Dow Chemical 2011 Annual Report Download - page 217

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to principal U.S. manufacturing facilities, or merge or consolidate with any other corporation, or sell or convey all or
substantially all of the Company’s assets. The outstanding debt also contains customary default provisions. Failure of the
Company to comply with any of these covenants could result in a default under the applicable indenture, which would allow
the note holders to accelerate the due date of the outstanding principal and accrued interest on the subject notes.
The Company’s primary credit agreements contain covenant and default provisions in addition to the covenants set forth
above with respect to the Company’s debt. Significant other covenants and default provisions related to these agreements
include:
(a) the obligation to maintain the ratio of the Company’s consolidated indebtedness to consolidated capitalization at no
greater than 0.65 to 1.00 at any time the aggregate outstanding amount of loans under the Five Year Competitive
Advance and Revolving Credit Facility dated October 18, 2011 equals or exceeds $500 million,
(b) a default if the Company or an applicable subsidiary fails to make any payment on indebtedness of $50 million or
more when due, or any other default under the applicable agreement permits or results in the acceleration of
$200 million or more of principal,
(c) a default if the Company or any applicable subsidiary fails to discharge or stay within 30 days after the entry of a final
judgment of more than $200 million.
Failure of the Company to comply with any of the covenants or default provisions could result in a default under the
applicable credit agreement which would allow the lenders to not fund future loan requests and to accelerate the due date of the
outstanding principal and accrued interest on any outstanding loans.
At December 31, 2011, management believes the Company was in compliance with all of the covenants and default
provisions referred to above.
NOTE Q – PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
Pension Plans
The Company has defined benefit pension plans that cover employees in the United States and a number of other countries. The
U.S. qualified plan covering the parent company is the largest plan. Benefits for employees hired before January 1, 2008 are
based on length of service and the employee’s three highest consecutive years of compensation. Employees hired after
January 1, 2008 earn benefits that are based on a set percentage of annual pay, plus interest.
The Company’s funding policy is to contribute to the plans when pension laws and/or economics either require or
encourage funding. In 2011, Dow contributed $806 million to its pension plans, including contributions to fund benefit
payments for its non-qualified supplemental plans. Dow expects to contribute approximately $885 million to its pension plans
in 2012.
The weighted-average assumptions used to determine pension plan obligations and net periodic benefit costs for the plans
are provided in the two tables below:
Weighted-Average Assumptions
for All Pension Plans
Discount rate
Rate of increase in future compensation levels
Expected long-term rate of return on plan assets
Benefit Obligations
at December 31
2011
4.93%
4.14%
—
2010
5.38%
4.13%
—
Net Periodic Costs
for the Year
2011
5.38%
4.16%
7.86%
2010
5.71%
4.17%
7.74%
Weighted-Average Assumptions
for U.S. Pension Plans
Discount rate
Rate of increase in future compensation levels
Expected long-term rate of return on plan assets
Benefit Obligations
at December 31
2011
4.98%
4.50%
—
2010
5.51%
4.50%
—
Net Periodic Costs
for the Year
2011
5.51%
4.50%
8.18%
2010
5.97%
4.50%
8.16%