Document
Exhibit 99.1
October 21, 2021
Dow reports third quarter 2021 results
FINANCIAL HIGHLIGHTS
•GAAP earnings per share (EPS) was $2.23; Operating EPS1 was $2.75, compared to $0.50 in the year-ago period. Operating EPS excludes certain items in the quarter, totaling $0.52 per share, primarily related to an early extinguishment of debt.
•Net sales were $14.8 billion, up 53% versus the year-ago period and 7% sequentially, with gains in all operating segments and regions.
•Local price increased 50% versus the year-ago period and 5% sequentially, reflecting gains in all operating segments, businesses and regions, driven by tight supply and demand dynamics across key value chains.
•Volume increased 2% versus the year-ago period, driven by gains in Packaging & Specialty Plastics and Performance Materials & Coatings. Sequentially, volume was also up 2%, reflecting ongoing economic recovery and continued underlying end-market demand strength, partly offset by supply and global logistics constraints.
•Equity earnings were $249 million, up $189 million from the year-ago period, primarily driven by margin expansion at Sadara and the Kuwait joint ventures. Equity earnings were down $29 million from the prior quarter as Sadara gains were more than offset primarily by a planned maintenance turnaround at a Kuwait joint venture.
•GAAP Net Income was $1.7 billion. Operating EBIT1 was $2.9 billion, up more than $2.1 billion from the year-ago period. Gains were posted across all operating segments and businesses, reflecting margin expansion and increased equity earnings. Sequentially, operating EBIT increased 2%, on gains in Industrial Intermediates & Infrastructure and Performance Materials and Coatings.
•Cash provided by operating activities – continuing operations was $2.7 billion, up $958 million year-over-year and an increase of $698 million compared to the prior quarter. Free cash flow1 was $2.3 billion.
•Gross debt was reduced by more than $1.1 billion in the quarter. Proactive liability management actions to tender existing notes have resulted in no substantive long-term debt maturities due until 2026 and reduced annual interest expense by more than $60 million.
•Returns to shareholders totaled $918 million in the quarter, comprised of $518 million in dividends and $400 million in share repurchases.
SUMMARY FINANCIAL RESULTS
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30 | Three Months Ended June 30 |
| In millions, except per share amounts | 3Q21 | 3Q20 | vs. SQLY [B / (W)] | 2Q21 | vs. PQ [B / (W)] |
| Net Sales | $ | 14,837 | | $ | 9,712 | | $ | 5,125 | | $ | 13,885 | | $ | 952 | |
| GAAP Income, Net of Tax | $ | 1,706 | | $ | (1) | | $ | 1,707 | | $ | 1,932 | | $ | (226) | |
Operating EBIT1 | $ | 2,886 | | $ | 761 | | $ | 2,125 | | $ | 2,828 | | $ | 58 | |
Operating EBIT Margin1 | 19.5 | % | 7.8 | % | 1,170 bps | 20.4 | % | (90) bps |
Operating EBITDA1 | $ | 3,611 | | $ | 1,485 | | $ | 2,126 | | $ | 3,573 | | $ | 38 | |
| GAAP Earnings Per Share | $ | 2.23 | | $ | (0.04) | | $ | 2.27 | | $ | 2.51 | | $ | (0.28) | |
Operating Earnings Per Share1 | $ | 2.75 | | $ | 0.50 | | $ | 2.25 | | $ | 2.72 | | $ | 0.03 | |
| Cash Provided by (Used for) Operating Activities - Cont. Ops | $ | 2,719 | | $ | 1,761 | | $ | 958 | | $ | 2,021 | | $ | 698 | |
1.Op. Earnings Per Share, Op. EBIT, Op. EBIT Margin, Op. EBITDA, and Free Cash Flow are non-GAAP measures. See page 6 for further discussion.
®™ Trademark of The Dow Chemical Company ("Dow") or an affiliated company of Dow
Dow reports third quarter 2021 results
CEO QUOTE
Jim Fitterling, chairman and chief executive officer, commented on the quarter:
“The Dow team delivered another quarter of sequential and year-over-year top- and bottom-line growth. Despite higher energy costs and industry-wide value chain disruptions from hurricanes on the U.S. Gulf Coast, our proactive storm preparations enabled us to maintain the safety of our team and operations, and recover quickly. Coupled with our global footprint, feedstock flexibility and structural cost advantages, we continued to capture robust end-market demand and price momentum. As a result, we generated higher cash flow from operations and achieved sales growth across all segments and geographies.
Additionally, earlier this month at our 2021 Investor Day we outlined a strategic plan to increase underlying EBITDA by more than $3 billion across the cycle through the implementation of a phased and disciplined approach to decarbonize our footprint and grow earnings. Our strategy enables us to capture demand growth for circular and low- to zero-carbon emissions products; progress our productivity actions; and continue to deliver our financial priorities.”
SEGMENT HIGHLIGHTS
Packaging & Specialty Plastics
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30 | Three Months Ended June 30 |
| In millions, except margin percentages | 3Q21 | 3Q20 | vs. SQLY [B / (W)] | 2Q21 | vs. PQ [B / (W)] |
| Net Sales | $ | 7,736 | | $ | 4,565 | | $ | 3,171 | | $ | 7,121 | | $ | 615 | |
| Operating EBIT | $ | 1,954 | | $ | 647 | | $ | 1,307 | | $ | 2,014 | | $ | (60) | |
| Operating EBIT Margin | 25.3 | % | 14.2 | % | 1,110 bps | 28.3 | % | (300) bps |
| Equity Earnings | $ | 124 | | $ | 71 | | $ | 53 | | $ | 130 | | $ | (6) | |
Packaging & Specialty Plastics segment net sales were $7.7 billion, up 69% versus the year-ago period. Local price increased 63% year-over-year due to tight supply and demand dynamics, with gains in both businesses and across all regions. Volume increased 5% year-over-year, as gains in energy and olefins were partly offset by lower polyethylene volumes due to weather-related supply constraints. Currency increased net sales by 1%. On a sequential basis, the segment recorded a 9% net sales improvement, primarily driven by continued local price gains in the U.S. & Canada.
