10-Q
UNION CARBIDE CORP /NEW/ filed this Form 10-Q on 04/27/2017
Entire Document
 
Union Carbide Corporation and Subsidiaries

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Pursuant to General Instruction H of Form 10-Q "Omission of Information by Certain Wholly-Owned Subsidiaries," this section includes only management's narrative analysis of the results of operations for the three-month period ended March 31, 2017, the most recent period, compared with the three-month period ended March 31, 2016, the corresponding period in the preceding fiscal year.

References to "Dow" refer to The Dow Chemical Company and its consolidated subsidiaries, except as otherwise indicated by the context.

Dow conducts its worldwide operations through global businesses. Union Carbide Corporation’s (the "Corporation" or "UCC") business activities comprise components of Dow’s global operations rather than stand-alone operations. Because there are no separable reportable business segments for UCC and no detailed business information is provided to a chief operating decision maker regarding the Corporation’s stand-alone operations, the Corporation’s results are reported as a single operating segment.


RESULTS OF OPERATIONS
Net Sales
Total net sales were $1,323 million in the first quarter of 2017 compared with $1,212 million in the first quarter of 2016, an increase of 9 percent. Net sales to related companies, principally to Dow, and based on market prices for the related products, were $1,266 million in the first quarter of 2017 compared with $1,186 million in the first quarter of 2016, an increase of 7 percent.

Average selling prices increased 5 percent in the first quarter of 2017 compared with the same quarter last year. Price increases were primarily driven by higher feedstock, energy and other raw material prices, with the largest increases in polyethylene, acrylic monomers, ethylene oxide/ethylene glycol and vinyl acetate monomers. Total sales volume was up 4 percent in the first quarter of 2017 compared with the first quarter of 2016. Increases in sales volume in vinyl acetate monomers, acrylic monomers, glycol ethers and glutaraldehydes were partially offset by lower sales volume in electrical and telecommunications and oxo alcohols.

Cost of Sales
Cost of sales were $1,041 million in the first quarter of 2017 compared with $833 million in the first quarter of 2016, an increase of 25 percent. The increase in cost of sales was primarily driven by higher feedstock, energy and other raw material costs as well as increased sales volume when compared with the same period last year.

Research and Development, Selling, General and Administrative Expenses
Research and development expenses were $2 million in the first quarter of 2017 compared with $4 million in the first quarter of 2016. Selling, general and administrative expenses were $2 million in the first quarter of 2017, flat compared with $2 million in the first quarter of 2016.

Equity in Earnings of Nonconsolidated Affiliate
Equity in earnings of a nonconsolidated affiliate was zero in the first quarter of 2017, down from $2 million in the first quarter of 2016.

Sundry Income (Expense) - Net
Sundry income (expense) – net includes a variety of income and expense items such as the gain or loss on foreign currency exchange, commissions, charges for management services provided by Dow, and gains and losses on sales of investments and assets. Sundry income (expense) - net for the first quarter of 2017 was net expense of $12 million compared with net expense of $13 million for the same quarter last year.

Interest Income and Expense
Interest income was $4 million in the first quarter of 2017 compared with $3 million in the first quarter of 2016. Interest expense and amortization of debt discount was $7 million in the first quarter of 2017 compared with $6 million in the first quarter of 2016.


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