 2,198 2,206
OTHER ASSETS 3,424 3,017
-------- --------
TOTAL $ 40,421 $ 39,426
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 2,150 $ 2,731
Short-Term Borrowings and Capital Lease Obligations 4,349 3,247
Income Taxes 377 250
Other Accrued Liabilities 3,050 3,027
-------- --------
Total Current Liabilities 9,926 9,255
LONG-TERM BORROWINGS AND CAPITAL LEASE OBLIGATIONS 6,531 6,658
OTHER LIABILITIES 7,659 7,729
DEFERRED INCOME TAXES 2,514 2,105
-------- --------
Total Liabilities 26,630 25,747
-------- --------
MINORITY INTERESTS 373 380
-------- --------
STOCKHOLDERS' EQUITY(i)
Preferred Stock 237 237
Common Stock, $.30 par value; 1,800,000,000 shares authorized;
shares issued at March 31, 2001 - 1,129,783,629; December 31,
2000 - 1,129,973,354 339 339
Additional Paid-In Capital 7,593 7,659
Reinvested Earnings 12,240 12,153
Accumulated Other Comprehensive Income (Loss) (264) (188)
Common Stock Held in Treasury at Cost (Shares: March 31, 2001 -
87,041,427; December 31, 2000 - 87,041,427) (6,727) (6,727)
Common Stock Held in Trust for Unearned Employee Compensation
and Benefits (Flexitrust), at Market (Shares: March 31, 2001 - 0;
December 31, 2000 - 3,601,199) -- (174)
-------- --------
Total Stockholders' Equity 13,418 13,299
-------- --------
TOTAL $ 40,421 $ 39,426
======== ========
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See Notes to Financial Statements.
5
Form 10-Q
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(a) These statements are unaudited, but reflect all adjustments that, in the
opinion of management, are necessary to provide a fair presentation of the
financial position, results of operations and cash flows for the dates and
periods covered.
Three Months Ended
(b) CONSOLIDATED SEGMENT INFORMATION(1) March 31
----------------------
2001 2000
----------------------
SEGMENT SALES(2)
----------------
Agriculture & Nutrition $ 609 $ 628
Nylon Enterprise 960 1,109
Performance Coatings & Polymers 1,458 1,653
Pharmaceuticals 205 389
Pigments & Chemicals 951 960
Pioneer 929 921
Polyester Enterprise 545 567
Specialty Fibers 858 905
Specialty Polymers 1,039 1,091
Other 81 123
------- -------
Total Segment Sales 7,635 8,346
Elimination of Intersegment Transfers (146) (159)
Elimination of Equity Affiliate Sales (628) (595)
Miscellaneous (2) 1
------- -------
CONSOLIDATED SALES $ 6,859 $ 7,593
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AFTER-TAX OPERATING INCOME (LOSS)
---------------------------------
Agriculture & Nutrition $ 48 $ 62
Nylon Enterprise 12 87
Performance Coatings & Polymers 132 179
Pharmaceuticals (64) 54
Pigments & Chemicals 124 164
Pioneer(3) 118 77
Polyester Enterprise (8) 9
Specialty Fibers 156 201
Specialty Polymers 130 165
Other 3 --
------- -------
Total Segment ATOI 651 998
Interest and Exchange Gains and Losses (97) (123)
Corporate Expenses (70) (72)
------- -------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE $ 484 $ 803
======= =======
FOOTNOTES TO NOTE (b)
- ---------------------
(1) Certain reclassifications of segment data have been made to reflect changes
in organizational structure.
(2) Includes pro rata share of equity affiliate sales and intersegment
transfers. Excludes sales of intermediates by DuPont to joint ventures
within the Nylon Enterprise and Polyester Enterprise segments.
(3) Includes noncash charges of $83 and $215 for first quarter 2001 and 2000,
respectively, resulting from the sale of acquired Pioneer inventories
which, in accordance with purchase accounting rules, were recorded at fair
value on October 1, 1999. The first quarter 2000 charge was partly offset
by a $109 gain resulting from the sale of certain equity securities
classified as available for sale and a credit of $11 to reduce the
preliminary purchase price allocated to acquired in-process research and
development.
6
Form 10-Q
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
(c) First quarter 2000 includes a $176 gain resulting from the sale by Pioneer
of certain equity securities classified as available for sale.
(d) In accordance with purchase accounting rules applied to the acquisition of
the remaining 80 percent ownership interest in Pioneer on October 1, 1999,
Pioneer inventory was increased to fair value. This inventory step-up
generates noncash charges to cost of goods sold as the inventory on hand
at the acquisition date is sold. Charges in first quarter 2001 and 2000
were $133 and $347, respectively.
(e) Purchased in-process research and development represents the value
assigned in a purchase business combination to research and development
projects of the acquired business that were commenced but not yet
completed at the date of acquisition, for which technological feasibility
has not yet been established, and which have no alternative future use in
research and development activities or otherwise. During first quarter
2000, a credit of $11 was recorded based on revisions of preliminary
purchase price allocations associated with the October 1, 1999, purchase
of the remaining 80 percent ownership interest in Pioneer.
(f) On January 1, 2001, the company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended. The new standard requires that all
derivative instruments be reported on the balance sheet at their fair
values. For derivative instruments designated as fair value hedges,
changes in the fair values of the derivative instruments will generally be
offset on the income statement by changes in the fair values of the hedged
items. For derivative instruments designated as cash flow hedges, the
effective portion of any hedge is reported in accumulated other
comprehensive income (loss) until it is cleared to earnings during the
same period in which the hedged item affects earnings. The ineffective
portion of all hedges is recognized in current period earnings. Changes in
the fair values of derivative instruments that are not designated as
hedges are recorded in current period earnings.
The adoption of SFAS No. 133 resulted in a pretax cumulative-effect-type
adjustment to income of $19 million ($11 million after-tax). The primary
component of this gain is related to the company's position in certain
stock warrants, which were previously accounted for as available-for-sale
securities for which changes in fair value have been reflected in
accumulated other comprehensive income. The company also recorded a pretax
increase to accumulated other comprehensive income of $10 million ($6
million after-tax). The increase in accumulated other comprehensive income
is primarily due to unrealized gains in agricultural commodity hedging
programs.
