DuPont 2007 Annual Report Download - page 38

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Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations, continued
The company’s long term and short term credit ratings have not changed over the last three year ends and are as
follows:
Long term Short term Outlook
Standard & Poor A A-1 Stable
Moody’s Investor Services A2 P-1 Negative
Fitch Ratings A F1 Stable
(Dollars in millions) 2007 2006 2005
Cash provided by operating activities $4,290 $3,736 $2,542
The company’s Cash provided by operating activities was $4.3 billion in 2007, a $554 million increase from the
$3.7 billion generated in 2006. The increase is primarily due to higher earnings after adjusting for noncash items. Net
income for 2006 included noncash tax benefits totaling $615 million (see Note 6 to the Consolidated Financial
Statements.) While the change in net working capital was essentially flat year over year, the company did realize
productivity gains in inventory days supply and days payable outstanding. However, days sales outstanding slightly
increased.
The company’s Cash provided by operating activities was $3.7 billion in 2006, a $1.2 billion increase from the
$2.5 billion generated in 2005. The increase is primarily due to higher net income in 2006 and a reduction in
contributions made to pension plans, partially offset by the timing of tax payments. Working capital productivity
measures of days sales outstanding and inventory days supply were essentially flat in 2006 versus 2005, while days
payable outstanding slightly decreased.
(Dollars in millions) 2007 2006 2005
Cash used for investing activities $(1,750) $(1,345) $(602)
In 2007, Cash used for investing activities totaled $1.8 billion compared to $1.3 billion used in 2006. The $405 million
increase was mainly due to the settlement of forward exchange contracts and a slight increase in capital spending,
partially offset by higher proceeds from sales of assets. Due to the impact of a weakening USD, the settlement of
forward exchange contracts issued to hedge the company’s net exposure, by currency, related to monetary assets
and liabilities resulted in the payment of $285 million in 2007 versus the receipt of $45 million in 2006. The forward
exchange contract settlements were largely offset by the revaluation of the items being hedged, which are reflected
in the appropriate categories in the Consolidated Statements of Cash Flows.
In 2006, Cash used for investing activities totaled $1.3 billion compared to $602 million used in 2005. The increase
reflects higher purchases of property, plant and equipment and lower proceeds from the sale of assets. In addition,
due to the impacts of a weakening USD, the settlement of forward exchange contracts issued to hedge the
company’s net exposure, by currency, related to monetary assets and liabilities resulted in the receipt of $45 million
in 2006 versus the receipt of $653 million in 2005. These settlements were largely offset by revaluation of the items
being hedged, which are reflected in the appropriate categories in the Consolidated Statements of Cash Flows.
Purchases of property, plant and equipment totaled $1.6 billion, $1.5 billion and $1.3 billion in 2007, 2006 and 2005,
respectively. The company expects 2008 purchases of plant, property and equipment to be higher than 2007 levels.
This incremental spending is primarily based on the company’s previously announced investments in Kevlar»,
Nomex»and titanium dioxide.
36
Part II