TIDMDOW
The Dow Chemical Company (NYSE: DOW):
First Quarter 2012 Highlights
-- The Company reported earnings of $0.35 per share, or adjusted earnings
of $0.61 per share(1). This compares with earnings of
$0.54 per share in the same quarter last year, or adjusted
earnings of
$0.82 per share. Earnings for the quarter were reduced by
certain
items totaling $0.26 per share, due to restructuring activities
the
Company elected to implement in the quarter, as well as a
charge
related to the early extinguishment of debt.
-- Sales were $14.7 billion, in line with the same quarter last year.
Adjusted sales(2) rose 4 percent versus the year-ago
period, marking the tenth consecutive quarter of year-over-year
sales
growth. Sales in Agricultural Sciences increased double
digits,
surpassing $1.8 billion and representing a significant increase
versus
the previous record.
-- Volume declined 1 percent, but was up 3 percent on an adjusted basis,
led by a double-digit increase in Agricultural Sciences, which
was up
12 percent. Volume in the United States grew 2 percent on an
adjusted
basis, reflecting improving economic conditions across several
sectors
and value chains.
-- Emerging geographies posted a tenth consecutive quarter of
year-over-year volume growth on an adjusted basis, led by gains
this
quarter in the Middle East, Africa, India, and Eastern
Europe.
-- EBITDA(3) was $1.7 billion, or $2.1 billion excluding
certain items. Agricultural Sciences EBITDA reached a new
quarterly
record of $451 million. EBITDA records were also achieved in
Functional Materials; Polyglycols, Surfactants and Fluids;
Dow
Elastomers; and Dow Automotive Systems.
-- The Company's operating rate was 84 percent for the quarter, up 12
percentage points versus the previous quarter and up 1
percentage
point versus the year-ago period.
-- Equity earnings were $169 million, versus $298 million in the year-ago
period. Dow Corning was the largest driver of the decline due
to
weakness in the silicon value chain.
-- The Company reduced debt by more than $1 billion in the quarter.
Interest expense declined nearly $50 million versus the
year-ago
period, due to the Company's ongoing capital management strategy
and
deleveraging actions over the last 12 months. Net debt(4)
to total capitalization was 41.2 percent, remaining on target to
reach
the Company's year-end 2012 goal.
Comment
Andrew N. Liveris, Dow's chairman and chief executive officer,
stated:
"Dow again demonstrated the strength of its transformed
portfolio, even as demand remained slow early in the quarter. We
have now delivered top-line growth for ten consecutive quarters,
and our Agricultural Sciences portfolio achieved record sales and
EBITDA. The benefit of our balanced portfolio was again evident: We
captured demand gains in developed regions - particularly in the
U.S. and Germany - and posted a tenth consecutive quarter of volume
increases in rapidly growing emerging economies.
"We exited the quarter with momentum, and looking forward we
remain resolutely focused on our strategic priorities - capturing
the benefits of new products and technologies, such as POWERHOUSEtm
and EVOQUEtm, which will generate value in local markets for both
our customers and our shareholders. In addition, we are
capitalizing on our world-class feedstock advantage and balanced,
integrated portfolio, as well as exhibiting diligent operating and
capital efficiency. All of this places us in a unique position to
drive earnings growth and continue our 100-year legacy of
shareholder remuneration."
Three Months Ended
Mar 31, Mar 31,
In millions, except per share amounts 2012 2011
Net Sales $14,719 $14,733
Adjusted Sales $14,719 $14,215
Net Income Available for Common Stockholders $412 $625
Net Income Available for Common Stockholders, $714 $952
excluding Certain Items
Earnings per Common Share - diluted $0.35 $0.54
Adjusted Earnings per Share $0.61 $0.82
Review of First Quarter Results
The Dow Chemical Company (NYSE: DOW) reported sales of $14.7
billion in the first quarter of 2012, in line with the year-ago
period. Adjusted sales increased 4 percent versus the prior year,
representing the tenth consecutive quarter of year-over-year sales
growth. Sales in Agricultural Sciences increased double-digits,
surpassing $1.8 billion and representing a new record.
