UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

E. I. du Pont de Nemours and Company

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or other Jurisdiction of Incorporation or Organization)		51-0014090 (I.R.S. Employer Identification No.)

1007 Market Street, Wilmington, Delaware 19898
(Address of Principal Executive Offices)

(302) 774-1000
(Registrant’s Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files.)

Yes o     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the Registrant is a shell company (as defined by Rule12b-2 of the Exchange Act). Yes o     No þ

The Registrant had 903,582,000 shares (excludes 87,041,000 shares of treasury stock) of common stock, $0.30 par value, outstanding at April 15, 2009.

 

 

E. I. DU PONT DE NEMOURS AND COMPANY

Table of Contents

The terms “DuPont” or the “company” as used herein refer to E. I. du Pont de Nemours and Company and its consolidated subsidiaries, or to E. I. du Pont de Nemours and Company, as the context may indicate.

		Page
Part I Financial Information
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Income Statements			3
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Cash Flows			5
Notes to the Consolidated Financial Statements
Note 1.   Summary of Significant Accounting Policies			6
Note 2.   Implementation of FASB Statement of Financial Accounting Standards No. 160 “Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51” (SFAS 160)			7
Note 3.   Fair Value Measurements			7
Note 4.   Other Income, Net			8
Note 5.   Restructuring Activities			9
Note 6.   Provision for Income Taxes			9
Note 7.   Earnings Per Share of Common Stock			10
Note 8.   Inventories			10
Note 9.   Goodwill and Other Intangible Assets			11
Note 10.  Commitments and Contingent Liabilities			12
Note 11.  Derivatives and Other Hedging Instruments			19
Note 12.  Long-Term Employee Benefits			24
Note 13.  Segment Information			25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Cautionary Statements About Forward-Looking Statements			26
Results of Operations			26
Accounting Standards Issued Not Yet Adopted			28
Segment Reviews			28
Liquidity & Capital Resources			29
Contractual Obligations			30
PFOA			30
Item 3. Quantitative and Qualitative Disclosures About Market Risk			32
Item 4. Controls and Procedures			33
Part II Other Information
Item 1. Legal Proceedings			34
Item 1A. Risk Factors			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			38
Item 6. Exhibits			38
Signature			39
Exhibit Index			40
EX-3.2
EX-10.8
EX-12
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Part I. Financial Information

Item 1. CONSOLIDATED FINANCIAL STATEMENTS

E. I. du Pont de Nemours and Company
Consolidated Income Statements (Unaudited)
(Dollars in millions, except per share)

		Three Months Ended
		March 31,
		2009				2008
Net sales		$	6,871			$	8,575
Other income, net			399				195
Total			7,270				8,770
Cost of goods sold and other operating charges			5,185				5,956
Selling, general and administrative expenses			907				934
Research and development expense			323				330
Interest expense			106				80
Total			6,521				7,300
Income before income taxes			749				1,470
Provision for income taxes			260				273
Net income			489				1,197
Less: Net income attributable to noncontrolling interests			1				6
Net income attributable to DuPont		$	488			$	1,191
Basic earnings per share of common stock		$	0.54			$	1.32
Diluted earnings per share of common stock		$	0.54			$	1.31
Dividends per share of common stock		$	0.41			$	0.41

See Notes to the Consolidated Financial Statements.

E. I. du Pont de Nemours and Company
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in millions, except per share)

		March 31,				December 31,
		2009				2008
Assets
Current assets
Cash and cash equivalents		$	2,386			$	3,645
Marketable securities			21				59
Accounts and notes receivable, net			6,423				5,140
Inventories			4,615				5,681
Prepaid expenses			200				143
Income taxes			570				643
Total current assets			14,215				15,311
Property, plant and equipment, net of accumulated depreciation (March 31, 2009 - $17,117; December 31, 2008 - $16,800)			11,164				11,154
Goodwill			2,128				2,135
Other intangible assets			2,612				2,710
Investment in affiliates			877				844
Other assets			3,892				4,055
Total		$	34,888			$	36,209
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$	2,300			$	3,128
Short-term borrowings and capital lease obligations			1,569				2,012
Income taxes			155				110
Other accrued liabilities			3,578				4,460
Total current liabilities			7,602				9,710
Long-term borrowings and capital lease obligations			8,490				7,638
Other liabilities			11,011				11,169
Deferred income taxes			142				140
Total liabilities			27,245				28,657
Commitments and contingent liabilities
Stockholders’ equity
Preferred stock			237				237
Common stock, $0.30 par value; 1,800,000,000 shares authorized; Issued at March 31, 2009 - 990,624,000; December 31, 2008 - 989,415,000			297				297
Additional paid-in capital			8,396				8,380
Reinvested earnings			10,569				10,456
Accumulated other comprehensive loss			(5,558	)			(5,518	)
Common stock held in treasury, at cost (87,041,000 shares at March 31, 2009 and December 31, 2008)			(6,727	)			(6,727	)
Total DuPont stockholders’ equity			7,214				7,125
Noncontrolling interests			429				427
Total equity			7,643				7,552
Total		$	34,888			$	36,209

See Notes to the Consolidated Financial Statements.

E. I. du Pont de Nemours and Company
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions)

		Three Months Ended
		March 31,
		2009				2008
Operating activities
Net income attributable to DuPont		$	488			$	1,191
Adjustments to reconcile net income attributable to DuPont to cash used for operating activities:
Depreciation			300				287
Amortization of intangible assets			99				93
Contributions to pension plans			(100	)			(89	)
Other noncash charges and credits — net			67				80
Change in operating assets and liabilities — net			(1,686	)			(2,513	)
Cash used for operating activities			(832	)			(951	)
Investing activities
Purchases of property, plant and equipment			(358	)			(410	)
Investments in affiliates			(8	)			(3	)
Payments for businesses — net of cash acquired			—				(31	)
Proceeds from sales of assets — net of cash sold			15				5
Net decrease in short-term financial instruments			38				104
Forward exchange contract settlements			(76	)			(187	)
Other investing activities — net			(4	)			2
Cash used for investing activities			(393	)			(520	)
Financing activities
Dividends paid to stockholders			(375	)			(372	)
Net increase in borrowings			433				1,611
Proceeds from exercise of stock options			—				19
Other financing activities — net			(38	)			4
Cash provided by financing activities			20				1,262
Effect of exchange rate changes on cash			(54	)			(2	)
Decrease in cash and cash equivalents		$	(1,259	)		$	(211	)
Cash and cash equivalents at beginning of period			3,645				1,305
Cash and cash equivalents at end of period		$	2,386			$	1,094

