OPERATING SEGMENTS AND GEOGRAPHIC AREAS
Dow is a diversified, worldwide manufacturer and supplier of products used primarily as raw materials in the manufacture of customer products and services. The Company serves the following industries: appliance; automotive; agricultural; building and construction; chemical processing; electronics; furniture; housewares; oil and gas; packaging; paints, coatings and adhesives; personal care; pharmaceutical; processed foods; pulp and paper; textile and carpet; utilities; and water treatment.
Dow conducts its worldwide operations through global businesses, which are reported in six operating segments. Corporate contains the reconciliation between the totals for the reportable segments and the Company’s totals and includes research and other expenses related to new business development activities, and other corporate items not allocated to the reportable operating segments.
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; items that principally apply to the Company as a whole are assigned to Corporate. See table toward the end of this footnote for depreciation and amortization by segment, as well as a reconciliation of EBITDA to “Income Before Income Taxes.”
Corporate Profile
Dow combines the power of science and technology to passionately innovate what is essential to human progress. The Company is driving innovations that extract value from the intersection of chemical, physical and biological sciences to help address many of the world's most challenging problems such as the need for clean water, clean energy generation and conservation, and increasing agricultural productivity. Dow's integrated, market-driven, industry-leading portfolio of specialty chemical, advanced materials, agrosciences and plastics businesses delivers a broad range of technology-based products and solutions to customers in approximately 180 countries and in high growth sectors such as packaging, electronics, water, coatings and agriculture. In 2013, Dow had annual sales of more than $57 billion and employed approximately 53,000 people worldwide. The Company's more than 6,000 products are manufactured at 201 sites in 36 countries across the globe. The Company conducts its worldwide operations through global businesses, which are reported in six operating segments: Electronic and Functional Materials, Coatings and Infrastructure Solutions, Agricultural Sciences, Performance Materials, Performance Plastics and Feedstocks and Energy.
Electronic and Functional Materials
The Electronic and Functional Materials segment consists of two businesses – Dow Electronic Materials and Functional Materials – and includes a portion of the Company’s share of the results of Dow Corning Corporation, a joint venture of the Company.
Dow Electronic Materials is a leading global supplier of enabling materials for applications such as consumer electronic devices, flat-panel displays and telecommunications. The business produces materials for chemical mechanical planarization ("CMP"); materials used in the production of electronic displays, including films and filters; metalorganic precursors for light-emitting diodes ("LEDs"); organic light-emitting diode ("OLED") materials; products and technologies that drive leading-edge semiconductor design; materials used in the fabrication of printed circuit boards; and integrated metallization processes for metal finishing and decorative applications. Dow Electronic Materials includes Display Technologies, Growth Technologies, Interconnect Technologies and Semiconductor Technologies.
The Functional Materials portfolio of businesses creates performance-enhancing solutions that enable customers to differentiate their products in the global pharmaceutical, food, water, energy and home and personal care markets. This group also provides key materials for industrial uses around the world. Functional Materials includes Dow Consumer and Industrial Solutions, Dow Microbial Control and Dow Pharma and Food Solutions.
Coatings and Infrastructure Solutions
Coatings and Infrastructure Solutions segment consists of the following businesses: Dow Building and Construction, Dow Coating Materials, Dow Water and Process Solutions, and Performance Monomers; and includes a portion of the Company's share of the results of Dow Corning Corporation, a joint venture of the Company. These businesses utilize advanced technology to deliver products ranging from low volatile organic compound ("VOC") coatings to building insulation and adhesives to water technologies.
Agricultural Sciences
The Agricultural Sciences segment is a global leader in providing crop protection and plant biotechnology products, urban pest management solutions and healthy oils. The business invents, develops, manufactures and markets products for use in agriculture, industrial and commercial pest management, and food service. Agricultural Sciences consists of two businesses - Crop Protection and Seeds, Traits and Oils.
