DuPont 2005 Annual Report Download - page 44

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Part II
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations–Continued
upon the difference between the volume weighted average price (VWAP) of DuPont common stock during the nine-month
purchase period and $39.62, multiplied by the number of shares purchased by Goldman Sachs. If the VWAP is less than $39.62,
then Goldman Sachs will owe an adjustment to the company; conversely if the VWAP exceeds $39.62, the company will owe
Goldman Sachs. Through December 31, 2005, Goldman Sachs had purchased 18,124,335 shares with a VWAP of $42.77. If
Goldman Sachs purchased the remaining 57,594,999 shares at the December 30, 2005 closing price of $42.50, then the company
would owe Goldman Sachs a price adjustment of $223 million upon settlement, payable in cash or shares of the company’s
common stock. The repurchase agreement caps the number of shares that could be required to be issued at 75,000,000. The
forward contract for the price adjustment is accounted for as an equity instrument and changes in its fair value are not
recorded during the contract period. Upon settlement in cash or shares, the price adjustment will be recorded as equity.
SYNTHETIC LEASES
At December 31, 2005, the company has one synthetic lease program relating to miscellaneous short-lived equipment valued at
approximately $115 million. Lease payments for these assets totaled $51 million in 2005, $54 million in 2004 and $43 million in
2003, and were reported as operating expenses in the Consolidated Income Statement. The leases under this program are
considered operating leases and accordingly the related assets and liabilities are not recorded on the Consolidated Balance
Sheet. Furthermore, the lease payments associated with this program vary based on one month LIBOR. The company may
terminate the program at any time by purchasing the assets. Should the company decide neither to renew the leases nor to
exercise its purchase option, it must pay the owner a residual value guarantee amount, which may be recovered from a sale
of the property to a third party. Residual value guarantees totaled $100 million at December 31, 2005.
During 2003, the company purchased the assets under its synthetic leases related to manufacturing and warehousing facilities
under construction for $210 million.
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