The Dow Chemical Company ("Dow" or the "Company") Reconciliation of non-gaap financial measures

Transcription

1 ("Dow" or the "Company") Reconciliation of non-gaap financial measures Some Dow communications or presentations to investors contain certain financial measures that are not defined under accounting principles generally accepted in the United States ("GAAP"). These non-gaap financial measures are clearly identified as such in all presentations in which they are included. These non-gaap financial measures exclude the impact of changes in accounting principles, certain gains and losses on the sale of assets, restructuring charges and certain other items. Dow believes that the non-gaap financial measures presented with these adjustments best reflect the ongoing performance of the Company during the periods presented and are more useful to investors for comparative analyses. These measures should not be viewed as an alternative to GAAP financial measures. Furthermore, these non-gaap financial measures may not be consistent with similar measures provided or used by For a reconciliation between the bases for these non-gaap financial measures and the most directly comparable GAAP financial measures, please see the following tables. PAGE 1

2 Non-GAAP Adjustments to Earnings Per Share Amounts in dollars per share Q10 2Q10 3Q10 4Q Q11 2Q11 3Q11 4Q Q12 Earnings (Loss) per common share - diluted (GAAP) $ (0.37) $ 1.87 $ 2.93 $ 4.62 $ 3.82 $ 2.99 $ 0.62 $ 0.32 $ 0.41 $ 0.50 $ 0.45 $ 0.37 $ 1.72 $ 0.54 $ 0.84 $ 0.69 $ (0.02) $ 2.05 $ 0.35 Adjustments for certain items UCC-related expenses and restructuring (0.21) Union Carbide asbestos-related charge (0.57) UOP restructuring (0.01) DuPont Dow Elastomers restructuring (0.01) Goodwill impairment losses in nonconsolidated affiliates (0.02) Gain on sale of Oasis Pipe Line One-time increase in cost of sales related to fair valuation of Rohm and Haas inventories (0.13) Impact of Hurricanes Gustav and Ike (0.12) K-Dow related expenses (0.05) Goodwill impairment losses (0.25) (0.01) Asset impairments and related costs (0.06) (0.06) (0.05) (0.05) - Restructuring (charges) credits (0.08) (0.46) (0.46) (0.68) (0.45) (0.01) (0.01) - - (0.02) (0.25) Purchased in-process research and development charges (0.05) (0.05) (0.01) Acquisition and integration related expenses (0.05) (0.16) (0.01) (0.02) (0.02) (0.03) (0.08) (0.02) (0.02) - Asbestos-related credit Dow Corning restructuring (0.03) Gain on collection of impaired note receivable (0.06) Loss contingency related to European Commission fine (0.09) Loss on divestiture of Styron (0.01) (0.02) (0.01) (0.04) Gain on sale of a contract manufacturing business Obligation related to past divestiture (0.03) (0.03) Warranty accrual adjustment of exited business (0.03) (0.03) - Gain on sale of EQUATE shares Gain on sale of TRN Gain on sale of OPTIMAL Labor-related litigation matter (0.03) - (0.03) Loss on early extinguishment of debt (0.02) (0.03) - - (0.02) - (0.02) (0.26) (0.01) - - (0.27) (0.01) Gain on sale of interest in UOP LLC Gain on sale of DERAKANE epoxy vinyl ester resin business Cash donation for aid to education and community development (0.07) German