Dow Chemical 2009 Annual Report Download - page 68

Table of Contents
level of debt throughout 2009 compared with 2008 and 2007 due to the debt financing activity related to the April 1, 2009 acquisition of Rohm and Haas. See
“Changes in Financial Condition” for additional information regarding debt financing activity related to the acquisition. Interest income was $39 million in
2009, down from $86 million in 2008 and $130 million in 2007, principally due to lower interest rates on investments.
The provision for income taxes was a credit of $97 million in 2009 compared with a provision of $651 million in 2008 and $1,230 million in 2007. The
Company’s effective tax rate fluctuates based on, among other factors, where income is earned and the level of income relative to tax credits available. For
example, as the percentage of foreign sourced income increases, the Company’s effective tax rate declines. The Company’s tax rate is also influenced by the
level of equity earnings, since most of the earnings from the Company’s equity company investments are taxed at the joint venture level.
The tax rate for 2009 was reduced by several factors: a significantly higher level of equity earnings as a percent of total earnings, favorable accrual-to-
return adjustments in various geographies, the recognition of domestic losses and an improvement in financial results in jurisdictions with tax rates that are
lower than the U.S. statutory rate. These factors resulted in an effective tax rate of negative 20.7 percent for 2009.
In 2008, the effective tax rate was 51.0 percent compared with 29.3 percent in 2007. The tax rate for 2008 was negatively impacted by goodwill
impairment losses that were not deductible for tax purposes. The tax rate for 2007 was negatively impacted by a change in German tax law that was enacted in
August 2007 and included a reduction in the German income tax rate. As a result of the change, the Company adjusted the value of its net deferred tax assets
in Germany (using the lower tax rate) and recorded a charge of $362 million against the “Provision for income taxes”. Also in 2007, the Company changed the
legal ownership structure of its investment in EQUATE, resulting in a favorable impact to the “Provision for income taxes” of $113 million. Excluding these
items, the effective tax rate was 23.4 percent in 2007.
On June 30, 2009, the Company sold the Calcium Chloride business and recognized a $162 million pretax gain. The results of operations related to the
Calcium Chloride business have been reclassified and reported as income from discontinued operations for all periods presented. Income from discontinued
operations (net of income taxes) for 2009 was $110 million ($0.10 per share), compared with $28 million ($0.03 per share) in 2008 and $23 million
($0.02 per share) in 2007.
Net income attributable to noncontrolling interests was $28 million in 2009, $75 million in 2008 and $98 million in 2007. The decline since 2007 was
related to the third quarter of 2008 redemption by the outside partner of its ownership interest in Hobbes Capital S.A. (see Note U to the Consolidated Financial
Statements).
Preferred stock dividends of $312 million were recognized in 2009. Dividends related to the Company’s Cumulative Convertible Perpetual Preferred
Stock, Series A were $255 million. The remaining $57 million of dividends related to the Cumulative Perpetual Preferred Stock, Series B and Cumulative
Perpetual Preferred Stock, Series C, both of which were retired in the second quarter of 2009. See Notes V and W to the Consolidated Financial Statements for
additional information.
Net income available for common stockholders was $336 million ($0.32 per share) in 2009 compared with $579 million ($0.62 per share) in 2008 and
$2,887 million ($2.99 per share) in 2007.
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