Dow Chemical Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

dow-20200630

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to__________ 


Commission File Number	Exact Name of Registrant as Specified in its Charter, Principal Office Address and Telephone Number	State of Incorporation or Organization	I.R.S. Employer Identification No.
001-38646	Dow Inc.	Delaware	30-1128146
	2211 H.H. Dow Way, Midland, MI 48674
	(989) 636-1000
001-03433	The Dow Chemical Company	Delaware	38-1285128
	2211 H.H. Dow Way, Midland, MI 48674
	(989) 636-1000

Securities registered pursuant to Section 12(b) of the Act:


Registrant	Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Dow Inc.	Common Stock, par value $0.01 per share	DOW	New York Stock Exchange
The Dow Chemical Company	0.500% Notes due March 15, 2027	DOW/27	New York Stock Exchange
The Dow Chemical Company	1.125% Notes due March 15, 2032	DOW/32	New York Stock Exchange
The Dow Chemical Company	1.875% Notes due March 15, 2040	DOW/40	New York Stock Exchange
The Dow Chemical Company	4.625% Notes due October 1, 2044	DOW/44	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Dow Inc.

☑

Yes

☐

The Dow Chemical Company

☑

Yes

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Dow Inc.

☑

Yes

☐

The Dow Chemical Company

☑

Yes

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Dow Inc.

Large accelerated filer

Accelerated
filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

The Dow Chemical Company

Large accelerated filer

Accelerated
filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Dow Inc.

☐

The Dow Chemical Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Dow Inc.

Yes

☑

The Dow Chemical Company

Yes

☑

Dow Inc. had 741,121,450 shares of common stock, $0.01 par value, outstanding at June 30, 2020. The Dow Chemical Company had 100 shares of common stock, $0.01 par value, outstanding at June 30, 2020, all of which were held by the registrant’s parent, Dow Inc.

Table of Contents

Dow Inc. and Subsidiaries

The Dow Chemical Company and Subsidiaries

QUARTERLY REPORT ON FORM 10-Q

For the quarterly period ended June 30, 2020

TABLE OF CONTENTS


		PAGE

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.	5
	Dow Inc. and Subsidiaries:
	Consolidated Statements of Income.	5
	Consolidated Statements of Comprehensive Income.	6
	Consolidated Balance Sheets.	7
	Consolidated Statements of Cash Flows.	8
	Consolidated Statements of Equity.	9

	The Dow Chemical Company and Subsidiaries:
	Consolidated Statements of Income.	10
	Consolidated Statements of Comprehensive Income.	11
	Consolidated Balance Sheets.	12
	Consolidated Statements of Cash Flows.	13
	Consolidated Statements of Equity.	14

	Dow Inc. and Subsidiaries and The Dow Chemical Company and Subsidiaries:
	Notes to the Consolidated Financial Statements.	15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	50

	Results of Operations.	56

	Changes in Financial Condition.	65

	Other Matters.	71

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	72

Item 4.	Controls and Procedures.	72

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	73

Item 1A.	Risk Factors.	73

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	74

Item 4.	Mine Safety Disclosures.	74

Item 5.	Other Information.	74

Item 6.	Exhibits.	74

SIGNATURE			76

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Dow Inc. and Subsidiaries The Dow Chemical Company and Subsidiaries

