Dow Chemical 2014 Annual Report Download - page 61

37
Furthermore, Dow Corning initiated restructuring actions in the fourth quarter of 2012, including workforce reductions and
asset impairments, of which Dow's share of the charge was approximately $30 million.
In January 2014, MOFCOM issued a final determination that China's solar-grade polycrystalline silicon industry suffered
material damage because of dumping, which resulted in antidumping duties of 53.3 percent and countervailing duties of
2.1 percent on future imports from Dow Corning into China. During the fourth quarter of 2014, Dow Corning determined its
polycrystalline silicon plant expansion in Clarksville, Tennessee, which was delayed in 2012, would not be economically viable
and made the decision to permanently abandon the assets. This decision was made after review of sustained adverse market
conditions and continued oversupply, the cost of operating the facility and the ongoing impact of tariffs on polycrystalline
silicon imported into China. Dow's share of the charge related to this asset abandonment was $500 million (reflected in
Infrastructure Solutions). As a result of the significant change in the use of this asset, Dow Corning assessed whether the
carrying value of all remaining polycrystalline silicon assets might be impaired. Dow Corning's estimates of future
undiscounted cash flows indicated the polycrystalline silicon asset group was recoverable.
In May 1995, Dow Corning filed for protection under Chapter 11 of the U.S Bankruptcy Code to address pending and claimed
liabilities arising from breast implant product lawsuits. On June 1, 2004, Dow Corning's Joint Plan of Reorganization (the
"Plan") became effective and Dow Corning emerged from bankruptcy. Under the Plan, Dow Corning established and agreed to
fund a products liability settlement program (the "Settlement Facility"). The Plan contains a cap on the amount of payments
required from Dow Corning to fund the Settlement Facility. During the fourth quarter of 2014, Dow Corning, with the
assistance of a third-party advisor, developed an estimate of the future Implant Liability based on evidence that the actual
funding required for the Settlement Facility is expected to be lower than the full funding cap set forth in the Plan. As a result,
Dow Corning reduced its Implant Liability by approximately $1.3 billion. The revised Implant Liability reflects Dow Corning’s
best estimate of its remaining obligations under the Plan. Dow’s share of the Implant Liability reduction was $407 million
($155 million reflected in Consumer Solutions and $252 million reflected in Infrastructure Solutions). See Note 8 to the
Consolidated Financial Statements for additional information on nonconsolidated affiliates.
Sundry Income (Expense) - Net
Sundry income (expense) - net includes a variety of income and expense items such as the gain or loss on foreign currency
exchange, dividends from investments, and gains and losses on sales of investments and assets. Sundry income (expense) - net
for 2014 was net expense of $27 million, compared with net income of $2,554 million in 2013 and net expense of $27 million
in 2012.
In 2014, sundry income (expense) - net included a gain related to the termination of an off-take agreement and gains on asset
sales which were more than offset by foreign currency exchange losses, venture capital investment losses and $49 million of
transaction expenses related to the planned separation of the Company's chlorine value chain (reflected in Corporate).
In 2013, sundry income (expense) - net included a gain of $2.161 billion related to damages awarded to the Company in the K-
Dow arbitration proceeding (reflected in Corporate), a $451 million gain on the sale of the Polypropylene Licensing and
Catalysts business (reflected in Performance Plastics), an $87 million gain on the sale of a 7.5 percent ownership interest in
Freeport LNG Development, L.P. (reflected in Performance Plastics), a $26 million gain on the sale of the Company's
ownership interest in Dow Kokam (reflected in Corporate), gains on asset sales and equity method investments and a
$326 million loss on the early extinguishment of debt (reflected in Corporate).
In 2012, sundry income (expense) - net included a $123 million loss on the early extinguishment of debt (reflected in
Corporate), foreign currency exchange losses and non-income tax related expenses which were partially offset by gains related
to small divestitures and asset sales and a gain related to post-closing adjustments on the sale of a contract manufacturing
business (reflected in Performance Materials & Chemicals). See Liquidity and Capital Resources in Management's Discussion
and Analysis of Financial Condition and Results of Operations, and Note 16 to the Consolidated Financial Statements for
additional information related to the early extinguishment of debt; Note 5 to the Consolidated Financial Statements for
additional information concerning the Company's divestitures; and Note 14 to the Consolidated Financial Statements for
additional information related to the K-Dow arbitration proceeding.
Net Interest Expense
Net interest expense (interest expense less capitalized interest and interest income) was $932 million in 2014, down from
$1,060 million in 2013 and $1,228 million in 2012, reflecting the impact of the Company's 2013 deleveraging activities and
lower debt financing costs. Interest income was $51 million in 2014 and $41 million in 2013 and 2012. Interest expense (net of
capitalized interest) and amortization of debt discount totaled $983 million in 2014, $1,101 million in 2013 and $1,269 million
in 2012. See Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 16 to the Consolidated Financial Statements for additional information related to debt financing activity.