Performance Materials
The Performance Materials segment consists of the following businesses: Amines; Chlorinated Organics; Dow Automotive Systems; Dow Formulated Systems; Dow Oil, Gas & Mining; Dow Plastics Additives; Epoxy; Oxygenated Solvents; Polyglycols, Surfactants & Fluids; Polyurethanes; and Propylene Oxide/Propylene Glycol. These businesses produce a wide variety of products with a broad range of applications – adhesives, aircraft and runway deicing fluids, automotive interiors and exteriors, carpeting, footwear, home furnishings, mattresses, personal care products, transportation, waterproofing membranes and wind turbines. The segment also includes the results of Map Ta Phut Olefins Company Limited and a portion of the results of Sadara Chemical Company, both joint ventures of the Company.
Divestiture:
The Performance Materials segment included Dow Haltermann until it was fully divested at December 31, 2011.
Performance Plastics
The Performance Plastics segment is a solutions-oriented portfolio comprised of Dow Elastomers, Dow Electrical and Telecommunications, and Dow Packaging and Specialty Plastics. These businesses serve high-growth, high-value sectors where Dow's world-class technology and rich innovation pipeline create new competitive advantages for customers and the entire value chain. These businesses also have complementary market reach, asset capabilities and technology platforms that provide immediate and long-term growth synergies. The Performance Plastics segment also includes the results of Univation Technologies, LLC, as well as a portion of the results of EQUATE Petrochemical Company K.S.C., The Kuwait Olefins Company K.S.C., The SCG-Dow Group and Sadara Chemical Company, all joint ventures of the Company.
Divestitures:
On December 2, 2013, the Company sold its Polypropylene Licensing and Catalysts business to W. R. Grace & Co. On September 30, 2011, the Company sold its global Polypropylene business to Braskem SA. These businesses were reported in the Performance Plastics segment through the date of the divestiture. See Note 5 for additional information on these divestitures.
Feedstocks and Energy
The Feedstocks and Energy segment includes the following businesses: Chlor-Alkali/Chlor-Vinyl; Energy; Ethylene Oxide/Ethylene Glycol ("EO/EG"); and Hydrocarbons. The Chlor-Alkali/Chlor-Vinyl business focuses on the production of chlorine for consumption by downstream Dow derivatives, as well as production, marketing and supply of ethylene dichloride, vinyl chloride monomer and caustic soda. These products are used for applications such as alumina production, pulp and paper manufacturing, soaps and detergents, and building and construction. The Energy business supplies power, steam and other utilities, principally for use in Dow’s global operations. The EO/EG business is the world’s largest producer of purified ethylene oxide, principally used in Dow’s downstream performance derivatives. Dow is also a key supplier of ethylene glycol to MEGlobal, a 50:50 joint venture and world leader in the manufacture and marketing of merchant monoethylene glycol and diethylene glycol. Ethylene glycol is used in polyester fiber, polyethylene terephthalate for food and beverage container applications, polyester film, and aircraft and runway deicers. The Hydrocarbons business encompasses the procurement of natural gas liquids and crude oil-based raw materials, as well as the supply of monomers, principally for use in Dow's global operations. The business regularly sells its by-products and buys and sells products in order to balance regional production capabilities and derivative requirements. The business also sells products to certain Dow joint ventures. Also included in the Feedstocks and Energy segment are the results of MEGlobal and a portion of the results of EQUATE Petrochemical Company K.S.C., The Kuwait Olefins Company K.S.C., and The SCG-Dow Group, all joint ventures of the Company.
