DOW INC. [DOW] Filings

10-Q 1 dow-20210930.htm 10-Q dow-20210930

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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, 2021

☐ 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

☐

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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 739,614,412 shares of common stock, $0.01 par value, outstanding at September 30, 2021. The Dow Chemical Company had 100 shares of common stock, $0.01 par value, outstanding at September 30, 2021, 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.

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Dow Inc. and Subsidiaries

The Dow Chemical Company and Subsidiaries

QUARTERLY REPORT ON FORM 10-Q

For the quarterly period ended September 30, 2021

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.	45

	Results of Operations.	48

	Changes in Financial Condition.	55

	Other Matters.	63

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	64

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.	65

Item 4.	Mine Safety Disclosures.	66

Item 5.	Other Information.	66

Item 6.	Exhibits.	66

SIGNATURE		68

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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") 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; 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.

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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, 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

Depreciation	$	517	$	526	$	1,550	$	1,558
Capital expenditures	$	413	$	287	$	1,035	$	955

See Notes to the Consolidated Financial Statements.

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Dow Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income


	Three Months Ended				Nine Months Ended
In millions (Unaudited)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020
Net income (loss)	$	1,706	$	(1)	$	4,644	$	40
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on investments	(13)		8		(45)		(16)
Cumulative translation adjustments	(157)		91		(345)		(9)
Pension and other postretirement benefit plans	149		147		1,432		430
Derivative instruments	32		38		148		(100)
Total other comprehensive income	11		284		1,190		305
Comprehensive income	1,717		283		5,834		345
Comprehensive income attributable to noncontrolling interests, net of tax	23		24		69		51
Comprehensive income attributable to Dow Inc.	$	1,694	$	259	$	5,765	$	294

See Notes to the Consolidated Financial Statements.

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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

See Notes to the Consolidated Financial Statements.

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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

See Notes to the Consolidated Financial Statements.

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Dow Inc. and Subsidiaries

Consolidated Statements of Equity


	Three Months Ended				Nine Months Ended
In millions, except per share amounts (Unaudited)	Sep 30, 2021		Sep 30, 2020		Sep 30, 2021		Sep 30, 2020
Common Stock
Balance at beginning and end of period	$	8	$	8	$	8	$	8


Additional Paid-in Capital
Balance at beginning of period	7,898		7,431		7,595		7,325
Common stock issued/sold	11		23		211		53

Stock-based compensation and allocation of ESOP shares	79		43		182		119

Balance at end of period	7,988		7,497		7,988		7,497
Retained Earnings
Balance at beginning of period	18,200		16,017		16,361		17,045
Net income (loss) available for Dow Inc. common stockholders	1,683		(25)		4,575		(11)
Dividends to stockholders	(518)		(518)		(1,561)		(1,552)



Other	(8)		(2)		(18)		(10)
Balance at end of period	19,357		15,472		19,357		15,472
Accumulated Other Comprehensive Loss
Balance at beginning of period	(9,676)		(10,225)		(10,855)		(10,246)
Other comprehensive income	11		284		1,190		305

Balance at end of period	(9,665)		(9,941)		(9,665)		(9,941)
Unearned ESOP Shares
Balance at beginning of period	(32)		(69)		(49)		(91)

Allocation of ESOP shares	8		12		25		34
Balance at end of period	(24)		(57)		(24)		(57)
Treasury Stock
Balance at beginning of period	(825)		(625)		(625)		(500)
Treasury stock purchases	(400)		—		(600)		(125)
Balance at end of period	(1,225)		(625)		(1,225)		(625)
Dow Inc.'s stockholders' equity	16,439		12,354		16,439		12,354
Noncontrolling Interests	589		578		589		578
Total Equity	$	17,028	$	12,932	$	17,028	$	12,932