DOW: Dow Chemical Co: Dow Reports Second Quarter Results

  DOW: Dow Chemical Co: Dow Reports Second Quarter Results

UK Regulatory Announcement

   Earnings Per Share Rises to $1.87, or $0.64 on an Adjusted Basis – Up 16
                        Percent Versus the Prior Year;
            Margin Expansion in Performance Plastics, Coupled with
   Strong Sales in Dow AgroSciences and Emerging Geographies Boost Results;
   Company Deploys K-Dow Award to Debt Reduction, Net Debt to Total Capital
                           Declines to 36.4 Percent

MIDLAND, Mich.

The Dow Chemical Company (NYSE: DOW):

                        Second Quarter 2013 Highlights

  *Dow reported earnings of $1.87per share or adjusted earnings of $0.64per
    share^(1). This compares with earnings of $0.55per share in the same
    quarter last year.
  *Results this quarter were impacted by the final resolution of the K-Dow
    arbitration and Dow’s receipt of a direct cash payment of nearly $2.2
    billion. Dow subsequently applied this award to debt reduction, driving
    the Company’s net debt^(2) to total capitalization down to 36.4percent.
  *Dow generated $3.7 billion in cash flow from operations in the quarter.
    Year to date, the Company has generated $4.2 billion in cash flow from
    operations, representing an improvement of $2.8 billion compared with the
    prior year.
  *Sales were $14.6billion, flat versus the year-ago period. Sales gains
    were led by Agricultural Sciences, which was up 10 percent in the quarter
    and achieved a first-half sales record of nearly $4billion. Sales also
    grew in Performance Materials (up 1percent).
  *Volume increased 2percent with gains in most geographic areas. Volume
    growth in emerging geographic areas rose 9 percent, led by double-digit
    growth in Latin America (up 12percent). Volume also increased in Asia
    Pacific (up 7percent).
  *Price decreased 2percent, with currency representing nearly one-third of
    the decline. The Feedstocks and Energy operating segment led the decrease
    (down 4percent), due to a declining feedstock cost environment.
  *EBITDA^(3) was $4.2billion, or $2.1billion on an adjusted basis^(4), up
    nearly 9percent versus the prior year. Adjusted EBITDA margin^(5)
    expanded nearly 110basis points. EBITDA gains were led by Performance
    Plastics, which achieved $1billion in EBITDA in the quarter (up 33
    percent) and expanded EBITDA margins by 700basis points versus the same
    quarter last year.
  *Equity earnings were $228million, versus $148million in the year-ago
    period.

                                   Comment

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

“Our results in the second quarter are indicative of Dow’s focus and drive to
aggressively manage our portfolio and generate momentum across our enterprise
– expanding margins, growing cash flow and increasing earnings, even in the
midst of a slow-growth macroeconomic environment. Strong performance in
Agricultural Sciences and Performance Plastics clearly demonstrates Dow’s
market and technology leadership in those segments. We also are fully
implementing aggressive improvement plans in those segments that do not
currently meet our return on capital expectations. Our strong cash generation,
our deployment of K-Dow proceeds to pay down debt and our ongoing $1.5billion
share buyback program are all focused on rewarding our shareholders – and we
will continue to do so as our earnings grow.”

                                                Three Months Ended
                                                  June 30,   June 30,
In millions, except per share amounts           2013       2012
Net Sales                                         $14,577      $14,513
                                                               
Net Income Available for Common Stockholders      $2,340       $649
Net Income Available for Common Stockholders,
excluding Certain Items                           $770         $649
                                                               
Earnings per Common Share – diluted               $1.87        $0.55
Adjusted Earnings per Share                     $0.64      $0.55
                                                               

Review of Second Quarter Results

The Dow Chemical Company (NYSE: DOW) reported sales of $14.6billion, flat
versus the year-ago period. Agricultural Sciences reported a 10 percent
increase in sales, achieving a first-half sales record of nearly $4billion.
Sales also rose in Performance Materials (up 1 percent), offsetting declines
in Feedstocks and Energy and Performance Plastics (down 4 percent and 1
percent, respectively).

Volume rose 2 percent with gains reported in most geographic areas. Volume
growth in emerging geographic areas increased 9 percent, led by double-digit
growth in Latin America (up 12 percent). Volume increases in Asia Pacific and
North America (up 7 percent and 1 percent, respectively), more than offset a 3
percent decline in Western Europe. Volume gains were reported in all operating
segments, excluding Performance Plastics (down 1percent) and Feedstocks and
Energy (flat versus the year-ago period).

