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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
FORM 10-K

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20192020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to__________

dow-20201231_g1.jpg

Commission
File Number
Exact Name of Registrant as Specified in its Charter,
Principal Office Address and Telephone Number
State of Incorporation or
Organization
I.R.S. Employer
Identification No.
001-38646Dow Inc.Delaware30-1128146
2211 H.H. Dow Way, Midland, MI 48674
(989) 636-1000
001-03433The Dow Chemical CompanyDelaware38-1285128
2211 H.H. Dow Way, Midland, MI 48674
(989) 636-1000
Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of each classTrading Symbol(s)Name of each exchange on which registered
Dow Inc.Common Stock, par value $0.01 per shareDOWNew York Stock Exchange
The Dow Chemical Company0.500% Notes due March 15, 2027DOW/27New York Stock Exchange
The Dow Chemical Company1.125% Notes due March 15, 2032DOW/32New York Stock Exchange
The Dow Chemical Company1.875% Notes due March 15, 2040DOW/40New York Stock Exchange
The Dow Chemical Company4.625% Notes due October 1, 2044DOW/44New York Stock Exchange



Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Dow Inc.☑Yes☐No
The Dow Chemical Company☑Yes☐No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Dow Inc.☐Yes☑No
The Dow Chemical Company☐Yes☑No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Dow Inc.☑Yes☐No
The Dow Chemical Company☑Yes☐No


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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Dow Inc.☑Yes☐No
The Dow Chemical Company☑Yes☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Dow Inc.
Large accelerated filerþ
Accelerated
filer ☑¨
Non-accelerated Accelerated
filer¨
¨
Non-
accelerated filer		¨Smaller reporting company¨
¨
Emerging growth company¨
The Dow Chemical Company
Large accelerated filer
¨
Accelerated

filer¨
Non-accelerated filer þ
¨
Non-
accelerated filer
☑Smaller reporting company¨
¨
Emerging growth company¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Dow Inc.
☐
The Dow Chemical Company☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Dow Inc.☑
The Dow Chemical Company☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Dow Inc.☐Yes☑No
The Dow Chemical Company☐Yes☑No

As of June 30, 2019,2020, the aggregate market value of the common stock of Dow Inc. held by non-affiliates of Dow Inc. was approximately $36.3$29.6 billion based on the last reported closing price of $49.31$40.76 per share as reported on the New York Stock Exchange.
Dow Inc. had 741,678,966743,914,560 shares of common stock, $0.01 par value, outstanding at January 31, 2020.2021. The Dow Chemical Company had 100 shares of common stock, $0.01 par value, outstanding at January 31, 2020,2021, all of which were held by the registrant’s parent, Dow Inc.
The Dow Chemical Company meets the conditions set forth in General Instruction I(1)(a) and (b) for Form 10-K and therefore is filing this form in the reduced disclosure format.

DOCUMENTS INCORPORATED BY REFERENCE

Dow Inc.: Portions of Dow Inc.'s Proxy Statement for the 20202021 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of Dow Inc.'s fiscal year ended December 31, 2019.2020.

The Dow Chemical Company: None.



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Dow Inc. and Subsidiaries
The Dow Chemical Company and Subsidiaries

ANNUAL REPORT ON FORM 10-K
For the fiscal year ended December 31, 20192020

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Dow Inc. and Subsidiaries:
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The Dow Chemical Company and Subsidiaries:
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Dow Inc. and Subsidiaries

The Dow Chemical Company and Subsidiaries
This Annual Report on Form 10-K is a combined report being filed by Dow Inc. and The Dow Chemical Company and its consolidated subsidiaries (“TDCC” and together with Dow Inc., “Dow” or the "Company"). This Annual Report on Form 10-K reflects the results of Dow and its consolidated subsidiaries, after giving effect to the distribution to DowDuPont Inc. (“DowDuPont” and effective June 3, 2019, n/k/a DuPont de Nemours, Inc. or "DuPont") of TDCC’s agricultural sciences business (“AgCo”) and specialty products business (“SpecCo”) and the receipt of E. I. du Pont de Nemours and Company and its consolidated subsidiaries' (“Historical DuPont”) ethylene and ethylene copolymers business (other than its ethylene acrylic elastomers business) ("ECP"). The U.S. GAAP consolidated financial results of Dow Inc. and TDCC reflect the distribution of AgCo and SpecCo as discontinued operations for the applicable periods presented as well as the receipt of ECP as a common control transaction from the closing of the merger with Historical DuPont on August 31, 2017. In addition, following the separation from DowDuPont, the Company changed the manner in which its business activities were managed. The Company's portfolio now includes six global businesses which are organized into the following operating segments: Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Corporate contains the reconciliation between the totals for the operating segments and the Company's totals. As a result of the parent/subsidiary relationship between Dow Inc. and TDCC, and the expectationconsidering that the financial statements and disclosures of each company will beare substantially similar, the companies are filing a combined report for this Annual Report on Form 10-K. The information reflected in this report is equally applicable to both Dow Inc. and TDCC, except where otherwise noted. Each of Dow Inc. and TDCC is filing information in this report on its own behalf and neither company makes any representation to the information relating to the other company.

Background
On April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC and its consolidated subsidiaries, owning all of the outstanding common shares of TDCC. For filings relating to the period commencing April 1, 2019 and thereafter, TDCC was deemed the predecessor to Dow Inc., and the historical results of TDCC are deemed the historical results of Dow Inc. for periods prior to and including March 31, 2019.

The separation was contemplated by the merger of equals transaction effective August 31, 2017, under the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017. TDCC and Historical DuPont each merged with subsidiaries of DowDuPont and, as a result, TDCC and Historical DuPont became subsidiaries of DowDuPont (the “Merger”). Subsequent to the Merger, TDCC and Historical DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. Dow Inc. was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
ThisCertain statements in this report containsare “forward-looking statements” within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In this context, forward-lookingSuch statements often address expected future business and financial performance, financial condition, and other matters, and often contain words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” "target," “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words. words or phrases.

Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.

Forward-looking statements include, but are not limited to, expectations as to future sales of Dow’s products; the ability to protect Dow’s intellectual property in the United States and abroad; estimates regarding Dow’s capital requirements and need for and availability of financing; estimates of Dow’s expenses, future revenues and profitability; estimates of the size of the markets for Dow’s products and services and Dow’s ability to compete in such markets; expectations related to the rate and degree of market acceptance of Dow’s products; the outcome of certain Dow contingencies, such as litigation and environmental matters; estimates of the success of competing technologies that may become available and expectations regarding the benefits and costs associated with each of the foregoing.


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Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Forward-looking statements are based on certain assumptions and expectations of future events which may not be realized and speak only as of the date the statements were made. In addition, forward-looking statements also involvethat are subject to risks, uncertainties and other factors that are beyond Dow’s control, that couldwhich may cause Dow’sactual results to differ materially from those projected, anticipated or implied in the forward-looking statements.statements and speak only as of the date the statements were made. These factors include, but are not limited to: fluctuationssales of Dow’s products; Dow’s expenses, future revenues and profitability; the continuing global and regional economic impacts of the coronavirus disease 2019 (“COVID-19”) pandemic and other public health-related risks and events on Dow’s business; capital requirements and need for and availability of financing; size of the markets for Dow’s products and services and ability to compete in energy and raw material prices;such markets; failure to develop and market new products and optimally manage product life cycles; the rate and degree of market acceptance of Dow’s products; significant litigation and environmental matters; failurematters and related contingencies and unexpected expenses; the success of competing technologies that are or may become available; the ability to appropriately manageprotect Dow’s intellectual property in the United States and abroad; developments related to contemplated restructuring activities and proposed divestitures or acquisitions such as workforce reduction, manufacturing facility and/or asset closure and related exit and disposal activities, and the benefits and costs associated with each of the foregoing; fluctuations in energy and raw material prices; management of process safety and product stewardship issues;stewardship; changes in relationships with Dow’s significant customers and suppliers; changes in consumer preferences and demand; changes in laws and regulations, political conditions or political conditions;industry
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development; global economic and capital markets conditions, such as inflation, market uncertainty, interest and currency exchange rates, and equity and commodity prices; business or supply disruptions; security threats, such as acts of sabotage, terrorism or war; weather events and natural disasters; ability to protect, defend and enforce Dow’s intellectual property rights; increased competition; changes in relationships with Dow’s significant customers and suppliers; unanticipated expenses such as litigation or legal settlement expenses; unanticipated business disruptions; Dow’s ability to predict, identify and interpret changes in consumer preferences and demand; Dow’s ability to complete proposed divestitures or acquisitions; Dow’s ability to realize the expected benefits of acquisitions if they are completed; the availability of financing to Dow in the future and the terms and conditions of such financing; and disruptions in Dow’s information technology networks and systems. Additionally, there may be other risks and uncertainties that Dow is unable to identify at this time or that Dow does not currently expect to have a material impact on its business.


Risks related to achieving the anticipated benefits of Dow's separation from DowDuPont include, but are not limited to, a number of conditions outside the control of Dow,including risks related toto: (i) Dow's inability to achieve some or all of the benefits that it expects to receive from the separation from DowDuPont,DowDuPont; (ii) certain tax risks associated with the separation,separation; (iii) Dow's inability to make necessary changes to operate as a stand-alone company, (iv) the failure of Dow's pro forma financial information to be a reliable indicator of Dow's future results, (v) Dow's inability to enjoy the same benefits of diversity, leverage and market reputation that it enjoyed as a combined company, (vi)results; (iv) Dow's inability to receive third-party consents required under the separation agreement, (vii) Dow's customers, suppliers and others' perception of Dow's financial stability on a stand-alone basis, (viii)agreement; (v) non-compete restrictions under the separation agreement, (ix)agreement; (vi) receipt of less favorable terms in the commercial agreements Dow entered into with DuPont and Corteva, Inc. ("Corteva"(“Corteva”), including restrictions under intellectual property cross-license agreements, than Dow would have received from an unaffiliated third party; and (x)(vii) Dow's obligation to indemnify DuPont and/or Corteva for certain liabilities.

Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. A detailed discussion of principal risks and uncertainties which may cause actual results and events to differ materially from such forward-looking statements is included in the section of this Annual Report on Form 10-K titled “Risk Factors.” These are not the only risks and uncertainties that Dow faces. There may be other risks and uncertainties that Dow is unable to identify at this time or that Dow does not currently expect to have a material impact on its business. If any of those risks or uncertainties develops into an actual event, it could have a material adverse effect on Dow’s business. Dow Inc. and TDCC assume no obligation to update or revise publicly any forward-looking statements whether because of new information, future events, or otherwise, except as required by securities and other applicable laws.

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Dow Inc. and Subsidiaries
The Dow Chemical Company and Subsidiaries
PART I

ITEM 1. BUSINESS

ITEM 1. BUSINESS
THE COMPANY
Dow Inc. was incorporated on August 30, 2018, under Delaware law, to serve as a holding company for The Dow Chemical Company and its consolidated subsidiaries ("TDCC" and together with Dow Inc., "Dow" or the "Company"). Dow Inc. operates all of its businesses through TDCC, a wholly owned subsidiary, which was incorporated in 1947 under Delaware law and is the successor to a Michigan corporation, of the same name, organized in 1897. The Company's principal executive offices are located at 2211 H.H. Dow Way, Midland, Michigan 48674.

Available Information
The Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge at www.dow.com/investors, as soon as reasonably practicable after the reports are electronically filed or furnished with the U.S. Securities and Exchange Commission ("SEC"). The SEC maintains a website that contains these reports as well as proxy statements and other information regarding issuers that file electronically. The SEC's website is at www.sec.gov. Dow's website and its content are not deemed incorporated by reference into this report.

MERGER AND SEPARATION
On April 1, 2019, DowDuPont Inc. (“DowDuPont” and effective June 3, 2019, n/k/a DuPont de Nemours, Inc. or "DuPont") completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC and its consolidated subsidiaries, owning all of the outstanding common shares of TDCC.

The separation was contemplated by the merger of equals transaction effective August 31, 2017, under the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017.2017 (the "Merger Agreement"). TDCC and E. I. du Pont de Nemours and Company and its consolidated subsidiaries (“Historical DuPont”) each merged with subsidiaries of DowDuPont and, as a result, TDCC and Historical DuPont became subsidiaries of DowDuPont (the “Merger”). Subsequent to the Merger, TDCC and Historical DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. Dow Inc. was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business.

As of the effective date and time of the distribution, DowDuPont does not beneficially own any equity interest in Dow and no longer consolidates Dow and its consolidated subsidiaries into its financial results. The consolidated financial results of Dow for periods prior to April 1, 2019, reflect the distribution of TDCC’s agricultural sciences business (“AgCo”) and specialty products business (“SpecCo”) as discontinued operations for each period presented as well as reflect the receipt of Historical DuPont’s ethylene and ethylene copolymers businesses (other than its ethylene acrylic elastomers business) (“ECP”) as a common control transaction from the closing of the Merger on August 31, 2017. See NotesNote 3 and 4 to the Consolidated Financial Statements and Dow Inc.'s Amendment No. 4 to the Registration Statement on Form 10 filed with the SEC on March 8, 2019, for additional information.

Throughout this Annual Report on Form 10-K, unless otherwise indicated, amounts and activity are presented on a continuing operations basis.

About DowABOUT DOW
Dow combines global breadth, asset integration and scale, focused innovation and leading business positions to achieve profitable growth. The Company’s ambition is to become the most innovative, customer centric, inclusive and sustainable materials science company. company, with a purpose to deliver a sustainable future for the world through our materials science expertise and collaboration with our partners. Dow’s portfolio of plastics, industrial intermediates, coatings and silicones businesses delivers a broad range of differentiated science-based products and solutions for its customers in high-growth market segments, such as packaging, infrastructure, mobility and consumer care. Dow operates 109106 manufacturing sites in 31 countries and employs approximately 36,50035,700 people.



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BUSINESS SEGMENTS AND PRODUCTS
Effective with the Merger, TDCC's business activities were components of DowDuPont's businessThe Company conducts its worldwide operations and were reported as a single operating segment. Following the separation from DowDuPont, the Company changed the manner in which its business activities were managed. The Company's portfolio now includesthrough six global businesses which are organized into the following operating segments: Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Corporate contains the reconciliation between the totals for the operating segments and the Company's totals. The Company did not aggregate any operating segments when determining its reportable segments. See Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2726 to the Consolidated Financial Statements for additional information concerning the Company’s operating segments.

PACKAGING & SPECIALTY PLASTICS
Packaging & Specialty Plastics consists of two highly integrated global businesses: Hydrocarbons & Energy and Packaging and Specialty Plastics. The segment employs the industry’s broadest polyolefin product portfolio, supported by the Company’s proprietary catalyst and manufacturing process technologies, to work at the customer’s design table throughout the value chain to deliver more reliable and durable, higher performing, and more sustainable plastics to customers in food and specialty packaging; industrial and consumer packaging; health and hygiene; caps, closures and pipe applications; consumer durables; automotive;mobility and transportation; and infrastructure.

The Company’s unique advantages compared with its competitors include: extensive low-cost feedstock positions around the world; unparalleled scale, global footprint and market reach, withreach; world-class manufacturing sites in every geography;geographic region; deep customer and brand owner understanding; portfolio of higher-value functional polymers, such as polyolefin elastomers, semiconductive and jacketing compound solutions and wire and cable insulation; and market-driven application development and technical support.

The segment remains agile and adaptive by participating in the entire ethylene-to-polyethylene chain integration, enabling the Company to manage market swings, and therefore optimize returns while reducing long-term earnings volatility. The Company’s unrivaled value chain ownership is further strengthened by its Pack Studio locations in every geography,geographic region, which help customers and brand owners deliver faster and more efficient packaging product commercialization through a global network of laboratories, technical experts and testing equipment.

Hydrocarbons & Energy
Hydrocarbons & Energy is the largesta leading global producer of ethylene, a key chemical building block that the Company consumes primarily within the Packaging & Specialty Plastics segment. Ethylene is transferred to downstream derivative businesses at market-based prices, which are generally equivalent to prevailing market prices for large volume purchases. In addition to ethylene, the business is a leading producer of propylene and aromatics products that are used to manufacture materials that consumers use every day. The business also produces and procures the power and feedstocks used by the Company’s manufacturing sites.

Packaging and Specialty Plastics
Packaging and Specialty Plastics serves growing, high-value sectors using world-class technology, broad existing product lines, and a rich product pipeline that creates competitive advantages for the entire packaging value chain. The business is a recognized leader in the production, marketing and innovation of polyethylene. The business is also a leader in other ethylene derivatives, such as polyolefin elastomers, ethylene vinyl acetate and ethylene propylene diene monomer ("EPDM") rubber serving automotive,mobility and transportation, consumer, wire and cable and construction markets.end-markets. Market growth is expected to be driven by major shifts in population demographics; improving socioeconomic status in emerging geographies;geographic regions; consumer and brand owner demand for increased functionality; global efforts to reduce food waste; growth in telecommunications networks; global development of electrical transmission and distribution infrastructure; and renewable energy applications.

Divestiture
On September 1, 2017, the Company sold its global Ethylene Acrylic Acid copolymers and ionomers business to SK Global Chemical Co., Ltd. See Note 6 to the Consolidated Financial Statements for additional information.


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Details on Packaging & Specialty Plastics' 20192020 net sales, by business and geographic region, are as follows:

chart-7f16172932255801a82.jpgdow-20201231_g2.jpgchart-b3a1a10d663f6fa0fe3.jpg
chart-94c466102324558aae5.jpgdow-20201231_g3.jpgchart-652a51b7ed46b98231d.jpg
* Europe, Middle East, Africa and India ("EMEAI")

Products
Major applications/market segments and products are listed below by business:

BusinessApplications/Market SegmentsMajor ProductsKey Raw MaterialsKey Competitors
Hydrocarbons & EnergyPurchaser of feedstocks; production of cost competitive hydrocarbon monomers utilized by Dow's derivative businesses; and energy, principally for use in Dow’s global operationsEthylene, propylene, benzene, butadiene, octene, aromatics co-products, power, steam, other utilitiesButane, condensate, ethane, naphtha, natural gas, propaneChevron Phillips Chemical, ExxonMobil, INEOS, LyondellBasell, SABIC, Shell, Sinopec
Packaging and Specialty PlasticsAdhesives; automotive; caps, closures and pipe applications; construction; cosmetics; electrical transmission and distribution; food and supply chain packaging; footwear; health and hygiene; housewares; industrial specialty applications using polyolefin elastomers, ethylene copolymers, and ethylene propylene diene monomer ("EPDM") elastomers;EPDM; irrigation pipe; mobility; photovoltaic encapsulants; sporting goods; telecommunications infrastructure; toys and infant products
Acrylics, bio-based plasticizers, copolymer, elastomers, ethylene copolymer resins, EPDM, ethylene vinyl acetate ("EVA"), methacrylic acid copolymer resins, polyethylene ("PE"), high-density polyethylene ("HDPE"), low-density polyethylene ("LDPE"), linear low-density polyethylene ("LLDPE"), polyolefin plastomers, resin additives and modifiers, semiconductive and jacketing compound solutions and wire and cable insulation

Aliphatic solvent, butene, ethylene, hexene, octene, propyleneBorealis, ExxonMobil, INEOS, Lanxess, LyondellBasell, Nova, SABIC


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Joint Ventures:
This segment includes a portion of the Company's share of the results of the following joint ventures:

•EQUATE Petrochemical Company K.S.C.C. (“EQUATE”) - a Kuwait-based company that manufactures ethylene, polyethylene and ethylene glycol, and manufactures and markets monoethylene glycol, diethylene glycol and polyethylene terephthalate resins; owned 42.5 percent by the Company.
•The Kuwait Olefins Company K.S.C.C. (“TKOC”) - a Kuwait-based company that manufactures ethylene and ethylene glycol; owned 42.5 percent by the Company.
•Map Ta Phut Olefins Company Limited (“Map Ta Phut”) - a Thailand-based company that manufactures propylene and ethylene; the Company has an effective ownership of 32.77 percent (of which 20.27 percent is owned directly by the Company and aligned with the Industrial Intermediates & Infrastructure segment and 12.5 percent is owned indirectly through the Company’s equity interest in Siam Polyethylene Company Limited, an entity that is part of The SCG-Dow Group and aligned with the Packaging & Specialty Plastics segment).
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•Sadara Chemical Company ("Sadara") - a Saudi Arabian company that manufactures chlorine, ethylene, propylene and aromatics for internal consumption and manufactures and sells polyethylene, ethylene oxide and propylene oxide derivative products, and isocyanates; owned 35 percent by the Company. The Company is responsible for marketing a majority of Sadara products outside of the Middle East zone through the Company’s established sales channels. As part of this arrangement, the Company purchases and sells Sadara products for a marketing fee.

This segment also includes the Company's share of the results of the following joint ventures:

•The Kuwait Styrene Company K.S.C.C. (“TKSC”) - a Kuwait-based company that manufactures styrene monomer; owned 42.5 percent by the Company.
•The SCG-Dow Group - a group of Thailand-based companies (consisting of Siam Polyethylene Company Limited; Siam Polystyrene Company Limited; Siam Styrene Monomer Company Limited; and Siam Synthetic Latex Company Limited) that manufacture polyethylene, polystyrene, styrene, latex and specialty elastomers; owned 50 percent by the Company.

Current and Future Investments
In 2017, the Company announced the startup of its new integrated world-scale ethylene production facility and its new ELITE™ Enhanced Polyethylene production facility, both located in Freeport, Texas. In 2018, the Company started up its new LDPE production facility and its new NORDEL™ Metallocene EPDM production facility, both located in Plaquemine, Louisiana. These key milestones enable the Company to capture benefits from increasing supplies of U.S. shale gas to deliver differentiated downstream solutions in its core market verticals. The Company also completed debottlenecking of an existing bi-modal gas phase polyethylene production facility in St. Charles, Louisiana, and started up a new High Melt Index ("HMI") AFFINITY™ polymer production facility in Freeport, Texas, in the fourth quarter of 2018. In 2020, the Company's integrated world-scale ethylene production facility in Freeport, Texas, was expanded to a capacity of 2,000 kilotonnes per annum ("KTA"), making it the largest ethylene cracker in the world. Recognized for efficiency in construction time and cost as a newly designed cracker, this facility is also known for its low operating cost, excellent safety, reliability and asset utilization performance.

Additionally, the Company has announced investments over the next fiveseveral years that are expected to enhance competitiveness. These include:

Expansion of the capacity of the Company’s new ethylene production facility in Freeport, TX, bringing the facility’s total ethylene capacity to 2,000 kilotonnes per annum ("KTA") and making it the largest ethylene cracker in the world.
•Incremental debottleneck projects across its global asset network that will deliver approximately 350 KTA of additional polyethylene, the majority of which will be in the U.S. & Canada.
•Construction of a world-scale polyethylene unit on the U.S. Gulf Coast based on Dow’s proprietary process technologies, to meet consumer-driven demand in specialty packaging, health and hygiene, and industrial and consumer packaging applications.
•A new catalyst production facility for key catalysts licensed by Univation Technologies, LLC, a wholly owned subsidiary of the Company.
On January 29, 2020, the Company announced plans to add another•Addition of a furnace to its ethylene production facility in Alberta, Canada, incrementally expanding capacity by approximately 130,000 metric tons. Dow will co-invest in the expansion with a regional customer, evenly sharing project costs and ethylene output, with the additional ethylene to be consumed by existing polyethylene manufacturing assets in the region. The expansion is expected to come online in the first half of 2021.


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The Company's ambition includes becoming the most sustainable materials science company, in the world with a strategy to advance the well-being of humanity by helping lead the transition to a sustainable planet and society. This includes lowering energy and greenhouse gas emissions ("GHG") emissions and enabling a shift to a circular economy for plastics by focusing on resource efficiency and integrating recycled content and renewable feedstocks into its production processes. As part of that strategy, Dow announced the followingfollowing:
•In 2020, Dow and waste-optimization specialist Avangard Innovative LP ("AI") announced that AI will supply post-consumer resin ("PCR") plastic film pellets to Dow, a significant addition to Dow’s plastic circularity portfolio. Dow will initially use the PCR pellets from AI to create linear low-density polyethylene and low-density polyethylene products.
•In 2020, Dow announced development and commercialization of a new formulated post-consumer plastic resin designed for collation shrink film applications in August 2019:Asia Pacific and the U.S. & Canada. The new resin is designed with up to 40 percent PCR content and creates a film with performance comparable to those made with virgin resins, which expands Dow’s circular technology portfolio to help more customers and brands achieve their sustainability goals.

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An
•In 2019, an agreement with the Fuenix Ecogy Group, based in Weert, The Netherlands, for the supply of pyrolysis oil feedstock, which is made from recycled plastic waste. The feedstock will be used to produce virgin polymers at Dow’s production facilities in Terneuzen, The Netherlands. ThisIn addition to increasing the Company's feedstock flexibility, this is an important step forward to increase feedstock recycling - the process of breaking down mixed waste plastics into their original form to manufacture new virgin polymers. The polymers produced from this pyrolysis oil will be identical to products produced from traditional feedstocks, and as such, they can be used in the same applications, including food packaging.
An•In 2019, an agreement with UPM Biofuels, a producer of biofuels, for the supply and integration of wood-based UPM Bio Verno renewable naphtha - a key raw material used to develop plastics - into Dow's slate of raw materials, creating an alternative source for plastics production. TheEffectively increasing the Company's feedstock flexibility, the feedstock will be used to produce bio-based polyethylene at Dow's production facilities in Terneuzen, The Netherlands, for use in packaging applications such as food packaging, to reduce food waste.
The•In 2019, the retrofit of one of its Louisiana steam crackers with Dow’s proprietary fluidized catalytic dehydrogenation ("FCDh") technology to produce on-purpose propylene. The FCDh technology retrofit further improves Dow’s ability to continue to source the most advantaged feedstocks, while also producing reliable and cost-efficient on-purpose propylene to supply its integrated derivative units in Louisiana. The technology reduces capital outlay by up to 25 percent and lowers energy usage and GHG emissions by up to 20 percent, thereby improving overall sustainability when compared with conventional propane dehydrogenation technologies. The project is expected to begin producing on-purpose propylene by the end of 2021.

INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE
Industrial Intermediates & Infrastructure consists of two customer-centric global businesses - Industrial Solutions and Polyurethanes & Construction Chemicals - that develop important intermediate chemicals that are essential to manufacturing processes, as well as downstream, customized materials and formulations that use advanced development technologies. These businesses primarily produce and market ethylene oxide and propylene oxide derivatives that are aligned to market segments as diverse as appliances, coatings, electronics, surfactants for cleaning and sanitization, infrastructure and oil and gas. The global scale and reach of these businesses, world-class technology and R&D capabilities and materials science expertise enable the Company to be a premier solutions provider offering customers value-add sustainable solutions to enhance comfort, energy efficiency, product effectiveness and durability across a wide range of home comfort and appliances, building and construction, adhesives and lubricant applications, among others.

Industrial Solutions
Industrial Solutions provides a broad portfolio of solutions that address world needs by enablingenable and improvingimprove the manufacture of consumer and industrial goods and services. The business’ solutions minimize friction and heat in mechanical processes; manage the oil and water interface; deliver ingredients for maximum effectiveness; facilitate dissolvability; enable product identification; and provide the foundational building blocks for the development of chemical technologies. The business supports manufacturers associated with a large variety of end-markets, notably coatings, detergents and cleaners, crop protection, solvents forpharmaceuticals, electronics, processing,oil and gas, inks and textiles. The business is the world's largesta leading producer of purified ethylene oxide.

Polyurethanes & Construction Chemicals
Polyurethanes & Construction Chemicals consists of three businesses: Polyurethanes, Chlor-Alkali & Vinyl (“CAV”) and Construction Chemicals (“DCC”). The Polyurethanes business is the world’s largest producer of propylene oxide, propylene glycol and polyether polyols, and a leading producer of aromatic isocyanates and fully formulated polyurethane systems for rigid, semi-rigid and flexible foams, and coatings, adhesives, sealants, elastomers and composites that serve energy efficiency, consumer comfort, industrial and enhanced mobility market sectors. The CAV business provides cost-advantaged chlorine and caustic soda supply and markets caustic soda, a valuable co-product of the chlor-alkali manufacturing process, and ethylene dichloride and vinyl chloride monomer. The CAV business' assets are predominantly in Western Europe and largely produce materials for internal consumption. The DCC business provides cellulose ethers, redispersible latex powders, and acrylic emulsions used as key building blocks for differentiated building and construction materials across many market segments and applications ranging from roofing and flooring to gypsum-, cement-, concrete- orand dispersion-based building materials.

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Details on Industrial Intermediates & Infrastructures' 20192020 net sales, by business and geographic region, are as follows:

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Products
Major applications/market segments and products are listed below by business:

BusinessApplications/Market SegmentsMajor ProductsKey Raw MaterialsKey Competitors
Industrial SolutionsBroad range of products for specialty applications, including pharmaceuticals, agriculture crop protection offerings, aircraft deicing, solvents for coatings, heat transfer fluids for concentrated solar power, construction, solvents for electronics processing, food preservation, fuel markers, homeindustrial and personal care,institutional cleaning, infrastructure applications, lubricant additives, paper, transportation and utilities; products for energy markets including exploration, production, transmission, refining, mining and gas processing to optimize supply, improve efficiencies and manage emissions
Acetone derivatives, butylButyl glycol ethers, VERSENE™ Chelants, UCAR™ Deicing Fluids, ethanolamines, ethylene oxide ("EO"), ethyleneamines, UCON™ Fluids, DOWANOL™glycol ethers, UCARTHERM™DOWTHERM™ Heat Transfer Fluids, higher glycols, isopropanolamines, low-VOC solvents, methoxypolyethylene glycol, methyl isobutyl, polyalkylene glycol, CARBOWAX™ SENTRY™
Polyethylene Glycol, TERGITOL™ and TRITON™ Surfactants, demulsifiers, drilling and completion fluids, heat transfer fluids, rheology modifiers, scale inhibitors, shale inhibitors, specialty amine solvents, surfactants, water clarifiers, frothing separating agents
Ethylene, propyleneBASF, Eastman, Hexion, Huntsman, INEOS, LyondellBasell, SABIC, Sasol, Shell
Polyurethanes & Construction ChemicalsAircraft deicing fluids; alumina;alumina, pulp and paper; appliances; automotive; bedding; building and construction; flooring; footwear; heat transfer fluids; hydraulic fluids; infrastructure; mobility; packaging; textiles and transportation; construction; caulks and sealants; cement-based tile adhesives; concrete solutions; elastomeric roof coatings; industrial non-wovens; plasters and renders; roof tiles and siding; sport grounds and tape joint compounds
Aniline, caustic soda, ethylene dichloride ("EDC"), methylene diphenyl diisocyanate (“MDI”), polyether polyols, propylene glycol ("PG"), propylene oxide ("PO"), polyurethane systems, toluene diisocyanate (“TDI”), vinyl chloride monomer ("VCM"), AQUASET™ Acrylic Thermosetting Resins, DOW™ Latex Powder, RHOPLEX™ and PRIMAL™ Acrylic Emulsion Polymers, WALOCEL™ Cellulose Ethers

Aniline, aqueous hydrochloric acid, benzene, carbon monoxide, caustic soda, cell effluent, cellulose, chlorine, electric power, ethylene, hydrogen peroxide, propylene, styreneArkema, Ashland, BASF, Covestro, Eastman, Huntsman, INEOS, Olin, Owens-Corning, Yantai Wanhua


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Joint Ventures
This segment includes a portion of the Company's share of the results of EQUATE, TKOC, Map Ta Phut and Sadara.


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Current and Future Investments
The Company expects to make investments over the next fiveseveral years to enhance competitiveness in the Company’s Polyurethanes & Construction Chemicals and Industrial Solutions businesses. The investments will include alkoxylation capacity expansions and finishing capabilities; investments to support growth in polyurethane systems; and efficiency improvements around the world.

PERFORMANCE MATERIALS & COATINGS
Performance Materials & Coatings includes industry-leading franchises that deliver a wide array of solutions into consumer and infrastructure end-markets. The segment consists of two global businesses: Coatings & Performance Monomers and Consumer Solutions. These businesses primarily utilize the Company's acrylics-, cellulosics- and silicone-based technology platforms to serve the needs of the architectural and industrial coatings,coatings; home care and personal carecare; consumer and electronics; mobility and transportation; industrial and chemical processing; and building and infrastructure end-markets. Both businesses employ materials science capabilities, global reach and unique products and technology to combine chemistry platforms to deliver differentiated offerings to customers.

Coatings & Performance Monomers
Coatings & Performance Monomers consists of two businesses: Coating Materials and Performance Monomers. The Coating Materials business makes critical ingredients and additives that help advance the performance of paints and coatings. The business offers innovative and sustainable products to accelerate paint and coatings performance across diverse market segments, including architectural paints and coatings, as well as industrial coatings applications used in maintenance and protective industries, wood, metal packaging, traffic markings, thermal paper and leather. These products enhance coatings by improving hiding and coverage characteristics, enhancing durability against nature and the elements, lowering or eliminating volatile organic compounds (“VOC”) content, reducing maintenance and improving ease of application. The Performance Monomers business manufactures acrylics-based building blocks needed for the production of coatings, textiles, adhesives and home and personal care products.

Consumer Solutions
Consumer Solutions consists of three businesses: Performance Silicones;Silicones, Home & Personal Care;Care and Silicone Feedstocks & Intermediates. Performance Silicones usesoffers a portfolio of innovative, versatile silicone-based technology to provide ingredients and solutions to customers for addressing megatrends, including globalization, urbanization, sustainability and digitalization. The business serves customers in high performanceseveral global markets with strong growth opportunities, including: building and infrastructure; consumer goods, elastomeric applications and the pressure sensitive adhesives industry that help them meet modern consumer preferences in attributes such as texture, feel, scent, durabilityelectronics; industrial and consistency.chemical processing; and mobility and transportation. Dow’s wide array of silicone-based products and solutions enables customers to: increase the appeal of their products; extend shelf life; improve performance of products under a wider range of conditions; and provide a more sustainable offering. The Home & Personal Care business collaborates closely with global and regional brand owners to deliver innovative solutions, leveraging acrylics, cellulosics and cellulosicssilicone technology platforms for creating new and unrivaled consumer benefits and experiences in cleaning, laundry and skin and hair care applications, among others. Silicone Feedstocks & Intermediates provides standalone silicone materials that are used as intermediates in a wide range of applications including adhesion promoters, coupling agents, crosslinking agents, dispersing agents and surface modifiers.


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Details on Performance Materials & Coatings' 20192020 net sales, by business and geographic region, are as follows:

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Products
Major applications/market segments and products are listed below by business:

BusinessApplications/Market SegmentsMajor ProductsKey Raw MaterialsKey Competitors
Coatings & Performance Monomers
Acrylic binders for architectural paints and coatings, industrial coatings and paper; adhesives; dispersants; impact modifiers; inks and paints; opacifiers and surfactants for both architectural and industrial applications; plastics additives; processing aids; protective and functional coatings; rheology modifiers

ACOUSTICRYL™ Liquid-Applied Sound Damping Technology; acrylates; ACRYSOL™ Rheology Modifiers; AVANSE™ Acrylic Binders; EVOQUE™ Pre-Composite Polymer; foam cell promoters; FORMASHIELD™ Acrylic Binder; high-quality impact modifiers; MAINCOTE™ Acrylic Epoxy Hybrid; methacrylates; processing aids; RHOPLEX™ Acrylic Resin; TAMOL™ Dispersants; vinyl acetate monomers; weatherable acrylic capstock compounds for thermoplastic and thermosetting materialsAcetic acid, acetone, acrylic acid, butyl acrylate, methyl methacrylate, propylene, styreneArkema, BASF, Celanese, Evonik, LyondellBasell, Wacker Chemie
Consumer SolutionsPersonal care, color cosmetics, baby care, home care and specialty applications with a key focus on hair care, skin care, sun care, cleansing, as well as fabric, dish, floor, hard surface and air care applications; commercial glazing; electrical and high-voltage insulation; lamp and luminaire modules assembly; mobility; oil and gas; paints and inks; release liners, specialty films and tapes; sporting goods; 3D printing
Adhesives and sealants; antifoams and surfactants; coatings and controlled release; coupling agents and crosslinkers; EVOLV3D™IMAGIN3D™ Printing Technology; fluids, emulsions and dispersions; formulating and processing aids; granulation and binders; oils; polymers and emollients; opacifiers; reagents; resins, gels and powders; rheology modifiers; rubber; silicone elastomers; solubility enhancers; aerospace composites; surfactants and solvents; SILASTIC™ Silicone Elastomers; DOWSIL™ Silicone ProductsProducts; SYL-OFF™Silicone Release Coatings; AMPLIFY™Si PE 1000 Polymer System
Hydrochloric acid, methanol, platinum, silica, silicon metalElkem, Momentive, Shin-Etsu, Wacker Chemie

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Current and Future Investments
The Company has announced investments over the next five years that are expectedcontinues to enhance competitiveness, including low capital intensity, high returnmake incremental investments in low-capital, high-return projects in the Company’s silicones franchise. The investmentsfranchise to further enhance competitiveness. Investments include a series of incremental siliconesboth debottleneck and efficiency improvement projects around the world, a new hydroxyl functional siloxane polymer plantacross its global footprint, including expansion of silicone polymers, as well as investments in the U.S. and a new specialty resin plant in China.high-performance sealants.

CORPORATE
Corporate includes certain enterprise and governance activities (including insurance operations, environmental operations, etc.); non-business aligned joint ventures; non-business aligned litigation expenses; and discontinued or non-aligned businesses.

RAW MATERIALS
The Company operates in an integrated manufacturing environment. Basic raw materials are processed through many stages to produce a number of products that are sold as finished goods at various points in those processes. The major raw material stream that feeds the production of the Company's finished goods is hydrocarbon-based raw materials. The Company purchases hydrocarbon raw materials including ethane, propane, butane, naphtha and condensate as feedstocks. These raw materials are used in the production of both saleable products and energy. The Company also purchases certain monomers, primarily ethylene and propylene, to supplement internal production. The Company purchases natural gas, primarily to generate electricity, and purchases electric power to supplement internal generation. In addition, the Company produces a portion of its electricity needs in Louisiana and Texas; Alberta, Canada; The Netherlands; and Germany.


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The Company's primary source of these raw materials are natural gas liquids ("NGLs"), which are derived from shale gas and crude oil production and naphtha, which is produced during the processing and refining of crude oil. Given recent advancements in shale gas, shale oil and conventional drilling techniques, the Company expects these raw materials to be in abundant supply. The Company's suppliers of these raw materials include regional, international and national oil and gas companies.

The Company purchases raw materials on both short- and long-term contracts. The Company had adequate supplies of raw materials in 20192020 and expects to continue to have adequate supplies of raw materials in 2020.2021.


INDUSTRY SEGMENTS AND GEOGRAPHIC REGION RESULTS
See Note 2726 to the Consolidated Financial Statements for information regarding net sales, pro forma net sales, Operating EBIT, pro forma Operating EBIT and total assets by segment, as well as net sales and long-lived assets by geographic region.

SIGNIFICANT CUSTOMERS AND PRODUCTS
All products and services are marketed primarily through the Company’s sales force, although in some instances more emphasis is placed on sales through distributors. In 2019,2020, no significant portion of the Company's sales was dependent upon a single customer.

PATENTS, LICENSES AND TRADEMARKS
The Company continually applies for and obtains U.S. and foreign patents and has a substantial number of pending patent applications throughout the world. At December 31, 2019,2020, the Company owned approximately 3,7003,500 active U.S. patents and 19,10018,900 active foreign patents as follows:

Remaining Life of Patents Owned at Dec 31, 2020United StatesRest of World
Within 5 years800 3,400 
6 to 10 years1,000 6,500 
11 to 15 years1,500 8,400 
16 to 20 years200 600 
Total3,500 18,900 
Remaining Life of Patents Owned at Dec 31, 2019United StatesForeign
Within 5 years900
3,800
6 to 10 years1,000
6,400
11 to 15 years1,600
8,300
16 to 20 years200
600
Total3,700
19,100

The Company’s primary purpose in obtaining patents is to protect the results of its research for use in operations and licensing. The Company is party to a substantial number of patent licenses, including intellectual property cross-license agreements and other technology agreements, and also has a substantial number of trademarks and trademark registrations in the United States and in other countries, including the “Dow in Diamond” trademark. Although the Company considers that its patents, licenses and trademarks in the aggregate constitute a valuable asset, it does not regard its business as being materially dependent on any single or group of related patents, licenses or trademarks.


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PRINCIPAL PARTLY OWNED COMPANIES
The Company’s principal nonconsolidated affiliates at December 31, 2019,2020, including direct orand indirect ownership interest for each, are listed below:

Principal Nonconsolidated AffiliateCountryOwnership InterestBusiness Description
EQUATE Petrochemical Company K.S.C.C.Kuwait42.50%Manufactures ethylene, polyethylene and ethylene glycol, and manufactures and markets monoethylene glycol, diethylene glycol and polyethylene terephthalate resins
The Kuwait Olefins Company K.S.C.C.Kuwait42.50%Manufactures ethylene and ethylene glycol
The Kuwait Styrene Company K.S.C.C.Kuwait42.50%Manufactures styrene monomer
Map Ta Phut Olefins Company Limited 1
Thailand32.77%Manufactures propylene and ethylene
Sadara Chemical Company 2
Saudi Arabia35.00%Manufactures chlorine, ethylene, propylene and aromatics for internal consumption and manufactures and sells polyethylene, ethylene oxide and propylene oxide derivative products, and isocyanates
The SCG-Dow Group:
Siam Polyethylene Company LimitedThailand50.00%Manufactures polyethylene
Siam Polystyrene Company LimitedThailand50.00%Manufactures polystyrene
Siam Styrene Monomer Company LimitedThailand50.00%Manufactures styrene
Siam Synthetic Latex Company LimitedThailand50.00%Manufactures latex and specialty elastomers
1.The Company's effective ownership of Map Ta Phut is 32.77 percent, of which the Company directly owns 20.27 percent and indirectly owns 12.5 percent through its equity interest in Siam Polyethylene Company Limited.
2.The Company is 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.
1.The Company's effective ownership of Map Ta Phut is 32.77 percent, of which the Company directly owns 20.27 percent and indirectly owns 12.5 percent through its equity interest in Siam Polyethylene Company Limited.
2.The Company is 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.

See Note 1312 to the Consolidated Financial Statements for additional information regarding nonconsolidated affiliates.

PROTECTION OF THE ENVIRONMENT
Matters pertaining to the environment are discussed in Part I, Item 1A. Risk Factors; Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations; and Notes 1 and 1716 to the Consolidated Financial Statements. In addition, detailed information on the Company's performance regarding environmental matters and goals can be found online onis accessible through the Science & Sustainability webpage at www.dow.com/sustainability. Dow's website and its content are not deemed incorporated by reference into this report.

EMPLOYEESHUMAN CAPITAL
Dow’s ambition – to be the most innovative, customer-centric, inclusive and sustainable materials science company - starts with people. Dow employees create innovative and sustainable materials science solutions to advance the world. Every answer starts with asking the right questions. This is why the diverse, dedicated Dow team collaborates with customers and other stakeholders to find solutions to the world's toughest challenges. The Company's values of Respect for People, Integrity and Protecting Our Planet are fundamental beliefs that are ingrained in each action taken, can never be compromised and are the foundation of the Company's Code of Conduct.

The Company is dedicated to employee health and safety, and is invested in fostering a culture of inclusion and continuous learning to ensure all Dow employees are respected, valued and encouraged to make their fullest contribution.


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Safety, Employee Health and Well-Being
A commitment to safety and employee health is engrained in Dow’s culture and central to how the Dow team works. Dow uses a comprehensive, integrated operating discipline management system that includes policies, requirements, best practices and procedures associated with health and safety. In 2020, the Company achieved an Occupational Safety and Health Administration ("OSHA") Total Recordable Injury and Illness Rate of 0.12, based upon the number of incidents per 200,000 work hours for employees and contractors globally. This measure, along with a consistent set of globally applied, as well as locally defined, leading indicators of safety performance, are cornerstones of Dow's worker protection program. The Company maintains a robust, globally tracked near-miss program for situations that did not result in an injury, but could have been high consequence had circumstances been slightly different. This data is reviewed regularly by management and the Environment, Health, Safety & Technology Committee of the Dow Inc. Board of Directors ("Board"), is visible to all employees and is built into digital dashboards that include actual injury information for every Dow location around the world.

As part of the Company’s total worker health strategy, employees have access to occupational health services at no cost through on-site, Company-managed clinics at its manufacturing locations or an offsite provider overseen by Dow Occupational Health. In addition to access for occupational health needs, the Company also maintains a comprehensive wellness program, recognizing the value of good physical as well as mental health to employees, families and communities. In 2020, the Company also initiated an offering of psychological safety training sessions to employees.

Dow maintains active Crisis Management Teams at the corporate level and in each region where the Company operates to ensure appropriate plans are in place in the event of natural disasters or other emergencies, and currently in response to the coronavirus disease 2019 ("COVID-19") pandemic. For additional information on the Company’s response to the COVID-19 pandemic, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Inclusion & Diversity
At Dow, inclusion and diversity (“I&D”) is a business imperative evidenced by inclusion serving as a core pillar of the Company's ambition statement. A strategic and intentional focus on I&D not only enhances the employee experience and satisfaction, but it also supports innovation, customer experience and understanding of the communities the Company serves. In 2020, Dow ranked #22 in the DiversityInc Top 50 Companies for Diversity.

Dow's strategic I&D efforts are directed by its Chief Inclusion Officer and Office of Inclusion, which supports implementation throughout Dow’s businesses, functions and regions. Three Inclusion Councils drive the I&D strategy from the top of the Company down and across the enterprise:
•The President’s Inclusion Council defines and supports the mandate from the top.
•A Senior Leaders’ Inclusion Council influences change through senior and mid-level business, geographic and functional leaders.
•A Joint Inclusion Council proactively engages with Dow’s Employee Resource Groups ("ERGs") to ensure employee engagement at all levels.

Dow’s 10 ERGs are representative of the Company’s diverse workforce and help foster an inclusive workplace. Dow’s ERGs are organized around historically underrepresented groups including women, people of color, LGBTQ+ individuals, people with disabilities and veterans, as well as groups both for professionals who are new to the Company and those who are later in their careers. Senior leaders serve as executive sponsors for each ERG. In 2020, 49 percent of Dow’s workforce and 98 percent of Dow leaders participated in at least one ERG.

I&D metrics, including ERG participation, global representation of women and U.S. minority representation in the United States, are published internally on a quarterly basis, are embedded in the same scorecard where Dow’s financial and safety results are measured and are directly connected to leaders’ annual performance and compensation. This data is reviewed regularly by management and with the Compensation and Leadership Development Committee of the Board.


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Employee Engagement, Learning and Development
Throughout an employee’s career, the Company supports development through a blend of learning approaches including in-person and virtual trainings, digital learning platforms, on-the-job training and a series of leadership development programs. Annually, all employees have the opportunity to provide feedback on employee experience and offer insights into how to improve Dow’s working culture through a global employee opinion survey. A key component of the survey is an opportunity for employees to provide feedback on the effectiveness of their direct leader. In 2020, 74 percent of employees responded to the annual survey. The feedback received through this annual survey and additional quarterly checkpoint surveys is used to drive actions to improve the overall Dow experience for employees across the Company, as well as to support continuous improvement in leader effectiveness.

At December 31, 2019,2020, the Company permanently employed approximately 36,50035,700 people on a full-time basis.

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dow-20201231_g10.jpg
*U.S. Minority includes employees who self-identify as Hispanic or Latino, Black or African American, Asian, American Indian or Alaskan Native, Native Hawaiian or other Pacific Islander, or two or more races. Employees who self-identify as White are considered U.S. Non-Minority.

Additional information regarding Dow’s human capital measures can be found in the Company's annual Sustainability Report, accessible through the Science & Sustainability webpage at www.dow.com/sustainability, as well as Dow's annual Shine Inclusion Report and the U.S. Equal Employment Opportunity Report (EEO-1), accessible through the Inclusion & Diversity webpage at www.dow.com/diversity. Dow’s website and its contents are not deemed incorporated by reference into this report.

OTHER ACTIVITIES
The Company engages in the property and casualty insurance and reinsurance business primarily through its Liana Limited subsidiaries.

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EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information related to the Company's executive officers as of February 7, 2020:5, 2021:

Name, - AgePresent Position with RegistrantYear Elected to be anas Executive Officer of Dow Inc.Other Business Experience since January 1, 20152016
Jack Broodo, 62President, Feedstocks & Energy2020Dow Inc.: President, Feedstocks & Energy since February 2020; Business President, Feedstocks & Energy from April 2019 to February 2020.

TDCC: President, Feedstocks & Energy since February 2020; Business President, Feedstocks & Energy from February 2016 to February 2020. Vice President, Investor Relations from November 2014 to January 2016.
Karen S. Carter, 4950Chief Human Resources Officer and Chief Inclusion Officer2019
Dow Inc.: Chief Human Resources Officer and Chief Inclusion Officer since April 1, 2019.

TDCC:
TDCC: Chief Human Resources Officer since October 2018; Chief Inclusion Officer since July 2017; North America Commercial Vice President, Dow Packaging and Specialty Plastics from February 2016 to July 2017; Global Business Director, Low Density & Slurry Polyethylene, Packaging & Specialty Plastics from April 2015 to January 2016; and Global Marketing Director Value Chain, New2016.
Diego Donoso, 53President, Packaging & Specialty Plastics2020
Dow Inc.: President, Packaging & Specialty Plastics since February 2020; Business DevelopmentPresident, Packaging & Sustainability, PerformanceSpecialty Plastics from September 2011April 2019 to April 2015.February 2020.

TDCC: President, Packaging & Specialty Plastics since February 2020; Business President, Packaging & Specialty Plastics from August 2012 to February 2020.
Ronald C. Edmonds, 6263Controller and Vice President of Controllers and Tax2019
Dow Inc.: Controller and Vice President of Controllers and Tax since April 1, 2019.


TDCC:TDCC: Controller and Vice President since November 2009; Vice President of Tax since January 2016.
Jim Fitterling, 5859Chairman and Chief Executive Officer2018
Dow Inc.: Chairman since April 2020; Chief Executive Officer since August 2018.

TDCC:
TDCC: Chairman since April 2020; Chief Executive Officer since July 2018; President and Chief Operating Officer from February 2016 to July 2018; Vice Chairman and Chief Operating Officer from October 2015 to February 2016; Vice Chairman,2016.
Mauro Gregorio, 58President, Performance Materials & Coatings2020Dow Inc.: President, Performance Materials & Coatings since February 2020; Business OperationsPresident, Performance Materials & Coatings from April 2019 to February 2020.

TDCC: President, Performance Materials & Coatings since February 2020; Business President, Consumer Solutions from January 2016 to February 2020.
Jane M. Palmieri, 51President, Industrial Intermediates & Infrastructure2020Dow Inc.: President, Industrial Intermediates & Infrastructure since February 2020; Business President, Polyurethanes and Chlor-Alkali & Vinyl from April 2019 to February 2020.

TDCC: President, Industrial Intermediates & Infrastructure since February 2020; Business President, Polyurethanes and Chlor-Alkali & Vinyl from April 2018 to February 2020; Business President, Polyurethanes and Chlor-Alkali from October 20142016 to October 2015.April 2018; Business President, Building and Construction from June 2013 to April 2018.
Peter Holicki, 59John M. Sampson, 60Senior Vice President, Operations, - Manufacturing & Engineering and Environment, Health and Safety Operations20192021
Dow Inc.: Senior Vice President, Operations, - Manufacturing & Engineering and Environment, Health and Safety Operations since April 1, 2019.
October 2020.
TDCC: Senior
Olin Corporation: Executive Vice President, Business Operations - Manufacturing & Engineering and Environment, Health and Safety Operations since October 2015; responsible for oversight of the Emergency Services and Security Expertise Center sincefrom April 2019 to September 2014; Corporate2020; Vice President, of Manufacturing & Engineering and Environment, Health & SafetyBusiness Operations January 2014from October 2015 to October 2015.April 2019.
A. N. Sreeram, 5253Senior Vice President of Research & Development and Chief Technology Officer2019
Dow Inc.: Senior Vice President of Research & Development and Chief Technology Officer since April 1, 2019.


