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) |
(d) | Exhibits. |
/s/ RONALD C. EDMONDS |
Ronald C. Edmonds |
Controller and Vice President of Controllers and Tax |
EXHIBIT INDEX | |
Exhibit No. | Description |
Press release issued by The Dow Chemical Company on July 27, 2017, announcing results for the second quarter of 2017. |
• | Earnings Per Share of $1.07; Operating Earnings Per Share of $1.08, up 14% |
• | Sales Increase to $13.8B; Ex. M&A Sales Rise 8% with Gains in all Segments and Geographies |
• | Volume Grows 11%, or 3% Ex. M&A, with Broad-Based Growth in all Segments and Geographies |
• | Price Increases 5% with Gains in all Geographies |
• | EBITDA of $2.8B; Operating EBITDA Increases 12%, or $295 Million |
• | Dow reported earnings per share of $1.07, or operating earnings per share of $1.08.(1) This compares with earnings per share of $2.61 in the year-ago period, or operating earnings per share of $0.95. Certain Items in the quarter reflected an $0.08 per share charge for transactions and productivity actions and a $0.07 per share gain for a patent infringement award. Results in the year-ago period primarily reflected a $2.20 per share gain related to the Dow Corning ownership restructure and a $0.27 per share charge related to a restructuring program. |
• | Sales increased to $13.8 billion, up 16 percent year-over-year. Sales rose 8 percent excluding the addition of Dow Corning’s silicones business, with increases in all operating segments and all geographic areas. Sales gains were led by Performance Materials & Chemicals (up 13 percent) as well as Performance Plastics and Consumer Solutions (each up 8 percent), and by EMEAI (up 12 percent), Asia Pacific (up 8 percent) and North America (up 7 percent). |
• | Volume grew 3 percent excluding the impact of acquisitions, reflecting broad-based gains in all operating segments and all geographic areas, led by the Middle East and Africa (up 17 percent), India (up 14 percent), Asia Pacific (up 6 percent) and Europe (up 4 percent). Volume growth was led by businesses aligned to Dow’s downstream consumer-driven end-markets of automotive, infrastructure, consumer care, electronics and agriculture. Operating segment highlights include Consumer Solutions (up 9 percent), Agricultural Sciences (up 6 percent) and Infrastructure Solutions and Performance Materials & Chemicals (each up 3 percent). |
• | Price rose 5 percent, with gains in all geographic areas. Price increases were achieved in Performance Materials & Chemicals, Performance Plastics and Infrastructure Solutions. |
• | Operating EBITDA(2) rose 12 percent to $2.8 billion, with gains in all operating segments, except Performance Plastics, driven by higher prices, broad-based demand growth, new product introductions, cost controls and productivity measures, and the contribution of Dow Corning’s silicones business. These gains more than offset higher feedstock costs, commissioning and startup costs at Sadara and in the U.S. Gulf Coast and planned maintenance spending. |
• | Dow generated $1.3 billion of cash flow from operations(3) in the quarter, down $889 million from the year-ago period, driven by broad-based sales gains as well as increased investments in working capital related to Sadara product marketing activities. Dow continued to further enhance working capital efficiency,(4) with an improvement of more than 8 days versus the year-ago period. |
