-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CNGjok7yjgE56v2NJTkQvfCZZQLmLmSFq/2lLeBJUhj1exlpuvNcGoVEjdovdQ7L HUl39EgRc1/F+mSsa/rRBA== 0000950109-97-002379.txt : 19970325 0000950109-97-002379.hdr.sgml : 19970325 ACCESSION NUMBER: 0000950109-97-002379 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970324 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DUPONT E I DE NEMOURS & CO CENTRAL INDEX KEY: 0000030554 STANDARD INDUSTRIAL CLASSIFICATION: PLASTIC MAIL, SYNTH RESIN/RUBBER, CELLULOS (NO GLASS) [2820] IRS NUMBER: 510014090 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00815 FILM NUMBER: 97561243 BUSINESS ADDRESS: STREET 1: 1007 MARKET ST CITY: WILMINGTON STATE: DE ZIP: 19898 BUSINESS PHONE: 3027741000 10-K 1 FORM 10-K 1996 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1996 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 IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 1007 MARKET STREET WILMINGTON, DELAWARE 19898 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 302-774-1000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT (EACH CLASS IS REGISTERED ON THE NEW YORK STOCK EXCHANGE, INC.): TITLE OF EACH CLASS COMMON STOCK ($.60 PAR VALUE) PREFERRED STOCK (WITHOUT PAR VALUE-CUMULATIVE) $4.50 SERIES $3.50 SERIES 6% DEBENTURES DUE 2001 NO SECURITIES ARE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT. ---------------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] 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 [_]. Aggregate market value of voting stock held by nonaffiliates of the registrant (excludes outstanding shares beneficially owned by directors and officers; and shares held by DuPont's Flexitrust) as of March 7, 1997, was approximately $63.2 billion. As of such date, 565,696,946 shares (excludes 13,345,779 shares held by DuPont's Flexitrust) of the company's common stock, $.60 par value, were outstanding. DOCUMENTS INCORPORATED BY REFERENCE (SPECIFIC PAGES INCORPORATED ARE INDICATED UNDER THE APPLICABLE ITEM HEREIN):
INCORPORATED BY REFERENCE IN PART NO. --------------------- The company's 1996 Annual Report to Stockholders........ I, II, and IV The company's Proxy Statement, dated March 21, 1997, in connection with the Annual Meeting of Stockholders to be held on April 30, 1997.............................. III
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- E. I. DU PONT DE NEMOURS AND COMPANY ---------------- The terms "DuPont" or the "company" as used herein refer to E. I. du Pont de Nemours and Company and its consolidated subsidiaries (which are wholly owned or majority-owned), or to E. I. du Pont de Nemours and Company, as the context may indicate. ---------------- TABLE OF CONTENTS
PAGE ---- PART I Item 1. Business................................................... 3 Item 2. Properties................................................. 6 Item 3. Legal Proceedings.......................................... 12 Item 4. Submission of Matters to a Vote of Security Holders........ 15 Executive Officers of the Registrant....................... 15 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters........................................ 16 Item 6. Selected Financial Data.................................... 16 Item 7. Management's Discussion and Analysis of Financial Condition Results of Operations...................................... 16 Item 8. Financial Statements and Supplementary Data................ 17 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure................................... 17 PART III Item 10. Directors and Executive Officers of the Registrant......... 17 Item 11. Executive Compensation..................................... 17 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................. 17 Item 13. Certain Relationships and Related Transactions............. 17 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................................... 18 Signatures............................................................ 20
NOTE ON INCORPORATION BY REFERENCE Throughout this report, various information and data are incorporated by reference to portions of the company's 1996 Annual Report to Stockholders (those portions are hereinafter referred to as Exhibit 13). Any reference in this report to disclosures in Exhibit 13 shall constitute incorporation by reference of that specific material into this Form 10-K. 2 PART I ITEM 1. BUSINESS DuPont was founded in 1802 and was incorporated in Delaware in 1915. DuPont is the largest chemical company in the world. The company conducts fully integrated petroleum operations primarily through its wholly owned subsidiary Conoco Inc. and, in 1996, ranked ninth in the worldwide production of petroleum liquids by U.S.-based companies, tenth in the production of natural gas, and seventh in refining capacity. Conoco Inc. and other subsidiaries and affiliates of DuPont conduct exploration, production, mining, manufacturing or selling activities, and some are distributors of products manufactured by the company. The company operates globally through approximately 20 strategic business units. Within the strategic business units approximately 80 businesses manufacture and sell a wide range of products to many different markets, including the energy, transportation, textile, construction, automotive, agricultural, printing, health care, packaging and electronics markets. During 1996, the company essentially completed repayment of the $8.3 billion of debt incurred to fund the 1995 redemption of 156 million DuPont common shares beneficially owned by The Seagram Company Ltd., and it repurchased for $504 million the 156 million warrants issued to Seagram. Also in 1996, the company divested essentially all of its medical products businesses, sold 30% of its photomasks business through an initial public offering, and entered into a 50-50 joint venture for its elastomers business with The Dow Chemical Company. The company and its subsidiaries have operations in about 70 nations worldwide and, as a result, about 50% of consolidated sales are derived from sales outside the United States, based on the location of the customer. Total worldwide employment at year-end 1996 was about 97,000 people. The company is organized for financial reporting purposes into six principal industry segments--Chemicals, Fibers, Life Sciences, Polymers, Petroleum, and Diversified Businesses. The following information describing the businesses of the company can be found on the indicated pages of Exhibit 13:
ITEM PAGE(S) ---- ------- Discussion of Business Developments in 1996: Letter to Stockholders............................................... 1-3* Industry Segment Reviews: Business Discussions, Principal Products and Principal Markets: Chemicals........................................................... 14 Fibers.............................................................. 15 Life Sciences....................................................... 16-17 Polymers............................................................ 17-18 Petroleum........................................................... 18-19 Diversified Businesses.............................................. 20 Sales, Transfers, Operating Profit, After-Tax Operating Income, and Identifiable Assets for 1996, 1995, and 1994........................ 49-50 Geographic Information: Sales, Transfers, After-Tax Operating Income, Identifiable Assets, and U.S. Export Sales for 1996, 1995, and 1994...................... 48 Revenues by Product Class (See footnote 1 on page 50 of Exhibit 13).... 50
- -------- * Includes text of letter except for photograph and related caption on page 2 and the chart on page 3. 3 SOURCES OF SUPPLY The company utilizes numerous firms as well as internal sources to supply a wide range of raw materials, energy, supplies, services and equipment. To assure availability, the company maintains multiple sources for most raw materials, including hydrocarbon feedstocks, and for fuels. Large volume purchases are generally procured under competitively priced supply contracts. A majority of sales in the Chemicals, Fibers, and Polymers segments' businesses is dependent on hydrocarbon feedstocks derived from crude oil and natural gas. Current hydrocarbon feedstock requirements are met by Conoco and other major oil companies. A joint venture with OxyChem, a subsidiary of Occidental Petroleum Corporation, manufactures and supplies a significant portion of the company's requirements for ethylene glycol. A joint venture with subsidiaries of RWE AG supplies a majority of the company's requirements for coal. The major purchased commodities, raw materials, and supplies for the following industry segments in 1996 are listed below:
DIVERSIFIED CHEMICALS FIBERS BUSINESSES POLYMERS - ------------------- ------------------- ------------------- ------------------- acetylene adipic acid aluminum acetic acid benzene ammonia ethylene glycol butadiene caustic soda butadiene gold caustic soda chlorine cyclohexane palladium/platinum chlorine chloroform ethylene glycol paraxylene ethane cyclohexane isophthalic acid silver fiberglass fluorspar natural gas packaging materials methanol hydrofluoric acid nitrogen methacrylates methanol packaging materials nitrogen oxygen/nitrogen paraxylene packaging materials packaging materials polyethylene LIFE SCIENCES pigments perchloroethylene ------------------- polyethylene propylene bromacil sulfur cyanuric chloride titanium ores metribuzin packaging materials
In the Petroleum segment, the major commodities and raw materials purchased are the same as those produced. Approximately 57% of the crude oil processed in the company's U.S. refineries in 1996 came from U.S. sources. In 1996, the company's refineries outside the United States processed principally North Sea, Russian, and Middle East crude oils. In addition, during 1996, the company consumed substantial amounts of electricity and natural gas for energy. PATENTS AND TRADEMARKS The company owns and is licensed under various patents, which expire from time to time, covering many products, processes and product uses. No individual patent is of material importance to any of the industry segments, although taken as a whole, the rights of the company and the products made and sold under patents and licenses are important to the company's business. During 1996, the company was granted 414 U.S. and 2,100 non-U.S. patents. The company also has approximately 2,000 individual trademarks and brands for its products and services which are registered in various countries throughout the world. Ownership rights in trademarks continue indefinitely if the trademarks are continued in use and properly protected. 4 SEASONALITY In general, sales of the company's products are not substantially affected by seasonality. However, the Life Sciences segment is impacted by seasonality of sales of agricultural products with highest sales in the first half of the year, particularly the second quarter. Within the Petroleum segment, the mix of refined products, natural gas and natural gas liquids produced and sold varies because of increased demand for gasoline in the summer months and natural gas, heating oil and propane during the winter months. MAJOR CUSTOMERS The company's sales are not materially dependent on a single customer or small group of customers. The Fibers and Polymers segments, however, have several large customers in their respective industries that are important to these segments' operating results. COMPETITION Principal competitors in the chemical industry include major chemical companies based in the United States, Europe, Japan, China and other Asian nations. Competitors offer a comparable range of products from agricultural, commodity and specialty chemicals to plastics and fibers products. The company also competes in certain product markets with smaller, more specialized firms. Principal competitors in the petroleum industry are integrated oil companies (including national oil companies), many of which also have substantial petrochemical operations, and a variety of other firms including independent oil and gas producers, pipeline companies, and large and small refiners and marketers. In addition, the company competes with the growing petrochemical operations in oil-producing countries. Businesses in the Chemicals, Fibers, Life Sciences, Polymers, and Diversified Businesses segments compete on a variety of factors such as price, product quality or specifications, customer service and breadth of product line, depending on the characteristics of the particular market involved. The Petroleum segment business is highly price-competitive and competes on quality and reliability of supply as well. Further information relating to competition is included in two areas of Exhibit 13: (1) the "Letter to Stockholders" (under "Growth Will Be Global") on page 2 and (2) Industry Segment Reviews on pages 14-20. RESEARCH AND DEVELOPMENT The company performs research and development at more than 75 sites worldwide. In the United States, research is conducted at over 40 sites in 18 states at either dedicated research facilities or manufacturing plants. The highest concentration of research is carried out at several large research centers in and around Wilmington, Delaware, which supports strategic business units in the Chemicals, Fibers, Life Sciences, Polymers, and Diversified Businesses segments. Among these, the Experimental Station laboratories engage in exploratory and applied research, the Chestnut Run laboratories focus on applications research, and the Stine-Haskell Research Center conducts agricultural product research and toxicological research on company products to assure they are safe for manufacture and use. The company conducts research related to petroleum operations as well as other segments of the business at its Ponca City, Oklahoma, facility. DuPont also operates an increasing number of research facilities at locations outside the United States in countries such as Belgium, Canada, France, Germany, Japan, Luxembourg, Mexico, The Netherlands, Spain, Switzerland and the United Kingdom, reflecting the company's growing global interests. Research and development activities include studies to advance scientific knowledge in fields of interest to the company, basic and applied work both to support and improve existing products and processes and identify new products and processes, and scouting works to identify and develop new business opportunities in relevant fields. Each strategic business unit of the company funds research and development activities to support its 5 business mission. The corporate laboratories are responsible for assuring that leading edge science and engineering concepts are identified and diffused throughout the DuPont technical community. All R&D activities are coordinated by senior R&D management through a corporate technology council to ensure that technical activities are consistent with business and corporate plans, and that the core technical competencies underlying DuPont's current and future businesses remain healthy and continue to provide competitive advantages. Further information regarding research and development is in Exhibit 13 on page 2 of the "Letter to Stockholders" (under "Innovation: Research is Key"). Annual research and development expense and such expense shown "As Percent of Sales" for the five years 1992 through 1996 are included under the heading "General" of the Five-Year Financial Review on page 58 of Exhibit 13. ENVIRONMENTAL MATTERS Information relating to environmental matters is included in three areas of Exhibit 13: (1) the "Letter to Stockholders" (under "Results On All Fronts") on page 3, (2) "Management's Discussion and Analysis" on pages 25-27; and (3) Notes 1 and 25 to the Financial Statements on pages 33-34 and 47. RISKS ATTENDANT TO FOREIGN OPERATIONS The company's petroleum exploration and production operations outside the United States are exposed to risks due to possible actions by host governments such as increases or variations in tax and royalty payments, participation in the company's concessions, limited or embargoed production, mandatory exploration or production controls, nationalization and export controls. Civil unrest and changes in government are also potential hazards. The profitability of the company's exploration and production operations is similarly exposed to risks due to actions of the United States government through tax legislation, executive order, and commercial restrictions. Actions by both the United States and host governments have affected operations significantly in the past and may continue to impact operations in the future. ITEM 2. PROPERTIES The company owns and operates manufacturing, processing, production, refining, marketing, and research and development facilities worldwide. In addition, the company owns and leases petroleum properties worldwide. DuPont's corporate headquarters is located in Wilmington, Delaware, and the company's petroleum businesses are headquartered in Houston, Texas. In addition, the company operates sales offices, regional purchasing offices, distribution centers, and various other specialized service locations. Further information regarding properties is included in Exhibit 13 in the Industry Segment Reviews on pages 14-20. Information regarding research and development facilities is incorporated by reference to Item 1, Business-- Research and Development on pages 5 and 6 of this report. Additional information with respect to the company's property, plant and equipment, and leases is contained in Notes 10 and 25 to the company's consolidated financial statements on pages 37 and 47 of Exhibit 13. CHEMICALS, FIBERS, LIFE SCIENCES, POLYMERS, AND DIVERSIFIED BUSINESSES Approximately 75% of the property, plant and equipment related to operations in the Chemicals, Fibers, Life Sciences, Polymers, and Diversified Businesses is located in the United States and Puerto Rico. This 6 investment is located at some 70 sites, principally in Texas, Delaware, Virginia, North Carolina, Tennessee, West Virginia, South Carolina, and New Jersey. The principal locations within these states are as follows:
TEXAS DELAWARE VIRGINIA NORTH CAROLINA - ---------------- ------------------ ------------------ ---------------------- Beaumont, Edge Moor, Newark Front Royal, Fayetteville, Kinston, Corpus Christi, and Seaford James River, Raleigh and Wilmington LaPorte, Orange Martinsville, and Victoria Richmond and Waynesboro TENNESSEE WEST VIRGINIA SOUTH CAROLINA NEW JERSEY - ---------------- ------------------ ------------------ ---------------------- Chattanooga, Belle, Martinsburg Camden, Charleston Deepwater and Memphis, and Parkersburg and Florence Parlin New Johnsonville and Old Hickory
Property, plant and equipment outside the United States and Puerto Rico is located at about 70 sites, principally in Canada, Germany, the United Kingdom, The Netherlands, Luxembourg, Singapore, Spain, Mexico, Taiwan, France, Brazil, Japan, China, Belgium, Argentina and Republic of Korea. Products from more than one business are frequently produced at the same location. The company's plants and equipment are well maintained and in good operating condition. Sales as a percent of capacity were 88% in 1996, 86% in 1995, and 87% in 1994. These properties are directly owned by the company except for some auxiliary facilities and miscellaneous properties, such as certain buildings and transportation equipment, which are leased. Although no title examination of the properties has been made for the purpose of this report, the company knows of no material defects in title to any of these properties. PETROLEUM BUSINESSES The company owns and leases oil and gas properties worldwide. Exploration, production, and natural gas and gas products properties are described generally on pages 18-19 and 51-56 of Exhibit 13. Estimated proved reserves of oil and gas are found on pages 53 and 54 of Exhibit 13. Information regarding the company's refining, marketing, supply, and transportation properties is also provided on pages 18-19 of Exhibit 13. 7 PETROLEUM PRODUCTION The following tables show the company's interests in petroleum liquids production and natural gas deliveries. Petroleum liquids production comprises crude oil and condensate produced for the company's account plus its share of natural gas liquids (NGL's) removed from natural gas deliveries from owned leases and NGL's acquired through gas plant ownership. Natural gas deliveries represent Conoco's share of deliveries from leases in which the company has an ownership interest.
1996 1995 1994 --------- --------- --------- (THOUSANDS OF BARRELS DAILY) Petroleum Liquids Production Consolidated Companies Crude Oil, Condensate, and Natural Gas Liquids from Owned Reserves: United States................................. 82 83 94 Europe........................................ 182 143 160 Other Regions................................. 88 98 109 --------- --------- --------- Subtotal.................................... 352 324 363 Natural Gas Liquids from Gas Plant Ownership: United States................................. 67 65 57 --------- --------- --------- Total Production--Consolidated Operations... 419 389 420 Share of Equity Affiliates Crude Oil, Condensate, and Natural Gas Liquids from Owned Reserves............................ 13 12 4 Natural Gas Liquids from Gas Plant Ownership.... 13 13 12 --------- --------- --------- Total Production--Equity Affiliates......... 26 25 16 --------- --------- --------- Total Petroleum Liquids Production.......... 445 414 436 ========= ========= ========= (MILLION CUBIC FEET DAILY) Natural Gas Deliveries Consolidated Companies Natural Gas Deliveries from Owned Reserves: United States................................. 828 832 871 Europe........................................ 416 341 398 Other Regions................................. 41 31 44 --------- --------- --------- Total Deliveries--Consolidated Operations... 1,285 1,204 1,313 Share of Equity Affiliates Natural Gas Deliveries from Owned Reserves: United States................................. 24 38 34 --------- --------- --------- Total Natural Gas Deliveries................ 1,309 1,242 1,347 ========= ========= =========
8 AVERAGE PRODUCTION COSTS AND SALES PRICES The following table presents data as prescribed by the Securities and Exchange Commission (SEC). Accordingly, the unit costs do not include income taxes and exploration, development, and general overhead costs. Since these excluded costs are material, the following data should not be interpreted as measures of profitability or relative profitability. See Results of Operations for Oil and Gas Producing Activities on page 51 of Exhibit 13 for a more complete disclosure of revenues and expenses. See also the references to crude oil and natural gas prices and volumes in business review of the Petroleum segment on pages 18-19 of Exhibit 13.
UNITED OTHER STATES EUROPE REGIONS ------ ------ ------- (U.S. DOLLARS) For the year ended December 31, 1996 Average production costs per barrel equivalent of petroleum produced(a)................................. $ 4.11 $ 3.95 $ 2.08 Average sales prices of produced petroleum(b) Per barrel of crude oil and condensate sold........... 18.68 20.94 19.47 Per thousand cubic feet (MCF) of natural gas sold..... 1.90 2.92 1.24 For the year ended December 31, 1995 Average production costs per barrel equivalent of petroleum produced(a)................................. 3.78 4.55 2.08 Average sales prices of produced petroleum(b) Per barrel of crude oil and condensate sold........... 15.53 16.95 16.56 Per MCF of natural gas sold........................... 1.44 2.96 1.13 For the year ended December 31, 1994 Average production costs per barrel equivalent of petroleum produced(a)................................. 3.99 4.37 1.62 Average sales prices of produced petroleum(b) Per barrel of crude oil and condensate sold........... 13.36 15.65 15.18 Per MCF of natural gas sold........................... 1.78 2.90 1.61
- -------- (a) Average production costs per barrel of equivalent liquids, with natural gas converted to liquids at a ratio of 6 MCF of gas to one barrel of liquids. (b) Excludes proceeds from sales of interest in oil and gas properties. PRESENT ACTIVITIES
TOTAL UNITED OTHER WORLDWIDE STATES EUROPE REGIONS --------- ------ ------ ------- (NUMBER OF WELLS) At December 31, 1996 Number of wells drilling* Gross........................................ 24 9 12 3 Net.......................................... 8 5 2 1 Number of productive wells** Oil wells--gross............................. 9,013 8,453 238 322 --net.................................... 3,004 2,853 21 130 Gas wells--gross............................. 7,601 7,433 122 46 --net.................................... 3,207 3,116 27 64
- -------- * Includes wells being completed. ** Approximately 92 gross (31 net) oil wells and 689 gross (226 net) gas wells, all in the United States, have multiple completions. 9 DEVELOPED AND UNDEVELOPED PETROLEUM ACREAGE
TOTAL UNITED OTHER WORLDWIDE STATES EUROPE REGIONS --------- ------ ------ ------- (THOUSANDS OF ACRES) At December 31, 1996 Developed acreage Gross........................................ 7,578 2,729 1,084 3,765 Net.......................................... 3,390 1,610 313 1,467 Undeveloped acreage Gross........................................ 100,106 2,704 5,505 91,897 Net.......................................... 61,226 1,998 2,317 56,911
NET EXPLORATORY AND DEVELOPMENT WELLS DRILLED
TOTAL UNITED OTHER WORLDWIDE STATES EUROPE REGIONS --------- ------ ------ ------- (NUMBER OF NET WELLS COMPLETED) For the year ended December 31, 1996 Exploratory--productive...................... 42.8 1.6 2.0 39.2 --dry................................... 20.5 10.3 4.0 6.2 Development--productive...................... 89.9 73.1 6.1 10.7 --dry................................... 17.3 13.5 0.3 3.5 For the year ended December 31, 1995 Exploratory--productive...................... 34.2 12.8 1.4 20.0 --dry................................... 38.2 22.1 4.9 11.2 Development--productive...................... 109.5 94.3 8.0 7.2 --dry................................... 13.7 10.7 0.0 3.0 For the year ended December 31, 1994 Exploratory--productive...................... 23.8 16.2 2.8 4.8 --dry................................... 39.3 30.0 1.7 7.6 Development--productive...................... 116.4 88.7 5.5 22.2 --dry................................... 14.3 13.3 0.0 1.0
ESTIMATES OF TOTAL PROVED RESERVES FILED WITH OTHER FEDERAL AGENCIES COVERING THE YEAR 1996 The company is not required to file, and has not filed on a recurring basis, estimates of its total proved net oil and gas reserves with any U.S. or non- U.S. governmental regulatory authority or agency other than the Department of Energy (DOE) and the SEC. The estimates furnished to the DOE have been consistent with those furnished to the SEC. They are not necessarily directly comparable, however, due to special DOE reporting requirements such as requirements to report in some instances on a gross, net or total operator basis, and requirements to report in terms of smaller units. In no instance have the estimates for the DOE differed by more than 5% from the corresponding estimates reflected in total reserves reported to the SEC. NATURAL GAS AND GAS PRODUCTS Upstream operations in the United States include consolidated interests in 27 natural gas processing plants located in Colorado, Louisiana, New Mexico, Oklahoma and Texas. Eighteen of the plants are operated by the company. The company's share of total natural gas liquids production (NGL) from the 27 plants averaged 67,489 barrels per day (BPD) in 1996 and 65,875 BPD in 1995. Additional NGL production volumes of 19,279 BPD in 1996 and 13,079 BPD in 1995 are attributable to Conoco equity gas processed in third-party-operated plants. Conoco's 50% owned equity affiliate, C&L Processors Partnership, has seven natural gas processing plants in 10 Oklahoma and Texas, and the company's pro rata share of NGL production was 7,926 BPD in 1996 and 8,102 BPD in 1995. Other natural gas and gas products facilities in the United States include an 800-mile intrastate natural gas pipeline system in Louisiana operated by Conoco's 100% owned subsidiary Louisiana Gas System, Inc., natural gas and natural gas liquids pipelines in several states, two underground NGL storage facilities, a 19,000 BPD natural gas liquids fractionating plant in Gallup, New Mexico, a 22.5% equity interest in a 104,000 BPD natural gas liquids fractionating plant in Mt. Belvieu, Texas, owned by affiliated Gulf Coast Fractionators, and a 75% equity interest in the Pocahontas Gas Partnership that gathers, treats, and markets coal bed methane associated with coal mines in Virginia. Outside the United States, the company's Conoco (U.K.) Limited subsidiary operates a 50% owned gas processing facility at Theddlethorpe, England. Kinetica, a 50% joint venture between Conoco (U.K.) and electricity generator PowerGen, transports and markets natural gas in England. Phoenix Park Gas Processors, a 41% owned equity affiliate, operates a natural gas plant at Point Lisas, Trinidad, of which Conoco's share of production was 4,936 BPD in 1996 and 4,185 BPD in 1995. REFINING The company currently owns and operates four refineries in the United States located at Lake Charles, Louisiana; Ponca City, Oklahoma; Billings, Montana; and Denver, Colorado. The company also owns and operates the Humber refinery in England and owns a 16.33% interest in two refineries in the Czech Republic. Conoco also owns a 40% interest in a company that is constructing a 100,000 barrel-per-day refinery near the city of Melaka, Malaysia, with completion scheduled for 1997. During 1996, a refinery in Karlsruhe, Germany, in which Conoco has a 25% interest, reached an agreement to integrate its operations with an adjacent refinery. Conoco's interest in the combined refining complex will be 18.75% upon completion of the integration. It is anticipated the integration will be completed in 1997. Capacities at year-end 1996 as well as inputs processed during 1996 are summarized in the following table:
TOTAL UNITED UNITED CZECH WORLDWIDE STATES KINGDOM GERMANY* REPUBLIC** --------- ------ ------- -------- ---------- (THOUSANDS OF BARRELS DAILY) At December 31, 1996 Refinery crude oil and condensate distillation capacity (excluding additional feedstocks input to other refinery units)................ 708 491 146 43 28 For the year ended December 31, 1996 Inputs proc- essed Crude oil and condensate....... 615 425 121 47 22 Additional feedstocks input to other refinery units.......... 117 26 76 14 1
- -------- * Represents 25% interest in the Karlsruhe refinery. ** Represents 16.33% interest in two Czech Republic refineries. Utilization of refinery capacity depends on the market demand for petroleum products, availability of crude oil and other feedstocks, and the economics of converting crude oil into refined products. MARKETING In the United States, the company sells refined products at retail in 34 states, principally under the "Conoco" brand. In addition, the company markets a wide range of products other than at retail in all 50 states and the District of Columbia. Refined products are also sold in Austria, Germany and the United Kingdom under the "Jet" and "Conoco" brands; in Belgium, France and Luxembourg under the "Seca" brand; and in Switzerland under the "OK Coop" brand. The "Jet" brand is used for marketing in the Czech Republic, 11 Denmark, Finland, Hungary, Norway, Poland, Slovakia, Spain, Sweden and Thailand. A joint venture in Turkey markets under the "TABAS" brand. During 1996, Conoco sold its marketing subsidiary in Ireland to Statoil. SUPPLY AND TRANSPORTATION The company has an extensive pipeline system for crude oil and refined products. Information concerning daily pipeline shipments is presented below:
1996 1995 1994 ------- ------- ------- (THOUSANDS OF BARRELS) Average Daily Pipeline Shipments Pipeline shipments of consolidated companies....... 845 873 849 Equity in shipments of nonconsolidated affiliates.. 360 358 365
Conoco Pipe Line Company (CPL), a wholly owned subsidiary and operator of the company's U.S. petroleum pipeline system, transported approximately 814 thousand barrels per day of crude oil and refined products in 1996. In addition to pipeline facilities, CPL operates, under a management contract, three marine terminals, one coke-exporting facility, and 43 product terminals located throughout the United States. These facilities are wholly or jointly owned by the company. Crude oil is gathered in the Rocky Mountain, mid- continent, and southern Louisiana areas primarily for delivery to local refiners. Refined products pipelines are located in the Rocky Mountain and mid-continent areas to serve regional demand centers. Other U.S. transportation assets include numerous tank cars, barges, tank trucks, and other motor vehicles. The company also operates a fleet of seagoing crude oil tankers. These vessels, principally of Liberian registry, are described as follows:
1996 1995 1994 ----------- ---------- ---------- (THOUSANDS OF DEADWEIGHT TONS) Controlled Seagoing Vessel Capacity Owned or Leased...................................... 1,006 881 881 =========== ========= ========= Number of Vessels 80,000 DWT and Above (NUMBER OF VESSELS) Single Hull................................ 3 3 3 Double Hull................................ 5 4 4 ----------- --------- --------- Total Vessels............................ 8 7 7 =========== ========= =========
ITEM 3. 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 fungicide 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 scientists concluded that "Benlate" 50 DF fungicide was not responsible for plant damage reports received since March 1991, and concurrent with these 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. The remaining cases include both alleged personal injury and crop damage cases. Four cases recently filed in West Virginia contain allegations that "Benlate" 50 DF fungicide caused personal injuries. The appeal of a June 1996 verdict of $3,980,000 against DuPont in a personal injury action involving "Benlate" 50 DF fungicide brought in Florida is still pending. Two appeals from adverse jury verdicts in crop damage cases are also still pending. The United States Court of Appeals for the Eleventh Circuit has reversed and remanded an order of a federal district court in Georgia which had found 12 that DuPont had engaged in discovery abuse during the first "Benlate" 50 DF fungicide case to go to trial. The Eleventh Circuit ordered that a different judge shall preside over the matter on remand; DuPont awaits further proceedings. A shareholder derivative action filed in the same Georgia federal district court alleging that DuPont's Board of Directors breached various duties in its role in the "Benlate" 50 DF fungicide litigation has been stayed pending resolution of DuPont's appeal of the sanctions order mentioned above. A putative securities fraud class action filed by a shareholder in federal district court in Florida against the company and the Chairman in September 1995 is also still pending, in which it is alleged that DuPont made false and misleading statements and omissions about the "Benlate" 50 DF fungicide litigation with the alleged effect of inflating the price of DuPont's stock between June 19, 1993, and January 27, 1995. A lawsuit has been filed in a separate Georgia federal court (the Northern District) by five growers alleging fraud based on, among other things, the assertion that at the time of their settlements with DuPont they were unaware of alleged discovery abuse by DuPont. Two similar cases have been filed in Hawaii, one of which was recently transferred to the Northern District federal court in Georgia. DuPont continues to believe that "Benlate" 50 DF fungicide did not cause the alleged damages and intends to defend against those allegations in ongoing matters. Since 1989, DuPont has been named as a defendant in numerous homeowner lawsuits in various state and federal courts alleging property damage resulting from leaks in certain polybutylene plumbing systems. In most cases, DuPont is a codefendant with Shell, Hoechst-Celanese, and parts manufacturers. The polybutylene plumbing systems consist of sections of flexible pipe extruded from polybutylene connected with fittings made from acetal. Shell Chemical is the sole producer of polybutylene; the acetals are provided by Hoechst-Celanese and DuPont. In 1995 DuPont settled a national class action lawsuit involving the plumbing systems by agreeing to contribute up to 10% of the cost of repair and replacement of the plumbing systems. DuPont's total contribution under the settlement is capped at $120 million. Several dozen cases involving individual or groups of homeowners who have opted out of the settlement 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. On June 28, 1991, DuPont entered into a voluntary agreement with the U.S. Environmental Protection Agency (EPA) to conduct an audit of the U.S. sites under the Toxic Substance Control Act (TSCA). Participation in the audit agreement was not an admission of TSCA noncompliance. Maximum stipulated penalties under the agreement were capped at $1 million. The first phase of the audit was completed, but 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 now issued a consent order/agreement assessing a $1 million dollar penalty against DuPont. The penalty has been paid and the matter is closed. On December 21, 1993, Conoco's Denver refinery received a Notice of Violation from the EPA, Region VIII, and the Colorado Department of Health requesting a civil penalty of $169,500 in a dispute over proper scope and scheduling of certain RCRA on-site investigation activities. The investigation activities have previously been the subject of a settlement with the EPA and the Colorado Department of Health, and the work performed has been in compliance with such agreement in the opinion of company counsel. As such, it is anticipated that the fine will be significantly reduced pursuant to negotiations between the parties. On June 30, 1994, the California Department of Toxic Substances Control issued to DuPont's Antioch Works in Antioch, California, an Enforcement Order alleging violations of state hazardous waste regulations. The alleged violations center principally on the status of several tanks at the site. The Order would require DuPont to undertake certain remedial activities around the tanks and pay a fine of $200,000. DuPont has filed a Notice of Defense in the matter for a hearing before the Office of Administrative Hearings of the California Department of General Services. The EPA filed on October 7, 1994, an administrative complaint against DuPont proposing to assess $1.9 million in civil penalties for distributing triazine herbicides with product labels that the EPA alleges were not in compliance with its new Worker Protection Standards. The labels were submitted to the EPA for approval in 13 July 1993 and accepted by the EPA in November. However, in March of 1994, the EPA notified DuPont of alleged errors in the labels after most of the products had been shipped and were in the distribution chain. DuPont has cooperated with the EPA in making label changes and has issued supplemental labeling for all products that had been distributed. DuPont believes the proposed penalties are unwarranted and has filed a motion for summary judgment in administrative court. On April 12, 1995, the EPA Region V served on DuPont an Administrative Complaint alleging the company's Circleville, Ohio, plant had failed to provide timely notice of a release of chlorine from the plant on January 30, 1993. The complaint sought civil penalties of $125,000. DuPont has reached agreement in principle with the EPA to settle the matter for a cash payment of $10,000 and a Supplemental Environmental Project valued at $27,000. On May 30, 1995, DuPont received a complaint from the EPA alleging that in 24 instances between 1990 and 1991, DuPont distributed or sold certain benomyl fungicide products in violation of the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA). The EPA has proposed a civil penalty of $120,000. The EPA's allegations are based on the contention that an analysis by EPA in 1994 indicated that an impurity, which is part of DuPont's statement of formula, had slightly exceeded an upper certified limit established by EPA. On January 6, 1997, the Administrative Law Judge issued an Order ruling in DuPont's favor on its motion for an accelerated decision. The Administrative Law Judge's Order is before the Environmental Appeals Board for review. On July 26, 1995, the Region V office of the EPA filed an Administrative Complaint/Assessment of Penalty against DuPont's East Chicago plant alleging nineteen recordkeeping and reporting violations of sections 311 and 312 of the Emergency Planning and Community Right to Know Act (EPCRA) between 1987 and 1991. The complaint seeks penalties of $262,260 for alleged failures to file or for the filing of incomplete Tier II Chemical Inventory forms. Settlement discussions with the EPA are underway. On December 5, 1995, the Kentucky Natural Resources and Environmental Protection Cabinet filed an administrative complaint against DuPont as a result of an oleum release at DuPont's Wurtland, Kentucky, facility on August 20, 1995. The complaint alleged the release was above statutorily reportable quantities, was not reported in a timely fashion, caused an environmental emergency and presented an imminent and substantial danger to public health and welfare. The State of Kentucky sought penalties of a least $600,000 as well as reimbursement for response costs. DuPont has reached an agreement in principle with the State to settle the matter. Under the settlement, DuPont would pay a penalty of $125,000 and expend $460,000 to implement supplemental environmental projects. The settlement is subject to final agreement and issuance of an Agreed Order. In January of 1996, the Department of Justice (DOJ) notified Conoco Pipe Line Company (CPL) of its intention to file a lawsuit under the Clean Water Act and the Oil Pollution Act for damages allegedly caused by releases from CPL's pipeline between 1991 and 1994. The DOJ sought the maximum civil penalty of $594,000. In December 1996, CPL reached a settlement with the DOJ and EPA under which CPL will pay a penalty of $112,500 and replace certain parts of the pipeline. It is anticipated that the penalty will be paid during the first quarter of 1997. On March 6, 1996, the Department of Justice filed a complaint in the United States District Court for the District of Montana against Yellowstone Pipeline Company (YPL) and the Conoco Pipe Line Company as a part owner and operator of YPL. The complaint alleges discharges of oil from a YPL pipeline in January 1993 and seeks civil penalties of up to $25,000 per day for each violation or up to $1,000 for each barrel of oil discharged. Since the duration of the discharge is in dispute, the penalty calculation is uncertain although it is expected to exceed $100,000. The parties are attempting to negotiate a settlement of 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 14 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 supplemental environmental projects with an expected cost of $174,500. In August 1996, the EPA and the Colorado Department of Health (CDH) notified Conoco and the Colorado Refining Company (CRC) that they intended to seek a penalty of $1,273,651 from the two companies in connection with faulty analytical work performed by an outside contractor as part of certain remedial activities undertaken at Conoco and CRC's Denver Refinery. On December 20, 1996, Conoco entered into a Compliance Order on Consent with the State of Colorado and the EPA. The total settlement amount is $475,000 of which 80% will be offset by two supplemental environmental projects. Conoco will pay the remaining 20% in the form of a cash payment of $95,000. CRC has been unable to reach agreement on the terms of a settlement with the state and the EPA. On October 17, 1996, the West Virginia Department of Environmental Protection (WVDEP) notified DuPont that it intended to seek damages and penalties for alleged violations of state regulations concerning operation of a landfill and permitted discharge limits at DuPont's Dry Run Landfill which supports DuPont's Washington Works facility in Parkersburg, West Virginia. The WVDEP entered an Administrative Order on December 31, 1996, to resolve this matter. The Order required DuPont to undertake certain remedial action and make certain improvements at the Dry Run Landfill. In addition, DuPont was required to pay a civil penalty of $200,000 and to undertake a supplemental environmental project valued at $50,000. All required actions have been taken and the penalty paid. The matter is closed. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE REGISTRANT The following is a list, as of March 7, 1997, of the company's executive officers.