Equity earnings for the segment were $124 million, up $53 million compared to the year-ago period due to higher integrated polyethylene margins at the principle joint ventures. On a sequential basis, equity earnings decreased by $6 million as earnings improvement at Sadara was more than offset by rising energy costs at the Kuwait and Thai joint ventures.
Operating EBIT was $2 billion, compared to $647 million in the year-ago period, reflecting Op. EBIT margin improvement in the core business, which was up 1,110 basis points. Sequentially, Op. EBIT was down $60 million, and Op. EBIT margins declined by 300 basis points on higher raw material and energy costs.
Packaging and Specialty Plastics business reported a net sales increase versus the year-ago period, led by local price gains in industrial & consumer packaging, and flexible food & beverage packaging applications. Volumes declined year-over-year due to lower polyethylene supply from planned maintenance turnarounds and weather-related outages. Compared to the prior quarter, the business delivered increased volume and price gains on strong demand in industrial & consumer packaging applications that were partly offset by additional weather-related outages.
Dow reports third quarter 2021 results
Hydrocarbons & Energy
Hydrocarbons & Energy business reported a net sales increase compared to the year-ago period, driven primarily by higher local prices and volumes in olefins and aromatics. Sequentially, the business delivered sales gains due to local price increases, which were partly offset by lower volumes as a result of planned maintenance turnarounds and weather-related outages.
Industrial Intermediates & Infrastructure
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30 | Three Months Ended June 30 |
| In millions, except margin percentages | 3Q21 | 3Q20 | vs. SQLY [B / (W)] | 2Q21 | vs. PQ [B / (W)] |
| Net Sales | $ | 4,481 | | $ | 3,058 | | $ | 1,423 | | $ | 4,215 | | $ | 266 | |
| Operating EBIT | $ | 713 | | $ | 104 | | $ | 609 | | $ | 648 | | $ | 65 | |
| Operating EBIT Margin | 15.9 | % | 3.4 | % | 1,250 bps | 15.4 | % | 50 bps |
| Equity Earnings (Losses) | $ | 122 | | $ | (13) | | $ | 135 | | $ | 144 | | $ | (22) | |
Industrial Intermediates & Infrastructure segment net sales were $4.5 billion, up 47% versus the year-ago period. Local price improved 49% year-over-year with gains in both businesses and in all regions on tight supply and demand dynamics. Currency increased net sales by 2%. Despite strong demand, volumes declined 4% year-over-year due to a planned transition of a low-margin coproducer contract, weather-related outages and third-party supply constraints. On a sequential basis, the segment recorded a net sales increase of 6%, driven by volume and price gains in both businesses due to strong demand and improved supply availability.
Equity earnings for the segment were $122 million, an increase of $135 million compared to the year-ago period, driven by margin expansion at the Sadara and Kuwait joint ventures. On a sequential basis, equity earnings decreased by $22 million as the Kuwait joint ventures’ margin improvement was more than offset by planned maintenance turnaround activity, as well as reduced margins at the Thai joint ventures.
Operating EBIT was $713 million, an increase of $609 million compared to the year-ago period, primarily due to continued tight supply and demand dynamics in both businesses. Op. EBIT margins were up 1,250 basis points year-over-year. Sequentially, Op. EBIT was up $65 million, and Op. EBIT margins expanded by 50 basis points on volume and price gains in both businesses.
Polyurethanes & Construction Chemicals business increased net sales compared to the year-ago period with price gains in all regions on tight supply and demand dynamics in key value chains. Volume declines year-over-year were primarily driven by a planned transition of a low-margin coproducer contract, weather-related outages and third-party supply constraints. Sequentially, the business delivered sales growth due to higher local price and volume increases from additional supply availability to meet resilient demand.
Industrial Solutions business net sales increased from the year-ago period with local price gains in all regions. Volume increased year-over-year on strong demand, particularly in industrial manufacturing and energy applications. Net sales increased sequentially on volume growth primarily in coatings and industrial applications from increased supply as well as on local price gains in all regions.
Performance Materials & Coatings
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30 | Three Months Ended June 30 |
| In millions, except margin percentages | 3Q21 | 3Q20 | vs. SQLY [B / (W)] | 2Q21 | vs. PQ [B / (W)] |
| Net Sales | $ | 2,526 | | $ | 2,002 | | $ | 524 | | $ | 2,465 | | $ | 61 | |
| Operating EBIT | $ | 284 | | $ | 75 | | $ | 209 | | $ | 225 | | $ | 59 | |
| Operating EBIT Margin | 11.2 | % | 3.7 | % | 750 bps | 9.1 | % | 210 bps |
| Equity Earnings | $ | 3 | | $ | 1 | | $ | 2 | | $ | — | | $ | 3 | |
Dow reports third quarter 2021 results
Performance Materials & Coatings segment net sales were $2.5 billion, up 26% versus the year-ago period. Local price increased 23% year-over-year due to tight supply and demand dynamics, with gains in both businesses and in all regions. Volume increased 2% year-over-year as stronger demand for mobility, electronics, personal care and industrial applications was partly offset by supply constraints for acrylic monomers and architectural coatings. Currency increased net sales by 1% year-over-year. On a sequential basis, the segment recorded a 2% increase in sales with price gains in both businesses and in all regions. Volume declined 5% sequentially as continued consumer and industrial demand strength was more than offset by third-party supply and global logistics constraints.
Operating EBIT was $284 million, compared to $75 million in the year-ago period, as Op. EBIT margins increased 750 basis points due to strong price momentum and robust demand recovery for silicones and industrial coatings offerings. Sequentially, Op. EBIT was up $59 million, expanding Op. EBIT margins by 210 basis points on price gains leading to margin expansion.
Consumer Solutions business achieved higher net sales year-over-year with local price gains in all regions. Volume increased versus the year-ago period, led by stronger consumer demand for personal care, mobility, and electronics offerings. Sequentially, sales were down as price increases in all regions were more than offset by volume declines from planned maintenance and third-party supply and logistics constraints.
