How to Read an Income Statement Part I

Dow Chemical

Highlights

Most times I see companies began their earnings release with the earnings per share number, they beat the Street estimate and then feel some kind of redemption. Dow Chemical has been under fire from an activist shareholder (yes, one of the “Pharaohs” of Wall Street) so they start out by showing the world that they beat consensus estimates by $0.08 (they know that anyone reading this knows the estimate).

Plastics had pricing power.

Coatings "outpaced" the market – another way of saying that they took market share.

Sales were strong in a difficult market: China

Our shareholders are getting paid big time to hold our stock and keep in current management…so stuff it, activist investors.

First Quarter 2014 Highlights

• The Company reported earnings of $0.79 per share. This compares with earnings of $0.46 per share in the same quarter last year, or adjusted
  earnings⁽¹⁾ of $0.69 per share – a 14 percent increase versus the year-ago period.
• Sales were $14.5 billion, up 1 percent versus the same quarter last year. Performance Plastics drove sales gains, up 6 percent on an adjusted basis⁽²⁾due to higher prices. Higher volumes in Coatings and Infrastructure Solutions outpaced the market, resulting in a 5 percent increase in sales for the segment.
• Emerging geographies grew sales 3 percent on an adjusted basis, led by volume growth in Greater China (up 7 percent). Price gains in North America were offset by volume declines, reflecting weather- and transportation-related impacts in the quarter. Sales in Western Europe increased slightly due to volume growth of 2 percent.
• EBITDA⁽³⁾ was $2.4 billion, compared with $2.2 billion or $2.3 billion on an adjusted basis⁽⁴⁾ in the year-ago period. Increases were reported in most operating segments, led by gains in Performance Plastics, Agricultural Sciences, and Coatings and Infrastructure Solutions.
• Adjusted EBITDA margin⁽⁵⁾ expanded more than 60 basis points to 16.6 percent on a year-over-year basis, with increases reported in all operating segments except Feedstocks and Energy. Margins expanded despite a more than $300 million increase in purchased feedstocks and energy, due to continued emphasis on productivity and cost-control actions.
• Cash flow from operations increased nearly 30 percent versus the year-ago period, reflecting the Company’s productivity actions to increase working capital efficiency and to reduce costs.
• Dow continued to drive shareholder remuneration actions, returning $1.7 billion to shareholders in the quarter through declared dividends and share repurchases.