TIDMDOW
Dow Reports Fourth Quarter and Full-Year Results
Dow Delivers Record Full-Year Revenue of $60 Billion, 19 Percent
Increase in Earnings Per Share; Fourth Quarter Revenue Grows to
$14.1 Billion with Record Quarterly Sales in Emerging Geographies,
Cash Flow from Operations of $2 Billion
The Dow Chemical Company (NYSE: DOW):
Fourth Quarter 2011 Highlights
-- The Company reported a loss of $0.02 per share, or earnings of
$0.25 per share excluding certain items(1).This
compares with earnings of $0.37 per share in the year-ago
period, or
$0.47 per share excluding certain items. Earnings for the
quarter were
reduced by certain items totaling $0.27 per share, including
the
recognition of a valuation allowance in Brazil that increased
income
taxes by $264 million, equivalent to $0.23 per share, resulting
in a
76.6 percent effective tax rate.
-- Sales were $14.1 billion, up 2 percent versus the same quarter last
year. Sales excluding the impact of divestitures increased 5
percent
versus the year-ago period, with increases in all geographic
areas and
in all operating segments except Electronic and Functional
Materials,
which was flat.
-- Sales in emerging geographies were $5 billion, reaching a new
quarterly record and representing 35 percent of Dow's global
sales.
Sales excluding divestitures rose 10 percent in these regions,
with
growth across all operating segments.
-- Volume declined 3 percent, but was flat excluding the impact of
divestitures. On the same basis, volume in emerging geographies
grew
7 percent led by China, which was up 12 percent. This increase
fully
offset declines in Western Europe (down 5 percent) and the
United
States (down 2 percent).
-- Price was up 5 percent, more than offsetting a $476 million increase
in purchased feedstock and energy costs. Price was up in all
operating
segments and in all geographic areas.
-- The Company's operating rate was 72 percent for the quarter, down 9
percentage points year-over-year, reflecting weak demand and
customer
destocking, particularly in Western Europe.
-- Equity earnings were $259 million. For the full year equity earnings
totaled $1.2 billion, representing the highest level in the
Company's
history.
-- EBITDA(2) was $1.4 billion, or $1.6 billion excluding
certain items. Agricultural Sciences reported record fourth
quarter
EBITDA driven by demand growth in Latin America (up 16
percent).
-- Net debt(3) to total capitalization declined to
40.8 percent, on target to reach the Company's 2012 goal. This
was
primarily due to Dow's actions during the quarter to improve
working
capital and operating rates, resulting in the generation of
$2.0
billion of cash flow from operating activities.
Comment
Andrew N. Liveris, Dow's chairman and chief executive officer,
stated:
"Dow saw deterioration in the macro environment mid-quarter and,
in line with our stated commitments, we purposefully intervened. In
the midst of uncertainty and significant destocking across customer
supply chains, we maintained our focus on financial discipline and
operating efficiency - evidenced by our tight management of working
capital, focus on improving operating rates and significant cash
flow generation.
"We derived strong benefit from our geographic footprint -
delivering broad-based top-line gains and achieving record sales
for both the quarter and the year in emerging regions, balancing
considerable weakness in Western Europe. In addition, our
significant U.S. market and feedstock advantage positioned us for
success in the quarter and will continue to provide substantial
value moving forward.
"Times like these demand a focused approach and strong resolve,
and Dow's firm operating discipline, cost control and productivity
will continue throughout 2012. This, together with our broad
geographic footprint, balanced and integrated portfolio of
businesses, technology-rich innovation engine and world-class
feedstock advantage, will enable us to continue to deliver
shareholder value."
2011 Full-Year Highlights
-- Dow reported full-year 2011 earnings of $2.05 per share, up 19 percent
versus prior-year earnings of $1.72 per share. Excluding
certain
items, Dow's full-year 2011 earnings were $2.54 per share, up
29
percent versus the prior-year result on a comparable basis
of
$1.97 per share.
-- Sales reached $60 billion, up 12 percent versus the prior year and a
record for the Company. Excluding the impact of divestitures,
sales
were up 18 percent versus the prior year, with double-digit
gains in
every geographic area and every operating segment except
Electronic
and Functional Materials, which was up 9 percent.
-- Sales in emerging geographies surpassed $19 billion for the year,
achieving a new record for the Company. Sales in Asia Pacific
exceeded
$10 billion for the first time in the Company's history.
Excluding the
impact of divestitures, sales in this region were up 16
percent.
-- Volume was down 1 percent. Excluding the impact of divestitures,
volume was up 4 percent, with increases in all geographic areas,
led
by Latin America (up 9 percent) and Asia Pacific (up 6
percent).
-- Price was up 13 percent, or 14 percent excluding the impact of
divestitures. Double-digit gains were reported in all
operating
segments except Electronic and Functional Materials (up 6
percent) and
Agricultural Sciences (up 5 percent).
-- Price gains more than offset a $4.3 billion increase in purchased
feedstock and energy costs.
-- For the full year, the Company reported EBITDA of $7.8 billion.
Excluding certain items, EBITDA totaled $8.4 billion, a 12
percent
increase versus 2010. Full-year EBITDA records were achieved
in
Electronic and Functional Materials, Agricultural Sciences,
Performance Materials and Feedstocks and Energy.
-- The Company generated nearly $4 billion of cash from operating
activities in the year, and reduced its net debt to total
capitalization ratio 180 basis points below year-end 2010.
Three Months Ended
Dec 31, Dec 31,
In millions, except per share amounts 2011 2010
Net Sales $14,097 $13,771
Net Sales, excluding divestitures $14,097 $13,364
Net Income (Loss) Available for Common Stockholders $(20) $426
Net Income Available for Common Stockholders, $289 $538
excluding Certain Items
Earnings (Loss) per Common Share $(0.02) $0.37
Earnings per Common Share, excluding Certain Items $0.25 $0.47
Twelve Months Ended
Dec 31, Dec 31,
In millions, except per share amounts 2011 2010
Net Sales $59,985 $53,674
Net Sales, excluding divestitures $59,985 $51,037
Net Income Available for Common Stockholders $2,402 $1,970
Net Income Available for Common Stockholders, $2,959 $2,263
excluding Certain Items
Earnings per Common Share $2.05 $1.72
Earnings per Common Share, excluding Certain Items $2.54 $1.97
Review of Fourth Quarter Results
The Dow Chemical Company (NYSE: DOW) achieved sales of $14.1
billion in the fourth quarter of 2011, a 2 percent increase
compared with the same period last year. Excluding the impact of
divestitures, sales increased 5 percent versus the year-ago period,
with increases in all geographic areas and in all operating
segments except Electronic and Functional Materials, which was
flat.
