Dow Reports Third Quarter Results

Equity Earnings were $123 million, down from $153 million from the same period last year. Equity earnings were unfavorably impacted by a production outage at EQUATE during the quarter. EBITDA for the segment was $200 million, compared with $263 million in the same period last year.

Outlook

Commenting on the Company’s outlook, Liveris said:

“Dow enters the fourth quarter and heads into 2013 on our front foot. We previously outlined $2.5 billion of levers we could pull to mitigate a slowing world economy. These actions are not only in motion, but are beginning to take hold, as we demonstrated this quarter.

“We recognize that these difficult conditions may have extended staying power, as the new reality is that we are operating in a slow-growth and volatile world. This requires an agile and efficient response. The task before us is straightforward: We must deliver value to our shareholders by a continuing focus on improving return on capital, increasing cash flow and growing earnings. And with our new, streamlined operating model and management structure, our entire organization is focused on delivering against these three objectives.”

Dow will host a live Webcast of its third quarter earnings conference call with investors to discuss its results, business outlook and other matters tomorrow, October 24, at 9:00 a.m. ET on www.dow.com.

(1)		“Adjusted earnings per share” is defined as earnings per share excluding the impact of “Certain Items.” See Supplemental Information at the end of the release for a description of these items, as well as a reconciliation of adjusted earnings per share to “Earnings per common share - diluted.”
(2)		“Adjusted sales” is defined as “Net Sales” excluding sales related to prior-period divestitures.
(3)		EBITDA is defined as earnings (i.e., “Net Income”) before interest, income taxes, depreciation and amortization. A reconciliation of EBITDA to "Net Income Available for The Dow Chemical Company Common Stockholders" is provided following the Operating Segments table.
(4)		Adjusted EBITDA margin is defined as EBITDA excluding the impact of “Certain Items” as a percentage of net sales.
(5)		Net debt equals total debt (“Notes payable” plus “Long-term debt due within one year” plus “Long-Term Debt”) minus “Cash and cash equivalents,” and “Marketable securities and interest-bearing deposits.”

^®SmartStax multi-event technology developed by Dow AgroSciences LLC and Monsanto. SmartStax is a trademark of Monsanto Technology LLC.™ trademark of The Dow Chemical Company (Dow”) or an affiliated company of Dow

About Dow

Dow (NYSE: DOW) combines the power of science and technology to passionately innovate what is essential to human progress. The Company connects chemistry and innovation with the principles of sustainability to help address many of the world's most challenging problems such as the need for clean water, renewable energy generation and conservation, and increasing agricultural productivity. Dow's diversified industry-leading portfolio of specialty chemical, advanced materials, agrosciences and plastics businesses delivers a broad range of technology-based products and solutions to customers in approximately 160 countries and in high growth sectors such as electronics, water, energy, coatings and agriculture. In 2011, Dow had annual sales of $60 billion and employed approximately 52,000 people worldwide. The Company's more than 5,000 products are manufactured at 197 sites in 36 countries across the globe. References to "Dow" or the "Company" mean The Dow Chemical Company and its consolidated subsidiaries unless otherwise expressly noted. More information about Dow can be found at www.dow.com.

Use of non-GAAP financial measures: Dow’s management believes that measures of income adjusted to exclude certain items (“non-GAAP” financial measures) provide relevant and meaningful information to investors about the ongoing operating results of the Company. Such financial measures are not recognized in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and should not be viewed as an alternative to GAAP financial measures of performance. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided in the Supplemental Information tables.

Note: The forward-looking statements contained in this document involve risks and uncertainties that may affect the Company’s operations, markets, products, services, prices and other factors as discussed in filings with the Securities and Exchange Commission. These risks and uncertainties include, but are not limited to, economic, competitive, legal, governmental and technological factors. Accordingly, there is no assurance that the Company’s expectations will be realized. The Company assumes no obligation to provide revisions to any forward-looking statements should circumstances change, except as otherwise required by securities and other applicable laws.

