Dow Chemical 2011 Annual Report Download - page 126

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2010; the Salt business of Rohm and Haas Company divested on October 1, 2009; and the Company’s ownership interest in
Total Raffinaderij Nederland N.V. (“TRN”) divested on September 1, 2009. Excluding divestitures, volume increased
12 percent compared with 2009 on a pro forma basis, with volume improvement in all segments and geographic areas.
Sales in the United States accounted for 32 percent of total sales in 2011, 33 percent of total sales in 2010 and 32 percent
of total sales in 2009. See the Sales Price and Volume tables at the end of the section titled “Segment Results” for details
regarding the change in sales by operating segment and geographic area. In addition, sales and other information by operating
segment and geographic area are provided in Note Y to the Consolidated Financial Statements.
Gross margin for 2011 was $9.0 billion, compared with $7.9 billion in 2010 and $5.7 billion in 2009. Compared with 2010,
gross margin was positively impacted by higher selling prices, which more than offset a $4.3 billion increase in purchased
feedstock and energy costs, lower operating rates, increases in other raw material costs and the unfavorable impact of currency
on costs. In 2011, gross margin was reduced by $77 million in asset impairments and related costs in the Polyurethanes
business (reflected in Performance Materials) and a $60 million warranty accrual adjustment related to an exited business
(reflected in Coatings and Infrastructure Solutions). See Environmental Matters in Management's Discussion and Analysis of
Financial Condition and Results of Operations; and Notes K and N to the Consolidated Financial Statements for additional
information concerning these matters.
In 2010, the improvement in gross margin compared with 2009 reflected higher selling prices, which more than offset a
$5.0 billion increase in purchased feedstock and energy costs; increased volume in Electronic and Functional Materials,
Agricultural Sciences, and other higher margin product lines; and significantly higher operating rates. In 2010, gross margin
was reduced by a $50 million labor-related litigation matter (reflected in Corporate), and $91 million in asset impairments and
related costs in the Polyurethanes business, the Epoxy business and Dow Automotive Systems (reflected in Performance
Materials).
Gross margin in 2009 was negatively impacted by lower sales as a result of the downturn in the global economy and by a
one-time increase in cost of sales of $209 million related to the fair value step-up of inventories acquired from Rohm and Haas,
and sold in the second quarter of 2009. The increase was reflected in the operating segments as follows: $75 million in
Electronic and Functional Materials, $81 million in Coatings and Infrastructure Solutions and $53 million in Performance
Plastics. Gross margin in 2009 was also reduced by hedging losses of $56 million related to the sale of the Company's
45 percent ownership interest in Total Raffinaderij Nederland N.V. (“TRN”) (see Note E to the Consolidated Financial
Statements), reflected in the Feedstocks and Energy segment.
Dow's global plant operating rate was 80 percent of capacity in 2011, compared with 83 percent in 2010 and 74 percent in
2009. Operating rates decreased in 2011 due to planned turnarounds and as the Company reduced production levels in the early
part of the fourth quarter due to customer destocking. In 2010, operating rates improved from 2009, with both increased
demand and actions taken by management to rationalize capacity through shutdowns and divestitures contributing to the
improvement. In 2009, operating rates were down reflecting the downturn in the global economy.
Personnel count was 51,705 at December 31, 2011, up from 49,505 at December 31, 2010. Headcount increased from year-
end 2010 primarily due to the hiring of additional employees to support the Company's growth initiatives. Personnel count at
December 31, 2010 was down from 52,195 at December 31, 2009 primarily due to divestitures, including Styron, the Powder
Coatings business and a portion of the Company's acrylic monomer and specialty latex businesses, as well as restructuring
activities associated with the integration of Rohm and Haas and previously announced restructuring plans.