Volume declined 3 percent, but was flat excluding the impact of
divestitures. On the same basis, volume increases in Latin America
(4 percent) and Asia Pacific (3 percent) offset weak demand in
North America and Europe, Middle East and Africa (EMEA), reflecting
steep inventory destocking across most value chains.
Price rose 5 percent at a Company level. Price gains were
broad-based, with increases in every geographic area, led by North
America (6 percent) and Latin America (5 percent). All operating
segments reported year-over-year price increases, led by Feedstocks
and Energy (up 11 percent).
The Company reported EBITDA of $1.4 billion, or $1.6 billion
excluding the impact of certain items. Agricultural Sciences
reported record fourth quarter EBITDA, double the level reported in
the same period last year, due to strength in Latin America.
Favorable price dynamics allowed the Company to fully offset a
$476 million increase in purchased feedstock and energy costs.
However, a lower operating rate (72 percent, down 9 percentage
points year-over-year) reflected weak demand, and decreased equity
earnings drove a decline in EBITDA compared with the same period
last year.
The Company reported a loss of $0.02 per share in the quarter.
Excluding certain items, the Company reported earnings of $0.25 per
share. Certain items in the current quarter consisted of asset
impairments and related costs equivalent to $0.05 per share; a
charge for a warranty accrual adjustment of an exited business of
$0.03 per share; a $0.04 per share gain on the sale of a contract
manufacturing business; and a charge related to a tax valuation
allowance in Brazil that unfavorably impacted results by $0.23 per
share. (See Supplemental Information at the end of the release for
a description of certain items affecting results.)
Research and Development (R&D) expenses declined 2 percent
versus the same period last year. The Company's cost-reduction
initiatives more than offset continued investments in its
technology pipeline, most notably Advanced Materials and
Agricultural Sciences.
Selling, General and Administrative (SG&A) expenses were up
7 percent versus the year-ago period, in part due to increased
spending to support growth and new product launches in Dow
AgroSciences.
Equity earnings were $259 million, a decline of $54 million
versus the same period last year. For the full year, equity
earnings reached $1.2 billion, representing the highest level in
the Company's history.
Net debt to total capitalization declined to 40.8 percent, 180
basis points below year-end 2010 and on target to reach the
Company's 2012 goal of 40 percent.
Electronic and Functional Materials
Sales in Electronic and Functional Materials were $1.1 billion,
flat versus the year-ago period, as a 3 percent decline in volume
was offset by a 3 percent increase in price.
Sales in Dow Electronic Materials decreased modestly in the
quarter, driven by lower demand in Interconnect Technologies and
Semiconductor Technologies. However, the business also reported
double-digit volume growth in Display Technologies as new product
introductions gained significant momentum. Dow Electronic Materials
continued to record several customer wins in the quarter involving
display films, organic light-emitting diode materials and chemical
mechanical planarization pads and slurries.
Functional Materials sales grew modestly versus the same period
last year, as price gains more than offset demand declines driven
by above-average year-end inventory destocking by customers, with
the largest decline seen in EMEA. Volume declined in all
businesses, except Dow Wolff Cellulosics, which grew modestly in
resilient end-markets such as pharmaceuticals.
Equity earnings were $32 million, primarily reflecting the
contribution from Dow Corning. This result is up slightly from the
$30 million reported in the same period last year. EBITDA for the
segment was $234 million, which compares with EBITDA of $277
million in the same period last year.
Coatings and Infrastructure Solutions
Sales in Coatings and Infrastructure Solutions were $1.6
billion, up 1 percent compared with the year-ago period. Volume
decreased 5 percent, while price rose 6 percent.
Dow Water and Process Solutions reported double-digit volume
growth, with increases in all geographic areas. The business saw
strong growth in emerging geographies, fueled by gains in ion
exchange resins and ultrafiltration. Dow Building and Construction
reported increased sales in all geographic areas, led by Latin
America and Asia Pacific. While the business continued to
experience soft demand conditions in construction end-markets,
particularly in developed regions, it was able to implement price
actions across all geographic areas. Demand increased in Dow
Construction Chemicals, driven by acrylic products in North
America. Dow Coating Materials reported sales declines in
architectural and industrial coatings due to lower demand globally,
partly offset by pricing gains. Sales in the Performance Monomers
business declined modestly, as reduced demand from the durable
goods industry was partly offset by broad-based price increases in
all geographic areas.
Equity earnings were $102 million, largely reflecting the
contribution from Dow Corning. This result is up slightly from the
$96 million reported in the year-ago period. EBITDA for the segment
was $177 million, which was reduced by a $60 million charge related
to a warranty accrual adjustment of an exited business. This
compares with EBITDA of $251 million in the same period last
year.
Agricultural Sciences
Agricultural Sciences reported record fourth quarter sales of
more than $1.3 billion, up 5 percent versus the year-ago period.
Volume increased 1 percent and price rose 4 percent. The segment
also posted record sales for the year of $5.7 billion, driven by
increased customer adoption of new products and successful growing
seasons in all geographic areas.
Fourth quarter sales of Agricultural Chemicals rose versus the
year-ago period, driven by gains in Latin America, which reported
17 percent demand growth in its peak selling quarter. Year-to-date
sales of new agricultural chemical products grew more than 20
percent, placing the business on track to exceed its target of $800
million in annual sales from these products by 2013.