• | Productivity and cost savings were $215 million in the quarter, an increase of $125 million versus the same quarter last year. In the quarter, Dow also completed its 2015 restructuring program. |
• | The Company achieved several milestones related to its strategic growth investments. On the U.S. Gulf Coast, Dow completed construction of its new ELITE™ enhanced polyethylene unit and continued to progress this unit and its new world-scale ethylene facility toward startup, which is imminent. In the Middle East, the Sadara joint venture continued its startup activities, and now has achieved commercial operations at 25 of the 26 production units, with the final unit preparing to start up this month. |
• | Dow recently entered into an agreement to sell a portion of Dow AgroSciences' corn seed business in Brazil for $1.1 billion in connection with conditional regulatory clearance of the proposed merger. |
• | Dow and DuPont advanced their proposed merger transaction. The companies reaffirmed the expectation to close the merger in August 2017, announced the Board of Directors for DowDuPont and achieved conditional regulatory clearance in key jurisdictions. |
(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 ‘Earnings per common share - diluted” to “Operating earnings per common share - diluted.” |
(2) | EBITDA is defined as earnings (i.e., “Net Income”) before interest, income taxes, depreciation and amortization. Operating EBITDA is defined as EBITDA excluding the impact of “Certain Items.” A reconciliation of "Net Income Available for The Dow Chemical Company Common Stockholders" to “Operating EBITDA” is provided following the Operating Segments table. |
(3) | Prior year cash flow changed due to implementation of Accounting Standards Update 2016-09 and applied retrospectively. |
(4) | Working capital efficiency is defined as the combination of days sales outstanding (DSO) and days sales in inventory (DSI). |
Three Months Ended | ||
In millions, except per share amounts | June 30, 2017 | June 30, 2016 |
Net Sales | $13,834 | $11,952 |
Adjusted Sales(5) | $12,964 | $11,952 |
Net Income Available for Common Stockholders | $1,321 | $3,123 |
Net Income Available for Common Stockholders, Excluding Certain Items | $1,333 | $1,075 |
Earnings per Common Share - Diluted | $1.07 | $2.61 |
Operating Earnings per Share | $1.08 | $0.95 |
Three Months Ended | Six Months Ended | ||||||||||||||
In millions, except per share amounts (Unaudited) | Jun 30, 2017 | Jun 30, 2016 | Jun 30, 2017 | Jun 30, 2016 | |||||||||||
Net Sales | $ | 13,834 | $ | 11,952 | $ | 27,064 | $ | 22,655 | |||||||
Cost of sales (Note B) | 10,764 | 9,275 | 20,961 | 17,226 | |||||||||||
Research and development expenses | 405 | 399 | 821 | 760 | |||||||||||
Selling, general and administrative expenses (Note C) | 855 | 787 | 1,722 | 1,529 | |||||||||||
Amortization of intangibles | 157 | 122 | 312 | 225 | |||||||||||
Restructuring charges (credits) (Note D) | (12 | ) | 454 | (13 | ) | 452 | |||||||||
Equity in earnings of nonconsolidated affiliates (Note E) | 54 | 82 | 250 | 121 | |||||||||||
Sundry income (expense) - net (Note F) | 299 | 2,550 | (171 | ) | 1,309 | ||||||||||
Interest income | 22 | 18 | 47 | 38 | |||||||||||
Interest expense and amortization of debt discount | 226 | 208 | 445 | 409 | |||||||||||
Income Before Income Taxes | 1,814 | 3,357 | 2,942 | 3,522 | |||||||||||
Provision for income taxes (Note G) | 455 | 130 | 668 | 20 | |||||||||||
Net Income | 1,359 | 3,227 | 2,274 | 3,502 | |||||||||||
