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 substantially completed by June 30, 2018.

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 (credits)" in the consolidated statements of income and reflected in the Company's segment results in the table that follows. The table also 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 Charges	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
Consumer Solutions	$	—		$	23		$	5		$	28
Infrastructure Solutions	—			74			23			97
Performance Plastics	—			10			—			10
Corporate	268			46			—			314
2016 restructuring charges	$	268		$	153		$	28		$	449
Charges against the reserve	—			(153		)	—			(153		)
Cash payments	(67		)	—			(1		)	(68		)
Reserve balance at December 31, 2016	$	201		$	—		$	27		$	228

Details regarding the components of the 2016 restructuring charge are discussed below:

Severance Costs

The restructuring charge included 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. At December 31, 2016, severance of $67 million was paid, leaving a liability of $201 million for approximately 1,700 employees.

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 totaled $153 million. Details regarding the write-downs and write-offs are as follows:

•

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 was shut down in the third 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 2018. In addition, an idled facility was shut down in the second quarter of 2016. As a result, the Company recorded a charge of $25 million, reflected in Consumer Solutions ($21 million) and Infrastructure Solutions ($4 million).


•	The Company will close and/or consolidate certain corporate facilities and data centers. Write-downs of $25 million were charged against 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 certain aircraft. Write-downs of $33 million were recorded, 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).

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 June 30, 2017.

As a result of these actions, the Company recorded pretax restructuring charges of $375 million in the second quarter of 2015 consisting of severance costs of $196 million, asset write-downs and write-offs of $169 million and costs associated with exit and disposal activities of $10 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 efforts to further streamline the organization, and $1 million of costs associated with exit and disposal activities. The impact of these charges is shown as "Restructuring charges (credits)" in the consolidated statements of income and reflected in the Company's segment results in the table that follows. The table also summarizes the activities related to the Company's 2015 restructuring reserve, which is included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the consolidated balance sheets.



2015 Restructuring Charges				Impairment of Long-Lived Assets, Investments and Other Assets			Costs Associated with Exit and Disposal Activities
In millions	Severance Costs						Costs Associated with Exit and Disposal Activities			Total
Agricultural Sciences	$	—		$	8		$	6		$	14
Consumer Solutions	—			65			2			67
Infrastructure Solutions	—			25			2			27
Performance Plastics	—			12			—			12
Corporate	196			59			—			255
2015 restructuring charges	$	196		$	169		$	10		$	375
Charges against the reserve	—			(169		)	—			(169		)
Adjustments to the reserve	39			—			1			40
Impact of currency	—			—			(1		)	(1		)
Cash payments	(92		)	—			—			(92		)
Reserve balance at December 31, 2015	$	143		$	—		$	10		$	153
Charges against the reserve	—			3			—			3
Adjustments to the reserve	—			(3		)	6			3
Cash payments	(98		)	—			(8		)	(106		)
Reserve balance at December 31, 2016	$	45		$	—		$	8		$	53

The Company also recorded $14 million of restructuring charges to "Net income attributable to noncontrolling interests" in the consolidated statements of income for the noncontrolling interests' portion of the charge.

Details regarding the components of the 2015 restructuring charges are discussed below:

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 June 30, 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. At December 31, 2016, severance of $190 million has been paid, leaving a liability of $45 million for approximately 290 employees.

Impairment of Long-Lived Assets, Investments and Other Assets

The restructuring charges related to the write-down and write-off of assets in the second quarter of 2015 totaled $169 million. Details regarding the write-downs and write-offs are as follows:

•

As a result of changing market dynamics in certain end-use markets, select manufacturing facilities and non-core assets aligned with the Dow Electronic Materials business were shut down in 2016. The assets impacted included certain display films and metalorganic precursors, including a metalorganic materials manufacturing site in North Andover, Massachusetts, and related operations in Taoyuan, Taiwan, as well as certain display films’ manufacturing assets aligned with SKC Haas Display Films Co., Ltd., a majority-owned joint venture located in Cheonan, South Korea. The Company recorded a $51 million charge for asset write-downs and write-offs in the Dow Electronic Materials business, which is reflected in the Consumer Solutions segment.


•	The Company shut down and/or consolidated manufacturing capacity in the Dow Building & Construction business during 2016. As a result, the Company recorded a charge of $15 million for asset write-offs which is reflected in the Infrastructure Solutions segment.


•	A Consumer Care manufacturing facility in Institute, West Virginia, was shut down in the fourth quarter of 2015. As a result, an asset write-down of $14 million was recorded against the Consumer Solutions segment.


•	A Dow Packaging and Specialty Plastics plant in Schkopau, Germany, was permanently shut down in the second quarter of 2015, resulting in an asset write-off of $12 million against the Performance Plastics segment.


•	Select operations in Agricultural Sciences were shut down, closed or idled in the second half of 2015, resulting in a pretax charge of $8 million for the write-down of assets. In the fourth quarter of 2015, the Company recorded an additional charge of $1 million related to the impairment of long-lived assets and other assets.

•

A decision was made to shut down two small manufacturing facilities and an administrative facility to optimize the Company's asset footprint. Write-downs of $14 million were recorded impacting Infrastructure Solutions ($10 million) and Corporate ($4 million). The manufacturing facilities were shut down in 2015 and the administrative facility will be shut down no later than the second quarter of 2017. In the fourth quarter of 2015, the Company recorded a favorable adjustment to the restructuring charge related to the impairment of long-lived assets of $1 million, impacting Infrastructure Solutions.


•	Due to a change in the Company's strategy to monetize and exit certain Venture Capital portfolio investments, a write-down of $55 million was recorded, reflected in Corporate.

Costs Associated with Exit and Disposal Activities

The restructuring charges for costs associated with exit and disposal activities, primarily environmental remediation and contract penalties, totaled $10 million in the second quarter of 2015, impacting Agricultural Sciences ($6 million), Consumer Solutions ($2 million) and Infrastructure Solutions ($2 million). In the fourth quarter of 2015, the Company increased the restructuring reserve for costs associated with exit and disposal activities by $1 million, impacting Agricultural Sciences.

2016 Adjustments to the 2015 Restructuring

In 2016, the Company increased the 2015 restructuring reserve related to additional accruals for costs associated with exit and disposal activities by $6 million. In addition, a favorable adjustment was recorded for the impairment of long-lived assets of $3 million. The net change was included in "Restructuring charges (credits)" in the consolidated statements of income and reflected in Agricultural Sciences ($5 million charge), Consumer Solutions ($1 million charge) and Infrastructure Solutions ($3 million gain).

2014 Adjustments to the 4Q12 Restructuring Plan

In 2014, the Company reduced the 4Q12 Restructuring reserve related to contract cancellation fees by $3 million. The impact of this adjustment is shown as "Restructuring charges (credits)" in the consolidated statements of income and reflected in Performance Materials & Chemicals.

Dow expects to incur additional costs in the future related to its 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 geographic areas. Future costs are expected to include demolition costs related to closed facilities and restructuring plan implementation costs; these costs 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.