Dow Chemical 2014 Annual Report Download - page 59

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Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses were $3,106 million in 2014, compared with $3,024 million in 2013
and $2,861 million in 2012. In 2014, SG&A expenses increased 3 percent from 2013, due to increased spending on growth
initiatives, primarily in Agricultural Sciences, and increased spending on Company branding initiatives. In 2013, SG&A
expenses increased 6 percent from 2012, primarily due to increased performance-based compensation costs and increased
spending on growth initiatives in Agricultural Sciences. In addition, SG&A expenses were impacted by $2 million of
implementation costs related to the Company's Restructuring programs in 2013 and $21 million of Restructuring program
implementation costs in 2012 (reflected in Corporate).
Production Costs and Operating Expenses
The following table illustrates the relative size of the primary components of total production costs and operating expenses of
Dow. More information about each of these components can be found in other sections of Management’s Discussion and
Analysis of Financial Condition and Results of Operations, and Notes to the Consolidated Financial Statements.
Production Costs and Operating Expenses
Cost components as a percent of total 2014 2013 2012
Hydrocarbon feedstocks and energy 38% 38% 37%
Salaries, wages and employee benefits 15 15 13
Maintenance 4 4 4
Depreciation 4 4 4
Restructuring charges — — 3
Supplies, services and other raw materials 39 39 39
Total 100% 100% 100%
Amortization of Intangibles
Amortization of intangibles was $436 million in 2014, $461 million in 2013 and $478 million in 2012. In 2013, amortization of
intangibles was impacted by a $3 million asset impairment charge (reflected in Corporate). See Notes 9 and 11 to the
Consolidated Financial Statements for additional information on this impairment.
Goodwill and Other Intangible Asset Impairment Losses
In the fourth quarter of 2014, the Company recognized a pretax charge of $50 million related to the impairment of intangible
assets in the Dow Electronic Materials business, which is included in "Goodwill and other intangible asset impairment losses"
in the consolidated statements of income and reflected in Consumer Solutions. See Notes 9 and 11 to the Consolidated
Financial Statements for additional information on this impairment.
The Company performs annual goodwill impairment tests during the fourth quarter of the year. In 2014, the Company
performed qualitative testing for 9 of the 14 reporting units carrying goodwill and quantitative testing for the remaining five
reporting units. As a result of this testing, no goodwill impairments were identified.
In 2013, the Company performed qualitative testing for 14 of the 19 reporting units carrying goodwill and quantitative testing
for the remaining five reporting units. As a result of this testing, no goodwill impairments were identified.
During the fourth quarter of 2012, the Company performed qualitative testing for 11 of the 20 reporting units carrying
goodwill. The qualitative assessment indicated that it was more likely than not that the fair value exceeded carrying value for
those reporting units. The Company performed the first step of the quantitative testing for the remaining nine reporting units.
The Company utilized a discounted cash flow methodology to calculate the fair value of the reporting units. Based on the fair
value analysis, management concluded that fair value exceeded carrying value for all reporting units except the reporting unit
previously known as Dow Formulated Systems. Management completed the second step of the quantitative test for Dow
Formulated Systems which compared the implied fair value of the reporting unit's goodwill to the carrying value. As a result of
this test, the Company recorded an impairment loss of $220 million in the fourth quarter of 2012, which is included in
"Goodwill and other intangible asset impairment losses" in the consolidated statements of income and reflected in Performance
Materials & Chemicals. The goodwill impairment loss represented the total amount of goodwill carried by the Dow Formulated
Systems reporting unit. See Critical Accounting Policies in Other Matters in Management's Discussion and Analysis of
Financial Condition and Results of Operations and Note 9 to the Consolidated Financial Statements for additional information
regarding goodwill and the impairment tests conducted in each year.