Objectives And Strategies For Holding Derivative Instruments
------------------------------------------------------------
Under procedures and controls established by the company's Financial Risk
Management Framework, the company enters into contractual arrangements
(derivatives) in the ordinary course of business to reduce its exposure to
foreign currency, interest rate and commodity price risks. The framework
has established a variety of approved derivative instruments to be
utilized in each risk management program, as well as varying levels of
exposure coverage and time horizons based on an assessment of risk factors
related to each program. Derivative instruments utilized during the period
include forwards, options, futures, and swaps. The company has not
designated any nonderivatives as hedging instruments.
7
Form 10-Q
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
Fair Value Hedges
-----------------
During the quarter, the company has maintained a number of interest rate
swaps that involve the exchange of fixed for floating rate interest
payments that allow the company to maintain a target range of floating
rate debt. All interest rate swaps qualify for the shortcut method of
hedge accounting, thus there is no ineffectiveness related to these
hedges. Changes in the fair value of derivatives that hedge interest rate
risk are recorded in interest expense each period. The offsetting changes
in the fair values of the related debt are also recorded in interest
expense. The company maintains no other fair value hedges.
Cash Flow Hedges
----------------
The company maintains a number of cash flow hedging programs to reduce
risks related to foreign currency and commodity price risk. Foreign
currency programs involve hedging a portion of foreign currency-
denominated revenues and major raw material purchases from vendors outside
of the United States. Commodity price risk management programs serve to
reduce exposure to price fluctuations on purchases of inventory such as
natural gas, corn, soybeans, and soybean meal. While each risk management
program has a different time horizon, no program currently extends beyond
the next two-year period.
The effects of hedges of foreign currency-denominated revenues are
reported on the Sales line of the Consolidated Income Statement, and the
effects of hedges of inventory purchases are reported as a component of
Cost of Goods Sold and Other Operating Charges.
Cash Flow Hedge Results During Pretax
The Quarter Gain/(Loss)
------------------------------------------ -----------
Hedge ineffectiveness reported in earnings $(3)
Hedge gains/(losses) excluded from
assessment of hedge effectiveness (6)
Reclassification to earnings for forecasted
transactions that did not occur -
Accumulated Other Comprehensive Income (Loss)
(Cash Flow Hedge Portion Only) Pretax Tax After-Tax
---------------------------------------------------------------- ------ ----- ---------
Balance at January 1, 2001 (upon adoption of FAS 133) $ 10 $ (4) $ 6
Additions and revaluations of derivatives designated as cash
flow hedges (27) 10 (17)
Less: Clearance of hedge results to earnings during the quarter (4) 1 (3)
---- ---- -----
Balance at March 31, 2001 $(13) $ 5 $ (8)
==== ==== =====
Portion of ending balance expected to be reclassified into
earnings over the next twelve months $(10) $ 4 $ (6)
Cash flow hedge results are reclassified into earnings during the same
period in which the related exposure impacts earnings. Reclassifications
are made sooner if it appears that a forecasted transaction will not
materialize.
8
Form 10-Q
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
Hedges Of Net Investment In A Foreign Operation
-----------------------------------------------
During the quarter, the company has not maintained any hedges of net
investment in a foreign operation.
Derivatives Not Designated In Hedging Relationships
---------------------------------------------------
The company uses forward exchange contracts to reduce its net exposure, by
currency, related to foreign currency-denominated monetary assets and
liabilities. The objective of this program is to maintain an approximately
balanced position in foreign currencies so that exchange gains and losses
resulting from exchange rate changes, net of related tax effects, are
minimized.
Several small equity affiliates have risk management programs, mainly in
the area of foreign currency exposure, for which they have elected not to
pursue hedge accounting. In addition, Pioneer maintains small risk
management programs for commodities that do not qualify for hedge
accounting treatment. Also, the company owns stock warrants in a few
companies for strategic purposes.
(g) Basic earnings per share is computed by dividing income available to
common stockholders (the numerator) by the weighted-average number of
common shares (the denominator) for the period. The numerator, net income,
is reduced by preferred dividends of $2.5. For diluted earnings per share,
the denominator is based on the following weighted-average number of
common shares and includes the additional common shares that would have
been outstanding if potentially dilutive common shares had been issued:
Three Months Ended
March 31
---------------------------------
Basic Diluted
------------- -------------
2001 1,042,168,259 1,047,973,561
2000 1,047,036,515 1,057,077,345
The difference between basic and diluted weighted-average common shares
outstanding results from the assumption that dilutive stock options
outstanding were exercised.
The following stock options are antidilutive, and therefore are not
included in the diluted earnings per share calculation since the exercise
price is greater than the average market price:
Three Months Ended
March 31
-------------------------
2001 2000
---------- ----------
Stock Options 35,344,478 13,382,037
Compensation expense (benefit) recognized in income for stock-based
employee compensation awards was $1 and $(25) for the three months ended
March 31, 2001 and 2000, respectively.
Treasury stock and shares previously held by the Flexitrust are not
considered outstanding in computing the foregoing weighted-average number
of common shares.
9
Form 10-Q
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
March 31 December 31
(h) Inventories 2001 2000
----------- --------- -----------
Finished Products $ 3,332 $ 2,818
Semifinished Products 1,014 1,504
Raw Materials and Supplies 971 907
--------- -----------
5,317 5,229
Less: Adjustment of Inventories to a Last-In,
First-Out (LIFO) Basis 580 571
--------- -----------
Total $ 4,737 $ 4,658
========= ===========
(i) The following sets forth the company's Total Comprehensive Income for the
periods shown:
Three Months Ended
------------------
2001 2000
---- ----
Net Income $495 $ 803
Cumulative Effect of a Change in
Accounting Principle 6 -
Net Revaluation and Reversal of Cash
Flow Hedges (14) -
Cumulative Translation Adjustment (32) (7)
Net Unrealized Gains (Losses) on
Securities (36) (129)*
----- -----
Total Comprehensive Income $419 $ 667
===== =====
* Primarily reflects unrealized holding losses of $85 associated
with the company's investment in Healtheon/WebMD and a $35
adjustment related to the sale of an equity security.
(j) In the first quarter 2001, there were no changes in estimates related to
reserves established for restructuring initiatives in prior years. A
complete discussion of these activities is included in Item 8 of the
company's Annual Report on Form 10-K for the period ended December 31,
2000, at Note 6 "Employee Separation Costs and Write-down of Assets." An
update on first quarter activity is provided below under the respective
prior years' activities.
10
Form 10-Q
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
2000 Activities
Performance Coatings & Polymers
A restructuring program (Phase II) was instituted in the second quarter to
continue the consolidation of business assets and to eliminate
redundancies as a result of the acquisition of Herberts in 1999 by
Performance Coatings. Charges resulting from these activities totaled $96.
