VIA FACSIMILE AND U.S. MAIL
April 5, 2005
Edward W. Rich
Vice President, Treasurer and Chief Financial Officer
Union Carbide Corporation
400 West Sam Houston Parkway South
Houston, Texas 77042
RE: Form 10-K for the year ended December 31, 2004
File No. 1-1463
Dear Mr. Rich:
We have reviewed these filings and have the following
comments. If you disagree with a comment, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Results of Operations, page 9
1. You discuss the business reasons for changes between periods in
your financial statement line items. However, in certain
circumstances where there is more than one business reason for the
change, you should quantify the incremental impact of each
individual
business reason discussed on the overall change in the line item
if
possible. Please quantify each business reason where practical.
Refer to Item 303(a) (3) of Regulation S-K and Financial Reporting
Codification 501.04.
Critical Accounting Policies - Pension and Other Postretirement
Benefits, page 11
2. In future filings address for readers the difference between
the
$196 million net losses that remain to be recognized in
calculation
of the market-value of assets and the $616 million unrecognized
net
loss as reflected in Note L.
Financial Statements
Statement of Cash Flows, page 23
3. In future filings, please separately present the material
components of the changes in other assets and liabilities.
Revenue Recognition, page 27
4. You indicate that revenue from product sales to related
companies
is recognized as risk and title to the product transfer to the
related company, which usually occurs at the time production is
complete. Please tell us supplementally and revise your policy in
future filings to clarify how you determined that delivery has
occurred as required by SAB Topic 13.A.1.
Note F - Significant Nonconsolidated Affiliates, page 30
5. We note that you are amortizing the negative basis difference
between the Company`s investment in EQUATE and its proportionate
share of the underlying net assets over "the useful life of the
assets". Tell us the authoritative literature you relied on for
this
accounting. As discussed in Note 16 to EQUATE`s December 31, 2004
audited financial statements, tell us how the 1999 conversion of
the
subordinated debt you received in exchange for your contributed
technology to EQUATE equity impacted your accounting for the
negative
basis difference.
Note J - Commitments and Contingent Liabilities, page 33
6. You indicate in the fourth bullet of your assumptions that "The
average resolution value for pending and future claims will be
equivalent to those experienced during 2003 and 2004 (excluding
settlements from closed claims filed in Madison County, Illinois
with
respect to future claims, as those claims are not considered
relevant
for predicting the cost of resolving future claims.)" Tell us
supplementally and revise future filings to address why the
Madison
County, Illinois claims are not deemed to be relevant.
7. You indicate that your recorded receivable for insurance
recoveries from all insurance carriers is collectible. However,
your
belief that a receivable is collectible, does not in itself make
recognizing the potential claim for recovery probable pursuant to
paragraph 140 of SOP 96-1. You also indicate that you have filed
a
comprehensive insurance coverage case seeking to confirm your
rights
to insurance for various asbestos claims. Please be advised that
if
a claim is the subject of litigation, a rebuttable presumption
exists
that realization of the claim is not probable. Based on your
insurance coverage case, please tell us how you have determined
that
the gain contingencies (i.e., insurance recoveries) from insurers
that are not signatories to the Wellington Agreement ("Agreement")
are considered probable under SFAS 5 and if appropriate revise
future
filings to clarify that the receivables are probable.
8. Please tell us supplementally and revise future filings to
discuss
the status of the insurance coverage case. In addition, please
tell
us and revise future filings to clarify why you are seeking to
confirm your rights to insurance for various asbestos claims.
Also,
indicate whether there have been any issues regarding claims to
insurers that are not signatories to the Agreement.
9. Please provide for us supplementally and revise future filings
to
disclose the amount of the insurance receivable at each balance
sheet
date that is related to insurers that are included in the
Agreement
and insurers that are not included in the Agreement. Also provide
and disclose a rollforward of the insurance receivable balance
from
December 31, 2002 that shows how much costs have been submitted to
the insurance carriers in each period presented and the amount of
the
receivable has been collected from insurers that are included in
the
Agreement and not included in the Agreement. Indicate any trends
that may exist with regards to collections of claims to insurers
not
included in the Agreement versus claims to insurers that are
included
in the Agreement.
Item 9A. Controls and Procedures, page 46
10. We note that your Chief Executive Officer and Chief Financial
Officer concluded your disclosure controls and procedures "...were
effective in timely alerting them to the material information
relating to the Corporation (including its consolidated
subsidiaries)
required to be included in our periodic SEC filings." In future
filings, please revise your disclosure to clarify, if true, that
your
officers concluded that your disclosure controls and procedures
are
effective to ensure that information required to be disclosed by
you
in the reports that you file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time
periods
specified in the Commission`s rules and forms and to ensure that
information required to be disclosed by an issuer in the reports
that
it files or submits under the Exchange Act is accumulated and
communicated to your management, including its principal executive
and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding
required disclosure. Otherwise, please simply conclude that your
disclosure controls and procedures are effective or ineffective,
whichever the case may be.
* * * *
Please respond to these comments within 10 business
days,
or tell us when you will provide us with a response. Please
provide
us with a supplemental response letter that keys your responses to
our comments and provides any requested supplemental information.
Detailed letters greatly facilitate our review. Please file your
supplemental response on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Ernest Greene, Staff Accountant, at (202)
942-
8091, or in his absence, Jeanne Baker, Assistant Chief Accountant
at
(202) 942-1835, if you have questions regarding comments on the
financial statements and related matters.
Sincerely,
Rufus Decker
Accounting Branch Chief
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Mr. Edward W. Rich
April 5, 2005
Page 1 of 5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-0510
DIVISION OF
CORPORATION FINANCE