The Company reported price declines of 2 percent, with currency representing
nearly one-third of the decline. The Feedstocks and Energy operating segment
led the decrease (down 4 percent), due to a declining feedstock cost
environment.

EBITDA was $4.2 billion, or $2.1 billion on an adjusted basis, representing a
nearly 9 percent increase versus the same quarter last year. The Company
reported adjusted EBITDA margin expansion of nearly 110 basis points, led by
Performance Plastics, which achieved $1 billion in EBITDA in the quarter and
expanded adjusted EBITDA margins by 700 basis points.

Earnings for the quarter were $1.87 per share, or $0.64 per share on an
adjusted basis. This compares with prior-year earnings per share of $0.55 and
represents year-over-year growth of 16 percent.

Certain Items in the current quarter included a gain from the K-Dow
arbitration, as well as a charge related to the early extinguishment of debt
and a charge for implementation costs related to the Company’s restructuring
programs. (See Supplemental Information at the end of the release for a
description of Certain Items affecting results.)

Research and Development (R&D) expenses increased 3percent versus the same
period last year, largely due to increases in prioritized technology pipeline
investments – primarily in Agricultural Sciences.

Selling, General and Administrative (SG&A) expenses increased 6percent from
the same period last year, driven primarily by new product launches and
commercial activities in Agricultural Sciences.

Equity earnings were $228 million, versus $148 million in the year-ago period,
led by improved year-over-year performance from MEGlobal, as well as improving
naphtha-based margins in Asia.

Net debt to total capitalization and interest expense both declined in the
quarter, demonstrating Dow’s successful debt-reduction efforts. Net debt to
total capitalization was 36.4 percent – well below the Company’s target of
lower than 40 percent. In addition, interest expense is expected to be down
more than $150 million on a full-year basis, with a decline of more than $30
million in the quarter.

“Our results in the second quarter are indicative of Dow’s focus and drive to
aggressively manage our portfolio and generate momentum across our enterprise
– expanding margins, growing cash flow and increasing earnings, even in the
midst of a slow-growth macroeconomic environment,” said Andrew N. Liveris,
Dow’s chairman and chief executive officer. “Strong performance in
Agricultural Sciences and Performance Plastics clearly demonstrates Dow’s
market and technology leadership in those segments. We also are fully
implementing aggressive improvement plans in those segments that do not
currently meet our return on capital expectations. Our strong cash generation,
our deployment of K-Dow proceeds to pay down debt and our ongoing $1.5billion
share buyback program are all focused on rewarding our shareholders – and we
will continue to do so as our earnings grow.”

Electronic and Functional Materials

Sales in Electronic and Functional Materials were $1.2 billion, or flat
compared with the same quarter last year, as volume increases of 2 percent
were offset by price declines of 2 percent. In Dow Electronic Materials,
strong growth in films and OLED drove higher sales in Display Technologies.
Overall, Dow Electronic Materials sales were flat with Semiconductor
Technologies experiencing softer demand in the quarter. In Functional
Materials, overall sales were flat. Dow Microbial Control grew sales in all
regions, delivering a new quarterly sales record primarily due to strength in
the energy markets.

Equity earnings for the segment were $28 million, down from $35 million in the
second quarter of last year driven primarily by Dow Corning. EBITDA for the
segment was $254 million, down $33 million from the year-ago period.

Coatings and Infrastructure Solutions

Coatings and Infrastructure Solutions reported sales of $1.9 billion, flat
versus the prior year, as volume rose 2percent and price declined 2 percent.
Volume growth for the segment was recorded in all regions except Europe,
Middle East and Africa (EMEA). Dow Coating Materials sales increased as volume
gains slightly offset price declines. Sales declines in Dow Building and
Construction were led by Dow Building Solutions in EMEA, which continues to
experience a weak overall construction market.

Equity earnings were $25 million, down from $45 million in the year-ago period
primarily as a result of lower earnings from Dow Corning. EBITDA of $250
million for the segment declined from $337 million in the same quarter of
2012.

