DuPont 2006 Annual Report Download - page 24

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued
(Dollars in millions) 2006 2005 2004
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $3,224 $3,223 $3,141
As a percent of Net sales 12% 12% 11%
Selling, general and administrative (SG&A) expenses increased $1 million and remained constant as a percent
of sales in 2006 as compared to 2005. In 2005, SG&A expenses increased $82 million. The 1 percentage point
increase as a percent of sales primarily reflects the absence of INVISTA in 2005, which had lower selling
expenses as a percent of sales compared to the rest of the company.
(Dollars in millions) 2006 2005 2004
RESEARCH AND DEVELOPMENT EXPENSE $1,302 $1,336 $1,333
As a percent of Net sales 5% 5% 5%
Research and development expense as a percent of sales remained constant over the three-year period.
Expenditures in 2006 were consistent with spending by segment in 2005 and reflect concentration in
expansion of seed traits, breeding advancement and product development within Agriculture & Nutrition, as
well as activities to support the growth platforms. Spending in 2005 reflects increases across most segments,
offset by the absence of spending in Textiles & Interiors after April 30, 2004. The company continues to
support a strong commitment to research and development as a source of sustainable growth and expects
research and development funding to increase modestly in 2007.
(Dollars in millions) 2006 2005 2004
INTEREST EXPENSE $460 $518 $362
Interest expense decreased $58 million in 2006 compared to 2005 primarily due to lower average borrowing
level partially offset by higher average rates. An increase in the average interest rates from 3.46 percent to
4.60 percent and a 3 percent higher average borrowing level resulted in the increase in interest expense for
2005 as compared to 2004.
(Dollars in millions) 2006 2005 2004
SEPARATION ACTIVITIES — TEXTILES & INTERIORS — $(62) $667
On April 30, 2004, the company sold a majority of the net assets of Textiles & Interiors, referred to as
INVISTA, to Koch. In January 2006, the company sold its interest in a Textiles & Interiors equity affiliate to
its equity partner for proceeds of $14 million thereby completing the sale of all of the net assets of Textiles &
Interiors.
During 2005, the company sold its investments in three affiliated companies to Koch and its investment in a
fourth affiliated company to its equity partner. The divestiture activities resulted in a net benefit of $62 million
and the transfer of the company’s interest in the affiliates to Koch resulted in a gain of $35 million. The sale
of two of these affiliates had been delayed until the company received approval from its equity partners.
Although the transfer of these affiliates completed the sale to Koch, the company will have significant
continuing involvement with INVISTA as a result of long-term purchase and supply contracts and a long-term
contract manufacturing agreement in which INVISTA will manufacture and supply certain products for the
company. In addition, the company indemnified Koch against certain liabilities, primarily related to taxes,
legal matters, environmental matters and representations and warranties (see Note 20 to the Consolidated
24
Part II