See Notes to the Consolidated Financial Statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 1. Summary of Significant Accounting Policies

Interim Financial Statements

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. Results for interim periods should not be considered indicative of results for a full year. These interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in the company’s Annual Report on Form 10-K for the year ended December 31, 2008, collectively referred to as the ‘2008 Annual Report’. The Consolidated Financial Statements include the accounts of the company and all of its subsidiaries in which a controlling interest is maintained, as well as variable interest entities in which DuPont is considered the primary beneficiary. Certain reclassifications of prior year’s data have been made to conform to current year classifications.

Accounting Standards Issued Not Yet Adopted

In December 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Financial Accounting Standard (FAS) 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets,” which is effective for fiscal years ending after December 15, 2009. The new standard expands disclosures for assets held by employer pension and other postretirement benefit plans. FSP FAS 132(R)-1 will not affect the company’s financial position or results of operations. The new standard solely affects the disclosure of information.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 2. Implementation of FASB Statement of Financial Accounting Standards No. 160 “Noncontrolling Interests in Consolidated Financial Statements — an Amendment of Accounting Research Bulletin No. 51” (SFAS 160)

Effective January 1, 2009, the company implemented the provisions of SFAS 160 for the reporting of noncontrolling interests in the company’s Consolidated Financial Statements and accompanying notes. SFAS 160 changed the accounting and reporting of minority interests (now referred to as noncontrolling interests) in the company’s Consolidated Financial Statements. The following tables illustrate the changes in equity for the three months ended March 31, 2009 and 2008, respectively:

																										Accumulated
																		Additional								Other
Consolidated Changes in Equity						Comprehensive				Preferred				Common				Paid-in-				Reinvested				Comprehensive				Treasury				Noncontrolling
as of March 31, 2009		Total				Income				Stock				Stock				Capital				Earnings				Loss				Stock				Interests
Beginning balance		$	7,552							$	237			$	297			$	8,380			$	10,456			$	(5,518	)		$	(6,727	)		$	427
Acquisition of a majority interest in a consolidated subsidiary			1																																1
Comprehensive income:
Net income			489				489																488												1
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment			(68	)			(68	)																			(68	)
Net revaluation and clearance of cash flow hedges to earnings			2				2																				2
Pension benefit plans			38				38																				38
Other benefit plans			(10	)			(10	)																			(10	)
Net unrealized loss on securities			(2	)			(2	)																			(2	)
Other comprehensive income (loss)			(40	)			(40	)
Comprehensive income			449				449	1
Common dividends			(372	)																			(372	)
Preferred dividends			(3	)																			(3	)
Common Stock issued - Compensation plans			16																16
Total Equity as of March 31, 2009		$	7,643							$	237			$	297			$	8,396			$	10,569			$	(5,558	)		$	(6,727	)		$	429

																										Accumulated
																		Additional								Other
Consolidated Changes in Equity						Comprehensive				Preferred				Common				Paid-in-				Reinvested				Comprehensive				Treasury				Noncontrolling
as of March 31, 2009		Total				Income				Stock				Stock				Capital				Earnings				Loss				Stock				Interests
Beginning balance		$	11,578							$	237			$	296			$	8,179			$	9,945			$	(794	)		$	(6,727	)		$	442
Comprehensive income:
Net income			1,197				1,197																1,191												6
Other comprehensive income (loss), net of tax:
Cumulative translation adjustment			120				120																				120
Net revaluation and clearance of cash flow hedges to earnings			5				5																				7								(2	)
Pension benefit plans			14				14																				14
Other benefit plans			(11	)			(11	)																			(11	)
Net unrealized loss on securities			(4	)			(4	)																			(4	)
Other comprehensive income (loss)			124				124
Comprehensive income			1,321				1,321	1
Common dividends			(372	)																			(369	)											(3	)
Preferred dividends			(3	)																			(3	)
Common Stock issued — Compensation plans			41																41
Total Equity as of March 31, 2008		$	12,565							$	237			$	296			$	8,220			$	10,764			$	(668	)		$	(6,727	)		$	443

Note 3. Fair Value Measurements

In 2008, the company implemented the provisions of SFAS 157, “Fair Value Measurements” for financial assets and financial liabilities reported at fair value. Effective January 1, 2009, the company prospectively implemented the provisions of FASB Staff Position No. FAS 157-2 for non-financial assets and non-financial liabilities reported or disclosed at fair value, except for non-financial items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The disclosures focus on the inputs used to measure fair value.

The company has determined that its financial assets and liabilities are level 1 and level 2 in the fair value hierarchy. The company uses the following valuation techniques to measure fair value for its financial assets and financial liabilities:

	Level 1 —		Quoted market prices in active markets for identical assets or liabilities
	Level 2 —		Significant other observable inputs (e.g. quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable such as interest rate and yield curves, and market-corroborated inputs)

At March 31, 2009, the following financial assets and financial liabilities were measured at fair value on a recurring basis using the type of inputs shown:

		March 31,				Fair Value Measurements at March 31, 2009 Using
		2009				Level 1 Inputs				Level 2 Inputs
Financial assets
Derivatives		$	114			$	—			$	114
Available-for-sale securities			16				16				—
		$	130			$	16			$	114
Financial liabilities
Derivatives		$	316			$	—			$	316

Note 4. Other Income, Net

		Three Months Ended
		March 31,
		2009				2008
CozaarÒ/HyzaarÒ income		$	251			$	233
Royalty income			32				27
Interest income			21				27
Equity in earnings of affiliates			33				19
Net gains on sales of assets			4				2
Net exchange gains (losses) 1			49				(135	)
Miscellaneous income and expenses, net 2			9				22
Total		$	399			$	195

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 5. Restructuring Activities

During the three months ended March 31, 2009, there were no significant changes in estimates related to liabilities established for the global restructuring program recorded in 2008. A complete discussion of all restructuring initiatives is included in the company’s 2008 Annual Report in Note 5, “Restructuring Activities.”

