Dow Reports Fourth Quarter and Full-Year Results

MIDLAND, Mich., Jan. 29 /PRNewswire-FirstCall/ --

Fourth Quarter 2007 Highlights -- Sales for the fourth quarter set a new Company record, rising 16 percent from the same period last year to $14.2 billion. -- Earnings for the quarter were $0.49 per share. Excluding certain items, earnings for the quarter were $0.84 per share. Earnings in the fourth quarter of 2006 were $1.00 per share. Excluding certain items, earnings for that quarter were $0.98 per share (see supplemental table at the end of the release for a description of these items). -- Compared with the same quarter of 2006, price increased 12 percent, with gains in all operating segments and geographic areas. -- Volume was up 4 percent compared with the fourth quarter of last year, with improvements in all operating segments and in every geographic area outside of North America. Asia Pacific recorded volume gains of 10 percent, and Europe 6 percent. -- Purchased feedstock and energy costs climbed $1.7 billion compared with the fourth quarter of last year, the largest year-over-year increase in the Company's history. -- Equity earnings increased 21 percent year-over-year, totaling $294 million for the quarter. 2007 Full-Year Highlights -- 2007 sales increased 9 percent compared with 2006, setting a new record for the Company of $53.5 billion. -- Dow reported full-year earnings of $2.99 per share. Excluding certain items, earnings for the year were $3.76 per share. Earnings for 2006 were $3.82 per share. Excluding certain items, earnings for 2006 were $4.25 per share (see supplemental table at the end of the release for a description of these items). -- Equity earnings rose 17 percent compared with 2006, to $1.1 billion, exceeding $1 billion for the first time in the Company's history. Comment Andrew N. Liveris, Dow's chairman and chief executive officer, stated:

"This was a good quarter ... a quarter in which our entire organization responded with speed and discipline to an unprecedented run-up in feedstock and energy costs, raising price to mitigate much of the $1.7 billion year over year increase. And our focus on price did not come at the expense of volume. Volume gains were reported in all operating segments, a testament to our price/volume management capabilities."

3 Months Ended 12 Months Ended (In millions, except for Dec. 31 Dec. 31 per share amounts) 2007 2006 2007 2006 Net Sales $14,227 $12,236 $53,513 $49,124 Net Income $472 $975 $2,887 $3,724 Earnings per Common Share $0.49 $1.00 $2.99 $3.82 Earnings per Common Share Excluding Certain Items $0.84 $0.98 $3.76 $4.25 Review of Fourth Quarter Results

The Dow Chemical Company reported sales of $14.2 billion for the fourth quarter of 2007, 16 percent higher than in the same period last year, setting a new quarterly sales record.

Net income for the quarter was $472 million, reflecting the impact of net after-tax charges of $334 million related to restructuring activities and purchased in-process research and development related to recent acquisitions, partially offset by a reduction in the provision for income taxes related to a change in the legal ownership structure of EQUATE. This compares to net income of $975 million in the fourth quarter of 2006, which included a net gain of $21 million for certain items (see supplemental table at the end of the release for a description of these items). Dow reported earnings for the current quarter of $0.49 per share, including a $0.35 per share charge for the items referenced above. This compares with earnings in the fourth quarter of 2006 of $1.00 per share, including a net benefit of $0.02 per share for the items referenced above.

Year over year, volume was up 4 percent, with all operating segments showing increases. Stronger demand in Europe, Asia Pacific, Latin America and India, Middle East and Africa ("IMEA") more than offset continued softness in North America. Price was 12 percent higher than the fourth quarter of 2006, with increases in all operating segments. These price gains largely offset significant increases in purchased feedstock and energy costs, which were 31 percent higher than the same period last year.

Selling, Administrative and Research and Development ("SARD") expenses increased 11 percent year over year, including the addition of SARD expenses in recently acquired Performance businesses. The increase also reflects a disciplined investment strategy to build markets, expand product offerings, and establish brands in several of Dow's high value, market-facing businesses.

Equity earnings were $294 million, up 21 percent year over year including record quarterly contributions from EQUATE, MEGlobal and Compania Mega.