Coatings & Performance Monomers business achieved increased net sales year-over-year as higher raw material costs and tight supply and demand dynamics led to local price gains in all regions. Volumes were down versus the year-ago period as demand recovery for industrial coatings was more than offset by supply availability challenges due to weather-related outages and third-party supply and logistics constraints. Sequentially, the business delivered local price gains in all regions. Volume increased sequentially due to continued strong demand for acrylic monomers and architectural coatings and increased supply.
OUTLOOK
“We continue to see robust end-market demand that is expected to extend into 2022, coupled with near-term logistics constraints and low inventory levels across our value chains,” said Fitterling. “Looking ahead, Dow is well-positioned to increase earnings, cash flow and returns as we decarbonize our footprint and achieve our 2030 and 2050 carbon emissions reduction targets. We will continue to build on our competitive advantage with growth from higher-margin, sustainability-driven, downstream solutions, and value-accretive investments to replace end-of-life assets with carbon-efficient and higher-ROIC production. Dow expects to deliver significant long-term value for shareholders as we continue to apply our balanced capital allocation approach to grow earnings while maintaining our strong operational and financial discipline.”
Conference Call
Dow will host a live webcast of its third quarter earnings conference call with investors to discuss its results, business outlook and other matters today at 8:00 a.m. ET. The webcast and slide presentation that accompany the conference call will be posted on the events and presentations page of investors.dow.com.
About Dow
Dow combines global breadth, asset integration and scale, focused innovation and leading business positions to achieve profitable growth. The Company’s ambition is to become the most innovative, customer centric, inclusive and sustainable materials science company, with a purpose to deliver a sustainable future for the world through our materials science expertise and collaboration with our partners. Dow’s portfolio of plastics, industrial intermediates, coatings and silicones businesses delivers a broad range of differentiated science-based products and solutions for its customers in high-growth market segments, such as packaging, infrastructure, mobility and consumer care.
Dow reports third quarter 2021 results
Dow operates 106 manufacturing sites in 31 countries and employs approximately 35,700 people. Dow delivered sales of approximately $39 billion in 2020. References to Dow or the Company mean Dow Inc. and its subsidiaries. For more information, please visit www.dow.com or follow @DowNewsroom on Twitter.
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For further information, please contact:
| | | | | |
| Investors: | Media: |
| Pankaj Gupta | Kyle Bandlow |
| pgupta@dow.com | kbandlow@dow.com |
| +1 989-638-5265 | +1 989-638-2417 |
Cautionary Statement about Forward-Looking Statements
Certain statements in this presentation are “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words or phrases.
Forward-looking statements are based on current assumptions and expectations of future events that are subject to risks, uncertainties and other factors that are beyond Dow’s control, which may cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements and speak only as of the date the statements were made. These factors include, but are not limited to: sales of Dow’s products; Dow’s expenses, future revenues and profitability; the continuing global and regional economic impacts of the coronavirus disease 2019 (“COVID-19”) pandemic and other public health-related risks and events on Dow’s business; capital requirements and need for and availability of financing; unexpected barriers in the development of technology, including with respect to Dow’s contemplated capital and operating projects; Dow’s ability to realize its commitment to carbon neutrality on the contemplated timeframe; size of the markets for Dow’s products and services and ability to compete in such markets; failure to develop and market new products and optimally manage product life cycles; the rate and degree of market acceptance of Dow’s products; significant litigation and environmental matters and related contingencies and unexpected expenses; the success of competing technologies that are or may become available; the ability to protect Dow’s intellectual property in the United States and abroad; developments related to contemplated restructuring activities and proposed divestitures or acquisitions such as workforce reduction, manufacturing facility and/or asset closure and related exit and disposal activities, and the benefits and costs associated with each of the foregoing; fluctuations in energy and raw material prices; management of process safety and product stewardship; changes in relationships with Dow’s significant customers and suppliers; changes in consumer preferences and demand; changes in laws and regulations, political conditions or industry development; global economic and capital markets conditions, such as inflation, market uncertainty, interest and currency exchange rates, and equity and commodity prices; business or supply disruptions; security threats, such as acts of sabotage, terrorism or war; weather events and natural disasters; and disruptions in Dow’s information technology networks and systems.
Risks related to Dow’s separation from DowDuPont Inc. include, but are not limited to: (i) Dow’s inability to achieve some or all of the benefits that it expects to receive from the separation from DowDuPont Inc.; (ii) certain tax risks associated with the separation; (iii) the failure of Dow’s pro forma financial information to be a reliable indicator of Dow’s future results; (iv) non-compete restrictions under the separation agreement; (v) receipt of less favorable terms in the commercial agreements Dow entered into with DuPont de Nemours, Inc. (“DuPont”) and Corteva, Inc. (“Corteva”), including restrictions under intellectual property cross-license agreements, than Dow would have received from an unaffiliated third party; and (vi) Dow’s obligation to indemnify DuPont and/or Corteva for certain liabilities.
Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. A detailed discussion of principal risks and uncertainties which may cause actual results and events to differ materially from such forward-looking statements is included in the section titled “Risk Factors” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. These are not the only risks and uncertainties that Dow faces. There may be other risks and uncertainties that Dow is unable to identify at this time or that Dow does not currently expect to have a material impact on its business. If any of those risks or uncertainties develops into an actual event, it could have a material adverse effect on Dow’s business. Dow assumes no obligation to update or revise publicly any forward-looking statements whether because of new information, future events, or otherwise, except as required by securities and other applicable laws.
