DuPont 2006 Annual Report Download - page 44

Download and view the complete annual report

Please find page 44 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

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued
The following table summarizes changes in net debt throughout 2006, 2005 and 2004:
(Dollars in millions)
December 31, 2006 2005 2004
Net debt-beginning of year $ 6,329 $ 2,949 $ 7,106
Cash provided by continuing operations (3,736) (2,542) (3,231)
Purchases of property, plant & equipment and investments in affiliates 1,563 1,406 1,298
Net payments for businesses acquired 60 206 119
Proceeds from sales of assets (148) (312) (68)
Proceeds from sale of assets-Textiles & Interiors, net of cash sold —— (3,840)
Debt assumed by Koch —— (255)
Forward exchange contract settlements (45) (653) 509
Dividends paid to stockholders 1,378 1,439 1,404
Acquisition of treasury stock 280 3,530 457
Effect of exchange rate changes on cash (10) 722 (404)
Other (34) (416) (146)
Increase (decrease) in net debt (692) 3,380 (4,157)
Net debt-end of year $ 5,637 $ 6,329 $ 2,949
Off-Balance Sheet Arrangements
Certain Guarantee Contracts
Indemnifications
The company has indemnified respective parties against certain liabilities that may arise in connection with
acquisitions and divestitures and related business activities prior to the completion of the transactions. The
terms of these indemnifications, which typically pertain to environmental, tax and product liabilities, are
generally indefinite. In addition, the company indemnifies its duly elected or appointed directors and officers
to the fullest extent permitted by Delaware law, against liabilities incurred as a result of their activities for the
company, such as adverse judgments relating to litigation matters. If the indemnified party were to incur a
liability or have a liability increase as a result of a successful claim, pursuant to the terms of the
indemnification, the company would be required to reimburse the indemnified party. The maximum amount of
potential future payments is generally indeterminable. The carrying amounts recorded for all indemnifications
as of December 31, 2006 and 2005 is $105 million and $103 million, respectively. Although it is reasonably
possible that future payments may exceed amounts accrued, due to the nature of indemnified items, it is not
possible to make a reasonable estimate of the maximum potential loss or range of loss. No assets are held as
collateral and no specific recourse provisions exist.
In connection with the sale of INVISTA, the company indemnified Koch against certain liabilities primarily
related to taxes, legal and environmental matters and other representations and warranties. The estimated fair
value of these obligations of $70 million is included in the indemnifications balance of $105 million at
December 31, 2006. The fair value was based on management’s best estimate of the value expected to be
required to issue the indemnifications in a stand-alone, arm’s length transaction with an unrelated party and,
where appropriate, by the utilization of probability-weighted discounted net cash flow models. The company
does not believe that these indemnities will have a material impact on the future liquidity of the company (see
Note 6 to the Consolidated Financial Statements).
44
Part II