Dow.com Corporate Locations

Non-GAAP financial measures

Corporate Home ESG ESG Report Reporting & disclosure Non-GAAP financial measures

Non-GAAP reconciliations

Reconciliation of “Income (loss) from continuing operations, net of tax” to Operating EBIT and Operating EBITDA

In millions (Unaudited)

 Twelve Months Ended
Dec 31, 2020 Dec 31, 20191
Income (loss) from continuing operations, net of tax $1,294 ($ 1,717)
+Provision for income taxes on continuing operations $777 $470
Income (loss) from continuing operations before income taxes $2,071 ($ 1,247)
-Interest income 38 81
+Interest expense and amortization of debt discount 827 933
+Pro forma adjustments2 – 65
-Significant items3 145 (4,682)
Operating EBIT (non-GAAP) $2,715 $4,352
+Depreciation and amortization 2,874 2,938
Operating EBITDA (non-GAAP) $5,589 $7,290

1 Operating EBIT, depreciation and amortization and Operating EBITDA for the year ended December 31, 2019 are presented on a pro forma basis.

2 Pro forma adjustments include: (1) the margin impact of various manufacturing, supply and service related agreements entered into with DuPont and Corteva in connection with the separation which provide for different pricing than the historical intercompany and intracompany pricing practices of TDCC and Historical DuPont (included for 2019 and 2018 only), (2) the removal of the amortization of ECP's inventory step-up recognized in connection with the Merger and (3) the elimination of the impact of events directly attributable to the Merger, internal reorganization and business realignment, separation, distribution and other related transactions (e.g., one-time transaction costs).

3The year ended December 31, 2020 includes integration and separation costs, restructuring and asset related charges - net, a gain on a warranty accrual adjustment of an exited business, restructuring implementation costs, a net gain on divestitures and asset sale, a gain related to a legal matter with Nova, a loss on early extinguishment of debt and a loss associated with agreements entered into with DuPont and Corteva as part of the separation and distribution. The year ended December 31, 2019 includes integration and separation costs, restructuring, goodwill impairment and asset related charges - net, a gain on a warranty accrual adjustment of an exited business, environmental charges, a loss related to previous divestitures, a loss on early extinguishment of debt, a net gain related to litigation matters and a loss associated with agreements entered into with DuPont and Corteva as part of the separation and distribution.

Reconciliation of Cash Flow Conversion (Operating EBITDA to Cash Flow from Operations)

In millions

 Twelve Months Ended
Dec 31, 2020 Dec 31, 2019
As Reported Pro Forma
Cash provided by operating activities - continuing operations (GAAP) $6,252 $5,713
Operating EBITDA (non-GAAP) $5,589 $7,290
Cash flow conversion (non-GAAP) 111.9% 78.4%
Reconciliation of Non-GAAP Cash Flow Measures

In millions

 Twelve Months Ended
Dec 31, 2020 Dec 31, 2019
Cash provided by operating activities - continuing operations (GAAP) $6,252 $5,713
Capital expenditures (1,252) (1,961)
Free cash flow (non-GAAP) $5,000 $3,752
Reconciliation of Net Debt

In millions (Unaudited)

 Dec 31, 2020 Dec 31, 2019
Notes payable $156 $586
Long-term debt due within one year 460 435
Long-term debt 16,491 15,975
Gross debt (GAAP) $17,107 $16,996
- Cash and cash equivalents 5,104 2,367
- Marketable securities 45 21
Net debt (non-GAAP) $11,958 $14,608

Definitions

Operating EBIT is defined as earnings (i.e. “Income (loss) from continuing operations before taxes”) before interest, excluding the impact of significant items. Pro forma operating EBIT is defined as earnings (i.e., “Income (loss) from continuing operations before income taxes”) before interest, plus pro forma adjustments, excluding the impact of significant items.

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

Cash Flow conversion is defined as “Cash provided by (used for) operating activities - continuing operations” divided by Operating EBITDA.

Free cash flow is defined as “Cash provided by operating activities - continuing operations”, less capital expenditures.

Net debt is defined as “Total gross debt” minus “Cash and cash equivalents” and “Marketable securities.”

 

Any information relating to Non-GAAP Financial Measures, was not subject to Deloitte & Touche LLP's review and, accordingly, Deloitte & Touche LLP does not express a conclusion or any form of assurance on such information.