-----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, HsTuWurZAaauD6hdyvxuL4WhOcWyaxdZGrfdz08cZfXW2Pq1K7kXr/wo5nxmLmbl lzRtUGXjB5DZkdtAaA+RTg== 0000950109-96-001642.txt : 19960321 0000950109-96-001642.hdr.sgml : 19960321 ACCESSION NUMBER: 0000950109-96-001642 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960320 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: 96536435 BUSINESS ADDRESS: STREET 1: 1007 MARKET ST CITY: WILMINGTON STATE: DE ZIP: 19898 BUSINESS PHONE: 3027741000 10-K 1 FORM 10-K 1995 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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, 1995 COMMISSION FILE NUMBER 1-815 E. I. DU PONT DE NEMOURS AND COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 51-0014090 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1007 MARKET STREET WILMINGTON, DELAWARE 19898 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) 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. [X] 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 5, 1996, was approximately $44.6 billion. As of such date, 559,010,099 shares (excludes 20,032,625 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 1995 Annual Report to Stockholders........ I, II, and IV The company's Proxy Statement, dated March 18, 1996, in connection with the Annual Meeting of Stockholders to be held on April 24, 1996.............................. 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 ........................................... 11 Item 4. Submission of Matters to a Vote of Security Holders ......... 14 Executive Officers of the Registrant......................... 14 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters......................................... 15 Item 6. Selected Financial Data ..................................... 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations .................................. 15 Item 8. Financial Statements and Supplementary Data ................. 16 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ................................... 16 PART III Item 10. Directors and Executive Officers of the Registrant .......... 16 Item 11. Executive Compensation ...................................... 16 Item 12. Security Ownership of Certain Beneficial Owners and Management ................................................. 16 Item 13. Certain Relationships and Related Transactions .............. 16 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ........................................................ 17 Signatures............................................................ 19
NOTE ON INCORPORATION BY REFERENCE Throughout this report, various information and data are incorporated by reference to portions of the company's 1995 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. The company is the largest United States chemical producer and is one of the leading chemical producers worldwide. The company conducts fully integrated petroleum operations primarily through its wholly owned subsidiary Conoco Inc. and, in 1994, ranked eighth in the worldwide production of petroleum liquids by U.S.-based companies, tenth in the production of natural gas, and sixth 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 twenty strategic business units. Within the strategic business units approximately 85 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. The company plans to sell its medical products businesses and enter into a 50-50 joint venture for its elastomer businesses with The Dow Chemical Company. Proceeds from these transactions will be used to reduce debt incurred to fund the April 6, 1995, redemption of 156 million DuPont common shares beneficially owned by The Seagram Company Ltd. The company and its subsidiaries have operations in about 70 nations worldwide and, as a result, about 49% of consolidated sales are derived from sales outside the United States, based on the location of the corporate unit making the sale. Total worldwide employment at year-end 1995 was about 105,000 people. The company is organized for financial reporting purposes into five principal industry segments--Chemicals, Fibers, 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 1995: Letter to Stockholders.............................................. 1-3* Industry Segment Reviews: Business Discussions, Principal Products and Principal Markets: Fibers............................................................ 6-7** Diversified Businesses............................................ 10-11** Petroleum......................................................... 14-15** Chemicals......................................................... 18-19** Polymers.......................................................... 22-23** Sales, Transfers, Operating Profit, After-Tax Operating Income, and Identifiable Assets for 1995, 1994, and 1993....................... 55-57 Geographic Information: Sales, Transfers, After-Tax Operating Income, Identifiable Assets, and U.S. Export Sales for 1995, 1994, and 1993..................... 54 Revenues by Product Class (See footnote 1 on page 56 of Exhibit 13)... 55
- -------- * Includes text of letter except for photograph and related caption on page 2 and for chart on page 3. ** Exclude photographs and related captions. 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. A significant portion of the company's caustic/chlorine needs is supplied by a joint venture with Olin Corporation. The major purchased commodities, raw materials, and supplies for the following industry segments in 1995 are listed below:
DIVERSIFIED CHEMICALS FIBERS BUSINESSES POLYMERS --------- ------ ----------- -------- acetylene adipic acid aluminum acetic acid benzene ammonia ethylene glycol butadiene carbon- butadiene gold caustic soda tetrachloride cyclohexane metribuzin chlorine caustic soda ethylene glycol palladium/platinum ethane chlorine isophthalic acid paraxylene fiberglass chloroform nitrogen silver nitrogen cyclohexane packaging materials packaging materials fluorspar paraxylene polyethylene hydrofluoric acid polyethylene methanol oxygen/nitrogen packaging materials perchloroethylene propylene sulfur titanium ores
In the Petroleum segment, the major commodities and raw materials purchased are the same as those produced. Approximately 61% of the crude oil processed in the company's U.S. refineries in 1995 came from U.S. sources. In 1995, the company's refineries outside the United States processed principally North Sea and Middle East crude oils. In addition, during 1995, the company consumed substantial amounts of electricity and natural gas. 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 1995, the company was granted 458 U.S. and 1,997 non-U.S. patents. The company also has about 1,000 registered trademarks for its products. 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 Diversified Businesses 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, People's Republic of China and other Asian nations. Competitors offer a comparable range of products from agricultural, commodity and specialty chemicals to plastics, fibers and medical 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, 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 realiability of supply as well. Further information relating to competition is included in two areas of Exhibit 13 (1) the "Letter to Stockholders" on pages 1-3 and (2) Industry Segment Reviews on pages 6-23. 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 the Wilmington, Delaware, area which support strategic business units in the Chemicals, Fibers, 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 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. 5 Further information regarding research and development is in Exhibit 13 on pages 2 and 3 of the "Letter to Stockholders." Annual research and development expense and such expense shown "As Percent of Sales" for the five years 1991 through 1995 are included under the heading "General" of the Five-Year Financial Review on page 65 of Exhibit 13. ENVIRONMENTAL MATTERS Information relating to environmental matters is included in three areas of Exhibit 13: (1) the "Letter to Stockholders" on pages 1 and 3; (2) "Management's Discussion and Analysis" on pages 29-31; and (3) Notes 1 and 26 to the Financial Statements on pages 39 and 53. 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 6-23. Information regarding research and development facilities is incorporated by reference to Item 1, Business-- Research and Development on page 5 of this report. Additional information with respect to the company's property, plant and equipment, and leases is contained in Notes 12 and 26 to the company's consolidated financial statements on pages 44 and 53 of Exhibit 13. CHEMICALS, FIBERS, POLYMERS, AND DIVERSIFIED BUSINESSES Approximately 75% of the property, plant and equipment related to operations in the Chemicals, Fibers, Polymers, and Diversified Businesses is located in the United States and Puerto Rico. This investment is located at some 80 sites, principally in Texas, Delaware, North Carolina, Virginia, 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 Front Royal Brevard Corpus Christi Glasgow James River Fayetteville LaPorte Newark Martinsville Kinston Orange Seaford Richmond Raleigh Victoria Waynesboro Wilmington TENNESSEE WEST VIRGINIA SOUTH CAROLINA NEW JERSEY --------- ------------- -------------- ---------- Chattanooga Belle Camden Deepwater Memphis Martinsburg Charleston Parlin New Johnsonville Parkersburg Florence Old Hickory
6 Property, plant and equipment outside the United States and Puerto Rico is located at about 70 sites, principally in Canada, the United Kingdom, Germany, The Netherlands, Luxembourg, Singapore, Spain, Mexico, France, Taiwan, Brazil, Japan, Republic of Korea, Belgium and Argentina. 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 86% in 1995, 87% in 1994, and 85% in 1993. 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 14-15 and 58-63 of Exhibit 13. Estimated proved reserves of oil and gas are found on pages 60 and 61 of Exhibit 13. Information regarding the company's refining, marketing, supply, and transportation properties is also provided on pages 14-15 of Exhibit 13. 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.
1995 1994 1993 --------- --------- --------- (THOUSANDS OF BARRELS DAILY) Petroleum Liquids Production Consolidated Companies Crude Oil, Condensate, and Natural Gas Liquids from Owned Reserves: United States.................................. 83 94 108 Europe......................................... 143 160 152 Other Regions.................................. 98 109 107 --------- --------- --------- Subtotal..................................... 324 363 367 Natural Gas Liquids from Gas Plant Ownership: United States.................................. 65 57 55 --------- --------- --------- Total Production--Consolidated Operations.... 389 420 422 Share of Equity Affiliates Crude Oil, Condensate, and Natural Gas Liquids from Owned Reserves............................. 12 4 -- Natural Gas Liquids from Gas Plant Ownership..... 13 12 12 --------- --------- --------- Total Production--Equity Affiliates.......... 25 16 12 --------- --------- --------- Total Petroleum Liquids Production........... 414 436 434 ========= ========= ========= (MILLION CUBIC FEET DAILY) Natural Gas Deliveries Consolidated Companies Natural Gas Deliveries from Owned Reserves: United States.................................. 832 871 834 Europe......................................... 341 398 409 Other Regions.................................. 31 44 50 --------- --------- --------- Total Deliveries--Consolidated Operations.... 1,204 1,313 1,293 Share of Equity Affiliates Natural Gas Deliveries from Owed Reserves: United States.................................. 38 34 18 --------- --------- --------- Total Natural Gas Deliveries................. 1,242 1,347 1,311 ========= ========= =========
7 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 58 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 14-15 of Exhibit 13.
UNITED OTHER STATES EUROPE REGIONS ------ ------ ------- (U.S. DOLLARS) 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 thousand cubic feet (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 For the year ended December 31, 1993 Average production costs per barrel equivalent of petroleum produced(a)................................. 4.97 4.34 1.63 Average sales prices of produced petroleum(b) Per barrel of crude oil and condensate sold.......... 14.66 17.35 15.32 Per MCF of natural gas sold.......................... 1.94 2.77 1.32
- -------- (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, 1995 Number of wells drilling* Gross....................................... 30 12 15 3 Net......................................... 12 7 3 2 Number of productive wells** Oil wells--gross............................ 11,412 10,785 242 385 --net.................................... 3,689 3,531 21 137 Gas wells--gross............................ 7,713 7,536 118 59 --net................................... 3,231 3,137 38 56
- -------- * Includes wells being completed. ** Approximately 126 gross (45 net) oil wells and 706 gross (242 net) gas wells, all in the United States, have multiple completions. 8 DEVELOPED AND UNDEVELOPED PETROLEUM ACREAGE
TOTAL UNITED OTHER WORLDWIDE STATES EUROPE REGIONS --------- ------ ------ ------- (THOUSANDS OF ACRES) At December 31, 1995 Developed acreage Gross....................................... 8,325 3,327 1,221 3,777 Net......................................... 4,138 2,271 393 1,474 Undeveloped acreage Gross....................................... 82,430 1,194 5,475 75,761 Net......................................... 31,717 563 2,312 28,842
NET EXPLORATORY AND DEVELOPMENT WELLS DRILLED
TOTAL UNITED OTHER WORLDWIDE STATES EUROPE REGIONS --------- ------ ------ ------- (NUMBER OF NET WELLS COMPLETED) 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 For the year ended December 31, 1993 Exploratory--productive...................... 15.6 10.7 3.4 1.5 --dry................................... 24.5 16.3 2.5 5.7 Development--productive...................... 175.2 158.3 5.0 11.9 --dry................................... 24.5 24.0 0.0 0.5
ESTIMATES OF TOTAL PROVED RESERVES FILED WITH OTHER FEDERAL AGENCIES COVERING THE YEAR 1995 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 24 natural gas processing plants located in Colorado, Louisiana, New Mexico, Oklahoma and Texas. Fifteen of the plants are operated by the company. The company's share of total natural gas liquids production (NGL) from the 24 plants averaged 65,319 barrels per day (BPD) in 1995 and 57,344 BPD in 1994. Additional NGL production volumes of 13,897 BPD in 1995 and 14,537 BPD in 1994 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 9 Oklahoma and Texas, and the company's pro rata share of NGL production was 8,102 BPD in 1995 and 7,908 BPD in 1994. 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, three underground NGL storage facilities, 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 West 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 4,185 BPD in 1995 and 3,915 BPD in 1994. 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 has a 25% interest in a refinery at Karlsruhe in Germany. Conoco also owns a 40% interest in a company that is constructing a 100,000 BPD refinery near the city of Melaka, Malaysia, with completion scheduled for 1997. Conoco and two other companies entered into a joint venture with the Czech Republic to own and operate two refineries in the Czech Republic that are currently government owned. Conoco has a 16 1/3% interest in the joint venture as do two other western companies. The Czech government owns the remaining 51% via the National Property Fund. The two refineries have a combined capacity of 170,000 BPD. Capacities at year-end 1995 as well as inputs processed during 1995 are summarized in the following table:
TOTAL UNITED UNITED WORLDWIDE STATES KINGDOM GERMANY* --------- ------ ------- -------- (THOUSANDS OF BARRELS DAILY) At December 31, 1995 Refinery crude oil and condensate distilla- tion capacity (excluding additional feedstocks input to other refinery units). 621 448 130 43 For the year ended December 31, 1995 Inputs processed Crude oil and condensate................. 603 424 133 46 Additional feedstocks input to other re- finery units............................ 118 32 74 12
- -------- * Represents 25% interest in the Karlsruhe refinery. 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 39 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, Denmark, Finland, Hungary, Ireland, Norway, Poland, Spain, Sweden and Thailand. A joint venture in Turkey markets under the "TABAS" brand. 10 SUPPLY AND TRANSPORTATION The company has an extensive pipeline system for crude oil and refined products. Information concerning daily pipeline shipments is presented below:
1995 1994 1993 ---------- ---------- ----------- (THOUSANDS OF BARRELS) Average Daily Pipeline Shipments Pipeline shipments of consolidated companies 873 849 761 Equity in shipments of nonconsolidated affil- iates....................................... 358 365 366 Conoco Pipe Line Company (CPL), a wholly owned subsidiary and operator of the company's U.S. petroleum pipeline system, transported approximately 843 thousand barrels per day of crude oil and refined products in 1995. In addition to pipeline facilities, CPL operates, under a management contract, four marine terminals, one coke-exporting facility, and 52 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: 1995 1994 1993 ---------- ---------- ----------- (THOUSANDS OF DEADWEIGHT TONS) Controlled Seagoing Vessel Capacity Owned or Leased.............................. 881 881 1,139 ========= ========= =========== (NUMBER OF VESSELS) Number of Vessels 80,000 DWT and Above Single Hull.................................. 3 3 4 Double Hull.................................. 4 4 4 --------- --------- ----------- Total Vessels.............................. 7 7 8 ========= ========= ===========
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 would be found to be a contributor to the claimed damage, DuPont began paying claims. In 1992, after 18 months of extensive research, DuPont scientists concluded that "Benlate" 50 DF was not responsible for plant damage reports received since March 1991. Concurrent with these research findings, DuPont stopped paying claims relating to those reports. To date, DuPont has been served with more than 700 lawsuits by growers who allege plant damage from using "Benlate" 50 DF fungicide. Fewer than 100 of the lawsuits brought against the company since 1991 remain, the rest having been disposed of by trial, dismissal or settlement. Two appeals from adverse jury verdicts are pending. One is from a 1994 trial in South Carolina where the jury found against DuPont and awarded the plaintiff damages of $17.2 million (later reduced to $7.5 million by the trial judge). The other is from a jury award to two plaintiffs of $23.9 million in a Kona, Hawaii, trial in 1995. In August 1995, the federal district court in Georgia, which in the summer of 1993 had presided over the first "Benlate" case to go to trial, issued an order finding that DuPont had engaged in discovery abuse during the trial and conditionally fined DuPont $115 million. DuPont is appealing that order to the 11th Circuit Court of Appeals. Following the district court's order, a shareholder derivative action was filed in the same court alleging that DuPont's Board of Directors breached various duties 11 in its role in the "Benlate" litigation. That suit has been stayed pending the resolution of DuPont's appeal of the Georgia court's order. In September 1995, a shareholder filed a putative class action in Federal District Court for the Southern District of Florida against the company and the Chairman. The plaintiff alleges violations of the federal securities laws, contending that the company had made certain misrepresentations in connection with its defense of the crop claims lawsuits. Also in September 1995, a Florida administrative hearing officer issued an order recommending dismissal of the Florida Department of Agriculture's administrative complaint against DuPont alleging "Benlate" was contaminated and caused injury to plants. DuPont continues to believe that "Benlate" 50 DF fungicide did not cause the alleged damages and intends to prove this in ongoing matters. Since 1989, DuPont has been served with approximately 100 homeowner lawsuits in numerous state and federal courts alleging damages as a result of leaks in certain polybutylene plumbing systems. Class actions alleging the same damages have also been filed in a number of jurisdictions. In most cases, DuPont is a codefendant with Shell, Hoechst-Celanese and parts manufacturers. The polybutylene plumbing systems consist of flexible pipe extruded from polybutylene connected by fittings made from acetal. Shell Chemical is the sole producer of polybutylene; the acetals are provided by Hoechst-Celanese and DuPont. Two nationwide class actions involving the plumbing systems, one in Alabama and one in Tennessee, were settled during the fourth quarter 1995. DuPont, Shell and Hoechst-Celanese are coordinating the terms of those settlements and setting up various repair facilities to serve participating class members. DuPont will contribute 10% of the cost of such repairs up to a total DuPont contribution of $120 million. 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 October 24, 1988, the Louisiana Department of Environmental Quality (LDEQ) issued a Compliance Order and Notice of Proposed Penalty to Conoco Inc. for alleged violations of the Louisiana Hazardous Waste Regulations. Following an inspection, LDEQ proposed a penalty of $165,000 for alleged violations related to the handling of by-product caustic and other refinery waste management practices. Negotiations with LDEQ have resulted in a preliminary agreement to settle the matter for payment of a $45,000 civil penalty. On June 28, 1991, DuPont entered into a voluntary agreement with the Environmental Protection Agency (EPA) to conduct an audit of the company's U.S. sites under the Toxic Substance Control Act (TSCA). Agreement participation is not an admission of TSCA noncompliance. Maximum stipulated penalties that DuPont could pay under the agreement are capped at $1 million. The first phase of the audit was completed, but no findings have been issued. Subject to the EPA's issuance of new reporting criteria (delayed since 1991), a second phase of the audit will begin. 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. 12 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 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 January 19, 1995, EPA Region IV issued a "Notice of Violation and Opportunity to Show Cause" against the Wurtland, Kentucky, sulphuric acid plant for 192 alleged violations of release reporting obligations under the Emergency Planning and Community Right to Know Act. The EPA proposed a civil penalty of $918,000 to resolve the matter, but thus far the parties have been unable to informally resolve the dispute. The EPA is expected to file a complaint in the matter. On January 31, 1995, DuPont received a Notice of Proposed Assessment of Civil Penalty from the Region III office of the EPA alleging various violations of the Clean Water Act at DuPont's Edge Moor Plant in Edge Moor, Delaware. The Proposed Assessment seeks a Class II administrative penalty of $121,000. The matter is under negotiation with the EPA. 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 seeks civil penalties of $125,000. DuPont has appealed the complaint and is vigorously defending. On May 30, 1995, DuPont received a complaint from the EPA alleging that in 24 instances in 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. 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. DuPont believes the Agency's complaint is without merit and intends to contest the matter. 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 a complaint against DuPont as a result of an oleum release at DuPont's Wurtland, Kentucky, facility on August 20, 1995. The complaint alleges that 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 seeks penalties of at least $400,000 as well as reimbursement for response costs. DuPont is defending the matter and preparing for nonbinding mediation with the state in April. 13 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 5, 1996, of the company's executive officers.
EXECUTIVE OFFICER AGE SINCE --- --------- President and Chief Executive Officer John A. Krol(1)................................................ 59 1987 Other Executive Officers: Jerald A. Blumberg, Executive Vice President................... 56 1990 Archie W. Dunham, Executive Vice President(1).................. 57 1985 Gary W. Edwards, Senior Vice President......................... 54 1991 Michael B. Emery, Senior Vice President........................ 57 1990 Charles L. Henry, Executive Vice President and Chief Financial Officer....................................................... 54 1986 Charles O. Holliday, Jr., Executive Vice President............. 47 1992 Robert v.d. Luft, Senior Vice President(2)..................... 60 1988 Robert E. McKee, III, Senior Vice President.................... 50 1992 Joseph A. Miller, Jr., Senior Vice President................... 54 1994 Stacey J. Mobley, Senior Vice President........................ 50 1992 Howard J. Rudge, Senior Vice President and General Counsel..... 60 1994
- -------- (1) Member of the Board of Directors. (2) Mr. Luft retires March 31, 1996. 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 or its subsidiaries during the past five years. 14 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 165,515 at December 31, 1995 and 164,043 at March 5, 1996.
