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Dupont E I De Nemours & Co – ‘10-Q’ for 9/30/16 – ‘R17’

On:  Tuesday, 10/25/16, at 1:40pm ET   ·   For:  9/30/16   ·   Accession #:  30554-16-156   ·   File #:  1-00815

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  As Of               Filer                 Filing    For·On·As Docs:Size

10/25/16  Dupont E I De Nemours & Co        10-Q        9/30/16   84:10M

Quarterly Report   —   Form 10-Q   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    704K 
 2: EX-12       Statement re: Computation of Ratios                 HTML     32K 
 3: EX-31.1     Certification -- §302 - SOA'02                      HTML     32K 
 4: EX-31.2     Certification -- §302 - SOA'02                      HTML     32K 
 5: EX-32.1     Certification -- §906 - SOA'02                      HTML     26K 
 6: EX-32.2     Certification -- §906 - SOA'02                      HTML     26K 
13: R1          Document and Entity Information                     HTML     43K 
14: R2          Consolidated Income Statements                      HTML     92K 
15: R3          Consolidated Statements of Comprehensive Income     HTML     90K 
16: R4          Condensed Consolidated Balance Sheets               HTML    122K 
17: R5          Condensed Consolidated Balance Sheets               HTML     36K 
                (Parenthetical)                                                  
18: R6          Condensed Consolidated Statements of Cash Flows     HTML    109K 
19: R7          Summary of Significant Accounting Policies          HTML     41K 
20: R8          Proposed Merger with Dow Chemical                   HTML     32K 
21: R9          Divestitures and Other Transactions                 HTML     77K 
22: R10         Employee Separation / Asset Related Charges, Net    HTML     83K 
23: R11         Other (Loss) Income, Net                            HTML     83K 
24: R12         Provision for Income Taxes                          HTML     29K 
25: R13         Earnings Per Share of Common Stock                  HTML     68K 
26: R14         Inventories                                         HTML     36K 
27: R15         Other Intangible Assets                             HTML     81K 
28: R16         Short-Term and Long-Term Borrowings                 HTML     33K 
29: R17         Commitments and Contingent Liabilities              HTML     81K 
30: R18         Stockholders' Equity                                HTML    269K 
31: R19         Financial Instruments                               HTML    195K 
32: R20         Long-Term Employee Benefits                         HTML     87K 
33: R21         Segment Information                                 HTML    158K 
34: R22         Summary of Significant Accounting Policies Summary  HTML     41K 
                of Significant Accounting Policies (Policies)                    
35: R23         Divestitures and Other Transactions Divestitures    HTML     67K 
                and Other Transactions (Tables)                                  
36: R24         Employee Separation / Asset Related Charges, Net    HTML     74K 
                (Tables)                                                         
37: R25         Other (Loss) Income, Net (Tables)                   HTML     84K 
38: R26         Earnings Per Share of Common Stock (Tables)         HTML     68K 
39: R27         Inventories (Tables)                                HTML     36K 
40: R28         Other Intangible Assets (Tables)                    HTML     78K 
41: R29         Commitments and Contingent Liabilities (Tables)     HTML     52K 
42: R30         Stockholders' Equity (Tables)                       HTML    257K 
43: R31         Financial Instruments (Tables)                      HTML    181K 
44: R32         Long-Term Employee Benefits (Tables)                HTML     82K 
45: R33         Segment Information (Tables)                        HTML    157K 
46: R34         Summary of Significant Accounting Policies Recent   HTML     32K 
                Accounting Pronouncements (Details)                              
47: R35         Proposed Merger with Dow Chemical (Narrative)       HTML     26K 
                (Details)                                                        
48: R36         Divestitures and Other Transactions (Narrative)     HTML    103K 
                (Details)                                                        
49: R37         Divestitures and Other Transactions (Schedule of    HTML     59K 
                results of operations from discontinued                          
                operations) (Details)                                            
50: R38         Divestitures and Other Transactions (Schedule of    HTML     32K 
                cash flow information of discontinued operations)                
                (Details)                                                        
51: R39         Employee Separation / Asset Related Charges, Net    HTML     35K 
                (La Porte) (Narrative) (Details)                                 
52: R40         Employee Separation / Asset Related Charges, Net    HTML     76K 
                (2016 Restructuring Program schedule )(Details)                  
