DuPont 2011 Annual Report Download - page 31

Table of Contents
Part II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, continued
Dividends paid to common and preferred shareholders were $1.5 billion in 2011, 2010 and 2009. Dividends per share of common stock were $1.64 in 2011,
2010 and 2009. The common dividend declared in the first quarter 2012 was the company's 430th consecutive dividend since the company's first dividend in
the fourth quarter 1904.
The company's Board of Directors authorized a $2 billion share buyback plan in June 2001. During 2011, the company purchased and retired 13.8 million
shares at a total cost of $672 million under this plan. During 2010, the company purchased and retired 5.4 million shares at a total cost of $250 million under
this plan. During 2009, there were no purchases of stock under this plan. As of December 31, 2011, the company has purchased 39.7 million shares at a total
cost of $1.9 billion. In April 2011, the company's Board of Directors authorized a $2 billion share buyback plan. This plan will not commence until the plan
authorized in June 2001 is completed. There is no expiration date on the current authorizations.
(Dollars in millions) 2011 2010 2009
Cash provided by operating activities $ 5,152 $ 4,559 $ 4,741
Purchases of property, plant and equipment (1,843) (1,508) (1,308)
Free cash flow $ 3,309 $ 3,051 $ 3,433
Free cash flow is a measurement not recognized in accordance with generally accepted accounting principles in the U.S. (GAAP) and should not be viewed as
an alternative to GAAP measures of performance. All companies do not calculate non-GAAP financial measures in the same manner and, accordingly, the
company's free cash flow definition may not be consistent with the methodologies used by other companies. The company defines free cash flow as cash
provided by operating activities less purchases of property, plant and equipment, and therefore indicates operating cash flow available for payment of
dividends, other investing activities and other financing activities. Free cash flow is useful to investors and management to evaluate the company's cash flow
and financial performance, and is an integral financial measure used in the company's financial planning process.
Critical Accounting Estimates
The company's significant accounting policies are more fully described in Note 1 to the Consolidated Financial Statements. Management believes that the
application of these policies on a consistent basis enables the company to provide the users of the financial statements with useful and reliable information
about the company's operating results and financial condition.
The preparation of the Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts, including, but not limited to, receivable and inventory valuations, impairment of tangible and intangible assets, long-term employee benefit
obligations, income taxes, restructuring liabilities, environmental matters and litigation. Management's estimates are based on historical experience, facts and
circumstances available at the time and various other assumptions that are believed to be reasonable. The company reviews these matters and reflects changes
in estimates as appropriate. Management believes that the following represents some of the more critical judgment areas in the application of the company's
accounting policies which could have a material effect on the company's financial position, liquidity or results of operations.
Long-term Employee Benefits
Accounting for employee benefit plans involves numerous assumptions and estimates. Discount rate and expected return on plan assets are two critical
assumptions in measuring the cost and benefit obligation of the company's pension and other long-term employee benefit plans. Management reviews these
two key assumptions annually as of December 31st. These and other assumptions are updated periodically to reflect the actual experience and expectations on
a plan specific basis as appropriate. As permitted by GAAP, actual results that differ from the assumptions are accumulated on a plan by plan basis and to the
extent that such differences exceed 10 percent of the greater of the plan obligations or the applicable plan assets, the excess is amortized over the average
remaining service period of active employees.
About 80 percent of the company's benefit obligation for pensions and essentially all of the company's other long-term employee benefit obligations are
attributable to the benefit plans in the U.S. The company utilizes published long-term high quality corporate bond indices to determine the discount rate at
measurement date. Where commonly available, the company considers indices of various durations to reflect the timing of future benefit payments.
Within the U.S., the company establishes strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes with the aim of
achieving a prudent balance between return and risk. Strategic asset allocations in other countries are selected in accordance with the laws and practices of
those countries. Where appropriate, asset-liability studies are also taken into
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