NONCONSOLIDATED AFFILIATES AND RELATED COMPANY TRANSACTIONS
The Company’s investments in companies accounted for using the equity method (“nonconsolidated affiliates”) were $4,501 million at December 31, 2013 and $4,121 million at December 31, 2012. At December 31, 2013, the carrying amount of the Company’s investments in nonconsolidated affiliates was $67 million more than its share of the investees’ net assets, exclusive of additional differences for Dow Corning Corporation (“Dow Corning”) and MEGlobal, which are discussed separately below. At December 31, 2012, the carrying amount of the Company’s investments in nonconsolidated affiliates was $69 million more than its share of the investees’ net assets, exclusive of additional differences for Dow Corning and MEGlobal. Dividends received from the Company’s nonconsolidated affiliates were $905 million in 2013, $823 million in 2012 and $1,016 million in 2011.
At December 31, 2013, the Company’s investment in Dow Corning was $149 million less than the Company’s proportionate share of Dow Corning’s underlying net assets ($227 million less at December 31, 2012). This amount is considered a permanent difference related to the other-than-temporary decline in the Company's investment in Dow Corning, triggered by Dow Corning's May 15, 1995 bankruptcy filing, and Dow Corning's purchase of additional ownership interests in its Hemlock Semiconductor Group entities in 2013. Dow Corning emerged from bankruptcy in 2004.
At December 31, 2013, the Company’s investment in MEGlobal was $184 million less than the Company’s proportionate share of MEGlobal’s underlying net assets ($193 million less at December 31, 2012). This amount represents the difference between the value of certain assets of the joint venture and the Company’s related valuation on a U.S. GAAP basis, of which $45 million (including $3 million related to Equipolymers) is being amortized over the remaining useful lives of the assets and $139 million is considered to be a permanent difference. On July 1, 2011, Equipolymers was merged into MEGlobal, with MEGlobal continuing as the surviving entity. In the third quarter of 2011, the Company received $115 million on a previously impaired note receivable related to its investment in Equipolymers and recognized $86 million in income, included in "Equity in earnings of nonconsolidated affiliates" in the consolidated statements of income and reflected in Performance Plastics.
On October 30, 2011, the Company and Saudi Arabian Oil Company formed Sadara Chemical Company ("Sadara") to build and operate a world-scale, fully integrated chemicals complex in Jubail Industrial City, Kingdom of Saudi Arabia. Construction began immediately and the first production units are expected to come on-line in the second half of 2015, with all units expected to be up and running in 2016. On December 8, 2012, Sadara's shareholders received approval to increase their share capital. Pursuant to this approval, Dow's $905 million of development costs related to Sadara were converted to equity and classified as "Investments in nonconsolidated affiliates" in the consolidated balance sheets. The Company's investment in Sadara is included in "Investments in and loans to nonconsolidated affiliates" in the consolidated statements of cash flows. Prior to the fourth quarter of 2011, the Company's investment in the Sadara project was included in "Investments in consolidated companies, net of cash acquired" in the consolidated statements of cash flows.
All of the nonconsolidated affiliates in which the Company has investments are privately held companies; therefore, quoted market prices are not available.
Sales to and purchases from nonconsolidated affiliates were not material to the consolidated financial statements. Balances due to or due from nonconsolidated affiliates at December 31, 2013 and 2012 are as follows:
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Balances Due To or Due From Nonconsolidated Affiliates at December 31 |
In millions | | 2013 |
| | 2012 |
|
Accounts and notes receivable - other | | $ | 512 |
| | $ | 632 |
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Noncurrent receivables | | 5 |
| | 8 |
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Total assets | | $ | 517 |
| | $ | 640 |
|
Notes payable | | $ | 137 |
| | $ | 66 |
|
Accounts payable - other | | 221 |
| | 331 |
|
Total current liabilities | | $ | 358 |
| | $ | 397 |
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Principal Nonconsolidated Affiliates
Dow had an ownership interest in 63 nonconsolidated affiliates at December 31, 2013 (67 at December 31, 2012). The Company's principal nonconsolidated affiliates and its ownership interest (direct and indirect) for each at December 31, 2013, 2012 and 2011 are as follows:
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Principal Nonconsolidated Affiliates at December 31 | | Ownership Interest |
| | 2013 |
| | 2012 |
| | 2011 |
|
Compañía Mega S.A. (1) | | N/A |
| | N/A |
| | 28 | % |
