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): June 28, 1995
THE DOW CHEMICAL COMPANY
(Exact name of registrant as specified in its charter)
Delaware 1-3433 38-1285128
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
2030 Dow Center, Midland, Michigan 48674
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (517) 636-1000
Not applicable
(Former name or former address, if changed since last report.)
Page 1
Item 2. Acquisition or Disposition of Assets
Dow issued a press release on June 28, 1995, the text of
which is as follows:
June 28, 1995
DOW SELLS ITS SHARES OF MARION MERRELL DOW TO HOECHST
The Dow Chemical Company has completed the sale of its
approximately 197 million shares of Marion Merrell Dow
to Hoechst for about $5.1 billion. The transaction
will result in a gain for Dow in the range of 35 to 50
cents per share to be reported in second quarter of
1995 earnings. Dow's second quarter sales and
operating income will not include Marion Merrell Dow's
results.
"Our decision to divest of Marion Merrell Dow allows us
to concentrate on the businesses we know best," said
Frank Popoff, Dow chairman and chief executive officer.
"The company is reviewing alternative uses for the cash
generated from this sale and will select the options
that best enhance shareholder value."
Dow expects to complete the sale of its pharmaceutical
activities in Latin America to Roussel Uclaf within
days. The purchase price will be about $145 million
and result in a gain for Dow in a range of 15 to 20
cents per share.
On June 30, 1995 and July 3, 1995, certain wholly owned
subsidiaries of Dow completed the sale of the Latin American
Pharmaceutical business to Roussel Uclaf for approximately
$145 million.
Page 2
ITEM 7: Financial Statements and Exhibits
(b) Pro Forma Financial Information.
The following unaudited pro forma consolidated statements of income for
the twelve months ended December 31, 1994, and the three months ended
March 31, 1995, reflect the operations of the Company as reported and as
restated, reflecting the exclusion of the pharmaceutical business as though
the sale of the pharmaceutical business had occurred at the beginning of
1994. The unaudited pro forma consolidated statement of income for the
twelve months ended December 31, 1994, reflects an estimated after tax
gain on the sale of the pharmaceutical business of $191 million or 70 cents
per share. The cash proceeds realized by the Company on the sale of the
pharmaceutical business, before taxes due on the gain, amounted to
approximately $5.2 billion. Future income resulting from the investment
of these proceeds has not been recognized in the unaudited pro forma
consolidated statements of income.
The following unaudited pro forma consolidated balance sheet as of March 31,
1995, reflects the financial position of the Company as reported and as
restated reflecting the exclusion of the pharmaceutical business as though the
sale of the pharmaceutical business had occurred at March 31, 1995. The
unaudited pro forma consolidated balance sheet as of March 31, 1995, reflects
the elimination of the net assets of the pharmaceutical business including
goodwill recorded in the Company's books, the pharmaceutical intercompany
accounts as trade accounts, the inclusion of the proceeds from the sale in
cash and cash equivalents, and the after tax gain on the sale in retained
earnings.
These unaudited pro forma financial statements have been prepared based on
assumptions and estimates deemed appropriate. The gain on the sale of the
pharmaceutical business may change upon final determination. These unaudited
pro forma financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K for the year
ended December 31, 1994, and the Company's Form 10-Q for the three months
ended March 31, 1995.
These unaudited pro forma financial statements are presented for illustrative
purposes only and are not necessarily indicative of the financial position or
results of operations which would have actually been reported had the
transactions occurred in the periods reported or in a future period to be
reported.