tax law change (0.38) Change in EQUATE legal ownership structure Unfavorable tax ruling (0.14) Reversal of tax valuation allowances and impact of change in tax rate on deferred tax liabilities Tax valuation allowance (0.23) (0.23) - American Jobs Creation Act repatriation of foreign earnings Cumulative effect of change in accounting principle 0.07 (0.01) - (0.02) Earnings (Loss) per share excluding certain items (non-gaap) 1 $ 0.34 $ 1.39 $ 2.71 $ 4.37 $ 4.25 $ 3.76 $ 1.78 $ 0.73 $ 0.43 $ 0.54 $ 0.54 $ 0.47 $ 1.97 $ 0.82 $ 0.85 $ 0.62 $ 0.25 $ 2.54 $ 0.61 Discontinued operations attributable to common stockholderes $ 0.01 $ 0.02 $ 0.02 $ 0.02 $ 0.02 $ 0.02 $ 0.03 $ 0.10 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Earnings (Loss) per share excluding certain items and discontinued operations (non-gaap) $ 0.33 $ 1.37 $ 2.69 $ 4.35 $ 4.23 $ 3.74 $ 1.75 $ 0.63 $ 0.43 $ 0.54 $ 0.54 $ 0.47 $ 1.97 $ 0.82 $ 0.85 $ 0.62 $ 0.25 $ 2.54 $ This measure of income excludes certain items that Dow does not consider part of ongoing operations for the periods presented. 2 Due to an increase in share count and a loss in 2Q09, the full-year results do not equal the sum of the quarters. 3 Due to an increase in share count, the full-year results do not equal the sum of the quarters. PAGE 2

3 Selected Quarterly Non-GAAP Calculation of EBITDA Excluding Certain Items Net Income (Loss) Attributable to The Dow Chemical Company (GAAP $ (338) $ 1,730 $ 2,797 $ 4,515 $ 3,724 $ 2,887 $ 579 $ 648 $ 551 $ 651 $ 597 $ 511 $ 2,310 $ 710 $ 1,067 $ 900 $ 65 $ 2,742 $ 497 Cumulative effect of change in accounting principl 67 (9) - (20) Income (Loss) before cumulative effect of changes in accounting principle (405) 1,739 2,797 4,535 3,724 2, , , , Net income attributable to noncontrolling interests Income from discontinued operations, net of income taxes (11) (17) (17) (23) (21) (23) (28) (110) Provision (Credit) for income taxes (287) (92) 867 1,769 1,142 1, (97) Income (Loss) from Continuing Operations Before Income Taxes (GAAP $ (640) $ 1,724 $ 3,769 $ 6,363 $ 4,938 $ 4,192 $ 1,277 $ 469 $ 655 $ 790 $ 711 $ 646 $ 2,802 $ 841 $ 1,317 $ 1,089 $ 354 $ 3,601 $ 706 Depreciation and Amortization (GAAP) 1,825 1,903 2,088 2,079 2,074 2,190 2,236 2, , , Interest income Interest expense and amortization of debt discoun , , , Earnings before interest, income taxes and depreciation and amortization (EBITDA) (non-gaap $ 1,893 $ 4,363 $ 6,518 $ 9,006 $ 7,443 $ 6,836 $ 4,075 $ 4,828 $ 1,781 $ 1,881 $ 1,782 $ 1,756 $ 7,200 $ 1,942 $ 2,332 $ 2,099 $ 1,412 $ 7,785 $ 1,708 Adjustments for certain items, before tax UCC-related expenses and restructuring (225) Union Carbide asbestos-related charge (828) DuPont Dow Elastomers restructuring (8) Gain on sale of Oasis Pipe Line One-time increase in cost of sales related to fair valuation of Rohm and Haas inventorie (209) Impact of Hurricanes Gustav and Ike (181) K-Dow related expenses (69) Goodwill impairment losses (239) (7) Asset impairments and related costs (91) (91) (77) (77) - Restructuring (charges) credit (114) (591) (578) (839) (689) (16) (13) - 3 (26) (357) Purchased in-process research and development (charges) credi (57) (44) (7) Acquisition