®TM Trademark of The Dow Chemical Company (“Dow”) or an affiliated company of Dow
Non-GAAP Financial Measures
This earnings release includes information that does not conform to U.S. GAAP and are considered non-GAAP measures. Management uses these measures internally for planning, forecasting and evaluating the performance of the Company's segments, including allocating resources. Dow's management believes that these non-GAAP measures best reflect the ongoing performance of the Company during the periods presented and provide more relevant and meaningful information to investors as they provide insight with respect to ongoing operating results of the Company and a more useful comparison of year-over-year results. These non-GAAP measures supplement the Company's U.S. GAAP disclosures and should not be viewed as alternatives to U.S. GAAP measures of performance. Furthermore, such non-GAAP measures may not be consistent with similar measures provided or used by other companies. Non-GAAP measures included in this release are defined below. Reconciliations for these non-GAAP measures to U.S. GAAP are provided in the Selected Financial Information and Non-GAAP Measures section starting on page 11. Dow does not provide forward-looking U.S. GAAP financial measures or a reconciliation of forward-looking non-GAAP financial measures to the most comparable U.S. GAAP financial measures on a forward-looking basis because the Company is unable to predict with reasonable certainty the ultimate outcome of pending litigation, unusual gains and losses, foreign currency exchange gains or losses and potential future asset impairments, as well as discrete taxable events, without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on U.S. GAAP results for the guidance period.
Operating earnings per share is defined as "Earnings (loss) per common share - diluted" excluding the after-tax impact of significant items.
Operating EBIT is defined as earnings (i.e., "Income (loss) before income taxes") before interest, excluding the impact of significant items.
Operating EBIT margin is defined as Operating EBIT as a percentage of net sales.
Operating EBITDA is defined as earnings (i.e., "Income (loss) before income taxes") before interest, depreciation and amortization, excluding the impact of significant items.
Free cash flow is defined as "Cash provided by operating activities - continuing operations," less capital expenditures. Under this definition, free cash flow represents the cash generated by the Company from operations after investing in its asset base. Free cash flow, combined with cash balances and other sources of liquidity, represent the cash available to fund obligations and provide returns to shareholders. Free cash flow is an integral financial measure used in the Company's financial planning process.
Cash flow conversion is defined as "Cash provided by operating activities - continuing operations," divided by Operating EBITDA. Management believes cash flow conversion is an important financial metric as it helps the Company determine how efficiently it is converting its earnings into cash flow.
Dow Inc. and Subsidiaries
Consolidated Statements of Income
| | | | | | | | | | | | | | |
| In millions, except per share amounts (Unaudited) | Three Months Ended | Nine Months Ended |
| Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2021 | Sep 30, 2020 |
| Net sales | $ | 14,837 | | $ | 9,712 | | $ | 40,604 | | $ | 27,836 | |
| Cost of sales | 11,611 | | 8,371 | | 32,413 | | 24,211 | |
| Research and development expenses | 210 | | 193 | | 632 | | 554 | |
| Selling, general and administrative expenses | 403 | | 372 | | 1,209 | | 1,063 | |
| Amortization of intangibles | 100 | | 100 | | 301 | | 300 | |
| Restructuring and asset related charges - net | — | | 617 | | 22 | | 719 | |
| Integration and separation costs | — | | 63 | | — | | 174 | |
| Equity in earnings (losses) of nonconsolidated affiliates | 249 | | 60 | | 751 | | (124) | |
| Sundry income (expense) - net | (350) | | 182 | | (225) | | 154 | |
| Interest income | 14 | | 6 | | 35 | | 27 | |
| Interest expense and amortization of debt discount | 178 | | 202 | | 561 | | 617 | |
| Income before income taxes | 2,248 | | 42 | | 6,027 | | 255 | |
| Provision for income taxes | 542 | | 43 | | 1,383 | | 215 | |
| Net income (loss) | 1,706 | | (1) | | 4,644 | | 40 | |
| Net income attributable to noncontrolling interests | 23 | | 24 | | 69 | | 51 | |
| Net income (loss) available for Dow Inc. common stockholders | $ | 1,683 | | $ | (25) | | $ | 4,575 | | $ | (11) | |
| | — | | | — | |
| Per common share data: | | | | |
| Earnings (loss) per common share - basic | $ | 2.25 | | $ | (0.04) | | $ | 6.11 | | $ | (0.02) | |
| Earnings (loss) per common share - diluted | $ | 2.23 | | $ | (0.04) | | $ | 6.06 | | $ | (0.02) | |
| | | | |
| Weighted-average common shares outstanding - basic | 744.5 | | 740.5 | | 745.4 | | 740.0 | |
| Weighted-average common shares outstanding - diluted | 750.0 | | 740.5 | | 750.9 | | 740.0 | |
Dow Inc. and Subsidiaries
Consolidated Balance Sheets
| | | | | | | | |
In millions, except share amounts (Unaudited) | Sep 30,
2021 | Dec 31,
2020 |
| Assets | | |
