Earnings per Share Rise to $0.97, or $0.91 on
an Operating Basis – up 23 Percent versus the Year-Ago Period;
EBITDA Increases to $2.4 Billion, or $2.5
Billion on an Operating Basis, Highest All-Time 2Q Operating
EBITDA;
Operating EBITDA Margin Expands to 19 Percent,
Up 396 Basis Points;
Dow Delivers 11th Consecutive Quarter of
Year-Over-Year Operating EPS, EBITDA and EBITDA Margin
Expansion
The Dow Chemical Company (NYSE: DOW):
Second Quarter 2015 Highlights
- Dow reported earnings per share of
$0.97, or operating earnings per share of $0.91(1). This compares
with earnings of $0.73 per share in the year-ago period, or
earnings of $0.74 per share on an operating basis – up 23 percent
versus the year-ago period. Results in the quarter were impacted by
a $375 million pre-tax charge, or $0.21 per share, associated with
the previously announced restructuring program, costs related to
portfolio and productivity actions of $0.03 per share, and the
favorable impact of $0.30 per share related to the consolidation of
Univation Technologies, LLC.
- Sales were $12.9 billion, down 13
percent year over year, with declines driven primarily by currency
and lower oil price. Sequentially, sales grew 4 percent with gains
across all geographic areas. Sales increases were led by Greater
China (up 14 percent) and the United States (up 6
percent).
- Volume rose 2 percent, or 3 percent
excluding Hydrocarbons and Energy and divestments on a
year-over-year basis led by Performance Plastics (up 9 percent). On
the same basis, geographic volume growth was led by Greater China
(up 9 percent), Europe (up 6 percent) and the United States
(up 2 percent). Sequentially, volume grew 4 percent excluding
Hydrocarbons and Energy and divestments, led by Greater China (up
12 percent), the United States (up 5 percent) and Latin
America (up 3 percent).
- EBITDA(2) rose to $2.4 billion, or $2.5
billion on an operating basis(3) – up $210 million versus the
year-ago period. Gains were led by Performance Plastics,
Performance Materials & Chemicals and Agricultural Sciences.
Performance Plastics operating EBITDA represented a new second
quarter record. Overall, the Company achieved a first-half EBITDA
of $5.4 billion, or a record $4.9 billion on an operating
basis.
- Operating EBITDA margin(4) expanded to
19 percent, up 396 basis points versus the year-ago period. Gains
were due to strong margins in Performance Plastics and Performance
Materials & Chemicals. This represents the highest second
quarter operating EBITDA margin since 2005.
- Year-to-date, cash from operations was
$2.7 billion, up $700 million versus the same period last year. On
the same basis, Dow has returned $1.5 billion to shareholders
through declared dividends and share repurchases.
- The Company announced a series of
execution milestones in its portfolio management program including:
the achievement of several significant regulatory clearances for
the chlor-alkali and derivatives divestiture transaction; the
mechanical completion and initiation of commissioning of the
propane dehydrogenation unit in Texas Operations; the consolidation
of Univation Technologies, LLC; and the signing of a definitive
agreement for the divestiture of its post-harvest specialty
chemical business, AgroFresh. Dow also achieved regulatory
clearances for its ARYLEXTM and ISOCLASTTM actives in Europe and
announced the first commercial sale of ENLIST DUOTM herbicide in
the United States in the quarter.
Comment
Andrew N. Liveris, Dow’s chairman and chief executive officer,
stated:
“Dow’s outstanding second quarter and first-half results
illustrate our relentless focus on execution against our strategy
and proactive self-help actions to deliver strong financial
performance. Through disciplined commercial and operational
excellence, coupled with underlying strength in demand for Dow
products, we once again generated significant earnings growth,
margin expansion and strong free cash flow in the quarter – in the
midst of record-level growth capital spending. I am proud of the
Dow team for achieving all-time second quarter operating EBITDA
records.
“Our strategy is delivering, as evidenced by the Company’s
consistently improving financial performance for the past eleven
quarters. We continue to realize a strong competitive advantage
from productivity, the benefits of our investments in propane
flexibility and our backbone of physical and technology
integration. We have also accelerated our customer-driven execution
by combining the power of rapid test R&D with high-touch
marketing to drive the development of innovative and in-demand
material and ag-science solutions. We are accessing big data more
quickly, which in turn, is improving the Company’s insight and
information quality and allowing us to operate more effectively and
meet ever-evolving customer needs. These actions continue to raise
both our current earnings and the earnings potential of our
enterprise.”
Three Months Ended June 30, June 30, In millions,
except per share amounts 2015 2014 Net Sales $12,910
$14,917 Adjusted Sales(5) $12,879 $14,818 Net Income
Available for Common Stockholders $1,135 $882 Net Income Available
for Common Stockholders,
Excluding Certain Items
$1,064 $893 Earnings per Common Share - Diluted $0.97 $0.73
Operating Earnings per Share $0.91 $0.74
Review of Second Quarter Results
The Dow Chemical Company (NYSE: DOW) reported earnings per share
of $0.97 or operating earnings per share of $0.91. This compares
with earnings of $0.73 per share in the year-ago period, or
earnings of $0.74 per share on an operating basis – up 23 percent
versus the year-ago period.
Sales were $12.9 billion, down 13 percent year over year, with
declines driven primarily by currency and lower oil price.
