NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
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Note
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10
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11
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12
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21
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22
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NOTE 1 – CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
Dow Inc. is the direct parent company of The Dow Chemical Company and its consolidated subsidiaries ("TDCC" and together with Dow Inc., "Dow" or the "Company"). The unaudited interim consolidated financial statements of Dow Inc. and TDCC were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect all adjustments (including normal recurring accruals) which, in the opinion of management, are considered necessary for the fair presentation of the results for the periods presented. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2020 ("2020 10-K").
As a result of the parent/subsidiary relationship between Dow Inc. and TDCC, and considering that the financial statements and disclosures of each company are substantially similar, the companies are filing a combined report for this Quarterly Report on Form 10-Q. The information reflected in the report is equally applicable to both Dow Inc. and TDCC, except where otherwise noted. Transactions between TDCC and Dow Inc. are treated as related party transactions for TDCC. See Note 21 for additional information.
Except as otherwise indicated by the context, the term "Union Carbide" means Union Carbide Corporation and the term "Dow Silicones" means Dow Silicones Corporation, both wholly owned subsidiaries of the Company.
NOTE 2 – RECENT ACCOUNTING GUIDANCE
Recently Adopted Accounting Guidance
In the first quarter of 2021, the Company adopted Accounting Standards Update 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, "Income Taxes" and improve consistent application by clarifying and amending existing guidance. The adoption of this guidance did not have a material impact on the consolidated financial statements.
NOTE 3 – SEPARATION FROM DOWDUPONT
For additional information on the separation from DowDuPont Inc. ("DowDuPont"), see Note 3 to the Consolidated Financial Statements included in the 2020 10-K.
Agreements Related to the Separation and Distribution
Dow Inc. entered into certain agreements with DuPont de Nemours, Inc. ("DuPont") and/or Corteva, Inc. ("Corteva"), including the following: Separation and Distribution Agreement, Tax Matters Agreement and Employee Matters Agreement (collectively, the "Agreements"). In addition to establishing the terms of Dow Inc.'s separation from DowDuPont, the Agreements provide a framework for Dow’s interaction with DuPont and Corteva after the separation and also provide for the allocation among Dow, DuPont and Corteva of assets, liabilities and obligations attributable to periods prior to, at and after the completion of the separation. The Agreements also contain certain indemnity and/or cross-indemnity provisions that are intended to set forth each party’s respective rights, responsibilities and obligations for matters subject to indemnification. Except in certain instances, the parties’ indemnification obligations are uncapped. Certain indemnification obligations will be subject to reduction by insurance proceeds or other third-party proceeds of the indemnified party that reduces the amount of the loss. In addition, indemnifiable losses will be subject to, in certain cases, “de minimis” threshold amounts and, in certain cases, deductible amounts.
The impacts of indemnifications and other post-separation matters relating to the Agreements were primarily included in the consolidated financial statements of Dow Inc. At September 30, 2021, the Company had assets of $22 million ($77 million at December 31, 2020) included in "Other current assets" and $31 million ($33 million at December 31, 2020) included in "Noncurrent receivables," and liabilities of $207 million ($412 million at December 31, 2020) included in "Accrued and other current liabilities" and $40 million ($46 million at December 31, 2020) included in "Other noncurrent obligations" in the consolidated balance sheets of Dow Inc. related to the Agreements.
In addition, the Company deferred a portion of the cash distribution received from DowDuPont at separation and recorded an associated liability in "Other noncurrent obligations," with an offset to "Retained earnings" in the consolidated balance sheets of Dow Inc. At September 30, 2021, $61 million ($103 million at December 31, 2020) of this liability was recorded in "Accrued and other current liabilities" and $96 million ($96 million at December 31, 2020) was recorded in "Other noncurrent obligations" in the consolidated balance sheets of Dow Inc.
NOTE 4 – REVENUE
Revenue Recognition
The majority of Dow's revenue is derived from product sales. Dow's revenue related to product sales was 99 percent for the three months ended September 30, 2021 and 98 percent for the nine months ended September 30, 2021 (99 percent for the three and nine months ended September 30, 2020), with the remaining balance primarily related to the Company's insurance operations and licensing of patents and technologies. Product sales consist of sales of Dow's products to manufacturers and distributors and considers order confirmations or purchase orders, which in some cases are governed by master supply agreements, to be contracts with a customer. Dow enters into licensing arrangements in which it licenses certain rights of its patents and technology to customers. Revenue from Dow’s licenses for patents and technology is derived from sales-based royalties and licensing arrangements based on billing schedules established in each contract.
Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to unsatisfied or partially unsatisfied performance obligations. At September 30, 2021, Dow had unfulfilled performance obligations of $831 million ($977 million at December 31, 2020) related to the licensing of technology. Dow expects revenue to be recognized for the remaining performance obligations over the next six years.
The remaining performance obligations are for product sales that have expected durations of one year or less, product sales of materials delivered through a pipeline for which Dow has elected the right to invoice practical expedient, or variable consideration attributable to royalties for licenses of patents and technology. Dow has received advance payments from customers related to long-term supply agreements that are deferred and recognized over the life of the contract, with remaining contract terms that range up to 20 years. Dow will have rights to future consideration for revenue recognized when product is delivered to the customer. These payments are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the consolidated balance sheets.
Disaggregation of Revenue
Dow disaggregates its revenue from contracts with customers by operating segment and business, as the Company believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows.
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Net Trade Sales by Segment and Business
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Three Months Ended
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Nine Months Ended
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In millions
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Sep 30, 2021
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Sep 30, 2020
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Sep 30, 2021
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Sep 30, 2020
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Hydrocarbons & Energy
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$
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2,251
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$
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1,021
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$
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6,010
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$
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3,027
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Packaging and Specialty Plastics
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5,485
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|
3,544
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|
14,929
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|
10,148
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Packaging & Specialty Plastics
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$
|
7,736
|
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$
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4,565
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$
|
20,939
|
|
$
|
13,175
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Industrial Solutions
|
$
|
1,377
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|
$
|
931
|
|
$
|
3,627
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|
$
|
2,879
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Polyurethanes & Construction Chemicals
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3,102
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|
2,124
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8,670
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5,632
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Other
|
2
|
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3
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|
6
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|
9
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Industrial Intermediates & Infrastructure
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$
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4,481
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$
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3,058
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$
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12,303
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$
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8,520
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Coatings & Performance Monomers
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$
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1,110
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$
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844
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$
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2,975
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$
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2,438
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Consumer Solutions
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1,416
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1,158
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4,139
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3,484
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Performance Materials & Coatings
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$
|
2,526
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$
|
2,002
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$
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7,114
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$
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5,922
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Corporate
|
$
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94
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|
$
|
87
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|
$
|
248
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$
|
219
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Total
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$
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14,837
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$
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9,712
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$
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40,604
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$
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27,836
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Net Trade Sales by Geographic Region
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Three Months Ended
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Nine Months Ended
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In millions
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Sep 30, 2021
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Sep 30, 2020
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Sep 30, 2021
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Sep 30, 2020
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U.S. & Canada
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$
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5,476
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$
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3,391
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$
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14,431
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$
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9,885
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EMEAI 1
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5,229
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3,272
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14,660
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9,394
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Asia Pacific
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2,579
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2,073
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7,423
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5,850
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Latin America
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1,553
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976
|
|
4,090
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|
2,707
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Total
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$
|
14,837
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$
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9,712
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$
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40,604
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|
$
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27,836
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|
1.Europe, Middle East, Africa and India.
Contract Assets and Liabilities
Dow receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets include amounts related to Dow's contractual right to consideration for completed performance obligations not yet invoiced. Contract liabilities include payments received in advance of performance under the contract and are recognized in revenue when the performance obligations are met. "Contract liabilities - current" primarily reflects deferred revenue from prepayments from customers for product to be delivered in 12 months or less and royalty payments that are deferred and will be recognized in 12 months or less. "Contract liabilities - noncurrent" includes advance payments that Dow has received from customers related to long-term supply agreements and royalty payments that are deferred and recognized over the life of the contract.
Revenue recognized in the first nine months of 2021 from amounts included in contract liabilities at the beginning of the period was approximately $250 million (approximately $110 million in the first nine months of 2020). In the first nine months of 2021, the amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional was approximately $5 million (approximately $25 million in the first nine months of 2020).
The following table summarizes the contract assets and liabilities at September 30, 2021 and December 31, 2020:
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Contract Assets and Liabilities
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Balance Sheet Classification
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Sep 30, 2021
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Dec 31, 2020
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In millions
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Accounts and notes receivable - trade
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Accounts and notes receivable - trade
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$
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6,844
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$
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4,839
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Contract assets - current
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Other current assets
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$
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52
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$
|
58
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Contract assets - noncurrent
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Deferred charges and other assets
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$
|
39
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$
|
11
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|
Contract liabilities - current 1
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Accrued and other current liabilities
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$
|
207
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$
|
349
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Contract liabilities - noncurrent
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Other noncurrent obligations
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$
|
1,910
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|
$
|
1,915
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|
1.The decrease from December 31, 2020 to September 30, 2021 was due to recognition of deferred royalty payments.
NOTE 5 – RESTRUCTURING AND ASSET RELATED CHARGES - NET
Charges for restructuring programs and other asset related charges, which includes asset impairments, are recorded in "Restructuring and asset related charges - net" in the consolidated statements of income and were $22 million for the nine months ended September 30, 2021 ($617 million and $719 million for the three and nine months ended September 30, 2020, respectively). For additional information on the Company's restructuring programs, see Note 6 to the Consolidated Financial Statements included in the 2020 10-K.
Restructuring Plans
2020 Restructuring Program
On September 29, 2020, the Board of Directors ("Board") of Dow Inc. approved restructuring actions to achieve the Company's structural cost improvement initiatives in response to the continued economic impact from the coronavirus disease 2019 ("COVID-19") pandemic. The restructuring program is designed to reduce structural costs and enable the Company to further enhance competitiveness while the COVID-19 economic recovery continues. This program includes a global workforce cost reduction of approximately 6 percent and actions to rationalize the Company's manufacturing assets, which include asset write-down and write-off charges, related contract termination fees and environmental remediation costs ("2020 Restructuring Program"). These actions are expected to be substantially complete by the end of 2021, except for certain cash payments in 2022.
The following table summarizes the activities related to the 2020 Restructuring Program:
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2020 Restructuring Program
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Severance and Related Benefit Costs
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Asset Write-downs and Write-offs
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Costs Associated with Exit and Disposal Activities
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Total
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In millions
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Packaging & Specialty Plastics
|
$
|
—
|
|
$
|
11
|
|
$
|
—
|
|
$
|
11
|
|
Industrial Intermediates & Infrastructure
|
—
|
|
22
|
|
—
|
|
22
|
|
Performance Materials & Coatings
|
—
|
|
117
|
|
57
|
|
174
|
|
Corporate
|
297
|
|
47
|
|
24
|
|
368
|
|
Total restructuring charges
|
$
|
297
|
|
$
|
197
|
|
$
|
81
|
|
$
|
575
|
|
Charges against the reserve
|
—
|
|
(197)
|
|
—
|
|
(197)
|
|
Cash payments
|
(1)
|
|
—
|
|
—
|
|
(1)
|
|
Reserve balance at Sep 30, 2020
|
$
|
296
|
|
$
|
—
|
|
$
|
81
|
|
$
|
377
|
|
|
|
|
|
|
|
|
|
|
|
Performance Materials & Coatings
|
$
|
—
|
|
$
|
(1)
|
|
$
|
4
|
|
$
|
3
|
|
Corporate
|
—
|
|
—
|
|
(5)
|
|
(5)
|
|
Total restructuring charges
|
$
|
—
|
|
$
|
(1)
|
|
$
|
(1)
|
|
$
|
(2)
|
|
Charges against the reserve
|
—
|
|
1
|
|
(5)
|
|
(4)
|
|
Cash payments
|
(7)
|
|
—
|
|
—
|
|
(7)
|
|
Reserve balance at Dec 31, 2020
|
$
|
289
|
|
$
|
—
|
|
$
|
75
|
|
$
|
364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments
|
(37)
|
|
—
|
|
(12)
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|
(49)
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|
Reserve balance at Mar 31, 2021
|
$
|
252
|
|
$
|
—
|
|
$
|
63
|
|
$
|
315
|
|
Packaging & Specialty Plastics
|
$
|
—
|
|
$
|
—
|
|
$
|
8
|
|
$
|
8
|
|
Industrial Intermediates & Infrastructure
|
—
|
|
1
|
|
—
|
|
1
|
|
Performance Materials & Coatings
|
—
|
|
8
|
|
2
|
|
10
|
|
Corporate
|
—
|
|
3
|
|
—
|
|
3
|
|
Total restructuring charges
|
$
|
—
|
|
$
|
12
|
|
$
|
10
|
|
$
|
22
|
|
Charges against the reserve
|
—
|
|
(12)
|
|
—
|
|
(12)
|
|
Cash payments
|
(53)
|
|
—
|
|
(3)
|
|
(56)
|
|
Reserve balance at Jun 30, 2021
|
$
|
199
|
|
$
|
—
|
|
$
|
70
|
|
$
|
269
|
|
|
|
|
|
|
Cash payments
|
(55)
|
|
—
|
|
(2)
|
|
(57)
|
|
Reserve balance at Sep 30, 2021
|
$
|
144
|
|
$
|
—
|
|
$
|
68
|
|
$
|
212
|
|
At September 30, 2021, $147 million of the reserve balance was included in "Accrued and other current liabilities" ($227 million at December 31, 2020) and $65 million was included in "Other noncurrent obligations" ($137 million at December 31, 2020) in the consolidated balance sheets.
