Dow Chemical 2011 Annual Report Download - page 147

53
LIQUIDITY AND CAPITAL RESOURCES
The Company’s cash flows from operating, investing and financing activities, as reflected in the Consolidated Statements of
Cash Flows, are summarized in the following table:
Cash Flow Summary
In millions
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes on cash
Cash assumed in initial consolidation of variable interest entities
Net change in cash and cash equivalents
2011
$ 3,879
(1,994)
(3,362)
(121)
3
$ (1,595)
2010
$ 4,102
135
(178)
88
46
$ 4,193
2009
$ 2,075
(14,767)
12,659
79
—
$ 46
Cash provided by operating activities in 2011 decreased compared with 2010 primarily due to an increase in working
capital requirements and increased pension contributions that more than offset increased earnings. Cash provided by operating
activities in 2010 increased significantly compared with 2009 primarily due to increased earnings. Cash provided by operating
activities in 2009 reflected an increase in working capital requirements primarily driven by an increase in trade accounts
receivable. The increase in trade accounts receivable reflected the increase in sales toward the end of 2009 primarily due to the
acquisition of Rohm and Haas in 2009.
Cash used in investing activities in 2011 reflected increased capital expenditures, partially offset by proceeds from the
divestiture of the Polypropylene business. Cash provided by investing activities in 2010 reflected proceeds from the divestiture
of Styron, as well as other smaller divestitures, proceeds from the change in restricted cash related to the consolidation of a
variable interest entity (see Note S to the Consolidated Financial Statements) and the usage of cash for capital expenditures.
Cash used in investing activities in 2009 reflected the April 1, 2009 acquisition of Rohm and Haas for $15,681 million and the
purchase of a previously leased ethylene plant in Canada for $713 million, and capital expenditures of $1,683 million, partially
offset by the proceeds from the sale of the Company’s interest in nonconsolidated affiliates (TRN for $742 million and
OPTIMAL for $660 million), net proceeds from the sale of Morton ($1,576 million).
Cash used in financing activities in 2011 included payments on short- and long-term debt including the retirement of
$4.8 billion of gross debt as further discussed below, as well as dividends paid to stockholders, partially offset by proceeds
from the issuance of long-term debt. Cash used in financing activities in 2010 included payments on long-term debt and
commercial paper, payments on notes payable related to the monetization of accounts receivable in Europe, and the payment of
dividends to stockholders, partially offset by the proceeds from the issuance of long-term debt. Cash provided by financing
activities in 2009 reflected the funding for the acquisition of Rohm and Haas as discussed in further detail below, partially
offset by the redemption of the preferred partnership units and accrued dividends of Tornado Finance V.O.F. of $520 million.
The Company had cash and cash equivalents of $5,444 million at December 31, 2011 and $7,039 million at December 31,
2010, of which $2,047 million at December 31, 2011 and $1,139 million at December 31, 2010 was held by foreign
subsidiaries. For each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended
for permanent reinvestment, with the balance available to be repatriated to the United States. The cash held by foreign
subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign
investments. A deferred tax liability has been accrued for the funds that are available to be repatriated to the United States. At
December 31, 2011, management believed that sufficient liquidity was available in the United States. However, in the unusual
event that additional foreign funds are needed in the United States, the Company has the ability to repatriate additional funds.
The repatriation could result in an adjustment to the tax liability after considering available foreign tax credits and other tax
attributes.