Volume declined 1 percent, but was up 3 percent on an adjusted
basis with increases in Agricultural Sciences (12 percent),
Feedstocks and Energy (7 percent), and Performance Materials (2
percent).
On an adjusted, geographic basis, volume gains in Europe, Middle
East and Africa (EMEA) (7 percent) and North America (2 percent)
more than offset declines in Latin America and Asia Pacific.
Volume increases in Europe were primarily driven by sales of
propylene, the result of a supply agreement from Dow's divestiture
of polypropylene. Volume in the United States grew 2 percent on an
adjusted basis, reflecting improving economic conditions across
several sectors and value chains. Emerging geographies posted a
tenth consecutive quarter of year-over-year volume growth on an
adjusted basis, led by gains this quarter in the Middle East,
Africa, India, and Eastern Europe.
Price rose 1 percent, partially offsetting an increase of nearly
$120 million in raw material costs, including feedstocks and
energy. Price gains in North America (3 percent) and Latin America
(2 percent) offset declines in EMEA and Asia Pacific. Price gains
were reported in Feedstocks and Energy (6 percent), Agricultural
Sciences (2 percent), and Electronic and Functional Materials (1
percent).
The Company reported EBITDA of $1.7 billion, or $2.1 billion
excluding certain items. Agricultural Sciences achieved a new
quarterly EBITDA record, led by strength in North America and Latin
America. In addition, EBITDA records were achieved in Functional
Materials; Polyglycols, Surfactants and Fluids; Dow Elastomers; and
Dow Automotive Systems.
Earnings for the quarter were $0.35 per share, compared with
$0.54 per share in the same period last year. Adjusted earnings
were $0.61 per share in the quarter. This compares with adjusted
earnings of $0.82 per share in the same quarter last year. Certain
items in the current quarter consisted of restructuring charges and
a charge related to the early extinguishment of debt. (See
Supplemental Information at the end of the release for a
description of certain items affecting results.)
Dow's global operating rate was 84 percent, up 12 percentage
points sequentially and 1 percentage point versus the year-ago
period.
Research and Development (R&D) expenses were up 1 percent
versus the same period last year. The Company continued to invest
in its technology-driven segments, including Coatings and
Infrastructure Solutions, Electronic and Functional Materials, and
Agricultural Sciences.
Selling, General and Administrative (SG&A) expenses rose 1
percent versus the prior year, in part due to increased spending to
support growth initiatives and new product launches in Agricultural
Sciences.
Equity earnings were $169 million, compared with $298 million in
the year-ago period. Dow Corning was the largest driver of the
decline, as it was impacted by weakness in the silicon value
chain.
Net debt to total capitalization was 41.2 percent, on target to
reach the Company's year-end 2012 goal. The Company reduced debt by
more than $1 billion in the quarter, in line with its continuing
capital management strategy. Total deleveraging actions taken over
the last 12 months resulted in an interest expense reduction of
nearly $50 million in the quarter versus the year-ago period.
"Dow again demonstrated the strength of its transformed
portfolio, even as demand remained slow early in the quarter," said
Andrew N. Liveris, Dow's chairman and chief executive officer. "We
have now delivered top-line growth for ten consecutive quarters,
and our Agricultural Sciences portfolio achieved record sales and
EBITDA. The benefit of our balanced portfolio was again evident: We
captured demand gains in developed regions - particularly in the
U.S. and Germany - and posted a tenth consecutive quarter of volume
increases in rapidly growing emerging economies.
