TIDMDOW
The Dow Chemical Company (NYSE: DOW):
Third Quarter 2012 Highlights
-- Dow reported earnings of $0.42 per share. This compares with earnings
of $0.69 per share in the same quarter last year, or adjusted
earnings
of $0.62 per share(1).
-- Sales were $13.6 billion, down 10 percent, or 7 percent on an adjusted
sales(2) basis. The decline was led by Europe, which
decreased 10 percent on the same basis driven by adverse
currency
conditions totaling more than $520 million.
-- Volume declined 1 percent, or rose 2 percent on an adjusted basis.
Volume was up in all geographic areas on the same basis, and
increases
were reported in Agricultural Sciences (up 7 percent),
Performance
Plastics (up 5 percent), Performance Materials (up 4 percent),
and
Coatings and Infrastructure Solutions (up 1 percent).
-- Price declined 9 percent, with double-digit decreases in most
businesses. Price was down in all geographic areas, led by
Europe and
Greater China, which declined 12 percent and 11 percent,
respectively
on an adjusted basis. Purchased feedstock and energy costs
decreased
by $1.2 billion versus the same quarter last year.
-- The Company's operating rate was 83 percent for the quarter, flat
versus the year-ago period and up 5 percentage points versus the
prior
quarter.
-- Equity earnings were $175 million, compared with $375 million in the
year-ago period, or $289 million in the year-ago period
excluding
certain items. Dow Corning represented the largest driver of
the
decline, due to ongoing weakness in the polysilicon value
chain.
-- EBITDA(3) was $1.8 billion. Adjusted EBITDA margin(4)
was essentially flat versus the year-ago period. Performance
Plastics
and Performance Materials both increased adjusted EBITDA
margins
versus the prior year, up 290 basis points and 150 basis
points,
respectively.
-- Dow delivered $1.1 billion in cash flow from operations in the
quarter. Year-to-date, Dow has increased cash flow from
operations
more than $650 million versus the year-ago period. In addition,
the
Company began to accelerate cost and cash interventions
announced
previously in the year, demonstrated by a $200 million
sequential
decline in operational expenses.
-- The Company's debt declined by nearly $250 million in the quarter, and
its net debt(5) to total capitalization declined to
39.7 percent, in line with the Company's previously stated
target of
less than 40 percent.
Comment
Andrew N. Liveris, Dow's chairman and chief executive officer,
stated:
"Dow's results this quarter demonstrate the acceleration and
delivery of our cost reduction actions. We focused on execution and
intervened to protect our prioritized growth path. Our low-cost
feedstock advantage enabled us to deliver volume growth - despite
weakening demand. And we have delivered improvements in operating
cash flow through our disciplined approach. The purposeful actions
we announced earlier this year are gaining momentum, and will be
bolstered by our new, streamlined operating model. Further, with
today's restructuring announcement, we now have a full array of
aggressive cash generation measures in place, with tight controls
on working capital, and reductions in costs and capital
expenditures - particularly in Europe - and by strict and firm
prioritization of our growth projects. Moving forward, Dow is
squarely focused on driving cost efficiencies, generating cash and
earnings growth."
Three Months Ended
In millions, except per share amounts Sept. 30, Sept. 30,
2012 2011
Net Sales $13,637 $15,109
Adjusted Sales $13,637 $14,642
Net Income Available for Common Stockholders $497 $815
Net Income Available for Common Stockholders, $497 $729
excluding Certain Items
Earnings per Common Share - diluted $0.42 $0.69
Adjusted Earnings per Share $0.42 $0.62
Review of Third Quarter Results
The Dow Chemical Company (NYSE: DOW) reported sales of $13.6
billion, down 10 percent, or 7 percent on an adjusted sales
basis.The decline was led by Europe, which decreased 10 percent on
the same basis driven by adverse currency conditions totaling more
than $520 million.
Volume declined 1 percent, or rose 2 percent on an adjusted
basis. On the same basis, volume was up in all geographic areas,
and increases were reported in Agricultural Sciences (up 7
percent), Performance Plastics (up 5 percent), Performance
Materials (up 4 percent), and Coatings and Infrastructure Solutions
(up 1 percent).
Price declined 9 percent, and purchased feedstock and energy
costs decreased by $1.2 billion versus the same quarter last year.
Price declined in all geographic areas, led by Europe (down 12
percent) and Greater China (down 11 percent), on an adjusted
basis.
