Dow Chemical 2013 Annual Report Download - page 56

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increased 3 percent from 2011, primarily due to increases in Agricultural Sciences due to growth initiatives. In addition, SG&A
expenses were impacted by $2 million of implementation costs related to the Company's restructuring programs in 2013 and
$21 million of restructuring program implementation costs in 2012 (reflected in Corporate).
Production Costs and Operating Expenses
The following table illustrates the relative size of the primary components of total production costs and operating expenses of
Dow. More information about each of these components can be found in other sections of Management’s Discussion and
Analysis of Financial Condition and Results of Operations, and Notes to the Consolidated Financial Statements.
Production Costs and Operating Expenses
Cost components as a percent of total 2013 2012 2011
Hydrocarbon feedstocks and energy 38% 37% 42%
Salaries, wages and employee benefits 15 13 13
Maintenance 4 4 4
Depreciation 4 4 4
Restructuring charges — 3 —
Supplies, services and other raw materials 39 39 37
Total 100% 100% 100%
Amortization of Intangibles
Amortization of intangibles was $461 million in 2013, $478 million in 2012 and $496 million in 2011. In 2013, amortization of
intangibles was impacted by a $3 million asset impairment charge (impacting Corporate). See Notes 9 and 11 to the
Consolidated Financial Statements for additional information regarding this matter.
Goodwill Impairment/Testing
The Company performs annual goodwill impairment tests during the fourth quarter of the year. In 2013, the Company
performed qualitative testing for 14 of its 19 reporting units carrying goodwill and quantitative testing for 5 of its reporting
units. As a result of this testing, no goodwill impairments were identified.
During the fourth quarter of 2012, the Company performed qualitative testing for 11 of the 20 reporting units carrying
goodwill. The qualitative assessment indicated that it was more likely than not that the fair value exceeded carrying value for
those reporting units. The Company performed the first step of the quantitative testing for the remaining 9 reporting units. The
Company utilized a discounted cash flow methodology to calculate the fair value of the reporting units. Based on the fair value
analysis, management concluded that fair value exceeded carrying value for all reporting units except the Dow Formulated
Systems reporting unit. Management completed the second step of the quantitative test for Dow Formulated Systems which
compared the implied fair value of the reporting unit's goodwill to the carrying value. As a result of this test, the Company
recorded an impairment loss of $220 million in the fourth quarter of 2012, which is included in "Goodwill impairment loss" in
the consolidated statements of income and reflected in Performance Materials. The goodwill impairment loss represents the
total amount of goodwill carried by the Dow Formulated Systems reporting unit.
During the fourth quarter of 2011, the Company performed qualitative testing for all reporting units carrying goodwill. As a
result of this testing, no goodwill impairments were identified. See Critical Accounting Policies in Other Matters in
Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 9 to the Consolidated
Financial Statements for additional information regarding goodwill and the impairment tests conducted in each year.
Restructuring Charges (Credits)
On March 27, 2012, the Company's Board of Directors approved a restructuring plan ("1Q12 Restructuring") as part of a series
of actions to optimize its portfolio, respond to changing and volatile economic conditions, particularly in Western Europe, and
to advance the Company's Efficiency for Growth program, which was initiated by the Company in the second quarter of 2011.
The 1Q12 Restructuring plan included the shutdown of a number of facilities and a global workforce reduction. These actions
were substantially complete at December 31, 2013. As a result of the 1Q12 Restructuring activities, the Company recorded
pretax restructuring charges of $357 million in the first quarter of 2012 consisting of costs associated with exit and disposal
activities of $150 million, severance costs of $113 million and asset write-downs and write-offs of $94 million. The impact of
these charges is shown as "Restructuring charges (credits)" in the consolidated statements of income and reflected in the
Company's segment results as follows: $17 million in Electronic and Functional Materials, $41 million in Coatings and
Infrastructure Solutions, $186 million in Performance Materials and $113 million in Corporate. During the fourth quarter of
2012, the Company recorded a favorable adjustment to the 1Q12 Restructuring charge related to the impairment of long-lived
assets and other assets of $4 million, impacting the Coatings and Infrastructure Solutions segment.