"This was a good quarter ... a quarter in which our entire organization responded with speed and discipline to an unprecedented run-up in feedstock and energy costs, raising price to mitigate much of the $1.7 billion year over year increase. And our focus on price did not come at the expense of volume," said Andrew N. Liveris, Dow's chairman and chief executive officer.

"Volume gains were reported in all operating segments, a testament to our price/volume management capabilities. Higher equity earnings, including strong contributions from companies with advantaged feedstocks, underscored the value of joint ventures in our overall strategy. With two-thirds of our sales outside of the United States, we were well placed to capture growth opportunities around the world."

Performance Plastics

In the Performance Plastics segment, fourth quarter sales of $3.97 billion represented a 12 percent increase over the same period last year. Price and volume both increased 6 percent, with gains in every geographic area outside North America. Polyurethanes posted volume gains reflecting recent acquisitions in Europe and strong sales in Asia Pacific. Dow Epoxy reported strong demand globally for industrial coatings, but saw lower demand in North America for architectural coatings used in housing, and building and construction applications. Dow Automotive showed price and volume gains globally, driven by growth in foam applications as manufacturers responded to consumer demand for thicker and firmer seats. The Specialty Plastics and Elastomers business posted increases in price and volume, led by growth in Asia Pacific for polymers used in information technology equipment. Demand for telecommunications fiber optic cables in the Wire and Cable business increased as well. Fourth quarter EBIT(1) for the Performance Plastics segment was $158 million, including charges of $184 million for restructuring. This compares with EBIT of $347 million in the fourth quarter of 2006, which included a charge of $85 million related to a loss contingency for a fine imposed by the European Commission associated with synthetic rubber industry matters.

Performance Chemicals

Sales in Performance Chemicals rose to $2.13 billion for the fourth quarter of 2007, an increase of 6 percent compared with $2.00 billion posted in the same period last year. Globally, price was up 4 percent while volume increased 2 percent. Price was up in all geographic areas and across all businesses. Volume was up in Europe, Latin America and IMEA. Designed Polymers showed price and volume gains globally, due in part to gains in the food, pharmaceutical and paint industries served by Dow Wolff Cellulosics. Demand for biocides used in oilfield applications was up as well, as oil extraction activities in North America and Latin America increased. In Specialty Chemicals, industry conditions for acrylic monomers remained very challenging, due to a rapid increase in propylene costs and lower demand, as customers drew down inventory levels. While earnings at Dow Corning remained strong, an extended outage at OPTIMAL unfavorably impacted equity earnings for the segment. Performance Chemicals reported EBIT of $124 million for the fourth quarter, which included restructuring charges of $85 million and a $2 million favorable adjustment to purchased in-process research and development. In the same period last year, EBIT was $293 million, which included a restructuring charge of $1 million.

Agricultural Sciences

The Agricultural Sciences segment posted record fourth quarter sales of $864 million, 6 percent higher than the same period in 2006, reflecting both organic growth and growth from acquisitions. Volume was up 2 percent and price up 4 percent, with price gains in all geographic areas and volume increases in Latin America, Asia Pacific and Europe. Seed sales increased substantially from the same period last year due to strong farm commodity prices, increasing demand for biofuels, higher 2007 farm incomes and grower confidence. Herbicide sales in Latin America grew significantly compared with the same period last year, while new products penoxsulam and aminopyralid continued to ramp-up. Integration of new acquisitions Agromen, MTI and Duo Maize are progressing well. The business continued to make strategic investments to accelerate new product development and commercialization. Fourth quarter EBIT for Agricultural Sciences was a loss of $38 million, which included restructuring charges of $77 million. This compares with EBIT of $38 million in the fourth quarter of 2006.