and integration related expenses (49) (226) (26) (37) (35) (45) (143) (31) (31) - Asbestos-related credit Dow Corning restructuring (29) Gain on collection of impaired note receivable (65) Loss contingency related to European Commission fine (85) Loss on sale of a contract manufacturing business (42) (42) - Gain (loss) on divestiture of Styron (26) Obligation related to past divestiture (47) (47) Warranty accrual adjustment of exited business (60) (60) - Gain on sale of EQUATE shares Gain on sale of TRN Gain on sale of OPTIMAL Labor-related litigation matter (50) - (50) Loss on early extinguishment of deb (31) (56) - - (46) - (46) (472) (10) - - (482) (24) Gain on sale of interest in UOP LLC Gain on sale of DERAKANE epoxy vinyl ester resin busines Cash donation for aid to education and community developmen (100) EBITDA excluding certain items (non-gaap) 1 $ 2,891 $ 4,363 $ 6,408 $ 8,544 $ 7,942 $ 7,471 $ 5,442 $ 5,320 $ 1,823 $ 1,880 $ 1,911 $ 1,908 $ 7,522 $ 2,445 $ 2,342 $ 2,013 $ 1,591 $ 8,391 $ 2,089 Net sales (GAAP) $ 27,545 $ 32,536 $ 40,063 $ 46,186 $ 49,009 $ 53,375 $ 57,361 $ 44,875 $ 13,417 $ 13,618 $ 12,868 $ 13,771 $ 53,674 $ 14,733 $ 16,046 $ 15,109 $ 14,097 $ 59,985 $ 14,719 EBITDA Margin 2 excluding certain items (non-gaap) 10.5% 13.4% 16.0% 18.5% 16.2% 14.0% 9.5% 11.9% 13.6% 13.8% 14.9% 13.9% 14.0% 16.6% 14.6% 13.3% 11.3% 14.0% 14.2% 1 EBITDA is defined as earnings (i.e., Net Income ) before interest, income taxes, depreciation and amortization. These measures of income exclude certain items that Dow does not consider part of ongoing operations for the periods presented. 2 EBITDA margin is EBITDA as a percentage of reported sales. PAGE 3

4 Non-GAAP Adjustments to Net Income Net Income (Loss) Available for The Dow Chemical Company Common Stockholders (GAA $ (338) $ 1,730 $ 2,797 $ 4,515 $ 3,724 $ 2,887 $ 579 $ 336 $ 466 $ 566 $ 512 $ 426 $ 1,970 $ 625 $ 982 $ 815 $ (20) $ 2,402 $ 412 Cumulative effect of change in accounting principl 67 (9) - (20) Adjustments for certain items, after tax One-time increase in cost of sales related to fair valuation of Rohm and Haas inventorie (132) Impact of Hurricanes Gustav and Ike (115) K-Dow related expenses (44) Goodwill impairment losses (230) (7) UCC-related expenses and restructuring ( ) (182) Asset impairments and related costs (72) (72) (51) (51) - Restructuring (charges) credits (15) - (362) (77) (445) (436) (628) (466) (8) (8) - 2 (14) (287) Purchased in-process R&D charges (50) (44) (5) Acquisition and integration related expense (43) (170) (17) (24) (23) (29) (93) (20) (20) - Union Carbide asbestos-related (charge) credi (522) Dow Corning restructuring (27) Gain on collection of impaired note receivable (65) Loss on divestiture of Styron (16) (23) (17) (56) Obligation related to past divestiture (30) (30) Gain on sale of a contract manufacturing business Warranty accrual adjustment of exited business (38) (38) - Gains/(losses) on disposition of assets Labor-related litigation matte (33) - (33) Loss on early extinguishment of deb (20) (36) - - (29) - (29) (307) (7) - - (314) (15) Cash donation for aid to education and community developmen (65) Asset write-downs (16) Dow