DOW: Dow Chemical Co: Final Results

  DOW: Dow Chemical Co: Final Results

UK Regulatory Announcement

MIDLAND, Mich.

               Dow Reports Fourth Quarter and Full-Year Results

  Dow Reports 4Q Loss of $0.61Per Share, or Adjusted Earnings Per Share of
 $0.33– Up 32Percent versus 4Q11, Due to Higher Margins Over Raw Materials
            and Improved Demand in North America and Asia Pacific;

 In 2012, CompanyDelivers $4Billion of Cash Flow from Operations, Continues
   Implementation of $2.5 Billion of Cost Reduction and Efficiency Actions,
             Increases Full-Year Declared Dividends by 34 Percent

The Dow Chemical Company (NYSE: DOW):

                        Fourth Quarter 2012 Highlights

  *Dow reported a loss of $0.61per share, or earnings of $0.33per share on
    an adjusted basis^(1). This compares with a loss of $0.02per share in the
    same quarter last year, or adjusted earnings of $0.25per share. Certain
    items in the quarter totaled a loss of $0.94per share, driven primarily
    by previously announced restructuring actions, coupled with a goodwill
    impairment charge in the Company’s Formulated Systems business.
  *Sales for the quarter were $13.9billion, down1 percent versus the
    year-ago period. Agricultural Sciences achieved a new sales record, with
    sales growing 17percent. Increases were also reported in Electronic and
    Functional Materials (up 3 percent), Performance Plastics (up 1 percent)
    and Coatings and Infrastructure Solutions (up 1percent). These increases
    were more than offset by declines in Feedstocks and Energy (down
    9percent) and Performance Materials (down 5 percent).
  *Volume was flatfor the quarter, as a 5percent decline in Western Europe
    offset volume growth in Asia Pacific (up 5percent) and North America and
    Latin America (each up 1percent). Excluding Dow’s Feedstocks and Energy
    operating segment, volume in North America increased 7percent, reflecting
    improving demand.
  *Price decreased $91million, or 1percent, while purchased feedstock and
    energy costs declined $413million versus the year-ago period. On a
    sequential basis, price was up $333million, or 2percent, outpacing
    increases of $218million in purchased feedstock and energy costs.
    Sequentially, price increases were led by Performance Plastics and
    Feedstocks and Energy, each up 4 percent.
  *Equity earnings were $44million, or $206million excluding the impact of
    certain items. This compares with $259million in the year-ago period. Dow
    Corning represented the largest driver of the decline.
  *EBITDA^(2) was $125million, or $1.6billion on an adjusted basis^(3).
    Agricultural Sciences achieved a new fourth quarter EBITDA record.
  *The Company leveraged the benefit of positive U.S. shale gas dynamics,
    driving a 430 basis point increase in Performance Plastics adjusted EBITDA
    margin year over year^(4). To further leverage this advantage, Dow also
    achieved the first major milestone in its U.S. Gulf Coast integration
    investments, as its previously idled St.Charles Operations ethylene
    cracker restarted in December, in line with Dow’s year-end target.
  *Cash flow from operations was $1.6billion for the quarter, bringing
    full-year cash flow from operations to $4.1billion.
  *The Company demonstrated its ongoing commitment to shareholder
    remuneration, evidenced by the acceleration of its fourth quarter dividend
    payment.

                                   Comment

Andrew N. Liveris, Dow’s chairman and chief executive officer, stated:

“The second half of 2012 saw significant deterioration in the markets we
serve, particularly in China. In response, Dow identified and took aggressive
action to mitigate the effects of a slow-to-no-growth global environment – by
deploying cost and cash flow levers and by continuing to prudently manage our
portfolio and prioritize growth investments.

“Our Agricultural Sciences business continues to outperform, driven by its
technology pipeline. Performance Plastics also posted strong results in the
quarter, bolstered by feedstock advantages in North America and the Middle
East, coupled with improving pricing momentum. In addition, our Kuwait joint
ventures posted exceptional results in the quarter.

“We delivered on our cash flow target for the year, and our focus on rewarding
shareholders remained resolute, as evidenced by a 34 percent increase in
declared dividends for 2012.”

                          2012 Full-Year Highlights

  *Dow reported full-year 2012 earnings of $0.70per share, or $1.90per
    share on an adjusted basis. This compares with prior-year earnings of
    $2.05per share, or $2.54per share on an adjusted basis.
  *Dow took action throughout the year to navigate volatile economic
    conditions, including reducing structural costs, prioritizing growth
    investments and announcing the shutdown of down nearly 30facilities. In
    total, the Company has set in motion $2.5billion in cost reductions and
    cash flow improvements, with $1 billion expected in 2013.
  *Sales were $56.8billion, down5 percent, or 3percent on an adjusted
    basis^(5). Sales decreased in all operating segments excluding
    Agricultural Sciences (up 13 percent) and in all geographic areas year
    over year, led by Western Europe.
  *Agricultural Sciences achieved record-level sales and EBITDA, posting
    $6.4billion and $977million, respectively.
  *Volume decreased 2percent, or increased 1percent on an adjusted
    basis^(6). Asia Pacific and Europe reported volume growth during the year
    (up 3percent and 1 percent respectively). Volume in North America
    remained flat, primarily due to the impact of shutdowns in Feedstocks and
    Energy.
  *Price declined 3percent. On an adjusted basis^(7), price was down
    4percent, or $2.1billion. Currency accounted for $1.3billion – nearly
    two-thirds of the decline. Purchased feedstock and energy costs decreased
    $2.5billion, or 11percent year over year.
  *Equity earnings were $536million, or $698million excluding certain
    items. This compares with 2011 equity earnings of $1.2billion, or
    $1.1billion excluding certain items. The decline was due primarily to Dow
    Corning.
  *For the full year, Dow reported EBITDA of $5.6billion, or $7.5billion on
    an adjusted basis.
  *The Company’s effective tax rate for the year was 34percent, versus an
    effective tax rate of 23percent in 2011, driven in part by a change in
    the geographic mix of earnings, as well as lower equity earnings.
  *Dow maintained its focus on lowering debt, reporting a $613million
    reduction in gross debt in 2012. In addition, year-over-year interest
    expense declined $72million.
  *Dow continued to demonstrate its priorities for uses of cash, rewarding
    shareholders with a 34percent increase in dividends declared per share in
    2012 versus 2011.