The Company recorded pretax restructuring charges of $595 million inception-to-date under the 2020 Restructuring Program, consisting of severance and related benefit costs of $297 million, asset write-downs and write-offs of $208 million and costs associated with exit and disposal activities of $90 million.
The Company expects to incur additional costs in the future related to its restructuring activities. Future costs are expected to include demolition costs related to closed facilities and restructuring implementation costs; these costs will be recognized as incurred. The Company also expects to incur additional employee-related costs, including involuntary termination benefits, related to its other optimization activities. These costs cannot be reasonably estimated at this time.
NOTE 6 – SUPPLEMENTARY INFORMATION
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dow Inc. Sundry Income (Expense) – Net
|
Three Months Ended
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
Non-operating pension and other postretirement benefit plan net credits 1
|
$
|
86
|
|
$
|
26
|
|
$
|
247
|
|
$
|
81
|
|
Foreign exchange losses
|
(5)
|
|
(24)
|
|
(21)
|
|
(42)
|
|
Gain on divestiture of rail infrastructure 2
|
—
|
|
233
|
|
—
|
|
233
|
|
Loss on early extinguishment of debt 3
|
(472)
|
|
(63)
|
|
(574)
|
|
(149)
|
|
Loss on divestitures 4
|
—
|
|
(13)
|
|
—
|
|
(13)
|
|
Gains on sales of other assets and investments
|
12
|
|
2
|
|
74
|
|
7
|
|
Indemnification and other transaction related costs 5
|
—
|
|
—
|
|
(5)
|
|
—
|
|
Gain related to Nova ethylene asset matter 6
|
—
|
|
—
|
|
—
|
|
6
|
|
Dow Silicones breast implant liability adjustment 6
|
—
|
|
—
|
|
—
|
|
5
|
|
|
|
|
|
|
Luxi arbitration award 6
|
54
|
|
—
|
|
54
|
|
—
|
|
Other - net
|
(25)
|
|
21
|
|
—
|
|
26
|
|
Total sundry income (expense) – net
|
$
|
(350)
|
|
$
|
182
|
|
$
|
(225)
|
|
$
|
154
|
|
1.See Note 16 for additional information.
2.Related to a gain on the sale of rail infrastructure in the U.S. & Canada.
3.See Note 11 for additional information.
4.The three and nine months ended September 30, 2020 includes a loss on the divestiture of a bio-ethanol manufacturing facility in Brazil, related to Packaging & Specialty Plastics.
5.See Note 3 for additional information.
6.See Note 12 for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDCC Sundry Income (Expense) – Net
|
Three Months Ended
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
Non-operating pension and other postretirement benefit plan net credits 1
|
$
|
86
|
|
$
|
26
|
|
$
|
247
|
|
$
|
81
|
|
Foreign exchange losses
|
(8)
|
|
(22)
|
|
(24)
|
|
(45)
|
|
Gain on divestiture of rail infrastructure 2
|
—
|
|
233
|
|
—
|
|
233
|
|
Loss on early extinguishment of debt 3
|
(472)
|
|
(63)
|
|
(574)
|
|
(149)
|
|
Loss on divestitures 4
|
—
|
|
(13)
|
|
—
|
|
(13)
|
|
Gains on sales of other assets and investments
|
12
|
|
2
|
|
74
|
|
7
|
|
Gain related to Nova ethylene asset matter 5
|
—
|
|
—
|
|
—
|
|
6
|
|
Dow Silicones breast implant liability adjustment 5
|
—
|
|
—
|
|
—
|
|
5
|
|
|
|
|
|
|
Luxi arbitration award 5
|
54
|
|
—
|
|
54
|
|
—
|
|
Other - net
|
(28)
|
|
18
|
|
(8)
|
|
25
|
|
Total sundry income (expense) – net
|
$
|
(356)
|
|
$
|
181
|
|
$
|
(231)
|
|
$
|
150
|
|
1.See Note 16 for additional information.
2.Related to a gain on the sale of rail infrastructure in the U.S. & Canada.
3.See Note 11 for additional information.
4.The three and nine months ended September 30, 2020 includes a loss on the divestiture of a bio-ethanol manufacturing facility in Brazil, related to Packaging & Specialty Plastics.
5.See Note 12 for additional information.
Accrued and Other Current Liabilities
“Accrued and other current liabilities” were $3,701 million and $3,413 million at September 30, 2021 and $3,790 million and $3,256 million at December 31, 2020, for Dow Inc. and TDCC, respectively. Accrued payroll, which is a component of "Accrued and other current liabilities" and includes liabilities related to payroll, performance-based compensation and severance, was $955 million at September 30, 2021 and $866 million at December 31, 2020. No other components of "Accrued and other current liabilities" were more than 5 percent of total current liabilities.
NOTE 7 - EARNINGS PER SHARE CALCULATIONS
The following tables provide earnings per share calculations for Dow Inc. for the three and nine months ended September 30, 2021 and 2020. Earnings per share of TDCC is not presented as this information is not required in financial statements of wholly owned subsidiaries.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) for Earnings Per Share Calculations
|
Three Months Ended
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
|
Net income (loss)
|
$
|
1,706
|
|
$
|
(1)
|
|
$
|
4,644
|
|
$
|
40
|
|
Net income attributable to noncontrolling interests
|
23
|
|
24
|
|
69
|
|
51
|
|
Net income attributable to participating securities 1
|
8
|
|
3
|
|
23
|
|
7
|
|
Net income (loss) attributable to common stockholders
|
$
|
1,675
|
|
$
|
(28)
|
|
$
|
4,552
|
|
$
|
(18)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per Share - Basic and Diluted
|
Three Months Ended
|
Nine Months Ended
|
Dollars per share
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
|
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share Count Information
|
Three Months Ended
|
Nine Months Ended
|
Shares in millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
|
Weighted-average common shares outstanding - basic
|
744.5
|
|
740.5
|
|
745.4
|
|
740.0
|
|
Plus dilutive effect of equity compensation plans 2
|
5.5
|
|
—
|
|
5.5
|
|
—
|
|
Weighted-average common shares outstanding - diluted 2
|
750.0
|
|
740.5
|
|
750.9
|
|
740.0
|
|
Stock options and restricted stock units excluded from EPS calculations 3
|
7.2
|
|
26.9
|
|
5.6
|
|
27.1
|
|
1.Restricted stock units are considered participating securities due to the Company's practice of paying dividend equivalents on unvested shares.
2.The three and nine months ended September 30, 2020 reflect a loss, and as such, the basic share count was used for purposes of calculating earnings per share on a diluted basis.
3.These outstanding options to purchase shares of common stock and restricted stock units were excluded from the calculation of diluted earnings per share because the effect of including them would have been antidilutive.
NOTE 8 – INVENTORIES
The following table provides a breakdown of inventories:
|
|
|
|
|
|
|
|
|
Inventories
|
Sep 30, 2021
|
Dec 31, 2020
|
In millions
|
Finished goods
|
$
|
4,233
|
|
$
|
3,140
|
|
Work in process
|
1,561
|
|
996
|
|
Raw materials
|
867
|
|
598
|
|
Supplies
|
875
|
|
933
|
|
Total
|
$
|
7,536
|
|
$
|
5,667
|
|
Adjustment of inventories to a LIFO basis
|
(425)
|
|
34
|
|
Total inventories
|
$
|
7,111
|
|
$
|
5,701
|
|
NOTE 9 – NONCONSOLIDATED AFFILIATES
For additional information on the Company’s nonconsolidated affiliates, see Note 12 to the Consolidated Financial Statements included in the 2020 10-K.
The Company's investments in companies accounted for using the equity method ("nonconsolidated affiliates"), by classification in the consolidated balance sheets, and dividends received from nonconsolidated affiliates are shown in the following tables:
|
|
|
|
|
|
|
|
|
Investments in Nonconsolidated Affiliates
|
Sep 30, 2021
|
Dec 31, 2020
|
In millions
|
Investment in nonconsolidated affiliates
|
$
|
1,910
|
|
$
|
1,327
|
|
Other noncurrent obligations
|
—
|
|
(169)
|
|
Net investment in nonconsolidated affiliates
|
$
|
1,910
|
|
$
|
1,158
|
|
|
|
|
|
|
|
|
|
|
Dividends Received from Nonconsolidated Affiliates
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Dividends from nonconsolidated affiliates 1
|
$
|
232
|
|
$
|
391
|
|
1.Included in "Earnings of nonconsolidated affiliates less than (in excess of) dividends received" in the consolidated statements of cash flows.
At September 30, 2021, the Company had an investment balance in EQUATE Petrochemical Company K.S.C.C. of $18 million included in "Investment in nonconsolidated affiliates" (negative $147 million at December 31, 2020 included in "Other noncurrent obligations") in the consolidated balance sheets.
At September 30, 2021, the Company had an investment balance in Sadara Chemical Company (“Sadara”) of $412 million included in “Investment in nonconsolidated affiliates” (negative $22 million at December 31, 2020 included in “Other noncurrent obligations”) in the consolidated balance sheets. In the first quarter of 2021, the Company entered into a new guarantee in conjunction with Sadara’s debt re-profiling activities. In the second quarter of 2021, as a part of Sadara's debt re-profiling activities, Sadara established a new revolving credit facility guaranteed by Dow, which will be used to fund Dow’s pro-rata share of any potential shortfall during the grace period. The Company does not expect to be required to perform under the guarantee. See Notes 12 and 19 for additional information on the guarantees.
Transactions with Nonconsolidated Affiliates
The Company is currently responsible for marketing the majority of Sadara products outside of the Middle East zone through the Company’s established sales channels. Under this arrangement, the Company purchases and sells Sadara products for a marketing fee. In March 2021, Dow and the Saudi Arabian Oil Company agreed to transition the marketing rights and responsibilities for Sadara’s finished products to levels more consistent with each partner’s equity ownership. This transition began in July 2021 and is being implemented over the next five years.
