TIDMDOW
The Dow Chemical Company (NYSE: DOW):
Second Quarter 2013 Highlights
-- Dow reported earnings of $1.87 per share or adjusted earnings of
$0.64 per share(1). This compares with earnings of
$0.55 per share in the same quarter last year.
-- Results this quarter were impacted by the final resolution of the
K-Dow arbitration and Dow's receipt of a direct cash payment of
nearly
$2.2 billion. Dow subsequently applied this award to debt
reduction,
driving the Company's net debt(2) to total capitalization
down to 36.4 percent.
-- Dow generated $3.7 billion in cash flow from operations in the
quarter. Year to date, the Company has generated $4.2 billion in
cash
flow from operations, representing an improvement of $2.8
billion
compared with the prior year.
-- Sales were $14.6 billion, flat versus the year-ago period. Sales gains
were led by Agricultural Sciences, which was up 10 percent in
the
quarter and achieved a first-half sales record of nearly $4
billion.
Sales also grew in Performance Materials (up 1 percent).
-- Volume increased 2 percent with gains in most geographic areas. Volume
growth in emerging geographic areas rose 9 percent, led by
double-digit growth in Latin America (up 12 percent). Volume
also
increased in Asia Pacific (up 7 percent).
-- Price decreased 2 percent, with currency representing nearly one-third
of the decline. The Feedstocks and Energy operating segment led
the
decrease (down 4 percent), due to a declining feedstock cost
environment.
-- EBITDA(3) was $4.2 billion, or $2.1 billion on an adjusted
basis(4), up nearly 9 percent versus the prior year.
Adjusted EBITDA margin(5) expanded nearly 110 basis points.
EBITDA gains were led by Performance Plastics, which
achieved
$1 billion in EBITDA in the quarter (up 33 percent) and
expanded
EBITDA margins by 700 basis points versus the same quarter last
year.
-- Equity earnings were $228 million, versus $148 million in the year-ago
period.
Comment
Andrew N. Liveris, Dow's chairman and chief executive officer,
stated:
"Our results in the second quarter are indicative of Dow's focus
and drive to aggressively manage our portfolio and generate
momentum across our enterprise - expanding margins, growing cash
flow and increasing earnings, even in the midst of a slow-growth
macroeconomic environment. Strong performance in Agricultural
Sciences and Performance Plastics clearly demonstrates Dow's market
and technology leadership in those segments. We also are fully
implementing aggressive improvement plans in those segments that do
not currently meet our return on capital expectations. Our strong
cash generation, our deployment of K-Dow proceeds to pay down debt
and our ongoing $1.5 billion share buyback program are all focused
on rewarding our shareholders - and we will continue to do so as
our earnings grow."
Three Months Ended
June 30, June 30,
In millions, except per share amounts 2013 2012
Net Sales $14,577 $14,513
Net Income Available for Common Stockholders $2,340 $649
Net Income Available for Common Stockholders,
excluding Certain Items $770 $649
Earnings per Common Share - diluted $1.87 $0.55
Adjusted Earnings per Share $0.64 $0.55
Review of Second Quarter Results
The Dow Chemical Company (NYSE: DOW) reported sales of $14.6
billion, flat versus the year-ago period. Agricultural Sciences
reported a 10 percent increase in sales, achieving a first-half
sales record of nearly $4 billion. Sales also rose in Performance
Materials (up 1 percent), offsetting declines in Feedstocks and
Energy and Performance Plastics (down 4 percent and 1 percent,
respectively).
Volume rose 2 percent with gains reported in most geographic
areas. Volume growth in emerging geographic areas increased 9
percent, led by double-digit growth in Latin America (up 12
percent). Volume increases in Asia Pacific and North America (up 7
percent and 1 percent, respectively), more than offset a 3 percent
decline in Western Europe. Volume gains were reported in all
operating segments, excluding Performance Plastics (down 1 percent)
and Feedstocks and Energy (flat versus the year-ago period).
The Company reported price declines of 2 percent, with currency
representing nearly one-third of the decline. The Feedstocks and
Energy operating segment led the decrease (down 4 percent), due to
a declining feedstock cost environment.
EBITDA was $4.2 billion, or $2.1 billion on an adjusted basis,
representing a nearly 9 percent increase versus the same quarter
last year. The Company reported adjusted EBITDA margin expansion of
nearly 110 basis points, led by Performance Plastics, which
achieved $1 billion in EBITDA in the quarter and expanded adjusted
EBITDA margins by 700 basis points.
