DuPont 2007 Annual Report Download - page 25

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Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations, continued
(Dollars in millions) 2007 2006 2005
NET INCOME $2,988 $3,148 $2,056
2007 versus 2006 Net income for 2007 decreased 5 percent versus 2006, primarily due to the higher effective tax
rate, as well as the decrease in Other income. These decreases were partially offset by a 7 percent increase in Net
sales, the absence of the restructuring charges taken in 2006 and a favorable foreign currency exchange impact.
2006 versus 2005 Net income for 2006 increased 53 percent versus 2005, reflecting higher selling prices, higher
sales volumes, lower fixed costs and an increase in Other income, net, partly offset by higher raw material costs.
Selling prices increased year over year in each quarter of 2006 and were higher for each platform and for each region
for the full year. Net income for 2006 also included benefits from tax settlements, reversals of tax valuation
allowances and insurance recoveries. These benefits were partly offset by charges for restructuring and asset
impairments. 2005 results included significant hurricane related charges as well as tax expenses associated with the
repatriation of cash under AJCA.
Corporate Outlook
The company’s current 2008 earnings outlook is a range of $3.35 to $3.55 per share based on the expectation of
continued revenue growth in emerging markets and earnings growth across all of the growth platforms. New product
acceleration, mix enrichment, pricing discipline and continued cost and capital productivity gains across the
company are expected to be additional contributing factors. The company’s 2008 outlook is positive; however, it
is moderated by continued weakness in U.S. housing and North American automotive markets and continued
escalation of energy, ingredient and transportation costs.
Accounting Standards Issued Not Yet Adopted
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 157, “Fair Value Measurements,” (SFAS 157) which addresses how companies should
measure fair value when required for recognition or disclosure purposes under GAAP. The standard’s provisions will
be applied to existing accounting measurements and related disclosures that are based on fair value. SFAS 157
does not require any new fair value measurements. The standard applies a common definition of fair value to be
used throughout GAAP, with emphasis on fair value as a “market based” measurement versus an entity-specific
measurement, and establishes a hierarchy of fair value measurement methods. The disclosure requirements are
expanded to include the extent to which companies use fair value measurements, the methods and assumptions
used to measure fair value and the effect of fair value measurements on earnings. SFAS 157 is effective for fiscal
years beginning after November 15, 2007. The new standard’s provisions applicable to the company will be applied
prospectively beginning January 1, 2008. The FASB, on February 12, 2008, issued FASB Staff Position (FSP)
FAS 157-2. This FSP permits a delay in the effective date of SFAS 157 to fiscal years beginning after November 15,
2008, for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). The delay is intended to allow the Board and
constituents additional time to consider the effect of various implementation issues that have arisen, or that may
arise, from the application of SFAS 157. On February 14, 2008, the FASB issued FSP FAS 157-1 to exclude SFAS 13,
Accounting for Leases, and its related interpretive accounting pronouncements from the scope of SFAS 157.
Management expects that adoption of SFAS 157 will not have a material effect on the company’s financial position,
liquidity or results of operations.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007) “Business
Combinations” (SFAS 141R) which replaces FASB Statement No. 141. SFAS 141R addresses the recognition and
measurement of identifiable assets acquired, liabilities assumed, and non-controlling interests in business
combinations. SFAS 141R also requires disclosure that enables users of the financial statements to better
evaluate the nature and financial effect of business combinations. SFAS 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning
on or after December 15, 2008. SFAS 141R will be adopted by the company on January 1, 2009. The company is
currently evaluating the impact of adoption on its Consolidated Financial Statements.
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Part II