DuPont 2014 Annual Report Download - page 44

Part II
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Derivatives and Other Hedging Instruments
In the ordinary course of business, the company enters into contractual arrangements (derivatives) to hedge its exposure to foreign
currency, interest rate and commodity price risks under established procedures and controls. For additional information on these
derivatives and related exposures, see Note 19 to the Consolidated Financial Statements.
The following table summarizes the impacts of the company's foreign currency hedging program on the company's results of
operations for the years ended December 31, 2014, 2013, and 2012, and includes the company's pro rata share of its equity affiliates'
exchange gains and losses and corresponding gains and losses on foreign currency exchange contracts:
(Dollars in millions) 2014 2013 2012
Pre-tax exchange gain (loss) $ 135 $ (128) $ (215)
Tax (expense) benefit (416) 42 73
After-tax exchange loss $ (281) $ (86) $ (142)
In addition to the contracts disclosed in Note 19 to the Consolidated Financial Statements, from time to time, the company will
enter into foreign currency exchange contracts to establish with certainty the USD amount of future firm commitments denominated
in a foreign currency. Decisions regarding whether or not to hedge a given commitment are made on a case-by-case basis, taking
into consideration the amount and duration of the exposure, market volatility and economic trends. Foreign currency exchange
contracts are also used, from time to time, to manage near-term foreign currency cash requirements.
Sensitivity Analysis
The following table illustrates the fair values of outstanding derivative contracts at December 31, 2014 and 2013, and the effect
on fair values of a hypothetical adverse change in the market prices or rates that existed at December 31, 2014 and 2013. The
sensitivity for interest rate swaps is based on a one percent change in the market interest rate. Foreign currency and commodity
contracts sensitivities are based on a 10 percent change in market rates.
Fair Value
Asset/(Liability) Fair Value Sensitivity
(Dollars in millions) 2014 2013 2014 2013
Interest rate swaps $ 1 $ 29 $ (5) $ (18)
Foreign currency contracts 192 18 (870)(1,000)
Commodity contracts (1)(1)(1)(2)
Since the company's risk management programs are highly effective, the potential loss in value for each risk management portfolio
described above would be largely offset by changes in the value of the underlying exposure.
Concentration of Credit Risk
The company maintains cash and cash equivalents, marketable securities, derivatives and certain other financial instruments with
various financial institutions. These financial institutions are generally highly rated and geographically dispersed and the company
has a policy to limit the dollar amount of credit exposure with any one institution.
As part of the company's financial risk management processes, it continuously evaluates the relative credit standing of all of the
financial institutions that service DuPont and monitors actual exposures versus established limits. The company has not sustained
credit losses from instruments held at financial institutions.
The company's sales are not materially dependent on any single customer. As of December 31, 2014, no one individual customer
balance represented more than five percent of the company's total outstanding receivables balance. Credit risk associated with its
receivables balance is representative of the geographic, industry and customer diversity associated with the company's global
businesses.
The company also maintains strong credit controls in evaluating and granting customer credit. As a result, it may require that
customers provide some type of financial guarantee in certain circumstances. Length of terms for customer credit varies by industry
and region.