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):
October 21, 1999
THE DOW CHEMICAL COMPANY
(Exact name of registrant as specified in its charter)
Delaware 1-3433 38-1285128
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) 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.)
Item 5. Other Events
The Dow Chemical Company issued a press release on October
21, 1999, the text of which is as follows:
October 21, 1999
Dow Reports Higher Earnings and Sales for Third Quarter
Third Quarter of 1999 Highlights
Earnings were $1.44 per share, an 8 percent increase from
third quarter 1998 earnings per share of $1.33 excluding unusual
items.
Sales for the quarter were $4.7 billion, up nine percent from
a year ago. Both volume and price improved - by seven percent
and two percent respectively.
EBIT was $584 million for the quarter versus $540 million,
excluding unusual items, for third quarter 1998 - a gain of eight
percent.
_________________________________________________________________
(In millions, except for per share amounts)
3 Months Ended 9 Months Ended
September 30 September 30
1999 1998 1999 1998
Net Sales $4693 $4314 $13729 $14000
Earnings Before Interest,
Income Taxes and
Minority Interests (EBIT) $584 $564 $1981 $2075
Earnings Per Common Share $1.44 $1.40 $4.74 $5.10
Excluding unusual items:
EBIT $584 $540 $1981 $2023
Earnings Per Common Share $1.44 $1.33 $4.74 $4.96
(more)
Review of Third Quarter Results
The Dow Chemical Company today announced higher sales and
earnings compared with the same quarter a year ago. The company
reported sales of $4.7 billion, earnings before interest, income
taxes and minority interests (EBIT) of $584 million and net
income of $320 million. Earnings per share of $1.44 were up
eight percent, excluding unusual items from third quarter 1998.
The company's higher earnings were achieved despite a 30 percent
spike in feedstock and energy costs from the same period a year
ago, according to J. Pedro Reinhard, executive vice president and
chief financial officer. "These strong results truly
differentiate Dow and reflect our ability to withstand
significant increases in feedstock costs through our diversified
business portfolio and geographic mix, operational excellence and
cost reductions." He added, "The fact that we have achieved
favorable year-to-year comparisons in sales and earnings
underscores that Dow will earn a positive economic profit this
year."
Sales increased by nine percent, while EBIT grew eight percent
excluding 1998 unusual items. Dow's volume climbed seven percent
- - the highest year-over-year growth since second quarter 1997.
Double-digit volume growth was achieved in Asia and Europe as
well as in the Plastics segment.
Price rose by two percent compared with the same quarter a year
ago and by five percent versus last quarter. Price increases in
the basics segments more than offset declines in the performance
businesses.
On a year-to-date basis excluding 1998 unusual items, EBIT for
Dow's combined performance segments was up two percent,
contributing more than 60 percent of the company's total
earnings. For the quarter, EBIT declined from the same period a
year ago reflecting higher feedstock costs and price
deterioration, which were only partially offset by increased
volume. Performance Plastics sales increased to $1.3 billion,
reflecting a nine percent growth in volume with strongest gains
in Engineering Plastics and Adhesives, Sealants and Coatings.
Sales in Performance Chemicals rose to $674 million, bolstered by
a six percent increase in volume. Exhibiting normal third
quarter seasonality, EBIT for the Agricultural Products segment
was negative, though up from the third quarter of 1998 due to a
strong focus on productivity improvements.
In the Chemicals and Plastics segments, improved productivity,
strong demand and some price recovery more than offset higher
feedstock and energy costs. The Chemicals segment turned in EBIT
of $101 million, an increase of 46 percent from the same period a
year ago. In the Plastics segment, EBIT improved by 57 percent
from third quarter 1998 to $207 million, on volume gains of 18
percent coupled with a ten percent increase in price. This
latter segment drew particular strength from its differentiated
product mix focused on higher value markets and high growth
customers.
"We are very pleased with the quarter's results, which again
demonstrate Dow's resilience based on our global business
leadership positions and low-cost structure," said Reinhard. "We
look forward to continuing this strong performance supported by
improving global economic conditions. Dow is delivering on its
commitments and remains focused on implementing its strategy to
achieve aggressive value growth."