NOTE 10 – GOODWILL AND OTHER INTANGIBLE ASSETS
The following table shows changes in the carrying amount of goodwill by reportable segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
Packaging & Specialty Plastics
|
Industrial Intermediates & Infrastructure
|
Performance Materials & Coatings
|
Total
|
In millions
|
Net goodwill at Dec 31, 2020
|
$
|
5,115
|
|
$
|
1,100
|
|
$
|
2,693
|
|
$
|
8,908
|
|
|
|
|
|
|
Foreign currency impact
|
(7)
|
|
(3)
|
|
(97)
|
|
(107)
|
|
Net goodwill at Sep 30, 2021
|
$
|
5,108
|
|
$
|
1,097
|
|
$
|
2,596
|
|
$
|
8,801
|
|
The following table provides information regarding the Company’s other intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Intangible Assets
|
Sep 30, 2021
|
Dec 31, 2020
|
In millions
|
Gross Carrying Amount
|
Accum Amort
|
Net
|
Gross Carrying Amount
|
Accum Amort
|
Net
|
Intangible assets with finite lives:
|
|
|
|
|
|
|
Developed technology
|
$
|
2,637
|
|
$
|
(1,833)
|
|
$
|
804
|
|
$
|
2,638
|
|
$
|
(1,677)
|
|
$
|
961
|
|
Software
|
1,494
|
|
(1,042)
|
|
452
|
|
1,489
|
|
(989)
|
|
500
|
|
Trademarks/tradenames
|
352
|
|
(344)
|
|
8
|
|
352
|
|
(343)
|
|
9
|
|
Customer-related
|
3,226
|
|
(1,528)
|
|
1,698
|
|
3,301
|
|
(1,419)
|
|
1,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other intangible assets
|
$
|
7,709
|
|
$
|
(4,747)
|
|
$
|
2,962
|
|
$
|
7,780
|
|
$
|
(4,428)
|
|
$
|
3,352
|
|
The following table provides information regarding amortization expense related to intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization Expense
|
Three Months Ended
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
Other intangible assets, excluding software
|
$
|
100
|
|
$
|
100
|
|
$
|
301
|
|
$
|
300
|
|
Software, included in “Cost of sales”
|
$
|
22
|
|
$
|
24
|
|
$
|
67
|
|
$
|
72
|
|
Total estimated amortization expense for 2021 and the five succeeding fiscal years, including amounts expected to be capitalized, is as follows:
|
|
|
|
|
|
Estimated Amortization Expense
|
In millions
|
2021
|
$
|
475
|
|
2022
|
$
|
410
|
|
2023
|
$
|
377
|
|
2024
|
$
|
359
|
|
2025
|
$
|
268
|
|
2026
|
$
|
194
|
|
NOTE 11 – NOTES PAYABLE, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES
|
|
|
|
|
|
|
|
|
Notes Payable
|
Sep 30, 2021
|
Dec 31, 2020
|
In millions
|
|
|
|
Notes payable to banks and other lenders
|
$
|
270
|
$
|
156
|
|
|
|
|
|
|
Period-end average interest rates
|
6.38
|
%
|
3.89
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt
|
2021 Average Rate
|
Sep 30, 2021
|
2020 Average Rate
|
Dec 31, 2020
|
In millions
|
Promissory notes and debentures:
|
|
|
|
|
Final maturity 2021
|
—
|
%
|
$
|
—
|
|
8.95
|
%
|
$
|
173
|
|
Final maturity 2022
|
8.64
|
%
|
121
|
|
8.64
|
%
|
121
|
|
Final maturity 2023
|
7.63
|
%
|
250
|
|
7.63
|
%
|
250
|
|
Final maturity 2024
|
—
|
%
|
—
|
|
3.43
|
%
|
1,017
|
|
Final maturity 2025
|
5.63
|
%
|
333
|
|
5.13
|
%
|
625
|
|
Final maturity 2026
|
3.63
|
%
|
750
|
|
3.63
|
%
|
750
|
|
Final maturity 2027 and thereafter 1
|
5.15
|
%
|
9,364
|
|
5.34
|
%
|
10,138
|
|
Other facilities:
|
|
|
|
|
|
|
|
|
|
Foreign currency notes and loans, various rates and maturities
|
1.22
|
%
|
2,889
|
|
1.41
|
%
|
3,189
|
|
InterNotes®, varying maturities through 2051
|
3.40
|
%
|
382
|
|
3.56
|
%
|
535
|
|
|
|
|
|
|
Finance lease obligations 2
|
|
542
|
|
|
518
|
|
Unamortized debt discount and issuance costs
|
|
(313)
|
|
|
(365)
|
|
Long-term debt due within one year 3
|
|
(291)
|
|
|
(460)
|
|
Long-term debt
|
|
$
|
14,027
|
|
|
$
|
16,491
|
|
1.Cost includes net fair value hedge adjustment gains of $48 million at September 30, 2021 ($69 million at December 31, 2020). See Note 18 for additional information.
2.See Note 13 for additional information.
3.Presented net of current portion of unamortized debt issuance costs.
|
|
|
|
|
|
Maturities of Long-Term Debt for Next Five Years at Sep 30, 2021
|
In millions
|
2021
|
$
|
122
|
|
2022
|
$
|
191
|
|
2023
|
$
|
345
|
|
2024
|
$
|
41
|
|
2025
|
$
|
364
|
|
2026
|
$
|
801
|
|
2021 Activity
In the second quarter of 2021, the Company redeemed $208 million aggregate principal amount of 3.15 percent notes due May 2024 and $811 million aggregate principal amount of 3.50 percent notes due October 2024. As a result of the redemptions, the Company recognized a pretax loss of $101 million on the early extinguishment of debt, included in "Sundry income (expense) - net" in the consolidated statements of income (related to Corporate) and included in "Other net loss" in the consolidated statements of cash flows.
In the third quarter of 2021, the Company completed cash tender offers for certain debt securities. In total, $1,042 million aggregate principal amount was tendered and retired. As a result, the Company recognized a pretax loss of $472 million on the early extinguishment of debt, included in "Sundry income (expense) – net" in the consolidated statements of income (related to Corporate) and included in "Other net loss" in the consolidated statements of cash flows. In addition, the Company voluntarily repaid $81 million of long-term debt due within one year.
In the first nine months of 2021, the Company issued an aggregate principal amount of $95 million of InterNotes®, and redeemed an aggregate principal amount of $28 million at maturity. In addition, the Company voluntarily repaid an aggregate principal amount of $213 million of InterNotes® with various maturities. As a result, the Company recognized a pretax loss on the early extinguishment of debt for the nine months ended September 30, 2021 of $1 million, included in "Sundry income (expense) - net" in the consolidated statements of income (related to Corporate) and included in "Other net loss" in the consolidated statements of cash flows.
Additionally, in the first nine months of 2021, the Company repaid approximately $173 million of long-term debt at maturity and approximately $14 million of long-term debt was repaid by consolidated variable interest entities.
2020 Activity
In February 2020, the Company issued €2.25 billion aggregate principal amount of notes (“Euro Notes”). The Euro Notes included €1.0 billion aggregate principal amount of 0.50 percent notes due 2027, €750 million aggregate principal amount of 1.125 percent notes due 2032 and €500 million aggregate principal amount of 1.875 percent notes due 2040. The Euro Notes have a weighted average coupon rate of approximately 1.0 percent. With the net proceeds from the issuance of the Euro Notes, Dow Silicones voluntarily repaid $750 million of principal under a certain third party credit agreement. In addition, the Company redeemed $1.25 billion of 3.0 percent notes issued by the Company with maturity in 2022. As a result, the Company recognized a pretax loss of $85 million on the early extinguishment of debt, included in “Sundry income (expense) – net” in the consolidated statements of income (related to Corporate) and included in "Other net loss" in the consolidated statements of cash flows.
In July 2020, the Company's accounts receivable securitization facility in Europe was amended and the terms of the agreement changed from a secured borrowing arrangement to an accounts receivable facility. Under the terms of the new agreement, the Company may sell certain eligible trade accounts receivable, up to €400 million, at any point in time. The Company continues to service the receivables from the customer, but retains no interest in the receivables, and remits payment to the financial institutions. The Company also provides a guarantee to the financial institutions for the creditworthiness and collection of the receivables in satisfaction of the facility. There were no receivables sold in the third quarter of 2020. See Note 12 for additional information related to guarantees.
In August 2020, the Company issued $2.0 billion aggregate principal amount of notes. The notes included $850 million aggregate principal amount of 2.1 percent notes due 2030 and $1.15 billion aggregate principal amount of 3.6 percent notes due 2050 (together, the "Notes"). With the net proceeds from the issuance of the Notes, Dow Silicones voluntarily repaid the remaining $1.25 billion outstanding principal balance under the Term Loan Facility. In September 2020, the Company also used $556 million of aggregate proceeds from the Notes to fund cash tender offers for certain of its debt securities and certain debt securities of Union Carbide. In total, $493 million aggregate principal amount was tendered and retired. These actions resulted in a pretax loss of $62 million on the early extinguishment of debt included in "Sundry income (expense) – net" in the consolidated statements of income (related to Corporate) and included in "Other net loss" in the consolidated statements of cash flows.
In the first nine months of 2020, the Company also issued an aggregate principal amount of $167 million of InterNotes®, and redeemed an aggregate principal amount of $166 million at maturity. In addition, the Company voluntarily repaid an aggregate principal amount of $307 million of InterNotes® with various maturities. As a result, the Company recognized a pretax loss on the early extinguishment of debt for the three months ended September 30, 2020 of $1 million ($2 million for the nine months ended September 30, 2020), included in “Sundry income (expense) – net” in the consolidated statements of income (related to Corporate) and included in "Other net loss" in the consolidated statements of cash flows.
Additionally, in the first nine months of 2020, the Company repaid approximately $76 million of long-term debt at maturity and approximately $17 million of long-term debt was repaid by consolidated variable interest entities.
Available Credit Facilities
The following table summarizes the Company's credit facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed and Available Credit Facilities at Sep 30, 2021
|
In millions
|
Committed Credit
|
Available Credit
|
Maturity Date
|
Interest
|
Five Year Competitive Advance and Revolving Credit Facility
|
$
|
5,000
|
|
$
|
5,000
|
|
October 2024
|
Floating rate
|
Bilateral Revolving Credit Facility
|
300
|
|
300
|
|
December 2021
|
Floating rate
|
Bilateral Revolving Credit Facility
|
300
|
|
300
|
|
December 2021
|
Floating rate
|
Bilateral Revolving Credit Facility
|
150
|
|
150
|
|
March 2022
|
Floating rate
|
Bilateral Revolving Credit Facility
|
100
|
|
100
|
|
June 2022
|
Floating rate
|
Bilateral Revolving Credit Facility
|
200
|
|
200
|
|
September 2022
|
Floating rate
|
Bilateral Revolving Credit Facility 1
|
200
|
|
200
|
|
November 2022
|
Floating rate
|
Bilateral Revolving Credit Facility
|
200
|
|
200
|
|
September 2023
|
Floating rate
|
Bilateral Revolving Credit Facility
|
250
|
|
250
|
|
September 2023
|
Floating rate
|
Bilateral Revolving Credit Facility
|
300
|
|
300
|
|
September 2023
|
Floating rate
|
Bilateral Revolving Credit Facility
|
100
|
|
100
|
|
October 2024
|
Floating rate
|
Bilateral Revolving Credit Facility
|
100
|
|
100
|
|
October 2024
|
Floating rate
|
Bilateral Revolving Credit Facility
|
200
|
|
200
|
|
November 2024
|
Floating rate
|
Bilateral Revolving Credit Facility
|
100
|
|
100
|
|
March 2025
|
Floating rate
|
Bilateral Revolving Credit Facility
|
250
|
|
250
|
|
March 2025
|
Floating rate
|
Bilateral Revolving Credit Facility
|
350
|
|
350
|
|
March 2025
|
Floating rate
|
Total committed and available credit facilities
|
$
|
8,100
|
|
$
|
8,100
|
|
|
|
1.Assumes the option to extend the bilateral revolving credit facility will be exercised.
Debt Covenants and Default Provisions
There were no material changes to the debt covenants and default provisions related to the Company's outstanding long-term debt and primary, private credit agreements in the first nine months of 2021. For additional information on the Company's debt covenants and default provisions, see Note 15 to the Consolidated Financial Statements included in the 2020 10-K.
NOTE 12 – COMMITMENTS AND CONTINGENT LIABILITIES
A summary of the Company's commitments and contingent liabilities can be found in Note 16 to the Consolidated Financial Statements included in the 2020 10-K, which is incorporated by reference herein.
Environmental Matters
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies. At September 30, 2021, the Company had accrued obligations of $1,231 million for probable environmental remediation and restoration costs, including $235 million for the remediation of Superfund sites. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the consolidated balance sheets. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to approximately one and a half times that amount. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the Company's results of operations, financial condition and cash flows. It is the opinion of the Company’s management, however, that the possibility is remote that costs in excess of the range disclosed will have a material impact on the Company’s results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration. As new or additional information becomes available and/or certain spending trends become known, management will evaluate such information in determination of the current estimate of environmental liability. At December 31, 2020, the Company had accrued obligations of $1,244 million for probable environmental remediation and restoration costs, including $248 million for the remediation of Superfund sites.