The charges included $71 related to termination payments to be settled
over time for about 1,100 employees involved in technical, manufacturing,
marketing and administrative activities. At March 31, 2001, about $41 had
been settled and charged against the related liabilities and approximately
850 employees had been terminated. Restructuring charges of $13 related to
the write-down of operating facilities that were shut down in the second
quarter. The remaining charge of $12 relates to the cancellation of
contractual agreements and, as of March 31, 2001, about $8 had been
settled and charged against the related liability. Termination of services
under the contractual agreements will be completed during 2001.
Pigments & Chemicals
A restructuring program was instituted in the third quarter to address
poor economic and intensely competitive market conditions for the Chemical
Solutions Enterprise. Charges resulting from this restructuring totaled
$28. This charge included $24 related to the write-down of operating
facilities at the New Jersey Chambers Works site that were shut down in
the third quarter. The charge covers the net book value of the facilities
of $15 and estimated dismantlement and removal costs less estimated
proceeds from the sale of equipment and scrap of $9. At March 31, 2001,
about $2 had been charged against the liability for dismantlement and
removal and these activities will be completed in 2001. The remaining
restructuring charge of $4 relates to employee termination payments to be
settled over time for approximately 65 employees involved in manufacturing
and technical activities. At March 31, 2001, essentially all employees had
been terminated thereby completing the program, and about $1 in employee
termination installment benefits had been settled and charged against the
related liability.
Account balances and activity for the 2000 restructuring programs are
summarized below:
Employee
Write-down Separation Other
of Assets Costs Exit Costs Total
------------ ---------- ---------- ---------
Balance at December 31, 2000 $ - $ 48 $ 16 $ 64
Changes to accounts
Employee separation settlements (15) (15)
Other expenditures (5) (5)
------------ ---------- ---------- ---------
Balance at March 31, 2001 $ - $ 33 $ 11 $ 44
============ ========== ========== =========
11
Form 10-Q
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
1999 Activities
Agriculture & Nutrition
A restructuring program was instituted in the third quarter to address
poor economic and intensely competitive market conditions for DuPont Crop
Protection. Charges resulting from these restructuring activities totaled
$124. This charge included $45 related to employee termination payments to
be settled over time for approximately 800 employees involved in
technical, manufacturing, marketing and administrative activities. A net
benefit of $2 was subsequently recorded to reflect lower costs associated
with employees who accepted other work assignments partially offset by
higher costs associated with terminating employees. At December 31, 2000,
approximately 730 employees had been terminated and the remaining
employees have accepted other work assignments within the company thereby
completing this program. At March 31, 2001, approximately $38 had been
settled and charged against the related liability.
The remaining restructuring charge of $79 principally related to the
write-down of operating facilities that were shut down in 1999. The effect
on results of removing these facilities from operations was not material.
The charge covers the net book value of the facilities ($64) and estimated
dismantlement and removal costs less estimated proceeds from the sale of
equipment and scrap ($15). A benefit of $6 was subsequently recorded to
reflect lower costs associated with dismantlement and removal. At March
31, 2001, approximately $6 in dismantlement and removal costs had been
paid.
Nylon Enterprise
The company also recorded a charge of $28 in the third quarter associated
with restructuring activities in Europe to modernize and consolidate
sites. This included employee termination payments to be settled over time
of $15 to about 120 employees involved principally in manufacturing
activities at several locations. A charge of $2 was subsequently recorded
to reflect higher costs associated with terminating employees. At December
31, 2000, essentially all employees had been terminated. At March 31,
2001, approximately $14 had been settled and charged against the related
liability. Also included was $13 for a manufacturing facility that was
shut down in 1999.
Polyester Enterprise
A restructuring program was instituted in the second quarter to address
poor economic and intensely competitive market conditions. Charges of $60
relate to employee separation costs to be settled over time for about 850
employees primarily engaged in manufacturing. A net benefit of $2 was
subsequently recorded to reflect lower costs associated with employees who
accepted other work assignments partially offset by higher costs
associated with terminating employees. At December 31, 2000, approximately
800 employees had been terminated and the remaining employees had accepted
other work assignments within the company thereby completing this program.
At March 31, 2001, about $54 in employee termination installment benefits
had been charged against the related liability.
12
Form 10-Q
NOTES TO FINANCIAL STATEMENTS
(Dollars in millions, except per share)
(continued)
Account balances and activity for the 1999 restructuring programs are
summarized below:
Employee
Write-down Separation Other
of Assets Costs Exit Costs Total
----------- ------------ ---------- -------
Balance at December 31, 2000 $ - $ 18 $ 4 $ 22
Changes to accounts
Employee separation settlements (6) (6)
Other expenditures (1) (1)
----------- ------------ ---------- -------
Balance at March 31, 2001 $ - $ 12 $ 3 $ 15
=========== ============ ========== =======
1998 Activities
During the third quarter 1998 the company recorded a charge of $577
directly related to management decisions to implement company-wide
productivity improvement initiatives.
These charges included $310 related to employee separation costs to be
settled over time, substantially all of which were for estimated
termination payments for approximately 4,100 employees, and were based on
plans that identified the number of employees to be terminated, their
functions and their businesses. A net benefit of $33 was subsequently
recorded to reflect changes in estimates. As of December 31, 1999, about
4,000 employees had been terminated and the remaining employees have
accepted other work assignments within the company thereby completing this
program. At March 31, 2001, about $272 in employee termination installment
benefits had been settled and charged against the related liability.
The remaining charge of $267 is related to write-downs of property, plant
and equipment, principally due to the shutdown of excess production
capacity, and there are no outstanding liabilities related to this
shutdown.
Account balances and activity for the 1998 restructuring programs are
summarized below:
Employee
Write-down Separation Other
of Assets Costs Exit Costs Total
----------- ---------- ---------- --------
Balance at December 31, 2000 $ - $ 7 $ - $ 7
Changes to accounts
Employee separation settlements (2) (2)
----------- ---------- ---------- --------
Balance at March 31, 2001 $ - $ 5 $ - $ 5
=========== ========== ========== ========
(k) On April 2, 2001, the company announced plans to further streamline
operations by reducing the employee work force and shutting down certain
manufacturing assets.
13
Form 10-Q
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This report contains forward-looking statements which may be
identified by their use of words like "plans," "expects," "will,"
"anticipates," "intends," "projects," "estimates" or other words of
similar meaning. All statements that address expectations or
projections about the future, including statements about the company's
strategy for growth, product development, market position,
expenditures and financial results are forward-looking statements.
