Dow Chemical 2009 Annual Report Download - page 124

Table of Contents
The following table summarizes the activities related to the Company’s restructuring reserve:
2009 Restructuring Activities
In millions
Impairment of
Long-Lived
Assets and Other
Assets
Costs associated
with Exit or
Disposal
Activities Severance Costs Total
Restructuring charges recognized in the second quarter
of 2009 $ 454 $ 68 $ 155 $ 677
Cash payments - - (72) (72)
Charges against reserve (454) (13) - (467)
Adjustment to reserve - 13 - 13
Foreign currency impact - - 1 1
Reserve balance at December 31, 2009 - $ 68 $ 84 $ 152
Dow expects to incur future costs related to its restructuring activities, as the Company continually looks for ways to enhance the efficiency and cost
effectiveness of its operations, and to ensure competitiveness across its businesses and across geographic areas. Future costs are expected to include demolition
costs related to the closed facilities, which will be recognized as incurred. The Company also expects to incur additional employee-related costs, including
involuntary termination benefits, related to its other optimization activities. These costs cannot be reasonably estimated at this time.
Restructuring Reserve Assumed from Rohm and Haas
Included in liabilities assumed in the April 1, 2009 acquisition of Rohm and Haas was a reserve of $122 million for severance and employee benefits for the
separation of 1,255 employees under the terms of Rohm and Haas’ ongoing benefit arrangement. The separations resulted from plant shutdowns, production
schedule adjustments, productivity improvements and reductions in support services. Cash payments are expected to be paid over the next two years. In the
fourth quarter of 2009, the Company decreased the severance reserve assumed from Rohm and Haas by $9 million, recorded in “Cost of sales,” to adjust the
reserve to the expected future severance payments. In the nine-month period following the acquisition, severance of $43 million was paid, leaving a currency
adjusted liability of $68 million for approximately 552 employees at December 31, 2009.
Restructuring Reserve Assumed from Rohm and Haas
In millions
Severance
Costs
Reserve balance assumed on April 1, 2009 $ 122
Cash payments (43)
Adjustments to reserve (9)
Foreign currency impact (2)
Reserve balance at December 31, 2009 $ 68
2008 Restructuring
On December 5, 2008, the Company’s Board of Directors approved a restructuring plan as part of a series of actions to advance the Company’s strategy and
respond to the severe economic downturn. The restructuring plan included the shutdown of a number of facilities and a global workforce reduction, which are
targeted to be completed by the end of 2010. As a result of the shutdowns and global workforce reduction, the Company recorded pretax restructuring charges
of $785 million in the fourth quarter of 2008. The charges consisted of asset write-downs and write-offs of $336 million, costs associated with exit or
disposal activities of $128 million and severance costs of $321 million. The impact of the charges is shown as “Restructuring charges” in the consolidated
statements of income and was reflected in the Company’s segment results as shown in the following table, which also reflects adjustments made in 2008 to the
2007 and 2006 restructuring charges. See the section titled “2007 Restructuring” for further discussion of adjustments to the 2007 restructuring charges.
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