Litigation
Asbestos-Related Matters of Union Carbide Corporation
Each quarter, Union Carbide reviews claims filed, settled and dismissed, as well as average settlement and resolution costs by disease category. Union Carbide also considers additional quantitative and qualitative factors such as the nature of pending claims, trial experience of Union Carbide and other asbestos defendants, current spending for defense and processing costs, significant appellate rulings and legislative developments, trends in the tort system, and their respective effects on expected future resolution costs. Union Carbide's management considers these factors in conjunction with the most recent actuarial study and determines whether a change in the estimate is warranted. Based on Union Carbide's review of 2021 activity, it was determined that no adjustment to the accrual was required at September 30, 2021.
Union Carbide’s total asbestos-related liability for pending and future claims and defense and processing costs was $1,047 million at September 30, 2021 ($1,098 million at December 31, 2020), and was included in “Accrued and other current liabilities” and “Asbestos-related liabilities - noncurrent” in the consolidated balance sheets. At September 30, 2021, approximately 24 percent of the recorded claim liability related to pending claims and approximately 76 percent related to future claims.
Dow Silicones Chapter 11 Related Matters
At September 30, 2021, Dow Silicones and its insurers had made life-to-date payments of $1,762 million to the settlement program administered by an independent claims office (the “Settlement Facility”), created to resolve breast implant and other product liability claims. At September 30, 2021, Dow Silicones estimates that it will be obligated to contribute an additional $160 million to the Settlement Facility ($160 million at December 31, 2020), of which $80 million ($46 million at December 31, 2020) was included in “Accrued and other current liabilities” and $80 million ($114 million at December 31, 2020) was included in "Other noncurrent obligations" in the consolidated balance sheets.
Indemnifications with Corning Incorporated
The Company had indemnification assets with Corning Incorporated of $119 million at September 30, 2021 ($115 million at December 31, 2020), included in "Noncurrent receivables" in the consolidated balance sheets.
Gain Contingency - Dow v. Nova Chemicals Corporation Patent Infringement Matter
As a result of a 2017 damages judgment related to the patent infringement matter, Nova Chemicals Corporation ("Nova") was ordered to pay the Company $645 million Canadian dollars, plus pre- and post-judgment interest, for which the Company received payment of $501 million U.S. dollars in July 2017. In May 2021, the Supreme Court of Canada granted Nova's application for leave and agreed to review the damages judgment. The Company expects a hearing on the appeal in early 2022, with a decision by July 2022. The Company is confident of its chances to continue to defend the entire judgment, particularly the trial and appellate courts' determinations on important factual issues, which will be accorded deferential review on appeal. At September 30, 2021, the Company had $341 million ($341 million at December 31, 2020) included in "Accrued and other current liabilities" in the consolidated balance sheets related to the disputed portion of the damages judgment.
Gain Contingency - Dow v. Nova Chemicals Corporation Ethylene Asset Matter
As a result of a 2019 damages judgment related to the ethylene asset matter, Nova was ordered to pay the Company $1.43 billion Canadian dollars (equivalent to approximately $1.08 billion U.S. dollars). In October 2019, Nova paid $1.08 billion Canadian dollars (equivalent to approximately $0.8 billion U.S. dollars) directly to the Company, and remitted $347 million Canadian dollars to the Canada Revenue Agency ("CRA") for the tax account of one of the Company's subsidiaries. In March 2020, the Company received the full refund from the CRA, equivalent to $259 million U.S. dollars. At September 30, 2021, $323 million ($323 million at December 31, 2020) was included in "Other noncurrent obligations" in the Company's consolidated balance sheets related to the disputed portion of the damages judgment. Dow continues to seek an award of additional damages for the period from 2013 through 2018. The trial court ordered a damages hearing for November 2021 that would resolve the impact of the appellate ruling and quantify Dow's damages for the 2013-2018 period, although Nova may seek to further delay this hearing.
Luxi Chemical Group Breach of Contract Matter
In November 2017, an arbitration panel of the Stockholm Chamber of Commerce held that Luxi Chemical Group Co., Ltd. (“Luxi”) based in Shandong Province, China violated a secrecy and non-use agreement related to the Dow and Johnson Matthey Davy Technologies Limited (“JM”) LP OxoSM Process by using Dow and JM protected information in the design, construction, and operation of its butanol and 2-ethylhexanol plants, awarding damages, fees and costs, plus interest, to both Dow and JM. In September 2021, Luxi paid the arbitration award and interest assessment and, as a result, Dow recorded a pretax gain of $54 million, included in “Sundry income (expense) – net” in the consolidated statements of income and related to Industrial Intermediates & Infrastructure.
Brazilian Tax Credits
In March 2017, the Federal Supreme Court of Brazil (“Brazil Supreme Court”) ruled in a leading case that a Brazilian value-added tax ("ICMS") should not be included in the base used to calculate a taxpayer's federal contribution on total revenue known as PIS/COFINS (the “2017 Decision”). Previously, three of the Company’s Brazilian subsidiaries filed lawsuits challenging the inclusion of ICMS in their calculation of PIS/COFINS, seeking recovery of excess taxes paid. In response to the 2017 Decision, the Brazilian tax authority filed an appeal seeking clarification of the amount of ICMS tax to exclude from the calculation of PIS/COFINS. In May 2021, the Brazil Supreme Court ruled in a leading case related to the amount of ICMS tax to exclude from the calculation of PIS/COFINS, which resolved two of the lawsuits filed by the Company. As a result, in the second quarter of 2021, the Company recorded a pretax gain of $61 million for certain excess PIS/COFINS paid from 2009 to 2019, plus applicable interest, which the Company expects to apply to future required federal tax payments, and the reversal of related liabilities. The pretax gain was recorded in “Cost of sales” in the consolidated statements of income. At September 30, 2021, related tax credits available and expected to be applied to future required federal tax payments totaled $50 million. The Company has not received a final ruling related to its remaining lawsuit.
Guarantees
The following table provides a summary of the final expiration, maximum future payments and recorded liability included in the consolidated balance sheets for guarantees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantees
|
Sep 30, 2021
|
Dec 31, 2020
|
In millions
|
Final
Expiration
|
Maximum
Future Payments 1
|
Recorded Liability
|
Final
Expiration
|
Maximum
Future Payments
|
Recorded Liability
|
Guarantees
|
2038
|
$
|
1,312
|
|
$
|
225
|
|
2023
|
$
|
251
|
|
$
|
2
|
|
1.In addition, TDCC has provided guarantees, in proportion to the Company's 35 percent ownership interest, of all future interest payments that will become due on Sadara’s project financing debt during the grace period, which Dow's share is estimated to be $501 million at September 30, 2021. Based on Sadara's current forecasted cash flows, the Company does not expect to be required to perform under the guarantees.
Guarantees arise during the ordinary course of business from relationships with customers, committed accounts receivable facilities and nonconsolidated affiliates when the Company undertakes an obligation to guarantee the performance of others (via delivery of cash or other assets) if specified triggering events occur. With guarantees, such as commercial or financial contracts, non-performance by the guaranteed party triggers the obligation of the Company to make payments to the beneficiary of the guarantee. The majority of the Company’s guarantees relate to debt of nonconsolidated affiliates, which have expiration dates ranging from less than 1 year to less than 17 years. The Company’s current expectation is that future payment or performance related to the non-performance of others is considered remote.
TDCC has entered into guarantee agreements related to Sadara, a nonconsolidated affiliate. In the first quarter of 2021, Sadara reached an agreement with its lenders to re-profile Sadara's outstanding project financing debt. In conjunction with the completion of Sadara’s debt re-profiling, TDCC entered into a new guarantee of up to approximately $1.3 billion of Sadara’s debt. The debt re-profiling also includes a grace period until June 2026, during which Sadara is obligated to make interest-only payments which are guaranteed by TDCC in proportion to the Company’s 35 percent ownership interest. The total of an Islamic bond and additional project financing outstanding at Sadara was $9.9 billion at September 30, 2021 and December 31, 2020. As part of the successful re-profiling, TDCC’s prior $220 million letter of credit related to the guarantee of one future Sadara debt service schedule payment was cancelled. As a result of these actions, the Company does not expect to provide any shareholder loans or equity contributions to Sadara in 2021.
In the second quarter of 2021, as a part of Sadara's debt re-profiling activities, Sadara established a new $500 million revolving credit facility guaranteed by Dow, which will be used to fund Dow’s pro-rata share of any potential shortfall during the grace period. Based on Sadara's current forecasted cash flows, the Company does not expect Sadara to draw on the facility.
NOTE 13 - LEASES
For additional information on the Company's leases, see Note 17 to the Consolidated Financial Statements included in the 2020 10-K.
The components of lease cost for operating and finance leases for the three and nine months ended September 30, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Cost
|
Three Months Ended
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
Operating lease cost
|
$
|
123
|
|
$
|
122
|
|
$
|
362
|
|
$
|
362
|
|
Finance lease cost
|
|
|
|
|
Amortization of right-of-use assets - finance
|
$
|
19
|
|
$
|
16
|
|
$
|
53
|
|
$
|
42
|
|
Interest on lease liabilities - finance
|
6
|
|
7
|
|
19
|
|
19
|
|
Total finance lease cost
|
$
|
25
|
|
$
|
23
|
|
$
|
72
|
|
$
|
61
|
|
Short-term lease cost
|
57
|
|
54
|
|
177
|
|
161
|
|
Variable lease cost
|
78
|
|
45
|
|
228
|
|
157
|
|
Sublease income
|
(2)
|
|
(2)
|
|
(5)
|
|
(4)
|
|
Total lease cost
|
$
|
281
|
|
$
|
242
|
|
$
|
834
|
|
$
|
737
|
|
The following table provides supplemental cash flow and other information related to leases:
|
|
|
|
|
|
|
|
|
Other Lease Information
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
Operating cash flows for operating leases
|
$
|
364
|
|
$
|
357
|
|
Operating cash flows for finance leases
|
$
|
19
|
|
$
|
19
|
|
Financing cash flows for finance leases
|
$
|
48
|
|
$
|
34
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
Operating leases
|
$
|
133
|
|
$
|
68
|
|
Finance leases
|
$
|
73
|
|
$
|
142
|
|
The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
Lease Position
|
Balance Sheet Classification
|
Sep 30, 2021
|
Dec 31, 2020
|
In millions
|
Assets
|
|
|
|
Operating lease assets
|
Operating lease right-of-use assets
|
$
|
1,727
|
|
$
|
1,856
|
|
Finance lease assets
|
Property
|
726
|
|
665
|
|
Finance lease amortization
|
Accumulated depreciation
|
(263)
|
|
(216)
|
|
Total lease assets
|
|
$
|
2,190
|
|
$
|
2,305
|
|
Liabilities
|
|
|
|
Current
|
|
|
|
Operating
|
Operating lease liabilities - current
|
$
|
413
|
|
$
|
416
|
|
Finance
|
Long-term debt due within one year
|
68
|
|
54
|
|
Noncurrent
|
|
|
|
Operating
|
Operating lease liabilities - noncurrent
|
1,428
|
|
1,521
|
|
Finance
|
Long-Term Debt
|
474
|
|
464
|
|
Total lease liabilities
|
|
$
|
2,383
|
|
$
|
2,455
|
|
The weighted-average remaining lease term and discount rate for leases recorded in the consolidated balance sheets at September 30, 2021 and December 31, 2020 are provided below:
|
|
|
|
|
|
|
|
|
Lease Term and Discount Rate
|
Sep 30, 2021
|
Dec 31, 2020
|
Weighted-average remaining lease term
|
|
|
Operating leases
|
7.2 years
|
7.6 years
|
Finance leases
|
10.3 years
|
11.6 years
|
Weighted-average discount rate
|
|
|
Operating leases
|
3.63
|
%
|
3.84
|
%
|
Finance leases
|
5.04
|
%
|
5.41
|
%
|
The following table provides the maturities of lease liabilities at September 30, 2021:
|
|
|
|
|
|
|
|
|
Maturities of Lease Liabilities
|
Sep 30, 2021
|
In millions
|
Operating Leases
|
Finance Leases
|
2021
|
$
|
140
|
|
$
|
29
|
|
2022
|
434
|
|
89
|
|
2023
|
351
|
|
113
|
|
2024
|
273
|
|
58
|
|
2025
|
201
|
|
47
|
|
2026 and thereafter
|
744
|
|
375
|
|
Total future undiscounted lease payments
|
$
|
2,143
|
|
$
|
711
|
|
Less: Imputed interest
|
302
|
|
169
|
|
Total present value of lease liabilities
|
$
|
1,841
|
|
$
|
542
|
|
At September 30, 2021, Dow had additional leases of approximately $152 million, primarily for equipment, which had not yet commenced. These leases are expected to commence in 2021 and 2022, with lease terms of up to 20 years.