The account balances and activity for the company’s 2008 global restructuring program are as follows:

		Employee				Other
		Separation				Non-personnel
		Costs				Charges				Total
Balance at December 31, 2008		$	309			$	17			$	326
Payments			(19	)			—				(19	)
Net Translation Adjustment			(12	)			(1	)			(13	)
Balance at March 31, 2009		$	278			$	16			$	294

As of March 31, 2009, approximately 900 employees were separated relating to the 2008 global restructuring program.

Note 6. Provision for Income Taxes

In the first quarter 2009, the company recorded a tax provision of $260, including $103 of tax expense associated with the company’s policy of hedging the foreign currency-denominated monetary assets and liabilities of its operations.

In the first quarter 2008, the company recorded a tax provision of $273, including $141 of tax benefit associated with the company’s policy of hedging the foreign currency-denominated monetary assets and liabilities of its operations.

Each year the company files hundreds of tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the taxing authorities. Positions challenged by the taxing authorities may be settled or appealed by the company. As a result, there is an uncertainty in income taxes recognized in the company’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes” (SFAS 109) and FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). 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 possible outcomes, a current estimate of the range of increases or decreases that may occur within the next twelve months cannot be made.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 7. Earnings Per Share of Common Stock

Set forth below is a reconciliation of the numerator and denominator for basic and diluted earnings per share calculations for the periods indicated:

		Three Months Ended
		March 31,
		2009				2008
Numerator:
Net income attributable to DuPont		$	488			$	1,191
Preferred dividends			(3	)			(3	)
Net income available to DuPont common stockholders		$	485			$	1,188
Denominator:
Weighted-average number of common shares — Basic			903,893,000				900,646,000
Dilutive effect of the company’s employee compensation plans			1,772,000				5,547,000
Weighted-average number of common shares — Diluted			905,665,000				906,193,000

The following average number of stock options were antidilutive, and therefore, were not included in the diluted earnings per share calculations:

		Three Months Ended
		March 31,
		2009				2008
Average Number of Stock Options			81,260,000				26,526,000

Note 8. Inventories

		March 31,				December 31,
		2009				2008
Finished products		$	3,535			$	3,156
Semifinished products			1,033				2,234
Raw materials and supplies			935				1,199
			5,503				6,589
Adjustment of inventories to a last-in, first-out (LIFO) basis			(888	)			(908	)
Total		$	4,615			$	5,681

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 9. Goodwill and Other Intangible Assets

There were no significant changes in goodwill for the three-month period ended March 31, 2009.

The gross carrying amounts and accumulated amortization of other intangible assets by major class are as follows:

		March 31, 2009												December 31, 2008
						Accumulated												Accumulated
		Gross				Amortization				Net				Gross				Amortization				Net
Intangible assets subject to amortization (Definite-lived):
Purchased and licensed technology		$	2,406			$	(1,426	)		$	980			$	2,420			$	(1,356	)		$	1,064
Patents			128				(48	)			80				128				(45	)			83
Trademarks			61				(20	)			41				61				(19	)			42
Other			625				(268	)			357				627				(260	)			367
			3,220				(1,762	)			1,458				3,236				(1,680	)			1,556
Intangible assets not subject to amortization (Indefinite-lived):
Trademarks / tradenames			179				—				179				179				—				179
Pioneer germplasm			975				—				975				975				—				975
		$	1,154			$	—			$	1,154			$	1,154			$	—			$	1,154
Total		$	4,374			$	(1,762	)		$	2,612			$	4,390			$	(1,680	)		$	2,710

The aggregate amortization expense for definitive-lived intangible assets was $99 and $93 for the three-month period ended March 31, 2009 and 2008, respectively. The estimated aggregate amortization expense for 2009 and each of the next five years is approximately $270, $210, $200, $180, $160 and $140.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 10. Commitments and Contingent Liabilities

Guarantees

Product Warranty Liability

The company warrants that its products meet standard specifications. The company’s product warranty liability was $25 and $24 as of March 31, 2009 and December 31, 2008, respectively. Estimates for warranty costs are based on historical claims experience.

Indemnifications

In connection with acquisitions and divestitures, the company has indemnified respective parties against certain liabilities that may arise in connection with these transactions and business activities prior to the completion of the transaction. The term of these indemnifications, which typically pertain to environmental, tax and product liabilities, is generally indefinite. In addition, the company indemnifies its duly elected or appointed directors and officers to the fullest extent permitted by Delaware law, against liabilities incurred as a result of their activities for the company, such as adverse judgments relating to litigation matters. If the indemnified party were to incur a liability or have a liability increase as a result of a successful claim, pursuant to the terms of the indemnification, the company would be required to reimburse the indemnified party. The maximum amount of potential future payments is generally unlimited. The carrying amount recorded for all indemnifications as of March 31, 2009 and December 31, 2008 was $110, respectively. Although it is reasonably possible that future payments may exceed amounts accrued, due to the nature of indemnified items, it is not possible to make a reasonable estimate of the maximum potential loss or range of loss. No assets are held as collateral and no specific recourse provisions exist.

In connection with the 2004 sale of the majority of the net assets of Textiles and Interiors, the company indemnified the purchasers, subsidiaries of Koch Industries, Inc. (INVISTA), against certain liabilities primarily related to taxes, legal and environmental matters and other representations and warranties under the Purchase and Sale Agreement. The estimated fair value of the indemnity obligations under the Purchase and Sale Agreement was $70 and was included in the indemnifications balance of $110 at March 31, 2009. Under the Purchase and Sale Agreement, the company’s total indemnification obligation for the majority of the representations and warranties cannot exceed $1,400. The other indemnities are not subject to this limit. In March 2008, INVISTA filed suit in the Southern District of New York alleging that certain representations and warranties in the Purchase and Sale Agreement were breached and, therefore, that DuPont is obligated to indemnify it. DuPont disagrees with the extent and value of INVISTA’s claims. DuPont has not changed its estimate of its total indemnification obligation under the Purchase and Sale Agreement as a result of the lawsuit.

