[October 22, 2014] |
|
Dow Reports Third Quarter Results
MIDLAND, Mich. --(Business Wire)--
The Dow Chemical Company (NYSE: DOW):
Third Quarter 2014 Highlights
-
Dow reported earnings of $0.71 per share or $0.72 per share on an
adjusted basis(1). This compares with earnings of $0.49 per
share, or adjusted earnings of $0.50 per share, in the same quarter
last year.
-
Sales rose 5 percent versus the year-ago period, reaching
$14.4 billion, driven by price increases associated with tightening
demand conditions in key regions, with gains in most operating
segments. Sales gains were led by Performance Plastics (up 9 percent
on an adjusted basis(2)), and Performance Materials (up
8 percent).
-
The Company reported increased sales in all geographic areas. Sales in
developed geographies grew 4 percent, led by gains in North America,
where sales rose 7 percent. Sales in emerging geographies increased
6 percent, due primarily to strength in Performance Plastics in Latin
America.
-
EBITDA(3) grew to $2.3 billion, up 24 percent versus the
prior year, driven by ongoing productivity actions and improved market
fundamentals.
-
Performance Plastics achieved record quarterly adjusted EBITDA results
(up 31 percent versus the year-ago period). Performance Materials
EBITDA grew 61 percent with increases in most businesses, notably in
Polyurethanes and PO/PG. Electronic and Functional Materials also
delivered record quarterly EBITDA (up 11 percent).
-
Adjusted EBITDA margin(4) expanded more than 240 basis
points to 15.9 percent year over year.
-
Dow reported an operating rate of 88 percent, up 6 percent versus the
same quarter last year, driven primarily by productivity improvements
in Performance Materials and Feedstocks and Energy, coupled with
higher operating rates in Performance Plastics.
-
Cash flow from operations was $1.8 billion for the quarter, and $3.7
billion year-to-date. Dow rewarded shareholders with $1.3 billion in
declared dividends and $3.1 billion in share repurchases year to date.
Comment
Andrew N. Liveris, Dow's chairman and chief executive officer, stated:
"Dow delivered a strong quarter of top- and bottom-line growth. Our
low-cost positions and geographic diversification enabled growth and
improving operating rates in the quarter. Record EBITDA in Performance
Plastics and Electronic and Functional Materials, coupled with
significant improvement in Performance Materials again this quarter,
demonstrates the value of our strategy to be low cost and fully
integrated in key products while adding value through technology in key
markets. We continued to achieve major milestones in Agricultural
Sciences - such as the recently announced regulatory approvals for our
Enlist™ Weed Control System - despite lower crop prices in a seasonally
weak quarter.
"This consistent execution against the plans we have firmly set - using
ROC to drive self-help actions such as prioritizing spending, further
enhancing productivity and liberating capital by applying a best-owner
mindset to our entire portfolio - is enabling us to deliver increasing
returns and maximize shareholder value creation. This remains our
singular focus."
|
|
Three Months Ended
|
|
|
Sept. 30,
|
Sept. 30,
|
In millions, except per share amounts
|
|
2014
|
2013
|
Net Sales
|
|
$14,405
|
$13,734
|
Adjusted Sales
|
|
$14,405
|
$13,703
|
|
|
|
|
Net Income Available for Common Stockholders
|
|
$852
|
$594
|
Net Income Available for Common Stockholders,
excluding Certain Items
|
|
$860
|
$599
|
|
|
|
|
Earnings per Common Share - diluted
|
|
$0.71
|
$0.49
|
Adjusted Earnings per Share
|
|
$0.72
|
$0.50
|
|
|
|
|
Review of Third Quarter Results
The Dow Chemical Company (NYSE: DOW) reported sales of $14.4 billion, up
5 percent versus the year-ago period. Gains were driven by price
increases associated with tightening demand conditions in key regions,
with increased sales reported in most operating segments. Sales gains
were led by Performance Plastics (up 9 percent on an adjusted basis) and
Performance Materials (up 8 percent).
The Company reported increased sales in all geographic areas. Sales in
developed geographies grew 4 percent, led by gains in North America,
where sales rose 7 percent. Sales in emerging geographies increased 6
percent, due primarily to strength in Performance Plastics in Latin
America.
EBITDA grew to $2.3 billion, up 24 percent versus the prior year, driven
by ongoing productivity actions and improved market fundamentals.
Earnings for the quarter were $0.71 per share, or $0.72 per share on an
adjusted basis. This compares with earnings of $0.49 per share, or
adjusted earnings of $0.50 per share in the same quarter last year.
Dow reported equity earnings of $229 million, down 29 percent versus the
same period last year. Decreases reflect higher spending at Sadara,
lower styrene prices and adverse impacts associated with the unplanned
outage of an ethylene production facility in Canada.
Certain Items in the current quarter included pretax charges of $12
million for nonrecurring transaction costs associated with the planned
separation of a significant portion of the Company's chlorine value
chain. (See Supplemental Information at the end of the release for a
description of Certain Items affecting results.)
Research and Development (R&D) expenses were down 2 percent versus the
same period last year, reflecting the Company's execution against its
strategy to prioritize R&D resources on high-return market sectors.