53: R41         Employee Separation / Asset Related Charges, Net    HTML     57K 
                (2014 Restructuring Program schedule) (Details)                  
54: R42         Employee Separation / Asset Related Charges, Net    HTML     35K 
                (Narrative) (Details)                                            
55: R43         Employee Separation / Asset Related Charges, Net    HTML     34K 
                (Asset Impairment) (Narrative) (Details)                         
56: R44         Other (Loss) Income, Net (Schedule of Other         HTML     55K 
                Income) (Details)                                                
57: R45         Other (Loss) Income, Net (Schedule of Foreign       HTML     39K 
                Exchange Gain (Loss)) (Details)                                  
58: R46         Provision for Income Taxes (Details)                HTML     29K 
59: R47         Earnings Per Share of Common Stock (Earnings Per    HTML     49K 
                Share of Common Stock Reconciliation) (Details)                  
60: R48         Earnings Per Share of Common Stock (Schedule of     HTML     30K 
                Average Number of Antidilutive Stock Options)                    
                (Details)                                                        
61: R49         Inventories (Details)                               HTML     37K 
62: R50         Other Intangible Assets (Schedule of Other          HTML     71K 
                Intangible Assets) (Details)                                     
63: R51         Other Intangible Assets (Narrative) (Details)       HTML     45K 
64: R52         Short-Term and Long-Term Borrowings (Details)       HTML     73K 
65: R53         Commitments and Contingent Liabilities              HTML     60K 
                (Guarantees) (Details)                                           
66: R54         Commitments and Contingent Liabilities              HTML     97K 
                (Litigation) (Narrative) (Details)                               
67: R55         Commitments and Contingent Liabilities              HTML     38K 
                (Environmental) (Narrative) (Details)                            
68: R56         Stockholders' Equity (Share Repurchase Program)     HTML     54K 
                (Narrative) (Details)                                            
69: R57         Stockholders' Equity (Noncontrolling Interest)      HTML     30K 
                (Narrative) (Details)                                            
70: R58         Stockholders' Equity (Schedule of Other             HTML    197K 
                Comprehensive Income) (Details)                                  
71: R59         Stockholder's Equity (Schedule of Accumulated       HTML     81K 
                Other Comprehensive Loss) (Details)                              
72: R60         Financial Instruments (Schedule of Cash, Cash       HTML     65K 
                Equivalents and Marketable Securities) (Details)                 
73: R61         Financial Instruments (Debt) (Narrative) (Details)  HTML     26K 
74: R62         Financial Instruments (Notional Amounts of          HTML     34K 
                Derivatives) (Details)                                           
75: R63         Financial Instruments (Effect of Cash Flows Hedges  HTML     37K 
                on Accumulated Other Comprehensive Income (Loss))                
                (Details)                                                        
76: R64         Financial Instruments (Schedule of the Fair Value   HTML     52K 
                of Derivative Instruments) (Details)                             
77: R65         Financial Instruments (Effect of Derivative         HTML     67K 
                Instruments) (Details)                                           
78: R66         Long-Term Employee Benefits (Schedules of Net       HTML     80K 
                Periodic Benefit Cost) (Details)                                 
79: R67         Segment Information (Schedule of Segment            HTML     51K 
                Information) (Details)                                           
80: R68         Segment Information (Reconciliation to              HTML     77K 
                Consolidated Income Statements) (Details)                        
81: R69         Segment Information (Significant Pre-tax (charges)  HTML    128K 
                benefits not included in Segment Operating                       
                Earnings) (Details)                                              
83: XML         IDEA XML File -- Filing Summary                      XML    156K 
82: EXCEL       IDEA Workbook of Financial Reports                  XLSX    103K 
 7: EX-101.INS  XBRL Instance -- dd-20160930                         XML   3.95M 
 9: EX-101.CAL  XBRL Calculations -- dd-20160930_cal                 XML    261K 
10: EX-101.DEF  XBRL Definitions -- dd-20160930_def                  XML   1.10M 
11: EX-101.LAB  XBRL Labels -- dd-20160930_lab                       XML   1.88M 
12: EX-101.PRE  XBRL Presentations -- dd-20160930_pre                XML   1.20M 
 8: EX-101.SCH  XBRL Schema -- dd-20160930                           XSD    219K 
84: ZIP         XBRL Zipped Folder -- 0000030554-16-000156-xbrl      Zip    322K 


