Delaware (State or other jurisdiction of incorporation) | 1-3433 (Commission file number) | 38-1285128 (IRS Employer Identification No.) |
2030 DOW CENTER, MIDLAND, MICHIGAN 48674 | ||
(Address of principal executive offices) (Zip Code) | ||
Registrant's telephone number, including area code: 989-636-1000 | ||
Not applicable (Former name or former address, if changed since last report) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(d) | Exhibits. |
/s/ RONALD C. EDMONDS |
Ronald C. Edmonds |
Controller and Vice President of |
Controllers and Tax |
EXHIBIT INDEX | |
Exhibit No. | Description |
99.1 | Press release issued by The Dow Chemical Company on January 26, 2017, announcing results for the fourth quarter of 2016. |
• | 4Q Loss Per Share of $0.03; Operating Earnings Per Share of $0.99, up 6% |
• | 4Q Sales Climb to $13B, up 14% with Gains in all Operating Segments |
• | 4Q EBITDA of $783MM; Operating EBITDA Rises 10% to $2.6B |
• | Full-Year Earnings Per Share of $3.52; Operating Earnings Per Share Increases 7% to $3.72 |
• | Full-Year EBITDA of $8B; Operating EBITDA Grows $212 Million to $9.8B |
• | Nearly $3B Returned to Shareholders through Paid Dividends and Share Repurchases in 2016 |
• | Dow reported a loss of $0.03 per share, or operating earnings per share of $0.99(1). This compares with earnings per share of $2.94 in the year-ago period, or operating earnings per share of $0.93. Operating earnings per share grew 6 percent versus the year-ago period. |
• | GAAP results in the quarter were impacted by Certain Items, primarily due to a voluntary change in accounting policy for asbestos-related matters and charges for legacy environmental remediation activities. Results in the year-ago period were impacted by Certain Items mostly related to gains on portfolio management actions. |
• | Sales were $13.0 billion, up 14 percent versus the year-ago period driven by volume growth, including the acquisition of Dow Corning’s silicones business, while maintaining prices. Sales rose 3 percent excluding the silicones acquisition, with increases in all operating segments except Infrastructure Solutions. |
• | Volume grew 3 percent excluding the impact of acquisitions, with gains in all geographic areas, except Latin America. These gains were driven by Dow’s continued portfolio shift toward growing consumer end-markets, led by Consumer Solutions (up 7 percent), Agricultural Sciences (up 5 percent) and Performance Plastics (up 4 percent), all also excluding the impact of acquisitions. |
• | Operating EBITDA(2) rose 10 percent versus the year-ago period to $2.6 billion, driven by the contribution of Dow Corning’s silicones businesses; increased seed sales; and demand for Dow’s differentiated products, particularly in infrastructure, transportation, electronics and consumer care. These gains more than offset higher feedstock and energy costs and the impact of planned turnaround activity. |
• | Productivity and cost cutting savings totaled $60 million in the quarter, bringing the full-year contribution to $313 million, exceeding the 2016 target. |
• | Dow delivered $1.9 billion of cash flow from operations, which compares with $2.3 billion in the year-ago period. The year-over-year comparison was unfavorably impacted by more than $750 million of non-operational items. Excluding these items, cash flow from operations increased more than $300 million. The Company returned more than $1 billion to shareholders in the quarter through paid dividends ($510 million) and share repurchases ($500 million). |
• | The Company converted all of its Series A Convertible Perpetual Preferred Stock into Common Stock, eliminating the $340 million annual preferred dividend payment and further enhancing Dow’s capital structure. |
• | The Company’s strategic investments for growth achieved several milestones. Dow made significant progress on: its planned merger with DuPont; the integration of Dow Corning’s silicones businesses, which reached an annual cost synergy run-rate of greater than $360 million; Sadara, which completed the construction phase of all 26 units at its world-scale complex; expansions of an ethylene facility in Louisiana and a polyethylene facility in Texas; and construction activities at its new ethylene facility in Texas, which reached more than 90 percent completion. |
(1) | Operating earnings per share is defined as earnings per share excluding the impact of “Certain Items.” See Supplemental Information at the end of the release for a description of these items, as well as a reconciliation of ‘Operating earnings per common share - diluted” to “Earnings per common share - diluted.” |
(2) | EBITDA is defined as earnings (i.e., “Net Income (Loss)”) before interest, income taxes, depreciation and amortization. A reconciliation of EBITDA to "Net Income (Loss) Available for The Dow Chemical Company Common Stockholders" is provided following the Operating Segments table. Operating EBITDA is defined as EBITDA excluding the impact of “Certain Items.” |
(3) | EBITDA margin is defined as EBITDA as a percentage of reported net sales. |
(4) | Operating EBITDA margin is defined as Operating EBITDA as a percentage of reported net sales. |
• | Dow reported full-year earnings per share of $3.52, or operating earnings per share of $3.72. This compares with earnings per share of $6.15 in the prior year, or operating earnings per share of $3.47. |
• | Sales were $48.2 billion, down 1 percent versus the prior year. |
• | Volume grew 5 percent on a reported basis and 4 percent excluding the impact of divestitures and acquisitions. This result reflected broad-based, consumer-driven demand, with gains across nearly all geographic areas - Asia Pacific (up 6 percent); Europe, Middle East, Africa and India (EMEAI) (up 4 percent); North America (up 3 percent); and Latin America (flat). Regional highlights included Greater China (up 11 percent), Europe (up 5 percent) and the United States (up 4 percent). |
