Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statements About Forward-Looking Statements This report contains forward-looking statements which may be identified by their use of words like "plans," "expects," "will," "anticipates," "intends," "projects," "estimates" or other words of similar meaning. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, market position, expenditures and financial results, are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The company cannot guarantee that these assumptions and expectations are accurate or will be realized. For some of the important factors that could cause the company's actual results to differ materially from those projected in any such forward-looking statements see the Risk Factors discussion set forth under Part II, Item 1A beginning on page 41. Additional risks and uncertainties not presently known to the company or that the company currently believes to be immaterial also could affect its businesses. Results of Operations
Overview
While the Agriculture & Nutrition and Pharmaceuticals segments both had earnings growth versus 2008, a majority of the company's businesses continue to be negatively affected by the global economic recession, in particular by the downturn in global industrial production. Total company sales in the second quarter 2009 were 22 percent lower than 2008, despite a 3 percent increase from the Agriculture & Nutrition segment. Company-wide actions to reduce fixed costs and improve productivity, along with the benefit of lower raw material, energy and freight costs, helped to offset the impact on earnings from lower sales. Net income attributable to DuPont declined 61 percent versus prior year primarily related to the decline in sales volume, a restructuring charge, and a negative impact from currency exchange rates. The company continues to focus on cash generation via reductions in cost, working capital, and capital expenditures. Programs to support future growth of the company, particularly from agricultural products, protective materials and applied bio-sciences, remain a strategic priority and continue to be funded at appropriate levels. Net Sales
Net sales for the second quarter 2009 were $6.9 billion versus $8.8 billion in the prior year, down 22 percent, reflecting 19 percent lower sales volume and a 1 percent net reduction from portfolio changes. A 3 percent increase in local selling prices was more than offset by a 5 percent reduction from currency exchange. Higher local selling prices principally reflect higher prices for seeds and other value-in-use products. The global economic recession had a significant negative impact on the company's sales volumes in all regions, particularly for products where demand is closely tied to industrial production. While volumes outside the United States declined 22 percent, volumes in the United States were 15 percent lower as higher Agriculture & Nutrition volumes partially offset significantly lower volumes in the other segments.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued The table below shows a regional breakdown of net sales based on location of customers and percentage variances from the prior year: Three Months Ended June 30, 2009 Percent Change Due to: 2009 Percent Net Sales Change vs. Local Currency ($ Billions) 2008 Price Effect Volume Portfolio U.S. $ 3.1 (13 ) 4 - (15 ) (2 ) Europe, Middle East & Africa 1.7 (38 ) 2 (13 ) (27 ) - Asia Pacific 1.2 (18 ) 1 (3 ) (16 ) - Canada & Latin America 0.9 (20 ) 5 (9 ) (16 ) - Total Consolidated Sales $ 6.9 (22 ) 3 (5 ) (19 ) (1 )

Net sales for the six months ended June 30, 2009 were $13.7 billion versus $17.4 billion in the prior year, down 21 percent, principally reflecting the negative impact on demand for the company's products related to industries other than production agriculture. Sales volumes were down 19 percent and sales were further reduced by a 1 percent impact from portfolio changes. A 4 percent increase in local selling prices was more than offset by a 5 percent reduction from currency exchange. Higher local selling prices principally reflect higher prices for seeds and other value-in-use products. Sales volumes were lower in all regions, particularly for products closely tied to industrial production. Volumes outside the United States declined 22 percent, while volumes in the United States were 15 percent lower reflecting higher Agriculture & Nutrition volumes that partially offset significantly lower volumes in the other segments.

Six Months Ended June 30, 2009 Percent Change Due to: 2009 Percent Net Sales Change vs. Local Currency ($ Billions) 2008 Price Effect Volume Portfolio U.S. $ 6.0 (11 ) 5 - (15 ) (1 ) Europe, Middle East & Africa 3.8 (33 ) 2 (12 ) (23 ) - Asia Pacific 2.2 (22 ) 3 (2 ) (23 ) - Canada & Latin America 1.7 (21 ) 7 (9 ) (18 ) (1 ) Total Consolidated Sales $ 13.7 (21 ) 4 (5 ) (19 ) (1 )

Other Income, Net
Second quarter 2009 other income, net, totaled $230 million as compared to $442 million in the prior year, a decrease of $212 million. The decrease is largely attributable to an increase of $97 million in net pre-tax exchange losses, a decrease of $44 million in equity in earnings of affiliates, and the absence of a $51 million favorable litigation settlement in 2008.