Agricultural Sciences

Agricultural Sciences reported record second quarter sales of nearly $1.9
billion, up 10 percent versus the year-ago period. Volume increased 9 percent
and price rose 1 percent. Volume gains were achieved in all geographic areas
led by Latin America.

Second quarter sales of Crop Protection rose 12 percent, with increases in all
geographic areas. Latin America posted the largest gains, driven by higher
sales of herbicides and insecticides. Sales of new crop protection products
grew 14 percent for the quarter.

Seeds, Traits and Oils (ST&O) sales were up 4 percent in the quarter versus
the year-ago period. Year-to-date, ST&O sales are up 23 percent, driven by
strong farmer demand for SmartStax^® corn hybrids.

EBITDA for the segment was $290 million, down from last year’s record second
quarter EBITDA of $307million, reflecting a shift in seasonal buying patterns
and increased growth investments. Agricultural Sciences achieved a new first
half EBITDA record of $774 million.

Performance Materials

Sales in Performance Materials were $3.4 billion, up 1 percent versus the
year-ago period. Volume grew 4percent, while price declined 3 percent
compared with the same quarter last year.

Volume increases were driven by improved asset supply and market share gains
within Polyurethanes and Propylene Oxide/Propylene Glycol. Lower propylene
costs drove lower market pricing levels. Competitive pricing pressure stemming
from unfavorable supply/demand dynamics – particularly in Epoxy, Chlorinated
Organics, Polyurethanes and Propylene Oxide/Propylene Glycol – impacted
overall margins.

Equity losses for the quarter were $12 million versus losses of $20 million in
the same quarter last year. The segment reported EBITDA of $284 million. This
compares with EBITDA of $350 million in the year-ago period.

Performance Plastics

Sales in Performance Plastics were $3.7 billion, down 1 percent compared with
the same quarter last year. The decline reflects the previously announced
shutdown of a high-density polyethylene facility in Tessenderlo, Belgium.

Dow Packaging and Specialty Plastics improved sales in North America, Latin
America and Asia Pacific, more than offsetting lower sales in Europe that were
primarily impacted by the Tessenderlo closure. Sales in food and specialty
packaging showed great strength across all geographic regions.

Transportation demand and improvements in hot melt adhesives for carton
sealing and nonwoven markets fueled a record volume quarter for Dow
Elastomers. Revenues were down on lower market pricing levels versus the
comparative period. Dow Electrical and Telecommunications expanded margins on
effective execution of business initiatives, particularly in the power market,
though sales were down due to the transition leading up to the July 1, 2013
divesture of the Company’s 50 percent ownership in Nippon Unicar Co. Ltd.

Equity earnings for the segment were $88 million, up from $39 million in the
year-ago period. EBITDA for the segment was $1 billion, up 33 percent from the
same period last year. Segment EBITDA margins expanded by 700 basis points to
27.5 percent. The segment has achieved six consecutive quarters of sequential
margin expansion.

Feedstocks and Energy

Sales in Feedstocks and Energy were $2.5 billion, down 4 percent versus the
same period last year. Price declined 4 percent due to falling monomers, while
volume was flat. Volume gains in EO/EG were offset by decreases in
Hydrocarbons associated with lower operating rates and a lighter feedslate in
Europe.

Equity earnings were $105 million, up from $52 million in the same quarter
last year. EBITDA for the segment was $193 million, an increase from $134
million in the year-ago period.

                                   Outlook

Commenting on the Company’s outlook, Liveris said:

“Dow’s cash and cost improvement plans continue to deliver strong forward
momentum. Together with our growth catalysts firmly embedded in our portfolio,
the Company is well-positioned to deliver year-over-year earnings improvement
in the second half of 2013.

“Moving forward, we are aggressively managing and continue to evaluate every
aspect of our portfolio to release and deliver value for our shareholders. We
have already announced plans to divest $1.5billion of non-strategic
businesses and expect to implement more portfolio activities over the next 12
months.

“Additionally, we continue investing for growth in attractive regions through
highly-accretive projects such as the expansions in the U.S. Gulf Coast and
Sadara, as well as targeted markets where we have competitive advantages, such
as in agriculture, water, electronics, coatings and packaging.

“We remain committed to driving shareholder-friendly and balance sheet-focused
actions, such as further debt reduction and ongoing cash flow growth, and
returning the benefits to our shareholders over the near- and long-term. This
is our singular focus."