The Dow Chemical Company is a global science and technology based
company that develops and manufactures a portfolio of chemical,
plastic and agricultural products and services for customers in
168 countries around the world. With annual sales of more than
$18 billion, Dow conducts its operations through 14 global
businesses employing 39,000 people and supplies more than 3,500
products.
# # #
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, as well as issues related to Year 2000 and
the Euro conversion. Accordingly, there is no assurance that the
company's expectations will be realized.
The Dow Chemical Company - 3Q99 Earnings
Financial Statements The Dow Chemical Company and Subsidiaries
Consolidated Statements of Income (Unaudited)
In millions, except for share amounts 3 Months Ended 9 Months Ended
9/30/99 9/30/98 9/30/99 9/30/98
NET SALES $4693 $4314 $13729 $14000
Cost of Sales 3587 3258 10258 10451
Research and development expenses 203 198 618 580
Selling, general and administrative
expenses 381 401 1145 1244
Amortization of intangibles 27 23 81 62
Purchased in-process research and
development charges (Note B) - - - 350
Special charges (Note C) - (24) - 306
Insurance and finance company operations,
pretax income 21 25 82 83
Equity in earnings of nonconsolidated
affiliates 15 28 62 78
Sundry income - net (Note D) 53 53 210 907
EARNINGS BEFORE INTEREST, INCOME TAXES
AND MINORITY INTERESTS 584 564 1981 2075
Interest income 29 34 81 100
Interest expense and amortization
of debt discount 93 121 334 370
INCOME BEFORE INCOME TAXES
AND MINORITY INTERESTS 520 477 1728 1805
Provision for taxes on income 182 158 613 632
Minority interests' share in income 17 4 52 9
Preferred stock dividends 1 1 4 4
NET INCOME AVAILABLE FOR
COMMON STOCKHOLDERS $320 $314 $1059 $1160
Share data
Earnings per common share - basic $1.46 $1.41 $4.81 $5.17
Earnings per common share - diluted $1.44 $1.40 $4.74 $5.10
Common stock dividends declared
per share $0.87 $0.87 $2.61 $2.61
Weighted-average common shares
outstanding - basic 219.4 222.7 220.1 224.3
Weighted-average common shares
outstanding - diluted 224.0 226.2 224.2 228.2
DEPRECIATION $273 $272 $830 $814
CAPITAL EXPENDITURES $353 $365 $950 $994
Notes to Financial Statements:
Note A: The unaudited interim 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 financial statements and notes
thereto included in the Company's Form 10-K for the
year ended December 31, 1998. (Except as otherwise
indicated by the context, the terms "Company" or "Dow"
as used herein mean The Dow Chemical Company and its
consolidated subsidiaries).
Note B: During the first half of 1998, pretax charges totaling
$350 million were recorded for purchased in-process
research and development (IPR&D) costs associated with
the acquisitions of Dow AgroSciences, Mycogen and
Sentrachem Limited. This amount was reduced in the
fourth quarter or 1998 by $55 million, in accordance
with the SEC's clarified guidance on IPR&D.
Note C: During the first quarter of 1998, a pretax special
charge of $330 million was recorded, principally for
severance costs and asset write-downs. In the third
quarter of 1998, this charge was reduced by $24
million.
Note D: In January 1998, the Company completed the sale of the
DowBrands business to S. C. Johnson & Son, Inc. The
sale resulted in a pretax gain of $816 million.
Note E: During the third quarter of 1999, a third party
contributed $500 million for a preferred interest in a
newly formed consolidated subsidiary of the Company.
