Dow Chemical 2009 Annual Report Download - page 67

Table of Contents
acquisitions within the Health and Agricultural Sciences segment and $7 million was related to the acquisition of Wolff Walsrode on June 30, 2007 and
impacted the results of the Electronic and Specialty Materials segment. See Note D to the Consolidated Financial Statements for information regarding these
charges.
Pretax charges totaling $166 million in 2009 and $49 million in 2008 were recorded for integration costs, legal expenses and other transaction costs
related to the acquisition of Rohm and Haas; these charges were reflected in Corporate. In 2008, these charges were expensed in anticipation of a 2009 closing
of the acquisition and the revision of the accounting guidance related to business combinations. In 2009, the Company also recorded $60 million in
acquisition-related retention costs. These costs were recorded in “Cost of sales,” “Research and development expenses,” and “Selling, general and
administrative expenses” in the consolidated statements of income and reflected in Corporate.
Following the December 2008 completion of a study to review Union Carbide’s asbestos claim and resolution activity, Union Carbide decreased its
asbestos-related liability for pending and future claims (excluding future defense and processing costs) by $54 million. The reduction was shown as
“Asbestos-related credit” in the consolidated statements of income and was reflected in the results of Corporate. See Note N to the Consolidated Financial
Statements for additional information regarding asbestos-related matters of Union Carbide.
Dow’s share of the earnings of nonconsolidated affiliates in 2009 was $630 million, compared with $787 million in 2008 and $1,122 million in 2007.
Equity earnings declined compared with 2008, reflecting the overall decrease in global demand and poor economic conditions, with EQUATE Petrochemical
Company K.S.C. (“EQUATE”), Dow Corning Corporation (“Dow Corning”) and the OPTIMAL Group of Companies (“OPTIMAL”) reporting the largest
declines. Improved results were reported by The Kuwait Olefins Company K.S.C. in 2009 due to additional production capacity for ethylene oxide/ethylene
glycol and polyethylene. Equity earnings for 2009 were negatively impacted by an impairment of $65 million related to Equipolymers and $29 million for the
Company’s share of a restructuring charge related to Dow Corning. Equity earnings in 2008 declined compared with 2007, reflecting volatile feedstock and
energy costs in 2008 and the collapse in global demand that took place in the fourth quarter of 2008. Equity earnings for 2008 reflected decreased earnings
from MEGlobal, EQUATE, Equipolymers and Siam Polyethylene Company Limited (“Siam Polyethylene”); partially offset by increased earnings from Dow
Corning and OPTIMAL. See Note H to the Consolidated Financial Statements for additional information on nonconsolidated affiliates.
Sundry income - net includes a variety of income and expense items such as the gain or loss on foreign currency exchange, dividends from investments,
and gains and losses on sales of investments and assets. Sundry income - net for 2009 was $891 million, up from $89 million in 2008 and $324 million in
2007. The increase in 2009 was principally due to a pretax gain of $513 million on the sale of the Company’s ownership interest in TRN, a nonconsolidated
affiliate, and related inventory on September 1, 2009; and a pretax gain of $339 million on the sale of the Company’s ownership interest in OPTIMAL on
September 30, 2009. Sundry income - net in 2009 was reduced by a loss of $56 million related to the Company’s early extinguishment of debt in the third
quarter of 2009. See “Changes in Financial Condition” for additional information on the Company’s early extinguishment of debt. In 2008, net sundry income
reflected unfavorable foreign exchange hedging results and a decrease in net gains on the sale of assets. In 2007, net sundry income reflected the impact of
favorable foreign exchange hedging results and gains on the sale of miscellaneous assets.
Net interest expense (interest expense less capitalized interest and interest income) was $1,532 million in 2009, up from $562 million in 2008 and
$454 million in 2007. Interest expense (net of capitalized interest) and amortization of debt discount totaled $1,571 million in 2009, $648 million in 2008 and
$584 million in 2007. Interest expense increased due to an increased
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