EXECUTIVE OFFICER AGE SINCE --- --------- President and Chief Executive Officer John A. Krol(1)................................................ 60 1987 Other Executive Officers: Jerald A. Blumberg, Executive Vice President................... 57 1990 Archie W. Dunham, Executive Vice President(1).................. 58 1985 Gary W. Edwards, Senior Vice President......................... 55 1991 Kurt M. Landgraf, Senior Vice President and Chief Financial Officer....................................................... 50 1996 Charles O. Holliday, Jr., Executive Vice President............. 48 1992 Robert E. McKee, III, Senior Vice President.................... 51 1992 Joseph A. Miller, Jr., Senior Vice President and Chief Technology Officer............................................ 55 1994 Stacey J. Mobley, Senior Vice President........................ 51 1992 Howard J. Rudge, Senior Vice President and General Counsel..... 61 1994
- -------- (1) Member of the Board of Directors. The company's executive officers are elected or appointed for the ensuing year or for an indefinite term, and until their successors are elected or appointed. Each officer named above has been an officer or an executive of DuPont, its subsidiaries, or an affiliate during the past five years. 15 PART II Information with respect to the following Items can be found on the indicated pages of Exhibit 13 if not otherwise included herein. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The company's common stock is listed on the New York Stock Exchange, Inc. (symbol DD) and certain non-U.S. exchanges. The number of record holders of common stock was 158,121 at December 31, 1996 and 156,479 at March 7, 1997.
PAGE(S) ------- Quarterly Financial Data: Dividends Per Share of Common Stock................................... 57 Market Price of Common Stock (High/Low)............................... 57 ITEM 6. SELECTED FINANCIAL DATA Five-Year Financial Review: Summary of Operations................................................. 58 Financial Position at Year End........................................ 58 Ratios................................................................ 58 General............................................................... 58 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Letter to Stockholders.................................................. 1-3* Industry Segment Reviews: Chemicals............................................................. 14 Fibers................................................................ 15 Life Sciences......................................................... 16-17 Polymers.............................................................. 17-18 Petroleum............................................................. 18-19 Diversified Businesses................................................ 20 Management's Discussion and Analysis: Analysis of Operations................................................ 21-22 Financial Condition and Cash Flows.................................... 22-24 Financial Instruments................................................. 24-25 Environmental Matters................................................. 25-27
DuPont's Board of Directors has approved a two-for-one split of DuPont common stock and the resulting increase in the number of authorized shares of common stock from 900 million to 1.8 billion shares in order to effectuate the split. This action is subject to the approval by DuPont's stockholders at the Annual Meeting on April 30, 1997, in Wilmington, Delaware. The split would apply to shareholders of record on May 15, 1997. - -------- * Includes text of letter except for photograph and related caption on page 2 and the chart on page 3. 16 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE(S) ------- Financial Statements: Report of Independent Accountants................................... 28 Consolidated Income Statement for 1996, 1995 and 1994............... 29 Consolidated Balance Sheet as of December 31, 1996 and December 31, 1995............................................................... 30 Consolidated Statement of Stockholders' Equity for 1996, 1995 and 1994............................................................... 31 Consolidated Statement of Cash Flows for 1996, 1995 and 1994........ 32 Notes to Financial Statements....................................... 33-50 Supplemental Financial Information: Supplemental Petroleum Data: Oil and Gas Producing Activities................................... 51-56 Quarterly Financial Data and related notes for the following items for the two years 1996 and 1995: Sales............................................................... 57 Cost of Goods Sold and Other Expenses............................... 57 Net Income.......................................................... 57 Earnings Per Share of Common Stock.................................. 57 Dividends Per Share of Common Stock................................. 57 Market Price of Common Stock........................................ 57
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III Information with respect to the following Items is incorporated by reference to the pages indicated in the company's 1997 Annual Meeting Proxy Statement dated March 21, 1997, filed in connection with the Annual Meeting of Stockholders to be held April 30, 1997. However, information regarding executive officers is contained in Part I of this report (page 15) pursuant to General Instruction G of this form. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
PAGE(S) ------- Election of Directors................................................... 4-7 Compliance With the Securities Exchange Act............................. 9 ITEM 11. EXECUTIVE COMPENSATION Compensation of Directors............................................... 2-3 Compensation and Stock Option Information............................... 9-15 Retirement Benefits..................................................... 16 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Beneficial Ownership of Securities...................................... 8-9 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Election of Directors................................................... 4-7
17 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Financial Statements, Financial Statement Schedules and Exhibits 1. Financial Statements (See listing at Part II, Item 8 of this report regarding financial statements, which are incorporated by reference to Exhibit 13.) 2. Financial Statement Schedules--none required. The following should be read in conjunction with the previously referenced Financial Statements: Financial Statement Schedules listed under SEC rules but not included in this report are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto incorporated by reference. Condensed financial information of the parent company is omitted because restricted net assets of consolidated subsidiaries do not exceed 25% of consolidated net assets. Footnote disclosure of restrictions on the ability of subsidiaries and affiliates to transfer funds is omitted because the restricted net assets of subsidiaries combined with the company's equity in the undistributed earnings of affiliated companies does not exceed 25% of consolidated net assets at December 31, 1996. Separate financial statements of affiliated companies accounted for by the equity method are omitted because no such affiliate individually constitutes a 20% significant subsidiary. 3. Exhibits The following list of exhibits includes both exhibits submitted with this Form 10-K as filed with the SEC and those incorporated by reference to other filings:
EXHIBIT NUMBER DESCRIPTION ------- ----------- 3.1 Company's Certificate of Incorporation, as last amended December 22, 1989 (incorporated by reference to Exhibit 3.1 of the company's Annual Report on Form 10-K for the year ended December 31, 1994). 3.2 Company's Bylaws, as last revised January 29, 1997. 3.3 Company's Bylaws, as last revised December 1, 1996. 3.4 Company's Bylaws, as last revised January 1, 1996 (incorporated by reference to Exhibit 3.2 of the company's Annual Report on Form 10-K for the year ended December 31, 1995). 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. 10.2* 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 (incorporated by reference to Exhibit 10.12 of the company's Quarterly Report on Form 10-Q for the period ended March 31, 1996). 10.3* Company's Supplemental Retirement Income Plan, as last amended effective June 4, 1996. 10.4* Company's Pension Restoration Plan, as last amended effective June 4, 1996. 10.5.1* Retirement Restoration Plan I of Conoco Inc., adopted by the Board of Directors on December 18, 1995 (incorporated by reference to Exhibit 10.6.1 of the company's Annual Report on Form 10-K for the year ended December 31, 1995).
- -------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K. 18
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.5.2* Retirement Restoration Plan II of Conoco Inc., adopted by the Board of Directors on December 18, 1995 (incorporated by reference to Exhibit 10.6.2 of the company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.6* Company's Stock Performance Plan, as last amended effective September 28, 1994 (incorporated by reference to Exhibit 10.7 of the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994). 10.7* Company's Variable Compensation Plan, as last amended effective November 24, 1993, reflecting changes approved by the Board on that date for Shareholder approval on April 27, 1994 (incorporated by reference to Exhibit 10.8 of the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994). 10.8* Company's Salary Deferral & Savings Restoration Plan effective April 26, 1994 (incorporated by reference to Exhibit 10.9 of the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994). 10.9* Company's 1995 Corporate Sharing Plan, adopted by the Board of Directors on January 25, 1995 (incorporated by reference to Exhibit 10.10 of the company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995). 10.10* Letter Agreement and Consulting Agreement, dated as of October 9, 1995, between the company and C. S. Nicandros (incorporated by reference to Exhibit 10.11 of the company's Annual Report on Form 10- K for the year ended December 31, 1995). 10.11* Company's 1997 Corporate Sharing Plan, adopted by the Board of Directors on January 29, 1997. 11 Statement re calculation of earnings per share. 12 Statement re computation of the ratio of earnings to fixed charges. 13 The 1996 "Letter to Stockholders," Industry Segment Reviews, and Financial Information Section of the Annual Report to Shareholders for the year ended December 31, 1996, which are furnished to the Commission for information only, and not filed except as expressly incorporated by reference in this Report. 21 Subsidiaries of the Registrant. 23 Consent of Independent Accountants.
- -------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K. (b) Reports on Form 8-K Reports on Form 8-K: (1) On October 23, 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. 33-53327, No. 33-61339, and No. 33-60069). Under Item 7, "Financial Statements and Exhibits," the Registrant's Earnings Press Release, dated October 23, 1996, was filed. (2) On January 29, 1997, a Current Report on Form 8-K was filed in connection with Debt Securities that may be offered on a delayed or continuous basis under its Registration Statements on Form S-3 (No. 33-53327, No. 33-61339, and No. 33-60069). Under Item 7, "Financial Statements and Exhibits," the Registrant's Earnings Press Release, dated January 29, 1997, was filed. (3) On March 7, 1997, a Current Report on Form 8-K was filed in connection with Debt Securities that may be offered on a delayed or continuous basis under its Registration Statements on Form S-3 (No. 33-53327, No. 33-61339, and No. 33-60069). Under Item 5, "Other Events," the Registrant's Press Release, dated March 3, 1997, was filed announcing a two-for-one common stock split. 19 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 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 AND IN THE CAPACITIES INDICATED, AS OF THE 24TH DAY OF MARCH 1997. E. I. DU PONT DE NEMOURS AND COMPANY (Registrant) K. M. Landgraf By: --------------------------------- K. M. LANDGRAF SENIOR VICE PRESIDENT--DUPONT FINANCE (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED AS OF THE 24TH DAY OF MARCH 1997, BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT IN THE CAPACITIES INDICATED: CHAIRMAN OF THE BOARD: E. S. Woolard, Jr. --------------------- E. S. WOOLARD, JR. PRESIDENT AND CHIEF EXECUTIVE OFFICER AND DIRECTOR: (PRINCIPAL EXECUTIVE OFFICER): J. A. Krol - ------------------------------------- J. A. KROL EXECUTIVE VICE PRESIDENT AND DIRECTOR: A. W. Dunham - ------------------------------------- A. W. DUNHAM DIRECTORS: P. N. Barnevik L. D. Juliber - ------------------------------------- ------------------------------------- P. N. BARNEVIK L. D. JULIBER A. F. Brimmer W. K. Reilly - ------------------------------------- ------------------------------------- A. F. BRIMMER W. K. REILLY L. C. Duemling H. R. Sharp, III - ------------------------------------- ------------------------------------- L. C. DUEMLING H. R. SHARP, III E. B. Du Pont C. M. Vest - ------------------------------------- ------------------------------------- E. B. DU PONT C. M. VEST C. M. Harper G. Watanabe - ------------------------------------- ------------------------------------- C. M. HARPER G. WATANABE 20 E. I. DU PONT DE NEMOURS AND COMPANY INDEX OF EXHIBITS
Exhibit Number Description - ------- ----------- 3.1 Company's Certificate of Incorporation, as last amended December 22, 1989 (incorporated by reference to Exhibit 3.1 of the company's Annual Report on Form 10-K for the year ended December 31, 1994). 3.2 Company's Bylaws, as last revised January 29, 1997. 3.3 Company's Bylaws, as last revised December 1, 1996. 3.4 Company's Bylaws, as last revised January 1, 1996 (incorporated by reference to Exhibit 3.2 of the company's Annual Report on Form 10-K for the year ended December 31, 1995). 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. 10.2* 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 (incorporated by reference to Exhibit 10.12 of the company's Quarterly Report on Form 10-Q for the period ended March 31, 1996). 10.3* Company's Supplemental Retirement Income Plan, as last amended effective June 4, 1996. 10.4* Company's Pension Restoration Plan, as last amended effective June 4, 1996. 10.5.1* Retirement Restoration Plan I of Conoco Inc., adopted by the Board of Directors on December 18, 1995 (incorporated by reference to Exhibit 10.6.1 of the company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.5.2* Retirement Restoration Plan II of Conoco Inc., adopted by the Board of Directors on December 18, 1995 (incorporated by reference to Exhibit 10.6.2 of the company's Annual Report on Form 10-K for the year ended December 31, 1995).
- ------------------ *Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.
Exhibit Number Description - -------- ----------- 10.6* Company's Stock Performance Plan, as last amended effective September 28, 1994 (incorporated by reference to Exhibit 10.7 of the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994). 10.7* Company's Variable Compensation Plan, as last amended effective November 24, 1993, reflecting changes approved by the Board on that date for Shareholder approval on April 27, 1994 (incorporated by reference to Exhibit 10.8 of the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994). 10.8* Company's Salary Deferral & Savings Restoration Plan effective April 26, 1994 (incorporated by reference to Exhibit 10.9 of the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994). 10.9* Company's 1995 Corporate Sharing Plan, adopted by the Board of Directors on January 25, 1995 (incorporated by reference to Exhibit 10.10 of the company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995). 10.10* Letter Agreement and Consulting Agreement, dated as of October 9, 1995, between the company and C. S. Nicandros (incorporated by reference to Exhibit 10.11 of the company's Annual Report on Form 10-K for the year ended December 31, 1995). 10.11* Company's 1997 Corporate Sharing Plan, adopted by the Board of Directors on January 29, 1997. 11 Statement re calculation of earnings per share. 12 Statement re computation of the ratio of earnings to fixed charges. 13 The 1996 "Letter to Stockholders," Industry Segment Reviews, and Financial Information Section of the Annual Report to Shareholders for the year ended December 31, 1996, which are furnished to the Commission for information only, and not filed except as expressly incorporated by reference in this Report. 21 Subsidiaries of the Registrant. 23 Consent of Independent Accountants.
- ----------------- *Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K. EX-3.2 2 COMPANY'S BY-LAWS EXHIBIT 3.2 BYLAWS OF E. I. DU PONT DE NEMOURS AND COMPANY ------------------------------------ Incorporated Under The Laws of Delaware AS REVISED January 29, 1997 EXHIBIT 3.2 BYLAWS
Page ARTICLE I. MEETING OF STOCKHOLDERS: Section 1. Annual 1 Section 2. Special 1 Section 3. Notice 1 Section 4. Quorum 1 Section 5. Organization 1 Section 6. Voting 2 Section 7. Inspectors 2 ARTICLE II. BOARD OF DIRECTORS: Section 1. Number 2 Section 2. Term 2 Section 3. Increase of Number 2 Section 4. Resignation 2 Section 5. Vacancies 2 Section 6. Regular Meetings 2 Section 7. Special Meetings 3 Section 8. Quorum 3 Section 9. Place of Meeting, Etc. 3 Section 10. Interested Directors; Quorum 3 ARTICLE III. COMMITTEES OF THE BOARD: Section 1. Committees 4 Section 2. Procedure 4 Section 3. Reports to the Board 4 Section 4. Strategic Direction Committee 4 Section 5. Audit Committee 5 Section 6 Environmental Policy Committee 5 Section 7. Compensation Committee 5 Section 8. Corporate Governance Committee 5 ARTICLE IV. OFFICE OF THE CHIEF EXECUTIVE 5
EXHIBIT 3.2
Page ARTICLE V. OFFICERS: Section 1. Officers 6 Section 2. Chairman of the Board 6 Section 3. President 6 Section 4. Executive Vice Presidents 6 Section 5. Vice Presidents 6 Section 6. Senior Vice President - Finance 6 Section 7. Treasurer 6 Section 8. Assistant Treasurer 7 Section 9. Controller 7 Section 10. Assistant Controller 7 Section 11. Secretary 7 Section 12. Assistant Secretary 7 Section 13. Removal 7 Section 14. Resignation 7 Section 15. Vacancies 7 ARTICLE VI. MISCELLANEOUS: Section 1. Indemnification of Directors or Officers 8 Section 2. Certificate for Shares 8 Section 3. Transfer of Shares 9 Section 4. Regulations 9 Section 5. Record Date of Stockholders 9 Section 6. Corporate Seal 9 ARTICLE VII. AMENDMENTS 10
EXHIBIT 3.2 BYLAWS OF E. I. DU PONT DE NEMOURS AND COMPANY ARTICLE I. MEETING OF STOCKHOLDERS SECTION 1. Annual. Meetings of the stockholders for the purpose of electing Directors, and transacting such other proper business as may be brought before the meeting, shall be held annually at such date, time and place, within or without the State of Delaware as may be designated by the Board of Directors ("Board"). SECTION 2. Special. Special meetings of the stockholders may be called by the Board and shall be called by the Secretary at the request in writing of the holders of record of at least twenty-five percent of the outstanding stock of the corporation entitled to vote. Special meetings shall be held within or without the State of Delaware, as the Board shall designate. SECTION 3. Notice. Written notice of each meeting of stockholders, stating the place, date and hour of the meeting, and the purpose or purposes thereof, shall be mailed not less than ten nor more than sixty days before the date of such meeting to each stockholder entitled to vote thereat. SECTION 4. Quorum. Unless otherwise provided by statute, the holders of shares of stock entitled to cast a majority of votes at a meeting, present either in person or by proxy, shall constitute a quorum at such meeting. Absence of a quorum of the holders of Common Stock or Preferred Stock at any meeting or adjournment thereof, at which under the Certificate of Incorporation the holders of Preferred Stock have the right to elect any Directors, shall not prevent the election of Directors by the other class of stockholders entitled to elect Directors as a class if the necessary quorum of stockholders of such other class shall be present in person or by proxy. SECTION 5. Organization. The Chairman of the Board or, in the Chairman's absence, the President shall preside at meetings of stockholders. The Secretary of the Company shall act as Secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint a Secretary of the meeting. The order of business for such meetings shall be determined by the Chairman of the Board, or, in the Chairman's absence, by the President. 1 EXHIBIT 3.2 SECTION 6. Voting. Each stockholder entitled to vote at any meeting shall be entitled to one vote, in person or by written proxy, for each share held of record. Upon the demand of any stockholder, such stockholder shall be entitled to vote by ballot. All elections and questions shall be decided by plurality vote, except as otherwise required by statute. SECTION 7. Inspectors. At each meeting of the stockholders the polls shall be opened and closed; the proxies and ballots shall be received and be taken in charge, and all questions touching the qualification of voters and the validity of proxies, and the acceptance or rejection of votes shall be decided by three Inspectors, two of whom shall have power to make a decision. Such Inspectors shall be appointed by the Board before the meeting, or in default thereof, by the presiding officer at the meeting, and shall be sworn to the faithful performance of their duties. If any of the Inspectors previously appointed shall fail to attend or refuse or be unable to serve, substitutes shall be appointed by the presiding officer. ARTICLE II. BOARD OF DIRECTORS SECTION 1. Number. The business and affairs of the Company shall be under the direction of the Board. The number of Directors, which shall not be less than ten, shall be determined from time to time by the vote of two-thirds of the whole Board. SECTION 2. Term. Each Director shall hold office until the next annual election of Directors and until the Director's successor is elected and qualified. SECTION 3. Increase of Number. In case of any increase in the number of Directors between Annual Meetings of Stockholders, each additional Director shall be elected by the vote of two-thirds of the whole Board. SECTION 4. Resignation. A Director may resign at any time by giving written notice to the Chairman of the Board or the Secretary. The acceptance thereof shall not be necessary to make it effective; and such resignation shall take effect at the time specified therein or, in the absence of such specification, it shall take effect upon the receipt thereof. SECTION 5. Vacancies. In case of any vacancy in the Board for any cause, the remaining Directors, by vote of majority of the whole Board, may elect a successor to hold office for the unexpired term of the Director whose place is vacant. SECTION 6. Regular Meetings. Regular meetings of the Board shall be held at such times as the Board may designate. A notice of each regular meeting shall not be required. 2 EXHIBIT 3.2 SECTION 7. Special Meetings. Special meetings of the Board shall be held whenever called by the direction of the Chairman of the Board, or of one- third of the Directors. The Secretary shall give notice of such special meetings by mailing the same at least two days before the meeting, or by telegraphing the same at least one day before the meeting to each Director; but such notice may be waived by any Director. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. At any meeting at which every Director shall be present, any business may be transacted, irrespective of notice. SECTION 8. Quorum. One-third of the Board shall constitute a quorum. If there be less than a quorum present at any meeting, a majority of those present may adjourn the meeting from time to time. Except as otherwise provided by law, the Certificate of Incorporation, or by these Bylaws, the affirmative vote of a majority of the Directors present at any meeting at which there is a quorum shall be necessary for the passage of any resolution. SECTION 9. Place of Meeting, Etc. The Directors shall hold the meetings, and may have an office or offices in such place or places within or outside the State of Delaware as the Board from time to time may determine. SECTION 10. Interested Directors; Quorum 1) No contract or other transaction between the Company and one or more of its Directors, or between the Company and any other corporation, partnership, association, or other organization in which one or more of the Directors of the Company is a Director or officer, or has a financial interest, shall be void or voidable, because the Director is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because such Director's vote is counted for such purpose, if: (a) the material facts as to such Director's relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (b) the material facts as to such Director's relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or 3 EXHIBIT 3.2 (c) the contract or transaction is fair as to the Company as of the time it is authorized, approved or ratified, by the Board, a committee thereof, or the stockholders; and 2) Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction. ARTICLE III. COMMITTEES OF THE BOARD SECTION 1. Committees. The Board shall by the affirmative vote of a majority of the whole Board, elect from the Directors a Strategic Direction Committee, an Audit Committee, an Environmental Policy Committee, and a Compensation and Benefits Committee, and may, by resolution passed by a majority of the whole Board, designate one or more additional committees, each committee to consist of one or more Directors. The Board shall designate for each of these committees a Chairman, and, if desired, a Vice Chairman, who shall continue as such during the pleasure of the Board. The number of members of each committee shall be determined from time to time by the Board. SECTION 2. Procedure. Each Committee shall fix its own rules of procedure and shall meet where and as provided by such rules. A majority of a committee shall constitute a quorum. In the absence or disqualification of a member of any committee, the members of such committee present at any meeting, and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. SECTION 3. Reports To The Board. Each Committee shall keep regular minutes of its proceedings and shall periodically report to the Board summaries of the Committee's significant completed actions and such other matters as requested by the Board. SECTION 4. Strategic Direction Committee. The Strategic Direction Committee shall review the Company's strategic direction and overall objectives and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. 4 EXHIBIT 3.2 SECTION 5. Audit Committee. The Audit Committee shall employ independent public accountants, subject to stockholder ratification at each annual meeting, review the adequacy of internal controls and the accounting principles employed in financial reporting, and shall have such power and perform such duties as may be assigned to it from time to time by the Board. None of the Members of the Audit Committee shall be an officer or employee of the Company or its subsidiaries. SECTION 6. Environmental Policy Committee. The Environmental Policy Committee shall review the Company's environmental policies and practices and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. SECTION 7. Compensation Committee. The Compensation Committee shall have the power and authority vested in it by the Compensation Plans of the Company and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. None of the members of the Compensation Committee shall be an officer or employee of the Company or its subsidiaries. SECTION 8. Corporate Governance Committee. The Corporate Governance Committee shall recommend to the Board nominees for election as directors of the Company. The Committee shall also have responsibility for reviewing and making recommendations to the Board related to matters on corporate governance and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. None of the members of the Corporate Governance Committee shall be an officer or employee of the Company or its subsidiaries. ARTICLE IV. OFFICE OF THE CHIEF EXECUTIVE The Board shall elect an Office of the Chief Executive whose members shall include the President and such other officers as may be designated by the Board. The Office of the Chief Executive shall have responsibility for the strategic direction and operations of all the businesses of the Company and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. All significant completed actions by the Office of the Chief Executive shall be reported to the Board at the next succeeding Board meeting, or at its meeting held in the month following the taking of such action. 5 EXHIBIT 3.2 ARTICLE V. OFFICERS SECTION 1. Officers. The officers of the Company shall be a Chairman of the Board, a President, one or more Executive Vice Presidents, Senior Vice President - Finance and a Secretary. The Board and the Office of the Chief Executive, may appoint such other officers as they deem necessary, who shall have such authority and shall perform such duties as may be prescribed, respectively, by the Board or the Office of the Chief Executive. SECTION 2. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board. The Chairman may sign and execute all authorized bonds, contracts or other obligations, in the name of the Company, and with the Treasurer may sign all certificates of the shares in the capital stock of the Company. SECTION 3. President. The President shall be the chief executive officer of the Company and, subject to the Board and the Office of the Chief Executive, shall have general charge of the business and affairs of the Company and shall perform such other duties as may be assigned to the President by the Board or the Chairman of the Board. In the absence or inability to act of the Chairman of the Board, the President shall perform the duties of the Chairman of the Board. SECTION 4. Executive Vice Presidents. Each Executive Vice President shall have such powers and perform such duties as may be assigned to such Executive Vice President by the Board or the Office of the Chief Executive. SECTION 5. Vice Presidents. The Board or the Office of the Chief Executive may appoint one or more Vice Presidents. Each Vice President shall have such title, powers and duties as may be assigned to such Vice President by the Board or the Office of the Chief Executive. SECTION 6. Senior Vice President - Finance. The Senior Vice President - Finance shall be the chief financial officer of the Company, and shall have such powers and perform such duties as may be assigned to such Senior Vice President - Finance by the Board or the Office of the Chief Executive. SECTION 7. Treasurer. The Board shall appoint a Treasurer. Under the general direction of the Senior Vice President - Finance, the Treasurer shall have such powers and perform such duties as may be assigned to such Treasurer by the Board or the Office of the Chief Executive. 6 EXHIBIT 3.2 SECTION 8. Assistant Treasurer. The Board or the Office of the Chief Executive may appoint one or more Assistant Treasurers. Each Assistant Treasurer shall have such powers and shall perform such duties as may be assigned to such Assistant Treasurer by the Board or the Office of the Chief Executive. SECTION 9. Controller. The Board may appoint a Controller. Under the general direction of the Senior Vice President - Finance, the Controller shall have such powers and perform such duties as may be assigned to such Controller by the Board or the Office of the Chief Executive. SECTION 10. Assistant Controller. The Board or the Office of the Chief Executive may appoint one or more Assistant Controllers. Each Assistant Controller shall have such powers and shall perform such duties as may be assigned to such Assistant Controller by the Board or the Office of the Chief Executive. SECTION 11. Secretary. The Secretary shall keep the minutes of all the meetings of the Board and the minutes of all the meetings of the stockholders; the Secretary shall attend to the giving and serving of all notices of meetings as required by law or these Bylaws; the Secretary shall affix the seal of the Company to any instruments when so required; and the Secretary shall in general perform all the corporate duties incident to the office of Secretary, subject to the control of the Board or the Chairman of the Board, and such other duties as may be assigned to the Secretary by the Board or the Chairman of the Board. SECTION 12. Assistant Secretary. The Board or the Office of the Chief Executive may appoint one or more Assistant Secretaries. Each Assistant Secretary shall have such powers and shall perform such duties as may be assigned to such Assistant Secretary by the Board or the Chairman of the Board or the President; and such Assistant Secretary shall affix the seal of the Company to any instruments when so required. SECTION 13. Removal. All officers may be removed or suspended at any time by the vote of the majority of the whole Board. All officers, agents and employees, other than officers elected or appointed by the Board, may be suspended or removed by the committee or by the officer appointing them. SECTION 14. Resignation. Any officer may resign at any time by giving written notice to the Chairman of the Board, the President or the Secretary. Unless otherwise stated in such notice of resignation, the acceptance thereof shall not be necessary to make it effective; and such resignation shall take effect at the time specified therein or, in the absence of such specification, it shall take effect upon the receipt thereof. SECTION 15. Vacancies. A vacancy in any office shall be filled in the same manner as provided for election or appointment to such office. 7 EXHIBIT 3.2 ARTICLE VI. MISCELLANEOUS SECTION 1. Indemnification of Directors or Officers. Each person who is or was a Director or officer of the Company (including the heirs, executors, administrators or estate of such person) shall be indemnified by the Company as of right to the full extent permitted by the General Corporation Law of Delaware against any liability, cost or expense asserted against such Director or officer and incurred by such Director or officer by reason of the fact that such person is or was a Director or officer. The right to indemnification conferred by this Section shall include the right to be paid by the Company the expenses incurred in defending in any action, suit or proceeding in advance of its final disposition, subject to the receipt by the Company of such undertakings as might be required of an indemnitee by the General Corporation Law of Delaware. In any action by an indemnitee to enforce a right to indemnification hereunder or by the Company to recover advances made hereunder, the burden of proving that the indemnitee is not entitled to be indemnified shall be on the Company. In such an action, neither the failure of the Company (including its Board, independent legal counsel or stockholders) to have made a determination that indemnification is proper, nor a determination by the Company that indemnification is improper, shall create a presumption that the indemnitee is not entitled to be indemnified or, in the case of such an action brought by the indemnitee, be a defense thereto. If successful in whole or in part in such an action, an indemnitee shall be entitled to be paid also the expense of prosecuting or defending same. The Company may, but shall not be obligated to, maintain insurance at its expense, to protect itself and any such person against any such liability, cost or expense. SECTION 2. Certificate for Shares. The certificate for shares of the capital stock of the Company shall be in such form, not inconsistent with the Certificate of Incorporation as shall be prescribed by the Board. Every stockholder shall have a certificate signed by the Chairman of the Board, the President or an Executive Vice President, and the Treasurer, certifying the number of shares owned by such stockholder in the Company, provided that if any such certificate is countersigned by a transfer agent or registrar other than the Company or its employee, then and other signature on the certificate may be a facsimile. The name of the person owning the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the Company's books. 8 EXHIBIT 3.2 All certificates surrendered to the Company shall be cancelled, and no new certificates shall be issued until the former certificate for the same number of shares of the same class shall have been surrendered and cancelled, except that the Board may determine, from time to time, the conditions and provisions on which new certificates may be used in substitution of any certificates that may have been lost, stolen or destroyed. SECTION 3. Transfer of Shares. Shares in the capital stock of the Company shall be transferred by the record holder thereof, in person, or by any such person's attorney upon surrender and cancellation of certificates for a like number of shares. SECTION 4. Regulations. The Board also may make rules and regulations concerning the issue, transfer and registration of certificates for shares of the capital stock of the Company. The Board may appoint one or more transfer agents and one or more registrars of transfers, and may require all stock certificates to bear the signature of a transfer agent and a registrar of transfer. SECTION 5. Record Date of Stockholders. The Board may fix in advance a date, not exceeding sixty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend or other distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend or other distribution, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive any such dividend or other distribution, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Company after such record date fixed as aforesaid. SECTION 6. Corporate Seal. The seal of the Company shall be circular in form, containing the words "E. I. DU PONT DE NEMOURS AND CO." and "DELAWARE" on the circumference, surrounding the words "FOUNDED" and "SEAL," and the date "1802." The seal shall be in the custody of the Secretary. A duplicate of the seal may be kept and used by the Senior Vice President - Finance, any Vice President - DuPont Finance, the Treasurer, or by any Assistant Secretary or Assistant Treasurer. 