Earnings for the quarter were $1.87 per share, or $0.64 per
share on an adjusted basis. This compares with prior-year earnings
per share of $0.55 and represents year-over-year growth of 16
percent.
Certain Items in the current quarter included a gain from the
K-Dow arbitration, as well as a charge related to the early
extinguishment of debt and a charge for implementation costs
related to the Company's restructuring programs. (See Supplemental
Information at the end of the release for a description of Certain
Items affecting results.)
Research and Development (R&D) expenses increased 3 percent
versus the same period last year, largely due to increases in
prioritized technology pipeline investments - primarily in
Agricultural Sciences.
Selling, General and Administrative (SG&A) expenses
increased 6 percent from the same period last year, driven
primarily by new product launches and commercial activities in
Agricultural Sciences.
Equity earnings were $228 million, versus $148 million in the
year-ago period, led by improved year-over-year performance from
MEGlobal, as well as improving naphtha-based margins in Asia.
Net debt to total capitalization and interest expense both
declined in the quarter, demonstrating Dow's successful
debt-reduction efforts. Net debt to total capitalization was 36.4
percent - well below the Company's target of lower than 40 percent.
In addition, interest expense is expected to be down more than $150
million on a full-year basis, with a decline of more than $30
million in the quarter.
"Our results in the second quarter are indicative of Dow's focus
and drive to aggressively manage our portfolio and generate
momentum across our enterprise - expanding margins, growing cash
flow and increasing earnings, even in the midst of a slow-growth
macroeconomic environment," said Andrew N. Liveris, Dow's chairman
and chief executive officer. "Strong performance in Agricultural
Sciences and Performance Plastics clearly demonstrates Dow's market
and technology leadership in those segments. We also are fully
implementing aggressive improvement plans in those segments that do
not currently meet our return on capital expectations. Our strong
cash generation, our deployment of K-Dow proceeds to pay down debt
and our ongoing $1.5 billion share buyback program are all focused
on rewarding our shareholders - and we will continue to do so as
our earnings grow."
Electronic and Functional Materials
Sales in Electronic and Functional Materials were $1.2 billion,
or flat compared with the same quarter last year, as volume
increases of 2 percent were offset by price declines of 2 percent.
In Dow Electronic Materials, strong growth in films and OLED drove
higher sales in Display Technologies. Overall, Dow Electronic
Materials sales were flat with Semiconductor Technologies
experiencing softer demand in the quarter. In Functional Materials,
overall sales were flat. Dow Microbial Control grew sales in all
regions, delivering a new quarterly sales record primarily due to
strength in the energy markets.
Equity earnings for the segment were $28 million, down from $35
million in the second quarter of last year driven primarily by Dow
Corning. EBITDA for the segment was $254 million, down $33 million
from the year-ago period.
Coatings and Infrastructure Solutions
Coatings and Infrastructure Solutions reported sales of $1.9
billion, flat versus the prior year, as volume rose 2 percent and
price declined 2 percent. Volume growth for the segment was
recorded in all regions except Europe, Middle East and Africa
(EMEA). Dow Coating Materials sales increased as volume gains
slightly offset price declines. Sales declines in Dow Building and
Construction were led by Dow Building Solutions in EMEA, which
continues to experience a weak overall construction market.
Equity earnings were $25 million, down from $45 million in the
year-ago period primarily as a result of lower earnings from Dow
Corning. EBITDA of $250 million for the segment declined from $337
million in the same quarter of 2012.
Agricultural Sciences
Agricultural Sciences reported record second quarter sales of
nearly $1.9 billion, up 10 percent versus the year-ago period.
Volume increased 9 percent and price rose 1 percent. Volume gains
were achieved in all geographic areas led by Latin America.
Second quarter sales of Crop Protection rose 12 percent, with
increases in all geographic areas. Latin America posted the largest
gains, driven by higher sales of herbicides and insecticides. Sales
of new crop protection products grew 14 percent for the
quarter.
Seeds, Traits and Oils (ST&O) sales were up 4 percent in the
quarter versus the year-ago period. Year-to-date, ST&O sales
are up 23 percent, driven by strong farmer demand for SmartStax®
corn hybrids.
EBITDA for the segment was $290 million, down from last year's
record second quarter EBITDA of $307 million, reflecting a shift in
seasonal buying patterns and increased growth investments.