Basic Plastics

Basic Plastics sales rose 18 percent in the fourth quarter to $3.49 billion from $2.94 billion in the same period last year. Price increased 17 percent and volume increased 1 percent. Price was up in all geographic areas and across all polymer families. Polyethylene and Polypropylene posted double- digit price gains in Europe, IMEA, Latin America and North America. Volume in the segment was up in Asia Pacific, Europe and Latin America, more than offsetting a decline in North America. Volume gains were achieved despite the sale of Polyethylene and Polypropylene assets in South Africa and the shut down of Polystyrene and Polyethylene capacity in Sarnia, Canada, in 2006. Polyethylene reported growth in specialty packaging applications, while underlying demand for Polypropylene was down due to slowdowns in the housing and automotive sectors in North America. Polystyrene saw margin expansion in the quarter due to a moderation in benzene costs. Disciplined price and volume management across the segment helped to overcome substantial increases in feedstock and energy costs. Equity earnings were down $11 million year over year due to lower earnings at Equipolymers and Siam Polyethylene, which offset very strong results at EQUATE. EBIT for the Basic Plastics segment was $394 million, including restructuring charges of $88 million. In the same period last year, EBIT was $461 million.

Basic Chemicals

Basic Chemicals sales for the quarter increased 24 percent year over year to $1.63 billion from $1.32 billion in 2006. The segment recorded a 5 percent gain in volume and a 19 percent gain in price. Double-digit price increases were realized in Europe, Latin America and North America driven by supporting industry fundamentals for ethylene glycol used in the manufacture of polyethylene terephthalate and polyester, and for caustic soda in the pulp and paper and alumina industries. In the Chlor-Vinyl business, weak demand for PVC in North America, combined with higher raw material costs, pressured margins for vinyl chloride monomer. The Ethylene Oxide/ Ethylene Glycol business had double-digit price increases as planned and unplanned industry outages drove price to record levels. Equity earnings in the Basic Chemicals segment increased to $135 million in the fourth quarter of 2007, up from $78 million in the year ago period. The increase reflects strong results at MEGlobal and EQUATE, which more than offset a decrease in equity earnings from OPTIMAL. The segment reported fourth quarter EBIT of $309 million, which included a restructuring charge of $7 million. This compares with EBIT of $194 million in the fourth quarter of 2006, which included a restructuring charge of $19 million.

Review of Results for 2007

Dow reported record annual sales of $53.5 billion in 2007, 9 percent higher than last year's record of $49.1 billion. Price rose 7 percent, with increases in every operating segment and in all geographic areas. Volume was up 2 percent, with gains in all segments except Basic Chemicals, and in all geographic areas except North America and IMEA. The gains in price and volume helped to offset an increase for the year of $2.5 billion in purchased feedstock and energy costs.

Net income for the year was $2.9 billion, which included certain items with a net unfavorable impact of $735 million. This compares with net income for 2006 of $3.7 billion, which included a net unfavorable impact of $417 million from certain items during that year. Earnings per share were $2.99 in 2007 and $3.82 in 2006. Excluding certain items in both periods, earnings per share were $3.76 in 2007, down from $4.25 in 2006 (see supplemental table at the end of the release for a description of certain items).

The Company also posted record equity earnings of $1.1 billion, with strong contributions from Dow Corning, EQUATE, MEGlobal, and OPTIMAL.

Commenting on the Company's outlook, Liveris said: "In 2007, we continued to face significant headwinds in purchased feedstock and energy costs, which increased to $24.6 billion for the full year ... three times what we paid in 2002. However, despite these headwinds, 2007 was a strong year for the Company, as we recorded our third highest earnings ever.* For 2008, there is some uncertainty in the economic outlook for the United States. With two- thirds of our sales outside the United States, our global footprint will allow us to continue to capture growth in key regions of the world, such as Brazil, Eastern Europe/Russia, India, and China. In addition, as we continue to implement our strategy, our focus will be on financial discipline and price/volume management which, coupled with the strong performance of our joint ventures, is expected to bring another solid year of earnings for Dow."

-- Dow will host a live Webcast of its fourth quarter earnings conference call with investors to discuss its results, business outlook and other matters today at 10:00 a.m. ET on http://www.dow.com/. (1) Earnings before interest, income taxes and minority interests ("EBIT"). A reconciliation of EBIT to "Net Income Available for Common Stockholders" is provided following the Operating Segments table. * Excluding certain items. See supplemental table at the end of the release for a description of these items. About Dow

With annual sales of $54 billion and 46,000 employees worldwide, Dow is a diversified chemical company that combines the power of science and technology with the "Human Element" to constantly improve what is essential to human progress. The Company delivers a broad range of products and services to customers in around 160 countries, connecting chemistry and innovation with the principles of sustainability to help provide everything from fresh water, food and pharmaceuticals to paints, packaging and personal care products. 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 http://www.dow.com/

Use of non-GAAP measures: Dow's management believes that measures of income excluding certain items ("non-GAAP" measures) provide relevant and meaningful information to investors about the ongoing operating results of the Company. Such measurements 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 measures of performance. Reconciliations of non-GAAP measures to GAAP 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.