Page 3
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
The Dow Chemical Company and Subsidiaries
For the Twelve Months Ended December 31, 1994
(Unaudited) (A) (B) (C) (A)-(B)+(C)
As Pharmaceutical Pro Forma As
In millions, except for share amounts Reported Business Adjustments Restated
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Net Sales $20,015 $3,273 $0 $16,742
- -----------------------------------------------------------------------------------------------------------------
Operating Costs and Expenses
Cost of sales 13,219 1,088 0 12,131
Insurance and finance company operations,
pretax income (40) 0 0 (40)
Research and development expenses 1,261 478 0 783
Promotion and advertising expenses 658 247 0 411
Selling and administrative expenses 2,403 809 0 1,594
Amortization of intangibles 169 126 0 43
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Total operating costs and expenses 17,670 2,748 0 14,922
- -----------------------------------------------------------------------------------------------------------------
Operating Income 2,345 525 0 1,820
- -----------------------------------------------------------------------------------------------------------------
Other Income (Expense)
Equity in earnings of 20%-50% owned companies 63 34 0 29
Interest expense (537) (175) 0 (362)
Interest income and foreign exchange 138 40 0 98
Net loss on investments (60) (18) 0 (42)
Sundry 103 20 0 83
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Total other income (expense) (293) (99) 0 (194)
- -----------------------------------------------------------------------------------------------------------------
Income before provision for taxes
on income and minority interests 2,052 426 0 1,626
Provision for taxes on income 779 125 0 654
Minority interests' share in income 335 135 0 200
Net income 938 166 0 772
Preferred stock dividends 7 0 0 7
- -----------------------------------------------------------------------------------------------------------------
Income from continuing operations 931 166 0 765
- -----------------------------------------------------------------------------------------------------------------
Discontinued Operations:
Income from pharmaceutical business,
net of taxes on income 0 0 166 166
Gain on sale of pharmaceutical business
net of taxes on income 0 0 191 (E) 191
- -----------------------------------------------------------------------------------------------------------------
Net income available for common stockholders $931 $166 $357 1,122
- -----------------------------------------------------------------------------------------------------------------
Average common shares outstanding 276.1 0.0 0.0 276.1
Earnings per common share from
continuing operations $3.37 $0.60 $0.00 $2.77
Earnings per common share $3.37 $0.60 $1.30 $4.07
Common stock dividends declared per share $2.60 $0.00 $0.00 $2.60
- -----------------------------------------------------------------------------------------------------------------
See Notes to the Pro Forma Consolidated Financial Statements.
</TABLE>
Page 4
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
The Dow Chemical Company and Subsidiaries
For the Three Months Ended March 31, 1995
(Unaudited) (A) (B) (C) (A)-(B)+(C)
As Pharmaceutical Pro Forma As
In millions, except for share amounts Reported Business Adjustments Restated
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Net Sales $5,962 $757 $0 $5,205
- -----------------------------------------------------------------------------------------------------------------
Operating Costs and Expenses
Cost of sales 3,574 248 0 3,326
Insurance and finance company operations,
pretax income (13) 0 0 (13)
Research and development expenses 324 111 0 213
Promotion and advertising expenses 161 44 0 117
Selling and administrative expenses 670 194 0 476
Amortization of intangibles 92 81 0 11
----------------------------------------------------------------
Total operating costs and expenses 4,808 678 0 4,130
- -----------------------------------------------------------------------------------------------------------------
Operating Income 1,154 79 0 1,075
- -----------------------------------------------------------------------------------------------------------------
Other Income (Expense)
Equity in earnings of 20%-50% owned companies 30 5 0 25
Interest expense (137) (36) 0 (101)
Interest income and foreign exchange 42 4 0 38
Net loss on investments 0 0 0 0
Sundry 37 26 0 11
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Total other income (expense) (28) (1) 0 (27)
- -----------------------------------------------------------------------------------------------------------------
Income before provision for taxes
on income and minority interests 1,126 78 0 1,048
Provision for taxes on income 450 37 0 413
Minority interests' share in income 92 24 0 68
Net income 584 17 0 567
Preferred stock dividends 2 0 0 2
- -----------------------------------------------------------------------------------------------------------------
Income from continuing operations $582 $17 0 $565
- -----------------------------------------------------------------------------------------------------------------
Discontinued Operations:
Income from pharmaceutical business,
net of taxes on income 0 0 17 17
- -----------------------------------------------------------------------------------------------------------------
Net income available for common stockholders $582 $17 $17 $582
- -----------------------------------------------------------------------------------------------------------------
Average common shares outstanding 276.9 0.0 0.0 276.9
Earnings per common share from
continuing operations $2.10 $0.06 $0.00 $2.04
Earnings per common share $2.10 $0.06 $0.06 $2.10
Common stock dividends declared per share $0.65 $0.00 $0.00 $0.65
- -----------------------------------------------------------------------------------------------------------------
See Notes to the Pro Forma Consolidated Financial Statements.