• | EBITDA was $8 billion. Operating EBITDA was $9.8 billion, up $212 million compared with the prior year, with increases in Consumer Solutions, Infrastructure Solutions and Agricultural Sciences more than offsetting declines in Performance Plastics and Performance Materials & Chemicals. |
• | EBITDA margin(3) was 17 percent. Operating EBITDA margin(4) expanded nearly 70 basis points to 20 percent, with increases reported in Consumer Solutions, Agricultural Sciences and Infrastructure Solutions, reflecting continued actions that further shifted the business mix toward consumer-driven end-markets, coupled with ongoing productivity savings. |
• | Dow delivered $5.5 billion of cash flow from operations in the year, which compares with $7.5 billion in the prior year. The year-over-year comparison was unfavorably impacted by more than $2 billion of non-operational items. Excluding these items, cash flow from operations increased more than $200 million. |
• | Dow’s annual dividend reached a historic high of $1.84 per share, and the Company returned nearly $3 billion to shareholders through paid dividends ($2.0 billion) and share repurchases ($916 million) in 2016. |
• | Dow growth investments reached several milestones in the year. On the U.S. Gulf Coast, the Company completed expansions of a Louisiana ethylene plant and a Texas gas-phase polyethylene facility. Additionally, the Company’s new ethylene unit in Texas surpassed 90 percent construction completion. In the Middle East, the Sadara joint venture started up its mixed feed cracker and two additional polyethylene units, and completed construction of all 26 units at the world-scale complex. |
• | The Company completed the ownership restructure of Dow Corning Corporation’s Silicones business on June 1 and increased the total synergy target by $100 million to $500 million. The transaction was immediately accretive to earnings per share and is expected to contribute greater than $1 billion of EBITDA at full run-rate. At year-end, Dow had already reached an annual cost synergy run-rate of more than $360 million. |
• | Dow made significant progress on its planned merger with DuPont, receiving overwhelming shareholder support for the transaction, announcing DowDuPont’s senior leadership team, finalizing plans to achieve the $3 billion in cost synergies and accelerating the timeline for the intended spins. |
Three Months Ended | ||
In millions, except per share amounts | Dec 31, 2016 | Dec 31, 2015 |
Net Sales | $13,020 | $11,462 |
Adjusted Sales(5) | $11,749 | $11,462 |
Net Income (Loss) Available for Common Stockholders | $(33) | $3,527 |
Net Income Available for Common Stockholders, Excluding Certain Items | $1,121 | $1,057 |
Earnings (Loss) per Common Share - Diluted | $(0.03) | $2.94 |
Operating Earnings per Share | $0.99 | $0.93 |
Twelve Months Ended | ||
In millions, except per share amounts | Dec 31, 2016 | Dec 31, 2015 |
Net Sales | $48,158 | $48,778 |
Adjusted Sales(5) | $45,108 | $46,672 |
Net Income Available for Common Stockholders | $3,978 | $7,345 |
Net Income Available for Common Stockholders, Excluding Certain Items | $4,221 | $4,054 |
Earnings per Common Share - Diluted | $3.52 | $6.15 |
Operating Earnings Per Share | $3.72 | $3.47 |
Three Months Ended | Twelve Months Ended | ||||||||||||||
In millions, except per share amounts (Unaudited) | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2015 | |||||||||||
Net Sales | $ | 13,020 | $ | 11,462 | $ | 48,158 | $ | 48,778 | |||||||
Cost of sales (Note B) | 10,574 | 8,806 | 37,641 | 37,836 | |||||||||||
Research and development expenses | 425 | 404 | 1,584 | 1,598 | |||||||||||
Selling, general and administrative expenses (Note C) | 911 | 757 | 3,304 | 2,971 | |||||||||||
Amortization of intangibles | 157 | 103 | 544 | 419 | |||||||||||
Restructuring charges (Note D) | — | 40 | 452 | 415 | |||||||||||
Asbestos-related charge (Note E) | 1,113 | — | 1,113 | — | |||||||||||
Equity in earnings of nonconsolidated affiliates (Note F) | 251 | 99 | 442 | 674 | |||||||||||
Sundry income (expense) - net (Note G) | (103 | ) | 2,912 | 1,202 | 4,592 | ||||||||||
Interest income | 43 | 25 | 107 | 71 | |||||||||||
Interest expense and amortization of debt discount | 229 | 240 | 858 | 946 | |||||||||||
Income (Loss) Before Income Taxes | (198 | ) | 4,148 | 4,413 | 9,930 | ||||||||||
Provision (Credit) for income taxes (Note H) | (282 | ) | 517 | 9 | 2,147 | ||||||||||
Net Income | 84 | 3,631 | 4,404 | 7,783 | |||||||||||
Net income attributable to noncontrolling interests | 32 | 19 | 86 | 98 | |||||||||||
Net Income Attributable to The Dow Chemical Company | 52 | 3,612 | 4,318 | 7,685 | |||||||||||
Preferred stock dividends | 85 | 85 | 340 | 340 | |||||||||||
Net Income (Loss) Available for The Dow Chemical Company Common Stockholders | $ | (33 | ) | $ | 3,527 | $ | 3,978 | $ | 7,345 | ||||||
Per Common Share Data: | |||||||||||||||
Earnings (Loss) per common share - basic | $ | (0.03 | ) | $ | 3.17 | $ | 3.57 | $ | 6.45 | ||||||
Earnings (Loss) per common share - diluted (Note I) | $ | (0.03 | ) | $ | 2.94 | $ | 3.52 | $ | 6.15 | ||||||
Dividends declared per share of common stock | $ | 0.46 | $ | 0.46 | $ | 1.84 | $ | 1.72 | |||||||
Weighted-average common shares outstanding - basic | 1,106.2 | 1,105.4 | 1,108.1 | 1,130.1 | |||||||||||
Weighted-average common shares outstanding - diluted (Note I) | 1,106.2 | 1,218.9 | 1,123.2 | 1,241.4 | |||||||||||
Depreciation | $ | 590 | $ | 446 | $ | 2,130 | $ | 1,909 | |||||||
Capital Expenditures | $ | 927 | $ | 886 | $ | 3,804 | $ | 3,703 |
