TIDMDOW
The Dow Chemical Company (NYSE: DOW):
Second Quarter 2011 Highlights
-- Dow reported earnings of $0.84 per share. This compares with reported
earnings of $0.50 per share in the same period last year. The
Company
delivered earnings of $0.85 per share excluding certain
items(2),
compared with $0.54 per share on the same basis in the year-ago
period.
-- EBITDA increased 24 percent year-over-year to $2.3 billion, with gains
in every operating segment. This contributed to a record
first-half
EBITDA excluding certain items. On the same basis, Electronic
and
Specialty Materials and Performance Systems each achieved
quarterly
records. Health and Agricultural Sciences and Chemicals and
Energy
grew more than 40 percent.
-- EBITDA margin(3) excluding certain items expanded for the
ninth consecutive quarter on a year-over-year basis, with
improvements
in excess of 200 basis points in Health and Agricultural
Sciences,
Performance Systems, and Chemicals and Energy. On the same
basis,
Plastics delivered the eighth consecutive quarter in excess of
20
percent.
-- On a reported basis, sales were $16 billion, the second highest
quarter in the Company's history. Sales excluding the impact
of
divestitures increased 28 percent year-over-year, with
double-digit
gains in all operating segments and geographic areas.
-- In emerging geographies, sales reached $4.9 billion, a new quarterly
record for the Company. Volume growth in these regions was 14
percent
excluding the impact of divestitures. Sales in Asia Pacific
reached a
new quarterly record of $2.7 billion, and grew 23 percent
excluding
divestitures.
-- Health and Agricultural Sciences set a new sales record for the first
half of the year, surpassing $3 billion. In the quarter, EBITDA
margin
rose more than 370 basis points versus the year-ago period.
-- Volume rose 9 percent versus the same quarter last year excluding the
impact of divestitures, with gains across nearly all
operating
segments. On the same basis, demand grew in all geographic
areas.
-- Price was up 19 percent excluding the impact of divestitures, with
increases in all operating segments and double-digit gains in
all
geographic areas.
-- Equity earnings were $291 million. The Company's year-to-date equity
earnings of $589 million represent a new record for the first
half of
the year.
-- Dow retired $1.5 billion of gross debt in the quarter and reduced net
debt(4) to total capitalization to 41.6 percent. In the
first half of the year, the Company retired $4 billion of gross
debt.
Comment
Andrew N. Liveris, Dow's chairman and chief executive officer,
stated:
"This marked another quarter of tremendous progress for Dow. We
delivered significant and broad-based top-line growth, and reached
a new quarterly sales record in emerging geographies. The
performance of our diverse and balanced portfolio once again
overcame continuing headwinds in certain sectors. More importantly,
we remain firmly on the trajectory to reach our near-term earnings
targets, as evidenced by EBITDA growth of nearly 25 percent - up in
every operating segment - as well as overall margin expansion for
the Company. Further, our year-over-year EPS growth and our EBITDA
run-rate of $9 billion are approaching our near-term target.
"Our transformed portfolio, underpinned by our cost-advantaged
and flexible operations, is now performing at a new level. This is
fueling higher-growth, higher-margin performance through superior
market-reach, customer intimacy and innovation. We're delivering
all of this while maintaining our steadfast commitment to enhance
financial flexibility by paying down debt, and increasing
shareholder remuneration. Coupled with the strength of our
integrated business model, Dow is firmly on the right strategic
path of sustained earnings growth."
Three Months Ended
In millions, except per share amounts Jun 30, Jun 30,
2011 2010
Net Sales $16,046 $13,618
Net Sales, excluding Divestitures $16,046 $12,576
Net Income Available for Common Stockholders $982 $566
Net Income Available for Common Stockholders, $989 $614
excluding Certain Items
Earnings per Common Share - diluted $0.84 $0.50
Earnings per Common Share - diluted, $0.85 $0.54
excluding Certain Items
Review of Second Quarter Results
The Dow Chemical Company (NYSE: DOW) achieved sales of $16.0
billion in the second quarter of 2011, the second highest quarter
in the Company's history. Sales increased 18 percent, driven by
price gains of 17 percent compared with the same period last
year.
Sales excluding the impact of divestitures increased 28 percent,
with double-digit gains in all operating segments and all
geographic areas.
At a Company level, volume grew 9 percent excluding the impact
of divestitures, with gains in all operating segments excluding
Coatings and Infrastructure, which was flat despite difficult
conditions in construction end-markets, and Chemicals and Energy.
On the same basis, double-digit volume growth was reported in
Health and Agricultural Sciences (13 percent) and Plastics (10
percent). Volume increased in all geographic areas, led by Latin
America (23 percent) and Asia Pacific (11 percent).
Price excluding the impact of divestitures rose 19 percent, with
double-digit increases in all geographic areas. All operating
segments except Electronic and Specialty Materials (up 7 percent)
and Health and Agricultural Sciences (up 5 percent) reported
double-digit price gains. Price gains more than offset a $1.5
billion increase in purchased feedstock and energy costs.