For the six months ended June 30, 2009, other income, net, was $629 million as compared to $637 million last year, a decrease of $8 million. The decrease was primarily attributable to a decrease in equity in earnings of affiliates of $30 million, and the absence of a $51 million favorable litigation settlement in 2008 offset by a decrease in net pre-tax exchange losses of $87 million.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued Additional information related to the company's other income, net, is included in Note 4 to the interim Consolidated Financial Statements. Cost of Goods Sold and Other Operating Charges (COGS) COGS totaled $5.0 billion in the second quarter 2009 versus $6.4 billion in the prior year, a decrease of 22 percent. As sales declined 22 percent, COGS as a percent of net sales was unchanged from the second quarter 2008 at 73 percent. The favorable impact of a $225 million decrease in raw material, energy and freight costs offset the adverse impact on unit costs resulting from lower capacity utilization and unfavorable currency impact. Second quarter 2009 COGS included insurance proceeds of $24 million received by the company from its insurance carriers for damages sustained from Hurricane Ike in the third quarter of 2008. The company continues to aggressively pursue insurance recoveries and expects that the next payments on account will occur during the second half of 2009 in the range of $50 - $100 million. In addition, COGS for the second quarter 2009 included a $26 million benefit related to a reduction in the reserve for Hurricane Ike recorded in 2008 as a result of lower than estimated inventory and permanent investment write-offs.
COGS for the six months ended June 30, 2009 was $10.2 billion, a decrease of 18 percent versus $12.4 billion in the prior year. COGS was 74 percent of net sales, a 3 percentage point increase from prior year. This increase principally reflects significantly lower capacity utilization and an unfavorable currency impact, partly offset by a modest decrease in raw material, energy and freight unit costs.
Selling, General and Administrative Expenses (SG&A) SG&A totaled $907 million for the second quarter 2009 versus $987 million in the prior year. Year-to-date SG&A totaled $1.8 billion versus $1.9 billion in 2008. The decrease in SG&A was primarily due to strict cost controls in response to weak market conditions. The decrease was partially offset by increased global commissions and selling and marketing investments related to the company's seed products. SG&A was approximately 13 percent of net sales for the three and six month periods ended June 30, 2009 and 11 percent in 2008. Research and Development Expense (R&D)
R&D totaled $331 million and $360 million for the second quarter 2009 and 2008, respectively. For the six month period ended June 30, 2009, R&D was $654 million versus $690 million last year. R&D spend was down for the three- and six-month periods versus prior year across all segments, excluding Agriculture & Nutrition, due to strict cost controls. R&D was approximately 5 percent of net sales for the three and six month periods ended June 30, 2009 and 4 percent in 2008.
Interest Expense
Interest expense totaled $106 million in the second quarter 2009 compared to $94 million in 2008. For the six-month period ended June 30, 2009, interest expense increased from $174 million in 2008 to $212 million in 2009. The increase in interest expense for the three and six months ended June 30, 2009 is due primarily to higher average gross debt and average rates. Employee Separation / Asset Related Charges, Net For the three and six months ended June 30, 2009, the company recorded a $340 million restructuring charge comprised of severance and related benefit costs, asset write-offs, and impairment charges, partially offset by a $75 million net reduction in the estimated costs related to the 2008 restructuring program. The $75 million net reduction in the estimated costs for the 2008 program was primarily due to work force reductions through non-severance programs and redeployments within the company. The 2009 actions are expected to produce a pre-tax cost savings of about $50 million for the remainder of 2009 and approximately $250 million per year in subsequent years. Additional information related to the company's 2009 program and reduction to the 2008 program is located in Note 5 to the interim Consolidated Financial Statements.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued Provision for Income Taxes
The company's effective tax rate for the second quarter 2009 was 10.8 percent as compared to 23.7 percent in 2008. The lower effective tax rate in 2009 versus 2008 principally relates to the tax impact associated with the company's policy of hedging the foreign currency-denominated monetary assets and liabilities of its operations and the tax benefit related to restructuring, which was partially offset by a favorable tax settlement recorded in 2008.