Selling, General and Administrative (SG&A) expenses increased 8 percent
as compared with the year-ago period, driven primarily by growth
initiatives - including commercial activities in Agricultural Sciences.
Cash flow from operations was $1.8 billion for the quarter, and $3.7
billion year to date. Dow rewarded shareholders with $1.3 billion in
declared dividends and $3.1 billion in share repurchases year to date.
Electronic and Functional Materials
Electronic and Functional Materials reported third quarter sales of $1.2
billion, up 3 percent versus the same quarter last year.
In Dow Electronic Materials, gains from continued strong foundry demand
in Semiconductor Technologies were offset by declines in Display
Technologies as a result of lower sales in films and filters and OLED
materials.
Functional Materials drove sales increases in nearly all geographies,
led by growth in North America. Double-digit gains in Dow Microbial
Control and Dow Pharma and Food Solutions reflect strong growth
fundamentals in the energy, water and pharmaceuticals market sectors.
Equity earnings for the segment were $35 million. This compares with $36
million in the year-ago period. The segment reported record third
quarter EBITDA of $320 million, versus $287 million in the same quarter
last year.
Coatings and Infrastructure Solutions
Coatings and Infrastructure Solutions reported third quarter sales of
$1.8 billion, flat versus the year-ago period, as gains in North America
and Latin America were offset by declines in other regions.
Dow Coating Materials reported broad-based sales gains, led by increases
in epoxy coatings. Supply limitations of vinyl acetate monomer from
unplanned production outages impacted sales in Performance Monomers. In
Dow Water and Process Solutions, increased demand for reverse osmosis
and ion exchange technologies in North America was more than offset by
declines in Asia Pacific and the Europe, Middle East and Africa (EMEA)
region.
Equity earnings for the segment were $54 million. This compares with $32
million in the year-ago period. The segment reported EBITDA of $289
million, up $6 million versus the same quarter last year, as equity
earnings, demand growth and productivity efforts more than offset costs
associated with unplanned outages.
Agricultural Sciences
Agricultural Sciences reported third quarter sales of $1.4 billion, flat
versus the year-ago period. On a year-to-date basis, the segment
reported record sales of $5.4 billion.
Crop Protection sales declined 1 percent versus the same quarter last
year, due to softening market conditions in North America. Year to date,
sales of new crop protection products were up 18 percent, led by
Isoclast™ insecticide.
Seeds delivered 5 percent sales gains versus the year-ago period,
representing a record third quarter, led by soybeans and sunflower
growth in North America and Latin America.
Equity earnings for the segment were $1 million. This compares with $3
million in the year-ago period. The segment reported EBITDA of $5
million, down from $18 million in the same quarter last year. Third
quarter EBITDA margins reflect the impact of softer market conditions in
a seasonally weak quarter weighing down Crop Protection results, coupled
with increased spending on growth initiatives.
Performance Materials
Performance Materials reported third quarter sales of $3.6 billion, up 8
percent versus the year-ago period, with gains in all geographic areas.
Polyurethanes achieved double-digit revenue growth with higher sales in
all geographic areas driven by gains in the consumer comfort, appliance
and industrial market sectors. Sales rose in Propylene Oxide/Propylene
Glycol to a new quarterly record due to strong operational performance,
growth in key market sectors, as well as industry supply disruptions in
both North America and EMEA. Dow Oil, Gas and Mining delivered record
sales due to double-digit growth on strong shale dynamics in North
America and project-related demand in refining and processing. Dow
Automotive Systems reported sales gains, driven by the adoption of
innovative adhesive products.
Equity losses for the quarter were $29 million. This compares with
equity losses of $11 million in the year-ago period. The segment
reported EBITDA of $506 million, an increase of $192 million or 61
percent versus the same quarter last year, as a result of improved
market dynamics coupled with ongoing productivity actions.
Performance Plastics
Performance Plastics reported record third quarter sales of $3.9
billion, up 8 percent versus the year-ago period. Excluding the impact
of divestitures, sales were up 9 percent with increases in all regions,
led by double-digit gains in North America and Latin America.
Dow Packaging and Specialty Plastics continued to drive sales increases,
capitalizing on strong market fundamentals and higher demand in
attractive markets, including double-digit gains in the hygiene and
medical and pipe market sectors, as well as continued growth in the food
and specialty packaging market sector. Market demand in transportation
and hot-melt adhesives drove increased sales in Dow Elastomers.
Equity earnings for the segment were $66 million. This compares with
$134 million in the year-ago period. The segment reported record third
quarter EBITDA of $1.3 billion, an increase of $305 million versus the
same quarter last year. Performance Plastics continued to deliver
profitable growth, with adjusted EBITDA margins expanding year-over-year
for the ninth consecutive quarter.
Feedstocks and Energy
Feedstocks and Energy reported third quarter sales of $2.4 billion, up 2
percent versus the year-ago period, led by price increases in olefins
and aromatics.
Equity earnings for the segment were $108 million. This compares with
$135 million in the year-ago period. The segment reported EBITDA of $183
million, down from $187 million in the same quarter last year, due
primarily to lower equity earnings.
