ITEM 3. LEGAL PROCEEDINGS
On March 6, 1996, the Department of Justice filed a complaint in the United States District Court for the District of Montana against Yellowstone Pipeline Company (YPL) and Conoco Pipe Line Company, as a 40 percent owner and operator of YPL. The complaint alleges discharges of oil from a YPL pipeline in January 1993 and seeks civil penalties of up to $25,000 per day for each violation or up to $1,000 for each barrel of oil discharged. The parties have reached an agreement to settle the case that requires the parties to pay a penalty of $165,000 and construct a fish passageway in the Jocko River to enhance the bull trout population. The court entered final settlement documents, and Conoco is in the process of implementing the terms of the settlement agreement.
On August 31, 1998, the Louisiana Department of Environmental Quality (LDEQ) issued a notice of violation against Conoco for failure to maintain control equipment to control emissions from the sulfur pits at the Lake Charles refinery. On November 11, 1998, the LDEQ notified Conoco that it would be seeking a civil penalty of $300,000. Since that time, Conoco and the LDEQ have negotiated a settlement of this matter. Under the settlement agreement terms, Conoco will execute a supplemental environmental project (SEP) and pay a civil penalty of $75,000. The SEP involves the relocation of marine dock area pipes. The draft agreement is currently being circulated within LDEQ for approvals.
On November 17, 1999, Conoco received Notice of Violation (NOV) 402 from the New Mexico Environment Department (NMED). NMED alleged that Conoco did not complete two initial compliance tests at the Kemnitz NG&GP Compressor Station by the permitted deadline, and that it did not submit the test reports to the state within the regulatory timeframe after the tests were completed. The NOV contained a draft penalty calculation of $160,656. Conoco disputes that it had the duty to conduct one of the compliance tests. Settlement negotiations are ongoing.
Conoco is subject to various lawsuits and claims involving a variety of matters including, along with other oil companies, actions challenging oil and gas royalty and severance tax payments based on posted prices, and claims for damages resulting from leaking underground storage tanks. As a result of its separation from DuPont, Conoco has also assumed responsibility for current and future claims related to certain discontinued chemicals and agricultural chemicals businesses operated by Conoco in the past. In general, the effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists. We believe the ultimate liabilities resulting from such lawsuits and claims may be material to results of operations in the period in which they are recognized, but will not materially affect the consolidated financial position of Conoco.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of 1999 to a vote of security holders through the solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
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(1) As of March 13, 2000.
Set forth below is information concerning the current executive officers.
Archie W. Dunham has been Chairman of the Board of Conoco since August 1999 and a director since July 1998. He has been President and Chief Executive Officer of Conoco since 1996. He joined Conoco in 1966 and subsequently held a number of commercial and managerial positions within Conoco and DuPont. He served on DuPont's board of directors until August 1999. Mr. Dunham is also a member of the boards of directors of Louisiana-Pacific Corporation and Phelps Dodge Corporation. Mr. Dunham is a former Executive Vice President, Exploration Production and Executive Vice President, Refining, Marketing, Supply and Transportation for Conoco. He was also a Senior Vice President, Polymers and Senior Vice President, Chemicals and Pigments for DuPont. He is a director of the American Petroleum Institute, the U.S.-Russia Business Council and the Greater Houston Partnership. He is Chairman of the United States Energy Association, Chairman of the National Petroleum Council and a member of The Business Council. Mr. Dunham is also a member of the Board of Visitors and the Energy Center board of directors at the
University of Oklahoma. He also serves on the board of trustees of the Memorial Hermann Healthcare System in Houston, the Houston Grand Opera, the Houston Symphony, the George Bush Presidential Library and the Smithsonian Institution.