                                                    
                                                      Three Months Ended
                                                      Dec. 31,   Dec. 31,
In millions, except per share amounts                         
                                                      2012       2011
Net Sales                                             $13,917   $14,097
Adjusted Sales                                        $13,917    $14,080
                                                                 
Net Income (Loss) Available for Common Stockholders   $(716)     $(20)
Net Income Available for Common Stockholders,
                                                      $389       $289
excluding Certain Items
                                                                 
Earnings (Loss) per Common Share                      $(0.61)    $(0.02)
Adjusted Earnings Per Share                          $0.33     $0.25

                                                    Twelve Months Ended
                                                          Dec. 31,   Dec. 31,
In millions, except per share amounts                        
                                                          2012       2011
Net Sales                                                 $56,786   $59,985
Adjusted Sales                                            $56,786    $58,396
                                                                     
Net Income Available for Common Stockholders              $842       $2,402
Net Income Available for Common Stockholders,
                                                          $2,249     $2,959
excluding Certain Items
                                                                     
Earnings per Common Share                                 $0.70      $2.05
Adjusted Earnings Per Share                         $1.90     $2.54
                                                                     

Review of Fourth Quarter Results

The Dow Chemical Company (NYSE: DOW) reported sales of $13.9billion, down 1
percent. Record sales gains in Agricultural Sciences (up 17 percent), together
with gains in Electronic and Functional Materials (up 3 percent) and
Performance Plastics and Coatings and Infrastructure Solutions (both up 1
percent), were offset by declines in the remaining segments.

The Company reported flatvolume growth for the quarter, as a 5percent
decline in Western Europe offset volume growth in Asia Pacific (up 5percent)
and North America and Latin America (each up 1percent). Excluding the
Company’s Feedstocks and Energy segment, volume in North America increased
7percent, reflecting improved demand conditions.

Price was down 1percent due largely to currency, while purchased feedstock
and energy costs declined $413million versus the same quarter last year. On a
sequential basis, price was up 2percent, outpacing increases of $218million
in purchased feedstock and energy costs.

EBITDA for the quarter was $125million, or $1.6billion on an adjusted basis.

Dow reported a loss of $0.61per share, or earnings of $0.33per share on an
adjusted basis. This compares with a loss of $0.02per share in the same
quarter last year, or adjusted earnings of $0.25per share. Certain items in
the quarter totaled a loss of $0.94per share, driven primarily by the impact
of previously announced restructuring actions, coupled with a goodwill
impairment charge in the Company’s Formulated Systems business.

Dow’s global operating rate was 78percent for the quarter, up 6percentage
points versus the year-ago period, as a result of limited destocking in the
value chain.

Research and Development (R&D) expenses and Selling, General and
Administrative (SG&A) expenses together increased $69million versus the
year-ago period, due primarily to ongoing investments in Agricultural
Sciences.

The Company reported equity earnings of $44million for the quarter, or
$206million excluding the impact of certain items. This compares with
$259million in the year-ago period. Dow Corning represented the largest
driver of the decline.

“The second half of 2012 saw significant deterioration in the markets we
serve, particularly in China,” said Andrew N. Liveris, Dow’s chairman and
chief executive officer. “In response, Dow identified and took aggressive
action to mitigate the effects of a slow-to-no-growth global environment – by
deploying cost and cash flow levers and by continuing to prudently manage our
portfolio and prioritize growth investments.

“Our Agricultural Sciences business continues to outperform, driven by its
technology pipeline. Performance Plastics also posted strong results in the
quarter, bolstered by feedstock advantages in North America and the Middle
East, coupled with improving pricing momentum. In addition, our Kuwait joint
ventures posted exceptional results in the quarter.

“We delivered on our cash flow target for the year, and our focus on rewarding
shareholders remained resolute, as evidenced by a 34 percent increase in
declared dividends for 2012.”

Electronic and Functional Materials

Sales in Electronic and Functional Materials were $1.1billion, up 3percent
from the same quarter last year, as price declined 4percent and volume
increased 7percent. Dow Electronic Materials reported modest revenue growth,
driven primarily by Semiconductor Technologies, where higher foundry
utilization in Korea and Taiwan contributed to stronger demand year over year.
Semiconductor Technologies experienced mid-to-high single-digit sales growth,
as double-digit volume growth was offset by price declines in the business.

Functional Materials revenue increased in all geographic areas, as volume
gains outpaced price declines. Stronger year-end demand in key market segments
such as energy, water, pharmaceutical, personal care and food drove volume
gains. The food sector saw particular strength during the year, driven by new
product introductions.

Equity earnings for the segment were $13 million, or $21million on an
adjusted basis. This compares with $32million in the year-ago period. The
decline was driven by Dow Corning as a result of costs associated with the
joint venture’s recently announced restructuring actions and ongoing
polysilicon value chain weakness. EBITDA was $155 million or $211million on
an adjusted basis. This compares with $234 million in the year-ago period.

Coatings and Infrastructure Solutions

Coatings and Infrastructure Solutions reported sales of $1.6billion, up
1percent compared with the same period last year. Volume increased 5percent
versus the prior year, while price decreased 4percent.

Dow Coating Materials reported sales gains as a result of improving demand
conditions and share gains in both Industrial and Architectural Coatings,
which drove volume improvements. This offset price declines during the
quarter. Lower pricing in epoxy-based products continued to hamper sales and
profitability. Dow Building and Construction experienced a reduction in sales,
as volumes decreased versus same quarter last year – primarily as a result of
the 2012 implementation of previously announced STYROFOAM™ asset closures in
Europe. Dow Water and Process Solutions reported a slight sales decline as a
result of lower volumes, which were driven by the timing of large capital
projects and softness in the industry.

