Dow Reports First Quarter Results

Includes $1.4 Billion Special Charge for Merger-Related Costs



Apr 26, 2001, 01:00 ET from The Dow Chemical Company

    MIDLAND, Mich., April 26 /PRNewswire/ -- Dow Reports First Quarter
 Results:
 
                     2001 First Quarter of 2001 Highlights
 
     *  Dow reported a loss of $0.76 cents per share, which included a special
 charge of $1.4 billion (pretax), or $1.02 per share, for costs and
 restructuring related to Dow's recent merger with Union Carbide.
     *  Record first quarter sales of $7.4 billion were up 2 percent from a
 year ago, on gains in both volume and price.
     *  EBIT was $502 million, excluding the special charge related to the
 merger, reflecting the impact of continuing high energy and feedstock costs
 that rose nearly $600 million from a year ago.
 
 
 
     (In millions, except for per share amounts)             3 Months Ended
                                                                 March 31
                                                              2001      2000
 
     Net Sales                                              $7,386    $7,269
     Earnings Before Interest, Income Taxes
        and Minority Interests (EBIT)                         (882)      902
     Earnings Per Common Share                              $(0.76)    $0.57
 
     Excluding Special Charge for Merger-Related Costs*:
     EBIT                                                      502       902
     Earnings Per Common Share                               $0.26     $0.57
 
     * See Note B to the Financial Statements.
 
     The Dow Chemical Company (NYSE:   DOW) today reported record first quarter
 sales of $7.4 billion, up 2 percent from a year ago.  The company recorded a
 loss of $0.76 per share, which included a special charge of $1.4 billion
 (pretax), or $1.02 per share, for costs related to Dow's recent merger with
 Union Carbide.  The charge included transaction costs, employee severance and
 the write-down of duplicate assets and facilities.
     Earnings also were affected by an $0.18 per share gain on the sale of
 stock in Schlumberger Ltd., an oil field services company.  This gain, as well
 as the special charge for merger-related costs, was recorded in Unallocated
 and Other.  Earnings of $0.04 per share were reclassified as a transition
 adjustment gain due to an accounting change related to derivative instruments
 and hedging activities (SFAS No. 133).
     Excluding the merger-related special charge, Dow reported earnings before
 interest, income taxes and minority interests (EBIT) of $502 million.  This
 reflected the impact of nearly $600 million in higher energy and feedstock
 costs that was only partially offset by hedging gains and a rise in price of
 less than $80 million.
     "This has been one of the most challenging quarters for the North American
 chemical industry and also for Dow," said J. Pedro Reinhard, executive vice
 president and chief financial officer.  "We are dealing with a unique
 situation brought on not just by persistently high oil prices, but also by an
 unprecedented environment of high and volatile natural gas prices in North
 America," he said.  "Those issues, combined with current supply/demand
 balances in certain sectors, have impacted our first quarter earnings."
     Reinhard noted several proactive steps Dow is taking to manage through
 these conditions.  "We have renewed our disciplined focus on costs and capital
 expenditures," he said.  "We have announced and implemented several pricing
 initiatives and, in response to the natural gas prices, we have temporarily
 reduced production in some of our North American facilities where Dow would
 not have recovered its cash costs."
     "Beyond these actions, Dow's key priorities are to capture the cost
 synergies of its merger with Union Carbide and to accelerate the most
 significant Six Sigma projects with a focus on cost savings," Reinhard said.
 "The current economic and business environment has toughened our resolve to
 deliver long-term shareholder value."
     Results from Union Carbide operations were reflected in Dow's earnings for
 the full quarter -- though the merger was completed in February -- because the
 transaction was accounted for as a pooling of interests.
     Volume and price each rose 1 percent from the same quarter last year.
 Dow's balanced geographic mix allowed it to benefit from volume growth in both
 Europe and Latin America, compensating for slowing demand in North America,
 particularly in the automotive and electronics industries.  Price increases in
 North America more than offset price declines in Europe, Asia Pacific and
 Latin America.
     In Performance Plastics and Performance Chemicals, combined EBIT was $317
 million, compared with $468 million for the same quarter last year.
 Performance Plastics recorded a 2 percent rise in volume while both segments
 posted 3 percent gains in price.  The higher prices are bringing some relief
 from the cumulative negative impact of hydrocarbon feedstock and energy costs
 that have squeezed margins for the past year.  Volume in Performance Chemicals
 declined and was impacted by the divestiture of certain businesses required
 for the regulatory approval of the Union Carbide merger.  Agricultural
 Products EBIT declined from a year ago, reflecting adverse conditions
 worldwide in the agricultural industry and the effect of discontinued
 applications of certain products.
     In the combined Chemicals and Plastics segments, EBIT declined to $26
 million, primarily due to the impact of high energy and feedstock costs.  In
 Chemicals sales, a 3 percent rise in price was more than offset by a 7 percent
 decline in volume.  In Plastics, volume rose 3 percent, while price decreased
 4 percent.
     According to Reinhard, "Based on current feedstock and energy prices, the
 slower growth environment around the world and our expectation of some
 improvement in pricing, along with the realization of cost synergies from the
 Union Carbide merger, Dow anticipates improved earnings in the second
 quarter."  Dow estimates earnings of between $0.35 to $0.45 per share.
 
