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Dow reports fourth quarter 2020 results

01/28/2021

MIDLAND, Mich.--(BUSINESS WIRE)-- Dow (NYSE: DOW):

FINANCIAL HIGHLIGHTS

  • GAAP earnings per share was $1.65; Operating EPS¹ was $0.81, excluding significant items in the quarter totaling $0.84 per share, primarily related to a gain on the sale of certain U.S. Gulf Coast marine and terminal operations and assets, as well as a gain associated with a legal matter.
  • Net sales were $10.7 billion, up 5% versus the year-ago period, with increased local prices, currency and volume. Dow’s fourth quarter sales increased 10% versus the prior quarter as the global economic recovery continued.
  • Local price increased 2% versus the year-ago period, primarily driven by improved pricing in polyethylene and polyurethane applications. Currency increased sales by 2%. Sequentially, price increased 8% with improvements in all segments.
  • Volume increased 1% versus the year-ago period, reaching pre-pandemic volume levels in all operating segments. The year-over-year increase was led by demand growth in Packaging & Specialty Plastics and Performance Materials & Coatings. Compared to the prior quarter, volume increased 2% with gains in Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure and in all regions, driven by strong supply and demand fundamentals.
  • Equity earnings were $106 million, up $127 million compared to the year-ago period, primarily driven by continued improvement in financial results at the Sadara joint venture.
  • GAAP Net Income was $1.3 billion. Operating EBIT1 was $1.1 billion, up from $1.0 billion in the year-ago period due to margin expansion in polyethylene and polyurethane applications.
  • Cash provided by operating activities – continuing ops. was $1.7 billion and free cash flow1 was $1.4 billion. Working capital was a $236 million source of cash despite increased sales. Free cash flow for the year was $5 billion, up $1.2 billion over the prior year. Cash conversion1 in the quarter was 93%, leading to a full-year rate of 112%, a 30% improvement over the prior year.
  • Dividend returns to shareholders totaled $519 million in the quarter.
  • Total cash and available committed liquidity at quarter-end was $14.6 billion, an increase of $3.9 billion over the year-ago period.
  • Net debt1 was reduced by $837 million in the quarter, resulting in a total net debt improvement of more than $2.6 billion in 2020. The Company continues to have no substantive long-term debt maturities due until the second half of 2024.
  • Dow completed the sale of select U.S. Gulf Coast marine and terminal operations and assets, receiving cash proceeds of $620 million in the quarter.
  • Sadara reached agreement in principle on key terms for its debt reprofiling with all remaining lenders in January 2021, supporting the joint venture’s path toward cash flow self-sufficiency.

SUMMARY FINANCIAL RESULTS

 

Three Months Ended Dec 31

 

Three Months Ended Sep 30

In millions, except per share amounts

4Q20

4Q19

vs. SQLY

[B / (W)]

 

3Q20

vs. PQ

[B / (W)]

Net Sales

$10,706

 

$10,204

 

$502

 

$9,712

 

$994

 

GAAP Income (Loss), Net of Tax

$1,254

 

(2,310)

 

$3,564

 

$(1)

 

$1,255

 

Operating EBIT1

$1,054

 

$1,033

 

$21

 

$761

 

$293

 

Operating EBIT Margin1

9.8 %

 

10.1 %

 

(30) bps

 

7.8 %

 

200 bps

Operating EBITDA1

$1,780

 

$1,746

 

$34

 

$1,485

 

$295

 

GAAP Earnings (Loss) Per Share

$1.65

 

$(3.14)

 

$4.79

 

$(0.04)

 

$1.69

 

Operating Earnings Per Share1

$0.81

 

$0.78

 

$0.03

 

$0.50

 

$0.31

 

Cash Provided by Operating
Activities - Continuing Ops

$1,656

 

$1,920

 

$(264)

 

$1,761

 

$(105)

 

1.

Op. Earnings Per Share, Op. EBIT, Op. EBIT Margin, Op. EBITDA, Free Cash Flow, Cash Flow Conversion and Net Debt are non-GAAP measures. See page 6 for further discussion.

CEO QUOTE

Jim Fitterling, Dow’s chairman and chief executive officer, commented on the quarter:

“The Dow team delivered top- and bottom-line growth in the fourth quarter, reaching pre-pandemic levels across most businesses as the economic recovery continued to gain traction. Our consumer-led portfolio and ongoing focus on capturing demand drove year-over-year volume growth in every region and segment, as well as sequential price and margin expansion across the portfolio.

“We delivered free cash flow of $5 billion for the year, and further improved our cash conversion rate by 30 percent. This focus on cash flow generation, coupled with our execution of key strategic cash levers such as the sale of select U.S. Gulf Coast marine and terminal assets, enabled additional deleveraging in the quarter as we reduced total net debt by more than $2.6 billion for the year. And we also achieved a significant milestone for Sadara by reaching agreement in principle with the lenders on its debt reprofiling. This was a strong finish to a year where the Dow team capably overcame significant macroeconomic and other external challenges. I am confident about our path forward for 2021 and beyond."

SEGMENT HIGHLIGHTS

Packaging & Specialty Plastics

 

Three Months Ended Dec 31

 

Three Months Ended Sep 30

In millions, except margin percentages

4Q20

4Q19

vs. SQLY

[B / (W)]

3Q20

vs. PQ

[B / (W)]

Net Sales

$5,126

 

$4,840

 

$286

 

$4,565

 

$561

 

Operating EBIT

$780

 

$648

 

$132

 

$647

 

$133

 

Operating EBIT Margin

15.2 %

 

13.4 %

 

180 bps

 

14.2 %

 

100 bps

 

Equity Earnings

$77

 

$27

 

$50

 

$71

 

$6

 

Packaging & Specialty Plastics net sales were $5.1 billion, up 6% versus the year-ago period. Local price increased 2% from improved supply and demand fundamentals in polyethylene, partly offset by lower ethylene and hydrocarbon co-product prices. Currency increased net sales by 2%. Volume increased 2%, primarily driven by olefin end-market demand. On a sequential basis, the segment recorded a 12% net sales improvement, primarily driven by continued strong pricing momentum across all regions and most applications, particularly in consumer packaging.