Sales in emerging geographies reached $4.9 billion, a new
quarterly record for the Company. Growth was led by Latin America,
which increased more than 35 percent excluding the impact of
divestitures. Volume in emerging geographies increased 14 percent
excluding the impact of divestitures, with double-digit gains in
Electronic and Specialty Materials, Health and Agricultural
Sciences, and Plastics.
At a Company level, EBITDA rose $451 million, or 24 percent, to
$2.3 billion. This contributed to a new record first-half EBITDA
excluding certain items. On the same basis, new quarterly records
were achieved in both Electronic and Specialty Materials and
Performance Systems. Health and Agricultural Sciences and Chemicals
and Energy each posted EBITDA increases in excess of 40
percent.
EBITDA margin excluding certain items expanded year-over-year
for the ninth consecutive quarter at a Company level, with Health
and Agricultural Sciences, Performance Systems, and Chemicals and
Energy each expanding more than 200 basis points. Electronic and
Specialty Materials reported its ninth consecutive quarter of at
least 25 percent EBITDA margin, excluding certain items, and
Plastics delivered the eighth consecutive quarter in excess of 20
percent.
Reported earnings for the quarter were $0.84 per share, compared
with reported earnings of $0.50 per share in the same period last
year. The Company delivered $0.85 per share excluding certain
items, compared with $0.54 per share on the same basis in the
year-ago period. Certain items in the current quarter consisted of
a loss on the early extinguishment of debt of $0.01 per share. (See
Supplemental Information at the end of the release for a
description of certain items affecting results.)
Dow's global operating rate was 84 percent, up 4 percent from
the same year-ago period. Sequentially, the Company's operating
rate rose 1 percent.
Research and Development (R&D) expenses rose 1 percent
versus the same period last year. The Company continued to invest
in technology-driven segments led by Coatings and Infrastructure
for DOWtm POWERHOUSEtm solar shingles and Electronic and Specialty
Materials.
Selling, General and Administrative (SG&A) expenses rose 7
percent versus the year-ago period, primarily driven by increased
spending in Health and Agricultural Sciences and Electronic and
Specialty Materials in support of product launches and growth
initiatives.
Equity earnings were $291 million, led by Dow Corning, MEGlobal
and the Company's joint ventures in Kuwait. The Company's
year-to-date equity earnings were $589 million, marking the
Company's highest ever first-half equity earnings.
The Company continued to surpass its growth synergy targets,
delivering $1.5 billion in sales on an annual run-rate basis.
Sequentially, the Company's run-rate grew 24 percent.
Net debt to total capitalization declined to 41.6 percent. In
line with continued deleveraging efforts, the Company retired $1.5
billion of gross debt in the quarter, bringing the year-to-date
total debt retirement to $4 billion and reducing interest expense
by $250 million on an annual basis going forward.
"This marked another quarter of tremendous progress for Dow,"
said Andrew N. Liveris, Dow's chairman and chief executive officer.
"We delivered significant and broad-based top-line growth, and
reached a new quarterly sales record in emerging geographies. The
performance of our diverse and balanced portfolio once again
overcame continuing headwinds in certain sectors. More importantly,
we remain firmly on the trajectory to reach our near-term earnings
targets, as evidenced by EBITDA growth of nearly 25 percent - up in
every operating segment - as well as overall margin expansion for
the Company. Further, our year-over-year EPS growth and our EBITDA
run-rate of $9 billion are approaching our near-term target.
"Our transformed portfolio, underpinned by our cost-advantaged
and flexible operations, is now performing at a new level. This is
fueling higher-growth, higher-margin performance through superior
market-reach, customer intimacy and innovation. We're delivering
all of this while maintaining our steadfast commitment to enhance
financial flexibility by paying down debt, and increasing
shareholder remuneration. Coupled with the strength of our
integrated business model, Dow is firmly on the right strategic
path of sustained earnings growth."
Electronic and Specialty Materials
Sales in Electronic and Specialty Materials were $1.5 billion,
up 13 percent from the same quarter last year, driven by 6 percent
volume growth and price gains of 7 percent. Dow Electronic
Materials reported a solid volume gain, with the strongest demand
growth in the Display Technologies and Growth Technologies
businesses, driven by new product introductions. In Asia Pacific,
Dow Electronic Materials reported double-digit demand growth, with
gains across all business units, resulting from favorable demand
trends in the region. The business recorded several customer wins
in the quarter, including electroplating materials, chemical
mechanical planarization pads and display films.
Specialty Materials reported a solid year-over-year sales
increase, with double-digit gains across all geographic areas. Dow
Water and Process Solutions reported quarterly sales and EBITDA
records, driven by double-digit volume growth in all geographic
areas except North America. Volume gains were reported in ion
exchange resins, reverse osmosis membranes and the business'
ultrafiltration platform. Dow Wolff Cellulosics reported an
increase in sales, with double-digit volume gains in Europe, Middle
East and Africa (EMEA) and Latin America, driven by strength in
food and pharmaceuticals demand. Dow Microbial Control continued to
see volume growth in North America, led by ongoing demand from
energy end-markets.