"We exited the quarter with momentum, and looking forward we
remain resolutely focused on our strategic priorities - capturing
the benefits of new products and technologies, such as POWERHOUSEtm
and EVOQUEtm, which will generate value in local markets for both
our customers and our shareholders. In addition, we are
capitalizing on our world-class feedstock advantage and balanced,
integrated portfolio, as well as exhibiting diligent operating and
capital efficiency. All of this places us in a unique position to
drive earnings growth and continue our 100-year legacy of
shareholder remuneration."
Electronic and Functional Materials
Sales in Electronic and Functional Materials were $1.1 billion,
down 1 percent from the same quarter last year, as a 2 percent
decline in volume was partially offset by price gains of 1 percent.
Dow Electronic Materials reported sales declines across most
businesses, due largely to softness in the electronics industry.
However, the business reported strong demand gains in Display
Technologies, driven primarily by backlit film sales in Europe. Dow
Electronic Materials recorded several customer wins in the quarter,
including photoresist for leading edge memory production, films for
consumer electronics and electroplating materials for mobile phone
applications.
Functional Materials reported record first quarter sales, as
price increases outpaced a modest contraction in volume.
Broad-based demand gains in Performance Additives were more than
offset by volume contraction in Dow Wolff Cellulosics.
Equity earnings were $19 million, down from $24 million versus
the year-ago period. The decline was principally due to results at
Dow Corning, which was adversely impacted by weakness in the
silicon value chain. EBITDA for the segment was $243 million, which
included a $17 million restructuring charge. This compares with
EBITDA of $257 million in the same period last year. Functional
Materials posted record quarterly EBITDA, driven largely by margin
expansion and cost control efforts.
Coatings and Infrastructure Solutions
Coatings and Infrastructure Solutions sales were $1.7 billion,
down 2 percent compared with the same period last year. Volume was
flat versus the prior year, and price was down 2 percent.
Dow Building and Construction reported sales gains across all
geographic areas, except Europe, where the construction industry
continues to contract. Dow Water and Process Solutions reported
record first quarter sales, with gains in both price and volume.
Demand continued to be particularly strong in reverse osmosis
membranes in industrial water applications. Dow Coating Materials
reported a decrease in sales as price declines more than offset a
modest increase in volume. In architectural coatings, volume
declined in most geographic areas, driven in part by the lack of
customer inventory restocking witnessed in the first quarter of
2011 as industry-wide supply issues abated in the latter part of
2010. Dow Coating Materials' hiding platform recorded several wins
with EVOQUEtm technology as customers continue to reformulate
paints to enhance performance and improve the efficiency of
titanium dioxide usage.
Equity earnings were $22 million, down from $68 million in the
same period last year, primarily due to lower results from Dow
Corning. EBITDA for the segment was $204 million, which included a
$41 million restructuring charge. This compares with EBITDA of $250
million in the year-ago period.
Agricultural Sciences
Agricultural Sciences posted its sixth consecutive quarter of
year-over-year sales record with sales of $1.8 billion, up 14
percent versus the year-ago period. Volume increased 12 percent and
price rose 2 percent. The gains were broad-based across products
and geographic areas, driven by customer adoption of new products,
healthy agricultural market fundamentals, and an early spring
planting season in North America. Overall, sales of new products
grew 41 percent compared with the year-ago period.
First quarter sales of Crop Protection products rose 14 percent
versus the prior year, driven by double-digit sales growth in North
America, Latin America, and Asia Pacific. Europe recorded sales
growth with strong sales in Northern Europe partially offset by
lower cereal portfolio sales in Southern Europe due to severe
freeze conditions impacting crop plantings. Sales of new Crop
Protection products grew 27 percent, led by gains in aminopyralid
and penoxsulam herbicides and spinetoram insecticide. In addition,
the business launched and secured first sales of sulfloxaflor
sap-feeding insecticide in Korea.
Seeds, Traits and Oils reported a 16 percent sales gain versus
the year-ago period, driven by continued introduction and adoption
of new seed technologies, as well as an early spring in North
America.
