DuPont 2005 Annual Report Download - page 27

Part II
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations–Continued
The following table highlights the potential impact on the company’s pretax earnings due to changes in certain key assump-
tions with respect to the company’s pension and other postretirement benefit plans, based on assets and liabilities at Decem-
ber 31, 2005:
1⁄2 Percentage 1⁄2 Percentage
(Dollars in millions) Point Increase Point Decrease
Discount rate $82 $(88)
Expected rate of return on plan pension assets 92 (92)
Additional information with respect to pension and other postretirement employee expenses, liabilities, and assumptions is
discussed under Long-term Employee Benefits beginning on page 45.
ENVIRONMENTAL MATTERS
DuPont accrues for remediation activities when it is probable that a liability has been incurred and a reasonable estimate of
the liability can be made. The company’s estimates are based on a number of factors, including the complexity of the geology,
the nature and extent of contamination, the type of remedy, the outcome of discussions with regulatory agencies and other
PRPs at multiparty sites, and the number of and financial viability of other PRPs. The company has recorded a liability of
$343 million on the Consolidated Balance Sheet as of December 31, 2005; these accrued liabilities exclude claims against third
parties and are not discounted.
Considerable uncertainty exists with respect to environmental remediation costs and, under adverse changes in circumstances,
the potential liability may range up to two to three times the amount accrued. Much of this liability results from the Compre-
hensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to as the Superfund), RCRA and
similar state laws. These laws require the company to undertake certain investigative and remedial activities at sites where
the company conducts or once conducted operations or at sites where company-generated waste was disposed. The accrual
also includes a number of sites identified by the company for which it is probable that environmental remediation will be
required, but which are not currently the subject of CERCLA, RCRA or state enforcement activities. Federal and state authori-
ties may seek fines and penalties for violation of the various laws and governmental regulations, and could, among other
things, impose liability on the company for cleaning up the damage resulting from company-generated waste disposal. Over the
next two decades, the company could incur significant costs under both CERCLA and RCRA.
Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated costs,
depend on the mix of unique site characteristics, evolving remediation technologies, diverse regulatory agencies and enforce-
ment policies, as well as the presence or absence of PRPs. Therefore, it is difficult to develop accurate estimates of future
site remediation costs. A detailed discussion of environmental matters is contained in Management’s Discussion and Analysis
of Financial Condition and Results of Operations, beginning on page 47.
LEGAL CONTINGENCIES
The company’s results of operations could be affected by significant litigation adverse to the company, including product
liability claims, patent infringement claims and antitrust claims. The company records reserves for legal matters when the
information available indicates that it is probable that a liability has been incurred and the amount of the loss can be
reasonably 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 exposure involves substantial uncertainties that could cause
actual costs to vary materially from estimates. In making determinations of likely outcomes of litigation matters, management
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