This Quarterly Report on Form 10-Q is a combined report being filed by Dow Inc. and The Dow Chemical Company and its consolidated subsidiaries (“TDCC” and together with Dow Inc., “Dow” or the "Company"). This Quarterly Report on Form 10-Q reflects the results of Dow and its consolidated subsidiaries, after giving effect to the distribution to DowDuPont Inc. (“DowDuPont” and effective June 3, 2019, n/k/a DuPont de Nemours, Inc. or "DuPont") of TDCC’s agricultural sciences business (“AgCo”) and specialty products business (“SpecCo”) and the receipt of E. I. du Pont de Nemours and Company and its consolidated subsidiaries' (“Historical DuPont”) ethylene and ethylene copolymers business (other than its ethylene acrylic elastomers business) ("ECP"). The U.S. GAAP consolidated financial results of Dow Inc. and TDCC reflect the distribution of AgCo and SpecCo as discontinued operations for the applicable periods presented as well as the receipt of ECP as a common control transaction from the closing of the merger with Historical DuPont on August 31, 2017. In addition, following the separation from DowDuPont, the Company changed the manner in which its business activities were managed. The Company's portfolio now includes six global businesses which are organized into the following operating segments: Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Corporate contains the reconciliation between the totals for the operating segments and the Company's totals. As a result of the parent/subsidiary relationship between Dow Inc. and TDCC, and considering that the financial statements and disclosures of each company are substantially similar, the companies are filing a combined report for this Quarterly Report on Form 10-Q. The information reflected in the report is equally applicable to both Dow Inc. and TDCC, except where otherwise noted. Each of Dow Inc. and TDCC is filing information in this report on its own behalf and neither company makes any representation to the information relating to the other company.

Background

On April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC, owning all of the outstanding common shares of TDCC. For filings related to the period commencing April 1, 2019 and thereafter, TDCC was deemed the predecessor to Dow Inc., and the historical results of TDCC are deemed the historical results of Dow Inc. for periods prior to and including March 31, 2019.

The separation was contemplated by the merger of equals transaction effective August 31, 2017, under the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017. TDCC and Historical DuPont each merged with subsidiaries of DowDuPont and, as a result, TDCC and Historical DuPont became subsidiaries of DowDuPont (the “Merger”). Subsequent to the Merger, TDCC and Historical DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. Dow Inc. was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business.

FORWARD-LOOKING STATEMENTS

This report contains “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. In this context, forward-looking statements often address expected future business and financial performance, financial condition, and other matters, and often contain words 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. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.

Forward-looking statements include, but are not limited to: expectations as to future sales of Dow’s products; the ability to protect Dow’s intellectual property in the United States and abroad; estimates regarding Dow’s capital requirements and need for and availability of financing; estimates of Dow’s expenses, future revenues and profitability; estimates of the size of the markets for Dow’s products and services and Dow’s ability to compete in such markets; expectations related to the rate and degree of market acceptance of Dow’s products; the outcome of certain Dow contingencies, such as litigation and environmental matters; estimates of the success of competing technologies that may become available; the continuing global and regional economic impacts of the coronavirus disease 2019 ("COVID-19") pandemic and crude oil supply and price volatility; estimates regarding benefits achieved through contemplated restructuring activities, such as workforce reduction and exit and disposal activities; and expectations regarding the benefits and costs associated with each of the foregoing.

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Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Forward-looking statements are based on certain assumptions and expectations of future events which may not be realized and speak only as of the date the statements were made. In addition, forward-looking statements also involve risks, uncertainties and other factors that are beyond Dow’s control that could cause Dow’s actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. These factors include, but are not limited to: fluctuations in energy and raw material prices; failure to develop and market new products and optimally manage product life cycles; significant litigation and environmental matters; failure to appropriately manage process safety and product stewardship issues; changes in laws and regulations or political conditions; 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; ability to protect, defend and enforce Dow’s intellectual property rights; increased competition; changes in relationships with Dow’s significant customers and suppliers; unanticipated expenses such as litigation or legal settlement expenses; unanticipated business disruptions; Dow’s ability to predict, identify and interpret changes in consumer preferences and demand; Dow’s ability to complete proposed divestitures or acquisitions; Dow’s ability to realize the expected benefits of acquisitions if they are completed; the availability of financing to Dow in the future and the terms and conditions of such financing; disruptions in Dow’s information technology networks and systems; the continuing risks related to the COVID-19 pandemic and crude oil supply and price volatility; and Dow's ability to realize the expected benefits of restructuring activities if they are approved and completed. Additionally, 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.