Seeds, Traits and Oils (STO) reported a 22 percent sales gain in
the quarter versus the year-ago period, driven by a strong growing
season in Latin America and increased demand for healthy oils. For
the year, STO sales increased 35 percent, with significant gains in
key crops, including corn and cotton. In corn, the business
continued to report strong farmer demand for SmartStax® hybrids in
North America and increased adoption of Herculex® technology in the
Americas. Cotton share in the United States increased 5 market
share points due to the continued success of Phytogen® seeds.
EBITDA for the segment was $145 million, a fourth quarter record
and double the $72 million reported in the year-ago period.
Performance Materials
Sales in Performance Materials were $3.6 billion, up 4 percent
compared with the same quarter last year, driven by price gains.
Volume was flat, as gains in Asia Pacific and EMEA were offset by
declines in Latin America and North America.
Polyurethanes reported a double-digit increase in sales,
primarily driven by double-digit volume gains in all geographic
areas except Latin America, which was impacted by a turnaround in
the quarter. Dow Formulated Systems reported sales gains in all
geographic areas except Asia Pacific, which continued to experience
weak demand conditions in the wind energy segment. In EMEA, the
business reported double-digit sales growth in energy efficiency
applications. Epoxy sales contracted in the quarter due to
continued softness in phenolics and allylics demand.
Amines reported double-digit volume gains, with increases across
all product lines. Polyglycols, Surfactants and Fluids reported a
double-digit price gain globally, which more than offset volume
declines partially due to warmer winter weather in North America
that impacted sales into the de-icer end-market. Price gains in
Oxygenated Solvents more than offset weak demand in North America
due to customer destocking. Dow Automotive Systems reported price
increases that partially offset volume declines across all
geographic areas. The business secured several customer wins for
its technology-differentiated products used in glass bonding
applications.
EBITDA for the segment was $225 million, which was reduced by a
$77 million charge for asset impairments and related costs and a
$42 million loss on the sale of a contract manufacturing business.
This compares with EBITDA of $337 million in the year-ago period,
or $449 million excluding certain items in that period.
Performance Plastics
Sales in Performance Plastics were $3.7 billion, down 6 percent
from the same quarter last year. Excluding the impact of
divestitures, sales increased 5 percent, with a 3 percent gain in
volume and a 2 percent increase in price. Strong performance in Dow
Elastomers was driven by stable demand in consumer goods, as well
as adhesives demand in Europe and recovery from the earthquake in
Japan. Polyethylene reported another strong quarter of volume
growth in Asia Pacific as it continued to benefit from new capacity
in Thailand. Dow Packaging and Converting reported a modest gain in
volume, driven by growth in Asia Pacific. Volume declines in Dow
Electrical and Telecommunications were partially due to decreased
infrastructure investments by state-owned utilities, particularly
in Asia Pacific.
Equity earnings for the segment were $32 million, which compares
with $72 million in the year-ago period. EBITDA for the segment was
$667 million. This compares with EBITDA of $942 million in the same
period last year, or $947 million excluding certain items.
Feedstocks and Energy
Sales in Feedstocks and Energy were $2.8 billion, up 14 percent
from the same period last year. Volume increased 3 percent and
price rose 11 percent. The Chlor-Alkali/Chlor-Vinyl business
continued to benefit from favorable conditions in caustic soda,
driven by tight supply and strong demand, particularly in the
alumina and pulp and paper industries. The business reported a
decrease in vinyl chloride monomer volume due to the shutdown of an
asset earlier in the year, and ongoing weak fundamentals in
construction end-markets. Ethylene Oxide/Ethylene Glycol (EO/EG)
sales increased versus the year-ago period, driven by double-digit
volume gains.
Equity earnings were $115 million for the quarter, which
compares with $113 million in the year-ago period, driven by strong
results from MEGlobal and The Kuwait Olefins Company. EBITDA for
the segment was $175 million, compared with $152 million in the
same period last year.
Review of Results for 2011
For full-year 2011, Dow reported record sales of $60 billion, up
12 percent versus the prior year. Excluding the impact of
divestitures, sales rose 18 percent versus the prior year, with
double-digit gains in every geographic area and every operating
segment except Electronic and Functional Materials, which was up 9
percent.
Sales in the emerging geographies surpassed $19 billion in the
year, setting an all-time record for the Company. Sales in Asia
Pacific topped $10 billion in the year, also representing a new
milestone.
On a reported basis, volume declined 1 percent. Excluding
divestitures, volume rose 4 percent, with increases in all
geographic areas, most notably in Latin America (up 9 percent) and
Asia Pacific (up 6 percent). Volume increased on the same basis in
all operating segments except Coatings and Infrastructure
Solutions, which declined 1 percent due to continued construction
industry weakness.
Price rose 13 percent on a reported basis, or 14 percent
excluding divestitures. Double-digit increases were reported across
all geographic areas and in all operating segments except
Electronic and Functional Materials (up 6 percent) and Agricultural
Sciences (up 5 percent). Gains were most notable in Feedstocks and
Energy, which posted a year-over-year increase of 27 percent.
Overall price increases more than offset a $4.3 billion increase in
purchased feedstock and energy costs.
EBITDA for the full year was $7.8 billion. Excluding certain
items, EBITDA was $8.4 billion - representing a 12 percent increase
versus 2010 on the same basis. Full-year EBITDA records were
achieved in Electronic and Functional Materials, Agricultural
Sciences, Performance Materials and Feedstocks and Energy.
Dow reported full-year earnings of $2.05 per share, which
compares with $1.72 per share in the prior year. Excluding certain
items, Dow's full-year 2011 earnings were $2.54 per share, which
represents a 29 percent increase over the prior-year result of
$1.97 per share.
Dow's global operating rate was 80 percent, down 3 percentage
points versus 2010, reflecting weak consumer confidence and
inventory destocking across most value chains in the fourth quarter
of 2011.
The Company continued to invest for growth in 2011. R&D
expenses were $1.6 billion, essentially flat with the prior year.
SG&A expenses rose 7 percent versus 2010, with investments
focused on supporting new product launches and commercial
activities in the Company's downstream, market-driven businesses,
including Electronic and Functional Materials and Agricultural
Sciences.