TDCC:TDCC: Chief Technology Officer since October 2015; Senior Vice President of Research & Development since August 2013; Corporate Vice President, Research & Development from August 2013 to October 2015.2013.
Howard Ungerleider, 5152President and Chief Financial Officer2018
Dow Inc.: President and Chief Financial Officer since August 2018.


TDCC:TDCC: Chief Financial Officer since October 2014; President since July 2018; Vice Chairman from October 2015 to July 2018; Executive Vice President from October 2014 to October 2015.2018.
Amy E. Wilson, 4950General Counsel and Corporate Secretary2018
Dow Inc.: General Counsel and Corporate Secretary since April 1, 2019; Secretary from August 2018 to April 1, 2019.


TDCC:TDCC: General Counsel since October 2018; Corporate Secretary since February 2015; Associate General Counsel from April 2017 to September 2018; Assistant General Counsel from February 2015 to April 2017; Assistant Corporate Secretary from 2008 to February 2015; Director of the Office of the Corporate Secretary from August 2013 to October 2018.

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ITEM 1A. RISK FACTORS
The factors described below represent the Company's principal risks.

COVID-19 PANDEMIC - RELATED RISKS
Public Health Crisis: A public health crisis or global outbreak of disease, including the pandemic caused by coronavirus disease 2019 (“COVID-19”) has had, and could continue to have, a negative effect on the Company's manufacturing operations, supply chain and workforce, creating business disruptions that couldcontinue to have a substantial negative impact on the Company’s results of operations, financial condition and cash flows.
The pandemic caused by COVID-19 has impacted all geographic regions where Dow products are produced and sold. The global, regional and local spread of COVID-19 has resulted in significant global mitigation measures, including government-directed quarantines, social distancing and shelter-in-place mandates, travel restrictions and/or bans, and restricted access to certain corporate facilities and manufacturing sites. Uncertainty with respect to the severity and duration of the COVID-19 pandemic, coupled with oil price fluctuations due in part to the global spread of COVID-19 and the continued increase in global cases, has contributed to the volatility of financial markets. While the severity and duration of the COVID-19 pandemic in key geographic regions and end-markets cannot be reasonably estimated at this time, impacts to the Company include, but are not limited to: fluctuations in the Company’s stock price due to market volatility; a decrease in demand for certain Company products; price declines; reduced profitability; supply chain disruptions impeding the Company’s ability to ship and/or receive product; temporary idling or permanent closure of select manufacturing facilities and/or manufacturing assets; asset impairment charges; interruptions or limitations to manufacturing operations imposed by local, state or federal governments; reduced market liquidity and increased borrowing costs; workforce absenteeism and distraction; labor shortages; customer credit concerns; increased cyber security risk and data accessibility disruptions due to remote working arrangements; workforce reductions and fluctuations in foreign currency markets. Additional risks may include, but are not limited to: shortages of key raw materials; potential impairment in the carrying value of goodwill; additional asset impairment charges; increased obligations related to the Company’s pension and other postretirement benefit plans; and tax valuation allowances. Business disruptions and market volatility resulting from the COVID-19 pandemic have had and could continue to have a substantial negative impact on the Company’s results of operations, financial condition and cash flows. The adverse impact of the COVID-19 pandemic on the Company may also have the effect of heightening many of the other risks described in this "Risk Factors" section.

MACROECONOMIC RISKS
Financial Commitments and Credit Markets: Market conditions could reduce the Company's flexibility to respond to changing business conditions or fund capital needs.
Adverse economic conditions could reduce the Company’s flexibility to respond to changing business and economic conditions or to fund capital expenditures or working capital needs. The economic environment could result in a contraction in the availability of credit in the marketplace and reduce sources of liquidity for the Company. This could result in higher borrowing costs.

Global Economic Considerations: The Company operates in a global, competitive environment which gives rise to operating and market risk exposure.
The Company sells its broad range of products and services in a competitive, global environment, and competes worldwide for sales on the basis of product quality, price, technology and customer service. Increased levels of competition could result in lower prices or lower sales volume, which could have a negative impact on the Company’s results of operations. Sales of the Company's products are also subject to extensive federal, state, local and foreign laws and regulations, trade agreements, import and export controls and duties and tariffs. The imposition of additional regulations, controls and duties and tariffs or changes to bilateral and regional trade agreements could result in lower sales volume, which could negatively impact the Company’s results of operations.

Economic conditions around the world, and in certain industries in which the Company does business, also impact sales price and volume. As a result, market uncertainty or an economic downturn driven by political tensions, war, terrorism, epidemics, pandemics or political instability in the geographic regions or industries in which the Company sells its products could reduce demand for these products and result in decreased sales volume, which could have a negative impact on the Company’s results of operations.

In addition, volatility and disruption of financial markets could limit customers’ ability to obtain adequate financing to maintain operations, which could result in a decrease in sales volume and have a negative impact on the Company’s results of operations. The Company’s global business operations also give rise to market risk exposure
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related to changes in foreign currency exchange rates, interest rates, commodity prices and other market factors such as equity prices. To manage such risks, the Company enters into hedging transactions pursuant to established guidelines and policies. If the Company fails to effectively manage such risks, it could have a negative impact on its results of operations.

Financial CommitmentsPension and Credit Markets: Market conditions could reduceOther Postretirement Benefits: Increased obligations and expenses related to the Company's flexibility to respond to changing business conditions or fund capital needs.
Adverse economic conditionsdefined benefit pension plans and other postretirement benefit plans could reduce the Company’s flexibility to respond to changing businessnegatively impact its financial condition and economic conditions or to fund capital expenditures or working capital needs. The economic environment could result in a contraction in the availability of credit in the marketplace and reduce sources of liquidity for the Company. This could result in higher borrowing costs.
Raw Materials: Availability of purchased feedstock and energy, and the volatility of these costs, impact Dow’s operating costs and add variability to earnings.
Purchased feedstock and energy costs account for a substantial portion of the Company’s total production costs and operating expenses. The Company purchases hydrocarbon raw materials including ethane, propane, butane, naphtha and condensate as feedstocks and also purchases certain monomers, primarily ethylene and propylene, to supplement internal production, as well as other raw materials. The Company also purchases natural gas, primarily to generate electricity, and purchases electric power to supplement internal generation.

Feedstock and energy costs generally follow price trends in crude oil and natural gas, which are sometimes volatile. While the Company uses its feedstock flexibility and financial and physical hedging programs to help mitigate feedstock cost increases, the Company is not always able to immediately raise selling prices. Ultimately, the ability to pass on underlying cost increases is dependent on market conditions. Conversely, when feedstock and energy costs decline, selling prices generally decline as well. As a result, volatility in these costs could impact the Company’s results of operations.

The Company has a number of investments on the U.S. Gulf Coast to take advantage of increasing supplies of low-cost natural gasdefined benefit pension plans and NGLs derived from shale gas including: the St. Charles Operations ("SCO-2"other postretirement benefit plans (the “plans”) ethylene production facility in December 2012; an on-purpose propylene production facility, which commenced operations in December 2015; an ethylene production facility in Plaquemine, Louisiana, which included expanding the facility’s ethylene production capacity and modifications to enable full ethane cracking flexibility; completion of a new integrated world-scale ethylene production facility and a new ELITE™ Enhanced Polyethylene production facility, both located in Freeport, Texas, in 2017, and a capacity expansion project which will bring the facility’s total ethylene capacity to 2,000 KTA in 2020; and, the Company commenced operations in 2018 on its new LDPE production facility and its new NORDEL™ Metallocene EPDM production facility, both located in Plaquemine, Louisiana. As a result of these investments, the Company’s exposure to purchased ethylene and propylene is expected to decline, offset by increased exposure to ethane- and propane-based feedstocks.

While the Company expects abundant and cost-advantaged supplies of NGLs in the United States to persist forand a number of other countries. The assets of the foreseeableCompany's funded plans are primarily invested in fixed income securities, equity securities of U.S. and foreign issuers and alternative investments, including investments in real estate, private equity and absolute return strategies. Changes in the market value of plan assets, investment returns, discount rates, mortality rates, regulations and the rate of increase in compensation levels may affect the funded status of the Company's plans and could cause volatility in the net periodic benefit cost, future if NGLs become significantly less advantaged than crude oil-based feedstocks, itfunding requirements of the plans and the funded status of the plans. A significant increase in the Company's obligations or future funding requirements could have a negative impact on the Company’sCompany's results of operations and future investments. Also, if the Company’s key suppliers of feedstockscash flows for a particular period and energy are unable to provide the raw materials required for production, it could have a negative impact on the Company’s results of operations.Company's financial condition.

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Supply/Demand Balance: Earnings generated by the Company's products vary based in part on the balance of supply relative to demand within the industry.
The balance of supply relative to demand within the industry may be significantly impacted by the addition of new capacity, especially for basic commodities where capacity is generally added in large increments as world-scale facilities are built. This may disrupt industry balances and result in downward pressure on prices due to the increase in supply, which could negatively impact the Company’s results of operations.

Litigation: The Company is party to a number of claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, employment matters, governmental tax and regulation disputes, contract and commercial litigation, and other actions.
Certain of the claims and lawsuits facing the Company purport to be class actions and seek damages in very large amounts. All such claims are contested. With the exception of the possible effect of the asbestos-related liability of Union Carbide Corporation (“Union Carbide”) and Chapter 11 related matters of Dow Silicones Corporation (“Dow Silicones,” formerly known as Dow Corning Corporation, which changed its name effective as of February 1, 2018) as described below, it is the opinion of the Company’s management that the possibility is remote that the aggregate of all such claims and lawsuits will have a material adverse impact on the Company’s consolidated financial statements.

Union Carbide is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades. At December 31, 2019, Union Carbide's total asbestos-related liability, including future defense and processing costs, was $1,165 million ($1,260 million at December 31, 2018).

In 1995, Dow Silicones, a former 50:50 joint venture, voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in order to resolve breast implant liabilities and related matters (the “Chapter 11 Proceeding”). Dow Silicones emerged from the Chapter 11 Proceeding on June 1, 2004, and is implementing the Joint Plan of Reorganization (the “Plan”). The Plan provides funding for the resolution of breast implant and other product liability litigation covered by the Chapter 11 Proceeding. Dow Silicones’ liability for breast implant and other product liability claims was $165 million at December 31, 2019 ($263 million at December 31, 2018).

See Note 17 to the Consolidated Financial Statements for additional information on these matters.

LEGAL AND REGULATORY RISKS
Environmental Compliance: The costs of complying with evolving regulatory requirements could negatively impact the Company's financial results. Actual or alleged violations of environmental laws or permit requirements could result in restrictions or prohibitions on plant operations, substantial civil or criminal sanctions, as well as the assessment of strict liability and/or joint and several liability.
The Company is subject to extensive federal, state, local and foreign laws, regulations, rules and ordinances relating to pollution, protection of the environment, climate change, greenhouse gas emissions, and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. In addition, the Company may have costs related to environmental remediation and restoration obligations associated with past and current sites as well as related to its past or current waste disposal practices or other hazardous materials handling. Although management will estimate and accrue liabilities for these obligations, it is reasonably possible that the Company’s ultimate cost with respect to these matters could be significantly higher, which could negatively impact the Company’s financial condition and results of operations. Costs and capital expenditures relating to environmental, health or safety matters are subject to evolving regulatory requirements and depend on the timing of the promulgation and enforcement of specific standards which impose the requirements. Moreover, changes in environmental regulations could inhibit or interrupt the Company’s operations, or require modifications to its facilities. Accordingly, environmental, health or safety regulatory matters could result in significant unanticipated costs or liabilities. For additional information, see Part II, Item 7. Other Matters, Environmental Matters in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Health and Safety: Increased concerns regarding the safe use of chemicals and plastics in commerce and their potential impact on the environment has resulted in more restrictive regulations and could lead to new regulations.
Concerns regarding the safe use of chemicals and plastics in commerce and their potential impact on health and the environment reflect a growing trend in societal demands for increasing levels of product safety and environmental protection. These concerns could manifest themselves in stockholder proposals, preferred purchasing, delays or failures in obtaining or retaining regulatory approvals, delayed product launches, lack of market acceptance and continued pressure for more stringent regulatory intervention and litigation. These concerns could also influence public perceptions, the viability or continued sales of certain of the Company's products, its reputation and the cost to comply with regulations. In addition, terrorist attacks and natural disasters have increased concerns about the security and safety of chemical production and distribution. These concerns could have a negative impact on the Company's results of operations.

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Local, state, federal and foreign governments continue to propose new regulations related to the security of chemical plant locations and the transportation of hazardous chemicals, which could result in higher operating costs.

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TableLitigation: The Company is party to a number of Contentsclaims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, employment matters, governmental tax and regulation disputes, contract and commercial litigation, and other actions.

Certain of the claims and lawsuits facing the Company purport to be class actions and seek damages in very large amounts. All such claims are contested. With the exception of the possible effect of the asbestos-related liability of Union Carbide Corporation (“Union Carbide”) and Chapter 11 related matters of Dow Silicones Corporation ("Dow Silicones") as described below, it is the opinion of the Company’s management that the possibility is remote that the aggregate of all such claims and lawsuits will have a material adverse impact on the Company’s consolidated financial statements.

Union Carbide is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades. At December 31, 2020, Union Carbide's total asbestos-related liability, including future defense and processing costs, was $1,098 million ($1,165 million at December 31, 2019).

In 1995, Dow Silicones, a former 50:50 joint venture, voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in order to resolve breast implant liabilities and related matters (the “Chapter 11 Proceeding”). Dow Silicones emerged from the Chapter 11 Proceeding on June 1, 2004, and is implementing the Joint Plan of Reorganization (the “Plan”). The Plan provides funding for the resolution of breast implant and other product liability litigation covered by the Chapter 11 Proceeding. Dow Silicones’ liability for breast implant and other product liability claims was $160 million at December 31, 2020 ($165 million at December 31, 2019). See Note 16 to the Consolidated Financial Statements for additional information on litigation matters.

Plastic Waste: Increased concerns regarding plastic waste in the environment, consumers selectively reducing their consumption of plastic products due to recycling concerns, or new or more restrictive regulations and rules related to plastic waste could reduce demand for the Company’s plastic products and could negatively impact the Company’s financial results.
Local, state, federal and foreign governments have been increasingly proposing and in some cases approving bans on certain plastic-based products including single-use plastics, plastic straws and utensils. In addition, plastics have faced increased public scrutiny due to negative coverage of plastic waste in the environment, including the world’s oceans. As Dow is one of the world’s largest producers of plastics, increased regulation on the use of plastics could cause reduced demand for the Company’s polyethylene products which could negatively impact the Company’s financial condition, results of operations and cash flows.

Operational Event: A significant operational eventOPERATIONAL AND STRATEGIC RISKS
Company Strategy: Implementing certain elements of the Company's strategy could negatively impact its financial results.
The Company currently has manufacturing operations, sales and marketing activities, and joint ventures in emerging geographic regions. Activities in these geographic regions are accompanied by uncertainty and risks including: navigating different government regulatory environments; relationships with new, local partners; project funding commitments and guarantees; expropriation, military actions, war, terrorism and political instability; sabotage; uninsurable risks; suppliers not performing as expected resulting in increased risk of extended project timelines; and determining raw material supply and other details regarding product movement. If the Company'smanufacturing operations, sales and marketing activities, and/or implementation of these projects is not successful, it could adversely affect the Company’s financial condition, cash flows and results of operations.
As a diversified chemical manufacturing company, the Company's operations, the transportation of products, cyber-attacks, or severe weather conditions and other natural phenomena (such as freezing, drought, hurricanes, earthquakes, tsunamis, floods, etc.) could result in an unplanned event that could be significant in scale and could negatively impact operations, neighbors or the public at large, which could have a negative impact on the Company's results of operations.

Major hurricanes have caused significant disruption in the Company's operations on the U.S. Gulf Coast, logistics across the region, and the supply of certain raw materials, which had an adverse impact on volume and cost for some of its products. Due to the Company's substantial presence on the U.S. Gulf Coast, similar severe weather conditions or other natural phenomena in the future could negatively impact the Company's results of operations.

Cyber Threat: The risk of loss of the Company’s intellectual property, trade secrets or other sensitive business information or disruption of operations could negatively impact the Company’s financial results.
Cyber-attacks or security breaches could compromise confidential, business critical information, cause a disruption in the Company’s operations or harm the Company's reputation. The Company has attractive information assets, including intellectual property, trade secrets and other sensitive, business critical information. While the Company has a comprehensive cyber-security program that is continuously reviewed, maintained and upgraded, a significant cyber-attack could result in the loss of critical business information and/or could negatively impact operations, which could have a negative impact on the Company’s financial results.

Company Strategy: Implementing certain elements
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Table of the Company's strategy could negatively impact its financial results.Contents
The Company currently has manufacturing operations, sales and marketing activities, and joint ventures in emerging geographies. Activities in these geographic regions are accompanied by uncertainty and risks including: navigating different government regulatory environments; relationships with new, local partners; project funding commitments and guarantees; expropriation, military actions, war, terrorism and political instability; sabotage; uninsurable risks; suppliers not performing as expected resulting in increased risk of extended project timelines; and determining raw material supply and other details regarding product movement. If the manufacturing operations, sales and marketing activities, and/or implementation of these projects is not successful, it could adversely affect the Company’s financial condition, cash flows and results of operations.

Goodwill: An impairment of goodwill could negatively impact the Company’s financial results.
At least annually, the Company assesses goodwill for impairment. If testing indicates that goodwill is impaired, the carrying value is written down based on fair value with a charge against earnings. Where the Company utilizes a discounted cash flow methodology in determining fair value, continued weak demand for a specific product line or business could result in an impairment. Accordingly, any determination requiring the write-off of a significant portion of goodwill could negatively impact the Company's results of operations. See Note 1413 to the Consolidated Financial Statements for additional information regarding the Company's goodwill impairment testing.

Pension and Other Postretirement Benefits: Increased obligations and expenses related to the Company's defined benefit pension plans and other postretirement benefit plansOperational Event: A significant operational event could negatively impact its financial condition andthe Company's results of operations.
The Company has defined benefit pension plansAs a diversified chemical manufacturing company, the Company's operations, the transportation of products, cyber-attacks, pandemics and other postretirement benefit plans (the “plans”public health-related events or severe weather conditions and other natural phenomena (such as freezing, drought, hurricanes, earthquakes, tsunamis, floods, etc.) could result in the United States and a number of other countries. The assets of the Company's funded plans are primarily investedan unplanned event that could be significant in fixed income securities, equity securities of U.S. and foreign issuers and alternative investments, including investments in real estate, private market securities and absolute return strategies. Changes in the market value of plan assets, investment returns, discount rates, mortality rates, regulations and the rate of increase in compensation levels may affect the funded status of the Company's plansscale and could cause volatility innegatively impact operations, neighbors or the net periodic benefit cost, future funding requirements of the plans and the funded status of the plans. A significant increase in the Company's obligations or future funding requirementspublic at large, which could have a negative impact on the Company's results of operations.

Major hurricanes have caused significant disruption in the Company's operations on the U.S. Gulf Coast, logistics across the region, and the supply of certain raw materials, which had an adverse impact on volume and cost for some of its products. Due to the Company's substantial presence on the U.S. Gulf Coast, similar severe weather conditions or other natural phenomena in the future could negatively impact the Company's results of operations.

Raw Materials: Availability of purchased feedstock and energy, and the volatility of these costs, impact Dow’s operating costs and add variability to earnings.
Purchased feedstock and energy costs account for a substantial portion of the Company’s total production costs and operating expenses. The Company purchases hydrocarbon raw materials including ethane, propane, butane, naphtha and condensate as feedstocks and also purchases certain monomers, primarily ethylene and propylene, to supplement internal production, as well as other raw materials. The Company also purchases natural gas, primarily to generate electricity, and purchases electric power to supplement internal generation.

Feedstock and energy costs generally follow price trends in crude oil and natural gas, which are sometimes volatile. While the Company uses its feedstock flexibility and financial and physical hedging programs to help mitigate feedstock cost increases, the Company is not always able to immediately raise selling prices. Ultimately, the ability to pass on underlying cost increases is dependent on market conditions. Conversely, when feedstock and energy costs decline, selling prices generally decline as well. As a result, volatility in these costs could impact the Company’s results of operations.

The Company has a number of investments on the U.S. Gulf Coast to take advantage of increasing supplies of low-cost natural gas and natural gas liquids ("NGLs") derived from shale gas including: the St. Charles Operations ("SCO-2") ethylene production facility, which commenced operations in December 2012; an on-purpose propylene production facility, which commenced operations in December 2015; an ethylene production facility in Plaquemine, Louisiana, which included expanding the facility’s ethylene production capacity and modifications to enable full ethane cracking flexibility; completion of a new integrated world-scale ethylene production facility and a new ELITE™ Enhanced Polyethylene production facility, both located in Freeport, Texas, in 2017, and a capacity expansion project which brought the facility’s total ethylene capacity to 2,000 kilotonnes per annum in 2020; and, the Company commenced operations in 2018 on its new LDPE production facility and its new NORDEL™ Metallocene EPDM production facility, both located in Plaquemine, Louisiana. As a result of these investments, the Company’s exposure to purchased ethylene and propylene is expected to decline, offset by increased exposure to ethane- and propane-based feedstocks.

While the Company expects abundant and cost-advantaged supplies of NGLs in the United States to persist for the foreseeable future, if NGLs become significantly less advantaged than crude oil-based feedstocks, it could have a negative impact on the Company’s results of operations and cash flowsfuture investments. Also, if the Company’s key suppliers of feedstock and energy are unable to provide the raw materials required for production, it could have a particular period andnegative impact on the Company's financial condition.Company’s results of operations.


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Separation from DowDuPont: Risks related to achieving the anticipated benefits of Dow's separation from DowDuPont.
Risks related to achieving the anticipated benefits of Dow's separation from DowDuPont include, but are not limited to, a number of conditions outside the control of Dow,including risks related toto: (i) Dow's inability to achieve some or all of the benefits that it expects to receive from the separation from DowDuPont,DowDuPont; (ii) certain tax risks associated with the separation,separation; (iii) Dow's inability to make necessary changes to operate as a stand-alone company, (iv) the failure of Dow's pro forma financial information to be a reliable indicator of Dow's future results, (v) Dow's inability to enjoy the same benefits of diversity, leverage and market reputation that it enjoyed as a combined company, (vi)results; (iv) Dow's inability to receive third-party consents required under the separation agreement, (vii) Dow's customers, suppliers and others' perception of Dow's financial stability on a stand-alone basis, (viii)agreement; (v) non-compete restrictions under the separation agreement, (ix)agreement; (vi) receipt of less favorable terms in the commercial agreements Dow entered into with DuPont and Corteva, Inc. ("Corteva"), including restrictions under intellectual property cross-license agreements, than Dow would have received from an unaffiliated third party; and (x)(vii) Dow's obligation to indemnify DuPont and/or Corteva for certain liabilities.



ITEM 1B. UNRESOLVED STAFF COMMENTS
None.


ITEM 2. PROPERTIES
The Company's corporate headquarters are located in Midland, Michigan. The Company's manufacturing, processing, marketing and research and development facilities, as well as regional purchasing offices and distribution centers are located throughout the world. The Company has investments in property, plant and equipment related to global manufacturing operations. Collectively, the Company operates 109106 manufacturing sites in 31 countries. The following table includes the major manufacturing sites by operating segment, including consolidated variable interest entities:
Major Manufacturing Sites by SegmentPackaging & Specialty PlasticsIndustrial Intermediates & InfrastructurePerformance Materials & Coatings
Location
Bahia Blanca, ArgentinaX
Candeias, BrazilX      X
Canada:
Fort Saskatchewan, AlbertaX
Prentiss, AlbertaX
Zhangjiagang, ChinaXXX
Germany:
BoehlenXXX
LeunaX
SchkopauXX
StadeX
Terneuzen, The NetherlandsXX
Tarragona, SpainXX
Map Ta Phut, ThailandXXX
Barry, United KingdomX
United States:
Carrollton, KentuckyX
Hahnville, LouisianaXXX
Plaquemine, LouisianaXX
Midland, MichiganX
Deer Park, TexasXX
Freeport, TexasXXX
Orange, TexasX
Seadrift, TexasXX


2023


Including the major manufacturing sites, the Company has manufacturing sites and holdings in all geographic regions as follows:
Manufacturing Sites by Region
Asia Pacific19 manufacturing sites in 10 countries
EMEAI1
37 manufacturing sites in 15 countries
Latin America1815 manufacturing sites in 4 countries
U.S. & Canada35 manufacturing sites in 2 countries
1.Europe, Middle East, Africa and India.

Properties of the Company include facilities which, in the opinion of management, are suitable and adequate for their use and will have sufficient capacity for the Company’s current needs and expected near-term growth. All of the Company’s plants are owned or leased, subject to certain easements of other persons which, in the opinion of management, do not substantially interfere with the continued use of such properties or materially affect their value. No title examination of the properties has been made for the purpose of this report. Additional information with respect to the Company's property, plant and equipment and leases is contained in Notes 12, 1611, 15 and 1817 to the Consolidated Financial Statements.


ITEM 3. LEGAL PROCEEDINGS
Asbestos-Related Matters of Union Carbide Corporation
Union Carbide Corporation (“Union Carbide”), a wholly owned subsidiary of the Company, is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-containing products located on Union Carbide’s premises, and Union Carbide’s responsibility for asbestos suits filed against a former Union Carbide subsidiary, Amchem Products, Inc.

For additional information, see Part II, Item 7. Other Matters, Asbestos-Related Matters of Union Carbide Corporation in Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Notes 1 and 1716 to the Consolidated Financial Statements.

Environmental MattersProceedings
In April 2012 and May 2015, Dow Silicones Corporation ("Dow Silicones"), a wholly owned subsidiary of the Company, received the following notifications from the U.S. Environmental Protection Agency ("EPA"), Region 5 related to Dow Silicones' Midland, Michigan, manufacturing facility (the “Facility”): 1) a Notice of Violation and Finding of Violation which alleges a number of violations in connection with the detection, monitoring and control of certain organic hazardous air pollutants at the Facility and various recordkeeping and reporting violations under the Clean Air Act and 2) a Notice of Violation alleging a number of violations relating to the management of hazardous wastes at the Facility pursuant to the Resource Conservation and Recovery Act. On June 25, 2019, the U.S. Department of Justice ("DOJ") filed a proceeding on behalf of the EPA against Dow Silicones in the U.S. District Court for the Eastern District of Michigan ("District Court"), which proposes to resolve the previously reported allegations of noncompliance with requirements of federal air, water, waste and chemical release reporting laws at the Facility predating the ownership restructure of Dow Silicones. The consent decree, which was entered by the District Court on January 24, 2020, provides for a penalty of $4.55 million, performance of supplemental environmental projects and enhancements at the site that will cost approximately $2 million, as well as additional environmental studies and other actions. 

On July 5, 2018, the Company received a draft consent decree from the EPA,U.S. Environmental Protection Agency ("EPA"), the DOJU.S. Department of Justice ("DOJ") and the Louisiana Department of Environmental Quality, (“DEQ”), relating to the operation of steam-assisted flares at the Company’s olefins manufacturing facilities in Freeport, Texas; Plaquemine, Louisiana; and St. Charles, Louisiana. Discussions betweenOn June 2, 2020, the EPA and the DOJ and the DEQ are ongoing.

On October 30, 2018, DC Alabama,added Performance Materials NA, Inc. (“DCA”), a wholly owned subsidiary of the Company, finalizedas an additional signatory to the existing draft consent decree based on the operation of steam-assisted flares at the Sabine olefins manufacturing facility in Orange, Texas (the "Orange, TX Facility"). Performance Materials NA, Inc. acquired the Orange, TX Facility in February 2019 and executedbecame a subsidiary of the Company in April 2019. On January 19, 2021, a proposed final consent order (“Order”) fromdecree was filed in the Alabama DepartmentU.S. District Court for the Eastern District of Environmental Management (“ADEM”) relatingLouisiana to alleged unpermitted dischargesaddress these matters. Notice of industrial process waterthe consent decree was published in the Federal Register on January 28, 2021 and certain water quality and equipment violations at DCA’s silicon metal production facility located in Mt. Meigs, Alabama.public comments are required to be submitted within 30 days of that publication. The Order included, among other remedies,consent decree would require the Company to pay a $3 million civil penalty and $424,786 to specified local projects in Louisiana. The consent decree would further require the Company to install and operate additional air pollution control and monitoring technology on these steam-assisted flares at an estimated cost of $250,000 that DCA paid in December 2018. Implementation ofapproximately $294 million, to be completed over the Order has been ongoing and DCA remains compliant with the Order. Discussions between DCA and ADEM are ongoing.next several years.


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On August 27, 2019, the EPA, DOJ, Texas Environmental Quality Board, and Texas Office of the Attorney General (the “Government Agencies”) added Performance Materials NA, Inc., a wholly owned subsidiary of the Company, as an additional signatory to an existing draft consent decree relating to alleged environmental violations at the Sabine manufacturing facility in Orange, Texas (the “Orange, TX Facility”).Facility. Performance Materials NA, Inc. acquired the Orange, TX Facility in February 2019 and became a subsidiary of the Company in April 2019. The alleged violations were first identified during multimedia environmental inspections that the EPA conducted at the Orange, TX Facility while under prior ownership in March 2009 and December 2015, and involve the management of materials in the Orange, TX Facility’s wastewater treatment system, hazardous waste management, flare and air emissions, including leak detection and repair. Discussions are ongoing between the Government Agencies, the Company, and the Orange, TX Facility’s prior owner, who is the other named signatory.

On October 23, 2019, Union Carbide received a proposed Agreed Order from the Texas Commission on Environmental Quality (“TCEQ”) relating to emissions of ethylene oxide from a process leak at Union Carbide’s manufacturing facility in Seadrift, Texas. The proposed Agreed Order included an administrative penalty of $800,000. On December 30, 2019, TCEQ sent a revised Agreed Order reducing the penalty to $600,000 based on Union Carbide’s corrective actions. Discussions between Union Carbide and TCEQ are ongoing.

On November 8, 2019, a proposed consent decree was filed in the U.S. District Court for the Eastern District of Michigan, Civil Action No. 1:19-cv-13292 between the Company and federal, state and tribal trustees to resolve allegations of natural resource damages arising from the historic operations of the Company’s Midland, Michigan, manufacturing facility. On November 14, 2019, a Notice of Lodging and Notice of Availability and Request for Comments on Draft Restoration Plan/Environmental Assessment was published in the Federal Register. Public commentsRegister. The DOJ filed a Joint Motion for Entry of the Consent Decree on the proposedMay 8, 2020, which was granted and entered as a final order on July 20, 2020. The consent decree and the draft Restoration Plan/Environmental Assessment were required to be submitted within 45 days of that publication. The proposed consent decree would require the Company to pay a $15 million cash settlement to be used for Trustee-selectedtrustee-selected remediation projects and $6.75 million to specified local projects managed by third parties, and requireparties. These funds were paid in December 2020. The consent decree further requires the Company to complete 13 additional environmental restoration projects which are valued by the trustees at approximately $77 million.million, to be conducted over the next several years.


On December 18, 2020, Dow and several other parties received a complaint and proposed consent decree from the EPA relating to environmental contamination at the Gulfco Marine Maintenance Superfund Site in Freeport, Texas. The proposed consent decree includes a requirement for three defendants to make a collective payment of $1.2 million for EPA’s past response costs as well as an obligation to conduct certain response actions at the site. The proposed consent decree was submitted for notice and a 30-day public comment period on December 29, 2020.


ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.


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ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

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Dow Inc. and Subsidiaries
The Dow Chemical Company and Subsidiaries
PART II

ITEM 5. MARKET FOR REGISTRANT’S
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
On April 1, 2019, DowDuPont Inc. (“DowDuPont” and effective June 3, 2019, n/k/a DuPont de Nemours, Inc.) completed the separation of its materials science business and Dow Inc. became the direct parent company of The Dow Chemical Company and its consolidated subsidiaries (“TDCC” and together with Dow Inc., “Dow” or the “Company”), owning all of the outstanding common shares of TDCC. Dow Inc. is now an independent, publicly traded company and Dow Inc. common stock is listed on the New York Stock Exchange under the symbol “DOW.” Dow Inc. common stock began regular-way trading on April 2, 2019.

Dow Inc. has paid dividends on a quarterly basis since the separation from DowDuPont and expects to continue to do so, subject to approval by the Company’s Board of Directors. Quarterly market price of common stock and dividend information can be found in Note 2827 to the Consolidated Financial Statements.

At January 31, 2020,2021, there were 81,54678,276 stockholders of record.

See Part III, Item 11. Executive Compensation for information relating to shares authorized for issuance under Dow Inc.'s equity compensation plans.

The Company grants stock-based compensation to employees and non-employee directors in the form of stock incentive plans, which include stock options, restricted stock units ("RSUs") and restricted stock. The Company also provides stock-based compensation in the form of performance stock units ("PSUs").units. See Note 2221 to the Consolidated Financial Statements for additional information.

Issuer Purchases of Equity Securities
The following table provides information regarding purchases of Dow Inc. common stock by the Company during the three months ended December 31, 2019:2020:

 Issuer Purchases of Equity SecuritiesTotal number of shares purchased as part of the Company's publicly announced share repurchase program
Approximate dollar value of shares that may yet be purchased under the Company's publicly announced share repurchase program 1
(In millions)
 PeriodTotal number of shares purchasedAverage price paid per share
 
 October 2019—
$—
—
$2,594
 November 2019735,600
$53.84
735,600
$2,555
 December 20191,032,502
$53.17
1,032,502
$2,500
 Fourth quarter 20191,768,102
$53.45
1,768,102
$2,500
1.Issuer Purchases of Equity SecuritiesOn April 1, 2019, Dow Inc.'s BoardTotal number of Directors ratifiedshares purchased as part of the Company's publicly announced share repurchase program originally approved on March 15, 2019, authorizing up to $3.0 billion to
Approximate dollar value of shares that may yet be spent on the repurchase ofpurchased under the Company's common stock, with no expiration date.publicly announced share repurchase program 1
(In millions)
PeriodTotal number of shares purchasedAverage price paid per share
October 2020— $— — $2,375 
November 2020— $— — $2,375 
December 2020— $— — $2,375 
Fourth quarter 2020— $— — $2,375 

1.On April 1, 2019, Dow Inc.'s Board of Directors ratified the share repurchase program originally approved on March 15, 2019, authorizing up to $3.0 billion to be spent on the repurchase of the Company's common stock, with no expiration date.

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ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data - Dow Inc.     
In millions, except as noted (Unaudited)20192018201720162015
Summary of Operations     
Net sales 1
$42,951
$49,604
$43,730
$36,264
$37,101
Income (loss) from continuing operations, net of tax 2
$(1,717)$2,940
$(1,287)$1,478
$6,462
Per share of common stock (in dollars):     
Earnings (loss) per common share from continuing operations - basic 2
$(2.42)$3.80
$(1.88)$1.57
$8.64
Earnings (loss) per common share from continuing operations - diluted 2
$(2.42)$3.80
$(1.88)$1.55
$8.31
Cash dividends declared per share of common stock 3
$2.10
$—
$1.38
$1.84
$1.72
Year-end Financial Position     
Total assets$60,524
$83,699
$85,852
$79,511
$67,938
Long-term debt$15,975
$19,253
$19,757
$20,444
$16,202
      
Financial Ratios     
Research and development expenses as percent of net sales1.8 %1.6%1.8%2.1%2.0%
Income (loss) from continuing operations before income taxes as percent of net sales 2
(2.9)%7.6%0.5%3.5%21.8%
Return on stockholders' equity 2
(10.0)%14.3%1.5%15.3%28.2%
Gross debt as a percent of total capitalization54.7 %37.2%39.1%43.9%39.5%
Net debt as a percent of total capitalization50.9 %33.7%31.1%35.1%24.6%

Selected Financial Data - TDCC     
In millions, except as noted (Unaudited)20192018201720162015
Summary of Operations     
Net sales 1
$42,951
$49,604
$43,730
$36,264
$37,101
Income (loss) from continuing operations, net of tax 2
$(1,595)$2,940
$(1,287)$1,478
$6,462
Year-end Financial Position     
Total assets$60,390
$83,699
$85,852
$79,511
$67,938
Long-term debt$15,975
$19,253
$19,757
$20,444
$16,202
      
Financial Ratios     
Research and development expenses as percent of net sales1.8 %1.6%1.8%2.1%2.0%
Income (loss) from continuing operations before income taxes as percent of net sales 2
(2.6)%7.6%0.5%3.5%21.8%
Return on stockholders' equity 2
(8.6)%14.3%1.5%15.3%28.2%
Gross debt as a percent of total capitalization53.3 %37.2%39.1%43.9%39.5%
Net debt as a percent of total capitalization49.6 %33.7%31.1%35.1%24.6%
1.The Company has certain product and service agreements with DuPont and Corteva that were considered intercompany transactions prior to the separation, but are trade transactions subsequent to the separation. Treatment of these transactions as trade transactions have been reflected in the tables above for 2019, 2018, 2017 and 2016. The amounts for 2015 were not updated as the impact to "Net sales" for this period was not significant.ITEM 6. SELECTED FINANCIAL DATA
2.
See Notes 4, 7, 8, 9, 13, 14, 16, 17 and 21 to the Consolidated Financial Statements for information on items materially impacting the results for the years ended December 31, 2019, 2018 and 2017, including the effects of the U.S. Tax Cuts and Jobs Act, enacted on December 22, 2017; Swiss tax reform; loss on early redemption of debt; integration and separation costs; charges related to restructuring programs; goodwill impairment and other asset related charges (including charges related to Sadara Chemical Company); a charge related to environmental remediation; a charge related to payment of plan obligations to certain participants of a U.S. non-qualified pension plan; litigation related charges, awards and adjustments; and charges associated with agreements entered into with DuPont and Corteva as part of the separation from DowDuPont.
3.Amount shown for 2019 represents dividends declared by Dow Inc. Amounts shown for 2017, 2016 and 2015 represent cash dividends declared by TDCC prior to the Merger. Subsequent to the Merger, TDCC has no common shares outstanding.

Selected Financial Data - Dow Inc.
In millions, except as noted (Unaudited)20202019201820172016
Summary of Operations
Net sales$38,542 $42,951 $49,604 $43,730 $36,264 
Income (loss) from continuing operations, net of tax 1
$1,294 $(1,717)$2,940 $(1,287)$1,478 
Per share of common stock (in dollars):
Earnings (loss) per common share from continuing operations - basic 1
$1.64 $(2.42)$3.80 $(1.88)$1.57 
Earnings (loss) per common share from continuing operations - diluted 1
$1.64 $(2.42)$3.80 $(1.88)$1.55 
Cash dividends declared per share of common stock 2
$2.80 $2.10 $— $1.38 $1.84 
Year-end Financial Position
Total assets$61,470 $60,524 $83,699 $85,852 $79,511 
Long-term debt$16,491 $15,975 $19,253 $19,757 $20,444 
Financial Ratios
Research and development expenses as percent of net sales2.0 %1.8 %1.6 %1.8 %2.1 %
Income (loss) from continuing operations before income taxes as percent of net sales 1
5.4 %(2.9)%7.6 %0.5 %3.5 %
Return on stockholders' equity 1
9.9 %(10.0)%14.3 %1.5 %15.3 %
Gross debt as a percent of total capitalization56.8 %54.7 %37.2 %39.1 %43.9 %
Net debt as a percent of total capitalization47.9 %50.9 %33.7 %31.1 %35.1 %

Selected Financial Data - TDCC
In millions, except as noted (Unaudited)20202019201820172016
Summary of Operations
Net sales$38,542 $42,951 $49,604 $43,730 $36,264 
Income (loss) from continuing operations, net of tax 1
$1,304 $(1,595)$2,940 $(1,287)$1,478 
Year-end Financial Position
Total assets$61,345 $60,390 $83,699 $85,852 $79,511 
Long-term debt$16,491 $15,975 $19,253 $19,757 $20,444 
Financial Ratios
Research and development expenses as percent of net sales2.0 %1.8 %1.6 %1.8 %2.1 %
Income (loss) from continuing operations before income taxes as percent of net sales 1
5.4 %(2.6)%7.6 %0.5 %3.5 %
Return on stockholders' equity 1
9.5 %(8.6)%14.3 %1.5 %15.3 %
Gross debt as a percent of total capitalization55.8 %53.3 %37.2 %39.1 %43.9 %
Net debt as a percent of total capitalization46.8 %49.6 %33.7 %31.1 %35.1 %
1.See Notes 3, 5, 6, 7, 8, 12, 13, 15 and 16 to the Consolidated Financial Statements for information on items materially impacting the results for the years ended December 31, 2020, 2019 and 2018, including the effects of the U.S. Tax Cuts and Jobs Act, enacted on December 22, 2017; Swiss tax reform; loss on early redemption of debt; integration and separation costs; charges related to restructuring programs; goodwill impairment and other asset related charges (including charges related to Sadara Chemical Company); a charge related to environmental remediation; litigation related charges, awards and adjustments; charges associated with agreements entered into with DuPont and Corteva as part of the separation from DowDuPont; adjustments to the warranty accrual of an exited business; and net gains on divestitures and asset sales.
2.Amounts shown for 2020 and 2019 represent dividends declared by Dow Inc. Amounts shown for 2017 and 2016 represent cash dividends declared by TDCC prior to the Merger. Subsequent to the Merger, TDCC has no common shares outstanding.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On April 1, 2019, DowDuPont Inc. (“DowDuPont” and effective June 3, 2019, n/k/a DuPont de Nemours, Inc. or "DuPont") completed the separation of its materials science business and Dow Inc. became the direct parent company of The Dow Chemical Company and its consolidated subsidiaries (“TDCC” and together with Dow Inc., “Dow” or the “Company”), owning all of the outstanding common shares of TDCC. For filings related to the period commencing April 1, 2019 and thereafter, TDCC was deemed the predecessor to Dow Inc., and the historical results of TDCC are deemed the historical results of Dow Inc. for periods prior to and including March 31, 2019. As a result of the parent/subsidiary relationship between Dow Inc. and TDCC, and the expectationconsidering that the financial statements and disclosures of each company will beare substantially similar, the companies are filing a combined report for this Annual Report on Form 10-K. The information reflected in the report is equally applicable to both Dow Inc. and TDCC, except where otherwise noted.

The separation was contemplated by the merger of equals transaction effective August 31, 2017, under the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017. TDCC and E. I. du Pont de Nemours and Company and its consolidated subsidiaries (“Historical DuPont”) each merged with subsidiaries of DowDuPont and, as a result, TDCC and Historical DuPont became subsidiaries of DowDuPont (the “Merger”). Subsequent to the Merger, TDCC and Historical DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. Dow Inc. was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business.

As of the effective date and time of the distribution, DowDuPont doesdid not beneficially own any equity interest in Dow and no longer consolidatesconsolidated Dow and its consolidated subsidiaries into its financial results. The consolidated financial results of Dow for all periods presented reflect the distribution of TDCC’s agricultural sciences business (“AgCo”) and specialty products business (“SpecCo”) as discontinued operations, as well as reflect the receipt of Historical DuPont’s ethylene and ethylene copolymers businesses (other than its ethylene acrylic elastomers business) (“ECP”) as a common control transaction from the closing of the Merger on August 31, 2017.2017 ("Merger Date"). See NotesNote 3 and 4 to the Consolidated Financial Statements and Dow Inc.'s Amendment No. 4 to the Registration Statement on Form 10 filed with the U.S. Securities and Exchange Commission ("SEC") on March 8, 2019 for additional information.

Throughout this Annual Report on Form 10-K, unless otherwise indicated, amounts and activity are presented on a continuing operations basis.

Except as otherwise indicated by the context, the terms "Union Carbide" means Union Carbide Corporation, a wholly owned subsidiary of the Company, and "Dow Silicones" means Dow Silicones Corporation, (formerly known as Dow Corning Corporation, which changed its name effective as of February 1, 2018), a wholly owned subsidiary of the Company.

Items Affecting Comparability of Financial Results
As a result of the separation from DowDuPont, pro forma net sales and pro forma Operating EBIT for the years ended December 31, 2019 and 2018 are provided in this section and based on the consolidated financial statements of TDCC, adjusted to give effect to the separation from DowDuPont as if it had been consummated on January 1, 2017. Pro forma adjustments include (1) the margin impact of various manufacturing, supply and service related agreements entered into with DuPont and Corteva, Inc. ("Corteva") in connection with the separation which provide for different pricing than the historical intercompany and intracompany pricing practices of TDCC and Historical DuPont, (only included for 2018 and the first three months of 2019), (2) the inclusion of ECP for the period of January 1, 2017 through August 31, 2017, (3) the removal of the amortization of ECP's inventory step-up recognized in connection with the Merger, (4) 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), and (5) the elimination of the effect of a consummated divestiture agreed to with certain regulatory agencies as a condition of approval for the Merger.. These adjustments impacted the consolidated results as well as the reportable segments. See Note 2726 to the Consolidated Financial Statements for a summary of the pro forma adjustments impacting segment measures for the years ended December 31, 2019 2018 and 2017.2018.




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STATEMENT ON COVID-19 AND OIL PRICE VOLATILITY
Overview of Dow’s Response to COVID-19
The pandemic caused by coronavirus disease 2019 ("COVID-19") has impacted all geographic regions where Dow products are produced and sold. Financial markets were volatile towards the end of the first quarter and early in the second quarter of 2020, primarily due to uncertainty with respect to the severity and duration of the pandemic, coupled with fluctuations in crude oil prices due in part to the global spread of COVID-19. As the second quarter progressed, crude oil prices increased, driven by improved supply and demand fundamentals, which continued into the second half of 2020. Financial markets also continued a gradual and uneven recovery in the second half of 2020.

The global, regional and local spread of COVID-19 resulted in significant global mitigation measures, including government-directed quarantines, social distancing and shelter-in-place mandates, travel restrictions and/or bans, and restricted access to certain corporate facilities and manufacturing sites. Most of the Company’s manufacturing facilities have been designated essential operations by local governments. As a result, nearly all of the Company’s manufacturing sites and facilities continue to operate and are doing so safely, having implemented social distancing and enhanced health, safety and sanitization measures as directed by Dow's regional Crisis Management Teams (“CMTs”). The CMTs continue to work closely with site leadership and are adjusting alert levels as warranted on a site by site basis.

In the second quarter of 2020, the CMTs initiated implementation of the Company’s comprehensive Return to Workplace ("RTW") plan that is tailored for each site and includes several health and safety measures to be followed in a gradual and phased approach. Employees in Europe, Middle East, Africa, and India ("EMEAI") and Asia Pacific returned to the workplace throughout the third quarter of 2020. In the fourth quarter of 2020, many EMEAI sites once again reduced on-site workforce in accordance with governmental regulations. A significant number of employees in the U.S. & Canada and Latin America continue to work remotely as the Company monitors the pandemic evolution, awaiting acceptable and safe levels to implement its RTW phases. If ongoing mitigation efforts are successful, sites in the U.S. & Canada expect to implement additional RTW phases in the first and second quarters of 2021 and Latin America anticipates RTW during the second quarter of 2021. At the time of this filing, approximately half of Dow’s global workforce is working remotely. The Company continues to encourage its workforce to practice safe behaviors in the workplace and while away from work to help prevent community spread of COVID-19.

Dow’s materials science expertise and production capabilities are used to develop some of the most vital hygiene and medical products and technologies to fight the COVID-19 pandemic, such as disinfectants, sanitizers, cleansers, plastics used in the production of disposable personal protective equipment for medical professionals, and memory foam for hospital beds. The Company has continued to look for ways to contribute time, talent and materials science expertise to help fight and combat the pandemic while creating some new opportunities for innovation and business. Dow’s contributions to fight the COVID-19 pandemic included the following:
•The Company collaborated with nine key partners across a myriad of industries to develop and donate 100,000 isolation gowns to help equip frontline workers in Texas, Louisiana and Mexico.
•Dow, Whirlpool Corporation and Reynolds Consumer Products jointly developed a powered, air-purifying respirator which takes the place of a traditional medical face mask and face shield.
•Dow developed and shared an open source design for a simplified face shield and donated 100,000 face shields to hospitals in Michigan.
•Five Dow sites in the United States, Europe and Latin America produced more than 200 metric tons of hand sanitizer, equivalent to more than 880,000 eight-ounce bottles, which were primarily donated to local health systems and government agencies.
•The Company and The Dow Company Foundation committed $4 million to aid COVID-19 relief efforts, with donations going towards global relief organizations, as well as non-profits in communities where Dow operates.


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During this public health crisis, the Company is focused on the health and safety of its employees, contractors, customers and suppliers around the world and maintaining the safe and reliable operations of its manufacturing sites. Although supply disruptions and related logistical issues have posed challenges across all modes of transportation, the Company’s manufacturing sites have continued to operate during the COVID-19 pandemic, with no significant impact to manufacturing whether through shutdowns or shortages in labor, raw materials or personal protective equipment. Supply chain and logistical challenges are expected to stabilize in 2021. Contingency plans remain in place in the event of significant impacts from COVID-19 infection resurgences.

The Company continues to maintain a strong financial position and build further liquidity in the midst of the economic recession triggered by the COVID-19 pandemic. The Company started 2020 with significant committed liquidity facilities. As markets became more volatile and uncertain during the first quarter of 2020, the Company took proactive measures to further bolster liquidity by drawing down certain uncommitted credit facilities, which were subsequently repaid in the second quarter of 2020, and partially monetizing investments in company-owned life insurance policies, which were fully repaid in the fourth quarter of 2020. At December 31, 2020, the Company had cash and committed and available forms of liquidity of $14.6 billion. The Company also has no substantive long-term debt maturities until the second half of 2024.

The Company took proactive actions to electively focus on cash and maintain financial strength with a continued emphasis on safe, reliable operations and disciplined capital allocation. These actions included:
•Further reduced the 2020 capital expenditures to $1.25 billion.
•Decreased operating expenses by $500 million through structural cost improvements.
��Unlocked nearly $500 million in structural improvements in working capital.
•Temporarily suspended share repurchases.
•Delayed planned maintenance turnaround spending, where appropriate, without compromising safety or the ability to serve customer needs.
•Temporarily idled select manufacturing facilities to balance production to demand across markets more severely affected by restrained economic activity. This included the idling of three polyethylene production units and two elastomers units; running Dow's polyurethanes assets, including propylene oxide and methylene diphenyl diisocyanate, at reduced operating rates; reducing siloxanes operating rates globally and extending a planned maintenance turnaround at a silicones production unit in Zhangjiagang, China. All of these assets returned to more normalized operating rates in the third quarter of 2020.
•Implementing a restructuring program ("2020 Restructuring Program"), which was approved by the Board of Directors ("Board") of Dow Inc. on September 29, 2020, targeting more than $300 million in annualized Operating EBITDA1 benefit by the end of 2021. This program includes a 6 percent reduction in Dow’s global workforce costs as well as actions to rationalize the Company's manufacturing assets, including asset write-down and write-off charges, related contract termination fees and environmental remediation costs. See Note 6 to the Consolidated Financial Statements for additional information.

Review of 2020 Financial Impacts from COVID-19
Net sales were $38.5 billion in 2020, down 10 percent from net sales of $43.0 billion in 2019, as the COVID-19 pandemic disrupted the global economy and supply and demand fundamentals. The most significant impacts from the pandemic occurred in the first half of the year, with a gradual yet uneven recovery taking hold as the second half of the year progressed.

In the first six months of 2020, the Company's sales declined 18 percent compared with the same period last year, with the most significant impact on demand in the second quarter of 2020. Strong demand in food packaging, health and hygiene, home care and pharma end-markets was more than offset by volume declines for products used in consumer durable good end-markets, including construction, furniture and bedding and automotive, with the most notable impacts in the Industrial Intermediates & Infrastructure and Performance Materials & Coatings operating segments. Demand for products used in consumer durable goods remained lower through the second quarter largely due to the delayed restart in these industries from May to June.


1.Operating EBITDA is a non-GAAP measure. Dow defines Operating EBITDA as earnings (i.e., "Income (loss) from continuing operations before income taxes") before interest, depreciation and amortization, excluding the impact of significant items.
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Local price declined in the first and second quarters of 2020, largely impacted by lower global energy prices. In March and April 2020, crude oil prices declined significantly, due in part to the COVID-19 pandemic, coupled with increased supply from oil producers. Crude oil prices increased in the latter half of the second quarter as supply and demand fundamentals improved, driving higher feedstock costs, which proved beneficial to product prices and margins in the third and fourth quarters of 2020.