Dow will host a live Webcast of its second quarter earnings conference call
with investors to discuss its results, business outlook and other matters
today at 9:00 a.m. ET on www.dow.com.

           ^“Adjusted earnings per share” is defined as earnings per share
           excluding the impact of “Certain Items.” See Supplemental
 ^(1)   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.”
           ^Net debt equals total debt (“Notes payable” plus “Long-term debt
  ^(2)     due within one year” plus “Long-Term Debt”) minus “Cash and cash
           equivalents.”
           ^EBITDA is defined as earnings (i.e., “Net Income”) before
           interest, income taxes, depreciation and amortization. A
  ^(3)     reconciliation of EBITDA to "Net Income Available for The Dow
           Chemical Company Common Stockholders" is provided following the
           Operating Segments table.
  ^(4)     ^“Adjusted EBITDA” is defined as EBITDA excluding the impact of
           Certain Items.
  ^(5)     ^“Adjusted EBITDA margin” is defined as EBITDA excluding the impact
           of Certain Items as a percentage of reported sales
           
           ^®SmartStax multi-event technology developed by Dow AgroSciences
           LLC and Monsanto. SmartStax is a trademark of Monsanto Technology
           LLC.
           

About Dow

Dow (NYSE: DOW) combines the power of science and technology to passionately
innovate what is essential to human progress. The Company connects chemistry
and innovation with the principles of sustainability to help address many of
the world's most challenging problems such as the need for clean water,
renewable energy generation and conservation, and increasing agricultural
productivity. Dow's diversified industry-leading portfolio of specialty
chemical, advanced materials, agrosciences and plastics businesses delivers a
broad range of technology-based products and solutions to customers in
approximately 160countries and in high growth sectors such as electronics,
water, energy, coatings and agriculture. In 2012, Dow had annual sales of
approximately $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          Six Months Ended
                         Jun 30,      Jun 30,        Jun 30,      Jun 30,
In millions, except
per share amounts      2013         2012         2013         2012
(Unaudited)
Net Sales              $ 14,577    $ 14,513    $ 28,960    $ 29,232
Cost of sales            12,103         12,200         23,810         24,485
Research and             417            406            852            811
development expenses
Selling, general and
administrative           716            674            1,488          1,381
expenses
Amortization of          115            122            230            244
intangibles
Restructuring            —              —              —              357
charges (Note B)
Equity in earnings
of nonconsolidated       228            148            458            317
affiliates
Sundry income
(expense) - net          2,053          27             2,021          44
(Note C)
Interest income          10             10             18             16
Interest expense and
amortization of debt   279         312         575         641
discount
Income Before Income   3,238       984         4,502       1,690
Taxes
Provision for income   795         244         1,399       430
taxes (Note D)
Net Income             2,443       740         3,103       1,260
Net income
attributable to        18          6           43          29
noncontrolling
interests
Net Income
Attributable to The    2,425       734         3,060       1,231
Dow Chemical Company
Preferred stock        85          85          170         170
dividends
Net Income Available
for The Dow Chemical   $ 2,340     $ 649       $ 2,890     $ 1,061
Company Common
Stockholders
                                                          
Per Common Share
Data:
Earnings per common      $ 1.96         $ 0.55         $ 2.42         $ 0.90
share - basic
Earnings per common
share - diluted        $ 1.87      $ 0.55      $ 2.36      $ 0.90
(Note E)
                                                          
Common stock
dividends declared       $ 0.32         $ 0.32         $ 0.64         $ 0.57
per share of common
stock
Weighted-average
common shares            1,186.1        1,169.7        1,183.6        1,165.3
outstanding - basic
Weighted-average
common shares          1,288.2     1,176.6     1,286.3     1,172.7
outstanding -
diluted (Note E)
                                                          
Depreciation             $ 504          $ 506          $ 1,009        $ 1,016
Capital Expenditures   $ 506       $ 581       $ 852       $ 983

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 December31, 2012. Except as otherwise indicated by
the context, the terms "Company" and "Dow" as used herein mean The Dow
Chemical Company and its consolidated subsidiaries.

