DOW INC. [DOW] Filings

10-Q 1 dow-20220930.htm 10-Q dow-20220930

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 September 30, 2022

☐ 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

☐

Table of Contents

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 703,759,269 shares of common stock, $0.01 par value, outstanding at September 30, 2022. The Dow Chemical Company had 100 shares of common stock, $0.01 par value, outstanding at September 30, 2022, all of which were held by the registrant’s parent, Dow Inc.

The Dow Chemical Company meets the conditions set forth in General Instruction H(1)(a) and (b) for Form 10-Q and therefore is filing this form with a reduced disclosure format.

Table of Contents

Dow Inc. and Subsidiaries

The Dow Chemical Company and Subsidiaries

QUARTERLY REPORT ON FORM 10-Q

For the quarterly period ended September 30, 2022

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.	46

	Results of Operations.	48

	Changes in Financial Condition.	55

	Other Matters.	63

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	63

Item 4.	Controls and Procedures.	64

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings.	65

Item 1A.	Risk Factors.	65

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	66

Item 4.	Mine Safety Disclosures.	66

Item 5.	Other Information.	66

Item 6.	Exhibits.	67

SIGNATURE		69

Table of Contents


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") due to the parent/subsidiary relationship between Dow Inc. and TDCC. 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.

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

Certain statements in this report 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; any sanction, export restrictions, supply chain disruptions or increased economic uncertainty related to the ongoing conflict between Russia and Ukraine; 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 including the ongoing conflict between Russia and Ukraine; weather events and natural disasters; disruptions in Dow’s information technology networks and systems; and risks related to Dow’s separation from DowDuPont Inc. such as Dow’s obligation to indemnify DuPont de Nemours, Inc. and/or Corteva, Inc. 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 Part II, Item 1A of this Quarterly Report on Form 10-Q and in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. 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 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				Nine Months Ended
In millions, except per share amounts (Unaudited)	Sep 30, 2022		Sep 30, 2021		Sep 30, 2022		Sep 30, 2021
Net sales	$	14,115	$	14,837	$	45,043	$	40,604
Cost of sales	12,381		11,611		37,682		32,413
Research and development expenses	191		210		626		632
Selling, general and administrative expenses	356		403		1,289		1,209
Amortization of intangibles	83		100		256		301
Restructuring and asset related charges - net	—		—		186		22
Equity in earnings (losses) of nonconsolidated affiliates	(58)		249		311		751
Sundry income (expense) - net	69		(350)		292		(225)
Interest income	41		14		105		35
Interest expense and amortization of debt discount	155		178		487		561
Income before income taxes	1,001		2,248		5,225		6,027
Provision for income taxes	241		542		1,232		1,383
Net income	760		1,706		3,993		4,644
Net income attributable to noncontrolling interests	21		23		24		69
Net income available for Dow Inc. common stockholders	$	739	$	1,683	$	3,969	$	4,575

Per common share data:
Earnings per common share - basic	$	1.03	$	2.25	$	5.45	$	6.11
Earnings per common share - diluted	$	1.02	$	2.23	$	5.41	$	6.06

Weighted-average common shares outstanding - basic	714.3		744.5		724.9		745.4
Weighted-average common shares outstanding - diluted	718.1		750.0		729.8		750.9

Depreciation	$	482	$	517	$	1,459	$	1,550
Capital expenditures	$	452	$	413	$	1,224	$	1,035

See Notes to the Consolidated Financial Statements.

Table of Contents

Dow Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income


	Three Months Ended				Nine Months Ended
In millions (Unaudited)	Sep 30, 2022		Sep 30, 2021		Sep 30, 2022		Sep 30, 2021
Net income	$	760	$	1,706	$	3,993	$	4,644
Other comprehensive income (loss), net of tax
Unrealized losses on investments	(122)		(13)		(371)		(45)
Cumulative translation adjustments	(403)		(157)		(1,081)		(345)
Pension and other postretirement benefit plans	125		149		356		1,432
Derivative instruments	22		32		491		148
Total other comprehensive income (loss)	(378)		11		(605)		1,190
Comprehensive income	382		1,717		3,388		5,834
Comprehensive income attributable to noncontrolling interests, net of tax	21		23		24		69
Comprehensive income attributable to Dow Inc.	$	361	$	1,694	$	3,364	$	5,765

See Notes to the Consolidated Financial Statements.