Increased corn sales were a key driver of growth, with increased
penetration of SmartStax® hybrids and Refuge Advanced® in North
America and further adoption of Herculex® technology in Latin
America.
EBITDA for the segment was $451 million. This represented a new
quarterly record, and an 11 percent increase over the previous
record of $406 million, which was reported in the year-ago
period.
Performance Materials
Sales in Performance Materials were $3.5 billion, down 2 percent
compared with the same quarter last year. However, adjusted sales
were flat as volume increases offset price declines. Volume rose in
all geographic areas excluding Latin America, which reported a
decline due to the shutdown of toluene diisocyanate capacity in
Brazil.
Polyurethanes sales were up modestly primarily due to
improvements in U.S. demand. Broad-based volume increases for
Oxygenated Solvents more than offset price declines, as early
weather patterns drove accelerated agricultural and construction
buying patterns. Epoxy sales contracted in the quarter due to
continued softness in allylics and phenolics, coupled with
record-level comparables in the year-ago period. Dow Formulated
Systems reported double-digit sales growth, with volume gains in
all geographic areas except Asia Pacific, which continued to
experience weak demand in the wind-energy sector.
Polyglycols, Surfactants and Fluids reported a quarterly sales
record due to broad-based price gains, however volume was flat as
unseasonably warmer weather in North America affected de-icing
sales. Amines reported double-digit volume gains, led by sales in
Asia Pacific. Sales in Chlorinated Organics declined as sales in
the year-ago period were unseasonably high due to industry
turnarounds. Dow Oil and Gas reported double-digit sales gains
driven by strong sector fundamentals, particularly in North America
due to the shale gas dynamic.
EBITDA for the segment was $332 million, which included $186
million in restructuring charges. This compares with EBITDA of $564
million in the year-ago period.
Performance Plastics
Sales in Performance Plastics were $3.6 billion, down 11 percent
from the same quarter last year. Adjusted sales were flat as both
volume and price were consistent with the year-ago period. Volume
gains in Asia Pacific and pricing initiatives in North America
offset sales declines in EMEA and Latin America.
Dow Elastomers posted new quarterly sales and EBITDA records.
The business achieved double-digit volume and price growth in North
America, Asia Pacific, and Latin America with strong results in
transportation, infrastructure, and adhesive markets. This
compensated for slower growth in Europe.
Dow Electrical and Telecommunications increased sales over the
year-ago period, with double-digit sales and volume gains in Asia
Pacific. Sales in Performance Packaging declined over the previous
year as a result of lower pricing in Europe, combined with price
and volume headwinds in both Asia Pacific and Latin America. These
declines were partially offset by pricing momentum in North
America.
Equity earnings were $34 million, down from $62 million in the
year-ago period. EBITDA for the segment was $718 million, compared
with $981 million in the same period last year, as naphtha-based
margins in Europe and Asia Pacific more than offset the positive
impact of favorable ethane-based margins on the U.S. Gulf
Coast.
Feedstocks and Energy
Sales in Feedstocks and Energy were $2.9 billion, up 13 percent
from the same period last year. Volume increased 7 percent and
price increased 6 percent. The Chlor-Alkali/Chlor-Vinyl business
saw continued strong demand in caustic soda, particularly in the
pulp and paper and water treatment industries. Vinyl chloride
monomer volume declined, primarily due to the shutdown of assets on
the U.S. Gulf Coast in 2011. Ethylene Oxide reported a double-digit
volume increase, driven by tight market conditions in North
America, while ethylene glycol sales declined modestly due to price
decreases.
Equity earnings were $125 million, down from $155 million in the
same quarter last year, as the Company's joint ventures in Kuwait
experienced margin contraction in ethylene glycol. EBITDA for the
segment was $198 million compared with $248 million in the same
period last year.