In the third quarter of 2020, net sales increased 16 percent compared with the second quarter of 2020, due to increasing demand and higher local prices. Sales increased sequentially in all operating segments and geographic regions, reflecting improved demand trends in furniture and bedding, appliances, packaging, construction and automotive end-markets. Local price also increased sequentially, reflecting higher global energy prices and improved supply and demand fundamentals, with increases in all geographic regions. Local price increases were reported in Packaging & Specialty Plastics and Industrial Intermediates & Infrastructure, which more than offset declines in Performance Materials & Coatings. Operating rates increased from second quarter lows, as the Company raised rates to match demand trends as the global economic recovery gained traction. The Company's deliberate focus on structural cost reductions and prudent cash management resulted in sequentially higher margins and cash flow in the third quarter of 2020.

Net sales in the fourth quarter of 2020 increased 10 percent sequentially, with continued demand recovery as the global economy continued to strengthen. Sales increased sequentially in all operating segments and geographic regions, reflecting strong supply and demand fundamentals which drove both price and volume gains. Local price increased in all segments and all geographic regions. Volume increased in all geographic regions and in Packaging & Specialty Plastics and Industrial Intermediates & Infrastructure, reflecting consumer-driven demand and industrial market recovery. Volume declined in Performance Materials & Coatings, primarily due to seasonal demand declines for coating applications. Operating rates continued to increase in the fourth quarter of 2020 and margins expanded.

Notably, net sales in the fourth quarter of 2020 increased 5 percent compared with the fourth quarter of 2019, with increases in local price and volume. Local price increased 2 percent compared with the same quarter last year, primarily driven by improved pricing in polyethylene and polyurethane applications. Volume returned to pre-pandemic levels in all operating segments and was led by demand growth in Packaging & Specialty Plastics and Performance Materials & Coatings.

The Company enters 2021 with sequential momentum and is well-positioned for continued profitable growth in the ongoing economic recovery and improving industry cycle. The Company will maintain its disciplined focus on capital allocation priorities as it benefits from an improving cost structure, financial flexibility and a low-cost operating model. As the market recovery broadens, Dow anticipates increasing margins as differentiated parts of the portfolio see improving demand. Longer-term, the Company expects to deliver ongoing significant value through increased innovation, operational efficiencies and a leading environmental, social, and governance profile that will further distinguish Dow from its peers.

At the time of this filing, the ultimate severity and duration of the COVID-19 pandemic cannot be reasonably estimated. The COVID-19 pandemic has had, and could continue to have, a substantial negative impact on the Company’s results of operations, financial condition and cash flows. The effects of the COVID-19 pandemic for the year ended December 31, 2020 and the additional risks associated with these conditions are more fully discussed in this report in Part I, Item 1A, Risk Factors. The Company is actively monitoring for potential financial impacts from the COVID-19 pandemic and oil price volatility, including, but not limited to: gauging the financial health of its customers; assessing liquidity; evaluating the recoverability of its assets; enhancing cyber security monitoring; and evaluating ongoing appropriateness of its estimates.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States. While there have been no significant impacts to the Company's provision for income taxes on continuing operations in 2020 as a result of the CARES Act legislation, the Company filed a tax loss carryback claim for $291 million in accordance with the provisions of the CARES Act.


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ABOUT DOW
Dow combines global breadth, asset integration and scale, focused innovation and leading business positions to achieve profitable growth. The Company’s ambition is to become the most innovative, customer centric, inclusive and sustainable materials science company. company, with a purpose to deliver a sustainable future for the world through our materials science expertise and collaboration with our partners. Dow’s portfolio of plastics, industrial intermediates, coatings and silicones businesses delivers a broad range of differentiated science-based products and solutions for its customers in high-growth market segments, such as packaging, infrastructure, mobility and consumer care. Dow operates 109106 manufacturing sites in 31 countries and employs approximately 36,50035,700 people.

In 2019,2020, the Company had annual sales of $43$38.5 billion, of which 3635 percent of the Company’s sales were to customers in the U.S. & Canada; 34 percent were in Europe, Middle East, Africa and India ("EMEAI");EMEAI; while the remaining 3031 percent were to customers in Asia Pacific and Latin America.

In 2019,2020, the Company and its consolidated subsidiaries did not operate in countries subject to U.S. economic sanctions and export controls as imposed by the U.S. State Department or in countries designated by the U.S. State Department as state sponsors of terrorism, including Iran, the Democratic People's Republic of Korea (North Korea), Sudan and Syria. The Company has policies and procedures in place designed to ensure that it and its consolidated subsidiaries remain in compliance with applicable U.S. laws and regulations.

OVERVIEW
The following is a summary of the results from continuing operations and other notable events for the Company for the year ended December 31, 2019:2020:

The Company reported net sales in 20192020 of $43$38.5 billion, down 1310 percent from $49.6$43.0 billion in 2018,2019, with declines across all geographic regions and operating segments.segments, reflecting the impact of the COVID-19 pandemic on economies and supply and demand fundamentals, most notably in the first half of the year. These declines were due to a decrease in local price of 117 percent and a volume decline of 2 percent and a 1 percent unfavorable currency impact, partially offset by a 1 percent increase in Portfolio & Other.3 percent. Currency was flat.

Local price decreased 117 percent compared with the same period last year, with decreases in all operating segments, including a double-digit declinesdecline in Packaging & Specialty Plastics and Industrial Intermediates & Infrastructure (both down 12(down 11 percent). Local price decreased in all geographic regions, including a double-digit declinesdecline in Latin America (down 14 percent), Asia PacificEMEAI (down 12 percent) and U.S. & Canada (down 11 percent).

Volume decreased 23 percent compared with 2018, driven primarily by lower hydrocarbon co-product sales. Packaging2019. Industrial Intermediates & Specialty PlasticsInfrastructure and Performance Materials & Coatings reported volume declines (both down 36 percent) while Industrial IntermediatesPackaging & Infrastructure was flat.Specialty Plastics volume increased 1 percent. Volume decreased in EMEAI (down 4 percent) and Latin America andthe U.S. & Canada (both down 3(down 8 percent), partially offset by an increase in EMEAI (up 1 percent). Volume was flat in Asia Pacific (up 5 percent).and Latin America.

Currency had an unfavorable impact of 1 percent on net sales, driven primarily by EMEAI (down 3 percent).
Research and development ("R&D") expenses were $765 million in 2019, down from $800 million in 2018. Selling, general and administrative ("SG&A") expenses for Dow Inc. and TDCC were $1,590 million and $1,585 million, respectively, in 2019, down from $1,782 million in 2018. R&D and SG&A expenses decreased primarily due to cost reductions, cost synergies, stranded cost removal and lower performance-based compensation costs.


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Restructuring goodwill impairment and asset related charges - net were $3,219$708 million in 2019,2020, primarily reflecting post-merger restructuring actions taken under the DowDuPont Cost Synergy Program, a goodwill impairment charge2020 Restructuring Program.
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Integration and separation costs for Dow Inc. and TDCC were $239 million in 2020, down from $1,063 million and $1,039 million, respectively, in 2019, down from $1,179 million in 2018, reflecting the wind-down of post-Merger integration and business separation activities. Integration and separation activities were completed as of December 31, 2020.

Equity in earnings (losses) of nonconsolidated affiliates was a loss of $18 million in 2020, compared with a loss of $94 million in 2019, down from2019. Equity in earnings (losses) of $555 million in 2018,nonconsolidated affiliates improved primarily due to increasedlower equity losses from Sadara andChemical Company ("Sadara") which were partially offset by lower equity earnings from the Kuwait joint ventures and the Thai joint ventures.

Sundry income (expense) - net for Dow Inc. and TDCC was income of $1,269 million and income of $1,274 million, respectively, in 2020 compared with income of $461 million and income of $573 million, respectively, in 2019, compared with income of $96 million in 2018.2019. Sundry income (expense) - net increased primarily due to an increase in foreign currency exchange gains as well as a net gainon the sale of certain rail and marine and terminal operations and assets and gains related to litigation matters.a legal matter, which were partially offset by losses on the early extinguishment of debt.

Net income (loss) available for Dow Inc. and TDCC common stockholder(s) was income of $1,225 million and $1,235 million, respectively, in 2020, compared with a loss of $1,359 million and $1,237 million, respectively, in 2019, compared with income of $4,641 million in 2018.2019. Earnings (loss) per share for Dow Inc. was earnings of $1.64 per share in 2020, compared with a loss of $1.84 per share in 2019, compared with income of $6.21 per share in 2018.2019.

In 2019,2020, Dow Inc. declared and paid dividends to common stockholders of $2.10$2.80 per share ($1,5502,071 million), to common stockholders, and TDCC paid a $535 million dividend to DowDuPont..

In 2019,2020, Dow Inc. repurchased $500$125 million of the Company's common stock.

In 2019, the Company reduced gross debt by nearly $3 billion.

In October 2019, the Company received a $0.8 billion cash payment related to the Nova Chemicals Corporation ("Nova") ethylene asset matter.

Other notable events and highlights from the year ended December 31, 20192020 include:

On April 1, 2019, •Dow successfully completed its separation from DowDuPont, becoming a more focused and streamlined materials science company.

In April 2019, Dow Inc. was named by the Human Rights Campaign ("HRC") Foundation to its 2020 list of “Best Places to Work” for LGBTQ+ equality. This marks the Company’s 15th consecutive year receiving a perfect score on HRC’s Corporate Equality Index, a national benchmarking tool on corporate policies and practices pertinent to LGBTQ+ employees.
•Dow received two 2020 BIG Innovation Awards from the Business Intelligence Group for DOWSIL™ TC-3015 Reworkable Thermal Gel and ECOFAST™ Pure Sustainable Textile Treatment.
•In February 2020, TDCC announced the completion of a public offering of €2.25 billion aggregate principal amount of its notes.
•In the first quarter of 2020, TDCC redeemed $1.25 billion of its 3.0 percent notes due November 15, 2022.
•In March 2020, Dow announced a commitment of $3 million to aid COVID-19 relief efforts worldwide. This included $2 million for immediate support of impacts caused by COVID-19, including donations to the COVID-19 Solidarity Fund, Direct Relief, and local and regional nonprofit organizations in Dow Jones Industrial Average.communities around the globe and $1 million to build community resilience in the recovery phase.

On April 25, 2019,•In response to global needs related to COVID-19, in March 2020, the Company announced plans to expandproduce hand sanitizer at five of its alkoxylation capacitymanufacturing sites around the world: Auburn, Michigan; South Charleston, West Virginia; Seneffe, Belgium; Hortolandia, Brazil and Stade, Germany. A majority of the hand sanitizer produced was donated to health systems and government agencies for distribution.
•In April 2020, Dow announced the Company had developed a simplified face shield design and shared the design through an open-source file to help accelerate production rates of the critically-needed personal protective equipment.
•Effective April 9, 2020, following the Company's Annual Meeting of Stockholders ("2020 Meeting") Dow Inc.'s Board elected Jim Fitterling, Dow’s Chief Executive Officer, as Chairman. In connection with that election, the Board elected Jeff M. Fettig to serve as Lead Director until the 2021 Annual Meeting of Stockholders or until a successor is duly elected and qualified. The Company also announced that Jill S. Wyant, currently Executive Vice President of Innovation and Transformation at Ecolab, Inc., was elected to the Board at the 2020 Meeting and Ruth G. Shaw retired from the Board following the 2020 Meeting after 15 years of exemplary leadership, in accordance with director tenure requirements of the Company's Corporate Governance Guidelines.
•Effective April 9, 2020, following the 2020 Meeting, Dow Inc.'s Board designated Dow's business presidents Jack Broodo, Diego Donoso, Mauro Gregorio and Jane Palmieri, as Executive Officers of the Company.
33

•On April 30, 2020, the Company announced the temporary idling or operating rate reductions of select manufacturing assets to balance production with demand across markets more severely affected by restrained economic activity. These assets returned to more normalized operating rates in the third quarter of 2020.
•Dow published its existing facility2019 Shine Inclusion Report, providing progress on the Company's inclusion and diversity strategy, goals and performance.
•Dow was named to the 2020 DiversityInc Top 50 Companies for Diversity list for the third consecutive year. Dow was also included on four of DiversityInc's Specialty Lists including: Top Companies for Employee Resource Groups, Top Companies for Supplier Diversity, Top Companies for People with Disabilities, and Top Companies for LGBT Employees.
•In May 2020, the Company’s global headquarters community of Midland, Michigan, experienced widespread devastation caused by heavy rain and two dam failures, which led to extensive flooding and damage to homes and businesses in Tarragona, Spain, directly benefiting the EMEAI region.area. The Company’s manufacturing facilities were not significantly impacted by the flooding. In response to this natural disaster, Dow pledged $1 million in financial support for immediate relief and long-term recovery efforts associated with the impact of the flooding and its aftermath.

•In June 2020, the Company launched Dow ACTs (Advocacy, Community and Talent), a strategic framework that outlined a new set of actions Dow is taking to address systemic racism and racial injustice. In addition, Dow pledged $5 million over the next five years to help advance racial equality and social justice.
•In June 2020, Dow published its annual Sustainability Report and announced new sustainability targets, which align to and build upon its 2025 Sustainability Goals, including targets to Protect the Climate, Stop the Waste and Close the Loop. By 2030, Dow expects to reduce its net annual carbon emissions by five million metric tons, or 15 percent from its 2020 baseline. Additionally, Dow intends to be carbon neutral by 2050, in alignment with the Paris Agreement. By 2030, Dow plans to help stop the waste by enabling one million metric tons of plastic to be collected, reused or recycled through its direct actions and partnerships. By 2035, Dow will help close the loop with a target to have 100 percent of its products sold into packaging applications be reusable or recyclable.
•Dow was named to the 2020 Disability Equality Index® "Best Places to Work," by receiving the top score for the fourth year in a row.
•In July 2020, Dow launched its MobilityScience™ platform, designed to enhance the customer experience by tailoring technologies, products, and services from across Dow businesses to the transportation industry. The platform is pursuing accelerated growth by addressing mobility mega-trends with materials science innovation, and enabling a seamless experience for Dow’s customers and partners.
•On August 13, 2019,2020, Gaurdie Banister Jr., former President and CEO of Aera Energy LLC, an oil and gas exploration and production company jointly owned by Shell Oil Company and ExxonMobil Corporation, was elected to Dow Inc.'s Board.
•In August 2020, TDCC announced the completion of a public offering of $2.0 billion aggregate principal amount of its notes.
•Dow Silicones voluntarily repaid the full $2.0 billion outstanding principal balance under a certain third party credit agreement.
•In September 2020, TDCC and Union Carbide completed cash tender offers for certain debt securities. A total of $493 million aggregate principal amount was tendered and retired.
•Dow was named as one of the 2020 PEOPLE's "50 Companies that Care" by Great Place to Work® and PEOPLE.
•Dow received four 2020 Sustainability Awards from the Business Intelligence Group, including the Sustainability Initiative of the Year Award for Dow's Carbon Partnership with International Olympic Committee as well as the Sustainability Products of the Year Award for ECOFAST™ Pure Sustainable Textile Treatment and SunSpheres™ BIO SPF Booster.
•On September 15, 2020, the Company announced that it reached an agreementJohn Sampson will rejoin Dow as Senior Vice President, Operations, Manufacturing and Engineering, succeeding Peter Holicki, who will retire in 2021 after more than 34 years of service with Dow.
•On September 30, 2020, TDCC completed the sale of rail infrastructure operations and assets at six sites in the U.S. & Canada for gross cash proceeds in excess of $310 million.
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•Dow was named to the divestiture of its acetone derivatives business to ALTIVIA Ketones & Additives, LLC, an affiliate of ALTIVIA, a privately held producer of chemicals headquartered in Houston, Texas. The transaction closed on November 1, 2019, and includedForbes JUST 100 list, recognizing the Company's acetone derivatives related inventory and production assets located in Institute, West Virginia, in addition to the site infrastructure, land and utilities.

On August 20, 2019, as part of the Company's current slate of low capital intensity, high-return incremental growth investments, Dow announced it will retrofit proprietary fluidized catalytic dehydrogenation technology into one of its mixed-feed crackers in Plaquemine, Louisiana, to produce on-purpose propylene.



27

Dow announced two new agreements that contribute to its commitment to incorporate at least 100,000 tonnes of recycled plastics in its product offerings soldserve all stakeholders. Dow was the top scoring chemical company in the European Unionworkers category.
•In October 2020, Dow launched its first digital waste management platform, Rethink+. Rethink+ is a plastics take-back program that aims to prevent post-consumer plastic waste from going to landfills by 2025. The first was announced on August 29, 2019 withdigitally connecting waste generators, waste aggregators, waste processors and recyclers.
•Dow received five R&D 100 Awards from R&D Magazine for innovative technologies including: DOWSIL™EC-6601 Electrically Conductive Adhesive, DOWSIL™EI-2888 Primerless Silicone Encapsulant, ENGAGE™ 11000 Polyolefin Elastomers, NEOSEED® NE-8800 Emulsion, and RHOBARR™ 320 Polyolefin Dispersion for Paper and Board.
•Dow received the Fuenix Ecogy Group2020 National Safety Council Green Cross for the supply of pyrolysis oil feedstock, which is made from plastic waste. The second agreement was announced on September 24, 2019 with UPM BiofuelsSafety® Innovation Award for the supply of wood-based UPM BioVerno renewable naphtha. These feedstocks will be used to produce new polymers and bio-based polyethylene at Dow's production facilities in Terneuzen, The Netherlands.its Aerial Lift Safety Project.

•Dow was named to the Dow Jones Sustainability World Index - marking the 20th21st time the Company has been named to this global benchmark.

•
Dow was named to •On December 1, 2020, TDCC completed the sale of certain U.S. Gulf Coast marine and terminal operations and assets for gross cash proceeds of $620 million.Fortune's 2019 Change the World list, recognizing the Company's program to pilot the use of recycled plastics in roads as part of the Company's long-standing commitment to reduce plastic waste and drive sustainable solutions.

•
Dow was named to the 2019 Disability Equality Index® "Best Places to Work," by receiving the top score for the third year in a row.

•
Dow received four R&D 100 Awards from R&D Magazine for innovative technologies including: IMAGIN3DTMPolyethylene OBC, SYL-OFFTMSL-25 Release Modifier, SILASTICTM MS-4007 Moldable Optical Silicone and GREAT STUFFTM SMART DISPENSERTM.

•
Dow received four 2019 Sustainability Awards from the Business Intelligence Group, including the Sustainability Initiative of the Year Award for the RENUVATMMattress Project and the Sustainability Products of the Year Award for Dow PRIMALTM Bio-based Acrylic Emulsion, DOWSILTM TC-3015 Re-workable Thermal Conductive Silicone Gel and RENUVATM Polyols.

•
Dow received five prestigious Edison Awards for breakthrough technologies, setting a record for the Company, with two gold, two silver and one bronze award including: gold to ENGAGETM PV Polyolefin Elastomers, gold to Tenter Frame Biaxially Orientable Polyethylene Resin, silver to ECOFASTTM Pure Sustainable Textile Treatment, silver to VORARADTMDownhole Radium Sequestration Technology and bronze to OPULUXTMHGT.

On June 13, 2019, Samuel R. Allen was elected to Dow's•In December 2020, Dow Inc.’s Board designated John Sampson as an Executive Officer of Directors,the Company, effective AugustJanuary 1, 2019.2021.

In addition to the highlights above, the following events occurred subsequent to December 31, 2019:2020:

•On January 29, 2020, the Company28, 2021, Dow announced plans to add another furnacefurther advance and expand its digitalization efforts to its ethylene production facilitydeliver long-term value creation, by accelerating investment in Alberta, Canada, incrementallythree key areas (“Digital Acceleration”): expanding capacitydigital tools to accelerate materials science innovation; further enhancing the e-commerce buying and fulfillment experience for Dow's customers; and adopting real-time digital manufacturing insights, operational data intelligence and demand sensing to enhance the productivity and reliability of Dow’s operations. The Company expects more than $300 million in incremental annual run rate Operating EBITDA generation by approximately 130,000 metric tons. Dow will co-investthe end of 2025 related to Digital Acceleration, with an additional one-time $100 million in the expansion with a regional customer, evenly sharing project costs and ethylene output, with the additional ethylenestructural working capital efficiency gains, driven in part by enhanced planning from digital tools. The activities related to be consumed by existing polyethylene manufacturing assets in the region. The expansion isDigital Acceleration are expected to come onlineresult in additional cash expenditures of approximately $400 million, primarily through the first halfend of 2021.2022.

RESULTS OF OPERATIONS
Net Sales
The following tables summarize net sales, pro forma net sales and sales variance by operating segment and geographic region from the prior year:

Summary of Sales Results 
In millions202020192018
Net sales$38,542 $42,951 $49,604 
Pro forma net sales$42,998 $49,852 

35
Summary of Sales Results   
In millions201920182017
Net sales$42,951
$49,604
$43,730
Pro forma net sales$42,998
$49,852
$44,772


28

Sales Variances by Operating Segment and Geographic Region - As Reported
20202019
Percentage change from prior yearLocal Price & Product MixCurrencyVolume
Portfolio & Other 1
TotalLocal Price & Product MixCurrency
Volume
Portfolio & Other 1
Total
Packaging & Specialty Plastics(11)%— %1 %— %(10)%(12)%(1)%(3)%— %(16)%
Industrial Intermediates & Infrastructure(5)— (6)— (11)(12)(1)— — (13)
Performance Materials & Coatings(6)— (6)1 (11)(6)(2)(3)3 (8)
Total(7)%— %(3)%— %(10)%(11)%(1)%(2)%1 %(13)%
Total, excluding the Hydrocarbons & Energy business(5)%— %(4)%— %(9)%(11)%(2)%1 %1 %(11)%
U.S. & Canada(5)%— %(8)%— %(13)%(11)%— %(3)%1 %(13)%
EMEAI(12)— 1 — (11)(9)(3)(4)— (16)
Asia Pacific(6)— — — (6)(12)(1)5 — (8)
Latin America(7)— — — (7)(14)— (3)— (17)
Total(7)%— %(3)%— %(10)%(11)%(1)%(2)%1 %(13)%
1.Portfolio & Other includes the sales 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.

Sales Variances by Operating Segment and Geographic Region - As Reported



Percentage change from prior year
2018
Local Price & Product MixCurrencyVolume
Portfolio & Other 1
Total
Packaging & Specialty Plastics1 %2 %5 %5 %13 %
Industrial Intermediates & Infrastructure5 1 13 — 19 
Performance Materials & Coatings10 1 (2)— 9 
Total4 %1 %6 %2 %13 %
Total, excluding the Hydrocarbons & Energy business4 %1 %7 %2 %14 %
U.S. & Canada4 %— %2 %2 %8 %
EMEAI5 3 4 2 14 
Asia Pacific2 1 19 3 25 
Latin America5 — 4 2 11 
Total4 %1 %6 %2 %13 %
1.Portfolio & Other includes the sales 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.

2020 Versus 2019
The Company reported net sales of $38.5 billion in 2020, down 10 percent from $43.0 billion in 2019, with local price down 7 percent and volume down 3 percent. Net sales decreased in all geographic regions and operating segments, reflecting impacts from the global COVID-19 pandemic on economies and supply and demand fundamentals, most notably in the first half of the year. Local price decreased in all operating segments and in all geographic regions, primarily in response to lower global energy prices. Local price decreased in Packaging & Specialty Plastics (down 11 percent), Industrial Intermediates & Infrastructure (down 5 percent) and Performance Materials & Coatings (down 6 percent). Volume declined 3 percent, driven by the U.S. & Canada (down 8 percent), which was partially offset by demand growth in EMEAI (up 1 percent). Volume was flat in Asia Pacific and Latin America. Volume increased in Packaging & Specialty Plastics (up 1 percent) and decreased in Industrial Intermediates & Infrastructure and Performance Materials & Coatings (both down 6 percent). Excluding the Hydrocarbons & Energy business, sales declined 9 percent.
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Sales Variances by Operating Segment and Geographic Region - As Reported
 20192018
Percentage change from prior yearLocal Price & Product MixCurrencyVolume
Portfolio & Other 1
TotalLocal Price & Product MixCurrency
Volume 
Portfolio & Other 1
Total
Packaging & Specialty Plastics(12)%(1)%(3)%—%(16)%1%2%5 %5%13%
Industrial Intermediates & Infrastructure(12)(1)—
—
(13)5
1
13
—
19
Performance Materials & Coatings(6)(2)(3)3
(8)10
1
(2)—
9
Total(11)%(1)%(2)%1%(13)%4%1%6 %2%13%
U.S. & Canada(11)%— %(3)%1%(13)%4%—%2 %2%8%
EMEAI(9)(3)(4)—
(16)5
3
4
2
14
Asia Pacific(12)(1)5
—
(8)2
1
19
3
25
Latin America(14)—
(3)—
(17)5
—
4
2
11
Total(11)%(1)%(2)%1%(13)%4%1%6 %2%13%
1.Portfolio & Other includes the sales 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.
Table of Contents
Sales Variances by Operating Segment and Geographic Region - As Reported



Percentage change from prior year
2017
Local Price & Product MixCurrencyVolume
Portfolio & Other 1
Total
Packaging & Specialty Plastics8%—%6%3%17%
Industrial Intermediates & Infrastructure10
1
6
—
17
Performance Materials & Coatings8
1
2
26
37
Total9%—%6%6%21%
U.S. & Canada8%—%5%6%19%
EMEAI12
1
6
5
24
Asia Pacific6
—
8
13
27
Latin America4
—
—
3
7
Total9%—%6%6%21%

1.Portfolio & Other primarily reflects sales related to the receipt of ECP as a common control transaction from the closing of the Merger on August 31, 2017, and the divestiture of the global Ethylene Acrylic Acid copolymers and ionomers business ("EAA Business"), divested on September 1, 2017 (both impacting Packaging & Specialty Plastics). In addition, Portfolio & Other includes the ownership restructure of Dow Silicones announced on June 1, 2016 (impacting Performance Materials & Coatings).

2019 Versus 2018
The Company reported net sales of $43$43.0 billion in 2019, down 13 percent from $49.6 billion in 2018, primarily driven by a decrease in local price, decreased volume and the unfavorable impact of currency. Sales declines were broad-based and occurred in all segments and geographic regions. Local price decreased 11 percent, primarily in response to lower feedstock and raw material costs and pricing pressures. Local price decreased in Packaging & Specialty Plastics and Industrial Intermediates & Infrastructure (both down 12 percent) and in Performance Materials & Coatings (down 6 percent). Local price decreased in all geographic regions. Volume decreased 2 percent with declines in all geographic regions except Asia Pacific (up 5 percent). Volume declines were primarily driven by lower hydrocarbon co-product sales. Volume decreased in Packaging & Specialty Plastics and Performance Materials & Coatings (both down 3 percent), while Industrial Intermediates & Infrastructure volume was flat. Currency unfavorably impacted net sales by 1 percent compared with the prior year, driven primarily by EMEAI (down 3 percent). Portfolio & Other improved sales by 1 percent. Excluding the Hydrocarbons & Energy business, sales declined 11 percent.

2018
Sales Variances by Operating Segment and Geographic Region - Pro Forma Basis
2020 1
2019
Percentage change from prior yearLocal Price & Product MixCurrencyVolumeTotalLocal Price & Product MixCurrencyVolumeTotal
Packaging & Specialty Plastics(11)%— %1 %(10)%(12)%(1)%(3)%(16)%
Industrial Intermediates & Infrastructure(5)— (6)(11)(12)(2)1 (13)
Performance Materials & Coatings(6)— (5)(11)(6)(2)(1)(9)
Total(7)%— %(3)%(10)%(11)%(1)%(2)%(14)%
Total, excluding the Hydrocarbons & Energy business(5)%— %(4)%(9)%(10)%(2)%1 %(11)%
U.S. & Canada(5)%— %(8)%(13)%(11)%— %(2)%(13)%
EMEAI(12)— 1 (11)(9)(3)(4)(16)
Asia Pacific(6)— — (6)(12)(1)5 (8)
Latin America(7)— — (7)(15)— (3)(18)
Total(7)%— %(3)%(10)%(11)%(1)%(2)%(14)%
1.As reported net sales for the year ended December 31, 2020 compared with pro forma net sales for the year ended December 31, 2019.

Sales Variances by Operating Segment and Geographic Region - Pro Forma Basis



Percentage change from prior year
2018
Local Price & Product MixCurrencyVolume
Portfolio & Other 1
Total
Packaging & Specialty Plastics1 %1 %5 %— %7 %
Industrial Intermediates & Infrastructure5 1 13 — 19 
Performance Materials & Coatings10 1 (2)2 11 
Total4 %1 %6 %— %11 %
Total, excluding the Hydrocarbons & Energy business4 %1 %7 %— %12 %
U.S. & Canada3 %— %2 %1 %6 %
EMEAI5 3 4 — 12 
Asia Pacific3 1 18 — 22 
Latin America5 — 4 — 9 
Total4 %1 %6 %— %11 %
1.Portfolio & Other includes the sales 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.

37

2020 Versus 20172019 - Pro Forma
The Company reported net sales of $49.6$38.5 billion for 2020, down 10 percent from pro forma net sales of $43.0 billion in 2018, up 13 percent from $43.7 billion in 2017, driven by higher sales volume, reflecting additional capacity from U.S. Gulf Coast growth projects and increased supply from Sadara, increased2019, with local price the receipt of ECPdown 7 percent and the favorable impact of currency. Sales growth was broad-based, with increasesvolume down 3 percent. Net sales decreased in all geographic regions and operating segments, reflecting impacts from the global COVID-19 pandemic on economies and supply and demand fundamentals, most notably in the first half of the year. Local price decreased in all operating segments and in all geographic regions. Volume increased 6 percent compared with the prior year, as increasesregions, primarily in response to lower global energy prices. Local price decreased in Packaging & Specialty Plastics (up 5(down 11 percent) and, Industrial Intermediates & Infrastructure (up 13 percent) more than offset a decline in Performance Materials & Coatings (down 2 percent). Volume increased in all geographic regions, including a double-digit increase in Asia Pacific (up 19 percent).

29

Local price was up 4 percent compared with the prior year, with increases in all geographic regions, driven by pricing initiatives and higher feedstock and raw material prices. Local price increased in all segments, with the most notable increases in Industrial Intermediates & Infrastructure (up 5 percent) and Performance Materials & Coatings (up 10(down 6 percent). Portfolio & Other contributed 2Volume declined 3 percent, of the sales increase, primarily reflecting the receipt of ECP. Currency was up 1 percent compared with the prior year, driven by a favorable impactthe U.S. & Canada (down 8 percent), which was partially offset by an increase in EMEAI (up 1 percent). Volume was flat in Asia Pacific and Asia Pacific.Latin America. Volume increased in Packaging & Specialty Plastics (up 1 percent) and decreased in Industrial Intermediates & Infrastructure (down 6 percent) and Performance Materials & Coatings (down 5 percent). Excluding the Hydrocarbons & Energy business, sales declined 9 percent.

Sales Variances by Operating Segment and Geographic Region - Pro Forma Basis
 20192018
Percentage change from prior yearLocal Price & Product MixCurrencyVolume
Portfolio & Other 1
TotalLocal Price & Product MixCurrencyVolume
Portfolio & Other 1
Total
Packaging & Specialty Plastics(12)%(1)%(3)%—%(16)%1%1%5 %—%7%
Industrial Intermediates & Infrastructure(12)(2)1
—
(13)5
1
13
—
19
Performance Materials & Coatings(6)(2)(1)—
(9)10
1
(2)2
11
Total(11)%(1)%(2)%—%(14)%4%1%6 %—%11%
Total, excluding the Hydrocarbons & Energy business(10)%(2)%1 %—%(11)%4%1%7 %—%12%
U.S. & Canada(11)%— %(2)%—%(13)%3%—%2 %1%6%
EMEAI(9)(3)(4)—
(16)5
3
4
—
12
Asia Pacific(12)(1)5
—
(8)3
1
18
—
22
Latin America(15)—
(3)—
(18)5
—
4
—
9
Total(11)%(1)%(2)%—%(14)%4%1%6 %—%11%
1.Portfolio & Other includes the sales 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.

2019 Versus 2018 - Pro Forma
The Company reported pro forma net sales for 2019 of $43$43.0 billion, down 14 percent from $49.9 billion for 2018, primarily driven by a decrease in local price, decreased volume and the unfavorable impact of currency. Sales declines were broad-based and occurred in all segments and geographic regions. Local price decreased 11 percent, primarily in response to lower feedstock and raw material costs and pricing pressures. Local price decreased in Packaging & Specialty Plastics and Industrial Intermediates & Infrastructure (both down 12 percent) and in Performance Materials & Coatings (down 6 percent). Local price decreased in all geographic regions. Volume decreased 2 percent with declines in all geographic regions, except Asia Pacific (up 5 percent). Volume decreased in Packaging & Specialty Plastics (down 3 percent) and Performance Materials & Coatings (down 1 percent), and increased in Industrial Intermediates & Infrastructure (up 1 percent). Currency unfavorably impacted net sales by 1 percent compared with the prior year, driven primarily by EMEAI (down 3 percent). PortfolioExcluding the Hydrocarbons & Other was flat compared with the prior year.Energy business, sales declined 11 percent.

2018 Versus 2017 - Pro Forma
The Company reported pro forma net sales of $49.9 billion in 2018, up 11 percent from pro forma net sales of $44.8 billion in 2017, with increases across all segments and geographic regions. Double-digit net sales increases were reported in Industrial Intermediates & Infrastructure (up 19 percent) and Performance Materials & Coatings (up 11 percent). Net sales increased in Asia Pacific (up 22 percent), EMEAI (up 12 percent), Latin America (up 9 percent) and U.S. & Canada (up 6 percent). Volume increased 6 percent compared with pro forma results in the prior year, reflecting additional capacity from U.S. Gulf Coast growth projects and increased supply from Sadara. Volume increases in Packaging & Specialty Plastics (up 5 percent) and Industrial Intermediates & Infrastructure (up 13 percent) more than offset a decline in Performance Materials & Coatings (down 2 percent). Volume increased in all geographic regions, including a double-digit increase in Asia Pacific (up 18 percent). Local price was up 4 percent compared with pro forma results in the prior year with increases in all geographic regions, driven by pricing initiatives and higher feedstock and raw material prices. Local price increased across all segments, including a double-digit increase in Performance Materials & Coatings (up 10 percent). Currency was up 1 percent compared with the prior year, driven primarily by EMEAI (up 3 percent).


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Cost of Sales
Cost of sales ("COS") was $33.3 billion in 2020, down $3.4 billion compared with $36.7 billion in 2019. COS decreased in 2020 primarily due to lower feedstock and other raw material costs, decreased sales volume and lower planned maintenance turnaround costs, which were partially offset by higher performance-based compensation costs. Operating rates declined significantly in the second quarter of 2020, as the Company temporarily idled certain manufacturing facilities and selectively adjusted operating rates at other facilities to balance production to demand in response to the COVID-19 pandemic. These facilities returned to more normalized operating rates in the third quarter of 2020. Overall, operating rates increased in the third and fourth quarters of 2020. In 2019, COS also included $75 million of transaction-related costs resulting from the separation from DowDuPont (related to Corporate) and $399 million of environmental charges related to Packaging & Specialty Plastics ($5 million), Industrial Intermediates & Infrastructure ($8 million), Performance Materials & Coatings ($50 million) and Corporate ($336 million). COS as a percentage of sales was 86.5 percent in 2020 compared with 85.3 percent in 2019.

COS was $36.7 billion in 2019, down $4.4 billion from $41.1 billion in 2018. COS decreased in 2019 primarily due to lower feedstock and other raw material costs, decreased sales volume, cost synergies, stranded cost removal and a favorable adjustment to the warranty accrual of an exited business, which were partially offset by $75 million of transaction-related costs resulting from the separation from DowDuPont (related to the Corporate segment)Corporate) and $399 million of environmental charges related to Packaging & Specialty Plastics ($5 million), Industrial Intermediates & Infrastructure ($8 million), Performance Materials & Coatings ($50 million) and Corporate ($336 million). COS as a percentage of sales was 85.3 percent in 2019 compared with 82.8 percent in 2018.

COS was $41.1 billion in 2018, up $4.7 billion from $36.4 billion in 2017, primarily due to increased sales volume, which reflected additional capacity from U.S. Gulf Coast growth projects and increased supply from Sadara, higher feedstock and other raw material costs and increased planned maintenance turnaround costs which more than offset lower commissioning expenses related to U.S. Gulf Coast growth projects and cost synergies. COS as a percentage of sales was 82.8 percent in 2018 compared with 83.1 percent in 2017.

Personnel Count
The Company permanently employed approximately 36,500 people at December 31, 2019, down from approximately 37,600 people at December 31, 2018 and 39,200 people at December 31, 2017 primarily due to the Company's restructuring programs.

Research and Development Expenses
R&D expenses were $768 million in 2020, compared with $765 million in 2019 compared withand $800 million in 2018 and $803 million2018. R&D expenses in 2017.2020 increased compared with 2019 primarily due to higher performance-based compensation costs which were partially offset by cost reductions. R&D expenses in 2019 decreased compared with 2018 primarily due to cost reductions and lower performance-based compensation costs. R&D expenses in 2018 were essentially flat compared with 2017.

Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A&A") expenses were $1,471 million in 2020, compared with $1,590 million and $1,585 million for Dow Inc. and TDCC, were $1,590 million and $1,585 million, respectively, in 2019 compared withand $1,782 million in 2018 and $1,795 million in 2017. In 2019,2018. SG&A expenses in 2020 decreased primarily due to cost reductions which were partially offset by higher performance-based compensation costs. SG&A was also favorably impacted by the recovery of legal costs related to the Nova
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Chemicals Corporation ("Nova") ethylene asset matter and the reversal of a bad debt reserve related to an arbitration judgment. SG&A expenses in 2019 decreased compared with 2018 primarily due to cost reductions, cost synergies, stranded cost removal and lower performance-based compensation costs. SG&A expenses were favorably impacted by a recovery of a portion of legal costs related to the Nova litigation awardmatter in the third quarter of 2019. In 2018, SG&A expenses decreased primarily due to additional cost reductions and lower performance-based compensation costs which more than offset a full year of expense from the ECP business and the absence of the recovery of costs related to the Nova patent infringement award in 2017. See Note 1716 to the Consolidated Financial Statements for additional information on the Nova litigation awards.matters.

Amortization of Intangibles
Amortization of intangibles was $401 million in 2020, compared with $419 million in 2019 down fromand $469 million in 2018,2018. Amortization of intangibles decreased primarily due to certain intangible assets becoming fully amortized. Amortization of intangibles in 2018 increased from $400 million in 2017, primarily due to the receipt of ECP. See Note 1413 to the Consolidated Financial Statements for additional information on intangible assets.

Restructuring, Goodwill Impairment and Asset Related Charges - Net
Restructuring, goodwill impairment and asset related charges - net were $708 million in 2020, $3,219 million in 2019 and $221 million in 20182018.

2020 Restructuring Program
On September 29, 2020, Dow Inc.'s Board approved restructuring actions to achieve the Company's structural cost improvement initiatives in response to the continued economic impact from the COVID-19 pandemic. The restructuring program is designed to reduce structural costs and $2,739enable the Company to further enhance competitiveness while the COVID-19 economic recovery gains traction. These actions are expected to be substantially complete by the end of 2021.

As a result of these actions, in 2020 the Company recorded pretax restructuring charges of $573 million, consisting of severance and related benefit costs of $297 million, asset write-downs and write-offs of $196 million and costs associated with exit and disposal activities of $80 million. The restructuring charges by segment were as follows: $11 million in 2017.Packaging & Specialty Plastics, $22 million in Industrial Intermediates & Infrastructure, $177 million in Performance Materials & Coatings and $363 million in Corporate.

DowDuPont Cost Synergy Program
In September and November 2017, DowDuPont approved post-mergerpost-Merger restructuring actions under the DowDuPont Cost Synergy Program (the "Synergy Program") which was designed to integrate and optimize the organization following the Merger and in preparation for the business separations. The Company expected (prior to the impact of any discontinued operations) to record total pretax restructuring charges of approximately $1.3 billion, which included initial estimates of approximately $525 million to $575 million of severance and related benefit costs; $400 million to $440 million of asset write-downs and write-offs, and $290 million to $310 million of costs associated with exit and disposal activities. The restructuring charges below reflect charges from continuing operations.

As a result of the Synergy Program, the Company recorded pretax restructuring charges of $399$184 million in 2017, consisting of severance and related benefit costs of $307 million, asset write-downs and write-offs of $87 million and costs associated with exit and disposal activities of $5 million. The restructuring charges by segment were as follows: $36 million in Packaging & Specialty Plastics, $12 million in Industrial Intermediates & Infrastructure, $11 million in Performance Materials & Coatings and $340 million in Corporate.


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For the year ended December 31, 2018, the Company recorded pretax restructuring charges of $184 million, consisting of severance and related benefit costs of $137 million, asset write-downs and write-offs of $33 million and costs associated with exit and disposal activities of $14 million. The restructuring charges by segment were as follows: $13 million in Packaging & Specialty Plastics, $11 million in Industrial Intermediates & Infrastructure, $7 million in Performance Materials & Coatings and $153 million in Corporate.

For the year ended December 31,In 2019, the Company recorded pretax restructuring charges of $292 million, consisting of severance and related benefit costs of $123 million, asset write-downs and write-offs of $143 million and costs associated with exit and disposal activities of $26 million. The restructuring charges by segment were as follows: $1 million in Packaging & Specialty Plastics, $7 million in Industrial Intermediates & Infrastructure, $28 million in Performance Materials & Coatings and $256 million in Corporate. The

In 2020, the Company expectsrecorded pretax restructuring charges of $86 million for severance and related benefit costs, related to Corporate. Cash expenditures related to the Synergy Program to bewere substantially complete bycompleted at the end of the second quarter of 2020.

2019 Goodwill Impairment
Upon completiocompletion of thn of thee goodwill impairment testing in the fourth quarter of 2019, the Company determined the fair value of the Coatings & Performance Monomers reporting unit was lower than its carrying amount. As a result, the Company recorded an impairment charge of $1,039 million in the fourth quarter of 2019 related to Performance Materials & Coatings.


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Upon completion of the goodwill impairment testing in the fourth quarter of 2017, the Company determined the fair value of the Coatings & Performance Monomers reporting unit was lower than its carrying amount. As a result, the Company recorded an impairment charge of $1,491 million in the fourth quarter of 2017, related to Performance Materials & Coatings.

Asset Related Charges
20192020 Charges
In 2019,2020, the Company recognized pretax impairment charges of $49 million, including additional pretax impairment charges of $58 million related primarily tofor capital additions made to a biopolymersbio-ethanol manufacturing facility in Santa Vitoria, Minas Gerais, Brazil ("Santa Vitoria"), which was impaired in 2017.2017 and divested in 2020, as well as charges for miscellaneous write-offs and write-downs of non-manufacturing assets and the write-down of certain corporate leased equipment. The impairment charges by segment were as follows: $44 millionincluded in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics $9 million in($19 million), Performance Materials & Coatings ($15 million) and $5 million in Corporate.Corporate ($15 million). See Note 23 for additional information.

2019 Charges
On August 13, 2019, the Company entered into a definitive agreement to sell its acetone derivatives business to ALTIVIA Ketones & Additives, LLC. The transaction closed on November 1, 2019 and included the Company's acetone derivatives related inventory and production assets, located in Institute, West Virginia, in addition to the site infrastructure, land, utilities and certain railcars. The Company remains at the Institute site as a tenant. As a result of the divestiture, the Company recognized a pretax impairment charge of $75 million in the third quarter of 2019. The impairment charge by segment was as follows: $24 million in Packaging & Specialty Plastics and $51 million in Corporate.

In the fourth quarter of 2019, the Company concluded that its equity method investment in Sadara was other-than-temporarily impaired. The Company also reserved certain accounts and notes receivable and accrued interest balances due to uncertainty on the timing of collection. As a result, the Company recorded a $1,755 million pretax charge related to Sadara. The charge by segment was as follows: $370 million in Packaging & Specialty Plastics, $1,168 million in Industrial Intermediates & Infrastructure and $217 million in Corporate.

In 2019, the Company recognized additional pretax impairment charges of $58 million related primarily to capital additions at its Santa Vitoria manufacturing facility, which was impaired in 2017. The impairment charges by segment were as follows: $44 million in Packaging & Specialty Plastics, $9 million in Performance Materials & Coatings and $5 million in Corporate.

2018 Charges
In 2018, the Company recognized an additional pretax impairment chargecharges of $34 million related primarily to capital additions at its Santa Vitoria manufacturing facility. The impairment charge was related to Packaging & Specialty Plastics.

2017 Charges
In 2017, the Company recognized a $622 million pretax impairment charge related to its Santa Vitoria manufacturing facility. The Company determined it would not pursue an expansion of the facility’s ethanol mill into downstream derivative products, primarily as a result of cheaper ethane-based production as well as the Company’s new assets coming online on the U.S. Gulf Coast which can be used to meet growing market demands in Brazil. As a result of this decision, cash flow analysis indicated the carrying amount of the impacted assets was not recoverable. The impairment charge was related to Packaging & Specialty Plastics.

The Company also recognized other pretax impairment charges of $246 million in the fourth quarter of 2017, including charges related to manufacturing assets of $159 million, an equity method investment of $81 million and other assets of $6 million. The impairment charges by segment were as follows: $58 million in Packaging & Specialty Plastics, $5 million in Industrial Intermediates & Infrastructure, $83 million in Performance Materials & Coatings and $100 million in Corporate.

Refer toSee Note 76 to the Consolidated Financial Statements for additional information on restructuring, goodwill impairment and asset related charges.

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Integration and Separation Costs
Integration and separation costs, which reflect costs related to the Mergerpost-Merger integration and business separation activities (through December 31, 2020) and the ownership restructure of Dow Silicones (through May 31, 2018), as well as post-Merger integration and business separation activities, were $239 million in 2020, $1,063 million and $1,039 million for Dow Inc. and TDCC, respectively, in 2019 and $1,179 million in 2018 and $798 million in 2017, and were related to Corporate.2018. In 2018 and 2019, integration and separation costs were higher as a result of post-mergerpost-Merger integration and business separation activities. Integration and business separation activities were completed as of December 31, 2020. Integration and separation costs are related to Corporate.

Equity in Earnings (Losses) of Nonconsolidated Affiliates
The Company’s share of theequity in earnings (losses) of nonconsolidated affiliates in 20192020 was a loss of $18 million, compared with a loss of $94 million compared within 2019 and earnings of $555 million in 20182018. In 2020, equity losses decreased primarily due to lower equity losses from Sadara, driven by improved industry supply and $394 milliondemand fundamentals in 2017. In 2019,the third and fourth quarters of 2020, which were partially offset by lower equity earnings decreasedfrom the Kuwait joint ventures due to lower monoethylene glycol prices. The Company had equity losses in 2019 compared with equity earnings in 2018 primarily due to lower equity earnings from the Kuwait joint ventures (duedue to lower monethylenemonoethylene glycol and polyethylene prices)prices and the Thai joint ventures and increased equity losses from Sadara. See Note 1312 to the Consolidated Financial Statements for additional information on the Company’s evaluation of its equity method investment in Sadara for other-than-temporary impairment.impairment in 2019.

In 2018, equity earnings increased from 2017 as higher earnings from the Kuwait joint ventures and lower equity losses from Sadara were partially offset by lower equity earnings from the Thai joint ventures.
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Sundry Income (Expense) - Net
Sundry income (expense) – net includes a variety of income and expense items such as foreign currency exchange gains and losses, dividends from investments, gains and losses on sales of investments and assets, non-operating pension and other postretirement benefit plan credits or costs, and certain litigation matters.

TDCC
Sundry income (expense) - net for 20192020 was income of $573$1,274 million, compared with income of $573 million in 2019 and $96 million in 20182018.

In 2020, sundry income (expense) - net included a $544 million gain related to the Nova ethylene asset matter (related to Packaging & Specialty Plastics), a $499 million gain related to the sale of certain U.S. Gulf Coast marine and expenseterminal operations and assets ($17 million related to Packaging & Specialty Plastics, $61 million related to Industrial Intermediates & Infrastructure and $421 million related to Corporate), a $233 million gain related to the sale of $154rail infrastructure operations and assets in the U.S. & Canada ($48 million related to Packaging & Specialty Plastics and $185 million related to Corporate), and non-operating pension and postretirement benefit plan credits. These were partially offset by a $149 million loss on the early extinguishment of debt (related to Corporate), foreign currency exchange losses, $11 million in 2017.charges associated with agreements entered into with DuPont and Corteva as part of the separation and distribution, which provides for cross-indemnities and allocations of obligations and liabilities for periods prior to, at and after completion of the separation (related to Corporate), a $13 million loss related to the divestiture of a bio-ethanol manufacturing facility in Brazil (related to Packaging & Specialty Plastics) and a $2 million loss on an asset sale (related to Corporate). See Notes 5, 7, 15, 16, 20 and 26 to the Consolidated Financial Statements for additional information.

In 2019, sundry income (expense) - net included an increase in foreign currency exchange gains, non-operating pension and postretirement benefit plan credits and gains on sales of assets and investments, as well as a net gain of $205 million related to litigation matters, which included a $170 million gain related to a legal settlementmatter with Nova (related to Packaging & Specialty Plastics), and an $85 million gain related to an adjustment of the Dow Silicones breast implant liability (related to Corporate), which were partially offset by a $50 million charge (net of indemnifications of $37 million), related to the settlement of the Dow Silicones commercial creditor matters (related to Corporate). In 2019, sundry income (expense) - net also included a $102 million loss on the early extinguishment of debt and a gain of $2 million on post-closing adjustments related to previous divestitures (both related to Corporate). See Notes 8,7, 15, 16, 17, 2120 and 2726 to the Consolidated Financial Statements for additional information.

In 2018, sundry income (expense) - net included non-operating pension and other postretirement benefit plan credits, a $20 million gain related to the Company's sale of its equity interest in MEGlobal (related to Corporate) and gains on sales of assets and investments, which more than offset foreign currency exchange losses, a loss of $54 million on the early extinguishment of debt (related to Corporate) and a loss of $20 million for post-closing adjustments related to the Dow Silicones ownership restructure (related to Performance Materials & Coatings). See Notes 8, 167, 15, 20, and 2126 to the Consolidated Financial Statements for additional information.

In 2017, sundry income (expense) - net included a $227 million gain on the divestiture of the EAA Business (related to Packaging & Specialty Plastics), a $137 million gain related to the Nova patent infringement matter (related to Packaging & Specialty Plastics), a $7 million gain on post-closing adjustments related to the split-off of the chlorine value chain (related to Corporate) and gains on sales of assets and investments. These gains were more than offset by $676 million of non-operating pension and other postretirement benefit costs, primarily driven by a $687 million settlement charge for a U.S. non-qualified pension plan (related to Corporate), and foreign currency exchange losses. See Notes 6, 8, 17 and 21 to the Consolidated Financial Statements for additional information.

Dow Inc.
Sundry income (expense) - net for 20192020 was income of $461$1,269 million, compared with income of $461 million in 2019 and $96 million in 2018 and an expense of $154 million2018.

In 2020, in 2017. In addition to the amounts previously discussed above for TDCC, sundry income (expense) - net included $10 million in charges associated with the agreements entered into with DuPont and Corteva as part of the separation and distribution (related to Corporate).

In 2019, in addition to the amounts previously discussed above for TDCC, sundry income (expense) - net included a $51 million loss on post-closing adjustments related to a previous divestiture and $69 million in charges associated with the agreements entered into with DuPont and Corteva as part of the separation and distribution which provides for cross-indemnities and allocations of obligations and liabilities for periods prior to, at and after completion of the separation (both related to Corporate). See Notes 4, 8, 17, 213, 7, 15, 16, 20 and 2726 to the Consolidated Financial Statements for additional information.


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Interest Expense and Amortization of Debt Discount
Dow Inc.
Interest expense and amortization of debt discount was $827 million in 2020, down from $933 million in 2019, primarily due to TDCC's redemption of long-term debt in 2019 and debt issuances at lower coupon rates in 2020. Interest expense and amortization of debt discount in 2019 was down from $1,063 million in 2018, primarily due to debt reductions and lower interest bearing notes issued in the fourth quarter of 2018, which replaced higher interest bearing notes redeemed in the fourth quarter of 2018. Interest expense and amortization of debt discount in 2018 was up from $914 million in 2017, primarily reflecting the effect of lower capitalized interest as a result of decreased capital spending. See Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes 1211 and 1615 to the Consolidated Financial Statements for additional information related to debt financing activity.