The segment reported equity losses of $46 million, or equity earnings of $35
million on an adjusted basis. This compares with $102million in the same
period last year. The decline was driven by Dow Corning, as a result of costs
associated with the joint venture’s recently announced restructuring actions
and ongoing polysilicon value chain weakness. EBITDA for the segment was $36
million or $129million on an adjusted basis. This compares with EBITDA of
$177 million or $237million on an adjusted basis in the year-ago period.

Agricultural Sciences

Agricultural Sciences reported record fourth quarter sales of $1.6billion, up
17percent versus the year-ago period. Volume increased 13percent and price
rose 4percent. The segment also reported record sales for the year of
$6.4billion, driven by increased customer adoption of new products and
healthy industry fundamentals.

Fourth quarter sales of Crop Protection rose 10percent versus the year-ago
period, driven by broad-based gains across all geographic areas. Sales of new
crop protection products grew 11percent for the quarter and 19percent for
the full year, placing the business on track to exceed its target of
$800million in annual sales from these products by 2013.

Seeds, Traits and Oils reported a 44percent sales gain in the quarter versus
the year-ago period, driven by continued strong growth in both North America
and Latin America. For the year, Seeds, Traits and Oils sales increased
27percent, with significant increases in key crops, including corn, soybeans
and healthy oils. Strong farmer demand fueled gains for SmartStax^® corn
hybrids.

EBITDA for the segment was a new fourth quarter record of $156million, up
from $145MM last year.

Performance Materials

Sales in Performance Materials were $3.4 billion, down 5 percent versus the
year-ago period. Volume declined 2percent and price declined 3 percent on an
adjusted basis compared with the same period last year. Europe, Asia Pacific
and Latin America all reported price and volume declines. Double-digit volume
gains in Polyurethanes, Amines and Oxygenated Solvents drove sales growth in
North America.

Propylene Oxide / Propylene Glycol sales declined, driven primarily by lower
prices in all regions. Polyurethane sales were lower principally due to the
shutdown of toluene diisocyanate capacity in Brazil. Sales declined in
Polyglycols, Surfactants and Fluids due to lower volume in Europe and Asia
Pacific. Volume gains in Oxygenated Solvents and Chlorinated Organics were
more than offset by lower prices in all geographic areas. Revenue increased in
Epoxy, due to new Liquid Epoxy Resin capacity in Europe, as well as higher
Phenolics sales.

Equity losses for the quarter were $25 million. The segment reported EBITDA
losses of $137 million on a reported basis, or EBITDA of $267 million on an
adjusted basis. This compares with EBITDA of $225 million, or $344 million on
an adjusted basis during the year-ago period.

Performance Plastics

Sales in Performance Plastics were $3.7billion, up 1percent compared with
the same quarter last year. Price increased 2percent, as volume declined
1percent. Volume gains were achieved in North America, Latin America and Asia
Pacific.

Fourth quarter sales increased in Performance Packaging, driven by gains in
North America and Latin America. Performance Packaging volumes declined in
Europe, Middle East and Africa (EMEA), partially offset by increases in North
America. EMEA recorded the most price improvement over the same quarter last
year.

Dow Elastomers sales declined versus the year-ago period, despite volume
growth in North America, Latin America, and Asia Pacific. Dow Electrical and
Telecommunications sales were down as increases in Asia Pacific were offset by
declines in other areas. Dow Hygiene and Medical increased both volume and
price in the quarter, with double-digit volume gains in Latin America and Asia
Pacific.

Equity earnings for the segment were $33million, which compares with
$32million in the year-ago period. EBITDA for the segment was $803million,
or $829million excluding certain items. This compares with EBITDA of
$667million in the same period last year.

Feedstocks and Energy

Sales in Feedstocks and Energy were $2.6 billion, down 9 percent versus the
same period last year. In Hydrocarbons, sales declined as a result of lower
sales of olefins due to lighter feedslates, as well as the expiration of
contract sales related to the divestiture of Dow’s Polypropylene business. The
Chlor-Alkali / Chlor-Vinyl business benefited from higher caustic soda prices
due largely to stable demand and tight supply conditions in North America and
Europe. These prices were more than offset by lower year-over-year vinyl
chloride monomer sales, as a result of lower volumes, driven by asset
shutdowns in 2011. Sales declined in Ethylene Oxide / Ethylene Glycol compared
with the year-ago period. These declines were due in part to lower available
volume stemming from planned maintenance activities.

Equity earnings were $152 million, up from $115 million in the same quarter
last year. EBITDA for the segment was $186 million, or $193 million on an
adjusted basis. This is up from $175 million in the same quarter last year.

Review of Results for 2012

Sales were $56.8billion, down5 percent, or 3percent on an adjusted basis,
with currency representing nearly two-thirds of the decline. Sales decreased
in most operating segments and in all geographic areas. This was led by
Western Europe, which was down 4percent.

On a reported basis, volume decreased 2percent in 2012. Adjusted volume
increased 1percent, as Asia Pacific and EMEA reported volume growth during
the year (up 3 percent and 1 percent respectively). Volume in North America
remained flat year over year, while Latin America reported a volume decline of
1percent.

Price was down 3percent, or 4percent on an adjusted basis. Currency was a
key driver, contributing $1.3billion– or more than half of the decline.
Purchased feedstock and energy costs decreased $2.5billion.

EBITDA for the full year was $5.6billion, or $7.5billion on an adjusted
basis.

Dow reported full-year earnings of $0.70per share, or $1.90per share on an
adjusted basis. This compares with prior-year earnings of $2.05per share, or
adjusted earnings of $2.54per share.

Dow’s global operating rate was 81percent, up 1percentage point versus 2011.