Outlook
Commenting on the Company's outlook, Liveris said:
"The pace of global recovery continues to be consistent with our
previous outlook: The United States appears to be on firmer
economic ground, buoyed by improvements in consumer confidence and
tailwinds from the country's abundant access to low-cost natural
gas. As China's economy moderates, it will remain attractive as it
transitions from managing inflation to encouraging domestic growth.
Germany is showing signs of improvement; while Western Europe is
expected to remain in recessionary conditions as the region
addresses its structural issues.
"The broad diversity of Dow's portfolio gives us the unique
ability to pivot - taking advantage of growth where it is happening
most. We are benefitting from strong fundamentals in a number of
resilient markets, including agriculture, food and industrials.
Further, we are encouraged by signs of improvement in construction,
electronics and transportation.
"We anticipate that global growth will gain momentum as we move
through the second quarter and into the remainder of the year. We
are committed and focused on execution, and the delivery of our
short- and long-term targets."
Dow will host a live Webcast of its first 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.
(1) "Adjusted earnings per share" is defined
as earnings per share excluding the
impact of "Certain Items." See Supplemental
Information at the end of
the release for a description of these
items, as well as a reconciliation
of adjusted earnings per share to "Earnings
per common share - diluted."
(2) "Adjusted sales" is defined as "Net Sales" excluding
sales related to prior-period divestitures.
(3) EBITDA is defined as earnings (i.e.,
"Net Income") before interest,
income taxes, depreciation and amortization. A reconciliation of
EBITDA to "Net Income Available for
The Dow Chemical Company Common
Stockholders" is provided following the Operating Segments table.
(4) Net debt equals total debt ("Notes payable" plus "Long-term
debt due within one year" plus "Long-Term
Debt") minus "Cash and cash equivalents," and "Marketable
securities and interest-bearing deposits."
tmTrademark of The Dow Chemical Company
or an affiliated company of Dow.
®REFUGE ADVANCED is a trademark of Dow AgroSciences LLC.
®SMARTSTAX multi-event technology developed
by Dow AgroSciences LLC and Monsanto.
SMARTSTAX and the SMARTSTAX logo are trademarks
of Monsanto Technology LLC.
®HERCULEX and the HERCULEX Shield Logo are
trademarks of Dow AgroSciences LLC.
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 the Supplemental Information tables.
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
Mar 31, Mar 31,
In millions, except per share 2012 2011
amounts (Unaudited)
Net Sales $ 14,719 $ 14,733
Cost of sales 12,285 12,117
Research and development expenses 405 400
Selling, general and administrative expenses 707 700
Amortization of intangibles 122 123
Restructuring charges (Note B) 357 --
Acquisition-related integration -- 31
expenses (Note C)
Equity in earnings of nonconsolidated 169 298
affiliates
Sundry income (expense) - net (Note D) 17 (449 )
Interest income 6 7
Interest expense and amortization 329 377
of debt discount
Income Before Income Taxes 706 841
Provision for income taxes 186 120
Net Income 520 721
Net income attributable to 23 11
noncontrolling interests
Net Income Attributable to 497 710
The Dow Chemical Company
Preferred stock dividends 85 85
Net Income Available for The Dow Chemical $ 412 $ 625
Company Common Stockholders
Per Common Share Data:
Earnings per common share - basic $ 0.35 $ 0.55
Earnings per common share - diluted $ 0.35 $ 0.54
Common stock dividends declared $ 0.25 $ 0.15
per share of common stock
Weighted-average common shares 1,160.9 1,139.5
outstanding - basic
Weighted-average common shares 1,168.7 1,161.2
outstanding - diluted
Depreciation $ 510 $ 559
Capital Expenditures $ 402 $ 405
Notes to the Consolidated Financial Statements:
Note A:The unaudited interim 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, 2011. 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: On March 27, 2012, the Company's Board of Directors
approved a restructuring plan as part of a series of actions to
optimize its portfolio, respond to changing and volatile economic
conditions, particularly in Western Europe, and to advance the
Company's Efficiency for Growth program. The restructuring plan
includes the shutdown of a number of manufacturing facilities and a
workforce reduction. As a result, in the first quarter of 2012, the
Company recorded pretax restructuring charges of $357 million that
included asset write-downs and write-offs, severance and costs
associated with exit and disposal activities.
