Dow 10-K Notables – ValuePlays

As promise, I went through Dow’s (DOW) 10-K and here are the relevant items.

To be honest, it was a refreshing read because there really wasn’t anything there that has not been discussed publicly by management at some point. The shot answer to that is that as shareholders were are getting a great level of disclosure and honesty from the stewards of the company.

Some Financials
* In 2007, lowered its debt-to-capital ratio to 32 percent from 34 percent at the end of 2006 and 39 percent at the end of 2005.
* In April 2007, Dow’s Board of Directors increased the quarterly dividend by 12 percent, to an annual rate of $1.68 per share.
* Since January 2006, the Company has raised its dividend by 25 percent.
* In the first quarter of 2007, Dow completed the share repurchase program authorized in July 2005, and commenced purchases under a new $2 billion share buyback program announced in October 2006.
* For the year, the Company invested over $1.4 billion to repurchase 32 million shares, an increase of more than 75 percent over the 18 million shares repurchased in 2006.
* Approximately two-thirds of Dow’s sales are now outside the United States.

Here is a “bet you did not know”. Dow also is engaged in property casualty and reinsurance. From the 10-k, “sales for Unallocated and Other, which primarily relate to the Company’s insurance operations, were $421 million in 2007, compared with $316 million in 2006 and $306 million in 2005.” Yes, I know in the scheme of things it is peanuts and there not any more details in the filing but I is worth noting.

Also, Dow’s “defined contribution” pension plan is not only fully funded but as of 12/13 has a credit balance $526 million, up from a deficit of $890 million in 2006. The date of the funding runs through 2017.

New Ventures in 2007 included:
• Dow started up its first-ever production facility in Russia, located in Kryukovo, outside Moscow. The plant produces STYROFOAM extruded polystyrene insulation boards for the Dow Building Solutions business.
• Dow introduced Propylene Glycol Renewable, a propylene glycol made from the glycerin that is generated during the manufacture of biodiesel, a diesel-fuel alternative produced from vegetable oil.
• Saudi Aramco and Dow signed a Memorandum of Understanding to move forward with their multibillion-dollar joint venture chemicals and plastics production complex near Ras Tanura, Saudi Arabia.
• Dow and Chevron Phillips Chemical Company LP announcefd plans for a 50:50 polystyrene and styrene monomer joint venture in the Americas.
• Beijing-based Shenhua Group and Dow agreed to a detailed feasibility study for a coal-to-chemicals joint venture in the Shaanxi Province, China.
• Dow completed the acquisition of Wolff Walsrode AG and certain related affiliates and assets (‘‘Wolff Walsrode’’) and formed Dow Wolff Cellulosics, a $1 billion specialty business focused on cellulosics and related chemistries and serving a broad spectrum of industry sectors.
• Dow AgroSciences and Monsanto signed a corn cross-licensing agreement, which breaks new ground in the commercialization of gene stacking technology.
• The Company signed a Memorandum of Understanding with Brazilian ethanol producer, Crystalsev, to form a joint venture to manufacture polyethylene from sugar cane.
• Dow AgroSciences acquired Agromen Tecnologia, substantially expanding its Brazilian corn seed business. This transaction followed two other related acquisitions in 2007 – The Netherlands-based Duo Maize and Austrian company Maize Technologies International – strengthening the Company’s global corn seed platform.
• Dow’s Polyurethanes Systems business acquired Danish company Edulan A/S, an independent polyurethane systems house specializing in rigid foam and elastomer technologies.
• Dow acquired three leading epoxy systems formulators: UPPC AG in Germany, and POLY-CARB Inc. and GNS Technologies in the United States.
• Dow and Petrochemical Industries Company (‘‘PIC’’) of the State of Kuwait, a wholly owned subsidiary of Kuwait Petroleum Corporation, announced plans to form a 50:50 joint venture

Disclosure (“none” means no position):Long Dow