Outlook
Commenting on the Company's outlook, Liveris said:
"We will continue to closely monitor global economic trends and
expect challenges in Western Europe to persist in the near term. We
do not anticipate material improvements in market conditions for
the first quarter of the year, but do project economic recovery
will gain momentum as we move through the second quarter and the
remainder of the year. Regardless, we will continue to intervene to
ensure we deliver against our short- and long-term targets.
"Dow's downstream, market-driven businesses are poised to
capture value from improving North American feedstock dynamics. We
maintain our view that ethylene industry operating rates will
tighten over the next several years - driving margin expansion.
"Within this context, our priorities reflect our intense focus
on execution, and we remain firmly committed to Dow's growth
targets. We will continue to diligently manage our business and
control the factors that we can in order to continue to generate
healthy cash flow, fund organic growth and remunerate
shareholders."
(1) See Supplemental Information at the end of the release for a
description of these items.
(2) EBITDA is defined as earnings (i.e., "Net Income") before
interest, income taxes, depreciation and amortization. A
reconciliation of EBITDA to "Net Income (Loss) Available for The
Dow Chemical Company Common Stockholders" is provided following the
Operating Segments table.
(3) Net debt equals total debt ("Notes payable" plus "Long-term
debt due within one year" plus "Long-Term Debt") minus "Cash and
cash equivalents."
®PhytoGen is a trademark of PhytoGen Seed Company, LLC.
®SmartStax multi-event technology developed by Dow AgroSciences
LLC and Monsanto. SmartStax is a trademark of Monsanto Technology
LLC.
®HERCULEX and the HERCULEX Shield Logo are trademarks of Dow
AgroSciences LLC.
Dow will host a live Webcast of its fourth quarter earnings
conference call with investors to discuss its results, business
outlook and other matters today at 9:00 a.m. ET on www.dow.com.
About Dow
Dow (NYSE: DOW) combines the power of science and technology to
passionately innovate what is essential to human progress. The
Company connects chemistry and innovation with the principles of
sustainability to help address many of the world's most challenging
problems such as the need for clean water, renewable energy
generation and conservation, and increasing agricultural
productivity. Dow's diversified industry-leading portfolio of
specialty chemical, advanced materials, agrosciences and plastics
businesses delivers a broad range of technology-based products and
solutions to customers in approximately 160 countries and in high
growth sectors such as electronics, water, energy, coatings and
agriculture. In 2011, Dow had annual sales of $60 billion and
employed approximately 52,000 people worldwide. The Company's more
than 5,000 products are manufactured at 197 sites in 36 countries
across the globe. References to "Dow" or the "Company" mean The Dow
Chemical Company and its consolidated subsidiaries unless otherwise
expressly noted. More information about Dow can be found at
www.dow.com.
Use of non-GAAP measures: Dow's management believes that
measures of income excluding certain items ("non-GAAP" measures)
provide relevant and meaningful information to investors about the
ongoing operating results of the Company. Such measurements are not
recognized in accordance with accounting principles generally
accepted in the United States of America ("GAAP") and should not be
viewed as an alternative to GAAP measures of performance.
Reconciliations of non-GAAP measures to GAAP measures are provided
in Supplemental Information at the end of the release.
Note: The forward-looking statements contained in this document
involve risks and uncertainties that may affect the Company's
operations, markets, products, services, prices and other factors
as discussed in filings with the Securities and Exchange
Commission. These risks and uncertainties include, but are not
limited to, economic, competitive, legal, governmental and
technological factors. Accordingly, there is no assurance that the
Company's expectations will be realized. The Company assumes no
obligation to provide revisions to any forward-looking statements
should circumstances change, except as otherwise required by
securities and other applicable laws.
Financial
Statements
(Note A)
The Dow Chemical
Company
and Subsidiaries
Consolidated
Statements
of Income
Three Months Ended Twelve Months Ended
Dec 31, Dec 31, Dec 31, Dec 31,
In millions, 2011 2010 2011 2010
except
per share
amounts
(Unaudited)
Net Sales $ 14,097 $ 13,771 $ 59,985 $ 53,674
Cost of sales 12,433 11,818 51,029 45,780
Research and 433 443 1,646 1,660
development
expenses
Selling, general 702 659 2,788 2,609
and
administrative
expenses
Amortization of 123 132 496 509
intangibles
Restructuring -- (3 ) -- 26
charges
(credit) (Note B)
Acquisition and -- 45 31 143
integration
related expenses
(Note C)
Asbestos-related -- 54 -- 54
credit (Note D)
Equity in earnings 259 313 1,223 1,112
of nonconsolidated
affiliates
(Note E)
Sundry income 6 (43 ) (316 ) 125
(expense)
- net (Note F)
Interest income 14 13 40 37
Interest expense 331 368 1,341 1,473
and amortization
of debt discount
Income Before 354 646 3,601 2,802
Income Taxes
Provision for 271 133 817 481
income
taxes (Note G)
Net Income 83 513 2,784 2,321
Net 18 2 42 11
income attributable
to
noncontrolling
interests
Net 65 511 2,742 2,310
Income Attributable
to
The Dow Chemical
Company
Preferred stock 85 85 340 340
dividends
Net Income (Loss) $ (20 ) $ 426 $ 2,402 $ 1,970
Available
for The Dow
Chemical Company
Common
Stockholders
Per Common Share
Data:
Earnings (Loss) $ (0.02 ) $ 0.38 $ 2.06 $ 1.75
per common
share - basic
Earnings (Loss) $ (0.02 ) $ 0.37 $ 2.05 $ 1.72
per common
share - diluted
Common stock $ 0.25 $ 0.15 $ 0.90 $ 0.60
dividends
declared
per share of
common stock
Weighted-average 1,154.3 1,132.6 1,149.0 1,125.9
common shares
outstanding
- basic
Weighted-average 1,159.3 1,153.3 1,158.2 1,143.8
common shares
outstanding
- diluted
Depreciation $ 553 $ 572 $ 2,177 $ 2,289
Capital $ 1,067 $ 942 $ 2,687 $ 2,130
Expenditures
See Notes to the
Consolidated
Financial
Statements:
The Dow Chemical Company and Subsidiaries
Notes to the Consolidated Financial Statements
Note A:The unaudited consolidated financial statements reflect
all adjustments which, in the opinion of management, are considered
necessary for a fair presentation of the results for the periods
covered. These statements should be read in conjunction with the
audited consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2010. Except as otherwise indicated by the
context, the terms "Company" and "Dow" as used herein mean The Dow
Chemical Company and its consolidated subsidiaries.
