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2006
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Mark One
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2006
nTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number 1-815
E. I. DU PONT DE NEMOURS
AND COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 51-0014090
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
1007 Market Street
Wilmington, Delaware 19898
(Address of principal executive offices)
Registrant’s telephone number, including area code: 302 774-1000
Securities registered pursuant to Section 12(b) of the Act
(Each class is registered on the New York Stock Exchange, Inc.):
Title of Each Class
Common Stock ($.30 par value)
Preferred Stock
(without par value-cumulative)
$4.50 Series
$3.50 Series
No securities are registered pursuant to Section 12(g) of the Act.
Indicate by check mark whether the registrant is a well-known seasoned issuer (as defined in Rule 405 of the Securities
Act). Yes No n
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes nNo
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No n
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. n
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer nNon-accelerated filer n
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes nNo
The aggregate market value of voting stock held by nonaffiliates of the registrant (excludes outstanding shares beneficially
owned by directors and officers and treasury shares) as of June 30, 2006, was approximately $38.0 billion.
As of January 31, 2007, 924,125,197 shares (excludes 87,041,427 shares of treasury stock) of the company’s common stock,
$.30 par value, were outstanding.
Documents Incorporated by Reference
(Specific pages incorporated are indicated under the applicable Item herein):
Incorporated
By Reference
In Part No.
The company’s Proxy Statement in connection with the Annual Meeting of Stockholders to be held on
April25,2007 ........................................................................ III

Table of contents

  • Page 1
    ... No.) 1007 Market Street Wilmington, Delaware 19898 (Address of principal executive offices) Registrant's telephone number, including area code: 302 774-1000 Securities registered pursuant to Section 12(b) of the Act (Each class is registered on the New York Stock Exchange, Inc.): Title of Each...

  • Page 2
    ... Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services 58...

  • Page 3
    ... in Delaware in 1915. DuPont is a world leader in science and technology in a range of disciplines, including biotechnology, electronics, materials science, safety and security and synthetic fibers. The company operates globally, manufacturing a wide range of products for distribution and sale to...

  • Page 4
    ... contracted with Convergys Corporation to provide the company with global human resources transactional services including employee development, workforce planning, compensation management, benefits administration and payroll. The full scope of these services is scheduled to be operating by the end...

  • Page 5
    ... and gain value from this estate. The company owns and is licensed under various patents, which expire from time to time, covering many products, processes and product uses. These patents protect many aspects of the company's significant research programs and the goods and services it sells. The...

  • Page 6
    ... company has long-standing relationships with these customers and they are considered to be important to the segments' operating results. Competition The company competes on a variety of factors such as price, product quality and performance or specifications, continuity of supply, customer service...

  • Page 7
    ... circuit market. The objectives of the company's research and development programs are to create new technologies, processes and business opportunities in relevant fields, as well as to improve existing products and processes. Each segment of the company funds research and development activities...

  • Page 8
    ... and copy any materials the company files with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site at http...

  • Page 9
    ... to identify viable new products, successfully complete research and development, obtain relevant regulatory approvals, obtain intellectual property protection, or gain market acceptance of new products and services. Because of the lengthy development process, technological challenges and intense...

  • Page 10
    ... its past operations and operations of divested businesses, the company could incur substantial costs, including cleanup costs, third-party property damage or personal injury claims. The costs of complying with complex environmental laws and regulations, as well as internal voluntary programs, are...

  • Page 11
    ... None. ITEM 2. PROPERTIES The company's corporate headquarters are located in Wilmington, Delaware. The company's manufacturing, processing, marketing and research and development facilities, as well as regional purchasing offices and distribution centers are located throughout the world. 11

  • Page 12
    ..., Mexico(2) Europe: Canada: Latin America: (1) Agriculture & Nutrition (2) Coatings & Color Technologies (3) Electronic & Communication Technologies (4) Performance Materials (5) Safety & Protection The company's plants and equipment are well maintained and in good operating condition. Sales as...