Outlook
Commenting on the Company's outlook, Liveris said:
"Delivering shareholder value is ingrained across the enterprise, and as
we look ahead, our priorities are clear: Improve return on capital,
increase cash flow by managing our portfolio of integrated value chains,
and innovate and commercialize technologies that our customers value.
"We remain committed to achieving our financial targets and ongoing
shareholder remuneration, and are taking targeted steps across our
businesses to navigate through persistently slow and volatile global
macroeconomic conditions. Looking ahead, we will continue leveraging the
power of Dow's global reach and industry-leading feedstock and
operational flexibility to manage our portfolio in the midst of volatile
energy markets. Our low-cost positions in key products such as ethylene
and our deep integration with downstream, value-added products that
create value for ourselves and our customers will uniquely position us
to continue driving profitable growth. In these conditions, having
global scale and flexibility is the best hedge against volatile markets."
Dow will host a live webcast of its third quarter earnings conference
call with investors to discuss its results, business outlook and other
matters today at 9:00 a.m. ET on www.dow.com.
(1)
|
|
"Adjusted earnings per share" is defined as earnings per share
excluding the impact of "Certain Items." See Supplemental
Information at the end of the release for a description of these
items, as well as a reconciliation of adjusted earnings per share to
"Earnings per common share - diluted."
|
(2)
|
|
"Adjusted sales" is defined as "Net Sales" excluding sales related
to prior-period divestitures.
|
(3)
|
|
"EBITDA" is defined as earnings (i.e., "Net Income") before
interest, income taxes, depreciation and amortization. A
reconciliation of EBITDA to "Net Income Available for The Dow
Chemical Company Common Stockholders" is provided following the
Operating Segments table.
|
(4)
|
|
"Adjusted EBITDA margin" is defined as Adjusted EBITDA as a
percentage of reported sales.
|
|
|
|
™Dow Diamond, Isoclast, and Enlist are trademarks 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 2013, Dow had annual sales of more than $57 billion and
employed approximately 53,000 people worldwide. The Company's more than
6,000 products are manufactured at 201 sites in 36 countries across the
globe. References to "Dow" or the "Company" mean The Dow Chemical
Company and its consolidated subsidiaries unless otherwise expressly
noted. More information about Dow can be found at www.dow.com.
Use of non-GAAP financial measures: Dow's management believes that
measures of income adjusted to exclude certain items ("non-GAAP"
financial measures) provide relevant and meaningful information to
investors about the ongoing operating results of the Company. Such
financial measures are not recognized in accordance with accounting
principles generally accepted in the United States of America ("GAAP")
and should not be viewed as an alternative to GAAP financial measures of
performance. Reconciliations of non-GAAP financial measures to GAAP
financial measures are provided in the Supplemental Information tables.
Note: The forward-looking statements contained in this document
involve risks and uncertainties that may affect the Company's
operations, markets, products, services, prices and other factors as
discussed in filings with the Securities and Exchange Commission. These
risks and uncertainties include, but are not limited to, economic,
competitive, legal, governmental and technological factors. Accordingly,
there is no assurance that the Company's expectations will be realized.
The Company assumes no obligation to provide revisions to any
forward-looking statements should circumstances change, except as
otherwise required by securities and other applicable laws.