Dow Corning Corporation | | 50 | % | | 50 | % | | 50 | % |
EQUATE Petrochemical Company K.S.C. | | 42.5 | % | | 42.5 | % | | 42.5 | % |
The Kuwait Olefins Company K.S.C. | | 42.5 | % | | 42.5 | % | | 42.5 | % |
Map Ta Phut Olefins Company Limited (2) | | 32.77 | % | | 32.77 | % | | N/A |
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MEGlobal | | 50 | % | | 50 | % | | 50 | % |
Sadara Chemical Company (3) | | 35 | % | | 35 | % | | N/A |
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The SCG-Dow Group: | | | | | | |
Siam Polyethylene Company Limited | | 50 | % | | 50 | % | | 50 | % |
Siam Polystyrene Company Limited | | 50 | % | | 50 | % | | 50 | % |
Siam Styrene Monomer Co., Ltd. | | 50 | % | | 50 | % | | 50 | % |
Siam Synthetic Latex Company Limited | | 50 | % | | 50 | % | | 50 | % |
Univation Technologies, LLC | | 50 | % | | 50 | % | | 50 | % |
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(1) | Compañia Mega S.A. is no longer considered a principal nonconsolidated affiliate as of the fourth quarter of 2012. The Company continues to maintain a 28 percent equity interest in this nonconsolidated affiliate. |
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(2) | Map Ta Phut Olefins Company Limited was added as a principal nonconsolidated affiliate in the fourth quarter of 2012. The Company's effective ownership of Map Ta Phut Olefins Company Limited is 32.77 percent, of which the Company directly owns 20.27 percent and indirectly owns 12.5 percent through its equity interest in Siam Polyethylene Company Limited and Siam Synthetic Latex Company Limited. |
(3) Sadara Chemical Company became a principal nonconsolidated affiliate in the fourth quarter of 2012.
The Company’s investment in its principal nonconsolidated affiliates was $3,625 million at December 31, 2013 and $3,243 million at December 31, 2012. Equity earnings from these companies were $951 million in 2013, $479 million in 2012 and $1,132 million in 2011. Equity earnings from principal nonconsolidated affiliates increased in 2013 compared with 2012 primarily due to increased equity earnings at Dow Corning, EQUATE Petrochemical Company K.S.C. and MEGlobal as well as lower equity losses from The SCG-Dow Group, Sadara and Map Ta Phut Olefins Company Limited. Equity earnings from Dow Corning were negatively impacted in 2012 by asset impairment and restructuring charges.
The summarized financial information that follows represents the combined accounts (at 100 percent) of the principal nonconsolidated affiliates.
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Summarized Balance Sheet Information at December 31 |
In millions | | 2013 |
| | 2012 |
|
Current assets | | $ | 8,675 |
| | $ | 8,841 |
|
Noncurrent assets | | 24,166 |
| | 20,109 |
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Total assets | | $ | 32,841 |
| | $ | 28,950 |
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Current liabilities | | $ | 5,972 |
| | $ | 6,903 |
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Noncurrent liabilities | | 17,129 |
| | 12,788 |
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Total liabilities | | $ | 23,101 |
| | $ | 19,691 |
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Noncontrolling interests | | $ | 624 |
| | $ | 708 |
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Summarized Income Statement Information |
In millions | | 2013 (1) |
| | 2012 (1) |
| | 2011 (2) |
|
Sales | | $ | 18,257 |
| | $ | 17,668 |
| | $ | 16,396 |
|
Gross profit | | $ | 3,403 |
| | $ | 2,911 |
| | $ | 4,176 |
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Net income | | $ | 1,906 |
| | $ | 872 |
| | $ | 2,470 |
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(1) | The summarized income statement information for 2013 and 2012 do not include the results for Compañia Mega S.A. which is no longer considered a principal nonconsolidated affiliate as of the fourth quarter of 2012. |
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(2) | The summarized income statement information for 2011 does not include the results for Map Ta Phut Olefins Company Limited and Sadara Chemical Company as these entities became principal nonconsolidated affiliates in 2012. |
The Company has service agreements with some of these entities, including contracts to manage the operations of manufacturing sites and the construction of new facilities; licensing and technology agreements; and marketing, sales, purchase and lease agreements.
Excess ethylene glycol produced in Dow’s plants in the United States and Europe is sold to MEGlobal and represented 1 percent of total net sales in 2013 (1 percent of total net sales in 2012 and 1 percent of total net sales in 2011). In addition, the Company sells ethylene to MEGlobal as a raw material for its ethylene glycol plants in Canada. Sales of ethylene and ethylene glycol to MEGlobal are reflected in the Feedstocks and Energy segment and represented 7 percent of the segment's sales in 2013 (4 percent in 2012 and 5 percent in 2011).