  • Page 13
    ...Environmental Quality (TCEQ) regarding its Sabine River Works facility located in Orange, Texas. The Notice contained 45 allegations relating to reportable and non-reportable emission events from 2002 through 2004 and sought an administrative penalty of $134,852. In addition to this NoE, the company...

  • Page 14
    ... Operating Officer Jeffrey L. Keefer, Executive Vice President and Chief Financial Officer Ellen J. Kullman, Executive Vice President - Safety & Protection and Coatings & Color Technologies Stacey J. Mobley, Senior Vice President and Chief Administrative Officer and General Counsel Executive Officer...

  • Page 15
    ... business director and was named vice president and general manager of White Pigment & Mineral Products in 1995. In 2000, Ms. Kullman was named group vice president and general manager of several businesses and new business development. She became group vice president-DuPont Safety & Protection...

  • Page 16
    ... AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Registrant's Common Equity and Related Stockholder Matters The company's common stock is listed on the New York Stock Exchange, Inc. (symbol DD) and certain non-U.S. exchanges. The number of record holders of common stock was 84,240 at December...

  • Page 17
    ...-year total return for the company's common stock compared with the S&P 500 Stock Index and a self-constructed peer group of companies. The peer group companies are Alcoa Inc.; BASF Corporation; The Dow Chemical Company; Eastman Kodak Company; Ford Motor Company; General Electric Company; Hewlett...

  • Page 18
    ... at year-end Working capital Total assets Borrowings and capital lease obligations Short-term Long-term Stockholders' equity General For the year Purchases of property, plant & equipment and investments in affiliates Depreciation Research and development (R&D) expense Average number of common...

  • Page 19
    ...focused on creating new technologies, processes and business opportunities in relevant fields, as well as improving existing products and processes. Market-driven innovation, which relies on the voice of the customer and concrete market opportunities, is central to the company's research efforts. In...

  • Page 20
    ..., Mississippi, titanium dioxide plant which remained shut down from August 2005 until production began a phased-in restart in January 2006. Normal operations resumed by the end of the second quarter 2006. In 2006, the company received $204 million in insurance recoveries related to losses suffered...

  • Page 21
    ... the divested Textiles & Interiors business in 2004. 2 Sales related to elastomers businesses transferred to Dow on June 30, 2005, were $386 million and $467 million in 2005 and 2004, respectively, primarily in the U.S. and Asia Pacific. Excluding these sales, the company's worldwide sales were $26...

  • Page 22
    ...COGS as a percent of sales principally reflects higher raw material costs not entirely covered by selling price increases and higher costs for restructuring plans discussed below. In 2006, the company recorded a benefit to COGS for $128 million for insurance recoveries related to the property damage...

  • Page 23
    ... portion of the Agriculture & Nutrition program involves reinvestment in research and development activities so cost savings are largely neutral under this plan. In 2005, the company evaluated capital investment requirements at its Louisville, Kentucky facility and the declining demand for the...

  • Page 24
    Part II Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued (Dollars in millions) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES As a percent of Net sales 2006 $3,224 12% 2005 $3,223 12% 2004 $3,141 11% Selling, general and administrative (SG...

  • Page 25
    ... pursuant to a domestic reinvestment plan. In 2004, the company recorded significant tax benefits which principally included $360 million on exchange losses in connection with the company's foreign currency hedging program, $320 million related to the separation of Textiles & Interiors, $160 million...

  • Page 26
    ... to slow to below-trend rates, while growth in the developing world will be near trend with about 5 percent growth in South America to 9 percent in China. Global industrial production, which is considered a reliable indicator of demand for the company's products and services, is forecast to expand...

  • Page 27
    ...the company's accounting policies which could have a material effect on the company's financial position, liquidity or results of operations. Pension and Other Postretirement Benefits Accounting for employee benefit plans involves numerous assumptions and estimates. Discount rate and expected return...

  • Page 28
    ... returns (net of inflation) for the asset classes covered by the investment policy and projections of inflation over the long-term period during which benefits are payable to plan participants. In determining annual expense for the principal U.S. pension plan, the company uses a market-related value...