Supplemental Information Description of Certain Items Affecting Results Fourth Quarters of 2007 and 2006

In December 2007, the Company's Board of Directors approved a restructuring plan that includes the shut down of a number of assets and organizational changes within targeted support functions to enhance the efficiency and cost effectiveness of the Company's global operations. As a result, the Company recorded restructuring charges totaling $590 million in the fourth quarter of 2007. The charges included asset write-downs and write- offs of $422 million, costs associated with exit or disposal activities of $82 million and severance costs of $86 million. In addition, in the fourth quarter of 2007 the Company recorded an $8 million favorable adjustment to restructuring charges originally recorded in the third quarter of 2006. The net impact of the charges is shown as "Restructuring charges" in the consolidated statements of income. Also in the fourth quarter of 2007, the Company recorded a favorable $2 million adjustment to purchased in-process R&D, originally recorded in the third quarter of 2007 related to the acquisition of Wolff Walsrode. In December 2007, the Company changed the legal ownership structure of its 42.5% interest in EQUATE Petrochemical Company K.S.C. As a consequence, the Company recorded a $113 million reduction in the provision for income taxes in the fourth quarter of 2007.

In the fourth quarter of 2006, earnings were favorably impacted by a reduction in Union Carbide's asbestos liability of $177 million. Earnings in the fourth quarter of 2006 were unfavorably impacted by the recognition of a loss contingency of $85 million for a fine imposed by the European Commission related to synthetic rubber industry matters (included in "Sundry income - net"), and an adjustment of $12 million to the third quarter 2006 "Restructuring charges" described below.

A table showing the impact of these items by operating segment is included with the Operating Segments tables.

The following table summarizes the impact of certain items recorded in the three-month periods ended December 31, 2007 and 2006, and previously described in this section:

Certain Items Impacting Results Pretax Impact on Impact on Impact (1) Net Income (2) EPS (3) In millions, Three Months Ended Three Months Ended Three Months Ended except per Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, share amounts 2007 2006 2007 2006 2007 2006 Restructuring charges $(582) $(12) $(436) $(7) $(0.46) $(0.01) Purchased in- process research and development charges 2 - (11) - (0.01) - Asbestos-related credit - 177 - 112 - 0.12 Loss contingency related to EC fine - (85) - (84) - (0.09) Change in EQUATE legal ownership structure - - 113 - 0.12 - Total $(580) $80 $(334) $21 $(0.35) $0.02 (1) Impact on "Income before Income Taxes and Minority Interests" (2) Impact on "Net Income Available for Common Stockholders" (3) Impact on "Earnings per common share - diluted" Years ended December 31, 2007 and 2006

In addition to the items described above for the fourth quarter of 2007, earnings for 2007 were unfavorably impacted by pretax charges totaling $59 million in the third quarter for purchased in-process research and development related to the acquisition of assets of Agromen, Exelixis, Duo Maize and Maize Technologies International and the acquisition of Wolff Walsrode, all in 2007. Earnings in 2007 were further impacted by a charge of $362 million against the provision for income taxes related to a change in German tax law enacted in August 2007, which reduced the German income tax rate, resulting in a reduction in the value of the Company's net deferred tax assets in Germany.

In addition to the items described above for the fourth quarter of 2006, earnings for 2006 included pretax restructuring charges totaling $579 million in the third quarter associated with plans to shut down a number of assets around the world as part of the Company's drive to improve the competitiveness of its global operations. The charges included asset write-downs and write- offs of $327 million, costs associated with exit or disposal activities of $171 million and severance costs of $81 million. The impact of these charges is shown as "Restructuring charges" and is reflected in the results of various segments.