Sequentially, sales grew 4 percent with gains across all geographic
areas. Sales increases were led by Greater China (up
14 percent) and the United States (up 6 percent).
Volume rose 2 percent, or 3 percent excluding Hydrocarbons and
Energy and divestments on a year-over-year basis led by Performance
Plastics (up 9 percent). On the same basis, geographic volume
growth was led by Greater China (up 9 percent), Europe (up
6 percent) and the United States (up 2 percent). Sequentially,
volume grew 4 percent excluding Hydrocarbons and Energy and
divestments, led by Greater China (up 12 percent), the United
States (up 5 percent) and Latin America (up 3 percent).
EBITDA rose to $2.4 billion, or $2.5 billion on an operating
basis – up $210 million versus the year-ago period. Gains were led
by Performance Plastics, Performance Materials & Chemicals and
Agricultural Sciences. Performance Plastics operating EBITDA
represented a new second quarter record. Overall, the Company
achieved a first-half EBITDA of $5.4 billion, or a record $4.9
billion on an operating basis.
Operating EBITDA margin expanded to 19 percent, up 396 basis
points versus the year-ago period. Gains were due to strong margins
in Performance Plastics and Performance Materials & Chemicals.
This represents the highest second quarter operating EBITDA margin
since 2005.
Certain Items in the current quarter included pre-tax charges of
$375 million, or $0.21 per share, associated with the previously
announced restructuring program, costs related to portfolio and
productivity actions of $0.03 per share, and the favorable impact
of $0.30 per share related to the consolidation of Univation
Technologies, LLC. (See Supplemental Information at the end of the
release for a description of Certain Items affecting results.)
Research and Development (R&D) expenses and Selling, General
and Administrative (SG&A) expenses together increased 3 percent
versus the year-ago period due primarily to an increase in employee
performance-based compensation.
Year-to-date, cash from operations was $2.7 billion, up $700
million versus the same period last year. On the same basis, Dow
has returned $1.5 billion to shareholders through declared
dividends and share repurchases.
The Company announced a series of execution milestones in its
portfolio management program including: the achievement of several
significant regulatory clearances for the chlor-alkali and
derivatives divestiture transaction; the mechanical completion and
initiation of commissioning of the propane dehydrogenation unit in
Texas Operations; the consolidation of Univation Technologies, LLC;
and the signing of a definitive agreement for the divestiture of
its post-harvest specialty chemical business, AgroFresh. Dow also
achieved regulatory clearances for its ARYLEXTM and ISOCLASTTM
actives in Europe and announced the first commercial sale of ENLIST
DUOTM herbicide in the United States in the quarter.
Agricultural Sciences
Agricultural Sciences reported second quarter sales of
$1.7 billion. Volume growth was achieved in Europe, Middle
East, Africa and India (EMEAI) and Asia Pacific but was more than
offset by lower demand in Latin America and North America. Lower
crop commodity prices, driving a flat agricultural market, together
with significant currency headwinds, impacted results. New Crop
Protection product sales for the segment were up 5 percent,
driven by spinetoram insecticide. Crop Protection reported
decreased sales due to currency headwinds with volume impacted by
lower glyphosate sales and missed applications caused by wet
weather conditions in North America. Seeds reported decreased
sales, driven by shifting acreage out of corn to soybeans and
currency headwinds.
The segment achieved significant regulatory milestones with the
approval of ENLIST™ corn and soybean traits in Brazil, ENLIST E3™
soybeans in Argentina, and the active ingredients in ARYLEX™
herbicide and ISOCLAST™ insecticide at the European level. The
business also announced and received positive grower feedback with
the first commercial sales of ENLIST DUO™ herbicides in the United
States. Additionally, the Company announced the signing of a
definitive agreement for the divestiture of AgroFresh, its
post-harvest specialty chemical business.
Operating EBITDA for the segment was $269 million, up 8
percent from $249 million in the year-ago period – as a result
of productivity actions as well as a gain related to the sale of a
product line.
Consumer Solutions
Consumer Solutions reported second quarter sales of
$1.1 billion, as sales gains in North America were more than
offset by declines in Asia Pacific and EMEAI.
Sales for all businesses within the operating segment were
lower, driven primarily by currency headwinds in EMEAI. Dow
Automotive Systems reported volume gains in EMEAI and North America
related to innovation and new business wins. Consumer Care reported
decreased sales due to unfavorable currency impacts and softened
conditions in the home care and industrial market sectors. Dow
Electronic Materials reported sales declines despite healthy demand
in Semiconductor Technologies due to strong MSI(6) growth from
mobile device applications, notably in Asia Pacific and North
America. The business experienced weakness in demand for Display
Technologies and Interconnect Technologies as the market awaits new
technology product releases.
Operating EBITDA for the segment was $236 million, down
from $263 million in the year-ago period – as volume declined
despite pockets of strong demand for differentiated product lines
coupled with currency and price headwinds across the segment. Dow
Automotive Systems delivered a second quarter operating EBITDA
record. The business reported margin expansion on continued demand
for premium vehicles and large SUVs with higher Dow content per
vehicle.
Equity earnings for the segment were $19 million, down from
$21 million in the same quarter last year.
Infrastructure Solutions
Infrastructure Solutions reported second quarter sales of $2
billion, reflecting headwinds from price and currency.