Net income attributable to noncontrolling interests | 38 | 19 | 65 | 40 | |||||||||||
Net Income Attributable to The Dow Chemical Company | 1,321 | 3,208 | 2,209 | 3,462 | |||||||||||
Preferred stock dividends | — | 85 | — | 170 | |||||||||||
Net Income Available for The Dow Chemical Company Common Stockholders | $ | 1,321 | $ | 3,123 | $ | 2,209 | $ | 3,292 | |||||||
Per Common Share Data: | |||||||||||||||
Earnings per common share - basic | $ | 1.08 | $ | 2.79 | $ | 1.82 | $ | 2.96 | |||||||
Earnings per common share - diluted | $ | 1.07 | $ | 2.61 | $ | 1.79 | $ | 2.83 | |||||||
Dividends declared per share of common stock | $ | 0.46 | $ | 0.46 | $ | 0.92 | $ | 0.92 | |||||||
Weighted-average common shares outstanding - basic | 1,211.8 | 1,111.1 | 1,207.2 | 1,107.0 | |||||||||||
Weighted-average common shares outstanding - diluted (Note H) | 1,229.0 | 1,222.8 | 1,225.5 | 1,218.5 | |||||||||||
Depreciation | $ | 534 | $ | 511 | $ | 1,112 | $ | 967 | |||||||
Capital Expenditures | $ | 795 | $ | 997 | $ | 1,549 | $ | 1,817 |
In millions (Unaudited) | Jun 30, 2017 | Dec 31, 2016 | |||||
Assets | |||||||
Current Assets | |||||||
Cash and cash equivalents (variable interest entities restricted - 2017: $87; 2016: $75) | $ | 6,218 | $ | 6,607 | |||
Accounts and notes receivable: | |||||||
Trade (net of allowance for doubtful receivables - 2017: $123; 2016: $110) | 5,307 | 4,666 | |||||
Other | 5,557 | 4,358 | |||||
Inventories | 8,163 | 7,363 | |||||
Other current assets | 690 | 665 | |||||
Total current assets | 25,935 | 23,659 | |||||
Investments | |||||||
Investment in nonconsolidated affiliates | 3,665 | 3,747 | |||||
Other investments (investments carried at fair value - 2017: $1,999; 2016: $1,959) | 2,985 | 2,969 | |||||
Noncurrent receivables | 755 | 708 | |||||
Total investments | 7,405 | 7,424 | |||||
Property | |||||||
Property | 59,573 | 57,438 | |||||
Less accumulated depreciation | 35,457 | 33,952 | |||||
Net property (variable interest entities restricted - 2017: $942; 2016: $961) | 24,116 | 23,486 | |||||
Other Assets | |||||||
Goodwill | 15,439 | 15,272 | |||||
Other intangible assets (net of accumulated amortization - 2017: $4,708; 2016: $4,295) | 5,812 | 6,026 | |||||
Deferred income tax assets | 2,922 | 3,079 | |||||
Deferred charges and other assets | 618 | 565 | |||||
Total other assets | 24,791 | 24,942 | |||||
Total Assets | $ | 82,247 | $ | 79,511 | |||
Liabilities and Equity | |||||||
Current Liabilities | |||||||
Notes payable | $ | 480 | $ | 272 | |||
Long-term debt due within one year | 955 | 635 | |||||
Accounts payable: | |||||||
Trade | 4,623 | 4,519 | |||||
Other | 3,113 | 2,401 | |||||
Income taxes payable | 531 | 600 | |||||
Dividends payable | 559 | 508 | |||||
Accrued and other current liabilities | 3,168 | 3,669 | |||||
Total current liabilities | 13,429 | 12,604 | |||||
Long-Term Debt (variable interest entities nonrecourse - 2017: $306; 2016: $330) | 20,072 | 20,456 | |||||
Other Noncurrent Liabilities | |||||||
Deferred income tax liabilities | 916 | 923 | |||||
Pension and other postretirement benefits - noncurrent | 11,195 | 11,375 | |||||
Asbestos-related liabilities - noncurrent | 1,301 | 1,364 | |||||
Other noncurrent obligations | 5,745 | 5,560 | |||||
Total other noncurrent liabilities | 19,157 | 19,222 | |||||
Stockholders’ Equity | |||||||
Common stock | 3,107 | 3,107 | |||||
Additional paid-in capital | 4,202 | 4,262 | |||||
Retained earnings | 31,417 | 30,338 | |||||