TDCC
Interest expense and amortization of debt discount was $827 million in 2020, down from $952 million in 2019 down fromand $1,063 million in 2018. Interest expense and amortization of debt discount in 2018 was up from $914 million in 2017. In addition to the amounts previously discussed above for Dow Inc., TDCC had interest expense related to an intercompany loan with Dow Inc. in 2019. See Note 2625 to the Consolidated Financial Statements for additional information.

Provision for Income Taxes on Continuing Operations
The Company's effective tax rate fluctuates based on, among other factors, where income is earned, the level of income relative to tax attributes and the level of equity earnings, since most earnings from the Company's equity method investments are taxed at the joint venture level. The underlying factors affecting the Company's overall tax rate are summarized in Note 98 to the Consolidated Financial Statements.

On December 22, 2017,The CARES Act was enacted on March 27, 2020 in the Tax Cuts and Jobs Act (“The Act”) was enacted. The Act reducedUnited States. There were no significant impacts to the U.S. federal corporateCompany's provision for income tax rate from 35 percent to 21 percent, required companies to paytaxes on continuing operations in 2020 as a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred, created new provisions related to foreign sourced earnings, eliminated the domestic manufacturing deduction and moved to a hybrid territorial system. At December 31, 2017, the Company had not completed its accounting for the tax effects of The Act; however, the Company made a reasonable estimateresult of the effects on its existing deferred tax balances and the one-time transition tax. In accordance with Staff Accounting Bulletin 118, income tax effects of TheCARES Act were refined upon obtaining, preparing, and analyzing additional information during the measurement period. At December 31, 2018, the Company had completed its accounting for the tax effects of The Act.legislation.

In the fourth quarter of 2019, the Company recorded the impacts of tax law changes enacted in Switzerland. As a result, deferred tax assets increased by $92 million.

The provision for income taxes on continuing operations was $777 million in 2020, compared with $470 million in 2019 compared withand $809 million in 20182018. The tax rate for 2020 was unfavorably impacted by valuation allowances of $260 million related to foreign tax credits and $1,524 millionother attributes that are more likely than not to remain unutilized prior to their expiration. The tax rate for 2020 was favorably impacted by a capital loss resulting from the divestiture of the Santa Vitoria manufacturing facility. This resulted in 2017. an effective tax rate of 37.5 percent for Dow Inc. in 2020.

The tax rate for 2019 was unfavorably impacted by non-deductible goodwill and investment impairments, geographic mix of earnings and reduced equity earnings. These factors resulted in a negative effective tax rate of 37.7 percent for Dow Inc. in 2019.

In the fourth quarter of 2019, the Company recorded the impacts of tax law changes enacted in Switzerland. As a result, deferred tax assets increased by $92 million.

The tax rate for 2018 was favorably impacted by the reduced U.S. federal corporate income tax rate as a result of Thethe Tax Cuts and Jobs Act, which was enacted on December 22, 2017, and benefits related to the issuance of stock-based compensation and unfavorably impacted by non-deductible restructuring costs and increases in statutory income in Latin America and Canada due to local currency devaluations. These factors resulted in an effective tax rate of 21.6 percent in 2018.

The tax rate for 2017 was unfavorably impacted by the enactment of The Act, the impairment of goodwill for which there was no corresponding tax deduction, charges related to tax attributes in the United States and Germany as a result of the Merger and certain non-deductible costs associated with the Merger. The tax rate was favorably impacted by the geographic mix of earnings, equity earnings and the adoption of Accounting Standards Update ("ASU") 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," which resulted in the recognition of excess tax benefits related to the issuance of stock-based compensation in the provision for income taxes on continuing operations. These factors resulted in an effective tax rate of 643.0 percent for 2017.

Income from Discontinued Operations, Net of Tax
Income from discontinued operations, net of tax was $445 million in 2019 and $1,835 million in 2018, and $1,882 million in 2017, and was related to the distribution of AgCo and SpecCo to DowDuPont as a result of the separation. See Note 43 to the Consolidated Financial Statements for additional information.


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Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests was $69 million in 2020, $87 million in 2019 and $134 million in 2018 and $130 million in 2017.2018. Net income attributable to noncontrolling interests decreased in 2019 compared with 2018, primarily due to the Company's acquisition of full ownership in a propylene oxide manufacturing joint venture on October 1, 2019. Net income attributable to noncontrolling interests increased in 2018 compared with 2017, primarily due to the sale of the Company's ownership interests in the SKC Haas Display Films group of companies on June 30, 2017. 2019. Net income attributable to noncontrolling interests from discontinued operations of $13 million in 2019 and $32 million in 2018 related to the distribution of AgCo and $28 million in 2017SpecCo to DowDuPont as a result of the separation are included in the amounts above. See Notes 2019 and 2524 to the Consolidated Financial Statements for additional information.

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Net Income (Loss) Available for the Common Stockholder(s)
Dow Inc.
Net income (loss) available for Dow Inc. and TDCC common stockholder(s)stockholders was income of $1,225 million in 2020, compared with a loss of $1,359 million and $1,237 million, respectively, in 2019 compared withand income of $4,641 million in 2018 and income of $465 million in 2017.2018. Earnings (loss) per share of Dow Inc. was earnings of $1.64 per share in 2020, compared with a loss of $1.84 per share in 2019 compared with incomeand earnings of $6.21 per share in 20182018. See Note 9 to the Consolidated Financial Statements for details on Dow Inc.'s earnings per share calculations.

TDCC
Net income (loss) available for TDCC common stockholder was income of $1,235 million in 2020, compared with loss of $1,237 million in 2019 and income of $0.60 per share$4,641 million in 2017.2018. Following the separation from DowDuPont, TDCC's common shares are owned solely by Dow Inc.

SEGMENT RESULTS
Effective with the Merger, TDCC's business activities were components of DowDuPont's businessThe Company conducts its worldwide operations and were reported as a single operating segment. Following the separation from DowDuPont, the Company changed the manner in which its business activities were managed. The Company's portfolio now includesthrough six global businesses which are organized into the following operating segments: Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Corporate contains the reconciliation between the totals for the operating segments and the Company's totals. The Company did not aggregate any operating segments when determining its reportable segments.

Following the separation from DowDuPont, the Company changed its practice of transferring ethylene to its downstream derivative businesses at cost to transferring ethylene at market prices. The Company also changed certain of its Corporate segment allocation practices, including costs previously assigned to AgCo and SpecCo ("stranded costs") which are now allocated to the operating segments. These changes to the Company's segment results have been consistently applied to all periods presented.

Dow reportedreports geographic information for the following regions: U.S. & Canada, Asia Pacific, Latin America and EMEAI. As a result ofThe Company transfers ethylene to its downstream derivative businesses at market prices. The Company also allocated costs previously assigned to AgCo and SpecCo ("stranded costs") to the separation from DowDuPont, the Company changed the geographic alignment for the country of India to be reflected in EMEAI (previously reported in Asia Pacific).operating segments.

The Company’s measure of profit/loss for segment reporting purposes is Operating EBIT (for the year ended December 31, 2020) and pro forma Operating EBIT (for the years ended December 31, 2019 and 2018) as this is the manner in which the Company's chief operating decision maker ("CODM") assesses performance and allocates resources. The Company defines Operating EBIT as earnings (i.e., "Income (loss) from continuing operations before income taxes") before interest, excluding the impact of significant items. The Company defines pro forma Operating EBIT as earnings (i.e., "Income (loss) from continuing operations before income taxes") before interest, plus pro forma adjustments, excluding the impact of significant items. ProOperating EBIT by segment and pro forma Operating EBIT by segment includesinclude all operating items relating to the businesses; items that principally apply to Dow as a whole are assigned to Corporate. The Company also presents pro forma net sales for the years ended December 31, 2019 and 2018, as it is included in management’s measure of segment performance and is regularly reviewed by the CODM. Pro forma net sales includes the impact of ECP from January 1, 2017 through August 31, 2017, as well as the 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. See Note 2726 to the Consolidated Financial Statements for reconciliations of these measures and a summary of the pro forma adjustments impacting segment measures, which are consistent with the pro forma adjustments included in the Current Report on Form 8-K filed on June 3, 2019, with the SEC.

PACKAGING & SPECIALTY PLASTICS
Packaging & Specialty Plastics consists of two highly integrated global businesses: Hydrocarbons & Energy and Packaging and Specialty Plastics. The segment employs the industry’s broadest polyolefin product portfolio, supported by the Company’s proprietary catalyst and manufacturing process technologies, to work at the customer’s design table throughout the value chain to deliver more reliable and durable, higher performing, and more sustainable plastics to customers in food and specialty packaging; industrial and consumer packaging; health and hygiene; caps, closures and pipe applications; consumer durables; automotive;mobility and transportation; and infrastructure. Ethylene is transferred to downstream derivative businesses at market-based prices, which are generally equivalent to prevailing market prices for large volume purchases.Thispurchases. This segment also includes the results of The Kuwait Styrene Company K.S.C.C. and The SCG-Dow Group, as well as a portion of the results of EQUATE Petrochemical Company K.S.C.C. ("EQUATE"), The Kuwait Olefins Company K.S.C.C. ("TKOC"), Map Ta Phut Olefins Company Limited ("Map Ta Phut") and Sadara, all joint ventures of the Company.

The Company is responsible for marketing a majority of Sadara products outside of the Middle East zone through the Company's established sales channels. As part of this arrangement, the Company purchases and sells Sadara products for a marketing fee.

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Packaging & Specialty Plastics
In millions202020192018
Net sales$18,301 $20,245 $24,195 
Pro forma net sales$20,245 $24,237 
Operating EBIT$2,325 
Pro forma Operating EBIT$2,904 $3,593 
Equity earnings$173 $162 $287 

Packaging & Specialty Plastics   
In millions201920182017
Net sales$20,245
$24,195
$21,504
Pro forma net sales$20,245
$24,237
$22,546
Pro forma Operating EBIT$2,904
$3,593
$3,712
Equity earnings$162
$287
$190
Packaging & Specialty Plastics
Percentage change from prior year202020192018
Change in Net Sales from Prior Period due to:
Local price & product mix(11)%(12)%1 %
Currency— (1)2 
Volume1 (3)5 
Portfolio & other— — 5 
Total(10)%(16)%13 %
Change in Pro Forma Net Sales from Prior Period due to:
Local price & product mix(12)%1 %
Currency(1)1 
Volume(3)5 
Total(16)%7 %

2020 Versus 2019
Packaging & Specialty Plastics   
Percentage change from prior year201920182017
Change in Net Sales from Prior Period due to:   
Local price & product mix(12)%1%8%
Currency(1)2
—
Volume(3)5
6
Portfolio & other—
5
3
Total(16)%13%17%
Change in Pro Forma Net Sales from Prior Period due to:   
Local price & product mix(12)%1% 
Currency(1)1
 
Volume(3)5
 
Portfolio & other—
—
 
Total(16)%7% 
Packaging & Specialty Plastics net sales were $18,301 million in 2020, down 10 percent from net sales and pro forma net sales of $20,245 million in 2019, with local price down 11 percent and volume up 1 percent. Net sales declined in the first half of the year, reflecting the impact of the COVID-19 pandemic, while strong supply and demand fundamentals took hold in the second half of the year. Local price decreased in both businesses and across all geographic regions, driven by reduced polyethylene prices and lower global energy prices. Local price declined in Hydrocarbons & Energy as prices for co-products are generally correlated to Brent crude oil prices, which declined 33 percent compared with 2019. Volume increased in Hydrocarbons & Energy as increases in EMEAI were partially offset by declines in the U.S. & Canada, Asia Pacific and Latin America. Packaging and Specialty Plastics volume was flat as increases in flexible food and specialty packaging, industrial and consumer packaging and health and hygiene applications in Asia Pacific, Latin America and EMEAI were offset by reduced demand for functional polymers, primarily due to the COVID-19 pandemic, and lower catalyst licensing activity in the U.S. & Canada.

Operating EBIT was $2,325 million in 2020, down 20 percent from pro forma Operating EBIT of $2,904 million in 2019. Operating EBIT decreased primarily due to integrated margin compression in both businesses. These declines more than offset cost reductions, decreased planned maintenance turnaround costs and increased equity earnings.

2019 Versus 2018
Packaging & Specialty Plastics net sales were $20,245 million in 2019, down 16 percent from net sales of $24,195 million in 2018. Pro forma net sales were $20,245 million in 2019, a decrease of 16 percent compared with pro forma net sales of $24,237 million in 2018, with local price down 12 percent, volume down 3 percent, and an unfavorable currency impact of 1 percent, primarily in EMEAI. Local price decreased in both businesses and across all geographic regions driven by reduced polyethylene prices and lower prices for Hydrocarbons & Energy co-products. Volume declined for the segment in all geographic regions, except Asia Pacific. Hydrocarbons & Energy volume declines more than offset volume gains in Packaging and Specialty Plastics. Volume decreased in Hydrocarbons & Energy primarily due to planned maintenance turnaround activity in Europe, increased internal consumption of ethylene on the U.S. Gulf Coast and lighter feedslate usage in Europe, leading to lower co-product production. Volume increased in Packaging and Specialty Plastics in Asia Pacific and EMEAI. Packaging and Specialty Plastics volume growth was driven by strong end-market growth in flexible food and specialty packaging, industrial and consumer packaging, and health and hygiene applications.
44

Pro forma Operating EBIT was $2,904 million in 2019, down 19 percent from pro forma Operating EBIT of $3,593 million in 2018. Pro forma Operating EBIT decreased primarily due to lower selling prices, reduced equity earnings at the Kuwait joint ventures due to lower polyethylene margins, lower sales volume in the Hydrocarbons & Energy business and the impact of an outage in Argentina, which more than offset lower feedstock and other raw material costs, volume gains in the Packaging and Specialty Plastics business and cost synergies.

2018 Versus 2017
Packaging & Specialty Plastics net sales were $24,195 million in 2018, up 13 percent from $21,504 million in 2017. Pro forma net sales were $24,237 million in 2018, up from pro forma net sales of $22,546 million in 2017. Pro forma net sales increased 7 percent compared with 2017, with volume up 5 percent, a currency benefit of 1 percent, primarily in EMEAI, and local price up 1 percent. Volume increased in both businesses and across all geographic regions primarily due to new capacity additions on the U.S. Gulf Coast and increased supply from Sadara. Packaging and Specialty Plastics' volume growth was driven by increased demand in industrial and consumer packaging, food and specialty packaging, health and hygiene solutions and elastomer applications. Hydrocarbons & Energy volume increased primarily due to higher sales of ethylene and ethylene co-products. Local price increased in all geographic regions, except U.S. & Canada. Hydrocarbons & Energy local price increased as a result of higher Brent crude oil prices, which increased approximately 30 percent compared with 2017. Packaging and Specialty Plastics local price was flat when compared with 2017 as local price increases in Latin America were offset by declines in EMEAI.


36

Pro forma Operating EBIT was $3,593 million in 2018, down 3 percent from pro forma Operating EBIT of $3,712 million in 2017. Pro forma Operating EBIT decreased as the impact of higher feedstock and other raw materials costs, increased costs from planned maintenance turnarounds and the unfavorable impact of stranded costs more than offset higher sales volume, reflecting additional capacity from growth projects, higher selling prices, the benefit from currency on sales, cost synergies, higher equity earnings and lower startup and commissioning costs.

INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE
Industrial Intermediates & Infrastructure consists of two customer-centric global businesses - Industrial Solutions and Polyurethanes & Construction Chemicals - that develop important intermediate chemicals that are essential to manufacturing processes, as well as downstream, customized materials and formulations that use advanced development technologies. These businesses primarily produce and market ethylene oxide and propylene oxide derivatives that are aligned to market segments as diverse as appliances, coatings, electronics, surfactants for cleaning and sanitization, infrastructure and oil and gas. The global scale and reach of these businesses, world-class technology and R&D capabilities and materials science expertise enable the Company to be a premier solutions provider offering customers value-add sustainable solutions to enhance comfort, energy efficiency, product effectiveness and durability across a wide range of home comfort and appliances, building and construction, adhesives and lubricant applications, among others. This segment also includes a portion of the results of EQUATE, TKOC, Map Ta Phut Olefins Company Limited and Sadara, all joint ventures of the Company.

The Company is responsible for marketing a majority of Sadara products outside of the Middle East zone through the Company's established sales channels. As part of this arrangement, the Company purchases and sells Sadara products for a marketing fee.

Industrial Intermediates & Infrastructure
In millions202020192018
Net sales$12,021 $13,440 $15,447 
Pro forma net sales$13,449 $15,465 
Operating EBIT$355 
Pro forma Operating EBIT$845 $1,767 
Equity earnings (losses)$(166)$(241)$284 

Industrial Intermediates & Infrastructure
Percentage change from prior year202020192018
Change in Net Sales from Prior Period due to:
Local price & product mix(5)%(12)%5 %
Currency— (1)1 
Volume(6)— 13 
Total(11)%(13)%19 %
Change in Pro Forma Net Sales from Prior Period due to:
Local price & product mix(12)%5 %
Currency(2)1 
Volume1 13 
Portfolio & other— — 
Total(13)%19 %


45

Industrial Intermediates & Infrastructure   
In millions201920182017
Net sales$13,440
$15,447
$12,951
Pro forma net sales$13,449
$15,465
$12,951
Pro forma Operating EBIT$845
$1,767
$1,470
Equity earnings (losses)$(241)$284
$172
2020 Versus 2019

Industrial Intermediates & Infrastructure net sales were $12,021 million in 2020, down 11 percent from $13,440 million in 2019. Net sales decreased 11 percent from pro forma net sales of $13,449 million in 2019, with volume down 6 percent and local price down 5 percent. Weak demand for products used in consumer durable good end-markets, including construction, furniture and bedding, appliances and automotive, drove volume declines in Polyurethanes & Construction Chemicals in all geographic regions, reflecting the impact of the COVID-19 pandemic on consumer activities and buying patterns, most notably in the first half of the year. Volume in Industrial Solutions was also impacted by the COVID-19 pandemic, with decreases in the U.S. & Canada and Latin America which were partially offset by increases in Asia Pacific and EMEAI. The volume decline in Industrial Solutions was due to weakened demand in industrial, energy and automotive end-markets partially offset by stronger demand for products used in electronics, agriculture and pharma applications. Local price decreased in both businesses and in all geographic regions, primarily due to lower global energy prices and raw material costs.

Industrial Intermediates & Infrastructure   
Percentage change from prior year201920182017
Change in Net Sales from Prior Period due to:   
Local price & product mix(12)%5%10%
Currency(1)1
1
Volume—
13
6
Portfolio & other—
—
—
Total(13)%19%17%
Change in Pro Forma Net Sales from Prior Period due to:   
Local price & product mix(12)%5% 
Currency(2)1
 
Volume1
13
 
Portfolio & other—
—
 
Total(13)%19% 
Operating EBIT was $355 million in 2020, down 58 percent from pro forma Operating EBIT of $845 million in 2019. Operating EBIT decreased due to lower demand and margin compression, which were partially offset by cost reductions, decreased equity losses and lower planned maintenance turnaround costs. The overall decrease in equity losses was driven by lower equity losses from Sadara partially offset by decreased equity earnings from EQUATE.

2019 Versus 2018
Industrial Intermediates & Infrastructure net sales were $13,440 million in 2019, down 13 percent from $15,447 million in 2018. Pro forma net sales were $13,449 million in 2019, down from pro forma net sales of $15,465 million in 2018. Pro forma net sales decreased 13 percent in 2019, with local price down 12 percent and an unfavorable currency impact of 2 percent, primarily in EMEAI, which were partially offset by a 1 percent increase in volume. Price decreased in both businesses and all geographic regions, driven by lower feedstock and other raw material costs and unfavorable supply/supply and demand fundamentals. Polyurethanes & Construction Chemicals reported volume increases in all geographic regions, primarily reflecting increased supply from Sadara and growth in polyurethanes systems applications, which were partially offset by a decline of caustic soda volume due to planned maintenance turnaround activities. Industrial Solutions volume decreased in EMEAI and the U.S & Canada and was flat in Latin America and Asia Pacific, primarily driven by reduced availability of glycol ethers, performance solvents and monoethylene glycol due to planned and unplanned events that more than offset higher demand for industrial specialties.


37

Pro forma Operating EBIT was $845 million in 2019, down 52 percent from pro forma Operating EBIT of $1,767 million in 2018. Pro forma Operating EBIT decreased as a result of margin compression across both businesses as well as lower equity earnings from the Kuwait joint ventures and increased equity losses from Sadara, which more than offset cost reductions.

2018 Versus 2017
Industrial Intermediates & Infrastructure net sales were $15,447 million in 2018, up 19 percent from $12,951 million in 2017. Pro forma net sales were $15,465 million in 2018, up from pro forma net sales of $12,951 million in 2017. Pro forma net sales increased 19 percent in 2018, with volume up 13 percent, local price up 5 percent and a currency benefit of 1 percent, primarily in EMEAI. Volume increased in both businesses and across all geographic regions. Polyurethanes & Construction Chemicals reported volume increases in all geographic regions, except Latin America, primarily reflecting increased supply from Sadara. Industrial Solutions volume increased in all geographic regions reflecting greater production from Sadara and increased demand in industrial specialties. Local price increased in both businesses and all geographic regions, except Asia Pacific. Local price increases were driven by higher feedstock and other raw material costs, pricing initiatives and strong demand for caustic soda, propylene glycols and propylene oxide which more than offset price declines in isocyanates.

Pro forma Operating EBIT was $1,767 million in 2018, up 20 percent from pro forma Operating EBIT of $1,470 million in 2017. Pro forma Operating EBIT increased as the impact of higher selling prices, cost synergies, higher equity earnings from the Kuwait joint ventures and lower equity losses from Sadara more than offset contraction in isocyanates margins, the unfavorable impact of stranded costs and higher feedstock and other raw material costs.

PERFORMANCE MATERIALS & COATINGS
Performance Materials & Coatings includes industry-leading franchises that deliver a wide array of solutions into consumer and infrastructure end-markets. The segment consists of two global businesses: Coatings & Performance Monomers and Consumer Solutions. These businesses primarily utilize the Company's acrylics-, cellulosics- and silicone-based technology platforms to serve the needs of the architectural and industrial coatings,coatings; home care and personal carecare; consumer and electronics; mobility and transportation; industrial and chemical processing; and building and infrastructure end-markets. Both businesses employ materials science capabilities, global reach and unique products and technology to combine chemistry platforms to deliver differentiated offerings to customers.

Performance Materials & Coatings
In millions202020192018
Net sales$7,951 $8,923 $9,677 
Pro forma net sales$8,961 $9,865 
Operating EBIT$314 
Pro forma Operating EBIT$918 $1,246 
Equity earnings$6 $5 $4 


46

Performance Materials & Coatings   
In millions201920182017
Net sales$8,923
$9,677
$8,892
Pro forma net sales$8,961
$9,865
$8,892
Pro forma Operating EBIT$918
$1,246
$817
Equity earnings$5
$4
$40
Performance Materials & Coatings
Percentage change from prior year202020192018
Change in Net Sales from Prior Period due to:
Local price & product mix(6)%(6)%10 %
Currency— (2)1 
Volume(6)(3)(2)
Portfolio & other1 3 — 
Total(11)%(8)%9 %
Change in Pro Forma Net Sales from Prior Period due to: 1
Local price & product mix(6)%(6)%10 %
Currency— (2)1 
Volume(5)(1)(2)
Portfolio & other— — 2 
Total(11)%(9)%11 %

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

Performance Materials & Coatings   
Percentage change from prior year201920182017
Change in Net Sales from Prior Period due to:   
Local price & product mix(6)%10 %8%
Currency(2)1
1
Volume(3)(2)2
Portfolio & other3
—
26
Total(8)%9 %37%
Change in Pro Forma Net Sales from Prior Period due to:   
Local price & product mix(6)%10 % 
Currency(2)1
 
Volume(1)(2) 
Portfolio & other—
2
 
Total(9)%11 % 
2020 Versus 2019
Performance Materials & Coatings net sales were $7,951 million in 2020, down 11 percent from net sales of $8,923 million in 2019. Net sales decreased 11 percent from pro forma net sales of $8,961 million in 2019, with local price down 6 percent and volume down 5 percent. Local price decreased in both businesses and all geographic regions. Consumer Solutions local price declined in all regions, primarily in upstream siloxanes due to weak supply and demand fundamentals. Local price decreased in Coatings & Performance Monomers in response to lower feedstock and other raw material costs. Volume declined in all geographic regions except Latin America, reflecting the impact from the COVID-19 pandemic. Consumer Solutions volume decreased as growth in home care applications was more than offset by lower demand for products used in automotive, industrial, construction and personal care end-markets as consumer activities and buying patterns were limited by the COVID-19 pandemic. Coatings & Performance Monomers volume increased in all geographic regions, except EMEAI. Volume gains were driven by higher demand for methacrylates used in protective applications, for architectural coatings as consumers continued do-it-yourself projects at home, and higher demand for vinyl acetate monomers.

Operating EBIT was $314 million in 2020, down 66 percent from pro forma Operating EBIT of $918 million in 2019. Operating EBIT decreased primarily due to margin compression, lower demand in siloxanes as a result of the COVID-19 pandemic and higher manufacturing and planned maintenance turnaround costs that more than offset volume gains in Coatings & Performance Monomers and lower SG&A costs.

2019 Versus 2018
Performance Materials & Coatings net sales were $8,923 million in 2019, down 8 percent from net sales of $9,677 million in 2018. Pro forma net sales were $8,961 million in 2019, down 9 percent from pro forma net sales of $9,865 million in 2018 with local price down 6 percent, an unfavorable currency impact of 2 percent and volume down 1 percent. Local price decreased in both businesses and all geographic regions. Local price decreased in Consumer Solutions due to lower siloxanes prices, primarily

38

in Asia Pacific and EMEAI. Coatings & Performance Monomers local price declined in all geographic regions in response to lower feedstock and other raw material costs. Volume for the segment declined in all geographic regions, except Asia Pacific. Consumer Solutions volume was flat, with volume growth in Asia Pacific, offset by volume declines in Latin America and EMEAI. Consumer Solutions volume was flat in the U.S. & Canada. Coatings & Performance Monomers volume declined in all geographic regions. The decline in volume was driven by increased captive use of coatings products which drove soft demand in coating applications, primarily architectural binders, and lower demand for acrylates and methacrylates due to supply/supply and demand balances.

Pro forma Operating EBIT was $918 million in 2019, down 26 percent from pro forma Operating EBIT of $1,246 million in 2018. Pro forma Operating EBIT decreased primarily due to margin compression in both businesses, which more than offset lower planned maintenance turnaround spending and cost synergies.

2018 Versus 2017
47
Performance Materials & Coatings net sales were $9,677 million in 2018, up from $8,892 million in 2017. Pro forma net sales were $9,865 million in 2018, up from pro forma net sales
Table of $8,892 million in 2017. Pro forma net sales increased 11 percent in 2018, with an increase in local price of 10 percent, a benefit of 2 percent from portfolio actions, a benefit from currency of 1 percent, primarily in EMEAI, and a decrease in volume of 2 percent. Local price increased in both businesses and all geographic regions. Consumer Solutions local price increased primarily due to disciplined price/volume management in upstream silicone intermediates, which more than offset a decrease in volume. Local price increased in Coatings & Performance Monomers in response to higher feedstock and other raw material costs and favorable supply/demand fundamentals. Volume decreased in both businesses and all geographic regions, except Asia Pacific. Volume decreased in Consumer Solutions primarily as a result of targeted reductions of low-margin business, primarily in the home care market sector. Volume decreased slightly for Coatings & Performance Monomers, with a decline in all geographic regions, except Asia Pacific.Contents

Pro forma Operating EBIT was $1,246 million in 2018, up 53 percent from pro forma Operating EBIT of $817 million in 2017. Pro forma Operating EBIT improved compared with 2017 as higher selling prices and the favorable impact of cost synergies more than offset the unfavorable impact of stranded costs and higher feedstock and other raw material costs.

CORPORATE
Corporate includes certain enterprise and governance activities (including insurance operations, environmental operations, etc.); non-business aligned joint ventures; non-business aligned litigation expenses; and discontinued or non-aligned businesses.

Corporate
In millions202020192018
Net sales$269 $343 $285 
Pro forma net sales$343 $285 
Operating EBIT$(279)
Pro forma Operating EBIT$(315)$(370)
Equity losses$(31)$(20)$(20)
Corporate   
In millions201920182017
Net sales$343
$285
$383
Pro forma net sales$343
$285
$383
Pro forma Operating EBIT$(315)$(370)$(422)
Equity losses$(20)$(20)$(8)

2020 Versus 2019
Net sales for Corporate, which primarily relate to the Company's insurance operations, were $269 million in 2020, down from net sales and pro forma net sales of $343 million in 2019.

Operating EBIT was a loss of $279 million in 2020, compared with a pro forma Operating EBIT loss of $315 million in 2019. Compared with 2019, Operating EBIT improved primarily due to cost reductions and stranded cost removal throughout 2019.

2019 Versus 2018
Net sales and pro forma net sales for Corporate, which primarily relate to the Company's insurance operations, were $343 million in 2019, up from net sales and pro forma net sales of $285 million in 2018.

Pro forma Operating EBIT was a loss of $315 million in 2019, compared with a pro forma Operating EBIT loss of $370 million in 2018. Compared with 2018, pro forma Operating EBIT improved primarily due to cost reductions and stranded cost removal.

2018 Versus 2017
Net sales and pro forma net sales for Corporate were $285 million in 2018, compared with net sales and pro forma net sales of $383 million in 2017.

Pro forma Operating EBIT was a loss of $370 million in 2018, compared with a loss of $422 million in 2017. Compared with 2017, pro forma Operating EBIT improved primarily due to lower discontinued business costs and cost reductions.

OUTLOOK
Operating Segments & End-Market Expectations
In 2020,2021, the Company expects continued volatility across crude oil, natural gas and feedstock costs to remain volatile and sensitive tofeedstocks, driven by external macroeconomic and geopolitical factors. Thefactors, including the continuation of an uneven recovery from the COVID-19 pandemic. Overall, the Company currently expects crude oil prices to be, on average, flat to slightly higher than 2019.2020 with an expectation of firming prices in the second half of the year. Crude oil fundamentals suggest ample global supply towill meet currentor slightly lag demand; however, geopolitical tensionsthe uneven pandemic recovery could add a risk premium that potentially supports higherslow demand, leading to further volatility in prices.

39

The Company expects natural gas prices to be, on average, lower than 2019. Inremain competitive. The Company expects the U.S. & Canada robustgas supply to continue to recover through 2021. Robust supplies of natural gas are expected to keep domestic prices globally competitive. U.S. exports of liquefied natural gas ("LNG") are expected to increase further in 2020.remain strong. In Europe, the supply of natural gas is expected to continue to be plentiful, both from pipeline supply and from growing LNG imports.

In Packaging & Specialty Plastics, integratedthe global economic recovery is expected to drive demand growth, notably for flexible food and specialty packaging, industrial and consumer packaging and functional polymers. Integrated margins are expected to remain stable in U.S. & Canada,improve, supported by delaysstrong supply and demand fundamentals expected in new capacity additions, solid underlying demandthe first half of the year and the Company’s regional feedstock cost advantages. Margins in Europe are expected to remain challenged as a result of weaker regional demand and flat to higher feedstock costs. Margins in Asia Pacific commenced 2020 slightly below break-even levels, while full year margins are expected to be comparable to the second half of 2019. Profitability could vary materially, particularly in the latter part of the year, depending on supply and demand dynamics, global GDPgross domestic product ("GDP") growth rates, industry operating rates, timing of new industry capacity startups and fluctuations in global crude oil, natural gas and feedstock prices. The Hydrocarbons & Energy business expects to bring online approximately 500,000130,000 metric tons of additional ethylene capacity in TexasCanada as part of its suite of incremental growth investments. The new capacity is expected to come online in the second quarterfirst half of 2020.2021.

In Industrial Intermediates & Infrastructure, above GDP top line growth is expected, driven by strong demand for products used in furniture and bedding, appliances, automotive, construction, electronics and pharma applications. Prices are expected to increase for most products, including continued recovery in monoethylene glycol ("MEG") marginspricing.
48

Supply and demand fundamentals for methylene diphenyl diisocyanate and propylene oxide are expected to remain constrainedconsistent with what was experienced in 2020, due to new industry capacity additions. End-market conditions for polyurethane intermediates are expected to remain highly competitive, with demand softness expected in key applications related to infrastructure, household appliances, automotive and furniture and bedding. Methyl diphenyl diisocyanate ("MDI") prices are expected to remain at low levels due to additional industry capacity and weak end-market fundamentals.anticipated to come online in 2021. Margins are also expected to improve, driven by demand growth.

In Performance Materials & Coatings, prices for commodity siloxane productssiloxanes are expected to be similar to those observedimprove compared with 2020, but remain below peak pricing that was seen in the second half of 2019.2018. Downstream silicones volume is expected to grow in excess of GDP, particularly for applications related to homeproducts used in mobility and personal care,transportation, high performance building and construction, industrial and pressure-sensitive adhesives.consumer and electronics applications. The Company will continue to pursue incremental downstream silicones capacity debottleneck and growth projects to meet expected demand in consumer driven end-markets. Global architectural coatings and industrial coatings demand is expectedanticipated to remain soft insee continued recovery as the do-it-yourself and retail market segments. Industrialend-markets remain strong and contractor demand improves. Highly competitive environments in both architectural and industrial coatings are also projectedexpected to soften in 2020; however,continue, but the Company’s focus will be on capturingCompany looks to capture opportunities from customers’ shift to waterbornesustainable chemistries where Dow has unique technologies and solutions.solutions to compete.

Other factors impacting operating segment profitability include:
•Planned maintenance turnaround spending is expected to be approximately flat compared with 2019.$400 million higher, including joint ventures. Spending will be higher in the second and third quarters, as the COVID-19 pandemic delayed certain planned maintenance turnaround activities in 2020.
•Equity losses in earnings (losses) of nonconsolidated affiliates are expected to be slightly unfavorable compared with 2019. With respect to Sadara, which impacts the Packaging & Specialty Plastics and Industrial Intermediates & Infrastructure operating segments, the Company expects to continue to record equity losses due to anticipated funding commitments with the joint venture.

Other Income Statement Expectations
Additional items that may impact the consolidated statements of income in 2020 include:
The service cost component of pension expense is expected to be flat compared with 2019. The non-operating pension benefit is2020 as projected margin improvements are expected to be a headwind of approximately $125 million compared with 2019.partially offset by increased planned maintenance turnaround spending at joint ventures.
Interest expense and amortization of debt discount is expected to be approximately $850 million in 2020, reflecting lower gross debt compared with 2019.

Projected Uses of Cash
Items that may impact the consolidated statements of cash flows in 20202021 include:
Integration and separation spending is expected to be approximately $200 million to $250 million. Year over year reductions in integration and separation spending as well as•Required cash payments related to the DowDuPont Cost Synergy Program will result in reduced cash spending of approximately $1 billion compared with 2019.
Cash contributions to global pension plans are expected to be limited to mandatory minimum contributions. The total cash outflow is projected to be approximately $250$300 million.
•Capital expenditures are expected to be $1.5 billion to $1.75approximately $1.6 billion. The Company will adjust its spending within this range through the year as economic conditions develop.
•Cash expenditures related to the Digital Acceleration program announced on January 28, 2021 are expected to be approximately $150 million in 2021.
•Cash outflows related to the Company's 2020 Restructuring Program, including restructuring implementation costs, are expected to be approximately $350 million.
•Cash dividends from equity companies are expected to be approximately $200 million lower than 2020.
•Cash outflows to drive further deleveraging are expected to be $1 billion.

Sadara debt re-profile
In January 2021, Sadara reached an agreement in principle with its lenders to re-profile Sadara’s outstanding project financing debt. Key features of the Sadara debt re-profile are expected to include:
•An extension of the contractual debt maturity from 2029 to 2038.
•A modified repayment schedule aligned with Sadara’s projected cash generation profile, including a grace period until June 2026 during which interest-only payments are required, and an excess cash sweep mechanism to prepay debt.
•No change to the notional debt amount and no other early repayment requirements.

As a result, Sadara is expected to have significantly improved cash flow self-sufficiency. The Company expectsre-profiling agreements have not been finalized and remain subject to loanmodification until the transaction formally closes, which is expected to occur in the first quarter of 2021. The impacts to Dow’s commitments are expected to include the following, which are in proportion to Dow’s 35 percent ownership interest in Sadara:
•Dow will provide guarantees for $1.3 billion of Sadara’s debt, effectively replacing approximately $4.0 billion of prior guarantees.
•Additionally, Dow will provide guarantees for its portion of all Sadara interest payments due during the grace period. Dow's pro-rata share of any potential shortfall will be funded by a new $500 million revolving credit facility guaranteed by Dow, which is expected to be established by Sadara and all or a portionin the first quarter of the loan could potentially be converted into equity.
•
The Company expects to preferentially deploy its free cash flow2021.1 in a balanced way between shareholder returns and debt reduction.


1. Dow defines free cash flow as cash flows from operating activities - continuing operations, excluding the impact of ASU 2016-15, less capital expenditures.

40
49
•Dow’s existing $220 million letter of credit related to the guarantee of one future Sadara debt service schedule payment will be cancelled.

As a result of these actions, the Company does not expect to provide any shareholder loans or equity contributions to Sadara in 2021. The impact of the debt re-profiling efforts and related actions taken by the Company are not expected to have a material impact on the Company’s results of operations.

LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $5,104 million at December 31, 2020 and $2,367 million at December 31, 2019, and $2,724of which $862 million at December 31, 2018, of which2020 and $986 million at December 31, 2019, and $2,013 million at December 31, 2018, was held by subsidiaries in foreign countries, including United States territories. The decrease in cash and cash equivalents held by subsidiaries in foreign countries is due to repatriation activities. For each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States.

The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign investments. Dow has the ability to repatriate additional funds to the U.S., which could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or U.S. state income taxes and the impact of foreign currency movements. At December 31, 2019,2020, management believed that sufficient liquidity was available in the United States. The Company has and expects to continue repatriating certain funds from its non-U.S. subsidiaries that are not needed to finance local operations; however, these particular repatriation activities have not and are not expected to result in a significant incremental tax liability to the Company.

The Company’s cash flows from operating, investing and financing activities, as reflected in the consolidated statements of cash flows, are summarized in the following table:

Cash Flow SummaryDow Inc.TDCC
In millions202020192018202020192018
Cash provided by (used for):
Operating activities - continuing operations$6,252 $5,713 $3,096 $6,263 $5,706 $3,096 
Operating activities - discontinued operations(26)217 1,158 — 371 1,158 
Operating activities6,226 5,930 4,254 6,263 6,077 4,254 
Investing activities - continuing operations(841)(2,158)(1,826)(841)(2,158)(1,826)
Investing activities - discontinued operations— (34)(369)— (34)(369)
Investing activities(841)(2,192)(2,195)(841)(2,192)(2,195)
Financing activities - continuing operations(2,764)(4,077)(5,351)(2,801)(4,224)(5,351)
Financing activities - discontinued operations— (18)(53)— (18)(53)
Financing activities(2,764)(4,095)(5,404)(2,801)(4,242)(5,404)
Effect of exchange rate changes on cash, cash equivalents and restricted cash107 (27)(99)107 (27)(99)
Summary
Increase (decrease) in cash, cash equivalents and restricted cash2,728 (384)(3,444)2,728 (384)(3,444)
Cash, cash equivalents and restricted cash at beginning of year2,380 2,764 6,208 2,380 2,764 6,208 
Cash, cash equivalents and restricted cash at end of year$5,108 $2,380 $2,764 $5,108 $2,380 $2,764 
Less: Restricted cash and cash equivalents, included in "Other current assets"4 13 40 4 13 40 
Cash and cash equivalents at end of year$5,104 $2,367 $2,724 $5,104 $2,367 $2,724 


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Cash Flow SummaryDow Inc.TDCC
In millions20192018
2017 1
20192018
2017 1
Cash provided by (used for):      
Operating activities - continuing operations$5,713
$3,096
$(6,443)$5,706
$3,096
$(6,443)
Operating activities - discontinued operations217
1,158
1,514
371
1,158
1,514
Operating activities5,930
4,254
(4,929)6,077
4,254
(4,929)
Investing activities - continuing operations(2,158)(1,826)6,793
(2,158)(1,826)6,793
Investing activities - discontinued operations(34)(369)725
(34)(369)725
Investing activities(2,192)(2,195)7,518
(2,192)(2,195)7,518
Financing activities - continuing operations(4,077)(5,351)(3,275)(4,224)(5,351)(3,275)
Financing activities - discontinued operations(18)(53)(50)(18)(53)(50)
Financing activities(4,095)(5,404)(3,325)(4,242)(5,404)(3,325)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(27)(99)320
(27)(99)320
Summary











Decrease in cash, cash equivalents and restricted cash(384)(3,444)(416)(384)(3,444)(416)
Cash, cash equivalents and restricted cash at beginning of year2,764
6,208
6,624
2,764
6,208
6,624
Cash, cash equivalents and restricted cash at end of year$2,380
$2,764
$6,208
$2,380
$2,764
$6,208
Less: Restricted cash and cash equivalents, included in "Other current assets"13
40
19
13
40
19
Cash and cash equivalents at end of year$2,367
$2,724
$6,189
$2,367
$2,724
$6,189
1.Updated for ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15") (including related SEC interpretive guidance) and ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash," which the Company adopted in 2018.

Cash Flows from Operating Activities
Cash provided by operating activities from continuing operations increased in 2020 compared with 2019. The improvement was primarily due to a decrease in integration and separation costs. Also contributing to the improvement from the prior year was a decrease in performance-based compensation payments, a cash receipt for the refund of withholding tax related to the Nova ethylene asset matter and an increase in advance payments from customers, which were partially offset by a decrease in dividends received from nonconsolidated affiliates, a reduction in cash generated from working capital and a cash receipt in 2019 related to the Nova ethylene asset matter. Cash provided by operating activities from continuing operations increased in 2019 compared with 2018. The increase was primarily due to improvements in working capital, a cash receipt related to the Nova ethylene asset matter, advance payments from customers for product supply agreements, lower pension contributions and higher dividends received from nonconsolidated affiliates, which were partially offset by a decrease in cash earnings. Cash provided by operating activities from continuing operations in 2018 improved from cash used for operating activities from continuing operations in 2017, primarily due

Net Working Capital and Current Ratio at Dec 31Dow Inc.TDCC
In millions2020201920202019
Current assets$19,084 $16,815 $18,998 $16,733 
Current liabilities11,108 10,679 10,574 10,150 
Net working capital$7,976 $6,136 $8,424 $6,583 
Current ratio1.72:11.57:11.80:11.65:1

Working Capital Metrics
Three Months Ended 1
Twelve Months Ended
Mar 31, 2020Jun 30, 2020Sep 30, 2020Dec 31, 2020Dec 31, 2020Dec 31, 2019
Days sales outstanding in trade receivables45 50 43 41 46 45 
Days sales in inventory69 72 63 57 65 65 
Days payables outstanding63 68 58 56 66 65 
1.Due to the change inimpacts related to the Company's accounts receivable securitization facilities discussed in the section titled "Non-GAAP Cash Flow Measures" and a decrease in cash used forCOVID-19 pandemic, quarterly working capital requirements, which were partially offset by the absence of certain cash receipts in 2017.metrics are presented for 2020.


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Net Working Capital at Dec 31Dow Inc.TDCC
In millions2019201820192018
Current assets 1
$16,815
$19,470
$16,733
$19,470
Current liabilities 1
10,679
11,059
10,150
11,059
Net working capital$6,136
$8,411
$6,583
$8,411
Current ratio1.57:1
1.76:1
1.65:1
1.76:1
1.Amounts exclude assets and liabilities of discontinued operations.

Working Capital MetricsTwelve Months Ended
 Dec 31, 2019Dec 31, 2018
Days sales outstanding in trade receivables 1
45
41
Days sales in inventory 2
65
58
Days payables outstanding 3
65
58
1.The increase in days sales outstanding in receivables was primarily due to an increase in accounts receivable as a result of the Company’s accounts receivable securitization facilities moving from off-balance sheet arrangements to secured borrowing arrangements in the second half of 2018.
2.The increase in days sales in inventory is primarily due to a decrease in COS, driven by lower sales and raw material costs, in addition to an increase in average ending inventory.
3.The increase in days payables outstanding is primarily due to a decrease in average accounts payable and a decrease in COS, which were partially offset by an increase in average ending inventory.

Cash provided by (used for) operating activities from discontinued operations decreased in 2020 and 2019 compared with 2018. The reduction was primarily duerelated to the separation of AgCo and SpecCo on April 1, 2019. The Company had cash payments and receipts the Company had with DuPont and Corteva that related to certain agreements and matters related to the separation from DowDuPont. See Note 4 to the Consolidated Financial Statements for additional information. Cash provided by operating activities from discontinued operations decreased in 20182019 compared with 2017,2018, primarily due to changes in working capital requirements.the separation of AgCo and SpecCo on April 1, 2019. See Note 3 to the Consolidated Financial Statements for additional information.

Cash Flows from Investing Activities
Cash used for investing activities from continuing operations in 2020 was primarily for capital expenditures, purchases of investments, investments in and loans to nonconsolidated affiliates (related to Sadara) and acquisitions of property and businesses, which were partially offset by proceeds from sales and maturities of investments and proceeds from sales of property and businesses. Cash used for investing activities from continuing operations in 2019 was primarily for capital expenditures, purchases of investments and investments in and loans to nonconsolidated affiliates, which were partially offset by proceeds from sales and maturities of investments. Cash used for investing activities from continuing operations in 2018 was primarily for capital expenditures and purchases of investments, which were partially offset by proceeds from sales and maturities of investments and proceeds from interests in trade accounts receivable conduits. Cash provided by investing activities from continuing operations in 2017 was primarily from proceeds from interests in trade accounts receivable conduits, proceeds from sales and maturities of investments and proceeds from divestitures, including the divestiture of the EAA Business, which were partially offset by capital expenditures, purchases of investments and investments in and loans to nonconsolidated affiliates, primarily with Sadara.

The Company loaned Sadara $473$333 million in 2020 ($473 million in 2019 (zeroand zero in 2018 and $735 million in 2017) and2018). As a portionresult of these loans has been converted to equity. In the fourth quarter of 2019,Sadara's debt re-profiling, the Company reserved certain notes receivable and accrued interest balances with Sadara duedoes not expect to uncertainty around timing of collection. The Company expects to loan Sadara approximately $500 million in 2020 and allprovide any shareholder loans or a portion of the loan could potentially be converted into equity. Additionally, the Company anticipates providing future financial supportequity contributions to Sadara through loans or capital contributions which will be subject to collectability assessments.in 2021. See Note 13Notes 12 and 16 to the Consolidated Financial Statements for additional information.

The Company's capital expenditures related to continuing operations, including capital expenditures of consolidated variable interest entities, were $1,252 million in 2020, $1,961 million in 2019 and $2,091 million in 20182018. Capital spending was lower in 2020 as the Company proactively reduced its capital expenditures to focus on cash and $2,807 million in 2017.maintaining financial strength during the COVID-19 pandemic. The Company expects capital spending in 20202021 to be in the range of $1.5 billion to $1.75approximately $1.6 billion. The Company will adjust its spending within this range through the year as economic conditions develop.
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Capital spending in 2018, 2019 2018 and 20172020, included spending related to certain U.S. Gulf Coast investment projects including: a world-scale ethylene production facility and an ELITE™ Enhanced Polyethylene production facility, both of which commenced operations in 2017; a NORDEL™ Metallocene EPDM production facility, a Low Density Polyethylene ("LDPE") production facility, a High Melt Index ("HMI") AFFINITY™ polymer production facility and debottlenecking of an existing bi-modal gas phase polyethylene production facility, all of which commenced operations in 2018; and an expansion of the Company's new ethylene production facility expected to commencein Freeport, Texas, which commenced operations in 2020, bringing the facility's total ethylene capacity to 2,000 kilotonnes per annum and making it the largest ethylene cracker in the world.world; the addition of a furnace to the Company's ethylene production facility in Alberta, Canada, which is expected to commence operations in the first half of 2021; and the retrofit of one of the Company's Louisiana steam crackers with Dow's proprietary fluidized catalytic dehydrogenation ("FCDh") technology to produce on-purpose propylene, which is expected by the end of 2021.


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Cash used for investing activities from discontinued operations in 2019 was primarily for capital expenditures, partially offset by proceeds from the sales of property, businesses and ownership interests in nonconsolidated affiliates. Cash used for investing activities from discontinued operations in 2018 was primarily for capital expenditures, partially offset by proceeds from the sales of property and businesses. Cash provided by investing activities from discontinued operations in 2017 was primarily due to proceeds from the sale of property and businesses, which was partially offset by capital expenditures.

Cash Flows from Financing Activities
Cash used for financing activities from continuing operations in 2020 included payments on long-term debt, changes in short-term notes payable and transaction financing, debt issuance and other costs, which were partially offset by proceeds from issuance of long-term debt. In addition, Dow Inc. included cash outflows for dividends paid to stockholders and purchases of treasury stock and TDCC included cash outflows for dividends paid to Dow Inc. Cash used for financing activities from continuing operations in 2019 included payments on long-term debt and dividends paid to DowDuPont, which were partially offset by proceeds from issuance of long-term debt. In addition, Dow Inc. received cash as part of the separation from DowDuPont, which was more than offset by dividends paid to stockholders and purchases of treasury stock. Cash used for financing activities fromin continuing operations in 2018 included dividends paid to DowDuPont and payments of long-term debt, which were partially offset by proceeds from issuance of long-term debt. Cash used for financing activities in continuing operations in 2017 included dividends paid to stockholders through the close of the Merger, a dividend paid to DowDuPont in the fourth quarter of 2017, and payments of long-term debt. See Notes 1615 and 1918 to the Consolidated Financial Statements for additional information related to the issuance and retirement of debt and the Company's share repurchases and dividends.

Cash used for financing activities from discontinued operations in 2019 2018 and 20172018 primarily related to distributions to noncontrolling interests and employee taxes paid for share-based payment arrangements.

Non-GAAP Cash Flow Measures
Cash Flows from Operating Activities - Continuing Operations - Excluding Impact of ASU 2016-15
Cash flows from operating activities - continuing operations, excluding the impact of ASUAccounting Standards Update ("ASU") 2016-15, is defined as cash provided by (used for) operating activities - continuing operations, excluding the impact of ASU 2016-15 and related interpretive guidance. Management believes this non-GAAP financial measure is relevant and meaningful as it presents cash flows from operating activities inclusive of all trade accounts receivable collection activity, which Dow utilizes in support of its operating activities. This measure is only applicable for the year ended December 31, 2018 as there were no sales of trade accounts receivable under the applicable programs for the years ended December 31, 2020 and 2019.

Free Cash Flow
Dow defines free cash flow as cash flows from operating activities - continuing operations, excluding the impact of ASU 2016-15, less capital expenditures. Under this definition, free cash flow represents the cash generated by Dow from operations after investing in its asset base. Free cash flow, combined with cash balances and other sources of liquidity, representrepresents the cash available to fund obligations and provide returns to shareholders. Free cash flow is an integral financial measure used in Dow's financial planning process.

Operating EBITDA and Pro Forma Operating EBITDA
Dow defines pro forma operatingOperating EBITDA (for the year ended December 31, 2020) as pro forma earnings (i.e. "Pro forma income, "Income from continuing operations before income taxes") before interest, depreciation and amortization, excluding the impact of significant items. Pro forma Operating EBITDA (for the years ended December 31, 2019 and 2018) 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.


52

Cash Flow Conversion (Pro Forma Operating EBITDA to Cash Flow From Operations)
Dow defines cash flow conversion (or(Operating EBITDA or pro forma Operating EBITDA to cash flow from operations) as cash flows from operating activities - continuing operations, excluding the impact of ASU 2016-15, divided by Operating EBITDA or pro forma Operating EBITDA. Management believes cash flow conversion is an important financial metric as it helps the Company determine how efficiently it is converting its earnings into cash flow.