Sales for all businesses within the operating segment were
lower, impacted by price and currency headwinds. Dow Building &
Construction reported volume growth in EMEAI and North America.
Demand remains strong for innovative product offerings in the
acrylics envelope, with Dow registering share gains in several key
targeted markets. Demand remained strong for reverse osmosis
technologies in Energy & Water Solutions, which was more than
offset by the fall-off in North American energy exploration and
fracturing markets. Sales declines in Performance Monomers were due
to price decreases driven by ongoing trough conditions for acrylic
acid, which more than offset double-digit improvements in demand
for vinyl acetate monomers. Dow Coating Materials reported volume
gains due to strength in industrial coating applications, while
experiencing moderate-to-soft conditions for architectural coating
applications.
Operating EBITDA for the segment was $267 million, down
from $310 million in the year-ago period – reflecting the
continued trough in acrylic acid supply/demand dynamics and
weakness in the energy industry. Dow Building & Construction
reported record quarterly operating EBITDA performance and Dow
Coating Materials also had a strong quarter, with both businesses
realizing double-digit operating EBITDA growth.
Equity earnings for the segment were $35 million, down from
$45 million in the same quarter last year.
Performance Materials & Chemicals
Performance Materials & Chemicals reported second quarter
sales of $3.2 billion, as pricing impacts and currency headwinds
offset overall increased demand.
Sales for all businesses within the operating segment were
lower, impacted by price and currency headwinds. Polyurethanes
reported volume growth on improved operations and demand resulting
from Dow’s localized marketing approach. Steady demand in
Chlor-Alkali and Vinyl in North America and Asia Pacific was more
than offset by declines in EMEAI and Latin America. Epoxy grew
volume from self-help, with strong demand in EMEAI overcoming
oversupply in Greater China. Industrial Solutions reported volume
increases (excluding the impact of recently completed divestitures)
due to strength in EMEAI and Asia Pacific.
Operating EBITDA for the segment was $572 million, up 28
percent from $447 million in the year-ago period – reflecting
solid demand and margin expansion from productivity, price volume
management and lower costs. Polyurethanes achieved record second
quarter operating EBITDA performance. Chlor-Alkali and Vinyl
realized solid operating EBITDA behind strong integrated demand for
chlorine and improved operations reliability in North America.
Industrial Solutions reported operating EBITDA gains on strength in
durables, lubricants and agricultural market applications.
Equity earnings for the segment were $122 million, up from
$97 million in the same quarter last year.
Performance Plastics
Performance Plastics reported second quarter sales of $4.8
billion. Excluding Hydrocarbons and Energy, volume gains in all
geographic areas were more than offset by lower global pricing and
currency headwinds in EMEAI.
Sales for most businesses within the operating segment were
lower, impacted by price and currency headwinds. In Dow Packaging
and Specialty Plastics, volume rose in high-end, differentiated
markets such as food and specialty packaging and hygiene and
medical. Dow Elastomers reported increased sales as double-digit
volume gains on strong demand overcame currency impacts. Continued
strength in demand for Dow products in the transportation,
infrastructure and consumer goods sectors reflected tight industry
conditions. In Dow Electrical and Telecommunications, volume gains
in the quarter were dampened by carry-over supply disruptions,
which began in the first quarter, causing second quarter sales
impacts. The Hydrocarbons and Energy businesses reported decreased
sales primarily due to lower prices for ethylene byproducts, which
decreased along with lower oil prices.
Operating EBITDA for the segment was $1.2 billion, up 15 percent
from $1.0 billion in the year-ago period – representing a
second quarter segment record – as margin expansion was led by
integration and differentiation in high-value businesses aligned to
strategic end-markets. Dow Elastomers achieved record quarterly
operating EBITDA and Dow Packaging and Specialty Plastics delivered
its highest second quarter operating EBITDA performance.
Equity earnings for the segment were $101 million, up from
$68 million in the same quarter last year.
Outlook
Commenting on the Company’s outlook, Liveris said:
“In a period of ongoing economic volatility, our order loading
remains strong. We see growing momentum in construction, packaging
and automotive markets outweighing some softness in agriculture and
energy-related markets, and we are geographically positioned to
grow where growth exists. We are consistently and strategically
building upon our competitive advantage behind our superior
low-cost integrated assets and best-in-class innovation –
developing solutions that build our momentum and broaden our
share-of-wallet in attractive end markets. And we continue to drive
all of our portfolio management programs through focused execution.
Specifically, our growth investments – including both integrated
assets on the U.S. Gulf Coast and in Saudi Arabia, as well as new
technology launches – remain on track and are beginning to deliver
significant earnings growth.
“The bottom line is that we remain disciplined managers of our
owners’ assets: We continue to advance our portfolio
transformation, productivity actions and innovation-driven
marketing to consistently grow the bottom line while increasing
returns and shareholder rewards. We have been doing just that for
eleven straight quarters. We will continue doing so.”