Forward-looking statements are based on certain assumptions and
expectations of future events. The company cannot guarantee that these
assumptions and expectations are accurate or will be realized. In
addition to the factors discussed in this report and in Management's
Discussion and Analysis in the company's latest Annual Report, the
following are some of the important factors that could cause the
company's actual results to differ materially from those projected in
any such forward-looking statements:
. The company operates in approximately 70 countries worldwide
and derives about half of its revenues from sales outside the
United States. Changes in the laws or policies of other
governmental and quasi-governmental activities in the
countries in which the company operates could affect its
business in the country and the company's results of
operations. In addition, economic factors (including
inflation and fluctuations in interest rates and foreign
currency exchange rates) and competitive factors (such as
greater price competition or a decline in U.S. or European
industry sales from slowing economic growth) in those
countries could affect the company's revenues, expenses and
results.
. The company's ability to grow earnings will be affected by
increases in the cost of raw materials, particularly
petroleum-based feedstocks, natural gas and paraxylene. The
company may not be able to fully offset the effects of higher
raw material costs through price increases or productivity
improvements.
. The company's growth objectives are largely dependent on its
ability to renew its pipeline of new products and to bring
those products to market. This ability may be adversely
affected by difficulties or delays in product development
such as the inability to: identify viable new products;
successfully complete research and development projects;
obtain relevant regulatory approvals, which may include
approval from the U.S. Food and Drug Administration; obtain
adequate intellectual property protection; or gain market
acceptance of the new products.
. As part of its strategy for growth, the company has made and
may continue to make acquisitions and divestitures and form
strategic alliances. There can be no assurance that these
will be completed or beneficial to the company.
. To a significant degree, results in the company's Agriculture
& Nutrition and Pioneer segments reflect changes in
agricultural conditions, including weather and government
programs. These results also reflect the seasonality of sales
of agricultural products; highest sales in the United States
occur in the first half of the year. In addition, demand for
products produced in these segments may be affected by market
acceptance of genetically enhanced products.
14
Form 10-Q
. The company has undertaken and may continue to undertake
productivity initiatives, including organizational
restructurings and Six Sigma productivity improvement
projects, to improve performance and generate cost savings.
There can be no assurance that these will be completed or
beneficial to the company. Also there can be no assurance
that any estimated cost savings from such activities will be
realized.
. The company's facilities are subject to a broad array of
environmental laws and regulations. The costs of complying
with complex environmental laws and regulations, as well as
internal voluntary programs, are significant and will
continue to be so for the foreseeable future. The company's
accruals for such costs and liabilities may not be adequate
since the estimates on which the accruals are based depend on
a number of factors including the nature of the allegation,
the complexity of the site, the nature of the remedy, the
outcome of discussions with regulatory agencies and other
potentially responsible parties (PRPs) at multiparty sites,
and the number and financial viability of other PRPs.
. The company's results of operations could be affected by
significant litigation adverse to the company including
product liability claims, patent infringement claims and
antitrust claims.
The foregoing list of factors is not inclusive, or necessarily
in order of importance.
(a) Results of Operations
(1) Financial Results:
Including one-time items in both periods, diluted earnings
per share for first quarter 2001 were $.47 compared to $.76 in 2000.
First quarter 2001 diluted earnings per share before one-time items
was $.54 per share, 36 percent below the $.85 per share earned in
the first quarter of 2000.
First quarter 2001 consolidated sales totaled $6.9 billion
compared to $7.6 billion in 2000. Segment sales, which include
intersegment transfers and a pro rata share of sales by equity
affiliates, were $7.6 billion, down 9 percent from $8.3 billion in
2000. This reflects 7 percent lower volume and 2 percent lower U.S.
dollar selling prices. The latter reflects 1 percent higher local
selling prices that were more than offset by adverse currency
effects, principally from the weaker euro and Japanese yen, which
reduced worldwide segment sales by 3 percent.
Regional segment sales and related variances for the first
quarter 2001 compared with the first quarter 2000 are summarized
below:
% Change Due To
-------------------------------------------
1Q 01 % Change Local Currency Portfolio
Segment Sales $B vs. 1Q 00 Price Effect Volume Changes
------------------ -------- ----------- ----- -------- ------ ---------
Worldwide 7.6 (9) 1 (3) (7) 0
U.S. 3.7 (13) 1 0 (13) (1)
Europe 2.1 (3) 3 (7) 1 0
Asia Pacific 1.1 (1) 1 (4) 2 0
Canada, Mexico,
S. America 0.7 (9) 2 (2) (9) 0
15
Form 10-Q
. U.S. first quarter sales volume declined 13 percent versus
2000 including a 4 percent adverse impact from
Pharmaceuticals, in addition to lower volumes of fibers,
automotive finishes, and white pigments.
. European volume was up 1 percent and local currency prices up
3 percent. However, the stronger dollar reduced European
sales by 7 percent.
. Asia Pacific sales decreased 1 percent, the first decline
since the economic downturn in 1998. Marginally higher volume
and local prices were more than offset by the negative impact
of weaker currencies, particularly the Japanese yen.
Including one-time items, net income was $495 million
versus $803 million in 2000, resulting in earnings per share of
$.47 compared to $.76 last year. The earnings decline reflects
significantly lower Pharmaceuticals results and reduced earnings
across the company's chemicals and materials segments. The
latter resulted principally from lower U.S. sales volumes,
higher raw material costs, and a stronger U.S. dollar.
Net income before one-time items was $567 million,
compared to $898 million in the first quarter of 2000, down $331
million or 37 percent. One-time items are described in the notes
to the accompanying financial statements and are summarized in
the table below:
$MM Pretax $MM After-Tax ($ Per Share)
----------- ------------- ------------
1Q 01 1Q 00 1Q 01 1Q 00 1Q 01 1Q 00
----- ----- ----- ------- ----- -----
Pioneer - In-Process R&D Revision 11 11 .01
Pioneer - Inventory Step-up (133) (347) (83) (215) (.08) (.20)
Asset Sale - Equity Securities 176 109 .10
Adoption of SFAS 133* 19 11 .01
---- ---- --- --- ---- ----
1/st/ Quarter - Total (114) (160) (72) (95) (.07) (.09)
==== ==== === === ==== ====
* Reflects the cumulative effect of a change in accounting
principle. Effective January 1, 2001, the company adopted
SFAS 133 -"Accounting for Derivative Instruments and Hedging
Activities," as amended.