The Company reported EBITDAof $1.8 billion. On an adjusted
basis, EBITDA margins were essentially flat versus the year-ago
period. On the same basis, Performance Plastics and Performance
Materials both increased EBITDA margins versus the prior period, up
290 basis points and 150 basis points, respectively.
Earnings for the quarter were $0.42 per share. This compares
with earnings of $0.69 per share in the same quarter last year, or
adjusted earnings of $0.62 per share. Certain items in the
prior-year period consisted of a pretax $86 million gain related to
cash collected on a previously impaired note receivable related to
Equipolymers, a nonconsolidated affiliate. (See Supplemental
Information at the end of the release for a description of certain
items affecting results in all periods presented.)
Dow's global operating rate was 83 percent for the quarter, flat
versus the year-ago period, and up 5 percentage points versus the
prior quarter.
Research and Development (R&D) expenses and Selling, General
and Administrative (SG&A) expenses both increased versus the
same period last year, as the Company continued to invest in growth
programs. Moving forward, these expenses are expected to decline as
Dow begins implementing restructuring actions announced October 23,
2012.
Equity earnings were $175 million, compared with $375 million in
the year-ago period, or $289 million, excluding certain items.
Ongoing weakness in the polysilicon value chain for Dow Corning
represented the largest driver of the decline.
The Company's debt declined by nearly $250 million in the
quarter, and its net debt to total capitalization declined to 39.7
percent, in line with the Company's previously stated target of
less than 40 percent.
"Dow's results this quarter demonstrate the acceleration and
delivery of our cost reduction actions," said Andrew N. Liveris,
Dow's chairman and chief executive officer. "We focused on
execution and intervened to protect our prioritized growth path.
Our low-cost feedstock advantage enabled us to deliver volume
growth - despite weakening demand. And we have delivered
improvements in operating cash flow through our disciplined
approach. The purposeful actions we announced earlier this year are
gaining momentum, and will be bolstered by our new, streamlined
operating model. Further, with today's restructuring announcement,
we now have a full array of aggressive cash generation measures in
place, with tight controls on working capital, and reductions in
costs and capital expenditures - particularly in Europe - and by
strict and firm prioritization of our growth projects. Moving
forward, Dow is squarely focused on driving cost efficiencies,
generating cash and earnings growth."
Electronic and Functional Materials
Sales in Electronic and Functional Materials were $1.1 billion,
down 8 percent from the same quarter last year as price declined 5
percent and volume declined 3 percent. The electronics sector
continued to grow at a lower-than-forecasted rate, driving sales
declines within Dow Electronic Materials. Semiconductor
Technologies recorded flat sales, as a modest volume increase was
offset by price declines. Interconnect Technologies sales decreased
as a result of weak demand and pricing for metallization in all
regions.
Functional Materials revenue declined overall as global
uncertainty dampened sales. Dow Home and Personal Care reported
sales decreases due to continued weakness with global brand owners.
Strength in the energy sector drove volume gains in nearly all
regions for Dow Microbial Control. However, these gains were offset
by volume declines in North America due to lower rig counts,
combined with overall price decline, which resulted in flat sales
for the business.
Equity earnings for the segment were $27 million, up from $23
million versus the year-ago period. EBITDA was $273 million,
compared with $306 million in the same period last year.
Coatings and Infrastructure Solutions
Coatings and Infrastructure Solutions sales were $1.7 billion,
down 9 percent compared with the same period last year. Volume was
up 1 percent versus the prior year, while price declined 10
percent.
Dow Coating Materials reported decreased sales as a result of
declining prices. These declines were partially offset by volume
gains in nearly all regions, boosted by demand growth in Industrial
Coatings, with strength in traffic paint and paper coating
applications. Weak pricing in epoxy-based products continued to
hamper sales and profitability. Dow Building and Construction
experienced volume declines as a result of actions taken within the
quarter to improve profitability, particularly in Europe. The
business commercialized an award-winning Polymeric Flame Retardant,
an innovative response to local regulations. Dow Water and Process
Solutions sales declined primarily due to weakening sales in Asia
Pacific, particularly in China. In addition, the business posted a
profitability decline due in part to higher comparables in the
year-ago period associated with the realization of insurance claims
for its operations in Soma, Japan.