Equity earnings for the segment were $77 million, up $50 million compared to the year-ago period. Gains were driven by improved integrated polyethylene margins at the Sadara, Kuwait and Thai joint ventures.

Operating EBIT was $780 million, compared to $648 million in the year-ago period as a result of strong pricing and operating discipline. Sequentially, the segment expanded Op. EBIT margins by 100 basis points, driven by a continued recovery in consumer and industrial sectors.

Packaging and Specialty Plastics reported a net sales increase, primarily driven by improved polyethylene prices compared to the year-ago period. Volume was up slightly as gains in Asia Pacific were partially offset by declines in all other regions. Notably, the demand decline in the U.S. & Canada was mostly driven by lower licensing activity and lingering impacts of hurricane-driven outages. On a year-over-year basis, the business captured strong price increases, primarily in industrial and consumer packaging and flexible food and beverage packaging applications. Compared to the prior quarter and continuing a sequential trend since second quarter, the business delivered local price gains in all regions and double-digit gains in the U.S. & Canada and Latin America.

Hydrocarbons & Energy reported a net sales decline, primarily driven by lower global energy prices and partially offset by increased co-product demand compared to the year-ago period. Sequentially, double-digit increases in volume and price were the result of strong olefin end-market demand and rising energy prices.

Industrial Intermediates & Infrastructure

 

Three Months Ended Dec 31

 

Three Months Ended Sep 30

In millions, except margin percentages

4Q20

4Q19

vs. SQLY

[B / (W)]

3Q20

vs. PQ

[B / (W)]

Net Sales

$3,501

 

$3,253

 

$248

 

$3,058

 

$443

 

Operating EBIT

$296

 

$221

 

$75

 

$104

 

$192

 

Operating EBIT Margin

8.5 %

 

6.8 %

 

170 bps

 

3.4 %

 

510 bps

 

Equity Earnings (Losses)

$36

 

$(45)

 

$81

 

$(13)

 

$49

 

Industrial Intermediates & Infrastructure net sales were $3.5 billion, up 8% versus the year-ago period. Local price improved 6%, primarily driven by significant increases in consumer goods and appliances. Currency increased net sales by 2%. Volume was resilient with growth from strong construction and durable goods demand, offset by downward pressure from supply limitations. On a sequential basis, the segment recorded a net sales increase of 14%, driven by significant price improvement in polyurethanes and robust demand in Industrial Solutions in line with the macroeconomic recovery.

Equity earnings for the segment were $36 million, an increase of $81 million compared to equity losses of $45 million in the year-ago period, driven by margin expansion at Sadara.

Operating EBIT was $296 million, compared to $221 million in the year-ago period due to strong supply and demand fundamentals in Polyurethanes & Construction Chemicals and at Sadara. Sequentially, the segment increased Op. EBIT by $192 million driven by significant improvement in margin-over-raw material costs across both businesses.

Polyurethanes & Construction Chemicals reported a double-digit net sales increase compared to the year-ago period, primarily due to significantly higher local prices in polyurethane applications, with improvements in all regions except Latin America. Demand recovery in Europe, Middle East, Africa and India (EMEAI) and Latin America, particularly in construction and consumer durables, was more than offset by lower supply volumes from planned and unplanned maintenance, weak demand for aircraft de-icing fluids, and reduced participation in select markets. And sequentially, the business delivered double-digit sales growth, driven by strong local pricing in all regions, as well as in furniture & bedding and appliance end markets.

Industrial Solutions reported flat net sales compared to the year-ago period with higher volumes and currency, offset by lower prices in materials for industrial manufacturing. Improved demand in solvents for coatings, industrial fluids, electronics, and pharma applications was partially offset by declines in materials for energy and aircraft de-icing fluids as a result of the pandemic. Volume gains in Asia Pacific, Latin America, and EMEAI were partially offset by declines in the U.S. & Canada. Sequentially, net sales increased double digits across all regions due to improved volume and price fundamentals as a result of the continued industrial market recovery.

Performance Materials & Coatings

 

Three Months Ended Dec 31

 

Three Months Ended Sep 30

In millions, except margin percentages

4Q20

4Q19

vs. SQLY

[B / (W)]

3Q20

vs. PQ

[B / (W)]

Net Sales

$2,029

 

$2,035

 

$(6)

 

$2,002

 

$27

 

Operating EBIT

$50

 

$233

 

$(183)

 

$75

 

$(25)

 

Operating EBIT Margin

2.5 %

 

11.4 %

 

(890) bps

 

3.7 %

 

(120 bps

 

Equity Earnings

$2

 

$2

 

$0

 

$1

 

$1

 

Performance Materials & Coatings net sales were $2 billion, approximately flat with the year-ago period. Volume increased 2% as growth in do-it-yourself (DIY) architectural coatings and home care was partially offset by declines in siloxanes. Local price decreased 3%, primarily due to home and personal care product mix and weaker monomer market dynamics. Currency increased net sales by 1%. On a sequential basis, the segment recorded a 1% sales increase as strong demand for silicones and positive pricing momentum for acrylic monomers were offset by seasonal demand declines in coatings.

Operating EBIT was $50 million, compared to $233 million in the year-ago period, as volume growth in silicones and coatings applications was more than offset by price and volume declines in siloxanes. Sequentially, Op. EBIT was down $25 million as margin expansion in silicone applications was more than offset by seasonality in coatings end markets.

Consumer Solutions reported a decrease in net sales as demand growth in home care, consumer & electronics, and high-performance building applications was more than offset by lower volumes in siloxanes and high-end personal care. Price declines were led by product mix changes in home and personal care. Compared to the prior quarter and continuing a sequential trend since second quarter, the business delivered volume gains as mobility & transportation and consumer & electronics end markets showed continued recovery. Further, personal care sales improved sequentially due to increased consumer demand.

Coatings & Performance Monomers reported higher net sales with a double-digit volume increase overall and growth in all regions. The business benefitted from strong demand for architectural coatings as consumers continued to focus on DIY projects, as well as modest value chain restocking. This was partially offset by local price declines, primarily due to weaker monomer market dynamics compared to the year-ago period. Sequentially, the business experienced positive pricing momentum particularly in acrylates, which was more than offset by seasonal demand declines for coating applications in the Northern Hemisphere.