Financial Statements (Note A)
The Dow Chemical Company and Subsidiaries
Consolidated Statements of Income
		Three Months Ended								Nine Months Ended
In millions, except per share amounts (Unaudited)		Sep 30, 2012				Sep 30, 2011				Sep 30, 2012				Sep 30, 2011
Net Sales		$	13,637			$	15,109			$	42,869			$	45,888
Cost of sales		11,368				12,928				35,853				38,596
Research and development expenses		434				402				1,245				1,213
Selling, general and administrative expenses		739				691				2,120				2,086
Amortization of intangibles		117				125				361				373
Restructuring charges (Note B)		—				—				357				—
Acquisition-related integration expenses (Note C)		—				—				—				31
Equity in earnings of nonconsolidated affiliates (Note D)		175				375				492				964
Sundry income (expense) - net (Note E)		(21		)		47				23				(322		)
Interest income		10				9				26				26
Interest expense and amortization of debt discount		318				305				959				1,010
Income Before Income Taxes		825				1,089				2,515				3,247
Provision for income taxes		234				186				664				546
Net Income		591				903				1,851				2,701
Net income attributable to noncontrolling interests		9				3				38				24
Net Income Attributable to The Dow Chemical Company		582				900				1,813				2,677
Preferred stock dividends		85				85				255				255
Net Income Available for The Dow Chemical Company Common Stockholders		$	497			$	815			$	1,558			$	2,422
Per Common Share Data:
Earnings per common share - basic		$	0.42			$	0.70			$	1.32			$	2.08
Earnings per common share - diluted		$	0.42			$	0.69			$	1.31			$	2.07
Common stock dividends declared per share of common stock		$	0.32			$	0.25			$	0.89			$	0.65
Weighted-average common shares outstanding - basic		1,172.7				1,152.3				1,167.8				1,147.2
Weighted-average common shares outstanding - diluted		1,179.5				1,160.9				1,174.9				1,157.8
Depreciation		$	514			$	539			$	1,530			$	1,624
Capital Expenditures		$	622			$	651			$	1,605			$	1,620

Notes to the Consolidated Financial Statements:

Note A: The unaudited interim consolidated financial statements reflect all adjustments which, in the opinion of management, are considered necessary for a fair presentation of the results for the periods covered. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December  31, 2011. Except as otherwise indicated by the context, the terms "Company" and "Dow" as used herein mean The Dow Chemical Company and its consolidated subsidiaries.

Note B: On March 27, 2012, the Company's Board of Directors approved a restructuring plan as part of a series of actions to optimize its portfolio, respond to changing and volatile economic conditions, particularly in Western Europe, and to advance the Company's Efficiency for Growth program. The restructuring plan includes the shutdown of a number of manufacturing facilities and a workforce reduction. As a result, in the first quarter of 2012, the Company recorded pretax restructuring charges of $357 million that included asset write-downs and write-offs, severance and costs associated with exit and disposal activities.

Note C: During the first quarter of 2011, pretax charges totaling $31 million were recorded for integration costs related to the April 1, 2009 acquisition of Rohm and Haas Company.

Note D: In the third quarter of 2011, the Company recognized an $86 million gain related to cash collected on a previously impaired note receivable related to Equipolymers, a nonconsolidated affiliate.

Note E: In the first quarter of 2012, the Company recognized a pretax loss of $24 million on the early extinguishment of debt. In the first half of 2011, the Company recognized a pretax loss of $482 million on the early extinguishment of debt.

The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets
In millions (Unaudited)		Sep 30, 2012				Dec 31, 2011
Assets
Current Assets
Cash and cash equivalents (variable interest entities restricted - 2012: $197; 2011: $170)		$	3,885			$	5,444
Marketable securities and interest-bearing deposits		—				2
Accounts and notes receivable:
Trade (net of allowance for doubtful receivables - 2012: $139; 2011: $121)		5,169				4,900
Other		4,797				4,726
Inventories		8,630				7,577
Deferred income tax assets - current		666				471
Other current assets		318				302
Total current assets		23,465				23,422
Investments
Investment in nonconsolidated affiliates		3,374				3,405
Other investments (investments carried at fair value - 2012: $2,068; 2011: $2,008)		2,559				2,508
Noncurrent receivables		1,238				1,144
Total investments		7,171				7,057
Property
Property		53,417				52,216
Less accumulated depreciation		35,860				34,917
Net property (variable interest entities restricted - 2012: $2,452; 2011: $2,169)		17,557				17,299
Other Assets
Goodwill		12,933				12,930
Other intangible assets (net of accumulated amortization - 2012: $2,684; 2011: $2,349)		4,849				5,061
Deferred income tax assets - noncurrent		2,407				2,559
Asbestos-related insurance receivables - noncurrent		156				172
Deferred charges and other assets		830				724
Total other assets		21,175				21,446
Total Assets		$	69,368			$	69,224
Liabilities and Equity
Current Liabilities
Notes payable		$	439			$	541
Long-term debt due within one year		1,747				2,749
Accounts payable:
Trade		4,627				4,778
Other		2,338				2,216
Income taxes payable		404				382
Deferred income tax liabilities - current		97				129
Dividends payable		463				376
Accrued and other current liabilities		2,680				2,463
Total current liabilities		12,795				13,634
Long-Term Debt (variable interest entities nonrecourse - 2012: $1,409; 2011: $1,138)		18,216				18,310
Other Noncurrent Liabilities
Deferred income tax liabilities - noncurrent		1,021				1,091
Pension and other postretirement benefits - noncurrent		8,590				9,034
Asbestos-related liabilities - noncurrent		549				608
Other noncurrent obligations		3,089				3,109
Total other noncurrent liabilities		13,249				13,842
Redeemable Noncontrolling Interest		147				147
Stockholders’ Equity
Preferred stock, series A		4,000				4,000
Common stock		2,998				2,961
Additional paid-in capital		3,112				2,663
Retained earnings		19,591				19,087
Accumulated other comprehensive loss		(5,481		)		(5,996		)
Unearned ESOP shares		(390		)		(434		)
The Dow Chemical Company’s stockholders’ equity		23,830				22,281
Noncontrolling interests		1,131				1,010
Total equity		24,961				23,291
Total Liabilities and Equity		$	69,368			$	69,224