Equity earnings were $97 million, reflecting a solid
contribution from Dow Corning. This compares with equity earnings
of $112 million in the same period last year. EBITDA for the
segment was $429 million, which compares with EBITDA of $426
million in the year-ago period.
Coatings and Infrastructure
Coatings and Infrastructure sales were $1.6 billion. Excluding
the impact of divestitures, sales were up 14 percent, completely
driven by price gains. Double-digit sales gains were reported in
Dow Adhesives and Functional Polymers, Dow Building and
Construction, and Dow Coating Materials. Volume growth in Dow
Building and Construction and Dow Coating Materials continued to be
restrained by soft demand from construction and architectural
end-markets in developed regions.
Dow Adhesives and Functional Polymers reported volume growth in
all geographic areas, except EMEA, with the largest gain in Asia
Pacific. The business also reported a double-digit increase in
price, reflecting actions taken in response to high raw material
costs. Dow Building and Construction reported demand growth across
all geographic areas except North America, where new construction
starts remain significantly depressed. The business reported a
double-digit volume gain in Asia Pacific, driven primarily by
demand in China. Results for the business were partly impacted by
ongoing investment in DOWtm POWERHOUSEtm solar shingles. Dow
Coating Materials reported price gains across all geographic areas
as the business responded to a sharp rise in raw materials costs.
In architectural coatings, volume gains were reported in Latin
America, Asia Pacific and EMEA, while industry conditions remained
difficult in North America. Industrial coatings volume fell as a
result of strong pricing initiatives to offset higher raw material
costs, particularly in the epoxy chain.
EBITDA for the segment was $231 million, which compares with
EBITDA of $230 million in the same period last year.
Health and Agricultural Sciences
Health and Agricultural Sciences reported record second quarter
sales of $1.5 billion, up 18 percent compared with the year-ago
period. Volume increased 13 percent and price rose 5 percent. All
geographic areas reported double-digit sales gains versus the same
period last year. The business also posted record first-half sales
of more than $3 billion.
Seeds, Traits and Oils reported demand growth of more than 35
percent. A continued increase in adoption of SmartStax® hybrids in
North America and a strong growing season in Latin America drove
significant volume increases in corn. Cotton finished a strong
season with first-half sales up more than 50 percent, driven by an
increase in U.S. planted acres and continued penetration of
PhytoGen® cottonseeds. Also in the quarter, the business announced
plans to acquire Prairie Brand Seeds, a leading provider of
top-quality, high-yielding soybeans, further expanding Dow
AgroSciences' broad range of product offerings.
Double-digit growth in agricultural chemical sales was driven by
volume gains resulting from new product sales and increased demand
for range and pasture products. Globally, new agricultural chemical
product sales were up nearly 40 percent versus the same quarter
last year, led by increased demand for rice herbicides in Asia
Pacific and strong sales of cereal herbicides in the United States
and Canada.
EBITDA for the segment was $287 million, which compares with
$196 million in the year-ago period.
Performance Systems
Sales in Performance Systems were $1.9 billion. Sales excluding
divestitures were up 19 percent compared with the same quarter last
year. Price was up 17 percent, reflecting actions taken in response
to higher raw material costs, with double-digit increases achieved
in all geographic areas. Volume increased 2 percent, led by Latin
America and North America. Dow Automotive Systems reported
double-digit volume expansion in Latin America, primarily driven by
demand growth in Brazil and Mexico. The business also reported
demand growth for its technology-differentiated products in
acoustical and adhesives (e.g., glass bonding) applications. Dow
Elastomers reported sales growth of more than 25 percent, driven by
volume and price gains across all geographic areas. The business'
sales in Asia Pacific rose more than 50 percent, primarily due to
the successful start-up of a new joint venture specialty elastomers
train in Thailand.
Dow Formulated Systems volume contracted in the quarter due to
continued weakness in construction end-markets, particularly in
EMEA, as well as lower demand for wind energy applications in
China. Dow Wire and Cable reported a double-digit sales increase,
driven by broad-based price gains, as well as volume growth
resulting from robust demand for power transmission and
telecommunications applications in Latin America, particularly in
Brazil and Mexico.
EBITDA was $260 million, representing a new quarterly record for
Performance Systems. In the year-ago period, EBITDA was $225
million, which included a $15 million pretax gain on the
divestiture of Styron.
Performance Products
Sales in Performance Products were $3.2 billion. Sales excluding
divestitures were up 29 percent compared with the year-ago period.