Dow provides guarantees related to certain leased assets, specifying the residual value that will be available to the lessor at lease termination through the sale of the assets to the lessee or third parties. The following table provides a summary of the final expiration, maximum future payments and recorded liability included in the consolidated balance sheets for residual value guarantees at September 30, 2021 and December 31, 2020. The Company had a recorded liability of $56 million related to these residual value guarantees at September 30, 2021 ($22 million at December 31, 2020), as payment of such residual value guarantees was determined to be probable. The lease agreements do not contain any material restrictive covenants.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Guarantees
|
Sep 30, 2021
|
Dec 31, 2020
|
In millions
|
Final Expiration
|
Maximum Future Payments
|
Recorded Liability
|
Final Expiration
|
Maximum Future Payments
|
Recorded Liability
|
Residual value guarantees
|
2031
|
$
|
805
|
|
$
|
56
|
|
2030
|
$
|
818
|
|
$
|
22
|
|
NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in each component of accumulated other comprehensive loss ("AOCL") for the three and nine months ended September 30, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Loss
|
Three Months Ended
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
Unrealized Gains (Losses) on Investments
|
|
|
|
|
Beginning balance
|
$
|
72
|
|
$
|
40
|
|
$
|
104
|
|
$
|
64
|
|
Unrealized gains (losses) on investments
|
(10)
|
|
35
|
|
(25)
|
|
39
|
|
Tax (expense) benefit
|
3
|
|
(8)
|
|
5
|
|
(10)
|
|
Net unrealized gains (losses) on investments
|
(7)
|
|
27
|
|
(20)
|
|
29
|
|
(Gains) losses reclassified from AOCL to net income 1
|
(8)
|
|
(25)
|
|
(33)
|
|
(59)
|
|
Tax expense (benefit) 2
|
2
|
|
6
|
|
8
|
|
14
|
|
Net (gains) losses reclassified from AOCL to net income
|
(6)
|
|
(19)
|
|
(25)
|
|
(45)
|
|
Other comprehensive income (loss), net of tax
|
(13)
|
|
8
|
|
(45)
|
|
(16)
|
|
Ending balance
|
$
|
59
|
|
$
|
48
|
|
$
|
59
|
|
$
|
48
|
|
Cumulative Translation Adjustment
|
|
|
|
|
Beginning balance
|
$
|
(1,118)
|
|
$
|
(1,235)
|
|
$
|
(930)
|
|
$
|
(1,135)
|
|
Gains (losses) on foreign currency translation
|
(148)
|
|
116
|
|
(298)
|
|
18
|
|
Tax (expense) benefit
|
(8)
|
|
4
|
|
(43)
|
|
18
|
|
Net gains (losses) on foreign currency translation
|
(156)
|
|
120
|
|
(341)
|
|
36
|
|
(Gains) losses reclassified from AOCL to net income 3
|
(1)
|
|
(29)
|
|
(4)
|
|
(45)
|
|
Other comprehensive income (loss), net of tax
|
(157)
|
|
91
|
|
(345)
|
|
(9)
|
|
Ending balance
|
$
|
(1,275)
|
|
$
|
(1,144)
|
|
$
|
(1,275)
|
|
$
|
(1,144)
|
|
Pension and Other Postretirement Benefits
|
|
|
|
|
Beginning balance
|
$
|
(8,276)
|
|
$
|
(8,498)
|
|
$
|
(9,559)
|
|
$
|
(8,781)
|
|
Gains (losses) arising during the period 4
|
2
|
|
2
|
|
1,270
|
|
2
|
|
Tax (expense) benefit
|
—
|
|
—
|
|
(298)
|
|
—
|
|
Net gains (losses) arising during the period
|
2
|
|
2
|
|
972
|
|
2
|
|
Amortization and recognition of net loss and prior service credits 5
|
191
|
|
188
|
|
583
|
|
557
|
|
Tax expense (benefit) 2
|
(44)
|
|
(43)
|
|
(123)
|
|
(129)
|
|
Net loss and prior service credits reclassified from AOCL to net income
|
147
|
|
145
|
|
460
|
|
428
|
|
Other comprehensive income (loss), net of tax
|
149
|
|
147
|
|
1,432
|
|
430
|
|
Ending balance
|
$
|
(8,127)
|
|
$
|
(8,351)
|
|
$
|
(8,127)
|
|
$
|
(8,351)
|
|
Derivative Instruments
|
|
|
|
|
Beginning balance
|
$
|
(354)
|
|
$
|
(532)
|
|
$
|
(470)
|
|
$
|
(394)
|
|
Gains (losses) on derivative instruments
|
55
|
|
45
|
|
167
|
|
(114)
|
|
Tax (expense) benefit
|
(9)
|
|
(10)
|
|
(10)
|
|
(2)
|
|
Net gains (losses) on derivative instruments
|
46
|
|
35
|
|
157
|
|
(116)
|
|
(Gains) losses reclassified from AOCL to net income 6
|
(16)
|
|
5
|
|
(10)
|
|
24
|
|
Tax expense (benefit) 2
|
2
|
|
(2)
|
|
1
|
|
(8)
|
|
Net (gains) losses reclassified from AOCL to net income
|
(14)
|
|
3
|
|
(9)
|
|
16
|
|
Other comprehensive income (loss), net of tax
|
32
|
|
38
|
|
148
|
|
(100)
|
|
Ending balance
|
$
|
(322)
|
|
$
|
(494)
|
|
$
|
(322)
|
|
$
|
(494)
|
|
Total AOCL ending balance
|
$
|
(9,665)
|
|
$
|
(9,941)
|
|
$
|
(9,665)
|
|
$
|
(9,941)
|
|
1.Reclassified to "Net sales" and "Sundry income (expense) - net."
2.Reclassified to "Provision for income taxes."
3.Reclassified to "Sundry income (expense) - net."
4.See Note 16 for additional information.
5.These AOCL components are included in the computation of net periodic benefit cost of the Company's defined benefit pension and other postretirement benefit plans. See Note 16 for additional information.
6.Reclassified to "Cost of sales," "Sundry income (expense) - net" and "Interest expense and amortization of debt discount."
NOTE 15 – NONCONTROLLING INTERESTS
Ownership interests in the Company's subsidiaries held by parties other than the Company are presented separately from the Company's equity in the consolidated balance sheets as "Noncontrolling interests." The amount of consolidated net income attributable to the Company and the noncontrolling interests are both presented on the face of the consolidated statements of income.
The following table summarizes the activity for equity attributable to noncontrolling interests for the three and nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interests
|
Three Months Ended
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
Balance at beginning of period
|
$
|
580
|
|
$
|
560
|
|
$
|
570
|
|
$
|
553
|
|
Net income attributable to noncontrolling interests
|
23
|
|
24
|
|
69
|
|
51
|
|
|
|
|
|
|
Distributions to noncontrolling interests 1
|
(7)
|
|
—
|
|
(27)
|
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
Deconsolidation of noncontrolling interests 2
|
—
|
|
(7)
|
|
—
|
|
(7)
|
|
Cumulative translation adjustments
|
(8)
|
|
2
|
|
(23)
|
|
(6)
|
|
Other
|
1
|
|
(1)
|
|
—
|
|
(1)
|
|
Balance at end of period
|
$
|
589
|
|
$
|
578
|
|
$
|
589
|
|
$
|
578
|
|
1.Distributions to noncontrolling interests are net of $8 million for the three and nine months ended September 30, 2021 ($7 million for the three and nine months ended September 30, 2020) in dividends paid to a joint venture, which were reclassified to "Equity in earnings (losses) of nonconsolidated affiliates" in the consolidated statements of income.
2.Related to the divestiture of the Company's interest in a cogeneration facility in Brazil in the third quarter of 2020.
NOTE 16 – PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
A summary of the Company's pension and other postretirement benefit plans can be found in Note 20 to the Consolidated Financial Statements included in the 2020 10-K.
On March 4, 2021, the Company announced changes to its U.S. tax-qualified and non-qualified pension plans. Effective December 31, 2023 ("Effective Date"), the Company will freeze the pensionable compensation and credited service amounts used to calculate pension benefits for employees who participate in its U.S. tax-qualified and non-qualified retirement programs (collectively, the "U.S. Plans"). As a result, at the Effective Date and subject to any bargaining obligations required by law, active participants of the U.S. Plans will not accrue additional benefits for future service and compensation. Additionally, contributions to U.S. tax-qualified and non-qualified defined contribution plans will be harmonized across the Company's U.S. eligible employee population. The new matching contribution, beginning January 1, 2022, will allow all eligible U.S. employees to receive matching contributions of up to 5 percent of their eligible compensation. In addition, beginning on January 1, 2024, all eligible U.S. employees will receive an automatic non-elective contribution of 4 percent of eligible compensation to their respective defined contribution plans.
The Company's funding policy is to contribute to defined benefit pension plans in the United States and a number of other countries when pension laws and/or economics either require or encourage funding. On March 4, 2021, the Company elected to contribute $1 billion to its U.S. tax-qualified pension plans and, as a result, increased its estimated global 2021 pension contributions to approximately $1,230 million, of which $1,165 million has been contributed through September 30, 2021.
In connection with the foregoing plan amendments, the Company remeasured its U.S. Plans effective February 28, 2021, which resulted in a pretax actuarial gain of $1,268 million, included in other comprehensive income and inclusive of a $345 million reduction in the projected benefit obligation resulting from the plan amendments, and a pretax curtailment gain of $19 million, recognized in the first quarter of 2021.
The following table provides the components of the Company's net periodic benefit cost for all significant plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit Cost for All Significant Plans
|
Three Months Ended
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
Defined Benefit Pension Plans
|
|
|
|
|
Service cost
|
$
|
95
|
|
$
|
100
|
|
$
|
293
|
|
$
|
298
|
|
Interest cost
|
151
|
|
191
|
|
444
|
|
574
|
|
Expected return on plan assets
|
(434)
|
|
(415)
|
|
(1,291)
|
|
(1,241)
|
|
Amortization of prior service credit
|
(5)
|
|
(4)
|
|
(15)
|
|
(14)
|
|
Amortization of net loss
|
198
|
|
194
|
|
622
|
|
578
|
|
Curtailment gain
|
—
|
|
—
|
|
(19)
|
|
—
|
|
Net periodic benefit cost
|
$
|
5
|
|
$
|
66
|
|
$
|
34
|
|
$
|
195
|
|
|
|
|
|
|
Other Postretirement Benefit Plans
|
|
|
|
|
Service cost
|
$
|
2
|
|
$
|
2
|
|
$
|
6
|
|
$
|
6
|
|
Interest cost
|
6
|
|
10
|
|
17
|
|
29
|
|
Amortization of net gain
|
(2)
|
|
(2)
|
|
(5)
|
|
(7)
|
|
|
|
|
|
|
Net periodic benefit cost
|
$
|
6
|
|
$
|
10
|
|
$
|
18
|
|
$
|
28
|
|
Net periodic benefit cost, other than the service cost component, is included in "Sundry income (expense) - net" in the consolidated statements of income.
NOTE 17 – STOCK-BASED COMPENSATION
A summary of the Company's stock-based compensation plans can be found in Note 21 to the Consolidated Financial Statements included in the 2020 10-K.
Stock Incentive Plan
The Company grants stock-based compensation to employees and non-employee directors under the 2019 Stock Incentive Plan, as amended. Most of the Company's stock-based compensation awards are granted in the first quarter of each year.