These financial measures are not recognized in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAPGAAP") and should not be viewed as alternatives to U.S. GAAP financial measures of performance. All companies do not calculate non-GAAP financial measures in the same manner and, accordingly, Dow's definitions may not be consistent with the methodologies used by other companies.

Reconciliation of Non-GAAP Cash Flow MeasuresDow Inc.
In millions202020192018
Cash provided by operating activities - continuing operations (GAAP)$6,252 $5,713 $3,096 
Impact of ASU 2016-15 and related interpretive guidance— — 657 
Cash flows from operating activities - continuing operations - excluding impact of ASU 2016-15 (non-GAAP)$6,252 $5,713 $3,753 
Capital expenditures(1,252)(1,961)(2,091)
Free cash flow (non-GAAP)$5,000 $3,752 $1,662 

Reconciliation of Cash Flow ConversionDow Inc.
In millions2020
2019 1
2018 1
Income (loss) from continuing operations, net of tax (GAAP)$1,294 $(1,717)$2,940 
+ Provision for income taxes on continuing operations777 470 809 
Income (loss) from continuing operations before income taxes$2,071 $(1,247)$3,749 
- Interest income38 81 82 
+ Interest expense and amortization of debt discount827 933 1,063 
+ Pro forma adjustments ²— 65 180 
- Significant items ³145 (4,682)(1,326)
Operating EBIT (non-GAAP)$2,715 $4,352 $6,236 
+ Depreciation and amortization2,874 2,938 2,909 
Operating EBITDA (non-GAAP)$5,589 $7,290 $9,145 
Cash flows from operating activities - continuing operations - excluding impact of ASU 2016-15 (non-GAAP)$6,252 $5,713 $3,753 
Cash flow conversion (Operating EBITDA or pro forma Operating EBITDA to cash flow from operations) (non-GAAP)111.9 %78.4 %41.0 %
1.Operating EBIT, depreciation and amortization and Operating EBITDA for the years ended December 31, 2019 and 2018 are presented on a pro forma basis.
2.Pro forma adjustments for the years ended December 31, 2019 and 2018 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 and (2) the elimination of the impact of events directly attributable to the Merger, internal reorganization and business realignment, separation, distribution and other related transactions (e.g., one-time transaction costs).
3.The 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. The year ended December 31, 2018 includes a post-closing adjustment related to the Dow Silicones ownership restructure, integration and separation costs, restructuring and asset related charges - net, a gain on divestiture and a loss on early extinguishment of debt. See Note 26 to the Consolidated Financial Statements for additional information.

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Reconciliation of Non-GAAP Cash Flow MeasuresDow Inc.
In millions201920182017
Cash provided by (used for) operating activities - continuing operations (GAAP)$5,713
$3,096
$(6,443)
Impact of ASU 2016-15 and related interpretive guidance—
657
9,462
Cash flows from operating activities - continuing operations - excluding impact of ASU 2016-15 (Non-GAAP)$5,713
$3,753
$3,019
Capital expenditures(1,961)(2,091)(2,807)
Free cash flow (Non-GAAP)$3,752
$1,662
$212


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Reconciliation of Cash Flow Conversion (Pro Forma Operating EBITDA to Cash Flow From Operations)Dow Inc.
In millions201920182017
Income (loss) from continuing operations, net of tax (GAAP)$(1,717)$2,940
$(1,287)
+ Provision for income taxes on continuing operations470
809
1,524
Income (loss) from continuing operations before income taxes$(1,247)$3,749
$237
- Interest income81
82
66
+ Interest expense and amortization of debt discount933
1,063
914
+ Pro forma adjustments 1
65
180
1,120
- Significant items(4,682)(1,326)(3,372)
Pro forma Operating EBIT$4,352
$6,236
$5,577
+ Pro forma depreciation and amortization2,938
2,909
2,684
Pro forma Operating EBITDA$7,290
$9,145
$8,261
Cash flows from operating activities - continuing operations - excluding impact of ASU 2016-15 (Non-GAAP)$5,713
$3,753
$3,019
Cash flow conversion (Pro Forma Operating EBITDA to cash flow from operations) (Non-GAAP)78.4%41.0%36.5%
1.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 inclusion of ECP for the period of January 1, 2017 through August 31, 2017, (3) the removal of the amortization of ECP's inventory step-up recognized in connection with the Merger (4) 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) and (5) the elimination of the effect of a consummated divestiture agreed to with certain regulatory agencies as a condition of approval for the Merger. See Note 27 to the Consolidated Financial Statements for additional information.
Liquidity & Financial Flexibility
The Company’s primary source of incremental liquidity is cash flows from operating activities. The generation of cash from operations and the Company's ability to access capital markets is expected to meet the Company’s cash requirements for working capital, capital expenditures, debt maturities, contributions to pension plans, dividend distributions to stockholders, share repurchases and other needs. In addition to cash from operating activities, the Company’s current liquidity sources also include TDCC's U.S. and Euromarket commercial paper programs, committed and uncommitted credit facilities, a committed accounts receivable facility,facilities, a U.S. retail note program (“InterNotes®”) and other debt markets.

The Company continues to maintain a strong financial position with all of its committed credit facilities undrawn and fully available at December 31, 2020. Cash and committed and available forms of liquidity were $14.6 billion at December 31, 2020. The Company also has no substantive long-term debt maturities until the second half of 2024. Additional details on sources of liquidity are as follows:

Commercial Paper
TDCC issues promissory notes under its U.S. and Euromarket commercial paper programs. TDCC had $151 million ofno commercial paper outstanding at December 31, 20192020 ($10151 million at December 31, 2018)2019). TDCC maintains access to the commercial paper market at competitive rates. Amounts outstanding under TDCC's commercial paper programs during the period may be greater or less than the amount reported at the end of the period. Subsequent to December 31, 2019,2020, TDCC issued approximately $1.5$1.3 billion of commercial paper.

Committed Credit Facilities
The Company also has the ability to access liquidity through TDCC's committed and available credit facilities. At December 31, 2019,2020, TDCC had total committed credit facilities of $9.4 billion and available credit facilities of $7.4$8.1 billion. In 2020, Dow Silicones voluntarily repaid $2.0 billion of principal under a certain third party credit agreement. See Note 1615 to the Consolidated Financial Statements for additional information on committed and available credit facilities.

In connection with the ownership restructure of Dow Silicones on May 31, 2016, Dow Silicones incurred $4.5 billion of indebtedness under a certain third party credit agreement ("Term Loan Facility"). In the second quarter of 2019, Dow Silicones voluntarily repaid $2.5 billion of principal on the Term Loan Facility. In September 2019, Dow Silicones amended the Term Loan Facility to extend the maturity date on the remaining principal balance of $2 billion, making amounts borrowed under the Term Loan Facility repayable in September 2021. Committed Accounts Receivable Facilities
In addition this amendment includes options to extend the maturity date through September 2023, at Dow Silicones' election, whichabove committed credit facilities, the Company intendsmaintains a committed accounts receivable facility in the U.S. where eligible trade accounts receivable, up to exercise.$900 million, may be sold at any point in time. The Company also maintains a committed accounts receivable facility in Europe where eligible trade accounts receivable, up to €400 million, may be sold at any point in time. See Note 1614 to the Consolidated Financial Statements for additional information on.

Company-Owned Life Insurance
The Company has investments in company-owned life insurance ("COLI") policies, which are recorded at their cash surrender value as of each balance sheet date. The Company has the Term Loan Facility.ability to monetize its investment in its COLI policies as an additional source of liquidity. At December 31, 2019, the Company had monetized $85 million of its existing COLI policies' value. In the first nine months of 2020, the Company monetized an additional $211 million as a proactive measure to bolster liquidity at the onset of the COVID-19 pandemic. In the fourth quarter of 2020, the Company repaid all existing drawdowns against the cash surrender value, which resulted in no monetization of its existing COLI policies' value at December 31, 2020. See Note 7 to the Consolidated Financial Statements for additional information.

Uncommitted Credit Facilities
Dow has entered into various uncommitted bilateral credit arrangements as a potential source of excess liquidity. These lines can be used to support short-term liquidity needs and for general purposes, including letters of credit. In the first quarter of 2020, the Company took proactive measures to further bolster liquidity by drawing down certain uncommitted credit facilities, which were subsequently repaid in the second quarter of 2020.

Letters of Credit
TDCC utilizes letters of credit to support commitments made in the ordinary course of business. While the terms and amounts of letters of credit change, TDCC generally has approximately $400 million of outstanding letters of credit at any given time. In addition, at December 31, 2020, the Company had a $220 million outstanding letter of credit related to the Company’s share of one future debt service schedule payment of Sadara. See Note 16 to the Consolidated Financial Statements for additional information related to guarantees.


44
54


Shelf Registration - U.S.
On July 26, 2019, Dow Inc. and TDCC filed a shelf registration statement with the SEC. The shelf indicates that Dow Inc. may offer common stock; preferred stock; depositary shares; debt securities; guarantees; warrants to purchase common stock, preferred stock and debt securities; and stock purchase contracts and stock purchase units, with pricing and availability of any such offerings depending on market conditions. The shelf also indicates that TDCC may offer debt securities, guarantees and warrants to purchase debt securities, with pricing and availability of any such offerings depending on market conditions. Also on July 26, 2019, TDCC filed a new prospectus supplement under this shelf registration to register an unlimited amount of securities for issuance under InterNotes®.

Debt
As the Company continues to maintain its strong balance sheet and financial flexibility, management is focused on net debt (a non-GAAP financial measure), as the Company believes this is the best representation of its financial leverage at this point in time. As shown in the following table, net debt is equal to total gross debt minus "Cash and cash equivalents" and "Marketable securities." At December 31, 2019,2020, net debt as a percent of total capitalization for Dow Inc. and TDCC increaseddecreased to 47.9 percent and 46.8 percent, respectively, compared with 50.9 percent and 49.6 percent, respectively, compared with 33.7 percent for both companies at December 31, 2018. The increase is primarily due to a reduction2019.

Total Debt at Dec 31Dow Inc.TDCC
In millions2020201920202019
Notes payable$156 $586 $156 $586 
Long-term debt due within one year460 435 460 435 
Long-term debt16,491 15,975 16,491 15,975 
Gross debt$17,107 $16,996 $17,107 $16,996 
 - Cash and cash equivalents5,104 2,367 5,104 2,367 
 - Marketable securities 1
45 21 45 21 
Net debt$11,958 $14,608 $11,958 $14,608 
Gross debt as a percent of total capitalization56.8 %54.7 %55.8 %53.3 %
Net debt as a percent of total capitalization47.9 %50.9 %46.8 %49.6 %
1.Included in stockholders' equity for both companies as a result of"Other current assets" in the separation from DowDuPont and a net loss in 2019, which was partially offset by a decrease in debt.

Total Debt at Dec 31Dow Inc.TDCC
In millions2019201820192018
Notes payable$586
$298
$586
$298
Long-term debt due within one year435
338
435
338
Long-term debt15,975
19,253
15,975
19,253
Gross debt$16,996
$19,889
$16,996
$19,889
- Cash and cash equivalents2,367
2,724
2,367
2,724
- Marketable securities21
100
21
100
Net debt$14,608
$17,065
$14,608
$17,065
Gross debt as a percent of total capitalization54.7%37.2%53.3%37.2%
Net debt as a percent of total capitalization50.9%33.7%49.6%33.7%

consolidated balance sheets.

In 2019,February 2020, the Company issued $2€2.25 billion aggregate principal amount of senior unsecured notes in an offering under Rule 144A(“Euro Notes”). The Euro Notes included €1.0 billion aggregate principal amount of the Securities Act of 1933. The offering included $7500.50 percent notes due 2027, €750 million aggregate principal amount of 4.801.125 percent notes due 2049; $7502032 and €500 million aggregate principal amount of 3.6251.875 percent notes due 2026; and $500 million aggregate principal amount2040. The Euro Notes have a weighted average coupon rate of 3.15 percent notes due 2024.approximately 1.0 percent. In addition, the Company redeemed $1.5$1.25 billion of 4.253.0 percent notes issued by the Company with maturity in 2022.

In August 2020, and $1.25 billion of 4.125 percent notes issued by the Company with maturity in 2021.

In October 2019, TDCC launched exchange offers for $4issued $2.0 billion aggregate principal amount of all the outstanding, unregistered seniornotes. The notes that were issued in private offerings on November 30, 2018 and May 20, 2019, for identical, registered notes under the Securities Actincluded $850 million aggregate principal amount of 1933 (the “Exchange Offers”). The Exchange Offers are with respect to the Company’s 3.152.1 percent notes due 2024, 4.552030 and $1.15 billion aggregate principal amount of 3.6 percent notes due 2025, 3.625 percent notes due 2026, 4.80 percent notes due 2028, 5.55 percent notes due 20482050 (together, the "Notes"). In September 2020, TDCC also used $556 million of aggregate proceeds from the Notes to fund cash tender offers for certain of its debt securities and 4.80 percent notes due 2049,certain debt securities of Union Carbide, of which $493 million aggregate principal amount was tendered and fulfilled the Company’s obligations contained in the registration rights agreements entered into in connection with the issuance of the aforementioned notes.retired.

The Company may at any time repurchase certain debt securities in the open market or in privately negotiated transactions subject to: the applicable terms under which any such debt securities were issued, certain internal approvals of the Company, and applicable laws and regulations of the relevant jurisdiction in which any such potential transactions might take place. This in no way obligates the Company to make any such repurchases nor should it be considered an offer to do so.

TDCC’s public debt instruments and primary, private credit agreements contain, among other provisions, certain customary restrictive covenant and default provisions. TDCC’s most significant debt covenant with regard to its financial position is the obligation to maintain the ratio of its consolidated indebtedness to consolidated capitalization at no greater than 0.65 to 1.00 at any time the aggregate outstanding amount of loans under the Five Year Competitive Advance and Revolving Credit Facility Agreement ("Revolving Credit Agreement") equals or exceeds $500 million. The ratio of TDCC’s consolidated indebtedness as defined in the Revolving Credit Agreement was 0.510.53 to 1.00 at December 31, 2019.2020. Management believes TDCC was in compliance with all of its covenants and default provisions at December 31, 2019.


2020.
45
55


On April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC. In conjunction with the separation, Dow Inc. is obligated, substantially concurrently with the issuance of any guarantee in respect of outstanding or committed indebtedness under the Revolving Credit Agreement, to enter into a supplemental indenture with TDCC and the trustee under TDCC’s existing 2008 base indenture governing certain notes issued by TDCC. Under such supplemental indenture, Dow Inc. will guarantee all outstanding debt securities and all amounts due under such existing base indenture and will become subject to certain covenants and events of default under the existing base indenture.

In addition, the Revolving Credit Agreement includes an event of default which would be triggered in the event Dow Inc. incurs or guarantees third party indebtedness for borrowed money in excess of $250 million or engages in any material activity or directly owns any material assets, in each case, subject to certain conditions and exceptions. Dow Inc. may, at its option, cure the event of default by delivering an unconditional and irrevocable guarantee to the administrative agent within thirty days of the event or events giving rise to such event of default.

No such events have occurred or have been triggered at the time of the filing of this Annual Report on Form 10-K. See Note 1615 to the Consolidated Financial Statements for information related to TDCC’s notes payable and long-term debt activity and information on TDCC’s debt covenants and default provisions.

ManagementWhile taking into consideration the current economic environment, management expects that the Company will continue to have sufficient liquidity and financial flexibility to meet all of its business obligations.

Credit Ratings
TDCC's credit ratings at January 31, 20202021 were as follows:

Credit RatingsLong-Term RatingShort-Term RatingOutlook
Standard & Poor’sBBBBBB-A-2A-3Stable
Moody’s Investors ServiceBaa2P-2Stable
Fitch RatingsBBB+F2StableNegative

On April 9, 2020, Standard & Poor's ("S&P") announced a credit rating change for TDCC from BBB and A-2 to BBB- and A-3, maintaining stable outlook. The decision was made as part of S&P’s broader review of the chemicals sector, in light of the global impact of COVID-19 and lower oil prices. On April 13, 2020, Fitch Ratings ("Fitch") re-affirmed TDCC’s BBB+ and F2 rating, and revised its outlook to negative from stable. The decision was made as part of Fitch’s annual review process.

Downgrades in TDCC’s credit ratings will increase borrowing costs on certain indentures and could impact its ability to access debt capital markets.

Dividends
Dow Inc.
The following table provides dividends paid to common stockholders for the years ended December 31, 2020, 2019 and 2018:

Dividends Paid for the Years Ended Dec 312020
2019 1
2018 2
In millions, except per share amounts
Dividends paid, per common share$2.80 $2.10 N/A
Dividends paid to common stockholders$2,071 $1,550 N/A
1.Reflects Dow Inc. activity subsequent to the separation from DowDuPont.
2.In 2018, the common stock of Dow Inc. and 2017:TDCC was owned solely by DowDuPont and therefore the Company did not have publicly traded stock.

Dividends Paid for the Years Ended Dec 31
2019 1
2018 2
2017 3
In millions, except per share amounts
Dividends paid, per common share$2.10
N/A$1.84
Dividends paid to common stockholders$1,550
N/A$2,179
1.Reflects Dow Inc. activity subsequent to the separation from DowDuPont.
2.In 2018, the common stock of Dow Inc. and TDCC was owned solely by DowDuPont and therefore the Company did not have publicly traded stock.
3.Reflects TDCC activity prior to the Merger.

TDCC
Effective with the Merger, TDCC no longer has publicly traded common stock. From the Merger dateDate through March 31, 2019, TDCC's common shares were owned solely by DowDuPont. Pursuant to the Merger Agreement, TDCC committed to fund a portion of DowDuPont's dividends paid to common stockholders and certain governance expenses. In addition, share repurchases by DowDuPont were partially funded by TDCC through 2018. Funding was accomplished through intercompany loans. On a quarterly basis, TDCC's Board of Directors reviewed and determined a
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dividend distribution to DowDuPont to settle the intercompany loans. The dividend distribution considered the level of TDCC’s earnings and cash flows and the outstanding intercompany loan balances. For the year ended December 31, 2019, TDCC declared and paid dividends to DowDuPont of $535 million ($3,711for the year ended December 31, 2019 and $3,711 million for the year ended December 31, 2018 and $1,056 for the year ended December 31, 2017).2018. See Note 2625 to the Consolidated Financial Statements for additional information.

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Effective with the separation from DowDuPont on April 1, 2019, TDCC became a wholly owned subsidiary of Dow Inc. TDCC has committed to fund Dow Inc.'s dividends paid to common stockholders, share repurchases and certain governance expenses. Funding is accomplished through intercompany loans. TDCC's Board of Directors reviews and determines a dividend distribution to Dow Inc. to settle the intercompany loans. For the year ended December 31, 2019,2020, TDCC declared and paid dividends to Dow Inc. of $201 million.$2,233 million ($201 million for the year ended December 31, 2019). At December 31, 2019,2020, TDCC's intercompany loan balance with Dow Inc. was zero.insignificant. See Note 2625 to the Consolidated Financial Statements for additional information.

Share Repurchase Program
Dow Inc.
On April 1, 2019, Dow Inc.'s Board of Directors ratified the share repurchase program originally approved on March 15, 2019, authorizing up to $3$3.0 billion to be spent on the repurchase of the Company's common stock, with no expiration date. In 2019,2020, Dow Inc. repurchased $500$125 million of the Company's common stock. At December 31, 2019,2020, approximately $2.5$2.4 billion of the share repurchase program authorization remained available for repurchases. Dow Inc. expectsThe Company will continue to repurchase $250 million of the Company's common stock in 2020.

TDCC
In 2013, TDCC's Board of Directors approved a share repurchase program. As a result of subsequent authorizations approved by TDCC's Board of Directors, the total authorized amount of the share repurchase program was $9.5 billion. Effective with the Merger, the share repurchase program was canceled. Over the duration of the program, a total of $8.1 billion was spent onevaluate the repurchase of TDCC Common Stock.additional shares to cover dilution as economic conditions develop.

Pension Plans
The Company has both funded and unfunded defined benefit pension plans that cover employees in the United States and a number of other countries. As a result of the Company’s separation from DowDuPont, the number of significant defined benefit pension plans administered by the Company decreased from 45 plans to 35 plans, with approximately $270 million of net unfunded pension liabilities transferred to DowDupont.DowDuPont. Plans administered by other subsidiaries of DowDuPont that were transferred to the Company were not significant. There were no changes in the number of significant other postretirement benefit plans administered by the Company as a result of the separation. Existing Company plans that were significantly impacted by the transfer of active plan participants to DowDuPont were remeasured, resulting in curtailment gains and losses and recognition of special termination benefits.

In 2020, 2019 2018 and 2017,2018, the Company contributed $299 million, $261 million $1,651 million and $1,672$1,651 million to its continuing operations pension plans respectively, including contributions to fund benefit payments for its non-qualified pension plans ($266299 million, $1,656$266 million and $1,676$1,656 million, including contributions to plans of discontinued operations). In the third quarter of 2018, the Company made a $1,100 million discretionary contribution to its principal U.S. pension plan, which is included in the 2018 contribution amount above. The discretionary contribution was primarily based on the Company's funding policy, which permits contributions to defined benefit pension plans when economics encourage funding, and reflected considerations relating to tax deductibility and capital structure.

The provisions of a U.S. non-qualified pension plan require the payment of plan obligations to certain participants upon a change in control of the Company, which occurred at the time of the Merger. Certain participants could elect to receive a lump-sum payment or direct the Company to purchase an annuity on their behalf using the after-tax proceeds of the lump sum. In the fourth quarter of 2017, the Company paid $940 million to plan participants and $230 million to an insurance company for the purchase of annuities, which were included in "Pension contributions" in the consolidated statements of cash flows. The Company also paid $205 million for income and payroll taxes for participants electing the annuity option. The Company recorded a settlement charge of $687 million associated with the payout in the fourth quarter of 2017.

The Company expects to contribute approximately $250$300 million to its pension plans in 2020.2021. See Note 2120 to the Consolidated Financial Statements for additional information concerning the Company’s pension plans.

Restructuring Goodwill ImpairmentPrograms
The actions related to the 2020 Restructuring Program are expected to result in additional cash expenditures of approximately $365 million, primarily through the first quarter of 2022, consisting of severance and Asset Related Charges - Netrelated benefit costs and costs associated with exit and disposal activities, including contract cancellation penalties and environmental remediation. Restructuring implementation costs, primarily decommissioning and demolition activities related to asset actions, are expected to result in additional cash expenditures of approximately $150 million, primarily through the third quarter of 2022.

The activities related to the Synergy Program are expected to result in additional cash payments of approximately $70$35 million, primarily through the second quarter of 2020,2021, consisting of severance and related benefit costs and costs associated with exit and disposal activities, including environmental remediation (see Note 7 to the Consolidated Financial Statements). remediation.

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; these costsactivities, which 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.


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time. See Note 6 to the Consolidated Financial Statements for additional information on the Company's restructuring activities.

Digital Acceleration
On January 28, 2021, Dow announced plans for Digital Acceleration: expanding digital tools to accelerate materials science innovation; further enhancing the e-commerce buying and fulfillment experience for Dow's customers; and adopting real-time digital manufacturing insights, operational data intelligence and demand sensing to enhance the productivity and reliability of Dow’s operations. The activities related to Digital Acceleration are expected to result in additional cash expenditures of approximately $400 million, primarily through the end of 2022.

Integration and Separation Costs
Integration and separation costs, which reflect costs related to the Merger, post-Merger integration and business separation activities and costs related to the ownership restructure of Dow Silicones, were $239 million in 2020, $1,063 million and $1,039 million in 2019 for Dow Inc. and TDCC, respectively, in 2019 and $1,179 million in 2018 and $798 million in 2017.2018. Integration and separation costs related to post-Merger integration and business separation activities are expected to continue in 2020 for activities primarily involving the separationwere completed as of information technology infrastructure and physical plant operations. Integration and separation costs are expected to result in additional cash expenditures of approximately $200 million to $250 million through the end ofDecember 31, 2020.

Contractual Obligations
The following table summarizes the Company’s contractual obligations, commercial commitments and expected cash requirements for interest at December 31, 2019.2020. Additional information related to these obligations can be found in Notes 15, 16, 17 18 and 2120 to the Consolidated Financial Statements.

Contractual Obligations at Dec 31, 2020Payments Due In
In millions20212022-20232024-20252026 and beyondTotal
Dow Inc.
Long-term debt obligations 1
$460 $617 $1,796 $14,443 $17,316 
Expected cash requirements for interest 2
764 1,453 1,354 8,368 11,939 
Pension and other postretirement benefits421 1,201 1,586 8,625 11,833 
Operating leases 3
477 699 406 703 2,285 
Purchase obligations 4
2,624 4,082 3,292 3,384 13,382 
Other noncurrent obligations 5
— 1,059 717 1,394 3,170 
Total$4,746 $9,111 $9,151 $36,917 $59,925 
TDCC
Long-term debt obligations 1
$460 $617 $1,796 $14,443 $17,316 
Expected cash requirements for interest 2
764 1,453 1,354 8,368 11,939 
Pension and other postretirement benefits421 1,201 1,586 8,625 11,833 
Operating leases 3
477 699 406 703 2,285 
Purchase obligations 4
2,624 4,082 3,292 3,384 13,382 
Other noncurrent obligations 5
— 1,025 619 1,371 3,015 
Total$4,746 $9,077 $9,053 $36,894 $59,770 
Contractual Obligations at Dec 31, 2019Payments Due In 
In millions20202021-20222023-20242025 and beyondTotal
Dow Inc.     
Long-term debt obligations 1
$435
$2,024
$4,036
$10,246
$16,741
Expected cash requirements for interest 2
799
1,529
1,289
7,479
11,096
Pension and other postretirement benefits379
909
1,944
7,214
10,446
Operating leases 3
492
777
504
803
2,576
Purchase obligations 4
2,548
4,162
3,664
4,737
15,111
Other noncurrent obligations 5
—
1,390
795
1,062
3,247
Total$4,653
$10,791
$12,232
$31,541
$59,217
TDCC     
Long-term debt obligations 1
$435
$2,024
$4,036
$10,246
$16,741
Expected cash requirements for interest 2
799
1,529
1,289
7,479
11,096
Pension and other postretirement benefits379
909
1,944
7,214
10,446
Operating leases 3
492
777
504
803
2,576
Purchase obligations 4
2,548
4,162
3,664
4,737
15,111
Other noncurrent obligations 5
—
1,180
633
1,061
2,874
Total$4,653
$10,581
$12,070
$31,540
$58,844
1.Excludes unamortized debt discount and issuance costs of $365 million. Includes finance lease obligations of $518 million.
1.Excludes unamortized debt discount and issuance costs of $331 million. Includes finance lease obligations of $395 million. Assumes the option to extend will be exercised for the $2 billion Dow Silicones Term Loan Facility.
2.Cash requirements for interest on long-term debt was calculated using current interest rates at December 31, 2019, and includes $2,344 million of various floating rate notes.
3.Includes imputed interest of $416 million.
4.Includes outstanding purchase orders and other commitments greater than $1 million obtained through a survey conducted within the Company.
5.Includes liabilities related to asbestos litigation, environmental remediation, legal settlements and other noncurrent liabilities. In addition to these items, Dow Inc. includes liabilities related to noncurrent obligations with DuPont and Corteva. The table excludes uncertain tax positions due to uncertainties in the timing of the effective settlement of tax positions with the respective taxing authorities and deferred tax liabilities as it is impractical to determine whether there will be a cash impact related to these liabilities. The table also excludes deferred revenue as it does not represent future cash requirements arising from contractual payment obligations.
2.Cash requirements for interest on long-term debt was calculated using current interest rates at December 31, 2020, and includes $235 million of various floating rate notes.
3.Includes imputed interest of $348 million.
4.Includes outstanding purchase orders and other commitments greater than $1 million obtained through a survey conducted within the Company.
5.Includes liabilities related to asbestos litigation, environmental remediation, legal matters and other noncurrent liabilities. In addition to these items, Dow Inc. includes liabilities related to noncurrent obligations with DuPont and Corteva. The table excludes uncertain tax positions due to uncertainties in the timing of the effective settlement of tax positions with the respective taxing authorities and deferred tax liabilities as it is impractical to determine whether there will be a cash impact related to these liabilities. The table also excludes deferred revenue and negative investment balances related to equity method investments as these items do not represent future cash requirements arising from contractual payment obligations.

The Company expects to meet its contractual obligations through its normal sources of liquidity and believes it has the financial resources to satisfy these contractual obligations.

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Off-Balance Sheet Arrangements
Off-balance sheet arrangements are obligations the Company has with nonconsolidated entities related to transactions, agreements or other contractual arrangements. The Company holds variable interests in joint ventures accounted for under the equity method of accounting. The Company is not the primary beneficiary of these joint ventures and therefore is not required to consolidate these entities (see Note 2524 to the Consolidated Financial Statements). In addition, see Note 1514 to the Consolidated Financial Statements for information regarding the transfer of financial assets.

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 if specific triggering events occur. The Company had outstanding guarantees at December 31, 20192020 of $3,952$251 million, compared with $4,273$3,952 million at December 31, 2018.2019. In the fourth quarter of 2020, the remaining project completion conditions related to the Sadara project finance guarantees were fulfilled. Additional information related to guarantees can be found in the “Guarantees” section of Note 1716 to the Consolidated Financial Statements.

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Fair Value Measurements
See Note 2120 to the Consolidated Financial Statements for information related to fair value measurements of pension and other postretirement benefit plan assets; see Note 2322 for information related to other-than-temporary impairments; and, see Note 2423 for additional information concerning fair value measurements.

OTHER MATTERS
Recent Accounting Guidance
See Note 2 to the Consolidated Financial Statements for a summary of recent accounting guidance.

Critical Accounting Estimates
The preparation of financial statements and related disclosures in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 1 to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. Following are the Company’s accounting policies impacted by judgments, assumptions and estimates:

Litigation
The Company is subject to legal proceedings and claims arising out of the normal course of business including product liability, patent infringement, employment matters, governmental tax and regulation disputes, contract and commercial litigation and other actions. The Company routinely assesses the legal and factual circumstances of each matter, the likelihood of any adverse outcomes to these matters, as well as ranges of probable losses. A determination of the amount of the reserves required, if any, for these contingencies is made after thoughtful analysis of each known claim. The Company has an active risk management program consisting of numerous insurance policies secured from many carriers covering various timeframes. These policies may provide coverage that could be utilized to minimize the financial impact, if any, of certain contingencies. The required reserves may change in the future due to new developments in each matter. For further discussion, see Note 1716 to the Consolidated Financial Statements.

Asbestos-Related Matters of Union Carbide Corporation
Union Carbide is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-containing products located on Union Carbide’s premises, and Union Carbide’s responsibility for asbestos suits filed against a former Union Carbide subsidiary, Amchem Products, Inc. ("Amchem"). Each year, Ankura Consulting Group, LLC ("Ankura") performs a review for Union Carbide based upon historical asbestos claims, resolution and asbestos-related defense and processing costs, through the terminal year of 2049. Union Carbide compares current asbestos claim and resolution activity, including asbestos-related defense and processing costs, to the results of the most recent Ankura study at each balance sheet date to determine whether the asbestos-related liability continues to be appropriate.

For additional information, see Part I, Item 3. Legal Proceedings; Asbestos-Related Matters of Union Carbide Corporation in Management’s Discussion and Analysis of Financial Condition and Results of Operations; and Notes 1 and 1716 to the Consolidated Financial Statements.
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Environmental Matters
The Company determines the costs of environmental remediation of its facilities and formerly owned facilities based on evaluations of current law and existing technologies. Inherent uncertainties exist in such evaluations primarily due to unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies. The recorded liabilities are adjusted periodically as remediation efforts progress, or as additional technical or legal information becomes available. At December 31, 2019,2020, the Company had accrued obligations of $1,155$1,244 million for probable environmental remediation and restoration costs, including $207$248 million for the remediation of Superfund sites. 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. For further discussion, see Environmental Matters in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes 1 and 1716 to the Consolidated Financial Statements.

Goodwill
The Company performs goodwill impairment testing at the reporting unit level. Reporting units are the level at which discrete financial information is available and reviewed by business management on a regular basis. The Company tests goodwill for impairment annually (in the fourth quarter), or more frequently when events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit has declined below its carrying value. Goodwill is evaluated for impairment using

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qualitative and/or quantitative testing procedures. The separation from DowDuPont on April 1, 2019, did not impact the composition of the Company's six reporting units: Coatings & Performance Monomers, Consumer Solutions, Hydrocarbons & Energy, Industrial Solutions, Packaging and Specialty Plastics and Polyurethanes & Construction Chemicals. The ECP businesses received as part of the separation from DowDuPont are included in the Hydrocarbons & Energy and Packaging and Specialty Plastics reporting units. At December 31, 2019,2020, goodwill was carried by five out of six of the Company's reporting units.

The Company has the option to first perform qualitative testing to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors assessed at the Company level include, but are not limited to, GDP growth rates, long-term hydrocarbon and energy prices, equity and credit market activity, discount rates, foreign exchange rates and overall financial performance. Qualitative factors assessed at the reporting unit level include, but are not limited to, changes in industry and market structure, competitive environments, planned capacity and new product launches, cost factors such as raw material prices, and financial performance of the reporting unit. If the Company chooses not to complete a qualitative assessment for a given reporting unit or if the initial assessment indicates that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying value, additional quantitative testing is required.

Quantitative testing requires the fair value of the reporting unit to be compared with its carrying value. If the reporting unit's carrying value exceeds its fair value, an impairment charge is recognized for the difference. The Company utilizes a discounted cash flow methodology to calculate the fair value of its reporting units. This valuation technique has been selected by management as the most meaningful valuation method due to the limited number of market comparables for the Company's reporting units. However, where market comparables are available, the Company includes EBIT/EBITDA multiples as part of the reporting unit valuation analysis. The discounted cash flow valuations are completed using the following key assumptions: projected revenue growth rates or compounded annual growth rates, discount rates, tax rates, terminal values, currency exchange rates, and forecasted long-term hydrocarbon and energy prices, by geographic region and by year, which include the Company's key feedstocks as well as natural gas and crude oil (due to its correlation to naphtha). Currency exchange rates and long-term hydrocarbon and energy prices are established for the Company as a whole and applied consistently to all reporting units, while revenue growth rates, discount rates and tax rates are established by reporting unit to account for differences in business fundamentals and industry risk. These key assumptions drive projected EBIT/EBITDA and EBIT/EBITDA margins, which are key elements of management’s internal control over the reporting unit valuation analysis.
2019

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2020 Goodwill Impairment Testing
In 2020, there were no events or changes in circumstances that warranted interim goodwill impairment testing. In the fourth quarter of 2019,2020, qualitative testing was performed for all reporting units carrying goodwill. Based on the results of the qualitative testing, quantitative testing was performed on twoone reporting units and a qualitative assessment was performed for the remaining reporting units.unit. For the qualitative assessments, management considered the factors at both the Company level and the reporting unit level. Based on the qualitative assessment,assessments for the reporting units, management concluded it is not more likely than not that the fair value of the reporting unit is less than the carrying value of the reporting unit.

Upon completion of For the quantitative testing, in the fourth quarter of 2019, the Company determined the Coatings & Performance Monomers ("C&PM") reporting unit was impaired. During 2019, the C&PM reporting unit did not consistently meet expected financial performance targets, primarily due to the industry’s increased captive use of coatings products, which led to volume reductions, reduced margins for products across the portfolio due to changes in customer buying patterns and supply and demand balances, as well as a continued trend of customer consolidation in end markets, which reduced growth opportunities. As a result, the C&PM reporting unit lowered its future revenue and profitability projections, which were used in determining the fair value of the C&PM reporting unit using a discounted cash flow methodology. These discounted cash flows did not supportexceeded the carrying value of the C&PM reporting unit. As a result, the Company recorded a goodwill impairment charge of$1,039 million in the fourth quarter of 2019. The C&PM reporting unit did not carry a goodwill balance at December 31, 2019. The fair value of the other reporting unit exceeded its carrying value and no other goodwill impairments were identified as a result of the 2019 testing.

Pension and Other Postretirement Benefits
As a result of the Company’s separation from DowDuPont, the number of defined benefit pension plans administered by the Company decreased from 45 plans to 35 plans, with approximately $270 million of net unfunded pension liabilities transferring to DowDuPont. Plans administered by other subsidiaries of DowDuPont that were transferred to the Company were not significant. There were no changes in the number of other postretirement benefit plans administered by the Company as a result of the separation.

The amounts recognized in the consolidated financial statements related to pension and other postretirement benefits are determined from actuarial valuations. Inherent in these valuations are assumptions including expected return on plan assets, discount rates at which the liabilities could have been settled at December 31, 2019,2020, rate of increase in future compensation levels, mortality rates and health care cost trend rates. These assumptions are updated annually and are disclosed in Note 2120 to the Consolidated Financial Statements. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, affect expense recognized and obligations recorded in future periods. The U.S. pension plans represent 7168 percent of the Company’s pension plan assets and 7069 percent of the pension obligations.

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The Company uses the spot rate approach to determine the discount rate utilized to measure the service cost and interest cost components of net periodic pension and other postretirement benefit costs for the U.S. and other selected countries. Under the spot rate approach, the Company calculates service costscost and interest costscost by applying individual spot rates from the Willis Towers Watson RATE:Link yield curve (based on high-quality corporate bond yields) for each selected country to the separate expected cash flow components of service cost and interest cost; service cost and interest cost for all other plans (including all plans prior to adoption) are determined on the basis of the single equivalent discount rates derived in determining those plan obligations.

The following information relates to the U.S. plans only; a similar approach is used for the Company’s non-U.S. plans.

The Company determines the expected long-term rate of return on assets by performing a detailed analysis of historical and expected returns based on the strategic asset allocation approved by the Company's Investment Committee and the underlying return fundamentals of each asset class. The Company’s historical experience with the pension fund asset performance is also considered. The expected return of each asset class is derived from a forecasted future return confirmed by historical experience. The expected long-term rate of return is an assumption and not what is expected to be earned in any one particular year. The weighted-average long-term rate of return assumption used for determining net periodic pension expense for 20192020 was 7.927.95 percent. The weighted-average assumption to be used for determining 20202021 net periodic pension expense is 7.957.96 percent. Future actual pension expense will depend on future investment performance, changes in future discount rates and various other factors related to the population of participants in the Company’s pension plans.

The discount rates utilized to measure the pension and other postretirement obligations of the U.S. qualified plans are based on the yield on high-quality corporate fixed income investments at the measurement date. Future expected actuarially determined cash flows for the Company’s U.S. plans are individually discounted at the spot rates under the Willis Towers Watson U.S. RATE:Link 60-90 corporate yield curve (based on 60th to 90th percentile high-quality corporate bond yields) to arrive at the plan’s obligations as of the measurement date. The weighted average discount rate utilized to measure pension obligations decreased to 2.71 percent at December 31, 2020, from 3.41 percent at December 31, 2019, from 4.39 percent at December 31, 2018.2019.

At December 31, 2019,2020, the U.S. qualified plans were underfunded on a projected benefit obligation basis by $4,768$5,873 million. The underfunded amount increased $702$1,105 million compared with December 31, 2018.2019. The increase in the underfunded amount in 20192020 was primarily due to the impact of lower discount rates, which was partially offset by the reduction in the number of active U.S. pension plan participants after the Company's separation from DowDuPont.overall favorable asset returns. The Company did not make contributions to the U.S. qualified plans in 2019.2020.

The assumption for the long-term rate for the compensation levels for the U.S. qualified plans was unchanged. The Company uses a generational mortality table to determine the duration of its pension and other postretirement obligations.

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The following discussion relates to the Company’s significant pension plans.

The Company bases the determination of pension expense on a market-related valuation of plan assets that reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose represent the difference between the expected return calculated using the market-related value of plan assets and the actual return based on the market value of plan assets. Since the market-related value of plan assets recognizes gains or losses over a five-year period, the future value will be impacted when previously deferred gains or losses are recorded. Over the life of the plans, both gains and losses have been recognized and amortized. At December 31, 2019,2020, net gains of $566$1,396 million remain to be recognized in the calculation of the market-related value of plan assets. These net gains will result in decreases in future pension expense as they are recognized in the market-related value of assets.

The net increase in the market-related value of assets due to the recognition of prior gains (losses) is presented in the following table:

Net Increase in Market-Related Asset Value Due to Recognition of Prior Gains
In millions
2021$359 
2022182 
2023627 
2024228 
Total$1,396 
Net Increase in Market-Related Asset Value Due to Recognition of Prior Gains (Losses)
In millions
2020$93
2021129
2022(48)
2023392
Total$566

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At December 31, 2019,2020, the Company expects pension expense from continuing operations to increasedecrease in 20202021 by approximately $125$25 million. The increasedecrease in pension expense is primarily due to the decrease in discount rates and curtailment gains of $27 million recognized in 2019 that are not expected to recur in 2020.lower interest cost component.

A 25 basis point increase or decrease in the long-term return on assets assumption would change the Company’s total pension expense for 20202021 by $59$61 million. A 25 basis point increase in the discount rate assumption would lower the Company's total pension expense for 20202021 by $54$55 million. A 25 basis point decrease in the discount rate assumption would increase the Company's total pension expense for 20202021 by $56$60 million. A 25 basis point change in the long-term return and discount rate assumptions would have an immaterial impact on the other postretirement benefit expense for 2020.2021.

Income Taxes
Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. Based on the evaluation of available evidence, both positive and negative, the Company recognizes future tax benefits, such as net operating loss carryforwards and tax credit carryforwards, to the extent that realizing these benefits is considered to be more likely than not.

At December 31, 2019,2020, the Company had a net deferred tax asset balance of $1,866$1,810 million, after valuation allowances of $1,262$1,302 million.

In evaluating the ability to realize the deferred tax assets, the Company relies on, in order of increasing subjectivity, taxable income in prior carryback years, the future reversals of existing taxable temporary differences, tax planning strategies and forecasted taxable income using historical and projected future operating results.

At December 31, 2019,2020, the Company had deferred tax assets for tax loss and tax credit carryforwards of $1,920$2,004 million, $295$708 million of which is subject to expiration in the years 20202021 through 2024.2025. In order to realize these deferred tax assets for tax loss and tax credit carryforwards, the Company needs taxable income of approximately $27,010$27,331 million across multiple jurisdictions. The taxable income needed to realize the deferred tax assets for tax loss and tax credit carryforwards that are subject to expiration between 2020from 2021 through 20242025 is approximately $3,388$6,405 million.

The Company recognizes the financial statement effects of an uncertain income tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination. At December 31, 2019,2020, the Company had uncertain tax positions for both domestic and foreign issues of $319$373 million.

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The Company accrues for non-income tax contingencies when it is probable that a liability to a taxing authority has been incurred and the amount of the contingency can be reasonably estimated. At December 31, 2019,2020, the Company had a non-income tax contingency reserve for both domestic and foreign issues of $44$33 million.

Indemnification Assets and Liabilities
In connection with the 2019 separation from DowDupontDowDuPont and the 2016 ownership restructure of Dow Silicones, Dow entered into agreements that established each party’s indemnification obligations for certain tax, environmental, litigation and other matters, subject to certain conditions and limits. The Company records indemnification assets when collection is deemed probable and engages with indemnifying parties and assesses publicly available information to evaluate collectability. The underlying tax, environmental, litigation and other liabilities for which the Company claims indemnification are subject to significant judgment and potential disputes could adversely impact collectability. The Company assesses the collectability of indemnification assets when events or changes in circumstances indicate the carrying values may not be recoverable. At December 31, 2019,2020, indemnification assets were $210$225 million and $115 million for Dow Inc. and TDCC, respectively ($210 million and $100 million for Dow Inc. and TDCC respectively (zero for both at December 31, 2018)2019).

The Company records indemnification liabilities when it is probable that a liability has been incurred and the amount can be reasonably estimated. At December 31, 2019,2020, indemnification liabilities related to the agreements were $848$657 million for Dow Inc. and zero for TDCC (zero($848 million for bothDow Inc. and zero for TDCC at December 31, 2018)2019). This represents management’s best estimate of the Company’s obligations under the agreements, although it is reasonably possible that future events could cause the actual values to be higher or lower than those projected or those recorded. For further discussion, see Notes 43 and 1716 to the Consolidated Financial Statements.


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Environmental Matters
Environmental Policies
Dow is committed to world-class environmental, health and safety (“EH&S”) performance, as demonstrated by industry-leading performance, a long-standing commitment to Responsible Care®, and a strong commitment to achieve the Company's 2025 Sustainability Goals – goals that set the standard for sustainability in the chemical industry by focusing on improvements in the Company’s local corporate citizenship and product stewardship, and by actively pursuing methods to reduce its environmental impact.

To meet the Company’s public commitments, as well as the stringent laws and government regulations related to environmental protection and remediation to which its global operations are subject, the Company has well-defined policies, requirements and management systems. The Company's EH&S Management System (“EMS”) defines the “who, what, when and how” needed for the businesses to achieve the Company’s policies, requirements, performance objectives, leadership expectations and public commitments. To ensure effective utilization, the EMS is integrated into a company-wide management system for EH&S, Operations, Quality and Human Resources.

It is the Company's policy to adhere to a waste management hierarchy that minimizes the impact of wastes and emissions on the environment. First, work to eliminate or minimize the generation of waste and emissions at the source through research, process design, plant operations and maintenance. Second, find ways to reuse and recycle materials. Finally, unusable or non-recyclable hazardous waste is treated before disposal to eliminate or reduce the hazardous nature and volume of the waste. Treatment may include destruction by chemical, physical, biological or thermal means. Disposal of waste materials in landfills is considered only after all other options have been thoroughly evaluated. The Company has specific requirements for waste that is transferred to non-Dow facilities, including the periodic auditing of these facilities.

The Company believes third-party verification and transparent public reporting are cornerstones of world-class EH&S performance and building public trust. Numerous Dow sites in Europe, Latin America, Asia Pacific and the U.S. & Canada have received third-party verification of the Company’s compliance with Responsible Care® and with outside specifications such as ISO-14001. The Company continues to be a global champion of Responsible Care® and has worked to broaden the application and impact of Responsible Care® around the world through engagement with suppliers, customers and joint venture partners.


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The Company’s EH&S policies helped to achieve improvementshealth and safety performance targets in many aspects of EH&S performance in 2019.2020. The Company’s safety continued to improve in 2020 based on process and personal safety performance was excellent in 2019 and improvements were made in injury/illness rates, and safety remains a priority. Further improvementproject implementations. Improvement in these areas, as well as environmental compliance, remains a top management priority, with initiatives underway to further improve performance and compliance in 20202021 as the Company continues to implement the 2025 Sustainability Goals.Goals and new, progressive, multi-decade sustainability targets around advancing a circular economy and climate protection.

Detailed information on Dow’s performance regarding environmental matters and goals can be found online onis accessible through the Company's Science & Sustainability webpage at www.dow.com/sustainability. The website and its content are not deemed incorporated by reference into this report.

Chemical Security
Public and political attention continues to be placed on the protection of critical infrastructure, including the chemical industry, from security threats. Terrorist attacks, natural disasters and cyber incidents have increased concernglobal concerns about the security and safety of chemical production and distribution. Many, including the Company and the American Chemistry Council, have called for uniform risk-based and performance-based national standards for securing the U.S. chemical industry. The Maritime Transportation Security Act of 2002 and itsU.S. regulations further set forth risk-based and performance-based standards that must be met at U.S. Coast Guard-regulated facilities. The Company is subject to U.S. Chemical Plant Security legislation was passed in 2006regulations and Chemical Facility Anti-Terrorism Standards which were implemented by the U.S. Department of Homeland Security is now implementing the regulations known as the Chemical Facility Anti-Terrorism Standards.Security. The Company is complying withalso subject to the requirements of the Rail Transportation Security Rule issued by the U.S. Transportation Security Administration. The Company continues to support uniform risk-based national standards for securing the chemical industry.

The focusSince 1988, the Company has maintained a comprehensive, multi-level security plan that focuses on security, emergency planning, preparedness and response is not new to the Company. A comprehensive, multi-level security plan has been maintained since 1988.response. This plan, which has been activated in response to significant world and national events, since then, is reviewed on an annual basis. The Company continues to improve its security plans, placing emphasis on the safety of Dow communities and people by being prepared to meet risks at any level and to address both internal and external identifiable risks. The security plan includes regular vulnerability assessments, security audits, mitigation efforts and physical security upgrades designed to reduce vulnerability. The Company’s security plans are also are developeddesigned to avert interruptions of normal business operations that could materially and adversely affect the Company’s results of operations, liquidityfinancial condition and financial condition.cash flows.


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The Company played a key role in the development and implementation of the American Chemistry Council’s Responsible Care® Security Code ("Security Code"), which requires that all aspects of security – including facility, transportation and cyberspace – be assessed and gaps addressed. Through the global implementation of the Security Code, the Company has permanently heightened the level of security – not just in the U.S.,United States, but worldwide. The Company employs several hundred employees and contractors in its Emergency Services and Security department worldwide. In 2019, the Company established its Global Security Operations Center ("GSOC") to provide 24-hour/day, 365-day/year real-time monitoring of global risks to Dow assets and people. The GSOC employs state-of-the-art social media monitoring, threat reporting and geo-fencing capabilities to analyze global risks and report those risks, facilitating decision-making and actions to prevent Dow crises.

Through the implementation of the Security Code, including voluntary security enhancements and upgrades, made since 2002, the Company is well-positioned to comply with U.S. chemical facility regulations and other regulatory security frameworks. The Company is currently participatingparticipates with the American Chemistry Council to periodically review and update the Security Code.

The Company continues to work collaboratively across the supply chain on Responsible Care®, Supply Chain Design, Emergency Preparedness, Shipment Visibilitysupply chain design, emergency preparedness, shipment visibility and transportation of hazardous materials. The Company is cooperatingcooperated with public and private entities to lead the implementation of advanced tank car design, and track and trace technologies. Further, the Company’s Distribution Risk Review process that has been in place for decades was expanded to addressaddresses potential threats in all modes of transportation across the Company’s supply chain. To reduce vulnerabilities, the Company maintains security measures that meet or exceed regulatory and industry security standards in all areas in which they operate.

The Company's initiatives relative to chemical security, emergency preparedness and response, Community Awareness and Emergency Responses and crisis management are implemented consistently at all Dow sites on a global basis. The Company participates with chemical associations globally and participates as an active member of the U.S. delegation to the G7 Global Partnership Sub-Working Group on Chemical Security.

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Climate Change
Climate change matters for the Company are likely to be driven by changesseveral categories of risks related to the transition to a lower-carbon economy (“Transition Risks”) and risks related to the physical impacts of climate change (“Physical Risks”).

Transition Risks
Transition Risks include carbon pricing mechanisms, transition to lower emissions technology, increased cost of raw materials, and mandates on and regulation of existing products and services. Carbon pricing is a market-based strategy for lowering global warming emissions by putting a monetary value on carbon emissions, allowing for the costs of climate impacts and opportunities for low-carbon energy options to be reflected in regulations, public policyproduction and physical climate parameters.

Regulatory Matters
Regulatory matters include capconsumption choices. Approximately 35 percent of Dow’s carbon emissions are generated from operations in Canada and trade schemes; increasedthe European Union (“EU”) where carbon pricing is already in place. As part of the European Green Deal, the European Commission proposed a 2030 greenhouse gas (“GHG”) limits;emissions reduction target of at least 55 percent below 1990 levels, with a goal for the EU to be carbon neutral by 2050. In China, an emissions trading system, initially proposed to cover the power sector only, is expected to gradually expand to cover a total of eight sectors, including the petrochemical and taxes on GHG emissions, fuelchemical industries, though no specific timeline for implementation and energy. The potential implications of each of these matters are all very similar, includingexpansion has been outlined.

These carbon pricing mechanisms will not only increase Dow’s direct costs to operate but will also result in increased cost of purchased energy additional capital costs for installation or modification of GHG emitting equipment, and additional costs associated directly with GHG emissions (such as cap and trade systems or carbon taxes), which are primarily related to energy use. It is difficult to estimatecosts. Dow mitigates the potentialdirect cost impact of these regulatory matters onexisting regulation through research and development projects designed to increase energy prices.