9 EXHIBIT 3.2 ARTICLE VII. AMENDMENTS The Board shall have the power to adopt, amend and repeal the Bylaws of the Company, by a vote of the majority of the whole Board, at any regular or special meeting of the Board, provided that notice of intention to adopt, amend or repeal the Bylaws in whole or in part shall have been given at the next preceding meeting, or, without any such notice, by the vote of two-thirds of the whole Board. I hereby certify that the foregoing is a true and correct copy of the Bylaws of E. I. du Pont de Nemours and Company. Witness my hand and the corporate seal of the Company this day of --------- 199 . - ------------------ -- ---------------------------- Secretary 10 EX-3.3 3 COMPANY'S BYLAWS REVISED 12/1/96 EXHIBIT 3.3 BYLAWS OF E. I. DU PONT DE NEMOURS AND COMPANY ------------------------------------ Incorporated Under The Laws of Delaware AS REVISED December 1, 1996 EXHIBIT 3.3 BYLAWS Page ARTICLE I. MEETING OF STOCKHOLDERS: Section 1. Annual 1 Section 2. Special 1 Section 3. Notice 1 Section 4. Quorum 1 Section 5. Organization 1 Section 6. Voting 2 Section 7. Inspectors 2 ARTICLE II. BOARD OF DIRECTORS: Section 1. Number 2 Section 2. Term 2 Section 3. Increase of Number 2 Section 4. Resignation 2 Section 5. Vacancies 2 Section 6. Regular Meetings 2 Section 7. Special Meetings 3 Section 8. Quorum 3 Section 9. Place of Meeting, Etc. 3 Section 10. Interested Directors; Quorum 3 ARTICLE III. COMMITTEES OF THE BOARD: Section 1. Committees 4 Section 2. Procedure 4 Section 3. Reports to the Board 4 Section 4. Strategic Direction Committee 4 Section 5. Audit Committee 5 Section 6 Environmental Policy Committee 5 Section 7. Compensation and Benefits Committee 5 ARTICLE IV. OFFICE OF THE CHIEF EXECUTIVE 5 EXHIBIT 3.3 Page ARTICLE V. OFFICERS: Section 1. Officers 5 Section 2. Chairman of the Board 6 Section 3. President 6 Section 4. Executive Vice Presidents 6 Section 5. Vice Presidents 6 Section 6. Senior Vice President - Finance 6 Section 7. Treasurer 6 Section 8. Assistant Treasurer 6 Section 9. Controller 7 Section 10. Assistant Controller 7 Section 11. Secretary 7 Section 12. Assistant Secretary 7 Section 13. Removal 7 Section 14. Resignation 7 Section 15. Vacancies 7 ARTICLE VI. MISCELLANEOUS: Section 1. Indemnification of Directors or Officers 8 Section 2. Certificate for Shares 8 Section 3. Transfer of Shares 9 Section 4. Regulations 9 Section 5. Record Date of Stockholders 9 Section 6. Corporate Seal 9 ARTICLE VII. AMENDMENTS 10 EXHIBIT 3.3 BYLAWS OF E. I. DU PONT DE NEMOURS AND COMPANY ARTICLE I. MEETING OF STOCKHOLDERS SECTION 1. Annual. Meetings of the stockholders for the purpose of electing Directors, and transacting such other proper business as may be brought before the meeting, shall be held annually at such date, time and place, within or without the State of Delaware as may be designated by the Board of Directors ("Board"). SECTION 2. Special. Special meetings of the stockholders may be called by the Board and shall be called by the Secretary at the request in writing of the holders of record of at least twenty-five percent of the outstanding stock of the corporation entitled to vote. Special meetings shall be held within or without the State of Delaware, as the Board shall designate. SECTION 3. Notice. Written notice of each meeting of stockholders, stating the place, date and hour of the meeting, and the purpose or purposes thereof, shall be mailed not less than ten nor more than sixty days before the date of such meeting to each stockholder entitled to vote thereat. SECTION 4. Quorum. Unless otherwise provided by statute, the holders of shares of stock entitled to cast a majority of votes at a meeting, present either in person or by proxy, shall constitute a quorum at such meeting. Absence of a quorum of the holders of Common Stock or Preferred Stock at any meeting or adjournment thereof, at which under the Certificate of Incorporation the holders of Preferred Stock have the right to elect any Directors, shall not prevent the election of Directors by the other class of stockholders entitled to elect Directors as a class if the necessary quorum of stockholders of such other class shall be present in person or by proxy. SECTION 5. Organization. The Chairman of the Board or, in the Chairman's absence, the President shall preside at meetings of stockholders. The Secretary of the Company shall act as Secretary of all meetings of the stockholders, but in the absence of the Secretary the presiding officer may appoint a Secretary of the meeting. The order of business for such meetings shall be determined by the Chairman of the Board, or, in the Chairman's absence, by the President. 1 EXHIBIT 3.3 SECTION 6. Voting. Each stockholder entitled to vote at any meeting shall be entitled to one vote, in person or by written proxy, for each share held of record. Upon the demand of any stockholder, such stockholder shall be entitled to vote by ballot. All elections and questions shall be decided by plurality vote, except as otherwise required by statute. SECTION 7. Inspectors. At each meeting of the stockholders the polls shall be opened and closed; the proxies and ballots shall be received and be taken in charge, and all questions touching the qualification of voters and the validity of proxies, and the acceptance or rejection of votes shall be decided by three Inspectors, two of whom shall have power to make a decision. Such Inspectors shall be appointed by the Board before the meeting, or in default thereof, by the presiding officer at the meeting, and shall be sworn to the faithful performance of their duties. If any of the Inspectors previously appointed shall fail to attend or refuse or be unable to serve, substitutes shall be appointed by the presiding officer. ARTICLE II. BOARD OF DIRECTORS SECTION 1. Number. The business and affairs of the Company shall be under the direction of the Board. The number of Directors, which shall not be less than ten, shall be determined from time to time by the vote of two-thirds of the whole Board. SECTION 2. Term. Each Director shall hold office until the next annual election of Directors and until the Director's successor is elected and qualified. SECTION 3. Increase of Number. In case of any increase in the number of Directors between Annual Meetings of Stockholders, each additional Director shall be elected by the vote of two-thirds of the whole Board. SECTION 4. Resignation. A Director may resign at any time by giving written notice to the Chairman of the Board or the Secretary. The acceptance thereof shall not be necessary to make it effective; and such resignation shall take effect at the time specified therein or, in the absence of such specification, it shall take effect upon the receipt thereof. SECTION 5. Vacancies. In case of any vacancy in the Board for any cause, the remaining Directors, by vote of majority of the whole Board, may elect a successor to hold office for the unexpired term of the Director whose place is vacant. SECTION 6. Regular Meetings. Regular meetings of the Board shall be held at such times as the Board may designate. A notice of each regular meeting shall not be required. 2 EXHIBIT 3.3 SECTION 7. Special Meetings. Special meetings of the Board shall be held whenever called by the direction of the Chairman of the Board, or of one- third of the Directors. The Secretary shall give notice of such special meetings by mailing the same at least two days before the meeting, or by telegraphing the same at least one day before the meeting to each Director; but such notice may be waived by any Director. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. At any meeting at which every Director shall be present, any business may be transacted, irrespective of notice. SECTION 8. Quorum. One-third of the Board shall constitute a quorum. If there be less than a quorum present at any meeting, a majority of those present may adjourn the meeting from time to time. Except as otherwise provided by law, the Certificate of Incorporation, or by these Bylaws, the affirmative vote of a majority of the Directors present at any meeting at which there is a quorum shall be necessary for the passage of any resolution. SECTION 9. Place of Meeting, Etc. The Directors shall hold the meetings, and may have an office or offices in such place or places within or outside the State of Delaware as the Board from time to time may determine. SECTION 10. Interested Directors; Quorum 1) No contract or other transaction between the Company and one or more of its Directors, or between the Company and any other corporation, partnership, association, or other organization in which one or more of the Directors of the Company is a Director or officer, or has a financial interest, shall be void or voidable, because the Director is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because such Director's vote is counted for such purpose, if: (a) the material facts as to such Director's relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (b) the material facts as to such Director's relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or 3 EXHIBIT 3.3 (c) the contract or transaction is fair as to the Company as of the time it is authorized, approved or ratified, by the Board, a committee thereof, or the stockholders; and 2) Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction. ARTICLE III. COMMITTEES OF THE BOARD SECTION 1. Committees. The Board shall by the affirmative vote of a majority of the whole Board, elect from the Directors a Strategic Direction Committee, an Audit Committee, an Environmental Policy Committee, and a Compensation and Benefits Committee, and may, by resolution passed by a majority of the whole Board, designate one or more additional committees, each committee to consist of one or more Directors. The Board shall designate for each of these committees a Chairman, and, if desired, a Vice Chairman, who shall continue as such during the pleasure of the Board. The number of members of each committee shall be determined from time to time by the Board. SECTION 2. Procedure. Each Committee shall fix its own rules of procedure and shall meet where and as provided by such rules. A majority of a committee shall constitute a quorum. In the absence or disqualification of a member of any committee, the members of such committee present at any meeting, and not disqualified from voting, whether or not they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. SECTION 3. Reports To The Board. Each Committee shall keep regular minutes of its proceedings and shall periodically report to the Board summaries of the Committee's significant completed actions and such other matters as requested by the Board. SECTION 4. Strategic Direction Committee. The Strategic Direction Committee shall review the Company's strategic direction and overall objectives and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. 4 EXHIBIT 3.3 SECTION 5. Audit Committee. The Audit Committee shall employ independent public accountants, subject to stockholder ratification at each annual meeting, review the adequacy of internal accounting controls and the accounting principles employed in financial reporting, and shall have such power and perform such duties as may be assigned to it from time to time by the Board. None of the Members of the Audit Committee shall be an officer or employee of the Company or its subsidiaries. SECTION 6. Environmental Policy Committee. The Environmental Policy Committee shall review the Company's environmental policies and practices and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. SECTION 7. Compensation and Benefits Committee. The Compensation and Benefits Committee shall have the power and authority vested in it by the Compensation Plans of the Company and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. None of the members of the Compensation and Benefits Committee shall be an officer or employee of the Company or its subsidiaries. ARTICLE IV. OFFICE OF THE CHIEF EXECUTIVE The Board shall elect an Office of the Chief Executive whose members shall include the President and such other officers as may be designated by the Board. The Office of the Chief Executive shall have responsibility for the strategic direction and operations of all the businesses of the Company and shall have such powers and perform such duties as may be assigned to it from time to time by the Board. All significant completed actions by the Office of the Chief Executive shall be reported to the Board at the next succeeding Board meeting, or at its meeting held in the month following the taking of such action. ARTICLE V. OFFICERS SECTION 1. Officers. The officers of the Company shall be a Chairman of the Board, a President, one or more Executive Vice Presidents, Senior Vice President - Finance and a Secretary. 5 EXHIBIT 3.3 The Board and the Office of the Chief Executive, may appoint such other officers as they deem necessary, who shall have such authority and shall perform such duties as may be prescribed, respectively, by the Board or the Office of the Chief Executive. SECTION 2. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board. The Chairman may sign and execute all authorized bonds, contracts or other obligations, in the name of the Company, and with the Treasurer may sign all certificates of the shares in the capital stock of the Company. SECTION 3. President. The President shall be the chief executive officer of the Company and, subject to the Board and the Office of the Chief Executive, shall have general charge of the business and affairs of the Company and shall perform such other duties as may be assigned to the President by the Board or the Chairman of the Board. In the absence or inability to act of the Chairman of the Board, the President shall perform the duties of the Chairman of the Board. SECTION 4. Executive Vice Presidents. Each Executive Vice President shall have such powers and perform such duties as may be assigned to such Executive Vice President by the Board or the Office of the Chief Executive. SECTION 5. Vice Presidents. The Board or the Office of the Chief Executive may appoint one or more Vice Presidents. Each Vice President shall have such title, powers and duties as may be assigned to such Vice President by the Board or the Office of the Chief Executive. SECTION 6. Senior Vice President - Finance. The Senior Vice President - Finance shall be the chief financial officer of the Company, and shall have such powers and perform such duties as may be assigned to such Senior Vice President - Finance by the Board or the Office of the Chief Executive. SECTION 7. Treasurer. The Board shall appoint a Treasurer. Under the general direction of the Senior Vice President - Finance, the Treasurer shall have such powers and perform such duties as may be assigned to such Treasurer by the Board or the Office of the Chief Executive. SECTION 8. Assistant Treasurer. The Board or the Office of the Chief Executive may appoint one or more Assistant Treasurers. Each Assistant Treasurer shall have such powers and shall perform such duties as may be assigned to such Assistant Treasurer by the Board or the Office of the Chief Executive. 6 EXHIBIT 3.3 SECTION 9. Controller. The Board may appoint a Controller. Under the general direction of the Senior Vice President - Finance, the Controller shall have such powers and perform such duties as may be assigned to such Controller by the Board or the Office of the Chief Executive. SECTION 10. Assistant Controller. The Board or the Office of the Chief Executive may appoint one or more Assistant Controllers. Each Assistant Controller shall have such powers and shall perform such duties as may be assigned to such Assistant Controller by the Board or the Office of the Chief Executive. SECTION 11. Secretary. The Secretary shall keep the minutes of all the meetings of the Board and the minutes of all the meetings of the stockholders; the Secretary shall attend to the giving and serving of all notices of meetings as required by law or these Bylaws; the Secretary shall affix the seal of the Company to any instruments when so required; and the Secretary shall in general perform all the corporate duties incident to the office of Secretary, subject to the control of the Board or the Chairman of the Board, and such other duties as may be assigned to the Secretary by the Board or the Chairman of the Board. SECTION 12. Assistant Secretary. The Board or the Office of the Chief Executive may appoint one or more Assistant Secretaries. Each Assistant Secretary shall have such powers and shall perform such duties as may be assigned to such Assistant Secretary by the Board or the Chairman of the Board or the President; and such Assistant Secretary shall affix the seal of the Company to any instruments when so required. SECTION 13. Removal. All officers may be removed or suspended at any time by the vote of the majority of the whole Board. All officers, agents and employees, other than officers elected or appointed by the Board, may be suspended or removed by the committee or by the officer appointing them. SECTION 14. Resignation. Any officer may resign at any time by giving written notice to the Chairman of the Board, the President or the Secretary. Unless otherwise stated in such notice of resignation, the acceptance thereof shall not be necessary to make it effective; and such resignation shall take effect at the time specified therein or, in the absence of such specification, it shall take effect upon the receipt thereof. SECTION 15. Vacancies. A vacancy in any office shall be filled in the same manner as provided for election or appointment to such office. 7 EXHIBIT 3.3 ARTICLE VI. MISCELLANEOUS SECTION 1. Indemnification of Directors or Officers. Each person who is or was a Director or officer of the Company (including the heirs, executors, administrators or estate of such person) shall be indemnified by the Company as of right to the full extent permitted by the General Corporation Law of Delaware against any liability, cost or expense asserted against such Director or officer and incurred by such Director or officer by reason of the fact that such person is or was a Director or officer. The right to indemnification conferred by this Section shall include the right to be paid by the Company the expenses incurred in defending in any action, suit or proceeding in advance of its final disposition, subject to the receipt by the Company of such undertakings as might be required of an indemnitee by the General Corporation Law of Delaware. In any action by an indemnitee to enforce a right to indemnification hereunder or by the Company to recover advances made hereunder, the burden of proving that the indemnitee is not entitled to be indemnified shall be on the Company. In such an action, neither the failure of the Company (including its Board, independent legal counsel or stockholders) to have made a determination that indemnification is proper, nor a determination by the Company that indemnification is improper, shall create a presumption that the indemnitee is not entitled to be indemnified or, in the case of such an action brought by the indemnitee, be a defense thereto. If successful in whole or in part in such an action, an indemnitee shall be entitled to be paid also the expense of prosecuting or defending same. The Company may, but shall not be obligated to, maintain insurance at its expense, to protect itself and any such person against any such liability, cost or expense. SECTION 2. Certificate for Shares. The certificate for shares of the capital stock of the Company shall be in such form, not inconsistent with the Certificate of Incorporation as shall be prescribed by the Board. Every stockholder shall have a certificate signed by the Chairman of the Board, the President or an Executive Vice President, and the Treasurer, certifying the number of shares owned by such stockholder in the Company, provided that if any such certificate is countersigned by a transfer agent or registrar other than the Company or its employee, then and other signature on the certificate may be a facsimile. The name of the person owning the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the Company's books. 8 EXHIBIT 3.3 All certificates surrendered to the Company shall be cancelled, and no new certificates shall be issued until the former certificate for the same number of shares of the same class shall have been surrendered and cancelled, except that the Board may determine, from time to time, the conditions and provisions on which new certificates may be used in substitution of any certificates that may have been lost, stolen or destroyed. SECTION 3. Transfer of Shares. Shares in the capital stock of the Company shall be transferred by the record holder thereof, in person, or by any such person's attorney upon surrender and cancellation of certificates for a like number of shares. SECTION 4. Regulations. The Board also may make rules and regulations concerning the issue, transfer and registration of certificates for shares of the capital stock of the Company. The Board may appoint one or more transfer agents and one or more registrars of transfers, and may require all stock certificates to bear the signature of a transfer agent and a registrar of transfer. SECTION 5. Record Date of Stockholders. The Board may fix in advance a date, not exceeding sixty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend or other distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend or other distribution, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive any such dividend or other distribution, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Company after such record date fixed as aforesaid. SECTION 6. Corporate Seal. The seal of the Company shall be circular in form, containing the words "E. I. DU PONT DE NEMOURS AND CO." and "DELAWARE" on the circumference, surrounding the words "FOUNDED" and "SEAL," and the date "1802." The seal shall be in the custody of the Secretary. A duplicate of the seal may be kept and used by the Senior Vice President - Finance, any Vice President - DuPont Finance, the Treasurer, or by any Assistant Secretary or Assistant Treasurer. 9 EXHIBIT 3.3 ARTICLE VII. AMENDMENTS The Board shall have the power to adopt, amend and repeal the Bylaws of the Company, by a vote of the majority of the whole Board, at any regular or special meeting of the Board, provided that notice of intention to adopt, amend or repeal the Bylaws in whole or in part shall have been given at the next preceding meeting, or, without any such notice, by the vote of two-thirds of the whole Board. I hereby certify that the foregoing is a true and correct copy of the Bylaws of E. I. du Pont de Nemours and Company. Witness my hand and the corporate seal of the Company this day of 199 . - ------------ ------------------ -- ------------------------------------- Secretary 10 EX-10.1 4 CORPORATE SHARING PLAN EXHIBIT 10.1 CORPORATE SHARING PLAN Originally Adopted - November 28, 1990 Last Amended - August 28, 1991 E. I. du Pont de Nemours and Company EXHIBIT 10.1 CORPORATE SHARING PLAN I. PURPOSE The purpose of this Corporate Sharing Plan (the "Plan") is to offer employees a favorable opportunity to share in the success of E. I. du Pont de Nemours and Company (the "Company") through stock options, thereby giving them a stake in the growth and prosperity of the Company and benefiting the Company. II. FORM OF AWARDS 1. Awards under this Plan may be granted in the form of stock options. 2. Stock options to purchase shares of the Company's common stock granted under this Plan will be stock options that are not incentive stock options qualified under the Internal Revenue Code ("nonqualified stock options"). III. LIMITATIONS ON AWARDS 1. The aggregate number of shares of the Company's stock which may be made subject to stock options granted under this Plan shall not exceed 15,000,000. The limitations set forth above shall be subject to adjustment as provided in Article XII thereof. 2. No awards may be granted under this Plan after December 31, 1991. IV. ADMINISTRATION 1. Except as otherwise specifically provided, the Plan shall be administered by the Compensation Committee of the Company's Board of Directors. The Compensation Committee shall be elected pursuant to the Bylaws of the Company, and the members thereof shall be ineligible for awards while serving on said Committee. 2. The Compensation 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. 3. The Compensation Committee shall, subject to the provisions of the Plan, determine the time when stock options will be granted, which employees of the Company, if any, shall be granted stock options, when they shall be exercisable, the number of shares to be covered by each stock option, and the terms and conditions of such stock options. 1 EXHIBIT 10.1 4. The decision of the Compensation Committee with respect to any questions arising as to interpretation of this Plan, including the severability of any or all of the provisions thereof, shall be final, conclusive and binding. 5. Nothing in this Plan shall be deemed to give any employee, or any employee's legal representatives or assigns, any right to participate in the Plan except to such extent, if any, as the Committee may have determined or approved pursuant to the provisions of this Plan. V. ELIGIBILITY FOR AWARDS 1. Awards under this Plan may be granted to employees of the Company as determined by the Compensation Committee. 2. The term "employee" may include an employee of a corporation or other business entity in which this Company shall directly or indirectly own fifty percent or more of the outstanding voting stock or other ownership interest (the term "sharing plan company" as used in this Plan shall mean a business entity whose employees are eligible for awards under this Plan), but shall exclude any director who is not also an officer or a full-time employee of a sharing plan company. The term "optionee" as used in this Plan means an employee to whom a stock option award has been granted under this Plan or, where appropriate, his or her successor in interest upon death. VI. GRANTING OF AWARDS 1. Any award granted to an employee shall be made by the Compensation Committee which shall take final action on any such award. 2. Awards may be granted at any time under this Plan and in the form provided in Article II hereof. 3. The date on which an award shall be deemed to have been granted under this Plan shall be the date of the Compensation Committee authorization of the award or such later date as may be determined by the Compensation Committee at the time the award is authorized. Each optionee shall be advised in writing by the Company of an award and the terms and conditions thereof, which terms and conditions, as the Compensation Committee from time to time shall determine, shall not be inconsistent with the provisions of this Plan. VII. GRANT PRICE The price per share of the Company's common stock which may be purchased upon exercise of a stock option granted under this Plan shall be determined by the Compensation Committee, but shall in no event be less than the fair market value of 2 EXHIBIT 10.1 such share on the date the stock option is granted, and in no event less than the par value thereof. For purposes of the grant price, fair market value shall be the average of the high and low prices of the Company's common stock as reported on the "NYSE-Composite Transactions Tape" on the date of grant 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 Article XII hereof. VIII. OPTION TERM The term of each stock option granted under this Plan shall be for such period as the Compensation Committee shall determine, but not for more than ten years from date of grant. IX. EXERCISE OF OPTIONS 1. 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 Compensation Committee may determine. However, in no event shall a stock option be exercisable prior to one year from date of grant, except for death or retirement pursuant to the provisions of the pension or retirement plan or policy of a sharing plan company or termination of employment by such company pursuant to a designated company initiated program or due to divestiture or lack of work, in which event the minimum period for exercise from date of grant shall be nine months. The Compensation Committee may fix from time to time a minimum number of shares which must be purchased at the time a stock option is exercised. 2. At optionee electing to exercise a stock option shall at the time of exercise pay the Company the full purchase price of the shares he or she has elected to purchase. Payment of the purchase price shall be made in cash. With respect to shares of the Company's common stock to be delivered upon exercise of a stock option, the Finance Committee of the Company's Board of Directors 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. X. NONTRANSFERABILITY OF AWARDS During an optionee's lifetime no stock option granted under this Plan shall be transferable and stock options may be exercised only by the optionee. XI. TERMINATION OF EMPLOYMENT The Compensation Committee shall determine the rules relating to rights under stock options upon termination of employment. 3 EXHIBIT 10.1 XII. ADJUSTMENTS 1. In the event of any stock dividend, split-up, reclassification or other analogous change in capitalization, the Compensation Committee shall make such adjustments, in the light of the change, as it deems to be equitable, both to the optionees and to the Company, in - (a) the number of shares and prices per share applicable to outstanding stock options, (b) the aggregate limitation set forth in Article III with respect to the number of shares which may be made subject to 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 Compensation Committee shall make such adjustments, in the light of the distribution, as it deems to be equitable, both to the optionees and to the Company, in respect of the items described in (a) above. 2. Any fractional shares resulting from adjustments made pursuant to this Article shall be eliminated. XIII. AMENDMENTS The Company reserves the right to change this Plan in its discretion by action of the Compensation Committee or discontinue this Plan in its discretion by action of the Board of Directors. 4 EX-10.3 5 SUPPLEMENTAL RETIREMENT INCOME PLAN EXHIBIT 10.3 SUPPLEMENTAL RETIREMENT INCOME PLAN Originally Adopted - August 21, 1978 Last Amended - June 4, 1996 E. I. du Pont de Nemours and Company EXHIBIT 10.3 SUPPLEMENTAL RETIREMENT INCOME PLAN ----------------------------------- I. PURPOSE The purpose of this Plan is to supplement an employee's pension payable under the Company's Pension and Retirement Plan to provide Monthly Retirement Income which represents an appropriate percentage of Average total Monthly Pay. Supplemental retirement income generally will be provided under the Plan to those eligible employees for whom awards under the Variable Compensation Plan, the Incentive Compensation Plan or the former Dividend Unit Plan of the Company are a significant part of Average Total Monthly Pay. II. ELIGIBILITY An employee whose effective date of retirement is after August 1, 1977 will participate in this Plan. 1. To the extent of the benefits provided herein if he is eligible for an unreduced monthly pension payable under Section IV (the Normal, Incapability, Early or Optional Retirement provisions) of the Company's Pension and Retirement Plan; or 2. To the extent deemed appropriate by the Compensation and Benefits Committee or its delegate if he is eligible for a reduced monthly pension payable under Section IV (the Early or Optional Retirement provisions) of the Company's Pension and Retirement Plan. III. AMOUNT OF SUPPLEMENTAL RETIREMENT INCOME A. The amount of monthly supplemental retirement income payable to an employee will be the excess, if any, of (1) the employee's Monthly Retirement Income, as determined under paragraph B of this Section, over (2) the employee's monthly pension under the Company's Pension and Retirement Plan, as determined under paragraph C of this Section. B. The amount of an employee's Monthly Retirement Income will be Average Total Monthly Pay multiplied by the applicable percentage factor from the following table, minus 50% of Primary Social Security Benefit. 1 EXHIBIT 10.3
Average Years of Service Total ------------------------------------------------------------ Monthly Pay 40 & (in thousands) 15 20 25 30 35 Over - -------------- ----- ----- ----- ----- ----- ----- $15 & Under 20.8% 27.6% 34.4% 41.2% 48.0% 54.8% 20 19.5 26.3 33.1 39.9 46.7 53.5 30 19.2 25.9 32.5 39.1 45.7 52.3 40 19.1 25.5 32.0 38.5 44.9 51.4 50 19.0 25.4 31.8 38.3 44.7 51.2 80 & Over 18.9 25.2 31.6 37.9 44.3 50.7
For intermediate Average Total Monthly Pay and Service combinations, the percentage factor will be interpolated from the above. ================================================================================ The amount determined above may not be greater than 50% of Average Total Monthly Pay. C. The amount of an employee's monthly pension taken into account under paragraph A of this Section will be the benefit, exclusive of any supplement for Incapability Retirement, determined without regard to the limitations imposed under paragraphs A(2)(b)(iii) and A(2)(b)(v) and D of Section IX of the Company's Pension and Retirement Plan and prior to any adjustment on account of (1) Early or Optional Retirement, (2) the Income-Leveling option, (3) any spouse or survivor benefit provision, or (4) benefits to which an employee is entitled from any other private organization or from, or under the law of, any foreign government. D. If an employee's monthly pension under the Company's Pension and Retirement Plan is reduced in accordance with the Early or Optional Retirement provisions of that Plan, the same percentage reduction factor used in that Plan will be applied to the monthly supplemental retirement income determined under paragraph A of this Section. 2 EXHIBIT 10.3 E. If the limitation set forth in Section IX.A(2)(b)(iii) of the Company's Pension and Retirement Plan relating to any deferred Variable Compensation Award has been applied, effective January 1, 1996, the amount of monthly supplemental retirement income payable to an employee under this Plan will include the amount of pension benefit attributable to the deferred Variable Compensation Award. IV. PAYMENTS OF BENEFITS A. Subject to paragraphs B and C below, an eligible employee will be entitled to monthly supplemental retirement income payments for the period beginning on the day after he retires under the Company's Pension and Retirement Plan and ending on the last day of the month in which he dies. B. If the monthly supplemental retirement income is or becomes less than or equal to the minimum monthly payment amount fixed by the Board of Benefits and Pensions, the actuarial equivalent of all such remaining monthly payments shall be paid in a lump sum. C. An eligible employee may irrevocably elect under rules prescribed by the Board of Benefits and Pensions to receive the actuarial equivalent of all or part of the monthly supplemental retirement income in a lump sum. D. Except as otherwise provided, benefits under this Plan are determined based on the Plan in effect at the time of retirement. V. DEFINITIONS AND GENERAL CONDITIONS A. Definitions 1. All terms used in this Plan which are defined in the Company's Pension and Retirement Plan will have the same meaning for purposes of this Plan except as expressly provided herein. 2. (a) The term "Average Total Monthly Pay" means the higher of (i) total pay for the thirty-six consecutive calendar months for which the employee's pay is the highest, divided by 36; or 3 EXHIBIT 10.3 (ii) average pay per month based on total pay over a number of calendar years, and a fraction of total pay for a calendar year if necessary, sufficient to obtain an aggregate amount of service equivalent to three full years. Such calendar years shall be selected beginning with the calendar year in which average pay per month was the highest and taking in turn calendar years of successively lower average pay per month. A fraction of total pay for a calendar year shall be calculated by multiplying average pay per month for that year by the number of months needed to yield an aggregate amount of service equivalent to three full years. Only pay for the 120 calendar months up to and including the calendar month in which the employee retires under the Company's Pension and Retirement Plan will be taken into account in computing Average Total Monthly Pay. (b) The term "pay" includes variable pay and awards under the Variable Compensation Plan, the Incentive Compensation Plan and former Dividend Unit Plan of the company or similar plans of any of its affiliated companies, which are not forfeited, but does not include (i) allowances in connection with transfer of employment or termination of employment and other special payments, or (ii) awards, pay under a gain sharing program or payments under the Special Compensation Plan or Stock Option Plan of the Company or similar plans of the Company or any of its affiliated companies. (c) The value of an award under the Company's Variable Compensation Plan, the Incentive Compensation Plan or former Dividend Unit Plan for any calendar year will be prorated over the length of an employee's service for that year which is used in computing his benefit under this Plan to the extent the award is attributable to such service. The value of an award under the Variable Compensation Plan, or the Incentive Compensation Plan will be the total award value approved by the Compensation and Benefits Committee. The value of an award under the former Dividend Unit Plan will be the value used by the Compensation and Benefits Committee in determining the number of dividend units awarded to an employee. 4 EXHIBIT 10.3 (d) Where a retired employee is granted an award under the Variable Compensation Plan, the Incentive Compensation Plan or the former Dividend Unit Plan for the calendar year in which his retirement is effective, his Average Total Monthly Pay will be recomputed and, if applicable, his monthly supplemental retirement income will be increased beginning the month following that in which such award is granted. 3. The term "Service" means the length, in years and fractions of a year, of an employee's period of "continuous service" as determined under the Company's Continuity of Service Rules for computing the amount of a pension and, to the extent prescribed in such Rules, recognition will be given for service which the employee has rendered to an affiliated company or to a company whose assets have been acquired in whole or in part, by the Company. 4. The term "Company" means E. I. du Pont de Nemours and Company, any wholly owned subsidiary or part thereof and any partnership or joint venture in which E. I. du Pont de Nemours and Company is joined which adopts this Plan with the approval of the Company, or such person or persons as the Company may designate. B. Payments Rounded to Next Higher Full Dollar Each monthly payment which is computed in accordance with this Plan will, if not in whole dollars, be increased to the next higher whole dollar. Such rounding shall be made after applying any applicable reduction factors. C. Nonassignment No assignment of the rights and interests under this Plan will be permitted or recognized under any circumstances, nor shall such rights and interests be subject to attachment or other legal processes for debt. D. Forfeiture of Benefits If an employee forfeits all or part of an award under the Company's variable Compensation Plan, the Incentive Compensation Plan or former Dividend Unit Plan, all rights and interests of the employee under this Plan will be forfeited. E. Administration 1. The administration of this Plan is vested in the Board of Benefits and Pensions appointed by the Company, except that the Compensation and Benefits Committee shall determine the discount rate to be used in 5 Exhibit 10.3 calculating the lump sum payment described in Section IV. The Board shall have the discretionary right to determine eligibility for benefits hereunder and to construe the terms and conditions of this Plan. The Board may adopt, subject to the approval of the Compensation and Benefits Committee, or its delegate, such rules as it may deem necessary for the proper administration of the Plan, and its decision in all matters involving the interpretation and application of the Plan shall be final, conclusive and binding. 2. All expenses and costs in connection with the operation of this Plan shall be borne by the Company out of its general assets. F. Amendment The Company reserves the right to change this Plan in its discretion by action of the Compensation and Benefits Committee or its delegate, or to discontinue this Plan in its discretion by action of the Board of Directors. 