Dow will host a live webcast of its second 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) Operating 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 operating earnings per share
to “Earnings per common share - diluted.” (2) 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. (3) Operating
EBITDA is defined as EBITDA excluding the impact of “Certain
Items.” (4) Operating EBITDA margin is defined as EBITDA excluding
the impact of Certain Items as a percentage of reported sales. (5)
“Adjusted Sales” is “Net Sales” adjusted for prior period
divestitures and current period acquisitions. (6) Millions of
Square Inches of silicon processed
™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 is driving innovations that extract value from the
intersection of chemical, physical and biological sciences to help
address many of the world's most challenging problems such as the
need for clean water, clean energy generation and conservation, and
increasing agricultural productivity. Dow's integrated,
market-driven, 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 180 countries and in high-growth sectors such
as packaging, electronics, water, coatings and agriculture. In
2014, Dow had annual sales of more than $58 billion and
employed approximately 53,000 people worldwide. The Company's
more than 6,000 product families are manufactured at 201 sites
in 35 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 Dow’s operations,
markets, products, services, prices and other factors as discussed
in filings with the Securities and Exchange Commission (“SEC”).
These risks and uncertainties include, but are not limited to,
economic, competitive, legal, governmental and technological
factors. Accordingly, there is no assurance that Dow’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. This document also contains statements about Dow’s
agreement to separate a substantial portion of its chlor-alkali and
downstream derivatives business, distribute the business to Dow
shareholders and then merge it with a subsidiary of Olin
Corporation (the “Transaction”). Many factors could cause actual
results to differ materially from these forward-looking statements
with respect to the Transaction, including risks relating to the
completion of the transaction on anticipated terms and timing,
including obtaining shareholder and regulatory approvals,
anticipated tax treatment, unforeseen liabilities, future capital
expenditures, revenues, expenses, earnings, synergies, economic
performance, indebtedness, financial condition, losses, future
prospects, business and management strategies for the management,
expansion and growth of the new combined company’s operations,
Olin’s ability to integrate the business successfully and to
achieve anticipated synergies, and the risk that disruptions from
the Transaction will harm Dow’s or Olin’s business. While the list
of factors presented here is considered representative, no such
list should be considered to be a complete statement of all
potential risks and uncertainties. Unlisted factors may present
significant additional obstacles to the realization of forward
looking statements. Consequences of material differences in results
as compared with those anticipated in the forward-looking
statements could include, among other things, business disruption,
operational problems, financial loss, legal liability to third
parties and similar risks, any of which could have a material
adverse effect on Dow’s or Olin’s consolidated financial condition,
results of operations or liquidity. Dow does not assume any
obligation to provide revisions to any forward looking statements
should circumstances change, except as otherwise required by
securities and other applicable laws.
Important Notices and Additional Information
In connection with the proposed transaction, Blue Cube Spinco
Inc. (“Spinco”) has filed a registration statement on Form S-4/S-1
containing a prospectus and Olin has filed a proxy statement on
Schedule 14A and a registration statement on Form S-4 containing a
prospectus with the SEC. INVESTORS AND SECURITY HOLDERS ARE ADVISED
TO READ THE REGISTRATION STATEMENTS/PROSPECTUSES AND PROXY
STATEMENT AND ANY FURTHER AMENDMENTS WHEN THEY BECOME AVAILABLE AS
WELL AS ANY OTHER RELEVANT DOCUMENTS WHEN THEY BECOME AVAILABLE,
BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PARTIES AND
THE PROPOSED TRANSACTION. Investors and security holders may obtain
a free copy of the prospectuses and proxy statement (when
available) and other documents filed by Dow, Spinco and Olin with
the SEC at the SEC's web site at http://www.sec.gov. Free copies of
these documents and any further amendments, once available, and
each of the companies’ other filings with the SEC may also be
obtained from the respective companies by directing a written
request to Olin at 190 Carondelet Plaza, Clayton, MO 63105.
Attention: Investor Relations or Dow or Spinco at The Dow Chemical
Company, 2030 Dow Center, Midland, Michigan 48674, Attention:
Investor Relations.
This communication is not a solicitation of a proxy from any
investor or security holder. However, Olin, Dow, and certain of
their respective directors, executive officers and other members of
management and employees, may be deemed to be participants in the
solicitation of proxies from shareholders of Olin in respect of the
proposed transaction under the rules of the SEC. Information
regarding Olin’s directors and executive officers is available in
Olin’s 2014 Annual Report on Form 10-K filed with the SEC on
February 25, 2015, and in its definitive proxy statement for its
annual meeting of shareholders filed March 4, 2015. Information
regarding Dow’s directors and executive officers is available in
Dow’s Annual Report on Form 10-K filed with the SEC on February 13,
2015, and in its definitive proxy statement for its annual meeting
of shareholders, filed March 27, 2015, and a supplement to the
proxy statement filed March 31, 2015. These documents can be
obtained free of charge from the sources indicated above. Other
information regarding the participants in the proxy solicitation
and a description of their direct and indirect interests, by
security holdings or otherwise, is contained in the registration
statements, prospectuses and proxy statement and other relevant
materials filed with the SEC.