Research and Development (R&D) expenses and Selling, General and
Administrative (SG&A) expenses together increased $135million on a full-year
basis. Agricultural Sciences represented $128million of this increase,
reflecting the Company’s commitment to prioritize spending in key growth
sectors.

Throughout the year, the Company maintained its focus on lowering debt,
reporting a gross debt reduction of $613million in 2012. In addition,
year-over-year interest expense declined $72million.

                                   Outlook

Commenting on the Company’s outlook, Liveris said:

“Dow enters 2013 squarely focused on driving earnings growth, increasing cash
flow and rewarding shareholders. And while our business plans do not call for
material macroeconomic tailwinds, we will fully harvest our feedstock
strength, particularly in Performance Plastics, and further accelerate growth
in our technology-driven Agricultural Sciences segment. In addition, we have
deployed $2.5 billion of cost reductions and cash flow improvements, and are
aggressively managing our portfolio – by prioritizing our growth programs and
driving selective, non-core divestitures. Collectively these actions
demonstrate our firm resolve to control what we can control, and proactively
implement the right strategic decisions to accelerate Dow’s performance.

“We have the right catalysts firmly in place. Our feedstock advantage,
particularly as the ethylene cycle unfolds, and the commercialization of our
technology pipeline, as well as our integration investments in the U.S. Gulf
Coast and Sadara as a whole differentiate Dow, and will continue to propel our
strategy to deliver higher earnings growth and increasingly reward
shareholders.”

Dow will host a live Webcast of its fourth 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.

        “Adjusted earnings per share” is defined as earnings per share
        excluding the impact of “Certain Items.” See Supplemental Information
(1)   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.”
        EBITDA is defined as earnings (i.e., “Net Income”) before interest,
        income taxes, depreciation and amortization. A reconciliation of
(2)     EBITDA to "Net Income (Loss) Available for The Dow Chemical Company
        Common Stockholders" is provided following the Operating Segments
        table.
(3)     Adjusted EBITDA is defined as EBITDA excluding the impact of “Certain
        Items.”
(4)     Adjusted EBITDA margin is defined as EBITDA excluding the impact of
        Certain Items as a percentage of reported sales.
(5)     “Adjusted sales” is defined as “Net Sales” excluding sales related to
        prior-period divestitures.
(6)     “Adjusted volume” is defined as reported volume excluding the impact
        of prior-period divestitures.
(7)     “Adjusted price” is defined as reported price excluding the impact of
        prior-period divestitures.

®™* Trademark of The Dow Chemical Company ("Dow") 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.

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 160countries and in high growth sectors such as electronics,
water, energy, coatings and agriculture. In 2012, Dow had annual sales of
$57billion and employed approximately 54,000people worldwide. The Company's
more than 5,000 products are manufactured at 188sites in 36countries 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        Twelve Months Ended
In millions, except per     Dec 31,     Dec 31,     Dec 31,     Dec 31,
share amounts (Unaudited)    2012         2011         2012         2011
Net Sales                   $ 13,917   $ 14,097   $ 56,786   $ 59,985 
Cost of sales                11,939      12,433       47,792      51,029
Research and development     463          433          1,708        1,646
expenses
Selling, general and         741          702          2,861        2,788
administrative expenses
Amortization of              117          123          478          496
intangibles
Goodwill impairment loss     220          —            220          —
(Note B)
Restructuring charges        986          —            1,343        —
(Note C)
Acquisition-related
integration expenses (Note   —            —            —            31
D)
Equity in earnings of
nonconsolidated affiliates   44           259          536          1,223
(Note E)
Sundry income (expense) -    (50      )   6            (27      )   (316     )
net (Note F)
Interest income              15           14           41           40
Interest expense and
amortization of debt        310        331        1,269      1,341    
discount
Income (Loss) Before        (850     )  354        1,665      3,601    
Income Taxes
Provision (Credit) for      (99      )  271        565        817      
income taxes (Note G)
Net Income (Loss)           (751     )  83         1,100      2,784    
Net income (loss)
attributable to             (120     )  18         (82      )  42       
noncontrolling interests
Net Income (Loss)
Attributable to The Dow     (631     )  65         1,182      2,742    
Chemical Company
Preferred stock dividends   85         85         340        340      
Net Income (Loss)
Available for The Dow       $ (716   )  $ (20    )  $ 842      $ 2,402  
Chemical Company Common
Stockholders
                                                            
Per Common Share Data:
Earnings (Loss) per common   $ (0.61  )   $ (0.02  )   $ 0.71       $ 2.06
share - basic
Earnings (Loss) per common  $ (0.61  )  $ (0.02  )  $ 0.70     $ 2.05   
share - diluted
                                                            
Common stock dividends
declared per share of        $ 0.32       $ 0.25       $ 1.21       $ 0.90
common stock
Weighted-average common      1,175.6      1,154.3      1,169.7      1,149.0
shares outstanding - basic
Weighted-average common
shares outstanding -        1,175.6    1,154.3    1,176.4    1,158.2  
diluted
                                                            
Depreciation                 $ 527        $ 553        $ 2,057      $ 2,177
Capital Expenditures        $ 1,009    $ 1,067    $ 2,614    $ 2,687  

See Notes to the Consolidated Financial Statements:

                  The Dow Chemical Company and Subsidiaries

                Notes to the Consolidated Financial Statements

Note A: The unaudited consolidated financial statements reflect all
adjustments which, in the opinion of management, are considered necessary for
a fair presentation of the results for the periods covered. These statements
should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 2011. Except as otherwise indicated by
the context, the terms "Company" and "Dow" as used herein mean The Dow
Chemical Company and its consolidated subsidiaries.

Note B: During the fourth quarter of 2012, the Company recorded a pretax
charge of $220million for a goodwill impairment loss related to the Dow
Formulated Systems reporting unit.