The company's effective tax rate for year-to-date 2009 was 25.5 percent as compared to 21.1 percent in 2008. The higher effective tax rate principally relates to the tax impact associated with the company's policy of hedging the foreign currency-denominated monetary assets and liabilities of its operations and a favorable tax settlement recorded in 2008. See Note 6 to the interim Consolidated Financial Statements for additional information. Net Income Attributable to DuPont
Net income attributable to DuPont ("earnings") for the second quarter of 2009 were $417 million versus $1.1 billion in the second quarter 2008, a 61 percent decrease. The decrease in earnings principally results from lower sales volume, restructuring charge, unfavorable currency impacts, higher pension costs and the absence of a prior-year favorable litigation settlement. Partly offsetting these factors were benefits from cost reduction productivity measures and lower raw material, energy and freight costs.
For the six months ended June 30, 2009, earnings were $905 million, compared to $2.3 billion in the prior year, a decrease of 60 percent. The decrease in earnings principally results from lower sales volume, unfavorable currency impacts, higher pension costs and restructuring charge. Partly offsetting these factors were benefits from cost reduction productivity measures. Corporate Outlook
The company re-affirmed its 2009 earnings outlook range of $1.54 to $1.94 per share. The outlook includes estimated full-year earnings impact of approximately $.16 per share related to the 2009 restructuring charge, reduction in estimated costs associated with the 2008 restructuring program and the reserve for hurricane damage, and initial insurance recoveries related to damage sustained from Hurricane Ike in 2008. The outlook anticipates prevailing weak demand across key markets other than agriculture with gradual improvement from current recessionary levels during the remainder of 2009. Favorable conditions are expected in southern hemisphere agriculture markets with the benefit of increased market share for new products and related higher selling prices. The company will continue aggressive actions to reduce costs and capital expenditures, in addition to maintaining an appropriate level of investment for high-growth, high-margin businesses including seed products and photovoltaics. Accounting Standards Issued Not Yet Adopted See Note 1 to the interim Consolidated Financial Statements for a description of recent accounting pronouncements.
Segment Reviews
Summarized below are comments on individual segment sales and pre-tax operating income/loss (PTOI) for the three- and six-month periods ended June 30, 2009 compared with the same period in 2008. Segment sales include transfers. Segment PTOI is defined as operating income/loss before income taxes, non-controlling interests, exchange gains/losses, corporate expenses and net interest. As described in Note 5 to the Consolidated Financial Statements, the company initiated a global restructuring program during the second quarter 2009 to reduce costs and improve profitability across its businesses. The program charge reduced second quarter and year-to-date 2009 segment PTOI as follows: Coatings & Color Technologies - $70 million; Electronic & Communication Technologies - $73 million; Performance Materials - $110 million; Safety & Protection - $86 million; and Other - $1 million. In addition, the company recorded a $75 million net reduction in the estimated costs associated with the

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued 2008 program. The $75 million net reduction impacted segment earnings for the three and six-months ended June 30, 2009 as follows: Agriculture & Nutrition - $(1) million; Coatings & Color Technologies - $43 million; Electronic & Communication Technologies - $1 million; Performance Materials - $28 million; Safety & Protection - $2 million; and Other - $2 million.
Agriculture & Nutrition - Second quarter 2009 sales of $2.6 billion were 3 percent higher, reflecting 7 percent higher USD selling prices, partially offset by a 4 percent decline in volume. The increase in USD selling prices reflect significantly higher local selling prices for seeds products, partially offset by unfavorable currency impacts across all regions. The volume decline was driven by lower demand for specialty herbicides, fungicides and insecticides in Latin America and Europe due to unfavorable weather conditions, lower planted acreage, the impact of the current economic recession on farmers and distributors, and lower sales of food and nutrition products. The volume decline was partially offset by higher corn and soybean seed sales in North America due to anticipated market share gains and increased planted acreage, and higher sales in Asia Pacific across the segment. PTOI for the second quarter of $580 million increased 15 percent, primarily due to the increase in sales and higher value product mix and the absence of a $52 million net charge from mark-to-market valuation of open soybean contracts in 2008, partially offset by significant unfavorable currency impacts.