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Financial Statements (Note A)
The Dow Chemical Company and Subsidiaries Consolidated
Statements of Income Three Months Ended Six Months Ended
In millions, except per share amounts (Unaudited) Jun 30,
2015 Jun 30, 2014 Jun 30, 2015 Jun 30, 2014
Net Sales $ 12,910 $ 14,917 $
25,280 $ 29,378 Cost of sales 10,146 12,344
19,681 24,077 Research and development expenses 429 419 812
810 Selling, general and administrative expenses 773 751 1,525
1,530 Amortization of intangibles 109 108 211 222 Restructuring
charges (Note B) 375 — 375 — Equity in earnings of nonconsolidated
affiliates 272 227 440 478 Sundry income (expense) - net (Note C)
385 25 1,048 54 Interest income 11 9 28 22 Interest expense and
amortization of debt discount 232 242
473 488 Income Before Income Taxes
1,514 1,314 3,719 2,805
Provision for income taxes 317 344
1,003 769 Net Income 1,197
970 2,716 2,036 Net income
(loss) attributable to noncontrolling interests (23 )
3 18 20 Net Income Attributable to The
Dow Chemical Company 1,220 967
2,698 2,016 Preferred stock dividends 85
85 170 170 Net Income
Available for The Dow Chemical Company Common Stockholders $
1,135 $ 882 $ 2,528 $
1,846
Per Common Share Data: Earnings per common share - basic $
0.99 $ 0.74 $ 2.21 $ 1.54 Earnings per common share - diluted (Note
D) $ 0.97 $ 0.73 $ 2.15
$ 1.52
Dividends declared per share of common stock $ 0.42 $
0.37 $ 0.84 $ 0.74 Weighted-average common shares outstanding -
basic 1,138.1 1,178.9 1,136.9 1,184.7 Weighted-average common
shares outstanding - diluted (Note D) 1,249.4
1,195.2 1,248.0 1,201.5
Depreciation $ 483
$ 525 $ 969 $ 1,042 Capital Expenditures $ 998
$ 864 $ 1,901 $ 1,536
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, 2014. 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 April 29, 2015, Dow's Board of Directors
approved actions to further streamline the organization and
optimize the Company’s footprint as a result of the pending
separation of a significant portion of Dow’s chlorine value chain.
These actions, which will further accelerate Dow’s value growth and
productivity targets, will result in a reduction of approximately
1,750 positions across a number of businesses and functions and
adjustments to the Company's asset footprint to enhance
competitiveness. As a result, the Company recorded pretax
restructuring charges of $375 million in the second quarter of
2015, which included asset write-downs and write-offs, severance
and costs associated with exit and disposal activities.
Note C: In the second quarter of 2015, the Company
recognized a pretax gain of $349 million (after-tax gain of $351
million) related to the step acquisition of Univation Technologies,
LLC, and a pretax loss of $49 million related to costs associated
with portfolio and productivity actions, including the planned
separation of the Company's chlorine value chain. In the first
quarter of 2015, the Company recognized a pretax gain of
$670 million related to the divestiture of ANGUS Chemical
Company ("ANGUS"), a pretax gain of $18 million (after-tax loss of
$9 million) related to the divestiture of the Sodium Borohydride
business and a pretax charge of $26 million for costs associated
with portfolio and productivity actions. In the second quarter of
2014, the Company recognized a pretax charge of $18 million for
costs associated with portfolio and productivity actions.
Note D: "Earnings per common share - diluted" for the
three- and six-month periods ended June 30, 2015, assumes the
conversion of the Company's Cumulative Convertible Perpetual
Preferred Stock, Series A into potential shares of the Company's
common stock due to the net income reported for the three- and
six-month periods, which includes the after-tax gain on the
divestiture of ANGUS and the after-tax gain on the Univation
Technologies, LLC step acquisition. In accordance with U.S. GAAP,
"Weighted-average common shares outstanding - diluted" increased by
96.8 million shares and "Net Income Attributable to The Dow
Chemical Company" was used in the calculation of "Earning per
common share - diluted" for the three- and six-month periods ended
June 30, 2015. See Supplemental Information for further
details.
The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets In millions (Unaudited)
Jun 30, 2015 Dec 31, 2014
Assets Current
Assets Cash and cash equivalents (variable interest entities
restricted - 2015: $212; 2014: $190) $ 6,224 $ 5,654 Accounts and
notes receivable: Trade (net of allowance for doubtful receivables
- 2015: $114; 2014: $110) 4,957 4,685 Other 4,072 4,687 Inventories
8,061 8,101 Deferred income tax assets - current 982 812 Other
current assets 468 328 Total current
assets 24,764 24,267 Investments
Investment in nonconsolidated affiliates 4,272 4,201 Other
investments (investments carried at fair value - 2015: $1,999;
2014: $2,009) 2,361 2,439 Noncurrent receivables 564
620 Total investments 7,197
7,260 Property Property 55,280 55,230 Less accumulated
depreciation 36,700 37,179 Net property
(variable interest entities restricted - 2015: $2,657; 2014:
$2,726) 18,580 18,051 Other Assets
Goodwill 12,358 12,632 Other intangible assets (net of accumulated
amortization - 2015: $3,887; 2014: $3,737) 3,971 3,768 Deferred
income tax assets - noncurrent 1,772 2,135 Asbestos-related
insurance receivables - noncurrent 54 62 Deferred charges and other
assets 638 621 Total other assets
18,793 19,218 Total Assets $
69,334 $ 68,796
Liabilities and Equity
Current Liabilities Notes payable $ 436 $ 551 Long-term debt due
within one year 1,479 394 Accounts payable: Trade 4,492 4,481 Other
2,199 2,299 Income taxes payable 664 361 Deferred income tax
liabilities - current 131 105 Dividends payable 565 563 Accrued and
other current liabilities 2,799 2,839
Total current liabilities 12,765 11,593
Long-Term Debt (variable interest entities nonrecourse - 2015:
$1,123; 2014: $1,229) 17,833 18,838
Other Noncurrent Liabilities Deferred income tax liabilities -
noncurrent 557 622 Pension and other postretirement benefits -
noncurrent 9,598 10,459 Asbestos-related liabilities - noncurrent
391 438 Other noncurrent obligations 3,423
3,290 Total other noncurrent liabilities 13,969
14,809 Redeemable Noncontrolling Interests
316 202 Stockholders’ Equity Preferred
stock, series A 4,000 4,000 Common stock 3,107 3,107 Additional
paid-in capital 4,839 4,846 Retained earnings 24,606 23,045
Accumulated other comprehensive loss (8,410 ) (8,017 ) Unearned
ESOP shares (284 ) (325 ) Treasury stock at cost (4,246 )
(4,233 ) The Dow Chemical Company’s stockholders’ equity
23,612 22,423 Non-redeemable
noncontrolling interests 839 931 Total
equity 24,451 23,354 Total Liabilities
and Equity $ 69,334 $ 68,796
See Notes to the Consolidated Financial Statements.