|
Financial Statements (Note A)
|
|
The Dow Chemical Company and Subsidiaries
|
Consolidated Statements of Income
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
In millions, except per share amounts (Unaudited)
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
Net Sales
|
|
$
|
14,405
|
|
|
$
|
13,734
|
|
|
$
|
43,783
|
|
|
$
|
42,694
|
Cost of sales
|
|
11,776
|
|
|
11,716
|
|
|
35,853
|
|
|
35,526
|
Research and development expenses
|
|
409
|
|
|
418
|
|
|
1,219
|
|
|
1,270
|
Selling, general and administrative expenses
|
|
753
|
|
|
698
|
|
|
2,283
|
|
|
2,186
|
Amortization of intangibles
|
|
108
|
|
|
114
|
|
|
330
|
|
|
344
|
Equity in earnings of nonconsolidated affiliates
|
|
229
|
|
|
322
|
|
|
707
|
|
|
780
|
Sundry income (expense) - net (Note B)
|
|
(23
|
)
|
|
59
|
|
|
31
|
|
|
2,080
|
Interest income
|
|
10
|
|
|
11
|
|
|
32
|
|
|
29
|
Interest expense and amortization of debt discount
|
|
233
|
|
|
264
|
|
|
721
|
|
|
839
|
Income Before Income Taxes
|
|
1,342
|
|
|
916
|
|
|
4,147
|
|
|
5,418
|
Provision for income taxes (Note C)
|
|
378
|
|
|
231
|
|
|
1,147
|
|
|
1,630
|
Net Income
|
|
964
|
|
|
685
|
|
|
3,000
|
|
|
3,788
|
Net income attributable to noncontrolling interests
|
|
27
|
|
|
6
|
|
|
47
|
|
|
49
|
Net Income Attributable to The Dow Chemical Company
|
|
937
|
|
|
679
|
|
|
2,953
|
|
|
3,739
|
Preferred stock dividends
|
|
85
|
|
|
85
|
|
|
255
|
|
|
255
|
Net Income Available for The Dow Chemical Company Common Stockholders
|
|
$
|
852
|
|
|
$
|
594
|
|
|
$
|
2,698
|
|
|
$
|
3,484
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common Share Data:
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share - basic
|
|
$
|
0.72
|
|
|
$
|
0.50
|
|
|
$
|
2.27
|
|
|
$
|
2.92
|
Earnings per common share - diluted (Note D)
|
|
$
|
0.71
|
|
|
$
|
0.49
|
|
|
$
|
2.24
|
|
|
$
|
2.88
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividends declared per share of common stock
|
|
$
|
0.37
|
|
|
$
|
0.32
|
|
|
$
|
1.11
|
|
|
$
|
0.96
|
Weighted-average common shares outstanding - basic
|
|
1,167.2
|
|
|
1,187.4
|
|
|
1,178.9
|
|
|
1,184.9
|
Weighted-average common shares outstanding - diluted (Note D)
|
|
1,184.1
|
|
|
1,194.2
|
|
|
1,195.7
|
|
|
1,287.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
550
|
|
|
$
|
509
|
|
|
$
|
1,592
|
|
|
$
|
1,518
|
Capital Expenditures
|
|
$
|
930
|
|
|
$
|
566
|
|
|
$
|
2,466
|
|
|
$
|
1,418
|
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,
2013. 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 the third quarter of 2014, the Company recognized a
pretax charge of $12 million for nonrecurring transaction costs
associated with the planned separation of a significant portion of the
Company's chlorine value chain, consisting primarily of financial and
professional advisory fees and legal fees; a pretax charge of $18
million was recognized in the second quarter of 2014. In the second
quarter of 2013, the Company recognized a pretax gain of $2.161 billion
related 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.
Note C: 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 D: During the second quarter of 2013, the Company
recorded a gain related to the K-Dow arbitration, which significantly
increased net income for the nine-month period ended September 30, 2013.
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 is dilutive for the
nine-month period ended September 30, 2013. 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 nine-month period ended September 30, 2013. See
Supplemental Information for further details.
|
|
|
|
|
The Dow Chemical Company and Subsidiaries
|
Consolidated Balance Sheets
|
|
|
|
|
|
In millions (Unaudited)
|
|
Sep 30, 2014
|
|
Dec 31, 2013
|
Assets
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents (variable interest entities restricted -
2014: $229; 2013: $147)
|
|
$
|
5,768