Gary W. Edwards was appointed Senior Executive Vice President, Corporate Strategy and Development of Conoco in November 1999. Prior to his appointment, he had been Executive Vice President of Conoco since 1991, with responsibility for worldwide refining, marketing, supply and transportation and was a Senior Vice President of DuPont until October 27, 1998. He joined Conoco in 1963, working at various locations throughout the United States and in the United Kingdom, and was formerly Conoco's Vice President, Refining Marketing Europe; Vice President Refining, Marketing and Transportation; and Vice President North American Marketing. Mr. Edwards has held a number of managerial positions in Conoco Pipe Line, Transportation, Natural Gas and Gas Products, Logistics and Marketing. He is a Director of the American Petroleum Institute and National Association of Manufacturers and a previous director and Vice President of the European Petroleum Industry Association in Brussels, Belgium. Mr. Edwards is a member of the Kansas State University Engineering advisory council and serves on the boards of the Yellowstone Park Foundation, Theatre Under the Stars, Junior Achievement, Inc. (National), as well as Junior Achievement of Southeast Texas, Target Hunger, Private Sector Initiative, and the Houston Music Hall Foundation.
Robert E. McKee III has been an Executive Vice President for Conoco since 1992, with responsibility for worldwide exploration and production and was a Senior Vice President of DuPont until October 27, 1998. He was formerly Conoco's Executive Vice President for Corporate Strategy and Development, Senior Vice President for Administration, Vice President of North American Refining and Marketing and Vice President, Chairman and Managing Director of Conoco (UK) Limited. Since he joined Conoco in 1967, Mr. McKee has worked at various locations and held numerous managerial, operating, administrative and technology positions both in the United States and overseas. He currently serves on the board of directors of the American Petroleum Institute and is a former director of Consol Energy Inc. and Consol Inc. In addition, he is Chairman of the Southern Regional Advisory Board of the Institute of International Education and a member of the advisory committee of the University of Texas Engineering Department. Mr. McKee also serves as Chairman of the President's Council of the Colorado School of Mines.
Jim W. Nokes has been Executive Vice President for Conoco since November 1999, with responsibility for worldwide refining, marketing, supply and transportation, and was President of North American Refining and Marketing from 1998 until 1999. Mr. Nokes was Vice President of North American Refining and Marketing from 1994 until 1998. Since he joined Conoco in 1970, Mr. Nokes has held various administrative, planning and operating management positions with Conoco's gas and natural gas processing departments and pipe line subsidiary. In 1989, he transferred to London to serve as Director and General Manager of Business Development for Conoco's exploration and production affiliate, returning to the United States in 1991 to become Vice President and General Manager for North American Marketing.
Robert W. Goldman has been Senior Vice President, Finance, and Chief Financial Officer of Conoco since 1998 and was its Vice President, Finance from 1991 to 1998. Mr. Goldman began his career with DuPont in 1965 and subsequently held many technical and managerial positions within the finance, tax and treasury functions. He is the former Vice President-Finance of DuPont (Mexico), Vice President, Remington Arms Company and served as Director and Comptroller of several operating departments of DuPont in Wilmington, Delaware. Mr. Goldman transferred to Conoco in 1988 as Vice President and Controller. He is co-chairman of Conoco's Risk Management Committee and is a member of the American Petroleum Institute, a former chairman of its Accounting Committee and currently serves on its Executive Committee of the General Committee on Finance. He is also a member of the Financial Executives Institute and the Executive Committee of the Board of Directors of the Alley Theatre in Houston, Texas.
Rick A. Harrington has been Senior Vice President, Legal, and General Counsel of Conoco since 1998 and was Vice President and General Counsel of Conoco and Vice President and Assistant General Counsel of DuPont from 1994 until October 27, 1998. He joined DuPont in 1979 as a Senior Attorney, and subsequently held the positions of Managing Counsel, Special Litigation, and Vice President and General Counsel of Consolidation Coal Company. Prior to joining DuPont, he was a partner in the firm of Arent, Fox, Kintner,
Plotkin and Kahn in Washington, D.C. where he specialized in antitrust litigation. Mr. Harrington is a member of the bar of the District of Columbia, the District of Columbia Court of Appeals and the Fifth Circuit Court of Appeals. He is co-chairman of Conoco's Risk Management Committee. He is on the boards of directors of the American Corporate Counsel Association and the Minority Corporate Counsel Association and Chairman of the American Petroleum Institute General Committee on Law. He is also a member of the Association of General Counsel.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET, STOCK AND DIVIDEND INFORMATION
Conoco's Class A common stock (symbol: COC.A) and Class B common stock (symbol: COC.B) are listed on the New York Stock Exchange, Inc. The number of record holders of Class A common stock was 2,122, and Class B common stock was 6,068 at March 1, 2000.
