8-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
July 25, 2002

THE DOW CHEMICAL COMPANY
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 1-3433
(Commission file number) 38-1285128
(I.R.S. 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, former address and former fiscal year, if changed since last report)

Item 5. Other Events.

The Dow Chemical Company issued a press release on July 25, 2002, announcing results for the second quarter of 2002.

Item 7. Financial Statements and Exhibits.

(c)

Exhibits.



99.1

Press release issued by The Dow Chemical Company on July 25, 2002, announcing results for the second quarter of 2002.

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SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THE DOW CHEMICAL COMPANY Registrant
Date: July 25, 2002
	/s/  FRANK H. BROD Frank H. Brod Vice President and Controller

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press release issued by The Dow Chemical Company on July 25, 2002, announcing results for the second quarter of 2002.

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Item 5. Other Events.
Item 7. Financial Statements and Exhibits.

SIGNATURE
EXHIBIT INDEX

EX-99.1

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EXHIBIT 99.1

July 25, 2002

Dow Reports Second Quarter Earnings

Second Quarter of 2002 Highlights

•

Sales were $7.2 billion, a decline of 2 percent from a year ago, with an 8 percent increase in volume and a 10 percent decrease in price.

•

Earnings per share were $0.28, excluding unusual items, down from a year ago, but showing a substantial improvement versus the first quarter of 2002.

•

Despite a margin compression of $280 million between price and feedstock and energy costs, EBIT, excluding unusual items, declined only $23 million versus a year ago, due to strong volume gains and cost reduction efforts.

	3 Months Ended June 30				6 Months Ended June 30
(In millions, except for per share amounts)
	2002		2001		2002		2001
Net Sales	$	7,217	$	7,344	$	13,479	$	14,730
Earnings (Loss) Before Interest, Income Taxes and Minority Interests ("EBIT")		539		558		782		(324	)
Earnings (Loss) Per Common Share	$	0.26	$	0.31	$	0.37	$	(0.45	)
Excluding Unusual Items:
EBIT		559		582		831		818
Earnings Per Common Share	$	0.28	$	0.33	$	0.35	$	0.37

Review of Second Quarter Results

        The Dow Chemical Company reported second quarter sales of $7.2 billion, a decline from $7.3 billion a year ago. Excluding unusual items, earnings before interest, income taxes and minority interests (EBIT) were $559 million, net income was $252 million and earnings per share were $0.28. Reported earnings per share were $0.26.

        For a description of unusual items that impacted second quarter results in 2002 and 2001, see "Supplemental Information" at the end of this release.

        Margin compression continued with price declines outpacing lower feedstock and energy costs by $280 million. Stronger gains in volume and continued productivity improvements helped the company mitigate the impact of this margin compression, as EBIT declined only $23 million from a year ago, excluding unusual items in both periods.

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        Noting that results were substantially better than the first quarter of 2002, J. Pedro Reinhard, executive vice president and chief financial officer, commented that the industry has begun to show signs of improvement from trough level pricing. "We're pleased that Dow's earnings are beginning to recover, reflecting some of the economic improvement which helped our volume growth. The company continues to benefit from its aggressive focus on productivity improvements and on capturing the synergies from the Union Carbide merger and other acquisitions."

        Dow's second quarter sales declined 2 percent, compared with a year ago, due to an 8 percent rise in volume and a 10 percent decrease in price. Volume was up substantially in nearly all segments, led by double-digit gains in Plastics, Chemicals and Agricultural Sciences. Volume rose in all geographic areas, most notably in Asia Pacific, Latin America and Europe. This broad-based volume improvement was the largest year-over-year quarterly gain since the third quarter of 2000.

        Price decreased in all segments, compared with a year ago, with the sharpest declines in the Chemicals and Plastics segments. It is worth noting, however, that price rose 6 percent versus the first quarter of 2002, as margins started to recover from historically low levels.

        In the performance segments, EBIT, excluding unusual items, increased by 7 percent from a year ago, due primarily to strong volume gains. Agricultural Sciences results reflected the full integration of Rohm and Haas' agricultural chemicals business, which was acquired in June of last year. In Performance Plastics and Performance Chemicals, EBIT improved despite the impact of lower prices that outpaced the reduction in feedstock and energy costs. Both segments benefited from strengthening demand in the housing and automotive industries, as well as from volume gains from recent acquisitions.

        EBIT in the basics segments rose 38 percent from a year ago, benefiting from strong volume gains, cost synergies and lower feedstock and energy costs, which more than offset the impact of significant price declines. Although Chemicals and Plastics experienced price declines of 21 and 14 percent, respectively, versus a year ago, Plastics EBIT rose substantially compared with the first quarter of 2002, due to a number of price increases that were implemented during the second quarter.

