DuPont 2006 Annual Report Download - page 113

Download and view the complete annual report

Please find page 113 of the 2006 DuPont annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 123

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123

intangibles included in these transactions amounted to $93, $40 and $86 in 2006, 2005 and 2004, respectively.
These investments did not have a material effect on the Consolidated Financial Statements.
Proceeds from Sales of Assets
During 2006, the company received proceeds from the sale of assets, net of cash sold, of $148. These
transactions were not significant on an individual basis.
Proceeds from sales of assets, net of cash sold, in 2005 were $312 which principally included $110 from the
sale of the company’s share in DuPont Sabanci International, LLC and $98 from the sale of the company’s
remaining interest in DuPont Photomasks, Inc.
During 2004, the company received proceeds from the sale of assets, net of cash sold, of $3,908, primarily
attributed to $3,840 from the sale of Textiles & Interiors assets. See Note 6 for further information.
25. DERIVATIVES AND OTHER HEDGING INSTRUMENTS
Objectives and Strategies for Holding Derivative 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 reduce its
exposure to foreign currency, interest rate and commodity price risks. The framework has established a variety
of approved derivative instruments to be utilized in each risk management program, as well as varying levels
of exposure coverage and time horizons based on an assessment of risk factors related to each hedging
program. Derivative instruments utilized during the period include forwards, options, futures and swaps. The
company has not designated any nonderivatives as hedging instruments.
The framework sets forth senior management’s financial risk management philosophy and objectives through a
Corporate Financial Risk Management Policy. In addition, the policy establishes oversight committees and risk
management guidelines that authorize the use of specific derivative instruments and further establishes
procedures for control and valuation, counterparty credit approval and routine monitoring and reporting. The
counterparties to these contractual arrangements are major financial institutions and major commodity
exchanges. The company is exposed to credit loss in the event of nonperformance by these counterparties. The
company manages this exposure to credit loss through the aforementioned credit approvals, limits and
monitoring procedures and, to the extent possible, by restricting the period over which unpaid balances are
allowed to accumulate. The company does not anticipate nonperformance by counterparties to these contracts
and no material loss would be expected from such nonperformance. Market and counterparty credit risks
associated with these instruments are regularly reported to management.
The company hedges foreign currency denominated monetary assets and liabilities, certain business specific
foreign currency exposures and certain energy feedstock purchases. In addition, the company enters into
exchange traded agricultural commodity derivatives to hedge exposures relevant to agricultural feedstock
purchases.
Fair Value Hedges
During the year ended December 31, 2006, the company has maintained 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 these hedges. Changes in the fair value of derivatives that hedge
interest rate risk are recorded in Interest expense each period. The offsetting changes in the fair values of the
related debt are also recorded in Interest expense. The company maintains no other fair value hedges.
F-50
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)