Year-to-date sales were $5.7 billion, a 5 percent increase versus the prior year, reflecting 6 percent higher USD selling prices, partially offset by a 1 percent decrease in volume. The higher USD selling prices are due to higher local selling prices for seeds products, partially offset by unfavorable currency impacts across all regions. The decrease in volume was primarily due to lower sales of crop protection products and food and nutrition products, partially offset by higher seeds sales in North America. PTOI for the first half of 2009 was $1.4 billion, up 11 percent versus $1.3 billion in the same period last year, principally due to the higher sales and higher value product mix, partially offset by unfavorable currency impacts globally.
On May 4, 2009, Monsanto Company (Monsanto) filed a lawsuit against the company in federal court claiming that Pioneer Hi-Bred International, Inc. (Pioneer), a wholly-owned subsidiary of the company, is violating its Roundup Ready® license agreements by stacking its Optimum® GAT® herbicide tolerance trait with Monsanto's Roundup Ready® herbicide tolerance trait. Monsanto also alleges that sales of Pioneer stacked seeds would infringe a Monsanto patent that expires in 2014. Monsanto seeks declaratory relief, unspecified damages and a permanent injunction to prevent sales of Optimum® GAT®/ Roundup Ready® seeds. The company has filed an answer and counterclaims, including patent misuse and antitrust claims, in response to the lawsuit. Management believes that the lawsuit is unlikely to materially affect the company's commercial results for soybean and corn seed.
Coatings & Color Technologies - Second quarter 2009 sales of $1.4 billion were down 26 percent, reflecting 21 percent decrease in volume and 5 percent lower USD selling prices. The decline in volume reflects lower sales of products to motor vehicle original equipment manufacturers (OEMs) due to fewer motor vehicle builds and decreased demand for industrial, refinish and titanium dioxide products due to the current economic recession. However, sales volumes improved sequentially versus first quarter 2009. The lower USD selling prices reflect unfavorable currency impacts, partially offset by higher local selling prices. Second quarter 2009 PTOI was $106 million, compared to $247 million in the second quarter 2008. The decrease in PTOI was mainly due to lower volumes, charges associated with low capacity utilization of production units, and the impact of the $70 million restructuring charge described above, partially offset by cost savings from the 2008 restructuring program. The second quarter 2009 PTOI also includes a $43 million reduction in the estimated costs associated with the 2008 restructuring program as described in Note 5.
Year-to-date 2009 sales were $2.5 billion, down 28 percent from the same period last year, reflecting 25 percent decline in volume and 3 percent lower USD selling prices. The decline in volume reflects the impact of fewer motor vehicle builds in sales to motor vehicle OEMs, and lower sales of industrial, refinish and titanium dioxide products as supply chains destocked in response to the global economic recession. Year-to-date PTOI was $87 million as compared to $437 million during the same period last year. The

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued decline in PTOI primarily reflects the impact of lower volumes, charges associated with low capacity utilization of production units and the $70 million restructuring charge recorded in the second quarter of 2009, partially offset by the $43 million reduction in the estimated costs associated with the 2008 restructuring program.
Electronic & Communication Technologies - Sales in the second quarter of $795 million decreased 26 percent, reflecting a 23 percent decline in volume and 3 percent lower USD selling prices. The decreased volume is primarily related to the global economic recession which affected demand for products across all regions and markets, and the effect of colder weather patterns in North America and Europe which significantly reduced sales of refrigerants. Nevertheless, most of the segment's key products experienced sales volume improvements sequentially versus first quarter 2009, primarily in emerging regions. The lower USD selling prices were mainly driven by unfavorable currency impacts, and lower local selling prices for some products due to contractual pass-through of lower metal prices. Second quarter 2009 PTOI was a loss of $35 million compared to income of $170 million in the second quarter 2008, driven by lower volumes and the impact of the $73 million restructuring charge described above, partially offset by fixed cost productivity improvements.