     Upcoming Investor Meetings and Live Webcasts:
     *  Dow will host a live audio Webcast of its first quarter earnings
 conference call with investors to discuss its results and business outlook at
 10 a.m. EDT today on www.dow.com .
     *  Dow has scheduled an investor meeting for Tuesday, May 1, to report on
 the integration of its merger with Union Carbide and provide updated
 projections for cost synergies.  The meeting will begin at 8:00 a.m. EDT and
 will be Webcast live on www.dow.com .
     *  Dow plans a live audio Webcast of its Annual Meeting of Stockholders on
 Thursday, May 10, at 2 p.m. EDT on www.dow.com .
 
     About Dow
     Dow is a leading science and technology company that provides innovative
 chemical, plastic and agricultural products and services to many essential
 consumer markets.  With annual sales of approximately $30 billion, Dow serves
 customers in more than 170 countries and a wide range of markets that are
 vital to human progress, including food, transportation, health and medicine,
 personal and home care, and building and construction, among others.
 Committed to the principles of sustainable development, Dow and its
 approximately 50,000 employees seek to balance economic, environmental and
 social responsibilities.
 
     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.
 
 
     THE DOW CHEMICAL COMPANY - 1Q01 EARNINGS
     FINANCIAL STATEMENTS (Note A)
 
        The Dow Chemical Company and Subsidiaries       Three Months Ended
         Consolidated Statements of Income           Mar. 31,          Mar. 31,
     In millions except for per share
      amounts      (Unaudited)                         2001               2000
     Net Sales                                       $7,386             $7,269
       Cost of sales                                  6,456              5,842
       Research and development expenses                272                270
       Selling, general and
        administrative expenses                         452                474
       Amortization of intangibles                       33                 41
       Merger-related expenses and
        restructuring (Note B)                        1,384                  -
       Insurance and finance company
        operations, pretax income                        11                 29
       Equity in earnings of
        nonconsolidated affiliates                       35                130
       Sundry income - net                              283                101
     Earnings (Loss) before Interest,
      Income Taxes and Minority Interests              (882)               902
       Interest income                                   24                 45
       Interest expense and amortization
        of debt discount                                182                155
     Income (Loss) before Income Taxes
      and Minority Interests                         (1,040)               792
       Provision for income taxes                      (340)               262
       Minority interests' share in
        income                                           17                 18
     Income (Loss) before Cumulative
      Effect of Change in Accounting
      Principle                                        (717)               512
       Cumulative effect of change in
        accounting principle (Note C)                    32                  -
     Net Income (Loss) Available for
      Common Stockholders                             ($685)              $512
     Share Data
       Earnings (Loss) before cumulative
        effect of change in accounting
        principle per common share -
        basic                                        ($0.80)             $0.58
       Earnings (Loss) per common share -
        basic                                        ($0.76)             $0.58
       Earnings (Loss) before cumulative
        effect of change in accounting
        principle per common share -
        diluted                                      ($0.80)             $0.57
       Earnings (Loss) per common share -
        diluted                                      ($0.76)             $0.57
       Common stock dividends declared
        per share of Dow common stock                 $0.29              $0.29
       Weighted-average common shares
        outstanding - basic                           898.1              889.6
       Weighted-average common shares
        outstanding - diluted                         898.1              903.8
     Depreciation                                      $388               $368
     Capital Expenditures                              $273               $439
 