6 EX-10.4 6 PENSION RESTORATION PLAN EXHIBIT 10.4 PENSION RESTORATION PLAN Originally Adopted - January 1, 1976 Last Amended - June 4, 1996 E. I. du Pont de Nemours and Company EXHIBIT 10.4 PENSION RESTORATION PLAN ------------------------ I. PURPOSE The purpose of this Plan is to provide an employee or pensioner or his survivor or survivors eligible to receive payments pursuant to the Company's Pension and Retirement Plan the portion of his pension or survivor benefit that would have been paid to him or his survivor or survivors under the Pension and Retirement Plan if the limitations established in paragraphs A(2)(b)(iii) relating to deferred Variable Compensation Awards, A(2)(b)(v) and D of Section IX of such Plan had not been applied, or, effective with payments made after January 1, 1996, if the limitations established in paragraphs A(2)(b)(v) and D of Section IX of such Plan not been applied. Notwithstanding the above, an employee or the survivor(s) of an employee who retires in accordance with the Incapability Retirement provision of Section IV of the Pension and Retirement Plan will not be eligible for participation in this Plan. II. ADMINISTRATION The administration of this Plan is vested in the Board of Benefits and Pensions appointed by the Company, except that the Compensation and Benefits Committee shall determine the discount rate to be used in calculating the lump sum payment described in Section V. The Board may adopt such rules as it may deem necessary for the proper administration of the Plan, and its decision in all matters involving the interpretation and application of this Plan shall be final. The Board shall have the discretionary right to determine eligibility for benefits hereunder and to construe the terms and conditions of this Plan. III. ELIGIBILITY An employee or pensioner who is entitled to pension payments, or a person entitled to survivor benefits, pursuant to the Company's Pension and Retirement Plan, but excluding an employee or the survivor(s) of an employee who retires under the Incapability Retirement provision of Section IV of the Plan, will be eligible for payments under this Plan provided payments that would have been made under the Pension and Retirement Plan have been reduced by the limitations on such payments set forth in paragraphs A(2)(b)(iii) relating to deferred Variable Compensation Awards, A(2)(b)(v) and D of Section IX of such Plan, or, effective with payments made after January 1, 1996, the limitations on such payments set forth in paragraphs A(2)(b)(v) and D of Section IX of such Plan. 1 EXHIBIT 10.4 For purposes of this Plan, the term "Company" means E. I. du Pont de Nemours and Company, any wholly owned subsidiary or part thereof and any partnership or joint venture in which E. I. du Pont de Nemours and Company is joined which adopts this Plan with the approval of the Company, or such person or persons as the Company may designate. IV. AMOUNT PAYABLE The monthly amount payable to a person eligible to receive payments under this Plan will be equal to his monthly pension or survivor benefit under the Pension and Retirement Plan calculated without application of the limitations on such payment set forth in paragraphs A(2)(b)(iii) relating to deferred Variable Compensation Awards, A(2)(b)(v) and D of Section IX of such Plan, or effective with payments made after January 1, 1996, the limitations on such payments set forth in paragraphs A(2)(b)(v) and D of Section IX of such Plan, less the amount of the actual monthly pension or survivor benefit paid under such Plan. V. PAYMENTS OF BENEFITS The amount payable under this Plan will be paid coincident with the monthly pension or survivor benefit paid under the Pension and Retirement Plan, unless (1) the amount payable is or becomes less than or equal to the minimum monthly payment amount fixed by the Board of Benefits and Pensions, in which case the actuarial equivalent of all such remaining payments shall be paid in a lump sum, or (2) the employee irrevocably elects under rules prescribed by the Board of Benefits and Pensions to receive all or part of the actuarial equivalent of such monthly payments in a lump sum. A lump sum payment shall be delivered as of the end of the month following that in which the employee retires or at such future times and under such terms and conditions as the Compensation Committee may determine. All payments under this Plan shall be made by, and all expenses of administering this Plan shall be borne by, the Company. VI. RIGHT TO MODIFY The Company reserves the right to change this Plan in its discretion by action of the Compensation and Benefits Committee or its delegate or to discontinue this Plan in its discretion by action of the Board of Directors. VII. NONASSIGNMENT No assignment of the rights and interests under this Plan will be permitted or recognized under any circumstances, nor shall such rights and interests be subject to attachment or other legal processes for debt. 2 EX-10.11 7 CORPORATE SHARING PLAN EXHIBIT 10.11 1997 CORPORATE SHARING PLAN Adopted - January 29,1997 E. I. du Pont de Nemours and Company EXHIBIT 10.11 1997 CORPORATE SHARING PLAN I. PURPOSE The purpose of this 1997 Corporate Sharing Plan (the "Plan") is to offer employees a favorable opportunity to share in the success of E. I. du Pont de Nemours and Company (the "Company") through stock options, thereby giving them a stake in the growth and prosperity of the Company and benefiting the Company. II. FORM OF GRANTS Grants under this Plan will be in the form of nonqualified stock options to purchase shares of the Company's common stock. III. LIMITATIONS ON GRANTS 1. The aggregate number of shares of the Company's stock which may be made subject to stock options granted under this Plan shall not exceed 9,500,000. The limitations set forth above shall be subject to adjustment as provided in Article XII hereof. 2. No grants may be made under this Plan after December 31, 1997. IV. ADMINISTRATION 1. Except as otherwise specifically provided, the Plan shall be administered by the Compensation and Benefits Committee of the Company's Board of Directors. 2. The Compensation and Benefits 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, including amending the Terms and Conditions. 3. The decision of the Compensation and Benefits Committee with respect to any questions arising as to interpretation of this Plan, including the severability of any or all of the provisions thereof, shall be final, conclusive and binding. 4. Nothing in this Plan shall be deemed to give any employee, or any employee's legal representatives or assigns, any right to participate in the Plan except to such extent, if any, as the Compensation and Benefits Committee may have determined or approved pursuant to the provisions of this Plan. 1 EXHIBIT 10.11 V. ELIGIBILITY FOR GRANTS 1. Grants under this Plan may be made to employees of the Company as determined by the Board of Directors. 2. The term "employee" may include an employee of a corporation or other business entity in which this Company shall directly or indirectly own fifty percent or more of the outstanding voting stock or other ownership interest (the term "sharing plan company" as used in this Plan shall mean a business entity whose employees are eligible for grants under this Plan), but shall exclude any director who is not also an officer or a full-time employee of a sharing plan company. The term "optionee" as used in this Plan means an employee to whom a stock option award has been granted under this Plan or, where appropriate, his or her successor in interest upon death. VI. GRANTS 1. Any grant made to an employee shall be made by the Board of Directors which shall take final action on any such grant. 2. Grants may be made at any time under this Plan and in the form provided in Article II hereof. 3. The date on which a grant shall be deemed to have been made under this Plan shall be the date of the Board of Directors authorization of the grant or such later date as may be determined by the Board of Directors at the time the grant is authorized. Each optionee shall be advised in writing by the Company of a grant and the terms and conditions thereof, which terms and conditions, as the Board of Directors from time to time shall determine, shall not be inconsistent with the provisions of this Plan. VII. GRANT PRICE The price per share of the Company's common stock which may be purchased upon exercise of a stock option granted under this Plan shall be determined by the Board of Directors, 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 purposes of the grant price, fair market value shall be the average of the high and low prices of the Company's common stock as reported on the "NYSE-Composite Transactions Tape" on the date of grant 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 Article XI hereof. 2 EXHIBIT 10.11 VIII. OPTION TERM The term of each stock option granted under this Plan shall be for such period as the Board of Directors shall determine, but not for more than ten years from date of grant. IX. EXERCISE OF OPTIONS 1. 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 Board of Directors may determine. However, in no event shall a stock option be exercisable prior to six months from date of grant. The Board of Directors may fix from time to time a minimum number of shares which must be purchased at the time a stock option is exercised. 2. An optionee electing to exercise a stock option shall at the time of exercise pay the Company the full purchase price of the shares he or she has elected to purchase. Payment of the purchase price shall be made in cash. With respect to shares of the Company's common stock to be delivered upon exercise of a stock option, the Compensation and Benefits 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. X. NONTRANSFERABILITY OF GRANTS Except as provided under conditions defined by the Compensation and Benefits Committee, during an optionee's lifetime no stock option granted under this Plan shall be transferable and stock options may be exercised only by the optionee. XI. TERMINATION OF EMPLOYMENT The Board of Directors shall determine the rules relating to rights under stock options upon termination of employment. XII. ADJUSTMENTS 1. In the event of any stock dividend, split-up, reclassification or other analogous change in capitalization, the Compensation and Benefits Committee shall make such adjustments, in the light of the change, as it deems to be equitable, both to the optionees and to the Company, in (a) the number of shares and prices per share applicable to outstanding stock options, (b) the aggregate limitation set forth in Article III which respect to the number of shares which may be made subject to options. 3 EXHIBIT 10.11 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 Compensation and Benefits Committee shall make such adjustments, in the light of the distribution, as it deems to be equitable, both to the optionees and to the Company, in respect of the items described in (a) above. 2. Any fractional shares resulting from adjustments made pursuant to this Article shall be eliminated. XIII. AMENDMENTS The Company reserves the right to change this Plan in its discretion by action of the Compensation and Benefits Committee or discontinue this Plan in its discretion by action of the Board of Directors. 4 EX-11 8 CALCULATIONS OF EARNINGS Exhibit 11 E. I. DU PONT DE NEMOURS AND COMPANY CALCULATION OF EARNINGS PER SHARE (Dollars in millions, except per share)
Years Ended December 31 ----------------------------------------------------------------------------------------------- 1995 ------------------------------ 1996 Primary Fully Diluted 1994 1993 1992 -------------- -------------- -------------- -------------- -------------- --------------- Net income (loss) less dividends on preferred stock ............ $3,626 $3,283 $3,283 $2,717 $545 $(3,937) Adjustment for interest, net of income tax, determined under "Modified Treasury Stock Method" ........................ -- 467 447 -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Earnings (loss) applicable to common stock ................... $3,626 $3,750 $3,730 $2,717 $545 $(3,937) =========== =========== =========== =========== =========== =========== Average number of common shares outstanding (excludes treasury stock and the shares held by DuPont Flexitrust) ............. 560,675,296 585,107,476 585,107,476 679,999,916 676,622,115 673,454,935 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" for 1995) ............ 9,923,630 73,678,138 73,955,886 4,542,903 3,785,582 4,575,929 ----------- ----------- ----------- ----------- ----------- ----------- Adjusted average number of common shares and share equivalents ... 570,598,926 658,785,614 659,063,362 684,542,819 680,407,697 678,030,864 =========== =========== =========== =========== =========== =========== Earnings (loss) per share and share equivalents .......... $6.35(a) $ 5.69(b) $ 5.66(b) $ 3.97(a) $.80(a) $ (5.81)(b) =========== =========== =========== =========== =========== =========== Earnings (loss) per share - as published ...................... $6.47 $ 5.61 $ 5.61 $ 4.00 $.81 $ (5.85) =========== =========== =========== =========== =========== ===========
- -------------------- (a) Fully diluted. (b) Calculations are antidilutive. EX-12 9 RATIO OF EARNINGS Exhibit 12 E. I. DU PONT DE NEMOURS AND COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions)
Years Ended December 31 ----------------------------------------------------- 1996 1995 1994 1993 1992 --------- ------- ------- --------- --------- Net Income ........................................... $3,636 $3,293 $2,727 $ 566(a) $ 975(a) Provision for Income Taxes ........................... 2,345 2,097 1,655 392 836 Minority Interests in Earnings of Consolidated Subsidiaries ....................................... 59 30 18 5 10 Adjustment for Companies Accounted for by the Equity Method ............................... 81 41 18 41 6 Capitalized Interest ................................. (144) (170) (143) (194) (194) Amortization of Capitalized Interest ................. 191(b) 154 154 144 101 ------ ------ ------ ------ ------ 6,168 5,445 4,429 954 1,734 ------ ------ ------ ------ ------ Fixed Charges: Interest and Debt Expense .......................... 729 758 559 594 643 Adjustment for Companies Accounted for by the Equity Method - Interest and Debt Expense .... 70 71 55 42 62 Capitalized Interest ............................... 144 170 143 194 194 Rental Expense Representative of Interest Factor ... 118 113 118 143 151 ------ ------ ------ ------ ------ 1,061 1,112 875 973 1,050 ------ ------ ------ ------ ------ Total Adjusted Earnings Available for Payment of Fixed Charges ...................................... $7,229 $6,557 $5,304 $1,927 $2,784 ====== ====== ====== ====== ====== Number of Times Fixed Charges Are Earned ............. 6.8 5.9 6.1 2.0 2.7 ====== ====== ====== ====== ======
- ----------------------- (a) Income Before Extraordinary Item and Transition Effect of Accounting Changes. (b) Includes write-off of capitalized interest associated with divested businesses. EX-13 10 ANNUAL REPORT To Our Shareholders - ------------------- DuPont had a stand-out year in 1996. We posted record earnings for the third year in a row. Our shareholders benefited from outstanding share price appreciation. And, very importantly, we articulated a fundamental strategy aimed at value creation -- DuPont's critical path to future success. Net income for the year was $3.6 billion or $6.47 per share compared to $3.3 billion or $5.61 per share in 1995. Total shareholder return was 38 percent, some 15 percentage points higher than the return for the S&P 500 index. Our energy business showed particular strength from both improved prices and higher volumes and provided the most significant portion of our increase in earnings. In our chemicals businesses, the largest contribution to earnings growth came from our newly reported Life Sciences segment which includes agricultural products and pharmaceuticals and also from the Lycra/(R)/ brand spandex business. DuPont's direction is clear - --------------------------- Underlying our performance is a clear understanding of our corporate direction and a well-articulated strategy to implement our goals. We want to be the most successful energy and chemistry-based company in the world, dedicated to creating materials that make people's lives better and easier. We believe that over the long haul, superior profitability comes from a leading global competitive position. We have a unique set of businesses that derive their superior competitive advantage from strong core technology platforms, product brand franchises and engineering capability. All of this is aimed at delivering at least 15 percent annual total shareholder return which will require 10-12 percent earnings growth. We are determined to build our company profitably with a clear focus on providing both superior value for our shareholders and personal growth and benefit for employees. We depend on 97,000 dedicated people around the world to accomplish this. Our success is the result of their creative efforts to improve the business continuously and to provide superior value for our customers. Value liberation to value creation - ---------------------------------- The past few years marked one of the greatest transformations in DuPont's history. We liberated value through productivity and efficiency improvements while reorganizing to speed decision 1996 1 CONTINUED making and implementation. Cost reduction and increased capital efficiency revitalized our competitiveness, enabling our businesses to compete and grow profitably in world markets. Our aim now is to create value by at least doubling the rate of revenue growth while we maintain our emphasis on productivity improvements. Growth will be global - --------------------- We have aggressive strategies for growth. One strategy is pursuing emerging markets. Today, markets outside the United States provide 50 percent of total revenue and that percentage is growing. Our fastest growth is coming from Asia Pacific and South America. We are also focused on capturing growth in the developed markets of North America and Western Europe where we have a large revenue base. Achieving sustained, profitable growth in today's global marketplace requires clear competitive advantage. We've defined that advantage as being number one or two in both market position and technology in our chemicals and specialties businesses that are global in scope. About two-thirds of our businesses are already positioned as global leaders by this measure. Among them are nylon, Lycra/(R)/, titanium dioxide, agricultural products, fluoroproducts, nonwovens, aramids and photopolymers. We have some others such as polyester, finishes and ethylene copolymers that are very strong regionally. For these, we are pursuing creative ways to achieve a strong global position. Conoco's global strategy includes a strong focus on growth in the upstream business, targeting undeveloped reserves in Venezuela, the Middle East, Russia, and Asia Pacific as well as deep water in the Gulf of Mexico. Our Polar Lights joint venture in Russia is the acknowledged model for petroleum development there and has become a showcase for the industry. Downstream we are building new refining capacity in Malaysia to participate in the region with the fastest growing energy demand in the world. Innovation: research is key - --------------------------- Research and development is essential to our growth strategy and we intend to use our technological strength to add superior competitiveness. We expect R&D to revolutionize the productivity of our manufacturing assets. A third of our revenue growth is targeted to come from new products. Research programs balance near- and long-term opportunities. Our agricultural products pipeline includes 14 new crop protection chemicals. In pharmaceuticals, Cozaar/(R)/ is the fastest growing antihypertension drug introduced in the last decade. Two other promising drugs are in the DuPont Merck research pipeline. Other development programs are focusing on the commercialization of new products and processes from a radical new catalyst system for polyolefins and a series of new technologies for polyester. Both polyesters and polyolefins are large markets that are growing rapidly and represent potential for DuPont based on new technologies. Alliances and acquisitions for speed and flexibility - ---------------------------------------------------- Doing things on our own is not the only route to success. We selectively use acquisitions and alliances to enter new markets, 2 secure technology advantages, or quickly establish regional market presence. We currently have some 120 joint venture companies worldwide, and 30 in the process of being formed. Many are in Asia and are essential to establishing our presence in that high-growth region of the world. Grow, fix, or divest - -------------------- Profitable growth is our aim. But sometimes portfolio adjustments are necessary to better focus on core businesses and strengthen the company. In 1996, we sold most of the medical products business, divested 30 percent of the photomasks business through an initial public offering and made agreements to exit businesses in electronic imaging, caustic chlorine and advanced composites. We gave new life to our elastomers business by entering into a joint venture with The Dow Chemical Company, combining DuPont's global market position with Dow's new technology. The recently announced nylon modernization program will enable us to maintain a leadership position globally. Some businesses such as Conoco's U.S. downstream operations and parts of printing and publishing remain challenges for 1997. Results on all fronts - --------------------- Committed as we are to getting financial results, we are equally determined to achieve them in harmony with DuPont's core values. In performance areas such as safety and the environment we continue to demonstrate leadership that directly benefits our shareholders as well as our employees. A major survey by BTI Consulting Group of Boston identified DuPont as the best U.S. company for environmental management. Actual environmental releases for the latest U.S. EPA Toxic Release Inventory report dropped 28 percent. Since 1988, we have reduced total land-filled waste by 45 percent. That represents a reduction of nearly 1 billion pounds per year. Safety performance continues to improve, while our overall safety record remains the best in industry. But although our accidents are few in number, we still have too many serious ones. Our goal remains zero for all accidents and environmental incidents. Leadership and accountability - ----------------------------- Our business leaders are focused on value creation for our customers and our shareholders. We are raising expectations for results and for maintaining an environment in which all employees contribute to their full potential. Our compensation plans were recently aligned with these goals and our desire to increase employee ownership in our company. Our future - ---------- Overall, we are well on our way to establishing ourselves as one of the great global competitors of the 21st century. We remain committed to generating a strong total shareholder return, and we will accomplish that by doing the things DuPont does best. Customers can count on DuPont research and technology to provide innovative products and services that meet their needs better than anyone else. Employees can count on DuPont to provide opportunities for them to contribute and to benefit from the company's success. Communities around the world know that DuPont is a company they can count on to live its core values. Those values include respect for people, a commitment to safety and the environment, and an insistence on ethics and integrity. Our future can only be realized if we achieve our objectives every step along the way. We're committed to making 1997 another record year of profitable growth. /s/ Edgar S. Woolard, Jr. /s/ John A. Krol Edgar S. Woolard, Jr. John A. Krol Chairman of the Board President and Chief Executive Officer February 28, 1997 3 - -------------------------------------------------------------------------------- chemicals ----------------------------------------------------------------------
Sales ($ in Billions) ------------------------------ 1996 1995 1994 ---- ---- ---- 4.1 4.2 3.8
[CHART APPEARS HERE]
ATOI ($ in Millions) ------------------------------ 1996 1995 1994 ---- ---- ---- 563 651 378
See Industry Segment Information (Note 27 to Financial Statements). - -------------------------------------------------------------------------------- The Chemicals segment includes a wide range of commodity and specialty products such as titanium dioxide, fluorochemicals and polymer intermediates used in the paper, plastics, chemical processing, refrigeration, textile and environmental management industries. Specialty Chemicals began operation of a new plant in Asturias, Spain, to produce tetrahydrofuran (THF) using a new technology. This lowest- cost, butane-based route to THF incorporates reactor and catalyst techniques developed by DuPont and Conoco scientists. A second new technology process, to convert THF into Terathane/(R)/ polytetramethylene ether glycol, is being incorporated in a plant under construction at LaPorte, Texas, scheduled for start up in 1997. This process has capital, cost and environmental advantages. Terathane/(R)/ is an ingredient of several DuPont products, including Lycra/(R)/ brand spandex. In other developments, a joint venture agreement was signed with Ticor Ltd. for production of sodium cyanide in Queensland, Australia. The joint venture is expected to increase Ticor's plant capacity by approximately one-third to more than 40,000 tons by 1998. In Fluorochemicals, the refrigerant business focused on improving efficiency and customer service while benefiting from growing demand for non-ozone depleting products. In Fluorochemicals specialty products, growth was led by a significant volume increase in the electronics gas business, which was fueled by a strong demand for semiconductors. The titanium dioxide market experienced slow growth and continued downward pressure on world prices. DuPont Ti-Pure/(R)/ titanium dioxide was helped in these difficult conditions by its position as the market leader with innovative products and low-cost capacity options. In regional markets, U.S. demand showed improvement at mid-year and some pickup was experienced in Europe toward the end of the year. 1996 versus 1995 Sales of $4.1 billion were 1 percent lower, ---------------- reflecting 4 percent higher sales volume more than offset by 5 percent lower prices. After-Tax Operating Income (ATOI) was $563 million, down 14 percent from $651 million in 1995. Excluding nonrecurring items from both years, earnings were $584 million, down 9 percent from the $641 million earned last year, principally reflecting lower earnings from titanium dioxide resulting from significantly lower selling prices. Partly offsetting this were higher earnings from chemical intermediates. Segment results were also negatively affected by investment write-offs in the fourth quarter. 1995 versus 1994 Sales of $4.2 billion were up 11 percent, ---------------- reflecting 9 percent higher prices and 2 percent higher volumes. ATOI was $651 million, up 72 percent from the $378 million earned in 1994, principally due to improvement in titanium dioxide and specialty chemicals. Excluding nonrecurring items, ATOI was $641 million, up 67 percent. Perspective Successful initiatives in new technologies and ----------- processes such as those in Specialty Chemicals should help the Chemicals segment maintain a healthy competitive position. In Fluorochemicals, the long-awaited increase in demand for alternatives to chlorofluorocarbons (CFCs) should boost sales of DuPont refrigerants, propellants, and cleaning solvents. As the low-cost producer in titanium dioxide, the company is in a good position to ride out market downturns and position itself for growth in new markets in Europe and Asia Pacific. 14 - -------------------------------------------------------------------------------- fibers -----------------------------------------------------------------------
Sales ($ in Billions) ------------------------------ 1996 1995 1994 ---- ---- ---- 7.2 7.2 6.8
[CHART APPEARS HERE]
ATOI ($ in Millions) ------------------------------ 1996 1995 1994 ---- ---- ---- 802 805 680
See Industry Segment Information (Note 27 to Financial Statements). - -------------------------------------------------------------------------------- A diversified mix of specialty fibers is produced to serve end uses ranging from protective apparel, active sportswear and packaging to high-strength composites in aerospace. High-volume fibers are produced for apparel and home fabrics, carpeting and industrial applications and sold directly to the textile and other industries for processing into products used in consumer and industrial markets. DuPont Nylon continued its strategy to improve revenue and earnings through two key thrusts. The first is a major renewal program focused on spinning technology, operating efficiencies and consolidation of production. The second is to build the unit's global leadership, including its position in the production and marketing of nylon chemical intermediates. As part of the global program, DuPont in 1996 signed a letter of intent to form a joint venture with BASF to produce and sell nylon intermediates in Asia. Integrated with DuPont's adipic acid and nylon resin plants in Singapore, the joint venture will expand the company's position as a major nylon intermediates, polymer and fiber producer in Asia Pacific. Investments are also being made at nylon intermediates sites in the United Kingdom and Texas. Lycra/(R)/ brand spandex continued to reach new markets in men's wear, woven fabrics and footwear and in combination with other fibers for use in ready-to-wear, swimwear, intimate apparel, legwear and activewear. A new specialty product, Lycra/(R)/ Power, was developed in 1996 for retail launch in 1997. The product is designed to enhance sports performance and is based on the results of a five-year sports physiology study conducted at The Pennsylvania State University Center for Sports Medicine. Dacron/(R)/ polyester benefited from the company's strong position in polyester intermediates, continuing aggressive cost control and a decrease in paraxylene prices which began in the second quarter of 1996. The filament plant at Cooper River, South Carolina, was upgraded and construction began on new capacity at Suzhou, China, in a new joint venture to supply the Chinese polyester market. In Nonwovens, the DuPont-Asahi Flash Spun Products joint venture in Japan contributed to global growth with market penetration in construction membranes, medical packaging and agriculture. Typar/(R)/ spunbonded polypropylene grew in rooflining markets in Europe and as a carpet backing material. A new line of Sontara/(R)/ branded industrial wipes was launched in Asia, Europe and North America. Tyvek/(R)/ HomeWrap/TM/ was introduced as the first of a series of weather membranes for specialized building needs. Advanced Fibers Systems continued to build on its Kevlar/(R)/ and Nomex/(R)/ brands of high-performance aramid fibers. Innovative new uses were developed for low-friction fibers in sportswear, incorporating Teflon/(R)/ fluoropolymers. A shift in resource allocation is aimed at growth in new markets in South America, Eastern Europe and Asia Pacific. 1996 versus 1995 Sales of $7.2 billion were flat as average selling prices ---------------- and sales volumes were essentially unchanged versus 1995. After-Tax Operating Income (ATOI) was $802 million, essentially even with the $805 million earned in 1995. Excluding nonrecurring items, earnings were $834 million, 8 percent above the $774 million earned in 1995. This is principally attributable to improved results for Lycra/(R)/ brand spandex, nonwovens and Dacron/(R)/ polyester. 1995 versus 1994 Fibers segment sales of $7.2 billion were up 7 percent. ---------------- The increase was driven by 5 percent higher selling prices and 2 percent higher volume. Sales volume increases, principally in Asia Pacific and Europe, were partly offset by 1 percent lower volume in the United States. ATOI was $805 million versus $680 million in the prior year. Excluding nonrecurring items, ATOI was $774 million, an increase of 18 percent, mainly on improvements in aramids and Dacron/(R)/ polyester. Perspective Development of new markets and uses for established products, ----------- along with a strong brand portfolio, are positive factors for the fibers businesses. The renewal program for nylon should help global growth. New technology and new products that combine the characteristics of several DuPont products also hold promise. 15 - -------------------------------------------------------------------------------- life sciences -----------------------------------------------------------------------
Sales ($ in Billions) ------------------------------ 1996 1995 1994 ---- ---- ---- 2.5 2.3 2.1
[CHART APPEARS HERE]
ATOI ($ in Millions) ------------------------------ 1996 1995 1994 ---- ---- ---- 679 588 360
See Industry Segment Information (Note 27 to Financial Statements). - -------------------------------------------------------------------------------- The Life Sciences businesses consist of Agricultural Products, with a focus on crop protection chemicals and an increasing role in biotechnology, and Pharmaceuticals. The pharmaceuticals business consists primarily of DuPont's 50 percent interest in The DuPont Merck Pharmaceutical Co. The Agricultural Products business continued its strong performance in 1996 with profitable growth in Latin America, particularly Brazil, and in Asia and Europe. DuPont is well-established as a leader in crop protection chemicals in the Americas, Europe, Japan and Australia and in newer growth markets in Southeast Asia. Further pursuing global expansion in 1996, the company continued building marketing organizations in China and India. DuPont also significantly increased its discovery research in 1996. During the year, DuPont introduced Staple/(R)/, a low-rate herbicide for cotton, Upbeet/(R)/ herbicide for sugarbeet, Matrix/(R)/ herbicide for potatoes and Fortress/(R)/ insecticide for corn. While expanding its base in crop protection chemicals, DuPont's strategy is to work toward a leading position in biotechnology-based businesses. DuPont Quality Grains, the biotechnology unit within Agricultural Products that improves the quality and functionality of corn and soybeans, strengthened its position as supplier of enhanced grains to the livestock industry worldwide. The unit's principal products are Optimum/(R)/ high oil corn seed and high oleic soybeans. Approximately 350,000 acres were planted in the high oil corn in 1996 and a 30,000-acre introduction was initiated for the high oleic soybeans for the 1997 season. The DuPont Merck Pharmaceutical Co. joint venture had another highly successful year with continued earnings growth and entry into new markets. Coumadin/(R)/, the anticoagulant drug, continued to be an important contributor. Also, Cozaar/(R)/ antihypertensive had strong sales in its first full year of commercialization. Cozaar/(R)/ was developed by DuPont and is marketed by Merck under a shared earnings agreement. In new developments during 1996, DuPont Merck entered into a marketing agreement with Boehringer Mannheim Corp. for RetavaseTM, a thrombolic agent for treatment of acute myocardial infarction. Also, the company is co-promoting Prinivil/(R)/ and Prinzide/(R)/, for control of hypertension, with Merck in North America. The U.S. Federal Drug Administration (FDA) cleared for marketing the radiopharmaceutical VerlumaTM for staging small-cell lung cancer. Verluma/TM/, licensed from NeoRx Corp., is the first nuclear oncology product to be marketed by DuPont Merck. The FDA is also reviewing a radiopharmaceutical agent for the treatment of bone pain and one for breast cancer imaging. Two promising pharmaceutical compounds entered clinical development. DMP 266 has shown significant results in HIV virus reduction when studied in combination with other antiviral agents. A new class of antiplatelet compounds is being developed for the prevention of blood clots that cause heart attacks and strokes. 1996 versus 1995 Segment sales of $2.5 billion were up 6 percent ---------------- reflecting 9 percent higher volume, partly offset by 3 percent lower prices. After-Tax Operating Income (ATOI) was $679 million, up 15 percent from $588 million. Excluding nonrecurring items from both years, ATOI was $789 million, up 21 percent from $651 million in 1995. This reflects earnings improvement from both pharmaceuticals and agricultural products. The increase in pharmaceuticals earnings was largely due to a more favorable allocation of operating income to DuPont from the DuPont Merck joint venture to recognize the performance of assets contributed to the venture by DuPont. These allocations totaled $186 million after tax in 1996, compared to $111 million after tax in 1995, and are now completed in accordance with the venture agreement. Segment sales reflect only the agricultural products business. Results related to the DuPont Merck joint venture and Agricultural Products affiliates are accounted for using the equity method. 16 1995 versus 1994 Segment sales were $2.3 billion, up 9 percent from 1994. ---------------- ATOI of $588 million was 63 percent higher than $360 million in 1994. Excluding nonrecurring items, 1995 earnings were $651 million, up 48 percent from $440 million in 1994. This reflects both higher agricultural products and pharmaceuticals earnings. The latter was due in part to a more favorable allocation ($111 million after tax) of operating income to DuPont from the DuPont Merck joint venture. Perspective Agricultural Products is pursuing global growth through entry ----------- into new markets and development of a range of new crop protection products, many of which are currently in the pipeline. The business expects to commercialize 14 new products by 2003. Initiatives in biotechnology are also viewed as important contributors to future growth of the agricultural business. New products continue to flow into the DuPont Merck pipeline as compounds for treatment of cystic fibrosis, AIDS and dementia enter development. Ongoing success of Coumadin/(R)/ and Cozaar/(R)/ and development of new products should benefit the pharmaceuticals business. - -------------------------------------------------------------------------------- polymers ----------------------------------------------------------------------
Sales ($ in Billions) ------------------------------ 1996 1995 1994 ---- ---- ---- 6.7 7.0 6.3 ATOI [CHART APPEARS HERE] ($ in Millions) ------------------------------ 1996 1995 1994 ---- ---- ---- 909 829 705