PAGE(S) ------- Quarterly Financial Data: Dividends Per Share of Common Stock.................................. 64 Market Price of Common Stock (High/Low).............................. 64 ITEM 6. SELECTED FINANCIAL DATA Five-Year Financial Review: Summary of Operations................................................ 65 Financial Position at Year End....................................... 65 General.............................................................. 65 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Letter to Stockholders................................................. 1-3* Industry Segment Reviews: Fibers............................................................... 6-7** Diversified Businesses............................................... 10-11** Petroleum............................................................ 14-15** Chemicals............................................................ 18-19** Polymers............................................................. 22-23** Management's Discussion and Analysis: Stock Redemption from Seagram........................................ 25 Joint Venture Formation and Divestitures............................. 25 Analysis of Operations............................................... 25-26 Financial Condition and Cash Flows................................... 26-28 Financial Instruments................................................ 28-29 Environmental Matters................................................ 29-31
The company does not plan to adopt the measurement principles of Financial Accounting Standards Board Statement No. 123, "Accounting for Stock-Based Compensation." The disclosures required by this standard will be included in a note to the 1996 financial statements. - -------- * Includes text of letter except for photograph and related caption on page 2 and for chart on page 3. ** Excludes photographs and related captions. 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE(S) ------- Financial Statements: Report of Independent Accountants.................................... 33 Consolidated Income Statement for 1995, 1994 and 1993................ 34 Consolidated Balance Sheet as of December 31, 1995 and December 31, 1994................................................................ 35 Consolidated Statement of Stockholders' Equity for 1995, 1994 and 1993................................................................ 36 Consolidated Statement of Cash Flows for 1995, 1994 and 1993......... 37 Notes to Financial Statements........................................ 38-57 Supplemental Financial Information: Supplemental Petroleum Data: Oil and Gas Producing Activities................................... 58-63 Quarterly Financial Data and related notes for the following items for the two years 1995 and 1994: Sales................................................................ 64 Cost of Goods Sold and Other Expenses................................ 64 Net Income........................................................... 64 Earnings Per Share of Common Stock................................... 64 Dividends Per Share of Common Stock.................................. 64 Market Price of Common Stock......................................... 64
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OF 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 1996 Annual Meeting Proxy Statement dated March 18, 1996, filed in connection with the Annual Meeting of Stockholders to be held April 24, 1996. However, information regarding executive officers is contained in Part I of this report (page 14) 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............................. 8 ITEM 11. EXECUTIVE COMPENSATION Compensation of Directors............................................... 2-3 Compensation and Stock Option Information............................... 12-14 Retirement Benefits..................................................... 15 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Beneficial Ownership of Securities...................................... 8 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Election of Directors................................................... 4-7
16 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, 1995. 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 1, 1996. 3.3 Company's Bylaws, as last revised December 1, 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 Agreements and related documents dated as of April 6, 1995, between and/or among the company and The Seagram Company Ltd., JES Developments, Inc.; the company and Warco Transfer Corporation; the company and certain individuals (incorporated by reference to Exhibit 99 of Form 8-K/A filed April 13, 1995, as Amendment No. 1 to Form 8-K filed by the company on April 7, 1995). 10.2* Company's Corporate Sharing Plan, as last amended August 28, 1991 (incorporated by reference to Exhibit 10.2 of the company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.3* Company's Deferred Compensation Plan for Directors, as last amended November 21, 1986 (incorporated by reference to Exhibit 10.3 of the company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.4* Company's Supplemental Retirement Income Plan, as last amended effective October 1, 1991 (incorporated by reference to Exhibit 10.4 of the company's Annual Report on Form 10-K for the year ended December 31, 1991). 10.5* Company's Pension Restoration Plan, as last amended effective October 1, 1991 (incorporated by reference to Exhibit 10.5 of the company's Annual Report on Form 10-K for the year ended December 31, 1991).
- -------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K. 17
EXHIBIT NUMBER DESCRIPTION ------- ----------- 10.6.1* Retirement Restoration Plan I of Conoco Inc., adopted by the Board of Directors on December 18, 1995. 10.6.2* Retirement Restoration Plan II of Conoco Inc., adopted by the Board of Directors on December 18, 1995. 10.7* 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). 10.8* 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). 10.9* 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). 10.10* 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). 10.11* Letter Agreement and Consulting Agreement, dated as of October 9, 1995, between the company and C. S. Nicandros. 11 Statement re calculation of earnings per share. 12 Statement re computation of the ratio of earnings to fixed charges. 13 The 1995 "Letter to Stockholders," Business Review Section, and Financial Information Section of the Annual Report to Shareholders for the year ended December 31, 1995, 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 January 5, 1996, 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- 48128, No. 33-53327 and No. 33-61339). Under Item 5, "Other Events," the Registrant announced two nonrecurring charges against fourth quarter 1995 earnings totaling $.15 per share. The first charge related to a recent settlement of a nationwide class-action plumbing lawsuit ($.07 a share) and the second to write-downs of certain petroleum assets ($.08 a share). (2) On January 24, 1996, 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- 48128, No. 33-53327 and No. 33-61339). Under Item 7, "Financial Statements and Exhibits," the Registrant's Earnings Press Release, dated January 24, 1996, was filed. 18 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 20TH DAY OF MARCH 1996. E. I. DU PONT DE NEMOURS AND COMPANY (Registrant) C. L. Henry By_____________________________________ C. L. HENRY, EXECUTIVE 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 ON THE 20TH DAY OF MARCH 1996, 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 E. B. Du Pont W. K. Reilly - ------------------------- ------------------------- ------------------------- P. N. BARNEVIK E. B. DU PONT W. K. REILLY A. F. Brimmer C. M. Harper H. R. Sharp, III - ------------------------- ------------------------- ------------------------- A. F. BRIMMER C. M. HARPER H. R. SHARP, III L. C. Duemling L. D. Juliber C. M. Vest - ------------------------- ------------------------- ------------------------- L. C. DUEMLING L. D. JULIBER C. M. VEST 19 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 1, 1996. 3.3 Company's Bylaws, as last revised December 1, 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 Agreements and related documents dated as of April 6, 1995, between and/or among the company and The Seagram Company Ltd., JES Developments, Inc.; the company and Warco Transfer Corporation; the company and certain individuals (incorporated by reference to Exhibit 99 of Form 8-K/A filed April 13, 1995, as Amendment No. 1 to Form 8-K filed by the company on April 7, 1995). 10.2* Company's Corporate Sharing Plan, as last amended August 28, 1991 (incorporated by reference to Exhibit 10.2 of the company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.3* Company's Deferred Compensation Plan for Directors, as last amended November 21, 1986 (incorporated by reference to Exhibit 10.3 of the company's Annual Report on Form 10-K for the year ended December 31, 1992). 10.4* Company's Supplemental Retirement Income Plan, as last amended effective October 1, 1991 (incorporated by reference to Exhibit 10.4 of the company's Annual Report on Form 10-K for the year ended December 31, 1991). 10.5* Company's Pension Restoration Plan, as last amended effective October 1, 1991 (incorporated by reference to Exhibit 10.5 of the company's Annual Report on Form 10-K for the year ended December 31, 1991). 10.6.1* Retirement Restoration Plan I of Conoco Inc., adopted by the Board of Directors on December 18, 1995. 10.6.2* Retirement Restoration Plan II of Conoco Inc., adopted by the Board of Directors on December 18, 1995.
___________________ *Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.
Exhibit Number Description - ------- ----------- 10.7* 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). 10.8* 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). 10.9* 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). 10.10* 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). 10.11* Letter Agreement and Consulting Agreement, dated as of October 9, 1995, between the company and C. S. Nicandros. 11 Statement re calculation of earnings per share. 12 Statement re computation of the ratio of earnings to fixed charges. 13 The 1995 "Letter to Stockholders," Business Review Section, and Financial Information Section of the Annual Report to Shareholders for the year ended December 31, 1995, 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 1, 1996 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 and Benefits Committee 5 ARTICLE IV. OFFICE OF THE CHIEF EXECUTIVE 5
EXHIBIT 3.2
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. Executive 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 3.2 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 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, including an Executive Vice President - Finance and a Secretary. 5 EXHIBIT 3.2 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. Executive Vice President - Finance. The Executive 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 Executive 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 Executive 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 3.2 SECTION 9. Controller. The Board may appoint a Controller. Under the general direction of the Executive 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 Executive Vice President - Finance, any Vice President - DuPont Finance, the Treasurer, or by any Assistant Secretary or Assistant Treasurer. 9 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 BY-LAWS EXHIBIT 3.3 BYLAWS OF E. I. DU PONT DE NEMOURS AND COMPANY ------------------------------------ Incorporated Under The Laws of Delaware AS REVISED December 1, 1995 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. Executive 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, the Vice Chairman, 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, a Vice Chairman, one or more Executive Vice Presidents, including an Executive 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. Executive Vice President - Finance. The Executive 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 Executive 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 Executive 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 Executive 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 Executive 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 _______________ 1995. ______________________________ Secretary 10 EX-10.6.1 4 RETIREMENT RESTORATION PLAN EXHIBIT 10.6.1 EXHIBIT A RETIREMENT RESTORATION PLAN I OF CONOCO INC. -------------------------------------------- Preamble - -------- The Retirement Restoration Plan I of Conoco Inc. ("Plan") is a successor plan to the Retirement Restoration Plan of Conoco Inc. It provides benefits which were described in Section 3.A. of that plan. SECTION 1. PURPOSE The purpose of this Plan is to provide each member of the Title Two of the Pension and Retirement Plan ("Retirement Plan") all benefits otherwise payable in accordance with the terms thereof, but for the limitation on maximum benefits set forth in Section 4(8) of the Retirement Plan and but for the limit on compensation set forth in Section 1(9) of the Retirement Plan. The limitation on maximum benefits is designed to comply with Internal Revenue Code Section 415 and the limit on compensation is designed to comply with Internal Revenue Code Section 401(a)(17). SECTION 2. ADMINISTRATION A. The Plan shall be administered by the Employee Benefit Plans Board ("Board") as defined in Section 1(6) of the Retirement Plan. B. The Board shall have the power to interpret the Plan, establish rules for the administration of the Plan, and make all other determinations necessary or desirable for the Plan's administration. C. The decision of the Board on any question concerning or involving the interpretation or administration of the Plan shall be final and conclusive. SECTION 3. ELIGIBILITY FOR BENEFITS AND AMOUNT OF BENEFITS All members of the Retirement Plan who would otherwise be entitled to benefits from the Retirement Plan in accordance with the terms thereof, but for the limitation on maximum benefits set forth in Section 4(8) of the Retirement Plan and but for the limitation on compensation set forth in Section 1(9) of the Retirement Plan, shall be paid such benefits under this Plan. The benefits due under this Plan are the difference between the benefits which would have been payable under the Retirement Plan but for the limitation on benefits and the limitation on compensation identified above and the benefits actually payable under the Retirement Plan. 1 EXHIBIT 10.6.1 EXHIBIT A SECTION 4. PAYMENT OF BENEFITS A. This Plan shall be an unfunded plan, and payments of benefits pursuant to this Plan shall be made from the general assets of Conoco Inc. B. Benefits paid under this Plan to a participant or designated beneficiary shall be paid in the form of a single life annuity, or in any of the forms detailed in Section 4(3)(a) or 4(3)(b) of the Retirement Plan in an amount actuarially equivalent to such single life annuity. The receipt of benefits may be deferred in accordance with procedures established by the Board. Elections regarding the form and payment of benefits shall be made independent of any election under the Retirement Plan and in such manner and at such time as the Board prescribes. C. Benefits payable under this Plan shall begin to be paid within a reasonable time after the amount of a participant's benefits pursuant to this Plan has been established. Notwithstanding the preceding sentence, participants who retire pursuant to Section 4(2)(d) of the Retirement Plan cannot begin to receive the benefits payable under this Plan until the end of the first full calendar month following age 50. SECTION 5. BENEFICIARIES A. Beneficiaries under this Plan shall be named in accordance with procedures established by the Board. B. Notwithstanding anything to the contrary contained herein or in the Retirement Plan, a participant or beneficiary who is awaiting payment pursuant to a lump sum election may, until death, change the beneficiary designated to receive benefits under this Plan. C. In no event shall any change in beneficiary pursuant to Section 5(B) affect the amount of benefits payable under this Plan. SECTION 6. AMENDMENT, SUSPENSION, TERMINATION The Board of Directors of Conoco Inc. may, at any time, amend, suspend, or terminate this Plan. 2 EXHIBIT 10.6.1 EXHIBIT B RETIREMENT RESTORATION PLAN II OF CONOCO INC. --------------------------------------------- Preamble - -------- The Retirement Restoration Plan II of Conoco Inc. ("Plan") is a successor plan to the former Retirement Restoration Plan of Conoco Inc. It provides benefits which were described in Sections 3.B. and 3.C. of that plan. SECTION 1. PURPOSE A. Retirement Restoration Compensation feature: The purpose of this feature of the Plan is to provide each member of Title Two of the Pension and Retirement Plan ("Retirement Plan") who is a participant in the Incentive Compensation Plan of Conoco Inc. under which awards were granted on and after January 1, 1981, and the Incentive Compensation Plan if E. I. du Pont de Nemours and Company and such other Variable Compensation Plans ("VC Plan") as may from time to time be in effect in substitution therefor and in which members of the Retirement Plan shall participate, all benefits to which the participant would be entitled if compensation, as defined in the Retirement Plan, included the annual awards (or in the case of Members who did not have an Hour of Service under the Retirement Plan on or after August 1, 1994, one-half the annual awards) granted to the member under the VC Plan then in effect. B. Retirement Restoration Enhancement feature: The purpose of this feature of the Plan is to provide each member of the Retirement Plan who was not eligible for benefits under the Temporary Retirement/Termination Incentive Program due to salary grade and who is approved for retirement enhancement by the President of Conoco Inc. or his delegee, retirement benefits provided for in the Retirement Plan under the terms of the Temporary Retirement/Termination Incentive Program, but without the limitations on salary grade and election date. 1 EX-10.6.2 5 RETIREMENT RESTORATION PLAN EXHIBIT 10.6.2 RETIREMENT RESTORATION PLAN II OF CONOCO INC. --------------------------------------------- Preamble - -------- The Retirement Restoration Plan II of Conoco Inc. ("Plan") is a successor plan to the former Retirement Restoration Plan of Conoco Inc. It provides benefits which were described in Sections 3.B. and 3.C. of that plan. SECTION 1. PURPOSE A. Retirement Restoration Compensation feature: The purpose of this feature of the Plan is to provide each member of Title Two of the Pension and Retirement Plan ("Retirement Plan") who is a participant in the Incentive Compensation Plan of Conoco Inc. under which awards were granted on and after January 1, 1981, and the Incentive Compensation Plan of E. I. du Pont de Nemours and Company and such other Variable Compensation Plans ("VC Plan") as may from time to time be in effect in substitution therefor and in which members of the Retirement Plan shall participate, all benefits to which the participant would be entitled if compensation, as defined in the Retirement Plan, included the annual awards (or in the case of Members who did not have an Hour of Service under the Retirement Plan on or after August 1, 1994, one-half the annual awards) granted to the member under the VC Plan then in effect. B. Retirement Restoration Enhancement feature: The purpose of this feature of the Plan is to provide each member of the Retirement Plan who was not eligible for benefits under the Temporary Retirement/Termination Incentive Program due to salary grade and who is approved for retirement enhancement by the President of Conoco Inc. or his delegee, retirement benefits provided for in the Retirement Plan under the terms of the Temporary Retirement/Termination Incentive Program, but without the limitations on salary grade and election date. SECTION 2. ADMINISTRATION A. The Plan shall be administered by the Employee Benefit Plans Board ("Board") as defined in Section 1(6) of the Retirement Plan. B. The Board shall have the power to interpret the Plan, establish rules for the administration of the Plan, and make all other determinations necessary or desirable for the Plan's administration. C. The decision of the Board on any question concerning or involving the interpretation or administration of the Plan shall be final and conclusive. 1 EXHIBIT 10.6.2 SECTION 3. ELIGIBILITY FOR BENEFITS AND AMOUNT OF BENEFITS A. Retirement Restoration Compensation feature: All members of the Retirement Plan, who are entitled to benefits from the Retirement Plan in accordance with the terms thereof, shall be paid benefits under this feature as follows: (a) In an amount equal to the amount of benefits which would have been paid to the members pursuant to Section 4 of the Retirement Plan if compensation, as defined in Section 1(9)(a), included the annual awards (or in the case of Members who do not have an Hour of Service under the Retirement Plan on or after August 1, 1994, one-half the annual awards) granted to members on or after January 1, 1981, under the VC Plan(s). Anything to the contrary notwithstanding, all members of the Retirement Plan who would otherwise be entitled to benefits from this Plan pursuant to the preceding sentence, shall be paid such benefits only to the extent that compensation, as defined in Section 1(9)(a) of the Retirement Plan, does not include the annual awards (or in the case of Members who do not have an Hour of Service under the Retirement Plan on or after August 1, 1994, one-half the annual awards) granted to members on or after January 1, 1981, under the VC Plan(s). (b) In an amount equal to the amount of benefits which would have been paid to the member pursuant to: (i) Section 16 of the Retirement Plan if annual compensation, as defined in Section 16(1)(l) of the Retirement Plan, included in the annual awards (or in the case of Members who do not have an Hour of Service under the Retirement Plan on or after August 1, 1994, one-half the annual awards) granted to members on or after January 1, 1981, under the VC Plan(s); or (ii) Section 20 of the Retirement Plan if basic earnings, as defined in Section 20(1)(b) of the Retirement Plan, included the annual awards (or in the case of Members who do not have an Hour of Service under the Retirement Plan on or after August 1, 1994, one-half the annual awards) granted to members on or after January 1, 1981, under the VC Plan(s). B. Retirement Restoration Enhancement feature: Each member of the Retirement Plan, who was not eligible for benefits under the Temporary Retirement/Termination Incentive Program due to salary grade and who is approved for Retirement Enhancement by the President of Conoco Inc. or his delegee, shall be paid benefits under this feature that would have been paid pursuant to the Retirement Plan, the Retirement Restoration Plan I of Conoco Inc., and the Retirement Restoration 2 EXHIBIT 10.6.2 Compensation feature of this Plan, enhanced under the terms of the Temporary Retirement/Termination Incentive Program, but without the limitations on salary grade and election date, less any benefit payable under the Retirement Plan, the Retirement Restoration Plan I of Conoco Inc., and the Retirement Restoration compensation feature of this Plan. SECTION 4. PAYMENT OF BENEFIT A. This Plan shall be an unfunded plan, and payments of benefits pursuant to this Plan shall be made from the general assets of Conoco Inc. B. Benefits paid under this Plan to a participant or designated beneficiary shall be paid in the form of a single life annuity, or in any of the forms detailed in Section 4(3)(a) or 4(3)(b) of the Retirement Plan in an amount actuarially equivalent to such single life annuity. The receipt of benefits may be deferred in accordance with procedures established by the Board. Elections regarding the form and payment of benefits shall be made independent of any election under the Retirement Plan and in such manner and at such time as the Board prescribes. C. Benefits payable under this Plan shall begin to be paid within a reasonable time after the amount of a participant's benefits pursuant to this Plan has been established. Notwithstanding the preceding sentence, participants who retire pursuant to Section 4(2)(d) of the Retirement Plan cannot begin to receive the benefits payable under this Plan until the end of the first full calendar month following age 50. SECTION 5. BENEFICIARIES A. Beneficiaries under this Plan shall be named in accordance with procedures established by the Board. B. Notwithstanding anything to the contrary contained herein or in the Retirement Plan, a participant or beneficiary who is awaiting payment pursuant to a sump sum election may, until death, change the beneficiary designated to receive benefits under this Plan. C. In no event shall any change in beneficiary amount pursuant to Section 5(b) affect the amount of benefits payable under this Plan. SECTION 6. AMENDMENT, SUSPENSION, TERMINATION The Board of Directors of Conoco Inc. may, at any time, amend, suspend, or terminate his Plan. 3 EXHIBIT 10.6.2 EXHIBIT C EMPLOYEE BENEFIT PLANS BOARD OF CONOCO INC. RULES FOR THE ELECTION OF PAYMENTS FROM THE RESTORATION PLANS ---------------------------------- 1. An election of the type of payment the employee wants to receive from the Retirement Restoration Plan I of Conoco Inc. and the Retirement Restoration Plan II of Conoco Inc. (the "Plans") may be made at any time up to 30 days prior to the employee's annuity starting date under Title Two of the Pension and Retirement Plan ("Retirement Plan") ("annuity starting date") and becomes irrevocable 30 days prior to the annuity starting date. Employees who have not made an election 30 days prior to the annuity starting date may made an election only with the approval of the Employee Benefit Plans Board ("Board"). Such election shall be irrevocable. 2. In the event an employee fails to make an election 30 days prior to his annuity starting date, such employee shall be deemed to have elected one lump sum payment (with out deferral) unless authorized by the Board to do otherwise in accordance with Rule No. 1 above. 3. If any employee elects lump sum payment, the employee may, up to 30 days before his annuity starting date, elect to defer such lump sum and receive it in annual installments (1 to 15) beginning in the month after his annuity starting date or beginning the first day of any January within five years after his annuity starting date. If an employee has elected to defer receipt of a lump sum in accordance with the first sentence of this paragraph, he may, by November 30 preceding delivery of any remaining installments, make one final irrevocable election to further defer any undelivered amounts, provided that the total number of annual installments after retirement from all elections does not exceed 15, and all payments are made by the end of the 20th year after his annuity starting date. 4. Deferred lump sum amounts paid after the month following the annuity starting date will earn interest at a rate corresponding to the average of Moody's AAA ten-year Municipal Bond Rate for the 13 weeks preceding the beginning of each new quarter. The interest will be compounded quarterly and will be deferred. If the rate changes, the new rate will apply to all amounts beginning with the following quarter. 5. Each installment will equal the amount of the remaining lump sum and accumulated interest divided by the number of annual installments remaining (including the payment being determined). 4 EXHIBIT 10.6.2 EXHIBIT C 6. As in the Retirement Plan, if an employee elects a joint and survivor annuity, the amount of such annuity shall be actuarially determined based on the ages of the employee and survivor designated under the Plans and the actuarial assumptions included in such Retirement Plan. 7. All benefit payments shall be made, or begin to be made, no later than the month following the employee's annuity starting date unless the employee has elected otherwise in accordance with Rule No. 3 above. 