Dow Chemical 2012 Annual Report Download - page 81

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Contractual Obligations
The following table summarizes the Company’s contractual obligations, commercial commitments and expected cash
requirements for interest at December 31, 2012. Additional information related to these obligations can be found in Notes 14,
16, 17, 18 and 22 to the Consolidated Financial Statements.
Contractual Obligations at December 31, 2012 Payments Due by Year
In millions 2013 2014 2015 2016 2017
2018 and
beyond Total
Long-term debt – current and noncurrent (1) $ 672 $ 1,438 $ 1,712 $ 1,043 $ 1,212 $ 14,917 $ 20,994
Deferred income tax liabilities – noncurrent (2) — — — — — 837 837
Pension and other postretirement benefits 841 955 1,216 1,268 1,217 5,854 11,351
Other noncurrent obligations (3) 71 472 434 239 176 2,491 3,883
Uncertain tax positions, including interest and
penalties (4) 15 — — — — 367 382
Other contractual obligations:
Minimum operating lease commitments 223 216 177 150 121 1,322 2,209
Purchase commitments – take-or-pay and
throughput obligations 2,570 2,607 2,141 1,904 1,712 8,106 19,040
Purchase commitments – other (5) 50 38 30 22 16 45 201
Expected cash requirements for interest (6) 1,154 1,079 1,000 942 921 8,384 13,480
Total $ 5,596 $ 6,805 $ 6,710 $ 5,568 $ 5,375 $ 42,323 $ 72,377
(1) Excludes unamortized debt discount of $403 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 “2018 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 $530 million has been reflected in “2018 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 “2018 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, 2012, and includes approximately $1.94
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 19 to the
Consolidated Financial Statements). See Note 15 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, 2012 of $2,181 million, up from $1,113 million at December 31, 2011.
The increase in the value of the outstanding guarantees during 2012 is primarily related to debt obligations of Sadara Chemical
Company, a nonconsolidated affiliate, which are guaranteed by the Company, in proportion to the Company's ownership
interest. Additional information related to these guarantees can be found in the “Guarantees” section of Note 14 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 are classified as Level 2 if they are valued based on a bid, bid evaluation, or by using observable market
data points of similar, more liquid securities to imply the price. 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.
Some pension or other postretirement benefit plan assets are held in funds where a net asset value is calculated based on the fair