See Industry Segment Information (Note 27 to Financial Statements). - -------------------------------------------------------------------------------- The Polymers group of businesses includes engineering polymers, elastomers, fluoropolymers, ethylene polymers, finishes and performance films serving industries such as packaging, construction, chemical processing, electrical, paper, textiles and transportation. This group includes the automotive businesses, which are engaged in manufacturing and marketing more than 100 DuPont product lines used by the automotive industry. It includes DuPont Dow Elastomers L.L.C., a 50 percent-owned joint venture. Packaging and Industrial Polymers sales grew in all major markets. Growth in specialty ethylene copolymer volume was fueled by new uses, rising global demand for modern food packaging and demand in industrial applications. Sales also increased in the films and vinyls businesses. DuPont launched a $15 million expansion of shrink film manufacturing facilities in France and also announced plans to increase global ethylene copolymer capacity by 25 percent over the next five years. The Fluoropolymers business, which includes Teflon/(R)/ and Tefzel/(R)/ fluoropolymer resins, Teflon/(R)/ and SilverStone/(R)/ non-stick finishes, Tedlar/(R)/ polyvinyl fluoride film and Nafion/(R)/ perfluorinated membranes, continued to grow and found new applications in industrial uses requiring high temperature and chemical resistance. Engineering Polymers' sales gains were aided by customer commercialization of recently introduced products based on Zytel/(R)/ high temperature nylon (automotive air intake manifolds), Crastin/(R)/ PBT polyester (electronic connectors) and Zenite/TM/ liquid crystal polymers (miniaturized computer circuit boards). The first DuPont manufacturing site in China for engineering polymer products was opened in 1996 to produce Delrin/(R)/ acetal resins. Investments in new capacity for several other products were also made in North and South America, Europe and Asia; these include capacity for manufacturing Zytel(R) nylon resin in Argentina to serve automotive, electronics and appliance customers in South America. DuPont Dow Elastomers began operating on April 1. The 50-50 joint venture had revenues of over $750 million in its first nine months of operation. This represents an increase of 10 percent versus the same period in 1995 for the combined product lines of both the DuPont and Dow components. During 1997 the new company will commercialize new grades of hydrocarbon rubber made using Insite/TM/, Dow's innovative new process and catalyst technology. Automotive, which includes original equipment and after-market coatings, specialties and industrial maintenance finishes and Butacite/(R)/ polyvinyl butyral safety glass interlayer, continued to expand Butacite/(R)/ into architectural markets. The business agreed to acquire the automotive finishes business of Carrs Paints, Ltd. of the United Kingdom and divested the automotive fascia parts paint- 17 ing operation in Kansas City, Kansas. SentryGlas(R) intrusion-resistant composite for glass windows passed tests to meet hurricane protection building codes in south Florida. 1996 versus 1995 Segment sales of $6.7 billion were 4 percent ---------------- above 1995, after adjusting for the reduction in sales resulting from formation of the DuPont Dow Elastomers joint venture. This reflects 4 percent higher volume and flat selling prices. After-Tax Operating Income (ATOI) was $909 million, up 10 percent from $829 million last year. Excluding nonrecurring items from both years, earnings were $854 million, down 1 percent from $864 million in 1995. Increased earnings from automotive products, engineering polymers, and Corian/R/ surfaces were offset by a reduction in elastomers earnings due to formation of the DuPont Dow Elastomers joint venture. 1995 versus 1994 Polymers segment sales of $7.0 billion were 11 ---------------- percent above 1994, reflecting 6 percent higher selling prices and 5 percent higher volume. ATOI was $829 million, up 18 percent from $705 million in 1994, reflecting improvement in most businesses. Elastomers and Packaging & Industrial Polymers had the greatest year-over-year gains. Excluding nonrecurring items, Polymers full-year earnings were $864 million, up 24 percent. Perspective The Polymers group of businesses is well-positioned ----------- for profitable growth. Packaging and Industrial Polymers and Automotive are strong, regional businesses seeking new growth through globalization and new product applications. Fluoropolymers and Engineering Polymers are capitalizing on growing demand for ingredients for high-performance, cost-efficient products. In DuPont Dow Elastomers, the combination of DuPont's strong worldwide market position and Dow's innovative Insite/TM/ catalyst technology should allow for significant growth in the business. - -------------------------------------------------------------------------------- petroleum -----------------------------------------------------------------------
Sales ($ in Billions) ------------------------------ 1996 1995 1994 ---- ---- ---- 20.2 17.7 16.8 ATOI [CHART APPEARS HERE] ($ in Millions) ------------------------------ 1996 1995 1994 ---- ---- ---- 860 619 658
See Industry Segment Information (Note 27 to Financial Statements). - -------------------------------------------------------------------------------- Petroleum operations are carried out by Conoco. The "upstream" part of the business finds, develops and produces crude oil and natural gas, and processes natural gas to recover higher-value liquids. The "downstream" part of the business transports and refines crude oil and other feedstocks to produce high- quality fuels, lubricants and other products, including petroleum coke and intermediates for use in making petrochemicals. Conoco is successfully pursuing a strategy of expanding into new areas of the world with high growth potential while continuing to improve efficiency and grow selectively in its established core areas in North America and Europe. In South America, Conoco is participating in a $2.2 billion joint venture to produce extra-heavy oil in Venezuela's Orinoco region and upgrade it to a synthetic crude oil, most of which will be processed at the company's U.S. refineries. Crude oil production is scheduled to begin in 1998 and continue for at least 35 years. Conoco also acquired highly promising exploration acreage in Venezuela and neighboring Colombia during 1996. In Asia Pacific, downstream growth centers on a 100,000-barrel- per-day joint venture refinery under construction at Melaka, Malaysia. Due to start up in late 1997, the refinery will supply Conoco's retail network in Thailand and planned marketing activities elsewhere in the region. The company also has several promising upstream prospects in Asia Pacific, including exploration acreage in the Taiwan Straits. In Indonesia, the company hopes to establish a market for gas discovered in Block B in the South China Sea, and is exploring for oil in the jungles of Irian Jaya. Other projects are under way in Queensland, Australia, and offshore New Zealand. 18 Exploration and production in ultra-deep water is one of the cornerstones of Conoco's strategy for long-term growth. The company's deepwater exploration interests cover more than 15 million acres in the Gulf of Mexico, the North Sea, Nigeria and southeast Asia. In partnership with Reading & Bates, one of the world's leading drilling companies, Conoco is constructing a state-of-the-art drillship that will be capable of operating in water depths of up to 10,000 feet. The ship is scheduled for delivery in 1998. It will be employed initially in a five-year program in the Gulf of Mexico. During 1996, Conoco began work on the Ukpokiti field, its first offshore development project in Nigeria, with production scheduled to begin this year. In northern Russia, the company is continuing efforts to expand its position in the region, building on its success with the Polar Lights joint venture. Polar Lights was the first western/Russian partnership to develop a new oil field in Russia. The company is expanding rapidly in downstream operations in Central Europe, based on newly acquired refining capacity in the Czech Republic, and is also expanding marketing operations in Turkey. In the Middle East, Conoco's long-established upstream presence in Dubai provides a foundation for pursuing other ventures in the Gulf region. In 1996, the company signed a technical services agreement with the Kuwait National Petroleum Co. to assist in upgrading Kuwait's refineries. Conoco is undertaking numerous growth activities in existing core areas, focusing on selected geographic areas, niche markets and new business activities. For example, building on its strong acreage position in the Lobo Trend of South Texas, the company is expanding the drilling program, leasing more acreage and acquiring existing natural gas production. It is also stepping up natural gas activity in other locations in the United States and Canada. In Europe, the giant Britannia gas field -- the largest undeveloped gas reservoir in the U.K. North Sea -- is scheduled to come on stream in 1998. Other oil and gas exploration opportunities and discoveries offshore Britain and Norway are also being evaluated or advanced toward development. In established areas downstream, Conoco is concentrating its marketing activities in those areas of the United States and Europe where it can take advantage of logistical or market strengths. A major step forward was taken at the end of 1996 with completion of a $500 million hydrocracker at Lake Charles, Louisiana, in a joint venture between Conoco and Pennzoil. The high-quality hydrocracked base oils produced at this facility should make Conoco a top competitor in the base oil business and ultimately put it in a leading position in the finished lubricants markets. Conoco Mineraloel continued to expand its marketing retail network in Germany and also in Austria. Conoco Global Power (CGP), a wholly owned subsidiary of Conoco, is pursuing new projects in Europe, Latin America, Asia Pacific and the United States. Late in 1996, CGP announced a joint venture to build, own and operate a 160-megawatt natural gas-fired power plant in Barrancabermeja, Colombia. CGP also announced it will form a joint venture with a Dutch electric utility to supply electricity and steam to a major DuPont chemicals plant in The Netherlands and sell surplus power to the Dutch grid. 1996 versus 1995 Sales for the year were $20.2 billion, up 14 percent from ---------------- last year. The increase resulted from higher crude oil and natural gas prices and higher volumes outside the United States. Earnings of $860 million were up 39 percent from $619 million the previous year. Excluding nonrecurring items from both years, 1996 earnings were $901 million versus $664 million in 1995, a 36 percent increase. Upstream earnings of $632 million were up 43 percent from $443 million in 1995. Excluding nonrecurring charges, earnings of $706 million were up 46 percent from $482 million in the prior year. Higher crude oil and natural gas prices and improved volumes outside the United States, partly offset by increased exploration costs, contributed to the improvement. Worldwide crude oil and natural gas liquids production of 445,000 barrels per day (bpd) was up 7 percent from 414,000 bpd in 1995. The net realized crude oil price averaged $20.11 per barrel, up 21 percent from $16.57 in 1995. Worldwide natural gas deliveries were 1,309 million cubic feet per day (mmcfd) compared to 1,242 mmcfd in 1995. Natural gas prices averaged $2.21 per thousand cubic feet, up from $1.85 in the prior year. Downstream earnings of $228 million were up 30 percent from $176 million in 1995. Excluding nonrecurring items, earnings of $195 million were up 7 percent from $182 million in the prior year due to gradually improving margins, despite higher crude oil prices and one-time startup costs for new units in refining. Total feedstocks processed were 732,000 bpd in 1996 versus 721,000 bpd in 1995. 1995 versus 1994 Sales of $17.7 billion were up 5 percent compared to 1994. ---------------- Higher crude oil prices and increased refined product volumes were partly offset by lower natural gas prices in the United States and lower worldwide oil and gas volumes. Earnings of $619 million were down 6 percent from $658 million. Excluding nonrecurring items from both years, earnings were $664 million in 1995, down 3 percent from $684 million in 1994. Perspective The global energy industry is changing rapidly, creating ----------- unprecedented challenges and opportunities. Conoco's efforts in recent years to reduce costs, raise productivity and upgrade its asset portfolio have greatly increased the company's competitiveness. Now one of the leading companies in terms of upstream performance, Conoco is committed to pursuing improvement in its downstream operations, focusing on areas of strength. 19 - -------------------------------------------------------------------------------- diversified ----------------------------------------------------------------------
Sales ($ in Billions) ------------------------------ 1996 1995 1994 ---- ---- ---- 3.1 3.7 3.5 [CHART APPEARS HERE] ATOI ($ in Millions) ------------------------------ 1996 1995 1994 ---- ---- ---- 205 252 254
See Industry Segment Information (Note 27 to Financial Statements). - ------------------------------------------------------------------------------- Diversified Businesses include Films, Photopolymer and Electronic Materials, Printing and Publishing, and CONSOL, a coal operation owned 50 percent by DuPont. Films The Films business continued to grow in 1996. Softness in ----- major polyester markets, primarily Mylar/(R)/ film and Crystar/(R)/ resins, was more than offset by productivity gains and a strong performance in Kapton/(R)/ polyimide film. In response to growth from new applications, polyimide capacity will be doubled by 2000, including a phased expansion at the Bayport facility in Texas, and a new line at Films' joint venture with Toray Industries Inc. in Japan. A polyester joint venture in China and completion of new polyester capacity in Luxembourg in 1997 will further strengthen DuPont's market position. In 1996, the business successfully undertook commercial trials of its Petretec/SM/ polyester regeneration technology. Medical Products Sale of the Diagnostic Imaging business was ---------------- finalized with The Sterling Group Inc. and the In-Vitro Diagnostics business was sold to Dade International Inc. The DuPont Sorvall/(R)/ centrifuge business was sold to First Chicago Equity Capital. Photopolymer and Electronic Materials An internal reorganization ------------------------------------- in 1996 brought together into one unit the research and development and manufacturing resources devoted to film-based photopolymer products for the electronics and printing industries and the emerging market for holographic materials. Expansion continued in Asia with the start up of a joint venture with Mitsubishi Rayon Co. to produce Riston/(R)/ dry film for the Japanese market. A plant for microcircuit film materials opened in China, in a joint venture with Dongguan South Electronic Corp. Printing and Publishing DuPont experienced growing acceptance of ----------------------- the Cyrel/(R)/ digital imaging products and the widely used Silverlith/TM/ plates, and is now the only company to offer computer- to-plate systems for both flexographic and offset printing. A new manufacturing line started up in Leeds, United Kingdom, to meet demand for Silverlith/TM/ and other DuPont Howson/TM/ printing plates. Digital WaterProof/TM/ and PreView/TM/ are gaining popularity among printers. As a result of restructuring the Crosfield joint venture with Fujifilm, the business will shift emphasis from manufacture of its own digital systems to working with specialized original equipment manufacturers. CONSOL CONSOL Energy Inc., a coal operations joint venture owned ------ 50 percent by DuPont, recorded increased sales and earnings. Improved demand for steam coal used for power generation stimulated higher sales volumes, and productivity gains at mining operations resulted in lower costs. 1996 versus 1995 Segment sales were $3.1 billion, up 2 percent, ---------------- after adjusting for the divested Medical Products businesses. This reflects flat selling prices and 2 percent higher sales volume. After- Tax Operating Income (ATOI) was $205 million, down 19 percent from $252 million in 1995. Excluding nonrecurring items from both years, earnings were $157 million, down 41 percent. This is principally due to the absence of earnings from Medical Products businesses that were divested during the year, and lower Printing and Publishing earnings. Partly offsetting were higher earnings from electronic materials and coal. 1995 versus 1994 Segment sales were $3.7 billion, up 6 percent ---------------- from $3.5 billion in 1994, reflecting higher sales in most businesses. ATOI was $252 million compared to $254 million in 1994. Excluding nonrecurring items from both years, earnings were $264 million versus $227 million in 1994, up 16 percent, reflecting higher electronic materials and Printing and Publishing results. Perspective New applications for products and growth in new ----------- markets such as China should help the Films business. A new polymerization process (NG3) should improve competitive advantage in polyester resin production. Synergies created in the Photopolymer and Electronic Materials reorganization, plus opportunities in the emerging market for holographic materials offer potential for profitable growth. The focus on an integrated product line should help Printing and Publishing. 20 Management's Discussion and Analysis This review and discussion of financial performance should be read in conjunction with the letter to stockholders (pages 1-3), segment reviews (pages 14-20) and consolidated financial statements (pages 29-50). Analysis of Operations SALES Sales in 1996 were a record $43.8 billion, up 4 percent from 1995. Petroleum segment sales were $20.2 billion, compared to $17.7 billion in 1995, up 14 percent. This reflects higher worldwide prices for crude oil and natural gas and increased crude oil production and natural gas deliveries. Crude oil and natural gas average prices were higher than those in 1995 by 21 percent and 19 percent, respectively. Sales for the combined chemicals and specialties segments (Chemicals, Fibers, Polymers, Life Sciences, and Diversified Businesses) were $23.6 billion, 4 percent lower than the prior year. This reflects a reduction in sales resulting from the divestiture of certain Medical Products businesses and formation of the DuPont Dow elastomers joint venture. After adjusting for these changes in business composition, sales were 2 percent higher than 1995, reflecting 3 percent higher sales volume, partly offset by 1 percent lower average selling prices. U.S. selling prices were flat, while prices outside the United States averaged 3 percent lower, mostly attributable to a stronger U.S. dollar. U.S. sales volume was up 3 percent. Volume outside the United States was up 4 percent. Sales in Mexico and South America combined were up 13 percent, reflecting a recovery from the 1995 devaluation in the Mexican peso and the continuing growth in South America. Sales volume growth in Asia was 9 percent but was substantially offset by 7 percent lower prices. European sales were down 1 percent, as slightly higher volume was more than offset by lower selling prices. Sales in 1995 were $42.2 billion, up 7 percent from 1994. Petroleum segment sales increased 5 percent to $17.7 billion. Sales for the combined chemicals and specialties segments increased 9 percent to $24.5 billion. This reflects, on average, 5 percent higher selling prices and 4 percent higher sales volume versus 1994. It is estimated that about 40 percent of the revenue benefit from higher selling prices was attributable to the currency effect of a weaker U.S. dollar. Sales gains were greatest in Europe and Asia, up 19 percent and 18 percent, respectively. In North America, revenue growth was below the worldwide average as sales in the United States and Canada grew 4 percent and 8 percent, respectively, while sales in Mexico decreased 25 percent due to a substantial devaluation in the Mexican peso. EARNINGS Net income in 1996 was a record $3,636 million versus $3,293 million in 1995, up 10 percent. This principally reflects a 39 percent improvement in after-tax operating income for the Petroleum segment and lower after-tax interest expense. Upstream petroleum had record earnings, primarily resulting from higher oil and gas prices. In addition, Life Sciences earnings increased 15 percent. In 1996, net nonrecurring charges were $101 million versus $114 million in 1995. Excluding these charges, earnings were $3,737 million, up $330 million from 1995. Earnings per share were $6.47 versus $5.61 in 1995. Excluding nonrecurring items from both years, 1996 earnings per share were $6.65, up 14 percent from $5.81 earned in 1995. One-half of this improvement was from higher Petroleum segment earnings with the balance attributable to higher results from the DuPont Merck pharmaceutical venture largely due to a more favorable allocation of operating income to DuPont, benefit from lower average shares outstanding and lower interest expense. Petroleum benefited from higher oil and gas prices and higher volumes. Earnings from the chemicals and specialties segments were up 1 percent as gains from higher sales volume were offset by lower selling prices and by reduction in earnings resulting from businesses that were divested or are now operated through a joint venture arrangement. Net income in 1995 was $3,293 million versus $2,727 million in 1994, as record results were achieved across a broad span of businesses, most significantly in white pigments, agricultural products, aramid fiber products, pharmaceuticals, and specialty chemicals. 1995 net income included net nonrecurring charges of $114 million, principally from costs associated with product liability litigation, and about $190 million of interest expense related to the stock redemption from Seagram. 1994 included net nonrecurring charges of $48 million. Excluding these items, earnings increased 30 percent. Earnings per share in 1995 totaled $5.61 versus $4.00 in 1994. Excluding nonrecurring items from both years, 1995 earnings per share were $5.81 up 43 percent from $4.07 earned in 1994. Approximately one-third of this improvement resulted from the stock redemption from Seagram. The remaining two-thirds principally reflects higher volumes and selling prices in the chemicals and specialties segments, partly offset by higher costs. Higher other income from joint ventures and insurance recoveries 21 DuPont Management's Discussion and Analysis related to environmental remediation also contributed to the earnings improvement. Petroleum earnings before nonrecurring charges were essentially unchanged as higher oil prices and lower costs were offset by lower U.S. gas prices and weaker worldwide downstream margins.
TAXES ($ in millions) - -------------------------------------------------------------------- 1996 1995 1994 - -------------------------------------------------------------------- Income tax expense $ 2,345 $ 2,097 $ 1,655 Effective income tax rate (EITR) 39.2% 38.9% 37.8% - --------------------------------------------------------------------
Over the last three years, the company's EITR exceeded the U.S. statutory rate of 35 percent, principally because a significant proportion of company earnings were derived from petroleum operations outside the United States which are taxed at higher rates. The 1996 EITR of 39 percent was essentially equal to 1995, reflecting insignificant changes in the effective tax rates for both chemicals and specialties and petroleum compared to 1995. The 1995 EITR increased about 1 percentage point from the prior year that reflected a 1994 tax benefit related to a change in the tax status resulting from a transfer of properties among certain North Sea affiliates; no such benefit is reflected in 1995. The 1995 EITR reflects a lower effective tax rate for the chemicals and specialties segments versus prior year, principally due to a lower effective tax rate on foreign earnings. The company paid total taxes of $8.4 billion in 1996, compared to $8.3 billion in 1995 and $7.5 billion in 1994. 1996 total tax payments were slightly higher than in 1995 due principally to higher income taxes and higher U.S. petroleum excise taxes, partly offset by lower petroleum excise taxes outside the United States. 1995 taxes were higher than in 1994 because of increased taxes on income and higher petroleum excise taxes outside the United States. Financial Condition and Cash Flows FINANCIAL CONDITION Borrowings at year-end 1996 of $8.9 billion were $2.8 billion below the $11.7 billion at the end of 1995. This reduction was accomplished through a combination of internally generated funds and $1.3 billion of asset sales, including proceeds from sales of essentially all of the Medical Products businesses and certain Petroleum properties, plus proceeds from the formation of the elastomers joint venture with Dow. With this reduction in debt, the ratio of cash provided by operations to debt improved from 57 percent in 1995 to 71 percent at the end of 1996. Also, the company's goal to reduce the debt ratio* to about 45 percent by year-end 1996 was achieved. The ratio was 44 percent at the end of 1996 as compared with 58 percent in 1995. Borrowings at year-end 1995 were $11.7 billion, as compared to $7.6 billion in 1994. During 1995, borrowings reached a high of $16.2 billion when the company borrowed $8.3 billion through sales of commercial paper to finance the April 1995 stock redemption from Seagram. Borrowings were subsequently reduced with funds from operations and $1.7 billion of proceeds from equity offerings. Subsequent to the stock redemption in 1995, Moody's Investor Service (Moody's) lowered its rating on the company's senior long-term debt from Aa2 to Aa3. The company's commercial paper rating was affirmed at Prime-1 by Moody's. Standard & Poor's (S&P) lowered its rating on senior debt and preferred stock from AA to AA- and affirmed its commercial paper rating of A-1+. The ratings outlook by S&P remains negative. These changes have not had any material impact on the company's interest and debt expense or on its access to borrowings. In January 1997, the company approved the purchase and retirement of up to 10 million shares of its common stock to offset dilution resulting from the issuance of shares under the company's compensation programs. Shares will be purchased from time to time in the open market. The company expects to use internally generated funds for these stock purchases. (See Note 20, "Compensation Plans," to the financial statements.) CASH PROVIDED BY OPERATIONS Cash provided by operations totaled $6.4 billion in 1996; this was $373 million below the $6.8 billion inflow in 1995. Excluding - -------------------------------------------------------------------------------- * Total short- and long-term borrowings and capital lease obligations divided by the sum of these amounts plus stockholders' equity and minority interests in consolidated subsidiaries. 22 DuPont Management's Discussion and Analysis changes in working capital due to divestitures and the formation of a joint venture with Dow, which are reported in Investment Activities, this reduction is primarily due to higher working capital investment in support of increased business activity in the latter part of 1996 and tax payments related to gains on divestitures and joint venture formation. In 1995, cash provided by operations of $6.8 billion was $1.1 billion higher than the $5.7 billion generated the previous year. This increase was largely the result of reductions in net operating investment during 1995, principally lower inventories and higher deferred income taxes, combined with higher net income. As shown on the Consolidated Statement of Cash Flows, net income was up about $350 million after adjusting for noncash charges and credits. This includes charges for depreciation, depletion and amortization which were $250 million lower in 1995 due to reduced write-downs of assets and generally lower petroleum production volumes. CAPITAL EXPENDITURES Capital expenditures, including investments in affiliates, were $3.7 billion in 1996. This is an increase of $227 million, or 7 percent, from the $3.5 billion spent in 1995. Expenditures in 1995 were up $349 million, or 11 percent, from the $3.1 billion spent in 1994. In the Petroleum segment, capital expenditures were $1.9 billion, up 12 percent from the $1.7 billion spent in 1995. The most significant petroleum expenditures in 1996 were similar to 1995 expenditures and included continuing the development of the Britannia field, installing a vacuum unit in the Humber refinery in the United Kingdom, constructing the Melaka refinery in Malaysia, and modifying the Lake Charles, Louisiana refinery in support of the hydrocracker joint venture with Pennzoil. For the chemicals and specialties businesses, capital spending was $1.8 billion, about the same as in 1995. In the United States, significant capital expenditures were made to increase manufacturing capacity for Lycra(R) brand spandex, Terathane(R) polyether glycol, Teflon(R) fluoropolymers, Suva(R) refrigerants, Fortress(R) insecticide, and Zytel(R) engineering polymers. Outside the United States, construction projects to strengthen and grow strategic businesses included Delrin(R) acetal resins, Crastin(R) polyester resins and thin films in Europe, polyester film in China, and nylon apparel fiber in South America, Mexico and Asia. Significant expenditures were also made to replace or improve existing facilities and for environmental activities. The company currently expects to increase capital expenditures to about $4.1 billion in 1997. Most of the increase is planned in the chemicals and specialties businesses to further increase global manufacturing capacity. Expenditures in the Petroleum segment are expected to be slightly higher than in 1996 and include funding for upstream development projects in Venezuela, the North Sea and the Gulf of Mexico. PROCEEDS FROM SALES OF ASSETS Proceeds from asset sales were $1,271 million in 1996. Most of the proceeds were from the sale of two Medical Products businesses (Diagnostic Imaging and In- Vitro Diagnostics), the formation of the elastomers joint venture with Dow and sales of various petroleum properties. In 1995, proceeds were $337 million. Proceeds from sales of petroleum properties accounted for $244 million of the total, and most of the balance came from the sale of the company's interest in a Specialty Chemicals joint venture in Japan and sale of excess real estate. Proceeds from asset sales in 1994 were $432 million. Petroleum property sales were $212 million, with the balance coming principally from sales of the Sclair(R), petroleum additives and Selar(R) businesses. DIVIDENDS Dividends per share of common stock were $2.23 in 1996, $2.03 in 1995 and $1.82 in 1994. The quarterly dividend was increased from $.52 to $.57 per share in the second quarter of 1996 and from $.47 to $.52 per share in the second quarter of 1995. The company's objective is to pay dividends that are 15 to 25 percent of cash provided by operations. For 1996, dividends paid in relation to cash provided by operations was 20 percent, as compared with 18 percent in 1995 and 22 percent in 1994. FINANCING ACTIVITIES In March 1996, the company received $297 million from the formation of a partnership, Conoco Oil & Gas Associates L.P., in which it has a general partnership interest of 67 percent. The remaining 33 percent is owned by Vanguard Energy Investors L.P. (See Note 18, "Minority Interests," to the financial statements.) In July 1996, the company paid $504 million to repurchase warrants from Seagram. The warrants were issued to Seagram as part of the 1995 transaction to redeem 156 million shares of the company's common stock. 23 DuPont Management's Discussion and Analysis WORKING CAPITAL INVESTMENT At the end of 1996, the company's investment in working capital (excluding cash and cash equivalents, marketable securities, and short-term borrowing and capital lease obligations) was $2.7 billion, a decrease of $219 million from the $2.9 billion in 1995. Accounts and notes receivable increased $281 million, primarily due to a $175 million note received in connection with the sale of the Diagnostic Imaging business. This increase was more than offset by a $503 million increase in current liabilities primarily due to increased business activity at the end of 1996 compared to 1995 as well as higher crude oil prices. Decreases in working capital due to sale of the Medical Products businesses and formation of the joint venture with Dow were essentially offset by increases in working capital required in support of increases in sales volumes experienced over the last half of the year. In 1995, working capital investment decreased about $800 million, largely as a result of lower inventories and miscellaneous notes receivable, increases in liabilities for hedging activities (see "Foreign Currency Risk") and higher interest payable on borrowings required to fund the redemption of common stock from Seagram. The ratio of current assets to current liabilities, including cash and cash equivalents, marketable securities, short-term borrowings and capital lease obligations, at year-end 1996 was 1.0:1, as compared with 0.9:1 in 1995 and 1.5:1 in 1994. The lower ratio in 1995 and 1996 as compared with 1994, results primarily from the commercial paper borrowings made in 1995 to finance the stock redemption from Seagram. This transaction caused short-term borrowings to increase nearly $4.9 billion in 1995; in 1996 short-term borrowings were reduced $2.2 billion. Financial Instruments DERIVATIVES AND OTHER HEDGING 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 hedge its exposure to foreign currency, interest rate and commodity price risks. The counterparties to these contractual arrangements are major financial institutions. Although the company is exposed to credit loss in the event of nonperformance by these counterparties, this exposure is managed through credit approvals, limits and monitoring procedures and, to the extent possible, by restricting the period over which unpaid balances are allowed to accumulate. The company does not anticipate nonperformance by counterparties to these contracts, and no material loss would be expected from any such nonperformance. FOREIGN CURRENCY RISK The company routinely uses forward exchange contracts to hedge its net exposures, by currency, related to the foreign currency - denominated monetary assets and liabilities of its operations. The primary business objective of this hedging 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. In addition, from time to time, the company will enter into forward exchange contracts to establish with certainty the U.S. dollar amount of future firm commitments denominated in a foreign currency. Decisions regarding whether or not to hedge a given commitment are made on a case-by-case basis taking into consideration the amount and duration of the exposure, market volatility and economic trends. Forward exchange contracts are also used to manage near-term foreign currency cash requirements and to place foreign currency deposits and marketable securities investments into currencies offering favorable returns. INTEREST RATE RISK The company uses a combination of financial instruments, including interest rate swaps, interest and principal currency swaps and structured medium-term financings, as part of its program to manage the fixed and floating interest rate mix of the total debt portfolio and related overall cost of borrowing. Interest rate swaps involve the exchange of fixed for floating rate interest payments to effectively convert fixed rate debt into floating rate debt based on LIBOR or commercial paper rates. Interest rate swaps also involve the exchange of floating for fixed rate interest payments to effectively convert floating rate debt into fixed rate debt. Interest rate swaps allow the company to maintain a target range of floating rate debt. Under interest and principal currency swaps, the company receives predetermined foreign currency-denominated payments corresponding, both as to timing and amount, to the fixed or floating 24 DuPont Management's Discussion and Analysis interest rate and fixed principal amounts to be paid by the company under concurrently issued foreign currency-denominated bonds. In return, the company pays U.S. dollar interest and a fixed U.S. dollar principal amount to the counterparty thereby effectively converting the foreign currency-denominated bonds into U.S. dollar-denominated obligations for both interest and principal. Interest and principal currency swaps allow the company to be fully hedged against fluctuations in currency exchange rates and foreign interest rates and to achieve U.S. dollar fixed or floating interest rate payments below the market interest rate, at the date of issuance, for borrowings of comparable maturity. Structured medium-term financings consist of a structured medium-term note and a concurrently executed structured medium-term swap which, for any and all calculations of the note's interest and/or principal payments over the term of the note, provide a fully hedged transaction such that the note is effectively converted to a U.S. dollar-denominated fixed or floating interest rate payment. Structured medium-term swaps allow the company to be fully hedged against fluctuations in exchange rates and interest rates and to achieve U.S. dollar fixed or floating interest rate payments below the market interest rate, at the date of issuance, for borrowings of comparable maturity. COMMODITY PRICE RISK AND TRADING The company enters into exchange-traded and over-the-counter derivative commodity instruments to hedge its exposure to price fluctuations on anticipated crude oil, refined products and natural gas transactions and certain raw material purchases. Commodity trading in petroleum futures contracts is a natural extension of cash market trading and is used to physically acquire a portion of North America refining crude supply requirements. The commodity futures market has underlying principles of increased liquidity and longer trading periods than the cash market and is one method of reducing exposure to the price risk inherent in the petroleum business. Typically, trading is conducted to manage price risk around near-term supply requirements. Occasionally, as market views and conditions allow, longer-term positions will be taken to manage price risk for the company's equity production (crude and natural gas) or net supply requirements. The company's use of derivative commodity instruments reduces the effects of price volatility, thereby protecting against adverse price movements, while limiting, somewhat, the benefits of favorable price movements. On a limited basis, the company also purchases and sells petroleum- and other energy-based futures contracts for trading purposes. After-tax gain/loss from such trading has not been material. Additional details on these and other financial instruments are set forth in Note 24 to the financial statements. Environmental Matters DuPont operates manufacturing facilities, petroleum refineries, natural gas processing plants and product-handling and distribution facilities around the world. Each facility is significantly affected by a broad array of environmental laws and regulations. It is company policy to fully meet or exceed legal and regulatory requirements wherever it operates. DuPont facilities worldwide are run in accordance with the highest standards of safe operation, even where those standards exceed the requirements of local law. DuPont has also implemented voluntary programs to reduce air emissions, curtail the generation of hazardous waste, decrease the volume of wastewater discharges and improve the efficiency of energy use. 