Obligations for Equity Affiliates & Others

The company has directly guaranteed various debt obligations under agreements with third parties related to equity affiliates, customers, suppliers and other affiliated and unaffiliated companies. At March 31, 2009, the company had directly guaranteed $528 of such obligations, and $121 relating to guarantees of historical obligations for divested subsidiaries. This represents the maximum potential amount of future (undiscounted) payments that the company could be required to make under the guarantees. The company would be required to perform on these guarantees in the event of default by the guaranteed party.

The company assesses the payment/performance risk by assigning default rates based on the duration of the guarantees. These default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical default history for counterparties that do not have published credit ratings. For counterparties without an external rating or available credit history, a cumulative average default rate is used.

At March 31, 2009 and December 31, 2008, a liability of $116 and $121, respectively, was recorded for these obligations, representing the amount of payment/performance risk for which the company deems probable. This liability is principally related to obligations of the company’s polyester films joint venture, which are guaranteed by the company.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

In certain cases, the company has recourse to assets held as collateral, as well as personal guarantees from customers and suppliers. Assuming liquidation, these assets are estimated to cover approximately 23 percent of the $235 of guaranteed obligations of customers and suppliers. Set forth below are the company’s guaranteed obligations at March 31, 2009:

		Short-				Long-
		Term				Term				Total
Obligations for customers, suppliers and other affiliated and unaffiliated companies1, 2:
Bank borrowings (terms up to 5 years)		$	344			$	153			$	497
Leases on equipment and facilities (terms less than 1 year)			13				—				13
Obligations for equity affiliates2:
Bank borrowings (terms up to 4 years)			—				15				15
Leases on equipment and facilities (terms up to 2 years)			—				3				3
Total obligations for customers, suppliers, other affiliated and unaffiliated companies and equity affiliates		$	357			$	171			$	528
Obligations for divested subsidiaries and affiliates3:
Conoco (terms up to 18 years)			2				16				18
Consolidation Coal Sales Company (terms from 2 to 3 years)			—				103				103
Total obligations for divested subsidiaries and affiliates			2				119				121
		$	359			$	290			$	649

Master Operating Leases

At March 31, 2009, the company has one master operating lease program relating to miscellaneous short-lived equipment with an unamortized value of approximately $88. The leases under this program are considered operating leases and accordingly the related assets and liabilities are not recorded on the Consolidated Balance Sheets. Furthermore, the lease payments associated with this program vary based on one month USD LIBOR. In November 2008, the lessor notified the company that the program will terminate by November 2009. Prior to that time, the company may either purchase the assets for their unamortized value or arrange for the sale of the assets and remit the proceeds to the lessor. If the assets are sold and the proceeds are less than the unamortized value, the company must pay to the lessor the difference between the proceeds and the unamortized value, up to the residual value guarantee, which totaled $76 at March 31, 2009.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Litigation

PFOA

Regulatory and Environmental Actions

In January 2009, the U.S. Environmental Protection Agency (EPA) issued a national Provisional Health Advisory for PFOA of 0.40 parts per billion (ppb) in drinking water. In March 2009, EPA and DuPont entered an Order on Consent under the Safe Drinking Water Act (SDWA) reflecting the advisory level. Under the terms of the 2009 consent order, DuPont will conduct surveys, sampling and analytical testing in the area around its Washington Works site located in Parkersburg, West Virginia. If tests indicate the presence of PFOA, (collectively, perfluorooctanoic acids and its salts, including the ammonium salt), in drinking water at 0.40 ppb or greater, the company will offer treatment or an alternative supply of drinking water. The 2009 consent order supersedes the November 2006 Order on Consent between DuPont and EPA which established a precautionary interim screening level for PFOA of 0.50 ppb in drinking water sources in the area around the Washington Works site. All of DuPont’s remaining obligations under the 2006 consent order have been incorporated into the 2009 consent order.

In late 2005 DuPont and the EPA entered into a Memorandum of Understanding (EPA MOU) that required DuPont to monitor PFOA in the soil, air, water and biota around the Washington Works site. The data generated in the monitoring process is subject to a third party peer review.

DuPont agreed with the New Jersey Department of Environmental Protection (NJDEP) to voluntarily sample private wells within a two-mile radius of its Chambers Works site in Deepwater New Jersey for the presence of PFOA beginning in spring 2009.

At March 31, 2009, DuPont has accruals of about $0.6 to fund its activities under the 2009 consent order and EPA MOU and to fund its voluntary activities under the NJDEP agreement.

EPA Administrative Complaints

In July and December 2004, the EPA filed administrative complaints against DuPont alleging that the company failed to comply with the technical reporting requirements of the Toxic Substances Control Act (TSCA) and the Resource Conservation and Recovery Act (RCRA) regarding PFOA. Under a 2005 agreement settling the matter, the company paid civil fines of $10.25 and will complete two Supplemental Environmental Projects at a total cost of $6.25.

Actions: Drinking Water

In August 2001, a class action, captioned Leach v. DuPont, was filed in West Virginia state court against DuPont and the Lubeck Public Service District. DuPont uses PFOA as a processing aid to manufacture fluoropolymer resins and dispersions at various sites around the world including its Washington Works plant in West Virginia. The complaint alleged that residents living near the Washington Works facility had suffered, or may suffer, deleterious health effects from exposure to PFOA in drinking water. The relief sought included damages for medical monitoring, diminution of property values and punitive damages plus injunctive relief to stop releases of PFOA. DuPont and attorneys for the class reached a settlement agreement in 2004 and as a result, the company established accruals of $108 in 2004. The agreement was approved by the Wood County Circuit Court on February 28, 2005 after a fairness hearing. The settlement binds a class of approximately 80,000 residents. As defined by the court, the class includes those individuals who have consumed, for at least one year, water containing 0.05 ppb or greater of PFOA from any of six designated public water sources or from sole source private wells.