|
|
|
$
|
5,940
|
|
Accounts and notes receivable:
|
|
|
|
|
|
|
Trade (net of allowance for doubtful receivables - 2014: $150; 2013:
$148)
|
|
5,032
|
|
|
4,935
|
|
Other
|
|
4,764
|
|
|
4,712
|
|
Inventories
|
|
9,019
|
|
|
8,303
|
|
Deferred income tax assets - current
|
|
824
|
|
|
743
|
|
Other current assets
|
|
323
|
|
|
344
|
|
Total current assets
|
|
25,730
|
|
|
24,977
|
|
Investments
|
|
|
|
|
|
|
Investment in nonconsolidated affiliates
|
|
4,385
|
|
|
4,501
|
|
Other investments (investments carried at fair value - 2014: $2,049;
2013: $2,056)
|
|
2,489
|
|
|
2,541
|
|
Noncurrent receivables
|
|
396
|
|
|
365
|
|
Total investments
|
|
7,270
|
|
|
7,407
|
|
Property
|
|
|
|
|
|
|
Property
|
|
55,072
|
|
|
55,114
|
|
Less accumulated depreciation
|
|
37,378
|
|
|
37,660
|
|
Net property (variable interest entities restricted - 2014: $2,718;
2013: $2,646)
|
|
17,694
|
|
|
17,454
|
|
Other Assets
|
|
|
|
|
|
|
Goodwill
|
|
12,688
|
|
|
12,798
|
|
Other intangible assets (net of accumulated amortization - 2014:
$3,604; 2013: $3,270)
|
|
3,976
|
|
|
4,314
|
|
Deferred income tax assets - noncurrent
|
|
1,572
|
|
|
1,964
|
|
Asbestos-related insurance receivables - noncurrent
|
|
74
|
|
|
86
|
|
Deferred charges and other assets
|
|
569
|
|
|
501
|
|
Total other assets
|
|
18,879
|
|
|
19,663
|
|
Total Assets
|
|
$
|
69,573
|
|
|
$
|
69,501
|
|
Liabilities and Equity
|
Current Liabilities
|
|
|
|
|
|
|
Notes payable
|
|
$
|
524
|
|
|
$
|
443
|
|
Long-term debt due within one year
|
|
257
|
|
|
697
|
|
Accounts payable:
|
|
|
|
|
|
|
Trade
|
|
4,846
|
|
|
4,590
|
|
Other
|
|
2,461
|
|
|
2,290
|
|
Income taxes payable
|
|
572
|
|
|
435
|
|
Deferred income tax liabilities - current
|
|
104
|
|
|
133
|
|
Dividends payable
|
|
513
|
|
|
467
|
|
Accrued and other current liabilities
|
|
2,810
|
|
|
2,916
|
|
Total current liabilities
|
|
12,087
|
|
|
11,971
|
|
Long-Term Debt (variable interest entities nonrecourse - 2014:
$1,310; 2013: $1,360)
|
|
19,001
|
|
|
16,820
|
|
Other Noncurrent Liabilities
|
|
|
|
|
|
|
Deferred income tax liabilities - noncurrent
|
|
637
|
|
|
718
|
|
Pension and other postretirement benefits - noncurrent
|
|
7,420
|
|
|
8,176
|
|
Asbestos-related liabilities - noncurrent
|
|
382
|
|
|
434
|
|
Other noncurrent obligations
|
|
3,144
|
|
|
3,302
|
|
Total other noncurrent liabilities
|
|
11,583
|
|
|
12,630
|
|
Redeemable Noncontrolling Interest
|
|
191
|
|
|
156
|
|
Stockholders' Equity
|
|
|
|
|
|
|
Preferred stock, series A
|
|
4,000
|
|
|
4,000
|
|
Common stock
|
|
3,107
|
|
|
3,054
|
|
Additional paid-in capital
|
|
4,741
|
|
|
3,928
|
|
Retained earnings
|
|
22,792
|
|
|
21,407
|
|
Accumulated other comprehensive loss
|
|
(5,371
|
)
|
|
(4,827
|
)
|
Unearned ESOP shares
|
|
(337
|
)
|
|
(357
|
)
|
Treasury stock at cost
|
|
(3,201
|
)
|
|
(307
|
)
|
The Dow Chemical Company's stockholders' equity
|
|
25,731
|
|
|
26,898
|
|
Noncontrolling interests
|
|
980
|
|
|
1,026
|
|
Total equity
|
|
26,711
|
|
|
27,924
|
|
Total Liabilities and Equity
|
|
$
|
69,573
|
|
|
$
|
69,501
|
|
See Notes to the Consolidated Financial Statements.
|
|
|
|
|
The Dow Chemical Company and Subsidiaries
|
Operating Segments
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
In millions (Unaudited)
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
Sales by operating segment
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic and Functional Materials
|
|
$
|
1,199
|
|
|
$
|
1,168
|
|
|
$
|
3,537
|
|
|
$
|
3,461
|
|
Coatings and Infrastructure Solutions
|
|
1,846
|
|
|
1,839
|
|
|
5,546
|
|
|
5,394
|
|
Agricultural Sciences
|
|
1,408
|
|
|
1,410
|
|
|
5,434
|
|
|
5,363
|
|
Performance Materials
|
|
3,573
|
|
|
3,307
|
|
|
10,304
|
|
|
10,024
|
|
Performance Plastics
|
|
3,924
|
|
|
3,616
|
|
|
11,283
|
|
|
10,790
|
|
Feedstocks and Energy
|
|
2,386
|
|
|
2,328
|
|
|
7,439
|
|
|
7,427
|