Note C: On March 27, 2012, the Company's Board of Directors approved a
restructuring plan ("1Q12 Restructuring") 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 1Q12 Restructuring plan includes the shutdown of a number
of manufacturing facilities and a workforce reduction. As a result of these
activities, the Company recorded pretax restructuring charges of $357 million
in the first quarter of 2012 that included asset write-downs and write-offs,
severance and costs associated with exit and disposal activities. In the
fourth quarter of 2012, the Company recorded a pretax gain of $4million for
restructuring charge adjustments related to asset write-downs and contract
cancellation fees.

On October 23, 2012, the Company's Board of Directors approved a restructuring
plan ("4Q12 Restructuring") to advance the next stage of the Company's
transformation and to address macroeconomic uncertainties. The 4Q12
Restructuring plan accelerates the Company's structural cost reduction program
and will affect approximately 2,800 positions. The 4Q12 Restructuring plan
also includes asset impairments related to the shutdown of 20 manufacturing
facilities, the write-off of certain capital project spending and an
impairment charge related to the write-down of Dow Kokam LLC's long-lived
assets. As a result of these activities, the Company recorded pretax
restructuring charges of $990million in the fourth quarter of 2012 that
included asset write-downs and write-offs, severance and costs associated with
exit or disposal activities.

Note D: During the first quarter of 2011, pretax charges totaling $31 million
were recorded for integration costs related to the April 1, 2009 acquisition
of Rohm and Haas Company.

Note E: In the fourth quarter of 2012, the Company recognized an $89million
loss related to the abandonment of a polycrystalline silicon plant expansion
as well as restructuring charges incurred at Dow Corning Corporation, a
nonconsolidated affiliate. In the fourth quarter of 2012, the Company also
recorded a $73million loss related to project development and other costs
associated with Sadara Chemical Company, a nonconsolidated affiliate. In the
third quarter of 2011, the Company recognized an $86 million gain related to
cash collected on a previously impaired note receivable related to
Equipolymers, a nonconsolidated affiliate.

Note F: In the fourth quarter of 2012, the Company recognized a pretax loss of
$99million on the early extinguishment of debt; a pretax loss of $24 million
was recognized in the first quarter of 2012; and a pretax loss of $482 million
was recognized in the first half of 2011.

In the fourth quarter of 2012, the Company recognized a pretax gain of
$8million related post-closing adjustments on the sale of a contract
manufacturing business; a pretax loss of $42 million ($44 million gain after
tax) was recognized in the fourth quarter of 2011.

Note G: In the fourth quarter of 2011, the Company established a valuation
allowance against the deferred tax assets of two Dow entities in Brazil in the
amount of $264 million.


The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets
                                                               
In millions (Unaudited)                             Dec 31,     Dec 31,
                                                       2012         2011
Assets
Current Assets
Cash and cash equivalents (variable interest           $ 4,318      $ 5,444
entities restricted - 2012: $146; 2011: $170)
Marketable securities and interest-bearing             —            2
deposits
Accounts and notes receivable:
Trade (net of allowance for doubtful receivables       5,074        4,900
- 2012: $121; 2011: $121)
Other                                                  4,605        4,726
Inventories                                            8,476        7,577
Deferred income tax assets - current                   877          471
Other current assets                                334        302      
Total current assets                                23,684     23,422   
Investments
Investment in nonconsolidated affiliates               4,121        3,405
Other investments (investments carried at fair         2,565        2,508
value - 2012: $2,061; 2011: $2,008)
Noncurrent receivables                              313        1,144    
Total investments                                   6,999      7,057    
Property
Property                                               54,366       52,216
Less accumulated depreciation                       36,846     34,917   
Net property (variable interest entities            17,520     17,299   
restricted - 2012: $2,554; 2011: $2,169)
Other Assets
Goodwill                                               12,739       12,930
Other intangible assets (net of accumulated            4,711        5,061
amortization - 2012: $2,785; 2011: $2,349)
Deferred income tax assets - noncurrent                3,333        2,559
Asbestos-related insurance receivables -               155          172
noncurrent
Deferred charges and other assets                   464        724      
Total other assets                                  21,402     21,446   
Total Assets                                        $ 69,605   $ 69,224 
Liabilities and Equity
Current Liabilities
Notes payable                                          $ 396        $ 541
Long-term debt due within one year                     672          2,749
Accounts payable:
Trade                                                  5,010        4,778
Other                                                  2,327        2,216
Income taxes payable                                   251          382
Deferred income tax liabilities - current              95           129
Dividends payable                                      86           376
Accrued and other current liabilities               2,656      2,463    
Total current liabilities                           11,493     13,634   
Long-Term Debt (variable interest entities          19,919     18,310   
nonrecourse - 2012: $1,406; 2011: $1,138)
Other Noncurrent Liabilities
Deferred income tax liabilities - noncurrent           837          1,091
Pension and other postretirement benefits -            11,459       9,034
noncurrent
Asbestos-related liabilities - noncurrent              530          608
Other noncurrent obligations                        3,353      3,109    
Total other noncurrent liabilities                  16,179     13,842   
Redeemable Noncontrolling Interest                  147        147      
Stockholders’ Equity
Preferred stock, series A                              4,000        4,000
Common stock                                           3,008        2,961
Additional paid-in capital                             3,281        2,663
Retained earnings                                      18,495       19,087
Accumulated other comprehensive loss                   (7,516   )   (5,996   )
Unearned ESOP shares                                (391     )  (434     )
The Dow Chemical Company’s stockholders’ equity     20,877     22,281   
Noncontrolling interests                            990        1,010    
Total equity                                        21,867     23,291   
Total Liabilities and Equity                        $ 69,605   $ 69,224 

See Notes to the Consolidated Financial Statements.