OUTLOOK

“Dow enters 2021 with sequential momentum and is well-positioned for continued profitable growth in the ongoing economic recovery and improving industry cycle,” said Fitterling. “We will maintain our disciplined focus on our capital allocation priorities as we continue to benefit from our improving cost structure, financial flexibility and low-cost operating model. As the market recovery broadens, we anticipate increasing margins as differentiated parts of our portfolio see improving demand. Longer-term, we expect to deliver ongoing significant value through increased innovation, operational efficiencies, and a leading ESG profile that will further distinguish us from our peers."

Conference Call

Dow will host a live webcast of its fourth 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 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.

Cautionary Statement about Forward-Looking Statements

Certain statements in this press release 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; 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 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; (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. 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 of this Annual Report on Form 10-K titled “Risk Factors.” 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 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.

Separation from DowDuPont

On April 1, 2019, DowDuPont Inc. ("DowDuPont" and effective June 3, 2019, n/k/a DuPont de Nemours, Inc. or "DuPont") completed the separation of its materials science business and Dow Inc. became the direct parent company of The Dow Chemical Company and its consolidated subsidiaries ("TDCC" and together with Dow Inc., "Dow" or the "Company"), 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 information in this report reflects the results of Dow and its consolidated subsidiaries, after giving effect to the distribution to DowDuPont 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 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.

Unaudited Pro Forma Financial Information

In order to provide the most meaningful comparison of results of operations and results by segment, supplemental unaudited pro forma financial information has been included in the following financial schedules. The unaudited pro forma financial information is based on the consolidated financial statements of TDCC, adjusted to give effect to the separation from DowDuPont as if it had been consummated on January 1, 2017. For the twelve months ended December 31, 2019, pro forma adjustments have been made for (1) the margin impact of various manufacturing, supply and service related agreements entered into with DuPont and Corteva in connection with the separation which provide for different pricing than the historical intercompany and intracompany pricing practices of TDCC and Historical DuPont and (2) the elimination of the impact of events directly attributable to the Merger, internal reorganization and business realignment, separation, distribution and other related transactions (e.g., one-time transaction costs). The results for the three months ended December 31, 2020 and 2019 and the twelve months ended December 31, 2020, are presented under accounting principles generally accepted in the United States of America ("U.S. GAAP").

The unaudited pro forma financial information has been presented for informational purposes only and is not necessarily indicative of what Dow's results of operations actually would have been had the separation from DowDuPont been completed as of January 1, 2017, nor is it indicative of the future operating results of Dow. The unaudited pro forma information does not reflect restructuring or integration activities or other costs following the separation from DowDuPont that may be incurred to achieve cost or growth synergies of Dow. For further information on the unaudited pro forma financial information, please refer to the Company's Current Report on Form 8-K dated June 3, 2019.

Non-GAAP Financial Measures

This earnings release includes information that does not conform to U.S. GAAP and are considered non-GAAP measures. These measures include the Company's pro forma consolidated results and pro forma earnings per share on an adjusted basis. 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 13. 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 (loss) per share is defined as "Earnings (loss) per common share from continuing operations - diluted" excluding the after-tax impact of significant items. Pro forma operating earnings (loss) per share is defined as "Pro forma earnings (loss) per common share from continuing operations - diluted" excluding the after-tax impact of significant items.

Operating EBIT is defined as earnings (i.e., "Income (loss) from continuing operations before income taxes") before interest, excluding the impact of significant items. Pro forma operating EBIT is defined as pro forma earnings (i.e., "Pro forma income (loss) from continuing operations 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. Pro forma Operating EBIT margin is defined as pro forma Operating EBIT as a percentage of pro forma net sales.

Operating EBITDA is defined as earnings (i.e., "Income (loss) from continuing operations before income taxes") before interest, depreciation and amortization, excluding the impact of significant items. Pro forma operating EBITDA is defined as pro forma earnings (i.e., "Pro forma income (loss) from continuing operations 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.

Net debt is defined as total gross debt minus "Cash and cash equivalents" and "Marketable securities." The Company believes net debt is the best representation of its financial leverage at this point in time.

Dow Inc. and Subsidiaries

Consolidated Statements of Income

In millions, except per share amounts (Unaudited)

Three Months Ended

Twelve Months Ended

Dec 31,
2020

Dec 31,
2019

Dec 31,
2020

Dec 31,
2019

Net sales

$

10,706

 

$

10,204

 

$

38,542

 

$

42,951

 

Cost of sales

 

9,135

 

 

8,718

 

 

33,346

 

 

36,657

 

Research and development expenses

 

214

 

 

173

 

 

768

 

 

765

 

Selling, general and administrative expenses

 

408

 

 

332

 

 

1,471

 

 

1,590

 

Amortization of intangibles

 

101

 

 

99

 

 

401

 

 

419

 

Restructuring, goodwill impairment and asset related charges

(credits) - net

 

(11

)

 

2,851

 

 

708

 

 

3,219

 

Integration and separation costs

 

65

 

 

99

 

 

239

 

 

1,063

 

Equity in earnings (losses) of nonconsolidated affiliates

 

106

 

 

(21

)

 

(18

)

 

(94

)

Sundry income (expense) - net

 

1,115

 

 

92

 

 

1,269

 

 

461

 

Interest income

 

11

 

 

23

 

 

38

 

 

81

 

Interest expense and amortization of debt discount

 

210

 

 

222

 

 

827

 

 

933

 

Income (loss) from continuing operations before income taxes

 

1,816

 

 

(2,196

)

 

2,071

 

 

(1,247

)

Provision for income taxes on continuing operations

 

562

 

 

114

 

 

777

 

 

470

 

Income (loss) from continuing operations, net of tax

 

1,254

 

 

(2,310

)

 

1,294

 

 

(1,717

)

Income from discontinued operations, net of tax

 

 

 

 

 

 

 

445

 

Net income (loss)

 

1,254

 

 

(2,310

)

 

1,294

 

 

(1,272

)

Net income attributable to noncontrolling interests

 

18

 

 

13

 

 

