DuPont 2005 Annual Report Download - page 51

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Part II
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations–Continued
In addition, DuPont will work individually and with others in the industry to inform EPA’s regulatory counterparts in the
European Union, Canada, China and Japan about these activities and PFOA in general, including emissions reductions from
DuPont’s facilities as well as reformulation of the company’s fluoropolymer dispersions. DuPont has developed technology that
can reduce the PFOA content in fluoropolymer dispersions by 97 percent. DuPont is offering the technology to fluoropolymer
manufacturers globally on a royalty-free basis.
Based on existing scientific data, DuPont believes that PFOA exposure at the levels observed does not pose any health risk to
the general public. To date no human health effects are known to be caused by PFOA, even in workers who have significantly
higher exposure levels than the general population. DuPont is conducting a two-phase employee health study on PFOA for
more than 1,000 workers at its Washington Works site located near Parkersburg, W.Va. Results from the first phase of this
study indicate no association between exposure to PFOA and most of the health parameters that were measured. The only
potentially relevant association is a modest increase in some, but not all, lipid fractions, e.g. cholesterol, in some of the highest
exposed workers. It is unclear if this association is caused by PFOA exposure or is related to some other variable; therefore,
DuPont is consulting with medical and other scientific experts to design and conduct appropriate follow-up testing. The second
phase is a mortality study that involves the examination of all causes of death in employees who worked at the Washington
Works site during its more than fifty years of operation.
DuPont has established reserves in connection with certain PFOA litigation matters. See Note 24 to the Consolidated Financial
Statements.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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,
petrochemical and petroleum companies, and exchanges.
The company hedges certain business-specific foreign currency exposures as well as foreign currency denominated monetary
assets and liabilities. In addition, the company enters into exchange traded agricultural commodity derivatives to hedge
exposures relevant to agricultural feedstock purchases.
In January 2004, the company terminated its broad-based foreign currency revenue hedging program, as well as its program to
hedge natural gas purchases. All outstanding foreign currency and natural gas hedging positions related to these programs
expired during 2004.
In October 2005, the company authorized the use of financial derivatives to hedge exposure to price fluctuations for certain
energy feedstock purchases. However, at December 31, 2005, the company had not entered into any derivative instruments
with respect to this program.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the company to significant concentrations of credit risk consist principally of
cash, investments, accounts receivable and derivatives.
51