  • Page 29
    ...estimated. Management makes adjustments to these reserves to reflect the impact and status of negotiations, settlements, rulings, advice of counsel and other information and events that may pertain to a particular matter. Predicting the outcome of claims and lawsuits and estimating related costs and...

  • Page 30
    ... and herbicides. The segment operates across the food value chain from inputs for production agriculture to global production and distribution of soy-based food ingredients, food quality diagnostic testing equipment and services and liquid food packaging systems. Research and development focuses...

  • Page 31
    ... 2006, the segment launched a restructuring plan to increase investment in plant genetics, biotechnology and other growth opportunities while consolidating manufacturing assets, technology centers and marketing strategies in its nutrition and crop protection businesses. The segment recorded a charge...

  • Page 32
    ... the U.S., Canada and Brazil. The segment's introduction of new crop protection products is projected to drive volume gains. Segment margins will be challenged by higher production and raw material costs and continued investments in research, which will drive long-term profitability. Technology will...

  • Page 33
    ... of $116 million related to the clean-up and restoration of manufacturing operations, as well as the write-off of inventory and plant assets that were destroyed by hurricanes. 2005 versus 2004 Sales of $6.1 billion were up 3 percent, reflecting 6 percent higher USD selling prices, partly offset by...

  • Page 34
    ..., the segment is developing new innovative technologies for liquid crystal displays, such as thermal color filters and display films, while continuing to invest in developing materials technologies for organic light-emitting diode (OLED) displays and field emission displays. In fluoropolymers and...

  • Page 35
    ... II Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued inks for ink-jet printing while continuing to pursue exciting new opportunities within ArtistriTM digital textile printing offerings. 2006 versus 2005 Sales of $3.8 billion increased about...

  • Page 36
    ... facility by the end of 2007 at which time neoprene production will cease at the Louisville site. In 2005, the company recorded a restructuring charge of $34 million, reflecting severance and related costs for approximately 275 employees. Annual cost reductions related to ceasing neoprene production...

  • Page 37
    ... will continue to improve. Performance Materials expects to realize continued revenue growth in 2007. PTOI is expected to increase, benefiting from higher revenue, price increases, improved fixed cost performance and customer-driven innovations for products and processes. The level of earnings...

  • Page 38
    Part II Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued Outlook DuPont and Merck continue to support Cozaar» and Hyzaar» with clinical studies designed to identify additional therapeutic benefits for patients with hypertension and co-morbid...

  • Page 39
    ... operating costs, productivity and quality. DuPont is a leader in this consulting field, selling materials and consulting. It operates within a range of business models, including sharing of client gains due to lower injury/workman's compensation claims. Initiated by DuPont in 2005, the World Safety...

  • Page 40
    ...for the transfer of certain equity affiliates, pending the approval of equity partners. Beginning in 2005, financial transactions related to the remaining assets of Textiles & Interiors are reported in Other. OTHER The company combines the results of its developmental and nonaligned businesses under...

  • Page 41
    ...'s Investors Service (Moody's) and Fitch Ratings (Fitch) downgraded the company's long-term debt credit rating following the company's announced $5 billion share buyback program. Management expected the revision and it had minimal impact on the company's borrowing costs and ability to access capital...

  • Page 42
    ...in the fourth quarter 1904. The company's Board of Directors authorized a $2 billion share buyback plan in June 2001. During 2005, the company purchased and retired 9.9 million shares at a total cost of $505 million. During 2006, there were no purchases of stock under this program. As of December 31...

  • Page 43
    ... Analysis of Financial Condition and Results of Operations, continued 20.5 million shares at a total cost of $962 million. Management has not established a timeline for the buyback of the remaining stock under this plan. In October 2005, the Board of Directors authorized a $5 billion share buyback...

  • Page 44
    ... for businesses acquired Proceeds from sales of assets Proceeds from sale of assets-Textiles & Interiors, net of cash sold Debt assumed by Koch Forward exchange contract settlements Dividends paid to stockholders Acquisition of treasury stock Effect of exchange rate changes on cash Other Increase...

  • Page 45
    ... Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, continued Obligations for Equity Affiliates and Others The company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates, customers, suppliers...