69

 

 

87

 

Net income (loss) available for Dow Inc. common stockholders

$

1,236

 

$

(2,323

)

$

1,225

 

$

(1,359

)

 

 

 

 

 

 

 

 

 

Per common share data:

 

 

 

 

Earnings (loss) per common share from continuing operations -

basic

$

1.66

 

$

(3.14

)

$

1.64

 

$

(2.42

)

Earnings per common share from discontinued operations - basic

 

 

 

 

 

 

 

0.58

 

Earnings (loss) per common share - basic

$

1.66

 

$

(3.14

)

$

1.64

 

$

(1.84

)

Earnings (loss) per common share from continuing operations -

diluted

$

1.65

 

$

(3.14

)

$

1.64

 

$

(2.42

)

Earnings per common share from discontinued operations - diluted

 

 

 

 

 

 

 

0.58

 

Earnings (loss) per common share - diluted

$

1.65

 

$

(3.14

)

$

1.64

 

$

(1.84

)

 

 

 

 

 

Weighted-average common shares outstanding - basic

 

742.1

 

 

740.2

 

 

740.5

 

 

742.5

 

Weighted-average common shares outstanding - diluted

 

745.0

 

 

740.2

 

 

742.3

 

 

742.5

 

Dow Inc. and Subsidiaries

Consolidated Balance Sheets

In millions, except share amounts (Unaudited)

Dec 31,
2020

Dec 31,
2019

Assets

 

 

Current Assets

 

 

Cash and cash equivalents (variable interest entities restricted - 2020: $26; 2019: $37)

$

5,104

 

$

2,367

 

Accounts and notes receivable:

 

 

Trade (net of allowance for doubtful receivables - 2020: $51; 2019: $45)

 

4,839

 

 

4,844

 

Other

 

2,551

 

 

2,711

 

Inventories

 

5,701

 

 

6,214

 

Other current assets

 

889

 

 

679

 

Total current assets

 

19,084

 

 

16,815

 

Investments

 

 

Investment in nonconsolidated affiliates

 

1,327

 

 

1,404

 

Other investments (investments carried at fair value - 2020: $1,674; 2019: $1,584)

 

2,775

 

 

2,588

 

Noncurrent receivables

 

465

 

 

1,063

 

Total investments

 

4,567

 

 

5,055

 

Property

 

 

Property

 

56,325

 

 

54,910

 

Less: Accumulated depreciation

 

36,086

 

 

33,914

 

Net property (variable interest entities restricted - 2020: $232; 2019: $330)

 

20,239

 

 

20,996

 

Other Assets

 

 

Goodwill

 

8,908

 

 

8,796

 

Other intangible assets (net of accumulated amortization - 2020: $4,428; 2019: $3,886)

 

3,352

 

 

3,759

 

Operating lease right-of-use assets

 

1,856

 

 

2,072

 

Deferred income tax assets

 

2,215

 

 

2,213

 

Deferred charges and other assets

 

1,249

 

 

818

 

Total other assets

 

17,580

 

 

17,658

 

Total Assets

$

61,470

 

$

60,524

 

Liabilities and Equity

 

 

Current Liabilities

 

 

Notes payable

$

156

 

$

586

 

Long-term debt due within one year

 

460

 

 

435

 

Accounts payable:

 

 

Trade

 

3,763

 

 

3,889

 

Other

 

2,126

 

 

2,064

 

Operating lease liabilities - current

 

416

 

 

421

 

Income taxes payable

 

397

 

 

522

 

Accrued and other current liabilities

 

3,790

 

 

2,762

 

Total current liabilities

 

11,108

 

 

10,679

 

Long-Term Debt (variable interest entities nonrecourse - 2020: $6; 2019: $34)

 

16,491

 

 

15,975

 

Other Noncurrent Liabilities

 

 

Deferred income tax liabilities

 

405

 

 

347

 

Pension and other postretirement benefits - noncurrent

 

11,648

 

 

10,083

 

Asbestos-related liabilities - noncurrent

 

1,013

 

 

1,060

 

Operating lease liabilities - noncurrent

 

1,521

 

 

1,739

 

Other noncurrent obligations

 

6,279

 

 

6,547

 

Total other noncurrent liabilities

 

20,866

 

 

19,776

 

Stockholders’ Equity

 

 

Common stock (authorized 5,000,000,000 shares of $0.01 par value each;
issued 2020: 755,993,198 shares; 2019: 751,228,644 shares)

 

8

 

 

8

 

Additional paid-in capital

 

7,595

 

 

7,325

 

Retained earnings

 

16,361

 

 

17,045

 

Accumulated other comprehensive loss

 

(10,855

)

 

(10,246

)

Unearned ESOP shares

 

(49

)

 

(91

)

Treasury stock at cost (2020: 12,803,303 shares; 2019: 9,729,834 shares)

 

(625

)

 

(500

)

Dow Inc.’s stockholders’ equity

 

12,435

 

 

13,541

 

Noncontrolling interests

 

570

 

 

553

 

Total equity

 

13,005

 

 

14,094

 

Total Liabilities and Equity

$

61,470

 

$

60,524

 

Dow Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In millions) (Unaudited) For the years ended Dec 31,

2020

 

2019

 

Operating Activities

 

 

Net income (loss)

$

1,294

 

$

(1,272

)

Less: Income from discontinued operations, net of tax

 

 

 

445

 

Income (loss) from continuing operations, net of tax

 

1,294

 

 

(1,717

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

Depreciation and amortization

 

2,874

 

 

2,938

 

Provision (credit) for deferred income tax

 

258

 

 

(228

)

Earnings of nonconsolidated affiliates less than dividends received

 

443

 

 

1,114

 

Net periodic pension benefit cost

 

266

 

 

144

 

Pension contributions

 

(299

)

 

(261

)

Net gain on sales of assets, businesses and investments

 

(802

)

 

(81

)

Restructuring, goodwill impairment and asset related charges - net

 

708

 

 

3,219

 

Other net loss

 

318

 

 

198

 

Changes in assets and liabilities, net of effects of acquired and divested companies:

 

 

Accounts and notes receivable

 

171

 

 

1,253

 

Inventories

 

