Dow Chemical 2013 Annual Report Download - page 42

20
Also, if the Company’s key suppliers of feedstocks and energy are unable to provide the raw materials required for production,
it could have a negative impact on the Company's results of operations.
Supply/Demand Balance: Earnings generated by the Company's chemical and plastic products vary based in part on
the balance of supply relative to demand within the industry.
The balance of supply relative to demand within the industry may be significantly impacted by the addition of new capacity,
especially for basic commodities where capacity is generally added in large increments as world-scale facilities are built. This
may disrupt industry balances and result in downward pressure on prices due to the increase in supply, which could negatively
impact the Company's results of operations.
Litigation: The Company is party to a number of claims and lawsuits arising out of the normal course of business with
respect to commercial matters including product liability, governmental regulation and other actions.
Certain of the claims and lawsuits facing the Company purport to be class actions and seek damages in very large amounts. All
such claims are contested. With the exception of the possible effect of the asbestos-related liability of Union Carbide
Corporation (“Union Carbide”) and certain urethane matters, described below, it is the opinion of the Company's management
that the possibility is remote that the aggregate of all such claims and lawsuits will have a material adverse impact on the
Company's consolidated financial statements.
Union Carbide is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past
three decades. At December 31, 2013, Union Carbide's asbestos-related liability for pending and future claims was
$501 million ($602 million at December 31, 2012) and its receivable for insurance recoveries related to the asbestos liability
was $25 million ($25 million at December 31, 2012). At December 31, 2013, Union Carbide also had receivables of
$66 million ($154 million at December 31, 2012) for insurance recoveries for defense and resolution costs. It is the opinion of
the Company's management that it is reasonably possible that the cost of Union Carbide disposing of its asbestos-related
claims, including future defense costs, could have a material impact on the Company's results of operations and cash flows for
a particular period and on the consolidated financial position of the Company.
The Company, among others, was named as a defendant in multiple civil class action lawsuits alleging a conspiracy to fix the
price of various urethane chemical products, namely polyurethane chemicals, including methylene diphenyl diisocyanate,
toluene diisocyanate, polyether polyols and system house products. These lawsuits were consolidated or have been tolled. In
January 2013, the class action lawsuit went to trial in the U.S. District Court for the District of Kansas with the Company as the
sole remaining defendant. On February 20, 2013, the jury in the matter returned a damages verdict of approximately
$400 million against the Company. The Company filed post-trial motions on March 5, 2013, requesting the District Court grant
judgment in favor of the Company, grant the Company a new trial and/or decertify the class. On May 15, 2013, the District
Court denied the Company's request to overturn the verdict and, under antitrust laws, tripled the damages verdict resulting in a
$1.2 billion judgment. On July 26, 2013, the District Court entered an amended judgment in the amount of $1.06 billion. The
Company is appealing this amended judgment. The Company has concluded it is not probable that a loss will occur and,
therefore, a liability has not been recorded with respect to these matters.
Environmental Compliance: The costs of complying with evolving regulatory requirements could negatively impact the
Company's financial results. Actual or alleged violations of environmental laws or permit requirements could result in
restrictions or prohibitions on plant operations, substantial civil or criminal sanctions, as well as the assessment of strict
liability and/or joint and several liability.
The Company is subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to
pollution, protection of the environment, greenhouse gas emissions, and the generation, storage, handling, transportation,
treatment, disposal and remediation of hazardous substances and waste materials. At December 31, 2013, the Company had
accrued obligations of $722 million ($754 million at December 31, 2012) for probable environmental remediation and
restoration costs, including $73 million ($69 million at December 31, 2012) for the remediation of Superfund sites. This is
management's best estimate of the costs for remediation and restoration with respect to environmental matters for which the
Company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters
could range up to approximately two and a half times that amount. Costs and capital expenditures relating to environmental,
health or safety matters are subject to evolving regulatory requirements and depend on the timing of the promulgation and
enforcement of specific standards which impose the requirements. Moreover, changes in environmental regulations could
inhibit or interrupt the Company's operations, or require modifications to its facilities. Accordingly, environmental, health or
safety regulatory matters could result in significant unanticipated costs or liabilities.