     Notes to Financial Statements:
 
     Note A: On February 6, 2001, a wholly owned subsidiary of The Dow Chemical
 Company ("Dow" or "Company") merged with Union Carbide Corporation ("Union
 Carbide") and, as a result, Union Carbide became a wholly owned subsidiary of
 the Company.  The merger was accounted for as a pooling of interests.
 Accordingly, the consolidated financial statements have been prepared to give
 retroactive effect to the merger and include the combined accounts of Dow and
 Union Carbide for all periods presented.
     The unaudited interim financial statements reflect all adjustments
 (consisting of normal recurring accruals) which, in the opinion of management,
 are considered necessary for a fair presentation of the results for the
 periods covered.  Certain reclassifications of prior year amounts have been
 made to conform to current year presentation.  These statements should be read
 in conjunction with the supplemental consolidated financial statements and
 notes thereto included in a Form 8-K filed by the Company on April 4, 2001 for
 the year ended December 31, 2000.
     Note B: In the first quarter of 2001, pretax costs of $1,384 million were
 recorded for merger-related expenses and restructuring.  These costs included
 transaction costs, employee severance, and the write-down of duplicate assets
 and facilities.
     Note C: On January 1, 2001, the Company recorded a cumulative transition
 adjustment gain of $32 million (net of related income tax of $19 million),
 upon adoption of SFAS No. 133, "Accounting for Derivative Instruments and
 Hedging Activities."
 
 
            The Dow Chemical Company and Subsidiaries
                  Consolidated Balance Sheets             Mar. 31,     Dec. 31,
     In millions      (Unaudited)                          2001          2000
     Assets
     Current Assets
       Cash and cash equivalents                           $244          $278
       Marketable securities and interest-
        bearing deposits                                    246           163
       Accounts and notes receivable:
            Trade (net of allowance for
             doubtful receivables - 2001:
             $121; 2000: $103)                            3,594         3,655
            Other                                         2,603         2,764
       Inventories:
            Finished and work in process                  3,618         3,396
            Materials and supplies                          759           817
       Deferred income tax assets -
        current                                             687           250
       Total current assets                              11,751        11,323
     Investments
       Investment in nonconsolidated
        affiliates                                        1,954         2,096
       Other investments                                  1,819         2,528
       Noncurrent receivables                               676           674
       Total investments                                  4,449         5,298
     Property
       Property                                          34,475        34,852
       Less accumulated depreciation                     21,495        21,141
       Net property                                      12,980        13,711
     Other Assets
       Goodwill (net of accumulated
        amortization - 2001: $491; 2000:
        $459)                                             2,226         1,928
       Deferred income tax assets -
        noncurrent                                        2,092         1,968
       Deferred charges and other assets                  1,932         1,763
       Total other assets                                 6,250         5,659
     Total Assets                                       $35,430       $35,991
 
     Liabilities and Stockholders' Equity
     Current Liabilities
       Notes payable                                     $3,086        $2,519
       Long-term debt due within one year                   307           318
       Accounts payable:
            Trade                                         2,540         2,975
            Other                                         1,203         1,594
       Income taxes payable                                 285           258
       Deferred income tax liabilities -
        current                                               7            35
       Dividends payable                                    152           217
       Accrued and other current
        liabilities                                       2,182         2,257
       Total current liabilities                          9,762        10,173
     Long-Term Debt                                       7,139         6,613
     Other Noncurrent Liabilities
       Deferred income tax liabilities -
        noncurrent                                        1,384         1,165
       Pension and other postretirement
        benefits - noncurrent                             2,408         2,238
       Other noncurrent obligations                       3,241         3,012
       Total other noncurrent liabilities                 7,033         6,415
     Minority Interest in Subsidiaries                      416           450
     Preferred Securities of Subsidiary                     500           500
     Stockholders' Equity
       Common stock                                       2,453         2,453
       Additional paid-in capital                            42             -
       Unearned ESOP shares                                (103)         (103)
       Retained earnings                                 11,729        12,675
       Accumulated other comprehensive
        loss                                               (926)         (560)
       Treasury stock at cost                            (2,615)       (2,625)
       Net stockholders' equity                          10,580        11,840
     Total Liabilities and Stockholders'
      Equity                                            $35,430       $35,991
     See Notes to Financial Statements.
 