        Commenting on the outlook for the remainder of the year, Reinhard said, "We expect overall economic activity to continue its improvement in the third quarter. Dow's results should benefit from upward price momentum, as feedstock and energy costs remain stable."

        Dow estimates earnings for the third quarter will be substantially better than the third quarter of last year and may show an improvement from results in the second quarter of this year.

        The company will host a live audio Webcast of its earnings conference call with investors to discuss its results and business outlook at 10 a.m. EDT today on www.dow.com.

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        Dow is a leading science and technology company that provides innovative chemical, plastic and agricultural products and services to many essential consumer markets. With annual sales of $28 billion, Dow serves customers in more than 170 countries and a wide range of markets that are vital to human progress, including food, transportation, health and medicine, personal and home care, and building and construction, among others. Committed to the principles of sustainable development, Dow and its approximately 50,000 employees seek to balance economic, environmental and social responsibilities.

        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.

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Supplemental Information

        The following information summarizes the impact of unusual items on EBIT, net income and earnings per share for 2002 and 2001, on a second quarter and year-to-date basis.

Description of Unusual Items—Second Quarter of 2002 and 2001

        Results in the second quarter of 2002 were unfavorably impacted by additional pretax merger-related expenses of $10 million and a $10 million pretax restructuring charge (Dow's share) recorded by UOP LLC, Dow's joint venture with Honeywell, reflected in "Equity in earnings of nonconsolidated affiliates" in the Performance Plastics segment.

        In the second quarter of 2001, earnings were impacted by additional pretax merger-related expenses of $24 million.

			EBIT						Net Income						Earnings Per Share
			Three Months Ended						Three Months Ended						Three Months Ended
In millions, except per share amounts			June 30, 2002			June 30, 2001			June 30, 2002			June 30, 2001			June 30, 2002			June 30, 2001
Unusual items:
	Merger-related expenses and restructuring		$	(10	)	$	(24	)	$	(7	)	$	(17	)	$	(0.01	)	$	(0.02	)
	UOP restructuring			(10	)		—			(7	)		—			(0.01	)		—
		Total unusual items	$	(20	)	$	(24	)	$	(14	)	$	(17	)	$	(0.02	)	$	(0.02	)
	As reported		$	539		$	558		$	238		$	280		$	0.26		$	0.31
	Excluding unusual items		$	559		$	582		$	252		$	297		$	0.28		$	0.33

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Description of Unusual Items—Year-to-Date 2002 and 2001

        Results in the first half of 2002 were unfavorably impacted by additional pretax merger-related expenses of $23 million, a $10 million pretax restructuring charge (Dow's share) recorded by UOP LLC, pretax goodwill impairment losses of $16 million related to investments in nonconsolidated affiliates and a net after-tax gain of $67 million related to the adoption of two new accounting standards (SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets").

        In the first half of 2001, earnings were impacted by a pretax special charge of $1.4 billion for costs related to the Union Carbide merger, a pretax gain of $266 million on the sale of stock in Schlumberger Ltd. and an after-tax transition adjustment gain of $32 million related to the adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."

			EBIT						Net Income						Earnings Per Share
			Six Months Ended						Six Months Ended						Six Months Ended
In millions, except per share amounts			June 30, 2002			June 30, 2001			June 30, 2002			June 30, 2001			June 30, 2002			June 30, 2001
Unusual items:
	Merger-related expenses and restructuring		$	(23	)	$	(1,408	)	$	(15	)	$	(936	)	$	(0.02	)	$	(1.04	)
	UOP restructuring			(10	)		—			(7	)		—			(0.01	)		—
	Goodwill impairment losses in nonconsolidated affiliates			(16	)		—			(16	)		—			(0.02	)		—
	Gain on sale of Schlumberger stock			—			266			—			168			—			0.18
	Cumulative effect of changes in accounting principles			—			—			67			32			0.07			0.04
		Total unusual items	$	(49	)	$	(1,142	)	$	29		$	(736	)	$	0.02		$	(0.82	)
	As reported		$	782		$	(324	)	$	343		$	(405	)	$	0.37		$	(0.45	)
	Excluding unusual items		$	831		$	818		$	314		$	331		$	0.35		$	0.37

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THE DOW CHEMICAL COMPANY — 2Q02 EARNINGS
FINANCIAL STATEMENTS (Note A)

