DuPont 2007 Annual Report Download - page 78

During 2007, the company’s wholly-owned subsidiary, Pioneer Hi-Bred International, Inc. (Pioneer) entered into a
business agreement on corn herbicide tolerance and insect control trait technologies with Monsanto Company.
Among other provisions, modifications were made to the existing corn license agreements; both parties agreed to
exchange certain non-assert and other intellectual property rights; and both parties obtained rights to reference and
access certain regulatory data and approvals in which the other has certain interests.
The YieldGard»MON810 Corn license agreement has been modified to provide Pioneer with more favorable royalty
terms and broader rights to certain regulatory data and approvals for use in developing products stacked with
YieldGard»MON810 Corn. As part of the agreement, Monsanto receives broader rights and access to certain
Herculex»Insect Control trait regulatory data and approvals for use in developing products stacked with Herculex»
Insect Control traits.
The agreement also modified the existing Roundup Ready»Corn 2 license to provide for specified annual royalty
payments from 2008 through 2015 versus the per unit royalty arrangement in place for the same period. As a result
of the change from a per unit royalty payment to specified annual royalty payments, the company recorded an
intangible asset for licensed technology and an associated liability with a net present value of $573 in the year ended
December 31, 2007. The intangible asset is subject to amortization, which will be reported in Cost of goods sold and
other operating charges, over the life of the related contract. Interest expense associated with the liability will be
reported in Cost of goods sold and other operating charges. Cumulative cash payments will be approximately $725
over this eight-year period.
The aggregate pretax amortization expense for definite-lived intangible assets was $213 for 2007, $227 for 2006,
and $230 for 2005. The estimated aggregate pretax amortization expense for 2008, 2009, 2010, 2011 and 2012 is
$280, $290, $275, $260 and $210, respectively, including amounts that will be reported in Cost of goods sold and
other operating charges.
12. 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 most significant of these affiliates at December 31, 2007, are
DuPont Teijin Films, DuPont-Toray Company Ltd. and DuPont-Mitsui, all of which are owned 50 percent by the
company. Dividends received from equity affiliates were $88 in 2007, $61 in 2006 and $107 in 2005.
Results of operations 2007 2006 2005
Net sales
1
$3,414 $3,491 $3,789
Earnings before income taxes 171 205 333
Net income
2
66 85 207
DuPont’s equity in (losses) earnings of affiliates:
Partnerships-pretax
3
(19) 37
Corporate joint ventures-after tax 54 47 101
Write-down of investment
4
(165) --
$ (130) $ 50 $ 108
1
Includes sales to DuPont of $496 in 2007, $624 in 2006, and $631 in 2005.
2
Includes losses of $25 in 2005 in DuPont Photomasks, Inc., an equity affiliate in which DuPont had approximately a 20 percent ownership
interest. DuPont sold its interest in DuPont Photomasks, Inc. in April 2005.
3
Income taxes are reflected in the company’s provision for income tax.
4
Impairment charge of $165 to write down the company’s investment in a polyester films joint venture in the Performance Materials segment.
As a result, at December 31, 2007, DuPont ceased using the equity method of accounting for three legal entities within the joint venture.
F-21
E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)