A table showing the impact of these items by operating segment is included with the Operating Segments tables.

The following table summarizes the impact of certain items recorded in the twelve-month periods ended December 31, 2007 and 2006, and previously described in this section:

Certain Items Impacting Results Pretax Impact on Impact on Impact (1) Net Income (2) EPS (3) In millions, Twelve Months Ended Twelve Months Ended Twelve Months Ended except per Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, share amounts 2007 2006 2007 2006 2007 2006 Restructuring charges $(578) $(591) $(436) $(445) $(0.46) $(0.46) Purchased in- process research and development charges (57) - (50) - (0.05) - Asbestos-related credit - 177 - 112 - 0.12 Loss contingency related to EC fine - (85) - (84) - (0.09) German tax law change - - (362) - (0.38) - Change in EQUATE legal ownership structure - - 113 - 0.12 - Total $(635) $(499) $(735) $(417) $(0.77) $(0.43) (1) Impact on "Income before Income Taxes and Minority Interests" (2) Impact on "Net Income Available for Common Stockholders" (3) Impact on "Earnings per common share - diluted" Financial Statements (Note A) The Dow Chemical Company and Subsidiaries Consolidated Statements of Income Three Months Ended Twelve Months Ended In millions, except Dec. 31, Dec. 31, Dec. 31, Dec. 31, per share amounts (Unaudited) 2007 2006 2007 2006 Net Sales $14,227 $12,236 $53,513 $49,124 Cost of sales 12,533 10,499 46,400 41,526 Research and development expenses 354 308 1,305 1,164 Selling, general and administrative expenses 493 453 1,864 1,663 Amortization of intangibles 21 13 72 50 Restructuring charges (Note B) 582 12 578 591 Purchased in-process research and development charges (credit) (Note C) (2) - 57 - Asbestos-related credit (Note D) - 177 - 177 Equity in earnings of nonconsolidated affiliates 294 242 1,122 959 Sundry income - net 62 50 324 137 Interest income 29 57 130 185 Interest expense and amortization of debt discount 161 154 584 616 Income before Income Taxes and Minority Interests 470 1,323 4,229 4,972 Provision (Credit) for income taxes (Note E) (27) 324 1,244 1,155 Minority interests' share in income 25 24 98 93 Net Income Available for Common Stockholders $472 $975 $2,887 $3,724 Share Data Earnings per common share - basic $0.50 $1.02 $3.03 $3.87 Earnings per common share - diluted $0.49 $1.00 $2.99 $3.82 Common stock dividends declared per share of common stock $0.42 $0.375 $1.635 $1.50 Weighted-average common shares outstanding - basic 945.4 958.5 953.1 962.3 Weighted-average common shares outstanding - diluted 957.5 971.1 965.6 974.4 Depreciation $520 $486 $1,959 $1,904 Capital Expenditures $764 $657 $2,075 $1,775 Notes to the Consolidated Financial Statements: Note A: The unaudited 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, 2006. 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: In August 2006, Dow's Board of Directors approved a plan to shut down a number of assets around the world as the Company continues its drive to improve the competitiveness of its global operations. As a result, the Company recorded restructuring charges totaling $591 million in 2006. The charges included asset write-downs and write-offs, severance costs, contract termination fees, costs for asbestos abatement and environmental remediation, and pension curtailment costs and termination benefits associated with Dow's defined benefit plans. In the fourth quarter of 2007, the Company recorded an $8 million favorable adjustment to the 2006 restructuring charges. In December 2007, Dow's Board of Directors approved a restructuring plan that includes the shut down of a number of assets and organizational changes within targeted support functions to enhance the efficiency and cost effectiveness of the Company's global operations. As a result, the Company recorded restructuring charges totaling $590 million in the fourth quarter of 2007. The charges included asset write-downs and write-offs, severance costs, contract