In millions (Unaudited) | Dec 31, 2016 | Dec 31, 2015 | |||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents (variable interest entities restricted - 2016: $75; 2015: $158) | $ | 6,607 | $ | 8,577 | |||
Accounts and notes receivable: | |||||||
Trade (net of allowance for doubtful receivables - 2016: $110; 2015: $94) | 4,666 | 4,078 | |||||
Other | 4,358 | 3,768 | |||||
Inventories | 7,363 | 6,871 | |||||
Other current assets | 665 | 647 | |||||
Total current assets | 23,659 | 23,941 | |||||
Investments | |||||||
Investment in nonconsolidated affiliates | 3,747 | 3,958 | |||||
Other investments (investments carried at fair value - 2016: $1,959; 2015: $1,866) | 2,969 | 2,923 | |||||
Noncurrent receivables | 708 | 816 | |||||
Total investments | 7,424 | 7,697 | |||||
Property | |||||||
Property | 57,438 | 50,802 | |||||
Less accumulated depreciation | 33,952 | 32,948 | |||||
Net property (variable interest entities restricted - 2016: $961; 2015: $1,717) | 23,486 | 17,854 | |||||
Other Assets | |||||||
Goodwill | 15,272 | 12,154 | |||||
Other intangible assets (net of accumulated amortization - 2016: $4,295; 2015: $3,770) | 6,026 | 3,617 | |||||
Deferred income tax assets | 3,079 | 2,140 | |||||
Deferred charges and other assets | 565 | 535 | |||||
Total other assets | 24,942 | 18,446 | |||||
Total Assets | $ | 79,511 | $ | 67,938 | |||
Liabilities and Equity | |||||||
Current Liabilities | |||||||
Notes payable | $ | 272 | $ | 454 | |||
Long-term debt due within one year | 635 | 541 | |||||
Accounts payable: | |||||||
Trade | 4,519 | 3,577 | |||||
Other | 2,401 | 2,287 | |||||
Income taxes payable | 600 | 452 | |||||
Dividends payable | 508 | 592 | |||||
Accrued and other current liabilities | 3,669 | 3,212 | |||||
Total current liabilities | 12,604 | 11,115 | |||||
Long-Term Debt (variable interest entities nonrecourse - 2016: $330; 2015: $487) | 20,456 | 16,215 | |||||
Other Noncurrent Liabilities | |||||||
Deferred income tax liabilities | 923 | 587 | |||||
Pension and other postretirement benefits - noncurrent | 11,375 | 9,119 | |||||
Asbestos-related liabilities - noncurrent | 1,364 | 387 | |||||
Other noncurrent obligations | 5,560 | 4,332 | |||||
Total other noncurrent liabilities | 19,222 | 14,425 | |||||
Stockholders’ Equity | |||||||
Preferred stock, series A | — | 4,000 | |||||
Common stock | 3,107 | 3,107 | |||||
Additional paid-in capital | 4,262 | 4,936 | |||||
Retained earnings | 30,338 | 28,425 | |||||
Accumulated other comprehensive loss | (9,822 | ) | (8,667 | ) | |||
Unearned ESOP shares | (239 | ) | (272 | ) | |||
Treasury stock at cost | (1,659 | ) | (6,155 | ) | |||
The Dow Chemical Company’s stockholders’ equity | 25,987 | 25,374 | |||||
Noncontrolling interests | 1,242 | 809 | |||||
Total equity | 27,229 | 26,183 | |||||
Total Liabilities and Equity | $ | 79,511 | $ | 67,938 |
Three Months Ended | Twelve Months Ended | ||||||||||||||
In millions (Unaudited) | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2015 | |||||||||||
Sales by operating segment | |||||||||||||||
Agricultural Sciences | $ | 1,716 | $ | 1,603 | $ | 6,174 | $ | 6,381 | |||||||
Consumer Solutions | 1,561 | 1,052 | 5,455 | 4,379 | |||||||||||
Infrastructure Solutions | 2,408 | 1,705 | 8,621 | 7,394 | |||||||||||
Performance Materials & Chemicals | 2,413 | 2,381 | 9,225 | 11,973 | |||||||||||
Performance Plastics | 4,843 | 4,617 | 18,404 | 18,357 | |||||||||||
Corporate | 79 | 104 | 279 | 294 | |||||||||||
Total | $ | 13,020 | $ | 11,462 | $ | 48,158 | $ | 48,778 | |||||||
EBITDA (1) by operating segment | |||||||||||||||
Agricultural Sciences | $ | 74 | $ | 186 | $ | 806 | $ | 1,432 | |||||||
Consumer Solutions | 568 | 304 | 2,828 | 1,048 | |||||||||||
Infrastructure Solutions | 350 | 161 | 2,318 | 1,021 | |||||||||||
Performance Materials & Chemicals | 411 | 3,144 | 134 | 5,479 | |||||||||||
Performance Plastics | 1,024 | 1,562 | 4,503 | 5,399 | |||||||||||
Corporate | (1,644 | ) | (394 | ) | (2,563 | ) | (1,053 | ) | |||||||
Total | $ | 783 | $ | 4,963 | $ | 8,026 | $ | 13,326 | |||||||
Certain items (increasing) decreasing EBITDA by operating segment (2) | |||||||||||||||
Agricultural Sciences | $ | (165 | ) | $ | (34 | ) | $ | (170 | ) | $ | 573 | ||||
Consumer Solutions | 27 | 8 | 1,144 | (59 | ) | ||||||||||
Infrastructure Solutions | — | (74 | ) | 864 | (101 | ) | |||||||||
Performance Materials & Chemicals | (1 | ) | 2,721 | (1,230 | ) | 3,409 | |||||||||
Performance Plastics | (119 | ) | 260 | (129 | ) | 597 | |||||||||
Corporate | (1,579 | ) | (308 | ) | (2,261 | ) | (689 | ) | |||||||
Total | $ | (1,837 | ) | $ | 2,573 | $ | (1,782 | ) | $ | 3,730 | |||||
EBITDA excluding certain items by operating segment | |||||||||||||||
Agricultural Sciences | $ | 239 | $ | 220 | $ | 976 | $ | 859 | |||||||
Consumer Solutions | 541 | 296 | 1,684 | 1,107 | |||||||||||
Infrastructure Solutions | 350 | 235 | 1,454 | 1,122 | |||||||||||
Performance Materials & Chemicals | 412 | 423 | 1,364 | 2,070 | |||||||||||
Performance Plastics | 1,143 | 1,302 | 4,632 | 4,802 | |||||||||||
Corporate | (65 | ) | (86 | ) | (302 | ) | (364 | ) | |||||||
Total | $ | 2,620 | $ | 2,390 | $ | 9,808 | $ | 9,596 |
Three Months Ended | Twelve Months Ended | ||||||||||||||
In millions (Unaudited) | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2015 | |||||||||||
Equity in earnings (losses) of nonconsolidated affiliates by operating segment (included in EBITDA) | |||||||||||||||
Agricultural Sciences | $ | (1 | ) | $ | (17 | ) | $ | 3 | $ | (15 | ) | ||||
Consumer Solutions | 85 | 38 | 132 | 91 | |||||||||||
Infrastructure Solutions | 94 | 67 | 215 | 203 | |||||||||||
Performance Materials & Chemicals | 31 | (6 | ) | (18 | ) | 225 | |||||||||
Performance Plastics | 54 | 46 | 137 | 220 | |||||||||||
Corporate | (12 | ) | (29 | ) | (27 | ) | (50 | ) | |||||||