(2) Segment Performance:
The following text compares first quarter 2001 results
with first quarter 2000, for sales and earnings of each segment,
excluding the earnings impact of the one-time items described in the
footnotes to the "Consolidated Segment Information" table at Note (b)
on page 6. Segment results include intersegment transfers and a pro
rata ownership share of the sales and earnings of equity affiliates.
. Agriculture & Nutrition - Sales declined 3 percent and ATOI
fell 23 percent reflecting lower earnings in both Crop
Protection and Nutrition & Health. Crop Protection earnings
were significantly affected by currency in Europe and Asia,
and by a litigation settlement. Nutrition & Health results
reflect high natural gas prices and weaker European volumes.
. Nylon Enterprise - Sales decreased 13 percent and ATOI
declined 86 percent, principally reflecting the impact of a
40 percent increase in raw material costs (largely natural
gas related), 15 percent lower volumes, and less favorable
product mix. Sales declines were principally due to lower
flooring and apparel volumes, particularly in the United
States.
16
Form 10-Q
. Performance Coatings & Polymers - Sales were 12 percent lower
than 2000 reflecting lower vehicle builds and lower refinish
sales in the United States, as well as the weak euro.
Increased raw material costs were a significant factor in
lower results in Engineering Polymers and Elastomers, in
addition to lower volumes. Segment ATOI declined 26 percent.
. Pharmaceuticals - The loss of $64 million was primarily due
to lower sales, as wholesaler inventories in the distribution
channel continue to be reduced. Underlying demand for
Sustiva(TM) efavirenz and Cardiolite(R) cardiac imaging agent
grew 15 percent, and the Coumadin(R) (warfarin sodium
tablets, USP) crystalline market position remains strong. The
DuPont share of U.S. operating profits for Cozaar(R)
(losartan) and Hyzaar(R) (losartan potassium) increased this
quarter as of February 1. R&D and marketing expenses
increased as planned. Major product sales are shown below:
1Q 2001 1Q 2000
------- -------
($ in millions)
Coumadin(R) $26 $100
Sustiva(TM) 55 96
Cardiolite(R)/Miraluma(TM) 18 40
. Pigments & Chemicals - ATOI declined 24 percent on 1 percent
lower sales reflecting lower earnings in all strategic
business units. Three percent lower worldwide volume was
partly offset by 2 percent higher U.S. dollar prices. Segment
earnings were negatively affected by high chlorine and energy
costs in White Pigment & Mineral Products and by a litigation
settlement in DuPont Chemical Solutions Enterprise.
. Pioneer - Worldwide sales increased slightly, reflecting
strong early season sales in the United States and southern
Europe, partly offset by lower U.S. dollar prices due to the
weak euro. Earnings increased 17 percent reflecting improved
margins and a more favorable product mix.
. Polyester Enterprise - Sales were 4 percent lower, reflecting
continuing depressed conditions in worldwide fibers markets.
Margins continue to be reduced by lower prices and higher raw
material and energy costs, resulting in a first quarter loss
of $8 million.
. Specialty Fibers - Sales and ATOI were 5 percent and 22
percent lower, respectively. Continued earnings growth from
Advanced Fibers Systems only partly offset lower Lycra(R)
elastane earnings, which were adversely affected by lower
U.S. dollar prices, higher raw material costs, and lower
volume. Earnings for Nonwovens were essentially flat on
modestly higher sales.
. Specialty Polymers - ATOI increases in Fluoropolymers and the
Electronic Technologies unit of DuPont iTechnologies only
partly offset a decline in Packaging & Industrial Polymers
earnings resulting from lower volumes and higher ethane
costs. Results also declined in DuPont Surfaces and the
Imaging Technologies unit of DuPont iTechnologies. Segment
earnings decreased 21 percent on 5 percent lower sales.
17
Form 10-Q
(3) Outlook:
Based on demand signals observed in the first quarter in key
markets, the company now anticipates that the global economic slowdown
will similarly impact the manufacturing sector through the second
quarter and perhaps into the second half of 2001. In the second
quarter the company expects continued volume pressure due to
macroeconomic factors; stabilizing energy and raw material costs,
albeit at a higher level than second quarter last year; and normal
seasonality for its portfolio of businesses.
. The company expects second quarter volumes to remain below 2000
levels in the United States in its chemicals and materials
businesses, although sequential declines should moderate
considerably. In Europe and Asia, year-over-year volume growth is
approaching zero, and continued strength of the U.S. dollar will
likely result in negative revenue comparisons in the second
quarter.
. The agriculture related segments, as expected, are operating in a
difficult U.S. farm economy and experiencing negative currency
impacts during the first half selling season. In addition, poor
weather conditions in North America, together with high fertilizer
costs, are expected to result in lower corn acreage than last year.
Accordingly, the company expects the full-year operating outlook
for these segments will be moderately negative versus 2000.
. Pharmaceuticals segment sales and earnings should improve in the
second quarter, but ATOI losses are again expected. A return to
more normal levels of sales and earnings is expected in the second
half of the year.
The economic outlook for the second half of 2001 remains
uncertain. However, key indicators suggest that declines in U.S.
manufacturing and global automotive markets may be moderating. The
company is encouraged by these trends, but continues to plan for a
second half economy that is on balance, similarly challenging to the
second half of last year.
(b) Financial Condition
Three Months Ended
March 31
----------------
Selected Cash Flow Information 2001 2000
--------------------------------------------------- ------- -------
($ in millions)
Cash Provided by (Used for) Operations $(522) $ 335
Purchases of Property, Plant and Equipment (316) (434)
Proceeds from Sales of Assets 6 191
Dividends Paid to Stockholders (368) (369)
Acquisition of Treasury Stock (50) 0
Cash used for operations was $522 million for first quarter 2001 as
compared to cash provided by operations of $335 million for the same period in
2000. Net income plus noncash charges included in net income was $1.1 billion
this year, down from $1.4 billion last year reflecting a $308 million decrease
in net income in the quarter. Net operating assets and liabilities increased
$1.6 billion in first quarter 2001 as compared to an increase of $1.1 billion in
2000. The increase was primarily due to an increase in inventories in first
quarter this year, while inventories declined in first quarter last year.
Year-to-date purchases of property, plant and equipment were $316
million in 2001, as compared to $434 million spent in 2000. The lower spending
level reflects management's intent to limit full year 2001 total capital
spending, including purchases of property, plant and equipment, investments in
affiliates, and payments for businesses acquired, to about $1.8 billion for the
year.