Price increased 20 percent, as a result of pricing initiatives to
offset higher raw material costs. Volume increased 9 percent and
grew in all geographic areas, with double-digit gains in North
America and Asia Pacific. Amines posted a double-digit volume
increase, driven by ethanolamines used in agricultural chemicals
and by ethyleneamines demand in China. The Epoxy business continued
to report strong double-digit year-over-year sales growth, with a
volume gain of more than 25 percent, led by EMEA and North America.
Polyglycols, Surfactants and Fluids also reported volume growth,
led by Latin America and Asia Pacific. Demand was particularly
strong for surfactants in food and fuel applications, and also for
lubricants, driven by uses in steel and automotive industries.
Oxygenated Solvents reported double-digit price gains across all
geographic areas. The business continues to see strong underlying
demand in its key end-use markets of energy, health and nutrition
and oil additives. Polyurethanes sales growth was driven by
double-digit price gains in all geographic areas. Volume growth was
led by North America and Latin America, as the business benefited
from tight supply conditions in the polyurethanes industry.
EBITDA for Performance Products was $387 million. This compares
with EBITDA of $330 million for the year-ago period, which included
a $26 million pretax gain on the divestiture of Styron, partially
offset by a $12 million adjustment to the 2009 restructuring
charge.
Plastics
Sales in Plastics were $3.3 billion. Sales excluding
divestitures increased 30 percent compared with the same quarter
last year. Volume increased 10 percent, while price rose 20
percent. Polyethylene reported broad-based sales gains, driven by
double-digit increases in both volume and price. The business
continued to record volume growth in Asia Pacific due, in part, to
additional sales from a new joint venture manufacturing facility in
Thailand. As a result of disciplined price and volume management
and the Company's cost-advantaged position in feedstocks, Plastics
maintained strong margins despite high and volatile raw material
costs. Polypropylene reported a significant sales increase in all
geographic areas except Asia Pacific as broad-based, double-digit
price gains in the packaging and hygiene and medical sectors were
achieved in response to rising propylene costs. The business
reported robust demand in North America due to low inventory levels
in the value chain and growing demand in automotive, consumer
durable goods, and packaging end-markets.
Equity earnings for the segment were $65 million, compared with
$59 million in the year-ago period. EBITDA for the segment was $751
million. In the same period last year, EBITDA was $696 million,
which included a $10 million pretax gain on the divestiture of
Styron.
Chemicals and Energy
Sales in the Chemicals and Energy segment were $1.0 billion, up
23 percent from the same period last year. Volume decreased 3
percent and price rose 26 percent. The Chlor-Alkali/Chlor-Vinyl
business reported strong sales growth, particularly in EMEA where
the business achieved double-digit price increases. The largest
price gains were reported in caustic soda, where tight supply and
continued strong demand in the alumina and pulp and paper
industries supported further pricing initiatives. Vinyl chloride
monomer sales were higher than the same period last year due to
strong price increases in response to rising ethylene costs.
Ethylene Oxide/Ethylene Glycol volume increased from the year-ago
period as the industry experienced unplanned production outages and
planned turnarounds. The business reported a double-digit increase
in price, led by gains in EMEA and North America.
Equity earnings were $130 million for the quarter, compared with
$54 million in the year-ago period. EBITDA for the segment was $282
million, which compares with EBITDA of $100 million in the same
period last year.
Outlook
Commenting on the Company's outlook, Liveris said:
"Dow's broad geographic reach and leadership in many attractive,
high-growth end-markets firmly position us to benefit from the
megatrends that are defining our future. On the whole we see growth
continuing to gain traction in developed markets, albeit at a
somewhat uneven and jagged pace given persistently high
unemployment in the United States and sovereign debt concerns in
Europe. In fast-growing emerging geographies, despite some
inflationary pressures, the rapid expansion of the middle class
continues to drive robust underlying fundamentals, and our strong
presence and diversification in these high-growth economies
continues to serve us well.
"Overall, while no one is immune to unexpected global economic
developments, Dow's focus remains steadfast on achieving our
strategic objectives, and we are optimistic about our growth
prospects in the second half and beyond. Our investments to drive
growth, coupled with our actions to further enhance our financial
flexibility and market diversification, provide a foundation of
strength. With these strengths we will continue to mitigate
volatile external conditions and capitalize on areas of greatest
opportunity - evidenced by the top- and bottom-line growth we
delivered once again this quarter. This is the power of our
strategy in action."
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 10:00 a.m. ET on
www.dow.com.
(1) 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.
(2) See Supplemental Information at the end of the release for a
description of these items.
(3) EBITDA margin is EBITDA as a percentage of reported
sales.
(4) Net debt equals total debt ("Notes payable" plus "Long-term
debt due within one year" plus "Long-Term Debt") minus "Cash and
Cash equivalents."
TMTrademark of The Dow Chemical Company or an affiliated company
of Dow.
®SmartStax multi-event technology developed by Dow AgroSciences
LLC and Monsanto. SmartStax is a trademark of Monsanto Technology
LLC.
®PhytoGen is a trademark of PhytoGen Seed Company, LLC.