Total | $ | 251 | $ | 99 | $ | 442 | $ | 674 |
(1) | The Company uses EBITDA (which Dow defines as earnings (i.e., "Net Income") before interest, income taxes, depreciation and amortization) as its measure of profit/loss for segment reporting purposes. EBITDA by operating segment includes all operating items relating to the businesses, except depreciation and amortization; items that principally apply to the Company as a whole are assigned to Corporate. A reconciliation of "Net Income (Loss) Available for The Dow Chemical Company Common Stockholders" to EBITDA is provided below. |
Reconciliation of "Net Income (Loss) Available for The Dow Chemical Company Common Stockholders" to EBITDA | Three Months Ended | Twelve Months Ended | |||||||||||||
In millions (Unaudited) | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2015 | |||||||||||
Net Income (Loss) Available for The Dow Chemical Company Common Stockholders | $ | (33 | ) | $ | 3,527 | $ | 3,978 | $ | 7,345 | ||||||
+ Preferred stock dividends | 85 | 85 | 340 | 340 | |||||||||||
+ Net income attributable to noncontrolling interests | 32 | 19 | 86 | 98 | |||||||||||
+ Provision (Credit) for income taxes | (282 | ) | 517 | 9 | 2,147 | ||||||||||
Income (Loss) Before Income Taxes | $ | (198 | ) | $ | 4,148 | $ | 4,413 | $ | 9,930 | ||||||
+ Interest expense and amortization of debt discount | 229 | 240 | 858 | 946 | |||||||||||
- Interest income | 43 | 25 | 107 | 71 | |||||||||||
+ Depreciation and amortization | 795 | 600 | 2,862 | 2,521 | |||||||||||
EBITDA | $ | 783 | $ | 4,963 | $ | 8,026 | $ | 13,326 |
(2) | See Supplemental Information for a description of certain items affecting results in 2016 and 2015. |
Three Months Ended | Twelve Months Ended | ||||||||||||||
In millions (Unaudited) | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2015 | |||||||||||
North America | $ | 4,717 | $ | 4,215 | $ | 18,083 | $ | 18,396 | |||||||
Europe, Middle East, Africa and India | 3,680 | 3,420 | 14,667 | 15,291 | |||||||||||
Asia Pacific | 2,764 | 2,017 | 9,129 | 8,308 | |||||||||||
Latin America | 1,859 | 1,810 | 6,279 | 6,783 | |||||||||||
Total | $ | 13,020 | $ | 11,462 | $ | 48,158 | $ | 48,778 |
Three Months Ended | Twelve Months Ended | ||||||||||||||||
Dec 31, 2016 | Dec 31, 2016 | ||||||||||||||||
Percentage change from prior year | Volume | Price | Total | Volume | Price | Total | |||||||||||
Agricultural Sciences | 5 | % | 2 | % | 7 | % | (3 | )% | — | % | (3 | )% | |||||
Consumer Solutions | 50 | (2 | ) | 48 | 29 | (4 | ) | 25 | |||||||||
Infrastructure Solutions | 43 | (2 | ) | 41 | 23 | (6 | ) | 17 | |||||||||
Performance Materials & Chemicals | 3 | (2 | ) | 1 | (14 | ) | (9 | ) | (23 | ) | |||||||
Performance Plastics | 4 | 1 | 5 | 8 | (8 | ) | — | ||||||||||
Total | 14 | % | — | % | 14 | % | 5 | % | (6 | )% | (1 | )% | |||||
North America | 11 | % | 1 | % | 12 | % | 5 | % | (7 | )% | (2 | )% | |||||
Europe, Middle East, Africa and India | 9 | (2 | ) | 7 | 3 | (7 | ) | (4 | ) | ||||||||
Asia Pacific | 38 | (1 | ) | 37 | 16 | (6 | ) | 10 | |||||||||
Latin America | 2 | 1 | 3 | (1 | ) | (6 | ) | (7 | ) | ||||||||
Developed geographies | 11 | % | — | % | 11 | % | 4 | % | (7 | )% | (3 | )% | |||||
Emerging geographies (1) | 18 | (1 | ) | 17 | 8 | (7 | ) | 1 |
Three Months Ended | Twelve Months Ended | ||||||||||||||||
Dec 31, 2016 | Dec 31, 2016 | ||||||||||||||||
Percentage change from prior year | Volume | Price | Total | Volume | Price | Total | |||||||||||
Agricultural Sciences | 5 | % | 2 | % | 7 | % | (2 | )% | — | % | (2 | )% | |||||
Consumer Solutions | 7 | (2 | ) | 5 | 4 | (4 | ) | — | |||||||||
Infrastructure Solutions | (5 | ) | (2 | ) | (7 | ) | (3 | ) | (6 | ) | (9 | ) | |||||
Performance Materials & Chemicals | 3 | (2 | ) | 1 | 2 | (11 | ) | (9 | ) | ||||||||
Performance Plastics | 4 | 1 | 5 | 9 | (8 | ) | 1 | ||||||||||
Total | 3 | % | — | % | 3 | % | 4 | % | (7 | )% | (3 | )% | |||||
North America | 1 | % | 1 | % | 2 | % | 3 | % | (7 | )% | (4 | )% | |||||
Europe, Middle East, Africa and India | 1 | (2 | ) | (1 | ) | 4 | (8 | ) | (4 | ) | |||||||
Asia Pacific | 12 | (1 | ) | 11 | 6 | (6 | ) | — | |||||||||
Latin America | (1 | ) | — | (1 | ) | — | (6 | ) | (6 | ) | |||||||
Developed geographies | 1 | % | — | % | 1 | % | 3 | % | (7 | )% | (4 | )% | |||||
Emerging geographies (1) | 6 | (1 | ) | 5 | 4 | (7 | ) | (3 | ) |
(1) | Emerging geographies includes Eastern Europe, Middle East, Africa, India, Latin America and Asia Pacific excluding Australia, Japan and New Zealand. |
(2) | Excludes prior period sales of recent divestitures including the chlorine value chain, divested on October 5, 2015 (primarily Performance Materials & Chemicals and Performance Plastics); the AgroFresh business, divested on July 31, 2015 (Agricultural Sciences); ANGUS, divested on February 2, 2015 (Performance Materials & Chemicals); and the global Sodium Borohydride business, divested on January 30, 2015 (Performance Materials & Chemicals). Also excludes current period sales related to the ownership restructure of Dow Corning announced on June 1, 2016 (Consumer Solutions and Infrastructure Solutions) and sales from January 1, 2016 through April 30, 2016 for the step acquisition of Univation, acquired on May 5, 2015 (Performance Plastics). |
Certain Items Impacting Results | Pretax Impact (1) | Net Income (2) | EPS - Diluted (3) (4) (5) | ||||||||||||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||||||||||
In millions, except per share amounts (Unaudited) | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2015 | |||||||||||||||||
Reported U.S. GAAP Amounts (6) | $ | (33 | ) | $ | 3,527 | $ | (0.03 | ) | $ | 2.94 | |||||||||||||
- Certain items: | |||||||||||||||||||||||
Environmental charges | $ | (295 | ) | $ | — | (205 | ) | — | (0.17 | ) | — | ||||||||||||