515

 

 

668

 

Accounts payable

 

(84

)

 

(948

)

Other assets and liabilities, net

 

590

 

 

(586

)

Cash provided by operating activities - continuing operations

 

6,252

 

 

5,713

 

Cash provided by (used for) operating activities - discontinued operations

 

(26

)

 

217

 

Cash provided by operating activities

 

6,226

 

 

5,930

 

Investing Activities

 

 

Capital expenditures

 

(1,252

)

 

(1,961

)

Investment in gas field developments

 

(5

)

 

(76

)

Purchases of previously leased assets

 

(5

)

 

(9

)

Proceeds from sales of property and businesses, net of cash divested

 

929

 

 

84

 

Acquisitions of property and businesses, net of cash acquired

 

(130

)

 

 

Investments in and loans to nonconsolidated affiliates

 

(333

)

 

(638

)

Distributions and loan repayments from nonconsolidated affiliates

 

7

 

 

89

 

Purchases of investments

 

(1,203

)

 

(899

)

Proceeds from sales and maturities of investments

 

1,122

 

 

1,252

 

Other investing activities, net

 

29

 

 

 

Cash used for investing activities - continuing operations

 

(841

)

 

(2,158

)

Cash used for investing activities - discontinued operations

 

 

 

(34

)

Cash used for investing activities

 

(841

)

 

(2,192

)

Financing Activities

 

 

Changes in short-term notes payable

 

(431

)

 

307

 

Proceeds from issuance of short-term debt greater than three months

 

163

 

 

 

Payments on short-term debt greater than three months

 

(163

)

 

 

Proceeds from issuance of long-term debt

 

4,672

 

 

2,287

 

Payments on long-term debt

 

(4,653

)

 

(5,561

)

Purchases of treasury stock

 

(125

)

 

(500

)

Proceeds from issuance of stock

 

108

 

 

93

 

Transaction financing, debt issuance and other costs

 

(175

)

 

(119

)

Employee taxes paid for share-based payment arrangements

 

(27

)

 

(60

)

Distributions to noncontrolling interests

 

(62

)

 

(77

)

Purchases of noncontrolling interests

 

 

 

(297

)

Dividends paid to stockholders

 

(2,071

)

 

(1,550

)

Dividends paid to DowDuPont Inc.

 

 

 

(535

)

Settlements and transfers related to separation from DowDuPont Inc.

 

 

 

1,935

 

Cash used for financing activities - continuing operations

 

(2,764

)

 

(4,077

)

Cash used for financing activities - discontinued operations

 

 

 

(18

)

Cash used for financing activities

 

(2,764

)

 

(4,095

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

107

 

 

(27

)

Summary

 

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

2,728

 

 

(384

)

Cash, cash equivalents and restricted cash at beginning of year

 

2,380

 

 

2,764

 

Cash, cash equivalents and restricted cash at end of year

$

5,108

 

$

2,380

 

Less: Restricted cash and cash equivalents, included in "Other current assets"

 

4

 

 

13

 

Cash and cash equivalents at end of year

$

5,104

 

$

2,367

 

Dow Inc. and Subsidiaries

Pro Forma Consolidated Statements of Income

 

Three Months Ended

 

Twelve Months Ended

In millions, except per share amounts (Unaudited)

Dec 31, 2020

 

Dec 31, 2019

 

Dec 31, 2020

 

Dec 31, 2019

As Reported

 

As Reported

 

As Reported

 

Pro Forma

Net sales

$

10,706

 

$

10,204

 

$

38,542

 

$

42,998

 

Cost of sales

 

9,135

 

 

8,718

 

 

33,346

 

 

36,689

 

Research and development expenses

 

214

 

 

173

 

 

768

 

 

765

 

Selling, general and administrative expenses

 

408

 

 

332

 

 

1,471

 

 

1,590

 

Amortization of intangibles

 

101

 

 

99

 

 

401

 

 

419

 

Restructuring, goodwill impairment and asset related charges

(credits) - net

 

(11

)

 

2,851

 

 

708

 

 

3,219

 

Integration and separation costs

 

65

 

 

99

 

 

239

 

 

1,013

 

Equity in earnings (losses) of nonconsolidated affiliates

 

106

 

 

(21

)

 

(18

)

 

(94

)

Sundry income (expense) - net

 

1,115

 

 

92

 

 

1,269

 

 

461

 

Interest income

 

11

 

 

23

 

 

38

 

 

82

 

Interest expense and amortization of debt discount

 

210

 

 

222

 

 

827

 

 

932

 

Income (loss) from continuing operations before income taxes

 

1,816

 

 

(2,196

)

 

2,071

 

 

(1,180

)

Provision for income taxes on continuing operations

 

562

 

 

114

 

 

777

 

 

485

 

Income (loss) from continuing operations, net of tax

 

1,254

 

 

(2,310

)

 

1,294

 

 

(1,665

)

Net income attributable to noncontrolling interests

 

18

 

 

13

 

 

69

 

 

74

 

Net income (loss) from continuing operations available for Dow Inc.

common stockholders

$

1,236

 

$

(2,323

)

$

1,225

 

$

(1,739

)

 

 

 

 

 

Per common share data:

 

 

 

 

Earnings (loss) per common share from continuing operations -

basic

$

1.66

 

$

(3.14

)

$

1.64

 

$

(2.35

)

Earnings (loss) per common share from continuing operations -

diluted

$

1.65

 

$

(3.14

)

$

1.64

 

$

(2.35

)

 

 

 

 

 

Weighted-average common shares outstanding - basic 1

 

742.1

 

 

740.2

 

 

740.5

 

 

742.5

 

Weighted-average common shares outstanding - diluted 1

 

745.0

 

 

740.2

 

 

742.3

 

 

742.5

 

1.

The weighted-average common shares outstanding - basic and diluted for the twelve months ended December 31, 2019, are the same under both U.S. GAAP and on a pro forma basis.