| Current Assets | | |
| Cash and cash equivalents (variable interest entities restricted - 2021: $49; 2020: $26) | $ | 2,911 | | $ | 5,104 | |
| | |
| Accounts and notes receivable: | | |
| Trade (net of allowance for doubtful receivables - 2021: $59; 2020: $51) | 6,844 | | 4,839 | |
| Other | 2,565 | | 2,551 | |
| Inventories | 7,111 | | 5,701 | |
| Other current assets | 962 | | 889 | |
| Total current assets | 20,393 | | 19,084 | |
| Investments | | |
| Investment in nonconsolidated affiliates | 1,910 | | 1,327 | |
| Other investments (investments carried at fair value - 2021: $1,958; 2020: $1,674) | 3,053 | | 2,775 | |
| Noncurrent receivables | 472 | | 465 | |
| Total investments | 5,435 | | 4,567 | |
| Property | | |
| Property | 56,522 | | 56,325 | |
| Less: Accumulated depreciation | 36,874 | | 36,086 | |
| Net property (variable interest entities restricted - 2021: $187; 2020: $232) | 19,648 | | 20,239 | |
| Other Assets | | |
| Goodwill | 8,801 | | 8,908 | |
| Other intangible assets (net of accumulated amortization - 2021: $4,747; 2020: $4,428) | 2,962 | | 3,352 | |
| Operating lease right-of-use assets | 1,727 | | 1,856 | |
| Deferred income tax assets | 1,357 | | 2,215 | |
| Deferred charges and other assets | 1,426 | | 1,249 | |
| Total other assets | 16,273 | | 17,580 | |
| Total Assets | $ | 61,749 | | $ | 61,470 | |
| Liabilities and Equity | | |
| Current Liabilities | | |
| Notes payable | $ | 270 | | $ | 156 | |
| Long-term debt due within one year | 291 | | 460 | |
| Accounts payable: | | |
| Trade | 4,601 | | 3,763 | |
| Other | 2,896 | | 2,126 | |
| Operating lease liabilities - current | 413 | | 416 | |
| Income taxes payable | 621 | | 397 | |
| | |
| Accrued and other current liabilities | 3,701 | | 3,790 | |
| Total current liabilities | 12,793 | | 11,108 | |
| Long-Term Debt (variable interest entities nonrecourse - 2021: $4; 2020: $6) | 14,027 | | 16,491 | |
| Other Noncurrent Liabilities | | |
| Deferred income tax liabilities | 501 | | 405 | |
| Pension and other postretirement benefits - noncurrent | 8,586 | | 11,648 | |
| Asbestos-related liabilities - noncurrent | 962 | | 1,013 | |
| Operating lease liabilities - noncurrent | 1,428 | | 1,521 | |
| Other noncurrent obligations | 6,424 | | 6,279 | |
| Total other noncurrent liabilities | 17,901 | | 20,866 | |
| Stockholders’ Equity | | |
Common stock (authorized 5,000,000,000 shares of $0.01 par value each;
issued 2021: 761,777,581 shares; 2020: 755,993,198 shares) | 8 | | 8 | |
| Additional paid-in capital | 7,988 | | 7,595 | |
| Retained earnings | 19,357 | | 16,361 | |
| Accumulated other comprehensive loss | (9,665) | | (10,855) | |
| Unearned ESOP shares | (24) | | (49) | |
| Treasury stock at cost (2021: 22,163,169 shares; 2020: 12,803,303 shares) | (1,225) | | (625) | |
| Dow Inc.’s stockholders’ equity | 16,439 | | 12,435 | |
| Noncontrolling interests | 589 | | 570 | |
| Total equity | 17,028 | | 13,005 | |
| Total Liabilities and Equity | $ | 61,749 | | $ | 61,470 | |
Dow Inc. and Subsidiaries
Consolidated Statements of Cash Flows
| | | | | | | | |
| In millions (Unaudited) | Nine Months Ended |
Sep 30,
2021 | Sep 30,
2020 |
| Operating Activities | | |
| Net income | $ | 4,644 | | $ | 40 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| Depreciation and amortization | 2,187 | | 2,148 | |
| Provision (credit) for deferred income tax | 488 | | (198) | |
| Earnings of nonconsolidated affiliates less than (in excess of) dividends received | (519) | | 515 | |
| Net periodic pension benefit cost | 34 | | 195 | |
| Pension contributions | (1,166) | | (188) | |
| Net gain on sales of assets, businesses and investments | (67) | | (283) | |
| | |
| Restructuring and asset related charges - net | 22 | | 719 | |
| | |
| Other net loss | 874 | | 288 | |
| Changes in assets and liabilities, net of effects of acquired and divested companies: | | |
| Accounts and notes receivable | (2,222) | | 339 | |
| Inventories | (1,502) | | 587 | |
| Accounts payable | 1,487 | | (560) | |
| Other assets and liabilities, net | 252 | | 994 | |
| Cash provided by operating activities - continuing operations | 4,512 | | 4,596 | |
| Cash used for operating activities - discontinued operations | (78) | | — | |
| Cash provided by operating activities | 4,434 | | 4,596 | |
| Investing Activities | | |
| Capital expenditures | (1,035) | | (955) | |
| Investment in gas field developments | (44) | | (5) | |
| Purchases of previously leased assets | (5) | | (4) | |
| Proceeds from sales of property and businesses, net of cash divested | 15 | | 295 | |
| Acquisitions of property and businesses, net of cash acquired | (107) | | (130) | |
| Investments in and loans to nonconsolidated affiliates | — | | (280) | |
| Distributions and loan repayments from nonconsolidated affiliates | 11 | | 7 | |
| Purchases of investments | (1,004) | | (582) | |
| Proceeds from sales and maturities of investments | 644 | | 1,009 | |
| | |
| Other investing activities, net | (10) | | 29 | |
| Cash used for investing activities | (1,535) | | (616) | |
| Financing Activities | | |
| Changes in short-term notes payable | (44) | | (267) | |
| Proceeds from issuance of short-term debt greater than three months | 144 | | 163 | |