Note C: In the first quarter of 2011, pretax charges totaling
$31 million were recorded for integration costs related to the
April 1, 2009 acquisition of Rohm and Haas Company.
Note D: In the first quarter of 2012, the Company recognized a
pretax loss of $24 million on the early extinguishment of debt; a
pretax loss of $472 million was recorded in the first quarter of
2011.
The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets
Mar 31, Dec 31,
In millions (Unaudited) 2012 2011
Assets
Current Assets
Cash and cash equivalents (variable $ 3,608 $ 5,444
interest entities
restricted - 2012: $154; 2011: $170)
Marketable securities and interest-bearing 2 2
deposits
Accounts and notes receivable:
Trade (net of allowance for 5,480 4,900
doubtful receivables
- 2012: $139; 2011: $121)
Other 5,026 4,726
Inventories 8,882 7,577
Deferred income tax assets - current 596 471
Other current assets 317 302
Total current assets 23,911 23,422
Investments
Investment in nonconsolidated affiliates 3,118 3,405
Other investments (investments carried at fair 2,597 2,508
value - 2012: $2,098; 2011: $2,008)
Noncurrent receivables 1,265 1,144
Total investments 6,980 7,057
Property
Property 53,013 52,216
Less accumulated depreciation 35,734 34,917
Net property (variable interest 17,279 17,299
entities restricted
- 2012: $2,264; 2011: $2,169)
Other Assets
Goodwill 12,973 12,930
Other intangible assets (net 4,983 5,061
of accumulated amortization
- 2012: $2,490; 2011: $2,349)
Deferred income tax assets - noncurrent 2,523 2,559
Asbestos-related insurance 168 172
receivables - noncurrent
Deferred charges and other assets 781 724
Total other assets 21,428 21,446
Total Assets $ 69,598 $ 69,224
Liabilities and Equity
Current Liabilities
Notes payable $ 555 $ 541
Long-term debt due within one year 1,798 2,749
Accounts payable:
Trade 4,944 4,778
Other 2,369 2,216
Income taxes payable 514 382
Deferred income tax liabilities - current 125 129
Dividends payable 379 376
Accrued and other current liabilities 2,781 2,463
Total current liabilities 13,465 13,634
Long-Term Debt (variable interest entities 18,224 18,310
nonrecourse - 2012: $1,276; 2011: $1,138)
Other Noncurrent Liabilities
Deferred income tax liabilities - noncurrent 1,061 1,091
Pension and other postretirement 8,905 9,034
benefits - noncurrent
Asbestos-related liabilities - noncurrent 591 608
Other noncurrent obligations 3,154 3,109
Total other noncurrent liabilities 13,711 13,842
Redeemable Noncontrolling Interest 147 147
Stockholders' Equity
Preferred stock, series A 4,000 4,000
Common stock 2,988 2,961
Additional paid-in capital 2,846 2,663
Retained earnings 19,203 19,087
Accumulated other comprehensive loss (5,586 ) (5,996 )
Unearned ESOP shares (425 ) (434 )
The Dow Chemical Company's 23,026 22,281
stockholders' equity
Noncontrolling interests 1,025 1,010
Total equity 24,051 23,291
Total Liabilities and Equity $ 69,598 $ 69,224
See Notes to the Consolidated Financial Statements.