     Operating Segments and Geographic Areas          The Dow Chemical Company
                                                          and Subsidiaries
                                                          Three Months Ended
                                                        Mar. 31,       Mar. 31,
     In millions      (Unaudited)                         2001           2000
     Operating segment sales
          Performance Plastics                           $1,921         $1,827
          Performance Chemicals                           1,310          1,338
          Agricultural Products                             605            633
          Plastics                                        1,769          1,779
          Chemicals                                         996          1,038
          Hydrocarbons and Energy                           709            571
          Unallocated and Other                              76             83
          Total                                          $7,386         $7,269
     Operating segment EBIT
          Performance Plastics                             $217           $316
          Performance Chemicals                             100            152
          Agricultural Products                              43             90
          Plastics                                           33            260
          Chemicals                                          (7)           143
          Hydrocarbons and Energy                            11             18
          Unallocated and Other                          (1,279)           (77)
          Total                                           ($882)          $902
     Geographic area sales
          United States                                  $3,205         $3,137
          Europe                                          2,370          2,264
          Rest of World                                   1,811          1,868
          Total                                          $7,386         $7,269
 
 
 
     Sales Volume and Price by Operating Segment and Geographic Area
                                                    Three Months Ended
                                                      Mar. 31, 2001
     Percentage change from prior year     Volume          Price          Total
     Operating segments
          Performance Plastics                2%             3%             5%
          Performance Chemicals             (5)%             3%           (2)%
          Agricultural Products               2%           (6)%           (4)%
          Plastics                            3%           (4)%           (1)%
          Chemicals                         (7)%             3%           (4)%
          Hydrocarbons and Energy            14%            10%            24%
          Total                               1%             1%             2%
     Geographic areas
          United States                     (2)%             4%             2%
          Europe                              7%           (2)%             5%
          Rest of World                     (2)%           (1)%           (3)%
          Total                               1%             1%             2%
 
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SOURCE The Dow Chemical Company
    MIDLAND, Mich., April 26 /PRNewswire/ -- Dow Reports First Quarter
 Results:
 
                     2001 First Quarter of 2001 Highlights
 
     *  Dow reported a loss of $0.76 cents per share, which included a special
 charge of $1.4 billion (pretax), or $1.02 per share, for costs and
 restructuring related to Dow's recent merger with Union Carbide.
     *  Record first quarter sales of $7.4 billion were up 2 percent from a
 year ago, on gains in both volume and price.
     *  EBIT was $502 million, excluding the special charge related to the
 merger, reflecting the impact of continuing high energy and feedstock costs
 that rose nearly $600 million from a year ago.
 
 
 
     (In millions, except for per share amounts)             3 Months Ended
                                                                 March 31
                                                              2001      2000
 
     Net Sales                                              $7,386    $7,269
     Earnings Before Interest, Income Taxes
        and Minority Interests (EBIT)                         (882)      902
     Earnings Per Common Share                              $(0.76)    $0.57
 
     Excluding Special Charge for Merger-Related Costs*:
     EBIT                                                      502       902
     Earnings Per Common Share                               $0.26     $0.57
 
     * See Note B to the Financial Statements.
 