Consolidated Balance Sheets - The Dow Chemical Company and Subsidiaries
In millions (Unaudited)
ASSETS 9/30/99 12/31/98
Current Assets
Cash and cash equivalents $369 $123
Marketable securities and interest-bearing 672 267
deposits
Accounts and notes receivable:
Trade (less allowance for doubtful 2223 2787
receivables: 1999, $132; 1998, $93)
Other 1889 1750
Inventories:
Finished and work in process 2168 2245
Material and supplies 591 565
Deferred income tax assets - current 255 303
Total current assets 8167 8040
Investments
Investment in nonconsolidated affiliates 1371 1311
Other investments 2239 2191
Noncurrent receivables 400 424
Total investments 4010 3926
Property
Property 24097 24435
Less accumulated depreciation 15730 15988
Net property 8367 8447
Other Assets
Goodwill (net of accumulated amortization: 1629 1641
1999, $292; 1998, $246)
Deferred income tax assets - noncurrent 583 684
Deferred charges and other assets 1116 1092
Total other assets 3328 3417
Total Assets $23872 $23830
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $921 $1526
Long-term debt due within one year 213 300
Accounts payable:
Trade 1695 1682
Other 882 981
Income taxes payable 210 290
Deferred income tax liabilities - current 40 71
Dividends payable 193 192
Accrued and other current liabilities 1970 1800
Total current liabilities 6124 6842
Long-Term Debt 4130 4051
Other Noncurrent Liabilities
Deferred income tax liabilities - noncurrent 809 747
Pension and other postretirement benefits -
noncurrent 1882 1903
Other nonconcurrent obligations 2286 2283
Total other noncurrent liabilities 4977 4933
Minority Interest in Subsidiaries 413 532
Preferred Securities of Subsidiary (Note E) 509 -
Temporary Equity
Preferred stock at redemption value 114 117
Guaranteed ESOP obligation (74) (74)
Total temporary equity 40 43
Stockholders' Equity
Common stock 818 818
Additional paid-in capital 898 718
Retained earnings 13372 12887
Accumulated other comprehensive income (353) (347)
Treasury stock, at cost (7056) (6647)
Net Stockholders' equity 7679 7429
Total Liabilities and Stockholders Equity $23872 $23830
See Notes to Financial Statements
RESULTS OF OPERATIONS (Unaudited) The Dow Chemical Company
and Subsidiaries
OPERATING SEGMENTS AND GEOGRAPHIC AREAS
3 Months Ended 9 Months Ended
In millions 9/30/99 9/30/98 9/30/99 9/30/98
Operating segment sales
Performance Plastics $1302 $1254 $3862 $3800
Performance Chemicals 674 663 1971 1965
Agricultural Products 399 424 1732 1831
Plastics 1170 915 3110 2905
Chemicals 607 555 1660 1817
Hydrocarbons and Energy 469 367 1141 1153
Unallocated and Other 72 136 253 529
Total $4693 $4314 $13729 $14000
Operating segment EBIT
Performance Plastics $248 $300 $815 $841
Performance Chemicals 108 136 381 334
Agricultural Products (35) (45) 205 (183)
Plastics 207 132 437 549
Chemicals 101 69 290 215
Hydrocarbons and Energy (17) 19 (7) (13)
Unallocated and Other (28) (47) (140) 332
Total $584 $564 $1981 $2075
Geographic area sales
United States $1821 $1743 $5577 $5710
Europe 1572 1427 4663 4830
Rest of World 1300 1144 3489 3460
Total $4693 $4314 $13729 $14000
SALES VOLUME AND PRICE BY OPERATING SEGMENT
AND GEOGRAPHIC AREA 3 Months Ended 9 Months Ended
9/30/99 9/30/99
Percentage change from
prior year Volume Price Total Volume Price Total
Operating segments
Performance Plastics 9% (5)% 4% 7% (5)% 2%
Performance Chemicals 6% (4)% 2% 3% (3)% 0%
Agriculture Products (2)% (4)% (6)% (2)% (3)% (5)%
Plastics 18% 10% 28% 14% (7)% 7%
Chemicals 7% 2% 9% 0% (9)% (9)%
Hydrocarbons and Energy 5% 23% 28% (1)% 0% (1)%
Total 7% 2% 9% 3% (5)% (2)%
Geographic areas
United States 1% 3% 4% 0% (2)% (2)%
Europe 10% 0% 10% 4% (7)% (3)%
Rest of World 13% 1% 14% 7% (6)% 1%
Total 7% 2% 9% 3% (5)% (2)%
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/ JOHN SCRIVEN
John Scriven
Vice President,
General Counsel and
Secretary
Date: October 21, 1999
