Siemens 2006 Annual Report Download - page 109

Management’s discussion and analysis 105
Research and development expenses increased to €5.024 billion from €4.511 billion in the
prior year, led by higher outlays at Med, A&D and PTD. Due to the significant increase in our
sales year-over-year, R&D expenses as a percent of sales declined to 5.8% from 6.0% in fiscal
2005. For additional information with respect to R&D, see “Business Overview and Economic
Environment – Research and Development” and “Notes to Consolidated Financial Statements.”
Marketing, selling and administrative expenses also declined as a percent of sales, to 17.7%
from 18.1% a year earlier, even as expenses rose to €15.470 billion from €13.684 billion.
Other operating income, net was €205 million in fiscal 2006, compared to a net expense of
€9 million a year earlier. The primary factor in this comparison is the fiscal 2005 goodwill
impairment of €262 million at SBS. Gains from the sale of real estate, net in fiscal 2006 were
lower year-over-year, at €136 million compared to €177 million, and gains from disposals of
businesses turned negative primarily due to a loss of €53 million on the Dematic sale. These
factors were partly offset by a €70 million positive effect in the current period related to the
settlement of an arbitration proceeding.
Income from investments in other companies, net increased to €647 million from €584 mil-
lion a year earlier, mainly due to higher gains from sales of investments in fiscal 2006. Income
from financial assets and marketable securities, net was €337 million compared to €297 mil-
lion a year earlier. The current period includes higher Juniper gains, partially offset by lower
income from financial assets and marketable securities, net at Corporate Treasury.
Income from continuing operations before income taxes in fiscal 2006 rose to €4.371 bil-
lion from €4.185 billion a year earlier, even as severance charges at Com and SBS increased to
€786 million compared to €341 million in the prior year.
Management’s discussion and analysis
(€ in millions) 2006 2005
Research and development expenses (5,024) (4,511 )
as percentage of sales 5.8% 6.0%
Marketing, selling and general administrative expenses (15,470) (13,684)
as percentage of sales 17.7% 18.1%
Other operating income (expense), net 205 (9)
Income from investments in other companies, net 647 584
Income from financial assets and marketable securities, net 337 297
Interest income (expense) of Operations, net (39) (32)
Other interest income, net 202 241
(€ in millions) 2006 2005
Income from continuing operations before income taxes 4,371 4,185
Income taxes (1,078) (979)
as percentage of income from continuing operations before income taxes 25% 23%
Minority interest (206) (148)
Income from continuing operations 3,087 3,058
Income (loss) from discontinued operations, net of income taxes (54) (810)
Net income 3,033 2,248