DuPont 2007 Annual Report Download - page 24

Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations, continued
(Dollars in millions) 2007 2006 2005
INTEREST EXPENSE $430 $460 $518
Interest expense decreased $30 million in 2007 compared to 2006 and $58 million in 2006 versus 2005. These
decreases were primarily due to lower average borrowing levels and higher capitalized interest, partially offset by
slightly higher average interest rates.
(Dollars in millions) 2007 2006 2005
SEPARATION ACTIVITIES – TEXTILES & INTERIORS $ - $ - $(62)
On April 30, 2004, the company sold a majority of the net assets of the then Textiles & Interiors segment (INVISTA) to
subsidiaries of Koch Industries, Inc. (Koch). 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, resulting in a net benefit of
$62 million. Although the transfer of these affiliates completed the sale to Koch, the company has significant
continuing involvement with INVISTA as a result of long-term purchase and supply contracts and a long-term
contract manufacturing agreement under which INVISTA manufactures and supplies certain products for the
company. 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. For more
information related to the Textiles & Interiors separation, see Note 5 to the Consolidated Financial Statements.
(Dollars in millions) 2007 2006 2005
PROVISION FOR INCOME TAXES $ 748 $196 $1,470
Effective income tax rate 20.0% 5.9% 41.3%
In 2007, the company recorded a tax provision of $748 million which included a benefit of $108 million related to tax
settlements offset by net tax expense in other operating results (see Note 6 to the Consolidated Financial
Statements.)
In 2006, the company recorded a tax provision of $196 million which included a benefit of $272 million related to tax
settlements and a $186 million benefit for reversal of tax valuation allowances related to the net deferred tax assets
of certain foreign subsidiaries due to the sustained improved business performance in these subsidiaries. These tax
benefits were offset by net tax expense in other operating results (see Note 6 to the Consolidated Financial
Statements).
In 2005, the company recorded a tax provision of $1,470 million which included $483 million of tax expense on
exchange gains associated with the company’s policy of hedging the foreign currency denominated monetary
assets and liabilities of its operations and $292 million of tax expense related to the repatriation of $9.1 billion under
The American Jobs Creation Act of 2004 (AJCA). AJCA created a temporary incentive for U.S. corporations to
repatriate accumulated income earned abroad by providing an 85 percent dividends received deduction for certain
dividends from controlled foreign corporations provided that repatriated cash from such accumulated earnings is
reinvested in the U.S. pursuant to a domestic reinvestment plan.
The company’s current estimate of the 2008 effective income tax rate is about 26 percent, excluding tax effects of
exchange gains and losses which can not be reasonably estimated at this time. See Note 6 for additional detail on
items that significantly impact the company’s effective tax rates. In the past three years, these items have generally
included a lower effective tax rate on international operations and tax settlements.
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Part II