Dow Inc. and Subsidiaries

Net Sales by Segment and Geographic Region

Net Sales by Segment

 

Three Months Ended

 

Twelve Months Ended

In millions (Unaudited)

 

Dec 31,
2020

 

Dec 31,
2019

 

Dec 31,
2020

 

Dec 31,
2019

 

As Reported

 

As Reported

 

As Reported

 

Pro Forma

Packaging & Specialty Plastics

$

5,126

 

$

4,840

 

$

18,301

 

$

20,245

 

Industrial Intermediates & Infrastructure

3,501

 

3,253

 

12,021

 

13,449

 

Performance Materials & Coatings

2,029

 

2,035

 

7,951

 

8,961

 

Corporate

50

 

76

 

269

 

343

 

Total

$

10,706

 

$

10,204

 

$

38,542

 

$

42,998

 

U.S. & Canada

$

3,697

 

$

3,612

 

$

13,582

 

$

15,582

 

EMEAI 1

3,575

 

3,384

 

12,969

 

14,618

 

Asia Pacific

2,315

 

2,212

 

8,165

 

8,683

 

Latin America

1,119

 

996

 

3,826

 

4,115

 

Total

$

10,706

 

$

10,204

 

$

38,542

 

$

42,998

 

Pro Forma Net Sales Variance by Segment and Geographic Region

Three Months Ended Dec 31, 2020

Twelve Months Ended Dec 31, 2020 2

Local Price
& Product
Mix

Currency

Volume

Total

Local Price
& Product
Mix

Currency

Volume

Total

Percent change from prior year

Packaging & Specialty Plastics

2

%

2

%

2

%

6

%

(11)

%

%

1

%

(10)

%

Industrial Intermediates & Infrastructure

6

 

2

 

 

8

 

(5)

 

 

(6)

 

(11)

 

Performance Materials & Coatings

(3)

 

1

 

2

 

 

(6)

 

 

(5)

 

(11)

 

Total

2

%

2

%

1

%

5

%

(7)

%

%

(3)

%

(10)

%

Total, excluding the Hydrocarbons & Energy business

4

%

2

%

%

6

%

(5)

%

%

(4)

%

(9)

%

U.S. & Canada

6

%

%

(4)

%

2

%

(5)

%

%

(8)

%

(13)

%

EMEAI 1

(4)

 

4

 

6

 

6

 

(12)

 

 

1

 

(11)

 

Asia Pacific

4

 

2

 

(1)

 

5

 

(6)

 

 

 

(6)

 

Latin America

6

 

(1)

 

7

 

12

 

(7)

 

 

 

(7)

 

Total

2

%

2

%

1

%

5

%

(7)

%

%

(3)

%

(10)

%

Net Sales Variance by Segment and Geographic Region

 

Three Months Ended Dec 31, 2020

 

 

Local Price
& Product
Mix

 

Currency

 

Volume

 

Total

Percent change from prior quarter

 

 

 

 

Packaging & Specialty Plastics

8

%

%

4

%

12

%

Industrial Intermediates & Infrastructure

12

 

 

2

 

14

 

Performance Materials & Coatings

2

 

1

 

(2)

 

1

 

Total

8

%

%

2

%

10

%

Total, excluding the Hydrocarbons & Energy business

8

%

%

1

%

9

%

U.S. & Canada

8

%

%

1

%

9

%

EMEAI 1

7

 

1

 

1

 

9

 

Asia Pacific

8

 

1

 

3

 

12

 

Latin America

11

 

 

4

 

15

 

Total

8

%

%

2

%

10

%

1.

Europe, Middle East, Africa, and India.

2.

As reported net sales for the twelve months ended December 31, 2020 compared with pro forma net sales for the twelve months ended December 31, 2019.

Dow Inc. and Subsidiaries

Selected Financial Information and Non-GAAP Measures

Operating EBIT by Segment

Three Months Ended

Twelve Months Ended

 

Dec 31,
2020

Dec 31,
2019

Dec 31,
2020

Dec 31,
2019

In millions (Unaudited)

As Reported

As Reported

As Reported

Pro Forma

Packaging & Specialty Plastics

$

780

 

$

648

 

$

2,325

 

$

2,904

 

Industrial Intermediates & Infrastructure

 

296

 

 

221

 

 

355

 

 

845

 

Performance Materials & Coatings

 

50

 

 

233

 

 

314

 

 

918

 

Corporate

 

(72

)

 

(69

)

 

(279

)

 

(315

)

Total

$

1,054

 

$

1,033

 

$

2,715

 

$

4,352

 

 

 

 

 

 

Depreciation and Amortization by Segment

Three Months Ended

Twelve Months Ended

 

Dec 31,
2020

Dec 31,
2019

Dec 31
2020

Dec 31,
2019

In millions (Unaudited)

As Reported

As Reported

As Reported

Pro Forma

Packaging & Specialty Plastics

$

342

 

$

332

 

$

1,372

 

$

1,435

 

Industrial Intermediates & Infrastructure

 

155

 

 

153

 

 

605

 

 

594

 

Performance Materials & Coatings

 

222

 

 

222

 

 

870

 

 

877

 

Corporate

 

7

 

 

6

 

 

27

 

 

32

 

Total

$

726

 

$

713

 

$

2,874

 

$

2,938

 

 

 

 

 

 

Operating EBITDA by Segment

Three Months Ended

Twelve Months Ended

 

Dec 31,
2020

Dec 31,
2019

Dec 31,
2020

Dec 31,
2019

In millions (Unaudited)

As Reported

As Reported

As Reported

Pro Forma

Packaging & Specialty Plastics

$

1,122

 

$

980

 

$

3,697

 

$

4,339

 

Industrial Intermediates & Infrastructure

 

451

 

 

374

 

 

960

 

 

1,439

 

Performance Materials & Coatings

 

272

 

 

455

 

 

1,184

 

 

1,795

 

Corporate

 

(65

)

 

(63

)

 

(252

)

 

(283

)

Total

$

1,780

 

$

1,746

 

$

5,589

 

$

7,290

 

 

 

 

 

 

Equity in Earnings (Losses) of Nonconsolidated Affiliates by Segment

Three Months Ended

Twelve Months Ended

Dec 31, 2020

Dec 31, 2019

Dec 31, 2020

Dec 31, 2019

In millions (Unaudited)

As Reported

As Reported

As Reported

Pro Forma

Packaging & Specialty Plastics

$

77

 