Accumulated other comprehensive loss | (9,074 | ) | (9,822 | ) | |||
Unearned ESOP shares | (198 | ) | (239 | ) | |||
Treasury stock at cost | (1,033 | ) | (1,659 | ) | |||
The Dow Chemical Company’s stockholders’ equity | 28,421 | 25,987 | |||||
Noncontrolling interests | 1,168 | 1,242 | |||||
Total equity | 29,589 | 27,229 | |||||
Total Liabilities and Equity | $ | 82,247 | $ | 79,511 |
Three Months Ended | Six Months Ended | ||||||||||||||
In millions (Unaudited) | Jun 30, 2017 | Jun 30, 2016 | Jun 30, 2017 | Jun 30, 2016 | |||||||||||
Sales by segment | |||||||||||||||
Agricultural Sciences | $ | 1,629 | $ | 1,577 | $ | 3,197 | $ | 3,223 | |||||||
Consumer Solutions | 1,676 | 1,265 | 3,275 | 2,319 | |||||||||||
Infrastructure Solutions | 2,789 | 2,085 | 5,314 | 3,679 | |||||||||||
Performance Materials & Chemicals | 2,566 | 2,264 | 5,008 | 4,445 | |||||||||||
Performance Plastics | 5,079 | 4,694 | 10,104 | 8,859 | |||||||||||
Corporate | 95 | 67 | 166 | 130 | |||||||||||
Total | $ | 13,834 | $ | 11,952 | $ | 27,064 | $ | 22,655 | |||||||
EBITDA by segment | |||||||||||||||
Agricultural Sciences | $ | 326 | $ | 228 | $ | 208 | $ | 631 | |||||||
Consumer Solutions | 541 | 1,575 | 1,041 | 1,885 | |||||||||||
Infrastructure Solutions | 559 | 1,390 | 1,070 | 1,683 | |||||||||||
Performance Materials & Chemicals | 347 | 301 | 782 | (599 | ) | ||||||||||
Performance Plastics | 1,199 | 1,237 | 2,183 | 2,228 | |||||||||||
Corporate | (215 | ) | (504 | ) | (427 | ) | (648 | ) | |||||||
Total | $ | 2,757 | $ | 4,227 | $ | 4,857 | $ | 5,180 | |||||||
Certain items impacting EBITDA by segment (1) | |||||||||||||||
Agricultural Sciences | $ | — | $ | (4 | ) | $ | (469 | ) | $ | (4 | ) | ||||
Consumer Solutions | — | 1,234 | — | 1,234 | |||||||||||
Infrastructure Solutions | 3 | 958 | 3 | 958 | |||||||||||
Performance Materials & Chemicals | — | 6 | — | (1,229 | ) | ||||||||||
Performance Plastics | 137 | (10 | ) | 137 | (10 | ) | |||||||||
Corporate | (142 | ) | (421 | ) | (277 | ) | (486 | ) | |||||||
Total | $ | (2 | ) | $ | 1,763 | $ | (606 | ) | $ | 463 | |||||
Operating EBITDA by segment (2) | |||||||||||||||
Agricultural Sciences | $ | 326 | $ | 232 | $ | 677 | $ | 635 | |||||||
Consumer Solutions | 541 | 341 | 1,041 | 651 | |||||||||||
Infrastructure Solutions | 556 | 432 | 1,067 | 725 | |||||||||||
Performance Materials & Chemicals | 347 | 295 | 782 | 630 | |||||||||||
Performance Plastics | 1,062 | 1,247 | 2,046 | 2,238 | |||||||||||
Corporate | (73 | ) | (83 | ) | (150 | ) | (162 | ) | |||||||
Total | $ | 2,759 | $ | 2,464 | $ | 5,463 | $ | 4,717 |
Three Months Ended | Six Months Ended | ||||||||||||||
In millions (Unaudited) | Jun 30, 2017 | Jun 30, 2016 | Jun 30, 2017 | Jun 30, 2016 | |||||||||||
Equity in earnings (losses) of nonconsolidated affiliates by segment (included in EBITDA) | |||||||||||||||
Agricultural Sciences | $ | (7 | ) | $ | (11 | ) | $ | (8 | ) | $ | (4 | ) | |||
Consumer Solutions | 15 | 18 | 55 | 38 | |||||||||||
Infrastructure Solutions | 28 | 45 | 83 | 96 | |||||||||||
Performance Materials & Chemicals | (13 | ) | (12 | ) | 60 | (43 | ) | ||||||||
Performance Plastics | 33 | 45 | 66 | 44 | |||||||||||
Corporate | (2 | ) | (3 | ) | (6 | ) | (10 | ) | |||||||
Total | $ | 54 | $ | 82 | $ | 250 | $ | 121 |
(1) | See Supplemental Information for a description of certain items affecting results in 2017 and 2016. |