  • Page 46
    ... maturity Capital leases1 Operating leases Purchase obligations Information technology infrastructure & services Raw material obligations Research & development agreements Utility obligations INVISTA-related obligations3 Human resource services Other4 Total purchase obligations Other long-term...

  • Page 47
    ... or discontinue its plans that provide pension and medical, dental and life insurance benefits. Benefits under defined benefit pension plans are based primarily on years of service and employees' pay near retirement. Pension benefits are paid primarily from trust funds established to comply with...

  • Page 48
    ... losses related to the pension plans. Additional information related to the company's adoption of SFAS 158 is included in Note 2 to the company's Consolidated Financial Statements. Medical, dental and life insurance plans are unfunded and the cost of the approved claims is paid from operating...

  • Page 49
    ... in businesses for which environmental assessments are required during product development. The largest of the environmental expenses in 2006 was $109 million for the operation of water pollution control facilities and $127 million for solid waste management. About 78 percent of total annual...

  • Page 50
    ... programs. DuPont has discovered that very low levels of dioxins (parts per trillion to low parts per billion) and related compounds are inadvertently generated during its titanium dioxide pigment production process. The company has launched an extensive research and process engineering development...

  • Page 51
    ... have the financial strength to meet their obligations and, where they do not, or where PRPs cannot be located, the company's own share of liability has not materially increased. There are relatively few sites where the company is a major participant and the cost to the company of remediation...

  • Page 52
    ... sources in the area around the Washington Works site located in Parkersburg, West Virginia. As part of the Order on Consent, DuPont will conduct a survey and perform sampling and analytical testing of certain public and private water systems in the area. DuPont is required under the agreement to...

  • Page 53
    ... to make, buy or use PFOA by 2015. This plan creates an opportunity for the company to leverage its research and development strengths to develop new sustainable technologies and products. Based on health and toxicological studies, DuPont believes the weight of evidence indicates that PFOA exposure...

  • Page 54
    ... currency-denominated monetary assets and liabilities of its operations. The primary business objective of this hedging program is to maintain an approximately balanced position in foreign currencies so that exchange gains and losses resulting from exchange rate changes, net of related tax effects...

  • Page 55
    ..., from time to time, to manage near-term foreign currency cash requirements and to place foreign currency deposits and marketable securities investments. Interest Rate Risk The company uses interest rate swaps to manage the interest rate mix of the total debt portfolio and related overall cost of...

  • Page 56
    ... the SEC. These controls and procedures also give reasonable assurance that information required to be disclosed in such reports is accumulated and communicated to management to allow timely decisions regarding required disclosures. As of December 31, 2006, the company's Chief Executive Officer (CEO...

  • Page 57
    ...company continues to take appropriate steps to enhance the reliability of its internal control over financial reporting. Management has identified areas for improvement and discussed them with the company's Audit Committee and independent registered public accounting firm. ITEM 9B. OTHER INFORMATION...

  • Page 58
    ... any material changes to the procedures by which security holders may recommend nominees to its Board of Directors since these procedures were communicated in the company's 2006 Proxy Statement for the Annual Meeting of Stockholders held on April 26, 2006. Information related to the Audit Committee...

  • Page 59
    ... and Approval of Transactions with Related Persons, Policies and Procedures." Information with respect to director independence is incorporated by reference herein to the Proxy and is included in the sections entitled "DuPont Board of Directors: Corporate Governance Guidelines," "Guidelines for...

  • Page 60
    ... 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 Consolidated Financial Statements or notes thereto incorporated by reference. Condensed financial information of the parent company is...

  • Page 61
    ... of the company's Annual Meeting Proxy Statement dated March 21, 2002). Company's Salary Deferral & Savings Restoration Plan, as last amended effective January 1, 2007. Company's Retirement Savings Restoration Plan adopted effective January 1, 2007. Company's Retirement Income Plan for Directors, as...