In July 2005, the company paid the plaintiffs’ attorneys’ fees and expenses of $23 and made a payment of $70, which class counsel has designated to fund a community health project. The company is also funding a series of health studies by an independent science panel of experts in the communities exposed to PFOA to evaluate available scientific evidence on whether any probable link exists between exposure to PFOA and human disease. The company expects the independent science panel to complete these health studies between 2009 and year-end 2011 at a total estimated cost of $26, of which

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

$5 was originally placed in an interest-bearing escrow account. In addition, the company is providing state-of-the art water treatment systems designed to reduce the level of PFOA in water to six area water districts, including the Little Hocking Water Association (LHWA), until the science panel determines that PFOA does not cause disease or until applicable water standards can be met without such treatment. All of the water treatment systems are operating. The estimated cost of constructing, operating and maintaining these systems is about $22 of which $10 was originally placed in an interest-bearing escrow account. At March 31, 2009, the accrual balance relating to the funding of the independent science panel health study and the water treatment systems was $14, including $6 in interest bearing escrow accounts.

The settlement resulted in the dismissal of all claims asserted in the lawsuit except for personal injury claims. If the independent science panel concludes that no probable link exists between exposure to PFOA and any diseases, then the settlement would also resolve personal injury claims. If it concludes that a probable link does exist between exposure to PFOA and any diseases, then DuPont would also fund up to $235 for a medical monitoring program to pay for such medical testing. In this event, plaintiffs would retain their right to pursue personal injury claims. All other claims in the lawsuit would remain dismissed by the settlement. DuPont believes that it is remote that the panel will find a probable link. Therefore, at March 31, 2009, the company had not established any accruals related to medical monitoring or personal injury claims. However, there can be no assurance as to what the independent science panel will conclude.

In June 2007, the LHWA notified DuPont that it intends to file suit under RCRA alleging “imminent and substantial endangerment to health and or the environment” based on detection of PFOA in its wells. DuPont received in February 2009, two additional letters of intent to file suit under RCRA alleging “imminent and substantial endangerment to health and or the environment” based on detection of PFOA in public and private water wells in Parkersburg, West Virginia and Penns Grove, New Jersey. DuPont denies any such endangerment exists at any of these locations and intends to vigorously defend itself if a lawsuit is filed.

In September 2007, LHWA refiled the suit it originally filed in Ohio state court and voluntarily dismissed in 2006. The suit claims that perfluorinated compounds, including PFOA, allegedly released from the Washington Works plant contaminated LHWA’s well fields and underlying aquifer. LHWA’s complaint seeks a variety of relief including compensatory and punitive damages, and an injunction requiring DuPont to provide a new “pristine” well field and the infrastructure to deliver it.

In the second quarter 2006, three purported class actions were filed alleging that drinking water had been contaminated by PFOA in excess of 0.05 ppb due to alleged releases from certain DuPont plants. One of these cases was filed in West Virginia state court on behalf of customers of the Parkersburg City Water District, but was removed on DuPont’s motion to the U.S. District Court for the Southern District of West Virginia. In September 2008, the U.S. District Court ruled that the case could not proceed as a class action. Plaintiffs’ appeal of the ruling was denied. The three plaintiffs have filed a case based on their individual claims. The other two purported class actions were filed in New Jersey. One was filed in federal court on behalf of individuals who allegedly drank water contaminated by releases from DuPont’s Chambers Works plant in Deepwater, New Jersey. The second was filed in state court on behalf of customers serviced primarily by the Pennsville Township Water Department and was removed to New Jersey federal district court on DuPont’s motion. The New Jersey cases have been combined for purposes of discovery and the complaints have been amended to allege that drinking water had been contaminated by PFOA in excess of 0.04 ppb. In December 2008, the court denied class action status in both cases, but ordered additional briefing on certain issues. The plaintiff in one of the cases is seeking leave from the Third Circuit Court of Appeals to appeal the denial. The company is defending itself vigorously against these lawsuits alleging contamination of drinking water sources.

While DuPont believes that it is reasonably possible that it could incur losses related to PFOA matters in addition to those matters discussed above for which it has established accruals, a range of such losses, if any, cannot be reasonably estimated at this time.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Consumer Products Class Actions

		Number of Cases
Balance at December 31, 2008			22
Filed			—
Resolved			—
Balance at March 31, 2009			22

As of March 31, 2009, twenty-two intrastate class actions are pending on behalf of consumers who have purchased cookware with Teflon^® non-stick coating in federal district courts against DuPont. The actions were filed on behalf of consumers in California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Illinois, Indiana, Iowa, Kentucky, Massachusetts, Michigan, Missouri, New Jersey, New Mexico, New York, Ohio, Oklahoma, Pennsylvania, South Carolina, Texas and West Virginia. One of the two actions originally filed in California was dismissed in the second quarter 2008 for failure to prosecute. In December 2008, the federal district court for the Southern District of Iowa ruled that the cases could not proceed as a class action, but must be tried separately. In March 2009, the Eighth Circuit Court of Appeals rejected plaintiffs’ appeal of the ruling. Rather than continue the litigation, plaintiffs’ counsel agreed to dismiss all twenty-two actions.

In December 2005, a motion was filed by a single named plaintiff in the Superior Court for the Province of Quebec, Canada seeking authorization to institute a class action on behalf of all Quebec consumers who have purchased or used kitchen items, household appliances or food-packaging containing Teflon^® or Zonyl^® non-stick coatings. A ruling on this motion is expected from the Court in 2009. Damages are not quantified, but are alleged to include the cost of replacement products as well as one hundred dollars per class member as exemplary damages.

The company believes that the class actions and the motion filed in Quebec are without merit and, therefore, believes it is remote that it will incur losses related to these actions. At March 31, 2009, the company had not established any accruals related to these matters.

Elastomers Antitrust Matters

Since 2002, the U.S., European Union (EU) and Canadian antitrust authorities have investigated the synthetic rubber markets for possible violations. These investigations included DuPont Dow Elastomers, LLC (DDE), as a result of its participation in the polychloroprene (PCP) and ethylene propylene diene monomer (EPDM) markets. DDE was a joint venture between The Dow Chemical Company (Dow) and DuPont.