Corning breast implant related Tax items (137) German tax law change (362) Change in EQUATE legal ownership structur Tax impact of the repatriation of foreign earnings per the American Jobs Creation Ac Tax Valuation Adjustmen (264) (264) - Other (84) Net Income Available for The Dow Chemical Company Common Stockholders excluding certain items (non-gaap) $ 290 $ 1,285 $ 2,577 $ 4,273 $ 4,141 $ 3,622 $ 1,649 $ 725 $ 491 $ 614 $ 620 $ 538 $ 2,263 $ 952 $ 989 $ 729 $ 289 $ 2,959 $ 714 PAGE 4

5 Calculation of Net Debt to Capital Dollar amounts in millions YE02 YE03 YE04 YE05 YE06 YE07 YE08 YE09 1Q10 2Q10 3Q10 YE10 1Q11 2Q11 3Q11 YE11 1Q12 Notes payable $ 580 $ 258 $ 104 $ 241 $ 219 $ 1,548 $ 2,360 $ 2,139 $ 2,594 $ 1,863 $ 1,329 $ 1,467 $ 709 $ 916 $ 887 $ 541 $ 555 Long-Term Debt 11,659 11,763 11,629 9,186 8,036 7,581 8,042 19,152 18,835 18,108 18,030 20,605 19,078 18,511 17,042 18,310 18,224 Long-term debt due within one year 797 1, ,279 1, ,454 1,082 1,773 1,472 1,772 1,755 1, ,674 2,749 1,798 Total Debt 13,036 $ 13,109 $ 12,594 $ 10,706 $ 9,546 $ 9,715 $ 11,856 $ 22,373 $ 23,202 $ 21,443 $ 21,131 $ 23,827 $ 21,394 $ 20,088 $ 19,603 $ 21,600 $ 20,577 Total debt 13,036 $ 13,109 $ 12,594 $ 10,706 $ 9,546 $ 9,715 $ 11,856 $ 22,373 $ 23,202 $ 21,443 $ 21,131 $ 23,827 $ 21,394 $ 20,088 $ 19,603 $ 21,600 $ 20,577 Less: Cash and cash equivalents 1,484 2,392 3,108 3,806 2,757 1,736 2,800 2,846 2,923 3,068 3,223 7,039 3,562 2,223 2,206 5,444 3,608 Less: Marketable securities and interest bearing deposits Net Debt 11,463 $ 10,675 $ 9,402 $ 6,868 $ 6,636 $ 7,978 $ 9,056 $ 19,527 $ 20,279 $ 18,369 $ 17,904 $ 16,788 $ 17,832 $ 17,865 $ 17,397 $ 16,154 $ 16,967 Total debt 13,036 $ 13,109 $ 12,594 $ 10,706 $ 9,546 $ 9,715 $ 11,856 $ 22,373 $ 23,202 $ 21,443 $ 21,131 $ 23,827 $ 21,394 $ 20,088 $ 19,603 $ 21,600 $ 20,577 Noncontrolling interests ,157 1,172 Preferred Securities of Subsidiaries 1,000 1,000 1,000 1,000 1,000 1, The Dow Chemical Company's stockholders' equity 7,626 9,175 12,270 15,324 17,065 19,389 13,511 20,555 20,417 20,490 21,906 21,839 23,021 24,185 24,152 22,281 23,026 Total Capital 22,028 $ 23,660 $ 26,313 $ 27,366 $ 27,976 $ 30,518 $ 25,936 $ 43,497 $ 44,294 $ 42,610 $ 43,735 $ 46,469 $ 45,231 $ 45,127 $ 44,744 $ 45,038 $ 44,775 Net debt 11,463 $ 10,675 $ 9,402 $ 6,868 $ 6,636 $ 7,978 $ 9,056 $ 19,527 $ 20,279 $ 18,369 $ 17,904 $ 16,788 $ 17,832 $ 17,865 $ 17,397 $ 16,154 $ 16,967 Noncontrolling interests ,157 1,172 Preferred Securities of Subsidiaries 1,000 1,000 1,000 1,000 1,000 1, The Dow Chemical Company's stockholders' equity 7,626 9,175 12,270 15,324 17,065 19,389 13,511 20,555 20,417 20,490 21,906 21,839 23,021 24,185 24,152 22,281 23,026 Net Capital 20,455 $ 21,226 $ 23,121 $ 23,528 $ 25,066 $ 28,781 $ 23,136 $ 40,651 $ 41,371 $ 39,536 $ 40,508 $ 39,430 $ 41,669 $ 42,904 $ 42,538 $ 39,592 $ 41,165 Debt to Capital Ratio 59.2% 55.4% 47.9% 39.1% 34.1% 31.8% 45.7% 51.4% 52.4% 50.3% 48.3% 51.3% 47.3% 44.5% 43.8% 48.0% 46.0% Net Debt to Capital Ratio 56.0% 50.3% 40.7% 29.2% 26.5% 27.7% 39.1% 48.0% 49.0% 46.5% 44.2% 42.6% 42.8% 41.6% 40.9% 40.8% 41.2% PAGE 5