The Dow Chemical Company and Subsidiaries
Operating Segments
                                                    
                             Three Months Ended        Twelve Months Ended
In millions (Unaudited)     Dec 31,     Dec 31,     Dec 31,     Dec 31,
                             2012         2011         2012         2011
Sales by operating segment                                       
Electronic and Functional    $ 1,098      $ 1,063      $ 4,481      $ 4,599
Materials
Coatings and                 1,577        1,561        6,898        7,200
Infrastructure Solutions
Agricultural Sciences        1,566        1,344        6,382        5,655
Performance Materials        3,355        3,550        13,608       14,647
Performance Plastics         3,677        3,659        14,479       16,257
Feedstocks and Energy        2,582        2,846        10,695       11,302
Corporate                   62         74         243        325      
Total                       $ 13,917   $ 14,097   $ 56,786   $ 59,985 
EBITDA (1) by operating
segment
Electronic and Functional    $ 155        $ 234        $ 958        $ 1,084
Materials
Coatings and                 36           177          823          1,167
Infrastructure Solutions
Agricultural Sciences        156          145          977          913
Performance Materials        (137     )   225          1,036        1,748
Performance Plastics         803          667          3,018        3,440
Feedstocks and Energy        186          175          718          940
Corporate                   (1,074   )  (211     )  (1,939   )  (1,507   )
Total                       $ 125      $ 1,412    $ 5,591    $ 7,785  
Certain items increasing
(decreasing) EBITDA by
operating segment (2)
Electronic and Functional    $ (56    )   $ —          $ (73    )   $ —
Materials
Coatings and                 (93      )   (60      )   (134     )   (60      )
Infrastructure Solutions
Agricultural Sciences        —            —            —            —
Performance Materials        (404     )   (119     )   (590     )   (119     )
Performance Plastics         (26      )   —            (26      )   86
Feedstocks and Energy        (7       )   —            (7       )   —
Corporate                   (895     )  —          (1,032   )  (513     )
Total                       $ (1,481 )  $ (179   )  $ (1,862 )  $ (606   )
EBITDA excluding certain
items by operating segment
Electronic and Functional    $ 211        $ 234        $ 1,031      $ 1,084
Materials
Coatings and                 129          237          957          1,227
Infrastructure Solutions
Agricultural Sciences        156          145          977          913
Performance Materials        267          344          1,626        1,867
Performance Plastics         829          667          3,044        3,354
Feedstocks and Energy        193          175          725          940
Corporate                   (179     )  (211     )  (907     )  (994     )
Total                       $ 1,606    $ 1,591    $ 7,453    $ 8,391  
                                                         Continued


The Dow Chemical Company and Subsidiaries
Operating Segments (Continued)
                                                 
                      Three Months Ended            Twelve Months Ended
In millions           Dec 31,        Dec 31,      Dec 31,      Dec 31,
(Unaudited)           2012            2011          2012          2011
Equity in earnings (losses) of nonconsolidated affiliates by operating segment
(included in EBITDA)
Electronic and        $   13         $  32         $  94        $  104
Functional Materials
Coatings and
Infrastructure        (46      )      102           50            321
Solutions
Agricultural Sciences (2       )      1             1             4
Performance Materials (25      )      (11     )     (92     )     (31       )
Performance Plastics  33              32            134           303
Feedstocks and Energy 152             115           452           561
Corporate             (81      )     (12     )    (103    )    (39       )
Total                 $   44        $  259      $  536      $  1,223  

      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
(1)  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 (Loss) Available for The Dow
      Chemical Company Common Stockholders" is provided below.

                                                        
Reconciliation of EBITDA to "Net
Income (Loss) Available for The
Dow Chemical Company Common         Three Months Ended     Twelve Months Ended
Stockholders"
In millions (Unaudited)            Dec 31,   Dec 31,    Dec 31,    Dec 31,
                                    2012       2011        2012        2011
EBITDA                              $ 125     $ 1,412     $ 5,591    $ 7,785
- Depreciation and amortization     680        741         2,698       2,883
+ Interest income                   15         14          41          40
- Interest expense and             310      331       1,269     1,341
amortization of debt discount
Income (Loss) Before Income Taxes  $ (850 )  $ 354     $ 1,665   $ 3,601
- Provision (Credit) for income     (99    )   271         565         817
taxes
- Net income (loss) attributable    (120   )   18          (82     )   42
to noncontrolling interests
- Preferred stock dividends        85       85        340       340
Net Income (Loss) Available for
The Dow Chemical Company Common    $ (716 )  $ (20   )  $ 842     $ 2,402
Stockholders

(2) See Supplemental Information for a description of certain items affecting
results in 2012 and 2011.

                                                     
Sales by Geographic Area
                                                         
                               Three Months Ended        Twelve Months Ended
In millions (Unaudited)      Dec 31,     Dec 31,     Dec 31,     Dec 31,
                               2012         2011         2012         2011
North America                  $ 4,814     $ 4,872      $ 20,294    $ 21,345
Europe, Middle East and        4,505        4,644        19,185       20,840
Africa
Asia Pacific                   2,662        2,669        10,247       10,554
Latin America                1,936      1,912      7,060      7,246
Total                        $ 13,917   $ 14,097   $ 56,786   $ 59,985
                                                           Continued

                                                   
Sales Volume and Price by Operating Segment and Geographic Area
                                                                            
                              Three Months Ended       Twelve Months Ended
                              December 31, 2012        December 31, 2012
Percentage change from      Volume  Price  Total  Volume  Price  Total
prior year
Electronic and Functional     7    %  (4 )%  3  %    —       (3 )%  (3  )%
Materials
Coatings and                  5        (4 )    1       2        (6 )    (4  )
Infrastructure Solutions
Agricultural Sciences         13       4       17      10       3       13
Performance Materials         (2   )   (3 )    (5 )    (1  )    (6 )    (7  )
Performance Plastics          (1   )   2       1       (7  )    (4 )    (11 )
Feedstocks and Energy       (10  )  1     (9 )   (3  )   (2 )   (5  )
Total                       —      (1 )%  (1 )%  (2  )%  (3 )%  (5  )%
North America                 1    %   (2 )%   (1 )%   (3  )%   (2 )%   (5  )%
Europe, Middle East and       (6   )   3       (3 )    (4  )    (4 )    (8  )
Africa
Asia Pacific                  5        (5 )    —       3        (6 )    (3  )
Latin America               1      —     1     (2  )   (1 )   (3  )
Total                       —      (1 )%  (1 )%  (2  )%  (3 )%  (5  )%