|
Corporate
|
|
69
|
|
|
66
|
|
|
240
|
|
|
235
|
|
Total
|
|
$
|
14,405
|
|
|
$
|
13,734
|
|
|
$
|
43,783
|
|
|
$
|
42,694
|
|
EBITDA (1) by operating segment
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic and Functional Materials
|
|
$
|
320
|
|
|
$
|
287
|
|
|
$
|
913
|
|
|
$
|
814
|
|
Coatings and Infrastructure Solutions
|
|
289
|
|
|
283
|
|
|
770
|
|
|
719
|
|
Agricultural Sciences
|
|
5
|
|
|
18
|
|
|
815
|
|
|
792
|
|
Performance Materials
|
|
506
|
|
|
314
|
|
|
1,332
|
|
|
1,038
|
|
Performance Plastics
|
|
1,275
|
|
|
970
|
|
|
3,342
|
|
|
2,932
|
|
Feedstocks and Energy
|
|
183
|
|
|
187
|
|
|
546
|
|
|
620
|
|
Corporate
|
|
(307
|
)
|
|
(225
|
)
|
|
(827
|
)
|
|
1,305
|
|
Total
|
|
$
|
2,271
|
|
|
$
|
1,834
|
|
|
$
|
6,891
|
|
|
$
|
8,220
|
|
Certain items (increasing) decreasing EBITDA by operating segment (2)
|
Electronic and Functional Materials
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Coatings and Infrastructure Solutions
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Agricultural Sciences
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Performance Materials
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Performance Plastics
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Feedstocks and Energy
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Corporate
|
|
(12
|
)
|
|
(7
|
)
|
|
(30
|
)
|
|
1,960
|
|
Total
|
|
$
|
(12
|
)
|
|
$
|
(7
|
)
|
|
$
|
(30
|
)
|
|
$
|
1,960
|
|
EBITDA excluding certain items by operating segment
|
|
|
|
|
|
|
|
|
|
|
|
|
Electronic and Functional Materials
|
|
$
|
320
|
|
|
$
|
287
|
|
|
$
|
913
|
|
|
$
|
814
|
|
Coatings and Infrastructure Solutions
|
|
289
|
|
|
283
|
|
|
770
|
|
|
719
|
|
Agricultural Sciences
|
|
5
|
|
|
18
|
|
|
815
|
|
|
792
|
|
Performance Materials
|
|
506
|
|
|
314
|
|
|
1,332
|
|
|
1,038
|
|
Performance Plastics
|
|
1,275
|
|
|
970
|
|
|
3,342
|
|
|
2,932
|
|
Feedstocks and Energy
|
|
183
|
|
|
187
|
|
|
546
|
|
|
620
|
|
Corporate
|
|
(295
|
)
|
|
(218
|
)
|
|
(797
|
)
|
|
(655
|
)
|
Total
|
|
$
|
2,283
|
|
|
$
|
1,841
|
|
|
$
|
6,921
|
|
|
$
|
6,260
|
|
Continued
|
|
|
|
|
|
The Dow Chemical Company and Subsidiaries
|
Operating Segments (Continued)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
In millions (Unaudited)
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
Equity in earnings (losses) of nonconsolidated affiliates by
operating segment (included in EBITDA)
|
Electronic and Functional Materials
|
|
$
|
35
|
|
|
$
|
36
|
|
|
$
|
88
|
|
|
$
|
81
|
|
Coatings and Infrastructure Solutions
|
|
54
|
|
|
32
|
|
|
168
|
|
|
83
|
|
Agricultural Sciences
|
|
1
|
|
|
3
|
|
|
3
|
|
|
6
|
|
Performance Materials
|
|
(29
|
)
|
|
(11
|
)
|
|
(83
|
)
|
|
(46
|
)
|
Performance Plastics
|
|
66
|
|
|
134
|
|
|
198
|
|
|
279
|
|
Feedstocks and Energy
|
|
108
|
|
|
135
|
|
|
354
|
|
|
399
|
|
Corporate
|
|
(6
|
)
|
|
(7
|
)
|
|
(21
|
)
|
|
(22
|
)
|
Total
|
|
$
|
229
|
|
|
$
|
322
|
|
|
$
|
707
|
|
|
$
|
780
|
|
(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
|
|
Nine Months Ended
|
In millions (Unaudited)
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
EBITDA
|
|
$
|
2,271
|
|
|
$
|
1,834
|
|
|
$
|
6,891
|
|
|
$
|
8,220
|
- Depreciation and amortization
|
|
706
|
|
|
665
|
|
|
2,055
|
|
|
1,992
|
+ Interest income
|
|
10
|
|
|
11
|
|
|
32
|
|
|
29
|
- Interest expense and amortization of debt discount
|
|
233
|
|
|
264
|
|
|
721
|
|
|
839
|
Income Before Income Taxes
|
|
$
|
1,342
|
|
|
$
|
916
|
|
|
$
|
4,147
|
|
|
$
|
5,418
|
- Provision for income taxes
|
|
378
|
|
|
231
|
|
|
1,147
|
|
|
1,630
|
- Net income attributable to noncontrolling interests
|
|
27
|
|
|
6
|
|
|
47
|
|
|
49
|
- Preferred stock dividends
|
|
85
|
|
|
85
|
|
|
255
|
|
|
255
|
Net Income Available for The Dow Chemical Company Common Stockholders
|
|
$
|
852
|
|
|
$
|
594
|
|
|
$
|
2,698
|
|
|
$
|
3,484