Note B:In June 2009, Dow's Board of Directors approved a
restructuring plan that incorporated actions related to the
Company's acquisition of Rohm and Haas Company as well as
additional actions to advance the Company's strategy and respond to
continued weakness in the global economy. In the first half of
2010, the Company recorded adjustments to the 2009 restructuring
plan of $29 million. In the fourth quarter of 2010, the Company
recorded a $3 million reduction in the 2008 restructuring plan. See
Supplemental Information for additional information.
Note C: On April 1, 2009, Dow completed the acquisition of Rohm
and Haas Company. During the first quarter of 2011, pretax charges
totaling $31 million were recorded for integration costs related to
the acquisition. During the fourth quarter of 2010, integration
costs totaled $45 million ($143 million for the year).
Note D:In December 2010, Union Carbide reduced its
asbestos-related liability $54 million based on a new study
completed in the fourth quarter of 2010 by Analysis, Research &
Planning Corporation using historical claims data for Union Carbide
and Amchem.
Note E:In the third quarter of 2011, the Company recognized an
$86 million gain related to cash collected on a previously impaired
note receivable related to Equipolymers, a nonconsolidated
affiliate.
Note F:In the fourth quarter of 2011, the Company recognized a
pretax loss of $42 million ($44 million gain after tax) on the sale
ofa contract manufacturing business. In the first half of 2011, the
Company recognized a pretax loss of $482 million on the early
extinguishment of debt; a pretax loss of $46 million was recognized
in the third quarter of 2010. In the fourth quarter of 2010, the
Company recorded a $47 million pretax charge for an obligation
related to a past divestiture.
Note G: As a result of the global recession in 2008-2009,
coupled with rapidly deteriorating isocyanate industry conditions
and increasing local costs, two Dow entities in Brazil were in a
three-year cumulative pretax operating loss position at December
31, 2011. While the Company expects to realize the tax loss
carryforwards generated by these operating losses based on several
factors - including forecasted margin expansion resulting from
improving economic conditions, higher industry growth rates in
Brazil, improving Dow operating rates, and a restructuring of legal
entities to maximize the use of existing tax loss carryforwards -
Dow was unable to overcome the negative evidence of recent
cumulative operating losses; and at December 31, 2011, the Company
could not assert it was more likely than not that it will realize
its deferred tax assets in the two Brazilian entities. Accordingly,
the Company established a valuation allowance against the deferred
tax assets of these companies in the amount of $264 million in the
fourth quarter of 2011.If in the future, as a result of the
Company's plans and expectations, one or both of these entities
generates sufficient profitability such that the evaluation of the
recoverability of the deferred tax assets changes, the valuation
allowance could be reversed in whole or in part in a future
period.
The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets
Dec 31, Dec 31,
In millions (Unaudited) 2011 2010
Assets
Current Assets
Cash and cash equivalents (variable $ 5,444 $ 7,039
interest entities
restricted - 2011: $170; 2010: $145)
Marketable securities and interest-bearing 2 --
deposits
Accounts and notes receivable:
Trade (net of allowance for 4,900 4,616
doubtful receivables
- 2011: $121; 2010: $128)
Other 4,726 4,428
Inventories 7,577 7,087
Deferred income tax assets - current 471 611
Other current assets 302 349
Total current assets 23,422 24,130
Investments
Investment in nonconsolidated affiliates 3,405 3,453
Other investments (investments carried at fair 2,508 2,542
value - 2011: $2,008; 2010: $2,064)
Noncurrent receivables 1,144 388
Total investments 7,057 6,383
Property
Property 52,216 51,648
Less accumulated depreciation 34,917 33,980
Net property (variable interest 17,299 17,668
entities restricted
- 2011: $2,169; 2010: $1,388)
Other Assets
Goodwill 12,930 12,967
Other intangible assets (net 5,061 5,530
of accumulated amortization
- 2011: $2,349; 2010: $1,805)
Deferred income tax assets - noncurrent 2,559 2,079
Asbestos-related insurance 172 220
receivables - noncurrent
Deferred charges and other assets 724 611
Total other assets 21,446 21,407
Total Assets $ 69,224 $ 69,588
Liabilities and Equity
Current Liabilities
Notes payable $ 541 $ 1,467
Long-term debt due within one year 2,749 1,755
Accounts payable:
Trade 4,778 4,356
Other 2,216 2,249
Income taxes payable 382 349
Deferred income tax liabilities - current 129 105
Dividends payable 376 257
Accrued and other current liabilities 2,463 3,358
Total current liabilities 13,634 13,896
Long-Term Debt (variable interest entities 18,310 20,605
nonrecourse - 2011: $1,138; 2010: $167)
Other Noncurrent Liabilities
Deferred income tax liabilities - noncurrent 1,091 1,295
Pension and other postretirement 9,034 7,492
benefits - noncurrent
Asbestos-related liabilities - noncurrent 608 663
Other noncurrent obligations 3,109 2,995
Total other noncurrent liabilities 13,842 12,445
Redeemable Noncontrolling Interest 147 --
Stockholders' Equity
Preferred stock, series A 4,000 4,000
Common stock 2,961 2,931
Additional paid-in capital 2,663 2,286
Retained earnings 19,087 17,736
Accumulated other comprehensive loss (5,996 ) (4,399 )
Unearned ESOP shares (434 ) (476 )
Treasury stock at cost -- (239 )
The Dow Chemical Company's 22,281 21,839
stockholders' equity
Noncontrolling interests 1,010 803
Total equity 23,291 22,642
Total Liabilities and Equity $ 69,224 $ 69,588
See Notes to the Consolidated
Financial Statements.
