DuPont 2008 Annual Report Download - page 27

Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations, continued
complexity of the geology, the nature and extent of contamination, the type of remedy, the outcome of discussions
with regulatory agencies and other Potentially Responsible Parties (PRPs) at multiparty sites and the number of and
financial viability of other PRPs. The company has recorded a liability of $379 million on the Consolidated Balance
Sheet as of December 31, 2008; 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 Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred
to as the Superfund), the Resource Conservation and Recovery Act (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
authorities 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 enforcement policies, as well as the presence or absence of PRPs. Therefore, it is difficult to develop
precise estimates of future site remediation costs.
Legal Contingencies
The company’s results of operations could be affected by significant litigation adverse to the company, including
product liability claims, patent infringement and antitrust claims, and claims for third party property damage or
personal injury stemming from alleged environmental torts. The company records accruals 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 accruals 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 considers many factors. These factors include, but are not
limited to, the nature of specific claims including unasserted claims, the company’s experience with similar types of
claims, the jurisdiction in which the matter is filed, input from outside legal counsel, the likelihood of resolving the
matter through alternative dispute resolution mechanisms and the matter’s current status. Considerable judgment is
required in determining whether to establish a litigation accrual when an adverse judgment is rendered against the
company in a court proceeding. In such situations, the company will not recognize a loss if, based upon a thorough
review of all relevant facts and information, management believes that it is probable that the pending judgment will
be successfully overturned on appeal. A detailed discussion of significant litigation matters is contained in Note 19 to
the Consolidated Financial Statements.
Income Taxes
The breadth of the company’s operations and the global complexity of tax regulations require assessments of
uncertainties and judgments in estimating the ultimate taxes the company will pay. The final taxes paid are
dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax
litigation and resolution of disputes arising from federal, state and international tax audits. The resolution of these
uncertainties may result in adjustments to the company’s tax assets and tax liabilities. It is reasonably possible that
changes to the company’s global unrecognized tax benefits could be significant, however, due to the uncertainty
regarding the timing of completion of audits and the possible outcomes, a current estimate of the range of increases
or decreases that may occur within the next twelve months cannot be made.
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Part II