The Dow Chemical Company and Subsidiaries
Operating Segments
Three Months Ended
Mar 31, Mar 31,
In millions (Unaudited) 2012 2011
Sales by operating segment
Electronic and Functional Materials $ 1,121 $ 1,134
Coatings and Infrastructure Solutions 1,703 1,732
Agricultural Sciences 1,838 1,606
Performance Materials 3,473 3,541
Performance Plastics 3,591 4,043
Feedstocks and Energy 2,935 2,588
Corporate 58 89
Total $ 14,719 $ 14,733
EBITDA (1) by operating segment
Electronic and Functional Materials $ 243 $ 257
Coatings and Infrastructure Solutions 204 250
Agricultural Sciences 451 406
Performance Materials 332 564
Performance Plastics 718 981
Feedstocks and Energy 198 248
Corporate (438 ) (764 )
Total $ 1,708 $ 1,942
Certain items decreasing EBITDA
by operating segment (2)
Electronic and Functional Materials $ (17 ) $ --
Coatings and Infrastructure Solutions (41 ) --
Agricultural Sciences -- --
Performance Materials (186 ) --
Performance Plastics -- --
Feedstocks and Energy -- --
Corporate (137 ) (503 )
Total $ (381 ) $ (503 )
EBITDA excluding certain items
by operating segment
Electronic and Functional Materials $ 260 $ 257
Coatings and Infrastructure Solutions 245 250
Agricultural Sciences 451 406
Performance Materials 518 564
Performance Plastics 718 981
Feedstocks and Energy 198 248
Corporate (301 ) (261 )
Total $ 2,089 $ 2,445
Continued
The Dow Chemical Company
and Subsidiaries
Operating Segments (Continued)
Three Months Ended
Mar 31, Mar 31,
In millions (Unaudited) 2012 2011
Equity in earnings (losses) of
nonconsolidated affiliates
by operating segment (included in EBITDA)
Electronic and Functional $ 19 $ 24
Materials
Coatings and Infrastructure 22 68
Solutions
Agricultural Sciences 1 3
Performance Materials (17 ) (5 )
Performance Plastics 34 62
Feedstocks and Energy 125 155
Corporate (15 ) (9 )
Total $ 169 $ 298
(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 Available for The Dow
Chemical Company Common Stockholders" is provided below.
Reconciliation of EBITDA
to "Net Income Available
for The Dow Chemical Company
Common Stockholders" Three Months Ended
Mar 31, Mar 31,
In millions (Unaudited) 2012 2011
EBITDA $ 1,708 $ 1,942
- Depreciation and amortization 679 731
+ Interest income 6 7
- Interest expense and amortization 329 377
of debt discount
Income Before Income Taxes $ 706 $ 841
- Provision for income taxes 186 120
- Net income attributable to 23 11
noncontrolling interests
- Preferred stock dividends 85 85
Net Income Available for The Dow Chemical $ 412 $ 625
Company Common Stockholders
(2) See Supplemental Information for a description of certain
items affecting results in 2012 and 2011.
Sales by Geographic Area
Three Months Ended
Mar 31, Mar 31,
In millions (Unaudited) 2012 2011
North America $ 5,337 $ 5,284
Europe, Middle East and Africa 5,367 5,358
Asia Pacific 2,420 2,485
Latin America 1,595 1,606
Total $ 14,719 $ 14,733
Sales Volume and Price by Operating
Segment and Geographic Area
Three Months Ended
March 31, 2012
Percentage change Volume Price Total
from prior year
Electronic and Functional (2 )% 1 % (1 )%
Materials
Coatings and Infrastructure -- (2 ) (2 )
Solutions
Agricultural Sciences 12 2 14
Performance Materials -- (2 ) (2 )
Performance Plastics (11 ) -- (11 )
Feedstocks and Energy 7 6 13
Total (1 )% 1 % -- %
North America (2 )% 3 % 1 %
Europe, Middle East and Africa 1 (1 ) --
Asia Pacific (1 ) (1 ) (2 )
Latin America (3 ) 2 (1 )
Total (1 )% 1 % -- %
Sales Volume and Price by Operating
Segment and Geographic Area
Excluding Divestitures (3)
Three Months Ended
March 31, 2012
Percentage change Volume Price Total
from prior year
Electronic and Functional (2 )% 1 % (1 )%
Materials
Coatings and Infrastructure -- (2 ) (2 )
Solutions
Agricultural Sciences 12 2 14
Performance Materials 2 (2 ) --
Performance Plastics -- -- --
Feedstocks and Energy 7 6 13
Total 3 % 1 % 4 %
North America 2 % 3 % 5 %
Europe, Middle East and Africa 7 (1 ) 6
Asia Pacific (1 ) (1 ) (2 )
Latin America (1 ) 2 1
Total 3 % 1 % 4 %
(3) Excludes sales of the Polypropylene business divested on
September 30, 2011 and sales of Dow Haltermann which was divested
during 2011.