Charge for the termination of a terminal use agreement | (117 | ) | — | (74 | ) | — | (0.06 | ) | — | ||||||||||||||
Asset impairments and related costs | — | (144 | ) | — | (123 | ) | — | (0.11 | ) | ||||||||||||||
2015 Restructuring charges | — | (40 | ) | — | (28 | ) | — | (0.03 | ) | ||||||||||||||
Asbestos-related charge | (1,113 | ) | — | (701 | ) | — | (0.58 | ) | — | ||||||||||||||
Joint venture actions | — | (36 | ) | — | (26 | ) | — | (0.02 | ) | ||||||||||||||
Implant liability adjustment | 27 | — | 17 | — | 0.01 | — | |||||||||||||||||
Charges related to AgroFresh | (163 | ) | — | (103 | ) | — | (0.08 | ) | — | ||||||||||||||
Gain on split-off of chlorine value chain | — | 2,233 | — | 2,215 | — | 1.96 | |||||||||||||||||
Gain on sale of MEGlobal | — | 723 | — | 589 | — | 0.52 | |||||||||||||||||
Gain on 2015 business divestitures | — | 11 | — | 15 | — | 0.01 | |||||||||||||||||
Costs associated with transactions and productivity actions | (176 | ) | (68 | ) | (132 | ) | (61 | ) | (0.11 | ) | (0.05 | ) | |||||||||||
Impact of Argentine peso devaluation | — | (98 | ) | — | (106 | ) | — | (0.09 | ) | ||||||||||||||
Loss on early extinguishment of debt | — | (8 | ) | — | (5 | ) | — | — | |||||||||||||||
Uncertain tax position | — | — | 44 | — | 0.04 | — | |||||||||||||||||
Total certain items | $ | (1,837 | ) | $ | 2,573 | $ | (1,154 | ) | $ | 2,470 | $ | (0.95 | ) | $ | 2.19 | ||||||||
+ Dilutive effect of assumed preferred stock conversion into shares of common stock | $ | 0.07 | $ | 0.18 | |||||||||||||||||||
= Operating Results (Non-GAAP) (7) | $ | 1,121 | $ | 1,057 | $ | 0.99 | $ | 0.93 |
(1) | Impact on "Income (Loss) Before Income Taxes." |
(2) | "Net Income (Loss) Available for The Dow Chemical Company Common Stockholders." |
(3) | "Earnings per common share - diluted." |
(4) | The assumed conversion of the Company's Cumulative Convertible Perpetual Preferred Stock, Series A ("Preferred Stock") into shares of the Company's common stock was excluded from the calculation of "Earnings per common share - diluted" (GAAP) for the three-month period ended December 31, 2016 and the certain items earnings per share impact for the three-month period ended December 31, 2015 because the effect of including them would have been antidilutive. |
(5) | For the three-month period ended December 31, 2016, an assumed conversion of the Company's Preferred Stock into shares of the Company's common stock was included in the calculation of "Operating earnings per common share - diluted" (Non-GAAP). For the three-month period ended December 31, 2015, an assumed conversion of the Company's Preferred Stock into shares of the Company's common stock was included in the calculation of "Earnings per common share - diluted" (GAAP) "and "Operating earnings per common share - diluted" (Non-GAAP). |
(6) | The Company used "Net Income Attributable to The Dow Chemical Company" when calculating "Earnings per common share - diluted" (GAAP) for the three-month period ended December 31, 2015, as it excludes quarterly preferred dividends of $85 million. |
(7) | "Operating earnings per common share - diluted" (Non-GAAP) for the three-month periods ended December 31, 2016 and December 31, 2015, excludes quarterly preferred dividends of $85 million. |
Certain Items Impacting Results | Pretax Impact (1) | Net Income (2) | EPS - Diluted (3) (4) (5) | ||||||||||||||||||||
Twelve Months Ended | Twelve Months Ended | Twelve Months Ended | |||||||||||||||||||||
In millions, except per share amounts (Unaudited) | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2015 | |||||||||||||||||
Reported U.S. GAAP Amounts (6) | $ | 3,978 | $ | 7,345 | $ | 3.52 | $ | 6.15 | |||||||||||||||
- Certain items: | |||||||||||||||||||||||
Environmental charges | $ | (295 | ) | $ | — | (205 | ) | — | (0.17 | ) | — | ||||||||||||
Charge for the termination of a terminal use agreement | (117 | ) | — | (74 | ) | — | (0.06 | ) | — | ||||||||||||||
Impact of Dow Corning ownership restructure | 2,106 | — | 2,350 | — | 2.07 | — | |||||||||||||||||
Asset impairments and related costs | — | (144 | ) | — | (123 | ) | — | (0.11 | ) | ||||||||||||||
Restructuring charges | (454 | ) | (415 | ) | (308 | ) | (274 | ) | (0.27 | ) | (0.24 | ) | |||||||||||
Asbestos-related charge | (1,113 | ) | — | (701 | ) | — | (0.58 | ) | — | ||||||||||||||
Joint venture actions | — | (36 | ) | — | (26 | ) | — | (0.02 | ) | ||||||||||||||
Implant liability adjustment | 27 | — | 17 | — | 0.01 | — | |||||||||||||||||
Charges related to AgroFresh | (163 | ) | — | (103 | ) | — | (0.08 | ) | — | ||||||||||||||
Urethane matters legal settlements | (1,235 | ) | — | (778 | ) | — | (0.70 | ) | — | ||||||||||||||
Gain on split-off of chlorine value chain | 6 | 2,233 | 6 | 2,215 | 0.01 | 1.96 | |||||||||||||||||
Gain on sale of MEGlobal | — | 723 | — | 589 | — | 0.52 | |||||||||||||||||
Gain on 2015 business divestitures | — | 1,320 | — | 823 | — | 0.71 | |||||||||||||||||
Gain on Univation step acquisition | — | 349 | — | 351 | — | 0.30 | |||||||||||||||||
Impact of Argentine peso devaluation | — | (98 | ) | — | (106 | ) | — | (0.09 | ) | ||||||||||||||
Loss on early extinguishment of debt | — | (8 | ) | — | (5 | ) | — | — | |||||||||||||||
Costs associated with transactions and productivity actions | (544 | ) | (194 | ) | (434 | ) | (153 | ) | (0.38 | ) | (0.13 | ) | |||||||||||
Uncertain tax position | — | — | (13 | ) | — | (0.01 | ) | — | |||||||||||||||
Total certain items | $ | (1,782 | ) | $ | 3,730 | $ | (243 | ) | $ | 3,291 | $ | (0.16 | ) | $ | 2.90 | ||||||||
+ Dilutive effect of assumed preferred stock conversion into shares of common stock | $ | 0.04 | $ | 0.22 | |||||||||||||||||||
= Operating Results (Non-GAAP) (7) | $ | 4,221 | $ | 4,054 | $ | 3.72 | $ | 3.47 |