QUARTERLY COMMON STOCK PRICES AND DIVIDENDS
Conoco's Class A common stock began trading on the New York Stock Exchange on October 22, 1998. There are no stock prices for Class A common stock for any quarters prior to the fourth quarter of 1998. Conoco's Class B common stock began trading on the New York Stock Exchange on August 16, 1999. There are no stock prices for Class B common stock for any quarters prior to the third quarter of 1999. Quarterly market prices are as reported by the New York Stock Exchange, Inc.
No dividends were declared in 1998 relating to the Class A common stock. Dividends were declared on a quarterly basis throughout 1999. The first quarter dividend of 1999 of $.14 per share was determined on a pro rata basis covering the period from October 27, 1998 to December 31, 1998, and is equivalent to $.19 per share for a full quarter. Conoco declared a first quarter cash dividend on January 26, 2000, of $.19 per share on each outstanding share of Class A common stock and Class B common stock, payable March 10, 2000, to shareholders of record as of February 10, 2000.
Conoco's Board of Directors will determine the amount of future cash dividends to be declared and paid based upon Conoco's financial condition, results of operations, cash flow, the level of its capital and exploration expenditures, its future business prospects and such other matters that the Board of Directors deems relevant.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
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(1) Includes petroleum excise taxes of $6,492, $5,801, $5,349, $5,461 and $5,655 for 1999, 1998, 1997, 1996 and 1995, respectively.
(2) Includes a non-cash stock option provision for 1998 of $236.
(3) Includes cash exploration overhead and operating expense, DD&A, dry hole costs and impairments of unproved properties.
(4) Includes after-tax exchange gains (losses) of $6, $32, $21, $(7), and $(40) for 1999, 1998, 1997, 1996 and 1995, respectively.
(5) Conoco's capital structure was established at the time of the initial public offering. Earnings per share for the periods prior to the initial public offering was calculated using only Class B common stock, as required by SFAS No. 128. See note 8 to the Consolidated Financial Statements incorporated into this document from our 1999 Annual Report to Stockholders.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by reference to pages 28 through 41 of Conoco Inc.'s 1999 Annual Report to Stockholders.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market Risk is incorporated herein by reference to pages 41 through 42 of Conoco Inc.'s 1999 Annual Report to Stockholders.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements and Supplementary Data is incorporated herein by reference to pages 43 through 77 of Conoco Inc.'s 1999 Annual Report to Stockholders.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Except as indicated below, information with respect to the following items is incorporated by reference to Conoco's 2000 Annual Meeting Proxy Statement filed in connection with the Annual Meeting of Stockholders to be held on May 16, 2000.
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will be set forth under the captions "Proposal I -- Election of Directors" and "Stock Ownership of Directors and Executive Officers -- Section 16 (a) Beneficial Ownership Reporting Compliance" in Conoco's definitive proxy statement (the "2000 Proxy Statement") for its annual meeting of stockholders to be held on May 16, 2000, which sections are incorporated herein by reference.
Pursuant to General Instruction G to Form 10-K, the information required by Item 401 of Regulation S-K with respect to executive officers of Conoco is set forth in Part I of this report (page 32).
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be set forth in the sections entitled "Proposal I -- Election of Directors--Board Compensation" and "Compensation of Executive Officers" in the 2000 Proxy Statement, which sections are incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth in the sections entitled "Principal Stockholders" and "Stock Ownership of Directors and Executive Officers" in the 2000 Proxy Statement, which sections are incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth in the section entitled "Compensation of Executive Officers -- Certain Relationships and Related Transactions" in the 2000 Proxy Statement, which section is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
1. Financial Statements (See Part II, Item 8 of this report regarding financial statements).
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.