Equity earnings were $29 million, down from $72 million in the
same period last year. The decline was driven by Dow Corning as a
result of ongoing weakness in the polysilicon value chain. EBITDA
for the segment was $246 million. This compares with EBITDA of $372
million in the year-ago period.
Agricultural Sciences
Agricultural Sciences reported record third quarter sales of
$1.3 billion, up 8 percent versus the same period last year. Volume
increased 7 percent and price rose 1 percent. Double-digit sales
and volume gains were reported in both North America and Latin
America. The segment continues to benefit from solid industry
fundamentals, with elevated farm income levels providing strong
incentive for farmers to maximize yields.
Crop Protection reported sales growth of 6 percent, driven by
significant volume and sales gains in Latin America, as well as
continued adoption of new products. Seeds, Traits and Oils reported
a 21 percent sales increase as a result of the introduction and
ramp-up of new technologies.
Year to date, new Crop Protection molecules are up 21 percent,
led by spinetoram insecticide, aminopyralid herbicide and
pyroxsulam herbicide. Seeds, Traits and Oils has achieved strong
growth through the third quarter in key crops, including corn,
soybeans, healthy oils, and cotton. Strong customer and channel
support fueled gains for SmartStax® corn hybrids.
EBITDA for the segment was $63 million, compared with $75
million in the year-ago period, due to continued investments in
growth.
Performance Materials
Sales in Performance Materials were $3.4 billion, down 8 percent
versus the year-ago period, or 7 percent on an adjusted basis.
Volume increased 4 percent and price declined 11 percent on an
adjusted basis compared to the same period last year. The segment
reported volume growth in nearly all geographic areas, excluding
Latin America, where declines were driven primarily by the shutdown
of toluene diisocyanate capacity in Brazil.
Polyurethanes reported demand growth in Asia Pacific driven by
new propylene oxide capacity in Thailand. These volume gains more
than offset the price declines in Asia Pacific. Dow Oil and Gas
reported double-digit sales gains fueled by strong sector
fundamentals in both exploration and production, and refining and
processing. Dow Formulated Systems experienced volume growth in
nearly all geographic areas. However, this was offset by price
declines primarily in Europe, Middle East and Africa (EMEA).
Polyglycols, Surfactants and Fluids reported both price and volume
declines, as sales growth in Asia Pacific and Latin America was
more than offset by declines in North America and EMEA.
Equity losses were $30 million, versus a loss of $11 million in
the same period last year. EBITDA for the segment was $491 million,
compared with EBITDA of $478 million in the year-ago period. The
increase was driven by volume growth and margin expansion.
Performance Plastics
Sales in Performance Plastics were $3.5 billion. Sales declined
15 percent, or 5 percent on an adjusted basis. The segment posted a
5 percent increase in volume on the same basis, with gains in all
geographic areas. However, these gains were offset by a 10 percent
decline in price.
Dow Elastomers reported sales gains driven by double-digit
volume growth. NORDELTM achieved record volume in the quarter due
to strong customer demand. Dow Performance Packaging recorded
volume gains in all geographic areas led by Asia Pacific and North
America. Despite achieving price increases throughout the quarter,
the business reported overall price declines compared with the
year-ago period.
Dow Electrical and Telecommunications sales were up versus the
year-ago period, with large volume gains recorded in Asia-Pacific.
Dow Hygiene and Medical sales rose, fueled by volume gains in EMEA,
Asia Pacific, and Latin America, supported by strong customer
demand for ASPUNtm Fiber Grade Resins.
Equity earnings were $28 million, compared with $150 million, or
$64 million excluding certain items in the year-ago period. EBITDA
for the segment was $737 million, compared with $834 million, or
$748 million excluding certain items in the year-ago period.
Lower-cost feedstocks continued to drive higher margins in North
America and Latin America. This positive impact was partially
offset by naphtha-based margin pressure in Europe and Asia
Pacific.
Feedstocks and Energy
Sales in Feedstocks and Energy were $2.5 billion, down 13
percent versus the same period last year. Volume decreased 1
percent and price declined 12 percent. Lower sales in the
Chlor-Alkali/Chlor-Vinyl business were driven by price declines
resulting from weak polyvinyl chloride (PVC) market fundamentals.
