Dow Chemical 2013 Annual Report Download - page 151

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Dividends on unallocated shares held by the ESOP are used by the ESOP to make debt service payments and to purchase
additional shares if dividends exceed the debt service payments. Dividends on allocated shares are used by the ESOP to make
debt service payments to the extent needed; otherwise, they are paid to the Plan participants. Shares are released for allocation
to participants based on the ratio of the current year’s debt service to the sum of the principal and interest payments over the
life of the loan. The shares are allocated to Plan participants in accordance with the terms of the Plan.
Compensation expense for allocated shares is recorded at the fair value of the shares on the date of allocation. ESOP shares that
have not been released or committed to be released are not considered outstanding for purposes of computing basic and diluted
earnings per share.
Compensation expense for ESOP shares was $132 million in 2013, $107 million in 2012 and $102 million in 2011. At
December 31, 2013, 14.8 million shares out of a total 37.4 million shares held by the ESOP had been allocated to participants’
accounts; 1.2 million shares were released but unallocated; and 21.4 million shares, at a fair value of $951 million, were
considered unearned.
Treasury Stock
On February 13, 2013, the Board of Directors approved a share buy-back program, authorizing up to $1.5 billion to be spent on
the repurchase of the Company's common stock over a period of time. Purchases under this program began in May 2013. In
addition, during 2011 the Company received shares from employee and non-employee directors to pay taxes owed to the
Company as a result of the exercise of stock options or the delivery of deferred stock. The total number of treasury shares
purchased by the Company was 8.2 million in 2013, zero in 2012 and 0.5 million in 2011.
The Company may issue shares for options exercised as well as for the release of deferred and restricted stock out of treasury
stock or as new common stock shares. The number of treasury shares issued to employees and non-employee directors under
the Company’s option and purchase programs was zero in 2013, zero in 2012 and 5.6 million in 2011.
Subsequent Event
On January 29, 2014, the Board of Directors announced an expansion of the Company's share buy-back authorization,
authorizing an additional amount not to exceed $3 billion to be spent on the repurchase of the Company's common stock over a
period of time. As a result, the authorized amount of the current ongoing share repurchase program has increased to
$4.5 billion. The Company expects the share repurchase program to be completed in 2014.
NOTE 22 – INCOME TAXES
Domestic and Foreign Components of Income Before Income Taxes
In millions 2013 (1) 2012 (2) 2011
Domestic $ 3,979 $ (401) $ 386
Foreign 2,825 2,066 3,215
Total $ 6,804 $ 1,665 $ 3,601
(1) In 2013, the domestic component of "Income Before Income Taxes" included a gain of
$2.195 billion related to the K-Dow arbitration and a $451 million gain related to the sale of
Dow's Polypropylene Licensing and Catalysts business.
(2) In 2012, the domestic component of "Income Before Income Taxes" was significantly
impacted by the Company's 1Q12 and 4Q12 restructuring charges.
Provision for Income Taxes
2013 2012 2011
In millions Current Deferred Total Current Deferred Total Current Deferred Total
Federal $ 805 $ 278 $ 1,083 $ 241 $ (312) $ (71) $ 36 $ (244) $ (208)
State and local 42 (73) (31) 9 (10) (1) 12 (13) (1)
Foreign 1,028 (92) 936 780 (143) 637 768 258 1,026
Total $ 1,875 $ 113 $ 1,988 $ 1,030 $ (465) $ 565 $ 816 $ 1 $ 817