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. These costs may increase in the future, but are not expected to have a material impact on the company's competitive or financial position. In 1996 DuPont spent about $300 million for environmental capital projects either required by the law or necessary to meet the company's internal waste elimination and pollution prevention goals. The company currently estimates expenditures for environmental-related capital projects will total $400 million in 1997. Significant capital expenditures may be required over the next decade for treatment, storage and disposal facilities for solid and hazardous waste and for compliance with the Clean Air Act (CAA) and its 1990 Amendments. Until all new CAA regulatory requirements are known, considerable uncertainty will remain regarding future estimates of capital expenditures. Total CAA capital costs over the next two years are currently estimated to range from $15-30 million. Estimated pretax environmental expenses charged to current operations totaled about $800 million, before insurance recoveries, in 1996 as compared to about $800 million in 1995 and $950 million in 1994. These expenses include the remediation accruals discussed below, operating, maintenance and 25 DuPont Management's Discussion and Analysis depreciation costs for solid waste, air and water pollution control facilities and the costs of environmental research activities. The largest of these expenses resulted from the operation of wastewater treatment facilities and solid waste management facilities, each of which accounted for about $180 million. About two-thirds of total annual expenses resulted from the operations of the company's Chemicals, Fibers, Polymers, Life Sciences and Diversified Businesses segments in the United States. REMEDIATION ACCRUALS DuPont accrues for remediation activities when it is probable that a liability has been incurred and reasonable estimates of the liability can be made. These accrued liabilities exclude claims against third parties and are not discounted. Much of this liability results from the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to as Superfund), the Resource Conservation and Recovery Act (RCRA) and similar state laws that require the company to undertake certain investigative and remedial activities at sites where the company conducts or once conducted operations or at sites where company-generated waste was disposed. The accrual also includes a number of sites identified by the company that may require environmental remediation but which are not currently the subject of CERCLA, RCRA or state enforcement activities. Over the next one to two decades the company may incur significant costs under both CERCLA and RCRA. Considerable uncertainty exists with respect to these costs and under adverse changes in circumstances, potential liability may exceed amounts accrued as of December 31, 1996. Remediation activities vary substantially in duration and cost from site to site depending on the mix of unique site characteristics, evolving remediation technologies, diverse regulatory agencies and enforcement policies and the presence or absence of potentially liable third parties. Therefore, it is difficult to develop reasonable estimates of future site remediation costs. Nevertheless, the company's assessment of such costs is a continuous process that takes into account the relevant factors affecting each specific site. At December 31, 1996, the company's balance sheet included an accrued liability of $586 million as compared to $602 million and $616 million at year-end 1995 and 1994, respectively. The moderate decline in the accrued liability reflects the completion of remediation programs at several sites. Approximately 78 percent of the company's environmental reserve at December 31, 1996 was attributable to RCRA and similar remediation liabilities and 22 percent to CERCLA liabilities. During 1996, remediation accruals of $91 million, offset by $100 million in insurance proceeds, resulted in a credit to income of $9 million, compared to a credit of $79 million in 1995, also resulting from insurance recoveries, and an accrual of $185 million in 1994. REMEDIATION EXPENDITURES RCRA extensively regulates the treatment, storage and disposal of hazardous waste and requires a permit to conduct such activities. The law requires that permitted facilities undertake an assessment of environmental conditions at the facility. If conditions warrant, the company may be required to remediate contamination caused by prior operations. As contrasted by CERCLA, the RCRA corrective action program results in the cost of corrective action activities being typically borne solely by the company. The company anticipates that significant ongoing expenditures for RCRA remediation activities may be required over the next two decades, although annual expenditures for the near term are not expected to vary significantly from the range of such expenditures over the past few years. Longer term, expenditures are subject to considerable uncertainty and may fluctuate significantly. The company's expenditures associated with RCRA and similar remediation activities were approximately $79 million in 1996, $94 million in 1995 and $70 million in 1994. The company from time to time receives requests for information or notices of potential liability from the Environmental Protection Agency (EPA) and state environmental agencies alleging that the company is a "potentially responsible party" (PRP) under CERCLA or an equivalent state statute. The company has also on occasion been made a party to cost recovery litigation by those agencies or by private parties. These requests, notices and lawsuits assert potential liability for remediation costs at various sites that typically are not company owned but allegedly contain wastes attributable to the company's past operations. As of December 31, 1996, the company had been notified of potential liability under CERCLA or state law at about 335 sites around the United States, with active remediation under way at 152 of those sites. In addition, the company has resolved its liability at 80 sites, either by completing remedial actions with other PRPs or by participating in "de minimis buyouts" with other PRPs whose waste, like the company's, represented only a small fraction of the total waste present at a site. The company received notice of potential liability at 7 new sites during 1996 compared with 16 similar notices in 1995 and 17 in 1994. The company's expenditures 26 DuPont Management's Discussion and Analysis associated with CERCLA and similar state remediation activities were approximately $28 million in 1996, $25 million in 1995 and $21 million in 1994. For most Superfund sites, the company's potential liability will be significantly less than the total site remediation costs because the percentage of waste attributable to the company versus that attributable to all other PRPs is relatively low. Other PRPs at sites where the company is a party typically have the financial strength to meet their obligations and, where they do not, or where certain PRPs cannot be located, the company's own share of liability has not materially increased. There are relatively few sites where the company is a major participant, and neither the cost to the company of remediation at those sites, nor at all CERCLA sites in the aggregate, is expected to have a material impact on the competitive or financial position of the company. Total expenditures for previously accrued remediation activities under CERCLA, RCRA and similar state laws were $107 million in 1996, $119 million in 1995 and $91 million in 1994. Although future remediation expenditures in excess of current reserves is possible, the effect on future financial results is not subject to reasonable estimation because of the considerable uncertainty regarding the cost and timing of expenditures. The company is actively pursuing claims against various parties with respect to remediation liabilities. 27 DuPont Responsibilities for Financial Reporting Management is responsible for the consolidated financial statements and the other financial information contained in this Annual Report. The financial statements have been prepared in accordance with generally accepted accounting principles considered by management to present fairly the company's financial position, results of operations and cash flows. The financial statements include some amounts that are based on management's best estimates and judgments. The company's system of internal controls is designed to provide reasonable assurance as to the protection of assets against loss from unauthorized use or disposition, and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The company's business ethics policy is the cornerstone of our internal control system. This policy sets forth management's commitment to conduct business worldwide with the highest ethical standards and in conformity with applicable laws. The business ethics policy also requires that the documents supporting all transactions clearly describe their true nature and that all transactions be properly reported and classified in the financial records. The system is monitored by an extensive program of internal audit, and management believes that the system of internal controls at December 31, 1996 meets the objectives noted above. The financial statements have been audited by the company's independent accountants, Price Waterhouse LLP. The purpose of their audit is to independently affirm the fairness of management's reporting of financial position, results of operations and cash flows. To express the opinion set forth in their report, they study and evaluate the internal controls to the extent they deem necessary. Their report is shown on this page. The adequacy of the company's internal controls and the accounting principles employed in financial reporting are under the general oversight of the Audit Committee of the Board of Directors. This Committee also has responsibility for employing the independent accountants, subject to stockholder ratification. No member of this Committee may be an officer or employee of the company or any subsidiary or affiliated company. The independent accountants and the internal auditors have direct access to the Audit Committee, and they meet with the Committee from time to time, with and without management present, to discuss accounting, auditing and financial reporting matters. /s/ John A. Krol /s/ Kurt M. Landgraf John A. Krol Kurt M. Landgraf President Senior Vice President and Chief Executive Officer and Chief Financial Officer February 14, 1997 Report of Independent Accountants To the Stockholders and the Board of Directors of E. I. du Pont de Nemours and Company In our opinion, the consolidated financial statements appearing on pages 29-50 of this Annual Report present fairly, in all material respects, the financial position of E. I. du Pont de Nemours and Company and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ Price Waterhouse LLP Price Waterhouse LLP Thirty South Seventeenth Street Philadelphia, Pennsylvania 19103 February 14, 1997 28 DuPont Financial Statements E.I. du Pont de Nemours and Company and Consolidated Subsidiaries
Consolidated Income Statement (Dollars in millions, except per share) - -------------------------------------------------------------------------------- 1996 1995 1994 Sales* $43,810 $42,163 $39,333 Other Income (Note 2) 1,340 1,059 888 -------------------------- Total 45,150 43,222 40,221 -------------------------- Cost of Goods Sold and Other Operating Charges 25,144 23,363 21,810 Selling, General and Administrative Expenses 2,856 2,995 2,875 Depreciation, Depletion and Amortization 2,621 2,722 2,976 Exploration Expenses, Including Dry Hole Costs and Impairment of Unproved Properties 404 331 357 Research and Development Expense 1,032 1,067 1,047 Interest and Debt Expense (Note 3) 713 758 559 Taxes Other Than on Income* (Note 4) 6,399 6,596 6,215 -------------------------- Total 39,169 37,832 35,839 -------------------------- Earnings Before Income Taxes 5,981 5,390 4,382 Provision for Income Taxes (Note 5) 2,345 2,097 1,655 -------------------------- Net Income $ 3,636 $ 3,293 $ 2,727 - -------------------------------------------------------------------------------- Earnings Per Share of Common Stock (Note 6) $ 6.47 $ 5.61 $ 4.00 ================================================================================
* Includes petroleum excise taxes of $5,461, $5,655, and $5,291 in 1996, 1995 and 1994, respectively. See pages 33-50 for Notes to Financial Statements. 29 DuPont Financial Statements E.I. du Pont de Nemours and Company and Consolidated Subsidiaries
Consolidated Balance Sheet (Dollars in millions, except per share) - ------------------------------------------------------------------------------ December 31 1996 1995 - ------------------------------------------------------------------------------ Assets Current Assets Cash and Cash Equivalents (Note 7) $ 1,066 $ 1,408 Marketable Securities (Note 7) 253 47 Accounts and Notes Receivable (Note 8) 5,193 4,912 Inventories (Note 9) 3,706 3,737 Prepaid Expenses 297 276 Deferred Income Taxes (Note 5) 588 575 ----------------- Total Current Assets 11,103 10,955 ----------------- Property, Plant and Equipment (Note 10) 50,549 50,385 Less: Accumulated Depreciation, Depletion and Amortization 29,336 29,044 ----------------- 21,213 21,341 Investment in Affiliates (Note 11) 2,278 1,846 Other Assets (Notes 5 and 12) 3,393 3,170 ----------------- Total $37,987 $37,312 - ------------------------------------------------------------------------------ Liabilities and Stockholders' Equity Current Liabilities Accounts Payable (Note 13) $ 2,757 $ 2,636 Short-Term Borrowings and Capital Lease Obligations (Note 14) 3,910 6,157 Income Taxes (Note 5) 526 470 Other Accrued Liabilities (Note 15) 3,794 3,468 ----------------- Total Current Liabilities 10,987 12,731 Long-Term Borrowings and Capital Lease Obligations (Note 16) 5,087 5,678 Other Liabilities (Note 17) 8,451 8,454 Deferred Income Taxes (Note 5) 2,133 1,783 ----------------- Total Liabilities 26,658 28,646 ----------------- Minority Interests (Note 18) 620 230 ----------------- Stockholders' Equity (next page) Preferred Stock 237 237 Common Stock, $.60 par value; 900,000,000 shares authorized; Issued at December 31, 1996--579,042,725; 1995--735,042,724 347 441 Additional Paid-In Capital 6,676 8,689 Reinvested Earnings 4,931 9,503 Cumulative Translation Adjustments (23) - Common Stock Held in Trust for Unearned Employee Compensation and Benefits (Flexitrust), at Market (Shares: December 31, 1996--15,495,795; December 31, 1995--23,546,176) (1,459) (1,645) Common Stock Held in Treasury, at Cost (Shares: December 31, 1995--156,000,000) - (8,789) ----------------- Total Stockholders' Equity 10,709 8,436 ----------------- Total $37,987 $37,312 ==============================================================================
See pages 33-50 for Notes to Financial Statements. 30 DuPont Financial Statements E.I. du Pont de Nemours and Company and Consolidated Subsidiaries
Consolidated Statement of Stockholders' Equity (Notes 19 and 20) (Dollars in millions, except per share) - ------------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------- Shares Amount Shares Amount Shares Amount - ------------------------------------------------------------------------------------------------------------------------------- Preferred Stock, without par value--cumulative; 23,000,000 shares authorized; issued at December 31: $4.50 Series--1,672,594 shares (callable at $120) $ 167 $ 167 $ 167 $3.50 Series--700,000 shares (callable at $102) 70 70 70 ---------------------------------------------------------------------- 237 237 237 ---------------------------------------------------------------------- Common Stock $.60 par value; 900,000,000 shares authorized; issued: Balance January 1 735,042,724 441 681,004,944 408 677,577,437 407 Issuance of Shares in Connection with: Public and Private Offerings 1 - 27,339,375 16 - - Establishment of Flexitrust - - 24,000,000 14 - - Compensation Plans - - 2,698,405 3 3,427,507 1 Retirement of Treasury Stock (156,000,000) (94) - - - - ---------------------------------------------------------------------- Balance December 31 579,042,725 347 735,042,724 441 681,004,944 408 ---------------------------------------------------------------------- Additional Paid-In Capital Balance January 1 8,689 4,771 4,660 Changes due to: Public and Private Offerings - 1,731 - Common Stock Held by Flexitrust 458 1,662 - Shares Issued by Flexitrust (289) (19) - Issuance (Repurchase) of Warrants (504) 439 - Compensation Plans 70 105 111 Retirement of Treasury Stock (1,748) - - ---------------------------------------------------------------------- Balance December 31 6,676 8,689 4,771 ---------------------------------------------------------------------- Reinvested Earnings Balance January 1 9,503 7,406 5,926 Net Income 3,636 3,293 2,727 Preferred Dividends (10) (10) (10) Common Dividends (1996--$2.23; 1995--$2.03; 1994--$1.82) (1,251) (1,186) (1,237) Retirement of Treasury Stock (6,947) - - ---------------------------------------------------------------------- Balance December 31 4,931 9,503 7,406 ---------------------------------------------------------------------- Cumulative Translation Adjustments Balance January 1 - - - Translation Adjustments During Year (23) - - ---------------------------------------------------------------------- Balance December 31 (23) - - ---------------------------------------------------------------------- Less: Common Stock Held in Flexitrust Balance January 1 23,546,176 1,645 - - - - Establishment of Flexitrust - - 24,000,000 1,626 - - Shares Issued (8,050,381) (644) (453,824) (31) - - Adjustments to Market Value 458 50 - ---------------------------------------------------------------------- Balance December 31 15,495,795 1,459 23,546,176 1,645 - - ---------------------------------------------------------------------- Less: Common Stock Held in Treasury, at Cost Balance January 1 156,000,000 8,789 - - - - Acquisition (Retirement) of Treasury Stock (156,000,000) (8,789) 156,000,000 8,789 - - ---------------------------------------------------------------------- Balance December 31 - - 156,000,000 8,789 - - ---------------------------------------------------------------------- Total Stockholders' Equity $ 10,709 $ 8,436 $12,822 ===============================================================================================================================
See pages 33-50 for Notes to Financial Statements. 31 DuPont Financial Statements E.I. du Pont de Nemours and Company and Consolidated Subsidiaries
Consolidated Statement of Cash Flows (Dollars in millions) - ------------------------------------------------------------------------------------------------------ 1996 1995 1994 ---------------------------------- Cash and Cash Equivalents at Beginning of Year $ 1,408 $ 856 $ 1,109 ---------------------------------- Cash Provided by Operations Net Income 3,636 3,293 2,727 Adjustments to Reconcile Net Income to Cash Provided by Operations: Depreciation, Depletion and Amortization 2,621 2,722 2,976 Dry Hole Costs and Impairment of Unproved Properties 137 121 152 Other Noncash Charges and Credits--Net (244) (67) (140) Decrease (Increase) in Operating Assets: Accounts and Notes Receivable (359) 151 30 Inventories and Other Operating Assets (253) 21 19 Increase (Decrease) in Operating Liabilities: Accounts Payable and Other Operating Liabilities 531 (8) (432) Accrued Interest and Income Taxes (Notes 3 and 5) 319 528 332 ---------------------------------- Cash Provided by Operations 6,388 6,761 5,664 ---------------------------------- Investment Activities (Note 21) Purchases of Property, Plant and Equipment (3,303) (3,240) (3,050) Investments in Affiliates (413) (249) (90) Payments for Businesses Acquired (75) (5) (5) Proceeds from Sales of Assets 1,271 337 432 Net Decrease (Increase) in Short-Term Financial Instruments (197) 500 (379) Miscellaneous--Net 57 (56) (41) ---------------------------------- Cash Used for Investment Activities (2,660) (2,713) (3,133) ---------------------------------- Financing Activities Dividends Paid to Stockholders (1,261) (1,196) (1,247) Net Increase (Decrease) in Short-Term Borrowings (954) 2,172 (517) Long-Term and Other Borrowings: Receipts 3,194 7,640 824 Payments (5,171) (5,642) (2,032) Acquisition of Treasury Stock (Note 19) - (8,350) - Repurchase of Warrants (Note 19) (504) - - Net Proceeds from Issuance of Common Stock through Public and Private Offerings (Note 19) - 1,747 - Proceeds from Exercise of Stock Options 315 58 94 Additions to Minority Interests (Note 18) 363 - - ---------------------------------- Cash Used for Financing Activities (4,018) (3,571) (2,878) ---------------------------------- Effect of Exchange Rate Changes on Cash (52) 75 94 Cash and Cash Equivalents at End of Year $ 1,066 $ 1,408 $ 856 ---------------------------------- Increase (Decrease) in Cash and Cash Equivalents $ (342) $ 552 $ (253) ======================================================================================================
See pages 33-50 for Notes to Financial Statements. 32 DuPont Notes to Financial Statements (Dollars in millions, except per share) 1. Summary of Significant Accounting Policies DuPont observes the generally accepted accounting principles described below. These, together with the other notes that follow, are an integral part of the consolidated financial statements. Basis of Consolidation The accounts of wholly owned and majority-owned subsidiaries are included in the consolidated financial statements. Investments in affiliates owned 20 percent or more and corporate joint ventures are accounted for under the equity method. Investments in noncorporate joint ventures of petroleum operations are consolidated on a pro rata basis. Other securities and investments, excluding marketable securities, are generally carried at cost. Inventories Substantially all inventories are valued at cost as determined by the last-in, first-out (LIFO) method; in the aggregate, such valuations are not in excess of market. Elements of cost in inventories include raw materials, direct labor and manufacturing overhead. Stores and supplies are valued at cost or market, whichever is lower; cost is generally determined by the average cost method. Property, Plant and Equipment Property, plant and equipment (PP&E) is carried at cost and, except for petroleum PP&E, PP&E placed in service prior to 1995 is depreciated under the sum-of-the-years' digits method and other substantially similar methods. PP&E placed in service after 1994 is depreciated using the straight-line method. This change in accounting was made to reflect management's belief that the productivity of such PP&E will not appreciably diminish in the early years of its useful life, and it will not be subject to significant additional maintenance in the later years of its useful life. In these circumstances, straight-line depreciation is preferable in that it provides a better matching of costs with revenues. Additionally, the change to the straight-line method conforms to predominant industry practice. The effect of this change on net income is dependent on the level of future capital spending; it did not have a material effect in 1995. Depreciation rates are based on estimated useful lives ranging from 3 to 25 years. Generally, for PP&E acquired prior to 1991, the gross carrying value of assets surrendered, retired, sold or otherwise disposed of is charged to accumulated depreciation and any salvage or other recovery therefrom is credited to accumulated depreciation. For disposals of PP&E acquired after 1990, the gross carrying value and related accumulated depreciation are removed from the accounts and included in determining gain or loss on such disposals. Petroleum PP&E, other than "Oil and Gas Properties" described below, is depreciated on the straight-line method at various rates calculated to extinguish carrying values over estimated useful lives. When petroleum PP&E is surrendered, retired, sold or otherwise disposed of, the nature of the assets involved determines if a gain or loss is recognized, or if the gross carrying value is charged to accumulated depreciation, depletion and amortization, and any salvage or other recovery therefrom is credited to accumulated depreciation, depletion and amortization. Maintenance and repairs are charged to operations; replacements and betterments are capitalized. Oil and Gas Properties The company's exploration and production activities are accounted for under the successful-efforts method. Costs of acquiring unproved properties are capitalized, and impairment of those properties, which are individually insignificant, is provided for by amortizing the cost thereof based on past experience and the estimated holding period. Geological, geophysical and delay rental costs are expensed as incurred. Costs of exploratory dry holes are expensed as the wells are determined to be dry. Costs of productive properties, production and support equipment and development costs are capitalized and amortized on a unit-of-production basis. Intangible Assets Identifiable intangible assets such as purchased patents and trademarks are amortized using the straight-line method over their estimated useful lives. Goodwill is amortized over periods up to 40 years using the straight-line method. The company continually evaluates the reasonableness of its amortization of intangibles. In addition, if it becomes probable that expected future undiscounted cash flows associated with intangible assets are less than their carrying value, the assets are written down to their fair value. Environmental Liabilities and Expenditures Accruals for environmental matters are recorded in operating expenses when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Accrued liabilities are exclusive of claims against third parties and are not discounted. 33 DuPont Notes to Financial Statements (Dollars in millions, except per share) Costs related to environmental remediation are charged to expense. Other environmental costs are also charged to expense unless they increase the value of the property and/or mitigate or prevent contamination from future operations, in which event they are capitalized. Income Taxes The provision for income taxes has been determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax bases of the company's assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Provision has been made for income taxes on unremitted earnings of subsidiaries and affiliates, except in cases in which earnings are deemed to be permanently invested. Investment tax credits or grants are accounted for in the period earned (the flow-through method). Foreign Currency Translation Through December 31, 1995, the company had determined that the U.S. dollar was the "functional currency" of its worldwide operations. All foreign currency asset and liability amounts were remeasured into U.S. dollars at end-of-period exchange rates, except for inventories, prepaid expenses and property, plant and equipment, which were remeasured at historical rates. Foreign currency income and expenses were remeasured at average exchange rates in effect during the year, except for expenses related to balance sheet amounts remeasured at historical exchange rates. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities were included in income in the period in which they occurred. Effective January 1, 1996, management determined that the local currency should be designated as functional currency for the company's integrated European petroleum operations to properly reflect changed circumstances in the primary economic environment in which these subsidiaries operate. For subsidiaries whose functional currency is local currency, assets and liabilities denominated in local currency are translated into U.S. dollars at end-of-period exchange rates, and resultant translation adjustments are reported as a separate component of stockholders' equity. Assets and liabilities denominated in other than the local currency are remeasured into the local currency prior to translation into U.S. dollars, and the resultant exchange gains or losses, net of their related tax effects, are included in income in the period in which they occur. Income and expenses are translated into U.S. dollars at average exchange rates in effect during the period. The company routinely uses forward exchange contracts to hedge its net exposure, by currency, related to monetary assets and liabilities denominated in currencies other than the functional currency of the reporting unit. Exchange gains and losses associated with these contracts are included in income in the period in which they occur. The company selectively enters into forward exchange contracts and similar agreements to effectively convert firm foreign currency commitments to functional currency-denominated transactions. Gains and losses on these firm commitment hedges are deferred and included in the functional currency measurement of the related foreign currency-denominated transactions. Exchange gains and losses, net of their related tax effects, are not material in amount. In the Consolidated Statement of Cash Flows, the company reports the cash flows resulting from its hedging activities in the same category as the related item that is being hedged. Interest Rate Swap Agreements The company enters into interest rate swap agreements as part of its program to manage the fixed and floating interest rate mix of its total debt portfolio and related overall cost of borrowing. The differential to be paid or received is accrued as interest rates change and is recognized in income over the life of the agreements. Commodity Hedges and Trading The company enters into commodity futures contracts to hedge its exposure to price fluctuations on anticipated crude oil, refined products and natural gas transactions and certain raw material purchases. Gains and losses on these hedge contracts are deferred and included in the measurement of the related 34 DuPont Notes to Financial Statements (Dollars in millions, except per share) transaction. On a limited basis, the company also purchases and sells petroleum- and other energy-based futures contracts for trading purposes. Changes in the market values of these trading contracts are reflected in income in the period the change occurs. Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain reclassifications of prior years' data have been made to conform to 1996 classifications. 2. Other Income
- -------------------------------------------------------------- 1996 1995 1994 --------------------- Royalty income $ 74 $ 70 $ 58 Interest income, net of miscellaneous interest expense 211 178 111 Equity in earnings of affiliates (see Note 11) 669 545 348 Sales of assets 279 102 104 Pipeline tariff revenue 81 71 75 Miscellaneous income and expenses--net 26 93 192 --------------------- $1,340 $1,059 $ 888 - --------------------------------------------------------------
3. Interest and Debt Expense
- -------------------------------------------------------------- 1996 1995 1994 --------------------- Interest and debt cost incurred $ 857 $ 928 $ 702 Less: Interest and debt cost capitalized 144 170 143 --------------------- $ 713 $ 758 $ 559 - --------------------------------------------------------------
Interest paid (net of amounts capitalized) was $755 in 1996, $688 in 1995 and $598 in 1994. 4. Taxes Other Than on Income
- -------------------------------------------------------------- 1996 1995 1994 --------------------- Petroleum excise taxes (also included in Sales): U.S. $1,145 $1,060 $1,049 Non-U.S. 4,316 4,595 4,242 Payroll taxes 439 433 424 Property taxes 205 214 202 Import duties 168 166 159 Production and other taxes 126 128 139 --------------------- $6,399 $6,596 $6,215 - --------------------------------------------------------------
5. Provision for Income Taxes
- -------------------------------------------------------------- 1996 1995 1994 --------------------- Current tax expense: U.S. federal $ 869 $ 617 $ 337 U.S. state and local 40 36 47 Non-U.S. 1,248 1,077 1,023 --------------------- Total 2,157 1,730 1,407 --------------------- Deferred tax expense: U.S. federal 135 379 497 U.S. state and local 4 22 (55) Non-U.S. 49 (25) (136) --------------------- Total 188 376 306 --------------------- Other/1/ - (9) (58) --------------------- Provision for Income Taxes 2,345 2,097 1,655 Stockholders' Equity/2/ (69) (30) (26) --------------------- Total Provision $2,276 $2,067 $1,629 - --------------------------------------------------------------
1 Represents exchange (gains)/losses associated with the company's hedged non- U.S. tax liabilities. These amounts offset the tax effect arising from related hedging activities. 2 Represents tax benefit of certain stock compensation amounts that are deductible for income tax purposes but do not affect net income. Total income taxes paid worldwide were $1,984 in 1996, $1,649 in 1995 and $1,344 in 1994. 35 DuPont Notes to Financial Statements (Dollars in millions, except per share) Deferred income taxes result from temporary differences between the financial and tax bases of the company's assets and liabilities. The tax effects of temporary differences and tax loss/tax credit carryforwards included in the deferred income tax provision are as follows:
- -------------------------------------------------------------- 1996 1995 1994 --------------------- Depreciation $ 68 $ 152 $ 144 Accrued employee benefits 99 62 (19) Other accrued expenses (91) 118 185 Intangible drilling costs (15) (23) (48) Inventories (52) (71) (87) Unrealized exchange gains/(losses) 5 (1) 103 Investment in subsidiaries and affiliates (19) - (7) Other temporary differences 107 40 33 Tax loss/tax credit carryforwards 210 18 90 Valuation allowance change--net (124) 81 17 Tax status changes - - (105) --------------------- $ 188 $ 376 $ 306 - --------------------------------------------------------------
The significant components of deferred tax assets and liabilities at December 31, 1996 and 1995 are as follows:
- ---------------------------------------------------------------- 1996 1995 - ---------------------------------------------------------------- Deferred Tax Asset Liability Asset Liability - ---------------------------------------------------------------- Depreciation $ 3 $3,220 $ - $3,120 Accrued employee benefits 2,852 811 2,920 738 Other accrued expenses 773 24 668 8 Intangible drilling costs - 251 - 266 Inventories 267 285 236 303 Unrealized exchange gains 7 37 21 41 Tax loss/tax credit carryforwards 236 - 446 - Investment in subsidiaries and affiliates 60 129 43 131 Other 453 1,066 376 880 ---------------------------------- Total $4,651 $5,823 $4,710 $5,487 ------ ------ Less: Valuation allowance 298 422 ------ ------ Net $4,353 $4,288 - ----------------------------------------------------------------
Current deferred tax liabilities (included in the Consolidated Balance Sheet caption "Income Taxes") were $48 and $66 at December 31, 1996 and 1995, respectively. In addition, deferred tax assets of $123 and $75 were included in Other Assets at December 31, 1996 and 1995, respectively (see Note 12). An analysis of the company's effective income tax rate follows:
- -------------------------------------------------------------- 1996 1995 1994 --------------------- Statutory U.S. federal income tax rate 35.0% 35.0% 35.0% Higher effective tax rate on non-U.S. operations (principally Petroleum) 6.7 6.8 9.9 Lower effective tax rate on operations within U.S. possessions (0.3) (1.0) (1.1) Alternative fuels credit (1.1) (1.1) (2.1) Tax status changes - - (2.4)* Other--net (1.1) (0.8) (1.5) --------------------- Effective income tax rate 39.2% 38.9% 37.8% - --------------------------------------------------------------
* Reflects a tax valuation allowance benefit of $105 related to a change in tax status resulting from a transfer of properties among certain North Sea affiliates. Earnings before income taxes shown below are based on the location of the corporate unit to which such earnings are attributable. However, since such earnings are often subject to taxation in more than one country, the income tax provision shown above as U.S. or non-U.S. does not correspond to the earnings set forth below.
- -------------------------------------------------------------- 1996 1995 1994 --------------------- United States (including exports) $3,633 $3,066 $2,651 Other regions 2,348 2,324 1,731 --------------------- $5,981 $5,390 $4,382 - --------------------------------------------------------------
At December 31, 1996, unremitted earnings of non-U.S. subsidiaries totaling $5,928 were deemed to be permanently invested. No deferred tax liability has been recognized with regard to the remittance of such earnings. It is not practicable to estimate the income tax liability that might be incurred if such earnings were remitted to the United States. Under the tax laws of various jurisdictions in which the company operates, deductions or credits that cannot be fully utilized for tax purposes during the current year may be carried forward, subject to statutory limitations, to reduce taxable income or taxes payable in a future year. At December 31, 1996, the tax effect of such carryforwards approximated $236. Of this amount, $133 has no expiration date, $30 expires in 1997, $13 expires after 1997 but before 2003 and $60 expires between 2003 and 2012. 6. Earnings Per Share of Common Stock Earnings per share are calculated on the basis of the following average number of common shares outstanding: 1996--560,675,296; 1995--585,107,476; and 1994-- 679,999,916. 36 DuPont Notes to Financial Statements (Dollars in millions, except per share) Shares held by the Flexitrust are not considered outstanding in computing average shares outstanding. Earnings per share calculations that reflect the effect of common stock equivalents in the periods presented either are anti- dilutive or result in no material dilution of earnings per share. See Notes 19 and 20. 7. Cash and Cash Equivalents and Marketable Securities Cash equivalents represent investments with maturities of three months or less from time of purchase. They are carried at cost plus accrued interest, which approximates fair value because of the short maturity of these instruments. Cash and cash equivalents are used in part to support a portion of the company's commercial paper program. Marketable securities represent investments in fixed and floating rate financial instruments classified as available-for-sale securities and reported at fair value. 8. Accounts and Notes Receivable
- ------------------------------------------------------------ December 31 1996 1995 - ------------------------------------------------------------ Trade--net of allowances of $66 in 1996 and $78 in 1995 $4,216 $4,292 Miscellaneous 977* 620 ----------------- $5,193 $4,912 - ------------------------------------------------------------
* Includes $137 from equity affiliates. Accounts and notes receivable are carried at amounts which approximate fair value. See Note 27 for a description of business segment markets and associated concentrations of credit risk. 9. Inventories
- ----------------------------------------- December 31 1996 1995 - ----------------------------------------- Chemicals $ 281 $ 262 Fibers 692 598 Polymers 620 637 Petroleum 1,270 1,293 Life Sciences 561 572 Diversified Businesses 282 375 --------------- $3,706 $3,737 - -----------------------------------------
The excess of replacement or current cost over stated value of inventories for which cost has been determined under the LIFO method approximated $785 and $885 at December 31, 1996 and 1995, respectively. In the aggregate, the market value of the company's vertically integrated petroleum and petroleum-based chemical products exceeds cost. Inventories valued at LIFO comprised 88 percent of consolidated inventories before LIFO adjustment at December 31, 1996 and 1995. 10. Property, Plant and Equipment
- ------------------------------------------------------ December 31 1996 1995 - ------------------------------------------------------ Chemicals $ 6,074 $ 6,055 Fibers 12,325 11,745 Polymers 6,813 7,247 Petroleum 20,070 19,390 Life Sciences 1,271 1,185 Diversified Businesses 3,996 4,763 ---------------- $50,549 $50,385 - ------------------------------------------------------
Property, plant and equipment includes gross assets acquired under capital leases of $209 and $208 at December 31, 1996 and 1995, respectively; related amounts included in accumulated depreciation, depletion and amortization were $99 and $95 at December 31, 1996 and 1995, respectively. 11. Summarized Financial Information for Affiliated Companies Summarized combined financial information for affiliated companies for which DuPont uses the equity method of accounting (see Note 1, "Basis of Consolidation") is shown below on a 100 percent basis. The most significant of these affiliates are CONSOL Energy Inc., DuPont Dow Elastomers L.L.C. and The DuPont Merck Pharmaceutical Company; DuPont has a 50 percent equity ownership in each of these companies. Dividends received from equity affiliates were $860 in 1996, $671 in 1995 and $326 in 1994.