(2) | The Company uses Operating EBITDA as its measure of profit/loss for segment reporting purposes. The Company defines Operating EBITDA as EBITDA (which Dow defines as earnings (i.e., "Net Income") before interest, income taxes, depreciation and amortization) excluding the impact of certain items. Operating EBITDA by 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 Available for The Dow Chemical Company Common Stockholders" to Operating EBITDA is provided below. |
Reconciliation of "Net Income Available for The Dow Chemical Company Common Stockholders" to Operating EBITDA | Three Months Ended | Six Months Ended | |||||||||||||
In millions (Unaudited) | Jun 30, 2017 | Jun 30, 2016 | Jun 30, 2017 | Jun 30, 2016 | |||||||||||
Net Income Available for The Dow Chemical Company Common Stockholders | $ | 1,321 | $ | 3,123 | $ | 2,209 | $ | 3,292 | |||||||
+ Preferred stock dividends | — | 85 | — | 170 | |||||||||||
+ Net income attributable to noncontrolling interests | 38 | 19 | 65 | 40 | |||||||||||
+ Provision for income taxes | 455 | 130 | 668 | 20 | |||||||||||
Income Before Income Taxes | $ | 1,814 | $ | 3,357 | $ | 2,942 | $ | 3,522 | |||||||
+ Interest expense and amortization of debt discount | 226 | 208 | 445 | 409 | |||||||||||
- Interest income | 22 | 18 | 47 | 38 | |||||||||||
+ Depreciation and amortization | 739 | 680 | 1,517 | 1,287 | |||||||||||
EBITDA | $ | 2,757 | $ | 4,227 | $ | 4,857 | $ | 5,180 | |||||||
- Certain items | (2 | ) | 1,763 | (606 | ) | 463 | |||||||||
Operating EBITDA | $ | 2,759 | $ | 2,464 | $ | 5,463 | $ | 4,717 |
Three Months Ended | Six Months Ended | ||||||||||||||
In millions (Unaudited) | Jun 30, 2017 | Jun 30, 2016 | Jun 30, 2017 | Jun 30, 2016 | |||||||||||
North America | $ | 5,265 | $ | 4,630 | $ | 10,503 | $ | 8,799 | |||||||
Europe, Middle East, Africa and India | 4,385 | 3,730 | 8,626 | 7,254 | |||||||||||
Asia Pacific | 2,645 | 2,152 | 5,060 | 3,944 | |||||||||||
Latin America | 1,539 | 1,440 | 2,875 | 2,658 | |||||||||||
Total | $ | 13,834 | $ | 11,952 | $ | 27,064 | $ | 22,655 |
Three Months Ended | Six Months Ended | ||||||||||||||||
Jun 30, 2017 | Jun 30, 2017 | ||||||||||||||||
Percentage change from prior year | Volume | Price | Total | Volume | Price | Total | |||||||||||
Agricultural Sciences | 6 | % | (3 | )% | 3 | % | 1 | % | (2 | )% | (1 | )% | |||||
Consumer Solutions | 33 | (1 | ) | 32 | 42 | (1 | ) | 41 | |||||||||
Infrastructure Solutions | 30 | 4 | 34 | 41 | 3 | 44 | |||||||||||
Performance Materials & Chemicals | 3 | 10 | 13 | 5 | 8 | 13 | |||||||||||
Performance Plastics | 1 | 7 | 8 | 3 | 11 | 14 | |||||||||||
Total | 11 | % | 5 | % | 16 | % | 13 | % | 6 | % | 19 | % | |||||
North America | 8 | % | 6 | % | 14 | % | 12 | % | 7 | % | 19 | % | |||||
Europe, Middle East, Africa and India | 11 | 6 | 17 | 12 | 7 | 19 | |||||||||||
Asia Pacific | 21 | 2 | 23 | 26 | 2 | 28 | |||||||||||
Latin America | 4 | 3 | 7 | 5 | 3 | 8 | |||||||||||
Developed geographies | 10 | % | 6 | % | 16 | % | 13 | % | 7 | % | 20 | % | |||||
Emerging geographies (1) | 13 | 3 | 16 | 15 | 3 | 18 |
Three Months Ended | Six Months Ended | ||||||||||||||||
Jun 30, 2017 | Jun 30, 2017 | ||||||||||||||||
Percentage change from prior year | Volume | Price | Total | Volume | Price | Total | |||||||||||
Agricultural Sciences | 6 | % | (3 | )% | 3 | % | 1 | % | (2 | )% | (1 | )% | |||||
Consumer Solutions | 9 | (1 | ) | 8 | 8 | (1 | ) | 7 | |||||||||
Infrastructure Solutions | 3 | 4 | 7 | 4 | 3 | 7 | |||||||||||
Performance Materials & Chemicals | 3 | 10 | 13 | 5 | 8 | 13 | |||||||||||
