The Company reported earnings of $0.08 per share, equivalent to $0.18 per share excluding certain items.(1) This compares with a reported loss of $1.68 per share in the fourth quarter of 2008, equivalent to a loss of $0.63 per share excluding certain items and discontinued operations.

Reported sales in the quarter increased 15 percent, to $12.5 billion compared to reported sales in the same period last year. On a pro forma(2) basis excluding completed divestitures, sales increased 4 percent, driven by a 10 percent increase in volume and a 6 percent decrease in price. Sequentially, and on the same pro forma basis, sales increased 8 percent, driven by a 3 percent increase in volume and a 5 percent increase in price, which largely offset a greater than $525 million increase in purchased feedstock and energy costs.

Quarterly volume on a pro forma basis increased 33 percent in emerging geographies versus the same period last year. On a pro forma basis and excluding divestitures, volume increased sequentially in all geographic areas except North America, which declined 1 percent.

EBITDA(3) on a pro forma basis excluding certain items increased $809 million versus the same quarter last year, with the combined performance segments up more than 85 percent. EBITDA from all operating segments was higher except Health and Agricultural Sciences, which was down $36 million year-over-year largely due to increased research and development (R&D) investments in Dow AgroSciences.

Structural cost reductions were more than $215 million in the quarter and more than $1.2 billion for the year, ahead of Company goals. Dow has now achieved 140 percent of the 12-month cost synergy and restructuring run-rate goal for the integration of Rohm and Haas Company.

Equity earnings were $219 million in the quarter, or $284 million excluding certain items, led by performance at Dow Corning, EQUATE and MEGlobal. This represents a return to the level of equity earnings reported prior to the economic downturn in the fourth quarter of 2008.

As of the end of the year, the Company reduced its net debt(4) to total capitalization to 48 percent, reflecting the full repayment of the bridge loan related to the acquisition of Rohm and Haas as well as the full repayment of the outstanding balance of the Company’s revolving credit facility.
(1) See Supplemental Information at the end of the release for a description of these items.
(2) The pro forma historical information reflects the combination of Dow and Rohm and Haas assuming the acquisition had been consummated on January 1, 2008, and the treatment of Dow’s Calcium Chloride business as discontinued operations.
(3) Earnings before interest, income taxes, depreciation and amortization ("EBITDA"). A reconciliation of EBITDA to "Income (Loss) from Continuing Operations Before Income Taxes" is provided following the Operating Segments table.
(4) Net debt equals total debt minus cash and cash equivalents.
®™ Trademark of The Dow Chemical Company or an affiliated company of Dow.

Comment
Andrew N. Liveris, Dow’s chairman and chief executive officer, stated:

“Dow delivered significantly better year-over-year revenue and earnings in the fourth quarter driven largely by volume gains across virtually all operating segments and improved equity earnings. Emerging geographies were a major factor in our results for the quarter, with volume up an impressive 33 percent, truly reflecting the strength of our broad geographic footprint. Quarterly equity earnings returned to a level not seen since before the economic downturn, further demonstrating the strategic importance of our joint ventures. We achieved all of this while furthering our growth strategy and by maintaining our focus on financial discipline. This allowed us to grow revenues, volume, and earnings while increasing our R&D investments yet still achieving reductions in structural costs.”

2009 Full-Year Highlights
Dow reported full-year earnings of $0.32 per share, or $0.63 per share excluding certain items and discontinued operations. Reported earnings for 2008 were $0.62 per share, or $1.79 per share excluding certain items and discontinued operations.

The Company reported sequential sales improvements throughout the year. These increases, however, were not enough to offset the full-year pro forma sales decline of 30 percent. Volume declined 13 percent, with Asia Pacific, Latin America and IMEA performing markedly better than North America and Europe.

Feedstock and energy costs fell $10.2 billion, or 40 percent, which led to price declines of 17 percent versus 2008. Price declines were reported in all operating segments and in all geographic areas.

Equity earnings were $630 million for the year. Excluding Dow’s share of a restructuring charge recognized by Dow Corning and a charge related to the Company’s Equipolymers joint venture, equity earnings were $724 million, 8 percent lower than the $787 million in 2008. The largest contributors were Dow Corning and EQUATE.

Dow completed the year ahead of its cost reduction and synergy goals, with an end-of-year run-rate of more than $1.7 billion, over 115 percent of the Company’s goal.

Despite one of the worst economic environments in decades, cash provided by operating activities was $2.1 billion in 2009, and the Company ended the year with a cash balance of $2.8 billion.

Since the completion of the acquisition of Rohm and Haas on April 1, 2009, Dow divested four non-core businesses ahead of schedule and to strategic buyers, and retired all Series B and C perpetual preferred shares from its capital structure at par. In addition, the Company reduced long-term debt with maturities through 2011 by 80 percent, and reduced total indebtedness by more than $2.5 billion. These actions lowered the net debt to total capitalization ratio to 48 percent, ahead of the Company’s target, and reduced the Company’s financing costs by $500 million per year.

Review of Fourth Quarter Results
The Dow Chemical Company (NYSE: DOW) reported sales of $12.5 billion for the fourth quarter of 2009, representing a 15 percent increase compared with reported sales in the same period last year.

Note: All additional sales, price and volume comparisons are presented on a pro forma basis, unless otherwise specified.

Sales in the fourth quarter of 2009, excluding completed divestitures, increased 4 percent compared to the same period last year, driven by a 10 percent increase in volume, partially offset by a 6 percent decrease in price. Growth was reported in all operating segments except Hydrocarbons and Energy.

