Dow Chemical 2009 Annual Report Download - page 129

Table of Contents
·Due to an unfavorable financial outlook, reflecting significant long-term economic challenges, the Company determined in the fourth quarter of 2007
that its equity investment in Pétromont, a 50 percent owned company, was other-than-temporarily impaired and recorded a $46 million write-down of
its interest in Pétromont against the Basic Plastics segment. In the fourth quarter of 2008, the joint venture announced the permanent shutdown of its
operations. As a result of this announcement, the Company recorded an additional charge of $50 million in the fourth quarter of 2008.
·Due to the loss of a significant portion of business and the lack of replacement business opportunities, the Company determined its equity
investment in Dow Reichhold Specialty Latex LLC, a 50:50 joint venture, to be other-than-temporarily impaired and recorded a $42 million write-
down of its interest in Dow Reichhold Specialty Latex LLC against the Performance Products segment in the fourth quarter of 2007. An agreement
was reached in the third quarter of 2008 to end the Company’s involvement in the joint venture.
In addition to the write-downs described above, the restructuring charges for investments in nonconsolidated affiliates included $11 million related to
the dissolution of two smaller joint ventures.
The restructuring charges in the fourth quarter of 2007 also included the write-off of capital project spending ($37 million); and trademarks and patents
($2 million), which the Company determined to be of no further value; as well as spare parts and catalysts ($11 million) associated with the plant closures.
These write-offs were principally related to the businesses involved in the shutdown of assets and were therefore reflected in the results of various operating
segments.
Costs Associated with Exit or Disposal Activities
The restructuring charges for costs associated with exit or disposal activities totaled $82 million in 2007 and included contract termination fees of
$53 million, pension curtailment costs and termination benefits of $15 million, environmental remediation of $7 million and $7 million of other related costs.
In the fourth quarter of 2008, an additional $5 million was recorded for environmental remediation and reflected in Corporate.
Contract termination fees of $53 million represented the Company’s best estimate of the fair value to negotiate the settlement of the early cancellation
of several service and supply agreements principally related to the shutdown of manufacturing assets within the Performance Systems and Health and
Agricultural Sciences segments. In the fourth quarter of 2008, based on negotiated settlements related to contract termination fees, the contract termination
fees associated with the 2007 restructuring charge were increased $5 million and reflected in the Performance Systems ($2 million) and Health and
Agricultural Sciences ($3 million) segments.
In the second quarter of 2009, the Company reduced the reserve related to contract termination fees by $15 million as a result of the Company’s
acquisition of Rohm and Haas, impacting the Health and Agricultural Sciences segment. The initial liability established in 2007 included contract
termination fees related to the cancellation of contract manufacturing agreements between the Company and Rohm and Haas. Following completion of the
acquisition, the liability for these fees was reversed.
Severance Costs
As a result of the Company’s decision to shut down assets around the world, and complete other workforce optimization activities, the restructuring
charges recorded in 2007 included severance of $86 million for the separation of approximately 978 employees under the terms of Dow’s ongoing benefit
arrangements, primarily over two years. These costs were charged against Corporate. At December 31, 2007, severance of approximately $1 million had
been paid to 12 employees and a liability of $85 million remained for approximately 966 employees. During 2008, severance of $47 million was paid to
439 employees, bringing the total payments against the program to $48 million paid to 451 employees. At December 31, 2008, a currency adjusted
liability of $37 million remained for approximately 527 employees. In the fourth quarter of 2009, the Company reduced the severance reserve by
$5 million as redeployment opportunities for affected employees were identified. During 2009, severance of $23 million was paid, bringing the total
payments against the program to $71 million. At December 31, 2009, a currency adjusted liability of $9 million remained for approximately
124 employees, with anticipated departure dates primarily in the first quarter of 2010.
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