</TABLE>
Page 5
<TABLE>
<CAPTION>
PRO FORMA CONSOLIDATED BALANCE SHEET
The Dow Chemical Company and Subsidiaries
As of March 31, 1995
(Unaudited) (A) (B) (C) (A)-(B)+(C)
As Pharmaceutical Pro Forma As
In millions Reported Business Adjustments Restated
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents $632 $120 $5,201 (A) $5,713
Marketable securities & interest-bearing deposits 549 441 0 108
Accounts and notes receivable:
Trade (less allowance for
doubtful receivables) 3,747 820 653 (B) 3,580
Other 1,456 119 49 (B) 1,386
Inventories:
Finished and work in process 2,257 300 0 1,957
Materials and supplies 620 53 0 567
Deferred income taxes receivable - current 482 124 0 358
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Total current assets 9,743 1,977 5,903 13,669
- -----------------------------------------------------------------------------------------------------------------
Investments
Capital stock at cost plus equity in accumulated
earnings of 20%-50% owned companies 940 15 0 925
Other investments 1,632 249 0 1,383
Noncurrent receivables 344 21 0 323
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Total investments 2,916 285 0 2,631
- -----------------------------------------------------------------------------------------------------------------
Plant properties 24,133 1,407 0 22,726
Less accumulated depreciation 15,311 651 0 14,660
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Net plant properties 8,822 756 0 8,066
- -----------------------------------------------------------------------------------------------------------------
Other assets
Goodwill (net of accumulated amortization) 4,380 3,696 0 684
Deferred income taxes receivable - noncurrent 1,172 169 0 1,003
Deferred charges and other assets 986 256 14 (D) 744
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Total other assets 6,538 4,121 14 2,431
- -----------------------------------------------------------------------------------------------------------------
Total assets $28,019 $7,139 $5,917 $26,797
- -----------------------------------------------------------------------------------------------------------------
See Notes to the Pro Forma Consolidated Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Page 6
PRO FORMA CONSOLIDATED BALANCE SHEET
The Dow Chemical Company and Subsidiaries
As of March 31, 1995
(Unaudited) (A) (B) (C) (A)-(B)+(C)
As Pharmaceutical Pro Forma As
In millions Reported Business Adjustments Restated
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------------------------------------------------------
Current Liabilities
Notes payable $845 $411 $376 (B) $810
Long-term debt due within one year 665 13 0 652
Accounts payable:
Trade 1,696 297 300 (B) 1,699
Other 897 35 0 862
Income taxes payable 986 116 362 (C) 1,232
Deferred income taxes payable - current 94 0 0 94
Dividends payable 206 69 49 (B) 186
Accrued and other current liabilities 1,963 484 85 (D) 1,564
----------------------------------------------------------------
Total current liabilities 7,352 1,425 1,172 7,099
- -----------------------------------------------------------------------------------------------------------------
Long-term debt 5,429 102 0 5,327
- -----------------------------------------------------------------------------------------------------------------
Deferred Taxes and Other Liabilities
Deferred income taxes payable - noncurrent 776 92 0 684
Pension and other postretirement benefits 2,028 103 0 1,925
Other noncurrent obligations 1,301 67 0 1,234
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Total deferred taxes and other liabilities 4,105 262 0 3,843
- -----------------------------------------------------------------------------------------------------------------
Minority interest in subsidiary companies 2,586 798 0 1,788
- -----------------------------------------------------------------------------------------------------------------
Temporary Equity
Preferred stock at redemption value 133 0 0 133
Less guaranteed ESOP obligation 111 0 0 111
----------------------------------------------------------------
Total temporary equity 22 0 0 22
- -----------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common stock 818 0 0 818
Additional paid-in capital 316 0 0 316
Retained earnings 9,259 4,558 4,749 (E) 9,450
Unrealized gains on investments 14 7 0 7
Cumulative translation adjustments (342) (13) (4) (D) (333)
Treasury stock, at cost (1,540) 0 0 (1,540)
----------------------------------------------------------------
Net stockholders' equity 8,525 4,552 4,745 8,718
- -----------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $28,019 $7,139 $5,917 $26,797
- -----------------------------------------------------------------------------------------------------------------
See Notes to the Pro Forma Consolidated Financial Statements.
Page 7
Notes to the Pro Forma Consolidated Financial Statements
(A) Reflects the proceeds received from the disposition of the pharmaceutical
business.
(B) Reflects intercompany assets and liabilities eliminated in consolidation
which would be assets or obligations of the Company due from or payable
to the pharmaceutical business.
(C) Reflects the estimated taxes on income due on the sale of the
pharmaceutical business.
(D) Reflects assets, liabilities and stockholders' equity of the Company
recognized as a result of the sale of the pharmaceutical business.
(E) Includes the adjustment necessary to reflect the gain on the sale of
the pharmaceutical business, net of taxes on income.
</TABLE>
Page 8
(c) Exhibits.
2.1 Agreement and Plan of Merger dated May 3, 1995, by and
among Marion Merrell Dow Inc., The Dow Chemical Company,
Hoechst Corporation and H Pharma Acquisition Corp.
(filed as the correspondingly numbered exhibit to the
Company's Current Report on Form 8-K dated May 3, 1995
and incorporated herein by reference).
2.2 Stock Purchase Agreement, dated May 3, 1995, by and
among Hoechst Corporation, H Pharma Acquisition Corp.,
The Dow Chemical Company, RH Acquisition Corp. and Dow
Holdings Inc. (filed as the correspondingly numbered
exhibit to the Company's Current Report on Form 8-K
dated May 3, 1995 and incorporated herein by reference).