Agricultural Sciences achieved a new first half EBITDA record of
$774 million.
Performance Materials
Sales in Performance Materials were $3.4 billion, up 1 percent
versus the year-ago period. Volume grew 4 percent, while price
declined 3 percent compared with the same quarter last year.
Volume increases were driven by improved asset supply and market
share gains within Polyurethanes and Propylene Oxide/Propylene
Glycol. Lower propylene costs drove lower market pricing levels.
Competitive pricing pressure stemming from unfavorable
supply/demand dynamics - particularly in Epoxy, Chlorinated
Organics, Polyurethanes and Propylene Oxide/Propylene Glycol -
impacted overall margins.
Equity losses for the quarter were $12 million versus losses of
$20 million in the same quarter last year. The segment reported
EBITDA of $284 million. This compares with EBITDA of $350 million
in the year-ago period.
Performance Plastics
Sales in Performance Plastics were $3.7 billion, down 1 percent
compared with the same quarter last year. The decline reflects the
previously announced shutdown of a high-density polyethylene
facility in Tessenderlo, Belgium.
Dow Packaging and Specialty Plastics improved sales in North
America, Latin America and Asia Pacific, more than offsetting lower
sales in Europe that were primarily impacted by the Tessenderlo
closure. Sales in food and specialty packaging showed great
strength across all geographic regions.
Transportation demand and improvements in hot melt adhesives for
carton sealing and nonwoven markets fueled a record volume quarter
for Dow Elastomers. Revenues were down on lower market pricing
levels versus the comparative period. Dow Electrical and
Telecommunications expanded margins on effective execution of
business initiatives, particularly in the power market, though
sales were down due to the transition leading up to the July 1,
2013 divesture of the Company's 50 percent ownership in Nippon
Unicar Co. Ltd.
Equity earnings for the segment were $88 million, up from $39
million in the year-ago period. EBITDA for the segment was $1
billion, up 33 percent from the same period last year. Segment
EBITDA margins expanded by 700 basis points to 27.5 percent. The
segment has achieved six consecutive quarters of sequential margin
expansion.
Feedstocks and Energy
Sales in Feedstocks and Energy were $2.5 billion, down 4 percent
versus the same period last year. Price declined 4 percent due to
falling monomers, while volume was flat. Volume gains in EO/EG were
offset by decreases in Hydrocarbons associated with lower operating
rates and a lighter feedslate in Europe.
Equity earnings were $105 million, up from $52 million in the
same quarter last year. EBITDA for the segment was $193 million, an
increase from $134 million in the year-ago period.
Outlook
Commenting on the Company's outlook, Liveris said:
"Dow's cash and cost improvement plans continue to deliver
strong forward momentum. Together with our growth catalysts firmly
embedded in our portfolio, the Company is well-positioned to
deliver year-over-year earnings improvement in the second half of
2013.
"Moving forward, we are aggressively managing and continue to
evaluate every aspect of our portfolio to release and deliver value
for our shareholders. We have already announced plans to divest
$1.5 billion of non-strategic businesses and expect to implement
more portfolio activities over the next 12 months.
"Additionally, we continue investing for growth in attractive
regions through highly-accretive projects such as the expansions in
the U.S. Gulf Coast and Sadara, as well as targeted markets where
we have competitive advantages, such as in agriculture, water,
electronics, coatings and packaging.
"We remain committed to driving shareholder-friendly and balance
sheet-focused actions, such as further debt reduction and ongoing
cash flow growth, and returning the benefits to our shareholders
over the near- and long-term. This is our singular focus."
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) "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) Net debt equals total debt ("Notes payable"
plus "Long-term debt due within
one year" plus "Long-Term Debt") minus
"Cash and cash equivalents."
(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" is defined as EBITDA excluding
the impact of Certain Items.