8. If benefits under the Plans (lump sum, retiree annuity, or survivor annuity) are increased as a result of incentive (variable) compensation award(s) granted after retirement, the increase shall be effective on the annuity starting date. The payment option elected at the annuity starting date shall apply to such additional benefit. In determining the actuarial factor for payment options other than straight life annuity for the additional benefit, the ages of the retiree and designated survivor and the applicable interest rates shall be determined as of the annuity starting date. 9. A retiree who has elected a lump sum (or who has made no election) may make or change a beneficiary designation in writing on the Plans' retirement application form at any time prior to the earlier of death or receipt of the full lump sum distribution. If a retiree who has designated a beneficiary(ies) under this Rule No. 9 dies after his annuity starting date but prior to full distribution of the lump sum, the balance of the distribution shall be paid in one lump sum to the designated beneficiary(ies) named under the Plans. If the deceased retiree made no beneficiary designation under the Plans, such lump sum shall be paid to the retiree's beneficiary(ies) as named under the Retirement Plan, or, if there is no beneficiary so named under the Retirement Plan, to the retiree's estate. 10. A beneficiary designated pursuant to Rule No. 9 who is entitled to receive a lump sum because a retiree who had elected a lump sum (or made no election) died subsequent to the retiree's annuity starting date may make or change a beneficiary designation on the Plans' retirement application form at any time prior to the earlier of death or receipt of the full lump sum distribution. If a beneficiary who has designated a beneficiary(ies) dies prior to full distribution of the lump sum, the balance of the distribution shall be paid in one lump sum to the beneficiary(ies) so designated under this Rule No. 10. If the deceased beneficiary made no beneficiary designation under the Plans, but designated a beneficiary(ies) under the Retirement Plan, such lump sum shall be paid to the beneficiary(ies) so designated. If the beneficiary designated no beneficiary(ies) under either the Plans or the Retirement Plan, such lump sum shall be paid to the beneficiary's estate. 5 EXHIBIT 10.6.2 EXHIBIT C 11. If an employee who is eligible for preretirement survivor annuity coverage under the Retirement Plan dies, the survivor benefits shall be restored under the Plans in the same manner as the Retirement Plan benefits, except that the payments shall be converted to a lump sum based on the survivor's age and the actuarial assumptions included in the Retirement Plan. Such lump sums may not be deferred. 12. In the event of changes in the relevant laws or circumstances, the Board may, in its sole discretion, accelerate or change the manner of payment of any deferred lump sum benefit from the Plans. 6 EX-10.11 6 LETTER AND CONSULTING AGREEMENT EXHIBIT 10.11 October 9, 1995 C. S. Nicandros Vice Chairman Pursuant to our recent discussions and subject to approval by the Board of Directors, this letter sets forth the terms we have agreed upon regarding your retirement from the Company. 1. On October 10, l995, we will announce that you have elected to retire from employment effective February 29, 1996. Coincident with the announcement, you will become Chairman of the Board of Conoco and remain President and Chief Executive Officer. 2. Effective January 1, 1996, you will retire as Vice Chairman of DuPont, and Chief Executive Officer and President of Conoco, and will relinquish all other titles and all duties arising out of these positions. You will remain Chairman of the Board of Conoco until February 29, 1996. Until March 1, 1996, you will remain an employee of Conoco and no aspect or item of your direct or indirect compensation, including employee benefit plans, programs or practices and including any variable compensation, shall be modified or changed in any way that is adverse to your interests. 3. You will remain a director of DuPont until the 1996 Annual Meeting, at which time you will not stand for election to the DuPont Board. While a member of the DuPont Board after February 29, 1996, you will receive the same compensation and benefits afforded other non-employee directors. It is also understood that while serving as a member of the Board, you will not engage in any business activity that directly competes with DuPont or is not in the interests of DuPont. 4. In recognition of your dedicated service to the Company and your continued service on the DuPont Board, the Board will waive the vesting requirements contained in the Directors' Charitable Gift Plan to enable the Company to make the maximum donation available under the Plan. In exchange, you will pay to the Company the sum of $20,000.00, representing the allocable cost of the benefit to be provided under the Plan upon your death. 5. DuPont will engage you as a consultant for the period March 1, 1996 through December 31, 1997 on terms defined in the form of the consulting agreement between you and the Company attached hereto as Exhibit "A". EXHIBIT 10.11 C. S. Nicandros - 2 - October 9, 1995 6. By signing this letter agreement, you agree to release DuPont, Conoco, their subsidiaries, affiliates, successors and assigns, and the employees, directors and officers of any of them from all claims or demands you may have based on your employment with DuPont, Conoco, their subsidiaries, affiliates, successors or assigns, or the termination of that employment. This includes, but is not limited to, the release of any rights or claims you may have under: the Age Discrimination in Employment Act, which prohibits age discrimination in employment; Title VII of the Civil Rights Act of l964, which prohibits discrimination in employment based on race, color, national origin, religion or sex; and federal, state, or local laws or regulations prohibiting employment discrimination; or any non-statutory claims such as wrongful discharge, defamation, breach of contract, impairment of economic opportunity, and intentional infliction of emotional distress. This release covers any and all claims arising on or before the date of this letter agreement. You further agree never to file a lawsuit asserting any claims released in this paragraph. You have a period of twenty one (21) days to review and consider this letter agreement before signing it. You may use as much of this 21 day period as you wish. You acknowledge that you have been advised to consult with an attorney before signing this letter agreement. You may revoke this letter agreement within seven (7) days of signing it. Revocation can be made by delivering a written notice of revocation to the undersigned. For this revocation to be effective, written notice must be received by the undersigned no later than the close of business on the seventh day after you sign the letter agreement. If you revoke this letter agreement within seven days of signing, it shall not be effective or enforceable, and you will not receive any of the benefits described herein. YOU ACKNOWLEDGE THAT YOU HAVE CAREFULLY READ THIS LETTER AGREEMENT, UNDERSTAND IT, AND ARE VOLUNTARILY ENTERING INTO IT. We appreciate your many fine contributions to our Company and look forward to your continued counsel in the months ahead. /s/ Edgar S. Woolard, Jr. ------------------------- E. S. Woolard, Jr. Agreed: /s/ C. S. Nicandros - ------------------------- C. S. Nicandros 10/9/95 - ------------------------- Date EXHIBIT 10.11 EXHIBIT A CONSULTING AGREEMENT This Consulting Agreement ("Agreement") by and between E. I. du Pont de Nemours and Company ("DuPont") and C. S. Nicandros ("Consultant") is made this 10th day of October, 1995. For good and valuable consideration, the parties agree as follows: 1. SCOPE OF SERVICES During the period March 1, 1996 through December 31, 1997, Consultant shall make available to DuPont a minimum of forty (40) hours per calendar month of consulting time. Consultant shall, at DuPont's election and request, provide consultation to DuPont on any matters pertaining to the exploration, development, refining and marketing of oil and gas throughout the world. DuPont shall give reasonable advance notice of any request to provide consulting services hereunder and in no event shall Consultant be required to provide such services if it would unreasonably interfere with Consultant's other business interests. Specific assignments hereunder shall be provided to Consultant by A. W. Dunham, who shall be Consultant's contact on all matters related to this Agreement. 2. TERM OF AGREEMENT This Agreement shall commence on March 1, 1996, and shall continue in full force and effect through December 31, 1997. 3. COMPENSATION OF CONSULTANT As compensation for the services provided hereunder, Consultant shall be paid a fee of fifty thousand dollars ($50,000.00) per month for each month of this Agreement. Payment shall be made in advance on the first day of each calendar month. Such payments shall continue until December 31, 1997, notwithstanding Consultant's death or disability and may be terminated only if Consultant refuses to provide services that DuPont is entitled to request pursuant to this Agreement. In the event of Consultant's death, payments shall be made to his estate. 4. REIMBURSEMENT OF EXPENSES DuPont shall reimburse Consultant for reasonable expenses incurred in connection with the performance of services hereunder. EXHIBIT 10.11 EXHIBIT A During the term of this Agreement, DuPont shall also reimburse Consultant for the expense of maintaining an office in the Galleria area of Houston, Texas, and for associated secretarial support, provided, however, that such cost shall not exceed twelve thousand dollars ($12,000.00) per month. Consultant shall provide to DuPont receipts or other appropriate documentation substantiating the expenses to be reimbursed under this provision. Reimbursement shall be made within fifteen (l5) days of DuPont's receipt of the required information. 5. AUTHORITY AND CAPACITY Consultant shall at all times be an independent contractor, and nothing in his Agreement shall be construed to constitute Consultant as an employee, agent, joint venturer or partner of DuPont. While on DuPont's premises, Consultant shall comply with all of DuPont's rules made known to Consultant, and be accompanied by an authorized employee of DuPont. 6. INFORMATION, MATERIALS AND INVENTIONS Consultant shall hold in strict confidence and not disclose to others or use, either before or after termination of this Agreement, unpublished information, technical, scientific or business, concerning DuPont's business activities and interests with which Consultant becomes familiar in contacts with DuPont. Similarly, Consultant shall not disclose to others without DuPont's prior written consent the results or specific nature of Consultant's work with DuPont. 7. OTHER OBLIGATIONS AND AGREEMENTS This Agreement does not change in any manner Consultant's rights under any pension plan or any agreements between Consultant and DuPont made before the execution of this Agreement. 8. COMPLIANCE WITH LAWS Consultant agrees that, in the performance of services hereunder, he shall comply with all laws, rules and regulations of any governmental authority applicable in connection therewith. EXHIBIT 10.11 EXHIBIT A 9. MISCELLANEOUS (a) Notices: All invoices and other documents required by this Agreement shall be sent to DuPont at the following address: E. I. du Pont de Nemours and Company l007 Market Street Wilmington, Delaware l9898 Attention: John A. Krol (b) Assignment and Subcontracting: This Agreement is not assignable or transferable by either party, in whole or in part, except with the prior written consent of the other party. Consultant shall not subcontract any work under this Agreement to any subcontractor except with DuPont's prior written consent. (c) Governing Law: This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware. (d) Entirety of Agreement: This Agreement represents the entire agreement and understanding between DuPont and Consultant relative to the subject matter hereof, and there are no understandings, agreements, conditions or representations, oral or written, express or implied, with reference to the subject matter hereof that are not merged or superseded hereby. No amendment, modification or release from any provision hereof shall be of any force or affect unless it specifially refers to this Agreement, is in writing and is signed by the party claimed to be bound thereby. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date set forth above. E. I. DU PONT DE NEMOURS AND COMPANY (DUPONT) BY: /s/ Edgar S. Woolard, Jr. ----------------------------- DATE: October 7, 1995 ----------------------------- C. S. NICANDROS (CONSULTANT) BY: /s/C. S. Nicandros ----------------------------- DATE: October 9, 1995 ----------------------------- EX-11 7 STATEMENT RE CALCULATION OF EARNINGS PER SHARE 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 ----------------------------- Primary Fully Diluted 1994 1993 1992 1991 ------------- ------------- ------------- ------------- ------------- ------------- Net income (loss) less dividends on preferred stock............... $3,283 $3,283 $2,717 $545 $(3,937) $1,393 Adjustments required for dividend equivalent payments and stock appreciation rights (net of tax).............................. - - - - - 1 Adjustment for interest, net of income tax, determined under "Modified Treasury Stock Method"........................... 467 447 - - - - ----------- ----------- ----------- ----------- ----------- ----------- Earnings (loss) applicable to common stock...................... $3,750 $3,730 $2,717 $545 $(3,937) $1,394 =========== =========== =========== =========== =========== =========== Average number of common shares outstanding (excludes treasury stock and the shares held by DuPont Flexitrust)........ 585,107,476 585,107,476 679,999,916 676,622,115 673,454,935 670,743,786 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)............... 73,678,138 73,955,886 4,542,903 3,785,582 4,575,929 4,740,453 ----------- ----------- ----------- ----------- ----------- ----------- Adjusted average number of common shares and share equivalents...... 658,785,614 659,063,362 684,542,819 680,407,697 678,030,864 675,484,239 =========== =========== =========== =========== =========== =========== Earnings (loss) per share and share equivalents............. $ 5.69(a) $ 5.66(a) $ 3.97(b) $.80(b) $ (5.81)(a) $ 2.06(b) =========== =========== =========== =========== =========== =========== Earnings (loss) per share - as published......................... $ 5.61 $ 5.61 $ 4.00 $.81 $ (5.85) $ 2.08 =========== =========== =========== =========== =========== ===========
____________________ (a) Calculations are antidilutive. (b) Fully diluted. EX-12 8 STATEMENT RE COMPUTION OF RATIO 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 ---------------------------------------------------- 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- Net Income......................................... $3,293 $2,727 $ 566(a) $ 975(a) $1,403 Provision for Income Taxes......................... 2,097 1,655 392 836 1,415 Minority Interests in Earnings of Consolidated Subsidiaries...................................... 30 18 5 10 6 Adjustment for Companies Accounted for by the Equity Method.............................. 41 18 41 6 35 Capitalized Interest............................... (170) (143) (194) (194) (197) Amortization of Capitalized Interest............... 154 154 144 101 94 ------ ------ ------ ------ ------ 5,445 4,429 954 1,734 2,756 ------ ------ ------ ------ ------ Fixed Charges: Interest and Debt Expense - Borrowings............ 758 559 594 643 752 Adjustment for Companies Accounted for by the Equity Method - Interest and Debt Expense.... 71 55 42 62 11 Capitalized Interest.............................. 170 143 194 194 197 Rental Expense Representative of Interest Factor.. 113 118 143 151 162 ------ ------ ------ ------ ------ 1,112 875 973 1,050 1,122 ------ ------ ------ ------ ------ Total Adjusted Earnings Available for Payment of Fixed Charges..................................... $6,557 $5,304 $1,927 $2,784 $3,878 ====== ====== ====== ====== ====== Number of Times Fixed Charges Are Earned........... 5.9 6.1 2.0 2.7 3.5 ====== ====== ====== ====== ======
_____________________ (a) Income Before Extraordinary Item and Transition Effect of Accounting Changes. EX-13 9 ANNUAL REPORT EXHIBIT 13 to our stockholders Last year was an extraordinarily successful one for our company, resulting in a wide range of important achievements: . We posted record revenues and earnings for the second consecutive year. . Total shareholder return was 29 percent, resulting in an average 18 percent total annual return to shareholders for the past five years. This exceeds our goal of an average of at least 15 percent per year over time. . Nearly 90 percent of our businesses have demonstrated their ability to earn the cost of capital. This compares with fewer than a third five years ago. . Fixed-cost productivity continued to improve. It has averaged more than 7 percent for the last three years. . Excellent environmental progress continued. Our chemicals and specialties businesses have reduced airborne carcinogens and toxics by more than two- thirds in the U.S. and about 50 percent globally since 1987. A further major milestone was the cessation of CFC production for sale in developed countries while introducing the widest range of alternative products of any supplier. . Work-related employee injuries and illnesses declined 40 percent. This builds on our outstanding safety performance which continues to be about 30 times better than the average for all industry. These accomplishments demonstrate the capability and determination of our 105,000 innovative employees around the world. We are grateful for their efforts and can be highly optimistic about the future because of their skills and enthusiasm. A further major development was the redemption of 156 million DuPont shares from Seagram for $8.8 billion in cash and warrants -- one of the largest stock redemptions in history. This large block of shares was redeemed at a 13 percent discount to market price. While DuPont later sold some new shares, there are 18 percent fewer shares currently outstanding than just prior to the redemption. This resulted in a significant opportunity for wealth creation for our stockholders. The share redemption was made possible by four years of cost reduction, productivity improvement and organizational change that have made us strong financially and allowed us to move decisively and quickly. Net income for the year was $3.3 billion or $5.61 per share compared to $2.7 billion or $4.00 per share in 1994. Excluding nonrecurring items and interest expense associated with the debt incurred to finance the redemption of stock from Seagram, earnings increased 30 percent. Sales of $42.2 billion were 7 percent higher than the prior year. Excluding nonrecurring items, 1995 earnings per share were $5.81, up 43 percent compared to 1994. Especially good performances came from agricultural products, films, engineering polymers, pharmaceuticals, packaging and industrial polymers, specialty chemicals, specialty fibers and white pigments. Conoco's exploration and production businesses produced record earnings for the third consecutive year. And all regions of the world contributed to our performance. Several years of very hard work and innovative leadership came together with generally strong economies in the past two years. In the next few years, the global economy will provide new opportunities but also a much more competitive business environment. Our response will be continuing change at DuPont. We intend to be the leading company in our major businesses in all our global markets. What strategies will guide the changes that take place? Our basic strategy to grow shareholder value is straightforward: profitable growth by focusing on what we do best. We intend to grow our strongest businesses globally. Research and new technology will continue to be the major source of competitive advantage providing improved processes and new products. Where advantageous, we will use acquisitions, joint ventures and alliances to strengthen our competitive position or market access. We will drive year-to-year improvements in the productivity of all resources employed. And we will differentiate ourselves by executing faster and more effectively than our competitors. We intend to create our own future. We will continue to insist that all business units exceed our cost of capital through business cycles. The relentlessly competitive, volatile global business environment we face requires that our organization become more and more flexible, that our cost structure become more variable, and that our costs allow us to deliver competitive value to customers anywhere in the world. We expect our business leaders to have a global, multicultural outlook and to be able to 2 execute our strategies successfully in any business setting. We are making good progress, as several additional accomplishments during 1995 show: . Conoco brought on stream the massive Heidrun field in the Norwegian Sea, now producing 220,000 barrels per day. This project features the world's first tension leg platform constructed from concrete, a technological feat that lowers capital expenditure and improves productivity. Downstream, joint ventures in two refineries in the Czech Republic and in a new Malaysian refinery expanded global capabilities. . We accelerated the globalization of our nylon business with joint ventures to produce and market nylon fiber in Taiwan, India, Japan, Brazil and Mexico, and to manufacture Zytel(R) nylon engineering polymer in Singapore. . We expanded our presence in China with new joint ventures to produce and market DuPont Lycra(R) brand spandex fiber, Mylar(R) polyester film and polyester chip and filament yarn. . We announced plans to build a plant for Terathane(R) PTMEG (an intermediate for Lycra(R)) in Korea, and a plant for Sontara(R) nonwovens at our Asturias, Spain, site. . A joint venture with combined annual sales of $1 billion is being formed with Dow to produce and market a broad portfolio of elastomer products. Based on new technology and marketing capabilities, this venture has the potential to grow at more than twice the industry rate. . Research made many important new contributions, including a breakthrough process for a key ingredient for Lycra(R). The new process reduces cost and investment and dramatically reduces process waste. It will be used in a plant under construction at our site in Asturias. On the product side, Cozaar(R), a new anti-hypertension drug, has been launched with our partner Merck. It promises to be a major revenue generator. Environmental progress has clearly established DuPont as a worldwide environmental leader. DuPont was recognized as an "Early Achiever" by the U.S. Environmental Protection Agency for our progress in the voluntary 33/50 Program. We exceeded 50 percent reductions in emissions of 17 large-volume toxic chemicals before the target year of 1995. The U.S. EPA also recognized DuPont as one of the top 20 partners in the agency's Waste Wi$e program for waste reduction. Other recognitions during the year included the United Nations University Unique Business Leadership Award for DuPont's commitment to a "zero" waste and emissions goal and the Banksia Award, one of Australia's most prestigious honors for environmental leadership. Finally, late last year the company announced major changes in senior management. Jack Krol became DuPont's president and chief executive officer upon Ed Woolard's retirement. Ed remains chairman of the board of directors. During Ed's tenure as CEO, many difficult changes were made to strengthen the company and position us for the future. Archie Dunham became president and chief executive officer of Conoco. He succeeds Constantine "Dino" Nicandros who has also retired. Under Dino's leadership, Conoco's performance improved to that of top tier petroleum companies. Our outlook for 1996 anticipates more difficult business conditions with world economies slowing. In this environment, we are committed to growing profits, maintaining a very strong focus on cost and capital employed, and returning to more normal debt levels by reducing the debt incurred for the Seagram share redemption. On the following pages we invite you to sample a few stories of how DuPonters worked together to come up with new ways of making "better things for better living" for people around the world, with a clear focus on growing shareholder value. /s/ Edgar S. Woolard, Jr. Edgar S. Woolard, Jr. Chairman of the Board /s/ John A. Krol John A. Krol President and Chief Executive Officer March 1, 1996 3 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. The fibers businesses continued to pursue high-growth markets worldwide, at the same time focusing on increasing productivity and reducing fixed cost. Innovative products, manufacturing technology and marketing continued to help drive growth of Lycra(R) brand spandex. Lycra(R) Soft, a new product to meet consumer demand for greater comfort in everyday living, was introduced in 1995. The product provides a softer, more comfortable stretch and recovery. Lycra(R) 3D, a revolutionary new hosiery construction, also gained acceptance by women worldwide by offering sheerness, strength and comfort. Ground was broken for a manufacturing facility at Waynesboro, Virginia, incorporating new technology to strengthen competitive advantage globally. The new capacity is expected to come on stream in 1997. Also, ground was broken for a joint venture that will manufacture and market Lycra(R) in China; this is scheduled for startup in 1997. As part of its commitment to protect customer investment in the Lycra(R) brand, DuPont is aggressively pursuing companies that infringe this trademark. Increasing customer awareness of nylon as a fashion fiber drove a resurgence in the nylon apparel business, led from Europe. Tactel(R) and Supplex(R) textile nylons and Cordura(R) industrial and specialty nylon remain fibers of choice in outerwear and are well-positioned in the growing ready-to- wear segment. The carpet business also had a good year, driven by brand recognition, technology and customer relationships. The nylon group is involved in a number of joint ventures in Asia, including partnerships with Far Eastern Textile Ltd. and Teijin Ltd. Construction began in India on a nylon tire cord plant, which is part of a joint venture with the Thapar Group of New Delhi and Mitsui Trading Company of Tokyo; the plant is scheduled to start operations in late 1997. Dacron(R) polyester benefited from higher productivity and lower fixed costs as a result of new filament yarn and intermedi- Fibers 6 ates production facilities that started up in 1994. These gains partly offset increases in the cost of paraxylene, the primary raw material in polyester production. The business continued its global strategy through a joint venture to produce polyester fiber in China where a new plant is scheduled to begin production in late 1997. DuPont's joint venture partners are Suzhou Chemical Fiber Company, Mitsubishi Corporation, and the International Finance Corporation, a member of the World Bank. The Nonwovens business delivered double-digit revenue growth for the second consecutive year, with strong gains in all markets and regions. Building on technology leadership and marketing, Nonwovens expanded in global markets. The DuPont-Asahi joint venture accelerated market penetration in Asia for Tyvek(R) spunbonded olefin in construction and medical packaging. Plans were announced to expand production of Sontara(R) spunlaced fabric with a new facility in Asturias, Spain. In China, a retail outlet opened featuring items such as printed jackets, car covers and other popular items, all made of Tyvek(R). Nonwovens commercialized Tyvek(R) Plus, a new, softer fabric for car covers, in less than a year. A new rooflining product based on Typar(R) spunbonded polypropylene was introduced to the construction industry in Europe. Advanced Fibers Systems benefited from growing demand in the industrialized economies, increasing demand in emerging markets, and a stream of innovative developments. These included new products of Nomex(R) and Kevlar(R) high-performance aramid fibers offering increased comfort and protection levels for thermal and ballistic apparel. 