     The Dow Chemical Company (NYSE:   DOW) today reported record first quarter
 sales of $7.4 billion, up 2 percent from a year ago.  The company recorded a
 loss of $0.76 per share, which included a special charge of $1.4 billion
 (pretax), or $1.02 per share, for costs related to Dow's recent merger with
 Union Carbide.  The charge included transaction costs, employee severance and
 the write-down of duplicate assets and facilities.
     Earnings also were affected by an $0.18 per share gain on the sale of
 stock in Schlumberger Ltd., an oil field services company.  This gain, as well
 as the special charge for merger-related costs, was recorded in Unallocated
 and Other.  Earnings of $0.04 per share were reclassified as a transition
 adjustment gain due to an accounting change related to derivative instruments
 and hedging activities (SFAS No. 133).
     Excluding the merger-related special charge, Dow reported earnings before
 interest, income taxes and minority interests (EBIT) of $502 million.  This
 reflected the impact of nearly $600 million in higher energy and feedstock
 costs that was only partially offset by hedging gains and a rise in price of
 less than $80 million.
     "This has been one of the most challenging quarters for the North American
 chemical industry and also for Dow," said J. Pedro Reinhard, executive vice
 president and chief financial officer.  "We are dealing with a unique
 situation brought on not just by persistently high oil prices, but also by an
 unprecedented environment of high and volatile natural gas prices in North
 America," he said.  "Those issues, combined with current supply/demand
 balances in certain sectors, have impacted our first quarter earnings."
     Reinhard noted several proactive steps Dow is taking to manage through
 these conditions.  "We have renewed our disciplined focus on costs and capital
 expenditures," he said.  "We have announced and implemented several pricing
 initiatives and, in response to the natural gas prices, we have temporarily
 reduced production in some of our North American facilities where Dow would
 not have recovered its cash costs."
     "Beyond these actions, Dow's key priorities are to capture the cost
 synergies of its merger with Union Carbide and to accelerate the most
 significant Six Sigma projects with a focus on cost savings," Reinhard said.
 "The current economic and business environment has toughened our resolve to
 deliver long-term shareholder value."
     Results from Union Carbide operations were reflected in Dow's earnings for
 the full quarter -- though the merger was completed in February -- because the
 transaction was accounted for as a pooling of interests.
     Volume and price each rose 1 percent from the same quarter last year.
 Dow's balanced geographic mix allowed it to benefit from volume growth in both
 Europe and Latin America, compensating for slowing demand in North America,
 particularly in the automotive and electronics industries.  Price increases in
 North America more than offset price declines in Europe, Asia Pacific and
 Latin America.
     In Performance Plastics and Performance Chemicals, combined EBIT was $317
 million, compared with $468 million for the same quarter last year.
 Performance Plastics recorded a 2 percent rise in volume while both segments
 posted 3 percent gains in price.  The higher prices are bringing some relief
 from the cumulative negative impact of hydrocarbon feedstock and energy costs
 that have squeezed margins for the past year.  Volume in Performance Chemicals
 declined and was impacted by the divestiture of certain businesses required
 for the regulatory approval of the Union Carbide merger.  Agricultural
 Products EBIT declined from a year ago, reflecting adverse conditions
 worldwide in the agricultural industry and the effect of discontinued
 applications of certain products.
     In the combined Chemicals and Plastics segments, EBIT declined to $26
 million, primarily due to the impact of high energy and feedstock costs.  In
 Chemicals sales, a 3 percent rise in price was more than offset by a 7 percent
 decline in volume.  In Plastics, volume rose 3 percent, while price decreased
 4 percent.
     According to Reinhard, "Based on current feedstock and energy prices, the
 slower growth environment around the world and our expectation of some
 improvement in pricing, along with the realization of cost synergies from the
 Union Carbide merger, Dow anticipates improved earnings in the second
 quarter."  Dow estimates earnings of between $0.35 to $0.45 per share.
 
     Upcoming Investor Meetings and Live Webcasts:
     *  Dow will host a live audio Webcast of its first quarter earnings
 conference call with investors to discuss its results and business outlook at
 10 a.m. EDT today on www.dow.com .
     *  Dow has scheduled an investor meeting for Tuesday, May 1, to report on
 the integration of its merger with Union Carbide and provide updated
 projections for cost synergies.  The meeting will begin at 8:00 a.m. EDT and
 will be Webcast live on www.dow.com .
     *  Dow plans a live audio Webcast of its Annual Meeting of Stockholders on
 Thursday, May 10, at 2 p.m. EDT on www.dow.com .
 
     About Dow
     Dow is a leading science and technology company that provides innovative
 chemical, plastic and agricultural products and services to many essential
 consumer markets.  With annual sales of approximately $30 billion, Dow serves
 customers in more than 170 countries and a wide range of markets that are
 vital to human progress, including food, transportation, health and medicine,
 personal and home care, and building and construction, among others.
 Committed to the principles of sustainable development, Dow and its
 approximately 50,000 employees seek to balance economic, environmental and
 social responsibilities.
 
     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.
 