Corporate
Corporate includes the results of insurance company operations; results of Ventures (which includes new business incubation platforms focused on identifying and pursuing new commercial opportunities); Venture Capital; gains and losses on sales of financial assets; stock-based compensation expense and severance costs; asbestos-related defense and resolution costs; foreign exchange results; non-business aligned technology licensing and catalyst activities; environmental operations; enterprise level mega project activities; and certain corporate overhead costs and cost recovery variances not allocated to the operating segments.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Operating Segment Information | | Electronic and Functional Materials |
| | Coatings and Infra- structure Solutions |
| | Ag Sciences |
| | Perf Materials |
| | Perf Plastics |
| | Feed-stocks and Energy |
| | Corp |
| | Total |
|
In millions |
2013 | | | | | | | | | | | | | | | | |
Sales to external customers | | $ | 4,591 |
| | $ | 7,132 |
| | $ | 7,137 |
| | $ | 13,415 |
| | $ | 14,645 |
| | $ | 9,854 |
| | $ | 306 |
| | $ | 57,080 |
|
Intersegment revenues (1) | | — |
| | — |
| | — |
| | 97 |
| | — |
| | 40 |
| | (137 | ) | | — |
|
Equity in earnings (losses) of nonconsolidated affiliates | | 112 |
| | 121 |
| | 6 |
| | (64 | ) | | 359 |
| | 539 |
| | (39 | ) | | 1,034 |
|
Restructuring charges (credits) (2) | | — |
| | (1 | ) | | — |
| | (15 | ) | | (6 | ) | | — |
| | — |
| | (22 | ) |
EBITDA (3) | | 1,040 |
| | 832 |
| | 969 |
| | 1,436 |
| | 4,549 |
| | 858 |
| | 861 |
| | 10,545 |
|
Total assets | | 11,067 |
| | 11,438 |
| | 7,058 |
| | 9,850 |
| | 10,920 |
| | 5,772 |
| | 13,396 |
| | 69,501 |
|
Investment in nonconsolidated affiliates | | 579 |
| | 1,140 |
| | 88 |
| | 100 |
| | 1,289 |
| | 224 |
| | 1,081 |
| | 4,501 |
|
Depreciation and amortization | | 425 |
| | 466 |
| | 189 |
| | 666 |
| | 707 |
| | 128 |
| | 100 |
| | 2,681 |
|
Capital expenditures | | 139 |
| | 181 |
| | 319 |
| | 159 |
| | 332 |
| | 1,172 |
| | — |
| | 2,302 |
|
2012 | |
| |
| |
| |
| |
| |
| |
| | |
Sales to external customers | | $ | 4,481 |
| | $ | 6,898 |
| | $ | 6,382 |
| | $ | 13,608 |
| | $ | 14,479 |
| | $ | 10,695 |
| | $ | 243 |
| | $ | 56,786 |
|
Intersegment revenues (1) | | — |
| | — |
| | — |
| | 107 |
| | — |
| | 43 |
| | (150 | ) | | — |
|
Equity in earnings (losses) of nonconsolidated affiliates | | 94 |
| | 50 |
| | 1 |
| | (92 | ) | | 134 |
| | 452 |
| | (103 | ) | | 536 |
|
Goodwill impairment loss (4) | | — |
| | — |
| | — |
| | 220 |
| | — |
| | — |
| | — |
| | 220 |
|
Restructuring charges (credits) (2) | | 65 |
| | 53 |
| | — |
| | 378 |
| | 26 |
| | 7 |
| | 814 |
| | 1,343 |
|
EBITDA (3) | | 958 |
| | 823 |
| | 977 |
| | 1,036 |
| | 3,018 |
| | 718 |
| | (1,939 | ) | | 5,591 |
|
Total assets | | 11,448 |
| | 11,630 |
| | 6,367 |
| | 11,073 |
| | 11,193 |
| | 5,276 |
| | 12,618 |
| | 69,605 |
|
Investment in nonconsolidated affiliates | | 462 |
| | 1,041 |
| | 86 |
| | 167 |
| | 1,264 |
| | 128 |
| | 973 |
| | 4,121 |
|
Depreciation and amortization | | 420 |
| | 476 |
| | 176 |
| | 703 |
| | 673 |
| | 141 |
| | 109 |
| | 2,698 |
|
Capital expenditures | | 268 |
| | 269 |
| | 316 |
| | 287 |
| | 264 |
| | 1,163 |
| | 47 |
| | 2,614 |
|
2011 | |
| |
| |