18
Form 10-Q
Proceeds from the sale of assets in the first quarter of 2001 were $6
million. Proceeds from the sale of assets in the first quarter of 2000 were $191
million primarily reflecting the sale of certain available for sale securities
held by Pioneer.
The per share dividend paid to stockholders in first quarter 2001 and
2000 was $.35 per share. This rate has been in effect since second quarter 1998.
In each of 1997 and 1998, DuPont's Board of Directors approved programs
to purchase and retire up to 20 million shares of DuPont common stock to offset
dilution from shares issued under compensation programs. On July 26, 2000, the
company's Board of Directors approved an increase in the amount of shares
remaining to be purchased under the 1998 program from about 16 million shares to
the total number of shares of DuPont common stock which can be purchased for
$2.5 billion. The remaining purchases are not limited to those needed to offset
dilution from shares issued under compensation programs. Under the increased
July 2000 authorization, the company spent $50 million in first quarter 2001 to
purchase and retire 1.2 million shares. To date under the increased July 2000
authorization, the company has spent $262 million to purchase and retire 5.7
million shares. DuPont anticipates completing this program in 2002 and for it to
be largely funded through the monetization of nonstrategic assets.
Debt, including capital lease obligations, net of cash and cash
equivalents and marketable securities at March 31, 2001, was $9.5 billion, as
compared to $8.3 billion at year-end 2000. The increase in debt primarily
reflects the issuance of commercial paper. To increase the company's financial
flexibility, management's intent over the course of the year is to reduce debt
from the current level, ending the year with net debt below last year-end.
Management believes that the company's ability to generate cash from
operations and its capacity to issue short-term and long-term debt will be
adequate to meet anticipated future cash requirements to fund working capital,
capital spending, dividend payments and other cash needs in the foreseeable
future.
(c) Other Items
Targeted Reductions To Improve Competitiveness
----------------------------------------------
On April 2, 2001, the company announced it will further align resources
consistent with the specific missions of its individual businesses. These
actions will reduce the company's global employee workforce by about 4,000, or 4
percent. DuPont will also reduce the number of contract personnel by about 1,300
and shut down less competitive manufacturing assets.
Approximately 75 percent of the affected employees and contractors are
in the United States. Projected annual payroll savings, including reduction in
contractor costs, are on the order of $400 million pretax. DuPont expects to
achieve about one-third of the projected cost benefit in 2001, and substantially
all in 2002.
DuPont expects to take a one-time second quarter charge of
approximately 40-45 cents per share as a result of these actions. Roughly half
of this estimated charge will be for employee severance costs, with the
remainder principally for asset shutdowns and related dismantlement expenses.
Since plans are still being finalized, the actual one-time charge to earnings
will not be available until the end of the second quarter.
19
Form 10-Q
Exit From Benlate(R) Business
-----------------------------
On April 19, 2001, the company informed its customers around the world
that it will discontinue the manufacture of its fungicide benomyl and will phase
out sales of Benlate(R) in all its forms from the global market. No sales will
occur after December 31, 2001, and all product is expected to clear the channels
of trade by the end of 2002.
DuPont advised customers that this is not a product recall, but a
voluntary business decision based on a review of global market conditions and
other factors. The decision is part of the recently announced restructuring to
improve the overall competitiveness of its agricultural businesses.
Pioneer Roundup Ready(R) Soybean Activities
-------------------------------------------
In December 1999, the Monsanto Company filed suit in the U.S. District
Court for the Eastern District of Missouri against Pioneer claiming that its
merger with DuPont breached a 1992 license agreement granting Pioneer the right
to produce and market Roundup Ready(R) glyphosate tolerant soybeans. Monsanto
asked for damages for the breach and termination of the license. Monsanto's
complaint also alleged claims for patent infringement and trade secret
misappropriation if the license were terminated. On March 20, 2001, the court,
on motions for summary judgment, found that DuPont's acquisition of Pioneer
terminated the agreement. The court found no breach of contract and therefore
awarded no damages on this claim. It held that any claim for damages or other
relief Monsanto seeks will have to wait until the next phase of the litigation,
which involves Monsanto's patent infringement and trade secret allegations.
The court found that its determination involved controlling questions of
law as to which there is a substantial difference of opinion and that an
immediate appeal would advance the ultimate determination of this litigation.
Those questions involve whether Federal common law or state merger law should
control the transferability of patent licenses. The court has certified its
decision for immediate appeal to the U.S. Court of Appeals for the Federal
Circuit. Pioneer will pursue the appeal expeditiously. The company believes that
the appellate court will ultimately find that state merger law rather than
Federal common law controls in merger situations and therefore, that no
prohibited license transfer took place when DuPont acquired Pioneer. Pioneer has
also moved the district court to stay the next phase of the litigation pending
the outcome of the appeal since a favorable ruling on appeal will reinstate the
license and eliminate the infringement and trade secret claims.
On October 1, 1999, the company acquired the approximately 80 percent of
Pioneer not previously owned for $7,684 million. An intangible asset has been
recorded to recognize the value of the 1992 license agreement. Should the
ultimate outcome of this lawsuit be adverse to the company, the value of this
intangible asset may become impaired, resulting in a one-time noncash charge to
earnings. Management does not anticipate that the ultimate outcome of this
lawsuit will have a material adverse effect on the company's consolidated
financial position or liquidity, although it could be significant to the results
of operations of the Pioneer segment in the period recognized.
Purchased In-Process Research and Development
---------------------------------------------
Unanticipated technical hurdles have adversely impacted the Pioneer
research and development project to impart resistance to molds and mycotoxins
that was in process at the October 1, 1999, acquisition date. As a result, the
estimated completion date for the project, if successful, has been moved back to
2009 and the probability of technical and commercial success is now estimated at
40 percent. Failure to successfully complete this project would not have a
material adverse impact on the company's financial condition, results of
operations or liquidity. In addition, uncertainties with respect to regulatory
approval may delay commercialization of technologically successful trait and
technology projects by six to twelve months.
No other significant changes occurred during the first quarter 2001
with respect to in-process research and development projects related to the
company's acquisitions in prior years.