2.3 Indemnity Agreement, dated as of May 3, 1995, between
Hoechst Corporation and The Dow Chemical Company (filed
as the correspondingly numbered exhibit to the Company's
Current Report on Form 8-K dated May 3, 1995 and
incorporated herein by reference).
2.4 Tax Allocation Agreement, dated as of May 3, 1995, among
The Dow Chemical Company, Hoechst Corporation and Marion
Merrell Dow Inc. (filed as the correspondingly numbered
exhibit to the Company's Current Report on Form 8-K
dated May 3, 1995 and incorporated herein by reference).
2.5 Computerized Process Control Software Agreement (Leases
and Services), dated as of May 3, 1995, between Rofan
Services, Inc. and Marion Merrell Pharmaceuticals, Inc.
(filed as the correspondingly numbered exhibit to the
Company's Current Report on Form 8-K dated May 3, 1995
and incorporated herein by reference).
2.6 Computerized Process Control Software Agreement (Leases
and Services), dated as of May 3, 1995, between Rofan
Automation and Information Systems B.V. and Gruppo
Lepetit S.p.A. (filed as the correspondingly numbered
exhibit to the Company's Current Report on Form 8-K
dated May 3, 1995 and incorporated herein by reference).
2.7 Computerized Process Control Software Agreement (Leases
and Services), dated as of May 3, 1995, between Rofan
Automation and Information Systems B.V. and Biochimica
Del Salento S.p.A. (filed as the correspondingly
numbered exhibit to the Company's Current Report on Form
8-K dated May 3, 1995 and incorporated herein by
reference).
2.8 Insurance Separation Agreement, dated as of May 3, 1995,
among The Dow Chemical Company, Hoechst Corporation,
Marion Merrell Dow Inc., Dorinco Insurance Company,
Dorintal Reinsurance Ltd. and Timber Insurance Ltd.
(filed as the correspondingly numbered exhibit to the
Company's Current Report on Form 8-K dated May 3, 1995
and incorporated herein by reference).
2.9 Manufacturing Agreement Amendment, dated as of May 3,
1995, between The Dow Chemical Company and Marion
Merrell Pharmaceuticals, Inc. (filed as the
correspondingly numbered exhibit to the Company's
Current Report on Form 8-K dated May 3, 1995 and
incorporated herein by reference).
2.10 Second Amendment to Master Services Agreements,
dated as of May 3, 1995, between Marion Merrell Dow
Inc., The Dow Chemical Company and Marion Merrell
Pharmaceuticals, Inc. (filed as the correspondingly
numbered exhibit to the Company's Current Report on Form
8-K dated May 3, 1995 and incorporated herein by
reference).
Page 9
2.11 Third Amendment to Master Services Agreements,
dated as of May 3, 1995, between Marion Merrell Dow
Inc., The Dow Chemical Company and Marion Merrell
Pharmaceuticals, Inc. (filed as the correspondingly
numbered exhibit to the Company's Current Report on Form
8-K dated May 3, 1995 and incorporated herein by
reference).
2.12 Letter Agreement, dated as of May 3, 1995, between
The Dow Chemical Company and Marion Merrell Dow Inc.
(filed as the correspondingly numbered exhibit to the
Company's Current Report on Form 8-K dated May 3, 1995
and incorporated herein by reference).
2.13 Letter Agreement, dated as of May 3, 1995, among
The Dow Chemical Company, Marion Merrell
Pharmaceuticals, Inc. and Marion Merrell Dow Inc. (filed
as the correspondingly numbered exhibit to the Company's
Current Report on Form 8-K dated May 3, 1995 and
incorporated herein by reference).
2.14 Purchase Agreement, dated as of May 3, 1995,
between Latin American Pharmaceutical Inc., Dow Quimica
Argentina S.A., Dow Quimica Mexicana S.A., Dow Productos
Quimicos LTDA, Mineracao e Quimica de Nordeste, Dow
Quimica S.A., Merrell Lepetit Farmaceutica Industrial
LTDA, Laboratorios Lepetit de Mexico S.A. de C.V. and
Roussel Uclaf S.A. (filed as the correspondingly
numbered exhibit to the Company's Current Report on Form
8-K dated May 3, 1995 and incorporated herein by
reference).
Page 10
SIGNATURES
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 hereunto duly
authorized.
THE DOW CHEMICAL COMPANY
Registrant
/s/
_______________________________
ROGER L. KESSELER
Vice President, Controller
Date: July 13, 1995
Page 11