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. After-tax operating income (ATOI) was $826 million versus $701 million in the prior year. Excluding nonrecurring items, ATOI was $795 million, an increase of 18 percent, mainly on improvements in aramids and Dacron(R) polyester. 1994 versus 1993 Sales of $6.8 billion were up 9 percent, principally reflecting the acquisition of ICI's nylon business. Excluding this acquisition, sales were up 5 percent on 6 percent higher volume, principally outside the United States, partly offset by 1 percent lower average selling prices. ATOI of $701 million was 315 percent above the $169 million earned in 1993. Excluding nonrecurring items, earnings were $676 million versus $425 million, mainly due to improved results for nylon, nonwovens and aramids. Outlook New products to meet consumer demand, such as those in the Lycra(R), Tyvek(R), Typar(R), Nomex(R) and Kevlar(R) product lines, new technologies to further improve competitive position, and entry into new markets put the Fibers segment in a good position for growth in the years ahead. [CHART APPEARS HERE] SALES ($ in Billions) 1993 1994 1995 ---- ---- ---- 6.2 6.8 7.2 ATOI ($ in Millions) 1993 1994 1995 ---- ---- ---- 169 701 826 See Industry Segment Information (Note 28 to Financial Statements). 7 Diversified Businesses are characterized by broad opportunities for future growth and the promise of increased profitability, with the shared advantage of DuPont research and development. These businesses include Agricultural Products, Electronic Materials, Films, Printing and Publishing and Medical Products. DuPont Merck (a research-based pharmaceutical company 50 percent owned by DuPont), and CONSOL (a coal operation 50 percent owned by DuPont) are also included. Agricultural Products Record sales and earnings were led by strong growth in Europe, Asia, Latin America and Canada, aided by productivity improvements in Europe and new product offerings in the United States. Rapid growth continued in emerging markets including India, Pakistan, Indonesia, Poland, Hungary and China. Londax(R) herbicide for rice continued gains in Japan and China, while Safari(R) herbicide for sugar beet grew in Europe. The business gained share in insect control markets in Asia with Lannate(R) methomyl insecticide. In the United States, registrations were received for Staple(R) herbicide for cotton and Fortress(R) insecticide for corn, which will be delivered through a new closed- application system. The Reliance(R) seed/herbicide system for soybeans was introduced to farmers in the U.S. northern Midwest. DuPont OptimumTM high-oil corn seed and grain continue to gain acceptance for poultry and animal feed around the world. Electronic Materials Revenues and earnings of Electronic Materials rose sharply for the second consecutive year, with strength in all regions. The improvement follows repositioning of the business over the past three years and new product introductions aimed at growing markets in mobile communications, portable computers and the automotive industry. Products developed in the past three years now generate 30 percent of the business's revenues. These developments, along with fixed-cost reductions, continue to enhance the business's competitive position. A recent new development includes materials for next-generation, wall- mounted televisions. New lines for coating Riston(R) dry film resists and other photopolymer products and for coating advanced ceramic tapes will start up in late 1996 at Towanda, Pennsylvania, to help meet burgeoning worldwide demand. Films The Films businesses experienced strong sales growth in all regions, helped by growing global applications for Kapton(R) polyimide film and Mylar(R) polyester film. Almost 20 percent of revenue came from products introduced over the past three years. Further improvements in permanent investment turnover and fixed-cost productivity included the shutdown of the industrial imaging business and closing of the Rochester, New York, imaging plant early in 1995. A new specialty film line at Circleville, Ohio, plus upgrading of the plant at Old Hickory, Tennessee, helped strengthen Films' polyester position. A joint venture was announced with Foshan Hongji to manufacture polyester film in China. Thin polyester and polyethylene napthalate film capacity will be added in Luxembourg, incorporating new technology developed by DuPont; the new line will add significant capacity by early 1998. Construction began in 1995 at the Bayport site in Texas to incrementally quadruple polyimide film capacity over the next five years. Construction was completed of the facility at Cape Fear, North Carolina, to provide PetretecSM regeneration services. This facility breaks polyester products back down into their original raw materials for recycling into a wide range of products from clothing to film. The products are equivalent in quality to those made from virgin polyester. Medical Products/DuPont Merck In line with previously announced plans to divest Medical Products businesses, agreements were reached for the sale of the In-Vitro Diagnostics business to Dade International and for the sale of the Diagnostic Imaging business to a new company formed by The Diversified 10 Sterling Group. Discussions are being held for the sale of New England Nuclear research products and Sorvall(R) centrifuges. The DuPont Merck Pharmaceutical Co. joint venture had another outstanding year, with continued earnings growth and expansion in new geographic areas of opportunity, including China. DuPont Merck continues to expand its offerings in preventive and therapeutic medicine, including a range of products for cardiac patients and products to help prevent strokes (see also page 9*). Separately, Merck & Co., Inc. launched Cozaar(R), a new class of drugs to control hypertension. Cozaar(R) was discovered by DuPont and the company has an important financial interest in it through a joint development and marketing agreement with Merck & Co. Printing and Publishing Despite a soft worldwide market, Printing and Publishing improved earnings, before nonrecurring items, and cash flow versus 1994. Sales growth continued in the packaging product line and across the board in Latin America and Asia Pacific. DuPont was an innovation leader at the printing and publishing trade fair in Dusseldorf, Germany, with a range of new products. These included a new line of Crosfield(R) imagesetters, the Crosfield(R) Celix platesetter for computer-to-plate applications, new Digital WaterProofTM PreViewTM digital proofing systems and the new digital Cyrel(R) plates for flexographic printing. CONSOL CONSOL Energy Inc., a coal operations joint venture owned 50 percent by DuPont, largely offset the effects of lower prices and slightly lower sales volumes through reduced costs and improved [CHART APPEARS HERE] SALES ($ in Billions) 1993 1994 1995 ---- ---- ---- 5.7 5.7 6.1 ATOI ($ in Millions) 1993 1994 1995 ---- ---- ---- (407) 623 849 See Industry Segment Information (Note 28 to Financial Statements). operating efficiency. CONSOL strengthened its long-term position in coal production in the eastern United States by reserve additions of high-quality coal in southwestern Pennsylvania. 1995 versus 1994 Sales in 1995 were $6.1 billion, up 7 percent, principally reflecting significantly higher sales of agricultural products, films, and electronic materials. Segment sales volume increased 5 percent and prices were up 2 percent. After-tax operating income (ATOI) was $849 million, up from $623 million, primarily due to earnings increases in agricultural and pharmaceutical products. Improvement in the latter was due in part to a more favorable allocation of DuPont Merck joint venture operating income to recognize the performance of assets originally contributed to the venture by DuPont. Results included net nonrecurring charges of $75 million in 1995 and $53 million in 1994, principally product liability charges related to Benlate(R) 50 DF fungicide. Excluding nonrecurring items from both years, ATOI was $924 million versus $676 million, up 37 percent. 1994 versus 1993 Sales of $5.7 billion were up 5 percent, after adjusting for the absence of the sporting goods business which was sold in 1993. Sales volume was up 7 percent, while average prices were down about 2 percent. Sales were up across all regions, with the largest percentage gain coming from South America, where sales improved 27 percent. ATOI was $623 million versus a loss of $407 million in 1993. Results in 1993 included significant nonrecurring charges principally for restructuring costs which were partly offset by gains from the sale of the Remington Arms Company. Excluding nonrecurring items from both years, ATOI was $676 million versus $238 million the previous year. This reflects higher sales and lower costs in agricultural products, better pharmaceutical results and significantly higher coal earnings compared to the prior year, which was affected by strikes. Outlook Continued success in bringing new products to market, along with productivity improvements, will help Agricultural Products to meet growing world demand for food and fiber. Vigorous growth is expected in developing countries in Asia. In Electronic Materials, the proliferation of electronics worldwide and DuPont's market position should result in continued brisk growth. Printing and Publishing is well-positioned to benefit from new processes and technologies in the printing industry. The Films businesses should benefit from growing markets in Asia Pacific and South America. The earnings benefit from a more favorable allocation of operating income to DuPont from the DuPont Merck joint venture will end in 1996. The absence of this benefit is expected to be mitigated by the growth of Cozaar(R) and by the continued development of DuPont Merck's business. *This information is not incorporated by reference in this Report. 11 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. In 1995, Conoco continued its strategy of improving operating efficiency and upgrading its asset base, while creating new business in areas offering the best opportunities for profitable growth. Cost-reduction efforts further decreased overhead and operating expenditures by more than $100 million, allowing Conoco to maintain earnings before nonrecurring items at about 1994 levels despite weak natural gas prices and product margins. Strategic alliances are playing an important role in improving profitability. For example, the small MacCulloch oil field in the U.K. North Sea is being made economically viable through an innovative agreement with contractors to provide and operate the field's facilities. In worldwide upstream operations, the highlight of 1995 was the successful completion and installation of the massive Heidrun tension leg platform in the Norwegian Sea (see also page 13*). Crude oil production from the Heidrun field has been stabilized around the design peak capacity of 220,000 barrels per day. In the Ardalin field in northern Russia, more than 7.5 million barrels of oil have been produced and exported to world markets since this pioneering joint venture came on stream in the fall of 1994. Fabrication is underway on the production facility for Britannia, a giant gas condensate field in the U.K. North Sea. Conoco has a 43 percent interest in Britannia, which is scheduled to begin producing in 1998. In exploration, a promising discovery was made offshore Norway. Four successful wells were drilled in the Rocky Mountain foothills in Alberta, Canada, where Conoco has a leadership position in acreage and knowledge of the subsurface geology. Conoco doubled its coalbed methane acreage in Australia to 5 million net acres. A total of 18 wells drilled in the area in 1995 added significantly to gas reserves. To enhance the value of these reserves, Conoco is evaluating acquisition of a pipeline to support development of an industrial market for natural gas in the area. The downstream business also made progress in strengthening existing operations and developing new business in markets with high growth potential. Conoco, together with two partners, acquired an interest in two refineries in the Czech Republic to supply its growing marketing operations in central and eastern Europe. In western Europe, restructuring and selective expansion of marketing networks continued. Conoco also entered the Turkish market, acquiring a 25 percent interest in one of the country's petroleum distribution and marketing companies. In Asia Pacific, retail expansion continued in Thailand. Construction began on a 100,000-barrels-per-day joint venture refinery at Melaka, Malaysia, and a study is being conducted on possible participation in a new refinery in Vietnam. In the United States, construction of the lube oil hydro-cracker at Lake Charles, Louisiana, a joint venture with Pennzoil, is expected to be completed in October, ahead of schedule. The $500 million facility will give Conoco a major presence and competitive advantage in the North American base oil market, and upgrade its finished lubricant lines. Continuing its strategy of concentrating U.S. gasoline marketing into fewer geographic regions, Conoco acquired new outlets in selected markets in the mid-con *This information is not incorporated by reference in this Report. Petroleum 14 tinent region, close to its Ponca City refinery and distribution infrastructure, while disposing of numerous outlets elsewhere. Around the world, Conoco's focus is increasingly on integrated operations involving different parts of the energy value chain. For example, Conoco is negotiating a 50-50 joint venture to produce extra-heavy Venezuelan crude oil and upgrade it to a synthetic crude oil. At a projected initial cost of $1.4 billion, this would be Venezuela's largest venture with a foreign petroleum company since nationalization of the oil industry in 1975. A second, preliminary agreement was signed to form a joint venture to manufacture and market OrimulsionTM, a boiler fuel consisting of bitumen and water. Also in Venezuela, Conoco was awarded some highly prospective acreage in the country's much-anticipated light and medium oil exploration bid round early in 1996. To pursue developing opportunities in Mexico's energy industry, Conoco opened an office in Mexico City with a view to extending its activities into natural gas transmission and distribution, and electrical power generation. Conoco Global Power has been formed to evaluate opportunities that integrate upstream reserve potential with downstream markets. A new specialty product, Conoco Liquid PowerTM, has been introduced to the pipeline industry. It is four times as effective as its market leading predecessor, CDRTM flow improver. After two years of testing, officials at Yellowstone National Park in Wyoming have switched to Conoco's new Bio-Synthetic 2-Cycle Engine Oil for their snowmobiles. The product is highly biodegradable and produces fewer emissions from small engines. 1995 versus 1994 Sales of $17.7 billion were up 5 percent from 1994. The increase resulted from higher crude oil prices and refined product volumes partly offset by lower U.S. natural gas prices and worldwide oil and gas volumes. Earnings of $655 million were down 4 percent from $680 million the previous year. 1995 earnings included a $45 million charge in the fourth quarter for the write-down of certain assets. 1994 earnings included a net charge of $26 million. Excluding these nonrecurring items, 1995 earnings were $700 million versus $706 million in 1994. Upstream earnings of $470 million were down 3 percent from $483 million in 1994. Excluding nonrecurring charges, earnings of $509 million were up 8 percent from $471 million in the prior year. Higher crude oil prices and significantly lower costs partly offset by 19 percent lower U.S. natural gas prices contributed to the improvement. Worldwide crude oil and natural gas liquids production of 414,000 barrels per day (bpd) was down 5 percent from 436,000 bpd in 1994. The net realized crude oil price averaged $16.57 per barrel, up 10 percent from $15.10 in 1994. Worldwide natural gas deliveries were 1,242 million cubic feet per day (mmcfd) compared to 1,347 mmcfd in 1994. Natural gas prices averaged $1.85 per million cubic feet, down from $2.11 in the prior year. Downstream earnings of $185 million were down 6 percent from $197 million in 1994. Excluding nonrecurring charges, earnings of $191 million were down 19 percent from $235 million in the prior year due to depressed worldwide refining margins partly offset by higher refinery volumes and lower costs. Total feedstocks processed at the refineries increased 4 percent in 1995 to 721,000 bpd from 696,000 bpd in 1994. 1994 versus 1993 Sales were up 7 percent compared to 1993 due to increased U.S. refinery production. Lower worldwide crude oil prices and natural gas prices in the United States held down the increase. Earnings of $680 million in 1994 were down 16 percent from $812 million in the prior year. 1994 earnings included a net charge of $26 million as a result of a $127 million international tax benefit offset by a $95 million write-down of North Sea oil properties to be sold, and $58 million of employee separation costs. 1993 earnings included a net gain of $69 million related to a $230 million benefit due to tax law changes, partly offset by property dispositions and restructuring charges of $161 million. After adjusting for these nonrecurring items, earnings were $706 million in 1994, down 5 percent from $743 million in 1993. Outlook Conoco is positioned to perform well in a very competitive environment, as a result of continuing productivity improvements and its successful strategy of focusing on core businesses, growing in selected new areas of opportunity, and leveraging its resources through joint ventures and alliances. [CHART APPEARS HERE] SALES ($ in Billions) 1993 1994 1995 ---- ---- ---- 15.8 16.8 17.7 ATOI ($ in Millions) 1993 1994 1995 ---- ---- ---- 812 680 655 See Industry Segment Information (Note 28 to Financial Statements). 15 Chemicals manufactures a wide range of commodity and specialty products, including titanium dioxide, fluorochemicals and polymer intermediates used in the paper, plastics, chemical processing, refrigeration, textile and environmental management industries. Chemicals increased revenue and significantly improved profitability as its businesses expanded strategically in worldwide markets, led by Ti-Pure(R) titanium dioxide (TiO2) and Specialty Chemicals businesses. Specialty Chemicals realized record earnings in 1995. Increases in sales volumes and prices coupled with a continued emphasis on fixed-cost productivity led to increased profitability. Capital projects are underway for the Terathane(R) polytetramethylene ether glycol and tetrahydrofuran businesses (see page 17*) and for hydrogen peroxide and sodium cyanide. Other plants are undertaking projects to improve efficiency and operating rates. In 1995, a letter of intent was signed to form a 50-50 joint venture in Ghent, Belgium, to manufacture and market a widely used industrial solvent, n-methyl, 2-pyrrolidone (NMP). Market opportunities for NMP are growing as it can replace solvents that are being phased out for environmental reasons. The 10,000-ton-per-year Ghent plant is scheduled to start up in 1997. DuPont's new facilities in Asturias, Spain, will provide a major ingredient for NMP. Prices for Ti-Pure(R) continued to recover worldwide from the lows of the early 1990s. Building on its position as the world's leading TiO2 producer, DuPont significantly expanded its presence in Europe and Asia Pacific. A new technical service center opened in the fall in Mechelen, Belgium, to support the growing number of customers in the region. The newest TiO2 plant, in Kuan Yin, Taiwan, is helping build DuPont's reputation as a premier local supplier to Asia Pacific customers. The Ti-Pure(R) business continued its aggressive capacity expansion program to meet demand and is on track toward its objective of 185,000 tons of new capacity by 1997. This 25 percent increase in supply will be achieved through improvements at existing plants and the full-scale operation of Kuan Yin. In 1995, 24 percent of sales were from new grades of TiO2 such as Ti- Pure(R) R-706, a multipurpose pigment for the coatings industry and Ti-Pure(R) RPS VantageTM for the paper industry. In Fluorochemicals, DuPont ended production of chlorofluorocarbons (CFCs) in developed nations in 1994, except for the United States where the government had requested the company to continue production of CFCs to service existing refrigeration and air conditioning equipment. Having fulfilled that request, DuPont ceased U.S. production of CFCs at the end of 1995. With the phaseout of CFC production in developed countries, DuPont's hydrochlorofluorocarbon (HCFC) and hydrofluorocarbon (HFC) alternative Chemicals *This information is not incorporated by reference in this Report. 18 products are critical in achieving a rapid transition from CFCs. These products meet safety, environmental and performance criteria in existing systems designed for CFCs as well as in new systems. DuPont CFC alternative products include Suva(R) refrigerants, Dymel(R) aerosol propellants, Formacel(R) foam blowing agents, Vertrel(R) cleaning solvents and FETM fire extinguishing agents. In 1995, DuPont commercialized Vertrel(R) XF, a zero-ozone-depleting HFC for precision cleaning applications. A second plant is being constructed for HFC- 152a production at Corpus Christi, Texas, to meet rising demand for this product, especially in the aerosol market. This plant is scheduled for startup in late 1996. 1995 versus 1994 Sales of $4.2 billion were up 11 percent, reflecting 9 percent higher prices and 2 percent higher volumes. After-tax operating income (ATOI) was $659 million, up 71 percent from the $386 million earned in 1994, principally due to improvement in TiO2 and specialty chemicals. Excluding nonrecurring items, ATOI was $649 million, up 66 percent. 1994 versus 1993 Sales of $3.8 billion were up 6 percent on higher volumes, with most of the gains attributable to markets outside the United States. While prices were trending upward during the second half of 1994, average selling prices were slightly below 1993 levels. ATOI was $386 million, up 133 percent from the prior year, which included $116 million in nonrecurring charges, principally for asset write-downs and facility shutdowns. Excluding nonrecurring charges from both years, earnings were $391 million, up 39 percent. Outlook Continuing emphasis on cost efficiency, new products, new technologies and growth in new markets should keep the Chemicals segment on the track of worldwide profitable growth. In Specialty Chemicals, a combination of new plant capacity and improved plant utilization is a positive development, along with the new Terathane(R) technology. In Fluorochemicals, demand for CFC alternatives should be an important factor following production shutdowns at CFC facilities. Ti-Pure(R) will continue to benefit from market leadership and new regional manufacturing facilities. [CHART APPEARS HERE] SALES ($ in Billions) 1993 1994 1995 ---- ---- ---- 3.5 3.8 4.2 ATOI ($ in Millions) 1993 1994 1995 ---- ---- ---- 166 386 659 See Industry Segment Information (Note 28 to Financial Statements). 19 Engineering polymers, elastomers, fluoropolymers, ethylene polymers, finishes and performance films are produced to serve industries including 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. Polymers completed the year with record sales and earnings as businesses continued to develop strong leadership positions in their respective high- growth, end-use markets. The results reflected several factors, including cost reduction, worldwide economic growth and new products meeting customer needs for higher performance materials. Improvements were led by Elastomers, Packaging & Industrial Polymers and Engineering Polymers. In Engineering Polymers, a new $100 million plant in Singapore producing Zytel(R) nylon 6,6 resins came on stream in mid-1995. With this facility, DuPont became the first supplier to manufacture and compound nylon 6,6 resins in all the major regions of Europe, Asia and the Americas. Engineering Polymers did especially well in Europe, where revenue grew substantially and cost reduction contributed to excellent bottom-line results. Elastomers sales and earnings increased to record levels. During 1995, progress continued in the formation of a joint venture with Dow Chemical Company for the discovery, development, production and sale of thermoset and thermoplastic elastomer products, with operations scheduled to begin in the first half of 1996. The products are used in applications such as automotive hose and tubing, construction roofing, chemical processing and wire and cable insulation. Products contributed by DuPont include neoprene and Hypalon(R) synthetic rubber. Packaging & Industrial Polymers delivered increased earnings for the third consecutive year by focusing on its core strengths and customer needs. Results were buoyed by strong market conditions and continuing efforts to enhance cost-effectiveness. Growth through technological innovation and partnering with customers in development of product improvements helped the business achieve greater sales of higher-value products. Fluoropolymers, which includes Teflon(R) and Tefzel(R) fluoropolymers, and Tedlar(R) polyvinyl fluoride films achieved continued growth in revenues and earnings, with particular strength in the United States and Europe. The product mix is moving toward higher-margin copolymer products, used in a variety of engineering applications. Polymers 22 Automotive completed another solid year, with record earnings despite slower growth in U.S. motor vehicle production and a weaker automotive aftermarket. Growth in the U.S. paints and coatings industry slowed markedly, from 7 percent in 1994 to 2 percent in 1995. However, overall revenues grew 8 percent, buoyed by expanding markets in Europe, Asia Pacific and South America. DuPont doubled its interest, to 46 percent, in the restructured Renner DuPont joint venture serving automotive and industrial finishes markets in South America. 1995 versus 1994 Polymers segment sales of $7 billion were 11 percent above 1994, reflecting 6 percent higher selling prices and 5 percent higher volume. After- tax operating income (ATOI) was $841 million, up 17 percent from $717 million in 1994, reflecting improvement in most businesses. Elastomers and Packaging & Industrial Polymers had the greatest year-over-year gains. Excluding nonrecurring items, principally $38 million for estimated costs in connection with recent settlements of nationwide class-action plumbing systems lawsuits, Polymers full-year earnings were $876 million, up 24 percent. 1994 versus 1993 Segment sales of $6.3 billion were up 8 percent over 1993 and, after adjusting for businesses divested in 1993, were up 12 percent. This reflects 13 percent higher sales with increases in all regions, partly offset by 1 percent lower selling prices. ATOI was $717 million, up 305 percent. This includes significantly improved results for Engineering Polymers, Packaging & Industrial Polymers, Elastomers, Fluoropolymers, and Automotive. Excluding nonrecurring items from both years, earnings were $706 million, up 108 percent from the $340 million earned in 1993. This reflects higher sales volume and lower costs across most businesses, with a significant earnings improvement from Europe. Outlook Polymers will continue to seek opportunities for profitable growth worldwide, while focusing on improving productivity and innovation to meet customer needs. Primary growth areas will continue to be Asia Pacific and Europe. It is expected that business in North America will improve from recent levels but will not match growth rates in other parts of the world. [CHART APPEARS HERE] SALES ($ in Billions) 1993 1994 1995 ---- ---- ---- 5.9 6.3 7.0 ATOI ($ in Millions) 1993 1994 1995 ---- ---- ---- 177 717 841 See Industry Segment Informationn (Note 28 to Financial Statements). 