Dow Chemical 2012 Annual Report Download - page 134

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A pension liability associated with this matter of $185 million was recognized as part of the acquisition of Rohm and Haas
on April 1, 2009. The liability, which was determined in accordance with the accounting guidance for contingencies,
recognized the estimated impact of the above described judicial decisions on the long-term Rohm and Haas Plan obligations
owed to the applicable Rohm and Haas retirees and active employees. The Company had a liability associated with this matter
of $189 million at December 31, 2011. The Rohm and Haas Plan made settlement payments totaling $139 million as of
December 31, 2012. The Company's remaining liability for this matter was $50 million at December 31, 2012. The remaining
liability will be resolved over time through the administration of the Rohm and Haas Plan.
Other Litigation Matters
In addition to the specific matters described above, the Company is party to a number of other claims and lawsuits arising out
of the normal course of business with respect to commercial matters, including product liability, governmental regulation and
other actions. Certain of these actions purport to be class actions and seek damages in very large amounts. All such claims are
being contested. Dow has an active risk management program consisting of numerous insurance policies secured from many
carriers at various times. These policies often provide coverage that will be utilized to minimize the financial impact, if any, of
the contingencies described above.
Summary
Except for the possible effect of Union Carbide’s asbestos-related liability described above, it is the opinion of the Company’s
management that the possibility is remote that the aggregate of all claims and lawsuits will have a material adverse impact on
the results of operations, financial condition and cash flows of the Company.
Purchase Commitments
The Company has numerous agreements for the purchase of ethylene-related products globally. The purchase prices are
determined primarily on a cost-plus basis. Total purchases under these agreements were $304 million in 2012, $552 million in
2011 and $714 million in 2010. The Company’s take-or-pay commitments associated with these agreements at December 31,
2012 are included in the table below.
The Company also has various commitments for take-or-pay and throughput agreements. These commitments are at prices
not in excess of current market prices. The remaining terms for all but one of these agreements extend from one to 33 years.
One agreement has a remaining term of 65 years. The determinable future commitments for this specific agreement for a period
of 10 years are included in the following table along with the fixed and determinable portion of all other obligations under the
Company’s purchase commitments at December 31, 2012:
Fixed and Determinable Portion of Take-or-Pay and
Throughput Obligations at December 31, 2012
In millions
2013 $ 2,570
2014 2,607
2015 2,141
2016 1,904
2017 1,712
2018 and beyond 8,106
Total $ 19,040
In addition to the take-or-pay obligations at December 31, 2012, the Company had outstanding commitments which ranged
from one to six years for materials, services and other items used in the normal course of business of approximately
$201 million. Such commitments were at prices not in excess of current market prices.
Guarantees
The Company provides a variety of guarantees, as described more fully in the following sections.
Guarantees
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 (via delivery of cash or other assets) if specified
triggering events occur. With guarantees, such as commercial or financial contracts, non-performance by the guaranteed party
triggers the obligation of the Company to make payments to the beneficiary of the guarantee. The majority of the Company’s
guarantees relates to debt of nonconsolidated affiliates, which have expiration dates ranging from less than one year to nine