The year-ago shutdown of the Company's vinyl chloride monomer (VCM)
asset in Louisiana drove volume declines in the business. Caustic
soda reported strong year-over-year demand growth for the fourth
consecutive quarter. However, this was more than offset by price
declines in all geographic areas. Ethylene Oxide/ Ethylene Glycol
maximized asset utilization, resulting in volume growth, while
weakening global ethylene glycol dynamics drove sales and price
declines.
Equity Earnings were $123 million, down from $153 million from
the same period last year. Equity earnings were unfavorably
impacted by a production outage at EQUATE during the quarter.
EBITDA for the segment was $200 million, compared with $263 million
in the same period last year.
Outlook
Commenting on the Company's outlook, Liveris said:
"Dow enters the fourth quarter and heads into 2013 on our front
foot. We previously outlined $2.5 billion of levers we could pull
to mitigate a slowing world economy. These actions are not only in
motion, but are beginning to take hold, as we demonstrated this
quarter.
"We recognize that these difficult conditions may have extended
staying power, as the new reality is that we are operating in a
slow-growth and volatile world. This requires an agile and
efficient response. The task before us is straightforward: We must
deliver value to our shareholders by a continuing focus on
improving return on capital, increasing cash flow and growing
earnings. And with our new, streamlined operating model and
management structure, our entire organization is focused on
delivering against these three objectives."
Dow will host a live Webcast of its third quarter earnings
conference call with investors to discuss its results, business
outlook and other matters tomorrow, October 24, 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) Adjusted EBITDA margin is defined as EBITDA excluding the
impact of "Certain Items" as a percentage of net sales.
(5) 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."
®SmartStax multi-event technology developed by Dow AgroSciences
LLC and Monsanto. SmartStax is a trademark of Monsanto Technology
LLC.tm trademark of The Dow Chemical Company (Dow") or an
affiliated company of Dow
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 financial measures: Dow's management believes
that measures of income adjusted to exclude certain items
("non-GAAP" financial measures) provide relevant and meaningful
information to investors about the ongoing operating results of the
Company. Such financial measures 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 financial measures of performance. Reconciliations of non-GAAP
financial measures to GAAP financial 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 Nine Months Ended
In millions, except Sep 30, Sep 30, Sep 30, Sep 30,
per share 2012 2011 2012 2011
amounts (Unaudited)
Net Sales $ 13,637 $ 15,109 $ 42,869 $ 45,888
Cost of sales 11,368 12,928 35,853 38,596
Research and 434 402 1,245 1,213
development
expenses
Selling, general and 739 691 2,120 2,086
administrative
expenses
Amortization of 117 125 361 373
intangibles
Restructuring charges -- -- 357 --
(Note B)
Acquisition-related -- -- -- 31
integration
expenses (Note C)
Equity in earnings 175 375 492 964
of nonconsolidated
affiliates (Note D)
Sundry income (21 ) 47 23 (322 )
(expense)
- net (Note E)
Interest income 10 9 26 26
Interest expense 318 305 959 1,010
and amortization
of debt discount
Income Before 825 1,089 2,515 3,247
Income Taxes
Provision for 234 186 664 546
income taxes
Net Income 591 903 1,851 2,701
Net income attributable 9 3 38 24
to
noncontrolling
interests
Net Income Attributable 582 900 1,813 2,677
to
The Dow Chemical
Company
Preferred stock 85 85 255 255
dividends
Net Income Available $ 497 $ 815 $ 1,558 $ 2,422
for The Dow Chemical
Company Common
Stockholders
Per Common Share Data:
Earnings per common $ 0.42 $ 0.70 $ 1.32 $ 2.08
share - basic
Earnings per common $ 0.42 $ 0.69 $ 1.31 $ 2.07
share - diluted
Common stock dividends $ 0.32 $ 0.25 $ 0.89 $ 0.65
declared
per share of
common stock
Weighted-average 1,172.7 1,152.3 1,167.8 1,147.2
common shares
outstanding - basic
Weighted-average 1,179.5 1,160.9 1,174.9 1,157.8
common shares
outstanding - diluted
Depreciation $ 514 $ 539 $ 1,530 $ 1,624
Capital Expenditures $ 622 $ 651 $ 1,605 $ 1,620
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: During 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 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 E: In the first quarter of 2012, the Company recognized a
pretax loss of $24 million on the early extinguishment of debt. In
the first half of 2011, the Company recognized a pretax loss of
$482 million on the early extinguishment of debt.