In April 2004, DuPont and Dow entered into a series of agreements under which DuPont obtained complete control over directing DDE’s response to these investigations and the related litigation and DuPont agreed to a disproportionate share of the venture’s liabilities and costs related to these matters. Consequently, DuPont bears any potential liabilities and costs up to the initial $150. Dow is obligated to indemnify DuPont for up to $72.5 by paying 15 to 30 percent toward liabilities and costs in excess of $150. On June 30, 2005, DDE became a wholly owned subsidiary of DuPont and was renamed DuPont Performance Elastomers, LLC (DPE).

In July 2007, DPE pled guilty to conspiring to fix prices and paid a fine of CDN $4, approximately $3.8 USD, resolving all criminal antitrust allegations against it related to PCP in Canada.

In late March 2007, the EU antitrust authorities issued a Statement of Objections that made antitrust allegations regarding the PCP market against DPE, relating to the joint venture’s activities, and DuPont,

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

to which both responded. In December 2007, the EU antitrust authorities issued their decision, including the imposition of fines against DPE, Dow and DuPont totaling EURO 59.25. In February 2008, DuPont appealed the decision to the EU’s Court of First Instance which has jurisdiction to review the findings and adjust the fine. It is very unlikely that the fine would be increased as a result of the review. In March 2008, the company provisionally paid the fine of EURO 59.25 ($90.9 USD); a portion of the payment may be refunded if the appeal is successful. While a decision on the February 2008 appeal has not been issued, the EU antitrust authorities revised the December 2007 decision by imposing an incremental fine on Dow of EURO 4.425 ($6.5 USD). Dow provisionally paid the incremental fine in the third quarter of 2008 which DuPont reimbursed under the agreements between the companies.

DDE resolved all criminal antitrust allegations against it related to PCP in the U.S. through a plea agreement with the Department of Justice (DOJ) in January 2005 which was approved by the court on March 29, 2005. The agreement requires the subsidiary to pay a fine of $84 which, at its election, is being paid in six equal, annual installments. The last remaining installment is due in 2010. The agreement also requires the subsidiary to provide ongoing cooperation with the DOJ’s investigation.

At March 31, 2009, the company has accruals of approximately $14 related to this matter and a receivable of $3.9 for the remaining amount that it expects to be reimbursed by Dow.

In 1991, DuPont began receiving claims by growers that use of Benlate^® 50 DF fungicide had caused crop damage. DuPont has since been served with thousands of lawsuits, most of which have been disposed of through trial, dismissal or settlement. The status of Benlate^® cases is indicated in the table below:

		Number of Cases
Balance at December 31, 2008			11
Filed			1
Resolved			—
Balance at March 31, 2009			12

At March 31, 2009, there were nine cases pending in Florida state court, involving allegations that Benlate^® caused crop damage. Plaintiffs appealed the court’s 2006 dismissal of one of the nine cases for failure to prosecute and the appellate court reinstated the case. Two of the nine cases, involving twenty-seven Costa Rican fern growers, were tried during the second quarter of 2006 resulting in a $56 judgment against the company, which was reduced to $24 on DuPont’s motion. At trial, the plaintiffs sought damages in the range of $270 to $400. The plaintiffs and DuPont have appealed the verdict. DuPont believes that the appeal will be resolved in its favor and, therefore, has not established an accrual relating to the judgment.

In two other cases pending in Florida, plaintiffs allege damage to shrimping operations. These cases had been decided in DuPont’s favor, but in September 2007, the judge granted plaintiffs’ motion for new trial thus reinstating the cases. Trial is expected to occur in the second half of 2009.

In January 2009, a case was filed in Florida state court claiming that plaintiff’s exposure to Benlate^® allegedly contaminated with atrazine caused plaintiff’s kidney and brain cancer. The case has been removed to federal court.

The company does not believe that Benlate^® caused the damages alleged in each of these cases and denies the allegations of fraud and misconduct. The company continues to defend itself in ongoing matters. As of March 31, 2009, the company has incurred costs and expenses of approximately $2,000 associated with these matters, but does not expect additional significant costs or expenses associated with the remaining 12 cases. The company has recovered approximately $275 of its costs and expenses

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

through insurance and does not expect additional insurance recoveries, if any, to be significant. At March 31, 2009, the company does not have any remaining accruals related to Benlate^®.

Spelter, West Virginia

In September 2006, a West Virginia state court certified a class action against DuPont that seeks relief including the provision of remediation services and property value diminution damages for 7,000 residential properties in the vicinity of a closed zinc smelter in Spelter, West Virginia. The action also seeks medical monitoring for an undetermined number of residents in the class area. The smelter was owned and operated by at least three companies between 1910 and 2001, including DuPont between 1928 and 1950. DuPont performed remedial measures at the request of the EPA in the late 1990s and in 2001 repurchased the site to facilitate and complete the remediation. The fall 2007 trial was conducted in four phases: liability, medical monitoring, property and punitive damages. The jury found against DuPont in all four phases awarding $55.5 for property remediation and $196.2 in punitive damages. In post trial motions, the court adopted the plaintiffs’ forty-year medical monitoring plan estimated by plaintiffs to cost $130 and granted plaintiffs’ attorneys legal fees of $127 plus $8 in expenses. In June 2008, DuPont filed its petitions for appeal with the West Virginia Supreme Court seeking review of a number of issues associated with the trial court’s decisions before, during and after the trial. On September 25, 2008, the Court decided to accept the case and consider the parties’ appeal on the merits. The oral argument was heard on April 7, 2009. A decision on the appeal is expected as early as the second quarter 2009. Effective with DuPont posting a bond, the execution of judgment against the company is stayed pending final disposition of DuPont’s appeal to the West Virginia Supreme Court of Appeals. As of March 31, 2009, the company had recorded accruals of $55, although given the uncertainties inherent in litigation, there can be no assurance as to the final outcome.

