Dow Chemical 2011 Annual Report Download - page 153

59
Contractual Obligations at December 31, 2011
In millions
Long-term debt – current and noncurrent (1)
Deferred income tax liabilities – noncurrent (2)
Pension and other postretirement benefits
Other noncurrent obligations (3)
Uncertain tax positions, including interest and
penalties (4)
Other contractual obligations:
Minimum operating lease commitments
Purchase commitments – take-or-pay and
throughput obligations
Purchase commitments – other (5)
Expected cash requirements for interest (6)
Total
Payments Due by Year
2012
$ 2,749
—
985
82
75
223
2,968
29
1,269
$ 8,380
2013
$ 662
—
1,298
328
—
209
2,964
29
1,124
$ 6,614
2014
$ 2,361
—
1,362
371
—
176
2,371
20
1,011
$ 7,672
2015
$ 1,453
—
1,337
227
—
146
1,693
16
897
$ 5,769
2016
$ 995
—
1,290
214
—
126
1,426
17
845
$ 4,913
2017 and
beyond
$ 13,232
1,091
2,671
2,495
318
1,269
9,074
60
7,773
$ 37,983
Total
$21,452
1,091
8,943
3,717
393
2,149
20,496
171
12,919
$71,331
(1) Excludes unamortized debt discount of $393 million.
(2) Deferred income tax liabilities may vary according to changes in tax laws, tax rates and the operating results of the Company. As a
result, it is impractical to determine whether there will be a cash impact to an individual year. All noncurrent deferred income tax
liabilities have been reflected in “2017 and beyond.”
(3) Annual payments to resolve asbestos litigation will vary based on changes in defense strategies, changes in state and national law, and
claims filing and resolution rates. As a result, it is impractical to determine the anticipated payments in any given year. Therefore, the
majority of the noncurrent asbestos-related liability of $608 million has been reflected in “2017 and beyond.”
(4) Due to uncertainties in the timing of the effective settlement of tax positions with the respective taxing authorities, the Company is
unable to determine the timing of payments related to its uncertain tax positions, including interest and penalties. Amounts beyond the
current year are therefore reflected in “2017 and beyond.”
(5) Includes outstanding purchase orders and other commitments greater than $1 million, obtained through a survey conducted within the
Company.
(6) Cash requirements for interest was calculated using current interest rates at December 31, 2011, and includes approximately $1.1 billion
of various floating rate notes.
Off-Balance Sheet Arrangements
The Company holds a variable interest in a joint venture accounted for under the equity method of accounting. The Company is
not the primary beneficiary of the joint venture and therefore is not required to consolidate the entity (see Note S to the
Consolidated Financial Statements). See Note O to the Consolidated Financial Statements for information regarding the
transfer of financial assets.
Guarantees arise during the ordinary course of business from relationships with customers and nonconsolidated affiliates
when the Company undertakes an obligation to guarantee the performance of others if specific triggering events occur. The
Company had outstanding guarantees at December 31, 2011 of $1,113 million, up from $836 million at December 31, 2010.
Additional information related to these guarantees can be found in the “Guarantees” section of Note N to the Consolidated
Financial Statements.
Fair Value Measurements
The Company’s assets and liabilities measured at fair value are classified in the fair value hierarchy (Level 1, 2 or 3) based on
the inputs used for valuation. Assets and liabilities that are traded on an exchange with a quoted price are classified as Level 1.
Assets and liabilities that are valued based on a bid or bid evaluation are classified as Level 2. The custodian of the Company’s
debt and equity securities uses multiple industry-recognized vendors for pricing information and established processes for
validation and verification to assist the Company in its process for determining and validating fair values for these assets. For
the Company's interests held in trade receivable conduits, classified as Level 3, the fair value is determined by calculating the
expected amount of cash to be received using the key input of anticipated credit losses in the portfolio of receivables sold that
have not yet been collected. For pension or other post retirement benefit plan assets classified as Level 3, the total fair value is
based on significant unobservable inputs including assumptions where there is little, if any, market activity for the investment.
The sensitivity of fair value estimates is immaterial relative to the assets and liabilities measured at fair value, as well as to the
total equity of the Company. See Notes K and Q to the Consolidated Financial Statements for the Company’s disclosures about
fair value measurements.
Portfolio managers and external investment managers regularly review all of the Company’s holdings to determine if any
investments are other-than-temporarily impaired. The analysis includes reviewing the amount of the temporary impairment, as
well as the length of time it has been impaired. In addition, specific guidelines for each instrument type are followed to