6 Non-GAAP Return on Equity Calculation Net Income Available for The Dow Chemical Company Common Stockholders excluding certain items (non-gaap $ 290 $ 1,285 $ 2,577 $ 4,273 $ 4,141 $ 3,622 $ 1,649 $ 725 $ 491 $ 614 $ 620 $ 538 $ 2,263 $ 952 $ 989 $ 729 $ 289 $ 2,959 $ 714 The Dow Chemical Company's stockholders' equity (GAAP) $ 7,626 $ 9,175 $ 12,270 $ 15,324 $ 17,065 $ 19,389 $ 13,511 $ 20,555 $ 20,417 $ 20,490 $ 21,906 $ 21,839 $ 21,839 $ 23,021 $ 24,185 $ 24,152 $ 22,281 $ 22,281 $ 23,026 Preferred stock ,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 Stockholders' equity attributable to common stockholders $ 7,626 $ 9,175 $ 12,270 $ 15,324 $ 17,065 $ 19,389 $ 13,511 $ 16,555 $ 16,417 $ 16,490 $ 17,906 $ 17,839 $ 17,839 $ 19,021 $ 20,185 $ 20,152 $ 18,281 $ 18,281 $ 19,026 Return on Equity excluding certain items 3.8% 14.0% 21.0% 27.9% 24.3% 18.7% 12.2% 4.4% 6.7% 9.5% 10.7% 12.7% 12.7% 14.3% 15.4% 15.9% 16.2% 16.2% 14.3% This measure of return excludes from income/loss certain items which Dow does not consider part of ongoing operations. PAGE 6

7 Non-GAAP Return on Capital Calculation Net Income Available for The Dow Chemical Company Common Stockholders excluding certain items (non-gaa $ 290 $ 1,285 $ 2,577 $ 4,273 $ 4,141 $ 3,622 $ 1,649 $ 725 $ 491 $ 614 $ 620 $ 538 $ 2,263 $ 952 $ 989 $ 729 $ 289 $ 2,959 $ 714 Preferred stock dividends Net income attributable to noncontrolling interests Gross interest expense , , , Tax on gross interest expense (274) (255) (213) (211) (202) (155) (267) (240) (88) (86) (85) (104) (363) (86) (80) (75) (95) (327) (85) Net Operating Profit After Tax excluding certain items (non-gaap) $ 904 $ 2,000 $ 3,281 $ 4,902 $ 4,722 $ 4,226 $ 2,202 $ 2,458 $ 882 $ 1,003 $ 997 $ 908 $ 3,791 $ 1,362 $ 1,353 $ 1,078 $ 644 $ 4,446 $ 1,091 Total debt (GAAP) $ 13,036 $ 13,109 $ 12,594 $ 10,706 $ 9,546 $ 9,715 $ 11,856 $ 22,373 $ 23,202 $ 21,443 $ 21,131 $ 23,827 $ 23,827 $ 21,394 $ 20,088 $ 19,603 $ 21,600 $ 21,600 $ 20,577 The Dow Chemical Company's stockholders' equity (GAAP 7,626 9,175 12,270 15,324 17,065 19,389 13,511 20,555 20,417 20,490 21,906 21,839 21,839 23,021 24,185 24,152 22,281 22,281 23,026 Total debt plus The Dow Chemical Company's stockholders' equity (non-gaap) 20,662 22,284 24,864 26,030 26,611 29,104 25,367 42,928 43,619 41,933 43,037 45,666 45,666 44,415 44,273 43,755 43,881 43,881 43,603 Noncontrolling interests ,157 1,157 1,172 Preferred Securities of Subsidiaries 1,000 1,000 1,000 1,000 1,000 1, Total Capital (non-gaap) $ 22,028 $ 23,660 $ 26,313 $ 27,366 $ 27,976 $ 30,518 $ 25,936 $ 43,497 $ 44,294 $ 42,610 $ 43,735 $ 46,469 $ 46,469 $ 45,231 $ 45,127 $ 44,744 $ 45,038 $ 45,038 $ 44,775 Average Total Capital (non-gaap) $ 22,131 $ 22,844 $ 24,987 $ 26,840 $ 27,671 $ 29,247 $ 28,227 $ 34,717 $ 44,143 $ 43,770 $ 43,616 $ 44,983 $ 44,983 $ 43,921 $ 44,431 $ 45,607 $ 45,754 $ 45,754 $ 44,951 Return on Capital excluding certain items (non-gaap 4.1% 8.8% 13.1% 18.3% 17.1% 14.4% 7.8% 7.1% 6.9% 7.8% 8.2% 8.4% 8.4% 9.7% 10.4% 10.3% 9.7% 9.7% 9.3% This measure of return excludes from income certain items which Dow does not consider part of ongoing operations, and also excludes after-tax costs related to financing, such as interest expense and preferred stock dividends. PAGE 7