  • Page 62
    ... and Financial Statement Schedules, continued Exhibit Number 10.16 Description Company's Bicentennial Corporate Sharing Plan, adopted by the Board of Directors on December 12, 2001 and effective January 9, 2002 (incorporated by reference to Exhibit 10.12 of the company's Quarterly Report on...

  • Page 63
    ... DE NEMOURS AND COMPANY By: /s/ J. L. KEEFER J. L. Keefer Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of...

  • Page 64
    ... de Nemours and Company Index to the Consolidated Financial Statements Page(s) Consolidated Financial Statements: Management's Reports on Responsibility for Financial Statements and Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm Consolidated Income...

  • Page 65
    ... Reporting Management is responsible for establishing and maintaining an adequate system of internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The company's internal control over financial reporting is a process designed...

  • Page 66
    ... the Company changed its accounting for defined benefit pension and other postretirement plans during 2006 and for the consolidation of variable interest entities during 2004. Internal control over financial reporting Also, in our opinion, management's assessment, included in "Management's Report on...

  • Page 67
    ... December 31, Net sales Other income, net Total Cost of goods sold and other operating charges Selling, general and administrative expenses Amortization of intangible assets Research and development expense Interest expense Separation activities-Textiles & Interiors Total Income before income taxes...

  • Page 68
    ..., plant and equipment Goodwill Other intangible assets Investment in affiliates Other assets Total Liabilities and Stockholders' Equity Current liabilities Accounts payable Short-term borrowings and capital lease obligations Income taxes Other accrued liabilities Total current liabilities Long-term...

  • Page 69
    ... of cash flow hedges to earnings Minimum pension liability Net unrealized loss on securities Total comprehensive income Common dividends ($1.46 per share) Preferred dividends Treasury stock Acquisition Retirement Common stock issued Compensation plans Balance December 31, 2005 2006 Net income...

  • Page 70
    ... by operating activities Investing activities Purchases of property, plant and equipment Investments in affiliates Payments for businesses - net of cash acquired Proceeds from sale of assets, net of cash sold Net decrease (increase) in short-term financial instruments Forward exchange contract...

  • Page 71
    ..." (SFAS 158). Upon adoption, the company recognized in its statement of financial position the funded status of its defined benefit postretirement plans and included in Accumulated other comprehensive loss, net of tax, the pretax gains and losses and prior service costs and credits that, pursuant to...

  • Page 72
    ... are accounted for by the cost method. Revenue Recognition The company recognizes revenue when the earnings process is complete. The majority of the company's revenues are from the sale of a wide range of products to a diversified base of customers around the world. Revenue for product sales is...

  • Page 73
    ... floating rate financial instruments with maturities of twelve months or less from time of purchase. They are classified as held-to-maturity and recorded at amortized cost. Other assets include long-term investments in securities, which comprise marketable equity securities and other securities and...

  • Page 74
    ...from future operations, in which case, they are capitalized. Asset Retirement Obligations The company records asset retirement obligations at fair value at the time the liability is incurred. Accretion expense is recognized as an operating expense using the credit-adjusted risk-free interest rate in...

  • Page 75
    ... of most of the company's worldwide operations. For subsidiaries where the USD is the functional currency, all foreign currency asset and liability amounts are remeasured into USD at end-of-period exchange rates, except for inventories, prepaid expenses, property, plant and equipment, goodwill and...

  • Page 76
    ... in Reinvested earnings at January 1, 2007. In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, (SFAS 157) "Fair Value Measurements," which addresses how companies should measure fair value when required for recognition or disclosure purposes under generally...

  • Page 77
    ...the gains and losses and prior service costs and credits that pursuant to SFAS No. 87 and 106 have not been recognized as components of net periodic benefit cost. The company also recognized in its statement of financial position an asset or a liability that reflects the funded status of its defined...

  • Page 78
    ..., by currency, related to the foreign currency-denominated monetary assets and liabilities of its operations. The objective of this program is to maintain an approximately balanced position in foreign currencies in order to minimize, on an after-tax basis, the effects of exchange rate changes. The...

  • Page 79
    ... from the plan totaled $135, including $123 related to severance payments primarily in Europe and the U.S. for approximately 1,300 employees involved in manufacturing, marketing, administrative and technical activities. In connection with this program, a $12 charge was also recorded related to exit...