The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets
In millions (Unaudited) Sep 30, Dec 31,
2012 2011
Assets
Current Assets
Cash and cash equivalents (variable $ 3,885 $ 5,444
interest entities
restricted - 2012: $197; 2011: $170)
Marketable securities and interest-bearing -- 2
deposits
Accounts and notes receivable:
Trade (net of allowance for 5,169 4,900
doubtful receivables
- 2012: $139; 2011: $121)
Other 4,797 4,726
Inventories 8,630 7,577
Deferred income tax assets - current 666 471
Other current assets 318 302
Total current assets 23,465 23,422
Investments
Investment in nonconsolidated affiliates 3,374 3,405
Other investments (investments carried at fair 2,559 2,508
value - 2012: $2,068; 2011: $2,008)
Noncurrent receivables 1,238 1,144
Total investments 7,171 7,057
Property
Property 53,417 52,216
Less accumulated depreciation 35,860 34,917
Net property (variable interest 17,557 17,299
entities restricted
- 2012: $2,452; 2011: $2,169)
Other Assets
Goodwill 12,933 12,930
Other intangible assets (net 4,849 5,061
of accumulated amortization
- 2012: $2,684; 2011: $2,349)
Deferred income tax assets - noncurrent 2,407 2,559
Asbestos-related insurance 156 172
receivables - noncurrent
Deferred charges and other assets 830 724
Total other assets 21,175 21,446
Total Assets $ 69,368 $ 69,224
Liabilities and Equity
Current Liabilities
Notes payable $ 439 $ 541
Long-term debt due within one year 1,747 2,749
Accounts payable:
Trade 4,627 4,778
Other 2,338 2,216
Income taxes payable 404 382
Deferred income tax liabilities - current 97 129
Dividends payable 463 376
Accrued and other current liabilities 2,680 2,463
Total current liabilities 12,795 13,634
Long-Term Debt (variable interest entities 18,216 18,310
nonrecourse - 2012: $1,409; 2011: $1,138)
Other Noncurrent Liabilities
Deferred income tax liabilities - noncurrent 1,021 1,091
Pension and other postretirement 8,590 9,034
benefits - noncurrent
Asbestos-related liabilities - noncurrent 549 608
Other noncurrent obligations 3,089 3,109
Total other noncurrent liabilities 13,249 13,842
Redeemable Noncontrolling Interest 147 147
Stockholders' Equity
Preferred stock, series A 4,000 4,000
Common stock 2,998 2,961
Additional paid-in capital 3,112 2,663
Retained earnings 19,591 19,087
Accumulated other comprehensive loss (5,481 ) (5,996 )
Unearned ESOP shares (390 ) (434 )
The Dow Chemical Company's 23,830 22,281
stockholders' equity
Noncontrolling interests 1,131 1,010
Total equity 24,961 23,291
Total Liabilities and Equity $ 69,368 $ 69,224
See Notes to the Consolidated Financial Statements.
The Dow Chemical
Company
and Subsidiaries
Operating Segments
Three Months Ended Nine Months Ended
In Sep 30, Sep 30, Sep 30, Sep 30,
millions (Unaudited) 2012 2011 2012 2011
Sales by operating
segment
Electronic and $ 1,111 $ 1,205 $ 3,383 $ 3,536
Functional
Materials
Coatings 1,730 1,905 5,321 5,639
and Infrastructure
Solutions
Agricultural Sciences 1,302 1,205 4,816 4,311
Performance Materials 3,411 3,698 10,253 11,097
Performance Plastics 3,500 4,114 10,802 12,598
Feedstocks and Energy 2,521 2,905 8,113 8,456
Corporate 62 77 181 251
Total $ 13,637 $ 15,109 $ 42,869 $ 45,888
EBITDA (1) by
operating
segment
Electronic and $ 273 $ 306 $ 803 $ 850
Functional
Materials
Coatings 246 372 787 990
and Infrastructure
Solutions
Agricultural Sciences 63 75 821 768
Performance Materials 491 478 1,173 1,523
Performance Plastics 737 834 2,215 2,773
Feedstocks and Energy 200 263 532 765