(1) | Impact on "Income Before Income Taxes." |
(2) | "Net Income Available for The Dow Chemical Company Common Stockholders." |
(3) | "Earnings per common share - diluted." |
(4) | The assumed conversion of the Company's Preferred Stock into shares of the Company's common stock was excluded from the calculation of "Earnings per common share - diluted" for the twelve-month period ended December 31, 2016 and the calculation of "Operating earnings per common share - diluted" (Non-GAAP) as well as the certain items earnings per share impact for the twelve-month period ended December 31, 2015 because the effect of including them would have been antidilutive. |
(5) | For the twelve-month period ended December 31, 2016, an assumed conversion of the Company's Preferred Stock into shares of the Company's common stock was included in the calculation of "Operating earnings per common share - diluted" (Non-GAAP). For the twelve-month period ended December 31, 2015, an assumed conversion of the Company's Preferred Stock into shares of the Company's common stock was included in the calculation of "Earnings per common share - diluted" (GAAP). |
(6) | The Company used "Net Income Attributable to The Dow Chemical Company" when calculating "Earnings per common share - diluted" (GAAP) for the twelve-month period ended December 31, 2015, as it excludes preferred dividends of $340 million. |
(7) | "Operating earnings per common share - diluted" (Non-GAAP) for the twelve-month period ended December 31, 2016, excludes preferred dividends of $340 million. |
U.S. GAAP Share Count | Three Months Ended | Twelve Months Ended | |||||||||
In millions | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2015 | |||||||
Weighted average common shares - basic (1) | 1,106.2 | 1,105.4 | 1,108.1 | 1,130.1 | |||||||
Plus dilutive effect of options and awards (2) | — | 16.7 | 15.1 | 14.5 | |||||||
Plus common shares from assumed conversion of preferred stock (3) | — | 96.8 | — | 96.8 | |||||||
Weighted average common shares - diluted (2) | 1,106.2 | 1,218.9 | 1,123.2 | 1,241.4 |
(1) | On December 30, 2016, the Company converted 4 million shares of Preferred Stock into 96.8 million shares of the Company's common stock. In accordance with U.S. GAAP, the basic share count for the three- and twelve-month periods ended December 31, 2016 reflects a two-day averaging effect related to this conversion, or 2.1 million shares for the three-month period ended December 31, 2016 and .5 million shares for the twelve-month period ended December 31, 2016. |
(2) | For the three-month period ended December 31, 2016, the Company reported "Net Loss Available for The Dow Chemical Company Common Stockholders." In accordance with U.S. GAAP, "Weighted-average common shares outstanding - basic" was used in the calculation of "Earnings per common share - diluted." |
(3) | In accordance with U.S. GAAP, the assumed conversion of the Preferred Stock was considered antidilutive to the "Earnings per common share - diluted" calculation for the three- and twelve-month periods ended December 31, 2016. |
Operating EPS Share Count (Non-GAAP) | Three Months Ended | Twelve Months Ended | |||||||||
In millions | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2016 | Dec 31, 2015 | |||||||
Weighted average common shares - basic (1) | 1,106.2 | 1,105.4 | 1,108.1 | 1,130.1 | |||||||
Plus dilutive effect of options and awards (2) | 15.9 | 16.7 | 15.1 | 14.5 | |||||||
Plus common shares from assumed conversion of preferred stock (3) | 94.7 | 96.8 | 96.3 | — | |||||||
Weighted average common shares - diluted (Non-GAAP) | 1,216.8 | 1,218.9 | 1,219.5 | 1,144.6 |
(1) | On December 30, 2016, the Company converted 4 million shares of Preferred Stock into 96.8 million shares of the Company's common stock. In accordance with U.S. GAAP, the basic share count for the three- and twelve-month periods ended December 31, 2016 reflects a two-day averaging effect related to this conversion, or 2.1 million shares for the three-month period ended December 31, 2016 and .5 million shares for the twelve-month period ended December 31, 2016. |
(2) | The dilutive effect of options and awards was included in the "Operating earnings per common share - diluted" calculation for the three-month period ended December 31, 2016 as the Company had net income for this period on an operating basis (Non-GAAP). |
(3) | The assumed conversion of the Preferred Stock was considered dilutive to the "Operating earnings per common share - diluted" calculation for the three- and twelve-month periods ended December 31, 2016. As a result and in accordance with U.S. GAAP, the share count for the three-month period ended December 31, 2016 reflects a 90-day averaging effect, or 94.7 million shares. The share count for the twelve-month period ended December 31, 2016 reflects a 363-day averaging effect, or 96.3 million shares. |
• | Pretax charge of $295 million for environmental remediation activities at a number of historical locations, including the Midland manufacturing site/off-site matters and the Wood-Ridge sites, primarily resulting from the culmination of negotiations with regulators and/or final agency approval. The charge was included in “Cost of sales” in the consolidated statements of income and reflected in Agricultural Sciences ($2 million), Performance Materials & Chemicals ($1 million), Performance Plastics ($2 million) and Corporate ($290 million). |
• | Pretax charge of $117 million related to the termination of a terminal use agreement. The charge was included in “Cost of sales” in the consolidated statements of income and reflected in Performance Plastics. |