23 FINANCIAL INFORMATION 25 Management's Discussion and Analysis 32 Responsibilities for Financial Reporting 33 Report of Independent Accountants FINANCIAL STATEMENTS 34 Consolidated Income Statement 35 Consolidated Balance Sheet 36 Consolidated Statement of Stockholders' Equity 37 Consolidated Statement of Cash Flows 38 Notes to Financial Statements 58 Supplemental Petroleum Data 64 Quarterly Financial Data 64 Consolidated Geographic Data 65 Five-Year Financial Review 24 DuPont 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 6-23) and consolidated financial statements (pages 34-57). Stock Redemption from Seagram In April 1995, the company redeemed 156 million of its common shares from Seagram for $8,775 million ($56.25 per share), including warrants valued at $439 million. Later in the second quarter the company sold approximately 27.3 million new shares for $1,747 million (average price of $63.90 per share) which was used to reduce debt incurred to finance the redemption. As a result of these transactions, average shares outstanding in 1995 were 14 percent lower than in 1994. The net effect of the redemption, after reflecting the cost of debt incurred to finance this transaction, was to increase earnings per share by about 10 percent in 1995. (See Note 20 to the Consolidated Financial Statements for additional details.) Joint Venture Formation and Divestitures In January 1995, DuPont and Dow Chemical announced their intention to form a joint venture for the discovery, development, production and sale of thermoset and thermoplastic elastomer products. DuPont will contribute six of its elastomer products including the neoprene and Hypalon(R) synthetic rubber businesses. The venture is expected initially to have annual sales of approximately $1 billion. In May 1995, the company announced its plans to sell its medical products businesses to reduce debt incurred for the Seagram share redemption. The company has agreed to sell its In-Vitro Diagnostics business to Dade International of Deerfield, Illinois, and its Diagnostic Imaging business to the Houston-based Sterling Group, Inc. Sales agreements are expected to be reached in 1996 for the two smaller remaining medical products businesses. Company earnings from ongoing operations will not be materially affected by the sales of the medical products businesses. Analysis of Operations SALES Sales in 1995 were $42.2 billion, up 7 percent from 1994. Petroleum segment sales increased 5 percent to $17.7 billion. Chemicals and Polymers segments were each up 11 percent, while Fibers and Diversified Businesses segments each increased 7 percent versus last year. Sales for the combined chemicals and specialties segments (Chemicals, Fibers, Polymers and Diversified Businesses) 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, principally reflecting sales growth in the Chemicals and Polymers segments. 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. Sales in 1994 were $39.3 billion, up 6 percent from 1993. Petroleum segment sales increased 7 percent, while the combined chemicals and specialties segments were up 6 percent. The chemicals and specialties segments sales increase was 8 percent after adjusting for businesses acquired and divested, reflecting 9 percent higher sales volume, with improvements in every region. Europe was particularly strong, with sales volume up 14 percent, reflecting the economic recovery in that region. Selling prices, while trending upward in 1994, still averaged 1 percent below average 1993 levels. Full-year currency effect on 1994 average prices versus 1993 was negligible. EARNINGS 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. DuPont 25 Management's Discussion and Analysis Earnings per share 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 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. Net income in 1994 was $2,727 million, or $4.00 per share, compared to $555 million, or $.81 per share, in 1993. Results in 1993 included nonrecurring items--principally for restructuring, write-down of intangible assets, product liability charges, asset sales and benefits from tax law changes--which totaled a net charge of $1.65 per share. For similar nonrecurring items in 1994, the total net charge was $.07 per share. Excluding these charges from both years, 1994 earnings were $2,775 million, or $4.07 per share, versus $1,677 million, or $2.46 per share, in 1993, up 65 percent. This increase principally reflects improvements in the chemicals and specialties segments from higher sales volume, lower fixed costs and a slightly lower tax rate. The coal business improved, reflecting a full year of normal operations, as compared to prior year results, which had been adversely affected by United Mine Workers strikes. Petroleum segment earnings were lower, principally reflecting reduced worldwide downstream refined product margins and the adverse impact of refinery downtime, partly offset by better results in upstream operations. TAXES ($ in millions) - ------------------------------------------------------------ 1995 1994 1993 ------ ------ ----- Income tax expense $2,097 $1,655 $ 392 Effective income tax rate (EITR) 38.9% 37.8% 40.9% - ------------------------------------------------------------ Over the last three years, the company's EITR exceeded the U.S. statutory rate of 35 percent, principally because of the higher tax rates associated with petroleum production operations outside the United States. The 1995 EITR increased about 1 percentage point from the prior year, which reflected a 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 decrease in the 1994 EITR versus 1993 reflected a lower effective tax rate for chemicals and specialities segments, and a lower proportion of higher-taxed petroleum earnings to total company earnings. The company paid total taxes of $8.3 billion in 1995, compared to $7.5 billion in 1994 and $6.4 billion in 1993. 1995 total tax payments were higher than 1994, reflecting higher taxes on income and higher petroleum excise taxes outside the United States. Tax payments in 1994 were higher than 1993, reflecting higher taxes on income and higher gas and oil excise taxes. Financial Condition and Cash Flows FINANCIAL CONDITION Borrowings at year-end 1995 were $11.7 billion, as compared to $7.6 billion and $9.3 billion in 1994 and 1993, respectively. Borrowings reached a high of $16.2 billion when the company borrowed $8.3 billion through sales of commercial paper to finance the 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, Moody's Investors Service (Moody's) lowered its rating on the company's senior long-term debt to Aa3 from Aa2. The company's commercial paper rating was not under review and was affirmed at Prime-1 by Moody's. Standard & Poor's (S&P) lowered its rating on the company's senior debt and preferred stock to AA- from AA and affirmed its commercial paper rating of A-1+. The ratings outlook by S&P remains negative. The company does not expect that these changes, or any prospective change in its credit ratings as a result of the stock redemption from Seagram, will have a material impact on its interest and debt expense or on its access to borrowings. 26 DuPont Management's Discussion and Analysis The debt ratio* at year-end 1995 was 58 percent, versus 37 percent in 1994. The company's goal is to reduce the debt ratio to about 45 percent by year-end 1996 through a combination of internally generated funds and about $2 billion in asset sales, including proceeds from the sales of the Medical Products businesses and formation of the elastomers joint venture with Dow. CASH PROVIDED BY OPERATIONS Cash provided by operations totaled $6.8 billion in 1995, about $1.1 billion more than in 1994. The 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 in 1995, adjusted for noncash charges and credits, was up about $350 million. This includes charges for depreciation, depletion and amortization which were lower by about $250 million in 1995, principally due to reduced write-downs of assets and generally lower petroleum production volumes. In 1994, cash provided by operations totaled $5.7 billion, about $300 million more than in 1993. In substance, the increase was the result of higher net income partly offset by higher cash payments for restructuring. Net income in 1994, adjusted for noncash charges and credits, was up $1.3 billion over that of 1993. Noncash charges in 1993 included asset write-downs and write-offs as part of that year's restructuring program. CAPITAL EXPENDITURES Capital expenditures of $3.5 billion in 1995, including investments in affiliates, were 11 percent above last year. In 1994, capital expenditures of $3.1 billion were 15 percent lower than in 1993. In the Petroleum segment, capital expenditures were $1.7 billion, up from $1.6 billion in 1994. The most significant Petroleum expenditures in 1995 were for completing the development of the Heidrun field in the Norwegian Sea, beginning 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 chemical and specialties segments, capital spending was $1.8 billion in 1995, up from $1.5 billion in 1994. In the United States, the company made significant expenditures to increase manufacturing capacity of Lycra(R) brand spandex, Kapton(R) polyimide and Mylar(R) polyester films, and specialty nylon yarns for airbags, as well as to modernize Zytel(R) engineering polymers processes. The company continued to strengthen and grow strategic businesses outside the United States. This included projects for Ti-Pure(R) TiO2 in the Asia Pacific region, THF/Terathane(R) polyether glycol in Spain, Tynex(R) nylon monofilament in India and China, and Zytel(R) nylon 6,6 resins in Singapore. Investments in affiliates increased nearly $70 million over 1994 as the company expanded and created several joint ventures, particularly in the Asia Pacific region and South America. The company expects capital expenditures in the range of $3.8 to $4.0 billion in 1996. The increase over 1995 levels is necessary to complete refinery projects begun in 1995 and to expand production in the fast-growing economies of Asia and Latin America. PROCEEDS FROM SALES OF ASSETS Proceeds from sales of assets were $337 million in 1995, versus $432 million in 1994 and $1.2 billion in 1993. The sale of petroleum properties, none individually significant, contributed $244 million of the 1995 total. Most of the balance came from the sale of the company's interest in a Speciality Chemicals joint venture in Japan and the sale of excess real estate. In 1994, $212 million came from the sale of petroleum properties with the balance coming principally from sales of the Sclair(R), petroleum additives and Selar(R) businesses. 1993 proceeds included $270 million from connector systems, $280 million from acrylics and $300 million from the sale of the Remington Arms Company. DIVIDENDS Dividends per share of common stock in 1995 were $2.03, versus $1.82 in 1994 and $1.76 in 1993. The company increased the regular - -------------------------------------------------------------------------------- * 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. DuPont 27 Management's Discussion and Analysis quarterly dividend from $.47 per share to $.52 per share in the second quarter of 1995. Despite the increase in the quarterly dividend rate, total dividends paid in 1995 were 4 percent lower than in 1994 due to the stock redemption from Seagram. This reduction in dividends paid, coupled with the increase in funds from operations, resulted in a common stock dividend payout in relation to cash provided by operations of 18 percent in 1995, as compared to 22 percent in 1994 and 1993. WORKING CAPITAL INVESTMENT Working capital investment (excluding cash and cash equivalents, marketable securities, and short-term borrowings and capital lease obligations) decreased about $800 million in 1995. This is largely the result of lower inventories and miscellaneous notes receivable, increases in liabilities for hedging activities (see first paragraph under "Foreign Currency") and higher interest payable for borrowings required to fund the redemption of common stock from Seagram. In 1994, working capital investment increased about $700 million, principally due to accounts receivable and inventory increases related to the exchange effect of a weaker U.S. dollar and a decrease in other accrued liabilities resulting from cash payments for Benlate(R) 50 DF fungicide settlements and for restructuring. These increases in investment were partially offset by higher accounts payable and a decrease in deferred tax asset balances as tax benefits were realized during the year. 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 1995 was 0.9:1, as compared to 1.5:1 in 1994 and 1.2:1 in 1993. The decrease in the current ratio from 1994 to 1995 is the result of largely using short-term debt to finance the share redemption from Seagram. 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 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 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. 28 DuPont Management's Discussion and Analysis 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 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 HEDGES AND TRADING The company enters into exchange-traded and over-the-counter 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. 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 futures contracts reduces the effects of price volatility, thereby protecting against adverse short-term price movements, while limiting, somewhat, the benefits of favorable short-term price movements. From time to time, on a limited basis, the company also purchases and sells petroleum-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 25 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 laws and regulations relating to the protection of the environment, and it is the company's policy to fully meet or exceed legal and regulatory requirements wherever it operates. Although some risk to the environment is associated with the company's operations, as it is with other companies engaged in similar operations, facilities are run in accordance with the highest standards of safe operation regardless of where they are located even though those standards may 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 cost of complying DuPont 29 Management's Discussion and Analysis with increasingly complex environmental laws and regulations, as well as the company's own internal programs, is significant and will continue to be so for the foreseeable future. It is not, however, expected to have a material impact on the company's competitive or financial position. The enactment of broader or more stringent environmental laws or regulations in the future, however, could lead to an upward reassessment of the potential environmental costs discussed below. In 1995 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 1996. 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 1990 Amendments to the Clean Air Act (CAA), although thus far expenditures related to the CAA Amendments have been relatively modest, amounting to about $2 million in 1995. Considerable uncertainty will remain, however, with regard to future estimates of capital expenditures until all new CAA regulatory requirements are known. Related capital costs over the next two years are currently estimated to total approximately $6 million. Estimated pretax environmental expenses charged to current operations totaled about $800 million, before insurance recoveries, in 1995 as compared to $950 million in 1994 and $1 billion in 1993. These expenses include the remediation accruals discussed below, operating, maintenance and 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 $200 million. About 80 percent of total annual expenses resulted from the operations of the company's Chemicals, Fibers, Polymers 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 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, 1995. It is difficult to develop reasonable estimates of future CERCLA and RCRA site remediation costs because of the inherent uncertainty associated with the remediation process. Remediation activities tend to occur over a relatively long period of time and vary in cost substantially 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. 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, 1995, the company's balance sheet included an accrued liability of $602 million as compared to $616 million and $522 million at year-end 1994 and 1993, respectively. Approximately 77 percent of the company's environmental reserve at December 31, 1995 was attributable to RCRA and similar remediation liabilities and 23 percent to CERCLA liabilities. During 1995, remediation accruals of $82 million, offset by $161 million in insurance proceeds, resulted in a credit to income of $79 million, compared to accruals of $185 million and $183 million in 1994 and 1993, respectively. 30 DuPont Management's Discussion and Analysis REMEDIATION EXPENDITURES RCRA extensively regulates the treatment, storage and disposal of hazardous waste. The law requires that companies operating hazardous waste treatment, storage or disposal facilities be permitted and must, as part of such permit, undertake an assessment of environmental conditions at the facility. If conditions warrant, the companies may be required to remediate contamination caused by prior operations. The RCRA corrective action program has a substantially different effect on the company than does CERCLA in that the cost of RCRA corrective action activities is typically borne solely by the company. The company anticipates that significant ongoing expenditures for RCRA corrective actions 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 $94 million in 1995, $70 million in 1994 and $90 million in 1993. 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. In addition, the company has 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 waste treatment or disposal sites that typically are not company owned but allegedly contain wastes attributable to the company's past operations. As of December 31, 1995, the company had been notified of potential liability under CERCLA or state law at about 327 sites around the United States. The remediation process is actively under way at one stage or another at about 158 of those sites. In addition, the company has resolved its liability at 73 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 16 new sites during 1995 compared with 17 similar notices in 1994 and 24 in 1993. The company's expenditures associated with CERCLA and similar state remediation activities were approximately $25 million in 1995, $21 million in 1994 and $36 million in 1993. 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. The process of estimating CERCLA remediation costs, the financial viability of other PRPs and the PRPs' respective shares of liability is ongoing, and, thus far, the estimates have not been subject to material uncertainty or dispute. Moreover, 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. The company's general experience has been that, in most cases, its share of estimated costs at any given site has trended downward over time. 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 $119 million in 1995, $91 million in 1994 and $126 million in 1993. 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 that exists as to the cost and timing of expenditures. The company is actively pursuing claims against insurers with respect to CERCLA and RCRA liabilities. DuPont 31 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 accounting controls at December 31, 1995 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 accounting controls to the extent they deem necessary. Their report is shown on page 33. The adequacy of the company's internal accounting 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 John A. Krol President and Chief Executive Officer /s/ Charles L. Henry Charles L. Henry Executive Vice President DuPont Finance and Chief Financial Officer February 15, 1996 32 DuPont 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 34-57 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, 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 15, 1996 DuPont 33 Financial Statements E.I. du Pont de Nemours and Company and Consolidated Subsidiaries Consolidated Income Statement (Dollars in millions, except per share)
- ---------------------------------------------------------------------------------------------------- 1995 1994 1993 ------- ------- ------- Sales* $42,163 $39,333 $37,098 Other Income (Note 2) 1,099 913 743 ------- ------- ------- Total 43,262 40,246 37,841 ------- ------- ------- Cost of Goods Sold and Other Operating Charges 23,499 21,977 21,624 Selling, General and Administrative Expenses 2,995 2,875 3,081 Depreciation, Depletion and Amortization 2,722 2,976 2,833 Exploration Expenses, Including Dry Hole Costs and Impairment of Unproved Properties 331 357 361 Research and Development Expense 1,067 1,047 1,132 Interest and Debt Expense (Note 3) 758 559 594 Taxes Other Than on Income* (Note 4) 6,596 6,215 5,423 Restructuring (Note 5) (96) (142) 1,621 Write-Down of Intangible Assets (Note 5) - - 214 ------- ------- ------- Total 37,872 35,864 36,883 ------- ------- ------- Earnings Before Income Taxes 5,390 4,382 958 Provision for Income Taxes (Note 6) 2,097 1,655 392 ------- ------- ------- Income Before Extraordinary Item 3,293 2,727 566 Extraordinary Charge from Early Extinguishment of Debt (Note 7) - - (11) ------- ------- ------- Net Income $ 3,293 $ 2,727 $ 555 ======= ======= ======= Earnings Per Share of Common Stock (Note 8) Income Before Extraordinary Item $ 5.61 $ 4.00 $ .83 Extraordinary Charge from Early Extinguishment of Debt (Note 7) - - (.02) ------- ------- ------- Net Income $ 5.61 $ 4.00 $ .81 ======= ======= =======
* Includes petroleum excise taxes of $5,655, $5,291 and $4,477 in 1995, 1994 and 1993, respectively. See pages 38-57 for Notes to Financial Statements. 34 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 1995 1994 - -------------------------------------------------------------------------------------- Assets Current Assets Cash and Cash Equivalents (Note 9) $ 1,408 $ 856 Marketable Securities (Note 9) 47 253 Accounts and Notes Receivable (Note 10) 4,912 5,213 Inventories (Note 11) 3,737 3,969 Prepaid Expenses 276 259 Deferred Income Taxes (Note 6) 575 558 ------- ------- Total Current Assets 10,955 11,108 ------- ------- Property, Plant and Equipment (Note 12) 50,385 48,838 Less: Accumulated Depreciation, Depletion and Amortization 29,044 27,718 ------- ------- 21,341 21,120 ------- ------- Investment in Affiliates (Note 13) 1,846 1,662 Other Assets (Notes 6 and 14) 3,170 3,002 ------- ------- Total $37,312 $36,892 ======= ======= Liabilities and Stockholders' Equity Current Liabilities Accounts Payable (Note 15) $ 2,636 $ 2,734 Short-Term Borrowings and Capital Lease Obligations (Note 16) 6,157 1,292 Income Taxes (Note 6) 470 409 Other Accrued Liabilities (Note 17) 3,468 3,130 ------- ------- Total Current Liabilities 12,731 7,565 Long-Term Borrowings and Capital Lease Obligations (Note 18) 5,678 6,376 Other Liabilities (Note 19) 8,454 8,438 Deferred Income Taxes (Note 6) 1,783 1,494 ------- ------- Total Liabilities 28,646 23,873 ------- ------- Minority Interests in Consolidated Subsidiaries 230 197 ------- ------- Stockholders' Equity (see page 36) Preferred Stock 237 237 Common Stock, $.60 par value; 900,000,000 shares authorized; Issued at December 31, 1995--735,042,724; 1994--681,004,944 441 408 Additional Paid-In Capital 8,689 4,771 Reinvested Earnings 9,503 7,406 Common Stock Held in Trust for Unearned Employee Compensation and Benefits, at Market (Shares: December 31, 1995--23,546,176) (1,645) - Common Stock Held in Treasury, at Cost (Shares: December 31, 1995--156,000,000) (8,789) - ------- ------- Total Stockholders' Equity 8,436 12,822 ------- ------- Total $37,312 $36,892 ======= =======
See pages 38-57 for Notes to Financial Statements. DuPont 35 Financial Statements E.I. du Pont de Nemours and Company and Consolidated Subsidiaries Consolidated Statement of Stockholders' Equity (Dollars in millions, except per share)
- ---------------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 --------------------- --------------------- --------------------- 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 (Notes 20 and 21), $.60 par value; 900,000,000 shares authorized; issued: Balance January 1 681,004,944 408 677,577,437 407 675,008,236 405 Issuance of Shares in Connection with: Public and Private Offerings 27,339,375 16 - - - - Establishment of Flexitrust 24,000,000 14 - - - - Compensation Plans 2,698,405 3 3,427,507 1 2,569,201 2 ----------- ------- ----------- ------- ----------- ------- Balance December 31 735,042,724 441 681,004,944 408 677,577,437 407 ----------- ------- ----------- ------- ----------- ------- Additional Paid-In Capital (Notes 20 and 21) Balance January 1 4,771 4,660 4,551 Changes due to: Public and Private Offerings 1,731 - - Common Stock Held by Flexitrust 1,662 - - Shares Issued by Flexitrust (19) - - Issuance of Warrants to Purchase Common Stock 439 - - Compensation Plans 105 111 109 ------- ------- ------- Balance December 31 8,689 4,771 4,660 ------- ------- ------- Reinvested Earnings Balance January 1 7,406 5,926 6,572 Net Income 3,293 2,727 555 ------- ------- ------- 10,699 8,653 7,127 ------- ------- ------- Preferred Dividends (10) (10) (10) Common Dividends (1995--$2.03; 1994--$1.82; 1993--$1.76) (1,186) (1,237) (1,191) ------- ------- ------- Total Dividends (1,196) (1,247) (1,201) ------- ------- ------- Balance December 31 9,503 7,406 5,926 ------- ------- ------- Less: Common Stock Held in Trust for Unearned Employee Compensation and Benefits (Flexitrust), at Market (Note 20) Balance January 1 - - - - - - Establishment of Flexitrust 24,000,000 1,626 - - - - Shares Issued (453,824) (31) - - - - Adjustment to Market Value 50 - - - - ----------- ------- ----------- ------- ----------- ------- Balance December 31 23,546,176 1,645 - - - - ----------- ------- ----------- ------- ----------- ------- Less: Common Stock Held in Treasury, at Cost (Note 20) 156,000,000 8,789 - - - - ----------- ------- ----------- ------- ----------- ------- Total Stockholders' Equity $ 8,436 $12,822 $11,230 ======= ======= =======
See pages 38-57 for Notes to Financial Statements. 36 DuPont Financial Statements E.I. du Pont de Nemours and Company and Consolidated Subsidiaries
Consolidated Statement of Cash Flows (Dollars in millions) - ------------------------------------------------------------------------------------------------- 1995 1994 1993 ---- ---- ---- Cash and Cash Equivalents at Beginning of Year $ 856 $ 1,109 $ 1,640 ------- ------- ------- Cash Provided by Operations Net Income 3,293 2,727 555 Adjustments to Reconcile Net Income to Cash Provided by Operations: Depreciation, Depletion and Amortization 2,722 2,976 2,833 Dry Hole Costs and Impairment of Unproved Properties 121 152 201 Other Noncash Charges and Credits--Net (67) (140) 854 Decrease in Operating Assets: Accounts and Notes Receivable 151 30 103 Inventories and Other Operating Assets 21 19 664 Increase (Decrease) in Operating Liabilities: Accounts Payable and Other Operating Liabilities (8) (432) 686 Accrued Interest and Income Taxes (Notes 3 and 6) 528 332 (516) ------- ------- ------- Cash Provided by Operations 6,761 5,664 5,380 ------- ------- ------- Investment Activities (Note 22) Purchases of Property, Plant and Equipment (3,240) (3,050) (3,621) Investments in Affiliates (249) (90) (70) Payments for Businesses Acquired (5) (5) (409) Proceeds from Sales of Assets 337 432 1,160 Net Decrease (Increase) in Short-Term Financial Instruments 500 (379) (85) Miscellaneous--Net (56) (41) (53) ------- ------- ------- Cash Used for Investment Activities (2,713) (3,133) (3,078) ------- ------- ------- Financing Activities Dividends Paid to Stockholders (1,196) (1,247) (1,201) Net Increase (Decrease) in Short-Term Borrowings 2,172 (517) (2,024) Long-Term and Other Borrowings: Receipts 7,640 824 1,806 Payments (5,642) (2,032) (1,392) Acquisition of Treasury Stock (Note 20) (8,350) - - Net Proceeds from Issuance of Common Stock through Public and Private Offerings (Note 20) 1,747 - - Common Stock Issued in Connection with Compensation Plans 58 94 67 Cash Used for Financing Activities (3,571) (2,878) (2,744) ------- ------- ------- Effect of Exchange Rate Changes on Cash 75 94 (89) ------- ------- ------- Cash and Cash Equivalents at End of Year $ 1,408 $ 856 $ 1,109 ------- ------- ------- Increase (Decrease) in Cash and Cash Equivalents $ 552 $ (253) $ (531) ======= ======= ======= See pages 38-57 for Notes to Financial Statements.