Table of Contents

Dow Inc. and Subsidiaries

Consolidated Balance Sheets


In millions, except share amounts (Unaudited)	Sep 30, 2022		Dec 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	2,216	$	2,988
Accounts and notes receivable:
Trade (net of allowance for doubtful receivables - 2022: $212; 2021: $54)	6,407		6,841
Other	2,123		2,713
Inventories	7,571		7,372
Other current assets	1,460		934
Total current assets	19,777		20,848
Investments
Investment in nonconsolidated affiliates	1,785		2,045
Other investments (investments carried at fair value - 2022: $1,685; 2021: $2,079)	2,732		3,193
Noncurrent receivables	499		478
Total investments	5,016		5,716
Property
Property	56,931		57,604
Less: Accumulated depreciation	36,899		37,049
Net property	20,032		20,555
Other Assets
Goodwill	8,524		8,764
Other intangible assets (net of accumulated amortization - 2022: $4,888; 2021: $4,725)	2,483		2,881
Operating lease right-of-use assets	1,231		1,412
Deferred income tax assets	1,136		1,358
Deferred charges and other assets	1,358		1,456
Total other assets	14,732		15,871
Total Assets	$	59,557	$	62,990
Liabilities and Equity
Current Liabilities
Notes payable	$	185	$	161
Long-term debt due within one year	364		231
Accounts payable:
Trade	5,008		5,577
Other	2,599		2,839
Operating lease liabilities - current	277		314
Income taxes payable	579		623
Accrued and other current liabilities	3,303		3,481
Total current liabilities	12,315		13,226
Long-Term Debt	12,921		14,280
Other Noncurrent Liabilities
Deferred income tax liabilities	716		506
Pension and other postretirement benefits - noncurrent	6,541		7,557
Asbestos-related liabilities - noncurrent	868		931
Operating lease liabilities - noncurrent	1,012		1,149
Other noncurrent obligations	6,555		6,602
Total other noncurrent liabilities	15,692		16,745
Stockholders’ Equity
Common stock (authorized 5,000,000,000 shares of $0.01 par value each; issued 2022: 768,611,564 shares; 2021: 764,226,882 shares)	8		8
Additional paid-in capital	8,396		8,151
Retained earnings	23,068		20,623
Accumulated other comprehensive loss	(9,582)		(8,977)
Unearned ESOP shares	—		(15)
Treasury stock at cost (2022: 64,852,295 shares; 2021: 29,011,573 shares)	(3,773)		(1,625)
Dow Inc.’s stockholders’ equity	18,117		18,165
Noncontrolling interests	512		574
Total equity	18,629		18,739
Total Liabilities and Equity	$	59,557	$	62,990

See Notes to the Consolidated Financial Statements.

Table of Contents

Dow Inc. and Subsidiaries

Consolidated Statements of Cash Flows


In millions (Unaudited)	Nine Months Ended
	Sep 30, 2022		Sep 30, 2021
Operating Activities
Net income	$	3,993	$	4,644
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,104		2,187
Provision for deferred income tax	124		488
Earnings of nonconsolidated affiliates less than (in excess of) dividends received	517		(519)
Net periodic pension benefit cost	19		34
Pension contributions	(156)		(1,166)
Net gain on sales of assets, businesses and investments	(11)		(67)