The Dow Chemical Company and Subsidiaries
Operating Segments Three Months Ended Six Months
Ended In millions (Unaudited) Jun 30, 2015 Jun 30,
2014 Jun 30, 2015 Jun 30, 2014 Sales by operating
segment Agricultural Sciences $ 1,747 $ 1,907 $ 3,611
$ 4,026 Consumer Solutions 1,096 1,195 2,219 2,332 Infrastructure
Solutions 1,961 2,268 3,789 4,303 Performance Materials &
Chemicals 3,241 3,761 6,450 7,311 Performance Plastics 4,806 5,713
9,075 11,235 Corporate 59 73 136
171 Total $ 12,910 $
14,917 $ 25,280 $ 29,378 EBITDA
(1) by operating segment Agricultural Sciences $ 255 $ 249 $ 664 $
755 Consumer Solutions 169 263 455 522 Infrastructure Solutions 240
310 535 578 Performance Materials & Chemicals 572 447 1,795 961
Performance Plastics 1,503 1,017 2,488 1,983 Corporate (362
) (62 ) (497 ) (179 ) Total $ 2,377
$ 2,224 $ 5,440 $ 4,620
Certain items (increasing) decreasing EBITDA by operating
segment (2) Agricultural Sciences $ (14 ) $ — $ (14 ) $ — Consumer
Solutions (67 ) — (67 ) — Infrastructure Solutions (27 ) — (27 ) —
Performance Materials & Chemicals — — 688 — Performance
Plastics 337 — 337 — Corporate (304 ) (18 )
(330 ) (18 ) Total $ (75 ) $ (18 ) $
587 $ (18 ) EBITDA excluding certain items by
operating segment Agricultural Sciences $ 269 $ 249 $ 678 $ 755
Consumer Solutions 236 263 522 522 Infrastructure Solutions 267 310
562 578 Performance Materials & Chemicals 572 447 1,107 961
Performance Plastics 1,166 1,017 2,151 1,983 Corporate (58 )
(44 ) (167 ) (161 ) Total $ 2,452
$ 2,242 $ 4,853 $ 4,638
Continued
The Dow Chemical Company and Subsidiaries
Operating Segments (Continued) Three Months Ended Six
Months Ended In millions (Unaudited) Jun 30, 2015 Jun
30, 2014 Jun 30, 2015 Jun 30, 2014 Equity in earnings
(losses) of nonconsolidated affiliates by operating segment
(included in EBITDA) Agricultural Sciences $ — $ 2 $ —
$ 2 Consumer Solutions 19 21 39 51 Infrastructure Solutions
35 45 111 116 Performance Materials & Chemicals 122 97 177 188
Performance Plastics 101 68 124 136 Corporate (5 ) (6
) (11 ) (15 ) Total $ 272 $ 227
$ 440 $ 478 (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 of
EBITDA to "Net Income Available for The Dow Chemical Company Common
Stockholders" Three Months Ended Six Months Ended
In millions (Unaudited) Jun 30, 2015 Jun 30, 2014
Jun 30, 2015 Jun 30, 2014 EBITDA $ 2,377 $
2,224 $ 5,440 $ 4,620 - Depreciation and amortization 642
677 1,276 1,349 + Interest income 11 9 28 22 - Interest expense and
amortization of debt discount 232 242
473 488 Income Before Income Taxes $
1,514 $ 1,314 $ 3,719 $
2,805 - Provision for income taxes 317 344 1,003 769 - Net income
(loss) attributable to noncontrolling interests (23 ) 3 18 20 -
Preferred stock dividends 85 85
170 170 Net Income Available for The Dow Chemical
Company Common Stockholders $ 1,135 $ 882
$ 2,528 $ 1,846 (2) See
Supplemental Information for a description of certain items
affecting results in 2015 and 2014.