$

27

 

$

173

 

$

162

 

Industrial Intermediates & Infrastructure

 

36

 

 

(45

)

 

(166

)

 

(241

)

Performance Materials & Coatings

 

2

 

 

2

 

 

6

 

 

5

 

Corporate

 

(9

)

 

(5

)

 

(31

)

 

(20

)

Total

$

106

 

$

(21

)

$

(18

)

$

(94

)

 

 

 

 

 

Reconciliation of "Income (loss) from continuing operations, net of tax" to "Operating EBIT"

 

Three Months Ended

 

Twelve Months Ended

 

Dec 31, 2020

 

Dec 31, 2019

 

Dec 31, 2020

 

Dec 31, 2019

In millions (Unaudited)

 

As Reported

 

As Reported

 

As Reported

 

Pro Forma

Income (loss) from continuing operations, net of tax

$

1,254

 

$

(2,310

)

$

1,294

 

$

(1,665

)

+ Provision for income taxes on continuing operations

 

562

 

 

114

 

 

777

 

 

485

 

Income (loss) from continuing operations before income taxes

$

1,816

 

$

(2,196

)

$

2,071

 

$

(1,180

)

- Interest income

 

11

 

 

23

 

 

38

 

 

82

 

+ Interest expense and amortization of debt discount

 

210

 

 

222

 

 

827

 

 

932

 

- Significant items

 

961

 

 

(3,030

)

 

145

 

 

(4,682

)

Operating EBIT (non-GAAP)

$

1,054

 

$

1,033

 

$

2,715

 

$

4,352

 

Dow Inc. and Subsidiaries

Selected Financial Information and Non-GAAP Measures

Significant Items Impacting Results for the Three Months Ended Dec 31, 2020

In millions, except per share amounts (Unaudited)

 

Pretax 1

 

Net
Income 2

 

EPS 3

 

Income Statement Classification

Reported results

$

1,816

 

$

1,236

 

$

1.65

 

 

Less: Significant items

 

 

 

 

Integration and separation costs

(65

)

(50

)

(0.07

)

Integration and separation costs

Restructuring and asset related credits - net

11

 

10

 

0.01

 

Restructuring, goodwill impairment and asset related charges - net

Warranty accrual adjustment of exited business

11

 

8

 

0.01

 

Cost of sales

Restructuring implementation costs 4

(10

)

(8

)

(0.01

)

Cost of sales ($7 million); SG&A ($3 million)

Net gain on divestiture and asset sale 5

497

 

469

 

0.63

 

Sundry income (expense) - net

Litigation related charges, awards and adjustments 6

538

 

481

 

0.65

 

Sundry income (expense) - net

Indemnifications and other transaction related costs 7

(21

)

(21

)

(0.03

)

Sundry income (expense) - net

Income tax related items 8

 

(260

)

(0.35

)

Provision for income taxes on continuing operations

Total significant items

$

961

 

$

629

 

$

0.84

 

 

Operating results (non-GAAP)

$

855

 

$

607

 

$

0.81

 

 

Significant Items Impacting Results for the Three Months Ended Dec 31, 2019

In millions, except per share amounts (Unaudited)

Pretax 1

Net
Income 2

EPS 3

Income Statement Classification

Reported results

$

(2,196

)

$

(2,323

)

$

(3.14

)

 

Less: Significant items

 

 

 

 

Integration and separation costs

(99

)

(89

)

(0.12

)

Integration and separation costs

Restructuring, goodwill impairment and asset related charges - net 9

(2,851

)

(2,842

)

(3.84

)

Restructuring, goodwill impairment and asset related charges - net

Loss on divestiture

(5

)

(4

)

(0.01

)

Sundry income (expense) - net

Loss on early extinguishment of debt

(58

)

(49

)

(0.07

)

Sundry income (expense) - net

Indemnification and other transaction related costs 7

(17

)

(17

)

(0.02

)

Sundry income (expense) - net

Income tax related items 8

 

101

 

0.14

 

Provision for income taxes on continuing operations

Total significant items

$

(3,030

)

$

(2,900

)

$

(3.92

)

 

Operating results (non-GAAP)

$

834

 

$

577

 

$

0.78

 

 

1.

"Income (loss) from continuing operations 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 from continuing operations - diluted."

4.

Costs associated with implementing the Company's 2020 Restructuring Program.

5.

Primarily related to a gain on the sale of marine and terminal operations and assets in the U.S.

6.

Related to a gain associated with a legal matter with Nova Chemicals Corporation ("Nova").

7.

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.

8.

The three months ended December 31, 2020 includes tax valuation allowances recorded in the U.S., primarily due to the filing of the final combined Dow and DuPont tax return and related unutilized foreign tax credits. The Company projects it is more likely than not that a portion of these foreign tax credits and other tax attributes will remain unutilized prior to their expiration. The three months ended December 31, 2019 primarily relates to the effects of Swiss tax reform.

9.

Primarily related to a $1,755 million pretax charge associated with Sadara (including an other-than-temporary impairment of the Company's equity method investment in Sadara and the reserve of loan and accounts receivable balances associated with Sadara) and a $1,039 million pretax impairment charge related to goodwill associated with the Coatings & Performance Monomers reporting unit.

Dow Inc. and Subsidiaries

Selected Financial Information and Non-GAAP Measures

Significant Items Impacting Results for the Twelve Months Ended Dec 31, 2020

In millions, except per share amounts (Unaudited)

Pretax 1

Net
Income 2

EPS 3

Income Statement Classification

Reported results

$

2,071

 

$

1,225

 

$

1.64

 

 

Less: Significant items

 

 

 

 

Integration and separation costs

(239

)

(186

)

(0.25

)

Integration and separation costs

Restructuring and asset related charges - net 4

(708

)

(570

)

(0.78

)

Restructuring, goodwill impairment and asset related charges - net

Warranty accrual adjustment of exited business

11

 

8

 

0.01

 

Cost of sales

Restructuring implementation costs 5

(10

)

(8

)

(0.01

)

Cost of sales ($7 million); SG&A ($3 million)

Net gain on divestitures and asset sale 6

717

 

664

 

0.89

 