Corporate (212 ) (229 ) (865 ) (1,296 )
Total $ 1,798 $ 2,099 $ 5,466 $ 6,373
Certain items
increasing
(decreasing)
EBITDA by operating
segment (2)
Electronic and $ -- $ -- $ (17 ) $ --
Functional
Materials
Coatings -- -- (41 ) --
and Infrastructure
Solutions
Agricultural Sciences -- -- -- --
Performance Materials -- -- (186 ) --
Performance Plastics -- 86 -- 86
Feedstocks and Energy -- -- -- --
Corporate -- -- (137 ) (513 )
Total $ -- $ 86 $ (381 ) $ (427 )
EBITDA excluding
certain items
by operating segment
Electronic and $ 273 $ 306 $ 820 $ 850
Functional
Materials
Coatings 246 372 828 990
and Infrastructure
Solutions
Agricultural Sciences 63 75 821 768
Performance Materials 491 478 1,359 1,523
Performance Plastics 737 748 2,215 2,687
Feedstocks and Energy 200 263 532 765
Corporate (212 ) (229 ) (728 ) (783 )
Total $ 1,798 $ 2,013 $ 5,847 $ 6,800
Continued
The
Dow Chemical
Company
and
Subsidiaries
Operating
Segments
(Continued)
Three Months Ended Nine Months Ended
In Sep 30, Sep 30, Sep 30, Sep 30,
millions 2012 2011 2012 2011
(Unaudited)
Equity in
earnings
(losses) of
nonconsolidated
affiliates
by operating
segment
(included in
EBITDA)
Electronic and $ 27 $ 23 $ 81 $ 72
Functional
Materials
Coatings 29 72 96 219
and
Infrastructure
Solutions
Agricultural 3 -- 3 3
Sciences
Performance (30 ) (11 ) (67 ) (20 )
Materials
Performance 28 150 101 271
Plastics
Feedstocks 123 153 300 446
and Energy
Corporate (5 ) (12 ) (22 ) (27 )
Total $ 175 $ 375 $ 492 $ 964
(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 by operating segment includes all
operating items relating to the businesses, except depreciation and
amortization; items that principally apply to the Company as a
whole are assigned to Corporate. A reconciliation of EBITDA to "Net
Income Available for The Dow Chemical Company Common Stockholders"
is provided below.
Reconciliation Three Months Ended Nine Months Ended
of EBITDA to
"Net Income
Available
for
The Dow Chemical
Company
Common Stockholders"
In Sep 30, Sep 30, Sep 30, Sep 30,
millions (Unaudited) 2012 2011 2012 2011
EBITDA $ 1,798 $ 2,099 $ 5,466 $ 6,373
- Depreciation and 665 714 2,018 2,142
amortization
+ Interest income 10 9 26 26
- Interest expense 318 305 959 1,010
and amortization
of debt discount
Income Before $ 825 $ 1,089 $ 2,515 $ 3,247
Income Taxes
- Provision for 234 186 664 546
income taxes
- Net income 9 3 38 24
attributable
to
noncontrolling
interests
- Preferred stock 85 85 255 255
dividends
Net Income Available $ 497 $ 815 $ 1,558 $ 2,422
for The Dow Chemical
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 Nine Months Ended
In millions (Unaudited) Sep 30, Sep 30, Sep 30, Sep 30,
2012 2011 2012 2011
North America $ 4,802 $ 5,375 $ 15,480 $ 16,473
Europe, Middle East 4,446 5,125 14,680 16,196
and Africa
Asia Pacific 2,520 2,659 7,585 7,885
Latin America 1,869 1,950 5,124 5,334
Total $ 13,637 $ 15,109 $ 42,869 $ 45,888
Sales
Volume
and Price
by
Operating
Segment
and
Geographic
Area
Three Months Ended Nine Months Ended
Sep 30, 2012 Sep 30, 2012
Percentage Volume Price Total Volume Price Total
change
from prior
year
Electronic (3 )% (5 )% (8 )% (3 )% (1 )% (4 )%
and
Functional
Materials
Coatings 1 (10 ) (9 ) 1 (7 ) (6 )
and
Infrastructure
Solutions
Agricultural 7 1 8 10 2 12
Sciences
Performance 3 (11 ) (8 ) (1 ) (7 ) (8 )
Materials
Performance (6 ) (9 ) (15 ) (8 ) (6 ) (14 )
Plastics
Feedstocks (1 ) (12 ) (13 ) (1 ) (3 ) (4 )
and Energy