About Dow
Dow (NYSE: Dow) combines the power of science and technology
with the "Human Element" 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 deliver 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 2010, Dow had annual sales of $53.7
billion and employed approximately 50,000 people worldwide. The
Company's more than 5,000 products are manufactured at 188 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 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
In millions, except Jun 30, Jun 30, Jun 30, Jun 30,
per share 2011 2010 2011 2010
amounts (Unaudited)
Net Sales $ 16,046 $ 13,618 $ 30,779 $ 27,035
Cost of sales 13,551 11,580 25,668 23,121
Research and 411 407 811 814
development
expenses
Selling, general and 695 648 1,395 1,310
administrative
expenses
Amortization of 125 125 248 253
intangibles
Restructuring charges -- 13 -- 29
(Note B)
Acquisition and -- 37 31 63
integration
related expenses
(Note C)
Equity in earnings 291 244 589 548
of nonconsolidated
affiliates
Sundry income 80 95 (369 ) 178
(expense)
- net (Note D)
Interest income 10 10 17 17
Interest expense 328 367 705 743
and amortization
of debt discount
Income Before 1,317 790 2,158 1,445
Income Taxes
Provision for 240 131 360 234
income taxes
Net Income 1,077 659 1,798 1,211
Net income attributable 10 8 21 9
to
noncontrolling
interests
Net Income Attributable 1,067 651 1,777 1,202
to
The Dow Chemical
Company
Preferred stock 85 85 170 170
dividends
Net Income Available $ 982 $ 566 $ 1,607 $ 1,032
for The Dow Chemical
Company Common
Stockholders
Per Common Share Data:
Earnings per common $ 0.84 $ 0.50 $ 1.39 $ 0.92
share - basic
Earnings per common $ 0.84 $ 0.50 $ 1.37 $ 0.91
share - diluted
Common stock dividends $ 0.25 $ 0.15 $ 0.40 $ 0.30
declared
per share of
common stock
Weighted-average 1,149.6 1,125.4 1,144.6 1,121.4
common shares
outstanding - basic
Weighted-average 1,160.9 1,141.6 1,156.2 1,138.3
common shares
outstanding - diluted
Depreciation $ 526 $ 571 $ 1,085 $ 1,162
Capital Expenditures $ 564 $ 397 $ 969 $ 691
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, 2010. Except as otherwise indicated by
the context, the terms "Company" and "Dow" as used herein mean The
Dow Chemical Company and its consolidated subsidiaries.
Note B:In June 2009, Dow's Board of Directors approved a
restructuring plan that incorporated actions related to the
Company's acquisition of Rohm and Haas Company as well as
additional actions to advance the Company's strategy and respond to
continued weakness in the global economy. The restructuring plan
included the shutdown of a number of facilities and a global
workforce reduction. In the second quarter of 2010, the Company
recorded adjustments to the 2009 restructuring plan of $13 million
($29 million year to date). See Supplemental Information for
additional information.
Note C: On April 1, 2009, Dow completed the acquisition of Rohm
and Haas Company. During the first quarter of 2011, pretax charges
totaling $31 million were recorded for integration costs related to
the acquisition. During the second quarter of 2010, integration
costs totaled $37 million ($63 million year to date).
Note D:In the second quarter of 2011, the Company recognized a
pretax loss of $10 million on the early extinguishment of debt
($482 million year to date).
The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets
In millions (Unaudited) Jun 30, Dec 31,
2011 2010
Assets
Current Assets
Cash and cash equivalents (variable $ 2,223 $ 7,039
interest entities
restricted - 2011: $107; 2010: $145)
Accounts and notes receivable:
Trade (net of allowance for 5,601 4,616
doubtful receivables
- 2011: $135; 2010: $128)
Other 5,150 4,428
Inventories 8,739 7,087
Deferred income tax assets - current 573 611
Other current assets 413 349
Total current assets 22,699 24,130
Investments
Investment in nonconsolidated affiliates 3,469 3,453
Other investments (investments carried at fair 2,480 2,542
value - 2011: $2,015; 2010: $2,064)
Noncurrent receivables 341 388
Total investments 6,290 6,383
Property
Property 53,888 51,648
Less accumulated depreciation 35,839 33,980
Net property (variable interest 18,049 17,668
entities restricted
- 2011: $1,747; 2010: $1,388)
Other Assets
Goodwill 13,079 12,967
Other intangible assets (net 5,389 5,530
of accumulated amortization
- 2011: $2,127; 2010: $1,805)
Deferred income tax assets - noncurrent 2,057 2,079
Asbestos-related insurance 217 220
receivables - noncurrent
Deferred charges and other assets 667 611
Total other assets 21,409 21,407
Total Assets $ 68,447 $ 69,588
Liabilities and Equity
Current Liabilities
Notes payable $ 916 $ 1,467
Long-term debt due within one year 661 1,755
Accounts payable:
Trade 4,893 4,356
Other 2,305 2,249
Income taxes payable 355 349
Deferred income tax liabilities - current 115 105
Dividends payable 374 257
Accrued and other current liabilities 2,810 3,358
Total current liabilities 12,429 13,896
Long-Term Debt (variable interest entities 18,511 20,605
nonrecourse - 2011: $930; 2010: $167)
Other Noncurrent Liabilities
Deferred income tax liabilities - noncurrent 1,238 1,295
Pension and other postretirement 7,552 7,492
benefits - noncurrent
Asbestos-related liabilities - noncurrent 643 663
Other noncurrent obligations 3,035 2,995
Total other noncurrent liabilities 12,468 12,445
Stockholders' Equity
Preferred stock, series A 4,000 4,000
Common stock 2,953 2,931
Additional paid-in capital 2,450 2,286
Retained earnings 18,877 17,736
Accumulated other comprehensive loss (3,647 ) (4,399 )
Unearned ESOP shares (448 ) (476 )
Treasury stock at cost -- (239 )
The Dow Chemical Company's 24,185 21,839
stockholders' equity
Noncontrolling interests 854 803
Total equity 25,039 22,642
Total Liabilities and Equity $ 68,447 $ 69,588
See Notes to the Consolidated Financial Statements.