‘R17’   —   Commitments and Contingent Liabilities


This is an IDEA Financial Report.  [ Alternative Formats ]



 
v3.5.0.2
Commitments and Contingent Liabilities
9 Months Ended
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingent Liabilities
Commitments and Contingent Liabilities 
Guarantees 
Indemnifications
In connection with acquisitions and divestitures as of September 30, 2016, the company has indemnified respective parties against certain liabilities that may arise in connection with these transactions and business activities prior to the completion of the transaction. The term of these indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. In addition, the company indemnifies its duly elected or appointed directors and officers to the fullest extent permitted by Delaware law, against liabilities incurred as a result of their activities for the company, such as adverse judgments relating to litigation matters. If the indemnified party were to incur a liability or have a liability increase as a result of a successful claim, pursuant to the terms of the indemnification, the company would be required to reimburse the indemnified party. The maximum amount of potential future payments is generally unlimited.

Obligations for Equity Affiliates & Others 
The company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates, customers and suppliers. In connection with the separation, the company has directly guaranteed Chemours' purchase obligations under an agreement with a third party supplier. At September 30, 2016 and December 31, 2015, the company had directly guaranteed $319 and $337, respectively, of such obligations. These amounts represent the maximum potential amount of future (undiscounted) payments that the company could be required to make under the guarantees. The company would be required to perform on these guarantees in the event of default by the guaranteed party.

The company assesses the payment/performance risk by assigning default rates based on the duration of the guarantees. These default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical default history for counterparties that do not have published credit ratings. For counterparties without an external rating or available credit history, a cumulative average default rate is used.

In certain cases, the company has recourse to assets held as collateral, as well as personal guarantees from customers and suppliers. Assuming liquidation, these assets are estimated to cover 22 percent of the $105 of guaranteed obligations of customers and suppliers.
Set forth below are the company's guaranteed obligations at September 30, 2016:
 
Short-Term
Long-Term
Total
Obligations for customers and suppliers1:
 

 

 

Bank borrowings (terms up to 5 years)
$
91

$
14

$
105

Obligations for equity affiliates2:
 

 

 

Bank borrowings (terms up to 1 year)
181


181

Obligations for Chemours3:
 
 
 
Chemours' purchase obligations (final expiration - 2018)
22

11

33

Total
$
294

$
25

$
319


1. 
Existing guarantees for customers and suppliers, as part of contractual agreements.
2.   
Existing guarantees for equity affiliates' liquidity needs in normal operations.
3. 
Guarantee for Chemours' raw material purchase obligations under agreement with third party supplier.

Litigation
The company is subject to various legal proceedings arising out of the normal course of its business including product liability, intellectual property, commercial, environmental and antitrust lawsuits. It is not possible to predict the outcome of these various proceedings. Although considerable uncertainty exists, management does not anticipate that the ultimate disposition of these matters will have a material adverse effect on the company's results of operations, consolidated financial position or liquidity.  However, the ultimate liabilities could be material to results of operations in the period recognized.

PFOA
DuPont used PFOA (collectively, perfluorooctanoic acids and its salts, including the ammonium salt), as a processing aid to manufacture some fluoropolymer resins at various sites around the world including its Washington Works plant in West Virginia.

Since 2006, DuPont has undertaken obligations under agreements with the U.S. Environmental Protection Agency (EPA) and voluntary commitments to the New Jersey Department of Environmental Protection (NJDEP).  These obligations and voluntary commitments include surveying, sampling and testing drinking water in and around certain company sites and offering treatment or an alternative supply of drinking water if tests indicate the presence of PFOA in drinking water at or greater than the national health advisory level, even if provisional, as established from time to time by EPA. A provisional health advisory level was set in 2009 at 0.4 parts per billion (ppb) for PFOA in drinking water considering episodic exposure. In May 2016, EPA announced a health advisory level of 0.07 ppb for PFOA in drinking water considering lifetime versus episodic exposure.