Supplemental Information
Description of Certain Items Affecting Results:
The following table summarizes the impact of certain items
recorded in the three-month periods ended March 31, 2012 and March
31, 2011:
Certain Items Pretax Impact (1) Net Income (2) EPS - Diluted (3)
Impacting
Results
Three Months Ended Three Months Ended Three Months Ended
Mar 31, Mar 31, Mar 31, Mar 31, Mar 31, Mar 31,
In millions, 2012 2011 2012 2011 2012 2011
except
per share
amounts
(Unaudited)
Adjusted to $ 714 $ 952 $ 0.61 $ 0.82
exclude
certain
items
(non-GAAP
measures)
Certain items:
Restructuring $ (357 ) $ -- (287 ) -- (0.25 ) --
charges
Acquisition-related -- (31 ) -- (20 ) -- (0.02 )
integration
expenses
Loss (24 ) (472 ) (15 ) (307 ) (0.01 ) (0.26 )
on
early
extinguishment
of debt
Total certain $ (381 ) $ (503 ) $ (302 ) $ (327 ) $ (0.26 ) $ (0.28 )
items
Reported (GAAP $ 412 $ 625 $ 0.35 $ 0.54
amounts)
(1) Impact on "Income Before Income Taxes"
(2) "Net Income Available for The Dow Chemical
Company Common Stockholders"
(3) "Earnings per common share - diluted"
Results in the first quarter of 2012 were unfavorably impacted
by two items:
-- Pretax restructuring charges of $357 million. On March 27, 2012, the
Company's Board of Directors approved a restructuring plan as
part of
a series of actions to optimize its portfolio, respond to
changing and
volatile economic conditions, particularly in Western Europe,
and to
advance the Company's Efficiency for Growth program, initiated
by the
Company in the second quarter of 2011. The restructuring plan
includes
the shutdown of a number of manufacturing facilities and a
workforce
reduction. As a result of these activities, the Company
recorded
pretax restructuring charges of $357 million in the first
quarter of
2012 consisting of costs associated with exit and disposal
activities
of $150 million, severance costs of $113 million and costs
associated
with asset write-downs and write-offs of $94 million. The impact
of
the charges is shown as "Restructuring charges" in the
consolidated
statements of income and is reflected in the Company's segment
results
as follows: $17 million in Electronic and Functional Materials,
$41
million in Coatings and Infrastructure Solutions, $186 million
in
Performance Materials and $113 million in Corporate.
-- Pretax loss of $24 million on the early extinguishment of debt
included in "Sundry income (expense) - net" in the
consolidated
statements of income and reflected in Corporate.
Results in the first quarter of 2011 were unfavorably impacted
by two items:
-- Pretax charges totaling $31 million for integration costs related to
the April 1, 2009 acquisition of Rohm and Haas Company. The
charges
are included in "Acquisition-related integration expenses" in
the
consolidated statements of income and reflected in
Corporate.
-- Pretax loss of $472 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 Company
Rebecca Bentley
+1 989 638 8568
rmbentley@dow.com
Dow Chem. (LSE:DOW)
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Dow Chem. (LSE:DOW)
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