In the first quarter of 2021, Dow Inc. granted the following stock-based compensation awards to employees:
•1.3 million stock options with a weighted-average exercise price of $57.67 per share and a weighted-average fair value of $10.37 per share;
•1.6 million restricted stock units with a weighted-average fair value of $57.70 per share; and
•1.2 million performance stock units with a weighted-average fair value of $61.48 per share.
There was minimal grant activity in the second and third quarters of 2021.
Employee Stock Purchase Plan
The Board unanimously approved the Dow Inc. 2021 Employee Stock Purchase Plan (the "2021 ESPP"), which was approved by the Company's stockholders at the 2021 Annual Meeting of Stockholders held on April 15, 2021. Under the 2021 ESPP offering, most employees were eligible to purchase shares of common stock of Dow Inc. valued at up to 10 percent of their annual total base salary or wages. The number of shares purchased is determined using the amount contributed by the employee divided by the plan price. The plan price of the stock is equal to 85 percent of the fair market value (closing price) of the common stock at June 1, 2021 (beginning) or December 3, 2021 (ending) of the offering period, whichever is lower.
In the second quarter of 2021, employees subscribed to the right to purchase approximately 2.0 million shares under the 2021 ESPP. The plan price is fixed upon the close of the offering period and will be determined in the fourth quarter of 2021. The shares will be delivered to employees in the fourth quarter of 2021.
NOTE 18 – FINANCIAL INSTRUMENTS
A summary of the Company's financial instruments, risk management policies, derivative instruments and hedging activities can be found in Note 22 to the Consolidated Financial Statements included in the 2020 10-K.
The following table summarizes the fair value of financial instruments at September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Financial Instruments
|
Sep 30, 2021
|
Dec 31, 2020
|
In millions
|
Cost
|
Gain
|
Loss
|
Fair Value
|
Cost
|
Gain
|
Loss
|
Fair Value
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
Held-to-maturity securities 1
|
$
|
921
|
|
$
|
—
|
|
$
|
—
|
|
$
|
921
|
|
$
|
980
|
|
$
|
—
|
|
$
|
—
|
|
$
|
980
|
|
Money market funds
|
498
|
|
—
|
|
—
|
|
498
|
|
484
|
|
—
|
|
—
|
|
484
|
|
Total cash equivalents
|
$
|
1,419
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,419
|
|
$
|
1,464
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1,464
|
|
Marketable securities 2
|
$
|
138
|
|
$
|
3
|
|
$
|
—
|
|
$
|
141
|
|
$
|
45
|
|
$
|
—
|
|
$
|
—
|
|
$
|
45
|
|
Other investments:
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
Government debt 3
|
$
|
687
|
|
$
|
18
|
|
$
|
(24)
|
|
$
|
681
|
|
$
|
673
|
|
$
|
35
|
|
$
|
(10)
|
|
$
|
698
|
|
Corporate bonds
|
1,172
|
|
89
|
|
(9)
|
|
1,252
|
|
822
|
|
119
|
|
(5)
|
|
936
|
|
Total debt securities
|
$
|
1,859
|
|
$
|
107
|
|
$
|
(33)
|
|
$
|
1,933
|
|
$
|
1,495
|
|
$
|
154
|
|
$
|
(15)
|
|
$
|
1,634
|
|
Equity securities 4
|
6
|
|
19
|
|
—
|
|
25
|
|
6
|
|
34
|
|
—
|
|
40
|
|
Total other investments
|
$
|
1,865
|
|
$
|
126
|
|
$
|
(33)
|
|
$
|
1,958
|
|
$
|
1,501
|
|
$
|
188
|
|
$
|
(15)
|
|
$
|
1,674
|
|
Total cash equivalents, marketable securities and other investments
|
$
|
3,422
|
|
$
|
129
|
|
$
|
(33)
|
|
$
|
3,518
|
|
$
|
3,010
|
|
$
|
188
|
|
$
|
(15)
|
|
$
|
3,183
|
|
Long-term debt including debt due within one year 5
|
$
|
(14,318)
|
|
$
|
21
|
|
$
|
(2,673)
|
|
$
|
(16,970)
|
|
$
|
(16,951)
|
|
$
|
6
|
|
$
|
(3,659)
|
|
$
|
(20,604)
|
|
Derivatives relating to:
|
|
|
|
|
|
|
|
|
Interest rates 6
|
$
|
—
|
|
$
|
—
|
|
$
|
(166)
|
|
$
|
(166)
|
|
$
|
—
|
|
$
|
41
|
|
$
|
(182)
|
|
$
|
(141)
|
|
Foreign currency
|
—
|
|
53
|
|
(82)
|
|
(29)
|
|
—
|
|
69
|
|
(84)
|
|
(15)
|
|
Commodities 6
|
—
|
|
240
|
|
(132)
|
|
108
|
|
—
|
|
63
|
|
(84)
|
|
(21)
|
|
Total derivatives
|
$
|
—
|
|
$
|
293
|
|
$
|
(380)
|
|
$
|
(87)
|
|
$
|
—
|
|
$
|
173
|
|
$
|
(350)
|
|
$
|
(177)
|
|
1.The Company's held-to-maturity securities primarily included treasury bills and time deposits.
2.The Company’s investments in marketable securities are included in “Other current assets” in the consolidated balance sheets.
3.U.S. Treasury obligations, U.S. agency obligations, U.S. agency mortgage-backed securities and other municipalities’ obligations.
4.Equity securities with a readily determinable fair value.
5.Cost includes fair value hedge adjustment gains of $48 million at September 30, 2021 and $69 million at December 31, 2020 on $2,279 million of debt at September 30, 2021 and $3,314 million at December 31, 2020.
6.Presented net of cash collateral where master netting arrangements allow.
Cost approximates fair value for all other financial instruments.
Debt Securities
The Company's investments in debt securities are primarily classified as available-for-sale. The following table provides the investing results from available-for-sale securities for the nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
Investing Results
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Proceeds from sales of available-for-sale securities
|
$
|
339
|
|
$
|
742
|
|
Gross realized gains
|
$
|
41
|
|
$
|
84
|
|
Gross realized losses
|
$
|
(8)
|
|
$
|
(25)
|
|
The following table summarizes the contractual maturities of the Company's investments in debt securities:
|
|
|
|
|
|
|
|
|
Contractual Maturities of Debt Securities at Sep 30, 2021 1
|
Cost
|
Fair Value
|
In millions
|
Within one year
|
$
|
22
|
|
$
|
23
|
|
One to five years
|
618
|
|
650
|
|
Six to ten years
|
709
|
|
720
|
|
After ten years
|
510
|
|
540
|
|
Total
|
$
|
1,859
|
|
$
|
1,933
|
|
1.Includes marketable securities with maturities of less than one year.
Equity Securities
There were no material adjustments to the carrying value of the not readily determinable investments for impairment or observable price changes for the three months ended September 30, 2021. There was $6 million of net unrealized losses recognized in earnings on equity securities for the three months ended September 30, 2021 ($1 million net unrealized loss for the three months ended September 30, 2020). There was $7 million of net unrealized losses recognized in earnings on equity securities for the nine months ended September 30, 2021 ($1 million unrealized loss for the nine months ended September 30, 2020).
|
|
|
|
|
|
|
|
|
Investments in Equity Securities
|
Sep 30, 2021
|
Dec 31, 2020
|
In millions
|
Readily determinable fair value
|
$
|
25
|
|
$
|
40
|
|
Not readily determinable fair value
|
$
|
226
|
|
$
|
215
|
|
Derivative Instruments
The notional amounts of the Company's derivative instruments presented on a net basis at September 30, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
Notional Amounts - Net
|
Sep 30, 2021
|
Dec 31, 2020
|
In millions
|
Derivatives designated as hedging instruments:
|
|
|
Interest rate contracts
|
$
|
3,005
|
|
$
|
612
|
|
Foreign currency contracts
|
$
|
3,725
|
|
$
|
3,784
|
|
Derivatives not designated as hedging instruments:
|
|
|
Interest rate contracts
|
$
|
58
|
|
$
|
94
|
|
Foreign currency contracts
|
$
|
13,663
|
|
$
|
9,187
|
|
The notional amounts of the Company's commodity derivatives presented on a net basis at September 30, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Notionals - Net
|
Sep 30, 2021
|
Dec 31, 2020
|
Notional Volume Unit
|
Derivatives designated as hedging instruments:
|
|
|
|
Hydrocarbon derivatives
|
6.9
|
|
10.9
|
|
million barrels of oil equivalent
|
Derivatives not designated as hedging instruments:
|
|
|
|
Hydrocarbon derivatives
|
0.1
|
|
—
|
|
million barrels of oil equivalent
|
|
|
|
|
|
|
|
|
|
|
Maturity Dates of Derivatives Designated as Hedging Instruments
|
Year
|
Interest rate contracts
|
2023
|
Foreign currency contracts
|
2023
|
Commodity contracts
|
2023
|
The following tables provide the fair value and balance sheet classification of derivative instruments at September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Derivative Instruments
|
Sep 30, 2021
|
In millions
|
Balance Sheet Classification
|
Gross
|
Counterparty and Cash Collateral Netting 1
|
Net Amounts Included in the Consolidated Balance Sheets
|
Asset derivatives
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
Interest rate contracts
|
Deferred charges and other assets
|
$
|
182
|
|
$
|
(182)
|
|
$
|
—
|
|
Foreign currency contracts
|
Other current assets
|
32
|
|
(18)
|
|
14
|
|
Foreign currency contracts
|
Deferred charges and other assets
|
86
|
|
(51)
|
|
35
|
|
Commodity contracts
|
Other current assets
|
448
|
|
(253)
|
|
195
|
|
Commodity contracts
|
Deferred charges and other assets
|
68
|
|
(32)
|
|
36
|
|
Total
|
|
$
|
816
|
|
$
|
(536)
|
|
$
|
280
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
Other current assets
|
$
|
20
|
|
$
|
(16)
|
|
$
|
4
|
|
Commodity contracts
|
Other current assets
|
29
|
|
(20)
|
|
9
|
|
Commodity contracts
|
Deferred charges and other assets
|
2
|
|
(2)
|
|
—
|
|
Total
|
|
$
|
51
|
|
$
|
(38)
|
|
$
|
13
|
|
Total asset derivatives
|
|
$
|
867
|
|
$
|
(574)
|
|
$
|
293
|
|
|
|
|
|
|
Liability derivatives
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
Other noncurrent obligations
|
$
|
233
|
|
$
|
(182)
|
|
$
|
51
|
|
Foreign currency contracts
|
Accrued and other current liabilities
|
21
|
|
(18)
|
|
3
|
|
Foreign currency contracts
|
Other noncurrent obligations
|
51
|
|
(51)
|
|
—
|
|
Commodity contracts
|
Accrued and other current liabilities
|
391
|
|
(287)
|
|
104
|
|
Commodity contracts
|
Other noncurrent obligations
|
48
|
|
(34)
|
|
14
|
|
Total
|
|
$
|
744
|
|
$
|
(572)
|
|
$
|
172
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
Other noncurrent obligations
|
$
|
115
|
|
$
|
—
|
|
$
|
115
|
|
Foreign currency contracts
|
Accrued and other current liabilities
|
95
|
|
(16)
|
|
79
|
|
Commodity contracts
|
Accrued and other current liabilities
|
34
|
|
(21)
|
|
13
|
|
Commodity contracts
|
Other noncurrent obligations
|
3
|
|
(2)
|
|
1
|
|
Total
|
|
$
|
247
|
|
$
|
(39)
|
|
$
|
208
|
|
Total liability derivatives
|
|
$
|
991
|
|
$
|
(611)
|
|
$
|
380
|
|
1.Counterparty and cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between the Company and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Derivative Instruments
|
Dec 31, 2020
|
In millions
|
Balance Sheet Classification
|
Gross
|
Counterparty and Cash Collateral Netting 1
|
Net Amounts Included in the Consolidated Balance Sheets
|
Asset derivatives
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
Interest rate contracts
|
Other current assets
|
$
|
3
|
|
$
|
(3)
|
|
$
|
—
|
|
Foreign currency contracts
|
Other current assets
|
39
|
|
(19)
|
|
20
|
|
Commodity contracts
|
Other current assets
|
146
|
|
(109)
|
|
37
|
|
Commodity contracts
|
Deferred charges and other assets
|
31
|
|
(8)
|
|
23
|
|
Total
|
|
$
|
219
|
|
$
|
(139)
|
|
$
|
80
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
Deferred charges and other assets
|
$
|
41
|
|
$
|
—
|
|
$
|
41
|
|
Foreign currency contracts
|
Other current assets
|
74
|
|
(25)
|
|
49
|
|
Commodity contracts
|
Other current assets
|
4
|
|
(1)
|
|
3
|
|
|
|
|
|
|
Total
|
|
$
|
119
|
|
$
|
(26)
|
|
$
|
93
|
|
Total asset derivatives
|
|
$
|
338
|
|
$
|
(165)
|
|
$
|
173
|
|
|
|
|
|
|
Liability derivatives
|
|
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
Interest rate contracts
|
Accrued and other current liabilities
|
$
|
7
|
|
$
|
(3)
|
|
$
|
4
|
|
|
|
|
|
|
Foreign currency contracts
|
Accrued and other current liabilities
|
93
|
|
(19)
|
|
74
|
|
Commodity contracts
|
Accrued and other current liabilities
|
151
|
|
(112)
|
|
39
|
|
Commodity contracts
|
Other noncurrent obligations
|
48
|
|
(9)
|
|
39
|
|
Total
|
|
$
|
299
|
|
$
|
(143)
|
|
$
|
156
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
Other noncurrent obligations
|
$
|
178
|
|
$
|
—
|
|
$
|
178
|
|
Foreign currency contracts
|
Accrued and other current liabilities
|
35
|
|
(25)
|
|
10
|
|
Commodity contracts
|
Accrued and other current liabilities
|
9
|
|
(3)
|
|
6
|
|
|
|
|
|
|
Total
|
|
$
|
222
|
|
$
|
(28)
|
|
$
|
194
|
|
Total liability derivatives
|
|
$
|
521
|
|
$
|
(171)
|
|
$
|
350
|
|
1.Counterparty and cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between the Company and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty.