Performance Plastics | 1 | 7 | 8 | 3 | 11 | 14 | |||||||||||
Total | 3 | % | 5 | % | 8 | % | 4 | % | 6 | % | 10 | % | |||||
North America | 2 | % | 5 | % | 7 | % | 4 | % | 7 | % | 11 | % | |||||
Europe, Middle East, Africa and India | 6 | 6 | 12 | 5 | 7 | 12 | |||||||||||
Asia Pacific | 6 | 2 | 8 | 6 | 2 | 8 | |||||||||||
Latin America | 1 | 3 | 4 | 1 | 3 | 4 | |||||||||||
Developed geographies | 3 | % | 6 | % | 9 | % | 4 | % | 7 | % | 11 | % | |||||
Emerging geographies (1) | 5 | 3 | 8 | 4 | 3 | 7 |
(1) | Emerging geographies includes Eastern Europe, Middle East, Africa, India, Latin America and Asia Pacific excluding Australia, Japan and New Zealand. |
(2) | Excludes current period sales from January 1, 2017 through May 31, 2017 related to the ownership restructure of Dow Corning announced on June 1, 2016 (Consumer Solutions and Infrastructure Solutions). |
Certain Items Impacting Results | Pretax Impact (1) | Net Income (2) | EPS - Diluted (3) (4) | ||||||||||||||||||||
Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||||||||||
In millions, except per share amounts (Unaudited) | Jun 30, 2017 | Jun 30, 2016 | Jun 30, 2017 | Jun 30, 2016 | Jun 30, 2017 | Jun 30, 2016 | |||||||||||||||||
Reported U.S. GAAP Amounts (5) (6) | $ | 1,321 | $ | 3,123 | $ | 1.07 | $ | 2.61 | |||||||||||||||
- Certain items: | |||||||||||||||||||||||
Restructuring charges and adjustments | $ | 12 | $ | (454 | ) | 8 | (308 | ) | 0.01 | (0.27 | ) | ||||||||||||
Impact of Dow Corning ownership restructure | — | 2,318 | — | 2,494 | — | 2.20 | |||||||||||||||||
Nova patent infringement award | 137 | — | 90 | — | 0.07 | — | |||||||||||||||||
Bayer CropScience arbitration matter | — | — | (10 | ) | — | (0.01 | ) | — | |||||||||||||||
Gain adjustment on split-off of chlorine value chain | 7 | 6 | 5 | 6 | — | 0.01 | |||||||||||||||||
Costs associated with transactions and productivity actions | (158 | ) | (107 | ) | (105 | ) | (87 | ) | (0.08 | ) | (0.08 | ) | |||||||||||
Uncertain tax position adjustment | — | — | — | (57 | ) | — | (0.05 | ) | |||||||||||||||
Total certain items | $ | (2 | ) | $ | 1,763 | $ | (12 | ) | $ | 2,048 | $ | (0.01 | ) | $ | 1.81 | ||||||||
+ Dilutive effect of assumed preferred stock conversion into shares of common stock | N/A | $ | 0.15 | ||||||||||||||||||||
= Operating Results (Non-GAAP) | $ | 1,333 | $ | 1,075 | $ | 1.08 | $ | 0.95 |
Certain Items Impacting Results | Pretax Impact (1) | Net Income (2) | EPS - Diluted (3) (4) | ||||||||||||||||||||
Six Months Ended | Six Months Ended | Six Months Ended | |||||||||||||||||||||
In millions, except per share amounts (Unaudited) | Jun 30, 2017 | Jun 30, 2016 | Jun 30, 2017 | Jun 30, 2016 | Jun 30, 2017 | Jun 30, 2016 | |||||||||||||||||
Reported U.S. GAAP Amounts (5) (6) | $ | 2,209 | $ | 3,292 | $ | 1.79 | $ | 2.83 | |||||||||||||||
- Certain items: | |||||||||||||||||||||||
Restructuring charges and adjustments | $ | 12 | $ | (454 | ) | 8 | (308 | ) | 0.01 | (0.27 | ) | ||||||||||||
Impact of Dow Corning ownership restructure | — | 2,318 | — | 2,494 | — | 2.20 | |||||||||||||||||
Nova patent infringement award | 137 | — | 90 | — | 0.07 | — | |||||||||||||||||
Bayer CropScience arbitration matter | (469 | ) | — | (305 | ) | — | (0.25 | ) | — | ||||||||||||||
Urethane matters legal settlements | — | (1,235 | ) | — | (778 | ) | — | (0.70 | ) | ||||||||||||||
Gain adjustment on split-off of chlorine value chain | 7 | 6 | 5 | 6 | — | 0.01 | |||||||||||||||||