Total (1 )% (9 )% (10 )% (2 )% (5 )% (7 )%
North (3 )% (8 )% (11 )% (3 )% (3 )% (6 )%
America
Europe, (2 ) (11 ) (13 ) (3 ) (6 ) (9 )
Middle
East
and Africa
Asia 5 (10 ) (5 ) 2 (6 ) (4 )
Pacific
Latin 1 (5 ) (4 ) (2 ) (2 ) (4 )
America
Total (1 )% (9 )% (10 )% (2 )% (5 )% (7 )%
Sales
Volume
and Price
by
Operating
Segment
and
Geographic
Area
Excluding
Divestitures
(3)
Three Months Ended Nine Months Ended
Sep 30, 2012 Sep 30, 2012
Percentage Volume Price Total Volume Price Total
change
from prior
year
Electronic (3 )% (5 )% (8 )% (3 )% (1 )% (4 )%
and
Functional
Materials
Coatings 1 (10 ) (9 ) 1 (7 ) (6 )
and
Infrastructure
Solutions
Agricultural 7 1 8 10 2 12
Sciences
Performance 4 (11 ) (7 ) 1 (7 ) (6 )
Materials
Performance 5 (10 ) (5 ) 3 (6 ) (3 )
Plastics
Feedstocks (1 ) (12 ) (13 ) (1 ) (3 ) (4 )
and Energy
Total 2 % (9 )% (7 )% 2 % (5 )% (3 )%
North 1 % (8 )% (7 )% 1 % (3 )% (2 )%
America
Europe, 3 (12 ) (9 ) 3 (7 ) (4 )
Middle
East
and Africa
Asia 5 (10 ) (5 ) 2 (6 ) (4 )
Pacific
Latin 2 (5 ) (3 ) (1 ) (2 ) (3 )
America
Total 2 % (9 )% (7 )% 2 % (5 )% (3 )%
(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 September 30, 2012 and
September 30, 2011:
Certain Pretax Impact (1) Net Income (2) EPS - Diluted (3)
Items
Impacting
Results
Three Months Ended Three Months Ended Three Months Ended
In Sep 30, Sep 30, Sep 30, Sep 30, Sep 30, Sep 30,
millions, 2012 2011 2012 2011 2012 2011
except
per share
amounts
(Unaudited)
Adjusted $ 497 $ 729 $ 0.42 $ 0.62
to
exclude
certain
items
(non-GAAP
measures)
Certain
items:
Gain $ -- $ 86 -- 86 -- 0.07
on
collection
of
impaired
note
receivable
Total $ -- $ 86 $ -- $ 86 $ -- $ 0.07
certain
items
Reported $ 497 $ 815 $ 0.42 $ 0.69
(GAAP
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 third quarter of 2011 were impacted by one
item:
-- 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.
The following table summarizes the impact of certain items
recorded in the nine-month periods ended September 30, 2012 and
September 30, 2011:
Certain Items Pretax Impact (1) Net Income (2) EPS - Diluted (3)
Impacting
Results
Nine Months Ended Nine Months Ended Nine Months Ended
In millions, Sep 30, Sep 30, Sep 30, Sep 30, Sep 30, Sep 30,
except 2012 2011 2012 2011 2012 2011
per share
amounts
(Unaudited)
Adjusted to $ 1,860 $ 2,670 $ 1.57 $ 2.29
exclude
certain
items
(non-GAAP
measures)
Certain items:
Restructuring $ (357 ) $ -- (287 ) -- (0.25 ) --
charges
Acquisition-related -- (31 ) -- (20 ) -- (0.02 )
integration
expenses
Gain -- 86 -- 86 -- 0.07
on collection
of impaired
note
receivable
Loss (24 ) (482 ) (15 ) (314 ) (0.01 ) (0.27 )
on
early
extinguishment
of debt
Total certain $ (381 ) $ (427 ) $ (302 ) $ (248 ) $ (0.26 ) $ (0.22 )
items
Reported (GAAP $ 1,558 $ 2,422 $ 1.31 $ 2.07
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 for the nine-month period ended September 30, 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.
In addition to the item described above for the third quarter of
2011, results for the nine-month period ended September 30, 2011
were impacted by the following 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 $482 million on the early extinguishment of debt,
included in "Sundry income (expense) - net" and reflected in
Corporate.
The Dow Chemical CompanyRebecca Bentley+1 989 638
8568rmbentley@dow.com
Dow Chem. (LSE:DOW)
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Dow Chem. (LSE:DOW)
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