DuPont 37 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 will be 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 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 on a straight-line basis over their estimated useful lives. Goodwill is amortized over periods up to 40 years on the straight-line method. The company continually 38 DuPont Notes to Financial Statements (Dollars in millions, except per share) evaluates the reasonableness of its amortization for 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. Costs related to environmental remediation are charged to expense. Environmental costs are capitalized if the costs increase the value of the property and/or mitigate or prevent contamination from future operations. 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 of foreign subsidiaries 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 occur. Effective January 1, 1996, management has 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 will be translated into U.S. dollars at end-of-period exchange rates, and resultant translation adjustments will be reported in a separate component of stockholders' equity. Assets and liabilities denominated in other than the local currency will be 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, will be included in income in the period in which they occur. Income and expenses will be 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, net of their related tax effects, are included in income in the period in which they occur. DuPont 39 Notes to Financial Statements (Dollars in millions, except per share) In addition, 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 specific commitment hedges are deferred and included in the functional currency measurement of the related foreign currency-denominated transactions. Forward exchange contracts that do not hedge monetary assets and liabilities or firm foreign currency commitments are reported at market value, with resultant gains or losses included in income in the period they occur. 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 transaction. From time to time, on a limited basis, the company also purchases and sells petroleum-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 1995 classifications. 2. Other Income - -------------------------------------------------------------------------------- 1995 1994 1993 ------ ----- ----- Royalty income $ 110 $ 95 $ 111 Interest income, net of miscellaneous interest expense 178 111 160 Equity in earnings of affiliates (see Note 13) 545 348 121 Sales of assets 102 92 198 Pipeline tariff revenue 71 75 80 Miscellaneous income and expenses--net 93 192 73 ------ ----- ----- $1,099 $ 913 $ 743 ====== ===== ===== 3. Interest and Debt Expense - -------------------------------------------------------------------------------- 1995 1994 1993 ----- ----- ---- Interest and debt cost incurred $ 929 $ 703 $825 Less: Interest and debt cost capitalized 170 143 194 Foreign currency adjustments* 1 1 37 ----- ----- ---- $ 758 $ 559 $594 ===== ===== ==== * Represents exchange gains associated with local currency borrowings in hyperinflationary economies. These amounts effectively offset the related inflationary interest expense arising from currency devaluations. Interest paid (net of amounts capitalized) was $688 in 1995, $598 in 1994 and $614 in 1993. 40 DuPont Notes to Financial Statements (Dollars in millions, except per share) 4. Taxes Other Than on Income 1995 1994 1993 ---- ---- ---- Petroleum excise taxes (also included in Sales): U.S. $1,060 $1,049 $ 803 Non-U.S. 4,595 4,242 3,674 Payroll taxes 433 424 443 Property taxes 214 202 201 Import duties 166 159 151 Production and other taxes 128 139 151 ------ ------ ------ $6,596 $6,215 $5,423 ====== ====== ====== 5. Restructuring Charges and Write-Down of Intangible Assets Restructuring charges are directly related to management decisions to reduce worldwide employment levels and realign worldwide production and support facilities in order to improve productivity and competitiveness. In the third quarter of 1993, the company recorded a restructuring charge of $1,621. The principal component of this charge related to employee separation costs of $665. This charge was for the involuntary and voluntary termination of approximately 10,900 employees, and was based on plans that identified the number of employees to be terminated, their functions and their businesses. Substantially all of this charge was for estimated termination payments and enhanced benefit costs for terminated employees. Adjustments to this portion of the restructuring charge were made in 1994 and 1995 to reflect a reduction in the number of employees to be terminated to about 9,700. At year-end 1995, the reserve balance for employees not yet terminated was $22. The restructuring plans have been announced and affected employees, all outside the United States, have been notified. The remaining portion of the 1993 restructuring charge, $956, was related to asset write-downs and facility shutdowns, principally associated with the printing and publishing business and certain North American petroleum-producing properties. The related reserve balance at year-end 1995 was $23. 1995 earnings included a $96 benefit associated with adjustments of restructuring provisions established in September 1993, principally $61 related to lower estimates for employee separation costs. 1994 earnings included a similar benefit of $167 ($122 for asset write-downs and facility shutdowns and $45 for lower estimates for employee separation costs) partly offset by an additional $25 charge for the 1992 restructuring. A charge of $214 was recorded in the third quarter 1993 for the write-down of intangible assets (technology and goodwill) associated with a series of acquisitions made by the printing and publishing business in 1989. Such action was taken when it became probable that undiscounted future cash flows would not be adequate to support carrying values. 6. Provision for Income Taxes - ------------------------------------------------------------------------------- 1995 1994 1993 ---- ---- ---- Current tax expense: U.S. federal $ 617 $ 337 $ 321 U.S. state and local 36 47 21 Non-U.S. 1,077 1,023 758 ------ ------ ------ Total 1,730 1,407 1,100 ------ ------ ------ Deferred tax expense: U.S. federal 379 497 (486) U.S. state and local 22 (55) (53) Non-U.S. (25) (136) (198) Total 376 306 (737) ------ ------ ------ Other/1/ (9) (58) 29 ------ ------ ------ Provision for Income Taxes (Excluding Extraordinary Item) 2,097 1,655 392 Extraordinary Item - - (7) Stockholders' Equity/2/ (30) (26) (20) ------ ------ ------ Total Provision $2,067 $1,629 $ 365 ====== ====== ====== 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. Exchange gains and losses, net of their related tax effects, were not material in the periods presented. 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 $1,649 in 1995, $1,344 in 1994 and $896 in 1993. DuPont 41 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 (excluding 1993 extraordinary item) are as follows: 1995 1994 1993 ---- ---- ---- Depreciation $ 152 $ 144 $ (105) Accrued employee benefits 62 (19) (69) Other accrued expenses 118 185 (346) Intangible drilling costs (23) (48) (68) Inventory (71) (87) 109 Unrealized exchange gains/(losses) (1) 103 (22) Investment in subsidiaries and affiliates - (7) (4) Other temporary differences 40 33 30 Tax loss/tax credit carryforwards 18 90 4 Valuation allowance change--net 81 17 8 Tax rate changes - - (274) Tax status changes - (105) - ------ ------ ------ $ 376 $ 306 $ (737) ====== ====== ====== The significant comonents of deferred tax assets and liabilities at December 31, 1995 and 1994 are as follows: - -------------------------------------------------------------------------------- 1995 1994 ---- ---- Deferred Tax Asset Liability Asset Liability - ------------ ----- --------- ----- --------- Depreciation $ - $3,120 $ - $2,940 Accrued employee benefits 2,920 738 2,873 630 Other accrued expenses 668 8 782 4 Intangible drilling costs - 266 - 289 Inventory 236 303 174 310 Unrealized exchange gains 21 41 - 19 Tax loss/tax credit carryforwards 446 - 395 - Investment in subsidiaries and affiliates 43 131 37 125 Other 376 880 331 835 ------ ------ ------ ------ Total $4,710 $5,487 $4,592 $5,152 ====== ====== Less: Valuation allowance (422) (357) ------ ------ Net $4,288 $4,235 ====== ====== Current deferred tax liabilities (included in the Consolidated Balance Sheet caption "Income Taxes") were $66 and $63 at December 31, 1995 and 1994, respectively. In addition, deferred tax assets of $75 and $82 were included in Other Assets at December 31, 1995 and 1994, respectively (see Note 14). An analysis of the company's effective income tax rate (excluding 1993 extraordinary item) follows: - -------------------------------------------------------------------------------- 1995 1994 1993 ---- ---- ---- Statutory U.S. federal income tax rate 35.0% 35.0% 35.0% Higher effective tax rate on non-U.S. operations (principally Petroleum) 6.8 9.9 51.9 Lower effective tax rate on operations within U.S. possessions (1.0) (1.1) (5.6) Alternative fuels credit (1.1) (2.1) (6.9) Tax rate changes - - (28.6)/1/ Tax status changes - (2.4)/2/ - Other--net (0.8) (1.5) (4.9) ----- ----- ----- Effective income tax rate 38.9% 37.8% 40.9% ===== ===== ===== 1 Reflects a net tax benefit of $265, arising principally from U.K. Petroleum Revenue Tax law revisions. 2 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. - ------------------------------------------------------------------------------- 1995 1994 1993 ---- ---- ---- U.S. (including exports) $3,066 $2,651 $ (167) Other regions 2,324 1,731 1,125 ------ ------ ------ $5,390 $4,382 $ 958 ====== ====== ====== At December 31, 1995, unremitted earnings of non-U.S. subsidiaries totaling $5,083 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. 42 DuPont Notes to Financial Statements (Dollars in millions, except per share) 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, 1995, the tax effect of such carryforwards approximated $446. Of this amount, $132 has no expiration date, $57 expires in 1996, $197 expires after 1996 but before 2002 and $60 expires between 2002 and 2011. 7. Extraordinary Charge from Early Extinguishment of Debt In 1993, there was a charge of $11, net of a tax benefit of $7, for the redemption of $285 of outstanding debentures. This charge principally represents call premium. 8. Earnings Per Share of Common Stock Earnings per share are calculated on the basis of the following average number of common shares outstanding: 1995--585,107,476; 1994--679,999,916; and 1993-- 676,622,115. The 23,546,176 shares held by the Flexitrust at December 31, 1995 are not considered outstanding in computing the foregoing 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 Note 20). 9. 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. 10. Accounts and Notes Receivable - -------------------------------------------------------------------------------- December 31 1995 1994 - ----------- ---- ---- Trade--net of allowances of $78 in 1995 and $86 in 1994 $4,292 $4,244 Miscellaneous 620 969 ------ ------ $4,912 $5,213 ====== ====== Accounts and notes receivable are carried at amounts which approximate fair value. See Note 28 for a description of business segment markets and associated concentrations of credit risk. 11. Inventories - -------------------------------------------------------------------------------- December 31 1995 1994 - ----------- ---- ---- Chemicals $ 248 $ 237 Fibers 569 677 Polymers 573 617 Petroleum 1,293 1,365 Diversified Businesses 1,054 1,073 ------ ------ $3,737 $3,969 ====== ====== The excess of replacement or current cost over stated value of inventories for which cost has been determined under the LIFO method approximated $885 and $819 at December 31, 1995 and 1994, 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, 1995 and 1994. The liquidation of LIFO inventory quantities carried in the aggregate at lower costs prevailing in prior years increased 1993 net income by about $50 ($.07 per share). DuPont 43 Notes to Financial Statements (Dollars in millions, except per share) 12. Property, Plant and Equipment - -------------------------------------------------------------------------------- December 31 1995 1994 - ----------- ---- ---- Chemicals $ 5,311 $ 5,086 Fibers 10,908 10,574 Polymers 8,055 7,827 Petroleum 18,508 17,999 Diversified Businesses 5,468 5,377 Corporate 2,135 1,975 ------- ------- $50,385 $48,838 ======= ======= Property, plant and equipment includes gross assets acquired under capital leases of $144 and $148 at December 31, 1995 and 1994, respectively; related amounts included in accumulated depreciation, depletion and amortization were $87 and $88 at December 31, 1995 and 1994, respectively. 13. 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. and The DuPont Merck Pharmaceutical Company; DuPont has a 50 percent equity ownership in each of these companies. Dividends received from equity affiliates were $671 in 1995, $326 in 1994 and $243 in 1993. - -------------------------------------------------------------------------------- Year Ended December 31 ---------------------- Results of operations 1995 1994 1993 - --------------------- ---- ---- ---- Sales/1/ $10,447 $ 9,161 $ 8,030 Earnings before income taxes 1,084 947 446 Net Income 828 732 252 DuPont's equity in earnings of affiliates (see Note 2) 545/2/ 348 121 ====== ======= ======= 1 Includes sales to DuPont of $802 in 1995, $828 in 1994 and $752 in 1993. 2 Reflects a more favorable allocation of DuPont Merck operating income to recognize the performance of assets originally contributed to the venture by DuPont. - ------------------------------------------------------------------------------- December 31 ----------- Financial position 1995 1994 - ------------------ ---- ---- Current assets $ 3,744 $ 3,254 Noncurrent assets 8,852 8,147 ------- ------- Total assets $12,596 $11,401 ------- ------- Short-term borrowings* $ 935 $ 648 Other current liabilities 2,434 2,065 Long-term borrowings* 2,652 2,590 Other long-term liabilities 2,847 2,934 ------- ------- Total liabilities $ 8,868 $ 8,237 ------- ------- DuPont's investment in affiliates (includes advances) $ 1,846 $ 1,662 ======= ======= * DuPont's pro rata interest in total borrowings was $1,401 in 1995 and $1,220 in 1994, of which $700 in 1995 and $599 in 1994 was guaranteed by the company. These amounts are included in the guarantees disclosed in Note 26. 14. Other Assets - ------------------------------------------------------------------------------- December 31 1995 1994 - ----------- ---- ---- Prepaid pension cost (see Note 24) $ 1,724 $ 1,502 Intangible assets 200 225 Other securities and investments 554 508 Deferred income taxes (see Note 6) 75 82 Miscellaneous 617 685 ------- ------- $ 3,170 $ 3,002 ======= ======= Other securities and investments includes $435 and $351 at December 31, 1995 and 1994, 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. 15. Accounts Payable - -------------------------------------------------------------------------------- December 31 1995 1994 - ----------- ---- ---- Trade $1,761 $1,847 Payables to banks 281 321 Compensation awards 242 222 Miscellaneous 352 344 ------ ------ $2,636 $2,734 ====== ====== 44 DuPont Notes to Financial Statements (Dollars in millions, except per share) 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. 16. Short-Term Borrowings and Capital Lease Obligations - -------------------------------------------------------------------------------- December 31 1995 1994 - ----------- ---- ---- Commercial paper/1/ 1,247 $ 450 Private placement commercial paper 3,686 - Bank borrowings: U.S. dollars 9 - Other currencies/2/ 290 264 Medium-term notes payable within one year 316 519 Long-term borrowings payable within one year 551 - Industrial development bonds payable on demand 51 51 Capital lease obligations 7 8 ------ ------ $6,157 $1,292 ====== ====== 1 An interest rate swap effectively converted $50 of these floating rate borrowings to a fixed rate obligation at December 31, 1995 and 1994, as part of the program to manage the fixed and floating interest rate mix of total borrowings. The interest rate was 8.3 percent and the remaining maturity was 0.2 years at December 31, 1995. 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 $6,200 and $1,300 at December 31, 1995 and 1994, respectively. The increase in estimated fair value in 1995 was primarily due to higher short-term borrowing levels associated with the redemption of DuPont stock from Seagram. Unused short-term bank credit lines were approximately $5,400 and $1,360 at December 31, 1995 and 1994, 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, 1995 and 1994 was 6.1 percent and 5.9 percent, respectively. 17. Other Accrued Liabilities - -------------------------------------------------------------------------------- December 31 1995 1994 - ----------- ---- ---- Payroll and other employee benefits $ 687 $ 725 Taxes other than on income 399 422 Postretirement benefits other than pensions (see Note 23) 345 333 Restructuring charges 45 219 Miscellaneous 1,992 1,431 ------ ------ $3,468 $3,130 ====== ====== 18. Long-Term Borrowings and Capital Lease Obligations - -------------------------------------------------------------------------------- December 31 1995 1994 - ----------- ---- ---- U.S. dollar: Industrial development bonds due 2001-2024 $ 294 $ 295 Medium-term notes due 1996-2005/1/ 838 592 8.50% notes due 1996 - 251 8.45% notes due 1996 - 300 8.65% notes due 1997 300 300 8.50% notes due 1998 301 302 7.50% notes due 1999 303 303 9.15% notes due 2000/2/ 305 306 6.00% debentures due 2001 ($660 face value, 13.95% yield to maturity) 451 430 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 331 331 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 1996-2008/4/ 294 725 Capital lease obligations 106 86 ------ ------ $5,678 $6,376 ====== ====== 1 Average interest rates at December 31, 1995 and 1994 were 6.8 percent and 7.5 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 DuPont 45 Notes to Financial Statements (Dollars in millions, except per share) 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, 1995 and 1994 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. 