Sundry income (expense) - net

Litigation related charges, awards and

adjustments 7

544

 

487

 

0.66

 

Sundry income (expense) - net

Loss on early extinguishment of debt

(149

)

(122

)

(0.16

)

Sundry income (expense) - net

Indemnification and other transaction related costs 8

(21

)

(21

)

(0.03

)

Sundry income (expense) - net

Income tax related items 9

 

(260

)

(0.35

)

Provision for income taxes on continuing operations

Total significant items

$

145

 

$

(8

)

$

(0.02

)

 

Operating results (non-GAAP)

$

1,926

 

$

1,233

 

$

1.66

 

 

Significant Items Impacting Results for the Twelve Months Ended Dec 31, 2019

In millions, except per share amounts (Unaudited)

Pretax 1

Net
Income 2

EPS 3

Income Statement Classification

Pro forma results

$

(1,180

)

$

(1,739

)

$

(2.35

)

 

Less: Significant items

 

 

 

 

Integration and separation costs

(1,013

)

(824

)

(1.11

)

Integration and separation costs

Restructuring, goodwill impairment and asset related charges - net 10

(3,219

)

(3,160

)

(4.26

)

Restructuring, goodwill impairment and asset related charges - net

Warranty accrual adjustment of exited business

39

 

30

 

0.04

 

Cost of sales

Environmental charges 11

(399

)

(311

)

(0.42

)

Cost of Sales

Loss on divestitures

(49

)

(47

)

(0.06

)

Sundry income (expense) - net

Loss on early extinguishment of debt

(102

)

(83

)

(0.11

)

Sundry income (expense) - net

Litigation related charges, awards and

adjustments 7

205

 

178

 

0.24

 

Sundry income (expense) - net

Indemnification and other transaction related costs 8

(144

)

(257

)

(0.34

)

Cost of sales ($75 million); Sundry income (expense) - net ($69 million); Provision for income taxes on continuing operations ($113 million)

Income tax related items 9

 

101

 

0.14

 

Provision for income taxes on continuing operations

Total significant items

$

(4,682

)

$

(4,373

)

$

(5.88

)

 

Operating pro forma results (non-GAAP)

$

3,502

 

$

2,634

 

$

3.53

 

 

1.

"Income (loss) from continuing operations before income taxes" or pro forma "Income (loss) from continuing operations before income taxes."

2.

"Net income (loss) available for Dow Inc. common stockholders" or pro forma "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 from continuing operations - diluted" or pro forma "Earnings (loss) per common share from continuing operations - diluted."

4.

Includes Board approved restructuring plans and asset related charges, which include other asset impairments.

5.

Costs associated with implementing the Company's 2020 Restructuring Program.

6.

Primarily related to a gain on the sale of rail infrastructure in the U.S. & Canada and a gain on the sale of marine and terminal operations and assets in the U.S.

7.

The twelve months ended December 31, 2020 includes a gain associated with a legal matter with Nova. The twelve months ended December 31, 2019 includes a gain associated with a legal matter with Nova as well as a gain related to an adjustment of the Dow Silicones breast implant liability and a charge related to the settlement of the Dow Silicones commercial creditor matters.

8.

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.

9.

The twelve months ended December 31, 2020 includes tax valuation allowances recorded in the U.S., primarily due to the filing of the final combined Dow and DuPont tax return and related unutilized foreign tax credits. The Company projects it is more likely than not that a portion of these foreign tax credits and other tax attributes will remain unutilized prior to their expiration. The twelve months ended December 31, 2019 primarily relates to the effects of Swiss tax reform.

10.

Primarily related to a $1,755 million pretax charge associated with Sadara (including an other-than-temporary impairment of the Company's equity method investment in Sadara and the reserve of loan and accounts receivable balances associated with Sadara) and a $1,039 million pretax impairment charge related to goodwill associated with the Coatings & Performance Monomers reporting unit.

11.

Related to environmental remediation, primarily resulting from the culmination of long-standing negotiations with regulators and/or agencies and review of additional costs to manage ongoing remediation activities resulting from Dow’s separation from DowDuPont and related agreements with Corteva and DuPont.

Dow Inc. and Subsidiaries

Selected Financial Information and Non-GAAP Measures

Reconciliation of Free Cash Flow

Three Months Ended

 

Twelve Months Ended

In millions (Unaudited)

Dec 31,
2020

 

Dec 31,
2019

 

Dec 31,
2020

 

Dec 31,

2019

Cash provided by operating activities - continuing operations (GAAP)

$

1,656

 

$

1,920

 

$

6,252

 

$

5,713

 

Capital expenditures

 

(297

)

 

(577

)

 

(1,252

)

 

(1,961

)

Free cash flow (non-GAAP)

$

1,359

 

$

1,343

 

$

5,000

 

$

3,752

 

Reconciliation of Cash Flow Conversion

Three Months Ended

Twelve Months Ended

In millions (Unaudited)

Dec 31,
2020

Dec 31,
2019

Dec 31,
2020

Dec 31,
2019

Cash provided by operating activities - continuing operations (GAAP)

$

1,656

 

$

1,920

 

$

6,252

 

$

5,713

 

Operating EBITDA (non-GAAP)

1,780

 

1,746

 

5,589

 

7,290

 

Cash flow conversion (Operating EBITDA to cash flow from operations) (non-GAAP)

93.0

%

110.0

%

111.9

%

78.4

%

Reconciliation of Net Debt

Dec 31,
2020

Dec 31,
2019

In millions (Unaudited)

Notes payable

$

156

 

$

586

 

Long-term debt due within one year

460

 

435

 

Long-term debt

16,491

 

15,975

 

Gross debt (GAAP)

$

17,107

 

$

16,996

 

- Cash and cash equivalents

5,104

 

2,367

 

- Marketable securities 1

45

 

21

 

Net debt (non-GAAP)

$

11,958

 

$

14,608

 

1.

The Company’s investments in marketable securities are included in “Other current assets” in the consolidated balance sheets.

 

Investors:
Colleen Kay
ckay@dow.com
+1 989-636-0920

Media:
Kyle Bandlow
kbandlow@dow.com
+1 989-638-2417

Source: Dow

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