Dow Chemical 2015 Annual Report Download - page 45

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and Corporate. The asset impairments and related costs were reflected in the following segments: Infrastructure Solutions
($95 million), Performance Materials & Chemicals ($70 million) and Corporate ($16 million). Gross margin in 2013 was also
reduced by $40 million in implementation costs related to the Company's 2012 Restructuring programs (reflected in Corporate).
See Note 12 to the Consolidated Financial Statements for additional information regarding these asset impairments.
Operating Rate
Dow's global plant operating rate was 85 percent of capacity in 2015, compared with 85 percent in 2014 and 81 percent in
2013. Operating rates improved in 2014 primarily due to increased demand and actions taken by management to increase asset
utilization.
Personnel Count
Personnel count was 49,495 at December 31, 2015, down from 53,216 at December 31, 2014. Headcount decreased in 2015
primarily due to the separation of employees as a result of divestitures and the Company's 2015 restructuring program.
Personnel count at December 31, 2014, increased from 52,731 at December 31, 2013, as hiring to support the Company's
growth initiatives more than offset declines due to the Company's 2012 Restructuring programs.
Research and Development Expenses
Research and development (“R&D”) expenses were $1,598 million in 2015, compared with $1,647 million in 2014 and
$1,747 million in 2013. R&D expenses decreased 3 percent in 2015 primarily due to cost reduction initiatives, notably in
Agricultural Sciences, which were partially offset by increased performance-based compensation costs. In 2014, R&D expenses
decreased primarily due to cost reduction initiatives, notably in Performance Materials & Chemicals. In 2013, R&D expenses
were impacted by increased performance-based compensation costs and $2 million of implementation costs related to the
Company's restructuring programs (reflected in Corporate).
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses were $2,971 million in 2015, compared with $3,106 million in 2014
and $3,024 million in 2013. In 2015, SG&A expenses decreased 4 percent from 2014, as lower expenses, notably in
Agricultural Sciences and from the impact of divestitures, more than offset increased performance-based compensation costs. In
2015, SG&A expenses were also impacted by $51 million in pretax charges for costs associated with portfolio and productivity
actions (reflected in Corporate). 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 were impacted by $2 million of implementation costs related to the Company's Restructuring programs (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 2015 2014 2013
Hydrocarbon feedstocks and energy 27% 38% 38%
Salaries, wages and employee benefits 18 15 15
Maintenance 5 4 4
Depreciation 4 4 4
Restructuring charges 1 — —
Supplies, services and other raw materials 45 39 39
Total 100% 100% 100%
Amortization of Intangibles
Amortization of intangibles was $419 million in 2015, $436 million in 2014 and $461 million in 2013. In 2013, amortization of
intangibles was impacted by a $3 million asset impairment charge (reflected in Corporate). See Notes 10 and 12 to the
Consolidated Financial Statements for additional information on this impairment.
Goodwill and Other Intangible Asset Impairment Losses
The Company performs annual goodwill impairment tests during the fourth quarter of the year. In 2015, the Company
performed qualitative testing for 9 of the 12 reporting units carrying goodwill and quantitative testing for the remaining three
reporting units. As a result of this testing, no goodwill impairments were identified. See Critical Accounting Policies in Other