At September 30, 2016 DuPont had an accrual balance of $18 related to the PFOA matters discussed in this Note. The company recorded an additional $5 during the nine months ended September 30, 2016 primarily for the impact of the new health advisory level on the company's obligations to EPA which have expanded the previously established testing and water supply commitments around the Washington Works facility. Pursuant to the Separation Agreement discussed in Note 3, the company is indemnified by Chemours for PFOA matters. As a result, the company has recorded an indemnification asset of $18 corresponding to the accrual balance as of September 30, 2016.

Drinking Water Actions
In August 2001, a class action, captioned Leach v. DuPont, was filed in West Virginia state court alleging that residents living near the Washington Works facility had suffered, or may suffer, deleterious health effects from exposure to PFOA in drinking water.

DuPont and attorneys for the class reached a settlement in 2004 that binds about 80,000 residents. In 2005, DuPont paid the plaintiffs’ attorneys’ fees and expenses of $23 and made a payment of $70, which class counsel designated to fund a community health project. The company funded a series of health studies which were completed in October 2012 by an independent science panel of experts (the C8 Science Panel). The studies were conducted in communities exposed to PFOA to evaluate available scientific evidence on whether any probable link exists, as defined in the settlement agreement, between exposure to PFOA and human disease.

The C8 Science Panel found probable links, as defined in the settlement agreement, between exposure to PFOA and pregnancy-induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and diagnosed high cholesterol.

In May 2013, a panel of three independent medical doctors released its initial recommendations for screening and diagnostic testing of eligible class members. In September 2014, the medical panel recommended follow-up screening and diagnostic testing three years after initial testing, based on individual results. The medical panel has not communicated its anticipated schedule for completion of its protocol. The company is obligated to fund up to $235 for a medical monitoring program for eligible class members and, in addition, administrative costs associated with the program, including class counsel fees. In January 2012, the company established and put $1 into an escrow account to fund medical monitoring as required by the settlement agreement. Under the settlement agreement, the balance in the escrow amount must be at least $0.5; as a result, transfers of additional funds may be required periodically. The court appointed Director of Medical Monitoring has established the program to implement the medical panel's recommendations and the registration process, as well as eligibility screening, is ongoing. Diagnostic screening and testing has begun and associated payments to service providers are being disbursed from the escrow account; at September 30, 2016, less than $1 has been disbursed. While it is probable that the company will incur liabilities related to funding the medical monitoring program, such liabilities cannot be reasonably estimated due to uncertainties surrounding the level of participation by eligible class members and the scope of testing.

In addition, under the settlement agreement, the company must continue to provide water treatment designed to reduce the level of PFOA in water to six area water districts, including the Little Hocking Water Association (LHWA), and private well users.

Class members may pursue personal injury claims against DuPont only for those human diseases for which the C8 Science Panel determined a probable link exists. At September 30, 2016 and December 31, 2015, there were approximately 3,500 lawsuits pending in various federal and state courts in Ohio and West Virginia. These lawsuits are consolidated in multi-district litigation (MDL) in the U.S. District Court for the Southern District of Ohio (the Court). DuPont, through Chemours, denies the allegations in these lawsuits and is defending itself vigorously. As a result of plaintiffs' corrected pleadings and further discovery, in the first quarter 2016, the company revised downward to 30 the estimated number of the pending lawsuits that allege wrongful death.

In 2014, six plaintiffs from the MDL were selected for individual trial. One of these six cases was voluntarily withdrawn by plaintiffs. In the first case tried to verdict, captioned Bartlett v. DuPont, in October 2015, the jury awarded $1.6 in compensatory damages and no punitive damages. The plaintiff alleged that exposure to PFOA in drinking water had caused kidney cancer. DuPont is appealing the decision. The second matter selected for trial, Wolf v. DuPont, involved allegations that exposure to PFOA in drinking water caused ulcerative colitis; prior to trial, a confidential settlement for an immaterial amount was reached in the first quarter 2016. Two cases alleging that exposure to PFOA in drinking water caused kidney cancer were settled in the second quarter 2016, for amounts immaterial individually and in the aggregate.