Condensed financial information of the parent company is omitted because restricted net assets of consolidated subsidiaries do not exceed 25 percent 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 Conoco's equity in the undistributed earnings of affiliated companies does not exceed 25 percent of consolidated net assets at December 31, 1999.
Separate financial statements of affiliated companies accounted for by the equity method are omitted because no such affiliate individually constitutes a 20 percent 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:
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(1) Incorporated by reference to exhibit 3.1 of Conoco's Form 10-Q for the quarter ended September 30, 1998.
(2) Incorporated by reference to exhibit 3.2 of Conoco's registration statement on Form S-3/A, Registration No. 333-88573.
(3) Incorporated by reference to the exhibit of the same number filed as part of Conoco's registration statement on Form S-1, Registration No. 333-60119.
(4) Incorporated by reference to exhibit 4.6 of Conoco's registration statement on Form S-8, Registration No. 333-65977.
(5) Incorporated by reference to exhibit 4.1 of Conoco's Form 10-Q for the quarter ended June 30, 1999.
(6) Incorporated by reference to exhibit 4.1 of Conoco's registration statement on Form S-3, Registration No. 333-72291.
(7) Incorporated by reference to exhibit of the same number of Conoco's registration statement on Form S-1, Registration No. 333-88573.
(8) Incorporated by reference to exhibit 10.1 of Conoco's Form 10-Q for the quarter ended March 31, 1999.
(9) Incorporated by reference to exhibit 10.19 of Conoco's registration statement on Form S-1, Registration No. 333-60119.
(10) Incorporated by reference to exhibit 10.6 of Conoco's Form 10-Q for the quarter ended September 30, 1999.
(11) Incorporated by reference to exhibit 10.7 of Conoco's Form 10-Q for the quarter ended September 30, 1999.
(12) Filed herein.
# 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
None.
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 13th day of March 2000.
CONOCO INC. (Registrant)
By: /s/ ROBERT W. GOLDMAN ---------------------------------- Robert W. Goldman Senior Vice President, Finance, and Chief Financial Officer
By: /s/ W. DAVID WELCH ---------------------------------- W. David Welch Controller and Principal Accounting Officer
Pursuant to the requirements of the Securities exchange Act of 1934, this report has been signed, as of the 13th day of March, 2000, by the following persons on behalf of the registrant in the capacities indicated:
INDEX TO EXHIBITS
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(1) Incorporated by reference to exhibit 3.1 of Conoco's Form 10-Q for the quarter ended September 30, 1998.
(2) Incorporated by reference to exhibit 3.2 of Conoco's registration statement on Form S-3/A, Registration No. 333-88573.
(3) Incorporated by reference to the exhibit of the same number filed as part of Conoco's registration statement on Form S-1, Registration No. 333-60119.
(4) Incorporated by reference to exhibit 4.6 of Conoco's registration statement on Form S-8, Registration No. 333-65977.
(5) Incorporated by reference to exhibit 4.1 of Conoco's Form 10-Q for the quarter ended June 30, 1999.
(6) Incorporated by reference to exhibit 4.1 of Conoco's registration statement on Form S-3, Registration No. 333-72291.
(7) Incorporated by reference to exhibit of the same number of Conoco's registration statement on Form S-1, Registration No. 333-88573.
(8) Incorporated by reference to exhibit 10.1 of Conoco's Form 10-Q for the quarter ended March 31, 1999.
(9) Incorporated by reference to exhibit 10.19 of Conoco's registration statement on Form S-1, Registration No. 333-60119.
(10) Incorporated by reference to exhibit 10.6 of Conoco's Form 10-Q for the quarter ended September 30, 1999.
(11) Incorporated by reference to exhibit 10.7 of Conoco's Form 10-Q for the quarter ended September 30, 1999.
(12) Filed herein.
# Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K.