Dow Chemical 2013 Annual Report Download - page 107

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NOTE 7 – PROPERTY
Property at December 31
In millions
Estimated Useful
Lives (Years) 2013 2012
Land — $ 907 $ 916
Land and waterway improvements 15-25 1,404 1,377
Buildings 5-55 4,945 4,886
Machinery and equipment 3-20 39,971 39,828
Utility and supply lines 5-20 2,446 2,350
Other property 3-50 2,430 2,267
Construction in progress — 3,011 2,742
Total property $ 55,114 $ 54,366
In millions 2013 2012 2011
Depreciation expense $ 2,051 $ 2,057 $ 2,177
Manufacturing maintenance and repair costs $ 2,325 $ 2,188 $ 2,247
Capitalized interest $ 78 $ 84 $ 90
NOTE 8 – NONCONSOLIDATED AFFILIATES AND RELATED COMPANY TRANSACTIONS
The Company’s investments in companies accounted for using the equity method (“nonconsolidated affiliates”) were
$4,501 million at December 31, 2013 and $4,121 million at December 31, 2012. At December 31, 2013, the carrying amount of
the Company’s investments in nonconsolidated affiliates was $67 million more than its share of the investees’ net assets,
exclusive of additional differences for Dow Corning Corporation (“Dow Corning”) and MEGlobal, which are discussed
separately below. At December 31, 2012, the carrying amount of the Company’s investments in nonconsolidated affiliates was
$69 million more than its share of the investees’ net assets, exclusive of additional differences for Dow Corning and MEGlobal.
Dividends received from the Company’s nonconsolidated affiliates were $905 million in 2013, $823 million in 2012 and
$1,016 million in 2011.
At December 31, 2013, the Company’s investment in Dow Corning was $149 million less than the Company’s proportionate
share of Dow Corning’s underlying net assets ($227 million less at December 31, 2012). This amount is considered a
permanent difference related to the other-than-temporary decline in the Company's investment in Dow Corning, triggered by
Dow Corning's May 15, 1995 bankruptcy filing, and Dow Corning's purchase of additional ownership interests in its Hemlock
Semiconductor Group entities in 2013. Dow Corning emerged from bankruptcy in 2004.
At December 31, 2013, the Company’s investment in MEGlobal was $184 million less than the Company’s proportionate share
of MEGlobal’s underlying net assets ($193 million less at December 31, 2012). This amount represents the difference between
the value of certain assets of the joint venture and the Company’s related valuation on a U.S. GAAP basis, of which $45 million
(including $3 million related to Equipolymers) is being amortized over the remaining useful lives of the assets and $139 million
is considered to be a permanent difference. On July 1, 2011, Equipolymers was merged into MEGlobal, with MEGlobal
continuing as the surviving entity. In the third quarter of 2011, the Company received $115 million on a previously impaired
note receivable related to its investment in Equipolymers and recognized $86 million in income, included in "Equity in
earnings of nonconsolidated affiliates" in the consolidated statements of income and reflected in Performance Plastics.
On October 30, 2011, the Company and Saudi Arabian Oil Company formed Sadara Chemical Company ("Sadara") to build
and operate a world-scale, fully integrated chemicals complex in Jubail Industrial City, Kingdom of Saudi Arabia. Construction
began immediately and the first production units are expected to come on-line in the second half of 2015, with all units
expected to be up and running in 2016. On December 8, 2012, Sadara's shareholders received approval to increase their share
capital. Pursuant to this approval, Dow's $905 million of development costs related to Sadara were converted to equity and
classified as "Investments in nonconsolidated affiliates" in the consolidated balance sheets. The Company's investment in
Sadara is included in "Investments in and loans to nonconsolidated affiliates" in the consolidated statements of cash flows.
Prior to the fourth quarter of 2011, the Company's investment in the Sadara project was included in "Investments in
consolidated companies, net of cash acquired" in the consolidated statements of cash flows.
All of the nonconsolidated affiliates in which the Company has investments are privately held companies; therefore, quoted
market prices are not available.