The Dow
Chemical Company and Subsidiaries Sales by Geographic
Area Three Months Ended Six Months Ended In millions
(Unaudited) Jun 30, 2015 Jun 30, 2014 Jun 30,
2015 Jun 30, 2014 North America $ 5,058 $ 5,572 $
9,828 $ 10,935 Europe, Middle East, Africa and India 4,086
5,146 8,060 10,361 Asia Pacific 2,178 2,387 4,226 4,574 Latin
America 1,588 1,812 3,166
3,508 Total $ 12,910 $ 14,917
$ 25,280 $ 29,378
Sales Volume and Price by Operating
Segment and Geographic Area
Three Months Ended Six Months Ended Jun 30, 2015 Jun 30,
2015 Percentage change from prior year Volume Price
Total Volume Price Total Agricultural
Sciences (2 )% (6 )% (8 )% (4 )% (6 )%
(10 )% Consumer Solutions (1 ) (7 ) (8 ) 1 (6 ) (5 ) Infrastructure
Solutions — (13 ) (13 ) — (12 ) (12 ) Performance Materials &
Chemicals 1 (15 ) (14 ) 2 (14 ) (12 ) Performance Plastics 5
(21 ) (16 ) 4 (23 )
(19 ) Total 2 % (15 )% (13 )% 1
% (15 )% (14 )% North America 3 % (12 )% (9 )% 1 %
(11 )% (10 )% Europe, Middle East, Africa and India 2 (23 ) (21 ) 2
(24 ) (22 ) Asia Pacific (1 ) (8 ) (9 ) 1 (9 ) (8 ) Latin America
(1 ) (11 ) (12 ) — (10 )
(10 ) Total 2 % (15 )% (13 )% 1
% (15 )% (14 )% Developed geographies 1 % (17 )% (16
)% — % (17 )% (17 )% Emerging geographies (1) 3
(12 ) (9 ) 3 (11 ) (8 )
Total 2 % (15 )% (13 )% 1 % (15
)% (14 )%
Sales Volume and Price by
Operating Segment and Geographic Area,
Excluding Acquisitions and
Divestitures (2), Hydrocarbons and Energy
Three Months Ended Six Months Ended Jun 30, 2015 Jun 30,
2015 Percentage change from prior year Volume Price
Total Volume Price Total Agricultural
Sciences (2 )% (6 )% (8 )% (4 )% (6 )%
(10 )% Consumer Solutions (1 ) (7 ) (8 ) 1 (6 ) (5 ) Infrastructure
Solutions — (13 ) (13 ) — (12 ) (12 ) Performance Materials &
Chemicals 4 (15 ) (11 ) 4 (14 ) (10 ) Performance Plastics 9
(14 ) (5 ) 7 (15 )
(8 ) Total 3 % (12 )% (9 )% 3 %
(12 )% (9 )% North America 2 % (9 )% (7 )% 1 % (8 )% (7 )%
Europe, Middle East, Africa and India 7 (20 ) (13 ) 5 (20 ) (15 )
Asia Pacific 2 (8 ) (6 ) 3 (9 ) (6 ) Latin America (1 )
(11 ) (12 ) 1 (10 ) (9 )
Total 3 % (12 )% (9 )% 3 % (12
)% (9 )% Developed geographies 2 % (12 )% (10 )% 2 % (13 )%
(11 )% Emerging geographies (1) 4 (12 )
(8 ) 4 (11 ) (7 ) Total 3 %
(12 )% (9 )% 3 % (12 )% (9 )%
(1) Emerging geographies includes Eastern Europe, Middle
East, Africa, India, Latin America and Asia Pacific excluding
Australia, Japan and New Zealand. (2) Excludes sales of Univation
Technologies, LLC, acquired on May 5, 2015, sales of ANGUS Chemical
Company, divested on February 2, 2015, and sales of the global
Sodium Borohydride business, divested on January 30, 2015.
Supplemental Information Description
of Certain Items Affecting Results
The following table summarizes the impact
of certain items recorded in the three- and six-month periods ended
June 30, 2015 and June 30, 2014:
Certain
Items Impacting Results Pretax Impact (1) Net Income
(2) EPS - Diluted (3) (4) Three Months Ended Three
Months Ended Three Months Ended In millions, except per share
amounts (Unaudited) Jun 30, 2015 Jun 30, 2014
Jun 30, 2015 Jun 30, 2014 Jun 30, 2015 Jun 30,
2014 Operating Results (non-GAAP measures) $ 1,064 $
893 $ 0.91 $ 0.74 Certain items: 2Q15 Restructuring charges
$ (375 ) $ — (246 ) — (0.21 ) — Univation step acquisition 349 —
351 — 0.30 — Costs associated with portfolio and productivity
actions (49 ) (18 ) (34 ) (11 )
(0.03 ) (0.01 ) Total certain items $ (75 ) $
(18 ) $ 71 $ (11 ) $ 0.06
$ (0.01 ) Reported GAAP Amounts (5) (6)
$ 1,135 $ 882 $ 0.97
$ 0.73
Certain Items Impacting Results
Pretax Impact (1) Net Income (2) EPS - Diluted (3)
(4) Six Months Ended Six Months Ended Six Months Ended In
millions, except per share amounts (Unaudited)
Jun 30,2015
Jun 30,2014
Jun 30,2015
Jun 30,2014
Jun 30,2015
Jun 30,2014
Operating Results (non-GAAP measures) $ 2,038 $ 1,857 $ 1.76 $ 1.53
Certain items: 2Q15 Restructuring charges $ (375 ) $ — (246 ) —
(0.21 ) — Univation step acquisition 349 — 351 — 0.30 — Gain on
divestiture of ANGUS Chemical 670 — 451 — 0.39 — Divestiture of
Sodium Borohydride business 18 — (9 ) — (0.01 ) — Costs associated
with portfolio and productivity actions (75 ) (18 )
(57 ) (11 ) (0.05 ) (0.01 ) Total
certain items $ 587 $ (18 ) $ 490
$ (11 ) $ 0.42 $ (0.01 )
Dilutive effect of assumed preferred stock conversion into shares
of common stock
(0.03 ) N/A Reported GAAP Amounts (5)
(6) $ 2,528 $
1,846 $ 2.15 $ 1.52 (1)
Impact on "Income Before Income Taxes." (2) "Net Income Available
for The Dow Chemical Company Common Stockholders." (3) "Earnings
per common share - diluted." (4) For the three- and six-month
periods ended June 30, 2015, conversion of the Company's Cumulative
Convertible Perpetual Preferred Stock, Series A ("Preferred Stock")
into shares of the Company's common stock was excluded from the
calculation of "Diluted earnings per share adjusted to exclude
certain items" as well as the earnings per share impact of certain
items because the effect of including them would have been
antidilutive. (5) For the three- and six-month periods ended June
30, 2015, an assumed conversion of the Company's Preferred Stock
into shares of the Company's common stock was included in the
calculation of diluted earnings per share (reported GAAP amount).