The Dow Chemical
Company
and Subsidiaries
Operating Segments
Three Months Ended Twelve Months Ended
Dec 31, Dec 31, Dec 31, Dec 31,
In 2011 2010 2011 2010
millions (Unaudited)
Sales by operating
segment
Electronic and $ 1,063 $ 1,059 $ 4,599 $ 4,203
Functional
Materials
Coatings 1,561 1,547 7,200 6,596
and Infrastructure
Solutions
Agricultural Sciences 1,344 1,276 5,655 4,869
Performance Materials 3,550 3,405 14,647 13,957
Performance Plastics 3,659 3,879 16,257 15,260
Feedstocks and Energy 2,846 2,506 11,302 8,457
Corporate 74 99 325 332
Total $ 14,097 $ 13,771 $ 59,985 $ 53,674
EBITDA (1) by
operating
segment
Electronic and $ 234 $ 277 $ 1,084 $ 1,052
Functional
Materials
Coatings 177 251 1,167 1,230
and Infrastructure
Solutions
Agricultural Sciences 145 72 913 640
Performance Materials 225 337 1,748 1,714
Performance Plastics 667 942 3,440 3,565
Feedstocks and Energy 175 152 940 471
Corporate (211 ) (275 ) (1,507 ) (1,472 )
Total $ 1,412 $ 1,756 $ 7,785 $ 7,200
Certain items
increasing
(decreasing)
EBITDA by operating
segment (2)
Electronic and $ -- $ -- $ -- $ (8 )
Functional
Materials
Coatings (60 ) -- (60 ) (20 )
and Infrastructure
Solutions
Agricultural Sciences -- -- -- --
Performance Materials (119 ) (112 ) (119 ) (71 )
Performance Plastics -- (5 ) 86 7
Feedstocks and Energy -- -- -- --
Corporate -- (35 ) (513 ) (230 )
Total $ (179 ) $ (152 ) $ (606 ) $ (322 )
EBITDA excluding
certain items
by operating segment
Electronic and $ 234 $ 277 $ 1,084 $ 1,060
Functional
Materials
Coatings 237 251 1,227 1,250
and Infrastructure
Solutions
Agricultural Sciences 145 72 913 640
Performance Materials 344 449 1,867 1,785
Performance Plastics 667 947 3,354 3,558
Feedstocks and Energy 175 152 940 471
Corporate (211 ) (240 ) (994 ) (1,242 )
Total $ 1,591 $ 1,908 $ 8,391 $ 7,522
Continued
The
Dow Chemical
Company
and
Subsidiaries
Operating
Segments
(Continued)
Three Months Ended Twelve Months Ended
Dec 31, Dec 31, Dec 31, Dec 31,
In 2011 2010 2011 2010
millions
(Unaudited)
Equity in
earnings
(losses) of
nonconsolidated
affiliates
by operating
segment
(included in
EBITDA)
Electronic and $ 32 $ 30 $ 104 $ 106
Functional
Materials
Coatings 102 96 321 343
and
Infrastructure
Solutions
Agricultural 1 (1 ) 4 2
Sciences
Performance (11 ) 7 (31 ) 16
Materials
Performance 32 72 303 254
Plastics
Feedstocks 115 113 561 407
and Energy
Corporate (12 ) (4 ) (39 ) (16 )
Total $ 259 $ 313 $ 1,223 $ 1,112
(1) The Company uses EBITDA (which Dow defines as earnings
(i.e., "Net Income") before interest, income taxes, depreciation
and amortization) as its measure of profit/loss for segment
reporting purposes. EBITDA includes all operating items related to
the businesses, except depreciation and amortization, and excludes
items that principally apply to the Company as a whole. A
reconciliation of EBITDA to "Net Income (Loss) Available for The
Dow Chemical Company Common Stockholders" is provided below.
Reconciliation of Three Months Ended Twelve Months Ended
EBITDA to "Net
Income (Loss)
Available
for The Dow Chemical
Company
Common Stockholders"
Dec 31, Dec 31, Dec 31, Dec 31,
In 2011 2010 2011 2010
millions (Unaudited)
EBITDA $ 1,412 $ 1,756 $ 7,785 $ 7,200
- Depreciation and 741 755 2,883 2,962
amortization
+ Interest income 14 13 40 37
- Interest expense 331 368 1,341 1,473
and amortization
of debt discount
Income Before $ 354 $ 646 $ 3,601 $ 2,802
Income Taxes
- Provision for 271 133 817 481
income taxes
- Net income 18 2 42 11
attributable
to
noncontrolling
interests
- Preferred stock 85 85 340 340
dividends
Net Income (Loss) $ (20 ) $ 426 $ 2,402 $ 1,970
Available
for The Dow
Chemical Company
Common
Stockholders
(2) See Supplemental Information for a description of certain
items affecting results in 2011 and 2010.