termination fees, and costs for environmental remediation. Note C: During the third quarter of 2007, pretax charges totaling $59 million were recorded for estimated values assigned to purchased in-process research and development. $50 million was related to recent acquisitions within the Agricultural Sciences segment; $9 million was related to the acquisition of Wolff Walsrode on June 30, 2007. In the fourth quarter of 2007, the Company recorded a $2 million adjustment to the charges. Note D: In December 2006, Union Carbide reduced its asbestos-related liability $177 million based on a new study completed in the fourth quarter by Analysis, Research & Planning Corporation using historical claims data for Union Carbide and Amchem. Note E: In August 2007, a change in German tax law, which included a reduction in the German income tax rate, was enacted. As a result, the Company adjusted the value of its net deferred tax assets in Germany and recorded a charge of $362 million against the provision for income taxes in the third quarter of 2007. In December 2007, the Company changed the legal ownership structure of EQUATE Petrochemical Company K.S.C., a 42.5 percent joint venture, resulting in a $113 reduction of the provision for income taxes in the fourth quarter of 2007. The Dow Chemical Company and Subsidiaries Consolidated Balance Sheets Dec. 31, Dec. 31, In millions (Unaudited) 2007 2006 Assets Current Assets Cash and cash equivalents $1,736 $2,757 Marketable securities and interest-bearing deposits 1 153 Accounts and notes receivable: Trade (net of allowance for doubtful receivables - 2007: $118; 2006: $122) 5,944 4,988 Other 3,740 3,060 Inventories 6,885 6,058 Deferred income tax assets - current 348 193 Total current assets 18,654 17,209 Investments Investment in nonconsolidated affiliates 3,089 2,735 Other investments 2,489 2,143 Noncurrent receivables 385 288 Total investments 5,963 5,166 Property Property 47,708 44,381 Less accumulated depreciation 33,320 30,659 Net property 14,388 13,722 Other Assets Goodwill 3,572 3,242 Other intangible assets (net of accumulated amortization - 2007: $721; 2006: $620) 781 457 Deferred income tax assets - noncurrent 2,126 4,006 Asbestos-related insurance receivables - noncurrent 696 725 Deferred charges and other assets 2,621 1,054 Total other assets 9,796 9,484 Total Assets $48,801 $45,581 Liabilities and Stockholders' Equity Current Liabilities Notes payable $1,548 $219 Long-term debt due within one year 586 1,291 Accounts payable: Trade 4,555 3,825 Other 1,981 1,849 Income taxes payable 728 569 Deferred income tax liabilities - current 117 251 Dividends payable 418 382 Accrued and other current liabilities 2,512 2,215 Total current liabilities 12,445 10,601 Long-Term Debt 7,581 8,036 Other Noncurrent Liabilities Deferred income tax liabilities - noncurrent 854 999 Pension and other postretirement benefits - noncurrent 3,014 3,094 Asbestos-related liabilities - noncurrent 1,001 1,079 Other noncurrent obligations 3,103 3,342 Total other noncurrent liabilities 7,972 8,514 Minority Interest in Subsidiaries 414 365 Preferred Securities of Subsidiaries 1,000 1,000 Stockholders' Equity Common stock 2,453 2,453 Additional paid-in capital 902 830 Retained earnings 18,004 16,987 Accumulated other comprehensive loss (170) (2,235) Treasury stock at cost (1,800) (970) Net stockholders' equity 19,389 17,065 Total Liabilities and Stockholders' Equity $48,801 $45,581 See Notes to the Consolidated Financial Statements. The Dow Chemical Company and Subsidiaries Operating Segments Three Months Ended Twelve Months Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, In millions (Unaudited) 2007 2006 2007 2006 Sales by operating segment Performance Plastics $3,968 $3,546 $15,116 $13,944 Performance Chemicals 2,126 1,999 8,351 7,867 Agricultural Sciences 864 814 3,779 3,399 Basic Plastics 3,488 2,944 12,878 11,833 Basic Chemicals 1,630 1,315 5,863 5,560 Hydrocarbons and Energy 2,042 1,562 7,105 6,205 Unallocated and