DuPont 2009 Annual Report Download - page 104

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E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
The company contracts with independent growers to produce finished seed inventory. Under these contracts, growers
are compensated with bushel equivalents that are marketed to the company for the market price of grain for a period of
time following harvest. Derivative instruments, such as commodity futures and options that have a high correlation to
the underlying commodity, are used to hedge the commodity price risk involved in compensating growers.
The company utilizes agricultural commodity futures to manage the price volatility of soybean meal. These derivative
instruments have a high correlation to the underlying commodity exposure and are deemed effective in offsetting
soybean meal feedstock price risk.
At December 31, 2009, the company had agricultural commodity contracts with gross notional amounts of
approximately $332.
The company entered into treasury rate contracts to hedge the company’s exposure to treasury rates on a portion of a
planned bond issue. The contracts were terminated at the time the bond was issued. At December 31, 2009, the gross
notional amount was $0.
Cash flow hedge results are reclassified into earnings during the same period in which the related exposure impacts
earnings. Reclassifications are made sooner if it is not probable that a forecasted transaction will materialize. The
following table summarizes the effect of cash flow hedges on accumulated other comprehensive income (loss) for the
year ended December 31, 2009:
Pretax Tax After-tax
Beginning balance $(246) $ 88 $(158)
Additions and revaluations of derivatives designated as cash flow hedges (48) 17 (31)
Clearance of hedge results to earnings 193 (69) 124
Ending balance $(101) $ 36 $ (65)
Portion of ending balance expected to be reclassified into earnings over
the next twelve months $ (54) $ 19 $ (35)
Hedges of Net Investment in a Foreign Operation
At December 31, 2009, the company did not maintain any hedges of net investment in a foreign operation.
Derivatives not Designated in Hedging Relationships
The company uses forward exchange contracts to reduce its net exposure, by currency, related to foreign currency-
denominated monetary assets and liabilities. The netting of such exposures precludes the use of hedge accounting.
However, the required revaluation of the forward contracts and the associated foreign currency-denominated monetary
assets and liabilities results in a minimal earnings impact, after taxes. At December 31, 2009, the company had forward
exchange contracts with gross notional amounts of approximately $7,634.
In addition, the company has risk management programs for agricultural commodities that do not qualify for hedge
accounting treatment. At December 31, 2009, the company had agricultural commodities contracts with gross notional
amounts of approximately $206.
Contingent Features
At December 31, 2009, the company did not maintain any derivative contracts with credit-risk-related contingent
features.
F-46