Sales by Geographic
Area
Three Months Ended Twelve Months Ended
Dec 31, Dec 31, Dec 31, Dec 31,
In 2011 2010 2011 2010
millions (Unaudited)
North America $ 4,872 $ 4,788 $ 21,345 $ 19,427
Europe, Middle 4,644 4,703 20,840 18,464
East
and Africa
Asia Pacific 2,669 2,511 10,554 9,630
Latin America 1,912 1,769 7,246 6,153
Total $ 14,097 $ 13,771 $ 59,985 $ 53,674
Continued
Sales
Volume
and Price
by
Operating
Segment
and
Geographic
Area
Three Months Ended Twelve Months Ended
December 31, 2011 December 31, 2011
Percentage Volume Price Total Volume Price Total
change
from
prior
year
Electronic (3 )% 3 % -- % 3 % 6 % 9 %
and
Functional
Materials
Coatings (5 ) 6 1 (4 ) 13 9
and
Infrastructure
Solutions
Agricultural 1 4 5 11 5 16
Sciences
Performance -- 4 4 (7 ) 12 5
Materials
Performance (8 ) 2 (6 ) (5 ) 12 7
Plastics
Feedstocks 3 11 14 7 27 34
and
Energy
Total (3 )% 5 % 2 % (1 )% 13 % 12 %
North (4 )% 6 % 2 % (2 )% 12 % 10 %
America
Europe, (5 ) 4 (1 ) (4 ) 17 13
Middle
East
and
Africa
Asia 3 3 6 -- 10 10
Pacific
Latin 3 5 8 6 12 18
America
Total (3 )% 5 % 2 % (1 )% 13 % 12 %
Sales
Volume
and Price
by
Operating
Segment
and
Geographic
Area
Excluding
Divestitures
(3)
Three Months Ended Twelve Months Ended
December 31, 2011 December 31, 2011
Percentage Volume Price Total Volume Price Total
change
from
prior
year
Electronic (3 )% 3 % -- % 3 % 6 % 9 %
and
Functional
Materials
Coatings (5 ) 6 1 (1 ) 13 12
and
Infrastructure
Solutions
Agricultural 1 4 5 11 5 16
Sciences
Performance -- 4 4 1 13 14
Materials
Performance 3 2 5 4 13 17
Plastics
Feedstocks 3 11 14 7 27 34
and
Energy
Total -- % 5 % 5 % 4 % 14 % 18 %
North (1 )% 6 % 5 % 1 % 12 % 13 %
America
Europe, -- 4 4 4 18 22
Middle
East
and
Africa
Asia 3 3 6 6 10 16
Pacific
Latin 4 5 9 9 12 21
America
Total -- % 5 % 5 % 4 % 14 % 18 %
Developed (3 )% 6 % 3 % 2 % 15 % 17 %
geographies
Emerging 7 % 3 % 10 % 8 % 11 % 19 %
geographies
(4)
Total -- % 5 % 5 % 4 % 14 % 18 %
(3) Excludes sales of the acrylic monomer business and a portion
of the specialty latex business divested on January 25, 2010, sales
of the Powder Coatings business divested on June 1, 2010, sales of
Styron divested on June 17, 2010, and sales of the Polypropylene
business divested on September 30, 2011.
(4) Emerging geographies includes Eastern Europe, Middle East,
Africa, Latin America, and Asia Pacific excluding Australia, Japan
and New Zealand.
Supplemental Information
Description of Certain Items Affecting Results:
The following table summarizes the impact of certain items
recorded in the three-month periods ended December 31, 2011 and
December 31, 2010:
Certain Items Pretax Impact(1) Net Income(2) EPS - Diluted(3)
Impacting
Results
Three Months Ended Three Months Ended Three Months Ended
Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,
In millions, 2011 2010 2011 2010 2011 2010
except
per share
amounts
(Unaudited)
Excluding $ 289 $ 538 $ 0.25 $ 0.47
certain
items
(non-GAAP
measures)
Certain items:
Asset $ (77 ) $ (91 ) (51 ) (72 ) (0.05 ) (0.06 )
impairments
and
related costs
Warranty (60 ) -- (38 ) -- (0.03 ) --
accrual
adjustment
of exited
business
Restructuring -- 3 -- 2 -- --
credit
Acquisition-related -- (45 ) -- (29 ) -- (0.03 )
integration
costs
Asbestos-related -- 54 -- 34 -- 0.03
credit
Loss -- (26 ) -- (17 ) -- (0.01 )
on divestiture
of Styron
Gain (Loss) (42 ) -- 44 -- 0.04 --
on sale
of contract
manufacturing
business
Obligation -- (47 ) -- (30 ) -- (0.03 )
related to
past
divestiture
Tax valuation -- -- (264 ) -- (0.23 ) --
allowance
Total certain $ (179 ) $ (152 ) $ (309 ) $ (112 ) $ (0.27 ) $ (0.10 )
items
Reported (GAAP $ (20 ) $ 426 $ (0.02 ) $ 0.37
amounts)
(1) Impact on "Income Before Income Taxes"
(2) "Net Income (Loss) Available for The Dow Chemical Company
Common Stockholders"
(3) "Earnings (Loss) per common share - diluted"
Results in the fourth quarter of 2011 were impacted by the
following items:
-- Pretax charges totaling $77 million for asset impairments and related
costs in the Polyurethanes business. The charges were included
in
"Cost of sales" in the consolidated statements of income and
reflected
in Performance Materials.
-- Pretax charge of $60 million for a warranty accrual adjustment related
to an exited business. The charge was included in "Cost of
sales" in
the consolidated statements of income and reflected in Coatings
and
Infrastructure Solutions.
-- Pretax loss of $42 million ($44 million gain after tax) on the sale of
a contract manufacturing business. The pretax loss was included
in
"Sundry income (expense) - net" in the consolidated statements
of
income and reflected in Performance Materials.
-- As a result of the global recession in 2008-2009, coupled with rapidly
deteriorating isocyanate industry conditions and increasing
local
costs, two Dow entities in Brazil were in a three-year
cumulative
pretax operating loss position at December 31, 2011. While the
Company
expects to realize the tax loss carryforwards generated by
these
operating losses based on several factors - including
forecasted
margin expansion resulting from improving economic conditions,
higher
industry growth rates in Brazil, improving Dow operating rates,
and a
restructuring of legal entities to maximize the use of existing
tax
loss carryforwards - Dow was unable to overcome the negative
evidence
of recent cumulative operating losses; and at December 31, 2011,
the
Company could not assert it was more likely than not that it
will
realize its deferred tax assets in the two Brazilian
entities.
Accordingly, the Company established a valuation allowance
against the
deferred tax assets of these companies in the amount of $264
million
in the fourth quarter of 2011. If in the future, as a result of
the
Company's plans and expectations, one or both of these
entities
generates sufficient profitability such that the evaluation of
the
recoverability of the deferred tax assets changes, the
valuation
allowance could be reversed in whole or in part in a future
period.
Results in the fourth quarter of 2010 were impacted by the
following items:
-- Pretax charges totaling $91 million for asset impairments and related
costs in the Polyurethanes business, the Epoxy business and
Dow
Automotive Systems. The charges were included in "Cost of sales"
in
the consolidated statements of income and reflected in
Performance
Materials.
