Dow Chemical 2013 Annual Report Download - page 144

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NOTE 18 – LEASED PROPERTY
Leased Property
The Company routinely leases premises for use as sales and administrative offices, warehouses and tanks for product storage,
motor vehicles, railcars, computers, office machines and equipment under leases. In addition, the Company leases aircraft in the
United States. At the termination of the leases, the Company has the option to purchase certain leased equipment and buildings
based on a fair market value determination.
Rental expenses under leases, net of sublease rental income, were $490 million in 2013, $476 million in 2012 and $437 million
in 2011. Future minimum rental payments under leases with remaining noncancelable terms in excess of one year are as
follows:
Minimum Lease Commitments at December 31, 2013
In millions
2014 $ 249
2015 244
2016 218
2017 181
2018 151
2019 and thereafter 1,580
Total $ 2,623
NOTE 19 – VARIABLE INTEREST ENTITIES
Consolidated Variable Interest Entities
The Company holds a variable interest in eight joint ventures for which the Company is the primary beneficiary.
Three of the joint ventures own and operate manufacturing and logistics facilities, which produce chemicals and provide
services in Asia Pacific. The Company’s variable interest in these joint ventures relates to arrangements between the joint
ventures and the Company, involving the majority of the output on take-or-pay terms with pricing ensuring a guaranteed return
to the joint ventures. In the third quarter of 2011, one of the joint ventures converted a note payable into cumulative perpetual
preferred shares, which is included in "Noncontrolling interests" in the consolidated balance sheets and "Conversion of note
payable to preferred shares of a subsidiary" in the consolidated statements of equity.
A fourth joint venture will construct, own and operate a membrane chlor-alkali facility to be located at the Company’s Freeport,
Texas integrated manufacturing complex. The Company’s variable interests in this joint venture relate to equity options
between the partners and a cost-plus off-take arrangement between the joint venture and the Company, involving proportional
purchase commitments on take-or-pay terms and ensuring a guaranteed return to the joint venture. The Company will provide
the joint venture with operation and maintenance services, utilities and raw materials; market the joint venture’s co-products;
and convert the other partner’s proportional purchase commitments into ethylene dichloride under a tolling arrangement. The
joint venture is expected to begin operations in the first quarter of 2014.
The fifth joint venture manufactures products in Japan for the semiconductor industry. Each joint venture partner holds several
equivalent variable interests, with the exception of a royalty agreement held exclusively between the joint venture and the
Company. In addition, the entire output of the joint venture is sold to the Company for resale to third-party customers.
The sixth joint venture is an ethylene storage joint venture located in Alberta, Canada. Previously accounted for as an equity
method investment, the Company became the primary beneficiary upon execution of new storage cavern agreements in 2011.
The Company's variable interests relate to arrangements involving a majority of the joint venture's storage capacity on take-or-
pay terms with pricing ensuring a guaranteed return to the joint venture; and favorably priced leases provided to the joint
venture. The Company provides the joint venture with operation and maintenance services and utilities.
The seventh joint venture is a development-stage enterprise located in Brazil that will initially produce ethanol from sugarcane.
The Company owned 100 percent of this entity until November 2011, when the Company sold a 50 percent interest to a third
party. The Company's variable interests in this joint venture relate to an equity option between the partners, a parental guarantee
related to debt financing and contractual arrangements limiting the partner's initial participation in the economics of certain
assets and liabilities. On July 12, 2013, the partners amended governing documents of the joint venture, including terms of the