Ei Du Pont/Titanium

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Exhibit 1 Five-year Financial Summary, 1967-1971 ($ millions, except per share and ratio
data)

1971 1970 1969 1968 1967

Income Statement
Sales $3,848 $3,618 $3,632 $3,455 $3,079
Net income 357 334 356 372 314

Cash flow from operations 727 684 677 659 583

Earnings per share 7.33 6.86 7.62 7.99 6.73

Dividends per share 5.00 5.00 5.25 5.50 5.00

Average shares outstanding (000) 47,281 47,257 47,076 46,285 46,158

Balance Sheet
Net working capital $1,221 $1,100 $1,107 $996 $874
Net property, plant and equipment 2,002 1,923 1,803 1,738 1,724
Total assets 3,999 3,740 3,453 3,289 3,071

Total debt 307 216 186 162 125

Shareholders’ equity 3,095 2,964 2,854 2,697 2,557
Total capital 3,402 3,180 3,040 2,859 2,682

Book value per share 60.23 57.67 55.53 53.09 50.22

Market value per sharea 143.75 113.38 133.38 162.75 163.25

Capital Sources

Cash flow retained $480 $438 $423 $394 $308

External equity financing (net) 21 37 35 23 19
Debt financing (net) 91 30 24 37 67

Total capital added $592 $505 $482 $454 $394

Capital Expenditures $454 $471 $391 $332 $454

Key Financial Ratios

Growth rate (%)
Sales 6.4 (0.4) 5.1 12.2 (2.5)
Profits 6.9 (6.2) (4.3) 18.5 (19.3)

Return on sales (%) 9.3 9.2 9.8 10.8 10.2

Return on equity (%) 11.5 11.3 12.5 11.3 12.3

Current ratio 3.5 3.6 3.6 3.6 3.2

Debt and total capital (%) 9.0 6.8 6.1 5.7 4.7

Price earnings ratioa 19.6 16.5 17.5 20.4 24.2

Market value/Book valuea 2.4 2.0 2.4 3.1 3.3
a
Based on midpoint of the year’s trading range for Du Pont’s common shares.
Exhibit 2

Domestic TiO2 Production Capacity by Firm Total Domestic TiO2 Shipments by Firm, Including Importsa
1972 est. 1971 1970 1972 est. 1971 1970 1972 est. 1971 1970
000 tons % 000 tons % 000 tons % 000 tons b
% 000 tons b
% 000 tons b
% $ millions c
% $ millions c
% $ millionsc %

Du Pont 325 38 277 33 252 30 220 30 222 31 206 30 100 29 98 31 100 31

NL Industries 230 27 268 32 268 32 180 25 209 30 210 31 95 28 102 33 112 35
American Cyanamid 90 10 82 10 90 11 80 11 72 10 53 8 40 12 30 10 24 7
SCM 75 9 78 9 78 9 65 9 64 9 58 9 25 7 26 9 27 8
Gulf & Western 70 8 70 8 70 8 60 8 26 4 30 4 30 9 11 3 13 4
Kerr-McGee 45 5 39 5 37 5 45 6 37 5 31 5 20 6 12 4 16 5
Sherwin-Williams 25 3 27 3 27 3 30 4 26 4 21 3 10 3 12 4 8 2
PPG — — — — 18 2 — — 10 1 9 1 — — 4 1 4 1
Total (U.S. firms) 860 100 841 100 840 100 680 93 666 94 618 91 320 94 296 95 304 93
Imports — — — — — — 50 7 41 6 58 9 20 6 15 5 21 7
Total 860 100 841 100 840 100 730 100 707 100 676 100 340 100 311 100 325 100

Source: Federal Trade Commission, In the Matter of E. I. du Pont de Nemours & Co., Docket No. 9108, Complaint Counsel’s Exhibits Nos. CX121A, B; CX223A, B; and CX222.
a
Excluded exports.
b
Thousands of tons shipped.
c
Dollar value of shipments.
Exhibit 3 TiO2 Production by Firm and Type of Process, 1970
(tons 000)

Total Sulfate Chloride

Productiona Process Process

Du Pontb 211 43 168

NL Industries 229 193 36
American Cyanamid 56 47 9
SCM 51 48 3
Gulf & Western 33 33 —
Kerr-McGee 35 — 35
Sherwin-Williams 19 — 19
PPG 10 — 10
Total 644 364 280

