Dow Chemical 2012 Annual Report Download - page 150

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terminate a specific contract within 24 months of initial equity investment. Therefore, the Company has classified the partner's
equity investment as "Redeemable Noncontrolling Interest" in the consolidated balance sheets. The joint venture's ethanol mill
is expected to process its first full harvest of sugarcane in 2014. The joint venture's original plans for expansion into
downstream derivative products have been postponed.
The eighth joint venture manages the growth, harvest and conditioning of soybean seed and grain, corn and wheat in
several midwestern states in the United States. On March 2, 2012, the Company acquired a 49 percent equity interest in this
venture. The Company's variable interest in this joint venture relates to an equity option between the partners. Terms of the
equity option require the Company to purchase the partner's equity investment at a fixed price, after a specified period of time
if the partner elects to sell its equity investment. The joint venture provides seed production services to the Company.
The Company also holds a variable interest in an owner trust, for which the Company is the primary beneficiary. The
owner trust leases an ethylene facility in The Netherlands to the Company, whereby substantially all of the rights and
obligations of ownership are transferred to the Company. The Company’s variable interest in the owner trust relates to a
residual value guarantee provided to the owner trust. Upon expiration of the lease, which matures in January, 2014, the
Company may purchase the facility for an amount based on a fair market determination. At December 31, 2012, the residual
value guarantee was $363 million, which represents the Company’s maximum exposure to loss under the lease. On February 1,
2013, the Company notified the owner trust of its intent to purchase the facility upon expiration of the lease for approximately
$440 million.
As the primary beneficiary of these variable interest entities ("VIEs"), the entities’ assets, liabilities and results of
operations are included in the Company’s consolidated financial statements. The other equity holders’ interests are reflected in
“Net income attributable to noncontrolling interests” in the consolidated statements of income and “Noncontrolling interests” in
the consolidated balance sheets except as noted above. The following table summarizes the carrying amounts of these entities’
assets and liabilities included in the Company’s consolidated balance sheets at December 31, 2012 and 2011:
Assets and Liabilities of Consolidated VIEs at December 31
In millions 2012 2011 (1)
Cash and cash equivalents (2) $ 146 $ 170
Other current assets 129 104
Property 2,554 2,169
Other noncurrent assets 139 151
Total assets (3) $ 2,968 $ 2,594
Current liabilities (nonrecourse 2012: $261; 2011: $226) $ 261 $ 226
Long-term debt (nonrecourse 2012: $1,406; 2011: $1,138) 1,752 1,484
Other noncurrent liabilities (nonrecourse 2012: $99; 2011: $86) 99 86
Total liabilities $ 2,112 $ 1,796
(1) December 31, 2011 values do not include assets and liabilities attributable to a seed production joint
venture located in the United States that became a VIE in the first quarter of 2012.
(2) Included $2 million at December 31, 2012 ($3 million at December 31, 2011) specifically restricted
for the construction of a manufacturing facility.
(3) All assets were restricted at December 31, 2012 and December 31, 2011.
In addition, the Company holds a variable interest in an entity created to monetize accounts receivable of select European
entities. The Company is the primary beneficiary of this entity as a result of holding subordinated notes while maintaining
servicing responsibilities for the accounts receivable. The carrying amounts of assets and liabilities included in the Company’s
consolidated balance sheets pertaining to this entity, were current assets of $179 million (zero restricted) at December 31, 2012
($233 million, zero restricted, at December 31, 2011) and current liabilities of less than $1 million (less than $1 million
nonrecourse) at December 31, 2012 (less than $1 million, less than $1 million nonrecourse, at December 31, 2011).
Amounts presented in the consolidated balance sheets and the table above as restricted assets or nonrecourse obligations
relating to consolidated VIEs at December 31, 2012 and 2011 are adjusted for intercompany eliminations, parental guarantees
and residual value guarantees.
Nonconsolidated Variable Interest Entity
The Company holds a variable interest in a joint venture that manufactures crude acrylic acid in the United States and Germany
on behalf of the Company and the other joint venture partner. The variable interest relates to a cost-plus arrangement between
the joint venture and each joint venture partner. The Company is not the primary beneficiary, as a majority of the joint venture’s
output is sold to the other joint venture partner; therefore, the entity is accounted for under the equity method of accounting. At