• | In the fourth quarter of 2016, the Company elected to change its method of accounting for asbestos-related defense costs from expensing as incurred to estimating and accruing a liability. As a result of this accounting policy change, the Company recorded a pretax charge of $1,009 million for asbestos-related defense costs through the terminal date of 2049. The Company also recorded a pretax charge of $104 million to increase the asbestos-related liability for pending and future claims through the terminal date of 2049. These charges were included in “Asbestos-related charge” in the consolidated statements of income and reflected in Corporate. |
• | Pretax credit of $27 million related to a decrease in Dow Corning's implant liability. The credit was included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in Consumer Solutions. |
• | Pretax charge of $163 million related to AgroFresh, including a partial impairment of the Company’s investment in AFSI ($143 million) and post-closing adjustments for the AgroFresh divestiture related to non-cash consideration ($20 million). Both charges were included in “Sundry income (expense) - net” in the consolidated statements of income and reflected in Agricultural Sciences. |
• | Pretax charges of $176 million for costs associated with transactions and productivity actions, primarily financial, legal and professional advisory fees, including costs associated with the planned all-stock merger of equals with E. I. duPont de Nemours and Company ("DuPont"), costs associated with the ownership restructure of Dow Corning, implementation costs associated with the Company's restructuring programs and costs related to a retained litigation matter related to the chlorine value chain (collectively, "Costs associated with transactions and productivity actions"). The charges were included in "Cost of sales" ($39 million), "Selling, general and administrative expenses" ($129 million) and "Sundry income (expense) - net" ($8 million) in the consolidated statements of income and reflected in Corporate. |
• | A tax benefit of $44 million for the settlement of an uncertain tax position associated with a historical change in the legal ownership structure of a nonconsolidated affiliate. |
• | Pretax charges of $144 million for asset impairments and related costs, including the shutdown of manufacturing assets and facilities in the Dow Building & Construction business, Energy & Water Solutions business and Dow Packaging and Specialty Plastics business; the abandonment of certain capital projects in the Dow Building & Construction and Dow Coating Materials businesses; and the impairment of an equity method investment aligned with the Performance Monomers business. The charges were included in "Cost of sales" ($91 million) and "Sundry income (expense) - net" ($53 million) in the consolidated statements of income and reflected in Infrastructure Solutions ($87 million) and Performance Plastics ($57 million). |
• | Pretax charges of $40 million for adjustments to the 2015 Restructuring charge, primarily related to severance costs. The impact is included in "Restructuring charges" in the consolidated statements of income and reflected in Agricultural Sciences (charge of $2 million), Infrastructure Solutions (gain of $1 million) and Corporate (charge of $39 million). |
• | A loss of $36 million related to actions taken by the Company's joint ventures including: a $20 million credit related to Dow Corning's adjustment of its implant liability, a $29 million charge related to AFSI's fair value step-up of its inventories and start-up costs, and a $27 million charge related to Sadara's write-off of design engineering work for an Epoxy plant. The charge was included in "Equity in earnings of nonconsolidated affiliates" and reflected in Agricultural Sciences (loss of $29 million), Consumer Solutions (gain of $8 million), Infrastructure Solutions (gain of $12 million) and Corporate (loss of $27 million). |
• | A $2,233 million pretax gain on the October 5, 2015, split-off of the chlorine value chain to Olin Corporation. The gain was included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in Performance Materials & Chemicals (gain of $1,984 million), Performance Plastics (gain of $317 million) and Corporate (loss of $68 million). |
• | A $723 million pretax gain related to the sale of the Company's equity interest in MEGlobal to EQUATE Petrochemical Company K.S.C. The gain was included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in Performance Materials & Chemicals. |
• | Pretax gain of $11 million for post-closing and other adjustments related to 2015 business divestitures, including ANGUS, the Sodium Borohydride business and the AgroFresh business. The gain was included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in Agricultural Sciences (loss of $3 million) and Performance Materials & Chemicals (gain of $14 million). |
• | Pretax charges of $68 million for costs associated with transactions and productivity actions, primarily financial, legal and professional advisory fees, including costs associated with the planned all-stock merger of equals with DuPont, costs associated with the ownership restructure of Dow Corning, costs associated with the separation of the chlorine value chain, implementation costs associated with the Company's 2015 Restructuring program and other productivity actions (collectively "Costs associated with transactions and productivity actions"). The charges were included in "Cost of sales" ($18 million), "Selling, general and administrative expenses" ($35 million) and "Sundry income (expense) - net" ($15 million) in the consolidated statements of income and reflected in Corporate. |
• | Pretax loss of $98 million related to the December 2015 devaluation of the Argentine Peso, included in "Sundry income (expense) - net" and reflected in Corporate. |