 
     THE DOW CHEMICAL COMPANY - 1Q01 EARNINGS
     FINANCIAL STATEMENTS (Note A)
 
        The Dow Chemical Company and Subsidiaries       Three Months Ended
         Consolidated Statements of Income           Mar. 31,          Mar. 31,
     In millions except for per share
      amounts      (Unaudited)                         2001               2000
     Net Sales                                       $7,386             $7,269
       Cost of sales                                  6,456              5,842
       Research and development expenses                272                270
       Selling, general and
        administrative expenses                         452                474
       Amortization of intangibles                       33                 41
       Merger-related expenses and
        restructuring (Note B)                        1,384                  -
       Insurance and finance company
        operations, pretax income                        11                 29
       Equity in earnings of
        nonconsolidated affiliates                       35                130
       Sundry income - net                              283                101
     Earnings (Loss) before Interest,
      Income Taxes and Minority Interests              (882)               902
       Interest income                                   24                 45
       Interest expense and amortization
        of debt discount                                182                155
     Income (Loss) before Income Taxes
      and Minority Interests                         (1,040)               792
       Provision for income taxes                      (340)               262
       Minority interests' share in
        income                                           17                 18
     Income (Loss) before Cumulative
      Effect of Change in Accounting
      Principle                                        (717)               512
       Cumulative effect of change in
        accounting principle (Note C)                    32                  -
     Net Income (Loss) Available for
      Common Stockholders                             ($685)              $512
     Share Data
       Earnings (Loss) before cumulative
        effect of change in accounting
        principle per common share -
        basic                                        ($0.80)             $0.58
       Earnings (Loss) per common share -
        basic                                        ($0.76)             $0.58
       Earnings (Loss) before cumulative
        effect of change in accounting
        principle per common share -
        diluted                                      ($0.80)             $0.57
       Earnings (Loss) per common share -
        diluted                                      ($0.76)             $0.57
       Common stock dividends declared
        per share of Dow common stock                 $0.29              $0.29
       Weighted-average common shares
        outstanding - basic                           898.1              889.6
       Weighted-average common shares
        outstanding - diluted                         898.1              903.8
     Depreciation                                      $388               $368
     Capital Expenditures                              $273               $439
 
     Notes to Financial Statements:
 
     Note A: On February 6, 2001, a wholly owned subsidiary of The Dow Chemical
 Company ("Dow" or "Company") merged with Union Carbide Corporation ("Union
 Carbide") and, as a result, Union Carbide became a wholly owned subsidiary of
 the Company.  The merger was accounted for as a pooling of interests.
 Accordingly, the consolidated financial statements have been prepared to give
 retroactive effect to the merger and include the combined accounts of Dow and
 Union Carbide for all periods presented.
     The unaudited interim financial statements reflect all adjustments
 (consisting of normal recurring accruals) which, in the opinion of management,
 are considered necessary for a fair presentation of the results for the
 periods covered.  Certain reclassifications of prior year amounts have been
 made to conform to current year presentation.  These statements should be read
 in conjunction with the supplemental consolidated financial statements and
 notes thereto included in a Form 8-K filed by the Company on April 4, 2001 for
 the year ended December 31, 2000.
     Note B: In the first quarter of 2001, pretax costs of $1,384 million were
 recorded for merger-related expenses and restructuring.  These costs included
 transaction costs, employee severance, and the write-down of duplicate assets
 and facilities.
     Note C: On January 1, 2001, the Company recorded a cumulative transition
 adjustment gain of $32 million (net of related income tax of $19 million),
 upon adoption of SFAS No. 133, "Accounting for Derivative Instruments and
 Hedging Activities."
 