The Dow Chemical
Company
and Subsidiaries
Operating Segments
Three Months Ended Six Months Ended
In Jun 30, Jun 30, Jun 30, Jun 30,
millions (Unaudited) 2011 2010 2011 2010
Sales by operating
segment
Electronic and $ 1,450 $ 1,278 $ 2,796 $ 2,457
Specialty
Materials
Coatings 1,587 1,437 2,985 2,722
and Infrastructure
Health 1,500 1,276 3,106 2,645
and Agricultural
Sciences
Performance Systems 1,901 1,808 3,568 3,483
Performance Products 3,157 2,754 6,060 5,543
Plastics 3,274 2,993 6,272 6,015
Chemicals and Energy 1,044 847 2,014 1,686
Hydrocarbons 2,044 1,151 3,796 2,316
Corporate 89 74 182 168
Total $ 16,046 $ 13,618 $ 30,779 $ 27,035
EBITDA (1) by
operating
segment
Electronic and $ 429 $ 426 $ 773 $ 786
Specialty
Materials
Coatings 231 230 419 368
and Infrastructure
Health 287 196 693 580
and Agricultural
Sciences
Performance Systems 260 225 467 430
Performance Products 387 330 843 618
Plastics 751 696 1,560 1,414
Chemicals and Energy 282 100 573 220
Hydrocarbons -- (1 ) -- (1 )
Corporate (295 ) (321 ) (1,054 ) (753 )
Total $ 2,332 $ 1,881 $ 4,274 $ 3,662
Certain items
increasing
(decreasing)
EBITDA by operating
segment (2)
Electronic and $ -- $ -- $ -- $ (8 )
Specialty
Materials
Coatings -- -- -- (5 )
and Infrastructure
Health -- -- -- --
and Agricultural
Sciences
Performance Systems -- 15 -- 15
Performance Products -- 14 -- 11
Plastics -- 10 -- 10
Chemicals and Energy -- -- -- --
Hydrocarbons -- -- -- --
Corporate (10 ) (38 ) (513 ) (64 )
Total $ (10 ) $ 1 $ (513 ) $ (41 )
EBITDA excluding
certain items
by operating segment
Electronic and $ 429 $ 426 $ 773 $ 794
Specialty
Materials
Coatings 231 230 419 373
and Infrastructure
Health 287 196 693 580
and Agricultural
Sciences
Performance Systems 260 210 467 415
Performance Products 387 316 843 607
Plastics 751 686 1,560 1,404
Chemicals and Energy 282 100 573 220
Hydrocarbons -- (1 ) -- (1 )
Corporate (285 ) (283 ) (541 ) (689 )
Total $ 2,342 $ 1,880 $ 4,787 $ 3,703
The Dow Chemical
Company
and Subsidiaries
Operating
Segments
(Continued)
Three Months Ended Six Months Ended
In Jun 30, Jun 30, Jun 30, Jun 30,
millions 2011 2010 2011 2010
(Unaudited)
Equity in
earnings
(losses) of
nonconsolidated
affiliates
by operating
segment
(included in
EBITDA)
Electronic and $ 97 $ 112 $ 188 $ 225
Specialty
Materials
Coatings -- 1 -- 2
and
Infrastructure
Health -- (1 ) 3 1
and Agricultural
Sciences
Performance (6 ) 2 (10 ) 2
Systems
Performance 3 2 (3 ) 9
Products
Plastics 65 59 133 124
Chemicals and 130 54 274 152
Energy
Hydrocarbons 8 20 19 44
Corporate (6 ) (5 ) (15 ) (11 )
Total $ 291 $ 244 $ 589 $ 548
(1) The Company uses EBITDA (which Dow defines as earnings
(i.e., "Net Income") before interest, income taxes, depreciation
and amortization) as its measure of profit/loss for segment
reporting purposes. EBITDA includes all operating items related to
the businesses, except depreciation and amortization, and excludes
items that principally apply to the Company as a whole. A
reconciliation of EBITDA to "Net Income Available for The Dow
Chemical Company Common Stockholders" is provided below.