See Notes to the Consolidated Financial Statements.

The Dow Chemical Company and Subsidiaries
Operating Segments
		Three Months Ended								Nine Months Ended
In millions (Unaudited)		Sep 30, 2012				Sep 30, 2011				Sep 30, 2012				Sep 30, 2011
Sales by operating segment
Electronic and Functional Materials		$	1,111			$	1,205			$	3,383			$	3,536
Coatings and Infrastructure Solutions		1,730				1,905				5,321				5,639
Agricultural Sciences		1,302				1,205				4,816				4,311
Performance Materials		3,411				3,698				10,253				11,097
Performance Plastics		3,500				4,114				10,802				12,598
Feedstocks and Energy		2,521				2,905				8,113				8,456
Corporate		62				77				181				251
Total		$	13,637			$	15,109			$	42,869			$	45,888
EBITDA (1) by operating segment
Electronic and Functional Materials		$	273			$	306			$	803			$	850
Coatings and Infrastructure Solutions		246				372				787				990
Agricultural Sciences		63				75				821				768
Performance Materials		491				478				1,173				1,523
Performance Plastics		737				834				2,215				2,773
Feedstocks and Energy		200				263				532				765
Corporate		(212		)		(229		)		(865		)		(1,296		)
Total		$	1,798			$	2,099			$	5,466			$	6,373
Certain items increasing (decreasing) EBITDA by operating segment (2)
Electronic and Functional Materials		$	—			$	—			$	(17	)		$	—
Coatings and Infrastructure Solutions		—				—				(41		)		—
Agricultural Sciences		—				—				—				—
Performance Materials		—				—				(186		)		—
Performance Plastics		—				86				—				86
Feedstocks and Energy		—				—				—				—
Corporate		—				—				(137		)		(513		)
Total		$	—			$	86			$	(381	)		$	(427	)
EBITDA excluding certain items by operating segment
Electronic and Functional Materials		$	273			$	306			$	820			$	850
Coatings and Infrastructure Solutions		246				372				828				990
Agricultural Sciences		63				75				821				768
Performance Materials		491				478				1,359				1,523
Performance Plastics		737				748				2,215				2,687
Feedstocks and Energy		200				263				532				765
Corporate		(212		)		(229		)		(728		)		(783		)
Total		$	1,798			$	2,013			$	5,847			$	6,800
															Continued

The Dow Chemical Company and Subsidiaries
Operating Segments (Continued)
		Three Months Ended								Nine Months Ended
In millions (Unaudited)		Sep 30, 2012				Sep 30, 2011				Sep 30, 2012				Sep 30, 2011
Equity in earnings (losses) of nonconsolidated affiliates by operating segment (included in EBITDA)
Electronic and Functional Materials		$	27			$	23			$	81			$	72
Coatings and Infrastructure Solutions		29				72				96				219
Agricultural Sciences		3				—				3				3
Performance Materials		(30		)		(11		)		(67		)		(20		)
Performance Plastics		28				150				101				271
Feedstocks and Energy		123				153				300				446
Corporate		(5		)		(12		)		(22		)		(27		)
Total		$	175			$	375			$	492			$	964

(1) The Company uses EBITDA (which Dow defines as earnings (i.e., "Net Income") before interest, income taxes, depreciation and amortization) as its measure of profit/loss for segment reporting purposes. EBITDA by operating segment includes all operating items relating to the businesses, except depreciation and amortization; items that principally apply to the Company as a whole are assigned to Corporate. A reconciliation of EBITDA to "Net Income Available for The Dow Chemical Company Common Stockholders" is provided below.