In the second case to be tried to a verdict, Freeman v. DuPont, the plaintiff alleged that exposure to PFOA in drinking water caused testicular cancer. In July 2016, the jury awarded $5.1 in compensatory damages plus $0.5 in punitive damages and attorneys’ fees. The company is appealing the decision.

As a result, four of the six cases have been resolved and the two that were tried to a verdict have been or will be appealed. In January 2016, the Court determined that 40 cases asserting cancer claims, to be identified by plaintiffs' attorneys, would be scheduled for trial through 2017. In July 2016, the Court scheduled the first case for trial in November 2016 and the second case for trial in January 2017. In both of these cases, plaintiffs allege that exposure to PFOA in drinking water caused testicular cancer and high cholesterol. The Court announced that the remaining 38 trials would be scheduled to begin each week starting in May 2017.

An approximate breakdown of the about 3,500 lawsuits still pending in the MDL is shown below.

Alleged Injury
Number of Claims
Kidney cancer
200

Testicular cancer
70

Ulcerative colitis
300

Preeclampsia
200

Thyroid disease
1,430

High cholesterol
1,340



This type of litigation could take place over many years and interim results do not predict the final outcome of cases. While DuPont believes it is probable that it could incur liabilities related to the lawsuits still pending in the MDL beyond the settlements discussed above, a range of such liabilities cannot be reasonably estimated at this time. Given the wide range of outcomes associated with the six initial cases in the MDL as discussed above, including two cases that have been or will be appealed, the company does not believe activity to date provides a reasonable basis to derive a range of loss for the remaining lawsuits still pending in the MDL in total or by category of claim. The possible range of loss is unpredictable and involves significant uncertainty due to the uniqueness of the remaining, individual plaintiff's claims and the company's defenses to those claims both as to potential liability and damages on an individual claims basis, among other factors.

The Court has ordered the parties to participate in confidential, nonbinding mediation regarding global resolution of the MDL. This process is ongoing.

Additional Actions
In the first quarter 2016, a confidential settlement was reached in the Ohio action brought by the LHWA claiming, “imminent and substantial endangerment to health and or the environment” under the Resource Conservation and Recovery Act (RCRA) in addition to general claims of PFOA contamination of drinking water. The cost of the settlement was paid by Chemours.

Under the Separation Agreement, all liabilities associated with the PFOA matters discussed above, including liabilities related to judgments, including punitive damages, or settlements associated with the MDL, are subject to indemnification by Chemours.

Environmental 
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 accrues for environmental remediation activities consistent with the policy as described in the company's 2015 Annual Report in Note 1, “Summary of Significant Accounting Policies.” Much of this liability results from the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to as Superfund), RCRA and similar state and global laws. These laws require the company to undertake certain investigative, remediation and restoration activities at sites where the company conducts or once conducted operations or at sites where company-generated waste was disposed. The accrual also includes estimated costs related to a number of sites identified by the company for which it is probable that environmental remediation will be required, but which are not currently the subject of enforcement activities.

Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated costs, depend on the mix of unique site characteristics, evolving remediation technologies, diverse regulatory agencies and enforcement policies, as well as the presence or absence of potentially responsible parties. At September 30, 2016, the Condensed Consolidated Balance Sheet included a liability of $497, relating to these matters and, in management's opinion, is appropriate based on existing facts and circumstances. The average time frame over which the accrued or presently unrecognized amounts may be paid, based on past history, is estimated to be 15-20 years. Considerable uncertainty exists with respect to these costs and, under adverse changes in circumstances, the potential liability may range up to $976 above the amount accrued as of September 30, 2016. Pursuant to the Separation Agreement discussed in Note 3, the company is indemnified by Chemours for certain environmental matters, included in the liability of $497, that have an estimated liability of $280 as of September 30, 2016, and a potential exposure that ranges up to approximately $600 above the amount accrued. As such, the company has recorded an indemnification asset of $280 corresponding to the company’s accrual balance related to these matters at September 30, 2016.

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
Filed on:10/25/168-K
For Period end:9/30/16
12/31/1510-K,  11-K,  4,  5,  SD
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Filing Submission 0000030554-16-000156   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

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