  • Page 80
    ... $29 in Other to write off the net book value of certain patents and purchased technology. Due to changes in the associated manufacturing process and executed supply agreements in 2004, these abandoned assets were determined to be of no future value to the company. Account balances and activity for...

  • Page 81
    ... in the book value of net assets, $37 related to final settlement of working capital balances and other separation charges of $154 which consisted primarily of incremental legal, accounting and other advisory fees, other employee separation costs and the early termination of a long-term supply...

  • Page 82
    ...Investment in affiliates Prepaid expenses and other assets Assets Accounts payable Borrowings and capital lease obligations Deferred tax liability Other liabilities Minority interests Liabilities During 2005, additional equity affiliates with a book value of $84 were transferred to Koch. The company...

  • Page 83
    ..., the company included in the ending balance of Accumulated other comprehensive loss, taxes associated with the gains and losses and prior service costs and credits, that pursuant to SFAS No. 87 and 106 prior to amendment by SFAS 158 had not been recognized as components of net periodic benefit cost...

  • Page 84
    ... of the company's assets and liabilities. The tax effects of temporary differences and tax loss/tax credit carryforwards/backs included in the deferred income tax provision are as follows: 2006 Depreciation Accrued employee benefits Other accrued expenses Inventories Unrealized exchange (loss) gain...

  • Page 85
    ... effective tax rates on international operations-net Tax settlements Lower effective tax rate on export sales The American Jobs Creation Act of 2004 (AJCA)2 Valuation Allowance Release Separation charges - Textiles & Interiors Tax basis investment losses on foreign subsidiaries3 Elastomers antitrust...

  • Page 86
    ... the company's repurchase and retirement of its common stock in connection with an accelerated share repurchase agreement. See Note 21 for further information. The following average number of stock options are antidilutive and therefore, are not included in the diluted earnings per share calculation...

  • Page 87
    ...Semifinished products Raw materials and supplies Adjustment of inventories to a LIFO basis Inventory values, before LIFO adjustment, are generally determined by the average cost method, which approximates current cost. Excluding Pioneer, stores and supplies, inventories valued under the LIFO method...

  • Page 88
    ... consists of sales and grower networks, customer lists, marketing and manufacturing alliances and noncompetition agreements. 2 Pioneer germplasm is the pool of genetic source material and body of knowledge gained from the development and delivery stage of plant breeding. The company recognized...

  • Page 89
    ... Statements (continued) (Dollars in millions, except per share) 13. SUMMARIZED FINANCIAL INFORMATION FOR AFFILIATED COMPANIES Summarized combined financial information for affiliated companies for which the equity method of accounting is used (see Note 1) is shown on a 100 percent basis. The...

  • Page 90
    ... Employee benefits - pension (Note 22) Intangible pension asset (Note 22) Long-term investments in securities Deferred income taxes (Note 7) Miscellaneous Included within long-term investments in securities are securities for which market values are not readily available. Also included in long-term...

  • Page 91
    ... advance customer payments related to businesses within the Agriculture & Nutrition segment. Miscellaneous other accrued liabilities principally includes accrued plant and operating expenses, accrued litigation costs, employee separation costs in connection with the company's restructuring programs...

  • Page 92
    ... with sinking fund requirements, are $888, $1,490, $884 and $9 for the years 2008, 2009, 2010 and 2011, respectively, and $2,728 thereafter. The estimated fair value of the company's long-term borrowings, including interest rate financial instruments, based on quoted market prices for the same...

  • Page 93
    ... the warranties. The company accrues for product warranties when, based on available information, it is probable that customers will make claims under warranties relating to products that have been sold and a reasonable estimate of the costs (based on historical claims experience relative to sales...

  • Page 94
    ... in its operations. The terms for these leased assets vary depending on the lease agreement. As of December 31, 2006, the company had one synthetic lease program relating to short-lived equipment. In connection with this synthetic lease program, the company had residual value guarantees in the...