| Payments on short-term debt greater than three months | — | | (163) | |
| Proceeds from issuance of long-term debt | 95 | | 4,649 | |
| Payments on long-term debt | (2,638) | | (4,347) | |
| Purchases of treasury stock | (600) | | (125) | |
| Proceeds from issuance of stock | 212 | | 53 | |
| Transaction financing, debt issuance and other costs | (536) | | (175) | |
| Employee taxes paid for share-based payment arrangements | (11) | | (26) | |
| Distributions to noncontrolling interests | (35) | | (19) | |
| | |
| Dividends paid to stockholders | (1,561) | | (1,552) | |
| | |
| | |
| | |
| Cash used for financing activities | (4,974) | | (1,809) | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (57) | | 4 | |
| | |
| Summary | | |
| Increase (decrease) in cash, cash equivalents and restricted cash | (2,132) | | 2,175 | |
| Cash, cash equivalents and restricted cash at beginning of period | 5,108 | | 2,380 | |
| Cash, cash equivalents and restricted cash at end of period | $ | 2,976 | | $ | 4,555 | |
| Less: Restricted cash and cash equivalents, included in "Other current assets" | 65 | | 6 | |
| Cash and cash equivalents at end of period | $ | 2,911 | | $ | 4,549 | |
Dow Inc. and Subsidiaries
Net Sales by Segment and Geographic Region
| | | | | | | | | | | | | | |
| Net Sales by Segment | Three Months Ended | Nine Months Ended |
| In millions (Unaudited) | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2021 | Sep 30, 2020 |
| Packaging & Specialty Plastics | $ | 7,736 | | $ | 4,565 | | $ | 20,939 | | $ | 13,175 | |
| Industrial Intermediates & Infrastructure | 4,481 | | 3,058 | | 12,303 | | 8,520 | |
| Performance Materials & Coatings | 2,526 | | 2,002 | | 7,114 | | 5,922 | |
| Corporate | 94 | | 87 | | 248 | | 219 | |
| Total | $ | 14,837 | | $ | 9,712 | | $ | 40,604 | | $ | 27,836 | |
| U.S. & Canada | $ | 5,476 | | $ | 3,391 | | $ | 14,431 | | $ | 9,885 | |
EMEAI 1 | 5,229 | | 3,272 | | 14,660 | | 9,394 | |
| Asia Pacific | 2,579 | | 2,073 | | 7,423 | | 5,850 | |
| Latin America | 1,553 | | 976 | | 4,090 | | 2,707 | |
| Total | $ | 14,837 | | $ | 9,712 | | $ | 40,604 | | $ | 27,836 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net Sales Variance by Segment and Geographic Region | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2021 |
| Local Price & Product Mix | Currency | Volume | Total | Local Price & Product Mix | Currency | Volume | Total |
| Percent change from prior year |
| Packaging & Specialty Plastics | 63 | % | 1 | % | 5 | % | 69 | % | 52 | % | 3 | % | 4 | % | 59 | % |
| Industrial Intermediates & Infrastructure | 49 | | 2 | | (4) | | 47 | | 41 | | 3 | | — | | 44 | |
| Performance Materials & Coatings | 23 | | 1 | | 2 | | 26 | | 14 | | 3 | | 3 | | 20 | |
| Total | 50 | % | 1 | % | 2 | % | 53 | % | 40 | % | 3 | % | 3 | % | 46 | % |
| Total, excluding the Hydrocarbons & Energy business | 45 | % | 1 | % | (1) | % | 45 | % | 36 | % | 3 | % | — | % | 39 | % |
| U.S. & Canada | 56 | % | — | % | 5 | % | 61 | % | 44 | % | — | % | 2 | % | 46 | % |
EMEAI 1 | 55 | | 2 | | 3 | | 60 | | 45 | | 6 | | 5 | | 56 | |
| Asia Pacific | 28 | | 2 | | (6) | | 24 | | 24 | | 3 | | — | | 27 | |
| Latin America | 60 | | — | | (1) | | 59 | | 51 | | — | | — | | 51 | |
| Total | 50 | % | 1 | % | 2 | % | 53 | % | 40 | % | 3 | % | 3 | % | 46 | % |
| | | | | | | | | | | | | | |
| Net Sales Variance by Segment and Geographic Region | Three Months Ended Sep 30, 2021 |
| Local Price & Product Mix | Currency | Volume | Total |
| Percent change from prior quarter |
| Packaging & Specialty Plastics | 6 | % | — | % | 3 | % | 9 | % |
| Industrial Intermediates & Infrastructure | 3 | | (1) | | 4 | | 6 | |
| Performance Materials & Coatings | 7 | | — | | (5) | | 2 | |
| Total | 5 | % | — | % | 2 | % | 7 | % |
| Total, excluding the Hydrocarbons & Energy business | 4 | % | — | % | 2 | % | 6 | % |
| U.S. & Canada | 12 | % | — | % | (1) | % | 11 | % |
EMEAI 1 | 2 | | (1) | | 1 | | 2 | |
| Asia Pacific | 1 | | — | | 3 | | 4 | |
| Latin America | 3 | | — | | 10 | | 13 | |
| Total | 5 | % | — | % | 2 | % | 7 | % |
1.Europe, Middle East, Africa and India.
Dow Inc. and Subsidiaries
Selected Financial Information and Non-GAAP Measures
| | | | | | | | | | | | | | | | | |
| Operating EBIT by Segment | | Three Months Ended | Nine Months Ended |
| In millions (Unaudited) | | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2021 | Sep 30, 2020 |
| Packaging & Specialty Plastics | | $ | 1,954 | | $ | 647 | | $ | 5,196 | | $ | 1,545 | |
| Industrial Intermediates & Infrastructure | | 713 | | 104 | | 1,687 | | 59 | |
| Performance Materials & Coatings | | 284 | | 75 | | 571 | | 264 | |
| Corporate | | (65) | | (65) | | (186) | | (207) | |
| Total | | $ | 2,886 | | $ | 761 | | $ | 7,268 | | $ | 1,661 | |
| | | | | |
| Depreciation and Amortization by Segment | | Three Months Ended | Nine Months Ended |
| In millions (Unaudited) | | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2021 | Sep 30, 2020 |
| Packaging & Specialty Plastics | | $ | 354 | | $ | 344 | | $ | 1,042 | | $ | 1,030 | |
| Industrial Intermediates & Infrastructure | | 157 | | 155 | | 481 | | 450 | |