Note B: On March 27, 2012, the Company's Board of Directors approved a
restructuring plan as part of a series of actions to optimize its portfolio,
respond to changing and volatile economic conditions, particularly in Western
Europe, and to advance the Company's Efficiency for Growth program. The
restructuring plan included the shutdown of a number of manufacturing
facilities and a workforce reduction. As a result of these activities, the
Company recorded pretax restructuring charges of $357 million in the first
quarter of 2012 that included asset write-downs and write-offs, severance and
costs associated with exit and disposal activities.

Note C: In the second quarter of 2013, the Company recognized a pretax gain of
$2.161 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 $110million on the early extinguishment of debt; a pretax
loss of $60 million was recorded in the first quarter of 2013. In the first
quarter of 2012, the Company recognized a pretax loss of $24 million on the
early extinguishment of debt.

Note D: During the first quarter of 2013, the Company recognized a tax charge
of $223 million related to court rulings on two separate matters that resulted
in the adjustment of uncertain tax positions.

Note E: During the second quarter of 2013, the Company recorded a gain related
to the K-Dow arbitration, which significantly increased net income for the
quarter and year-to-date. As a result of the net income increase, the assumed
conversion of the Company's Cumulative Convertible Perpetual Preferred Stock,
Series A into potential shares of the Company's common stock was dilutive. In
accordance with U.S. GAAP, "Weighted-average common shares outstanding -
diluted" increased by 96.8 million shares and "Net Income Attributable to The
Dow Chemical Company" was used in the calculation of "Earning per common share
- diluted" for the three- and six-month periods ended June 30, 2013. See
Supplementary Information for further details.


The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets

                                                   Jun 30,      Dec 31,
In millions (Unaudited)                            2013         2012
Assets
Current Assets
Cash and cash equivalents (variable interest         $ 4,883        $ 4,318
entities restricted - 2013: $158; 2012: $146)
Accounts and notes receivable:
Trade (net of allowance for doubtful receivables     5,619          5,074
- 2013: $128; 2012: $121)
Other                                                4,859          4,605
Inventories                                          8,836          8,476
Deferred income tax assets - current                 735            877
Other current assets                               395         334      
Total current assets                               25,327      23,684   
Investments
Investment in nonconsolidated affiliates             4,012          4,121
Other investments (investments carried at fair       2,424          2,565
value - 2013: $1,938; 2012: $2,061)
Noncurrent receivables                             278         313      
Total investments                                  6,714       6,999    
Property
Property                                             54,366         54,366
Less accumulated depreciation                      37,164      36,846   
Net property (variable interest entities           17,202      17,520   
restricted - 2013: $2,577; 2012: $2,554)
Other Assets
Goodwill                                             12,721         12,739
Other intangible assets (net of accumulated          4,454          4,711
amortization - 2013: $3,013; 2012: $2,785)
Deferred income tax assets - noncurrent              3,050          3,333
Asbestos-related insurance receivables -             163            155
noncurrent
Deferred charges and other assets                  511         464      
Total other assets                                 20,899      21,402   
Total Assets                                       $ 70,142    $ 69,605 
Liabilities and Equity
Current Liabilities
Notes payable                                        $ 505          $ 396
Long-term debt due within one year                   846            672
Accounts payable:
Trade                                                4,812          5,010
Other                                                2,323          2,327
Income taxes payable                                 903            251
Deferred income tax liabilities - current            89             95
Dividends payable                                    465            86
Accrued and other current liabilities              2,670       2,656    
Total current liabilities                          12,613      11,493   
Long-Term Debt (variable interest entities         17,475      19,919   
nonrecourse - 2013: $1,423; 2012: $1,406)
Other Noncurrent Liabilities
Deferred income tax liabilities - noncurrent         795            837
Pension and other postretirement benefits -          11,131         11,459
noncurrent
Asbestos-related liabilities - noncurrent            497            530
Other noncurrent obligations                       3,284       3,353    
Total other noncurrent liabilities                 15,707      16,179   
Redeemable Noncontrolling Interest                 147         147      
Stockholders’ Equity
Preferred stock, series A                            4,000          4,000
Common stock                                         3,031          3,008
Additional paid-in capital                           3,537          3,281
Retained earnings                                    20,620         18,495
Accumulated other comprehensive loss                 (7,526   )     (7,516   )
Unearned ESOP shares                                 (371     )     (391     )
Treasury stock at cost                             (80      )   —        
The Dow Chemical Company’s stockholders’ equity    23,211      20,877   
Noncontrolling interests                           989         990      
Total equity                                       24,200      21,867   
Total Liabilities and Equity                       $ 70,142    $ 69,605 
See Notes to the Consolidated Financial Statements.