(5) "Adjusted EBITDA margin" is defined as EBITDA excluding the
impact of Certain Items as a percentage of reported sales
®SmartStax multi-event technology developed
by Dow AgroSciences LLC
and Monsanto. SmartStax is a trademark
of Monsanto Technology 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 2012, Dow had annual sales of approximately $57
billion and employed approximately 54,000 people worldwide. The
Company's more than 5,000 products are manufactured at 188 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 Six Months Ended
Jun 30, Jun 30, Jun 30, Jun 30,
In millions, 2013 2012 2013 2012
except
per share
amounts
(Unaudited)
Net Sales $ 14,577 $ 14,513 $ 28,960 $ 29,232
Cost of sales 12,103 12,200 23,810 24,485
Research and 417 406 852 811
development
expenses
Selling, general 716 674 1,488 1,381
and
administrative
expenses
Amortization of 115 122 230 244
intangibles
Restructuring -- -- -- 357
charges
(Note B)
Equity in earnings 228 148 458 317
of nonconsolidated
affiliates
Sundry income 2,053 27 2,021 44
(expense)
- net (Note C)
Interest income 10 10 18 16
Interest expense 279 312 575 641
and amortization
of debt discount
Income Before 3,238 984 4,502 1,690
Income Taxes
Provision for 795 244 1,399 430
income
taxes (Note D)
Net Income 2,443 740 3,103 1,260
Net 18 6 43 29
income attributable
to
noncontrolling
interests
Net 2,425 734 3,060 1,231
Income Attributable
to
The Dow Chemical
Company
Preferred stock 85 85 170 170
dividends
Net Income $ 2,340 $ 649 $ 2,890 $ 1,061
Available
for The Dow
Chemical
Company Common
Stockholders
Per Common Share
Data:
Earnings per $ 1.96 $ 0.55 $ 2.42 $ 0.90
common
share - basic
Earnings per $ 1.87 $ 0.55 $ 2.36 $ 0.90
common share
- diluted (Note E)
Common stock $ 0.32 $ 0.32 $ 0.64 $ 0.57
dividends
declared
per share of
common stock
Weighted-average 1,186.1 1,169.7 1,183.6 1,165.3
common shares
outstanding
- basic
Weighted-average 1,288.2 1,176.6 1,286.3 1,172.7
common shares
outstanding
- diluted
(Note E)
Depreciation $ 504 $ 506 $ 1,009 $ 1,016
Capital $ 506 $ 581 $ 852 $ 983
Expenditures
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, 2012. 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
included 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 that included asset write-downs and write-offs,
severance and costs associated with exit and disposal
activities.
Note C: In the second quarter of 2013, the Company recognized a
pretax gain of $2.161 billionrelated to damages awarded to the
Company in the K-Dow arbitration proceeding. In the second quarter
of 2013, the Company recognized a pretax loss of $110 million on
the early extinguishment of debt; a pretax loss of $60 million was
recorded in the first quarter of 2013. In the first quarter of
2012, the Company recognized a pretax loss of $24 million on the
early extinguishment of debt.
Note D:During the first quarter of 2013, the Company recognized
a tax charge of $223 million related to court rulings on two
separate matters that resulted in the adjustment of uncertain tax
positions.
Note E:During the second quarter of 2013, the Company recorded a
gain related to the K-Dow arbitration, which significantly
increased net income for the quarter and year-to-date. As a result
of the net income increase, the assumed conversion of the Company's
Cumulative Convertible Perpetual Preferred Stock, Series A into
potential shares of the Company's common stock was dilutive. 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, 2013. See Supplementary
Information for further details.