(6) The Company used "Net Income Attributable to The Dow Chemical
Company" when calculating diluted earnings per share (reported GAAP
amount) for the three- and six-month periods ended June 30, 2015,
as it excludes quarterly preferred dividends of $85 million.
The following table presents diluted share counts for the three-
and six-month periods ended June 30, 2015 and June 30, 2014,
including the effect of an assumed conversion of the Company's
Cumulative Convertible Perpetual Preferred Stock, Series A into
shares of the Company's common stock:
Common Shares -
Diluted Three Months Ended Six Months Ended
In millions
Jun 30,2015
Jun 30,2014
Jun 30,2015
Jun 30,2014
Share count - diluted, excluding assumed preferred stock conversion
to common shares 1,152.6 1,195.2 1,151.2 1,201.5
Potential common shares from assumed conversion of preferred stock,
included in reported U.S. GAAP EPS calculation 96.8 N/A 96.8 N/A
Share count - diluted, including assumed preferred stock conversion
to common shares 1,249.4 1,195.2 1,248.0
1,201.5
Results in the second quarter of 2015 were impacted by the
following items:
- Pretax restructuring charges of $375
million. On April 29, 2015, Dow's Board of Directors approved
actions to further streamline the organization and optimize the
Company’s footprint as a result of the pending separation of a
significant portion of Dow’s chlorine value chain. These actions,
which will further accelerate Dow’s value growth and productivity
targets, will result in a reduction of approximately 1,750
positions across a number of businesses and functions and
adjustments to the Company's asset footprint to enhance
competitiveness. As a result of these actions, the Company recorded
pretax restructuring charges of $375 million in the second quarter
of 2015 consisting of costs associated with exit or disposal
activities of $10 million, severance costs of $196 million and
asset write-downs and write-offs of $169 million. The impact of
these charges is shown as "Restructuring charges" in the
consolidated statements of income and reflected in the Company's
segment results as follows: Agricultural Sciences ($14 million),
Consumer Solutions ($67 million), Infrastructure Solutions ($27
million), Performance Plastics ($12 million) and Corporate
($255 million).
- Pretax gain of $349 million (after-tax
gain of $351 million) related to the step acquisition of Univation
Technologies, LLC, previously a 50:50 joint venture. The gain,
which is included Performance Plastics, included a $361 million
pretax gain on the step acquisition (after-tax gain of $359
million), included in "Sundry income (expense) - net" in the
consolidated statements of income, and a pretax loss of $12 million
(after-tax loss of $8 million) for a one-time increase in
"Cost of sales" related to the fair value step-up of inventories
assumed in the step acquisition.
- Pretax charge of $49 million for
nonrecurring transaction costs associated with portfolio and
productivity actions, including the planned separation of a
significant portion of the Company’s chlorine value chain,
implementation costs associated with the Company's 2Q15
restructuring program and other productivity actions (collectively
“Costs associated with portfolio and productivity actions”). These
charges are included in "Selling, general and administrative
expenses" ($6 million) and "Sundry income (expense) - net"
($43 million) in the consolidated statements of income and
reflected in Corporate.
Results in the second quarter of 2014 were unfavorably impacted
by the following item:
- Pretax charge of $18 million for
costs associated with portfolio and productivity actions, included
in "Sundry income (expense) - net" in the consolidated statements
of income and reflected in Corporate.
Results in the first quarter of 2015 were impacted by the
following items:
- Pretax gain of $670 million on the
February 2, 2015, divestiture of ANGUS Chemical Company, included
in "Sundry income (expense) - net" in the consolidated statements
of income and reflected in Performance Materials &
Chemicals.
- Pretax gain of $18 million
(after-tax loss of $9 million) on the January 30, 2015,
divestiture of the Sodium Borohydride business. The pretax gain was
included in "Sundry income (expense) - net" in the consolidated
statements of income and reflected in Performance Materials &
Chemicals.
- Pretax charge of $26 million for
costs associated with portfolio and productivity actions, included
in "Sundry income (expense) - net" in the consolidated statements
of income and reflected in Corporate.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150723005543/en/
The Dow Chemical CompanyEmily Parenteau+1 989 636
7904ebparenteau@dow.com
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