| Performance Materials & Coatings | | 207 | | 217 | | 642 | | 648 | |
| Corporate | | 7 | | 8 | | 22 | | 20 | |
| Total | | $ | 725 | | $ | 724 | | $ | 2,187 | | $ | 2,148 | |
| | | | | |
| Operating EBITDA by Segment | | Three Months Ended | Nine Months Ended |
| In millions (Unaudited) | | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2021 | Sep 30, 2020 |
| Packaging & Specialty Plastics | | $ | 2,308 | | $ | 991 | | $ | 6,238 | | $ | 2,575 | |
| Industrial Intermediates & Infrastructure | | 870 | | 259 | | 2,168 | | 509 | |
| Performance Materials & Coatings | | 491 | | 292 | | 1,213 | | 912 | |
| Corporate | | (58) | | (57) | | (164) | | (187) | |
| Total | | $ | 3,611 | | $ | 1,485 | | $ | 9,455 | | $ | 3,809 | |
| | | | | |
| Equity in Earnings (Losses) of Nonconsolidated Affiliates by Segment | | Three Months Ended | Nine Months Ended |
| In millions (Unaudited) | | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2021 | Sep 30, 2020 |
| Packaging & Specialty Plastics | | $ | 124 | | $ | 71 | | $ | 360 | | $ | 96 | |
| Industrial Intermediates & Infrastructure | | 122 | | (13) | | 381 | | (202) | |
| Performance Materials & Coatings | | 3 | | 1 | | 5 | | 4 | |
| Corporate | | — | | 1 | | 5 | | (22) | |
| Total | | $ | 249 | | $ | 60 | | $ | 751 | | $ | (124) | |
| | | | | |
| Reconciliation of "Net income" to "Operating EBIT" | Three Months Ended | Nine Months Ended |
| In millions (Unaudited) | Jun 30, 2021 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2021 | Sep 30, 2020 |
| Net income (loss) | $ | 1,932 | | $ | 1,706 | | $ | (1) | | $ | 4,644 | | $ | 40 | |
| + Provision for income taxes | 524 | | 542 | | 43 | | 1,383 | | 215 | |
| Income before income taxes | $ | 2,456 | | $ | 2,248 | | $ | 42 | | $ | 6,027 | | $ | 255 | |
| - Interest income | 13 | | 14 | | 6 | | 35 | | 27 | |
| + Interest expense and amortization of debt discount | 187 | | 178 | | 202 | | 561 | | 617 | |
| - Significant items | (198) | | (474) | | (523) | | (715) | | (816) | |
| Operating EBIT (non-GAAP) | $ | 2,828 | | $ | 2,886 | | $ | 761 | | $ | 7,268 | | $ | 1,661 | |
| | | | | |
| | | | | |
Dow Inc. and Subsidiaries
Selected Financial Information and Non-GAAP Measures
| | | | | | | | | | | | | | |
| Significant Items Impacting Results for the Three Months Ended Sep 30, 2021 |
| In millions, except per share amounts (Unaudited) | Pretax 1 | Net Income 2 | EPS 3 | Income Statement Classification |
| Reported results | $ | 2,248 | | $ | 1,683 | | $ | 2.23 | | |
| Less: Significant items | | | | |
| | | | |
Digitalization program costs 4 | (40) | | (32) | | (0.04) | | Cost of sales ($36 million); R&D ($1 million); SG&A ($3 million) |
Restructuring, implementation costs and asset related charges - net 5 | (16) | | (13) | | (0.02) | | Cost of sales ($13 million); R&D ($2 million); SG&A ($1 million) |
| Loss on early extinguishment of debt | (472) | | (387) | | (0.52) | | Sundry income (expense) - net |
| Litigation related charges, awards and adjustments | 54 | | 42 | | 0.06 | | Sundry income (expense) - net |
| | | | |
| Total significant items | $ | (474) | | $ | (390) | | $ | (0.52) | | |
| Operating results (non-GAAP) | $ | 2,722 | | $ | 2,073 | | $ | 2.75 | | |
| | | | | | | | | | | | | | |
| Significant Items Impacting Results for the Three Months Ended Sep 30, 2020 |
| In millions, except per share amounts (Unaudited) | Pretax 1 | Net Income 2 | EPS 3 | Income Statement Classification |
| Reported results | $ | 42 | | $ | (25) | | $ | (0.04) | | |
| Less: Significant items | | | | |
| Integration and separation costs | (63) | | (49) | | (0.06) | | Integration and separation costs |
Restructuring, implementation costs and asset related charges - net 5 | (617) | | (495) | | (0.67) | | Restructuring and asset related charges - net |
Net gain on divestitures 6 | 220 | | 195 | | 0.26 | | Sundry income (expense) - net |
| Loss on early extinguishment of debt | (63) | | (52) | | (0.07) | | Sundry income (expense) - net |
| Total significant items | $ | (523) | | $ | (401) | | $ | (0.54) | | |
| Operating results (non-GAAP) | $ | 565 | | $ | 376 | | $ | 0.50 | | |
1."Income (loss) before income taxes."
2."Net income (loss) available for Dow Inc. common stockholders." The income tax effect on significant items was calculated based upon the enacted tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment.
3."Earnings (loss) per common share - diluted," which includes the impact of participating securities in accordance with the two-class method.
4.Costs associated with implementing the Company's Digital Acceleration program.
5.Restructuring charges, asset related charges, and costs associated with implementing the Company's 2020 Restructuring Program. The three months ended September 30, 2020 include pretax restructuring charges of $575 million related to the 2020 Restructuring Program, including the following charges: $297 million for severance and related benefit costs, $197 million for asset write-downs and write-offs and $81 million for contract terminations and environmental remediation costs. Also includes other asset impairment charges of $46 million.
6.Primarily related to a gain on the sale of rail infrastructure in the U.S. & Canada.