The Dow Chemical Company and Subsidiaries
Operating Segments
                   
                      Three Months Ended          Six Months Ended
                       Jun 30,      Jun 30,        Jun 30,      Jun 30,
In millions          2013         2012         2013         2012
(Unaudited)
Sales by operating
segment
Electronic and
Functional             $ 1,152        $ 1,151        $ 2,293        $ 2,272
Materials
Coatings and
Infrastructure         1,888          1,888          3,555          3,591
Solutions
Agricultural           1,850          1,676          3,953          3,514
Sciences
Performance            3,389          3,369          6,717          6,842
Materials
Performance            3,676          3,711          7,174          7,302
Plastics
Feedstocks and         2,543          2,657          5,099          5,592
Energy
Corporate            79          61          169         119      
Total                $ 14,577    $ 14,513    $ 28,960    $ 29,232 
EBITDA (1) by
operating segment
Electronic and
Functional             $ 254          $ 287          $ 527          $ 530
Materials
Coatings and
Infrastructure         250            337            436            541
Solutions
Agricultural           290            307            774            758
Sciences
Performance            284            350            724            682
Materials
Performance            1,010          760            1,962          1,478
Plastics
Feedstocks and         193            134            433            332
Energy
Corporate            1,885       (215     )   1,530       (653     )
Total                $ 4,166     $ 1,960     $ 6,386     $ 3,668  
Certain items
increasing
(decreasing)
EBITDA by
operating segment
(2)
Electronic and
Functional             $ —            $ —            $ —            $ (17    )
Materials
Coatings and
Infrastructure         —              —              —              (41      )
Solutions
Agricultural           —              —              —              —
Sciences
Performance            —              —              —              (186     )
Materials
Performance            —              —              —              —
Plastics
Feedstocks and         —              —              —              —
Energy
Corporate            2,039       —           1,967       (137     )
Total                $ 2,039     $ —         $ 1,967     $ (381   )
EBITDA excluding
certain items by
operating segment
Electronic and
Functional             $ 254          $ 287          $ 527          $ 547
Materials
Coatings and
Infrastructure         250            337            436            582
Solutions
Agricultural           290            307            774            758
Sciences
Performance            284            350            724            868
Materials
Performance            1,010          760            1,962          1,478
Plastics
Feedstocks and         193            134            433            332
Energy
Corporate            (154     )   (215     )   (437     )   (516     )
Total                $ 2,127     $ 1,960     $ 4,419     $ 4,049  
Continued
                     

The Dow Chemical Company and Subsidiaries
Operating Segments (Continued)

                                 Three Months Ended    Six Months Ended
                                   Jun 30,   Jun 30,     Jun 30,   Jun 30,
In millions (Unaudited)          2013      2012      2013      2012
Equity in earnings (losses) of
nonconsolidated affiliates by
operating segment (included in
EBITDA)
Electronic and Functional          $ 28        $ 35        $ 45        $ 54
Materials
Coatings and Infrastructure        25          45          51          67
Solutions
Agricultural Sciences              1           (1    )     3           —
Performance Materials              (12   )     (20   )     (35   )     (37   )
Performance Plastics               88          39          145         73
Feedstocks and Energy              105         52          264         177
Corporate                        (7    )   (2    )   (15   )   (17   )
Total                            $ 228    $ 148    $ 458    $ 317 

        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
(1)   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                Three Months Ended        Six Months Ended
Chemical Company Common
Stockholders"
                             Jun 30,     Jun 30,       Jun 30,     Jun 30,
In millions (Unaudited)    2013        2012        2013        2012
EBITDA                       $ 4,166       $ 1,960       $ 6,386       $ 3,668
- Depreciation and           659           674           1,327         1,353
amortization
+ Interest income            10            10            18            16
- Interest expense and
amortization of debt       279        312        575        641
discount
Income Before Income       $ 3,238    $ 984      $ 4,502    $ 1,690
Taxes
- Provision for income       795           244           1,399         430
taxes
- Net income
attributable to              18            6             43            29
noncontrolling interests
- Preferred stock          85         85         170        170
dividends
Net Income Available for
The Dow Chemical Company   $ 2,340    $ 649      $ 2,890    $ 1,061
Common Stockholders

(2)   See Supplemental Information for a description of certain items
        affecting results in 2013 and 2012.
        