Costs associated with transactions and productivity actions | (293 | ) | (172 | ) | (196 | ) | (133 | ) | (0.16 | ) | (0.12 | ) | |||||||||||
Uncertain tax position adjustment | — | — | — | (57 | ) | — | (0.05 | ) | |||||||||||||||
Total certain items | $ | (606 | ) | $ | 463 | $ | (398 | ) | $ | 1,224 | $ | (0.33 | ) | $ | 1.07 | ||||||||
+ Dilutive effect of assumed preferred stock conversion into shares of common stock | N/A | $ | 0.09 | ||||||||||||||||||||
= Operating Results (Non-GAAP) | $ | 2,607 | $ | 2,068 | $ | 2.12 | $ | 1.85 |
(1) | Impact on "Income Before Income Taxes." |
(2) | "Net Income Available for The Dow Chemical Company Common Stockholders." The income tax effect for each certain item was calculated based on the statutory tax rate for the jurisdiction(s) in which the certain item was taxable or deductible. |
(3) | "Earnings per common share - diluted." |
(4) | For the three- and six-month periods ended June 30, 2016, an 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 "Operating earnings per common share - diluted" (Non-GAAP) as well as the earnings per share impact of certain items because the effect of including them would have been antidilutive. On December 30, 2016, the Company converted its outstanding shares of Preferred Stock into shares of the Company's common stock. As a result of this conversion, no shares of Preferred Stock are issued or outstanding. |
(5) | For the three- and six-month periods ended June 30, 2016, 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 three- and six-month periods ended June 30, 2016, as it excludes quarterly preferred dividends of $85 million. |
Share counts | Three Months Ended | Six Months Ended | |||||||||
In millions | Jun 30, 2017 | Jun 30, 2016 | Jun 30, 2017 | Jun 30, 2016 | |||||||
Weighted-average common shares outstanding - basic (U.S. GAAP) | 1,211.8 | 1,111.1 | 1,207.2 | 1,107.0 | |||||||
Plus: dilutive effect of options and awards (U.S. GAAP) | 17.2 | 14.9 | 18.3 | 14.7 | |||||||
Plus: common shares from assumed conversion of preferred stock (U.S. GAAP) (1) | N/A | 96.8 | N/A | 96.8 | |||||||
Weighted-average common shares outstanding - diluted (U.S. GAAP) | 1,229.0 | 1,222.8 | 1,225.5 | 1,218.5 | |||||||
Less: common shares from assumed conversion of preferred stock (Non-GAAP) (1) (2) | N/A | (96.8 | ) | N/A | (96.8 | ) | |||||
Weighted-average common shares outstanding - diluted (Non-GAAP) | 1,229.0 | 1,126.0 | 1,225.5 | 1,121.7 |
(1) | On December 30, 2016, the Company converted its outstanding shares of Preferred Stock into shares of the Company's common stock. As a result of this conversion, no shares of Preferred Stock are issued or outstanding. |
(2) | For the three- and six-month periods ended June 30, 2016, the assumed conversion of Preferred Stock into shares of the Company's common stock was excluded from the calculation of "Operating earnings per common share - diluted" (Non-GAAP) because the effect of including them would have been antidilutive. |
• | Pretax gains of $3 million related to adjustments to the Company's 2016 restructuring program and $9 million related to adjustments to the Company's 2015 restructuring program, included in "Restructuring charges (credits)" in the consolidated statements of income and reflected in Infrastructure Solutions ($3 million) and Corporate ($9 million). |
• | In the second quarter of 2017, a federal court in Canada found that Nova Chemicals Corporation infringed on certain patent rights of Dow. As a result, the Company recorded a pretax gain of $137 million, included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in the Performance Plastics segment. |