20
Form 10-Q
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Benlate(R)
- ---------
In 1991, DuPont began receiving claims by growers that use of
Benlate(R) 50 DF fungicide had caused crop damage. Based on the belief that
Benlate(R) 50 DF would be found to be a contributor to the claimed damage,
DuPont began paying crop damage claims. In 1992, after 18 months of extensive
research, DuPont scientists concluded that Benlate(R) 50 DF was not responsible
for plant damage reports received since March 1991. Concurrent with these
research findings, DuPont stopped paying claims. DuPont since has been served
with several hundred lawsuits most of which were disposed of by trial, dismissal
or settlement. Approximately 125 cases are pending. Most of these lawsuits were
filed by growers who allege plant damage from using Benlate(R) 50 DF, although
some include claims for alleged damage to shrimping operations from Benlate(R)
50 OD and a smaller number of cases include claims for alleged personal
injuries. Also, many of these cases include general allegations of fraud and
misconduct.
In addition, a securities fraud class action was filed in September
1995 by a shareholder in federal district court in Florida against the company
and the then-Chairman. This action is still pending. The plaintiff in this case
alleges that DuPont made false and misleading statements and omissions about
Benlate(R) 50 DF, with the alleged effect of inflating the price of DuPont's
stock between June 19, 1993, and January 27, 1995. This district court has
certified the case as a class action. Discovery is proceeding.
Certain plaintiffs who previously settled with the company have filed
cases alleging fraud and other misconduct relating to the litigation and
settlement of Benlate(R) 50 DF claims. Approximately 47 such cases are pending.
These cases are in various stages of proceedings in trial and appellate courts
in Florida and Hawaii.
On June 21, 2000, a jury in Texas state court awarded compensatory
damages of $10.3 million, prejudgment interest, and punitive damages of $90
million to two growers who claimed Benlate(R) 50 DF failed to protect their
melons and cantaloupe crops. Due to limitations on punitive damages in Texas,
the total award was reduced to approximately $35 million. DuPont and the
plaintiff have reached a settlement of all claims.
Pending against the company in state court in Broward County, Florida,
are 30 cases brought by Ecuadorian shrimp farmers alleging that Benlate(R) 50
OD, applied to banana plantations in Ecuador, ran off and was deposited in
plaintiffs' shrimp farms, causing massive numbers of shrimp to die. Two cases
were tried, in the fall of 2000 and in early 2001, which resulted in adverse
judgments of approximately $14 million and $16 million. The company has appealed
both cases. DuPont contends that the deaths of the shrimp are attributable to a
virus, Taura Syndrome Virus, and in no way involve Benlate(R) 50 OD.
DuPont continues to believe that Benlate(R) did not cause the damages
alleged in these cases and denies the allegations of fraud and misconduct.
DuPont intends to defend itself in ongoing matters and in any additional cases
that may be filed or reopened. The ultimate liabilities from the Benlate(R)
lawsuits discussed above may be significant to the company's results of
operations, particularly in the Crop Protection business, in the period
recognized, but management does not anticipate that they will have a material
adverse effect on the company's consolidated financial position or liquidity.
The company's balance sheet reflect accruals for estimated costs
associated with this matter. Adverse changes in estimates for such liabilities
could result in additional future charges.
21
Form 10-Q
Environmental Proceedings
- -------------------------
The Indiana Departments of Natural Resources and Environmental
Management and the United States Department of Interior are in the process of
conducting a natural resource damage assessment of the Grand Calumet River and
the Indiana Harbor Canal System under the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA) and the Oil Pollution Act (OPA). The
company owned a facility in East Chicago, Indiana, which discharged industrial
wastewater into these waterways. The company was identified as one of 17
potentially responsible parties (PRPs) for the cost of the assessment and any
determined natural resource damages. The trustees recently indicated that their
preferred remedy is to dredge the entire Grand Cal/Indiana Harbor system. DuPont
has joined with eight other PRPs to contest the remedy. A settlement offer has
been tendered to the trustees and negotiations are ongoing.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Business transacted at the annual meeting:
A total of 860,593,610 shares of common stock were voted in person or
by proxy at the annual meeting of stockholders on April 25, 2001, or 82.5
percent of the shares entitled to be voted. The following are the voting results
on proposals considered and voted upon at the meeting, all of which are
described in the proxy statement.
1. ELECTION OF DIRECTORS: The 12 nominees listed below were elected to
serve on the Board of Directors for the ensuring year. The vote
tabulation with respect to each nominee follows:
Votes Votes Cast Against
Director Cast For or Withheld
-------------- ----------- ---------------
A. J. P. Belda 851,405,763 9,187,847
C. J. Crawford 851,315,790 9,277,820
L. C. Duemling 851,084,365 9,509,245
E. B. du Pont 851,345,765 9,247,845
C. O. Holliday, Jr. 850,584,557 10,009,053
D. C. Hopkins 851,013,279 9,580,331
L. D. Juliber 851,377,939 9,215,671
G. Lindahl 851,335,753 9,257,857
M. Naitoh 851,075,494 9,518,116
W. K. Reilly 851,333,581 9,260,029
H. R. Sharp, III 851,031,792 9,561,818
C. M. Vest 851,536,147 9,057,463
2. RATIFICATION OF INDEPENDENT ACCOUNTANTS: The proposal to ratify the
appointment of PricewaterhouseCoopers LLP as independent accountants
for 2001 was approved by a vote of 838,315,829 shares for, 17,068,036
shares against, and 5,209,745 abstentions and broker nonvotes.
3. POLITICAL NONPARTISANSHIP: A stockholder proposal recommending that
DuPont affirm its political nonpartisanship was defeated by a vote of
638,581,241 shares against, 36,001,198 for, and 186,011,171 abstentions
and broker nonvotes.
22
Form 10-Q
4. EMPLOYMENT MATTERS: A stockholder proposal requesting the Board of
Directors prepare a report in response to the Glass Ceiling
Commission's business recommendations was defeated by a vote of
613,534,210 shares against, 57,160,583 shares for, and 189,898,817
abstentions and broker nonvotes.
5. PLANT CLOSURE: A stockholder proposal that DuPont create a committee to
report to the Board of Directors regarding the impact to communities as
a result of the closure of DuPont plants and alternatives that can be
developed to help mitigate the impact of such closures in the future
was defeated by a vote of 641,115,715 shares against, 34,300,116 shares
for, and 185,177,779 abstentions and broker nonvotes.
6. INTERNATIONAL WORKPLACE STANDARDS: A stockholder proposal that DuPont
adopt, implement and enforce the workplace Code of Conduct as based on
the International Labor Organization's Conventions 29, 87, 98, 100,
105, 111, 135 and 138 on workplace human rights was defeated by a vote
of 610,686,987 share against, 55,383,923 shares for, and 194,522,700
abstentions and broker nonvotes.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibit index filed with this Form 10-Q is on pages 26 and 27.