Risks related to achieving the anticipated benefits of Dow's separation from DowDuPont include, but are not limited to, a number of conditions outside the control of Dow, including risks related to: (i) Dow's inability to achieve some or all of the benefits that it expects to receive from the separation from DowDuPont; (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) Dow's inability to receive third-party consents required under the separation agreement; (v) non-compete restrictions under the separation agreement; (vi) receipt of less favorable terms in the commercial agreements Dow entered into with DuPont and Corteva, Inc. ("Corteva"), including restrictions under intellectual property cross-license agreements, than Dow would have received from an unaffiliated third party; and (vii) 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. For a more detailed discussion of Dow’s risks and uncertainties, see the section titled “Risk Factors” contained in Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A of the combined Dow Inc. and TDCC Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Dow Inc. and TDCC assume 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.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Dow Inc. and Subsidiaries

Consolidated Statements of Income


	Three Months Ended						Six Months Ended
In millions, except per share amounts (Unaudited)	Jun 30, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019
Net sales	$	8,354	$	11,014	$	18,124	$	21,983
Cost of sales	7,610		9,420		15,840		18,562
Research and development expenses	182		208		361		398
Selling, general and administrative expenses	357		422		691		870
Amortization of intangibles	100		104		200		220
Restructuring and asset related charges - net	6		65		102		221
Integration and separation costs	46		348		111		800
Equity in losses of nonconsolidated affiliates	(95)		(15)		(184)		(29)
Sundry income (expense) - net	53		(1)		(28)		68
Interest income	6		21		21		39
Interest expense and amortization of debt discount	200		237		415		478
Income (loss) from continuing operations before income taxes	(183)		215		213		512
Provision for income taxes on continuing operations	34		125		172		266
Income (loss) from continuing operations, net of tax	(217)		90		41		246
Income from discontinued operations, net of tax	—		—		—		445
Net income (loss)	(217)		90		41		691
Net income attributable to noncontrolling interests	8		15		27		60
Net income (loss) available for Dow Inc. common stockholders	$	(225)	$	75	$	14	$	631

Per common share data:
Earnings (loss) per common share from continuing operations - basic	$	(0.31)	$	0.10	$	0.01	$	0.26
Earnings per common share from discontinued operations - basic	—		—		—		0.58
Earnings (loss) per common share - basic	$	(0.31)	$	0.10	$	0.01	$	0.84
Earnings (loss) per common share from continuing operations - diluted	$	(0.31)	$	0.10	$	0.01	$	0.26
Earnings per common share from discontinued operations - diluted	—		—		—		0.58
Earnings (loss) per common share - diluted	$	(0.31)	$	0.10	$	0.01	$	0.84

Weighted-average common shares outstanding - basic	739.3		742.8		739.7		745.0
Weighted-average common shares outstanding - diluted	739.3		747.9		741.0		747.6

Depreciation	$	517	$	538	$	1,032	$	1,081
Capital expenditures	$	273	$	470	$	668	$	912

See Notes to the Consolidated Financial Statements.

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Dow Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income


	Three Months Ended						Six Months Ended
In millions (Unaudited)	Jun 30, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019
Net income (loss)	$	(217)	$	90	$	41	$	691
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on investments	76		33		(24)		100
Cumulative translation adjustments	63		67		(100)		36
Pension and other postretirement benefit plans	141		106		283		247
Derivative instruments	24		(204)		(138)		(279)
Total other comprehensive income	304		2		21		104
Comprehensive income	87		92		62		795
Comprehensive income attributable to noncontrolling interests, net of tax	8		21		27		72
Comprehensive income attributable to Dow Inc.	$	79	$	71	$	35	$	723

See Notes to the Consolidated Financial Statements.