 
            The Dow Chemical Company and Subsidiaries
                  Consolidated Balance Sheets             Mar. 31,     Dec. 31,
     In millions      (Unaudited)                          2001          2000
     Assets
     Current Assets
       Cash and cash equivalents                           $244          $278
       Marketable securities and interest-
        bearing deposits                                    246           163
       Accounts and notes receivable:
            Trade (net of allowance for
             doubtful receivables - 2001:
             $121; 2000: $103)                            3,594         3,655
            Other                                         2,603         2,764
       Inventories:
            Finished and work in process                  3,618         3,396
            Materials and supplies                          759           817
       Deferred income tax assets -
        current                                             687           250
       Total current assets                              11,751        11,323
     Investments
       Investment in nonconsolidated
        affiliates                                        1,954         2,096
       Other investments                                  1,819         2,528
       Noncurrent receivables                               676           674
       Total investments                                  4,449         5,298
     Property
       Property                                          34,475        34,852
       Less accumulated depreciation                     21,495        21,141
       Net property                                      12,980        13,711
     Other Assets
       Goodwill (net of accumulated
        amortization - 2001: $491; 2000:
        $459)                                             2,226         1,928
       Deferred income tax assets -
        noncurrent                                        2,092         1,968
       Deferred charges and other assets                  1,932         1,763
       Total other assets                                 6,250         5,659
     Total Assets                                       $35,430       $35,991
 
     Liabilities and Stockholders' Equity
     Current Liabilities
       Notes payable                                     $3,086        $2,519
       Long-term debt due within one year                   307           318
       Accounts payable:
            Trade                                         2,540         2,975
            Other                                         1,203         1,594
       Income taxes payable                                 285           258
       Deferred income tax liabilities -
        current                                               7            35
       Dividends payable                                    152           217
       Accrued and other current
        liabilities                                       2,182         2,257
       Total current liabilities                          9,762        10,173
     Long-Term Debt                                       7,139         6,613
     Other Noncurrent Liabilities
       Deferred income tax liabilities -
        noncurrent                                        1,384         1,165
       Pension and other postretirement
        benefits - noncurrent                             2,408         2,238
       Other noncurrent obligations                       3,241         3,012
       Total other noncurrent liabilities                 7,033         6,415
     Minority Interest in Subsidiaries                      416           450
     Preferred Securities of Subsidiary                     500           500
     Stockholders' Equity
       Common stock                                       2,453         2,453
       Additional paid-in capital                            42             -
       Unearned ESOP shares                                (103)         (103)
       Retained earnings                                 11,729        12,675
       Accumulated other comprehensive
        loss                                               (926)         (560)
       Treasury stock at cost                            (2,615)       (2,625)
       Net stockholders' equity                          10,580        11,840
     Total Liabilities and Stockholders'
      Equity                                            $35,430       $35,991
     See Notes to Financial Statements.
 
     Operating Segments and Geographic Areas          The Dow Chemical Company
                                                          and Subsidiaries
                                                          Three Months Ended
                                                        Mar. 31,       Mar. 31,
     In millions      (Unaudited)                         2001           2000
     Operating segment sales
          Performance Plastics                           $1,921         $1,827
          Performance Chemicals                           1,310          1,338
          Agricultural Products                             605            633
          Plastics                                        1,769          1,779
          Chemicals                                         996          1,038
          Hydrocarbons and Energy                           709            571
          Unallocated and Other                              76             83
          Total                                          $7,386         $7,269
     Operating segment EBIT
          Performance Plastics                             $217           $316
          Performance Chemicals                             100            152
          Agricultural Products                              43             90
          Plastics                                           33            260
          Chemicals                                          (7)           143
          Hydrocarbons and Energy                            11             18
          Unallocated and Other                          (1,279)           (77)
          Total                                           ($882)          $902
     Geographic area sales
          United States                                  $3,205         $3,137
          Europe                                          2,370          2,264
          Rest of World                                   1,811          1,868
          Total                                          $7,386         $7,269
 
 
 
     Sales Volume and Price by Operating Segment and Geographic Area
                                                    Three Months Ended
                                                      Mar. 31, 2001
     Percentage change from prior year     Volume          Price          Total
     Operating segments
          Performance Plastics                2%             3%             5%
          Performance Chemicals             (5)%             3%           (2)%
          Agricultural Products               2%           (6)%           (4)%
          Plastics                            3%           (4)%           (1)%
          Chemicals                         (7)%             3%           (4)%
          Hydrocarbons and Energy            14%            10%            24%
          Total                               1%             1%             2%
     Geographic areas
          United States                     (2)%             4%             2%
          Europe                              7%           (2)%             5%
          Rest of World                     (2)%           (1)%           (3)%
          Total                               1%             1%             2%
 
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 SOURCE  The Dow Chemical Company

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