The Dow Chemical Company and Subsidiaries
Consolidated Statements of Income

		Three Months Ended						Six Months Ended
In millions, except per share amounts (Unaudited)		June 30, 2002			June 30, 2001			June 30, 2002			June 30, 2001
Net Sales		$	7,217		$	7,344		$	13,479		$	14,730
	Cost of sales		5,990			6,137			11,311			12,593
	Research and development expenses		272			271			522			543
	Selling, general and administrative expenses		405			456			796			908
	Amortization of intangibles		19			35			33			68
	Merger-related expenses and restructuring (Note B)		10			24			23			1,408
	Insurance and finance company operations, pretax income		1			14			10			25
	Equity in earnings (losses) of nonconsolidated affiliates		21			38			(5	)		73
	Sundry income (expense) — net		(4	)		85			(17	)		368
Earnings (Loss) before Interest, Income Taxes and Minority Interests			539			558			782			(324	)
	Interest income		14			16			30			40
	Interest expense and amortization of debt discount		188			179			377			361
Income (Loss) before Income Taxes and Minority Interests			365			395			435			(645	)
	Provision (Credit) for income taxes		111			120			135			(220	)
	Minority interests' share in income (loss)		16			(5	)		24			12
Income (Loss) before Cumulative Effect of Changes in Accounting Principles			238			280			276			(437	)
	Cumulative effect of changes in accounting principles (Note C)		—			—			67			32
Net Income (Loss) Available for Common Stockholders		$	238		$	280		$	343		$	(405	)
Share Data
	Earnings (Loss) before cumulative effect of changes in accounting principles per common share — basic	$	0.26		$	0.31		$	0.30		$	(0.49	)
	Earnings (Loss) per common share — basic	$	0.26		$	0.31		$	0.38		$	(0.45	)
	Earnings (Loss) before cumulative effect of changes in accounting principles per common share — diluted	$	0.26		$	0.31		$	0.30		$	(0.49	)
	Earnings (Loss) per common share — diluted	$	0.26		$	0.31		$	0.37		$	(0.45	)
	Common stock dividends declared per share of common stock	$	0.335		$	0.335		$	0.67		$	0.625
	Weighted-average common shares outstanding — basic		910.7			900.9			909.0			899.5
	Weighted-average common shares outstanding — diluted		919.3			912.7			917.2			899.5
Depreciation		$	402		$	384		$	790		$	772
Capital Expenditures		$	391		$	376		$	688		$	649

Notes to the Consolidated Financial Statements:

Note A:	The unaudited interim consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are considered necessary for a fair presentation of the results for the periods covered. Certain reclassifications of prior year amounts have been made to conform to current year presentation. 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 filed on March 20, 2002, for the year ended December 31, 2001. Except as otherwise indicated by the context, the terms "Company" and "Dow" as used herein mean The Dow Chemical Company and its consolidated subsidiaries.
Note B:	In the first half of 2001, pretax costs of $1,408 million were recorded for merger-related expenses and restructuring. These costs included transaction costs, employee severance, and the write-down of duplicate assets and facilities.
	In the first half of 2002, the Company recorded one-time merger and integration costs of $23 million.
Note C:	On January 1, 2001, the Company recorded a cumulative transition adjustment gain of $32 million (net of related income tax of $19 million), upon adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
	On January 1, 2002, the Company adopted SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." The cumulative effect of adoption was a net gain of $67 million and was primarily due to the write-off of negative goodwill related to BSL, partially offset by the write-off of unrelated goodwill impairments. Total goodwill amortization expense, including equity method goodwill, was $31 million in the second quarter of 2001 and $54 million in the first six months of 2001.

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The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets

In millions (Unaudited)			June 30, 2002			Dec. 31, 2001
Assets
Current Assets
	Cash and cash equivalents		$	299		$	220
	Marketable securities and interest-bearing deposits			64			44
	Accounts and notes receivable:
		Trade (net of allowance for doubtful receivables — 2002: $120; 2001: $123)		3,667			2,868
		Other		2,047			2,230
	Inventories:
		Finished and work in process		3,440			3,569
		Materials and supplies		915			871
	Deferred income tax assets — current			518			506
	Total current assets			10,950			10,308
Investments
	Investment in nonconsolidated affiliates			1,615			1,581
	Other investments			1,703			1,663
	Noncurrent receivables			1,003			802
	Total investments			4,321			4,046
Property
	Property			37,206			35,890
	Less accumulated depreciation			23,469			22,311
	Net property			13,737			13,579
Other Assets
	Goodwill			3,180			3,130
	Other intangible assets (net of accumulated amortization — 2002: $388; 2001: $346)			609			607
	Deferred income tax assets — noncurrent			2,550			2,248
	Deferred charges and other assets			1,758			1,597
	Total other assets			8,097			7,582
Total Assets			$	37,105		$	35,515
Liabilities and Stockholders' Equity
Current Liabilities
	Notes payable		$	1,645		$	1,209
	Long-term debt due within one year			921			408
	Accounts payable:
		Trade		2,505			2,713
		Other		1,284			926
	Income taxes payable			196			190
	Deferred income tax liabilities — current			285			236
	Dividends payable			327			323
	Accrued and other current liabilities			2,257			2,120
	Total current liabilities			9,420			8,125
Long-Term Debt				9,336			9,266
Other Noncurrent Liabilities
	Deferred income tax liabilities — noncurrent			1,063			760
	Pension and other postretirement benefits — noncurrent			2,416			2,475
	Other noncurrent obligations			3,464			3,539
	Total other noncurrent liabilities			6,943			6,774
Minority Interest in Subsidiaries				355			357
Preferred Securities of Subsidiaries				1,000			1,000
Stockholders' Equity
	Common stock			2,453			2,453
	Additional paid-in capital			—			—
	Unearned ESOP shares			(86	)		(90	)
	Retained earnings			10,833			11,112
	Accumulated other comprehensive loss			(905	)		(1,070	)
	Treasury stock at cost			(2,244	)		(2,412	)
	Net stockholders' equity			10,051			9,993
Total Liabilities and Stockholders' Equity			$	37,105		$	35,515

See Notes to the Consolidated Financial Statements.

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The Dow Chemical Company and Subsidiaries
Operating Segments and Geographic Areas

		Three Months Ended						Six Months Ended
In millions (Unaudited)		June 30, 2002			June 30, 2001			June 30, 2002			June 30, 2001
Operating segment sales
	Performance Plastics	$	1,835		$	1,864		$	3,554		$	3,785
	Performance Chemicals		1,302			1,240			2,561			2,550
	Agricultural Sciences		886			809			1,531			1,414
	Plastics		1,688			1,697			3,116			3,466
	Chemicals		861			945			1,546			1,941
	Hydrocarbons and Energy		583			718			1,068			1,427
	Unallocated and Other		62			71			103			147
	Total	$	7,217		$	7,344		$	13,479		$	14,730
Operating segment EBIT
	Performance Plastics	$	145		$	140		$	392		$	357
	Performance Chemicals		165			158			363			258
	Agricultural Sciences		189			176			215			219
	Plastics		106			42			44			75
	Chemicals		(15	)		45			(68	)		38
	Hydrocarbons and Energy		10			(14	)		41			(3	)
	Unallocated and Other		(61	)		11			(205	)		(1,268	)
	Total	$	539		$	558		$	782		$	(324	)
Geographic area sales
	United States	$	2,983		$	3,203		$	5,539		$	6,408
	Europe		2,359			2,265			4,514			4,635
	Rest of World		1,875			1,876			3,426			3,687
	Total	$	7,217		$	7,344		$	13,479		$	14,730

The Dow Chemical Company and Subsidiaries
Sales Volume and Price by Operating Segment and Geographic Area

		Three Months Ended June 30, 2002			Six Months Ended June 30, 2002
Percentage change from prior year
		Volume	Price	Total	Volume	Price	Total
Operating segments
	Performance Plastics	6%	(8)%	(2)%	4%	(10)%	(6)%
	Performance Chemicals	9%	(4)%	5%	5%	(5)%	—
	Agricultural Sciences	11%	(1)%	10%	10%	(2)%	8%
	Plastics	13%	(14)%	(1)%	12%	(22)%	(10)%
	Chemicals	12%	(21)%	(9)%	3%	(23)%	(20)%
	Hydrocarbons and Energy	(8)%	(11)%	(19)%	1%	(26)%	(25)%
	Total	8%	(10)%	(2)%	6%	(14)%	(8)%
Geographic areas
	United States	3%	(10)%	(7)%	(1)%	(13)%	(14)%
	Europe	11%	(7)%	4%	13%	(16)%	(3)%
	Rest of World	14%	(14)%	—	10%	(17)%	(7)%
	Total	8%	(10)%	(2)%	6%	(14)%	(8)%

End of Dow Chemical 2Q02 Earnings Release

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EXHIBIT 99.1

Dow Reports Second Quarter Earnings Second Quarter of 2002 Highlights
The Dow Chemical Company and Subsidiaries Consolidated Statements of Income
The Dow Chemical Company and Subsidiaries Consolidated Balance Sheets
The Dow Chemical Company and Subsidiaries Operating Segments and Geographic Areas
The Dow Chemical Company and Subsidiaries Sales Volume and Price by Operating Segment and Geographic Area