Reducingefficiency, and capital investment projects that will reduce the Company's overallCompany’s energy usage and GHG emissions through new and unfolding projects will decrease the potential impact of these regulatory matters.carbon footprint. The Company is also hasexploring options for carbon capture, utilization and storage (“CCUS”) and electrification of Dow’s processes. Dow sees CCUS as a dedicated commercial groupmechanism to handle energy contractshelp bridge the time period between the onset of increased carbon regulation and purchases, including managing emissions trading.the technology available to economically reduce Dow’s GHG emissions. Dow also incorporates a theoretical internal carbon price into its business planning and risk management strategies. This theoretical price of carbon is also included in internal calculations used for prioritizing capital projects. Ultimately the goal of utilizing an internal carbon price is to mitigate the risk of Dow’s carbon exposure to help ensure future resiliency.

Physical Risks
Operationally, climate change may result in more frequent severe weather events, potential changes in precipitation patterns and extreme variability in weather patterns, which can disrupt operations. Several of Dow’s production facilities are located in water-scarce areas and water shortages could impact normal production. Changes in average precipitation could have an impact on the availability and price of water. The Company has not experienced any material impact relatedengineered susceptible facilities, particularly on the U.S. Gulf Coast, to regulated GHG emissions,better withstand severe weather and rising sea levels, and continues to evaluatestudy the long-term implications of changing climate parameters on water availability, plant siting issues and monitor this area for future developments.

Physical Climate Parameters
Many scientific academies throughout the world have concluded that it is very likely that human activities are contributing to global warming. At this point, it is difficult to predict and assess the probability and opportunity of a global warming trend on the Company specifically.other impacts. Preparedness plans are developed that detail actions needed in the event of severe weather. These measures have historically been in place and these activities and associated costs are driven by normal operational preparedness. Dow continues to study

In 2019, the long-term implicationsmost recent period for which data is available, the Company’s greenhouse gas intensity was down approximately 3 percent from 2018 and by a total of changing climate parameters on water availability, plant siting issues, and impacts and opportunities for products.

Dow’s Energy business and Public Affairs and Sustainability functions are tasked with developing and implementing a comprehensive strategy that addressesapproximately 13 percent since the potential challengesbaseline year of energy security and GHG emissions on the Company. Dow continues to elevate its internal focus and external positions - to focus on the root causes of GHG emissions - including the unsustainable use of energy. The Company's energy plan provides the roadmap:

Conserve - aggressively pursue energy efficiency and conservation
Optimize - increase and diversify energy resources
Accelerate - develop cost-effective, clean, renewable and alternative energy sources
Transition - to a sustainable energy future


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Through corporate energy efficiency programs and focused GHG management efforts,2006. In addition, the Company hasis on track to meet its target of purchasing 750 megawatts of renewable power by 2025.

The Company continues progress toward its defined 2025 Sustainability Goals and is continuingtaking further action to lessen its carbon impact moving forward. In June 2020, the Company announced a new, multi-decade carbon target to reduce its GHGnet annual carbon emission by 5 million metric tons compared with its 2020 baseline, a reduction of approximately 15 percent, and an intention to be carbon neutral (Scopes 1+2+3, as defined by the Greenhouse Gas Protocol, plus product benefits) by 2050.


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Dow’s action plan to achieve carbon neutrality by 2050 includes:
•Optimizing energy efficiency of facilities and processes
•Increasing renewables in purchased power mix
•Investments in CCUS
•Developing low-carbon technologies for emission reductions
•Deploying materials to enable emissions footprint. Dow’s manufacturing intensity, measured in Btu per pound of product, has improved by more than 40 percent since 1990. As part of the 2025 Sustainability Goals, the Company will maintain GHG emissions below 2006 levels on an absolute basisreductions for all GHGs.customers and industries

The Company intends to meet its commitment to implement the recommendations of the Financial Stability Board's Task Force on Climate-related Financial Disclosures ("Task Force"TCFD") over the next three years, which istwo years. Disclosures aligned with TCFD recommendations will be included in the recommendations of the Task Force.Company’s annual Sustainability Report.

Environmental Remediation
The Company accrues the costs of remediation of its facilities and formerly owned facilities based on current law and regulatory requirements. The nature of such remediation can include management of soil and groundwater contamination. The accounting policies adopted to properly reflect the monetary impacts of environmental matters are discussed in Note 1 to the Consolidated Financial Statements. To assess the impact on the financial statements, environmental experts review currently available facts to evaluate the probability and scope of potential liabilities. Inherent uncertainties exist in such evaluations primarily due to unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and the ability to apply remediation technologies. These liabilities are adjusted periodically as remediation efforts progress or as additional technical or legal information becomes available. The Company had an accrued liability of $948$996 million at December 31, 2019,2020, related to the remediation of current or former Dow-owned sites. At December 31, 2018,2019, the liability related to remediation was $654$948 million.

In addition to current and former Dow-owned sites, under the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and equivalent state laws (hereafter referred to collectively as "Superfund Law"), the Company is liable for remediation of other hazardous waste sites where the Company allegedly disposed of, or arranged for the treatment or disposal of, hazardous substances. Because Superfund Law imposes joint and several liability upon each party at a site, the Company has evaluated its potential liability in light of the number of other companies that have also have been named potentially responsible parties (“PRPs”) at each site, the estimated apportionment of costs among all PRPs, and the financial ability and commitment of each to pay its expected share. The Company’s remaining liability for the remediation of Superfund sites was $207$248 million at December 31, 20192020 ($156207 million at December 31, 2018)2019). The Company has not recorded any third-party recovery related to these sites as a receivable.

Information regarding environmental sites is provided below:

Environmental Sites
Dow-owned Sites 1
Superfund Sites 2
  
2020201920202019
Number of sites at Jan 1178 178 133 131 
Sites added during year7 7 — 6 
Sites closed during year— (7)(1)(4)
Number of sites at Dec 31185 178 132 133 
Environmental Sites
Dow-owned Sites 1
Superfund Sites 2
  
2019201820192018
Number of sites at Jan 1178
181
131
131
Sites added during year7
3
6
2
Sites closed during year(7)(6)(4)(2)
Number of sites at Dec 31178
178
133
131
1.Dow-owned sites are sites currently or formerly owned by the Company. In the United States, remediation obligations are imposed by the Resource Conservation and Recovery Act or analogous state law. At December 31, 2020, 24 of these sites (28 sites at December 31, 2019) were formerly owned by Dowell Schlumberger, Inc., a group of companies in which the Company previously owned a 50 percent interest. The Company sold its interest in Dowell Schlumberger in 1992.
1.Dow-owned sites are sites currently or formerly owned by the Company. In the United States, remediation obligations are imposed by the Resource Conservation and Recovery Act or analogous state law. At December 31, 2019, 28 of these sites (32 sites at December 31, 2018) were formerly owned by Dowell Schlumberger, Inc., a group of companies in which the Company previously owned a 50 percent interest. The Company sold its interest in Dowell Schlumberger in 1992.
2.Superfund sites are sites, including sites not owned by the Company, where remediation obligations are imposed by Superfund Law.
2.Superfund sites are sites, including sites not owned by the Company, where remediation obligations are imposed by Superfund Law.

Additional information is provided below for the Company’s Midland, Michigan, manufacturing site and Midland off-site locations (collectively, the "Midland sites"), as well as a Superfund site in Wood-Ridge, New Jersey, the locations for which the Company has the largest potential environmental liabilities.


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In the early days of operations at the Midland manufacturing site, wastes were usually disposed of on-site, resulting in soil and groundwater contamination, which has been contained and managed on-site under a series of Resource Conservation and Recovery Act permits and regulatory agreements. The Hazardous Waste Operating License for the Midland manufacturing site, issued in 2003, and renewed and replaced in September 2015, also included provisions for the Company to conduct an investigation to determine the nature and extent of off-site contamination from historic Midland manufacturing site operations. In January 2010, the Company, the U.S. Environmental Protection Agency ("EPA") and the State of Michigan ("State") entered into an Administrative Order on Consent that requires the Company to conduct a remedial investigation, a feasibility study and a remedial design for the Tittabawassee River, the Saginaw River and the Saginaw Bay, and pay the oversight costs of the EPA and the State under the authority of CERCLA. See Note 1716 to the Consolidated Financial Statements for further information relating to Midland off-site environmental matters.

Rohm and Haas, a wholly owned subsidiary of the Company, is a PRP at the Wood-Ridge, New Jersey Ventron/Velsicol Superfund Site, and the adjacent Berry’s Creek Study Area ("BCSA") (collectively, the "Wood-Ridge sites"). Rohm and Haas is a successor

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in interest to a company that owned and operated a mercury processing facility, where wastewater and waste handling resulted in contamination of soils and adjacent creek sediments. In 2018, the Berry’s Creek Study Area Potentially Responsible Party Group (“PRP Group”), consisting of over 100 PRPs, completed a Remedial Investigation/Feasibility Study for the BCSA. During that time, the EPA concluded that an “iterative or adaptive approach” was appropriate for cleaning up the BCSA. Thus, each phase of remediation will be followed by a period of monitoring to assess its effectiveness and determine if there is a need for more work. In September 2018, the EPA signed a Record of Decision ("ROD 1") which describes the initial phase of the EPA’s plan to clean-up the BCSA. ROD 1 will remediate waterways and major tributaries in the most contaminated part of the BCSA. The PRP Group has signed agreements with the EPA to design the selected remedy. Although there is currently much uncertainty as to what will ultimately be required to remediate the BCSA and Rohm and Haas's share of these costs has yet to be determined, the range of activities that are required in the interim Record of Decision is known in general terms.

At December 31, 2019,2020, the Company had accrued liabilities totaling $368$370 million ($240368 million at December 31, 2018)2019) for environmental remediation at the Midland and Wood-Ridge sites. In 2019,2020, the Company spent $32$53 million ($32 million in 2018)2019) for environmental remediation at the Midland and Wood-Ridge sites.

During the third quarter of 2020, the Company accrued additional liabilities totaling $106 million related to environmental remediation matters resulting from the Company's evaluation of the costs required to manage remediation activities at sites Dow will permanently shut down as part of its 2020 Restructuring Program. In addition, the Company recorded indemnification assets of $50 million related to Dow Silicones' environmental matters. Net of indemnifications, the Company recognized a pretax charge of $56 million related to these environmental matters, included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income.

During the third quarter of 2019, the Company accrued additional liabilities totaling $447 million related to environmental remediation matters at a number of current and historical locations. The additional accrual primarily resulted from: the culmination of long-standing negotiations and discussions with regulators and agencies, including technical studies supporting higher cost estimates for final or staged remediation plans; the Company’s evaluation of the cost required to manage remediation activities at sites affected by Dow’s separation from DowDuPont and related agreements with Corteva and DuPont; and, the Company’s review of its closure strategies and obligations to monitor ongoing operations and maintenance activities. In addition, the Company recorded indemnification assets of $48 million related to Dow Silicones’ environmental matters. Net of indemnifications, the Company recognized a pretax charge of $399 million related to these environmental matters, included in “Cost of sales” in the consolidated statements of income.

In total, the Company’s accrued liability for probable environmental remediation and restoration costs was $1,244 million at December 31, 2020, compared with $1,155 million at December 31, 2019, compared with $810 million at December 31, 2018.2019. 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.
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The amounts charged to income on a pretax basis related to environmental remediation totaled $234 million in 2020, $588 million in 2019 and $176 million in 2018 and $163 million in 2017.2018. The amounts charged to income on a pretax basis related to operating the Company's current pollution abatement facilities, excluding internal recharges, totaled $616 million in 2020, $677 million in 2019 and $695 million in 2018 and $566 million in 2017.2018. Capital expenditures for environmental protection were $80 million in 2020, $83 million in 2019 and $55 million in 2018 and $57 million in 2017.2018.

Asbestos-Related Matters of Union Carbide Corporation
Union Carbide is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-containing products located on Union Carbide’s premises, and Union Carbide’s responsibility for asbestos suits filed against a former Union Carbide subsidiary, Amchem. In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to Union Carbide’s products.

The table below provides information regarding asbestos-related claims pending against Union Carbide and Amchem based on criteria developed by Union Carbide and its external consultants:

Asbestos-Related Claim Activity202020192018
Claims unresolved at Jan 111,117 12,780 15,427 
Claims filed4,857 5,743 6,599 
Claims settled, dismissed or otherwise resolved(6,848)(7,406)(9,246)
Claims unresolved at Dec 319,126 11,117 12,780 
Claimants with claims against both Union Carbide and Amchem(2,904)(3,837)(4,675)
Individual claimants at Dec 316,222 7,280 8,105 
Asbestos-Related Claim Activity201920182017
Claims unresolved at Jan 112,780
15,427
16,141
Claims filed5,743
6,599
7,010
Claims settled, dismissed or otherwise resolved(7,406)(9,246)(7,724)
Claims unresolved at Dec 3111,117
12,780
15,427
Claimants with claims against both Union Carbide and Amchem(3,837)(4,675)(5,530)
Individual claimants at Dec 317,280
8,105
9,897

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Plaintiffs’ lawyers often sue numerous defendants in individual lawsuits or on behalf of numerous claimants. As a result, the damages alleged are not expressly identified as to Union Carbide, Amchem or any other particular defendant, even when specific damages are alleged with respect to a specific disease or injury. In fact, there are no asbestos personal injury cases in which only Union Carbide and/or Amchem are the sole named defendants. For these reasons and based upon Union Carbide’s litigation and settlement experience, Union Carbide does not consider the damages alleged against Union Carbide and Amchem to be a meaningful factor in its determination of any potential asbestos-related liability.

For additional information see Part I, Item 3. Legal Proceedings and Asbestos-Related Matters of Union Carbide Corporation in Note 1716 to the Consolidated Financial Statements.


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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s business operations give rise to market risk exposure due to changes in foreign exchange rates, interest rates, commodity prices and other market factors such as equity prices. To manage such risks effectively, the Company enters into hedging transactions, pursuant to established guidelines and policies that enable it to mitigate the adverse effects of financial market risk. Derivatives used for this purpose are designated as hedges per the accounting guidance related to derivatives and hedging activities, where appropriate. A secondary objective is to add value by creating additional non-specific exposure within established limits and policies; derivatives used for this purpose are not designated as hedges. The potential impact of creating such additional exposures is not material to the Company’s results.

The global nature of the Company’s business requires active participation in the foreign exchange markets. The Company has assets, liabilities and cash flows in currencies other than the U.S. dollar. The primary objective of the Company’s foreign currency risk management is to optimize the U.S. dollar value of net assets and cash flows. To achieve this objective, the Company hedges on a net exposure basis using foreign currency forward contracts, over-the-counter option contracts, cross-currency swaps and nonderivative instruments in foreign currencies. Exposures primarily relate to assets, liabilities and bonds denominated in foreign currencies, as well as economic exposure, which is derived from the risk that currency fluctuations could affect the dollar value of future cash flows related to operating activities. The largest exposures are denominated in European currencies, the Chinese yuan, the Japanese yen and the Chinese yuan,Thai baht, although exposures also exist in the Canadian dollar, the Indian rupee and other currencies in Asia Pacific, Latin America, the Middle East, Africa, India and Africa.Canada.

The main objective of interest rate risk management is to reduce the total funding cost to the Company and to alter the interest rate exposure to the desired risk profile. To achieve this objective, the Company hedges using interest rate swaps, “swaptions,” and exchange-traded instruments. The Company’s primary exposure is to the U.S. dollar yield curve.

The Company has a portfolio of equity securities derived primarily from the investment activities of its insurance subsidiaries. This exposure is managed in a manner consistent with the Company’s market risk policies and procedures.

Inherent in the Company’s business is exposure to price changes for several commodities. Some exposures can be hedged effectively through liquid tradable financial instruments. Natural gas and crude oil, along with feedstocks for ethylene and propylene production, constitute the main commodity exposures. Over-the-counter and exchange traded instruments are used to hedge these risks, when feasible.

The Company uses value-at-risk (“VAR”), stress testing and scenario analysis for risk measurement and control purposes. VAR estimates the maximum potential loss in fair market values, given a certain move in prices over a certain period of time, using specified confidence levels. The VAR methodology used by the Company is a variance/covariance model. This model uses a 97.5 percent confidence level and includes at least one year of historical data. The 20192020 and 20182019 year-end and average daily VAR for the aggregate of all positions are shown below. These amounts are immaterial relative to the total equity of the Company.

Total Daily VAR by Exposure Type at Dec 3120202019
In millionsYear-endAverageYear-endAverage
Commodities$23 $19 $7 $12 
Equity securities18 17 10 11 
Foreign exchange11 15 43 36 
Interest rate142 153 77 69 
Composite$194 $204 $137 $128 
Total Daily VAR by Exposure Type at Dec 3120192018
In millionsYear-endAverageYear-endAverage  
Commodities$7
$12
$26
$30
Equity securities10
11
12
7
Foreign exchange43
36
26
28
Interest rate77
69
81
80
Composite$137
$128
$145
$145

The Company’s composite VAR for the aggregate of all positions decreasedincreased from $145 million at December 31, 2018 to $137 million at December 31, 2019.2019 to $194 million at December 31, 2020. The interest rate and commodities VAR declinedincreased due to a decreasean increase in exposure.managed exposures and an increase in commodity volatility. The equity securities VAR declinedincreased due to an increase in equity volatility. The foreign exchange VAR decreased due to a decrease in managed exposures and lower equity volatility.exposures. The foreign exchangeinterest rate VAR increased due to increased hedging.an increase in interest rate volatility and an increase in interest rate exposure. See Note 2322 to the Consolidated Financial Statements for further disclosure regarding market risk.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Dow Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Dow Inc. and subsidiaries (the "Company") as of December 31, 20192020 and 2018,2019, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2019,2020, and the related notes and the schedule listed in the Index at Item 15(a)2 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20192020 and 2018,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2020, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019,2020, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 7, 2020,5, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.
Changes in Accounting Principles
As discussed in Note 1 to the financial statements, in the first quarter of 2018,2019, the Company changed its method of accounting for revenue due to the adoption of Accounting Standards Codification (ASC) Topic 606, Revenue From Contracts with Customers and, in the first quarter of 2019, the Company changed the method of accounting for leases due to the adoption of ASCAccounting Standards Codification (ASC) Topic 842, Leases.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit mattersmatter communicated below are mattersis a matter arising from the current-period audit of the financial statements that werewas communicated or required to be communicated to the audit committee and that (1) relaterelates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing separate opinions on the critical audit mattersmatter or on the accounts or disclosures to which they relate.it relates.
Goodwill - Coatings & Performance Monomers Reporting Unit -– Annual Impairment Assessment – Refer to Note 1 and Note 1413 to the financial statements
Critical Audit Matter Description
The Company tests goodwill for impairment annually (in the fourth quarter), or more frequently when events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit has declined below its carrying value. The Company utilizes a discounted cash flow methodology to calculate the fair value of its reporting units, which requires management to make significant estimates and assumptions related to projected revenue growth rates, discount rates, and earnings before interest, taxes, depreciation and amortization (“EBITDA”). Changes in these assumptions could have a significant impact on the fair value

58

of the reporting unit and the amount of any goodwill impairment charge. As of December 31, 2019,2020, the Company has six reporting units, all but one of which have goodwill.
70

Throughout 2019,2020, the Coatings & Performance MonomersCoronavirus (COVID-19) has had substantial negative impact on the results of the Company’s operations and financial performance of its reporting unit (“C&PM”) did not consistently meet expectedunits. With unprecedented volatility in global financial targets and commodities markets, the Company’s reporting units experienced volume reductions and reduced margins for products across the portfolio due todecreased demand in certain end-customer markets, changes in customer buying patterns and supply and demand balances,fundamentals, and margin compression caused by lowering of global energy prices. Given the uncertainty as well asto the continued trendultimate severity and duration of customer consolidationthe COVID-19 pandemic, the volatility in end markets, which reduced its future revenue and profitability projections. Therefore, in 2019, the Company used a discounted cash flow methodology to determine the fair value of the C&PM reporting unit. These discounted cash flows did not support the carrying valueCompany’s shares, and uneven course of C&PM. As a result, the Company recorded aeconomic recovery, leading up to its annual goodwill impairment charge of $1,039 milliontest in the fourth quarter the Company continuously monitored the impact of 2019.the pandemic on its reporting units to determine if it was more likely than not that the fair value was less than the carrying value for any of its reporting units. Based on the results of qualitative assessments completed as part of the annual impairment test for all reporting units, the Company moved to performing a quantitative test for one reporting unit. The discounted cash flows of this reporting unit supported a fair value in excess of the carrying value and as such no goodwill impairment charges were recorded.
Given the significant judgments made by management to estimate the fair value of the C&PM reporting unit, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to projected revenue growth rates, discount rates, EBITDA and EBITDA margin required a high degree of auditor judgment and an increased extent of effort, including the assistance of our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimates and assumptions related to projected revenue growth rates, discount rates, EBITDA and EBITDA margin for the C&PM reporting unit subject to the quantitative test included the following, among other procedures:
We•With the assistance of our fair value specialists, we tested the effectiveness of internal controls over the goodwill impairment evaluation, including controls over the selection of the discount rates and over forecasts of future revenue growth rates, EBITDA, and EBITDA margin.
•We performed a retrospective review comparing actual revenue and EBITDA results of the reporting unit for 20192020 to the forecasted results from 2018.2019.
•We performed a retrospective review comparing management’s estimates and assumptions relating to revenue, EBITDA, and EBITDA margin projections for the reporting unit used for the purpose of current year’s annual impairment test to the projections previously used in connection with the prior year annual impairment test.
•We evaluated the consistency of estimates and assumptions relating to revenue and EBITDA growth inherent in the discounted cash flow model for the reporting unit to those used by management in other annual forecasting activities.
•With the assistance of our fair value specialists, we performed a benchmarking exercise comparing management’s estimates and assumptions related to revenue growth, EBITDA and EBITDA margin for the reporting unit as of the measurement date to the revenue growth, EBITDA and EBITDA margins of a peer group of public companies for the most recent three years and the projection period.
•With the assistance of our fair value specialists, we evaluated (1) the valuation methodology used and (2) the projections of long-term revenue growth and the discount rates by testing the underlying source information, and by developing a range of independent estimates and comparing those to the rates selected by management.
Other-Than-Temporary-Impairment (“OTTI”) of the Sadara Chemical Company (“Sadara”) equity method investment - Refer to Note 13 to the financial statements
Critical Audit Matter Description
In 2011, the Company and Saudi Arabian Oil Company formed Sadara Chemical Company (“Sadara”), a joint venture between the two companies that subsequently constructed and now operates a world-scale, fully integrated chemicals complex in Jubail Industrial City, Kingdom of Saudi Arabia. The Company has a 35 percent equity interest in this joint venture and has been, and continues to be, responsible for marketing the majority of Sadara’s products through the Company’s established sales channels.
In 2017, Sadara achieved full commercial operations of all its facilities. In December 2018, the joint venture successfully completed its Creditors Reliability Test, an extensive operational testing program designed to demonstrate the reliability of the joint venture’s full chemical complex by operating at high rates for an extended period of time. While Sadara has reached these operational milestones and has been generating positive EBITDA, the joint venture has yet to report positive net income.
During the fourth quarter of 2019, Sadara tested its long-lived assets for impairment using long-term cash flow projections. Due to Sadara's financial condition and its long-lived asset impairment test, Dow evaluated its equity method investment in Sadara for other-than-temporary impairment. The Company utilized a discounted cash flow methodology to measure the estimated fair value of its investment in Sadara, which was estimated to be zero. The Company determined the decline in value of its investment in Sadara was other-than-temporary due to Sadara’s financial performance since becoming commercially operational in 2017 and uncertainty around the prospects for recovery in Sadara’s financial condition. In the fourth quarter of 2019, the Company recorded

59

an impairment of its investment in Sadara and reserved certain accounts and notes receivable and accrued interest balances due to uncertainty around timing of collection for a total charge of $1,755 million.
We have identified the evaluation of the Sadara investment for other-than-temporary impairment as a critical audit matter because of the significant estimates and assumptions management makes to estimate the fair value of its investment, including the discount rate, terminal value, and long-term growth rates. This required a high degree of auditor judgment and increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s judgements, estimates and assumptions, related to the discount rate, terminal value, and long-term growth rate used in the discounted cash flow analysis used in the evaluation of other-than-temporary impairment of the Sadara investment included the following, among others:
We tested the effectiveness of internal controls over management’s evaluation of the Sadara investment for other-than-temporary impairment, including management’s evaluation of the assumptions used such as discount rate, terminal value, and long-term growth rate.
We evaluated the consistency of the assumptions and judgments relating to the discount rate, terminal value, and long-term growth rates by comparing to:
◦Agreements in place between Sadara and Dow
◦Independent third-party pricing study
We read external information included in press releases, earnings releases, regulatory filings, and other Sadara communications to search for contradictory information.
With the assistance of our fair value specialists, we evaluated (1) the valuation methodology used and model being used (2) the assumptions used such as the discount rate, terminal value, and the long-term growth rate by testing the underlying source information, and by developing a range of independent estimates and comparing those to the rates selected by management.


/s/ DELOITTE & TOUCHE LLP
Midland, Michigan
February 5, 2021
Deloitte & Touche LLP
Midland, Michigan
February 7, 2020

We have served as the Company's auditor since 1905.

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60

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholder and the Board of Directors of The Dow Chemical Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of The Dow Chemical Company and subsidiaries (the "Company") as of December 31, 20192020 and 2018,2019, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2019,2020, and the related notes and the schedule listed in the Index at Item 15(a)2 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20192020 and 2018,2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019,2020, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019,2020, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 7, 2020,5, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.
Changes in Accounting Principles
As discussed in Note 1 to the financial statements, in the first quarter of 2018, the Company changed its method of accounting for revenue due to the adoption of Accounting Standards Codification (ASC) Topic 606, Revenue From Contracts with Customers and, in the first quarter of 2019, the Company changed the method of accounting for leases due to the adoption of ASCAccounting Standards Codification (ASC) Topic 842, Leases.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit MattersMatter
The critical audit mattersmatter communicated below are mattersis a matter arising from the current-period audit of the financial statements that werewas communicated or required to be communicated to the audit committee and that (1) relaterelates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing separate opinions on the critical audit mattersmatter or on the accounts or disclosures to which they relate.
Goodwill - Coatings & Performance Monomers Reporting Unit -– Annual Impairment Assessment – Refer to Note 1 and Note 1413 to the financial statements
Critical Audit Matter Description
The Company tests goodwill for impairment annually (in the fourth quarter), or more frequently when events or changes in circumstances, indicate it is more likely than not that the fair value of a reporting unit has declined below its carrying value. TheIn performing quantitative assessments, the Company utilizes a discounted cash flow methodology to calculate the fair value of its reporting units, which requires management to make significant estimates and assumptions related to projected revenue growth rates, discount rates, and earnings before interest, taxes, depreciation and amortization (“EBITDA”)., and EBITDA margin. Changes in these assumptions could have a significant impact on the fair value of the reporting unit and the amount of any goodwill impairment charge. As ofAt December 31, 2019,2020, the Company has six reporting units, all but one of which have goodwill.

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72


Throughout 2019,2020, the Coatings & Performance MonomersCoronavirus (COVID-19) has had substantial negative impact on the results of the Company’s operations and financial performance of its reporting unit (“C&PM”) did not consistently meet expectedunits. With unprecedented volatility in global financial targets and commodities markets, the Company’s reporting units experienced volume reductions and reduced margins for products across the portfolio due todecreased demand in certain end-customer markets, changes in customer buying patterns and supply and demand balances,fundamentals, and margin compression caused by lowering of global energy prices. Given the uncertainty as well asto the continued trendultimate severity and duration of customer consolidationthe COVID-19 pandemic, the volatility in end markets, which reduced its future revenue and profitability projections. Therefore, in 2019, the Company used a discounted cash flow methodology to determine the fair value of the C&PM reporting unit. These discounted cash flows did not support the carrying valueCompany’s shares, and uneven course of C&PM. As a result, the Company recorded aeconomic recovery, leading up to its annual goodwill impairment charge of $1,039 milliontest in the fourth quarter the Company continuously monitored the impact of 2019.the pandemic on its reporting units to determine if it was more likely than not that the fair value was less than the carrying value for any of its reporting units. Based on the results of qualitative assessments completed as part of the annual impairment test for all reporting units, the Company moved to performing a quantitative test for one reporting unit. The discounted cash flows of this reporting unit supported a fair value in excess of the carrying value and as such no goodwill impairment charges were recorded.
Given the significant judgments made by management to estimate the fair value of the C&PM reporting unit, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to projected revenue growth rates, discount rates, EBITDA and EBITDA margin required a high degree of auditor judgment and an increased extent of effort, including the assistance of our fair value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimates and assumptions related to projected revenue growth rates, discount rates, EBITDA and EBITDA margin for the C&PM reporting unit subject to the quantitative test included the following, among other procedures:
We•With the assistance of our fair value specialists, we tested the effectiveness of internal controls over the goodwill impairment evaluation, including quarterly impairment monitoring controls and controls over the selection of the discount rates and over forecasts of future revenue growth rates, EBITDA, and EBITDA margin.
•We performed a retrospective review comparing actual revenue and EBITDA results of the reporting unit for 20192020 to the forecasted results from 2018.2019.
•We performed a retrospective review comparing management’s estimates and assumptions relating to revenue, EBITDA, and EBITDA margin projections for the reporting unit used for the purpose of current year’s annual impairment test to the projections previously used in connection with the prior year annual impairment test.
•We evaluated the consistency of estimates and assumptions relating to revenue and EBITDA growth inherent in the discounted cash flow model for the reporting unit to those used by management in other annual forecasting activities.
•With the assistance of our fair value specialists, we performed a benchmarking exercise comparing management’s estimates and assumptions related to revenue growth, EBITDA and EBITDA margin for the reporting unit as of the measurement date to the revenue growth, EBITDA and EBITDA margins of a peer group of public companies for the most recent three years and the projection period.
•With the assistance of our fair value specialists, we evaluated (1) the valuation methodology used and (2) the projections of long-term revenue growth and the discount rates by testing the underlying source information, and by developing a range of independent estimates and comparing those to the rates selected by management.
Other-Than-Temporary-Impairment (“OTTI”) of the Sadara Chemical Company (“Sadara”) equity method investment - Refer to Note 13 to the financial statements
Critical Audit Matter Description
In 2011, the Company and Saudi Arabian Oil Company formed Sadara Chemical Company (“Sadara”), a joint venture between the two companies that subsequently constructed and now operates a world-scale, fully integrated chemicals complex in Jubail Industrial City, Kingdom of Saudi Arabia. The Company has a 35 percent equity interest in this joint venture and has been, and continues to be, responsible for marketing the majority of Sadara’s products through the Company’s established sales channels.
In 2017, Sadara achieved full commercial operations of all its facilities. In December 2018, the joint venture successfully completed its Creditors Reliability Test, an extensive operational testing program designed to demonstrate the reliability of the joint venture’s full chemical complex by operating at high rates for an extended period of time. While Sadara has reached these operational milestones and has been generating positive EBITDA, the joint venture has yet to report positive net income.
During the fourth quarter of 2019, Sadara tested its long-lived assets for impairment using long-term cash flow projections. Due to Sadara's financial condition and its long-lived asset impairment test, Dow evaluated its equity method investment in Sadara for other-than-temporary impairment. The Company utilized a discounted cash flow methodology to measure the estimated fair value of its investment in Sadara, which was estimated to be zero. The Company determined the decline in value of its investment in Sadara was other-than-temporary due to Sadara’s financial performance since becoming commercially operational in 2017 and uncertainty around the prospects for recovery in Sadara’s financial condition. In the fourth quarter of 2019, the Company recorded an impairment of its investment in Sadara and reserved certain accounts and notes receivable and accrued interest balances due to uncertainty around the timing of collection for a total charge of $1,755 million.

62

We have identified the evaluation of the Sadara investment for other-than-temporary impairment as a critical audit matter because of the significant estimates and assumptions management makes to estimate the fair value of its investment, including the discount rate, terminal value, and long-term growth rates. This required a high degree of auditor judgment and increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s judgements, estimates and assumptions, related to the discount rate, terminal value, and long-term growth rate used in the discounted cash flow analysis used in the evaluation of other-than-temporary impairment of the Sadara investment included the following, among others:
We tested the effectiveness of internal controls over management’s evaluation of the Sadara investment for other-than-temporary impairment, including management’s evaluation of the assumptions used such as discount rate, terminal value, and long-term growth rate.
We evaluated the consistency of the assumptions and judgments relating to the discount rate, terminal value, and long-term growth rates by comparing to:
◦Agreements in place between Sadara and Dow
◦Independent third-party pricing study
We read external information included in press releases, earnings releases, regulatory filings, and other Sadara communications to search for contradictory information.
With the assistance of our fair value specialists, we evaluated (1) the valuation methodology used and model being used (2) the assumptions used such as the discount rate, terminal value, and the long-term growth rate by testing the underlying source information, and by developing a range of independent estimates and comparing those to the rates selected by management.


/s/ DELOITTE & TOUCHE LLP
Midland, Michigan
February 5, 2021
Deloitte & Touche LLP
Midland, Michigan
February 7, 2020

We have served as the Company's auditor since 1905.

73
63

Dow Inc. and Subsidiaries
Consolidated Statements of Income

(In millions, except per share amounts) For the years ended Dec 31,201920182017(In millions, except per share amounts) For the years ended Dec 31,202020192018
Net sales$42,951
$49,604
$43,730
Net sales$38,542 $42,951 $49,604 
Cost of sales36,657
41,074
36,350
Cost of sales33,346 36,657 41,074 
Research and development expenses765
800
803
Research and development expenses768 765 800 
Selling, general and administrative expenses1,590
1,782
1,795
Selling, general and administrative expenses1,471 1,590 1,782 
Amortization of intangibles419
469
400
Amortization of intangibles401 419 469 
Restructuring, goodwill impairment and asset related charges - net3,219
221
2,739
Restructuring, goodwill impairment and asset related charges - net708 3,219 221 
Integration and separation costs1,063
1,179
798
Integration and separation costs239 1,063 1,179 
Equity in earnings (losses) of nonconsolidated affiliates(94)555
394
Equity in earnings (losses) of nonconsolidated affiliates(18)(94)555 
Sundry income (expense) - net461
96
(154)Sundry income (expense) - net1,269 461 96 
Interest income81
82
66
Interest income38 81 82 
Interest expense and amortization of debt discount933
1,063
914
Interest expense and amortization of debt discount827 933 1,063 
Income (loss) from continuing operations before income taxes(1,247)3,749
237
Income (loss) from continuing operations before income taxes2,071 (1,247)3,749 
Provision for income taxes on continuing operations470
809
1,524
Provision for income taxes on continuing operations777 470 809 
Income (loss) from continuing operations, net of tax(1,717)2,940
(1,287)Income (loss) from continuing operations, net of tax1,294 (1,717)2,940 
Income from discontinued operations, net of tax445
1,835
1,882
Income from discontinued operations, net of tax0 445 1,835 
Net income (loss)(1,272)4,775
595
Net income (loss)1,294 (1,272)4,775 
Net income attributable to noncontrolling interests87
134
130
Net income attributable to noncontrolling interests69 87 134 
Net income (loss) available for Dow Inc. common stockholders$(1,359)$4,641
$465
Net income (loss) available for Dow Inc. common stockholders$1,225 $(1,359)$4,641 
 
 
Per common share data:  Per common share data:
Earnings (loss) per common share from continuing operations - basic$(2.42)$3.80
$(1.88)Earnings (loss) per common share from continuing operations - basic$1.64 $(2.42)$3.80 
Earnings per common share from discontinued operations - basic0.58
2.41
2.48
Earnings per common share from discontinued operations - basic0 0.58 2.41 
Earnings (loss) per common share - basic$(1.84)$6.21
$0.60
Earnings (loss) per common share - basic$1.64 $(1.84)$6.21 
Earnings (loss) per common share from continuing operations - diluted$(2.42)$3.80
$(1.88)Earnings (loss) per common share from continuing operations - diluted$1.64 $(2.42)$3.80 
Earnings per common share from discontinued operations - diluted0.58
2.41
2.48
Earnings per common share from discontinued operations - diluted0 0.58 2.41 
Earnings (loss) per common share - diluted$(1.84)$6.21
$0.60
Earnings (loss) per common share - diluted$1.64 $(1.84)$6.21 




 
Weighted-average common shares outstanding - basic742.5
747.2
744.8
Weighted-average common shares outstanding - basic740.5 742.5 747.2 
Weighted-average common shares outstanding - diluted742.5
747.2
744.8
Weighted-average common shares outstanding - diluted742.3 742.5 747.2 
See Notes to the Consolidated Financial Statements.


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74

Dow Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income

(In millions) For the years ended Dec 31,201920182017(In millions) For the years ended Dec 31,202020192018
Net income (loss)$(1,272)$4,775
$595
Net income (loss)$1,294 $(1,272)$4,775 
Other comprehensive income (loss), net of tax


Other comprehensive income (loss), net of tax
Unrealized gains (losses) on investments115
(67)(46)Unrealized gains (losses) on investments40 115 (67)
Cumulative translation adjustments(32)(225)900
Cumulative translation adjustments205 (32)(225)
Pension and other postretirement benefit plans(899)(40)391
Pension and other postretirement benefit plans(778)(899)(40)
Derivative instruments(338)75
(14)Derivative instruments(76)(338)75 
Total other comprehensive income (loss)(1,154)(257)1,231
Total other comprehensive lossTotal other comprehensive loss(609)(1,154)(257)
Comprehensive income (loss)(2,426)4,518
1,826
Comprehensive income (loss)685 (2,426)4,518 
Comprehensive income attributable to noncontrolling interests, net of tax99
97
172
Comprehensive income attributable to noncontrolling interests, net of tax69 99 97 
Comprehensive income (loss) attributable to Dow Inc.$(2,525)$4,421
$1,654
Comprehensive income (loss) attributable to Dow Inc.$616 $(2,525)$4,421 
See Notes to the Consolidated Financial Statements.


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75

Dow Inc. and Subsidiaries
Consolidated Balance Sheets

(In millions, except share amounts) At Dec 31,20192018(In millions, except share amounts) At Dec 31,20202019
Assets  Assets
Current Assets

Current Assets
Cash and cash equivalents (variable interest entities restricted - 2019: $37; 2018: $71)$2,367
$2,724
Marketable securities21
100
Cash and cash equivalents (variable interest entities restricted - 2020: $26; 2019: $37)Cash and cash equivalents (variable interest entities restricted - 2020: $26; 2019: $37)$5,104 $2,367 
Accounts and notes receivable:

Accounts and notes receivable:
Trade (net of allowance for doubtful receivables - 2019: $45; 2018: $42)4,844
5,646
Trade (net of allowance for doubtful receivables - 2020: $51; 2019: $45)Trade (net of allowance for doubtful receivables - 2020: $51; 2019: $45)4,839 4,844 
Other2,711
3,389
Other2,551 2,711 
Inventories6,214
6,899
Inventories5,701 6,214 
Other current assets658
712
Other current assets889 679 
Assets of discontinued operations - current—
19,900
Total current assets16,815
39,370
Total current assets19,084 16,815 
Investments

Investments
Investment in nonconsolidated affiliates1,404
3,320
Investment in nonconsolidated affiliates1,327 1,404 
Other investments (investments carried at fair value - 2019: $1,584; 2018: $1,699)2,588
2,646
Other investments (investments carried at fair value - 2020: $1,674; 2019: $1,584)Other investments (investments carried at fair value - 2020: $1,674; 2019: $1,584)2,775 2,588 
Noncurrent receivables1,063
360
Noncurrent receivables465 1,063 
Total investments5,055
6,326
Total investments4,567 5,055 
Property

Property
Property54,910
53,984
Property56,325 54,910 
Less accumulated depreciation33,914
32,566
Net property (variable interest entities restricted - 2019: $330; 2018: $683)20,996
21,418
Less: Accumulated depreciationLess: Accumulated depreciation36,086 33,914 
Net property (variable interest entities restricted - 2020: $232; 2019: $330)Net property (variable interest entities restricted - 2020: $232; 2019: $330)20,239 20,996 
Other Assets

Other Assets
Goodwill8,796
9,846
Goodwill8,908 8,796 
Other intangible assets (net of accumulated amortization - 2019: $3,886; 2018: $3,379)3,759
4,225
Other intangible assets (net of accumulated amortization - 2020: $4,428; 2019: $3,886)Other intangible assets (net of accumulated amortization - 2020: $4,428; 2019: $3,886)3,352 3,759 
Operating lease right-of-use assets2,072
—
Operating lease right-of-use assets1,856 2,072 
Deferred income tax assets2,213
1,779
Deferred income tax assets2,215 2,213 
Deferred charges and other assets818
735
Deferred charges and other assets1,249 818 
Total other assets17,658
16,585
Total other assets17,580 17,658 
Total Assets$60,524
$83,699
Total Assets$61,470 $60,524 
Liabilities and Equity

Liabilities and Equity
Current Liabilities

Current Liabilities
Notes payable$586
$298
Notes payable$156 $586 
Long-term debt due within one year435
338
Long-term debt due within one year460 435 
Accounts payable:

Accounts payable:
Trade3,889
4,456
Trade3,763 3,889 
Other2,064
2,479
Other2,126 2,064 
Operating lease liabilities - current421
—
Operating lease liabilities - current416 421 
Income taxes payable522
557
Income taxes payable397 522 
Accrued and other current liabilities2,762
2,931
Accrued and other current liabilities3,790 2,762 
Liabilities of discontinued operations - current—
4,488
Total current liabilities10,679
15,547
Total current liabilities11,108 10,679 
Long-Term Debt (variable interest entities nonrecourse - 2019: $34; 2018: $75)15,975
19,253
Long-Term Debt (variable interest entities nonrecourse - 2020: $6; 2019: $34)Long-Term Debt (variable interest entities nonrecourse - 2020: $6; 2019: $34)16,491 15,975 
Other Noncurrent Liabilities

Other Noncurrent Liabilities
Deferred income tax liabilities347
501
Deferred income tax liabilities405 347 
Pension and other postretirement benefits - noncurrent10,083
8,926
Pension and other postretirement benefits - noncurrent11,648 10,083 
Asbestos-related liabilities - noncurrent1,060
1,142
Asbestos-related liabilities - noncurrent1,013 1,060 
Operating lease liabilities - noncurrent1,739
—
Operating lease liabilities - noncurrent1,521 1,739 
Other noncurrent obligations6,547
4,709
Other noncurrent obligations6,279 6,547 
Total other noncurrent liabilities19,776
15,278
Total other noncurrent liabilities20,866 19,776 
Stockholders’ Equity

Stockholders’ Equity
Common stock (2019: authorized 5,000,000,000 shares and issued 751,228,644 shares of $0.01 par value each;
2018: authorized and issued 100 shares of $0.01 par value each)
8
—
Common stock (authorized 5,000,000,000 shares of $0.01 par value each;
issued 2020: 755,993,198 shares; 2019: 751,228,644 shares)
Common stock (authorized 5,000,000,000 shares of $0.01 par value each;
issued 2020: 755,993,198 shares; 2019: 751,228,644 shares)
8 8 
Additional paid-in capital7,325
7,042
Additional paid-in capital7,595 7,325 
Retained earnings17,045
35,460
Retained earnings16,361 17,045 
Accumulated other comprehensive loss(10,246)(9,885)Accumulated other comprehensive loss(10,855)(10,246)
Unearned ESOP shares(91)(134)Unearned ESOP shares(49)(91)
Treasury stock at cost (2019: 9,729,834 shares; 2018: zero shares)(500)—
Treasury stock at cost (2020: 12,803,303 shares; 2019: 9,729,834 shares)Treasury stock at cost (2020: 12,803,303 shares; 2019: 9,729,834 shares)(625)(500)
Dow Inc.’s stockholders’ equity13,541
32,483
Dow Inc.’s stockholders’ equity12,435 13,541 
Noncontrolling interests553
1,138
Noncontrolling interests570 553 
Total equity14,094
33,621
Total equity13,005 14,094 
Total Liabilities and Equity$60,524
$83,699
Total Liabilities and Equity$61,470 $60,524 
See Notes to the Consolidated Financial Statements.

76
66

Dow Inc. and Subsidiaries
Consolidated Statements of Cash Flows

(In millions) For the years ended Dec 31,
201920182017
(In millions) For the years ended Dec 31,
202020192018
Operating Activities
 Operating Activities
Net income (loss)$(1,272)$4,775
$595
Net income (loss)$1,294 $(1,272)$4,775 
Less: Income from discontinued operations, net of tax445
1,835
1,882
Less: Income from discontinued operations, net of tax0 445 1,835 
Income (loss) from continuing operations, net of tax(1,717)2,940
(1,287)Income (loss) from continuing operations, net of tax1,294 (1,717)2,940 
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization2,938
2,909
2,546
Depreciation and amortization2,874 2,938 2,909 
Provision (credit) for deferred income tax(228)(429)1,413
Provision (credit) for deferred income tax258 (228)(429)
Earnings of nonconsolidated affiliates less than dividends received1,114
108
253
Earnings of nonconsolidated affiliates less than dividends received443 1,114 108 
Net periodic pension benefit cost144
279
1,032
Net periodic pension benefit cost266 144 279 
Pension contributions(261)(1,651)(1,672)Pension contributions(299)(261)(1,651)
Net gain on sales of assets, businesses and investments(81)(38)(419)Net gain on sales of assets, businesses and investments(802)(81)(38)
Restructuring, goodwill impairment and asset related charges - net3,219
221
2,739
Restructuring, goodwill impairment and asset related charges - net708 3,219 221 
Other net loss198
415
451
Other net loss318 198 415 
Changes in assets and liabilities, net of effects of acquired and divested companies:





Changes in assets and liabilities, net of effects of acquired and divested companies:
Accounts and notes receivable1,253
(855)(11,431)Accounts and notes receivable171 1,253 (855)
Inventories668
(859)(891)Inventories515 668 (859)
Accounts payable(948)787
1,081
Accounts payable(84)(948)787 
Other assets and liabilities, net(586)(731)(258)Other assets and liabilities, net590 (586)(731)
Cash provided by (used for) operating activities - continuing operations5,713
3,096
(6,443)
Cash provided by operating activities - discontinued operations217
1,158
1,514
Cash provided by (used for) operating activities5,930
4,254
(4,929)
Cash provided by operating activities - continuing operationsCash provided by operating activities - continuing operations6,252 5,713 3,096 
Cash provided by (used for) operating activities - discontinued operationsCash provided by (used for) operating activities - discontinued operations(26)217 1,158 
Cash provided by operating activitiesCash provided by operating activities6,226 5,930 4,254 
Investing Activities



 Investing Activities
Capital expenditures(1,961)(2,091)(2,807)Capital expenditures(1,252)(1,961)(2,091)
Investment in gas field developments(76)(114)(121)Investment in gas field developments(5)(76)(114)
Purchases of previously leased assets(9)(26)(187)Purchases of previously leased assets(5)(9)(26)
Proceeds from sales of property and businesses, net of cash divested84
47
522
Proceeds from sales of property and businesses, net of cash divested929 84 47 
Acquisitions of property and businesses, net of cash acquired—
(20)47
Acquisitions of property and businesses, net of cash acquired(130)0 (20)
Investments in and loans to nonconsolidated affiliates(638)(18)(749)Investments in and loans to nonconsolidated affiliates(333)(638)(18)
Distributions and loan repayments from nonconsolidated affiliates89
55
69
Distributions and loan repayments from nonconsolidated affiliates7 89 55 
Purchases of investments(899)(1,530)(642)Purchases of investments(1,203)(899)(1,530)
Proceeds from sales and maturities of investments1,252
1,214
1,165
Proceeds from sales and maturities of investments1,122 1,252 1,214 
Proceeds from interests in trade accounts receivable conduits—
657
9,462
Proceeds from interests in trade accounts receivable conduits0 0 657 
Other investing activities, net—
—
34
Other investing activities, net29 0 0 
Cash provided by (used for) investing activities - continuing operations(2,158)(1,826)6,793
Cash provided by (used for) investing activities - discontinued operations(34)(369)725
Cash provided by (used for) investing activities(2,192)(2,195)7,518
Cash used for investing activities - continuing operationsCash used for investing activities - continuing operations(841)(2,158)(1,826)
Cash used for investing activities - discontinued operationsCash used for investing activities - discontinued operations0 (34)(369)
Cash used for investing activitiesCash used for investing activities(841)(2,192)(2,195)
Financing Activities





Financing Activities
Changes in short-term notes payable307
(178)268
Changes in short-term notes payable(431)307 (178)
Proceeds from issuance of short-term debt greater than three monthsProceeds from issuance of short-term debt greater than three months163 0 0 
Payments on short-term debt greater than three monthsPayments on short-term debt greater than three months(163)0 0 
Proceeds from issuance of long-term debt2,287
1,999
—
Proceeds from issuance of long-term debt4,672 2,287 1,999 
Payments on long-term debt(5,561)(3,054)(617)Payments on long-term debt(4,653)(5,561)(3,054)
Purchases of treasury stock(500)—
—
Purchases of treasury stock(125)(500)0 
Proceeds from issuance of parent company stock93
112
66
Proceeds from sales of common stock—
—
423
Proceeds from issuance of stockProceeds from issuance of stock108 93 112 
Transaction financing, debt issuance and other costs(119)(70)—
Transaction financing, debt issuance and other costs(175)(119)(70)
Employee taxes paid for share-based payment arrangements(60)(77)(81)Employee taxes paid for share-based payment arrangements(27)(60)(77)
Distributions to noncontrolling interests(77)(135)(101)Distributions to noncontrolling interests(62)(77)(135)
Purchases of noncontrolling interests(297)—
—
Purchases of noncontrolling interests0 (297)0 
Dividends paid to stockholders(1,550)—
(2,179)Dividends paid to stockholders(2,071)(1,550)0 
Dividends paid to DowDuPont Inc.(535)(3,711)(1,056)Dividends paid to DowDuPont Inc.0 (535)(3,711)
Settlements and transfers related to separation from DowDuPont Inc.1,935
(240)6
Settlements and transfers related to separation from DowDuPont Inc.0 1,935 (240)
Other financing activities, net—
3
(4)Other financing activities, net0 0 3 
Cash used for financing activities - continuing operations(4,077)(5,351)(3,275)Cash used for financing activities - continuing operations(2,764)(4,077)(5,351)
Cash used for financing activities - discontinued operations(18)(53)(50)Cash used for financing activities - discontinued operations0 (18)(53)
Cash used for financing activities(4,095)(5,404)(3,325)Cash used for financing activities(2,764)(4,095)(5,404)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(27)(99)320
Effect of exchange rate changes on cash, cash equivalents and restricted cash107 (27)(99)
Summary





Summary
Decrease in cash, cash equivalents and restricted cash(384)(3,444)(416)
Increase (decrease) in cash, cash equivalents and restricted cashIncrease (decrease) in cash, cash equivalents and restricted cash2,728 (384)(3,444)
Cash, cash equivalents and restricted cash at beginning of year2,764
6,208
6,624
Cash, cash equivalents and restricted cash at beginning of year2,380 2,764 6,208 
Cash, cash equivalents and restricted cash at end of year$2,380
$2,764
$6,208
Cash, cash equivalents and restricted cash at end of year$5,108 $2,380 $2,764 
Less: Restricted cash and cash equivalents, included in "Other current assets"13
40
19
Less: Restricted cash and cash equivalents, included in "Other current assets"4 13 40 
Cash and cash equivalents at end of year$2,367
$2,724
$6,189
Cash and cash equivalents at end of year$5,104 $2,367 $2,724 
See Notes to the Consolidated Financial Statements.