Reconciliation of EBITDA to "Net Income Available for The Dow Chemical Company Common Stockholders"		Three Months Ended								Nine Months Ended
In millions (Unaudited)		Sep 30, 2012				Sep 30, 2011				Sep 30, 2012				Sep 30, 2011
EBITDA		$	1,798			$	2,099			$	5,466			$	6,373
- Depreciation and amortization		665				714				2,018				2,142
+ Interest income		10				9				26				26
- Interest expense and amortization of debt discount		318				305				959				1,010
Income Before Income Taxes		$	825			$	1,089			$	2,515			$	3,247
- Provision for income taxes		234				186				664				546
- Net income attributable to noncontrolling interests		9				3				38				24
- Preferred stock dividends		85				85				255				255
Net Income Available for The Dow Chemical Company Common Stockholders		$	497			$	815			$	1,558			$	2,422

(2) See Supplemental Information for a description of certain items affecting results in 2012 and 2011.

Sales by Geographic Area
		Three Months Ended								Nine Months Ended
In millions (Unaudited)		Sep 30, 2012				Sep 30, 2011				Sep 30, 2012				Sep 30, 2011
North America		$	4,802			$	5,375			$	15,480			$	16,473
Europe, Middle East and Africa		4,446				5,125				14,680				16,196
Asia Pacific		2,520				2,659				7,585				7,885
Latin America		1,869				1,950				5,124				5,334
Total		$	13,637			$	15,109			$	42,869			$	45,888

Sales Volume and Price by Operating Segment and Geographic Area
			Three Months Ended										Nine Months Ended
			Sep 30, 2012										Sep 30, 2012
Percentage change from prior year			Volume			Price			Total				Volume			Price			Total
Electronic and Functional Materials			(3	)%		(5	)%		(8	)%			(3	)%		(1	)%		(4	)%
Coatings and Infrastructure Solutions			1			(10	)		(9	)			1			(7	)		(6	)
Agricultural Sciences			7			1			8				10			2			12
Performance Materials			3			(11	)		(8	)			(1	)		(7	)		(8	)
Performance Plastics			(6	)		(9	)		(15	)			(8	)		(6	)		(14	)
Feedstocks and Energy			(1	)		(12	)		(13	)			(1	)		(3	)		(4	)
Total			(1	)%		(9	)%		(10	)%			(2	)%		(5	)%		(7	)%
North America			(3	)%		(8	)%		(11	)%			(3	)%		(3	)%		(6	)%
Europe, Middle East and Africa			(2	)		(11	)		(13	)			(3	)		(6	)		(9	)
Asia Pacific			5			(10	)		(5	)			2			(6	)		(4	)
Latin America			1			(5	)		(4	)			(2	)		(2	)		(4	)
Total			(1	)%		(9	)%		(10	)%			(2	)%		(5	)%		(7	)%
Sales Volume and Price by Operating Segment and Geographic Area
Excluding Divestitures (3)
			Three Months Ended										Nine Months Ended
			Sep 30, 2012										Sep 30, 2012
Percentage change from prior year			Volume			Price			Total				Volume			Price			Total
Electronic and Functional Materials			(3	)%		(5	)%		(8	)%			(3	)%		(1	)%		(4	)%
Coatings and Infrastructure Solutions			1			(10	)		(9	)			1			(7	)		(6	)
Agricultural Sciences			7			1			8				10			2			12
Performance Materials			4			(11	)		(7	)			1			(7	)		(6	)
Performance Plastics			5			(10	)		(5	)			3			(6	)		(3	)
Feedstocks and Energy			(1	)		(12	)		(13	)			(1	)		(3	)		(4	)
Total			2	%		(9	)%		(7	)%			2	%		(5	)%		(3	)%
North America			1	%		(8	)%		(7	)%			1	%		(3	)%		(2	)%
Europe, Middle East and Africa			3			(12	)		(9	)			3			(7	)		(4	)
Asia Pacific			5			(10	)		(5	)			2			(6	)		(4	)
Latin America			2			(5	)		(3	)			(1	)		(2	)		(3	)
Total			2	%		(9	)%		(7	)%			2	%		(5	)%		(3	)%

(3) Excludes sales of the Polypropylene business divested on September 30, 2011 and sales of Dow Haltermann which was divested during 2011.

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