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Dow Inc. and Subsidiaries

Consolidated Balance Sheets


In millions, except share amounts (Unaudited)	Jun 30, 2020		Dec 31, 2019
Assets
Current Assets
Cash and cash equivalents (variable interest entities restricted - 2020: $41; 2019: $37)	$	3,724	$	2,367
Marketable securities	2		21
Accounts and notes receivable:
Trade (net of allowance for doubtful receivables - 2020: $48; 2019: $45)	4,353		4,844
Other	2,528		2,711
Inventories	5,784		6,214
Other current assets	606		658
Total current assets

Price	1.00	EPS	-4,633,000,000
Shares	-0	P/E	-0
MCap	-0	P/FCF	-0
Net Debt	17,505	EBIT	5,719
TEV	17,505	TEV/EBIT	3
TTM 2018-12-31, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-07-24
10-Q	2020-03-31	Filed 2020-05-01
10-K	2019-12-31	Filed 2020-02-07
10-Q	2019-09-30	Filed 2019-10-25
10-Q	2019-06-30	Filed 2019-07-25
10-Q	2019-03-31	Filed 2019-05-03
10-K	2018-12-31	Filed 2019-02-11
10-Q	2018-09-30	Filed 2018-11-02
10-Q	2018-06-30	Filed 2018-08-03
10-Q	2018-03-31	Filed 2018-05-04
10-K	2017-12-31	Filed 2018-02-15
10-Q	2017-09-30	Filed 2017-11-06
10-Q	2017-06-30	Filed 2017-07-27
10-Q	2017-03-31	Filed 2017-04-27
10-K	2016-12-31	Filed 2017-02-09
10-Q	2016-09-30	Filed 2016-10-27
10-Q	2016-06-30	Filed 2016-07-28
10-Q	2016-03-31	Filed 2016-04-29
10-K	2015-12-31	Filed 2016-02-12
10-Q	2015-09-30	Filed 2015-10-27
10-Q	2015-06-30	Filed 2015-07-29
10-Q	2015-03-31	Filed 2015-05-04
10-K	2014-12-31	Filed 2015-02-13
10-Q	2014-09-30	Filed 2014-10-28
10-Q	2014-06-30	Filed 2014-07-29
10-Q	2014-03-31	Filed 2014-04-29
10-K	2013-12-31	Filed 2014-02-14
10-Q	2013-09-30	Filed 2013-10-29
10-Q	2013-06-30	Filed 2013-07-30
10-Q	2013-03-31	Filed 2013-04-30
10-K	2012-12-31	Filed 2013-02-15
10-Q	2012-09-30	Filed 2012-10-30
10-Q	2012-03-31	Filed 2012-05-02
10-K	2011-12-31	Filed 2012-02-15
10-Q	2011-09-30	Filed 2011-11-01
10-Q	2011-06-30	Filed 2011-08-03
10-Q	2011-03-31	Filed 2011-05-04
10-K	2010-12-31	Filed 2011-02-18
10-Q	2010-09-30	Filed 2010-11-03
10-Q	2010-06-30	Filed 2010-08-04
10-Q	2010-03-31	Filed 2010-05-04
10-K	2009-12-31	Filed 2010-02-19

8-K	2020-08-26	Regulation FD, Other Events, Exhibits
8-K	2020-08-17	Other Events, Exhibits
8-K	2020-08-17	Regulation FD, Exhibits
8-K	2020-05-12
8-K	2020-02-18
8-K	2019-10-11
8-K	2019-09-23
8-K	2019-08-05
8-K	2019-07-25
8-K	2019-06-03
8-K	2019-05-20
8-K	2019-05-20
8-K	2019-05-02
8-K	2019-04-01
8-K	2019-03-08
8-K	2018-11-30
8-K	2018-11-30
8-K	2018-11-28

EX-23	dowinc-q2x6302020ex23.htm
EX-31.1	dowinc-q2x6302020ex311.htm
EX-31.2	dowinc-q2x6302020ex312.htm
EX-32.1	dowinc-q2x6302020ex321.htm
EX-32.2	dowinc-q2x6302020ex322.htm

DOW 10Q Quarterly Report

Dow Chemical Earnings 2020-06-30