Other 109 56 421 316 Total $14,227 $12,236 $53,513 $49,124 EBIT(1) by operating segment Performance Plastics $158 $347 $1,390 $1,629 Performance Chemicals 124 293 949 1,242 Agricultural Sciences (38) 38 467 415 Basic Plastics 394 461 2,006 2,022 Basic Chemicals 309 194 813 689 Hydrocarbons and Energy (44) - (45) - Unallocated and Other (301) 87 (897) (594) Total $602 $1,420 $4,683 $5,403 Certain items (reducing) increasing EBIT by operating segment (2) Performance Plastics $(184) $(85) $(180) $(327) Performance Chemicals (83) (1) (92) (12) Agricultural Sciences (77) - (127) - Basic Plastics (88) - (88) (16) Basic Chemicals (7) (19) (7) (184) Hydrocarbons and Energy (44) - (44) - Unallocated and Other (97) 185 (97) 40 Total $(580) $80 $(635) $(499) Equity in earnings of nonconsolidated affiliates by operating segment (included in EBIT) Performance Plastics $13 $8 $68 $89 Performance Chemicals 83 93 382 368 Agricultural Sciences 3 - 4 1 Basic Plastics 35 46 176 173 Basic Chemicals 135 78 405 241 Hydrocarbons and Energy 25 17 87 85 Unallocated and Other - - - 2 Total $294 $242 $1,122 $959 (1) The Company uses EBIT (which Dow defines as earnings before interest, income taxes and minority interests) as its measure of profit/loss for segment reporting purposes. EBIT includes all operating items related to the businesses and excludes items that principally apply to the Company as a whole. A reconciliation of EBIT to "Net Income Available for Common Stockholders" is provided below: Three Months Ended Twelve Months Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2007 2006 2007 2006 EBIT $602 $1,420 $4,683 $5,403 + Interest income 29 57 130 185 - Interest expense and amortization of debt discount 161 154 584 616 - Provision for income taxes (27) 324 1,244 1,155 - Minority interests' share in income 25 24 98 93 Net Income Available for Common Stockholders $472 $975 $2,887 $3,724 (2) See Supplemental Information for a description of certain items affecting results in 2007 and 2006. The Dow Chemical Company and Subsidiaries Sales Volume and Price by Operating Segment Three Months Ended Twelve Months Ended Percentage change from Dec. 31, 2007 Dec. 31, 2007 prior year Volume Price Total Volume Price Total Operating segments Performance Plastics 6% 6% 12% 2% 6% 8% Performance Chemicals 2% 4% 6% 2% 4% 6% Agricultural Sciences 2% 4% 6% 9% 2% 11% Basic Plastics 1% 17% 18% 1% 8% 9% Basic Chemicals 5% 19% 24% (1)% 6% 5% Hydrocarbons and Energy 6% 25% 31% 3% 12% 15% Total 4% 12% 16% 2% 7% 9% Sales by Geographic Area Three Months Ended Twelve Months Ended Dec. 31, Dec. 31, Dec. 31, Dec. 31, In millions (Unaudited) 2007 2006 2007 2006 Sales by geographic area(1) North America $5,224 $4,782 $20,498 $20,431 Europe 5,267 4,240 19,614 16,776 Asia Pacific 1,668 1,464 6,186 5,364 Latin America 1,599 1,372 5,745 5,058 India, Middle East and Africa 469 378 1,470 1,495 Total $14,227 $12,236 $53,513 $49,124 (1) Beginning with the earnings release for the second quarter of 2007, the Company is providing a more detailed breakdown of its sales by geographic area. Prior to the change, the geographic breakdown included sales to customers in the United States, Europe (which included the Middle East and Africa) and Rest of World (which included the Indian subcontinent). With the new breakdown, sales to customers in the Indian subcontinent, the Middle East and Africa are reported together on a separate line, and sales to customers in Europe for prior periods have been adjusted to reflect the realignment. North America includes sales to customers in the United States and Canada. Sales Volume and Price by Geographic Area Three Months Ended Twelve Months Ended Percentage change from Dec. 31, 2007 Dec. 31, 2007 prior year Volume Price Total Volume Price Total Geographic areas North America (2)% 11% 9% (2)% 2% 0% Europe 6% 18% 24% 5% 12% 17% Asia Pacific 10% 4% 14% 8% 7% 15% Latin America 5% 12% 17% 7% 7% 14% India, Middle East and Africa 18% 6% 24% (9)% 7% (2)% Total 4% 12% 16% 2% 7% 9%