Source: Federal Trade Commission, In the Matter of E. I. du Pont de Nemours &

Co., Docket No. 9108, Initial Decision, p. 11.
a
Differences between total production and total shipments (see Exbibit 2) represent
adjustments to TiO2 nventory.
b
Only Du Pont had chloride process production using low-grade feedstock; all
others used high-grade feedstock.
Exhibit 4 TiO2 Market Forecasts under Alternative Strategies for Du Pont, 1973-1985

Growth Strategy Maintain Strategy

Pretax
Size of Cost of New Operating Average Gross Du Pont Du Pont Average Gross Du Pont Du Pont
Marketa Capacity ($ Expensesb Selling Price ($ Market Capacity Selling Price ($ Market Capacity
(tons 000) per ton) ($ per ton) per ton) Share (%) (tons 000) per ton) Share (%) (tons 000)
325 325
1973 752 900 330 540 35 350 555 35 340
1974 774 927 390 640 40 375 665 40 350
1975 798 955 460 750 47 400 760 45 360
1976 822 983 540 880 47 421 890 45 370
1977 846 1,013 580 950 51 443 955 45 381
1978 872 1,043 620 1,010 52 475 1,015 45 392
1979 898 1,075 660 1,070 52 505 1,070 45 404
1980 925 1,107 690 1,130 55 530 1,120 45 416
1981 952 1,140 710 1,190 58 552 1,170 45 428
1982 981 1,174 740 1,250 59 579 1,210 45 441
1983 1,010 1,210 770 1,310 61 616 1,270 45 455
1984 1,041 1,246 810 1,370 62 645 1,320 45 468
1985 1,072 1,283 850 1,430 64 685 1,370 45 482

a
Total demand for TiO2 is forecast to grow at 3% annually and is not considered to be very sensitive to price.
b
Pretax operating expense per ton includes depreciation allowances but excludes interest expense.
 Zero Capex or Do Nothing

Average
Gross Du Pont
Selling Du Pont Capacity Competit
Price ($ Market (tons ors
per ton) Share (%) 000) Output
325
555 325 488.80
665 325 464.40
760 325 422.94
890 325 435.66
955 325 414.54
1015 325 418.56
1070 Lower of 325 431.04
1120 demand 325 416.25
1170 under 325 399.84
maintain
1210 325 402.21
and
1270 capacity 325 393.90
1320 under do 325 395.58
1370 nothing 325 385.92

Shut down
 $m

Expansion Salvage
Year Prod (kt) Sales Opex EBIT EBIT(1-t) Capex Delta WC ITC Value
100.00
1973 263.20 142.13 86.86 55.27 28.74 22.50 8.43 2.25
1974 309.60 198.14 120.74 77.40 40.25 23.18 11.20 2.32
1975 375.06 281.30 172.53 108.77 56.56 23.88 16.63 2.39
1976 386.34 339.98 208.62 131.36 68.30 20.64 11.74 2.06
1977 431.46 409.89 250.25 159.64 83.01 22.29 13.98 2.23
1978 453.44 457.97 281.13 176.84 91.96 33.38 9.62 3.34
1979 466.96 499.65 308.19 191.45 99.56 32.25 8.33 3.23
1980 508.75 574.89 351.04 223.85 116.40 27.68 15.05 2.77
1981 552.16 657.07 392.03 265.04 137.82 25.08 16.44 2.51
1982 578.79 723.49 428.30 295.18 153.50 31.70 13.28 3.17
1983 616.10 807.09 474.40 332.69 173.00 44.77 16.72 4.48
1984 645.42 884.23 522.79 361.44 187.95 36.13 15.43 3.61
1985 686.08 981.09 583.17 397.93 206.92 51.32 19.37 5.13 571.00
394.78 176.22 + 1972 BV
Add back Depreciation
Less Capex for replacement and expansion
Subtract only expansion capex
PAT+DEP-R_Capex-E_Capex
PAT-E_Capex
 Less
foregone
Cash licensing
Flows revenue