• | Pretax loss of $8 million on the early extinguishment of debt, included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in Corporate. |
• | Pretax restructuring charges of $449 million. On June 27, 2016, Dow's Board of Directors approved a restructuring plan that incorporates actions related to the recent ownership restructure of Dow Corning. These actions, aligned with Dow’s value growth and synergy targets, will result in a global workforce reduction of approximately 2,500 positions, with most of these positions resulting from synergies related to the Dow Corning transaction. As a result, the Company recorded pretax restructuring charges of $449 million in the second quarter of 2016 consisting of severance charges of $268 million, asset write-downs and write-offs of $153 million and costs associated with exit and disposal activities of $28 million. The impact of these charges is shown as "Restructuring charges" in the consolidated statements of income and reflected in the Company's operating segments as follows: Consumer Solutions ($28 million), Infrastructure Solutions ($97 million), Performance Plastics ($10 million) and Corporate ($314 million). |
• | Pretax charge of $5 million related to adjustments to the Company's 2015 restructuring program, included in "Restructuring charges" in the consolidated statements of income and reflected in Agricultural Sciences ($4 million) and Consumer Solutions ($1 million). |
• | Pretax gain of $2,106 million (after-tax gain of $2,350 million) related to the ownership restructure of Dow Corning, previously a 50:50 joint venture. The pretax gain included a $2,445 million gain (after-tax gain of $2,586 million) on the ownership restructure, included in "Sundry income (expense) - net" and reflected in Consumer Solutions ($1,301 million) and Infrastructure Solutions ($1,144 million); a pretax loss of $317 million for a one-time increase in "Cost of sales" related to the fair value step-up of inventories assumed in the ownership restructure, reflected in Consumer Solutions ($147 million) and Infrastructure Solutions ($170 million); and a loss of $22 million related to a loss on the early redemption of debt incurred by Dow Corning, included in "Equity in earnings of nonconsolidated affiliates" in the consolidated statements of income and reflected in Consumer Solutions ($8 million) and Infrastructure Solutions ($14 million). |
• | Pretax loss of $1,235 million related to the Company's settlement of the urethane matters class action lawsuit and the opt-out cases litigation. The pretax loss is included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in Performance Materials & Chemicals. |
• | A pretax gain of $6 million (after-tax gain of $6 million) related to post-closing adjustments on the split-off of the Company's chlorine value chain, included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in Performance Materials & Chemicals. |
• | Pretax charges of $368 million for costs associated with transactions and productivity actions, including costs associated with a retained litigation matter related to the chlorine value chain, included in "Cost of sales" ($85 million), "Selling, general and administrative expenses" ($250 million) and “Sundry income (expense) - net” ($33 million) in the consolidated statements of income and reflected in Corporate. |
• | A tax charge of $57 million for the adjustment of an uncertain tax position associated with a historical change in the legal ownership structure of a nonconsolidated affiliate. |
• | Pretax restructuring charges of $375 million. On April 29, 2015, Dow's Board of Directors approved actions to further streamline the organization and optimize the Company's footprint as a result of the pending separation of a significant portion of Dow's chlorine value chain. These actions, which will further accelerate Dow's value growth and productivity targets, will result in a reduction of approximately 1,750 positions across a number of businesses and functions and adjustments to the Company's asset footprint to enhance competitiveness. As a result of these actions, the Company recorded pretax restructuring charges of $375 million in the second quarter of 2015 consisting of costs associated with exit or disposal activities of $10 million, severance costs of $196 million and asset write-downs and write-offs of $169 million. |
• | Pretax gain of $1,309 million related to 2015 business divestitures, including the February 2, 2015 divestiture of ANGUS (gain of $670 million), the July 31, 2015 divestiture of the AgroFresh business (gain of $621 million) and the January 30, 2015 divestiture of the Sodium Borohydride business (pretax gain of $18 million; after-tax loss of $9 million). The gain was included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in Agricultural Sciences ($621 million) and Performance Materials & Chemicals ($688 million). |
• | Pretax gain of $349 million (after-tax gain of $351 million) related to the step acquisition of Univation, previously a 50:50 joint venture. The gain, which is included in Performance Plastics, included a $361 million pretax gain on the step acquisition (after-tax gain of $359 million), included in "Sundry income (expense) - net" in the consolidated statements of income, and a pretax loss of $12 million (after-tax loss of $8 million) for a one-time increase in "Cost of sales" related to the fair value step-up of inventories assumed in the step acquisition. |
• | Pretax charges of $126 million for costs associated with transactions and productivity actions. The charges were included in "Cost of sales" ($6 million), "Selling, general and administrative expenses" ($16 million) and "Sundry income (expense) - net" ($104 million) in the consolidated statements of income and reflected in Corporate. |