(b) Reports on Form 8-K
1. On January 24, 2001, a Current Report on Form 8-K, pursuant
to Regulation FD, was filed in connection with Debt and/or
Equity Securities that may be offered on a delayed or
continuous basis under Registration Statements on Form S-3
(No. 33-53327, No. 33-61339, No. 33-60069, and No.
333-86363). Under Item 5, "Other Events," the Registrant
filed a news release, dated January 24, 2001, entitled
"DuPont Reports Fourth Quarter And Full-Year 2000 Earnings."
2. On March 26, 2001, a Current Report on Form 8-K, pursuant to
Regulation FD, was filed in connection with Debt and/or
Equity Securities that may be offered on a delayed or
continuous basis under Registration Statements on Form S-3
(No. 33-53327, No. 33-61339, No. 33-60069, and No.
333-86363). Under Item 5, "Other Events," the Registrant
filed a news release, dated March 21, 2001, entitled "DuPont
Reaffirms Pioneer Hi-Bred Ability To Market Roundup Ready(R)
Soybeans And Roundup Ready Canola(R)."
3. On April 2, 2001, a Current Report on Form 8-K, pursuant to
Regulation FD, was filed in connection with Debt and/or
Equity Securities that may be offered on a delayed or
continuous basis under Registration Statements on Form S-3
(No. 33-53327, No. 33-61339, No. 33-60069, and No.
333-86363). Under Item 5, "Other Events," the Registrant
filed a news release, dated April 2, 2001, entitled "DuPont
Plans Targeted Reductions To Improve Competitiveness."
4. On April 19, 2001, a Current Report on Form 8-K, pursuant to
Regulation FD, was filed in connection with Debt and/or
Equity Securities that may be offered on a delayed or
continuous basis under Registration Statements on Form S-3
(No. 33-53327, No. 33-61339, No. 33-60069, and No.
333-86363). Under Item 5, "Other Events," the Registrant
filed a news release, dated April 19, 2001, entitled "DuPont
To Phase Out Sale Of Benlate(R)."
23
Form 10-Q
5. On April 24, 2001, a Current Report on Form 8-K, pursuant to
Regulation FD, was filed in connection with Debt and/or
Equity Securities that may be offered on a delayed or
continuous basis under Registration Statements on Form S-3
(No. 33-53372, No. 33-61339, No. 33-60069, and No.
333-86363). Under Item 5, "Other Events," the Registrant
filed a news release, dated April 24, entitled "DuPont
Reports First Quarter 2001 Earnings."
24
Form 10-Q
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
E. I. DU PONT DE NEMOURS AND COMPANY
(Registrant)
Date: May 10, 2001
------------------------------------
By /s/ Gary M. Pfeiffer
---------------------------------------
Gary M. Pfeiffer
Senior Vice President - DuPont Finance
(As Duly Authorized Officer and Principal
Financial and Accounting Officer)
25
Form 10-Q
EXHIBIT INDEX
Exhibit
Number Description
------ -----------------------------------------------------------------
3.1 Company's Restated Certificate of Incorporation, filed May 29,
1997 (incorporated by reference to the company's filing on Form
8-K on June 13, 1997.)
3.2 Company's Bylaws, as last revised January 1, 1999 (incorporated
by reference to Exhibit 3.2 of the company's Annual Report on
Form 10-K for the year ended December 31, 1998).
4 The company agrees to provide the Commission, on request, copies
of instruments defining the rights of holders of long-term debt
of the company and its subsidiaries.
10.1* Company's Corporate Sharing Plan, as last amended August 28, 1991
(incorporated by reference to Exhibit 10.1 of the company's
Annual Report on Form 10-K for the year ended December 31, 1996).
10.2* The DuPont Stock Accumulation and Deferred Compensation Plan, as
last amended April 29, 1998 (incorporated by reference to Exhibit
10.3 of the company's Quarterly Report on Form 10-Q for the
period ended March 31, 1998).
10.3* Company's Supplemental Retirement Income Plan, as last amended
effective June 4, 1996 (incorporated by reference to Exhibit 10.3
of the company's Annual Report on Form 10-K for the year ended
December 31, 1996).
10.4* Company's Pension Restoration Plan, as last amended effective
June 4, 1996 (incorporated by reference to Exhibit 10.4 of the
company's Annual Report on Form 10-K for the year ended December
31, 1996).
10.5* Company's Stock Performance Plan, as last amended effective
January 28, 1998 (incorporated by reference to Exhibit 10.1 of
the company's Quarterly Report on Form 10-Q for the period ended
March 31, 1998).
10.6* Company's Variable Compensation Plan, as last amended effective
April 30, 1997 (incorporated by reference to Exhibit 10.7 of the
company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997).
10.7* Company's Salary Deferral & Savings Restoration Plan, as last
amended September 20, 2000, effective January 1, 2000.
10.8* Company's 1995 Corporate Sharing Plan, adopted by the Board of
Directors on January 25, 1995 (incorporated by reference to
Exhibit 10.8 of the company's Annual Report on Form 10-K for the
year ended December 31, 1999).
10.9* Company's 1997 Corporate Sharing Plan, adopted by the Board of
Directors on January 29, 1997 (incorporated by reference to
Exhibit 10.11 of the company's Annual Report on Form 10-K for the
year ended December 31, 1996).
- ------------------------------------------
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Form 10-Q.
26
Form 10-Q
EXHIBIT INDEX
(continued)
Exhibit
Number Description
------ -----------------------------------------------------------------
10.10* Company's Retirement Income Plan for Directors, as last amended
August 1995 (incorporated by reference to Exhibit 10.12 of the
company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997).
10.11* Letter Agreement and Employee Agreement, dated as of April 22,
1999, between the company and R. R. Goodmanson (incorporated by
reference to Exhibit 10.11 of the company's Annual Report on Form
10-K for the year ended December 31, 1999).
10.12 Company's Tax Sharing Agreement dated October 27, 1998, by and
among the company and Conoco Inc., formerly known as Conoco
Energy Company (incorporated by reference to Exhibit 10.13 of the
company's Annual Report on Form 10-K for the year ended December
31, 1998).
12 Computation of Ratio of Earnings to Fixed Charges.
- --------------------------------------
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Form 10-Q.
27
Form 10-Q
Exhibit 10.7
SALARY DEFERRAL & SAVINGS RESTORATION PLAN
Originally Adopted - April 26, 1994
As Last Amended September 20, 2000, Effective January 1, 2000
E. I. du Pont de Nemours and Company
28