Reconciliation Three Months Ended Six Months Ended
of EBITDA to
"Net Income
Available
for
The Dow Chemical
Company
Common
Stockholders"
In Jun 30, Jun 30, Jun 30, Jun 30,
millions (Unaudited) 2011 2010 2011 2010
EBITDA $ 2,332 $ 1,881 $ 4,274 $ 3,662
- Depreciation and 697 734 1,428 1,491
amortization
+ Interest income 10 10 17 17
- Interest expense 328 367 705 743
and amortization
of debt discount
Income Before $ 1,317 $ 790 $ 2,158 $ 1,445
Income Taxes
- Provision for 240 131 360 234
income taxes
- Net income 10 8 21 9
attibutable
to
noncontrolling
interests
- Preferred stock 85 85 170 170
dividends
Net Income $ 982 $ 566 $ 1,607 $ 1,032
Available
for The Dow
Chemical
Company Common
Stockholders
(2) See Supplemental Information for a description of certain
items affecting results in 2011 and 2010.
Sales by Geographic Area
Three Months Ended Six Months Ended
In millions (Unaudited) Jun 30, Jun 30, Jun 30, Jun 30,
2011 2010 2011 2010
North America $ 5,814 $ 5,050 $ 11,098 $ 9,939
Europe, Middle East 5,713 4,721 11,071 9,468
and Africa
Asia Pacific 2,741 2,493 5,226 4,862
Latin America 1,778 1,354 3,384 2,766
Total $ 16,046 $ 13,618 $ 30,779 $ 27,035
Sales Volume
and Price
by Operating
Segment and
Geographic
Area
Three Months Ended Six Months Ended
June 30, 2011 June 30, 2011
Percentage Volume Price Total Volume Price Total
change
from prior
year
Electronic 6 % 7 % 13 % 8 % 6 % 14 %
and
Specialty
Materials
Coatings (4 ) 14 10 (4 ) 14 10
and
Infrastructure
Health 13 5 18 13 4 17
and
Agricultural
Sciences
Performance (10 ) 15 5 (10 ) 12 2
Systems
Performance (3 ) 18 15 (7 ) 16 9
Products
Plastics (7 ) 16 9 (10 ) 14 4
Chemicals (3 ) 26 23 (1 ) 20 19
and
Energy
Hydrocarbons 32 46 78 30 34 64
Total 1 % 17 % 18 % (1 )% 15 % 14 %
North -- % 15 % 15 % -- % 12 % 12 %
America
Europe, (3 ) 24 21 (2 ) 19 17
Middle
East
and Africa
Asia Pacific (1 ) 11 10 (3 ) 10 7
Latin 17 14 31 8 14 22
America
Total 1 % 17 % 18 % (1 )% 15 % 14 %
Sales
Volume
and Price
by
Operating
Segment
and
Geographic
Area
Excluding
Divestitures
(3)
Three Months Ended Six Months Ended
June 30, 2011 June 30, 2011
Percentage Volume Price Total Volume Price Total
change
from
prior
year
Electronic 6 % 7 % 13 % 8 % 6 % 14 %
and
Specialty
Materials
Coatings -- 14 14 1 14 15
and
Infrastructure
Health 13 5 18 13 4 17
and
Agricultural
Sciences
Performance 2 17 19 3 14 17
Systems
Performance 9 20 29 6 18 24
Products
Plastics 10 20 30 7 17 24
Chemicals (3 ) 26 23 (1 ) 20 19
and
Energy
Hydrocarbons 33 46 79 32 35 67
Total 9 % 19 % 28 % 8 % 16 % 24 %
North 4 % 15 % 19 % 3 % 13 % 16 %
America
Europe, 10 27 37 12 22 34
Middle
East
and
Africa
Asia 11 12 23 9 12 21
Pacific
Latin 23 15 38 14 15 29
America
Total 9 % 19 % 28 % 8 % 16 % 24 %
(3) Excludes sales of the acrylic monomer business and a portion
of the specialty latex business divested on January 25, 2010, sales
of the Powder Coatings business divested on June 1, 2010 and sales
of Styron divested on June 17, 2010.