Assets and liabilities related to forward contracts, interest rate swaps, currency swaps, options and other conditional or exchange contracts executed with the same counterparty under a master netting arrangement are netted. Collateral accounts are netted with corresponding assets or liabilities, when applicable. The Company posted cash collateral of $45 million at September 30, 2021 ($7 million at December 31, 2020). No cash collateral was posted by counterparties with the Company at September 30, 2021 and December 31, 2020.
The following tables summarize the gain (loss) of derivative instruments in the consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Derivative Instruments
|
Amount of gain (loss) recognized in OCI 1
|
Amount of gain (loss) recognized in income 2
|
Income Statement Classification
|
|
Three Months Ended
|
Three Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
Derivatives designated as hedging
instruments:
|
|
|
|
|
|
Fair value hedges:
|
|
|
|
|
|
|
|
|
|
|
|
Excluded components 3
|
$
|
—
|
|
$
|
3
|
|
$
|
—
|
|
$
|
—
|
|
Interest expense and amortization of debt discount
|
Cash flow hedges:
|
|
|
|
|
|
Interest rate contracts
|
5
|
|
—
|
|
(2)
|
|
(1)
|
|
Interest expense and amortization of debt discount
|
Foreign currency contracts
|
4
|
|
(12)
|
|
(3)
|
|
(1)
|
|
Cost of sales
|
|
|
|
|
|
|
Commodity contracts
|
37
|
|
42
|
|
21
|
|
(4)
|
|
Cost of sales
|
Net foreign investment hedges:
|
|
|
|
|
|
Foreign currency contracts
|
20
|
|
(19)
|
|
—
|
|
—
|
|
|
Excluded components 3
|
12
|
|
—
|
|
1
|
|
2
|
|
Sundry income (expense) - net
|
Total derivatives designated as hedging instruments
|
$
|
78
|
|
$
|
14
|
|
$
|
17
|
|
$
|
(4)
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Interest rate contracts
|
$
|
—
|
|
$
|
—
|
|
$
|
(2)
|
|
$
|
(3)
|
|
Interest expense and amortization of debt discount
|
Foreign currency contracts
|
—
|
|
—
|
|
(84)
|
|
(5)
|
|
Sundry income (expense) - net
|
Commodity contracts
|
—
|
|
—
|
|
(12)
|
|
(7)
|
|
Cost of sales
|
Total derivatives not designated as
hedging instruments
|
$
|
—
|
|
$
|
—
|
|
$
|
(98)
|
|
$
|
(15)
|
|
|
Total derivatives
|
$
|
78
|
|
$
|
14
|
|
$
|
(81)
|
|
$
|
(19)
|
|
|
1.OCI is defined as other comprehensive income (loss).
2.Pretax amounts.
3.The excluded components are related to the time value of the derivatives designated as hedges.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Derivative Instruments
|
Amount of gain (loss) recognized in OCI 1
|
Amount of gain (loss) recognized in income 2
|
Income Statement Classification
|
|
Nine Months Ended
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
Fair value hedges:
|
|
|
|
|
|
Interest rate contracts
|
$
|
—
|
|
$
|
—
|
|
$
|
(25)
|
|
$
|
24
|
|
Interest expense and amortization of debt discount 3
|
Excluded components 4
|
2
|
|
10
|
|
—
|
|
—
|
|
Interest expense and amortization of debt discount
|
Cash flow hedges:
|
|
|
|
|
|
Interest rate contracts
|
(39)
|
|
—
|
|
(7)
|
|
(1)
|
|
Interest expense and amortization of debt discount
|
Foreign currency contracts
|
10
|
|
(9)
|
|
(15)
|
|
8
|
|
Cost of sales
|
|
|
|
|
|
|
Commodity contracts
|
143
|
|
(23)
|
|
32
|
|
(32)
|
|
Cost of sales
|
Net foreign investment hedges:
|
|
|
|
|
|
Foreign currency contracts
|
33
|
|
(3)
|
|
—
|
|
—
|
|
|
Excluded components 4
|
20
|
|
27
|
|
5
|
|
18
|
|
Sundry income (expense) - net
|
Total derivatives designated as hedging instruments
|
$
|
169
|
|
$
|
2
|
|
$
|
(10)
|
|
$
|
17
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Interest rate contracts
|
$
|
—
|
|
$
|
—
|
|
$
|
(5)
|
|
$
|
(10)
|
|
Interest expense and amortization of debt discount
|
Foreign currency contracts
|
—
|
|
—
|
|
(202)
|
|
(15)
|
|
Sundry income (expense) - net
|
Commodity contracts
|
—
|
|
—
|
|
(47)
|
|
10
|
|
Cost of sales
|
Total derivatives not designated as
hedging instruments
|
$
|
—
|
|
$
|
—
|
|
$
|
(254)
|
|
$
|
(15)
|
|
|
Total derivatives
|
$
|
169
|
|
$
|
2
|
|
$
|
(264)
|
|
$
|
2
|
|
|
1.OCI is defined as other comprehensive income (loss).
2.Pretax amounts.
3.Gain (loss) recognized in income of derivatives is offset by gain (loss) recognized in income of the hedged item.
4.The excluded components are related to the time value of the derivatives designated as hedges.
The following table provides the net after-tax amounts expected to be reclassified from AOCL to income within the next 12 months:
|
|
|
|
|
|
Expected Reclassifications from AOCL within the next 12 months
|
Sep 30, 2021
|
In millions
|
Cash flow hedges:
|
|
Interest rate contracts
|
$
|
(8)
|
|
Commodity contracts
|
$
|
74
|
|
Foreign currency contracts
|
$
|
5
|
|
Net foreign investment hedges:
|
|
Excluded components
|
$
|
9
|
|
NOTE 19 – FAIR VALUE MEASUREMENTS
A summary of the Company's recurring and nonrecurring fair value measurements can be found in Note 23 to the Consolidated Financial Statements included in the 2020 10-K.
Fair Value Measurements on a Recurring Basis
The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basis of Fair Value Measurements on a Recurring Basis
|
Sep 30, 2021
|
Dec 31, 2020
|
Quoted Prices in Active Markets for Identical Items
(Level 1)
|
Significant Other Observable Inputs
(Level 2)
|
Significant Unobservable Inputs
(Level 3)
|
Total
|
Quoted Prices in Active Markets for Identical Items
(Level 1)
|
Significant Other Observable Inputs
(Level 2)
|
|
Total
|
In millions
|
|
Assets at fair value:
|
|
|
|
|
|
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
Held-to-maturity securities 1
|
$
|
—
|
|
$
|
921
|
|
$
|
—
|
|
$
|
921
|
|
$
|
—
|
|
$
|
980
|
|
|
$
|
980
|
|
Money market funds
|
—
|
|
498
|
|
—
|
|
498
|
|
—
|
|
484
|
|
|
484
|
|
Marketable securities 2
|
—
|
|
141
|
|
—
|
|
141
|
|
—
|
|
45
|
|
|
45
|
|
Equity securities 3
|
25
|
|
—
|
|
—
|
|
25
|
|
40
|
|
—
|
|
|
40
|
|
Debt securities: 3
|
|
|
|
|
|
|
|
|
Government debt 4
|
—
|
|
681
|
|
—
|
|
681
|
|
—
|
|
698
|
|
|
698
|
|
Corporate bonds
|
39
|
|
1,213
|
|
—
|
|
1,252
|
|
28
|
|
908
|
|
|
936
|
|
Derivatives relating to: 5
|
|
|
|
|
|
|
|
|
Interest rates
|
—
|
|
182
|
|
—
|
|
182
|
|
—
|
|
44
|
|
|
44
|
|
Foreign currency
|
—
|
|
138
|
|
—
|
|
138
|
|
—
|
|
113
|
|
|
113
|
|
Commodities
|
20
|
|
527
|
|
—
|
|
547
|
|
8
|
|
173
|
|
|
181
|
|
Total assets at fair value
|
$
|
84
|
|
$
|
4,301
|
|
$
|
—
|
|
$
|
4,385
|
|
$
|
76
|
|
$
|
3,445
|
|
|
$
|
3,521
|
|
Liabilities at fair value:
|
|
|
|
|
|
|
|
|
Long-term debt including debt due within one year 6
|
$
|
—
|
|
$
|
16,970
|
|
$
|
—
|
|
$
|
16,970
|
|
$
|
—
|
|
$
|
20,604
|
|
|
$
|
20,604
|
|
Guarantee liability 7
|
—
|
|
—
|
|
225
|
|
225
|
|
—
|
|
—
|
|
|
—
|
|
Derivatives relating to: 5
|
|
|
|
|
|
|
|
|
Interest rates
|
—
|
|
348
|
|
—
|
|
348
|
|
—
|
|
185
|
|
|
185
|
|
Foreign currency
|
—
|
|
167
|
|
—
|
|
167
|
|
—
|
|
128
|
|
|
128
|
|
Commodities
|
47
|
|
429
|
|
—
|
|
476
|
|
7
|
|
201
|
|
|
208
|
|
Total liabilities at fair value
|
$
|
47
|
|
$
|
17,914
|
|
$
|
225
|
|
$
|
18,186
|
|
$
|
7
|
|
$
|
21,118
|
|
|
$
|
21,125
|
|
1.The Company's held-to-maturity securities primarily included treasury bills and time deposits.
2.The Company’s investments in marketable securities are included in “Other current assets” in the consolidated balance sheets.
3.The Company’s investments in debt securities, which are primarily available-for-sale, and equity securities are included in “Other investments” in the consolidated balance sheets.
4.U.S. Treasury obligations, U.S. agency obligations, U.S. agency mortgage-backed securities and other municipalities’ obligations.
5.See Note 18 for the classification of derivatives in the consolidated balance sheets.
6.See Note 18 for information on fair value measurements of long-term debt.
7.Estimated liability for TDCC's guarantee of Sadara's debt which is included in "Other noncurrent obligations" in the consolidated balance sheets. See Note 12 for additional information.
For equity securities calculated at net asset value per share (or its equivalent), the Company had $125 million in private market securities and $22 million in real estate at September 30, 2021 ($111 million in private market securities and $19 million in real estate at December 31, 2020). There are no redemption restrictions and the unfunded commitments on these investments were $89 million at September 30, 2021 ($63 million at December 31, 2020).