Year-to-date sales of $1.5 billion were down 29 percent, reflecting 2 percent lower USD selling prices and a 27 percent decline in volume. The lower volumes reflect the effect of the global economic recession which impacted sales for products across all the segment key markets. Year-to-date PTOI was a loss of $89 million compared to income of $345 million in prior year. The decline in PTOI was driven by decreased sales, charges associated with low capacity utilization of production units, and the impact of the $73 million restructuring charge.
Performance Materials - Second quarter sales of $1.1 billion were down 40 percent, reflecting a 29 percent decline in volume, 8 percent lower USD selling prices, and a 3 percent decrease related to a portfolio change. Sales volume declines occurred in all major regions and market segments, however experienced improvements sequentially versus first quarter 2009. The lower USD selling prices reflect unfavorable currency impacts and a significantly weaker sales mix driven by the economic recession. Second quarter 2009 PTOI was $5 million, compared to $223 million in the second quarter 2008, primarily due to the $110 million restructuring charge described above, the impact of lower sales, and charges associated with low capacity utilization of production units, partially offset by improvements in variable margin. The second quarter 2009 PTOI also includes a $28 million reduction in the estimated costs associated with the 2008 restructuring program as described in Note 5, initial insurance recoveries amounting to $24 million related to damages sustained from Hurricane Ike in 2008, and a benefit of $26 million from a reduction to the reserve recorded in 2008 for Hurricane Ike. The $26 million reduction was primarily due to lower than estimated inventory and permanent investment write-offs. Year-to-date sales were $2.0 billion versus $3.5 billion in the prior year. The 42 percent decrease in sales reflects 6 percent lower USD prices, 33 percent decrease in volume, and a 3 percent reduction related to portfolio changes. The lower USD selling prices were a combination of significantly weaker sales mix and unfavorable currency impacts. The decrease in volume mainly reflects the effect of the global economic recession and destocking of downstream inventory channels during the period. Year-to-date PTOI was a loss of $141 million compared to income of $442 million in prior year. The decline in PTOI was driven by decreased sales, charges associated with low capacity utilization of production units, and the impact of the $110 million restructuring charge, partially offset by fixed costs productivity improvements.
Safety & Protection - Sales in the second quarter of $1.0 billion decreased 37 percent, reflecting a 29 percent decline in volume and 8 percent lower USD selling prices. The lower volume reflects the impact of the global economic recession which continued to affect demand for products in motor vehicle, industrial, military, and residential construction markets. The lower USD selling prices were mainly driven by unfavorable currency impacts and lower local selling prices for some industrial chemicals products due to contractual pass-through of raw material price declines. Second quarter 2009 PTOI was a loss of $13 million, compared to income of $302 million in the second quarter 2008, primarily due to the $86 million restructuring charge described above, the impact of lower sales and charges associated with low

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued capacity utilization of production units, partially offset by improved variable margins and fixed costs productivity.
Year-to-date sales of $2.0 billion were 31 percent lower than last year, due to 7 percent lower USD selling prices and a 24 percent decline in volume. The lower volume reflects decreased demand for products across all markets and regions as customers reduced inventories in response to the economic recession. Year-to-date PTOI was $59 million compared to $574 million in the prior year. The decrease in earnings was primarily due to the impact of lower volumes, charges associated with low capacity utilization of production units, and the impact of the $86 million restructuring charge.
Pharmaceuticals - Second quarter 2009 PTOI was $272 million compared to $265 million in the second quarter 2008. Year-to-date 2009 PTOI was $524 million compared to $500 million in the prior year.
Other - The company includes embryonic businesses not included in growth platforms, such as applied biosciences and nonaligned businesses in Other. Sales in the second quarter 2009 of $31 million decreased 30 percent from the second quarter 2008 due to the absence of sales from a discontinued business. PTOI for the second quarter 2009 was a loss of $43 million compared to income of $1 million in the second quarter 2008. The lower PTOI is mainly due to the absence of a benefit of $51 million from a litigation settlement in 2008. Year-to-date sales of $59 million compared to $84 million in 2008. Year-to-date pre-tax operating loss of $87 million compared to pre-tax operating loss of . . .