General

The company is subject to various lawsuits and claims arising out of the normal course of its business. These lawsuits and claims include actions based on alleged exposures to products, intellectual property and environmental matters and contract and antitrust claims. Management has noted a nationwide trend in purported class actions against chemical manufacturers generally seeking relief such as medical monitoring, property damages, off-site remediation and punitive damages arising from alleged environmental torts without claiming present personal injuries. Such cases may allege contamination from unregulated substances or remediated sites. Although it is not possible to predict the outcome of these various lawsuits and claims, management does not anticipate they will have a materially adverse effect on the company’s consolidated financial position or liquidity. However, the ultimate liabilities may be significant to results of operations in the period recognized. The company accrues for contingencies when the information available indicates that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated.

Environmental

The company is also subject to contingencies pursuant to environmental laws and regulations that in the future may require the company to take further action to correct the effects on the environment of prior disposal practices or releases of chemical or petroleum substances by the company or other parties. The company accrues for environmental remediation activities consistent with the policy set forth in Note 1 in the company’s 2008 Annual Report. Much of this liability results from the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to as 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 estimated costs related to 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.

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,

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

diverse regulatory agencies and enforcement policies, as well as the presence or absence of potentially responsible parties. At March 31, 2009, the Condensed Consolidated Balance Sheets included a liability of $382, relating to these matters and, in management’s opinion, is appropriate based on existing facts and circumstances. The average time frame, over which the accrued or presently unrecognized amounts may be paid, based on past history, is estimated to be 15-20 years. Considerable uncertainty exists with respect to these costs and, under adverse changes in circumstances, potential liability may range up to two to three times the amount accrued as of March 31, 2009.

Other

The company has various purchase commitments incident to the ordinary conduct of business. In the aggregate, such commitments are not at prices in excess of current market nor are they significantly different than amounts disclosed in the company’s 2008 Annual Report.

Note 11. Derivatives and Other Hedging Instruments

Effective January 1, 2009, the company prospectively implemented the provisions of SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161). SFAS 161 enhances the disclosure requirements of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133) to provide users of financial statements with a better understanding of the objectives of a company’s derivative use and the risks managed.

Objectives and Strategies for Holding Derivative Instruments

In the ordinary course of business, the company enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency, interest rate and commodity price risks under established procedures and controls. The company has established a variety of approved derivative instruments to be utilized in each risk management program, as well as varying levels of exposure coverage and time horizons based on an assessment of risk factors related to each hedging program. Derivative instruments utilized during the period include forwards, options, futures and swaps. The company has not designated any nonderivatives as hedging instruments.

The corporate financial risk management policy establishes an oversight committee and risk management guidelines that authorize the use of specific derivative instruments and further establishes procedures for control and valuation, counterparty credit approval and routine monitoring and reporting. The counterparties to these contractual arrangements are major financial institutions and major commodity exchanges. The company is exposed to credit loss in the event of nonperformance by these counterparties. The company manages this exposure to credit loss through the aforementioned credit approvals, limits and monitoring procedures and, to the extent possible, by restricting the period over which unpaid balances are allowed to accumulate. The company anticipates performance by counterparties to these contracts and therefore no material loss is expected. Market and counterparty credit risks associated with these instruments are regularly reported to management.

The company hedges foreign currency denominated revenue and monetary assets and liabilities, certain business specific foreign currency exposures and certain energy feedstock purchases. In addition, the company enters into exchange traded agricultural commodity derivatives to hedge exposures relevant to agricultural feedstock purchases.

Foreign Currency Risk

The company’s objective in managing exposure to foreign currency fluctuations is to reduce earnings and cash flow volatility associated with foreign currency rate changes. Accordingly, the company enters into various contracts that change in value as foreign exchange rates change to protect the value of its existing foreign currency-denominated assets, liabilities, commitments, and cash flows.

The company routinely uses forward exchange contracts to offset its net exposures, by currency, related to the foreign currency-denominated monetary assets and liabilities of its operations. The primary business objective of this hedging program is to maintain an approximately balanced position in foreign currencies so

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

that exchange gains and losses resulting from exchange rate changes, net of related tax effects, are minimized.

Interest Rate Risk

The company uses interest rate swaps to manage the interest rate mix of the total debt portfolio and related overall cost of borrowing.

Interest rate swaps involve the exchange of fixed for floating rate interest payments to effectively convert fixed rate debt into floating rate debt based on USD LIBOR. Interest rate swaps allow the company to achieve a target range of floating rate debt.

Commodity Price Risk

Commodity price risk management programs serve to reduce exposure to price fluctuations on purchases of inventory such as natural gas, ethane, corn, soybeans and soybean meal.

The company enters into over-the-counter and exchange-traded derivative commodity instruments to hedge the commodity price risk associated with energy feedstock and agricultural commodity exposures.

Fair Value Hedges

During the quarter ended March 31, 2009, the company maintained a number of interest rate swaps that involve the exchange of fixed for floating rate interest payments which allows the company to achieve a target range of floating rate debt. All interest rate swaps qualify for the shortcut method of hedge accounting, thus there is no ineffectiveness related to these hedges. The company maintains no other fair value hedges. At March 31, 2009, the company had interest rate swap agreements with gross notional amounts of approximately $1,150.

Cash Flow Hedges

The company maintains a number of cash flow hedging programs to reduce risks related to foreign currency and commodity price risk. While each risk management program has a different time maturity period, most programs currently do not extend beyond the next two-year period.

The company uses foreign currency exchange contracts to offset a portion of the company’s exposure to certain foreign currency denominated revenues so that gains and losses on these contracts offset changes in the U.S. Dollar value of the related foreign currency-denominated revenues. At March 31, 2009, the company had foreign currency exchange contracts with gross notional amounts of approximately $374.

A portion of natural gas purchases are hedged to reduce price volatility using fixed price swaps and options. At March 31, 2009, the company had energy feedstock contracts with gross notional amounts of approximately $392.