The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets
Jun 30, Dec 31,
In millions (Unaudited) 2013 2012
Assets
Current Assets
Cash and cash equivalents (variable $ 4,883 $ 4,318
interest entities
restricted - 2013: $158; 2012: $146)
Accounts and notes receivable:
Trade (net of allowance for 5,619 5,074
doubtful receivables
- 2013: $128; 2012: $121)
Other 4,859 4,605
Inventories 8,836 8,476
Deferred income tax assets - current 735 877
Other current assets 395 334
Total current assets 25,327 23,684
Investments
Investment in nonconsolidated affiliates 4,012 4,121
Other investments (investments carried at fair 2,424 2,565
value - 2013: $1,938; 2012: $2,061)
Noncurrent receivables 278 313
Total investments 6,714 6,999
Property
Property 54,366 54,366
Less accumulated depreciation 37,164 36,846
Net property (variable interest 17,202 17,520
entities restricted
- 2013: $2,577; 2012: $2,554)
Other Assets
Goodwill 12,721 12,739
Other intangible assets (net 4,454 4,711
of accumulated amortization
- 2013: $3,013; 2012: $2,785)
Deferred income tax assets - noncurrent 3,050 3,333
Asbestos-related insurance 163 155
receivables - noncurrent
Deferred charges and other assets 511 464
Total other assets 20,899 21,402
Total Assets $ 70,142 $ 69,605
Liabilities and Equity
Current Liabilities
Notes payable $ 505 $ 396
Long-term debt due within one year 846 672
Accounts payable:
Trade 4,812 5,010
Other 2,323 2,327
Income taxes payable 903 251
Deferred income tax liabilities - current 89 95
Dividends payable 465 86
Accrued and other current liabilities 2,670 2,656
Total current liabilities 12,613 11,493
Long-Term Debt (variable interest entities 17,475 19,919
nonrecourse - 2013: $1,423; 2012: $1,406)
Other Noncurrent Liabilities
Deferred income tax liabilities - noncurrent 795 837
Pension and other postretirement 11,131 11,459
benefits - noncurrent
Asbestos-related liabilities - noncurrent 497 530
Other noncurrent obligations 3,284 3,353
Total other noncurrent liabilities 15,707 16,179
Redeemable Noncontrolling Interest 147 147
Stockholders' Equity
Preferred stock, series A 4,000 4,000
Common stock 3,031 3,008
Additional paid-in capital 3,537 3,281
Retained earnings 20,620 18,495
Accumulated other comprehensive loss (7,526 ) (7,516 )
Unearned ESOP shares (371 ) (391 )
Treasury stock at cost (80 ) --
The Dow Chemical Company's 23,211 20,877
stockholders' equity
Noncontrolling interests 989 990
Total equity 24,200 21,867
Total Liabilities and Equity $ 70,142 $ 69,605
See Notes to the Consolidated
Financial Statements.
The Dow Chemical
Company
and Subsidiaries
Operating
Segments
Three Months Ended Six Months Ended
Jun 30, Jun 30, Jun 30, Jun 30,
In 2013 2012 2013 2012
millions
(Unaudited)
Sales
by operating
segment
Electronic and $ 1,152 $ 1,151 $ 2,293 $ 2,272
Functional
Materials
Coatings 1,888 1,888 3,555 3,591
and
Infrastructure
Solutions
Agricultural 1,850 1,676 3,953 3,514
Sciences
Performance 3,389 3,369 6,717 6,842
Materials
Performance 3,676 3,711 7,174 7,302
Plastics
Feedstocks 2,543 2,657 5,099 5,592
and Energy
Corporate 79 61 169 119
Total $ 14,577 $ 14,513 $ 28,960 $ 29,232
EBITDA (1) by
operating
segment
Electronic and $ 254 $ 287 $ 527 $ 530
Functional
Materials
Coatings 250 337 436 541
and
Infrastructure
Solutions
Agricultural 290 307 774 758
Sciences
Performance 284 350 724 682
Materials
Performance 1,010 760 1,962 1,478
Plastics
Feedstocks 193 134 433 332
and Energy
Corporate 1,885 (215 ) 1,530 (653 )
Total $ 4,166 $ 1,960 $ 6,386 $ 3,668
Certain items
increasing
(decreasing)
EBITDA
by operating
segment (2)
Electronic and $ -- $ -- $ -- $ (17 )