4 1994 includes a loan of 190 million pounds sterling ($296 at the 1994 year- end exchange rate) with a floating money market-based interest rate. Average interest rates on industrial development bonds and on other loans (various currencies) were 6.1 percent and 6.5 percent at December 31, 1995, and 6.1 percent and 7.3 percent at December 31, 1994. Maturities of long-term borrowings, together with sinking fund requirements in each of the four years after December 31, 1996 are as follows: 1997--$665 1999--$392 1998--$412 2000--$566 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 $6,500 and $6,600 at December 31, 1995 and 1994, respectively. 19. Other Liabilities - ------------------------------------------------------------------------------- December 31 1995 1994 - ----------- ------ ------ Accrued postretirement benefits cost (see Note 23) $6,022 $6,058 Reserves for employee-related costs 1,080 937 Miscellaneous 1,352 1,443 ------ ------ $8,454 $8,438 ====== ====== 20. 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. These shares were held by the company as Treasury Stock at December 31, 1995. All of the warrants issued in this transaction were outstanding at December 31, 1995. In general, the warrants allow Seagram to purchase 48 million DuPont common shares for a 60-day period ending on October 6, 1997 at a price of $89 per share; 54 million shares for a 60-day period ending October 6, 1998 at a price of $101 per share; and 54 million shares for a 60-day period ending on October 6, 1999 at a price of $114 per share. The warrants are exercisable sooner in connection with certain significant corporate events. The warrants are not transferable until May 15, 1996. Following such date, the company would have the right to buy the warrants from Seagram before Seagram would be permitted to transfer the warrants to a third party. Any warrants that are transferred to non-affiliates of Seagram would be exercisable at any time prior to their expiration. The warrants contain standard anti-dilution adjustments. 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 (or $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, DuPont issued 24 million shares of common stock to the Flexitrust in return for a $1,612 promissory note and $14 in cash. At December 31, 1995, 23,546,176 shares with a market value of $1,645 were held by the Flexitrust. 46 DuPont Notes to Financial Statements (Dollars in millions, except per share) 21. Compensation Plans 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. Common shares subject to option under these programs are as follows: - -------------------------------------------------------------------------------- 1995 1994 1993 ----------- ---------- ----------- Outstanding at January 1 6,674,352 8,916,709 10,525,892 Options granted 9,845,700 - - Average price $ 57.00 - - Options exercised 1,324,222 2,199,142 1,534,403 Average price $ 38.85 $ 38.25 $ 38.25 Options expired or terminated 173,242 43,215 74,780 At December 31: Options outstanding 15,022,588 6,674,352 8,916,709 Average price $ 50.30 $ 38.25 $ 38.25 Options exercisable 5,367,088 6,674,352 8,916,709 ============ ========== =========== Awards for 1995 under the DuPont Stock Performance Plan (granted to key employees in 1996) consisted of 2,682,079 options to acquire DuPont common stock at fair market value of $79.25 per share. Payment of the purchase price must be made in cash or in DuPont common stock (at fair market value on the date of exercise). Common shares subject to option under this Plan are as follows: - -------------------------------------------------------------------------------- 1995 1994 1993 ----------- ----------- ----------- Outstanding at January 1 14,694,900 14,553,921 13,594,606 Options granted 3,396,161 2,324,720 2,160,360 Average price $ 56.10 $ 52.50 $ 46.01 Options exercised 2,228,978 1,954,064 1,092,473 Average price $ 34.49 $ 32.46 $ 27.77 Options expired or terminated 129,868 229,677 108,572 At December 31: Participants 1,555 1,318 1,226 Options outstanding 15,732,215 14,694,900 14,553,921 Average price $ 45.07 $ 40.83 $ 37.62 Options exercisable 12,345,904 12,384,780 12,418,711 Shares available for option 28,285,230 27,527,631 26,215,426 =========== =========== =========== Expiration dates for outstanding options under the Corporate Sharing Programs and DuPont Stock Performance Plan range from February 10, 1996 to October 24, 2005. The company does not plan to adopt the measurement principles of Financial Accounting Standards Board Statement No. 123 "Accounting for Stock-Based Compensation." The disclosures required by this standard will be included in a note to the 1996 financial statements. 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 $240 for 1995, $208 for 1994 and $87 for 1993. 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 $240 in 1995, $220 in 1994 and $89 in 1993. In accordance with the terms of the Variable Compensation Plan and similar plans of subsidiaries, 1,209,475 shares of common stock were awaiting delivery from awards for 1995 and prior years. 22. Investment Activities In 1995 and 1994, there were no individually material items included in Proceeds from Sales of Assets. Proceeds from sales in 1993 principally include $270 from the sale of the connector systems business, $280 from the sale of the acrylics business and $300 from the sale of the Remington Arms Company. Assets sold in connection with these sales amounted to $656, of which $336 was property, plant and equipment with the remainder divided about equally between inventories and other current assets. Payments for businesses acquired in 1993 include $380 as part of the acquisition of Imperial Chemical Industries P.L.C.'s worldwide nylon business. In addition to the cash payment, a deferred payment of $93 was reflected in Other Liabilities. Of the total purchase price, $259 and $170 were reflected in property, plant and equipment and inventories, respectively. DuPont 47 Notes to Financial Statements (Dollars in millions, except per share) 23. 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 the benefit plans, the company reserves the right to change, modify or discontinue the plans. Other postretirement benefits cost include the following components: - -------------------------------------------------------------------------------- Health Life Care Insurance Total ------ --------- ----- 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 ===== ==== ===== 1993 Service cost--benefits allocated to current period $ 55 $ 12 $ 67 Interest cost on accumulated postretirement benefit obligation 305 69 374 Amortization of net gains and prior service credit (94) - (94) ----- ---- ----- Other postretirement benefits cost $ 266 $ 81 $ 347 ===== ==== ===== The lower health care costs in 1995 versus 1994 and 1993 were due to the discount rate and health care trends used to determine the accumulated postretirement benefit obligation. The following provides a reconciliation of the accumulated postretirement benefit obligation to the liabilities reflected in the balance sheet at December 31, 1995 and 1994: - ------------------------------------------------------------------------------- Health Life Care Insurance Total ------ --------- ----- 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 17) $ 345 ======= Amount included in Other Liabilities (see Note 19) $ 6,022 ======= 1994 Accumulated postretirement benefit obligation for: Current pensioners and survivors $(2,366) $ (570) $(2,936) Fully eligible employees (139) - (139) Other employees (674) (319) (993) ------- ------- ------- (3,179) (889) (4,068) Unrecognized net loss/(gain) (1,267) 3 (1,264) Unrecognized prior service credit (1,059) - (1,059) ------- ------- ------- Accrued postretirement benefits cost $(5,505) $ (886) $(6,391) ======= ======= ======= Amount included in Other Accrued Liabilities (see Note 17) $ 333 ======= Amount included in Other Liabilities (see Note 19) $ 6,058 ======= The health care accumulated postretirement benefit obligation was determined at December 31, 1995 and at December 31, 1994 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 7.25 percent at December 31, 1995 and 9 percent at December 31, 1994. A one-percentage-point increase in the health care cost escalation rate would have increased the accumulated postretirement benefit obligation by $293 at December 31, 1995, and the 1995 other postretirement benefit cost would have increased by $30. 48 DuPont Notes to Financial Statements (Dollars in millions, except per share) 24. 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:
- ----------------------------------------------------------------------------------------- 1995 1994 1993 ---- ---- ---- Service cost--benefits earned during the period $ 292 $ 380 $ 301 Interest cost on projected benefit obligation 1,140 1,079 1,038 Return on assets: Actual (gain)/loss $(3,417) $ 214 $(1,880) Deferred gain/(loss) 2,082 (1,335) (1,540) (1,326) 617 (1,263) ------- ------- ------ ------- ------- ------- Amortization of net gains and prior service cost (108) (91) (123) Net pension cost/(credit) $ (11) $ 42 $ (47) ======= ======= =======
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.
- --------------------------------------------------------------------------------------------------------------------- The funded status of these plans was as follows: December 31 1995 1994 - ----------- ---- ---- Actuarial present value of: Vested benefit obligation $ (12,543) $ (10,342) Accumulated benefit obligation $ (13,128) $ (10,744) Projected benefit obligation $(15,404) $ (12,303) Plan assets at fair value 16,691 14,223 Excess of assets over projected benefit obligation 1,287 1,920 Unrecognized net (gains)/1/ (73) (877) Unrecognized prior service cost 510 459 Prepaid pension cost/2/ $ 1,724 $ 1,502
1 Includes the unamortized balance of $(1,168) and $(1,339) at December 31, 1995 and 1994, 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 $966 and $820 and the related projected benefit obligation of $1,474 and $1,213 at December 31, 1995 and 1994, respectively. DuPont 49 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 7.25 percent at December 31, 1995 and 9 percent at December 31, 1994, 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 8,078,309 shares of DuPont at December 31, 1995, and U.S. government obligations. For non-U.S. plans, no one of which was material, similar economic assumptions were used. 25. Derivatives and Other Hedging Instruments 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 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. Foreign Currency 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. Principal foreign currency exposures and related hedge positions at December 31, 1995 were as follows: Open Contracts To Buy/(Sell) Net Monetary Foreign Currency Net Asset/(Liability) ----------------------- After-Tax Currency Exposure Pretax After-Tax Exposure - ------------- ----------------- ------ --------- --------- British Pound $(1,403) $2,234 $1,385 $(18) German Mark $ (436) $ 702 $ 435 $ (1) Norwegian Krone $ (817) $1,215 $ 754 $(63) French Franc $ 240 $ (387) $ (240) $ - Italian Lira $ 241 $ (390) $ (242) $ (1) 50 DuPont Notes to Financial Statements (Dollars in millions, except per share) In connection with the change to local currency as the functional currency for certain European petroleum operations (see Note 1), the company entered into contracts to sell forward the following amounts of foreign currency in December 1995: British pound, $3,150; Norwegian krone, $2,386; and German mark, $170. At December 31, 1995, these contracts did not hedge an existing exposure and were reported at market value. The carrying value and exchange loss associated with these contracts were immaterial. On January 1, 1996, these contracts became part of the company's hedging program, as discussed above, and effectively offset the change in the net monetary asset (liability) exposure at January 1, 1996 caused by the change of functional currency. 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, 1995, one such commitment was hedged. The deferred loss associated with this hedge was immaterial. 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 $195, $139 and $(84) for the years 1995, 1994 and 1993, respectively. Interest Rate 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 that had a notional amount of $50, a fixed rate paid of 8.3 percent, a floating rate received of 5.9 percent and a remaining maturity of 0.2 years. 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, 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 DuPont 51 Notes to Financial Statements (Dollars in millions, except per share) incorporating changes in currency exchange rates or other financial indices; 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 at December 31, 1995 was $230, with a weighted average interest rate of 6.3 percent, and a weighted average maturity of 3.0 years. In addition, the company's majority-owned Canadian subsidiary had a structured medium-term financing outstanding at December 31, 1995 that effectively converted a 160 million Australian dollar borrowing, with a 16.5 percent Australian dollar fixed interest rate and a maturity of 1996, to a Canadian dollar borrowing with an implicit 12.43 percent Canadian dollar fixed interest rate. 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, 1995 and 1994. See also Notes 16 and 18 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, 1995 and 1994. 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, 1995 and 1994, respectively. At December 31, 1995, 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 9, 10, 14, 15, 16 and 18 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, 1995 $14,818 $(108) $(144) 1994 7,978 62 73 Interest Rate Swaps December 31, 1995 $ 50 $ (1) $ - 1994 825 (47) (1) Interest and Principal Currency Swaps December 31, 1995 $ 103 $ 38 $27 1994 103 21 11 Structured Medium-Term Swaps December 31, 1995 $ 349 $ 73 $71 1994 646 23 36 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 $12,800 and $7,900 at December 31, 1995 and 1994, respectively. The increase in fair value in 1995 was 52 DuPont Notes to Financial Statements (Dollars in millions, except per share) primarily due to higher borrowing levels associated with the redemption of DuPont stock from Seagram. 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 Hedges and Trading The company enters into exchange-traded and over-the-counter 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. 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. These positions may not exceed anticipated equity production or net supply requirements for the hedge period. The company's use of futures contracts reduces the effects of price volatility, thereby protecting against adverse short-term price movements, while limiting, somewhat, the benefits of favorable short-term price movements. Open hedge positions and deferred gains/losses for petroleum futures contracts were immaterial at December 31, 1995 and 1994. From time to time, on a limited basis, the company also purchases and sells petroleum-based futures contracts for trading purposes. After-tax gain/loss from such trading has not been material. 26. Commitments and Contingent Liabilities The company uses various leased facilities and equipment in its operations. Future minimum lease payments under noncancelable operating leases are $301, $297, $193, $152 and $125 for the years 1996, 1997, 1998, 1999 and 2000, respectively, and $704 for subsequent years, and are not reduced by noncancelable minimum sublease rentals due in the future in the amount of $111. Rental expense under operating leases was $339 in 1995, $355 in 1994 and $429 in 1993. 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. Fewer than 100 of the 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. DuPont 53 Notes to Financial Statements (Dollars in millions, except per share) 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, 1995, such accrual amounted to $602 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, 1995, these indirect guarantees totaled $34. In addition, at December 31, 1995, the company had directly guaranteed $1,137 of the obligations of certain affiliated companies and others. No material loss is anticipated by reason of such agreements and guarantees. 27. Geographic Information - --------------------------------------------------------------------------------
United Other States Europe Regions Consolidated ------ ------ ------- ------------ 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 $ 2,453 $ 1,193 $ 184 $ 3,830 Identifiable Assets at December 31 $16,865 $10,367 $4,000 $31,232 ------- ------- ------ ------- 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 $ 1,993 $ 874 $ 240 $ 3,107 Identifiable Assets at December 31 $16,933 $10,232 $3,857 $31,022 ------- ------- ------ ------- 1993 Sales to Unaffiliated Customers/1/ $20,342 $12,639 $4,117 $37,098 Transfers Between Geographic Areas/2/ 2,260 395 522 - ------- ------- ------ ------- Total $22,602 $13,034 $4,639 $37,098 ======= ======= ====== ======= After-Tax Operating Income $ 133 $ 721 $ 63 $ 917 Identifiable Assets at December 31 $17,117 $ 9,995 $3,812 $30,924
1 Sales outside the United States of products manufactured in and exported from the United States totaled $4,289 in 1995, $3,625 in 1994 and $3,500 in 1993. 2 Products are transferred between geographic areas on a basis intended to reflect as nearly as practicable the "market value" of the products. 54 DuPont Notes to Financial Statements (Dollars in millions, except per share) 28. Industry Segment Information The company has five 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 49 percent and 38 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 (textiles, flooring systems, nonwovens, aramids and advanced materials systems and industrial nylon); Polymers (automotive finishes, elastomers, fluoropolymers, packaging and industrial polymers, and engineering polymers); Petroleum (crude oil, natural gas and refined products), and Diversified Businesses (agricultural products, electronic materials, medical products, printing industry products and films). 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.