  • Page 95
    ... and removal costs for mining operations related to the production of titanium dioxide in Coatings & Color Technologies. The company's asset retirement obligation liabilities were $62 and $58 at December 31, 2006 and 2005, respectively. Litigation Benlate» In 1991, DuPont began receiving claims by...

  • Page 96
    ... In 2001, DuPont and the West Virginia Department of Environmental Protection (WVDEP) signed a multimedia Consent Order (the WV Order) that required environmental sampling and analyses and the development of screening levels for PFOA that is used or managed by the Washington Works plant. As a result...

  • Page 97
    ... Public Service District. DuPont uses PFOA as a processing aid to manufacture fluoropolymer resins and dispersions at various sites around the world including its Washington Works plant in West Virginia. The complaint alleged that residents living near the Washington Works facility had suffered...

  • Page 98
    ..., Delaware, the District of Columbia, Florida, Illinois, Indiana, Iowa, Kentucky, Massachusetts, Michigan, Missouri, New Jersey, New Mexico, New York, Ohio, Pennsylvania, South Carolina, Texas and West Virginia. Two of the 22 actions were filed in California. By order of the Judicial Panel on...

  • Page 99
    ... of 2004, DuPont and Dow entered into a series of agreements under which DuPont obtained complete control over directing DDE's response to these investigations and the related litigation and DuPont agreed to a disproportionate share of the venture's liabilities and costs related to these matters...

  • Page 100
    ... without claiming present personal injuries. Such cases may allege contamination from unregulated substances or remediated sites. For example, in September 2006, a West Virginia state court certified a class action against DuPont seeking damages similar to those listed above allegedly related to...

  • Page 101
    ..., except per share) 21. STOCKHOLDERS' EQUITY The company's Board of Directors authorized a $2 billion share buyback plan in June 2001. During 2005, the company purchased and retired 9.9 million shares at a total cost of $505. During 2006, there were no purchases of stock under this program. As of...

  • Page 102
    ... clearance of cash flow hedges to earnings Minimum pension liability adjustment Net unrealized gains/(losses) on securities Pension benefits Net gains/(losses) Net prior service cost Other benefits Net gains/(losses) Net prior service cost $ 2006 156 17 - 3 2005 $ 79 2 (594) (5) - - - - $(518) 2004...

  • Page 103
    ..., under insurance policies, or remain unfunded. Other Postretirement Benefits The parent company and certain subsidiaries provide medical, dental and life insurance benefits to pensioners and survivors. The associated plans are unfunded and the cost of the approved claims are paid from company funds...

  • Page 104
    ... Financial Statements (continued) (Dollars in millions, except per share) Summarized information on the company's postretirement plans is as follows: Pension Benefits Obligations and Funded Status at December 31, Change in benefit obligation Benefit obligation at beginning of year Service cost...

  • Page 105
    ... Fair value of plan assets 2006 $4,018 3,691 2,113 2005 $4,219 3,838 2,088 Pension Benefits Components of net periodic benefit cost (credit) Service cost Interest cost Expected return on plan assets Amortization of transition asset Amortization of net loss Amortization of prior service cost...

  • Page 106
    ... of 2006, reflecting plan assets and benefit obligations as of the remeasurement date. Better than expected return on plan assets and a higher discount rate of 6 percent decreased pretax pension expense for 2006 by $72. The company utilizes published long-term high quality corporate bond indices to...

  • Page 107
    ...trust fund is selected by management, reflecting the results of comprehensive asset liability modeling. The general principles guiding investment of U.S. pension assets are those embodied in the Employee Retirement Income Security Act of 1974 (ERISA). These principles include discharging the company...

  • Page 108
    ... company will continue to monitor asset values during the year. The Pension Protection Act of 2006 (the "Act") was signed into law in the U.S. in August 2006. The Act introduces new funding requirements for single-employer defined benefit pension plans, provides guidelines for measuring pension plan...

  • Page 109
    ... definition of eligible compensation in the pension plan. This enhanced savings plan was adopted in connection with the changes to the principal U.S. pension plan discussed above. 23. COMPENSATION PLANS The DuPont Stock Performance Plan provides for long-term incentive grants of stock options, time...