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 March 31, 2009, the company had agricultural commodity contracts with gross notional amounts of approximately $323.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

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 appears that a forecasted transaction will not materialize. The following table summarizes the effect of cash flow hedges on accumulated other comprehensive income (loss) for the periods shown:

		Three Months Ended
		March 31, 2009
		Pre-tax				Tax				After- Tax
Beginning balance		$	(246	)		$	88			$	(158	)
Additions and revaluations of derivatives designated as cash flow hedges			(60	)			20				(40	)
Clearance of hedge results to earnings			63				(21	)			42
Balance at March 31, 2009		$	(243	)		$	87			$	(156	)
Amounts expected to be reclassified into earnings over the next twelve months		$	(143	)		$	54			$	(89	)

Hedges of Net Investment in a Foreign Operation

During the quarter ended March 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 March 31, 2009, the company had forward exchange contracts with gross notional amounts of approximately $7,682.

In addition, the company has risk management programs for agricultural commodities that do not qualify for hedge accounting treatment. At March 31, 2009, the company had agricultural commodities contracts with gross notional amounts of approximately $105.

Contingent Features

During the quarter ended March 31, 2009, the company did not maintain any derivative contracts with credit-risk-related contingent features.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

The following tables provide information on the location and amounts of derivative fair values in the consolidated balance sheet and derivative gains and losses in the consolidated income statement:

Fair Values of Derivative Instruments

		Asset Derivatives				Liability Derivatives
		March 31, 2009				March 31, 2009
		Fair Value				Fair Value
Derivatives designated as hedging instruments under SFAS 133
Interest rate swaps		$	3	1		$	—
Interest rate swaps			29	2			—
Foreign currency contracts			9	1			—
Energy feedstocks			—				96	3
Energy feedstocks			—				83	4
Total derivatives designated as hedging instruments under SFAS 133		$	41			$	179
Derivatives not designated as hedging instruments under SFAS 133
Agricultural feedstocks			5	1
Foreign currency contracts			68	1			137	3
Total derivatives not designated as hedging instruments under SFAS 133		$	73			$	137
Total derivatives		$	114			$	316

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

The Effect of Derivative Instruments on the Consolidated Income Statement

Fair Value Hedging

		Amount of Gain or				Amount of Gain or (Loss)
Derivatives in SFAS		(Loss) Recognized in				Recognized in Income on
133 Fair Value Hedging		Income of Derivative				Hedged Item
Relationships		March 31, 2009				March 31, 2009
Interest rate swaps		$	(11	) 1		$	11	1
Total		$	(11	)		$	11

Cash Flow Hedging

										Amount of Gain or
										(Loss) Recognized in
		Amount of Gain or				Amount of Gain or				Income on Derivative
		(Loss) Recognized in				(Loss) Reclassified from				(Ineffective Portion and
Derivatives in SFAS 133		OCI1 on Derivative				Accumulated OCI1 into				Amount Excluded from
Cash Flow Hedging		(Effective Portion)				Income (Effective Portion)				Effectiveness Testing)
Relationships		March 31, 2009				March 31, 2009				March 31, 2009
Foreign currency contracts		$	5			$	(16	) 2		$	—
Agricultural feedstocks			(14	)			(14	) 3			(3	) 3
Energy feedstocks			(51	)			(33	) 3			—
Total		$	(60	)		$	(63	)		$	(3	)

Derivatives not Designated in Hedging Instruments

Derivatives Not		Amount of Gain or (Loss)
Designated in Hedging		Recognized in Income on
Instruments under SFAS		Derivative
133		March 31, 2009
Foreign currency contracts		$	195	1
Agricultural feedstocks			3	2
Total		$	198

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 12. Long-Term Employee Benefits

The following sets forth the components of the company’s net periodic benefit cost/(credit) for pensions:

		Three Months Ended
		March 31,
		2009				2008
Service cost		$	47			$	52
Interest cost			315				323
Expected return on plan assets			(398	)			(485	)
Amortization of unrecognized loss			70				14
Amortization of prior service cost			4				5
Net periodic benefit cost/(credit)		$	38			$	(91	)

The company disclosed in its Consolidated Financial Statements for the year ended December 31, 2008, that it expected to contribute approximately $300 to its pension plans, other than to the principal U.S. pension plan in 2009. As of March 31, 2009, contributions of $100 have been made to these pension plans and the company anticipates additional contributions during the remainder of 2009 to total approximately $192.

The following sets forth the components of the company’s net periodic benefit cost for other long-term employee benefits:

		Three Months Ended
		March 31,
		2009				2008
Service cost		$	8			$	7
Interest cost			61				57
Amortization of unrecognized loss			12				8
Amortization of prior service benefit			(26	)			(27	)
Net periodic benefit cost		$	55			$	45

The company disclosed in its Consolidated Financial Statements for the year ended December 31, 2008, that it expected to make payments of approximately $330 to its other long-term employee benefit plans in 2009. Through March 31, 2009, the company has made benefit payments of $67 related to its other long-term employee benefit plans and anticipates additional payments during the remainder of 2009 to total approximately $263.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per share)

Note 13. Segment Information

Segment sales include transfers. Segment pre-tax operating income/(loss) (PTOI) is defined as operating income/(loss) before income taxes, noncontrolling interests, exchange gains/(losses), corporate expenses and net interest.

										Electronic &
Three Months Ended		Agriculture &				Coatings & Color				Communication				Performance				Safety &				Pharma
March 31,		Nutrition				Technologies				Technologies				Materials				Protection				-ceuticals				Other				Total 1
2009
Segment sales		$	3,062			$	1,156			$	696			$	942			$	1,033			$	—			$	28			$	6,917
Less transfers			—				(9	)			(11	)			(5	)			(12	)			—				(9	)			(46	)
Net sales			3,062				1,147				685				937				1,021				—				19				6,871
Pre-tax operating income (loss)			852				(19	)			(54	)			(146	)			72				252				(44	)			913
2008
Segment sales		$	2,883			$	1,645			$	1,026			$	1,713			$	1,365			$	—			$	40			$	8,672
Less transfers			—				(17	)			(36	)			(14	)			(26	)			—				(4	)			(97	)
Net sales			2,883				1,628				990				1,699				1,339				—				36				8,575
Pre-tax operating income (loss)			786				190				175				219				272				235				(26	)			1,851