| |
| |
| |
| |
| | |
Sales to external customers | | $ | 4,599 |
| | $ | 7,200 |
| | $ | 5,655 |
| | $ | 14,647 |
| | $ | 16,257 |
| | $ | 11,302 |
| | $ | 325 |
| | $ | 59,985 |
|
Intersegment revenues (1) | | — |
| | — |
| | — |
| | 91 |
| | — |
| | 23 |
| | (114 | ) | | — |
|
Equity in earnings (losses) of nonconsolidated affiliates | | 104 |
| | 321 |
| | 4 |
| | (31 | ) | | 303 |
| | 561 |
| | (39 | ) | | 1,223 |
|
Acquisition-related integration expenses (5) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 31 |
| | 31 |
|
EBITDA (3) | | 1,084 |
| | 1,167 |
| | 913 |
| | 1,748 |
| | 3,440 |
| | 940 |
| | (1,507 | ) | | 7,785 |
|
Total assets | | 11,386 |
| | 11,935 |
| | 5,746 |
| | 10,936 |
| | 11,583 |
| | 5,116 |
| | 12,522 |
| | 69,224 |
|
Investment in nonconsolidated affiliates | | 350 |
| | 1,104 |
| | 50 |
| | 198 |
| | 1,376 |
| | 127 |
| | 200 |
| | 3,405 |
|
Depreciation and amortization | | 439 |
| | 548 |
| | 167 |
| | 635 |
| | 754 |
| | 212 |
| | 128 |
| | 2,883 |
|
Capital expenditures | | 247 |
| | 365 |
| | 352 |
| | 567 |
| | 251 |
| | 886 |
| | 19 |
| | 2,687 |
|
| |
(1) | Includes revenues generated by transfers of product to Agricultural Sciences from other segments, generally at market-based prices. Other transfers of products between operating segments are generally valued at cost. |
| |
(2) | See Note 3 for information regarding restructuring charges. |
| |
(3) | A reconciliation of EBITDA to “Income Before Income Taxes” is provided below. |
| |
(4) | See Note 9 for information regarding the goodwill impairment loss. |
| |
(5) | See Note 4 for information regarding acquisition-related integration expenses. |
|
| | | | | | | | | | | | |
Reconciliation of EBITDA to “Income Before Income Taxes” In millions | | 2013 |
| | 2012 |
| | 2011 |
|
EBITDA | | $ | 10,545 |
| | $ | 5,591 |
| | $ | 7,785 |
|
- Depreciation and amortization | | 2,681 |
| | 2,698 |
| | 2,883 |
|
+ Interest income | | 41 |
| | 41 |
| | 40 |
|
- Interest expense and amortization of debt discount | | 1,101 |
| | 1,269 |
| | 1,341 |
|
Income Before Income Taxes | | $ | 6,804 |
| | $ | 1,665 |
| | $ | 3,601 |
|
The Company operates 201 manufacturing sites in 36 countries. The United States is home to 73 of these sites, representing 53 percent of the Company’s long-lived assets. Sales are attributed to geographic areas based on customer location; long-lived assets are attributed to geographic areas based on asset location.
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| | | | | | | | | | | | | | | | |
Geographic Area Information | | United States |
| | Europe, Middle East and Africa |
| | Rest of World |
| | Total |
|
In millions |
2013 | | | | | | | | |
Sales to external customers | | $ | 18,712 |
| | $ | 18,244 |
| | $ | 20,124 |
| | $ | 57,080 |
|
Long-lived assets | | $ | 9,320 |
| | $ | 3,210 |
| | $ | 4,924 |
| | $ | 17,454 |
|
2012 | |
| |
| |
| | |
Sales to external customers | | $ | 18,391 |
| | $ | 19,185 |
| | $ | 19,210 |
| | $ | 56,786 |
|
Long-lived assets | | $ | 8,953 |
| | $ | 3,374 |
| | $ | 5,193 |
| | $ | 17,520 |
|
2011 | | | | | | | | |
Sales to external customers | | $ | 19,374 |
| | $ | 20,840 |
| | $ | 19,771 |
| | $ | 59,985 |
|
Long-lived assets | | $ | 8,651 |
| | $ | 3,546 |
| | $ | 5,102 |
| | $ | 17,299 |
|