                                                    
Sales Volume and Price by Operating Segment and Geographic Area
Excluding Divestitures (1)
                                                                            
                               Three Months Ended       Twelve Months Ended
                               December 31, 2012        December 31, 2012
Percentage change from       Volume  Price  Total  Volume  Price  Total
prior year
Electronic and Functional      7    %  (4 )%  3  %    —       (3 )%  (3 )%
Materials
Coatings and                   5        (4 )    1       2        (6 )    (4 )
Infrastructure Solutions
Agricultural Sciences          13       4       17      10       3       13
Performance Materials          (2   )   (3 )    (5 )    —        (6 )    (6 )
Performance Plastics           (1   )   2       1       1        (4 )    (3 )
Feedstocks and Energy        (10  )  1     (9 )   (3  )   (2 )   (5 )
Total                        —      (1 )%  (1 )%  1   %   (4 )%  (3 )%
North America                  1    %   (2 )%   (1 )%   —        (2 )%   (2 )%
Europe, Middle East and        (6   )   3       (3 )    1        (5 )    (4 )
Africa
Asia Pacific                   5        (5 )    —       3        (6 )    (3 )
Latin America                1      —     1     (1  )   (1 )   (2 )
Total                        —      (1 )%  (1 )%  1   %   (4 )%  (3 )%

(1)  Excludes sales of the Polypropylene business, divested on September 30,
      2011, and sales of Dow Haltermann divested during 2011.
      

Supplemental Information

Description of Certain Items Affecting Results:

The following table summarizes the impact of certain items recorded in the
three-month periods ended December31, 2012 and December31, 2011:

                                                             
Certain Items
Impacting        Pretax Impact (1)       Net Income (2)          EPS - Diluted (3)
Results
                 Three Months Ended      Three Months Ended      Three Months Ended
In millions,
except per      Dec 31,     Dec 31,   Dec 31,     Dec 31,   Dec 31,    Dec 31,
share amounts    2012         2011       2012         2011       2012        2011
(Unaudited)
Adjusted to
exclude
certain items                           $ 389       $ 289      $ 0.33     $ 0.25
(non-GAAP
measures)
Certain items:
Asset
impairments      $ —          $ (77  )   —            (51    )   —           (0.05   )
and related
costs
Warranty
accrual
adjustment of    —            (60    )   —            (38    )   —           (0.03   )
exited
business
Restructuring
plan             (22      )   —          (14      )   —          (0.01   )   —
implementation
costs
Goodwill         (220     )   —          (220     )   —          (0.19   )   —
impairment
1Q12
Restructuring    4            —          7            —          —           —
credit
4Q12
Restructuring    (990     )   —          (671     )   —          (0.57   )   —
charge
Charge related
to Dow Corning
restructuring    (89      )   —          (82      )   —          (0.07   )   —
and asset
abandonment
Charge for
Sadara related
development      (73      )   —          (70      )   —          (0.06   )   —
and other
costs
Gain (Loss) on
sale of
contract         8            (42    )   8            44         0.01        0.04
manufacturing
business
Loss on early
extinguishment   (99      )   —          (63      )   —          (0.05   )   —
of debt
Tax valuation   —          —        —          (264   )  —         (0.23   )
allowance
Total certain   $ (1,481 )  $ (179 )  $ (1,105 )  $ (309 )  $ (0.94 )  $ (0.27 )
items
Reported (GAAP                      $ (716   )  $ (20  )  $ (0.61 )  $ (0.02 )
amounts)

(1)  Impact on "Income (Loss) Before Income Taxes."
(2)   "Net Income (Loss) Available for The Dow Chemical Company Common
      Stockholders."
(3)   "Earnings (Loss) per common share - diluted."
      

Results in the fourth quarter of 2012 were impacted by the following items:

  *Pretax charges of $22 million for implementation costs related to the
    Company's restructuring programs. The charges were included in "Cost of
    sales" ($1 million) and "Selling, general and administrative expenses"
    ($21 million) in the consolidated statements of income and reflected in
    Corporate.
  *Pretax charge of $220million for a goodwill impairment loss related to
    the Dow Formulated Systems reporting unit. The charge was included in
    "Goodwill impairment loss" in the consolidated statements of income and
    reflected in Performance Materials.
  *Pretax gain of $4million ($7 million gain after tax) for adjustments to
    asset write-downs and contract cancellation fees related to the 1Q12
    Restructuring plan. The gain was included in "Restructuring charges" in
    the consolidated statements of income and reflected in Coatings and
    Infrastructure Solutions.
  *Pretax restructuring charges of $990million. On October 23, 2012, the
    Company's Board of Directors approved a restructuring plan ("4Q12
    Restructuring") to advance the next stage of the Company's transformation
    and to address macroeconomic uncertainties. The 4Q12 Restructuring plan
    accelerates the Company's structural cost reduction program and will
    affect approximately 2,800 positions. The 4Q12 Restructuring plan also
    includes asset impairments related to the shutdown of 20 manufacturing
    facilities, the write-off of certain capital project spending and an
    impairment charge related to the write-down of Dow Kokam LLC's long-lived
    assets. As a result of these activities, the Company recorded pretax
    restructuring charges of $990million in the fourth quarter of 2012
    consisting of costs associated with exit and disposal activities of
    $39million, severance costs of $375million and costs associated with
    asset write-downs and write-offs of $576million. The charges were
    included in "Restructuring charges" in the consolidated statements of
    income and reflected in the Company's segment results as follows:
    $48million in Electronic and Functional Materials, $16million in
    Coatings and Infrastructure Solutions, $192million in Performance
    Materials, $26million in Performance Plastics, $7million in Feedstocks
    and Energy and $701million in Corporate.
  *Pretax loss of $89million related to the abandonment of a polycrystalline
    silicon plant expansion as well as restructuring charges incurred at Dow
    Corning Corporation, a nonconsolidated affiliate. The loss was included in
    "Equity in earnings of nonconsolidated affiliates" in the consolidated
    statements of income and reflected in Electronic and Functional Materials
    ($8 million) and Coatings and Infrastructure Solutions ($81 million).
  *Pretax loss of $73million related to expensed project development and
    other costs associated with Sadara Chemical Company, a nonconsolidated
    affiliate. The loss was included in "Equity in earnings of nonconsolidated
    affiliates" in the consolidated statements of income and is reflected in
    Corporate.
  *Pretax gain of $8million related post-closing adjustments on the sale of
    a contract manufacturing business. The gain was included in "Sundry income
    (expense) - net" in the consolidated statements of income and reflected in
    Performance Materials.
  *Pretax loss of $99million on the early extinguishment of debt included in
    "Sundry income (expense) - net" in the consolidated statements of income
    and reflected in Corporate.