  • Page 110
    ... determines the long-term incentive mix, including stock options, time-vested and performance-based restricted stock units and may authorize new grants annually. Stock Options The company grants stock option awards under the DuPont Stock Performance Plan. The purchase price of shares subject to...

  • Page 111
    ... eligible employee retains any granted awards upon retirement provided the employee has rendered at least six months of service following grant date. Additional restricted stock units are also granted from time to time to key senior management employees. These restricted stock units generally vest...

  • Page 112
    ...significant of these plans are the company's U.S. Regional Variable Compensation Plan and Pioneer's Annual Reward Program Plan. Such awards were $60 for 2006, $69 for 2005, and $85 for 2004. 24. INVESTING ACTIVITIES Investments During 2006, the company invested in 5 businesses for a cost of $60, net...

  • Page 113
    ... a number of interest rate swaps that involve the exchange of fixed for floating rate interest payments which allows the company to maintain a target range of floating rate debt. All interest rate swaps qualify for the shortcut method of hedge accounting, thus there is no ineffectiveness related to...

  • Page 114
    ... per share) Cash Flow Hedges The company maintains a number of cash flow hedging programs to reduce risks related to commodity price risk. Commodity price risk management programs serve to reduce exposure to price fluctuations on purchases of inventory such as natural gas, ethane, corn, soybeans and...

  • Page 115
    ... deposits and marketable securities investments. Interest Rate Risk The company primarily uses interest rate swaps to manage the interest rate mix of the total debt portfolio and related overall cost of borrowing. Interest rate swaps involve the exchange of fixed for floating rate interest payments...

  • Page 116
    ... per share) 26. GEOGRAPHIC INFORMATION 2006 Net Sales1 United States Europe Belgium Germany France Italy Luxembourg The Netherlands Spain United Kingdom Other Total Europe Asia Pacific China/Hong Kong India Japan Taiwan Korea Singapore Other Total Asia Pacific Canada & Latin America Brazil Canada...

  • Page 117
    ... relating to Cozaar»/Hyzaar» antihypertensive drugs, which is reported as Other income); and Safety & Protection (specialty and industrial chemicals, nonwovens, aramids and solid surfaces). The company operates globally in substantially all of its product lines. In general, the accounting policies...

  • Page 118
    ... assets 2004 Segment sales Less transfers Less equity affiliate sales Net sales Pretax operating income (loss) Depreciation and amortization Equity in earnings of affiliates Segment net assets Affiliate net assets Expenditures for longlived assets Coatings & Electronic & Safety Textiles Total Color...

  • Page 119
    ... and Company Notes to the Consolidated Financial Statements (continued) (Dollars in millions, except per share) Reconciliation to Consolidated Financial Statements Pretax operating income to income before income taxes and minority interests Total segment PTOI Net exchange (losses)/gains (includes...

  • Page 120
    ...160 for damaged facilities, inventory write-offs, clean-up costs and other costs related to the Hurricanes, in the following segments: Coatings & Color Technologies - $116; Performance Materials - $17; and Safety & Protection - $27. b Reflects a gain from the sale of the company's equity interest in...

  • Page 121
    ... consisting of an agreed upon reduction in sales price; settlement of working capital and other changes in estimates associated with the sale of INVISTA to Koch; an increase in the book value of net assets sold and additional separation costs; and a write-down of an equity affiliate to fair market...

  • Page 122
    ... share calculations. 4 Includes a $135 restructuring charge in Coatings & Color Technologies in connection with the company's plans to close and consolidate certain manufacturing and laboratory sites within this segment. 5 Includes a $50 benefit resulting from initial insurance recoveries relating...

  • Page 123
    ... DuPont Corporate Information Center CRP705-GS25 P.O. Box 80705 Wilmington, DE 19880-0705 or call 302 774-5991 E-mail: [email protected] Services for Shareholders Online Delivery of Proxy Materials Registered stockholders and holders of shares in the company's U.S. employee benefit plans may...