|
(2) See Supplemental Information for a description of certain items
affecting results in 2014 and 2013.
|
|
|
|
|
The Dow Chemical Company and Subsidiaries
|
Sales by Geographic Area
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
In millions (Unaudited)
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
North America
|
|
$
|
5,287
|
|
|
$
|
4,918
|
|
|
$
|
16,222
|
|
|
$
|
15,741
|
Europe, Middle East and Africa
|
|
4,437
|
|
|
4,308
|
|
|
14,274
|
|
|
13,794
|
Asia Pacific
|
|
2,518
|
|
|
2,474
|
|
|
7,616
|
|
|
7,564
|
Latin America
|
|
2,163
|
|
|
2,034
|
|
|
5,671
|
|
|
5,595
|
Total
|
|
$
|
14,405
|
|
|
$
|
13,734
|
|
|
$
|
43,783
|
|
|
$
|
42,694
|
|
|
|
|
|
Sales Volume and Price by Operating Segment and Geographic Area
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
Sep 30, 2014
|
|
Sep 30, 2014
|
Percentage change from prior year
|
|
Volume
|
|
Price
|
|
Total
|
|
Volume
|
|
Price
|
|
Total
|
Electronic and Functional Materials
|
|
3
|
%
|
|
-
|
%
|
|
3
|
%
|
|
3
|
%
|
|
(1
|
)%
|
|
2
|
%
|
Coatings and Infrastructure Solutions
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3
|
|
|
-
|
|
|
3
|
|
Agricultural Sciences
|
|
(2
|
)
|
|
2
|
|
|
-
|
|
|
1
|
|
|
-
|
|
|
1
|
|
Performance Materials
|
|
6
|
|
|
2
|
|
|
8
|
|
|
2
|
|
|
1
|
|
|
3
|
|
Performance Plastics
|
|
2
|
|
|
6
|
|
|
8
|
|
|
(2
|
)
|
|
6
|
|
|
4
|
|
Feedstocks and Energy
|
|
(1
|
)
|
|
3
|
|
|
2
|
|
|
1
|
|
|
(1
|
)
|
|
-
|
|
Total
|
|
2
|
%
|
|
3
|
%
|
|
5
|
%
|
|
1
|
%
|
|
2
|
%
|
|
3
|
%
|
North America
|
|
3
|
%
|
|
4
|
%
|
|
7
|
%
|
|
-
|
%
|
|
3
|
%
|
|
3
|
%
|
Europe, Middle East and Africa
|
|
1
|
|
|
2
|
|
|
3
|
|
|
1
|
|
|
2
|
|
|
3
|
|
Asia Pacific
|
|
-
|
|
|
2
|
|
|
2
|
|
|
-
|
|
|
1
|
|
|
1
|
|
Latin America
|
|
3
|
|
|
3
|
|
|
6
|
|
|
-
|
|
|
1
|
|
|
1
|
|
Total
|
|
2
|
%
|
|
3
|
%
|
|
5
|
%
|
|
1
|
%
|
|
2
|
%
|
|
3
|
%
|
Developed geographies
|
|
1
|
%
|
|
3
|
%
|
|
4
|
%
|
|
-
|
%
|
|
2
|
%
|
|
2
|
%
|
Emerging geographies (1)
|
|
4
|
|
|
2
|
|
|
6
|
|
|
2
|
|
|
1
|
|
|
3
|
|
Total
|
|
2
|
%
|
|
3
|
%
|
|
5
|
%
|
|
1
|
%
|
|
2
|
%
|
|
3
|
%
|
|
|
|
|
|
Sales Volume and Price by Operating Segment and Geographic Area,
|
Excluding Divestitures (2)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
Sep 30, 2014
|
|
Sep 30, 2014
|
Percentage change from prior year
|
|
Volume
|
|
Price
|
|
Total
|
|
Volume
|
|
Price
|
|
Total
|
Electronic and Functional Materials
|
|
3
|
%
|
|
-
|
%
|
|
3
|
%
|
|
3
|
%
|
|
(1
|
)%
|
|
2
|
%
|
Coatings and Infrastructure Solutions
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3
|
|
|
-
|
|
|
3
|
|
Agricultural Sciences
|
|
(2
|
)
|
|
2
|
|
|
-
|
|
|
1
|
|
|
-
|
|
|
1
|
|
Performance Materials
|
|
6
|
|
|
2
|
|
|
8
|
|
|
2
|
|
|
1
|
|
|
3
|
|
Performance Plastics
|
|
3
|
|
|
6
|
|
|
9
|
|
|
-
|
|
|
6
|
|
|
6
|
|
Feedstocks and Energy
|
|
(1
|
)
|
|
3
|
|
|
2
|
|
|
1
|
|
|
(1
|
)
|
|
-
|
|
Total
|
|
2
|
%
|
|
3
|
%
|
|
5
|
%
|
|
1
|
%
|
|
2
|
%
|
|
3
|
%
|
North America
|
|
3
|
%
|
|
4
|
%
|
|
7
|
%
|
|
-
|
%
|
|
3
|
%
|
|
3
|
%
|
Europe, Middle East and Africa
|
|
1
|
|
|
2
|
|
|
3
|
|
|
2
|
|
|
2
|
|
|
4
|
|
Asia Pacific
|
|
-
|
|
|
2
|
|
|
2
|
|
|
2
|
|
|
1
|
|
|
3
|
|
Latin America
|
|
3
|
|
|
3
|
|
|
6
|
|
|
-
|
|
|
1
|
|
|
1
|
|
Total
|
|
2
|
%
|
|
3
|
%
|
|
5
|
%
|
|
1
|
%
|
|
2
|
%
|
|
3
|
%
|
Developed geographies
|
|
1
|
%
|
|
3
|
%
|
|
4
|
%
|
|
1
|
%
|
|
2
|
%
|
|
3
|
%
|
Emerging geographies (1)
|
|
4
|
|
|
2
|
|
|
6
|
|
|
3
|
|
|
1
|
|
|
4
|
|
Total
|
|
2
|
%
|
|
3
|
%
|
|
5
|
%
|
|
1
|
%
|
|
2
|
%
|
|
3
|
%
|
(1)
|
|
Emerging geographies includes Eastern Europe, Middle East, Africa,
Latin America and Asia Pacific excluding Australia, Japan and New
Zealand.
|
(2)
|
|
Excludes sales related to Nippon Unicar Company Limited, divested on
July 1, 2013, and sales of the Polypropylene Licensing and Catalysts
business, divested on December 2, 2013.