0.07
8.19
18.44
37.99
48.97
52.30
62.20
76.45
98.81
111.68
115.99
140.00
712.36
 $m
Expansion Salvage
Year Prod (kt) Sales Opex EBIT EBIT(1-t) Capex Delta WC ITC Value
100.00
1973 263.20 146.08 86.86 59.22 30.79 13.50 9.22 1.35
1974 309.60 205.88 120.74 85.14 44.27 9.27 11.96 0.93
1975 359.10 272.92 165.19 107.73 56.02 9.55 13.41 0.96
1976 369.90 329.21 199.75 129.47 67.32 9.83 11.26 0.98
1977 380.70 363.57 220.81 142.76 74.24 11.14 6.87 1.11
1978 392.40 398.29 243.29 155.00 80.60 11.47 6.94 1.15
1979 404.10 432.39 266.71 165.68 86.15 12.90 6.82 1.29
1980 416.25 466.20 287.21 178.99 93.07 13.28 6.76 1.33
1981 428.40 501.23 304.16 197.06 102.47 13.68 7.01 1.37
1982 441.45 534.15 326.67 207.48 107.89 15.26 6.59 1.53
1983 454.50 577.22 349.97 227.25 118.17 16.94 8.61 1.69
1984 468.45 618.35 379.44 238.91 124.23 16.20 8.23 1.62
1985 482.40 660.89 410.04 250.85 130.44 17.96 8.51 1.80 283.17
170.99 112.18 + 1972 BV
Add back Depreciation
Less Capex for replacement and expansion
Subtract only expansion capex
Cash
Flows

9.43
23.97
34.02
47.22
57.34
63.33
67.72
74.36
83.16
87.57
94.31
101.43
388.94
 $m
Expansion Salvage
Year Prod (kt) Sales Opex EBIT EBIT(1-t) Capex Delta WC ITC Value
100.00
1973 263.20 146.08 86.86 59.22 30.79 9.22 0.00
1974 309.60 205.88 120.74 85.14 44.27 11.96 0.00
1975 325.00 247.00 149.50 97.50 50.70 8.22 0.00
1976 325.00 289.25 175.50 113.75 59.15 8.45 0.00
1977 325.00 310.38 188.50 121.88 63.38 4.23 0.00
1978 325.00 329.88 201.50 128.38 66.76 3.90 0.00
1979 325.00 347.75 214.50 133.25 69.29 3.58 0.00
1980 325.00 364.00 224.25 139.75 72.67 3.25 0.00
1981 325.00 380.25 230.75 149.50 77.74 3.25 0.00
1982 325.00 393.25 240.50 152.75 79.43 2.60 0.00
1983 325.00 412.75 250.25 162.50 84.50 3.90 0.00
1984 325.00 429.00 263.25 165.75 86.19 3.25 0.00
1985 325.00 445.25 276.25 169.00 87.88 3.25 0.00 69.05
0.00 69.05 + 1972 BV
Add back Depreciation
Less Capex for replacement and expansion
Subtract only expansion capex
Cash
Flows

21.58
32.31
42.48
50.70
59.15
62.86
65.72
69.42
74.49
76.83
80.60
82.94
153.68
 Incremental
Year Growth Maintain DoNothing G-M G-N M-N

1973 0.07 9.43 21.58 -9.36 -21.51 -12.15

1974 8.19 23.97 32.31 -15.78 -24.12 -8.34
1975 18.44 34.02 42.48 -15.58 -24.04 -8.46
1976 37.99 47.22 50.70 -9.23 -12.71 -3.48
1977 48.97 57.34 59.15 -8.36 -10.18 -1.81
1978 52.30 63.33 62.86 -11.03 -10.55 0.47
1979 62.20 67.72 65.72 -5.53 -3.52 2.01
1980 76.45 74.36 69.42 2.09 7.03 4.94
1981 98.81 83.16 74.49 15.65 24.32 8.67
1982 111.68 87.57 76.83 24.11 34.85 10.74
1983 115.99 94.31 80.60 21.68 35.39 13.71
1984 140.00 101.43 82.94 38.57 57.06 18.49
1985 712.36 388.94 153.68 323.42 558.68 235.26

NPV 15% 28.93 55.93 27.00

20% 4.06 12.03 7.97

Special risks of Growth Strategy

Anti trust
New reserves of high quality ore
Slack enforcement of environmental regulations
Demand
should not be too high initially
should not be too low later
Technology