Dow Chemical 2013 Annual Report Download - page 61

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SEGMENT RESULTS
The Company uses EBITDA (which Dow defines as earnings (i.e., "Net Income") before interest, income taxes, depreciation
and amortization) as its measure of profit/loss for segment reporting purposes. EBITDA by operating segment includes all
operating items relating to the businesses; items that principally apply to the Company as a whole are assigned to Corporate.
Additional information regarding the Company's operating segments and a reconciliation of EBITDA to “Income Before
Income Taxes” can be found in Note 24 to the Consolidated Financial Statements.
Due to the completion of several divestitures (see Note 5 to the Consolidated Financial Statements), the change in sales volume
from 2012 to 2013 and 2011 to 2012 excluding divestitures is also provided by operating segment, where applicable. Sales
excluding divestitures exclude sales related to Nippon Unicar Company Limited, divested on July 1, 2013; sales of the
Polypropylene business, divested on September 30, 2011; and sales of Dow Haltermann, divested during 2011.
ELECTRONIC AND FUNCTIONAL MATERIALS
The Electronic and Functional Materials segment consists of two businesses – Dow Electronic Materials and Functional
Materials – and includes a portion of the Company’s share of the results of Dow Corning Corporation, a joint venture of the
Company. Dow Electronic Materials includes Display Technologies, Growth Technologies, Interconnect Technologies and
Semiconductor Technologies. Functional Materials includes Dow Consumer and Industrial Solutions, Dow Microbial Control
and Dow Pharma and Food Solutions.
Electronic and Functional Materials
In millions 2013 2012 2011
Sales $ 4,591 $ 4,481 $ 4,599
Price change from comparative period (2)% (2)% 6%
Volume change from comparative period 4 % (1)% 3%
Equity earnings $ 112 $ 94 $ 104
EBITDA $ 1,040 $ 958 $ 1,084
Certain items impacting EBITDA $ — $ (73) $ —
2013 Versus 2012
Electronic and Functional Materials sales were $4,591 million for 2013, up from $4,481 million in 2012. Sales increased
2 percent from 2012, with volume up 4 percent and price down 2 percent (with nearly one-third of the price decline due to
currency). Volume increased in all geographic areas, except EMEA, driven by higher demand for consumer electronics,
specialty polymers used in home and personal care applications and specialty materials used in energy and industrial water
applications. Price increases in North America and EMEA were more than offset by decreases in Latin America and most
notably in Asia Pacific. Price decreased in most business units. EBITDA for 2013 was $1,040 million, up from $958 million in
2012. EBITDA improved from last year as increased sales volume, higher equity earnings from Dow Corning and lower R&D
and SG&A expenses more than offset lower selling prices. EBITDA for 2012 was negatively impacted by $65 million of
restructuring charges. The 1Q12 Restructuring program included a $17 million charge related to the write-off of a capital
project. The 4Q12 Restructuring program included a $48 million charge related to asset write-downs and write-offs and
contract cancellation fees. In addition, EBITDA for 2012 included an $8 million charge related to Dow Corning's
restructuring and asset abandonment. See Notes 3 and 8 to the Consolidated Financial Statements for additional information on
these charges.
Dow Electronic Materials sales in 2013 were flat compared with 2012, with volume up 3 percent and price down 3 percent.
Volume was higher in Display Technologies due to increased demand for organic light emitting diode materials used in mobile
applications and televisions. Volume increased in Interconnect Technologies due to higher demand for printed circuit boards
and for advanced metallization used in electronic finishing. Volume decreased in Semiconductor Technologies as customers
reduced inventory levels for chemical mechanical planarization pads and slurries despite semiconductor foundry utilization
rates holding steady across the industry in 2013. The decrease in price was driven by continued competitive pressure and the
unfavorable impact of currency, which represented nearly 40 percent of the decrease and was primarily due to the weakening
Japanese yen.
Functional Materials sales in 2013 increased 5 percent from 2012, with volume up 5 percent and price flat. Volume increased in
all geographic areas, except EMEA, driven by higher demand for home and personal care products, specialty biocides used in
energy applications and acrolein derivatives. Price remained flat as price increases in acrolein derivatives were offset by
decreases in Dow Pharma and Food Solutions due to price/volume optimization efforts, notably cellulosics.