RESTRUCTURING

2016 Restructuring

On June 27, 2016, the Board of Directors of the Company approved a restructuring plan that incorporates actions related to the recent ownership restructure of Dow Corning Corporation ("Dow Corning"). These actions, aligned with Dow’s value growth and synergy targets, will result in a global workforce reduction of approximately 2,500 positions, with most of these positions resulting from synergies related to the Dow Corning transaction. These actions are expected to be completed during the next two years.

As a result of these actions, the Company recorded pretax restructuring charges of $449 million in the second quarter of 2016 consisting of severance charges of $268 million, asset write-downs and write-offs of $153 million and costs associated with exit and disposal activities of $28 million. The impact of these charges is shown as "Restructuring charges" in the consolidated statements of income and reflected in the Company's segments results as shown in the following table:



2016 Restructuring Charges by Operating Segment	Severance Costs		Impairment of Long-Lived Assets and Other Assets		Costs Associated with Exit or Disposal Activities		Total
In millions	Severance Costs		Impairment of Long-Lived Assets and Other Assets		Costs Associated with Exit or Disposal Activities		Total
Consumer Solutions	$	—	$	23	$	5	$	28
Infrastructure Solutions	—		74		23		97
Performance Plastics	—		10		—		10
Corporate	268		46		—		314
Total	$	268	$	153	$	28	$	449

Details regarding the components of the 2Q16 restructuring charge are discussed below:

Severance Costs

The restructuring charge includes severance of $268 million for the separation of approximately 2,500 employees under the terms of the Company's ongoing benefit arrangements, primarily by June 30, 2018. These costs were charged against Corporate.

Impairment of Long-Lived Assets and Other Assets

The restructuring charges related to the write-down and write-off of assets in the second quarter of 2016 total $153 million. Details regarding the write-downs and write-offs are as follows:

•

In the second quarter of 2016, the Company recorded a charge of $70 million for asset write-downs and write-offs including the shutdown of an Energy & Water Solutions solar manufacturing facility in Midland, Michigan; the write-down of a solar facility in Milpitas, California; and, the write-off of capital projects and in-process research and development. The charge was reflected in the Infrastructure Solutions operating segment. The Midland facility is expected to be shut down by the end of the fourth quarter of 2016.

•

To enhance competitiveness and streamline costs associated with the ownership restructure of Dow Corning, silicones manufacturing facilities in Yamakita, Japan, and Greensboro, North Carolina, will be shut down by the end of the second quarter of 2018 and an idled facility was shut down in the second quarter of 2016. As a result, in the second quarter of 2016 the Company recorded a charge of $25 million reflected in Consumer Solutions ($21 million) and Infrastructure Solutions ($4 million).


•	The closure and/or consolidation of certain corporate facilities and data centers. Write-downs of $25 million were recorded in the second quarter of 2016, impacting Corporate. These facilities will be shut down no later than the end of the second quarter of 2018.

•

A decision was made to shut down a small manufacturing facility and to write-down other non-manufacturing assets, including a cost method investment and aircraft. Write-downs of $33 million were recorded in the second quarter of 2016, impacting Consumer Solutions ($2 million), Performance Plastics ($10 million) and Corporate ($21 million). The manufacturing facility was shut down in the second quarter of 2016.

Costs Associated with Exit and Disposal Activities

The restructuring charges for cost associated with exit and disposal activities, including contract cancellation penalties, environmental remediation and warranty liabilities, totaled $28 million in the second quarter of 2016, impacting Consumer Solutions ($5 million) and Infrastructure Solutions ($23 million).

The following table summarizes the activities related to the Company's 2016 restructuring reserve, which is included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the consolidated balance sheets:



2016 Restructuring Activities	Severance Costs		Impairment of Long-Lived Assets and Other Assets			Costs Associated with Exit and Disposal Activities		Total
In millions	Severance Costs		Impairment of Long-Lived Assets and Other Assets			Costs Associated with Exit and Disposal Activities		Total
Restructuring charge recognized in the second quarter of 2016	$	268	$	153		$	28	$	449
Charges against the reserve	—		(153		)	—		(153		)
Reserve balance at June 30, 2016	$	268	$	—		$	28	$	296

2015 Restructuring

On April 29, 2015, Dow's Board of Directors approved actions to further streamline the organization and optimize the Company’s footprint as a result of the separation of a significant portion of Dow’s chlorine value chain. These actions, which will further accelerate Dow’s value growth and productivity targets, will result in a reduction of approximately 1,750 positions across a number of businesses and functions and adjustments to the Company's asset footprint to enhance competitiveness. These actions are expected to be completed primarily by March 31, 2017.

As a result of the 2015 restructuring activities, the Company recorded pretax restructuring charges of $375 million in the second quarter of 2015 consisting of costs associated with exit and disposal activities of $10 million, severance costs of $196 million and asset write-downs and write-offs of $169 million. In the fourth quarter of 2015, the Company recorded restructuring charge adjustments of $40 million, including severance costs of $39 million for the separation of approximately 500 additional positions as part of the Company's effort to streamline the organization, and $1 million of costs associated with exit and disposal activities.

Severance Costs

The restructuring charges recorded in the second quarter of 2015 included severance of $196 million for the separation of approximately 1,750 employees under the terms of the Company's ongoing benefit arrangements. In the fourth quarter of 2015, the Company recorded an additional charge of $39 million related to the separation of approximately 500 additional employees, primarily by March 31, 2017. These costs were charged against Corporate. At December 31, 2015, severance of $92 million was paid, leaving a liability of $143 million for approximately 1,250 employees. In the first six months of 2016, severance of $55 million was paid, leaving a liability of $88 million for approximately 650 employees at June 30, 2016.

Adjustments to the 2015 Restructuring Charge

During the first quarter of 2016, the Company recorded a favorable adjustment to the 2015 restructuring charge related to the impairment of long-lived assets of $2 million, included in "Restructuring charges" in the consolidated statements of income and reflected in the Infrastructure Solutions segment.

During the second quarter of 2016, the Company recorded an unfavorable adjustment to the 2015 restructuring charge related to additional accruals for exit and disposal activities of $5 million, included in "Restructuring charges" in the consolidated statements of income and reflected in Agricultural Sciences ($4 million) and Consumer Solutions ($1 million).

The following table summarizes the activities related to the Company's 2015 restructuring reserve, which is included in "Accrued and other current liabilities" in the consolidated balance sheets:



2015 Restructuring Activities	Costs Associated with Exit and Disposal Activities
In millions	Costs Associated with Exit and Disposal Activities			Severance Costs			Total
Reserve balance at Dec 31, 2015	$	10		$	143		$	153
Cash payments	(1		)	(30		)	(31		)
Reserve balance at Mar 31, 2016	$	9		$	113		$	122
Adjustments to the reserve	5			—			5
Cash payments	(1		)	(25		)	$	(26	)
Reserve balance at June 30, 2016	$	13		$	88		$	101

Dow expects to incur future costs related to its 2015 and 2016 restructuring activities, as the Company continually looks for ways to enhance the efficiency and cost effectiveness of its operations, and to ensure competitiveness across its businesses and across geographic areas. Future costs are expected to include demolition costs related to closed facilities and restructuring plan implementation costs; these will be recognized as incurred. The Company also expects to incur additional employee-related costs, including involuntary termination benefits, related to its other optimization activities. These costs cannot be reasonably estimated at this time and are not included in the restructuring activities tables.