The Dow Chemical Company and Subsidiaries
Sales by Geographic Area

                       Three Months Ended          Six Months Ended
                         Jun 30,      Jun 30,        Jun 30,      Jun 30,
In millions            2013         2012         2013         2012
(Unaudited)
North America            $ 5,440        $ 5,341        $ 10,823       $ 10,678
Europe, Middle East      4,571          4,867          9,486          10,234
and Africa
Asia Pacific             2,722          2,645          5,090          5,065
Latin America          1,844       1,660       3,561       3,255
Total                  $ 14,577    $ 14,513    $ 28,960    $ 29,232
                                                                        

Sales Volume and Price by Operating Segment and Geographic Area

                   Three Months Ended           Six Months Ended
                     Jun 30, 2013                   Jun 30, 2013
Percentage
change from        Volume   Price   Total   Volume   Price   Total
prior year
Electronic and
Functional           2   %    (2 )%   —  %      3   %    (2 )%   1  %
Materials
Coatings and
Infrastructure       2          (2 )      —         —          (1 )      (1 )
Solutions
Agricultural         9          1         10        10         2         12
Sciences
Performance          4          (3 )      1         (1  )      (1 )      (2 )
Materials
Performance          (1  )      —         (1 )      (3  )      1         (2 )
Plastics
Feedstocks and     —       (4 )    (4 )    (6  )    (3 )    (9 )
Energy
Total              2   %    (2 )%   —  %    —   %    (1 )%   (1 )%
North America        1   %      1  %      2  %      1   %      —  %      1  %
Europe, Middle       (2  )      (4 )      (6 )      (6  )      (1 )      (7 )
East and Africa
Asia Pacific         7          (4 )      3         4          (3 )      1
Latin America      12      (1 )    11     8       1      9  
Total              2   %    (2 )%   —  %    —   %    (1 )%   (1 )%
Developed            (1  )%     (2 )%     (3 )%     (3  )%     (1 )%     (4 )%
geographies
Emerging           9       (2 )    7      5       —      5  
geographies (3)
Total              2   %    (2 )%   —  %    —   %    (1 )%   (1 )%

        Emerging geographies includes Eastern Europe, Middle East, Africa,
(3)   Latin America, and Asia Pacific excluding Australia, Japan and New
        Zealand.
        

Supplemental Information

Description of Certain Items Affecting Results
The following tables summarize the impact of certain items recorded in the three- and six-month
periods ended June 30, 2013 and June 30, 2012:

Certain Items
Impacting        Pretax Impact (1)        Net Income (2)            EPS - Diluted (3)
Results
                   Three Months Ended         Three Months Ended          Three Months Ended
                   Jun 30,     Jun 30,      Jun 30,     Jun 30,       Jun 30,    Jun 30,
In millions,
except per       2013        2012       2013        2012        2013       2012
share amounts
(Unaudited)
Adjusted to
exclude
certain items                                 $ 770         $ 649         $ 0.64       $ 0.55
(non-GAAP
measures) (4)
Certain items:
Restructuring
plan               $ (12   )     $ —          (8      )     —             —            —
implementation
costs (4)
Loss on early
extinguishment     (110    )     —            (69     )     —             (0.06  )     —
of debt (4)
Gain from
K-Dow            2,161      —         1,647      —          1.37      —       
arbitration
(4)
Total certain    $ 2,039    $ —       $ 1,570    $ —        $ 1.31    $ —     
items (4)
Dilutive
effect of
assumed
preferred                                                   (0.08  )   —       
stock
conversion
into shares of
common stock
Reported GAAP
Amounts (5)                           $ 2,340    $ 649      $ 1.87    $ 0.55  
(6)
                                                                          
