10-QPeriod: Q3 FY2019

DOW INC. Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 25, 2019For Securities:DOW

Summary

Dow Inc. reported a 15% decrease in net sales for the third quarter of 2019 compared to the same period in 2018, reaching $10.8 billion. This decline was attributed to a 12% decrease in local prices, a 2% drop in volume, and a 1% unfavorable currency impact, affecting all geographic regions and operating segments. Net income available for common stockholders was $333 million ($0.45 per diluted share) for the quarter, a significant decrease from $1,013 million ($1.36 per diluted share) in the prior year's third quarter. The company also incurred substantial restructuring and integration/separation costs related to its recent separation from DowDuPont. Despite the top-line decline, Dow Inc. continued its share repurchase program, buying back $101 million in the third quarter and indicating a full-year target of $500 million.

Financial Highlights

52 data points
Beta

Revenue

$10.76B

12.9% Gross Margin

Net Income

$333.00M

3.1% Net Margin

EPS (Diluted)

$0.45

Total Assets

$64.94B

Cash & Equivalents

$2.84B

Free Cash Flow

$1.72B

Financial Statements
Beta
Revenue$10.76B
Cost of Revenue$9.38B
Gross Profit$1.39B
SG&A Expenses$388.00M
Operating Income$347.00M
Interest Expense$233.00M
Net Income$333.00M
EPS (Basic)$0.45
EPS (Diluted)$0.45
Shares Outstanding (Basic)739.80M
Shares Outstanding (Diluted)743.00M

Key Highlights

  • 1Net sales decreased by 15% year-over-year to $10.8 billion in Q3 2019.
  • 2Earnings per diluted share fell to $0.45 from $1.36 in the prior year's Q3.
  • 3The company experienced a 12% decrease in local prices across all segments and regions.
  • 4Restructuring and asset-related charges totaled $147 million for the quarter.
  • 5Integration and separation costs were $164 million in Q3 2019.
  • 6Dow Inc. repurchased $101 million of its stock in the third quarter, continuing its share repurchase program.
  • 7Significant litigation gains, particularly from Nova Chemicals, contributed positively to 'Sundry income (expense) - net'.

Frequently Asked Questions

The primary driver of the decrease in net sales was a significant decline in local prices (down 12% year-over-year), coupled with a modest decrease in volume (down 2%) and an unfavorable currency impact (down 1%). This was observed across all geographic regions and operating segments.

The separation, completed on April 1, 2019, resulted in substantial integration and separation costs of $164 million in the third quarter of 2019. While the filing focuses on continuing operations post-separation, the context of the separation is crucial for understanding year-over-year comparisons and the company's new standalone structure.

The company's outlook emphasizes leveraging feedstock flexibility, advancing growth investments, and driving cost synergies. They are focused on improving free cash flow, highlighted by debt redemption plans using proceeds from a judgment. Dow expects to manage the current macroeconomic environment and be well-positioned for an industrial economy rebound.

Yes, 'Sundry income (expense) - net' significantly improved due to litigation matters, including a $170 million gain from a settlement with Nova Chemicals Corporation and an $85 million gain related to an adjustment of the Dow Silicones breast implant liability. However, there were also charges related to commercial creditor matters and other items. The net impact of these sundry items was a significant positive contribution to the quarter's results.