- ------------------------------------------------------------------------------------------------------------------------------ Diversified Chemicals Fibers Polymers Petroleum Businesses Consolidated --------- ------ -------- --------- ----------- ------------ 1995 Sales to Unaffiliated Customers/1/ $4,181 $7,215 $7,037 $ 17,660/2/ $ 6,070 $ 42,163 Transfers Between Segments 248 31 208 298 46 - ------ ------ ------ --------- -------- --------- Total $4,429 $7,246 $7,245 $ 17,958 $ 6,116 $ 42,163 ====== ====== ====== ========= ======== ========= Operating Profit $ 961 $1,233 $1,263 $ 1,334 $ 767 $ 5,558 Provision for Income Taxes (366) (448) (472) (701) (291) (2,278) Equity in Earnings of Affiliates 64 41 50 22 373 550 ------ ------ ------ --------- -------- --------- After-Tax Operating Income/3/ $ 659 $ 826 $ 841 $ 655 $ 849 $ 3,830/4/ ====== ====== ====== ========= ======== ========= Identifiable Assets at December 31 $2,940 $5,983 $5,254 $ 12,093 $ 4,962 $ 31,232/5/ ====== ====== ====== ========= ======== ========= Depreciation, Depletion and Amortization $ 402 $ 527 $ 359 $ 1,034 $ 341 $ 2,823/6/ Capital Expenditures $ 351 $ 566 $ 389 $ 1,619 $ 299 $ 3,394/7/ ====== ====== ====== ========= ======== ========= 1994 Sales to Unaffiliated Customers/1/ $3,760 $6,767 $6,318 $16,815/2/ $ 5,673 $ 39,333 Transfers Between Segments 208 44 181 388 36 - ------ ------ ------ --------- -------- --------- Total $3,968 $6,811 $6,499 $ 17,203 $ 5,709 $ 39,333 ====== ====== ====== ========= ======== ========= Operating Profit $ 536 $1,083 $1,084 $ 1,141 $ 608 $ 4,452 Provision for Income Taxes (208) (412) (423) (486) (191) (1,720) Equity in Earnings of Affiliates 58 30 56 25 206 375 ------ ------ ------ --------- -------- --------- After-Tax Operating Income/8/ $ 386 $ 701 $ 717 $ 680 $ 623 $ 3,107/4/ ====== ====== ====== ========= ======== ========= Identifiable Assets at December 31 $2,880 $6,020 $5,160 $ 11,961 $ 5,001 $ 31,022/5/ ====== ====== ====== ========= ======== ========= Depreciation, Depletion and Amortization $ 412 $ 512 $ 403 $ 1,191 $ 434 $ 3,106/6/ Capital Expenditures $ 298 $ 541 $ 310 $ 1,576 $ 283 $ 3,151/7/ ====== ====== ====== ========= ======== ========= 1993 Sales to Unaffiliated Customers/1/ $3,546 $6,188 $5,869 $15,771/2/ $ 5,724 $ 37,098 Transfers Between Segments 475 14 23 428 1 - ------ ------ ------ --------- -------- --------- Total $4,021 $6,202 $5,892 $ 16,199 $ 5,725 $ 37,098 ====== ====== ====== ========= ======== ========= Operating Profit $ 237 $ 258 $ 255 $ 1,195 $ (495) $ 1,450 Provision for Income Taxes (99) (144) (108) (428) 162 (617) Equity in Earnings of Affiliates 28 55 30 45 (74) 84 ------ ------ ------ --------- -------- --------- After-Tax Operating Income/9,10,11/ $ 166 $ 169 $ 177 $ 812 /12/ $ (407)/13/ $ 917/4/ ====== ====== ====== ========= ======== ========= Identifiable Assets at December 31 $2,960 $5,771 $5,226 $ 11,938 $ 5,029 $ 30,924/5/ ====== ====== ====== ========= ======== ========= Depreciation, Depletion and Amortization $ 303 $ 658 $ 527 $ 1,379 $ 460 $ 3,451/6/ Capital Expenditures $ 294 $ 751 $ 428 $ 1,659 $ 329 $ 3,655/7/ ====== ====== ====== ========= ======== =========
DuPont 55 Notes to Financial Statements (Dollars in millions, except per share) 1 Sales of refined petroleum products of $13,938 in 1995, $12,853 in 1994 and $12,403 in 1993 exceeded 10 percent of consolidated sales. 2 Excludes crude oil and refined product exchanges and trading transactions totaling $2,299 in 1995, $2,254 in 1994 and $3,808 in 1993. 3 Includes the following (charges)/benefits/a/: - --------------------------------------------------- Chemicals $ 10 Fibers 31 Polymers/b/ (35) Petroleum/c/ (45) Diversified Businesses/d/ (75) ----- $(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 Includes a charge of $24 for printing and publishing operations, principally for employee separation costs in Europe, a litigation provision of $13 related to a previously sold business and a charge of $63 associated with Benlate(R) 50 DF fungicide recall. 4 The following reconciles After-Tax Operating Income to Net Income: - ----------------------------------------------------------------------- 1995 1994 1993 ------ ------ ----- After-Tax Operating Income $3,830 $3,107 $ 917 Interest and Other Corporate Expenses Net of Tax/a/ (537) (380) (351) ------ ------ ----- Net Income $3,293 $2,727 $ 566/b/ ====== ====== ===== a 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) and amortization of capitalized interest. b Before extraordinary item. See the Consolidated Income Statement on page 34. 5 The following reconciles Identifiable Assets to Total Assets: - ---------------------------------------------------------------------- 1995 1994 1993 ------- ------- ------- Identifiable Assets at December 31 $31,232 $31,022 $30,924 Investment in Affiliates 1,846 1,662 1,607 Corporate Assets 4,234 4,208 4,522 ------- ------- ------- Total Assets at December 31 $37,312 $36,892 $37,053 ======= ======= ======= 6 Includes depreciation on research and development facilities, impairment of unproved properties and, in 1993, depreciation reflected in restructuring charges. 7 Excludes investments in affiliates. 8 Includes the following (charges)/benefits/a/: - --------------------------------------------------- Chemicals/b/ $ (5) Fibers 25 Polymers 11 Petroleum/c/ (26) Diversified Businesses/d/ (53) ---- $(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 charges of $110 associated with the Benlate(R) 50 DF fungicide recall and $27 for the write-down of assets and discontinuation of certain products, and a benefit of $30 from an adjustment of prior-year tax provisions. 9 Includes the following third-quarter charges for asset write-downs, employee separation costs, facility shutdowns and other restructuring costs (see Note 5): - -------------------------------------------------- Chemicals/a/ $ 112 Fibers/b/ 266 Polymers/c/ 148 Petroleum/d/ 172 Diversified Businesses/e/ 413 ------ $1,111 ====== a Includes $59 for asset write-downs and facility shutdowns for the fluorochemicals and specialty chemicals businesses. b Includes $46 for facility shutdowns and asset write-downs, primarily for the nylon business. c Includes $64 for shutdown of a portion of a polymers plant in LaPorte, Texas. d Includes $147 for asset write-downs, primarily for certain North American petroleum-producing properties sold in the fourth quarter. e Includes $264 for asset write-downs, principally facilities for the printing and publishing business. 10 Includes a net benefit of $265 resulting from tax law changes. The Petroleum segment reflects $230, primarily due to a reduction in deferred U.K. petroleum revenue taxes, and $35 is reflected in the remaining segments (Chemicals $6; Fibers $10; Polymers $10; and Diversified Businesses $9). 56 DuPont Notes to Financial Statements (Dollars in millions, except per share) 11 Includes a net charge of $92 related to certain product liability claims and litigation costs ($144, of which $126 is associated with the Benlate(R) 50 DF fungicide recall) and a loss on the sale of a polyethylene business ($17), partly offset by a gain from the sale of the Remington Arms Company ($69). The $92 is reflected in Chemicals $10; Polymers $25; and Diversified Businesses $57. 12 Includes a $21 loss from sale of petroleum-producing properties and a $32 gain from exchange of several proved and unproved North Sea petroleum properties for an interest in a Norwegian offshore pipeline and cash; since these are not "similar productive assets" as defined under Accounting Principles Board Opinion No. 29, a gain was recognized on the exchange. 13 Includes a charge of $184 for the write-down of intangible assets (technology and goodwill) associated with the printing and publishing business. See segment discussions on pages 6-23 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. DuPont 57 Supplemental Petroleum Data (Dollars in millions) Oil and Gas Producing Activities The disclosures on pages 58-63 are presented in accordance with the provisions of Statement of Financial Accounting Standards No. 69. 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 Europe Other Regions ----------------------- ----------------------- ----------------------- ------------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993 ------ ------ ------- ----- ----- ------- ----- ------ ------ ----- ----- ----- Consolidated Companies Revenues: Sales to unaffiliated customers $1,863 $2,196 $ 2,177 $ 443 $ 552 $ 538 $ 817 $1,015 $1,000 $ 603 $ 629 $ 639 Transfers to other company operations 862 733 930 386 401 558 477 332 372 (1) -- -- Exploration, including dry hole costs (275) (323) (329) (80) (130) (107) (134) (110) (109) (61) (83) (113) Production (727) (786) (868) (287) (327) (424) (347) (377) (363) (93) (82) (81) Depreciation, depletion, amortization and valuation provisions (727) (957) (1,140) (290) (334) (591)/1/ (362) (533)/2/ (468) (75) (90) (81) Other/3/ 82 67 (20) 48 38 (17) 31 25 9 3 4 (12) Income taxes (626) (463) (281) (24) 7 84 (242) (122)/4/ (16)/5/ (360) (348) (349) ------ ------ ------- ----- ----- ------- ----- ------ ------ ----- ----- ----- Total consolidated companies 452 467 469 196 207 41 240 230 425 16 30 3 ------ ------ ------- ----- ----- ------- ----- ------ ------ ----- ----- ----- Equity Affiliates Results of operations of equity affiliates 12 (16) (13) -- 1 (1) 12 (17) (12) -- -- -- ------ ------ ------- ----- ----- ------- ----- ------ ------ ----- ----- ----- Total $ 464 $ 451 $ 456 $ 196 $ 208 $ 40 $ 252 $ 213 $ 413 $ 16 $ 30 $ 3 ====== ====== ======= ===== ===== ======= ===== ====== ====== ===== ===== =====
1 Includes a charge of $219 ($137 after taxes) for impairment of certain U.S. petroleum-producing properties to be sold. 2 Includes a charge of $115 ($95 after taxes) for impairment of certain North Sea oil properties to be sold. 3 Includes gain/(loss) on disposal of fixed assets and other miscellaneous revenues and expenses. 4 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. 5 Includes a benefit of $241 resulting from tax law changes in the United Kingdom. 58 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 --------------------------- ---------------------- ---------------------- ---------------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993 ------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ Consolidated Companies Property acquisitions: Proved/2/ $ 96 $ 139 $ 111 $ 95 $ 14 $ 93 $ -- $ 115 $ 5 $ 1 $ 10 $ 13 Unproved 58 36 11 29 18 8 1 5 -- 28 13 3 Exploration 358 403 352 128 151 83 159 136 158 71 116 111 Development 745 713 864 242 174 195 463 466 567 40 73 102 ------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ Total consolidated companies 1,257 1,291 1,338 494 357 379 623 722 730 140 212 229 ------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ Equity Affiliates Property acquisitions: Proved -- -- 43 -- -- 43 -- -- -- -- -- -- Development 29 75 70 19 12 16 10 63 54 -- -- -- ------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ Total equity affiliates 29 75 113 19 12 59 10 63 54 -- -- -- ------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ Total $ 1,286 $ 1,366 $ 1,451 $ 513 $ 369 $ 438 $ 633 $ 785 $ 784 $ 140 $ 212 $ 229 ======= ======= ======= ====== ====== ====== ====== ====== ====== ====== ====== ======
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 --------------------------- ---------------------- ---------------------- ---------------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993 ------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ Consolidated Companies Gross costs: Proved properties $11,023 $11,057 $11,663 $4,440 $4,806 $4,934 $5,220 $4,950 $5,582 $1,363 $1,301 $1,147 Unproved properties 883 790 701 251 291 321 439 323 218 193 176 162 Accumulated depreciation, depletion, amortization and valuation allowances: Proved properties 6,290 6,173 6,467 2,822 3,073 3,023 2,425 2,122 2,604 1,043 978 840 Unproved properties 156 185 261 76 110 162 7 6 13 73 69 86 ------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ Total net costs of consolidated companies 5,460 5,489 5,636 1,793 1,914 2,070 3,227 3,145 3,183 440 430 383 ------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ Equity Affiliates Net costs of equity affiliates: Proved properties 223 253 177 60 93 92 163 160 85 -- -- -- ------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------ ------ Total $ 5,683 $ 5,742 $ 5,813 $1,853 $2,007 $2,162 $3,390 $3,305 $3,268 $ 440 $ 430 $ 383 ======= ======= ======= ====== ====== ====== ====== ====== ====== ====== ====== ======
DuPont 59 Supplemental Petroleum Data (In millions of barrels) Estimated Proved Reserves of Oil/1/
- ---------------------------------------------------------------------------------------------------------------------------------- Total Worldwide United States Europe Other Regions/2/ --------------------- -------------------- ------------------- ------------------ 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993 ---- ---- ----- ---- ---- ---- ---- ---- ---- ---- ---- ---- Proved Developed and Undeveloped Reserves of Consolidated Companies Beginning of year 953 964 1,034 336 344 421 394 390 391 223 230 222 Revisions and other changes (1) 51 14 (8) 14 (6) (9) 26 13 16 11 7 Extensions and discoveries 122 50 83 25 8 19 72 21 41 25 21 23 Improved recovery 4 10 7 1 9 5 3 -- -- -- 1 2 Purchase of reserves/3/ 5 43 25 3 14 7 -- 29 2 2 -- 16 Sale of reserves/4/ (33) (33) (64) (33) (20) (62) -- (13) (2) -- -- -- Production (117) (132) (135) (30) (33) (40) (52) (59) (55) (35) (40) (40) ---- ---- ----- --- --- --- --- --- --- --- --- --- End of year 933 953 964 294 336 344 408 394 390 231 223 230 ---- ---- ----- --- --- --- --- --- --- --- --- --- Proved Developed and Undeveloped Reserves of Equity Affiliates Beginning of year 35 19 19 -- -- -- 35 19 19 -- -- -- Revisions and other changes 5 6 -- -- -- -- 5 6 -- -- -- -- Extensions and discoveries 8 11 -- -- -- -- 8 11 -- -- -- -- Production (4) (1) -- -- -- -- (4) (1) -- -- -- -- ---- ---- ----- --- --- --- --- --- --- --- --- --- End of year 44 35 19 -- -- -- 44 35 19 -- -- -- ---- ---- ----- --- --- --- --- --- --- --- --- --- Total 977 988 983 294 336 344 452 429 409 231 223 230 ---- ---- ----- --- --- --- --- --- --- --- --- --- Proved Developed Reserves of Consolidated Companies Beginning of year 706 708 750 324 332 397 171 160 153 211 216 200 End of year 684 706 708 265 324 332 217 171 160 202 211 216
1 Oil reserves comprise crude oil and condensate and natural gas liquids (NGL) 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. 3 Includes reserves acquired through property exchanges. 4 Includes reserves disposed of through property exchanges. 60 DuPont Supplemental Petroleum Data (In billion cubic feet) Estimated Proved Reserves of Gas
- ---------------------------------------------------------------------------------------------------------------------------------- Total Worldwide United States Europe Other Regions ------------------------ ---------------------- --------------------- ------------------ 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993 ----- ----- ----- ----- ----- ----- ----- ----- ----- ---- ---- ---- Proved Developed and Undeveloped Reserves of Consolidated Companies Beginning of year 4,330 3,680 3,445 1,749 1,802 1,928 2,431 1,752 1,417 150 126 100 Revisions and other changes 328 317 72 131 121 (22) 195 187 54 2 9 40 Extensions and discoveries 400 514 712 225 139 196 147 356 507 28 19 9 Improved recovery 1 -- 1 1 -- 1 -- -- -- -- -- -- Purchase of reserves/1/ 167 375 53 167 42 53 -- 321 -- -- 12 -- Sale of reserves/2/ (78) (71) (122) (78) (37) (49) -- (34) (68) -- -- (5) Production (439) (485) (481) (304) (318) (305) (124) (151) (158) (11) (16) (18) ----- ----- ----- ----- ----- ----- ----- ----- ----- --- --- --- End of year 4,709 4,330 3,680 1,891 1,749 1,802 2,649 2,431 1,752 169 150 126 ----- ----- ----- ----- ----- ----- ----- ----- ----- --- --- --- Proved Developed and Undeveloped Reserves of Equity Affiliates Beginning of year 830 586 368 830 586 368 -- -- -- -- -- -- Revisions and other changes -- 255 72 -- 255 72 -- -- -- -- -- -- Purchase of reserves -- 2 151 -- 2 151 -- -- -- -- -- -- Sale of reserves (189) -- -- (189) -- -- -- -- -- -- -- -- Production (14) (13) (5) (14) (13) (5) -- -- -- -- -- -- ----- ----- ----- ----- ----- ----- ----- ----- ----- --- --- --- End of year 627 830 586 627 830 586 -- -- -- -- -- -- ----- ----- ----- ----- ----- ----- ----- ----- ----- --- --- --- Total 5,336 5,160 4,266 2,518 2,579 2,388 2,649 2,431 1,752 169 150 126 ===== ===== ===== ===== ===== ===== ===== ===== ===== === === === Proved Developed Reserves of Consolidated Companies Beginning of year 2,496 2,570 2,539 1,687 1,717 1,837 683 738 618 126 115 84 End of year 2,933 2,496 2,570 1,733 1,687 1,717 1,071 683 738 129 126 115
1 Includes reserves acquired through property exchanges. 2 Includes reserves disposed of through property exchanges. DuPont 61 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, 1995 data averaged $16.71 for the United States, $18.87 for Europe and $17.61 for Other Regions, and the gas prices per thousand cubic feet averaged approximately $1.65 for the United States, $2.86 for Europe and $1.10 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. 62 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 Other Regions ------------------------- ------------------------- ------------------------- ------------------------- 1995 1994 1993 1995 1994 1993 1995 1994 1993 1995 1994 1993 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------ Consolidated Companies Future cash flows: Revenues $26,766 $23,836 $19,558 $ 7,631 $ 7,201 $ 7,199 $14,995 $12,945 $ 9,380 $ 4,140 $ 3,690 $ 2,979 Production costs (9,152) (8,967) (9,117) (3,038) (3,411) (4,361) (5,154) (4,719) (4,005) (960) (837) (751) Development costs (1,583) (1,693) (1,802) (218) (184) (515) (1,234) (1,439) (1,143) (131) (70) (144) Income tax expense (7,404) (6,084) (3,607) (1,169) (873) (414) (3,758) (2,893) (1,514) (2,477) (2,318) (1,679) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------ Future net cash flows 8,627 7,092 5,032 3,206 2,733 1,909 4,849 3,894 2,718 572 465 405 Discounted to present value at a 10% annual rate (3,469) (2,817) (1,818) (1,456) (1,154) (655) (1,813) (1,522) (1,021) (200) (141) (142) ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------ Total consolidated companies 5,158 4,275 3,214 1,750 1,579 1,254 3,036 2,372 1,697 372 324 263 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------ Equity Affiliates Standardized measure of discounted future net cash flows of equity affiliates 166 211 99 44 102 96 122 109 3 -- -- -- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------ Total $ 5,324 $ 4,486 $ 3,313 $ 1,794 $ 1,681 $ 1,350 $ 3,158 $ 2,481 $ 1,700 $ 372 $ 324 $ 263 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= ======
Summary of Changes in Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves for Fully Consolidated Companies
- ---------------------------------------------------------------------------------------------------------- 1995 1994 1993 ------- ------- ------- Balance at January 1 $ 4,275 $ 3,214 $ 4,308 Sales and transfers of oil and gas produced, net of production costs (1,998) (2,143) (2,239) Development costs incurred during the period 745 713 864 Net changes in prices and in development and production costs 675 1,275 (3,017) Extensions, discoveries and improved recovery, less related costs 1,219 775 915 Revisions of previous quantity estimates 375 796 130 Purchases (sales) of reserves in place--net (62) 333 (120) Accretion of discount 753 529 791 Net change in income taxes (897) (1,174) 1,493 Other 73 (43) 89 ------- ------- ------- Balance at December 31 $ 5,158 $ 4,275 $ 3,214 ======= ======= =======
DuPont 63 Quarterly Financial Data (Dollars in millions, except per share)
- ---------------------------------------------------------------------------------------------------- Quarter Ended March 31 June 30 September 30 December 31 - ---------------------------------------------------------------------------------------------------- 1995 Sales $10,502 $11,076 $10,200 $10,385 Cost of Goods Sold and Other Expenses/1/ 9,022 9,566 8,951 9,575 Net Income 959 938/2/ 769/3/ 627/4/ 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 - ---------------------------------------------------------------------------------------------------- 1994 Sales $ 9,190 $10,161 $ 9,845 $10,137 Cost of Goods Sold and Other Expenses/1/ 8,101 8,924 8,958 9,322 Net Income 642 792/6/ 647/7/ 646/8/ Earnings Per Share of Common Stock .94 1.16 .95 .95 Dividends Per Share of Common Stock .44 .44 .47 .47 Market Price of Common Stock/5/ High 59 7/8 62 3/8 61 3/8 60 1/2 Low 48 1/4 51 1/2 56 7/8 50 3/4
1 Excludes interest and debt expense and provision for income taxes. 2 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. 3 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. 4 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. 5 As reported on the New York Stock Exchange, Inc. Composite Transactions Tape. 6 Includes a charge of $47 ($.07 per share) associated with Benlate(R) 50 DF fungicide recall. 7 Includes a net charge of $3 reflecting: a benefit of $50 from adjustments in estimates associated with the third quarter 1993 restructuring charge; 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; a charge of $27 associated with the discontinuation of certain products, assets sales and write-downs; 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. 8 Includes a net benefit of $2 reflecting: a benefit of $62 from adjustments in estimates associated with the third quarter 1993 restructuring charge; a charge of $63 associated with the Benlate(R) 50 DF fungicide recall; a charge of $27 for the write-down of assets and discontinuation of certain products; and a benefit of $30 from an adjustment of prior-year tax provisions. Consolidated Geographic Data (Dollars in millions)
Capital Total Assets Average Expenditures December 31 Employment ---------------------- -------------------- -------------------- 1995 1994 1995 1994 1995 1994 ------- ------- ------- ------- ------- ------- United States $ 1,889 $ 1,520 $19,490 $19,857 71,121 73,507 Europe 1,268 1,317 12,166 11,957 20,765 22,624 Other Regions 486 404 5,656 5,078 14,255 14,376 Total $ 3,643 $ 3,241 $37,312 $36,892 106,141 110,507 ======= ======= ======= ======= ======= =======
Capital expenditures, total assets and average employment are assigned to geographic areas, generally based on physical location. 64 DuPont Five-Year Financial Review/1/ (Dollars in millions, except per share)
- ----------------------------------------------------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 ------- ------- ------- ------- ------- Summary of Operations Sales $42,163 $39,333 $37,098 $37,799 $38,695 Earnings Before Income Taxes $ 5,390 $ 4,382 $ 958 $ 1,811 $ 2,818 Provision for Income Taxes $ 2,097 $ 1,655 $ 392 $ 836 $ 1,415 Net Income $ 3,293 $ 2,727 $ 566/2/ $ 975/3/ $ 1,403 As Percent of Average Stockholders' Equity 32.7% 22.6% 4.8% 8.1% 8.3% Earnings Per Share of Common Stock/4/ $ 5.61 $ 4.00 $ .83 $ 1.43 $ 2.08 ======= ======= ======= ======= ======= Financial Position at Year End Working Capital $(1,776) $ 3,543 $ 1,460 $ 2,002 $ 3,381 Total Assets $37,312 $36,892 $37,053 $38,870 $36,559 Borrowings and Capital Lease Obligations: Short Term $ 6,157 $ 1,292 $ 2,796 $ 3,799 $ 1,841 Long Term $ 5,678 $ 6,376 $ 6,531 $ 7,193 $ 6,456 Stockholders' Equity $ 8,436 $12,822 $11,230 $11,765 $16,739 Total Debt as Percent of Total Capitalization 58% 37% 45% 48% 33% ======= ======= ======= ======= ======= General For the Year: Capital Expenditures $ 3,643 $ 3,241 $ 3,725 $ 4,524 $ 5,246 Depreciation, Depletion and Amortization $ 2,722 $ 2,976 $ 2,833 $ 2,655 $ 2,640 Research and Development Expense $ 1,067 $ 1,047 $ 1,132 $ 1,277 $ 1,298 As Percent of Sales for: Chemicals, Fibers, Polymers and Diversified Businesses 4.2% 4.5% 5.1% 5.6% 5.8% Petroleum 0.2% 0.3% 0.3% 0.4% 0.4% Average Number of Shares Outstanding (millions) 585 680 677 673 671 Dividends Per Common Share $ 2.03 $ 1.82 $ 1.76 $ 1.74 $ 1.68 Dividends as Percent of Earnings on Common Stock 36% 46% 212%/2/ 122%/3/ 81% Common Stock Prices: High $ 73 $ 62 3/8 $ 53 7/8 $ 54 7/8 $ 50 Low $ 52 5/8 $ 48 1/4 $ 44 1/2 $ 43 1/2 $ 32 3/4 Year-End Close $ 69 7/8 $ 56 1/8 $ 48 1/4 $ 47 1/8 $ 46 5/8 At Year End: Employees (thousands) 105 107 114 125 133 Common Stockholders of Record (thousands) 166 172 181 188 195 Book Value Per Common Share $ 14.76 $ 18.48 $ 16.22 $ 17.08 $ 24.58 ======= ======= ======= ======= =======
1 See Management's Discussion and Analysis on pages 25-31, Consolidated Income Statement on page 34, Notes to Financial Statements on pages 38-57 and Quarterly Financial Data on page 64 for information relating to significant items affecting the results of operations and financial position. 2 Before effect on income of extraordinary item. See the Consolidated Income Statement on page 34. 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. 4 Based on the average number of common shares outstanding. DuPont 65 EX-21 10 SUBSIDIARIES Exhibit 21 SUBSIDIARIES OF THE REGISTRANT
Name Organized Under Laws of - --------------------------------------------------- ----------------------- 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 Ireland Ltd. ............................... Delaware 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. (76.6% 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 Electronic Materials, Inc. ................. Delaware DuPont Energy Company ............................. Delaware DuPont Engineering Products, S.A. ................. Luxembourg DuPont Feedstocks Company ......................... Delaware
Name Organized Under Laws of - --------------------------------------------------- ----------------------- DuPont Flexitrust ................................. 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. ........................... 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 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 11 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. 33-48128, No. 33-53327 and No. 33-61339) and Form S-8 (No. 2-74004, No. 33-36339, 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 15, 1996 appearing on page 33 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 20, 1996 EX-27 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED INCOME STATEMENT FILED AS PART OF THE ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 1,408 47 4,912 78 3,737 10,955 50,385 29,044 37,312 12,731 5,678 0 237 441 7,758 37,312 42,163 43,262 23,499 37,114 0 0 758 5,390 2,097 3,293 0 0 0 3,293 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; and Restructuring.
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