Dow Inc. and Subsidiaries
Selected Financial Information and Non-GAAP Measures
| | | | | | | | | | | | | | |
| Significant Items Impacting Results for the Nine Months Ended Sep 30, 2021 |
| In millions, except per share amounts (Unaudited) | Pretax 1 | Net Income 2 | EPS 3 | Income Statement Classification |
| Reported results | $ | 6,027 | | $ | 4,575 | | $ | 6.06 | | |
| Less: Significant items | | | | |
Digitalization program costs 4 | (121) | | (94) | | (0.12) | | Cost of sales ($106 million); R&D ($2 million); SG&A ($13 million) |
| | | | |
Restructuring, implementation costs and asset related charges - net 5 | (69) | | (55) | | (0.07) | | Cost of sales ($39 million); R&D ($5 million); SG&A ($3 million); Restructuring and asset related charges - net ($22 million) |
| Loss on early extinguishment of debt | (574) | | (471) | | (0.63) | | Sundry income (expense) - net |
| Litigation related charges, awards and adjustments | 54 | | 42 | | 0.06 | | Sundry income (expense) - net |
Indemnification and other transaction related costs 6 | (5) | | (5) | | (0.01) | | Sundry income (expense) - net |
| Total significant items | $ | (715) | | $ | (583) | | $ | (0.77) | | |
| Operating results (non-GAAP) | $ | 6,742 | | $ | 5,158 | | $ | 6.83 | | |
| | | | | | | | | | | | | | |
| Significant Items Impacting Results for the Nine Months Ended Sep 30, 2020 |
| In millions, except per share amounts (Unaudited) | Pretax 1 | Net Income 2 | EPS 3 | Income Statement Classification |
| Reported results | $ | 255 | | $ | (11) | | $ | (0.02) | | |
| Less: Significant items | | | | |
| Integration and separation costs | (174) | | (136) | | (0.18) | | Integration and separation costs |
Restructuring, implementation costs and asset related charges - net 5 | (719) | | (580) | | (0.79) | | Restructuring and asset related charges - net |
Net gain on divestitures 7 | 220 | | 195 | | 0.26 | | Sundry income (expense) - net |
| Loss on early extinguishment of debt | (149) | | (122) | | (0.16) | | Sundry income (expense) - net |
| Litigation related charges, awards and adjustments | 6 | | 6 | | 0.01 | | Sundry income (expense) - net |
| Total significant items | $ | (816) | | $ | (637) | | $ | (0.86) | | |
| Operating results (non-GAAP) | $ | 1,071 | | $ | 626 | | $ | 0.84 | | |
1."Income before income taxes"
2."Net income (loss) available for Dow Inc. common stockholders." The income tax effect on significant items was calculated based upon the enacted tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment.
3."Earnings per common share - diluted," which includes the impact of participating securities in accordance with the two-class method.
4.Costs associated with implementing the Company's Digital Acceleration program.
5.Restructuring charges, asset related charges, and costs associated with implementing the Company's 2020 Restructuring Program. The three months ended September 30, 2020 include pretax restructuring charges of $575 million related to the 2020 Restructuring Program, including the following charges: $297 million for severance and related benefit costs, $197 million for asset write-downs and write-offs and $81 million for contract terminations and environmental remediation costs. Also includes other asset impairment charges of $46 million.
6.Primarily related to charges associated with agreements entered into with DuPont and Corteva as part of the separation and distribution which, among other matters, provides for cross-indemnities and allocations of obligations and liabilities for periods prior to, at and after the completion of the separation.
7.Primarily related to a gain on the sale of rail infrastructure in the U.S. & Canada.
Dow Inc. and Subsidiaries
Selected Financial Information and Non-GAAP Measures
| | | | | | | | | | | | | | |
| Significant Items Impacting Results for the Three Months Ended Jun 30, 2021 |
| In millions, except per share amounts (Unaudited) | Pretax 1 | Net Income 2 | EPS 3 | Income Statement Classification |
| Reported results | $ | 2,456 | | $ | 1,901 | | $ | 2.51 | | |
| Less: Significant items | | | | |
| | | | |
Digitalization program costs 4 | (48) | | (37) | | (0.05) | | Cost of sales ($41 million); R&D ($1 million); SG&A ($6 million) |
Restructuring, implementation costs and asset related charges - net 5 | (43) | | (34) | | (0.04) | | Cost of sales ($17 million); R&D ($2 million); SG&A ($2 million); Restructuring and asset related charges - net ($22 million) |
| Loss on early extinguishment of debt | (102) | | (84) | | (0.11) | | Sundry income (expense) - net |
Indemnification and other transaction related costs 6 | (5) | | (5) | | (0.01) | | Sundry income (expense) - net |
| | | | |
| Total significant items | $ | (198) | | $ | (160) | | $ | (0.21) | | |
| Operating results (non-GAAP) | $ | 2,654 | | $ | 2,061 | | $ | 2.72 | | |
1."Income before income taxes"
2."Net income available for Dow Inc. common stockholders." The income tax effect on significant items was calculated based upon the enacted tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment.
3."Earnings per common share - diluted," which includes the impact of participating securities in accordance with the two-class method.
4.Costs associated with implementing the Company's Digital Acceleration program.
5.Restructuring charges, asset related charges, and costs associated with implementing the Company's 2020 Restructuring Program.
6.Primarily related to charges associated with agreements entered into with DuPont and Corteva as part of the separation and distribution which, among other matters, provides for cross-indemnities and allocations of obligations and liabilities for periods prior to, at and after the completion of the separation.
| | | | | | | | | | | | | | |
Reconciliation of Free Cash Flow | Three Months Ended | Nine Months Ended |
In millions (Unaudited) | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2021 | Sep 30, 2020 |
| Cash provided by operating activities - continuing operations (GAAP) | $ | 2,719 | | $ | 1,761 | | $ | 4,512 | | $ | 4,596 | |
| Capital expenditures | (413) | | (287) | | (1,035) | | (955) | |
Free cash flow (non-GAAP) 1 | $ | 2,306 | | $ | 1,474 | | $ | 3,477 | | $ | 3,641 | |
1.Free cash flow in the first nine months of 2021 reflects a $1 billion elective pension contribution.
| | | | | | | | | | | | | | |
Reconciliation of Cash Flow Conversion | Three Months Ended |
In millions (Unaudited) | Dec 31, 2020 | Mar 31, 2021 | Jun 30, 2021 | Sep 30, 2021 |
| Cash provided by (used for) operating activities - continuing operations (GAAP) | $ | 1,656 | | $ | (228) | | $ | 2,021 | | $ | 2,719 | |
| Operating EBITDA (non-GAAP) | $ | 1,780 | | $ | 2,271 | | $ | 3,573 | | $ | 3,611 | |
Cash flow conversion (Operating EBITDA to cash flow from operations) (non-GAAP) 1 | 93.0 | % | (10.0) | % | 56.6 | % | 75.3 | % |
| Cash flow conversion - trailing twelve months (non-GAAP) | | 54.9 | % |
1.Cash flow conversion in the first quarter of 2021 reflects a $1 billion elective pension contribution.
