Dow Chemical 2015 Annual Report Download - page 65

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As Dow continues to maintain its strong balance sheet and financial flexibility, management is focused on net debt, as Dow
believes this is the best representation of the Company’s financial leverage at this point in time. As shown in the following
table, net debt is equal to total gross debt minus "Cash and cash equivalents." At December 31, 2015, net debt as a percent of
total capitalization decreased to 24.8 percent. This decrease was primarily due to a $2.5 billion reduction in gross debt and a
$2.9 billion increase in cash and cash equivalents; and a significant increase in earnings, which includes the after-tax gain on
the split-off of the Company's chlorine value chain, the sale of the Company's interest in MEGlobal and other business
divestitures. See Notes 5 and 6 to the Consolidated Financial Statements for further information on the split-off of the
Company's chlorine value chain and other divestitures.
Total Debt at December 31
In millions 2015 2014
Notes payable $ 454 $ 551
Long-term debt due within one year (1) 541 382
Long-term debt (1) 16,215 18,741
Gross debt $ 17,210 $ 19,674
Cash and cash equivalents $ 8,577 $ 5,654
Net debt $ 8,633 $ 14,020
Gross debt as a percent of total capitalization 39.7% 45.5%
Net debt as a percent of total capitalization 24.8% 37.3%
(1) Presented in accordance with newly implemented ASU 2015-03. See Note 2 to the
Consolidated Financial Statements for further information.
See Note 17 to the Consolidated Financial Statements for information related to the Company’s notes payable and long-term
debt activity, including debt retired and issued during the year ended December 31, 2015.
Dow’s public debt instruments and primary, private credit agreements contain, among other provisions, certain customary
restrictive covenant and default provisions. The Company’s most significant debt covenant with regard to its financial position
is the obligation to maintain the ratio of the Company’s consolidated indebtedness to consolidated capitalization at no greater
than 0.65 to 1.00 at any time the aggregate outstanding amount of loans under the Five Year Competitive Advance and
Revolving Credit Facility Agreement ("Revolving Credit Facility") equals or exceeds $500 million. The ratio of the Company’s
consolidated indebtedness to consolidated capitalization as defined in the Revolving Credit Facility was 0.38 to 1.00 at
December 31, 2015. At December 31, 2015, management believes the Company was in compliance with all of its covenants
and default provisions. For information on Dow’s covenants and default provisions, see Note 17 to the Consolidated Financial
Statements.
Management expects that the Company will continue to have sufficient liquidity and financial flexibility to meet all of its
business obligations.
Credit Ratings
As of February 12, 2016, the Company's credit ratings were as follows:
Credit Ratings Long-Term Short-Term
Rating Agency Rating Rating Outlook
Standard & Poor’s BBB A-2 Watch Developing
Moody’s Investors Service Baa2 P-2 Stable
Fitch Ratings BBB F2 Watch Positive
Downgrades in the Company’s credit ratings will increase borrowing costs on certain indentures and could have an
impact on the Company’s ability to access credit markets.