Restructuring and asset related charges - net	186		22
Other net loss	159		874
Changes in assets and liabilities, net of effects of acquired and divested companies:
Accounts and notes receivable	323		(2,222)
Inventories	(254)		(1,502)
Accounts payable	(860)		1,487
Other assets and liabilities, net	(736)		252
Cash provided by operating activities - continuing operations	5,408		4,512
Cash used for operating activities - discontinued operations	(11)		(78)
Cash provided by operating activities	5,397		4,434
Investing Activities
Capital expenditures	(1,224)		(1,035)
Investment in gas field developments	(134)		(44)
Purchases of previously leased assets	(5)		(5)
Proceeds from sales of property and businesses, net of cash divested	16		15
Acquisitions of property and businesses, net of cash acquired	(54)		(107)
Investments in and loans to nonconsolidated affiliates	(69)		—
Distributions and loan repayments from nonconsolidated affiliates	10		11
Proceeds from sales of ownership interests in nonconsolidated affiliates	11		—
Purchases of investments	(445)		(1,004)
Proceeds from sales and maturities of investments	596		644

Other investing activities, net	(41)		(10)
Cash used for investing activities	(1,339)		(1,535)
Financing Activities
Changes in short-term notes payable	72		(44)
Proceeds from issuance of short-term debt greater than three months	—		144
Payments on short-term debt greater than three months	(14)		—
Proceeds from issuance of long-term debt	82		95
Payments on long-term debt	(957)		(2,638)

Purchases of treasury stock	(2,200)		(600)
Proceeds from issuance of stock	99		212
Transaction financing, debt issuance and other costs	(8)		(536)
Employee taxes paid for share-based payment arrangements	(34)		(11)
Distributions to noncontrolling interests	(42)		(35)

Dividends paid to stockholders	(1,511)		(1,561)

Cash used for financing activities	(4,513)		(4,974)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(261)		(57)

Summary
Decrease in cash, cash equivalents and restricted cash	(716)		(2,132)
Cash, cash equivalents and restricted cash at beginning of period	3,033		5,108
Cash, cash equivalents and restricted cash at end of period	$	2,317	$	2,976
Less: Restricted cash and cash equivalents, included in "Other current assets"	101		65
Cash and cash equivalents at end of period	$	2,216	$	2,911

See Notes to the Consolidated Financial Statements.

Table of Contents

Dow Inc. and Subsidiaries

Consolidated Statements of Equity


	Three Months Ended				Nine Months Ended
In millions, except per share amounts (Unaudited)	Sep 30, 2022		Sep 30, 2021		Sep 30, 2022		Sep 30, 2021
Common Stock
Balance at beginning and end of period	$	8	$	8	$	8	$	8


Additional Paid-in Capital
Balance at beginning of period	8,343		7,898		8,151		7,595
Common stock issued/sold	2		11		99		211
Stock-based compensation and allocation of ESOP shares	79		79		198		182
Treasury stock issuances - compensation and benefit plans	(28)		—		(52)		—

Balance at end of period	8,396		7,988		8,396		7,988
Retained Earnings
Balance at beginning of period	22,827		18,200		20,623		16,361
Net income available for Dow Inc. common stockholders	739		1,683		3,969		4,575
Dividends to stockholders	(493)		(518)		(1,511)		(1,561)

Other	(5)		(8)		(13)		(18)
Balance at end of period	23,068		19,357		23,068		19,357
Accumulated Other Comprehensive Loss
Balance at beginning of period	(9,204)		(9,676)		(8,977)		(10,855)
Other comprehensive income (loss)	(378)		11		(605)		1,190

Balance at end of period	(9,582)		(9,665)		(9,582)		(9,665)
Unearned ESOP Shares
Balance at beginning of period	—		(32)		(15)		(49)

Allocation of ESOP shares	—		8		15		25
Balance at end of period	—		(24)		—		(24)
Treasury Stock
Balance at beginning of period	(3,001)		(825)		(1,625)		(625)
Treasury stock purchases	(800)		(400)		(2,200)		(600)
Treasury stock issuances - compensation and benefit plans	28		—		52		—
Balance at end of period	(3,773)		(1,225)		(3,773)		(1,225)
Dow Inc.'s stockholders' equity	18,117		16,439		18,117		16,439
Noncontrolling Interests	512