Dow Chemical 2011 Annual Report Download - page 127

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Research and development (“R&D”) expenses were $1,646 million in 2011, compared with $1,660 million in 2010 and
$1,492 million in 2009. R&D expenses in 2011 were in line with the prior year as selected cost-reduction initiatives offset
Dow's continued investment in its technology pipeline, with the most notable investments made in Agricultural Sciences,
Electronic and Functional Materials, and Coatings and Infrastructure Solutions. In 2010, R&D expenses increased compared
with 2009, due to the Company's planned spending on strategic corporate growth initiatives and continued investments in the
Agricultural Sciences segment, partially offset by the elimination of R&D expenses related to the divestiture of Styron.
Selling, general and administrative (“SG&A”) expenses were $2,788 million in 2011, compared with $2,609 million in
2010 and $2,487 million in 2009. SG&A expenses increased 7 percent from 2010, as selling expenses increased in Electronic
and Functional Materials and Agricultural Sciences to support new product launches and commercial activities. In 2010, SG&A
expenses increased compared with 2009, as selling expenses for all segments increased commensurate with higher sales and
due to the full-year impact of the Rohm and Haas acquisition in 2010.
The following table illustrates the relative size of the primary components of total production costs and operating expenses
of Dow. More information about each of these components can be found in other sections of Management’s Discussion and
Analysis of Financial Condition and Results of Operations, Notes to the Consolidated Financial Statements, and Part II, Item 6.
Selected Financial Data.
Production Costs and Operating Expenses
Cost components as a percent of total
Hydrocarbon feedstocks and energy
Salaries, wages and employee benefits
Maintenance
Depreciation
Restructuring charges
Supplies, services and other raw materials
Total
2011
42%
13
4
4
—
37
100%
2010
41%
14
4
5
—
36
100%
2009
35%
15
3
5
2
40
100%
Amortization of intangibles was $496 million in 2011, $509 million in 2010 and $399 million in 2009. Amortization of
intangibles in 2010 increased from 2009 due to the full-year impact of the amortization of intangible assets acquired from
Rohm and Haas. See Notes D and I to the Consolidated Financial Statements for additional information regarding the
acquisition of Rohm and Haas and goodwill and other intangible assets.
The Company performs annual goodwill impairment tests during the fourth quarter of the year. During the fourth quarter
of 2011, the Company performed qualitative testing for all reporting units carrying goodwill. As a result of this testing, no
goodwill impairments were identified. During the fourth quarter of 2010, no impairment indicators related to the carrying value
of goodwill were identified. During the fourth quarter of 2009, the goodwill associated with the Dow Haltermann business unit
was impaired. The impairment was based on a review performed by management in which discounted cash flows did not
support the carrying value of the goodwill. As a result, the Company recorded a goodwill impairment loss of $7 million,
impacting the Performance Materials segment. See Note I to the Consolidated Financial Statements for additional information
regarding goodwill and the impairment tests conducted in each year.