77
67

Dow Inc. and Subsidiaries
Consolidated Statements of Equity

(In millions, except per share amounts) For the years ended Dec 31,(In millions, except per share amounts) For the years ended Dec 31,202020192018
(In millions, except per share amounts) For the years ended Dec 31,201920182017
Common Stock

Common Stock
Balance at beginning of year$—
$—
$3,107
Balance at beginning of year$8 $0 $0 
Merger impact—
—
(3,107)
Common stock issued8
—
—
Common stock issued0 8 0 
Balance at end of year8
—
—
Balance at end of year8 8 0 
Additional Paid-in Capital

Additional Paid-in Capital
Balance at beginning of year7,042
6,553
4,262
Balance at beginning of year7,325 7,042 6,553 
Common stock issued / sold57
—
423
Common stock issued / sold108 57 0 
Issuance of parent company stock - DowDuPont Inc.28
112
66
Issuance of parent company stock - DowDuPont Inc.0 28 112 
Stock-based compensation and allocation of ESOP shares235
377
(368)Stock-based compensation and allocation of ESOP shares162 235 377 
Merger impact—
—
2,172
Other(37)—
(2)Other0 (37)0 
Balance at end of year7,325
7,042
6,553
Balance at end of year7,595 7,325 7,042 
Retained Earnings

Retained Earnings
Balance at beginning of year35,460
33,742
30,338
Balance at beginning of year17,045 35,460 33,742 
Adoption of accounting standards (Note 1)(151)989
—
Net income (loss) available for Dow Inc.'s common stockholders(1,359)4,641
465
Net income (loss) available for Dow Inc.'s common stockholders1,225 (1,359)4,641 
Dividends to stockholders(1,550)—
(1,673)Dividends to stockholders(2,071)(1,550)0 
Dividends to DowDuPont Inc.(535)(3,711)(1,056)Dividends to DowDuPont Inc.0 (535)(3,711)
Common control transaction(14,806)(182)5,693
Common control transaction177 (14,806)(182)
Adoption of accounting standards (Note 1)Adoption of accounting standards (Note 1)0 (151)989 
Other(14)(19)(25)Other(15)(14)(19)
Balance at end of year17,045
35,460
33,742
Balance at end of year16,361 17,045 35,460 
Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss
Balance at beginning of year(9,885)(8,591)(9,822)Balance at beginning of year(10,246)(9,885)(8,591)
Other comprehensive lossOther comprehensive loss(609)(1,154)(257)
Common control transactionCommon control transaction0 793 0 
Adoption of accounting standards (Note 1)—
(1,037)—
Adoption of accounting standards (Note 1)0 0 (1,037)
Other comprehensive income (loss)(1,154)(257)1,231
Common control transaction793
—
—
Balance at end of year(10,246)(9,885)(8,591)Balance at end of year(10,855)(10,246)(9,885)
Unearned ESOP Shares

Unearned ESOP Shares
Balance at beginning of year(134)(189)(239)Balance at beginning of year(91)(134)(189)
Stock-based compensation and allocation of ESOP shares45
55
50
Stock-based compensation and allocation of ESOP shares42 45 55 
ESOP shares acquired(2)—
—
ESOP shares acquired0 (2)0 
Balance at end of year(91)(134)(189)Balance at end of year(49)(91)(134)
Treasury Stock

Treasury Stock
Balance at beginning of year—
—
(1,659)Balance at beginning of year(500)0 0 
Common stock issued/sold—
—
724
Treasury stock purchases(500)—
—
Treasury stock purchases(125)(500)0 
Merger impact—
—
935
Balance at end of year(500)—
—
Balance at end of year(625)(500)0 
Dow Inc.'s stockholders' equity13,541
32,483
31,515
Dow Inc.'s stockholders' equity12,435 13,541 32,483 
Noncontrolling Interests553
1,138
1,186
Noncontrolling Interests570 553 1,138 
Total Equity$14,094
$33,621
$32,701
Total Equity$13,005 $14,094 $33,621 
  
Dividends declared per share of common stock$2.10
$—
$1.38
Dividends declared per share of common stock$2.80 $2.10 $0 
See Notes to the Consolidated Financial Statements.


68
78

The Dow Chemical Company and Subsidiaries
Consolidated Statements of Income

(In millions) For the years ended Dec 31,201920182017(In millions) For the years ended Dec 31,202020192018
Net sales$42,951
$49,604
$43,730
Net sales$38,542 $42,951 $49,604 
Cost of sales36,657
41,074
36,350
Cost of sales33,343 36,657 41,074 
Research and development expenses765
800
803
Research and development expenses768 765 800 
Selling, general and administrative expenses1,585
1,782
1,795
Selling, general and administrative expenses1,471 1,585 1,782 
Amortization of intangibles419
469
400
Amortization of intangibles401 419 469 
Restructuring, goodwill impairment and asset related charges - net3,219
221
2,739
Restructuring, goodwill impairment and asset related charges - net708 3,219 221 
Integration and separation costs1,039
1,179
798
Integration and separation costs239 1,039 1,179 
Equity in earnings (losses) of nonconsolidated affiliates(94)555
394
Equity in earnings (losses) of nonconsolidated affiliates(18)(94)555 
Sundry income (expense) - net573
96
(154)Sundry income (expense) - net1,274 573 96 
Interest income81
82
66
Interest income40 81 82 
Interest expense and amortization of debt discount952
1,063
914
Interest expense and amortization of debt discount827 952 1,063 
Income (loss) from continuing operations before income taxes(1,125)3,749
237
Income (loss) from continuing operations before income taxes2,081 (1,125)3,749 
Provision for income taxes on continuing operations470
809
1,524
Provision for income taxes on continuing operations777 470 809 
Income (loss) from continuing operations, net of tax(1,595)2,940
(1,287)Income (loss) from continuing operations, net of tax1,304 (1,595)2,940 
Income from discontinued operations, net of tax445
1,835
1,882
Income from discontinued operations, net of tax0 445 1,835 
Net income (loss)(1,150)4,775
595
Net income (loss)1,304 (1,150)4,775 
Net income attributable to noncontrolling interests87
134
130
Net income attributable to noncontrolling interests69 87 134 
Net income (loss) available for The Dow Chemical Company common stockholder$(1,237)$4,641
$465
Net income (loss) available for The Dow Chemical Company common stockholder$1,235 $(1,237)$4,641 
See Notes to the Consolidated Financial Statements.


69
79

The Dow Chemical Company and Subsidiaries
Consolidated Statements of Comprehensive Income

(In millions) For the years ended Dec 31,201920182017(In millions) For the years ended Dec 31,202020192018
Net income (loss)$(1,150)$4,775
$595
Net income (loss)$1,304 $(1,150)$4,775 
Other comprehensive income (loss), net of tax   Other comprehensive income (loss), net of tax
Unrealized gains (losses) on investments115
(67)(46)Unrealized gains (losses) on investments40 115 (67)
Cumulative translation adjustments(32)(225)900
Cumulative translation adjustments205 (32)(225)
Pension and other postretirement benefit plans(899)(40)391
Pension and other postretirement benefit plans(778)(899)(40)
Derivative instruments(338)75
(14)Derivative instruments(76)(338)75 
Total other comprehensive income (loss)(1,154)(257)1,231
Total other comprehensive lossTotal other comprehensive loss(609)(1,154)(257)
Comprehensive income (loss)(2,304)4,518
1,826
Comprehensive income (loss)695 (2,304)4,518 
Comprehensive income attributable to noncontrolling interests, net of tax99
97
172
Comprehensive income attributable to noncontrolling interests, net of tax69 99 97 
Comprehensive income (loss) attributable to The Dow Chemical Company$(2,403)$4,421
$1,654
Comprehensive income (loss) attributable to The Dow Chemical Company$626 $(2,403)$4,421 
See Notes to the Consolidated Financial Statements.


70
80

The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets

(In millions, except share amounts) At Dec 31,20192018(In millions, except share amounts) At Dec 31,20202019
Assets  Assets
Current Assets  Current Assets
Cash and cash equivalents (variable interest entities restricted - 2019: $37; 2018: $71)$2,367
$2,724
Marketable securities21
100
Cash and cash equivalents (variable interest entities restricted - 2020: $26; 2019: $37)Cash and cash equivalents (variable interest entities restricted - 2020: $26; 2019: $37)$5,104 $2,367 
Accounts and notes receivable:  Accounts and notes receivable:
Trade (net of allowance for doubtful receivables - 2019: $45; 2018: $42)4,844
5,646
Trade (net of allowance for doubtful receivables - 2020: $51; 2019: $45)Trade (net of allowance for doubtful receivables - 2020: $51; 2019: $45)4,839 4,844 
Other2,716
3,389
Other2,553 2,716 
Inventories6,214
6,899
Inventories5,701 6,214 
Other current assets571
712
Other current assets801 592 
Assets of discontinued operations - current—
19,900
Total current assets16,733
39,370
Total current assets18,998 16,733 
Investments  Investments
Investment in nonconsolidated affiliates1,404
3,320
Investment in nonconsolidated affiliates1,327 1,404 
Other investments (investments carried at fair value - 2019: $1,584; 2018: $1,699)2,588
2,646
Other investments (investments carried at fair value - 2020: $1,674; 2019: $1,584)Other investments (investments carried at fair value - 2020: $1,674; 2019: $1,584)2,775 2,588 
Noncurrent receivables1,011
360
Noncurrent receivables426 1,011 
Total investments5,003
6,326
Total investments4,528 5,003 
Property  Property
Property54,910
53,984
Property56,325 54,910 
Less accumulated depreciation33,914
32,566
Net property (variable interest entities restricted - 2019: $330; 2018: $683)20,996
21,418
Less: Accumulated depreciationLess: Accumulated depreciation36,086 33,914 
Net property (variable interest entities restricted - 2020: $232; 2019: $330)Net property (variable interest entities restricted - 2020: $232; 2019: $330)20,239 20,996 
Other Assets  Other Assets
Goodwill8,796
9,846
Goodwill8,908 8,796 
Other intangible assets (net of accumulated amortization - 2019: $3,886; 2018: $3,379)3,759
4,225
Other intangible assets (net of accumulated amortization - 2020: $4,428; 2019: $3,886)Other intangible assets (net of accumulated amortization - 2020: $4,428; 2019: $3,886)3,352 3,759 
Operating lease right-of-use assets2,072
—
Operating lease right-of-use assets1,856 2,072 
Deferred income tax assets2,213
1,779
Deferred income tax assets2,215 2,213 
Deferred charges and other assets818
735
Deferred charges and other assets1,249 818 
Total other assets17,658
16,585
Total other assets17,580 17,658 
Total Assets$60,390
$83,699
Total Assets$61,345 $60,390 
Liabilities and Equity  Liabilities and Equity
Current Liabilities  Current Liabilities
Notes payable$586
$298
Notes payable$156 $586 
Long-term debt due within one year435
338
Long-term debt due within one year460 435 
Accounts payable:  Accounts payable:
Trade3,889
4,456
Trade3,763 3,889 
Other2,064
2,479
Other2,126 2,064 
Operating lease liabilities - current421
—
Operating lease liabilities - current416 421 
Income taxes payable522
557
Income taxes payable397 522 
Accrued and other current liabilities2,233
2,931
Accrued and other current liabilities3,256 2,233 
Liabilities of discontinued operations - current—
4,488
Total current liabilities10,150
15,547
Total current liabilities10,574 10,150 
Long-Term Debt (variable interest entities nonrecourse - 2019: $34; 2018: $75)15,975
19,253
Long-Term Debt (variable interest entities nonrecourse - 2020: $6; 2019: $34)Long-Term Debt (variable interest entities nonrecourse - 2020: $6; 2019: $34)16,491 15,975 
Other Noncurrent Liabilities  Other Noncurrent Liabilities
Deferred income tax liabilities347
501
Deferred income tax liabilities405 347 
Pension and other postretirement benefits - noncurrent10,083
8,926
Pension and other postretirement benefits - noncurrent11,648 10,083 
Asbestos-related liabilities - noncurrent1,060
1,142
Asbestos-related liabilities - noncurrent1,013 1,060 
Operating lease liabilities - noncurrent1,739
—
Operating lease liabilities - noncurrent1,521 1,739 
Other noncurrent obligations6,174
4,709
Other noncurrent obligations6,124 6,174 
Total other noncurrent liabilities19,403
15,278
Total other noncurrent liabilities20,711 19,403 
Stockholder's Equity  Stockholder's Equity
Common stock (authorized and issued 100 shares of $0.01 par value each)—
—
Common stock (authorized and issued 100 shares of $0.01 par value each)0 0 
Additional paid-in capital7,333
7,042
Additional paid-in capital7,603 7,333 
Retained earnings17,313
35,460
Retained earnings16,300 17,313 
Accumulated other comprehensive loss(10,246)(9,885)Accumulated other comprehensive loss(10,855)(10,246)
Unearned ESOP shares(91)(134)Unearned ESOP shares(49)(91)
The Dow Chemical Company’s stockholder's equity14,309
32,483
The Dow Chemical Company’s stockholder's equity12,999 14,309 
Noncontrolling interests553
1,138
Noncontrolling interests570 553 
Total equity14,862
33,621
Total equity13,569 14,862 
Total Liabilities and Equity$60,390
$83,699
Total Liabilities and Equity$61,345 $60,390 
See Notes to the Consolidated Financial Statements.

81
71

The Dow Chemical Company and Subsidiaries
Consolidated Statements of Cash Flows

(In millions) For the years ended Dec 31,
201920182017
(In millions) For the years ended Dec 31,
202020192018
Operating Activities  Operating Activities
Net income (loss)$(1,150)$4,775
$595
Net income (loss)$1,304 $(1,150)$4,775 
Less: Income from discontinued operations, net of tax445
1,835
1,882
Less: Income from discontinued operations, net of tax0 445 1,835 
Income (loss) from continuing operations, net of tax(1,595)2,940
(1,287)Income (loss) from continuing operations, net of tax1,304 (1,595)2,940 
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:

Adjustments to reconcile net income (loss) to net cash provided by operating activities:Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization2,938
2,909
2,546
Depreciation and amortization2,874 2,938 2,909 
Provision (credit) for deferred income tax(228)(429)1,413
Provision (credit) for deferred income tax258 (228)(429)
Earnings of nonconsolidated affiliates less than dividends received1,114
108
253
Earnings of nonconsolidated affiliates less than dividends received443 1,114 108 
Net periodic pension benefit cost144
279
1,032
Net periodic pension benefit cost266 144 279 
Pension contributions(261)(1,651)(1,672)Pension contributions(299)(261)(1,651)
Net gain on sales of assets, businesses and investments(81)(38)(419)Net gain on sales of assets, businesses and investments(802)(81)(38)
Restructuring, goodwill impairment and asset related charges - net3,219
221
2,739
Restructuring, goodwill impairment and asset related charges - net708 3,219 221 
Other net loss213
415
451
Other net loss320 213 415 
Changes in assets and liabilities, net of effects of acquired and divested companies:





Changes in assets and liabilities, net of effects of acquired and divested companies:
Accounts and notes receivable1,253
(855)(11,431)Accounts and notes receivable171 1,253 (855)
Inventories668
(859)(891)Inventories515 668 (859)
Accounts payable(948)787
1,081
Accounts payable(84)(948)787 
Other assets and liabilities, net(730)(731)(258)Other assets and liabilities, net589 (730)(731)
Cash provided by (used for) operating activities - continuing operations5,706
3,096
(6,443)
Cash provided by operating activities - continuing operationsCash provided by operating activities - continuing operations6,263 5,706 3,096 
Cash provided by operating activities - discontinued operations371
1,158
1,514
Cash provided by operating activities - discontinued operations0 371 1,158 
Cash provided by (used for) operating activities6,077
4,254
(4,929)
Cash provided by operating activitiesCash provided by operating activities6,263 6,077 4,254 
Investing Activities





Investing Activities
Capital expenditures(1,961)(2,091)(2,807)Capital expenditures(1,252)(1,961)(2,091)
Investment in gas field developments(76)(114)(121)Investment in gas field developments(5)(76)(114)
Purchases of previously leased assets(9)(26)(187)Purchases of previously leased assets(5)(9)(26)
Proceeds from sales of property and businesses, net of cash divested84
47
522
Proceeds from sales of property and businesses, net of cash divested929 84 47 
Acquisitions of property and businesses, net of cash acquired—
(20)47
Acquisitions of property and businesses, net of cash acquired(130)0 (20)
Investments in and loans to nonconsolidated affiliates(638)(18)(749)Investments in and loans to nonconsolidated affiliates(333)(638)(18)
Distributions and loan repayments from nonconsolidated affiliates89
55
69
Distributions and loan repayments from nonconsolidated affiliates7 89 55 
Purchases of investments(899)(1,530)(642)Purchases of investments(1,203)(899)(1,530)
Proceeds from sales and maturities of investments1,252
1,214
1,165
Proceeds from sales and maturities of investments1,122 1,252 1,214 
Proceeds from interests in trade accounts receivable conduits—
657
9,462
Proceeds from interests in trade accounts receivable conduits0 0 657 
Other investing activities, net—
—
34
Other investing activities, net29 0 0 
Cash provided by (used for) investing activities - continuing operations(2,158)(1,826)6,793
Cash provided by (used for) investing activities - discontinued operations(34)(369)725
Cash provided by (used for) investing activities(2,192)(2,195)7,518
Cash used for investing activities - continuing operationsCash used for investing activities - continuing operations(841)(2,158)(1,826)
Cash used for investing activities - discontinued operationsCash used for investing activities - discontinued operations0 (34)(369)
Cash used for investing activitiesCash used for investing activities(841)(2,192)(2,195)
Financing Activities





Financing Activities
Changes in short-term notes payable307
(178)268
Changes in short-term notes payable(431)307 (178)
Proceeds from issuance of short-term debt greater than three monthsProceeds from issuance of short-term debt greater than three months163 0 0 
Payments on short-term debt greater than three monthsPayments on short-term debt greater than three months(163)0 0 
Proceeds from issuance of long-term debt2,287
1,999
—
Proceeds from issuance of long-term debt4,672 2,287 1,999 
Payments on long-term debt(5,561)(3,054)(617)Payments on long-term debt(4,653)(5,561)(3,054)
Proceeds from issuance of parent company stock93
112
66
Proceeds from sales of common stock—
—
423
Proceeds from issuance of stockProceeds from issuance of stock108 93 112 
Transaction financing, debt issuance and other costs(119)(70)—
Transaction financing, debt issuance and other costs(175)(119)(70)
Employee taxes paid for share-based payment arrangements(60)(77)(81)Employee taxes paid for share-based payment arrangements(27)(60)(77)
Distributions to noncontrolling interests(77)(135)(101)Distributions to noncontrolling interests(62)(77)(135)
Purchases of noncontrolling interests(297)—
—
Purchases of noncontrolling interests0 (297)0 
Dividends paid to stockholders—
—
(2,179)
Dividends paid to DowDuPont Inc.(535)(3,711)(1,056)Dividends paid to DowDuPont Inc.0 (535)(3,711)
Dividends paid to Dow Inc.(201)—
—
Dividends paid to Dow Inc.(2,233)(201)0 
Settlements and transfers related to separation from DowDuPont Inc.(61)(240)6
Settlements and transfers related to separation from DowDuPont Inc.0 (61)(240)
Other financing activities, net—
3
(4)Other financing activities, net0 0 3 
Cash used for financing activities - continuing operations(4,224)(5,351)(3,275)Cash used for financing activities - continuing operations(2,801)(4,224)(5,351)
Cash used for financing activities - discontinued operations(18)(53)(50)Cash used for financing activities - discontinued operations0 (18)(53)
Cash used for financing activities(4,242)(5,404)(3,325)Cash used for financing activities(2,801)(4,242)(5,404)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(27)(99)320
Effect of exchange rate changes on cash, cash equivalents and restricted cash107 (27)(99)
Summary





Summary
Decrease in cash, cash equivalents and restricted cash(384)(3,444)(416)
Increase (decrease) in cash, cash equivalents and restricted cashIncrease (decrease) in cash, cash equivalents and restricted cash2,728 (384)(3,444)
Cash, cash equivalents and restricted cash at beginning of year2,764
6,208
6,624
Cash, cash equivalents and restricted cash at beginning of year2,380 2,764 6,208 
Cash, cash equivalents and restricted cash at end of year$2,380
$2,764
$6,208
Cash, cash equivalents and restricted cash at end of year$5,108 $2,380 $2,764 
Less: Restricted cash and cash equivalents, included in "Other current assets"13
40
19
Less: Restricted cash and cash equivalents, included in "Other current assets"4 13 40 
Cash and cash equivalents at end of year$2,367
$2,724
$6,189
Cash and cash equivalents at end of year$5,104 $2,367 $2,724 
See Notes to the Consolidated Financial Statements.


72
82

The Dow Chemical Company and Subsidiaries
Consolidated Statements of Equity

(In millions, except per share amounts) For the years ended Dec 31,(In millions, except per share amounts) For the years ended Dec 31,202020192018
(In millions, except per share amounts) For the years ended Dec 31,201920182017
Common Stock Common Stock
Balance at beginning of year$—
$—
$3,107
Merger impact—
—
(3,107)
Balance at end of year—
—
—
Balance at beginning and end of yearBalance at beginning and end of year$0 $0 $0 
Additional Paid-in Capital Additional Paid-in Capital
Balance at beginning of year7,042
6,553
4,262
Balance at beginning of year7,333 7,042 6,553 
Common stock issued / sold—
—
423
Issuance of parent company stock - Dow Inc.65
—
—
Issuance of parent company stock - Dow Inc.108 65 0 
Issuance of parent company stock - DowDuPont Inc.28
112
66
Issuance of parent company stock - DowDuPont Inc.0 28 112 
Stock-based compensation and allocation of ESOP shares235
377
(368)Stock-based compensation and allocation of ESOP shares162 235 377 
Merger impact—
—
2,172
Other(37)—
(2)Other0 (37)0 
Balance at end of year7,333
7,042
6,553
Balance at end of year7,603 7,333 7,042 
Retained Earnings Retained Earnings
Balance at beginning of year35,460
33,742
30,338
Balance at beginning of year17,313 35,460 33,742 
Net income (loss) available for The Dow Chemical Company's common stockholder Net income (loss) available for The Dow Chemical Company's common stockholder1,235 (1,237)4,641 
Dividends to Dow Inc.Dividends to Dow Inc.(2,233)(201)0 
Dividends to DowDuPont Inc.Dividends to DowDuPont Inc.0 (535)(3,711)
Common control transactionCommon control transaction0 (16,009)(182)
Adoption of accounting standards (Note 1)(151)989
—
Adoption of accounting standards (Note 1)0 (151)989 
Net income (loss) available for The Dow Chemical Company's common stockholder(1,237)4,641
465
Dividends to stockholders—
—
(1,673)
Dividends to DowDuPont Inc.(535)(3,711)(1,056)
Dividends to Dow Inc.(201)—
—
Common control transaction(16,009)(182)5,693
Other(14)(19)(25)Other(15)(14)(19)
Balance at end of year17,313
35,460
33,742
Balance at end of year16,300 17,313 35,460 
Accumulated Other Comprehensive Loss Accumulated Other Comprehensive Loss
Balance at beginning of year(9,885)(8,591)(9,822)Balance at beginning of year(10,246)(9,885)(8,591)
Other comprehensive lossOther comprehensive loss(609)(1,154)(257)
Common control transactionCommon control transaction0 793 0 
Adoption of accounting standards (Note 1)—
(1,037)—
Adoption of accounting standards (Note 1)0 0 (1,037)
Other comprehensive income (loss)(1,154)(257)1,231
Common control transaction793
—
—
Balance at end of year(10,246)(9,885)(8,591)Balance at end of year(10,855)(10,246)(9,885)
Unearned ESOP Shares Unearned ESOP Shares
Balance at beginning of year(134)(189)(239)Balance at beginning of year(91)(134)(189)
Stock-based compensation and allocation of ESOP shares45
55
50
Stock-based compensation and allocation of ESOP shares42 45 55 
ESOP shares acquired(2)—
—
ESOP shares acquired0 (2)0 
Balance at end of year(91)(134)(189)Balance at end of year(49)(91)(134)
Treasury Stock 
Balance at beginning of year—
—
(1,659)
Common stock issued/sold—
—
724
Merger impact—
—
935
Balance at end of year—
—
—
The Dow Chemical Company's stockholder's equity14,309
32,483
31,515
The Dow Chemical Company's stockholder's equity12,999 14,309 32,483 
Noncontrolling Interests553
1,138
1,186
Noncontrolling Interests570 553 1,138 
Total Equity$14,862
$33,621
$32,701
Total Equity$13,569 $14,862 $33,621 
See Notes to the Consolidated Financial Statements.


73
83

Dow Inc. and Subsidiaries

The Dow Chemical Company and Subsidiaries
Notes to the Consolidated Financial Statements
Table of Contents

NotePage
1
84
2
90
3
91
4
93
5
96
6
97
7
101
8
103
9
107
10
108
11
108
12
109
13
112
14
114
15
115
16
119
17
127
18
129
19
132
20
133
21
140
22
145
23
152
24
155
25
156
26
157
27
162


Note Page
1
Summary of Significant Accounting Policies
74
2
Recent Accounting Guidance
80
3
Merger with Historical DuPont
81
4
Separation from DowDuPont
82
5
Revenue
84
6
Divestitures
87
7
Restructuring, Goodwill Impairment and Asset Related Charges - Net
87
8
Supplementary Information
90
9
Income Taxes
91
10
Earnings Per Share Calculations
95
11
Inventories
96
12
Property
96
13
Nonconsolidated Affiliates
96
14
Goodwill and Other Intangible Assets
99
15
Transfers of Financial Assets
101
16
Notes Payable, Long-Term Debt and Available Credit Facilities
102
17
Commitments and Contingent Liabilities
105
18
Leases
112
19
Stockholders' Equity
115
20
Noncontrolling Interests
118
21
Pension Plans and Other Postretirement Benefits
119
22
Stock-Based Compensation
126
23
Financial Instruments
131
24
Fair Value Measurements
138
25
Variable Interest Entities
141
26
Related Party Transactions
142
27
Segments and Geographic Regions
143
28
Selected Quarterly Financial Data
147


NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Merger and Separation
On April 1, 2019, DowDuPont Inc. (“DowDuPont” and effective June 3, 2019, n/k/a DuPont de Nemours, Inc. or "DuPont") completed the separation of its materials science business and Dow Inc. became the direct parent company of The Dow Chemical Company and its consolidated subsidiaries (“TDCC” and together with Dow Inc., “Dow” or the “Company”). The separation was contemplated by the merger of equals transaction effective August 31, 2017, under the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017.2017 (the "Merger Agreement"). TDCC and E. I. du Pont de Nemours and Company and its consolidated subsidiaries (“Historical DuPont”) each merged with subsidiaries of DowDuPont and, as a result, TDCC and Historical DuPont became subsidiaries of DowDuPont (the “Merger”). Subsequent to the Merger, TDCC and Historical DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. Dow Inc. was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business. See NotesNote 3 and 4 for additional information.


74
84


Principles of Consolidation and Basis of Presentation
The accompanying 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 include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which Dow exercises control and, when applicable, entities for which Dow has a controlling financial interest or is the primary beneficiary. Intercompany transactions and balances are eliminated in consolidation. Investments in nonconsolidated affiliates (20-50 percent owned companies or less than 20 percent owned companies over which significant influence is exercised) are accounted for using the equity method.

Effective April 1, 2019, Dow Inc. owns all of the outstanding common shares of TDCC. TDCC is deemed the predecessor to Dow Inc. and the historical results of TDCC are deemed the historical results of Dow Inc. for periods prior to and including March 31, 2019. As a result of the parent/subsidiary relationship between Dow Inc. and TDCC, and the expectationconsidering that the financial statements and disclosures of each company will beare substantially similar, the companies are filing a combined report for this Annual Report on Form 10-K. The information reflected in the report is equally applicable to both Dow Inc. and TDCC, except where otherwise noted.

As of the effective date and time of the distribution, DowDuPont does notno longer beneficially ownowned any equity interest in Dow and no longer consolidatesconsolidated Dow and its consolidated subsidiaries into its financial results. The consolidated financial results of Dow for all periods presented reflect the distribution of TDCC’s agricultural sciences business (“AgCo”) and specialty products business (“SpecCo”) as discontinued operations, as well as the receipt of Historical DuPont’s ethylene and ethylene copolymers businesses (other than its ethylene acrylic elastomers business) (“ECP”) as a common control transaction from the closing of the Merger on August 31, 2017 ("Merger Date"). See NotesNote 3 and 4 for additional information.

Effective with the Merger, the Company's business activities were components of DowDuPont's businessThe Company conducts its worldwide operations and therefore, were reported as a single operating segment. Following the separation from DowDuPont, the Company changed the manner in which its business activities were managed. The Company's portfolio now includesthrough six global businesses which are organized into the following operating segments: Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Corporate contains the reconciliation between the totals for the operating segments and the Company's totals. See Note 2726 for additional information.

From the Merger Date through the separation, transactions between DowDuPont, TDCC and Historical DuPont and their affiliates were treated as related party transactions. Transactions between TDCC and Historical DuPont primarily consisted of the sale and procurement of certain raw materials that were consumed in each company's manufacturing process. Transactions between TDCC and Dow Inc. are treated as related party transactions for TDCC. See Note 2625 for additional information.

Throughout this Annual Report on Form 10-K, unless otherwise indicated, amounts and activity are presented on a continuing operations basis.

Except as otherwise indicated by the context, the termsterm "Union Carbide" means Union Carbide Corporation, a wholly owned subsidiary of the Company, and "Dow Silicones" means Dow Silicones Corporation, (formerly known as Dow Corning Corporation, which changed its name effective as of February 1, 2018), a wholly owned subsidiary of the Company.

Use of Estimates in Financial Statement Preparation
The preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Company’s consolidated financial statements include amounts that are based on management’s best estimates and judgments. Actual results could differ from those estimates.

Significant Accounting Policies
Asbestos-Related Matters
Accruals for asbestos-related matters, including defense and processing costs, are recorded based on an analysis of claim and resolution activity, defense spending, and pending and future claims. These accruals are assessed at each balance sheet date to determine if the asbestos-related liability remains appropriate. Accruals for asbestos-related matters are included in the consolidated balance sheets in “Accrued and other current liabilities” and “Asbestos-related liabilities - noncurrent.” See Note 1716 for additional information.


85

Legal Costs
The Company expenses legal costs as incurred, with the exception of defense and processing costs associated with asbestos-related matters.


75

Foreign Currency Translation
The local currency has been primarily used as the functional currency throughout the world. Translation gains and losses of those operations that use local currency as the functional currency are included in the consolidated balance sheets in "Accumulated other comprehensive loss" ("AOCL"). For certain subsidiaries, the U.S. dollar is used as the functional currency. This occurs when the subsidiary operates in an economic environment where the products produced and sold are tied to U.S. dollar-denominated markets, or when the foreign subsidiary operates in a hyper-inflationary environment. Where the U.S. dollar is used as the functional currency, foreign currency translation gains and losses are reflected in income.

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. These accruals are adjusted periodically as assessment and remediation efforts progress or as additional technical or legal information becomes available. Accruals for environmental liabilities are included in the consolidated balance sheets in “Accrued and other current liabilities” and “Other noncurrent obligations” at undiscounted amounts. Accruals for related insurance or other third-party recoveries for environmental liabilities are recorded when it is probable that a recovery will be realized and are included in the consolidated balance sheets in “Accounts and notes receivable - Other” or "Noncurrent receivables."

Environmental costs are capitalized if the costs extend the life of the property, increase its capacity and/or mitigate or prevent contamination from future operations. Environmental costs are also capitalized in recognition of legal asset retirement obligations resulting from the acquisition, construction and/or normal operation of a long-lived asset. Costs related to environmental contamination treatment and cleanup are charged to expense. Estimated future incremental operations, maintenance and management costs directly related to remediation are accrued when such costs are probable and reasonably estimable.

Cash and Cash Equivalents
Cash and cash equivalents include time deposits and investments with maturities of three months or less at the time of purchase.

Financial Instruments
The Company calculates the fair value of financial instruments using quoted market prices when available. When quoted market prices are not available for financial instruments, the Company uses standard pricing models with market-based inputs that take into account the present value of estimated future cash flows.

The Company utilizes derivatives to manage exposures to foreign currency exchange rates, commodity prices and interest rate risk. The fair values of all derivatives are recognized as assets or liabilities at the balance sheet date. Changes in the fair values of these instruments are reported in income or AOCL, depending on the use of the derivative and whether the Company has elected hedge accounting treatment.

Gains and losses on derivatives that are designated and qualify as cash flow hedging instruments are recorded in AOCL until the underlying transactions are recognized in income. Gains and losses on derivative and non-derivative instruments used as hedges of the Company’s net investment in foreign operations are recorded in AOCL as part of the cumulative translation adjustment. Prior to the adoption of Accounting Standards Update ("ASU") 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" in 2018, the ineffective portions of hedges, if any, were recognized in income immediately.

Gains and losses on derivatives designated and qualifying as fair value hedging instruments, as well as the offsetting losses and gains on the hedged items, are reported in income in the same accounting period. Derivatives not designated as hedging instruments are marked-to-market at the end of each accounting period with the results included in income.

86

Inventories
Inventories are stated at the lower of cost or net realizable value. The method of determining cost for each subsidiary varies among last-in, first-out (“LIFO”); first-in, first-out (“FIFO”); and average cost, and is used consistently from year to year. At December 31, 2020, approximately 30 percent, 58 percent and 12 percent of the Company's inventories were accounted for under the LIFO, FIFO and average cost methods, respectively. At December 31, 2019, approximately 32 percent, 58 percent and 10 percent of the Company's inventories were accounted for under the LIFO, FIFO and average cost methods, respectively. At December 31, 2018, approximately 34 percent, 57 percent and 9 percent of the Company's inventories were accounted for under the LIFO, FIFO and average cost methods, respectively.

The Company routinely exchanges and swaps raw materials and finished goods with other companies to reduce delivery time, freight and other transportation costs. These transactions are treated as non-monetary exchanges and are valued at cost.


76

Property
Land, buildings and equipment are carried at cost less accumulated depreciation or amortization. Property under finance lease agreements is carried at the present value of lease payments over the lease term less accumulated amortization. Depreciation is based on the estimated service lives of depreciable assets and is calculated using the straight-line method, unless the asset was capitalized before 1997 when the declining balance method was used.method. Fully depreciated assets are retained in property and accumulated depreciation accounts until they are removed from service. In the case of disposals, assets and related accumulated depreciation are removed from the accounts, and the net amounts, less proceeds from disposal, are included in income.

Impairment and Disposal of Long-Lived Assets
The Company evaluates long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When undiscounted future cash flows are not expected to be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value based on bids received from third parties or a discounted cash flow analysis based on market participant assumptions.

Long-lived assets to be disposed of by sale, if material, are classified as held for sale and reported at the lower of carrying amount or fair value less cost to sell, and depreciation is ceased. Long-lived assets to be disposed of other than by sale are classified as held and used until they are disposed of and reported at the lower of carrying amount or fair value, and depreciation is recognized over the remaining useful life of the assets.

Goodwill and Other Intangible Assets
The Company records goodwill when the purchase price of a business combination exceeds the estimated fair value of net identified tangible and intangible assets acquired. Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value. When testing goodwill for impairment, the Company may first assess qualitative factors. If an initial qualitative assessment identifies that it is more likely than not that the fair value of a reporting unit is less than its carrying value, additional quantitative testing is performed. The Company may also elect to skip the qualitative testing and proceed directly to the quantitative testing. If the quantitative testing indicates that goodwill is impaired, an impairment charge is recognized based on the difference between the reporting unit's carrying value and its fair value. The Company primarily utilizes a discounted cash flow methodology to calculate the fair value of its reporting units.

Finite-lived intangible assets such as purchased customer lists, developed technology, patents,customer-related, trademarks, tradenames and software, are amortized over their estimated useful lives, generally on a straight-line basis for periods ranging primarily from 3 to 20 years. Indefinite-lived intangible assets are reviewed for impairment or obsolescence annually, or more frequently when events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows.

Asset Retirement Obligations
The Company records asset retirement obligations as incurred and reasonably estimable, including obligations for which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the Company. The fair values of obligations are recorded as liabilities on a discounted basis and are accreted over time for the change in present value. Costs associated with the liabilities are capitalized and amortized over the estimated remaining useful life of the asset, generally for periods of 10 years or less.

87

Investments
Investments in debt securities, primarily held by the Company's insurance operations, are classified as trading, available-for-sale or held-to-maturity. Investments classified as trading are reported at fair value with unrealized gains and losses related to mark-to-market adjustments included in income. Those classified as available-for-sale are reported at fair value with unrealized gains and losses recorded in AOCL. Those classified as held-to-maturity are recorded at amortized cost. The cost of investments sold is determined by FIFO or specific identification.

Investments in equity securities with a readily determinable fair value are reported at fair value with unrealized gains and losses related to mark-to-market adjustments included in income. Equity securities without a readily determinable fair value are accounted for at cost, adjusted for impairments and observable price changes in orderly transactions.

The Company routinely reviews its investments for declines in fair value below the cost basis. When events or changes in circumstances indicate the carrying value of an asset may not be recoverable, the security is written down, to fair value, establishing a new cost basis.


77

Leases
Effective January 1, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842),” and the associated ASUs (collectively, “Topic 842”). The Company added the following significant accounting policy for leases as a result of the adoption of Topic 842.

The Company determines whether a contract contains a lease at contract inception. A contract contains a lease if there is an identified asset and the Company has the right to control the asset.

Operating lease right-of-use (“ROU”) assets represent the Company's right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses the incremental borrowing rate in determining the present value of lease payments, unless the implicit rate is readily determinable. If lease terms include options to extend or terminate the lease, the ROU asset and lease liability are measured based on the reasonably certain decision. Leases with a term of 12 months or less at the commencement date are not recognized on the balance sheet and are expensed as incurred.

The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component for nearly all classes of leased assets for which the Company is the lessee. Additionally, for certain equipment leases, the portfolio approach is applied to account for the operating lease ROU assets and lease liabilities. In the consolidated statements of income, lease expense for operating lease payments is recognized on a straight-line basis over the lease term. For finance leases, interest expense is recognized on the lease liability and the ROU asset is amortized over the lease term.

Some leasing arrangements require variable payments that are dependent upon usage or output, or may vary for other reasons, such as insurance or tax payments. Variable lease payments are recognized as incurred and are not presented as part of the ROU asset or lease liability. See Notes 2 and 18Note 17 for additional information.

Revenue
Effective with the January 1, 2018 adoption of ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," and the associated ASUs (collectively, "Topic 606"), theThe Company recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition, for the arrangements that the Company determines are within the scope of Topic 606, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. See Note 54 for additional information.

Revenue related to the Company's insurance operations includes third-party insurance premiums, which are earned over the terms of the related insurance policies and reinsurance contracts.

In periods prior to the adoption of Topic 606, the Company's accounting policy was to recognize revenue when it was realized or realizable, and the earnings process was complete. Revenue for product sales was recognized as risk and title to the product transferred to the customer, which usually occurred at the time shipment was made. As such, title to the product passed when the product was delivered to the freight carrier. The Company’s standard terms of delivery were included in its contracts of sale, order confirmation documents and invoices. Revenue related to the initial licensing of patent and technology was recognized when earned; revenue related to running royalties was recognized according to licensee production levels.

Severance Costs
The Company routinely reviews its operations around the world in an effort to ensure competitiveness across its businesses and geographic regions. When the reviews result in a workforce reduction related to the shutdown of facilities or other optimization activities, severance benefits are provided to employees primarily under the Company’s ongoing benefit arrangements. These severance costs are accrued once management commits to a plan of termination and it becomes probable that employees will be entitled to benefits at amounts that can be reasonably estimated.

88

Integration and Separation Costs
The Company classifies expenses related to the Merger and separation and the ownership restructure of Dow Silicones as "Integration and separation costs" in the consolidated statements of income. Merger and separation related costs include: costs incurred to prepare for and close the Merger, post-Merger integration expenses, costs incurred for the separation of AgCo and SpecCo and costs related to the integration of ECP. The Dow Silicones-related costs include integration expenses incurred after the close of the ownership restructure. Integration and separation costs primarily consist of financial adviser, information technology, legal, accounting, consulting and other professional advisory fees associated with preparation and execution of these activities. Integration and separation costs related to the Dow Silicones ownership restructure were completed as of May 31, 2018. Integration and separation costs related to the Merger and separation were completed as of December 31, 2020.

78

Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted tax rates. The effect of a change in tax rates on deferred tax assets or liabilities is recognized in income in the period that includes the enactment date. The Company uses the portfolio approach for releasing income tax effects from AOCL.

Effective with the Merger, TDCC and Historical DuPont were subsidiaries of DowDuPont. Prior to the separation, TDCC was included in DowDuPont's consolidated tax groups and related income tax returns within certain jurisdictions. The Company recordsrecorded a separate tax liability for its share of the taxable income and tax attributes and obligations on DowDuPont’s consolidated income tax returns following a formula consistent with the economic sharing of tax attributes and obligations. The Company and Historical DuPont computecomputed the amount due to DowDuPont for their share of taxable income and tax attributes and obligations on DowDuPont’s consolidated tax return. The amounts reported as income tax payable or receivable represent the Company’s payment obligation (or refundable amount) to DowDuPont based on a theoretical tax liability calculated based on the methodologies agreed, elected or required in each combined or consolidated filing jurisdiction. Since April 1, 2019, the Company no longer has consolidated income tax return filings with Historical DuPont entities.

The Company recognizes the financial statement effects of an uncertain income tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. The Company accrues for other tax contingencies when it is probable that a liability to a taxing authority has been incurred and the amount of the contingency can be reasonably estimated. The current portion of uncertain income tax positions is included in “Income taxes payable” and the long-term portion is included in “Other noncurrent obligations” in the consolidated balance sheets.

Provision is made for taxes on undistributed earnings of foreign subsidiaries and related companies to the extent that such earnings are not deemed to be permanently invested.

See Note 9 for further information relating to the enactment of the Tax Cuts and Jobs Act ("The Act") in 2017.

Earnings per Common Share
The calculation of earnings per common share is based on the weighted-average number of the Company's common shares outstanding for the applicable period. The calculation of diluted earnings per common share reflects the effect of all potential common shares that were outstanding during the respective periods, unless the effect of doing so is antidilutive.

Adoption of Accounting Standards
2019
Effective January 1, 2019, the Company adopted Topic 842Accounting Standards Update ("ASU") 2016-02, “Leases (Topic 842),” and the associated ASUs (collectively, "Topic 842") and added the accounting policy on leases discussed in the section above. Adoption of the new standard resulted in the recording of operating lease ROU assets and lease liabilities of $2.3 billion at January 1, 2019. The net impact to “Retained earnings” was an increase of $32 million and was primarily a result of the recognition of a deferred gain associated with a prior sale-leaseback transaction. The adoptionimpact is reflected in the "Adoption of accounting standards" line in the new guidance did not have a material impact on Dow's consolidated statements of incomeequity of both Dow Inc. and had no impact on cash flows.TDCC. See Notes 2 and 18Note 17 for additional information.

Additionally,
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In addition, the Company's consolidated balance sheetsfinancial statements reflect the impact of the adoption of Topic 606ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," and the associated ASUs (collectively, "Topic 606") at January 1, 2019 by certain nonconsolidated affiliates of the Company, which were subsequently distributed as part of the separation from DowDuPont. The net impact iswas reflected in assets and liabilities of discontinued operations with a corresponding reduction to "Retained earnings" of $183 million in the consolidated balance sheets at January 1, 2019. The impact is reflected in the "Adoption of accounting standards" line in the consolidated statements of equity of both Dow Inc. and TDCC.

2018
In the first quarterThe adoption of 2018, the Company adopted Topic 606, ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities" and ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory." The adoptionInventory" in the first quarter of these ASUs2018 resulted in a net decrease of $68 million to "Retained earnings" and a decrease of $20 million to "Accumulated other comprehensive loss" ("AOCL")AOCL in the consolidated statements of equity at January 1, 2018. In the second quarter of 2018, the Company early adopted ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02")." The adoption of this standard resulted in a $1,057 million increase to "Retained earnings" due to the reclassification from AOCL in the consolidated statements of equity at April 1, 2018. The impacts are reflected in the "Adoption of accounting standards" line in the consolidated statements of equity.


Change in Financial Statement Presentation
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Table of ContentsConsolidated Balance Sheets


Dividends
PriorIn 2020, the Company elected to reclassify "Marketable securities" to "Other current assets" in the consolidated balance sheets and, as a result, the prior period amounts have been reclassified to conform to current year presentation. Changes made to the Merger, consolidated balance sheets were as follows:

Changes to the Consolidated Balance SheetsDec 31, 2019
Dow Inc.TDCC
In millionsAs FiledUpdatedAs FiledUpdated
Marketable securities$21$0$21$0
Other current assets$658$679$571$592

TDCC declared dividends of $1.38 per share in 2017, based on the historical number of shares of common stock of TDCC held by shareholders of record for each dividend. Dividends
Effective with the Merger, TDCC no longer had publicly traded common stock. TDCC's common shares were owned solely by its parent company, DowDuPont, prior to separation, and TDCC's Board of Directors ("Board") determined whether or not there would be a dividend distribution to DowDuPont. Effective with the separation from DowDuPont, TDCC became a wholly owned subsidiary of Dow Inc. and TDCC's Board of Directors determines whether or not there will be a dividend distribution to Dow Inc. Subsequent to the separation from DowDuPont, Dow Inc. declared dividends of $2.10 per share in 2019. See Notes 1918 and 2625 for additional information.


NOTE 2 – RECENT ACCOUNTING GUIDANCE
Recently Adopted Accounting Guidance
In 2019,the first quarter of 2020, the Company adopted Topic 842, which requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance requires that a lessee recognize assets and liabilities for leases, and recognition, presentation and measurement in the financial statements will depend on its classification as a finance or operating lease. In addition, the new guidance requires disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. Lessor accounting remains largely unchanged from legacy U.S. GAAP but does contain some targeted improvements to align with the new revenue recognition guidance in Topic 606. The new standard was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, and early adoption was permitted.

The Company adopted Topic 842 using the modified retrospective transition approach, applying the new standard to leases existing at the date of initial adoption. The Company elected to apply the transition requirements at the effective date rather than at the beginning of the earliest comparative period presented with a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption, and prior periods were not restated. In addition, the Company elected to apply the package of practical expedients permitted under the transition guidance which does not require reassessment of prior conclusions, lease classification and initial direct lease costs. The Company did not elect to use the hindsight practical expedient in determining the lease term or assessing impairment of ROU assets. Adoption of the new standard resulted in the recording of operating lease ROU assets and lease liabilities of $2.3 billion at January 1, 2019. The net impact to retained earnings was an increase of $32 million and was primarily a result of the recognition of a deferred gain associated with a prior sale-leaseback transaction. The adoption of the new guidance did not have a material impact on Dow's consolidated statements of income and had no impact on cash flows. See Notes 1 and 18 for additional information.

Accounting Guidance Issued But Not Adopted at December 31, 2019
In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which is part of the FASBFinancial Accounting Standards Board's ("FASB") disclosure framework project to improve the effectiveness of disclosures in the notes to the financial statements. The amendments in the new guidance remove, modify and add certain disclosure requirements related to fair value measurements covered in Topic 820, "Fair Value Measurement.Measurement," The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for either the entire standard or only the requirements that modify or eliminate the disclosure requirements, with certain requirements applied prospectively and all other requirements applied retrospectively to all periods presented.retrospectively. The Company expects to adopt the new guidance in the first quarter of 2020 and the adoption of this guidance isdid not expected to have a material impact on the consolidated financial statements. See Note 23 for additional information.

In August 2018, the FASB issuedfirst quarter of 2020, the Company adopted ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement Thatthat is a Service Contract," which requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Topic 350, "Intangibles - Goodwill and Other" to determine which implementation costs to capitalize as assets or expense as incurred. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted and an entity can electCompany elected to apply the new guidance on a prospective or retrospective basis. The Company expects to adopt the new guidance in the first quarter of 2020standard prospectively and the adoption of this guidance isdid not expected to have a material impact on the consolidated financial statements.
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In the first quarter of 2020, the Company adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and the associated ASUs. The amendments replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Accordingly, companies are required to consider forward-looking information to estimate credit losses expected to occur over the estimated life of an asset, including losses that may be incurred in future periods. The amendments in the standard required application through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The adoption of this guidance did not have a material impact on the consolidated financial statements.

In the third quarter of 2020, the Company adopted ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The new standard is effective March 12, 2020 through December 31, 2022, with the adoption date dependent upon the Company’s election. The Company has elected to apply the optional expedients and exceptions provided by the new guidance as modifications are made to relevant contracts, hedging relationships and other transactions during the reference rate reform transition period. As the amendments are intended to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting, the application of this guidance has not and will not have a material impact on the consolidated financial statements.

Accounting Guidance Issued But Not Adopted at December 31, 2020
In December 2019, the FASB issued ASU 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 also improve consistent application by clarifying and amending existing guidance. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, with the amendments to be applied on a retrospective, modified retrospective or prospective basis, depending on the specific amendment. The Company is currently evaluatingwill adopt the impact of adopting this guidance.

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NOTE 3 - MERGER WITH HISTORICAL DUPONT
Effective August 31, 2017, TDCC and Historical DuPont completed the merger of equals transaction contemplated by the Merger Agreement, by and among TDCC, Historical DuPont, DowDuPont, Diamond Merger Sub, Inc. and Orion Merger Sub, Inc. Pursuant to the Merger Agreement, (i) Diamond Merger Sub, Inc. was merged with and into TDCC, with TDCC surviving the merger as a subsidiary of DowDuPont (the "Diamond Merger") and (ii) Orion Merger Sub, Inc. was merged with and into Historical DuPont, with Historical DuPont surviving the merger as a subsidiary of DowDuPont (the "Orion Merger" and, together with the Diamond Merger, the "Mergers"). Following the consummation of the Mergers, each of TDCC and Historical DuPont became subsidiaries of DowDuPont. Subsequent to the Merger, TDCC and Historical DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. Dow Inc. was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business.

Upon completion of the Diamond Merger, each share of common stock, par value $2.50 per share, of TDCC ("TDCC Common Stock") (excluding any shares of TDCC Common Stock that were held in treasury immediately prior to the effective time of the Diamond Merger, which were automatically canceled and retired for no consideration) was converted into the right to receive 1 fully paid and non-assessable share of common stock, par value $0.01 per share, of DowDuPont ("DowDuPont Common Stock"). As providednew guidance in the Merger Agreement, atfirst quarter of 2021 and the effective timeadoption of the Mergers, (i) all options, deferred stock, performance deferred stock and other equity awards relatingthis guidance is not expected to shares of TDCC Common Stock outstanding immediately prior to the effective time of the Mergers were generally automatically converted into options and deferred stock and other equity awards relating to shares of DowDuPont Common Stock after giving effect to appropriate adjustments to reflect the Mergers and otherwise generallyhave a material impact on the same terms and conditions as applied under the applicable plans and award agreements immediately prior to the effective time of the Mergers. See Note 22 for additional information on the conversion of the equity awards.consolidated financial statements.

In the third quarter of 2017, as a result of the Diamond Merger and the Merger, TDCC recorded a reduction in "Treasury stock" of $935 million, a reduction in "Common stock" of $3,107 million and an increase in "Additional paid in capital" of $2,172 million. At September 1, 2017, TDCC had 100 shares of common stock issued and outstanding, par value $0.01 per share, owned solely by its parent, DowDuPont. Following the separation from DowDuPont, these shares are now solely owned by Dow Inc.

On August 31, 2017, following the Diamond Merger, TDCC requested that the New York Stock Exchange ("NYSE") withdraw the shares of TDCC Common Stock from listing on the NYSE and filed a Form 25 with the SEC to report that the shares of TDCC Common Stock are no longer listed on the NYSE. The shares of TDCC Common Stock were suspended from trading on the NYSE prior to the open of trading on September 1, 2017.

As a condition of the regulatory approval of the Merger, TDCC and Historical DuPont agreed to certain closing conditions, which are as follows:

TDCC divested its global Ethylene Acrylic Acid copolymers and ionomers business ("EAA Business") to SK Global Chemical Co., Ltd., on September 1, 2017, as part of a divestiture commitment given to the European Commission ("EC") in connection with the EC's conditional approval of the Merger granted on March 27, 2017. See Note 6 for additional information on this transaction.

Historical DuPont divested its Cereal Broadleaf Herbicides and Chewing Insecticides portfolios as well as its Crop Protection research and development ("R&D") pipeline and organization (excluding seed treatment, nematicides, late-stage R&D programs and certain personnel needed to support marketed products and R&D programs that remained with Historical DuPont) (collectively, the "DuPont Divested Assets") to FMC Corporation ("FMC") on November 1, 2017, as part of the EC's conditional approval granted on March 27, 2017. Also on November 1, 2017, Historical DuPont completed its acquisition of FMC's Health and Nutrition business, excluding its Omega-3 products.

On May 2, 2017, TDCC and Historical DuPont announced that China's Ministry of Commerce ("MOFCOM") granted conditional regulatory approval for the companies' proposed merger of equals which included commitments already made to the EC including Historical DuPont's divestiture of the DuPont Divested Assets and TDCC's divestiture of the EAA Business. In addition, TDCC and Historical DuPont made commitments related to the supply and distribution in China of certain herbicide and insecticide ingredients and formulations for rice crops for five years after the closing of the Merger.



