Dow Chemical 2012 Annual Report Download - page 76

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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 2012 2011 2010
Cash provided by (used in):
Operating activities $ 4,075 $ 3,879 $ 4,102
Investing activities (2,687) (1,994) 135
Financing activities (2,530) (3,362) (178)
Effect of exchange rate changes on cash 16 (121) 88
Cash assumed in initial consolidation of variable interest entities — 3 46
Net change in cash and cash equivalents $ (1,126) $ (1,595) $ 4,193
Cash provided by operating activities increased in 2012 compared with 2011 primarily due to a decrease in working capital
requirements and an increase in dividends received in excess of equity earnings from nonconsolidated affiliates which more
than offset decreased earnings and higher pension contributions. 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 used in investing activities in 2012 was primarily due to capital expenditures. Cash used in investing activities in
2011 included increased capital expenditures, which were 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 and the
usage of cash for capital expenditures.
Cash used in financing activities in 2012 included payments on short- and long-term debt, including the $2.25 billion of
early redemptions as further discussed below and higher dividends paid to stockholders, including the acceleration of the fourth
quarter dividend payment, which were partially offset by proceeds from the issuance of $2.5 billion of long-term debt in the
fourth quarter. 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 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.
The Company had cash and cash equivalents of $4,318 million at December 31, 2012 and $5,444 million at December 31,
2011, of which $845 million at December 31, 2012 and $2,047 million at December 31, 2011 was held by subsidiaries in
foreign countries, including United States territories. 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. During the second quarter of 2012, the Company changed the permanent reinvestment
assertion of certain subsidiaries located in Europe, resulting in a tax benefit in that period. During the third quarter of 2012, the
Company changed the permanent reinvestment assertion of certain subsidiaries located in Asia Pacific, resulting in a tax benefit
in the quarter. At December 31, 2012, 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.
The Company announced two restructuring plans in 2012 as described below (additional details are provided in Note 3 to
the Consolidated Financial Statements):
• On March 27, 2012, the Board of Directors approved a restructuring plan ("1Q12 Restructuring") to optimize its
portfolio, respond to changing and volatile economic conditions, particularly in Western Europe, and to advance the
Company's Efficiency for Growth program, which was initiated by the Company in the second quarter of 2011. The
1Q12 Restructuring plan includes the elimination of approximately 900 positions and the shutdown of a number of
manufacturing facilities. These actions are expected to be completed primarily by December 31, 2013. In addition, the
1Q12 Restructuring activities are expected to result in cash expenditures for contract termination fees and severance