DuPont 2012 Annual Report Download - page 74

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(Dollars in millions, except per share)
Operating Leases
The company uses various leased facilities and equipment in its operations. The terms for these leased assets vary depending on the lease agreement.
Future minimum lease payments (including residual value guarantee amounts) under non-cancelable operating leases are $320, $260, $213, $178 and $153
for the years 2013, 2014, 2015, 2016 and 2017, respectively, and $290 for subsequent years and are not reduced by non-cancelable minimum sublease
rentals due in the future in the amount of $3. Net rental expense under operating leases was $316, $268 and $229 in 2012, 2011 and 2010, respectively.
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The company has recorded asset retirement obligations primarily associated with closure, reclamation and removal costs for mining operations related to the
production of titanium dioxide in Performance Chemicals. The company's asset retirement obligation liabilities were $64 and $59 at December 31, 2012 and
2011.
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The company has received claims and been served with multiple lawsuits alleging that the use of Imprelis ® herbicide caused damage to certain trees. The
lawsuits seeking class action status have been consolidated in multidistrict litigation in federal court in Philadelphia, Pennsylvania. In addition, about 80
individual actions on behalf of approximately 180 plaintiffs have been filed in state court in various jurisdictions. DuPont has removed most of these cases to
federal court in Philadelphia, Pennsylvania.
DuPont and lead and liaison counsel for plaintiffs in the multidistrict litigation sought preliminary approval from the court of a class action settlement; the
court scheduled a hearing on February 5, 2013. The settlement would incorporate the company's existing claims process and provide certain additional relief.
The proposed settlement class would include affected property owners and lawn care companies who do not "opt out" of the settlement. DuPont would have the
ability to cancel the agreement if the number of “opt-outs” is unsatisfactory to DuPont. If the settlement is approved, DuPont would pay about $7 in plaintiffs'
attorney fees and expenses and bear the costs of notifying potential class participants. In addition, DuPont would provide a warranty against new damage, if
any, caused by the use of Imprelis® on class members' properties through May 2015.
In August 2011, the company suspended sales of Imprelis ® and in September 2011 began a process to fairly resolve claims associated with the use of
Imprelis®. The company believes that the number of unasserted claims is limited due to the fact that sales were suspended in August 2011 and the product
was last applied during the 2011 spring application season.
The company has established review processes to verify and evaluate damage claims. There are several variables that impact the evaluation process including
the number of trees on a property, the species of tree with reported damage, the height of the tree, the extent of damage and the possibility for trees to naturally
recover over time. Upon receiving claims, DuPont verifies their accuracy and validity which often requires physical review of the property.
In 2012 and 2011, DuPont had recorded charges of $575 and $175, respectively, to resolve these claims, bringing the total charges to $750 at December 31,
2012. It is reasonably possible that additional charges could result related to this matter. While there is a high degree of uncertainty, total charges could range
up to $900. Predicting the impact of Imprelis® on living organisms and how those organisms may react over time are significant factors driving the
uncertainty of future charges. Imprelis® was applied throughout the United States and the ability of any particular species of tree to naturally recover over time
may be different depending on the property's geography and associated climate. The company has an applicable insurance program with a deductible equal to
the first $100 of costs and expenses. The insurance program limits are $725 for costs and expenses in excess of the $100. DuPont has submitted and will
continue to submit requests for payment to its insurance carriers for costs associated with this matter.
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The company is subject to various legal proceedings arising out of the normal course of its business including product liability, intellectual property,
commercial, environmental and antitrust lawsuits. It is not possible to predict the outcome of these various proceedings. Except as otherwise noted,
management does not anticipate their resolution will have a materially adverse effect on the company's consolidated financial position or liquidity. However,
the ultimate liabilities could be significant to results of operations in the period recognized.
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