Results in the fourth quarter of 2011 were impacted by the following items:

  *Pretax charges totaling $77 million for asset impairments and related
    costs in the Polyurethanes business. The charges were included in "Cost of
    sales" in the consolidated statements of income and reflected in
    Performance Materials.
  *Pretax charges of $60 million for a warranty accrual adjustment related to
    an exited business. The charge was included in "Cost of sales" in the
    consolidated statements of income and reflected in Coatings and
    Infrastructure Solutions.
  *Pretax loss of $42 million ($44 million gain after tax) on the sale of a
    contract manufacturing business. The pretax loss was included in "Sundry
    income (expense) - net" in the consolidated statements of income and
    reflected in Performance Materials.
  *A valuation allowance was established against the deferred tax assets of
    two Dow entities in Brazil in the amount of $264 million.

The following table summarizes the impact of certain items recorded in the
years ended December31, 2012 and December31, 2011:

                                                                   
Certain Items         Pretax Impact (1)       Net Income (2)           EPS - Diluted (3)
Impacting Results
                      Twelve Months Ended     Twelve Months Ended      Twelve Months Ended
In millions, except   Dec 31,      Dec 31,    Dec 31,      Dec 31,     Dec 31,     Dec 31,
per share amounts    2012        2011      2012        2011       2012       2011
(Unaudited)
Adjusted to exclude
certain items                                $ 2,249     $ 2,959     $ 1.90     $ 2.54
(non-GAAP measures)
Certain items:
Asset impairments     $ —          $ (77  )   —            (51     )   —           (0.05   )
and related costs
Warranty accrual
adjustment of         —            (60    )   —            (38     )   —           (0.03   )
exited business
Restructuring plan
implementation        (22      )   —          (14      )   —           (0.01   )   —
costs
Goodwill impairment   (220     )   —          (220     )   —           (0.19   )   —
1Q12 Restructuring    (353     )   —          (280     )   —           (0.25   )   —
charge
4Q12 Restructuring    (990     )   —          (671     )   —           (0.57   )   —
charge
Acquisition-related   —            (31    )   —            (20     )   —           (0.02   )
integration costs
Gain on collection
of impaired note      —            86         —            86          —           0.07
receivable
Charge related to
Dow Corning           (89      )   —          (82      )   —           (0.07   )   —
restructuring and
asset abandonment
Charge for Sadara
related development   (73      )   —          (70      )   —           (0.06   )   —
and other costs
Gain (Loss) on sale
of a contract         8            (42    )   8            44          0.01        0.04
manufacturing
business
Loss on early
extinguishment of     (123     )   (482   )   (78      )   (314    )   (0.06   )   (0.27   )
debt
Tax valuation        —          —        —          (264    )  —         (0.23   )
allowance
Total certain items  $ (1,862 )  $ (606 )  $ (1,407 )  $ (557  )  $ (1.20 )  $ (0.49 )
Reported (GAAP                           $ 842      $ 2,402   $ 0.70    $ 2.05  
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 items described above for the fourth quarter of 2012,
results for the year ended December31, 2012 were unfavorably impacted by two
items:

  *Pretax restructuring charges of $357 million. On March 27, 2012, the
    Company's Board of Directors approved a restructuring plan ("1Q12
    Restructuring") as part of a series of actions to optimize its portfolio,
    respond to changing and volatile economic conditions, particularly in
    Western Europe, and to advance the Company's Efficiency for Growth
    program, initiated by the Company in the second quarter of 2011. The
    restructuring plan includes the shutdown of a number of manufacturing
    facilities and a workforce reduction. As a result of these activities, the
    Company recorded pretax restructuring charges of $357 million in the first
    quarter of 2012 consisting of costs associated with exit and disposal
    activities of $150 million, severance costs of $113 million and costs
    associated with asset write-downs and write-offs of $94 million. The
    impact of the charges was shown as "Restructuring charges" in the
    consolidated statements of income and is reflected in the Company's
    segment results as follows: $17 million in Electronic and Functional
    Materials, $41 million in Coatings and Infrastructure Solutions, $186
    million in Performance Materials and $113 million in Corporate.
  *Pretax loss of $24 million on the early extinguishment of debt, included
    in "Sundry income (expense) - net" in the consolidated statements of
    income and reflected in Corporate.

In addition to the items described above for the fourth quarter of 2011,
results for the year ended December31, 2011 were impacted by the following
items:

  *Pretax charges totaling $31million for integration costs related to the
    April1, 2009 acquisition of Rohm and Haas. The charges are included in
    "Acquisition-related integration expenses" in the consolidated statements
    of income and reflected in Corporate.
  *Pretax $86 million gain related to cash collected on a previously impaired
    note receivable related to Equipolymers, a nonconsolidated affiliate. The
    gain is shown as "Equity in earnings of nonconsolidated affiliates" in the
    consolidated statements of income and reflected in Performance Plastics.
  *Pretax loss of $482million 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 Company
Rebecca Bentley
+1 989 638 8568
rmbentley@dow.com

Contact:

The Dow Chemical Company