                                                                 
Certain Items
Impacting          Pretax Impact (1)          Net Income (2)              EPS - Diluted (3)
Results
                   Six Months Ended           Six Months Ended            Six Months Ended
                   Jun 30,       Jun 30,      Jun 30,       Jun 30,       Jun 30,      Jun 30,
In millions,
except per       2013        2012       2013        2012        2013       2012
share amounts
(Unaudited)
Adjusted to
exclude
certain items                                 $ 1,589       $ 1,363       $ 1.33       $ 1.16
(non-GAAP
measures) (4)
Certain items:
Restructuring
plan               $ (24   )     $ —          (16     )     —             (0.01  )     —
implementation
costs (4)
Restructuring      —             (357   )     —             (287    )     —            (0.25   )
charges
Loss on early
extinguishment     (170    )     (24    )     (107    )     (15     )     (0.09  )     (0.01   )
of debt (4)
Gain from
K-Dow              2,161         —            1,647         —             1.37         —
arbitration
(4)
Uncertain tax
position         —          —         (223    )   —          (0.19  )   —       
adjustments
Total certain    $ 1,967    $ (381 )   $ 1,301    $ (302  )   $ 1.08    $ (0.26 )
items (4)
Dilutive
effect of
assumed
preferred                                                   (0.05  )   —       
stock
conversion
into shares of
common stock
Reported GAAP
Amounts (5)                           $ 2,890    $ 1,061    $ 2.36    $ 0.90  
(6)

(1)   Impact on "Income Before Income Taxes."
(2)     "Net Income Available for The Dow Chemical Company Common
        Stockholders."
(3)     "Earnings per common share - diluted."
        For the three- and six-month periods ended June 30, 2013, conversion
        of the Company's Cumulative Convertible Perpetual Preferred Stock,
        Series A into shares of the Company's common stock was excluded from
(4)     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.
        For the three- and six-month periods ended June 30, 2013, an assumed
        conversion of the Company's Cumulative Convertible Perpetual Preferred
(5)     Stock, Series A into shares of the Company's common stock was included
        in the calculation of diluted earnings per share (reported GAAP
        amount).
        The Company used "Net Income Attributable to The Dow Chemical Company"
        when calculating diluted earnings per share (reported GAAP amounts)
(6)     for the three- and six-month periods ended June 30, 2013, as it
        excludes preferred dividends of $85 million for the three months ended
        June 30, 2013 ($170 million for the six months ended June 30, 2013).
        

The following table presents diluted share counts for the three- and six-month
periods ended June 30, 2013 and June 30, 2012, including the effect of an
assumed conversion of the Company's Cumulative Convertible Perpetual Preferred
Stock, Series A into shares of the Company's common stock:


Common Shares - Diluted          Three Months Ended    Six Months Ended
                                   Jun 30,   Jun 30,     Jun 30,   Jun 30,
In millions                      2013      2012      2013      2012
Share count - diluted,
excluding preferred stock          1,191.4     1,176.6     1,189.5     1,172.7
conversion to common shares
Potential common shares from
assumed conversion of              96.8        N/A         96.8        N/A
preferred stock, included in
reported GAAP EPS calculation
Share count - diluted,
including assumed preferred      1,288.2   N/A       1,286.3   N/A
stock conversion to common
shares

Results in the second quarter of 2013 were impacted by three items:

  *Pretax charges of $12 million for implementation costs related to the
    Company's restructuring programs. The charges were included in "Cost of
    sales" in the consolidated statements of income and reflected in
    Corporate.
  *Pretax loss of $110 million on the early extinguishment of debt. The loss
    was included in "Sundry income (expense) - net" in the consolidated
    statements of income and reflected in Corporate.
  *Pretax gain of $2.161 billion related to damages awarded to the Company in
    the K-Dow arbitration proceeding. The gain was included in "Sundry income
    (expense) - net" in the consolidated statements of income and reflected in
    Corporate.

In addition to the items described above for the second quarter of 2013,
results for the six-month period ended June30, 2013 were impacted by the
following items:

  *Pretax charges of $12 million for implementation costs related to the
    Company's restructuring programs. The charges were included in "Cost of
    sales" ($11 million) and "Selling, general and administrative expenses"
    ($1 million) in the consolidated statements of income and reflected in
    Corporate.
  *Pretax loss of $60 million on the early extinguishment of debt. The loss
    was included in "Sundry income (expense) - net" in the consolidated
    statements of income and reflected in Corporate.
  *A tax charge of $223 million related to court rulings on two separate
    matters that resulted in the adjustment of uncertain tax positions.

The results for the six-month period ended June30, 2012 were impacted by the
following items:

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

The Dow Chemical Company
Rebecca Bentley, +1 989 638 8568
rmbentley@dow.com

Contact:

Dow Chemical Co
 
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