Dow Chemical 2015 Annual Report Download - page 144

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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 $174 million in 2015, $163 million in 2014 and $132 million in 2013. At
December 31, 2015, 15.2 million shares out of a total 31.8 million shares held by the ESOP had been allocated to participants’
accounts and 16.6 million shares, at a fair value of $852 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. 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. On November 12, 2014, the Board of Directors
announced a new $5 billion tranche to its share buy-back program, with the repurchase of the Company's common stock timed
to proceeds received from portfolio management actions and increases in operating cash flows. As a result of these actions, the
total authorized amount of the share repurchase program is $9.5 billion. At December 31, 2015, $2.3 billion of the share buy-
back authorization remained for repurchases. The total number of treasury shares purchased by the Company was 23.1 million
in 2015, 84.1 million in 2014 and 8.2 million in 2013. In 2015, the Company also recorded 34.1 million treasury shares as part
of the Reverse Morris Trust transaction with Olin, which were tendered as part of a non-cash, public exchange offer. See Note 6
for additional information.
On December 11, 2015, the Company and DuPont announced that their boards of directors unanimously approved a definitive
agreement under which the companies will combine in an all-stock merger of equals strategic combination. The combined
company will be named DowDuPont. This transaction is expected to close in the second half of 2016, subject to customary
closing conditions, including regulatory approvals. As a result of this pending transaction, the Company will not repurchase
shares under the share repurchase program until after the shareholder vote on the DowDuPont merger.
The Company may issue shares for purchases under the Employee Stock Purchase Plan, for options exercised as well as for the
release of deferred, performance deferred and restricted stock out of treasury stock or as new common stock shares. The
number of treasury shares issued to employees under the Company’s stock-based compensation programs was 16.5 million in
2015, 7.1 million in 2014 and zero in 2013.