• | A pretax gain of $7 million related to post-closing adjustments on the 2015 split-off of the Company's chlorine value chain, included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in Corporate. |
• | Pretax charges of $158 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. du Pont de Nemours and Company ("DuPont"), implementation costs associated with the ownership restructure of Dow Corning, implementation costs associated with the Company's restructuring programs and other productivity actions (collectively, "Costs associated with transactions and productivity actions"). The charges were included in "Cost of sales" ($19 million) and "Selling, general and administrative expenses" ($139 million) in the consolidated statements of income and reflected in Corporate. |
• | A tax charge of $10 million related to an adjustment of the income tax effect on the Bayer CropScience arbitration matter. |
• | Pretax restructuring charges of $449 million. On June 27, 2016, the Board of Directors of the Company approved a restructuring plan that incorporates actions related to the 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. These actions are expected to be substantially completed by June 30, 2018. 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 (credits)" 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 (credits)" in the consolidated statements of income and reflected in Agricultural Sciences ($4 million) and Consumer Solutions ($1 million). |
• | Pretax gain of $2,318 million (after-tax gain of $2,494 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 $105 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 ($30 million) and Infrastructure Solutions ($75 million); and a pretax 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). |
• | A pretax gain of $6 million (after-tax gain of $6 million) related to post-closing adjustments on the 2015 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 $107 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, implementation costs associated with the Company's 2015 Restructuring program, and other productivity actions (collectively, "Costs associated with transactions and productivity actions"). The charges are included in "Cost of sales" ($34 million) and "Selling, general and administrative expenses" ($73 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 charge of $469 million related to the Bayer CropScience arbitration matter. The pretax charge was included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in Agricultural Sciences. |
• | Pretax charges of $135 million for costs associated with transactions and productivity actions. The charges were included in "Cost of sales" ($23 million) and "Selling, general and administrative expenses" ($112 million) in the consolidated statements of income and reflected in Corporate. |
• | 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 was included in "Sundry income (expense) - net" in the consolidated statements of income and reflected in Performance Materials & Chemicals. |
• | Pretax charges of $65 million for costs associated with transactions and productivity actions, included in "Cost of sales" ($23 million) and "Selling, general and administrative expenses" ($42 million) in the consolidated statements of income and reflected in Corporate. |