- -------------------------------------------------------------------------------- Year Ended December 31 ------------------------------------------ Results of operations 1996 1995 1994 - -------------------------------------------------------------------------------- Sales/1/ $13,374 $10,447 $ 9,161 Earnings before income taxes 1,108 1,084 947 Net Income 822 828 732 DuPont's equity in earnings of affiliates (see Note 2) 669/2/ 545/2/ 348 - --------------------------------------------------------------------------------
1 Includes sales to DuPont of $804 in 1996, $802 in 1995 and $828 in 1994. 2 Reflects a more favorable allocation of DuPont Merck operating income to recognize the performance of assets originally contributed to the venture by DuPont. 37 DuPont Notes to Financial Statements (Dollars in millions, except per share)
- ----------------------------------------------------------------- Financial position at December 31 1996 1995 - ----------------------------------------------------------------- Current assets $ 4,715 $ 3,744 Noncurrent assets 10,936 8,852 ---------------------- Total assets $15,651 $12,596 ---------------------- Short-term borrowings* $ 830 $ 935 Other current liabilities 2,630 2,434 Long-term borrowings* 3,802 2,652 Other long-term liabilities 3,250 2,847 ---------------------- Total liabilities $10,512 $ 8,868 ---------------------- DuPont's investment in affiliates (includes advances) $ 2,278 $ 1,846 - -----------------------------------------------------------------
* DuPont's pro rata interest in total borrowings was $1,565 in 1996 and $1,401 in 1995, of which $789 in 1996 and $700 in 1995 was guaranteed by the company. These amounts are included in the guarantees disclosed in Note 25. 12. Other Assets
- ----------------------------------------------------------------- December 31 1996 1995 - ----------------------------------------------------------------- Prepaid pension cost (see Note 23) $1,760 $1,724 Intangible assets 221 200 Other securities and investments 586 554 Deferred income taxes (see Note 5) 123 75 Miscellaneous 703 617 --------------------- $3,393 $3,170 - -----------------------------------------------------------------
Other securities and investments includes $478 and $435 at December 31, 1996 and 1995, respectively, representing marketable securities classified as available for sale and reported at fair value. The remainder represents numerous small investments in securities for which there are no quoted market prices and for which it is not practicable to determine fair value. Such securities are reported at cost. 13. Accounts Payable
- ----------------------------------------------------------------- December 31 1996 1995 - ----------------------------------------------------------------- Trade $1,926 $1,761 Payables to banks 264 281 Compensation awards 231 242 Miscellaneous 336 352 --------------------- $2,757 $2,636 - -----------------------------------------------------------------
Payables to banks represents checks issued on certain disbursement accounts but not presented to the banks for payment. The reported amounts approximate fair value because of the short maturity of these obligations. 14. Short-Term Borrowings and Capital Lease Obligations
- ----------------------------------------------------------------- December 31 1996 1995 - ----------------------------------------------------------------- Commercial paper/1/ $1,663 $1,247 Private placement commercial paper 1,318 3,686 Bank borrowings: U.S. dollars 61 9 Other currencies/2/ 136 290 Medium-term notes payable within one year 372 316 Long-term borrowings payable within one year 300 551 Industrial development bonds payable on demand 51 51 Capital lease obligations 9 7 --------------------- $3,910 $6,157 - -----------------------------------------------------------------
/1/ 1995 includes an interest rate swap that converted $50 of floating rate borrowings to a fixed rate obligation of 8.3 percent, as part of the program to manage the fixed and floating rate mix of total borrowings. /2/ 1995 includes notes denominated as 160 million Australian dollars with a 16.5 percent Australian dollar fixed interest rate issued by the company's majority-owned Canadian subsidiary, which were effectively converted to a Canadian dollar borrowing with an implicit 12.43 percent Canadian dollar fixed interest rate. The estimated fair value of the company's short-term borrowings, including interest rate financial instruments, based on quoted market prices for the same or similar issues or on current rates offered to the company for debt of the same remaining maturities, was $3,900 and $6,200 at December 31, 1996 and 1995, respectively. The decrease in estimated fair value in 1996 was primarily due to lower short-term borrowing levels. Unused short-term bank credit lines were approximately $4,500 and $5,400 at December 31, 1996 and 1995, respectively. These lines support short-term industrial development bonds, a portion of the company's commercial paper program and other borrowings. The weighted average interest rate on short-term borrowings outstanding at December 31, 1996 and 1995 was 6.0 percent and 6.1 percent, respectively. DuPont 38 Notes to Financial Statements (Dollars in millions, except per share) 15. Other Accrued Liabilities
- -------------------------------------------------------------------------- December 31 1996 1995 - -------------------------------------------------------------------------- Payroll and other employee benefits $ 688 $ 687 Taxes other than on income 395 399 Accrued postretirement benefits cost (see Note 22) 356 345 Miscellaneous 2,355 2,037 -------------------------- $3,794 $3,468 - --------------------------------------------------------------------------
16. Long-Term Borrowings and Capital Lease Obligations
- -------------------------------------------------------------------------- December 31 1996 1995 - -------------------------------------------------------------------------- U.S. dollar: Industrial development bonds due 2007-2026 $ 334 $ 294 Medium-term notes due 1997-2005/1/ 516 838 8.65% notes due 1997 - 300 8.50% notes due 1998 301 301 7.50% notes due 1999 302 303 9.15% notes due 2000/2/ 304 305 6.00% debentures due 2001 ($660 face value, 13.95% yield to maturity) 475 451 6.75% notes due 2002 299 299 8.00% notes due 2002 253 253 8.50% notes due 2003/2/ 300 300 8.13% notes due 2004 330 331 8.25% notes due 2006 282 282 8.25% debentures due 2022 372 372 7.95% debentures due 2023 299 299 7.50% debentures due 2033 247 247 6.25% Swiss franc notes due 2000/3/ 103 103 Other loans (various currencies) due 1997-2008 266 294 Capital lease obligations 104 106 -------------------------- $5,087 $5,678 - --------------------------------------------------------------------------
/1/ Average interest rates at December 31, 1996 and 1995 were 7.0 percent and 6.8 percent, respectively. /2/ The company entered into an interest rate swaption agreement for each of these notes as part of the program to manage the fixed and floating interest rate mix of total borrowings. Each agreement gives the swaption counterparty the one-time option to put the company into an interest rate swap with a notional amount of $300, whereby the company would, over the remaining term of the notes, receive fixed rate payments essentially equivalent to the fixed interest rate of the underlying notes, and pay the counterparty a floating rate of interest essentially equivalent to the rate the company pays on its commercial paper. If exercised, the swaptions would effectively convert the notes to a floating rate obligation over the remaining maturity of the notes. The premium received from the counterparties for these swaptions is being amortized to income, using the effective interest method, over the remaining maturity of the notes. The fair value and carrying value of these swaptions at December 31, 1996 and 1995 were not material. /3/ Represents notes denominated as 150 million Swiss francs with a 6.25 percent Swiss franc fixed interest rate. Concurrent with the issuance of these notes, the company entered into an interest and principal currency swap that effectively established a $103 fixed principal amount with a 6.9 percent U.S. dollar fixed interest rate. Average interest rates on industrial development bonds and on other loans (various currencies) were 6.1 percent and 6.9 percent at December 31, 1996, and 6.1 percent and 6.5 percent at December 31, 1995. Maturities of long-term borrowings, together with sinking fund requirements for years ending after December 31, 1997 are $446, $409, $523, and $784 for the years 1998, 1999, 2000 and 2001, respectively. The estimated fair value of the company's long-term borrowings, including interest rate financial instruments, based on quoted market prices for the same or similar issues or on current rates offered to the company for debt of the same remaining maturities was $5,700 and $6,500 at December 31, 1996 and 1995, respectively. 17. Other Liabilities
- -------------------------------------------------------------------------- December 31 1996 1995 - -------------------------------------------------------------------------- Accrued postretirement benefits cost (see Note 22) $5,847 $6,022 Reserves for employee-related costs 1,159 1,080 Miscellaneous 1,445 1,352 -------------------- $8,451 $8,454 - --------------------------------------------------------------------------
18. Minority Interests In March 1996, certain petroleum subsidiaries contributed assets with an aggregate fair value of $613 to Conoco Oil & Gas Associates L.P. (COGA) for a general partnership interest of 67 percent. The remaining 33 percent was purchased by Vanguard Energy Investors L.P. (Vanguard) as a limited partner. The net result of this transaction was to increase minority interests by $297. Vanguard is entitled to a cumulative annual priority return on its investment and participation in residual earnings at rates established in the partnership agreement. The priority return rate, currently 6.52 percent, is negotiated every four years. Vanguard's share of COGA's 1996 earnings was $18, or 17 percent. DuPont 39 Notes to Financial Statements (Dollars in millions, except per share) 19. Stockholders' Equity In April 1995, the company redeemed 156 million shares of its common stock from Seagram for $8,775 ($56.25 per share), including warrants valued at $439. In addition, related costs of $14 were incurred. In July 1996, DuPont repurchased the warrants for $504. Coincident with the repurchase, the company retired 156 million shares of common stock held as treasury stock. In the second quarter of 1995, the company sold through public and private offerings 27,339,375 shares of newly issued common stock for $1,747, including 7,789,375 shares that were sold to the DuPont Pension Trust Fund for $500 ($64.19 a share). The company also established a Flexitrust that will effect the sale or distribution of common stock to satisfy existing employee compensation and benefit programs. In May 1995, DuPont issued 24 million shares of common stock to the Flexitrust in return for a $1,612 promissory note and $14 in cash. In January 1997, the company approved plans to purchase and retire up to 10 million shares of common stock to offset dilution resulting from shares issued under its compensation programs. 20. Compensation Plans The company has two stock option programs - the Corporate Sharing Program and the DuPont Stock Performance Plan. In 1990 and 1995, the Board of Directors approved the adoption of worldwide Corporate Sharing Programs. Under each of these two programs, essentially all employees each received a one-time grant to acquire 100 shares of DuPont common stock at the fair market value at date of grant. Option terms are "fixed and determinable." Also, options generally are exercisable one year after date of grant and expire 10 years from date of grant. Stock option awards under the DuPont Stock Performance Plan may be granted to key employees of the company. Except for certain options granted in 1997, as discussed below, option terms are "fixed and determinable." The purchase price of shares subject to option is the fair value of the company's stock on the date of grant. Generally, options are exercisable one year after date of grant and expire 10 years from date of grant. The maximum number of shares that may be subject to option for any consecutive five-year period is 36 million shares. Subject to this limit, additional shares that may have been made subject to options for the years 1996, 1995 and 1994 were 29,539,463, 28,385,230 and 27,527,631, respectively. Common shares subject to option under both of these programs are as follows:
- -------------------------------------------------------------------------------- 1996 1995 1994 ------------------------------------------- Outstanding at January 1 30,769,589 21,364,847 23,470,630 Options granted 2,846,733 13,260,861 2,324,720 Weighted average price $78.82 $56.78 $52.50 Options exercised 8,877,026 3,558,624 4,153,206 Weighted average price $47.12 $36.05 $35.53 Options expired or terminated 47,182 297,495 277,297 Weighted average price $51.58 $45.52 $28.68 At December 31: Options outstanding 24,692,114 30,769,589 21,364,847 Weighted average price $51.46 $47.66 $40.03 Options exercisable 21,869,201 17,709,638 19,054,727 Weighted average price $47.93 $40.93 $38.52 - --------------------------------------------------------------------------------
The following table summarizes information concerning currently outstanding and exercisable options:
- -------------------------------------------------------------------------------- Exercise Exercise Exercise Price Price Price $26.34-$39.25 $44.50-$62.75 $67.25-$94.25 ------------------------------------------- Options outstanding at 12/31/96 7,610,919 14,214,282 2,866,913 Weighted average remaining contractual life (years) 3.5 7.4 9.1 Weighted average price $36.63 $53.92 $78.64 Options exercisable at 12/31/96 7,610,919 14,214,282 44,000 Weighted average price $36.63 $53.92 $67.53 - --------------------------------------------------------------------------------
In January 1997, the Board of Directors approved a worldwide 1997 Corporate Sharing Program and awarded to essentially all employees a one-time "fixed and determinable" grant to acquire 100 shares of DuPont common stock at the fair market value ($105 per share) on the date of grant. During all but the last six months of the ten-year option term, these options cannot be exercised until a market price of $150 per share of DuPont common stock is achieved. Awards for 1996 under the DuPont Stock Performance Plan (granted to key employees in 1997) consisted of 4,468,813 options to acquire DuPont common stock at the fair market value ($105 per share) on the date of grant. Two types of options were granted: 2,023,663 "fixed and determinable" options and 2,445,150 "variable" options. During all but the last six months of the ten-year option term, the "fixed and determinable" options cannot be exercised until a market price of $150 per share is DuPont 40 Notes to Financial Statements (Dollars in millions, except per share) achieved. "Variable" options were granted to certain senior management. These options are subject to forfeiture if, within five years from the date of grant, the market price of DuPont common stock does not achieve a price of $150 per share for 50 percent of the options and $180 per share for the remaining 50 percent. Also, in January 1997, a reload feature was added to the Stock Performance Plan to accelerate stock ownership by more effectively using stock options granted prior to 1997. For a one-year period, optionees are eligible for reload options upon the exercise of previously granted stock options with the condition that shares received from that exercise are held for at least five years. Reload options will be granted at the fair market value on the date of grant and have a term equal to the remaining term of the original option. The maximum number of reload options granted is limited to the number of shares subject to option in the original option times the original option price divided by the option price of the reload option. The company applies APB Opinion No. 25,"Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock option plans. Accordingly, no compensation expense has been recognized for the fixed option plans. Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," was issued in 1995. The company has elected not to adopt the optional recognition provisions of SFAS No. 123. The table below sets forth pro forma information as if the company had adopted these recognition provisions.
- --------------------------------------------------------------------- 1996 1995 ----------------- Weighted average fair value of options granted - per share subject to option* $17.89 $11.88 Reduction of: Net income $ 34 $ 100 Earnings per share $ .06 $ .17 Assumptions: Dividend yield 2.6% 3.4% Volatility 21.0% 20.6% Risk-free interest rate 5.4% 7.6% Expected life (years) 6.0 4.5 - ---------------------------------------------------------------------
* Calculated using Black-Scholes option-pricing model. Awards under the Variable Compensation Plan may be granted in stock and/or cash to employees who have contributed most in a general way to the company's success, consideration being given to ability to succeed to more important managerial responsibility. Such awards were $233 for 1996, $240 for 1995 and $208 for 1994. Amounts credited to the Variable Compensation Fund are dependent on company earnings, and are subject to maximum limits as defined by the plan. The amounts credited to the fund were $230 in 1996, $240 in 1995 and $220 in 1994. In accordance with the terms of the Variable Compensation Plan and similar plans of subsidiaries, 914,036 shares of common stock were awaiting delivery from awards for 1996 and prior years. 21. Investment Activities Proceeds from sales of assets in 1996 principally include $570 from the sales of Medical Products businesses, $390 from the formation of the elastomers joint venture, and $275 from the sales of various petroleum properties. Also, a note for $175 was received as part of the consideration for the sale of one of the Medical Products businesses. Assets sold in connection with these sales amounted to $1,163, of which $644 was for property, plant and equipment with the remainder being primarily working capital. In 1995 and 1994, there were no individually material items included in sales of assets. Payments for businesses acquired in 1996 principally relate to the purchase of commercial floorcovering distribution and installation companies. 22. Other Postretirement Benefits The parent company and certain subsidiaries provide medical, dental and life insurance benefits to pensioners and survivors. The associated plans are unfunded, and approved claims are paid from company funds. Under the terms of these plans, the company reserves the right to change, modify or discontinue the plans. 41 DuPont Notes to Financial Statements (Dollars in millions, except per share) Other postretirement benefits cost include the following components:
- ----------------------------------------------------------------- Health Life Care Insurance Total -------------------------- 1996 Service cost--benefits allocated to current period $ 51 $ 17 $ 68 Interest cost on accumulated postretirement benefit obligation 259 74 333 Amortization of net gains and prior service credit (102) (1) (103) -------------------------- Other postretirement benefits cost $ 208 $ 90 $ 298 -------------------------- 1995 Service cost--benefits allocated to current period $ 39 $ 13 $ 52 Interest cost on accumulated postretirement benefit obligation 274 78 352 Amortization of net gains and prior service credit (133) (1) (134) -------------------------- Other postretirement benefits cost $ 180 $ 90 $ 270 -------------------------- 1994 Service cost--benefits allocated to current period $ 56 $ 17 $ 73 Interest cost on accumulated postretirement benefit obligation 288 77 365 Amortization of net gains and prior service credit (78) 8 (70) -------------------------- Other postretirement benefits cost $ 266 $102 $ 368 =================================================================
The lower health care costs in 1996 and 1995 versus 1994 were due to the discount rate and health care trends used to determine the accumulated postretirement benefit obligation. In 1996, the company recorded a curtailment gain of $115 related to business divestitures, joint venture activity and other business restructurings. The following provides a reconciliation of the accumulated postretirement benefit obligation to the liabilities reflected in the balance sheet at December 31, 1996 and 1995:
- --------------------------------------------------------------------- Health Life Care Insurance Total ----------------------------- 1996 Accumulated postretirement benefit obligation for: Current pensioners and survivors $(2,661) $ (676) $(3,337) Fully eligible employees (195) - (195) Other employees (908) (287) (1,195) ----------------------------- (3,764) (963) (4,727) Unrecognized net loss/(gain) (714) 13 (701) Unrecognized prior service credit (775) - (775) ----------------------------- Accrued postretirement benefits cost $(5,253) $ (950) $(6,203) ----------------------------- Amount included in Other Accrued Liabilities (see Note 15) $ 356 ------- Amount included in Other Liabilities (see Note 17) $ 5,847 ------- 1995 Accumulated postretirement benefit obligation for: Current pensioners and survivors $(2,535) $ (660) $(3,195) Fully eligible employees (196) - (196) Other employees (981) (381) (1,362) ----------------------------- (3,712) (1,041) (4,753) Unrecognized net loss/(gain) (756) 116 (640) Unrecognized prior service credit (974) - (974) ----------------------------- Accrued postretirement benefits cost $(5,442) $ (925) $(6,367) ----------------------------- Amount included in Other Accrued Liabilities (see Note 15) $ 345 ------- Amount included in Other Liabilities (see Note 17) $ 6,022 =====================================================================
The health care accumulated postretirement benefit obligation was determined at December 31, 1996 and 1995 using a health care escalation rate of 8 percent decreasing to 5 percent over 8 years. The assumed long-term rate of compensation increase used for life insurance was 5 percent. The discount rate was 7.75 percent at December 31, 1996 and 7.25 percent at December 31, 1995. A one- percentage-point increase in the health care cost escalation rate would have increased the accumulated postretirement benefit obligation by $295 at December 31, 1996, and the 1996 other postretirement benefit cost would have increased by $30. 42 DuPont Notes to Financial Statements (Dollars in millions, except per share) 23. Pensions The company has noncontributory defined benefit plans covering substantially all U.S. employees. The benefits for these plans are based primarily on years of service and employees' pay near retirement. The company's funding policy is consistent with the funding requirements of federal law and regulations. Pension coverage for employees of the company's non-U.S. consolidated subsidiaries is provided, to the extent deemed appropriate, through separate plans. Obligations under such plans are systematically provided for by depositing funds with trustees, under insurance policies or by book reserves. Net pension cost/(credit) for defined benefit plans includes the following components:
- --------------------------------------------------------------------------------------- 1996 1995 1994 ----------------- ----------------- ----------------- Service cost--benefits earned during the period $ 382 $ 292 $ 380 Interest cost on projected benefit obligation 1,173 1,140 1,079 Return on assets: Actual (gain)/loss $(2,477) $(3,417) $ 214 Deferred gain/(loss) 1,017 (1,460) 2,082 (1,335) (1,540) (1,326) ------- ------- ------- Amortization of net gains and prior service cost (72) (108) (91) ------- ------- ------- Net pension cost/(credit) $ 23 $ (11) $ 42 =======================================================================================
The change in the annual pension cost/(credit) was primarily due to the discount rate used to determine the present value of future benefits and the return on pension trust assets. In 1996, the company recorded a curtailment loss of $88 related to business divestitures, joint venture activity and other business restructurings. The funded status of these plans was as follows:
- ------------------------------------------------------------------------------------------- December 31 1996 1995 - ----------------------------------------------------------------- --------------------- Actuarial present value of: Vested benefit obligation $(12,584) $(12,543) -------- -------- Accumulated benefit obligation $(13,073) $(13,128) -------- -------- Projected benefit obligation $(15,085) $(15,404) Plan assets at fair value 17,654 16,691 -------- -------- Excess of assets over projected benefit obligation 2,569 1,287 Unrecognized net (gains)/1/ (1,493) (73) Unrecognized prior service cost 684 510 -------- -------- Prepaid pension cost/2/ $ 1,760 $ 1,724 ===========================================================================================
1 Includes the unamortized balance of $(1,000) and $(1,168) at December 31, 1996 and 1995, respectively, of unrecognized net gain at January 1, 1985, the initial application date of Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions." 2 Excludes the pension liability for unfunded plans of $1,014 and $966 and the related projected benefit obligation of $1,597 and $1,474 at December 31, 1996 and 1995, respectively. 43 DuPont Notes to Financial Statements (Dollars in millions, except per share) For U.S. plans, the projected benefit obligation was determined using a discount rate of 7.75 percent at December 31, 1996 and 7.25 percent at December 31, 1995, and an assumed long-term rate of compensation increase of 5 percent. The assumed long-term rate of return on plan assets is 9 percent. Plan assets consist principally of common stocks, including 8,068,948 shares of DuPont at December 31, 1996, and U.S. government obligations. For non-U.S. plans, no one of which was material, similar economic assumptions were used. 24. Derivatives and Other Hedging Instruments The company enters into contractual arrangements (derivatives) in the ordinary course of business to hedge its exposure to currency, interest rate and commodity price risks. The company has established an overlying Financial Risk Management Framework for risk management and derivative activities. The Framework sets forth senior management's financial risk management philosophy and objectives through a Corporate Financial Risk Management Policy. In addition, it establishes oversight committees and risk management guidelines that authorize the use of specific derivative instruments and further establishes procedures for control and valuation, counterparty credit approval, and routine monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions. The company is exposed to credit loss in the event of nonperformance by these counterparties. The company manages this exposure to credit loss through the aforementioned credit approvals, limits and monitoring procedures and, to the extent possible, by restricting the period over which unpaid balances are allowed to accumulate. The company does not anticipate nonperformance by counterparties to these contracts, and no material loss would be expected from such nonperformance. Market and counterparty credit risks associated with these instruments are regularly reported to management. The company's accounting policies with respect to these financial instrument transactions are set forth in Note 1. Currency Risk The company routinely uses forward exchange contracts to hedge its net exposures, by currency, related to monetary assets and liabilities of its operations that are denominated in currencies other than the designated functional currency. The primary business objective of this hedging 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. Principal currency exposures and related hedge positions at December 31, 1996 were as follows:
- ------------------------------------------------------------------------ Open Contracts To Net Monetary Buy/(Sell) Currency Net Asset/(Liability) -------------------- After-Tax Currency Exposure Pretax After-Tax Exposure - ------------------------------------------------------------------------ British Pound $ 568 $(923) $(572) $(4) Canadian Dollar $ 315 $(507) $(314) $ 1 German Mark $(344) $ 552 $ 342 $(2) Norwegian Krone $ 570 $(921) $(571) $(1) French Franc $ 288 $(463) $(287) $ 1 Italian Lira $ 235 $(379) $(235) $ - ========================================================================
44 DuPont Notes to Financial Statements (Dollars in millions, except per share) In addition, the company from time to time will enter into forward exchange contracts to establish with certainty the functional currency amount of future firm commitments denominated in another currency. Decisions regarding whether or not to hedge a given commitment are made on a case-by-case basis, taking into consideration the amount and duration of the exposure, market volatility and economic trends. At December 31, 1996, no such commitments were hedged. Forward exchange contracts are also used to manage near-term foreign currency cash requirements and to place foreign currency deposits and marketable securities investments into currencies offering favorable returns. Net cash inflow/(outflow) from settlement of forward exchange contracts was $(192), $195 and $139 for the years 1996, 1995 and 1994, respectively. Interest Rate Risk The company uses a combination of financial instruments, including interest rate swaps, interest and principal currency swaps and structured medium-term financings, as part of its program to manage the fixed and floating interest rate mix of the total debt portfolio and related overall cost of borrowing. Interest rate swaps involve the exchange of fixed for floating rate interest payments that are fully integrated with underlying fixed-rate bonds or notes to effectively convert fixed rate debt into floating rate debt based on LIBOR or commercial paper rates. Interest rate swaps also involve the exchange of floating for fixed rate interest payments that are fully integrated with commercial paper or other floating rate borrowings to effectively convert floating rate debt into fixed rate debt. Both types of interest rate swaps are denominated in U.S. dollars. Interest rate swaps allow the company to maintain a target range of floating rate debt. Notional amounts do not represent the amounts exchanged by the counterparties, and thus are not a measure of market or credit exposure to the company. The amounts exchanged by the counterparties are calculated on the basis of the notional amounts and the fixed and floating interest rates. An interest rate swap was outstanding at December 31, 1995, which matured in 1996, that had a notional amount of $50, and a fixed rate of 8.3 percent in exchange for a floating rate. Under interest and principal currency swaps, the company receives predetermined foreign currency-denominated payments corresponding, both as to timing and amount, to the fixed or floating interest rate and fixed principal amount to be paid by the company under concurrently issued foreign currency-denominated bonds. In return, the company pays a U.S. dollar-denominated fixed or floating interest rate and a U.S. dollar-denominated fixed principal amount to the counterparty, thereby effectively converting the foreign currency-denominated bonds into U.S. dollar-denominated obligations for both interest and principal. Interest and principal currency swaps allow the company to be fully hedged against fluctuations in currency exchange rates and foreign interest rates and to achieve U.S. dollar fixed or floating interest rate payments below the market interest rate, at the date of issuance, for borrowings of comparable maturity. An interest and principal currency swap was outstanding at December 31, 1996 and 1995, that effectively converted a 150 million Swiss franc borrowing with a 6.25 percent Swiss franc fixed interest rate and a maturity of 2000 to a U.S. dollar fixed principal amount of $103 with a 6.9 percent U.S. dollar fixed interest rate. Structured medium-term financings consist of: (a) a structured medium-term note with interest and/or principal payments (denominated in either U.S. dollars or foreign currencies) determined using a specified calculation incorporating changes in currency exchange rates or other financial indexes; and (b) a concurrently executed structured medium-term swap that, for any and all calculations of the note's interest and/or principal payments over the term of the note, provides a fully hedged transaction such that the note is effectively converted to a U.S. dollar-denominated fixed or floating interest rate with a U.S. dollar-denominated fixed principal amount. Structured medium-term swaps allow the company to be fully hedged against fluctuations in exchange rates and interest rates and to achieve U.S. dollar fixed or floating interest rate payments below the market interest rate, at the date of issuance, for borrowings of comparable maturity. The face amount of these structured medium-term financings outstanding was $135 and $230 at December 31, 1996 and 1995, respectively. The weighted average interest rate and weighted average maturity was 5.8 and 6.3 percent, and 3.8 years and 3.0 years, at December 31, 1996 and 1995, respectively. In addition, the company's majority-owned Canadian subsidiary had a structured medium-term financing outstanding at December 31, 1995, which matured in 1996, that effectively converted a 160 million Australian dollar borrowing, with a 16.5 percent Australian dollar fixed interest rate, to a Canadian dollar borrowing with an implicit 12.43 percent Canadian dollar fixed interest rate. 45 DuPont Notes to Financial Statements (Dollars in millions, except per share) It is the company's policy that foreign currency bonds and structured medium- term notes will not be issued unless a hedge of the market risks inherent in such borrowings is executed simultaneously with a management-approved, highly creditworthy counterparty to provide a fully hedged transaction. Interest rate financial instruments did not have a material effect on the company's overall cost of borrowing at December 31, 1996 and 1995. See also Notes 14 and 16 for additional descriptions of interest rate financial instruments. Summary of Outstanding Derivative Financial Instruments Set forth below is a summary of the notional amounts, estimated fair values and carrying amounts of outstanding financial instruments at December 31, 1996 and 1995. Notional amounts represent the face amount of the contractual arrangements and are not a measure of market or credit exposure. Estimated fair values represent a reasonable approximation of amounts the company would have received from/(paid to) a counterparty at December 31 to unwind the positions prior to maturity. Estimated fair value of forward exchange contracts is based on market prices for contracts of comparable time to maturity. Estimated fair value of swaps represents the present value of remaining net cash flows to maturity under swap agreements, discounted using market-implied future interest rates existing at December 31, 1996 and 1995, respectively. At December 31, 1996, the company had no plans to unwind these positions prior to maturity. Carrying amounts represent the receivable/(payable) recorded in the Consolidated Balance Sheet. See also Notes 7, 8, 12, 13, 14 and 16 for fair values and carrying amounts of other financial instruments. Notional Amount, Estimated Fair Value and Carrying Amount of Outstanding Derivative Financial Instruments
- ------------------------------------------------------------------------------ Notional Estimated Carrying Type of Instrument Amount Fair Value Amount - ------------------------------------------------------------------------------ Forward Exchange Contracts December 31, 1996 $ 7,597 $ (30) $ (52) 1995 14,818 (108) (144) Interest Rate Swaps December 31, 1996 $ - $ - $ - 1995 50 (1) - Interest and Principal Currency Swaps December 31, 1996 $ 103 $ 18 $ 8 1995 103 38 27 Structured Medium-Term Swaps December 31, 1996 $ 135 $ (1) $ 5 1995 349 73 71 ==============================================================================
Estimated fair values shown above only represent the value of the hedge or swap component of these transactions, and thus are not indicative of the fair value of the company's overall hedged position. The estimated fair value of the company's total debt portfolio, based on quoted market prices for the same or similar issues or on current rates offered to the company for debt of the same remaining maturities, was $9,600 and $12,800 at December 31, 1996 and 1995, respectively. The decrease in fair value in 1996 was primarily due to reduced borrowing levels. As fully hedged transactions, the estimated fair values of the integrated debt and interest rate financial instruments do not affect income and are not recorded in the financial statements, but rather only represent the amount to unwind the debt and financial instruments at a specific point in time prior to maturity. Commodity Price Risk The company enters into exchange-traded and over-the-counter derivative commodity instruments to hedge its exposure to price fluctuations on anticipated crude oil, refined products and natural gas transactions and certain raw material purchases. Commodity trading in petroleum futures contracts is a natural extension of cash market trading and is used to physically acquire a portion of North America refining crude supply requirements. The commodity futures market has underlying principles of increased liquidity and longer trading periods than the cash market and is one method of reducing exposure to the price risk inherent in the petroleum business. Typically, trading is conducted to manage price risk around near-term supply requirements. 46 DuPont Notes to Financial Statements (Dollars in millions, exept per share) Occasionally, as market views and conditions allow, longer-term positions will be taken to manage price risk for the company's equity production (crude and natural gas) or net supply requirements. These positions may not exceed anticipated equity production or net supply requirements for the hedge period. The company's use of derivative commodity instruments reduces the effects of price volatility, thereby protecting against adverse price movements, while limiting, somewhat, the benefits of favorable price movements. Open hedge positions and deferred gains/losses for derivative commodity instruments were not material at December 31, 1996 and 1995. On a limited basis, the company also purchases and sells petroleum- and other energy-based futures contracts for trading purposes. After-tax gain/loss from such trading has not been material. 25. Commitments and Contingent Liabilities The company uses various leased facilities and equipment in its operations. Future minimum lease payments under noncancelable operating leases are $344, $276, $191, $148 and $122 for the years 1997, 1998, 1999, 2000 and 2001, respectively, and $620 for subsequent years, and are not reduced by noncancelable minimum sublease rentals due in the future in the amount of $149. Rental expense under operating leases was $354 in 1996, $339 in 1995 and $355 in 1994. The company has various purchase commitments for materials, supplies and items of permanent investment incident to the ordinary conduct of business. In the aggregate, such commitments are not at prices in excess of current market. The company is subject to various lawsuits and claims with respect to such matters as product liabilities, governmental regulations and other actions arising out of the normal course of business. While the effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists, in the opinion of company counsel, the ultimate liabilities resulting from such lawsuits and claims will not materially affect the consolidated financial position of the company. During 1991, the company initiated a stop-sale and recall of Benlate(R) 50 DF fungicide. About 60 of the more than 700 cases filed against the company in connection with the recall remain, the rest having been disposed of by trial, dismissal or settlement. In the fourth quarter of 1995, DuPont and the other major defendants in litigation concerning allegedly defective plumbing systems made with polybutylene pipe and acetal fittings settled two of several national class actions. The company's liability in the settled actions is limited to 10 percent of the cost of repairing plumbing systems up to a total company payout of $120. The related liability for each of these matters included in the Consolidated Balance Sheet is not reduced by the amounts of any expected insurance recoveries. Adverse changes in estimates for such costs could result in additional future charges. The company is also subject to contingencies pursuant to environmental laws and regulations that in the future may require the company to take further action to correct the effects on the environment of prior disposal practices or releases of chemical or petroleum substances by the company or other parties. The company has accrued for certain environmental remediation activities consistent with the policy set forth in Note 1. At December 31, 1996, such accrual amounted to $586 and, in management's opinion, was appropriate based on existing facts and circumstances. Under adverse changes in circumstances, potential liability may exceed amounts accrued. In the event that future remediation expenditures are in excess of amounts accrued, management does not anticipate that they will have a material adverse effect on the consolidated financial position of the company. The company has indirectly guaranteed various debt obligations under agreements with certain affiliated and other companies to provide specified minimum revenues from shipments or purchases of products. At December 31, 1996, these indirect guarantees totaled $73, and the company had directly guaranteed $1,262 of the obligations of certain affiliated companies and others. No material loss is anticipated by reason of such agreements and guarantees. In addition, at December 31, 1996, the company had directly guaranteed the commitment by an equity affilate to purchase natural gas at prices that were in excess of year-end 1996 market prices. No material annual loss is expected from this commitment. 47 DuPont Notes to Financial Statements (Dollars in millions, except per share) 26. Geographic Information
- ---------------------------------------------------------------------------------------------------------------- United Other States Europe Regions Consolidated - ---------------------------------------------------------------------------------------------------------------- 1996 Sales to Unaffiliated Customers/1/ $22,969 $16,045 $4,796 $43,810 Transfers Between Geographic Areas/2/ 2,699 753 671 - ----------------------------------------------------- Total $25,668 $16,798 $5,467 $43,810 ----------------------------------------------------- After-Tax Operating Income $ 2,688 $ 1,144 $ 186 $ 4,018 Identifiable Assets at December 31 $17,230 $10,973 $4,462 $32,665 ----------------------------------------------------- 1995 Sales to Unaffiliated Customers/1/ $21,534 $15,859 $4,770 $42,163 Transfers Between Geographic Areas/2/ 2,406 755 605 - ----------------------------------------------------- Total $23,940 $16,614 $5,375 $42,163 ----------------------------------------------------- After-Tax Operating Income $ 2,414 $ 1,161 $ 169 $ 3,744 Identifiable Assets at December 31 $17,387 $10,879 $4,149 $32,415 ----------------------------------------------------- 1994 Sales to Unaffiliated Customers/1/ $20,769 $14,216 $4,348 $39,333 Transfers Between Geographic Areas/2/ 2,044 673 507 - ----------------------------------------------------- Total $22,813 $14,889 $4,855 $39,333 ----------------------------------------------------- After-Tax Operating Income $ 1,955 $ 850 $ 230 $ 3,035 Identifiable Assets at December 31 $17,479 $10,708 $4,007 $32,194 - ---------------------------------------------------------------------------------------------------------------
1 Sales outside the United States of products manufactured in and exported from the United States totaled $3,826 in 1996, $4,289 in 1995 and $3,625 in 1994. 2 Products are transferred between geographic areas on a basis intended to reflect as nearly as practicable the "market value" of the products. 48 DuPont Notes to Financial Statements (Dollars in millions, except per share) 27. Industry Segment Information The company has six principal segments that manufacture and sell a wide range of products to many different markets, including energy, transportation, textile, construction, automotive, electronics, printing, health care, packaging and agricultural products. The company sells its products worldwide, however, about 50 percent and 36 percent of sales are made in the United States and Europe, respectively. Major products by segment include: Chemicals (specialty chemicals, white pigment and mineral products, fluorochemicals and nylon intermediates); Fibers (textile, industrial and carpet nylon, Dacron(R) polyester, Lycra/(R)/ spandex, nonwovens and aramids); Polymers (automotive finishes, elastomers, fluoropolymers, packaging and industrial polymers, and engineering polymers); Petroleum (crude oil, natural gas and refined products), Life Sciences (agricultural products and pharmaceuticals), and Diversified Businesses (photopolymers and electronic materials, printing industry products, films and coal). The Life Sciences and Diversified Businesses segments were previously reported as one segment, Diversified Businesses; prior years' data have been restated for comparative purposes. The company's sales are not materially dependent on a single customer or small group of customers. The Fibers and Polymers segments, however, have several large customers in their respective industries that are important to these segments' operating results.