-- Pretax reduction of $3 million in the 2008 restructuring charge to
adjust the severance reserve. The net impact of the reduction
was
shown as "Restructuring charges (credit)" in the
consolidated
statements of income and reflected in Corporate.
-- Pretax charges totaling $45 million for integration costs related to
the April 1, 2009 acquisition of Rohm and Haas Company ("Rohm
and
Haas"). The charges were included in "Acquisition and
integration
related expenses" in the consolidated statements of income
and
reflected in Corporate.
-- Pretax reduction of $54 million in the asbestos-related liability for
pending and future claims (excluding future defense and
processing
costs). The reduction was shown as "Asbestos-related credit" in
the
consolidated statements of income and reflected in
Corporate.
-- A $26 million pretax decrease in the gain ($17 million loss after tax)
on the divestiture of Styron, sold to an affiliate of Bain
Capital
Partners on June 17, 2010. The adjustment included the
finalization of
the working capital adjustments and additional costs to sell.
The
decrease in the gain was included in "Sundry income (expense) -
net"
in the consolidated statements of income and reflected in
Performance
Materials ($21 million) and Performance Plastics ($5
million).
-- A pretax charge of $47 million for an obligation related to a past
divestiture. The charge was shown as "Sundry income (expense) -
net"
in the consolidated statements of income and reflected in
Corporate.
The following table summarizes the impact of certain items
recorded in the years ended December 31, 2011 and December 31,
2010:
Certain Items Pretax Impact(1) Net Income(2) EPS - Diluted(3)
Impacting
Results
Twelve Months Ended Twelve Months Ended Twelve Months Ended
Dec 31, Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,
In millions, 2011 2010 2011 2010 2011 2010
except
per share
amounts
(Unaudited)
Excluding $ 2,959 $ 2,263 $ 2.54 $ 1.97
certain
items
(non-GAAP
measures)
Certain items:
Asset $ (77 ) $ (91 ) (51 ) (72 ) (0.05 ) (0.06 )
impairments
and
related costs
Warranty (60 ) -- (38 ) -- (0.03 ) --
accrual
adjustment
of exited
business
Restructuring -- (26 ) -- (14 ) -- (0.02 )
charges
Acquisition-related (31 ) (143 ) (20 ) (93 ) (0.02 ) (0.08 )
integration
costs
Asbestos-related -- 54 -- 34 -- 0.03
credit
Gain 86 -- 86 -- 0.07 --
on collection
of impaired
note
receivable
Gain (Loss) on -- 27 -- (56 ) -- (0.04 )
divestiture
of Styron
Gain (Loss) (42 ) -- 44 -- 0.04 --
on sale
of a contract
manufacturing
business
Labor-related -- (50 ) -- (33 ) -- (0.03 )
litigation
matter
Obligation -- (47 ) -- (30 ) -- (0.03 )
related to
past
divestiture
Loss (482 ) (46 ) (314 ) (29 ) (0.27 ) (0.02 )
on
early
extinguishment
of debt
Tax valuation -- -- (264 ) -- (0.23 ) --
allowance
Total certain $ (606 ) $ (322 ) $ (557 ) $ (293 ) $ (0.49 ) $ (0.25 )
items
Reported (GAAP $ 2,402 $ 1,970 $ 2.05 $ 1.72
amounts)
(1) Impact on "Income Before Income Taxes"
(2) "Net Income (Loss) Available for The Dow Chemical Company
Common Stockholders"
(3) "Earnings (Loss) per common share - diluted"
In addition to the item described above for the fourth quarter
of 2011, results for the year ended December 31, 2011 were
unfavorably impacted by three items:
-- Pretax charges totaling $31 million for integration costs related to
the April 1, 2009 acquisition of Rohm and Haas. The charges
are
included in "Acquisition and integration related expenses" in
the
consolidated statements of income and reflected in
Corporate.
-- Pretax $86 million gain related to cash collected on a previously
impaired note receivable related to Equipolymers, a
nonconsolidated
affiliate. The gain is shown as "Equity in earnings of
nonconsolidated
affiliates" in the consolidated statements of income and
reflected in
Performance Plastics.
-- Pretax loss of $482 million on the early extinguishment of debt,
included in "Sundry income (expense) - net" in the
consolidated
statements of income and reflected in Corporate.
In addition to the items described above for the fourth quarter
of 2010, results for the year ended December 31, 2010 were impacted
by the following items:
-- Pretax adjustments to the 2009 restructuring charge of $29 million,
including $16 million related to additional asset
impairments,
approximately half of which was related to a consolidated
joint
venture, and $13 million for additional exit or disposal
activities
related to the divestitures of certain acrylic monomer assets
and the
hollow sphere particle business. The charges were shown as
"Restructuring charges (credit)" in the consolidated statements
of
income and reflected in Electronic and Functional Materials
($8 million), Coatings and Infrastructure Solutions ($20
million) and
Corporate ($1 million).
-- Pretax charges totaling $98 million in the first nine months of 2010
for integration costs related to the April 1, 2009 acquisition
of Rohm
and Haas. The charges are included in "Acquisition and
integration
related expenses" in the consolidated statements of income
and
reflected in Corporate.
-- Pretax gain of $53 million ($39 million loss after tax) on the
divestiture of Styron. The pretax gain was included in "Sundry
income
(expense) - net" in the consolidated statements of income and
was
reflected in Performance Materials ($41 million) and
Performance
Plastics ($12 million).
-- Pretax charge of $50 million for a labor-related litigation matter
included in "Cost of sales" in the consolidated statements of
income
and reflected in Corporate.
-- Pretax loss of $46 million on the early extinguishment of debt
included in "Sundry income (expense) - net" in the
consolidated
statements of income and reflected in Corporate.
The Dow Chemical CompanyRebecca Bentley+1 989 638
8568rmbentley@dow.comDave Johnson+1 989 636
1375dcjohnson@dow.com
Dow Chem. (LSE:DOW)
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