For liabilities classified as Level 3 measurements, the fair value is based on significant unobservable inputs including assumptions where there is little, if any, market activity. The fair value of the Company’s accrued liability related to the guarantee of Sadara’s debt is in proportion to the Company’s 35 percent ownership interest in Sadara. The estimated fair value of the guarantee was calculated using a "with" and "without" method. The fair value of the debt was calculated "with" the guarantee less the fair value of the debt "without" the guarantee. The "with" and "without" values were calculated using a discounted cash flow method based on contractual cash flows as well as projected prepayments made on the debt by Sadara. See Note 12 for further information on guarantees classified as Level 3 measurements.
NOTE 20 – VARIABLE INTEREST ENTITIES
A summary of the Company's variable interest entities ("VIEs") can be found in Note 24 to the Consolidated Financial Statements included in the 2020 10-K.
Assets and Liabilities of Consolidated VIEs
The Company's consolidated financial statements include the assets, liabilities and results of operations of VIEs for which the Company is the primary beneficiary. The other equity holders’ interests are included in “Net income attributable to noncontrolling interests” in the consolidated statements of income and "Noncontrolling interests" in the consolidated balance sheets.
The following table summarizes the carrying amounts of these entities' assets and liabilities included in the Company’s consolidated balance sheets at September 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
Assets and Liabilities of Consolidated VIEs
|
Sep 30, 2021
|
Dec 31, 2020
|
In millions
|
Cash and cash equivalents
|
$
|
49
|
|
$
|
26
|
|
Other current assets
|
38
|
|
44
|
|
Net property
|
187
|
|
232
|
|
Other noncurrent assets
|
15
|
|
17
|
|
Total assets 1
|
$
|
289
|
|
$
|
319
|
|
Current liabilities
|
$
|
51
|
|
$
|
73
|
|
Long-term debt
|
4
|
|
6
|
|
Other noncurrent obligations
|
14
|
|
18
|
|
Total liabilities 2
|
$
|
69
|
|
$
|
97
|
|
1.All assets were restricted at September 30, 2021 and December 31, 2020.
2.All liabilities were nonrecourse at September 30, 2021 and December 31, 2020.
Amounts presented in the consolidated balance sheets and the table above as restricted assets or nonrecourse obligations relating to consolidated VIEs at September 30, 2021 and December 31, 2020 are adjusted for intercompany eliminations.
Nonconsolidated VIEs
The following table summarizes the carrying amounts of assets included in the consolidated balance sheets at September 30, 2021 and December 31, 2020, related to variable interests in joint ventures or entities for which the Company is not the primary beneficiary. The Company's maximum exposure to loss is the same as the carrying amounts.
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amounts of Assets Related to Nonconsolidated VIEs
|
|
Sep 30, 2021
|
Dec 31, 2020
|
In millions
|
Description of asset
|
Silicon joint ventures
|
Equity method investments 1
|
$
|
113
|
|
$
|
107
|
|
1.Included in "Investment in nonconsolidated affiliates" in the consolidated balance sheets.
NOTE 21 – RELATED PARTY TRANSACTIONS
TDCC has committed to fund Dow Inc.'s dividends paid to common stockholders and share repurchases, as approved by Dow Inc.'s Board from time to time, as well as certain governance expenses. Funding is accomplished through intercompany loans. TDCC's Board reviews and determines a dividend distribution to Dow Inc. to settle the intercompany loans. The following table summarizes cash dividends TDCC declared and paid to Dow Inc. for the three and nine months ended September 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TDCC Cash Dividends Declared and Paid
|
Three Months Ended
|
Nine Months Ended
|
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
In millions
|
Cash dividends declared and paid
|
$
|
919
|
|
$
|
513
|
|
$
|
2,361
|
|
$
|
1,685
|
|
At September 30, 2021 and December 31, 2020, TDCC's outstanding intercompany loan balance with Dow Inc. was insignificant.
NOTE 22 – SEGMENTS AND GEOGRAPHIC REGIONS
Dow’s measure of profit/loss for segment reporting purposes is Operating EBIT as this is the manner in which the Company's chief operating decision maker assesses performance and allocates resources. The Company defines Operating EBIT as earnings (i.e., "Income before income taxes") before interest, excluding the impact of significant items. Operating EBIT by segment includes all operating items relating to the businesses; items that principally apply to Dow as a whole are assigned to Corporate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Information
|
Pack. & Spec. Plastics
|
Ind. Interm. & Infrast.
|
Perf. Materials & Coatings
|
Corp.
|
Total
|
In millions
|
Three months ended Sep 30, 2021
|
|
|
|
|
|
Net sales
|
$
|
7,736
|
|
$
|
4,481
|
|
$
|
2,526
|
|
$
|
94
|
|
$
|
14,837
|
|
Equity in earnings of nonconsolidated affiliates
|
$
|
124
|
|
$
|
122
|
|
$
|
3
|
|
$
|
—
|
|
$
|
249
|
|
Dow Inc. Operating EBIT 1
|
$
|
1,954
|
|
$
|
713
|
|
$
|
284
|
|
$
|
(65)
|
|
$
|
2,886
|
|
|
|
|
|
|
|
Three months ended Sep 30, 2020
|
|
|
|
|
|
Net sales
|
$
|
4,565
|
|
$
|
3,058
|
|
$
|
2,002
|
|
$
|
87
|
|
$
|
9,712
|
|
Equity in earnings (losses) of nonconsolidated affiliates
|
$
|
71
|
|
$
|
(13)
|
|
$
|
1
|
|
$
|
1
|
|
$
|
60
|
|
Dow Inc. Operating EBIT 1
|
$
|
647
|
|
$
|
104
|
|
$
|
75
|
|
$
|
(65)
|
|
$
|
761
|
|
Nine months ended Sep 30, 2021
|
|
|
|
|
|
Net sales
|
$
|
20,939
|
|
$
|
12,303
|
|
$
|
7,114
|
|
$
|
248
|
|
$
|
40,604
|
|
|
|
|
|
|
|
Equity in earnings of nonconsolidated affiliates
|
$
|
360
|
|
$
|
381
|
|
$
|
5
|
|
$
|
5
|
|
$
|
751
|
|
Dow Inc. Operating EBIT 1
|
$
|
5,196
|
|
$
|
1,687
|
|
$
|
571
|
|
$
|
(186)
|
|
$
|
7,268
|
|
|
|
|
|
|
|
Nine months ended Sep 30, 2020
|
|
|
|
|
|
Net sales
|
$
|
13,175
|
|
$
|
8,520
|
|
$
|
5,922
|
|
$
|
219
|
|
$
|
27,836
|
|
|
|
|
|
|
|
Equity in earnings (losses) of nonconsolidated affiliates
|
$
|
96
|
|
$
|
(202)
|
|
$
|
4
|
|
$
|
(22)
|
|
$
|
(124)
|
|
Dow Inc. Operating EBIT 1
|
$
|
1,545
|
|
$
|
59
|
|
$
|
264
|
|
$
|
(207)
|
|
$
|
1,661
|
|
1.Operating EBIT for TDCC for the three and nine months ended September 30, 2021 and 2020 is substantially the same as that of Dow Inc. and therefore has not been disclosed separately in the table above. A reconciliation of "Net income" to Operating EBIT is provided in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of "Net income (loss)" to Operating EBIT
|
Three Months Ended
|
Nine Months Ended
|
In millions
|
Sep 30, 2021
|
Sep 30, 2020
|
Sep 30, 2021
|
Sep 30, 2020
|
Net income (loss)
|
$
|
1,706
|
|
$
|
(1)
|
|
$
|
4,644
|
|
$
|
40
|
|
+ Provision for income taxes
|
542
|
|
43
|
|
1,383
|
|
215
|
|
Income before income taxes
|
$
|
2,248
|
|
$
|
42
|
|
$
|
6,027
|
|
$
|
255
|
|
- Interest income
|
14
|
|
6
|
|
35
|
|
27
|
|
+ Interest expense and amortization of debt discount
|
178
|
|
202
|
|
561
|
|
617
|
|
- Significant items
|
(474)
|
|
(523)
|
|
(715)
|
|
(816)
|
|
Operating EBIT
|
$
|
2,886
|
|
$
|
761
|
|
$
|
7,268
|
|
$
|
1,661
|
|
The following tables summarize the pretax impact of significant items by segment excluded from Operating EBIT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment
|
Three Months Ended Sep 30, 2021
|
Nine Months Ended Sep 30, 2021
|
Pack. & Spec. Plastics
|
Ind. Interm. & Infrast.
|
Perf. Mat. & Coatings
|
Corp.
|
Total
|
Pack. & Spec. Plastics
|
Ind. Interm. & Infrast.
|
Perf. Mat. & Coatings
|
Corp.
|
Total
|
In millions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digitalization program costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(40)
|
|
$
|
(40)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(121)
|
|
$
|
(121)
|
|
Restructuring, implementation costs and asset related charges - net 2
|
—
|
|
—
|
|
—
|
|
(16)
|
|
(16)
|
|
(8)
|
|
(1)
|
|
(10)
|
|
(50)
|
|
(69)
|
|
Loss on early extinguishment of debt 3
|
—
|
|
—
|
|
—
|
|
(472)
|
|
(472)
|
|
—
|
|
—
|
|
—
|
|
(574)
|
|
(574)
|
|
Litigation related charges, awards and adjustments 4
|
—
|
|
54
|
|
—
|
|
—
|
|
54
|
|
—
|
|
54
|
|
—
|
|
—
|
|
54
|
|
Indemnification and other transaction related costs 5
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(5)
|
|
(5)
|
|
Total
|
$
|
—
|
|
$
|
54
|
|
$
|
—
|
|
$
|
(528)
|
|
$
|
(474)
|
|
$
|
(8)
|
|
$
|
53
|
|
$
|
(10)
|
|
$
|
(750)
|
|
$
|
(715)
|
|
1.Includes costs associated with implementing the Company's digital acceleration program.
2.Includes Board approved restructuring plans, including costs associated with implementing the Company's 2020 Restructuring Program, and asset related charges, which include other asset impairments. See Note 5 for additional information.
3.The Company redeemed outstanding long-term debt resulting in a loss on early extinguishment. See Note 11 for additional information.
4.Related to an arbitration award received from Luxi Chemical Group Co., Ltd. See Note 12 for additional information.
5.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. See Note 3 for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Items by Segment
|
Three Months Ended Sep 30, 2020
|
Nine Months Ended Sep 30, 2020
|
Pack. & Spec. Plastics
|
Ind. Interm. & Infrast.
|
Perf. Mat. & Coatings
|
Corp.
|
Total
|
Pack. & Spec. Plastics
|
Ind. Interm. & Infrast.
|
Perf. Mat. & Coatings
|
Corp.
|
Total
|
In millions
|
|
|
|
|
|
|
|
|
|
|
|
Integration and separation costs 1
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(63)
|
|
$
|
(63)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
(174)
|
|
$
|
(174)
|
|
Restructuring, implementation costs and asset-related charges, net 2
|
(18)
|
|
(22)
|
|
(189)
|
|
(388)
|
|
(617)
|
|
(30)
|
|
(22)
|
|
(189)
|
|
(478)
|
|
(719)
|
|
|
|
|
|
|
|
|
|
|
|
|
Litigation related charges, awards and adjustments 3
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
6
|
|
—
|
|
—
|
|
—
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on divestitures 4
|
35
|
|
—
|
|
—
|
|
185
|
|
220
|
|
35
|
|
—
|
|
—
|
|
185
|
|
220
|
|
Loss on early extinguishment of debt 5
|
—
|
|
—
|
|
—
|
|
(63)
|
|
(63)
|
|
—
|
|
—
|
|
—
|
|
(149)
|
|
(149)
|
|
Total
|
$
|
17
|
|
$
|
(22)
|
|
$
|
(189)
|
|
$
|
(329)
|
|
$
|
(523)
|
|
$
|
11
|
|
$
|
(22)
|
|
$
|
(189)
|
|
$
|
(616)
|
|
$
|
(816)
|
|
1.Costs related to business separation activities.
2.Includes Board approved restructuring plans and asset related charges, which include other asset impairments. See Note 5 for additional information.
3.Includes a gain associated with a legal matter with Nova. See Note 12 for additional information.
4.Primarily related to a gain on the sale of rail infrastructure in the U.S. & Canada. See Note 6 for additional information.
5.The Company redeemed outstanding long-term debt resulting in a loss on early extinguishment. See Note 11 for additional information.