|
|
|
|
Supplemental Information
Description of Certain Items Affecting Results
|
The following table summarizes the impact of certain items recorded
in the three- and nine-month periods ended September 30, 2014 and
September 30, 2013:
|
|
Certain Items Impacting Results
|
|
Pretax Impact (1)
|
|
Net Income (2)
|
|
EPS - Diluted (3)
|
|
|
Three Months Ended
|
|
Three Months Ended
|
|
Three Months Ended
|
In millions, except per share amounts (Unaudited)
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
Adjusted to exclude certain items (non-GAAP measures)
|
|
|
|
|
|
|
|
$
|
860
|
|
|
$
|
599
|
|
|
$
|
0.72
|
|
|
$
|
0.50
|
|
Certain items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring plan implementation costs
|
|
$
|
-
|
|
|
$
|
(7
|
)
|
|
-
|
|
|
(5
|
)
|
|
-
|
|
|
(0.01
|
)
|
Chlorine value chain separation costs
|
|
(12
|
)
|
|
-
|
|
|
(8
|
)
|
|
-
|
|
|
(0.01
|
)
|
|
-
|
|
Total certain items
|
|
$
|
(12
|
)
|
|
$
|
(7
|
)
|
|
$
|
(8
|
)
|
|
$
|
(5
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
Reported GAAP Amounts
|
|
|
|
|
|
|
|
$
|
852
|
|
|
$
|
594
|
|
|
$
|
0.71
|
|
|
$
|
0.49
|
|
|
|
|
|
|
|
|
Certain Items Impacting Results
|
|
Pretax Impact (1)
|
|
Net Income (2)
|
|
EPS - Diluted (3) (4)
|
|
|
Nine Months Ended
|
|
Nine Months Ended
|
|
Nine Months Ended
|
In millions, except per share amounts (Unaudited)
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
Adjusted to exclude certain items (non-GAAP measures)
|
|
|
|
|
|
|
|
$
|
2,717
|
|
|
$
|
2,188
|
|
|
$
|
2.26
|
|
|
$
|
1.83
|
|
Certain items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring plan implementation costs
|
|
$
|
-
|
|
|
$
|
(31
|
)
|
|
-
|
|
|
(21
|
)
|
|
-
|
|
|
(0.02
|
)
|
Chlorine value chain separation costs
|
|
(30
|
)
|
|
-
|
|
|
(19
|
)
|
|
-
|
|
|
(0.02
|
)
|
|
-
|
|
Loss on early extinguishment of debt
|
|
-
|
|
|
(170
|
)
|
|
-
|
|
|
(107
|
)
|
|
-
|
|
|
(0.09
|
)
|
Gain from K-Dow arbitration
|
|
-
|
|
|
2,161
|
|
|
-
|
|
|
1,647
|
|
|
-
|
|
|
1.37
|
|
Uncertain tax position adjustments
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(223
|
)
|
|
-
|
|
|
(0.19
|
)
|
Total certain items
|
|
$
|
(30
|
)
|
|
$
|
1,960
|
|
|
$
|
(19
|
)
|
|
$
|
1,296
|
|
|
$
|
(0.02
|
)
|
|
$
|
1.07
|
|
Dilutive effect of assumed preferred stock conversion into
shares of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.02
|
)
|
Reported GAAP Amounts (5) (6)
|
|
|
|
|
|
|
|
$
|
2,698
|
|
|
$
|
3,484
|
|
|
$
|
2.24
|
|
|
$
|
2.88
|
|
(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 nine-month period ended September 30, 2013, 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 nine-month period ended September 30, 2013, 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 nine-month period ended September 30, 2013, as it
excludes preferred dividends of $255 million.
|
The following table presents diluted share counts for the three- and
nine-month periods ended September 30, 2014 and September 30, 2013,
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
|
|
Nine Months Ended
|
In millions
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
|
Sep 30, 2014
|
|
Sep 30, 2013
|
Share count - diluted, excluding preferred stock conversion to
common shares
|
|
1,184.1
|
|
|
1,194.2
|
|
|
1,195.7
|
|
|
1,191.0
|
Potential common shares from assumed conversion of preferred stock,
included in reported GAAP EPS calculation
|
|
N/A
|
|
N/A
|
|
N/A
|
|
96.8
|
Share count - diluted, including assumed preferred stock conversion
to common shares
|
|
N/A
|
|
N/A
|
|
N/A
|
|
1,287.8
|
Results in the third quarter of 2014 were unfavorably impacted by the
following item:
-
Pretax charges of $12 million for nonrecurring transaction costs
associated with the planned separation of a significant portion of the
Company's chlorine value chain, consisting primarily of financial and
professional advisory fees and legal fees ("Chlorine value chain
separation costs"). The charges were included in "Sundry income
(expense) - net" in the consolidated statements of income and
reflected in Corporate.
Results in the third quarter of 2013 were unfavorably impacted by the
following item:
-
Pretax charges of $7 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.
In addition to the item described above for the third quarter of 2014,
results for the nine-month period ended September 30, 2014 were also
unfavorably impacted by the following item:
-
Pretax charges of $18 million for Chlorine value chain separation
costs. The charges were included in "Sundry income (expense) - net" in
the consolidated statements of income and reflected in Corporate.
In addition to the item described above for the third quarter of 2013,
results for the nine-month period ended September 30, 2013 were also
impacted by the following items:
-
Pretax charges of $24 million for implementation costs related to the
Company's restructuring programs. The charges were included in "Cost
of sales" ($23 million) and "Selling, general and administration
expenses" ($1 million) in the consolidated statements of income and
reflected in Corporate.
-
Pretax loss of $170 million on the early extinguishment of debt,
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.
-
A tax charge of $223 million related to court rulings on two separate
matters that resulted in the adjustment of uncertain tax positions.
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