Functional
Materials
Coatings -- -- -- (41 )
and
Infrastructure
Solutions
Agricultural -- -- -- --
Sciences
Performance -- -- -- (186 )
Materials
Performance -- -- -- --
Plastics
Feedstocks -- -- -- --
and Energy
Corporate 2,039 -- 1,967 (137 )
Total $ 2,039 $ -- $ 1,967 $ (381 )
EBITDA excluding
certain items
by operating
segment
Electronic and $ 254 $ 287 $ 527 $ 547
Functional
Materials
Coatings 250 337 436 582
and
Infrastructure
Solutions
Agricultural 290 307 774 758
Sciences
Performance 284 350 724 868
Materials
Performance 1,010 760 1,962 1,478
Plastics
Feedstocks 193 134 433 332
and Energy
Corporate (154 ) (215 ) (437 ) (516 )
Total $ 2,127 $ 1,960 $ 4,419 $ 4,049
Continued
The
Dow Chemical
Company
and
Subsidiaries
Operating
Segments
(Continued)
Three Months Ended Six Months Ended
Jun 30, Jun 30, Jun 30, Jun 30,
In 2013 2012 2013 2012
millions
(Unaudited)
Equity in
earnings
(losses) of
nonconsolidated
affiliates
by operating
segment
(included in
EBITDA)
Electronic and $ 28 $ 35 $ 45 $ 54
Functional
Materials
Coatings 25 45 51 67
and
Infrastructure
Solutions
Agricultural 1 (1 ) 3 --
Sciences
Performance (12 ) (20 ) (35 ) (37 )
Materials
Performance 88 39 145 73
Plastics
Feedstocks 105 52 264 177
and Energy
Corporate (7 ) (2 ) (15 ) (17 )
Total $ 228 $ 148 $ 458 $ 317
(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 Six Months Ended
of EBITDA to
"Net Income
Available
for
The
Dow Chemical
Company
Common
Stockholders"
Jun 30, Jun 30, Jun 30, Jun 30,
In 2013 2012 2013 2012
millions
(Unaudited)
EBITDA $ 4,166 $ 1,960 $ 6,386 $ 3,668
- Depreciation 659 674 1,327 1,353
and
amortization
+ Interest 10 10 18 16
income
- Interest 279 312 575 641
expense
and
amortization
of
debt discount
Income Before $ 3,238 $ 984 $ 4,502 $ 1,690
Income Taxes
- Provision for 795 244 1,399 430
income taxes
- Net income 18 6 43 29
attributable
to
noncontrolling
interests
- Preferred 85 85 170 170
stock
dividends
Net Income $ 2,340 $ 649 $ 2,890 $ 1,061
Available
for The Dow
Chemical
Company Common
Stockholders
(2) See Supplemental Information for a description of certain
items affecting results in 2013 and 2012.
The Dow Chemical
Company
and Subsidiaries
Sales by Geographic
Area
Three Months Ended Six Months Ended
Jun 30, Jun 30, Jun 30, Jun 30,
In 2013 2012 2013 2012
millions (Unaudited)
North America $ 5,440 $ 5,341 $ 10,823 $ 10,678
Europe, Middle East 4,571 4,867 9,486 10,234
and Africa
Asia Pacific 2,722 2,645 5,090 5,065
Latin America 1,844 1,660 3,561 3,255
Total $ 14,577 $ 14,513 $ 28,960 $ 29,232
Sales
Volume
and Price
by
Operating
Segment
and
Geographic
Area
Three Months Ended Six Months Ended
Jun 30, 2013 Jun 30, 2013
Percentage Volume Price Total Volume Price Total
change
from
prior
year
Electronic 2 % (2 )% -- % 3 % (2 )% 1 %
and
Functional
Materials
Coatings 2 (2 ) -- -- (1 ) (1 )
and
Infrastructure
Solutions
Agricultural 9 1 10 10 2 12
Sciences
Performance 4 (3 ) 1 (1 ) (1 ) (2 )
Materials
Performance (1 ) -- (1 ) (3 ) 1 (2 )
Plastics
Feedstocks -- (4 ) (4 ) (6 ) (3 ) (9 )
and
Energy
Total 2 % (2 )% -- % -- % (1 )% (1 )%
North 1 % 1 % 2 % 1 % -- % 1 %
America
Europe, (2 ) (4 ) (6 ) (6 ) (1 ) (7 )
Middle
East
and
Africa
Asia 7 (4 ) 3 4 (3 ) 1
Pacific
Latin 12 (1 ) 11 8 1 9
America
Total 2 % (2 )% -- % -- % (1 )% (1 )%
Developed (1 )% (2 )% (3 )% (3 )% (1 )% (4 )%
geographies
Emerging 9 (2 ) 7 5 -- 5
geographies
(3)
Total 2 % (2 )% -- % -- % (1 )% (1 )%
(3) Emerging geographies includes Eastern
Europe, Middle East, Africa, Latin
America, and Asia Pacific excluding
Australia, Japan and New Zealand.