EBITDA Margin Calculation
Three Months Ended Six Months Ended
In millions (Unaudited) Jun 30, Jun 30, Jun 30, Jun 30,
2011 2010 2011 2010
Net Sales $ 16,046 $ 13,618 $ 30,779 $ 27,035
EBITDA excluding 2,342 1,880 4,787 3,703
certain items
EBITDA margin excluding 14.6 % 13.8 % 15.6 % 13.7 %
certain items
Supplemental Information
Description of Certain Items Affecting Results:
The following table summarizes the impact of certain items
recorded in the three-month periods ended June 30, 2011 and June
30, 2010:
Certain Items Pretax Impact(1) Net Income(2) EPS - Diluted(3)
Impacting
Results
Three Months Ended Three Months Ended Three Months Ended
In millions, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30,
except 2011 2010 2011 2010 2011 2010
per share
amounts
(Unaudited)
Excluding $ 989 $ 614 $ 0.85 $ 0.54
certain
items
(non-GAAP
measures)
Certain items:
Restructuring $ -- $ (13 ) -- (8 ) -- (0.01 )
charges
Acquisition-related -- (37 ) -- (24 ) -- (0.02 )
integration
costs
Loss (10 ) -- (7 ) -- (0.01 ) --
on
early
extinguishment
of debt
Gain (Loss) on -- 51 -- (16 ) -- (0.01 )
Divestiture
of Styron
Total certain $ (10 ) $ 1 $ (7 ) $ (48 ) $ (0.01 ) $ (0.04 )
items
Reported (GAAP $ 982 $ 566 $ 0.84 $ 0.50
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 second quarter of 2011 were impacted by one
item:
-- Pretax loss of $10 million on the early extinguishment of debt,
included in "Sundry income (expense) - net" and reflected in
Corporate.
Results in the second quarter of 2010 were impacted by three
items:
-- Pretax adjustments to the 2009 restructuring charge of $13 million for
additional exit or disposal activities related to the
divestitures of
certain acrylic monomer assets and the hollow sphere
particle
business. The charges are shown as "Restructuring charges" in
the
consolidated statements of income and reflected in
Performance
Products ($12 million) and Corporate ($1 million).
-- Pretax charges totaling $37 million for integration costs related to
the April 1, 2009 acquisition of Rohm and Haas Company ("Rohm
and
Haas"). The charges are included in "Acquisition and
integration
related expenses" in the consolidated statements of income
and
reflected in Corporate.
-- Pretax gain of $51 million ($16 million loss after tax) on the
divestiture of Styron, sold to an affiliate of Bain Capital
Partners
on June 17, 2010. The pretax gain was included in "Sundry income
-
net" and was reflected in Performance Systems ($15 million),
Performance Products ($26 million) and Plastics ($10
million).
The following table summarizes the impact of certain items
recorded in the six-month periods ended June 30, 2011 and June 30,
2010:
Certain Items Pretax Impact(1) Net Income(2) EPS - Diluted(3)
Impacting
Results
Six Months Ended Six Months Ended Six Months Ended
In millions, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30, Jun 30,
except 2011 2010 2011 2010 2011 2010
per share
amounts
(Unaudited)
Excluding $ 1,941 $ 1,105 $ 1.66 $ 0.97
certain
items
(non-GAAP
measures)
Certain items:
Restructuring $ -- $ (29 ) -- (16 ) -- (0.02 )
charges
Acquisition-related (31 ) (63 ) (20 ) (41 ) (0.02 ) (0.03 )
integration
costs
Loss (482 ) -- (314 ) -- (0.27 ) --
on
early
extinguishment
of debt
Gain (Loss) on -- 51 -- (16 ) -- (0.01 )
Divestiture
of Styron
Total certain $ (513 ) $ (41 ) $ (334 ) $ (73 ) $ (0.29 ) $ (0.06 )
items
Reported (GAAP $ 1,607 $ 1,032 $ 1.37 $ 0.91
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"
In addition to the item described above for the second quarter
of 2011, results for the six-month period ended June 30, 2011 were
unfavorably impacted by two items:
-- Pretax charges totaling $31 million for integration costs related to
the April 1, 2009 acquisition of Rohm and Haas. The charges
are
included in "Acquisition and integration related expenses" in
the
consolidated statements of income and reflected in
Corporate.
-- Pretax loss of $472 million on the early extinguishment of debt,
included in "Sundry income (expense) - net" and reflected in
Corporate.
In addition to the items described above for the second quarter
of 2010, results for the six-month period ended June 30, 2010 were
unfavorably impacted by the following items:
-- Pretax adjustments of $16 million to the 2009 restructuring charge
related to additional asset impairments, approximately half of
which
was related to a consolidated joint venture. The charges are
shown as
"Restructuring charges" in the consolidated statements of income
and
reflected in Electronic and Specialty Materials ($8 million),
Coatings
and Infrastructure ($5 million) and Performance Products ($3
million).
-- Pretax charges totaling $26 million for integration costs related to
the April 1, 2009 acquisition of Rohm and Haas. The charges
are
included in "Acquisition and integration related expenses"
and
reflected in Corporate.
Media ContactRebecca BentleyThe Dow Chemical Company2030 Dow
CenterMidland, MI 48674+1 989 638 8568orAnalyst ContactDave
JohnsonThe Dow Chemical Company2030 Dow CenterMidland, MI 48674+1
989 636 1375
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