From a geographic perspective, volume trends favored emerging regions. Volume grew more than 20 percent versus the same period last year in Asia Pacific, Latin America, Eastern Europe, and IMEA.

Sequentially, excluding completed divestitures, sales increased 8 percent. Volume increased 3 percent and price increased 5 percent, largely offsetting a greater than $525 million increase in purchased feedstock and energy costs which escalated toward the end of the quarter and hampered the Company’s ability to further improve margins. On the same basis, volume grew in all geographic areas except North America, which declined 1 percent. Normal seasonal patterns within Electronic and Specialty Materials (down 4 percent) and Coatings and Infrastructure (down 14 percent) were offset by strong demand in Health and Agricultural Sciences (up 38 percent), and volume gains in Basic Plastics (up 6 percent) and Basic Chemicals (up 16 percent).

EBITDA on a pro forma basis excluding certain items increased $809 million, with the combined performance segments up more than 85 percent versus the same quarter last year. EBITDA in all operating segments were higher except Health and Agricultural Sciences, which was down $36 million largely due to increased research and development (R&D) investments in Dow AgroSciences.

Net income from continuing operations for the quarter was $178 million. This compares with a net loss from continuing operations of $1.55 billion in the fourth quarter of 2008. Net income from continuing operations was $799 million in the prior quarter, which reflected after-tax gains of $512 million from the Company’s divestitures of ownership stakes in Total Raffinaderij Nederland N.V. (TRN) and the OPTIMAL Group of Companies.

Reported earnings for the current quarter were $0.08 per share versus a loss of $1.68 per share in the fourth quarter of 2008.

The Company earned $0.18 per share in the quarter, excluding certain items. This compares with a loss of $0.63 per share in the same quarter last year, excluding certain items and discontinued operations. Certain items in the current quarter included an adjustment to the previously recognized gain from the divestiture of the Company’s ownership stake in the OPTIMAL Group of Companies, which increased earnings $0.01 per share; a charge of $0.06 per share, related to the Company’s Equipolymers joint venture; transaction, integration and other acquisition costs of $0.03 per share, related to the acquisition of Rohm and Haas; a purchased in process research and development charge of $0.01 per share; and a charge of $0.01 per share related to a goodwill impairment loss. (See supplemental information at the end of the release for a description of certain items affecting results.)

The Company benefited from a lower tax rate in the quarter due to higher earnings in emerging geographies and joint ventures.

The Company’s global operating rate in the fourth quarter was 76 percent, a 12 percentage point increase from the fourth quarter of 2008 which was impacted by a severe downturn in demand and manufacturing activity. On a sequential basis, the global operating rate fell 2 percentage points, as normal seasonal patterns were mostly offset by increased production in Basic Chemicals.

Structural cost reductions are ahead of Company goals, with savings of more than $215 million in the quarter and more than $1.2 billion year-to-date, resulting in an annualized run-rate of more than $1.7 billion. The Company has already achieved 140 percent of the 12-month cost synergy and restructuring run-rate goal for the integration of Rohm and Haas, which began nine months ago.

Selling, General and Administrative (SG&A) expenses, as reported, were up more than 50 percent from the fourth quarter of last year, due to the acquisition of Rohm and Haas. On a pro forma basis, SG&A expenses declined 4 percent from the same period last year despite a 15 percent increase in Health and Agricultural Sciences that was driven by new product launches and commercial activities related to recently-acquired seed companies.

R&D expenses, as reported, increased more than 35 percent from the fourth quarter of last year, primarily due to the acquisition of Rohm and Haas. R&D expenses were flat on a pro forma basis, excluding Health and Agricultural Sciences, as that segment continued to invest in its technology-rich pipeline.

Equity earnings were $219 million in the quarter. Excluding certain items, equity earnings were $284 million, returning to the level of earnings reported prior to the fourth quarter of 2008. Dow Corning, EQUATE and MEGlobal led the improvement in equity earnings.

“Dow delivered significantly better year-over-year revenue and earnings in the fourth quarter driven largely by volume gains across virtually all operating segments and improved equity earnings,” said Andrew N. Liveris, Dow chairman and chief executive officer. “Emerging geographies were a major factor in our results for the quarter, with volume up an impressive 33 percent, truly reflecting the strength of our broad geographic footprint. Quarterly equity earnings returned to a level not seen since before the economic downturn, further demonstrating the strategic importance of our joint ventures. We achieved all of this while furthering our growth strategy and by maintaining our focus on financial discipline. This allowed us to grow revenues, volume, and earnings while increasing our R&D investments yet still achieving reductions in structural costs.”

Note: Due to rapidly changing business conditions, the Company has included comparisons to the prior quarter in addition to comparisons to the same period last year in the following operating segment summaries. Comparisons to the same period last year are made on a pro forma basis.

Outlook

Commenting on the Company’s outlook, Liveris said:
“We see demand in emerging geographies continuing to show sustained growth, which bodes well for global growth. Growth will continue to lag in the U.S. and Europe, however, as high unemployment persists and questions about the sustainability of government stimulus spending remain.

“Dow’s ongoing financial discipline, transformed portfolio and strong presence in emerging geographies position us well to benefit from an economic recovery. Throughout 2009, this approach delivered sequential revenue growth which accelerated during the fourth quarter.

“This operating discipline has served us well last year, and will continue throughout 2010. This, coupled with our broad geographic footprint, larger portfolio of specialty businesses, invigorated innovation engine and world-class plastics franchise, will drive earnings growth into the future.”

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 www.dow.com