Supplemental
Information
Description
of
Certain
Items
Affecting
Results
The
following
tables
summarize
the
impact
of
certain
items
recorded
in the
three-
and
six-month
periods
ended
June 30,
2013
and
June 30,
2012:
Certain Pretax Impact (1) Net Income (2) EPS - Diluted (3)
Items
Impacting
Results
Three Months Ended Three Months Ended Three Months Ended
Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30,
In 2013 2012 2013 2012 2013 2012
millions,
except
per share
amounts
(Unaudited)
Adjusted $ 770 $ 649 $ 0.64 $ 0.55
to
exclude
certain
items
(non-GAAP
measures)
(4)
Certain
items:
Restructuring $ (12 ) $ -- (8 ) -- -- --
plan
implementation
costs (4)
Loss (110 ) -- (69 ) -- (0.06 ) --
on
early
extinguishment
of debt
(4)
Gain from 2,161 -- 1,647 -- 1.37 --
K-Dow
arbitration
(4)
Total $ 2,039 $ -- $ 1,570 $ -- $ 1.31 $ --
certain
items (4)
Dilutive (0.08 ) --
effect
of
assumed
preferred
stock
conversion
into
shares
of common
stock
Reported $ 2,340 $ 649 $ 1.87 $ 0.55
GAAP
Amounts
(5) (6)
Certain Pretax Impact (1) Net Income (2) EPS - Diluted (3)
Items
Impacting
Results
Six Months Ended Six Months Ended Six Months Ended
Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30,
In 2013 2012 2013 2012 2013 2012
millions,
except
per share
amounts
(Unaudited)
Adjusted $ 1,589 $ 1,363 $ 1.33 $ 1.16
to
exclude
certain
items
(non-GAAP
measures)
(4)
Certain
items:
Restructuring $ (24 ) $ -- (16 ) -- (0.01 ) --
plan
implementation
costs (4)
Restructuring -- (357 ) -- (287 ) -- (0.25 )
charges
Loss (170 ) (24 ) (107 ) (15 ) (0.09 ) (0.01 )
on
early
extinguishment
of debt
(4)
Gain from 2,161 -- 1,647 -- 1.37 --
K-Dow
arbitration
(4)
Uncertain -- -- (223 ) -- (0.19 ) --
tax
position
adjustments
Total $ 1,967 $ (381 ) $ 1,301 $ (302 ) $ 1.08 $ (0.26 )
certain
items (4)
Dilutive (0.05 ) --
effect
of
assumed
preferred
stock
conversion
into
shares
of common
stock
Reported $ 2,890 $ 1,061 $ 2.36 $ 0.90
GAAP
Amounts
(5) (6)
(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, 2013,
conversion of the Company's Cumulative Convertible
Perpetual Preferred Stock, Series A 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, 2013, an assumed conversion
of the Company's Cumulative Convertible Perpetual Preferred Stock,
Series A 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 amounts)
for the three- and six-month periods
ended June 30, 2013, as it excludes preferred
dividends of $85 million for the three
months ended June 30, 2013 ($170 million for
the six months ended June 30, 2013).
The following table presents diluted share counts for the three-
and six-month periods ended June 30, 2013 and June 30, 2012,
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
Jun 30, Jun 30, Jun 30, Jun 30,
In millions 2013 2012 2013 2012
Share count - diluted, 1,191.4 1,176.6 1,189.5 1,172.7
excluding preferred
stock conversion to
common shares
Potential common shares 96.8 N/A 96.8 N/A
from assumed
conversion of preferred
stock, included in reported
GAAP EPS calculation
Share count - diluted, 1,288.2 N/A 1,286.3 N/A
including
assumed preferred
stock conversion
to common shares
Results in the second quarter of 2013 were impacted by three
items:
-- Pretax charges of $12 million for implementation costs related to the
Company's restructuring programs. The charges were included in
"Cost
of sales" in the consolidated statements of income and reflected
in
Corporate.
-- Pretax loss of $110 million on the early extinguishment of debt. The
loss was included in "Sundry income (expense) - net" in the
consolidated statements of income and reflected in
Corporate.
-- Pretax gain of $2.161 billion related to damages awarded to the
Company in the K-Dow arbitration proceeding. The gain was
included in
"Sundry income (expense) - net" in the consolidated statements
of
income and reflected in Corporate.
In addition to the items described above for the second quarter
of 2013, results for the six-month period ended June 30, 2013 were
impacted by the following items:
-- Pretax charges of $12 million for implementation costs related to the
Company's restructuring programs. The charges were included in
"Cost
of sales" ($11 million) and "Selling, general and
administrative
expenses" ($1 million) in the consolidated statements of income
and
reflected in Corporate.
-- Pretax loss of $60 million on the early extinguishment of debt. The
loss was included in "Sundry income (expense) - net" in the
consolidated statements of income and reflected in
Corporate.
-- A tax charge of $223 million related to court rulings on two separate
matters that resulted in the adjustment of uncertain tax
positions.
The results for the six-month period ended June 30, 2012 were
impacted by the following 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. The
restructuring
plan included 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.
The Dow Chemical CompanyRebecca Bentley, +1 989 638
8568rmbentley@dow.com
This information is provided by Business Wire
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