- -------------------------------------------------------------------------------------------------------------------------------- Life Diversified Chemicals Fibers Polymers Petroleum Sciences Businesses Consolidated - -------------------------------------------------------------------------------------------------------------------------------- 1996 Sales to Unaffiliated Customers/1/ $4,141 $7,204 $6,699 $ 20,166/2/ $2,472 $3,128 $ 43,810 Transfers Between Segments 190 22 213 413 - 52 - ---------------------------------------------------------------------------------------- Total $4,331 $7,226 $6,912 $ 20,579 $2,472 $3,180 $ 43,810 ---------------------------------------------------------------------------------------- Operating Profit $ 808 $1,247 $1,306 $ 1,818 $ 436 $ 257 $ 5,872 Provision for Income Taxes (301) (455) (489) (933) (254) (90) (2,522) Equity in Earnings of Affiliates 56 10 92 (25) 497 38 668 ---------------------------------------------------------------------------------------- After-Tax Operating Income/3/ $ 563 $ 802 $ 909 $ 860 $ 679 $ 205 $ 4,018/4/ ---------------------------------------------------------------------------------------- Identifiable Assets at December 31 $3,723 $6,805 $4,535 $ 13,018 $1,749 $2,835 $ 32,665/5/ ---------------------------------------------------------------------------------------- Depreciation, Depletion and Amortization $ 330 $ 609 $ 350 $ 1,128 $ 70 $ 232 $ 2,719/6/ Capital Expenditures $ 338 $ 611 $ 446 $ 1,616 $ 93 $ 213 $ 3,317/7/ - -------------------------------------------------------------------------------------------------------------------------------- 1995 Sales to Unaffiliated Customers/1/ $4,181 $7,215 $7,037 $ 17,660/2/ $2,322 $3,748 $ 42,163 Transfers Between Segments 248 31 208 298 - 46 - ---------------------------------------------------------------------------------------- Total $4,429 $7,246 $7,245 $ 17,958 $2,322 $3,794 $ 42,163 ---------------------------------------------------------------------------------------- Operating Profit $ 947 $1,199 $1,244 $ 1,257 $ 468 $ 283 $ 5,398 Provision for Income Taxes (360) (435) (465) (660) (202) (82) (2,204) Equity in Earnings of Affiliates 64 41 50 22 322 51 550 ---------------------------------------------------------------------------------------- After-Tax Operating Income/8/ $ 651 $ 805 $ 829 $ 619 $ 588 $ 252 $ 3,744/4/ Identifiable Assets at December 31 $3,643 $6,305 $4,678 $ 12,634 $1,651 $3,504 $ 32,415/5/ Depreciation, Depletion and Amortization $ 352 $ 626 $ 362 $ 1,111 $ 78 $ 294 $ 2,823/6/ Capital Expenditures $ 417 $ 593 $ 399 $ 1,714 $ 73 $ 198 $ 3,394/7/ - -------------------------------------------------------------------------------------------------------------------------------- 1994 Sales to Unaffiliated Customers/1/ $3,760 $6,767 $6,318 $ 16,815/2/ $2,132 $3,541 $ 39,333 Transfers Between Segments 208 44 181 388 - 36 - ---------------------------------------------------------------------------------------- Total $3,968 $6,811 $6,499 $ 17,203 $2,132 $3,577 $ 39,333 ---------------------------------------------------------------------------------------- Operating Profit $ 523 $1,051 $1,066 $ 1,096 $ 324 $ 268 $ 4,328 Provision for Income Taxes (203) (401) (417) (463) (102) (82) (1,668) Equity in Earnings of Affiliates 58 30 56 25 138 68 375 ---------------------------------------------------------------------------------------- After-Tax Operating Income/9/ $ 378 $ 680 $ 705 $ 658 $ 360 $ 254 $ 3,035/4/ ---------------------------------------------------------------------------------------- Identifiable Assets at December 31 $3,556 $6,380 $4,462 $ 12,484 $1,637 $3,675 $ 32,194/5/ ---------------------------------------------------------------------------------------- Depreciation, Depletion and Amortization $ 405 $ 686 $ 386 $ 1,266 $ 79 $ 284 $ 3,106/6/ Capital Expenditures $ 258 $ 640 $ 356 $ 1,635 $ 47 $ 215 $ 3,151/7/ - --------------------------------------------------------------------------------------------------------------------------------
49 DuPont Notes to Financial Statements (Dollars in millions, except per share) 1 Sales of refined petroleum products of $15,169 in 1996, $13,938 in 1995 and $12,853 in 1994 exceeded 10 percent of consolidated sales. 2 Excludes crude oil and refined product exchanges and trading transactions totaling $3,549 in 1996, $2,299 in 1995 and $2,254 in 1994. 3 Includes the following (charges)/benefits: - ------------------------------------------------------------------------------ Chemicals/a/ $ (21) Fibers/a/ (32) Polymers/b/ 55 Petroleum/c/ (41) Life Sciences/d/ (110) Diversified Businesses/e/ 48 ------ $ (101) - ------------------------------------------------------------------------------
a Charges associated principally with employee separation costs in the United States. b Benefit associated with formation of the DuPont Dow elastomers joint venture. c Includes charges of $63 for write-down 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. d Charge associated with the Benlate/(R)/ 50 DF fungicide recall. e Includes gains of $41 from the sale of certain medical products businesses and $33 related to sale of stock received in connection with the previously sold connector systems business, and a charge of $26, principally employee separation costs outside the United States, associated with the printing and publishing business. 4 The following reconciles After-Tax Operating Income to Net Income:
- ------------------------------------------------------------------------------ 1996 1995 1994 ---------------------------------------- After-Tax Operating Income/a/ $4,018 $3,744 $3,035 Interest and Other Corporate Expenses Net of Tax/a/,/b/ (382) (451) (308) --------------------------------------- Net Income $3,636 $3,293 $2,727 - -----------------------------------------------------------------------------
a 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 years' data have been reclassified for comparative purposes. b Includes interest and debt expense and other corporate expenses such as exchange gains and losses (including the company's share of equity affiliates' exchange gains and losses). 5 The following reconciles Identifiable Assets to Total Assets:
- ----------------------------------------------------------------------------- 1996 1995 1994 ------------------------- Identifiable Assets at December 31* $32,665 $32,415 $32,194 Investment in Affiliates 2,278 1,846 1,662 Corporate Assets* 3,044 3,051 3,036 ------------------------- Total Assets at December 31 $37,987 $37,312 $36,892 - -----------------------------------------------------------------------------
* Capitalized interest, net of amortization, is included in Identifiable Assets versus Corporate Assets. 6 Includes depreciation on research and development facilities and impairment of unproved properties. 7 Excludes investments in affiliates and payments for businesses acquired. 8 Includes the following (charges)/benefits/a/: - -------------------------------------------------------------------------- Chemicals $ 10 Fibers 31 Polymers/b/ (35) Petroleum/c/ (45) Life Sciences/d/ (63) Diversified Businesses/e/ (12) ----- $(114) - --------------------------------------------------------------------------
a Includes a benefit of $69 principally from adjustments in estimates associated with the third quarter 1993 restructuring charge. The $69 is reflected in Chemicals $10; Fibers $31; Polymers $3; and Diversified Businesses $25. b Includes a charge of $38 for costs to settle certain plumbing systems litigation. c Charge for write-down of certain North American and European assets consistent with the provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which was adopted by the company in 1995. d Charge associated with the Benlate/(R)/ 50 DF fungicide recall. e Includes a charge of $24 for printing and publishing operations, principally for employee separation costs in Europe, and a litigation provision of $13 related to a previously sold business. 9 Includes the following (charges)/benefits/a/: - ------------------------------------------------------------------------------- Chemicals/b/ $ (5) Fibers 25 Polymers 11 Petroleum/c/ (26) Life Sciences/d/ (80) Diversified Businesses/e/ 27 ----- $ (48) - -------------------------------------------------------------------------------
a Includes a net benefit of $112 from adjustments in estimates associated with the third quarter 1993 restructuring charge of which $88 relates to adjustments for other than employee separation costs. The $112 is reflected in Chemicals $22; Fibers $25; Polymers $11; and Diversified Businesses $54. b Includes a charge of $27 associated with the discontinuation of certain products, asset sales and write-downs. c Includes a charge of $58 for employee separation costs, a loss of $95 from the write-down of certain North Sea oil properties to be sold and a benefit of $127 principally related to a favorable change in tax status resulting from a transfer of properties among certain North Sea affiliates. d Includes a charge of $110 associated with the Benlate/(R)/ 50 DF fungicide recall and a benefit of $30 from an adjustment of prior-year tax provisions. e Includes a charge of $27 for the write-down of assets and discontinuation of certain products. See segment discussions on pages 14-20 for a description of each industry segment. Products are transferred between segments on a basis intended to reflect as nearly as practicable the "market value" of the products. 50 DuPont Supplemental Petroleum Data (Dollars in millions) Oil and Gas Producing Activities The disclosures on pages 51-56 are presented in accordance with the provisions of Statement of Financial Accounting Standards No. 69, "Disclosures About Oil and Gas Producing Activities." Accordingly, volumes of reserves and production exclude royalty interests of others, and royalty payments are reflected as reductions in revenues. Results of Operations for Oil and Gas Producing Activities
- ----------------------------------------------------------------------------------------------------- Total Worldwide United States -------------------------------------------------------- 1996 1995 1994 1996 1995 1994 -------------------------------------------------------- Consolidated Companies Revenues: Sales to unaffiliated customers $ 2,479 $ 1,863 $ 2,196 $ 621 $ 443 $ 552 Transfers to other company operations 927 862 733 363 386 401 Exploration, including dry hole costs (374) (275) (323) (131) (80) (130) Production (755) (727) (786) (297) (287) (327) Depreciation, depletion, amortization and valuation provisions (800) (727) (957) (302) (290) (334) Other/2/ 69 82 67 48 48 38 Income taxes (912) (626) (463) (47) (24) 7 -------------------------------------------------------- Total consolidated companies 634 452 467 255 196 207 -------------------------------------------------------- Equity Affiliates Results of operations of equity affiliates 36 12 (16) 11 -- 1 -------------------------------------------------------- Total $ 670 $ 464 $ 451 $ 266 $ 196 $ 208 - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- Europe Other Regions -------------------------------------------------------- 1996 1995 1994 1996 1995 1994 -------------------------------------------------------- Consolidated Companies Revenues: Sales to unaffiliated customers $ 1,204 $ 817 $ 1,015 $ 654 $ 603 $ 629 Transfers to other company operations 566 477 332 (2) (1) -- Exploration, including dry hole costs (156) (134) (110) (87) (61) (83) Production (372) (347) (377) (86) (93) (82) Depreciation, depletion, amortization and valuation provisions (443) (362) (533)/1/ (55) (75) (90) Other/2/ (1) 31 25 22 3 4 Income taxes (436) (242) (122)/3/ (429) (360) (348) -------------------------------------------------------- Total consolidated companies 362 240 230 17 16 30 -------------------------------------------------------- Equity Affiliates Results of operations of equity affiliates 25 12 (17) -- -- -- -------------------------------------------------------- Total $ 387 $ 252 $ 213 $ 17 $ 16 $ 30 - -----------------------------------------------------------------------------------------------------
1 Includes a charge of $115 ($95 after taxes) for impairment of certain North Sea oil properties to be sold. 2 Includes gain/(loss) on disposal of fixed assets and other miscellaneous revenues and expenses. 3 Includes a tax benefit of $127 principally related to a favorable change in tax status resulting from a transfer of properties among certain North Sea affiliates. 51 DuPont Supplemental Petroleum Data (Dollars in millions) Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities/1/
- ------------------------------------------------------------------------------------------------------------------------------------ Total Worldwide United States Europe Other Regions -------------------------------------------------------------------------------------------------- 1996 1995 1994 1996 1995 1994 1996 1995 1994 1996 1995 1994 -------------------------------------------------------------------------------------------------- Consolidated Companies Property acquisitions: Proved/2/ $ 21 $ 96 $ 139 $ 14 $ 95 $ 14 $ - $ - $ 115 $ 7 $ 1 $ 10 Unproved 42 58 36 41 29 18 - 1 5 1 28 13 Exploration 445 358 403 144 128 151 169 159 136 132 71 116 Development 828 745 713 203 242 174 543 463 466 82 40 73 -------------------------------------------------------------------------------------------------- Total consolidated companies 1,336 1,257 1,291 402 494 357 712 623 722 222 140 212 -------------------------------------------------------------------------------------------------- Equity Affiliates Property acquisitions: Proved - - - - - - - - - - - - Development 22 29 75 8 19 12 14 10 63 - - - -------------------------------------------------------------------------------------------------- Total equity affiliates 22 29 75 8 19 12 14 10 63 - - - -------------------------------------------------------------------------------------------------- Total $1,358 $1,286 $1,366 $ 410 $ 513 $ 369 $ 726 $ 633 $ 785 $ 222 $ 140 $ 212 - ------------------------------------------------------------------------------------------------------------------------------------
/1/ These data comprise all costs incurred in the activities shown, whether capitalized or charged to expense at the time they were incurred. /2/ Does not include properties acquired through property exchanges. Capitalized Costs Relating to Oil and Gas Producing Activities
- ------------------------------------------------------------------------------------------------------------------------------------ Total Worldwide United States Europe Other Regions -------------------------------------------------------------------------------------------------- 1996 1995 1994 1996 1995 1994 1996 1995 1994 1996 1995 1994 -------------------------------------------------------------------------------------------------- Consolidated Companies Gross costs: Proved properties $11,914 $11,023 $11,057 $4,255 $4,440 $4,806 $6,268 $5,220 $4,950 $1,391 $1,363 $1,301 Unproved properties 913 883 790 262 251 291 444 439 323 207 193 176 Accumulated depreciation, depletion, amortization and valuation allowances: Proved properties 6,729 6,290 6,173 2,739 2,822 3,073 2,947 2,425 2,122 1,043 1,043 978 Unproved properties 157 156 185 77 76 110 7 7 6 73 73 69 -------------------------------------------------------------------------------------------------- Total net costs of consolidated companies 5,941 5,460 5,489 1,701 1,793 1,914 3,758 3,227 3,145 482 440 430 -------------------------------------------------------------------------------------------------- Equity Affiliates Net costs of equity affiliates: Proved properties 217 223 253 55 60 93 162 163 160 - - - -------------------------------------------------------------------------------------------------- Total $ 6,158 $ 5,683 $ 5,742 $1,756 $1,853 $2,007 $3,920 $3,390 $3,305 $ 482 $ 440 $ 430 - ------------------------------------------------------------------------------------------------------------------------------------
DuPont 52 S u p p l e m e n t a l P e t r o l e u m D a t a (In millions of barrels) Estimated Proved Reserves of Oil/1/
- ------------------------------------------------------------------------------------------------------------------------------------ Total Worldwide United States Europe Other Regions/2/ ---------------------------------------------------------------------------------------------- 1996 1995 1994 1996 1995 1994 1996 1995 1994 1996 1995 1994 ---------------------------------------------------------------------------------------------- Proved Developed and Undeveloped Reserves of Consolidated Companies Beginning of year 933 953 964 294 336 344 408 394 390 231 223 230 Revisions and other changes 55 (1) 51 11 (8) 14 36 (9) 26 8 16 11 Extensions and discoveries 75 122 50 31 25 8 35 72 21 9 25 21 Improved recovery 4 4 10 4 1 9 - 3 - - - 1 Purchase of reserves/3/ (1) 5 43 (1) 3 14 - - 29 - 2 - Sale of reserves/4/ (12) (33) (33) (10) (33) (20) - - (13) (2) - - Production (128) (117) (132) (30) (30) (33) (66) (52) (59) (32) (35) (40) ---------------------------------------------------------------------------------------------- End of year/5/ 926 933 953 299 294 336 413 408 394 214 231 223 ---------------------------------------------------------------------------------------------- Proved Developed and Undeveloped Reserves of Equity Affiliates Beginning of year 44 35 19 - - - 44 35 19 - - - Revisions and other changes 8 5 6 - - - 8 5 6 - - - Extensions and discoveries - 8 11 - - - - 8 11 - - - Production (5) (4) (1) - - - (5) (4) (1) - - - ---------------------------------------------------------------------------------------------- End of year 47 44 35 - - - 47 44 35 - - - ---------------------------------------------------------------------------------------------- Total 973 977 988 299 294 336 460 452 429 214 231 223 ---------------------------------------------------------------------------------------------- Proved Developed Reserves of Consolidated Companies Beginning of year 684 706 708 265 324 332 217 171 160 202 211 216 End of year 630 684 706 258 265 324 185 217 171 187 202 211 - ------------------------------------------------------------------------------------------------------------------------------------
1 Oil reserves comprise crude oil and condensate and natural gas liquids expected to be removed for the company's account from its natural gas deliveries. 2 Excludes reserve data applicable to Conoco's petroleum assets in Libya. Although negotiations with the Libyan government's national oil company continue and Conoco believes recovery of the carrying value of assets is probable, Conoco has not resumed its participation in Libyan operations. Also excludes reserve data applicable to Conoco's interest in the heavy oil project in Venezuela's Orinoco's region, pending completion of financing arrangements. 3 Includes reserves acquired through property exchanges. 4 Includes reserves disposed of through property exchanges. 5 Includes reserves of 89 at year-end 1996 attributable to Conoco Oil & Gas Associates L.P. in which there is a minority interest with an approximate 17 percent revenue share at year-end 1996. See Note 18. 53 DuPont Supplemental Petroleum Data (In billion cubic feet)
Estimated Proved Reserves of Gas Total Worldwide United States Europe Other Regions - ---------------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1996 1995 1994 1996 1995 1994 1996 1995 1994 -------------------------------------------------------------------------------------------- Proved Developed and Undeveloped Reserves of Consolidated Companies Beginning of year 4,709 4,330 3,680 1,891 1,749 1,802 2,649 2,431 1,752 169 150 126 Revisions and other changes 74 328 317 112 131 121 (39) 195 187 1 2 9 Extensions and discoveries 780 400 514 176 225 139 574 147 356 30 28 19 Improved recovery - 1 - - 1 - - - - - - - Purchase of reserves/1/ 41 167 375 3 167 42 36 - 321 2 - 12 Sales of reserves/2/ (71) (78) (71) (57) (78) (37) - - (34) (14) - - Production (470) (439) (485) (303) (304) (318) (152) (124) (151) (15) (11) (16) ------------------------------------------------------------------------------------------ End of year/3/ 5,063 4,709 4,330 1,822 1,891 1,749 3,068 2,649 2,431 173 169 150 ------------------------------------------------------------------------------------------- Proved Developed and Undeveloped Reserves of Equity Affiliates Beginning of year 627 830 586 627 830 586 - - - - - - Revisions and other changes 1 - 255 1 - 255 - - - - - - Purchase of reserves - - 2 - - 2 - - - - - - Sale of Reserves - (189) - - (189) - - - - - - - Production (15) (14) (13) (15) (14) (13) - - - - - - ------------------------------------------------------------------------------------------ End of year 613 627 830 613 627 830 - - - - - - ------------------------------------------------------------------------------------------ Total 5,676 5,336 5,160 2,435 2,518 2,579 3,068 2,649 2,431 173 169 150 ----------------------------------------------------------------------------------------- Proved Developed Reserves of Consolidated Companies Beginning of year 2,933 2,496 2,570 1,733 1,687 1,717 1,071 683 738 129 126 115 End of year 2,843 2,933 2,496 1,672 1,733 1,687 1,041 1,071 683 130 129 126 - ------------------------------------------------------------------------------------------------------------------------------------
1 Includes reserves acquired through property exchanges. 2 Includes reserves disposed of through property exchanges. 3 Includes reserves of 104 at year-end 1996 attributable to Conoco Oil & Gas Associates L.P. in which there is a minority interest with an approximate 17 percent revenue share at year-end 1996. See Note 18. 54 DuPont Supplemental Petroleum Data Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves The information on the following page has been prepared in accordance with Statement of Financial Accounting Standards No. 69, which requires the standardized measure of discounted future net cash flows to be based on year-end sales prices, costs and statutory income tax rates and a 10 percent annual discount rate. Specifically, the per-barrel oil sales prices used to calculate the December 31, 1996 data averaged $22.96 for the United States, $20.99 for Europe and $22.10 for Other Regions, and the gas prices per thousand cubic feet averaged approximately $2.40 for the United States, $3.09 for Europe and $1.39 for Other Regions. Because prices used in the calculation are as of December 31, the standardized measure could vary significantly from year to year based on market conditions at that specific date. The projections should not be viewed as realistic estimates of future cash flows nor should the "standardized measure" be interpreted as representing current value to the company. Material revisions to estimates of proved reserves may occur in the future, development and production of the reserves may not occur in the periods assumed, actual prices realized are expected to vary significantly from those used and actual costs may also vary. The company's investment and operating decisions are not based on the information presented on the following page, but on a wide range of reserve estimates that includes probable as well as proved reserves, and on different price and cost assumptions from those reflected in this information. Beyond the above considerations, the "standardized measure" is also not directly comparable with asset balances appearing elsewhere in the financial statements because any such comparison would require reconciling adjustments, including reduction of the asset balances for related deferred income taxes. 55 DUPONT Supplemental Petroleum Data (Dollars in millions) Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
- ---------------------------------------------------------------------------------------------------------------------------- Total Worldwide United States Europe - ---------------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1996 1995 1994 1996 1995 1994 --------------------------------------------------------------------------------------- Consolidated Companies Future cash flows: Revenues $34,366 $26,766 $23,836 $10,044 $ 7,631 $ 7,201 $19,364 $14,995 $12,945 Production costs (10,406) (9,152) (8,967) (3,085) (3,038) (3,411) (6,378) (5,154) (4,719) Development costs (1,669) (1,583) (1,693) (283) (218) (184) (1,294) (1,234) (1,439) Income tax expense (10,364) (7,404) (6,084) (2,041) (1,169) (873) (5,179) (3,758) (2,893) --------------------------------------------------------------------------------------- Future net cash flows 11,927 8,627 7,092 4,635 3,206 2,733 6,513 4,849 3,894 Discounted to present value at a 10% annual rate (4,638) (3,469) (2,817) (2,088) (1,456) (1,154) (2,317) (1,813) (1,522) --------------------------------------------------------------------------------------- Total consolidated companies* 7,289 5,158 4,275 2,547 1,750 1,579 4,196 3,036 2,372 --------------------------------------------------------------------------------------- Equity Affiliates Standardized measure of discounted future net cash flows of equity affiliates 357 166 211 156 44 102 201 122 109 --------------------------------------------------------------------------------------- Total $ 7,646 $ 5,324 $ 4,486 $ 2,703 $ 1,794 $ 1,681 $ 4,937 $ 3,158 $ 2,481 ============================================================================================================================ -------------------------- Other Regions -------------------------- 1996 1995 1994 -------------------------- Consolidated Companies Future cash flows: Revenues $ 4,958 $ 4,140 $ 3,690 Production costs (943) (960) (837) Development costs (92) (131) (70) Income tax expense (3,144) (2,477) (2,318) -------------------------- Future net cash flows 779 572 465 Discounted to present value at a 10% annual rate (233) (200) (141) -------------------------- Total consolidated companies* 546 372 324 -------------------------- Equity Affiliates Standardized measure of discounted future net cash flows of equity affiliates - - - -------------------------- Total $ 546 $ 372 $ 324 ==========================
* Includes $686 at year-end 1996 attributable to Conoco Oil & Gas Associates L.P. in which there is a minority interest with an approximate 17 percent revenue share at year-end 1996. See Note 18. Summary of Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves for Fully Consolidated Companies
- -------------------------------------------------------------------------------- 1996 1995 1994 ----------------------------- Balance at January 1 $5,158 $4,275 $3,214 Sales and transfers of oil and gas produced, net of production costs (2,647) (1,998) (2,143) Development costs incurred during the period 828 745 713 Net changes in prices and in development and production costs 2,525 675 1,275 Extensions, discoveries and improved recovery, less related costs 1,630 1,219 775 Revisions of previous quantity estimates 553 375 796 Purchases (sales) of reserves in place--net (54) (62) 333 Accretion of discount 931 753 529 Net change in income taxes (1,676) (897) (1,174) Other 41 73 (43) ----------------------------- Balance at December 31 $7,289 $5,158 $4,275 ================================================================================
56 Quarterly Financial Data (Dollars in millions, except per share)
- -------------------------------------------------------------------------------------------------------------- Quarter Ended March 31 June 30 September 30 December 31 - -------------------------------------------------------------------------------------------------------------- 1996 Sales $10,769 $11,148 $10,486 $11,407 Cost of Goods Sold and Other Expenses/1/ 9,457 9,673 9,131 10,195 Net Income 879/2/ 1,001/3/ 898/4/ 858 Earnings Per Share of Common Stock 1.57 1.78 1.60 1.52 Dividends Per Share of Common Stock .52 .57 .57 .57 Market Price of Common Stock/5/ High 84 3/8 84 7/8 89 7/8 99 3/8 Low 69 5/8 76 3/4 72 7/8 87 3/4 - -------------------------------------------------------------------------------------------------------------- 1995 Sales $10,502 $11,076 $10,200 $10,385 Cost of Goods Sold and Other Expenses/1/ 9,014 9,555 8,941 9,564 Net Income 959 938/6/ 769/7/ 627/8/ Earnings Per Share of Common Stock 1.40 1.70 1.38 1.13 Dividends Per Share of Common Stock .47 .52 .52 .52 Market Price of Common Stock/5/ High 61 3/4 69 3/8 73 70 1/4 Low 52 5/8 60 1/4 63 3/4 60 1/8 - --------------------------------------------------------------------------------------------------------------
1 Excludes interest and debt expense and provision for income taxes. 2 Includes a net charge of $20 ($.04 per share) reflecting: a charge of $53 principally for employee separation costs; and a benefit of $33 for sale of stock received in connection with a previously sold business. 3 Includes a net charge of $34 ($.06 per share) reflecting: a charge of $63 for write-down of investment in a European national gas marketing joint venture; a charge of $48 principally for employee separation costs; a charge of $63 associated with Benlate/(R)/ 50 DF fungicide recall; a gain of $55 associated with the formation of the DuPont Dow elastomers joint venture; a benefit of $44 related to environmental insurance recoveries; and a gain of $41 from the sale of certain medical products businesses. 4 Includes a charge of $47 ($.08 per share) associated with Benlate/(R)/ 50 DF fungicide recall. 5 As reported on the New York Stock Exchange, Inc. Composite Transactions Tape. 6 Includes a net charge of $29 ($.05 per share) related to a charge of $63 associated with Benlate/(R)/ 50 DF fungicide recall and a benefit of $34, principally due to adjustment of estimates associated with the third quarter 1993 restructuring charge. 7 Includes a net charge of $2 reflecting: a benefit of $38 from adjustments in estimates associated with the third quarter 1993 restructuring charge; a charge of $27 principally for employee separation costs; and a litigation provision of $13 related to a previously sold business. 8 Includes charges of $45 ($.08 per share) for the write-down of certain North American and European petroleum assets and $38 ($.07 per share) for costs to settle certain plumbing systems litigation. Consolidated Geographic Data (Dollars in millions)
- -------------------------------------------------------------------- Capital Total Assets Average Expenditures December 31 Employment --------------------------------------------------- 1996 1995 1996 1995 1996 1995 --------------------------------------------------- United States $1,723 $1,889 $19,601 $19,490 67,119 71,121 Europe 1,418 1,268 12,043 12,166 19,796 20,765 Other Regions 589 486 6,343 5,656 14,556 14,255 --------------------------------------------------- Total $3,730 $3,643 $37,987 $37,312 101,471 106,141 - --------------------------------------------------------------------
Capital expenditures, total assets and average employment are assigned to geographic areas, generally based on physical location. 57 DuPont Five-Year Financial Review/1/ (Dollars in millions, except per share)
- ------------------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 --------------------------------------------------------------------- Summary of Operations Sales $43,810 $42,163 $39,333 $37,098 $37,799 Earnings Before Income Taxes $ 5,981 $ 5,390 $ 4,382 $ 958 $ 1,811 Provision for Income Taxes $ 2,345 $ 2,097 $ 1,655 $ 392 $ 836 Net Income $ 3,636 $ 3,293 $ 2,727 $ 566/2/ $ 975/3/ Earnings Per Share of Common Stock $ 6.47 $ 5.61 $ 4.00 $ .83 $ 1.43 --------------------------------------------------------------------- Financial Position at Year End Working Capital $ 116 $(1,776) $ 3,543 $ 1,460 $ 2,002 Total Assets $37,987 $37,312 $36,892 $37,053 $38,870 Borrowings and Capital Lease Obligations: Short Term $ 3,910 $ 6,157 $ 1,292 $ 2,796 $ 3,799 Long Term $ 5,087 $ 5,678 $ 6,376 $ 6,531 $ 7,193 Stockholders' Equity $10,709 $ 8,436 $12,822 $11,230 $11,765 --------------------------------------------------------------------- Ratios Dividends as Percent of Cash Provided by Operations 20% 18% 22% 22% 27% Cash Provided by Operations as Percent of Total Debt 71% 57% 74% 58% 40% Total Debt as Percent of Total Capitalization 44% 58% 37% 45% 48% Return on Average Investors' Capital 19.9% 17.9% 14.6% 4.0% 5.9% Net Income As Percent of Average Stockholders' Equity 37.8% 32.7% 22.6% 4.8% 8.1% --------------------------------------------------------------------- General For the Year: Capital Expenditures $ 3,730 $ 3,643 $ 3,241 $ 3,725 $ 4,524 Depreciation, Depletion and Amortization $ 2,621 $ 2,722 $ 2,976 $ 2,833 $ 2,655 Research and Development Expense $ 1,032 $ 1,067 $ 1,047 $ 1,132 $ 1,277 As Percent of Sales for: Chemicals and Specialties Businesses 4.2% 4.2% 4.5% 5.1% 5.6% Petroleum 0.2% 0.2% 0.3% 0.3% 0.4% Average Number of Shares Outstanding (millions) 561 585 680 677 673 Dividends Per Common Share $ 2.23 $ 2.03 $ 1.82 $ 1.76 $ 1.74 Common Stock Prices: High $ 99 3/8 $ 73 $ 62 3/8 $ 53 7/8 $ 54 7/8 Low $ 69 5/8 $ 52 5/8 $ 48 1/4 $ 44 1/2 $ 43 1/2 Year-End Close $ 94 1/8 $ 69 7/8 $ 56 1/8 $ 48 1/4 $ 47 1/8 At Year End: Employees (thousands) 97 105 107 114 125 Common Stockholders of Record (thousands) 158 166 172 181 188 Book Value Per Common Share $ 18.58 $ 14.76 $ 18.48 $ 16.22 $ 17.08 - -------------------------------------------------------------------------------------------------------------------
1 See Management's Discussion and Analysis on pages 21-27, Consolidated Income Statement on page 29, Notes to Financial Statements on pages 33-50 and Quarterly Financial Data on page 57 for information relating to significant items affecting the results of operations and financial position. 2 Before effect on income of extraordinary item. 3 Before transition effect of accounting changes adopted in 1992 for Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 109, "Accounting for Income Taxes." Charges to net income of $3,788 ($5.63 per share) and $1,045 ($1.55 per share), respectively, were recorded for the effects of transition to these two new standards. Also, before extraordinary charge of $69 ($.10 per share) from early extinguishment of debt. 58 DuPont EX-21 11 SUBSIDIARIES OF THE REGISTRATE Exhibit 21 SUBSIDIARIES OF THE REGISTRANT
Name Organized Under Laws of - --------------------------------------------------- ----------------------- Conoco Asia Ltd. .................................. Bermuda Conoco Canada Limited ............................. Canada Conoco Developments Limited ....................... England Conoco Inc. ....................................... Delaware Conoco Indonesia Inc. ............................. Delaware Conoco International, Inc. ........................ Delaware Conoco Investments Norge A/S ...................... Norway Conoco Limited .................................... England Conoco Mineraloel GmbH ............................ Germany Conoco Norway Inc. ................................ Delaware Conoco Petroleum Limited .......................... England Conoco Petroleum Norge AS ......................... Norway Conoco Pipe Line Company .......................... Delaware Conoco Specialty Products Inc. .................... Delaware Conoco Timan-Pechora Ltd. ......................... Bermuda Conoco (U.K.) Limited ............................. England Consol Energy Inc. (50% owned) .................... Delaware Continental Oil Company of Libya .................. Delaware Danube Insurance Ltd. ............................. Bermuda Douglas Oil Company of California ................. California Dubai Petroleum Company ........................... Delaware DuPont Agrichemicals Caribe, Inc. ................. Delaware DuPont Argentina S.A. ............................. Argentina DuPont Asia Pacific, Ltd. ......................... Delaware DuPont (Australia) Limited ........................ Australia DuPont Canada Inc. (76.8% owned) .................. Canada DuPont Chemical and Energy Operations, Inc. ....... Delaware DuPont Coordination Center N.V. ................... Belgium DuPont Conoco Nordic A.B. ......................... Sweden DuPont Delaware, Inc. ............................. Delaware DuPont Diagnostics, Inc. .......................... Delaware DuPont de Colombia, S.A. .......................... Colombia DuPont de Nemours (Belgium) N.V. .................. Belgium DuPont de Nemours (Deutschland) GmbH .............. Germany DuPont de Nemours (Flandre), S.A. ................. France DuPont de Nemours (France) S.A. ................... France DuPont de Nemours International S.A. .............. Switzerland DuPont de Nemours Italiana S.p.A. ................. Italy DuPont de Nemours (Luxembourg) S.A. ............... Luxembourg DuPont de Nemours (Nederland) B.V. ................ The Netherlands DuPont do Brasil S.A. ............................. Brazil DuPont Dow Elastomers, L.L.C. (50% owned) ......... Delaware DuPont Electronic Materials, Inc. ................. Delaware DuPont Energy Company ............................. Delaware
Name Organized Under Laws of - --------------------------------------------------- ----------------------- DuPont Engineering Products, S.A. ................. Luxembourg DuPont Feedstocks Company ......................... Delaware DuPont Foreign Sales Corporation .................. Virgin Islands DuPont Iberica, S.A. .............................. Spain DuPont Kabushiki Kaisha ........................... Delaware DuPont Korea, Ltd. ................................ Republic of Korea DuPont Merck Pharmaceutical Company (Delaware Partnership) (50% owned) ........................ Delaware DuPont Merck Pharma (Puerto Rico Partnership) (50% owned) ..................................... Puerto Rico DuPont (New Zealand) Ltd. ......................... New Zealand DuPont Photomasks, Inc. (69.5% owned) ............. Texas DuPont, S.A. de C.V. .............................. Mexico DuPont (Singapore) Pte. Ltd. ...................... Singapore DuPont (Singapore) Fibres Pte. Ltd. (90% owned) ... Singapore DuPont Taiwan Ltd. ................................ Taiwan DuPont (Thailand) Co. Ltd. ........................ Thailand DuPont Treasury Ltd. .............................. England DuPont (U.K.) Limited ............................. England Kayo Oil Company .................................. Delaware Norske Conoco A/S ................................. Norway Societe Europeene Des Carburants .................. Belgium World Wide Transport, Inc. ........................ Liberia
Subsidiaries not listed would not, if considered in the aggregate as a single subsidiary, constitute a significant subsidiary. 2 EX-23 12 CONSENT OF ACCOUNTANTS Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (No. 33-53327, No. 33-61339, and No. 33-60069) and Form S-8 (No. 2-74004, No. 33-43918, No. 33- 51817, No. 33-51821, No. 33-60037, and No. 33-61703) of E. I. du Pont de Nemours and Company of our report dated February 14, 1997, appearing on page 28 of the Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. /s/ PRICE WATERHOUSE LLP PRICE WATERHOUSE LLP Thirty South Seventeenth Street Philadelphia, Pennsylvania 19103 March 24, 1997 EX-27 13 FINANCIAL DATA SCHEDULE
5 1,000,000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 1,066 253 5,193 66 3,706 11,103 50,549 29,336 37,987 10,987 5,087 0 237 347 10,125 37,987 43,810 45,150 25,144 38,456 0 0 713 5,981 2,345 3,636 0 0 0 3,636 0 0 Includes Other Accounts In Addition to Notes and Accounts Receivable - Trade. Includes Other Operating Charges. Cost of Goods Sold and Other Operating Charges; Selling, General and Administrative Expenses; Depreciation, Depletion and Amortization; Exploration Expenses, Including Dry Hole Costs and Impairment of Unproved Properties; Research and Development Expense; Taxes Other Than On Income.
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