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TDCC divested a select portion of Dow AgroSciences' corn seed business in Brazil to CITIC Agri Fund on November 30, 2017. The divestiture was part of the commitment given to Brazil's Administrative Council for Economic Defense ("CADE") in connection with the CADE's conditional approval of the Merger granted on May 17, 2017, which was incremental to commitments already made to the EC, China and regulatory agencies in other jurisdictions. This divestiture was included in discontinued operations of the Company.

On June 15, 2017, TDCC and Historical DuPont announced that a proposed agreement had been reached with the Antitrust Division of the United States Department of Justice that permitted the companies to proceed with the proposed merger of equals transaction. The proposed agreement was consistent with commitments already made to the EC.


NOTE 43 – SEPARATION FROM DOWDUPONT
Effective August 31, 2017, TDCC and Historical DuPont completed the merger of equals transaction contemplated by the Merger Agreement, by and among TDCC, Historical DuPont, DowDuPont, Diamond Merger Sub, Inc. and Orion Merger Sub, Inc. Pursuant to the Merger Agreement, (i) Diamond Merger Sub, Inc. was merged with and into TDCC, with TDCC surviving the merger as a subsidiary of DowDuPont (the "Diamond Merger") and (ii) Orion Merger Sub, Inc. was merged with and into Historical DuPont, with Historical DuPont surviving the merger as a subsidiary of DowDuPont (the "Orion Merger" and, together with the Diamond Merger, the "Mergers"). Following the consummation of the Mergers, each of TDCC and Historical DuPont became subsidiaries of DowDuPont. Subsequent to the Merger, TDCC and Historical DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. Dow Inc. was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business.

On April 1, 2019, DowDuPont completed the previously announced separation of its materials science business. The separation was effected by way of a pro rata distribution of all of the then-issued and outstanding shares of Dow Inc. common stock to DowDuPont stockholders of record as of the close of business, Eastern Time, on March 21, 2019 (the “Record Date”). The shareholders of record of DowDuPont received one share of Dow Inc. common stock, par value $0.01 per share, for every three shares of DowDuPont common stock, par value $0.01 per share, held as of the Record Date ("Distribution Ratio"). No fractional shares of Dow Inc. common stock were issued. Instead, cash in lieu of any fractional shares was paid to DowDuPont registered shareholders. The number of shares of Dow Inc. common stock issued on April 1, 2019 was 748.8 million shares. Dow Inc. is now an independent, publicly traded company and Dow Inc. common stock is listed on the NYSE under the symbol “DOW.” Dow Inc. common stock began regular-way trading on April 2, 2019, the first day following the distribution.


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Effective April 1, 2019, TDCC became a wholly owned subsidiary of Dow Inc. As of the effective date and time of the distribution, DowDuPont doesdid not beneficially own any equity interest in Dow and will no longer consolidateconsolidated Dow and its consolidated subsidiaries into its financial results. Beginning in the second quarter of 2019, Dow’s consolidated financial results reflect the results of Dow Inc. and its consolidated subsidiaries - that is, TDCC after giving effect to the distribution of AgCo and SpecCo and the receipt of ECP. The consolidated financial results of Dow for periods prior to April 1, 2019, reflect the distribution of AgCo and SpecCo as discontinued operations for each period presented as well as reflect the receipt of ECP as a common control transaction from the closing of the Merger on August 31, 2017.

On April 1, 2019, Dow Inc. received a cash contribution of $2,024 million from DowDuPont as part of the internal reorganization and business realignment steps between Dow Inc., TDCC and DowDuPont. Dow Inc. recognized a reduction to "Retained earnings" of $14,806 million in 2019 as a result of the cash contribution, the distribution of AgCo and SpecCo, and other separation related adjustments. TDCC recognized a reduction to "Retained earnings" of $16,009 million in 2019 as a result of the distribution of AgCo and SpecCo.

Receipt of ECP
As the receipt of ECP was accounted for as a transfer between entities under common control, the consolidated financial statements have been retrospectively adjusted to reflect the receipt of ECP from the closing of the Merger on August 31, 2017. All intercompany transactions have been eliminated in consolidation.


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Distribution of AgCo and SpecCo
Upon distribution, the Company retrospectively adjusted the previously issued consolidated financial statements and presented AgCo and SpecCo as discontinued operations based on the guidance in Accounting Standards Codification (“ASC”)ASC 205-20 “Discontinued Operations” (“ASC 205-20”). The results of operations of AgCo and SpecCo are presented as discontinued operations in the consolidated statements of income and are summarized in the following table:

Results of Operations of AgCo and SpecCo
2019 1
2018
In millions
Net sales$2,953 $12,187 
Cost of sales1,804 7,668 
Research and development expenses175 761 
Selling, general and administrative expenses262 1,108 
Amortization of intangibles61 249 
Restructuring and asset related charges - net78 411 
Equity in earnings of nonconsolidated affiliates28 400 
Sundry income (expense) - net(18)(13)
Interest income3 26 
Interest expense and amortization of debt discount7 56 
Income from discontinued operations before income taxes$579 $2,347 
Provision for income taxes134 512 
Income from discontinued operations, net of tax$445 $1,835 
Results of Operations of AgCo and SpecCo
2019 1
20182017
In millions
Net sales$2,953
$12,187
$12,337
Cost of sales1,804
7,668
7,769
Research and development expenses175
761
854
Selling, general and administrative expenses262
1,108
1,143
Amortization of intangibles61
249
255
Restructuring and asset related charges - net78
411
376
Integration and separation costs—
—
18
Equity in earnings of nonconsolidated affiliates28
400
372
Sundry income (expense) - net(18)(13)245
Interest income3
26
40
Interest expense and amortization of debt discount7
56
61
Income from discontinued operations before income taxes$579
$2,347
$2,518
Provision for income taxes134
512
636
Income from discontinued operations, net of tax$445
$1,835
$1,882
1. Results through March 31, 2019.

The carrying amount of major classes of assets and liabilities related to the distribution of AgCo and SpecCo consisted of the following:

Carrying Values of AgCo and SpecCo 1
Dec 31, 2018
In millions
Accounts and notes receivable - Trade$2,768
Accounts and notes receivable - Other773
Inventories2,826
Other current assets151
Investment in nonconsolidated affiliates612
Other investments2
Noncurrent receivables35
Net property3,014
Goodwill7,590
Other intangible assets1,830
Deferred income tax assets239
Deferred charges and other assets60
Total assets of discontinued operations$19,900
Notes payable$7
Long-term debt due within one year4
Accounts payable - Trade1,118
Accounts payable - Other868
Income taxes payable234
Accrued and other current liabilities716
Long-Term Debt5
Deferred income tax liabilities568
Pension and other postretirement benefits - noncurrent306
Other noncurrent obligations662
Total liabilities of discontinued operations$4,488
1.Includes assets and liabilities of consolidated variable interest entities related to discontinued operations.


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Agreements Related to the Separation and Distribution
In connection with the separation, Dow Inc. entered into certain agreements with 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 the separation, 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.

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The impacts of indemnifications and other post-separation matters relating to the Agreements are primarily reflected in the consolidated financial statements of Dow Inc. In 2019, the Company recorded pretax charges related to the Agreements of $24 million in "Integration and separation costs" and $69 million in "Sundry income (expense) - net" in the consolidated statements of income of Dow Inc., and related to Corporate.

At December 31, 2019,2020, the Company had assets of $58$77 million ($58 million at December 31, 2019) included in "Other current assets" and $52$33 million ($52 million at December 31, 2019) included in "Noncurrent receivables,"receivables" and liabilities of $352$412 million ($352 million at December 31, 2019) included in "Accrued and other current liabilities" and $96$46 million ($96 million at December 31, 2019) included in "Other noncurrent obligations" in the consolidated balance sheets of Dow Inc. related to the Agreements. Any adjustments to these assets and liabilities in subsequent periods will be recorded in Dow Inc.'s results of operations.

In addition, the Company deferred approximately $400 million of the cash distribution received from DowDuPont at separation and recorded an associated liability with an offset to "Retained earnings" in the consolidated balance sheets of Dow Inc. At December 31, 2019, $1302020, $103 million ($130 million at December 31, 2019) of this liability was recorded in "Accrued and other current liabilities" and $270$96 million ($270 million at December 31, 2019) was recorded in "Other noncurrent obligations" in the consolidated balance sheets of Dow Inc. Based on notices received in the fourth quarter of 2020, Dow Inc. reversed $177 million of the liability and the impact is reflected in the "Common control transaction" line in the consolidated statements of equity of Dow Inc. The final resolution of thisthe remaining liability is uncertain and any subsequent adjustments to the carrying value of this liability will be reflected in equity of Dow Inc. Following the separation,

In 2020, Dow Inc. made net cash payments of $215$18 million ($215 million in 2019) related to the Agreements, recorded in "Cash flows from operating activities - discontinued operations" in the Dow Inc. consolidated statements of cash flows. The Company also received $98 million in 2019 related to the Agreements, recorded in "Other assets and liabilities, net" within "Cash flows from operating activities - continuing operations" in the Dow Inc. consolidated statements of cash flows.

Continuing Involvement
The Company has certain product and service agreements with DuPont and Corteva that were considered intercompany transactions prior to the separation, but are trade transactions subsequent to the separation. These transactions have been retrospectively reclassified as trade transactions in the consolidated financial statements. Based on the Company’s assessment of the specific factors identified in ASC Topic 205, “Presentation of Financial Statements,” the Company concluded that these agreements do not constitute significant continuing involvement in AgCo or SpecCo.

Integration and Separation Costs
Integration and separation costs, which reflect costs related to post-Merger integration and business separation activities, as well as the ownership restructure of Dow Silicones (through May 31, 2018), were $239 million in 2020, compared with $1,063 million and $1,039 million for Dow Inc. and TDCC, respectively, in 2019 compared withand $1,179 million in 2018 and $798 million in 2017.2018. Integration and separation costs related to post-Merger integration and business separation activities are expected to be substantially complete by the endwere completed as of December 31, 2020.


NOTE 54 – REVENUE
The majority of the Company's revenue is derived from product sales. In 2019, 982020, 99 percent of the Company's revenue related to product sales (99(98 percent in 20182019 and 9899 percent in 2017)2018). The remaining sales were primarily related to the Company's insurance operations and licensing of patents and technologies.

Product Sales
Product sales consist of sales of the Company's products to manufacturers and distributors. The Company considers order confirmations or purchase orders, which in some cases are governed by master supply agreements, to be contracts with a customer. Product sale contracts are generally short-term contracts where the time between order confirmation and satisfaction of all performance obligations is less than one year. However, the Company has some long-term contracts which can span multiple years.


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Revenues from product sales are recognized when the customer obtains control of the product, which occurs at a point in time, usually upon shipment, with payment terms typically in the range of 30 to 60 days after invoicing, depending on business and geographic region. When the Company performs shipping and handling activities after the transfer of control to the customer (e.g., when control transfers prior to shipment), these are considered fulfillment activities, and accordingly, the costs are accrued when

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the related revenue is recognized. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. The Company elected to use the practical expedient to expense cash and non-cash sales incentives, as the amortization period for the costs to obtain the contract would have been one year or less.

Certain long-term contracts include a series of distinct goods that are delivered continuously to the customer through a pipeline (e.g., feedstocks). For these types of product sales, the Company invoices the customer in an amount that directly corresponds with the value to the customer of the Company’s performance to date. As a result, the Company recognizes revenue based on the amount billable to the customer in accordance with the right to invoice practical expedient.

The transaction price includes estimates for reductions in revenue from customer rebates and right of returns on product sales. These amounts are estimated based upon the most likely amount of consideration to which the customer will be entitled. All estimates are based on historical experience, anticipated performance and the Company’s best judgment at the time to the extent it is probable that a significant reversal of revenue recognized will not occur. All estimates for variable consideration are reassessed periodically. The Company elected the practical expedient to not adjust the amount of consideration for the effects of a significant financing component for all instances in which the period between payment and transfer of the goods will be one year or less.

For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation based on the relative standalone selling price. The standalone selling price is the observable price which depicts the price as if sold to a similar customer in similar circumstances.

Patents, Trademarks and Licenses
The Company enters into licensing arrangements in which it licenses certain rights of its patents and technology to customers. Revenue from the majority of the Company’s licenses for patents and technology is derived from sales-based royalties. The Company estimates the amount of sales-based royalties it expects to be entitled to based on historical sales to the customer. For the remaining revenue from licensing arrangements, payments are typically received from the Company's licensees based on billing schedules established in each contract. Revenue is recognized when the performance obligation is satisfied.

Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to unsatisfied or partially unsatisfied performance obligations. At December 31, 2019,2020, the Company had unfulfilled performance obligations forof $977 million ($826 million at December 31, 2019) related to the licensing of technology of $826 million, and expects revenue to be recognized for the remaining performance obligations over the next one to seven 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 the Company has elected the right to invoice practical expedient, or variable consideration attributable to royalties for licenses of patents and technology. The Company 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 21 years. The Company 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.


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Disaggregation of Revenue
The CompanyDow 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. See details in the tables below:

Net Trade Sales by Segment and Business202020192018
In millions
Hydrocarbons & Energy$4,271 $5,357 $7,587 
Packaging and Specialty Plastics14,030 14,888 16,608 
Packaging & Specialty Plastics$18,301 $20,245 $24,195 
Industrial Solutions$3,929 $4,310 $4,812 
Polyurethanes & Construction Chemicals8,080 9,117 10,615 
Others12 13 20 
Industrial Intermediates & Infrastructure$12,021 $13,440 $15,447 
Coatings & Performance Monomers$3,258 $3,517 $3,979 
Consumer Solutions4,693 5,406 5,698 
Performance Materials & Coatings$7,951 $8,923 $9,677 
Corporate$269 $343 $285 
Total$38,542 $42,951 $49,604 
Net Trade Sales by Segment and Business20192018
In millions
Hydrocarbons & Energy$5,357
$7,587
Packaging and Specialty Plastics14,888
16,608
Packaging & Specialty Plastics$20,245
$24,195
Industrial Solutions$4,310
$4,812
Polyurethanes & Construction Chemicals9,117
10,615
Others13
20
Industrial Intermediates & Infrastructure$13,440
$15,447
Coatings & Performance Monomers$3,517
$3,979
Consumer Solutions5,406
5,698
Performance Materials & Coatings$8,923
$9,677
Corporate$343
$285
Total$42,951
$49,604


Net Trade Sales by Geographic Region202020192018
In millions
U.S. & Canada$13,582 $15,549 $17,809 
EMEAI 1
12,969 14,612 17,406 
Asia Pacific8,165 8,676 9,404 
Latin America3,826 4,114 4,985 
Total$38,542 $42,951 $49,604 
Net Trade Sales by Geographic Region20192018
In millions
U.S. & Canada$15,549
$17,809
EMEAI 1
14,612
17,406
Asia Pacific8,676
9,404
Latin America4,114
4,985
Total$42,951
$49,604
1.Europe, Middle East, Africa and India.

Contract Assets and Liabilities
The Company 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 the Company’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 realizedrecognized in revenue when the associated revenue is recognized under the contract.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. "Contract liabilities - noncurrent" includes advance payments that the Company has received from customers related to long-term supply agreements and royalty payments that are deferred and recognized over the life of the contract.

The Company's contract liabilities increased from December 31, 2018 to December 31, 2019 due to advanced payments from customers related to long-term product supply agreements. Revenue recognized in 20192020 from amounts included in contract liabilities at the beginning of the period was approximately $145 million ($205(approximately $145 million in 2019 and $205 million in 2018). In 2019,2020, the amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional was approximately $25 million (approximately $15 million ($12 million in 2018)2019). The Company did not recognize any asset impairment charges related to contract assets in 2020, 2019, or 2018.


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The following table summarizes the contract assets and liabilities at December 31, 20192020 and 2018:2019:

Contract Assets and Liabilities at Dec 3120202019
In millions
Accounts and notes receivable - Trade$4,839 $4,844 
Contract assets - current 1
$58 $41 
Contract assets - noncurrent 2
$11 $4 
Contract liabilities - current 3
$349 $193 
Contract liabilities - noncurrent 4
$1,915 $1,607 
Contract Assets and Liabilities at Dec 3120192018
In millions
Accounts and notes receivable - Trade$4,844
$5,646
Contract assets - current 1
$41
$19
Contract assets - noncurrent 2
$4
$1
Contract liabilities - current 3
$193
$134
Contract liabilities - noncurrent 4
$1,607
$1,318
1.Included in "Other current assets" in the consolidated balance sheets.
2.Included in "Deferred charges and other assets" in the consolidated balance sheets.
3.Included in "Accrued and other current liabilities" in the consolidated balance sheets. The increase from December 31, 2019 to December 31, 2020 was primarily due to advance payments from customers related to royalty agreements.
4.Included in "Other noncurrent obligations" in the consolidated balance sheets. The increase from December 31, 2019 to December 31, 2020 was due to an advance payment from a customer related to a long-term product supply agreement.


NOTE 65 – DIVESTITURES
Merger Remedy - Divestiture of the Global Ethylene Acrylic Acid CopolymersRail Infrastructure Operations and Ionomers BusinessAssets
On February 2, 2017, as a condition of regulatory approval of the Merger, the Company announced it would divest its global EAA Business to SK Global Chemical Co., Ltd. The divestiture included production assets located in Freeport, Texas, and Tarragona, Spain, along with associated intellectual property and product trademarks. Under terms of the purchase agreement, SK Global Chemical Co., Ltd will honor certain customer and supplier contracts and other agreements. On September 1, 2017,30, 2020, TDCCsold its rail infrastructure operations and assets, including existing agreements to provide rail services to unrelated third parties, at six sites in the sale was completedU.S. & Canada to an affiliate of Watco Companies, L.L.C. for $296cash proceeds of $303 million, net of working capital adjustments, costs to sell and other adjustments with proceedsand subject to customary post-closing adjustments. AsThese assets are located at TDCC’s sites in Plaquemine and St. Charles, Louisiana; Freeport and Seadrift, Texas; and Fort Saskatchewan and Prentiss, Alberta, Canada. Divested operations included property with a result, in 2017,net book value of $68 million and goodwill of $2 million ($16 million related to Packaging & Specialty Plastics and $54 million related to Corporate). TDCC retained ownership of the Companysites and underlying real property where the divested operations are located. TDCC and the buyer entered into mutual long-term service agreements designed to ensure the continuation of rail services for TDCC's existing operations at each site. The rail-service agreements include variable fees that have an initial term of 25 years. TDCC recognized a pretax gain of $227$233 million on the sale ($48 million related to Packaging & Specialty Plastics and $185 million related to Corporate), included in "Sundry income (expense) - net" in the consolidated statements of income and related to the Packaging & Specialty Plastics segment.income.

The Company evaluated the divestiture of the EAA Businessrail infrastructure operations and assets and determined it did not represent a strategic shift that had a major effect on the Company’s operations and financial results and did not qualify as an individually significant component of the Company. As a result, thisthe divestiture wasis not reported inas discontinued operations.


Divestiture of Marine and Terminal Operations and Assets
On December 1, 2020, TDCC sold certain U.S. Gulf Coast marine and terminal operations and assets, including existing agreements to provide marine and terminal services to unrelated third parties, at three U.S. sites to an affiliate of Royal Vopak for cash proceeds of $600 million, net of costs to sell and other adjustments and subject to customary post-closing adjustments. These assets are located at TDCC's sites in Plaquemine and St. Charles, Louisiana, and Freeport, Texas. Divested operations included property with a net book value of $93 million and goodwill of $8 million ($7 million related to Packaging & Specialty Plastics, $17 million related to Industrial Intermediates & Infrastructure and $77 million related to Corporate). TDCC retained ownership of the sites and the underlying real property where the divested operations are located. TDCC and the buyer entered into mutual long-term service agreements designed to ensure the continuation of marine and terminal services for TDCC's existing operations at each site. The marine and terminal service agreements include fixed and variable fees that have initial terms of up to 25 years. In the fourth quarter of 2020, TDCC recognized a pretax gain of $499 million on the sale ($17 million related to Packaging & Specialty Plastics, $61 million related to Industrial Intermediates & Infrastructure and $421 million related to Corporate), included in "Sundry income (expense) - net" in the consolidated statements of income.

The Company evaluated the divestiture of the marine and terminal operations and assets and determined it did not represent a strategic shift that had a major effect on the Company’s operations and financial results and did not qualify as an individually significant component of the Company. As a result, the divestiture is not reported as discontinued operations.

96

NOTE 76 – RESTRUCTURING, GOODWILL IMPAIRMENT AND ASSET RELATED CHARGES - NET
The "Restructuring, goodwill impairment and asset related charges - net" line in the consolidated statements of income is used to record charges for restructuring programs, goodwill impairments, and other asset related charges, which includes other asset impairments.

Restructuring Programs
2020 Restructuring Program
On September 29, 2020, the 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 gains traction. 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.

As a result of these actions, in the third quarter of 2020 the Company recorded pretax restructuring charges of $575 million, consisting of severance and related benefit costs of $297 million, asset write-downs and write-offs of $197 million and costs associated with exit and disposal activities of $81 million. The impact of these charges is shown as "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income. In the fourth quarter of 2020, the Company recorded net favorable pretax restructuring credits of $1 million related to asset write-downs and write-offs and $1 million related to costs associated with exit and disposal activities (related to Performance Materials & Coatings and Corporate). The adjustment to costs associated with exit and disposal activities included curtailment costs associated with a defined benefit pension plan. See Note 20 for additional information. The following table summarizes the activities related to the 2020 Restructuring Program:

2020 Restructuring ProgramSeverance and Related Benefit CostsAsset Write-downs and Write-offsCosts Associated with Exit and Disposal ActivitiesTotal
In millions
Packaging & Specialty Plastics$0 $11 $0 $11 
Industrial Intermediates & Infrastructure0 22 0 22 
Performance Materials & Coatings0 116 61 177 
Corporate297 47 19 363 
Total restructuring charges$297 $196 $80 $573 
Charges against the reserve0 (196)(5)(201)
Cash payments(8)0 0 (8)
Reserve balance at Dec 31, 2020$289 $0 $75 $364 

At December 31, 2020, $227 million of the reserve balance was included in "Accrued and other current liabilities" and $137 million was included in "Other noncurrent obligations" in the consolidated balance sheets.

Severance and Related Benefit Costs
Severance benefits are provided to employees primarily under Dow's ongoing benefit arrangements and are accrued against the Corporate segment once management commits to a plan of termination. The 2020 Restructuring Program included a charge for severance and related benefit costs of $297 million for a global workforce cost reduction of approximately 6 percent, with separations occurring primarily through the end of 2021, and impacting Corporate. At December 31, 2020, $8 million in severance payments had been made.


97

Asset Write-downs and Write-offs
The 2020 Restructuring Program included charges related to the write-down and write-off of assets totaling $196 million. Details regarding the asset write-downs and write-offs are as follows:

•Packaging & Specialty Plastics recorded a charge of $11 million to rationalize its production capacity by shutting down a small-scale production unit. The production unit will be shut down by the end of the third quarter of 2022.
•Industrial Intermediates & Infrastructure recorded a charge of $22 million to rationalize its asset footprint by shutting down certain amines and solvents facilities in the United States and Europe as well as select, small-scale downstream polyurethanes manufacturing facilities. The facilities will be shut down by the end of 2021.
•Performance Materials & Coatings recorded a charge of $116 million to shut down manufacturing assets, primarily related to small-scale coatings reactors, and will also rationalize its upstream asset footprint in Europe and the U.S. & Canada by adjusting the supply of siloxane and silicon metal to balance to regional needs. The impacted facilities will be shut down by the end of 2021.
•Corporate recorded a charge of $47 million related to the write-down of leased, non-manufacturing facilities and the write-down of miscellaneous assets.

Costs Associated with Exit and Disposal Activities
The 2020 Restructuring Program included charges of $80 million for costs associated with exit and disposal activities, which included $19 million for contract termination fees related to the asset actions listed above, impacting Performance Materials & Coatings ($9 million) and Corporate ($10 million), as well as $56 million for environmental remediation, impacting Performance Materials & Coatings ($52 million) and Corporate ($4 million) and $5 million related to curtailment costs associated with a defined benefit pension plan, impacting Corporate.

DowDuPont Cost Synergy Program
In September and November 2017, DowDuPont approved post-mergerpost-Merger restructuring actions under the DowDuPont Cost Synergy Program (the "Synergy Program") which was designed to integrate and optimize the organization following the Merger and in preparation for the business separations. The Company expected (prior to the impact of any discontinued operations) to record total pretax restructuring charges of approximately $1.3 billion, which included initial estimates of approximately $525 million to $575 million of severance and related benefit costs, $400 million to $440 million of asset write-downs and write-offs, and $290 million to $310 million of costs associated with exit and disposal activities. The restructuring charges below reflect charges from continuing operations. The impact of the charges are shown as "Restructuring, goodwill impairment and asset related charges ‑ net" in the consolidated statements of income.

The Company recorded pretax restructuring charges of $399 million in 2017, consisting of severance and related benefit costs of $307 million, asset write-downs and write-offs of $87 million and costs associated with exit and disposal activities of $5 million.
The Company recorded pretax restructuring charges of $184 million in 2018, consisting of severance and related benefit costs of $137 million, assetsasset write-downs and write-offs of $33 million and costs associated with exit and disposal activities of $14 million.
For the year ended December 31, 2019, the
The Company recorded pretax restructuring charges of $292 million in 2019, consisting of severance and related benefit costs of $123 million, assetassets write-downs and write-offs of $143 million and costs associated with exit and disposal activities of $26 million. The impact

For the year ended December 31, 2020, the Company recorded pretax restructuring charges of these charges is shown as "Restructuring, goodwill impairment$86 million for severance and asset related charges ‑ net" in the consolidated statements of income. The Company expectsbenefit costs. Cash expenditures related to the Synergy Program to bewere substantially complete by the end of the second quarter ofat December 31, 2020.


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98


The following table summarizes the activities related to the Synergy Program. At December 31, 2019, $522020, $21 million was included in "Accrued and other current liabilities" ($20552 million at December 31, 2018)2019) and $19$13 million ($19 million at December 31, 2019) was included in "Other noncurrent obligations" ($12 million at December 31, 2018) in the consolidated balance sheets.

DowDuPont Synergy ProgramSeverance and Related Benefit CostsAsset Write-downs and Write-offsCosts Associated with Exit and Disposal ActivitiesTotal
In millions
2017 restructuring charges    
Packaging & Specialty Plastics$—
$33
$3
$36
Industrial Intermediates & Infrastructure—
12
—
12
Performance Materials & Coatings—
9
2
11
Corporate307
33
—
340
Total 2017 restructuring charges$307
$87
$5
$399
Charges against the reserve—
(87)—
(87)
Cash payments(37)—
—
(37)
Reserve balance at Dec 31, 2017$270
$—
$5
$275
2018 restructuring charges   
Packaging & Specialty Plastics$—
$10
$3
$13
Industrial Intermediates & Infrastructure—
—
11
11
Performance Materials & Coatings—
7
—
7
Corporate137
16
—
153
Total 2018 restructuring charges$137
$33
$14
$184
Charges against the reserve—
(33)—
(33)
Cash payments(197)—
(12)(209)
Reserve balance at Dec 31, 2018$210
$—
$7
$217
2019 restructuring charges    
Packaging & Specialty Plastics$—
$—
$1
$1
Industrial Intermediates & Infrastructure—
2
5
7
Performance Materials & Coatings—
28
—
28
Corporate123
113
20
256
Total 2019 restructuring charges$123
$143
$26
$292
Charges against the reserve—
(143)—
(143)
Cash payments(279)—
(16)(295)
Reserve balance at Dec 31, 2019$54
$—
$17
$71

DowDuPont Synergy ProgramSeverance and Related Benefit CostsAsset Write-downs and Write-offsCosts Associated with Exit and Disposal ActivitiesTotal
In millions
Reserve balance at Dec 31, 2017$270 $0 $5 275
2018 restructuring charges
Packaging & Specialty Plastics$0 $10 $3 $13 
Industrial Intermediates & Infrastructure0 0 11 11 
Performance Materials & Coatings0 7 0 7 
Corporate137 16 0 153 
Total 2018 restructuring charges$137 $33 $14 $184 
Charges against the reserve0 (33)0 (33)
Cash payments(197)0 (12)(209)
Reserve balance at Dec 31, 2018$210 $0 $7 $217 
2019 restructuring charges
Packaging & Specialty Plastics$0 $0 $1 $1 
Industrial Intermediates & Infrastructure0 2 5 7 
Performance Materials & Coatings0 28 0 28 
Corporate123 113 20 256 
Total 2019 restructuring charges$123 $143 $26 $292 
Charges against the reserve0 (143)0 (143)
Cash payments(279)0 (16)(295)
Reserve balance at Dec 31, 2019$54 $0 $17 $71 
2020 restructuring charges
Corporate90 0 0 90 
Total 2020 restructuring charges$90 $0 $0 $90 
Charges against the reserve(4)0 0 (4)
Cash payments(121)0 (2)(123)
Reserve balance at Dec 31, 2020$19 $0 $15 $34 

The Company recorded pretax restructuring charges of $961 million inception-to-date under the Synergy Program on a continuing operations basis, consisting of severance and related benefit costs of $653 million, asset write-downs and write-offs of $263 million and costs associated with exit and disposal activities of $45 million.

Asset Write-downs and Write-offs
The restructuring charges related to the write-down and write-off of assets in 2017 are2018 under the Synergy Program were as follows:

The Company recorded a charge of $22 million for asset write-downs and write-offs aligned with an energy project, including the write-off of capital projects and other non-manufacturing assets in Packaging & Specialty Plastics.

The Company recorded a charge of $65 million for other miscellaneous asset write-downs and write-offs, including the shutdown of several small manufacturing facilities and the write-off of non-manufacturing assets, certain corporate facilities and data centers. The charge related to Packaging & Specialty Plastics ($11 million), Industrial Intermediates & Infrastructure ($12 million), Performance Materials & Coatings ($9 million) and Corporate ($33 million). These manufacturing facilities were shut down primarily by the end of 2019.

The restructuring charges related to the write-down and write-off of assets in 2018 are as follows:

•The Company recorded a charge of $33 million for other miscellaneous asset write-downs and write-offs, including the shutdown of several small manufacturing facilities and the write-off of leased, non-manufacturing assets and certain corporate facilities. The charge related to Packaging & Specialty Plastics ($10 million), Performance Materials & Coatings ($7 million) and Corporate ($16 million). These manufacturing facilities were shut down by the end of 2019.


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The restructuring charges related to the write-down and write-off of assets in 2019 areunder the Synergy Program were as follows:

•The Company recorded a charge of $143 million for other miscellaneous asset write-downs and write-offs, including the shutdown of several small manufacturing facilities and the write-off of non-manufacturing assets and certain corporate facilities. The charge related to Industrial Intermediates & Infrastructure ($2 million), Performance Materials & Coatings ($28 million) and Corporate ($113 million). These manufacturing facilities will bewere substantially shut down by the end of 2020.

There were no restructuring charges related to the second quarterwrite-down and write-off of 2020.assets in 2020 under the Synergy Program.

Costs Associated with Exit and Disposal Activities
The restructuring charges for costs associated with exit and disposal activities, including contract cancellation penalties and environmental remediation liabilities, totaled $5 million in 2017, $14 million in 2018, and $26 million in 2019.2019 and 0 in 2020.

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.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.

2019 Goodwill Impairment
Upon completion of the goodwill impairment testing in the fourth quarter of 2019, the Company determined the fair value of the Coatings & Performance Monomers reporting unit was lower than its carrying amount. As a result, the Company recorded an impairment charge of $1,039 million in the fourth quarter of 2019, included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Performance Materials & Coatings.

In 2017, upon completion of the annual goodwill impairment testing, the Company determined the fair value of the Coatings & Performance Monomers reporting unit was lower than its carrying amount and as a result, recorded an impairment charge of $1,491 million in the fourth quarter of 2017, included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Performance Materials & Coatings. See Note 1413 for additional information on these impairment charges.information.

Asset Related Charges
20192020 Charges
In 2019,2020, the Company recognized pretax impairment charges of $49 million, including additional pretax impairment charges of $58 million related primarily tofor capital additions made to a biopolymersbio-ethanol manufacturing facility in Santa Vitoria, Minas Gerais, Brazil ("Santa Vitoria"), which was impaired in 2017.2017 and divested in 2020, as well as charges for miscellaneous write-offs and write-downs of non-manufacturing assets and the write-down of certain corporate leased equipment. The impairment charges were included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics ($4419 million), Performance Materials & Coatings ($915 million) and Corporate ($515 million). See Note 2423 for additional information.

2019 Charges
On August 13, 2019, the Company entered into a definitive agreement to sell its acetone derivatives business to ALTIVIA Ketones & Additives, LLC. The transaction closed on November 1, 2019 and included the Company's acetone derivatives related inventory and production assets, located in Institute, West Virginia, in addition to the site infrastructure, land, utilities and certain railcars. The Company remains at the Institute site as a tenant. As a result of the planned transaction, the Company recognized a pretax impairment charge of $75 million in the third quarter of 2019, included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($24 million) and Corporate ($51 million). See Note 2423 for additional information.


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In the fourth quarter of 2019, upon completion of an evaluation of its equity method investment in Sadara Chemical Company ("Sadara") for other-than-temporary impairment, the Company determined that its investment in Sadara was other-than-temporarily impaired and it was written down to zero. Additionally, as part of Dow's evaluation of Sadara, the Company reserved certain of its notes and accounts receivable with Sadara due to uncertainty on the timing of collection. As a result, the Company recorded a $1,755 million charge related to Sadara, included in “Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($370 million), Industrial Intermediates & Infrastructure ($1,168 million) and Corporate ($217 million). See Notes 1312 and 2423 for additional information.

In 2019, the Company recognized additional pretax impairment charges of $58 million related primarily to capital additions at Santa Vitoria. The impairment charges were included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics ($44 million), Performance Materials & Coatings ($9 million) and Corporate ($5 million). See Note 23 for additional information.

2018 Charges
In 2018, the Company recognized an additional pretax impairment charge of $34 million related primarily to capital additions at Santa Vitoria. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to the Packaging & Specialty Plastics segment. See Note 2423 for additional information.


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2017 Charges
In 2017, the Company recognized a $622 million pretax impairment charge related to Santa Vitoria. The Company determined it would not pursue an expansion of the facility’s ethanol mill into downstream derivative products, primarily as a result of cheaper ethane-based production as well as the Company’s new assets coming online on the U.S. Gulf Coast which can be used to meet growing market demands in Brazil. As a result of this decision, cash flow analysis indicated the carrying amount of the impacted assets was not recoverable. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to the Packaging & Specialty Plastics segment. See Note 24 for additional information.

The Company also recognized other pretax impairment charges of $246 million in the fourth quarter of 2017, including charges related to manufacturing assets of $159 million, an equity method investment of $81 million and other assets of $6 million. The impairment charges were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($58 million), Industrial Intermediates & Infrastructure ($5 million), Performance Materials & Coatings ($83 million) and Corporate ($100 million). See Note 24 for additional information.


NOTE 87 – SUPPLEMENTARY INFORMATION

Sundry Income (Expense) – Net 1
Dow Inc.TDCC
In millions202020192018202020192018
Non-operating pension and other postretirement benefit plan net credits 2
$103 $205 $123 $103 $205 $123 
Foreign exchange gains (losses)(62)91 (119)(65)77 (119)
Gain on divestiture of marine and terminal operations and assets 3
233 0 0 233 0 0 
Gain on divestiture of rail infrastructure operations and assets 3
499 0 0 499 0 0 
Loss on early extinguishment of debt 4
(149)(102)(54)(149)(102)(54)
Gain (loss) on divestitures and asset sale 5
(15)(49)0 (15)2 0 
Gain related to Nova ethylene asset matter 6
544 170 0 544 170 0 
Gain on sales of other assets and investments48 67 18 48 67 18 
Dow Silicones breast implant liability adjustment 6
5 85 0 5 85 0 
Indemnification and other transaction related credits (costs) 7
(21)(69)0 (11)6 0 
Loss on Dow Silicones commercial creditor matters 6
0 (50)0 0 (50)0 
Post-closing adjustments related to Dow Silicones ownership restructure0 0 (20)0 0 (20)
Post-closing adjustments on divestiture of MEGlobal0 0 20 0 0 20 
Other - net84 113 128 82 113 128 
Total sundry income (expense) – net$1,269 $461 $96 $1,274 $573 $96 
1.Prior period amounts were updated to conform with the current year presentation.
2.See Note 20 for additional information.
3.See Note 5 for additional information.
4.See Note 15 for additional information.
5.The year ended December 31, 2020 primarily relates to a loss on the divestiture of a bio-ethanol manufacturing facility in Brazil, related to Packaging & Specialty Plastics. The year ended December 31, 2019 includes post-closing adjustments on previous divestitures, related to Corporate.
6.See Note 16 for additional information.
7.See Note 3 for additional information.

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Sundry Income (Expense) – NetDow Inc.TDCC
In millions201920182017201920182017
Non-operating pension and other postretirement benefit plan net credits (costs) 1
$205
$123
$(676)$205
$123
$(676)
Foreign exchange gains (losses)91
(119)(72)77
(119)(72)
Gain related to Nova ethylene asset matter 2
170
—
—
170
—
—
Dow Silicones breast implant liability adjustment 2
85
—
—
85
—
—
Gain (loss) on Dow Silicones commercial creditor matters 2
(50)—
33
(50)—
33
Indemnification and other transaction related costs 3
(69)—
—
6
—
—
Loss on early extinguishment of debt 4
(102)(54)—
(102)(54)—
Gain (loss) on divestitures 5
(49)—
7
2
—
7
Gain on sales of other assets and investments67
18
117
67
18
117
Reclassification of cumulative translation adjustments10
4
8
10
4
8
Post-closing adjustments related to Dow Silicones ownership restructure—
(20)—
—
(20)—
Post-closing adjustments on divestiture of MEGlobal—
20
—
—
20
—
Gain on divestiture of the EAA business 6
—
—
227
—
—
227
Gain related to Nova patent infringement award 2
—
—
137
—
—
137
Other - net103
124
65
103
124
65
Total sundry income (expense) – net$461
$96
$(154)$573
$96
$(154)
1.See Note 21 for additional information.
2.See Note 17 for additional information.
3.See Note 4 for additional information.
4.See Note 16 for additional information.
5.Primarily related to post-closing adjustments on previous divestitures.
6.See Note 6 for additional information.

Accrued and Other Current Liabilities
“Accrued and other current liabilities” were $3,790 million and $3,256 million at December 31, 2020 and $2,762 million and $2,233 million at December 31, 2019, for Dow Inc. and TDCC, respectively, and $2,931 million at December 31, 2018.respectively. Accrued payroll, which is a component of "Accrued and other current liabilities" and includes liabilities related to payroll, incentive compensation and severance, was $866 million at December 31, 2020 and $284 million at December 31, 2019 and $759 million at December 31, 2018.2019. No other components of "Accrued and other current liabilities" were more than 5 percent of total current liabilities.


Other Investments
90
Investments in Company-Owned Life InsuranceDec 31, 2020Dec 31, 2019
In millions
Gross cash value$807 $820 
Less: Existing drawdowns 1
0 85 
Investments in company-owned life insurance 2
$807 $735 
1.Classified as "Proceeds from sales and maturities of investments" in the consolidated statements of cash flows.
2.Classified as "Other investments" in the consolidated balance sheets.

The Company has the ability to monetize its investment in its COLI policies as an additional source of liquidity. At December 31, 2019, the Company had monetized $85 million of its existing COLI policies' value. In the first nine months of 2020, the Company monetized an additional $211 million. In the fourth quarter of 2020, the Company repaid all existing drawdowns against the cash surrender value, which resulted in no monetization of its existing COLI policies' value at December 31, 2020. The repayment was reflected in "Purchases of investments" in the consolidated statements of cash flows.

Supplemental Cash Flow Information
The following table shows cash paid for interest and income taxes for the years ended December 31, 2020, 2019 2018 and 2017:2018:

Supplemental Cash Flow Information201920182017
In millions
Cash paid during year for:   
Interest, net of amounts capitalized$993
$1,143
$1,115
Income taxes$881
$1,193
$1,259


Supplemental Cash Flow Information202020192018
In millions
Cash paid during year for:
Interest$842 $993 $1,143 
Income taxes$518 $881 $1,193 


102

NOTE 98 – INCOME TAXES
The financial statements for Dow Inc. and TDCC are substantially similar, including the reporting of current and deferred tax expense (benefit), provision for income taxes on continuing operations, and deferred tax asset and liability balances. As a result, the following income tax discussion pertains to Dow Inc. only.

Geographic Allocation of Income and Provision for Income Taxes on Continuing Operations
In millions202020192018
Income (loss) from continuing operations before income taxes
Domestic 1
$(681)$(1,196)$745 
Foreign 2
2,752 (51)3,004 
Income (loss) from continuing operations before income taxes$2,071 $(1,247)$3,749 
Current tax expense (benefit)
Federal$(176)$(287)$324 
State and local4 25 13 
Foreign691 960 901 
Total current tax expense$519 $698 $1,238 
Deferred tax expense (benefit)
Federal 3
$184 $52 $(318)
State and local19 19 (32)
Foreign55 (299)(79)
Total deferred tax expense (benefit)$258 $(228)$(429)
Provision for income taxes on continuing operations$777 $470 $809 
Income (loss) from continuing operations, net of tax$1,294 $(1,717)$2,940 
Geographic Allocation of Income and Provision for Income Taxes on Continuing Operations   
In millions201920182017
Income (loss) from continuing operations before income taxes   
Domestic 1
$(1,196)$745
$(2,226)
Foreign 2 
(51)3,004
2,463
Income (loss) from continuing operations before income taxes$(1,247)$3,749
$237
Current tax expense (benefit)   
Federal$(287)$324
$(864)
State and local25
13
4
Foreign960
901
971
Total current tax expense$698
$1,238
$111
Deferred tax expense (benefit)   
Federal 3
$52
$(318)$1,499
State and local19
(32)85
Foreign(299)(79)(171)
Total deferred tax expense (benefit)$(228)$(429)$1,413
Provision for income taxes on continuing operations$470
$809
$1,524
Income (loss) from continuing operations, net of tax$(1,717)$2,940
$(1,287)
1.The 2019 amount includes approximately $1.4 billion of expense related to goodwill impairment and environmental matters. See Notes 13 and 16 for additional information.
1.The 2019 amount includes approximately $1.4 billion of expense related to goodwill impairment and environmental matters. The 2017 amount includes approximately $1.4 billion of expense related to goodwill impairment and litigation settlements. See Notes 14 and 17 for additional information.
2.The 2019 amount includes approximately $1.8 billion of expense related to Sadara related charges. See Note 13 for additional information.
3.The 2018 and 2017 amounts reflect
2.The 2019 amount includes approximately $1.8 billion of expense for Sadara related charges. See Note 12 for additional information.
3.The 2018 amount reflects the tax impact of The Act which accelerated the utilization of tax credits and required remeasurement of all U.S. deferred tax assets and liabilities.

In 2017, as a result of the MergerTax Cuts and subsequent changeJobs Act which accelerated the utilization of tax credits and required remeasurement of all U.S. deferred tax assets and liabilities.

Reconciliation to U.S. Statutory Rate202020192018
Statutory U.S. federal income tax rate21.0 %21.0 %21.0 %
Equity earnings effect0.2 (3.2)(3.3)
Foreign income taxed at rates other than the statutory U.S. federal income tax rate 1
1.7 (14.8)6.7 
U.S. tax effect of foreign earnings and dividends3.9 1.9 (0.7)
Unrecognized tax benefits3.3 1.0 0.2 
Divestitures 2
(5.1)0 0.8 
Changes in valuation allowances12.6 0 0 
Impact of tax reform 3
0 11.1 (3.4)
Federal tax accrual adjustment 4
0 10.4 0 
State and local income taxes0.3 (4.4)0.4 
Sadara related charges 5
0 (29.5)0 
Goodwill impairment 6
0 (17.5)0 
Other - net(0.4)(13.7)(0.1)
Effective tax rate37.5 %(37.7)%21.6 %
1.Includes the impact of valuation allowances and interest and penalties associated with uncertain tax positions in foreign jurisdictions. The 2020 impact from interest and penalties increased the effective tax rate by approximately 4 percent.
2.The 2020 impact relates to the divestiture of a bio-ethanol manufacturing facility in Brazil. See Note 6 for additional information.
3.Includes the impact of tax reform in Switzerland and the United States.
4.Primarily related to the favorable impact of the restoration of tax basis in assets, driven by a court judgment that did not involve the Company.
5.See Note 12 for additional information.
6.See Note 13 for additional information.

103

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States. While the CARES Act has had no significant impact on the Company's ownership, certain net operating loss carryforwards available for the Company’s consolidated German tax group were derecognized. In addition, the sale of stock between two consolidated subsidiaries in 2014 created a gain that was initially deferred for tax purposes. This deferred gain became taxable as a result of activities executed in anticipation of the business separations. As a result, in 2017, the Company recorded a charge of $267 million to “Provisionprovision for income taxes on continuing operations”operations in 2020, the Company filed a tax loss carryback claim for $291 million in accordance with the provisions of the CARES Act. This resulted in an increase in "Accounts and notes receivable - other" and a decrease in "Deferred income tax assets" in the consolidated statementsbalance sheets.

In the fourth quarter of income.2020, a valuation allowance of $260 million was recorded in the United States, primarily due to filing of the final combined Dow and DuPont tax return and related unutilized foreign tax credits. The Company projects it is more likely than not that a portion of these foreign tax credits and other tax attributes will remain unutilized prior to their expiration.


91

Reconciliation to U.S. Statutory Rate201920182017
Statutory U.S. federal income tax rate21.0 %21.0 %35.0 %
Equity earnings effect(3.2)(3.3)(52.7)
Foreign income taxed at rates other than the statutory U.S. federal income tax rate 1
(14.8)6.7
(61.2)
U.S. tax effect of foreign earnings and dividends1.9
(0.7)(8.4)
Unrecognized tax benefits1.0
0.2
13.5
Divestitures 2
—
0.8
142.0
Impact of tax reform 3
11.1
(3.4)367.8
Federal tax accrual adjustment 4
10.4
—
—
State and local income taxes(4.4)0.4
11.4
Sadara related charges 5
(29.5)—
—
Goodwill impairment 6
(17.5)—
220.8
Excess tax benefits from stock-based compensation1.2
(1.0)(39.7)
Other - net(14.9)0.9
14.5
Effective Tax Rate(37.7)%21.6 %643.0 %
1.Includes the impact of valuation allowances in foreign jurisdictions.
2.See Note 6 for additional information.
3.Includes the impact of tax reform in Switzerland and the U.S.
4.Primarily related to the favorable impact of the restoration of tax basis in assets, driven by a recent court judgment that did not involve the Company.
5.
See Note 13 for additional information.
6.See Note 14 for additional information.

On December 22, 2017, the Tax Cuts and Jobs Act ("The ActAct") was enacted. The Act reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred, created new provisions related to foreign sourced earnings, eliminated the domestic manufacturing deduction and moved to a hybrid territorial system. At December 31, 2017, the Company had not completed its accounting for the tax effects of The Act; however,While the Company made a reasonable estimate of the effects of The Act on its existing deferred tax balances and the one-time transition tax. Intax at December 31, 2017, in accordance with Staff Accounting Bulletin 118, the income tax effects of The Act were refined upon obtaining, preparing and analyzing additional information during the measurement period. At December 31,period as follows:

•In 2018, the Company had completed its accounting for the tax effectsremeasurement of The Act.

As a result of The Act, the Company remeasured its U.S. federal deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21 percent. The Companypercent, and recorded a cumulative benefit of $81$79 million ($79 million benefit in 2018 and $2 million benefit in 2017) to “Provision for income taxes on continuing operations” in the consolidated statements of income with respect to the remeasurement of the Company's deferred tax balances.

•The Act required aCompany adjusted the impact of the mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits, which resulted in a one-time transition tax. The Companytax, and recorded a cumulative charge of $789 million ($85 million benefit in 2018 and $874of $85 million charge in 2017) to "Provision for income taxes on continuing operations" in the consolidated statements of income with respect to the one-time transition tax. The Company had sufficient tax credits to offset the tax liability associated with the one-time transition tax.

•In 2018, the Company recorded an indirect impact of The Act related to prepaid tax on the intercompany sale of inventory. The amount recorded related to inventory was a charge of $38 million to "Provision for income taxes on continuing operations" in the consolidated statements of income.

For tax years beginning after December 31, 2017, The Act introduced new provisions for U.S. taxation of certain global intangible low-taxed income (“GILTI”). The Company has made the policy election to record any liability associated with GILTI in the period in which it is incurred.
Deferred Tax Balances at Dec 3120202019
In millionsAssetsLiabilitiesAssetsLiabilities
Property$499 $3,388 $494 $3,177 
Tax loss and credit carryforwards2,004 — 1,920 — 
Postretirement benefit obligations2,712 250 2,432 210 
Other accruals and reserves1,507 43 1,678 43 
Intangibles124 638 120 688 
Inventory30 198 28 234 
Investments142 51 125 48 
Other – net858 196 851 120 
Subtotal$7,876 $4,764 $7,648 $4,520 
Valuation allowances(1,302)— (1,262)— 
Total$6,574 $4,764 $6,386 $4,520 


92
104


Operating Loss and Tax Credit Carryforwards at Dec 3120202019
In millionsAssetsAssets
Operating loss carryforwards
Expire within 5 years$274 $263 
Expire after 5 years or indefinite expiration1,031 1,133 
Total operating loss carryforwards$1,305 $1,396 
Tax credit carryforwards
Expire within 5 years$434 $32 
Expire after 5 years or indefinite expiration265 492 
Total tax credit carryforwards$699 $524 
Total operating loss and tax credit carryforwards$2,004 $1,920 
Deferred Tax Balances at Dec 3120192018
In millionsAssetsLiabilitiesAssetsLiabilities
Property$494
$3,177
$406
$2,519
Tax loss and credit carryforwards1,920
—
2,079
—
Postretirement benefit obligations2,432
210
2,115
143
Other accruals and reserves1,678
43
1,220
151
Intangibles120
688
157
954
Inventory28
234
53
239
Investments125
48
190
84
Other – net851
120
620
247
Subtotal$7,648
$4,520
$6,840
$4,337
Valuation allowances(1,262)—
(1,225)—
Total$6,386
$4,520
$5,615
$4,337

Operating Loss and Tax Credit Carryforwards at Dec 3120192018
In millionsAssetsAssets
Operating loss carryforwards  
Expire within 5 years$263
$245
Expire after 5 years or indefinite expiration1,133
1,196
Total operating loss carryforwards$1,396
$1,441
Tax credit carryforwards  
Expire within 5 years$32
$32
Expire after 5 years or indefinite expiration492
606
Total tax credit carryforwards$524
$638
Total operating loss and tax credit carryforwards$1,920
$2,079

Undistributed earnings of foreign subsidiaries and related companies that are deemed to be permanently invested amounted to $7,401 million at December 31, 2020 and $6,851 million at December 31, 2019 and $6,014 million at December 31, 2018. The Act imposed U.S. tax on all post-1986 foreign unrepatriated2019. Undistributed earnings accumulated through December 31, 2017. Unrepatriated earnings generated after December 31, 2017, are now subject to tax in the current year. All undistributed earnings are still subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply. It is not practicable to calculate the unrecognized deferred tax liability on undistributed earnings.

The following table provides a reconciliation of the Company's unrecognized tax benefits:

Total Gross Unrecognized Tax Benefits   
In millions201920182017
Total unrecognized tax benefits at Jan 1$314
$255
$231
Decreases related to positions taken on items from prior years(1)(8)(4)
Increases related to positions taken on items from prior years16
68
37
Increases related to positions taken in the current year10
2
12
Settlement of uncertain tax positions with tax authorities(19)—
(12)
Decreases due to expiration of statutes of limitations—
(1)(9)
Foreign exchange gain(1)(2)—
Total unrecognized tax benefits at Dec 31$319
$314
$255
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate$234
$235
$245
Total amount of interest and penalties (benefit) recognized in "Provision for income taxes on continuing operations"$(11)$(12)$2
Total accrual for interest and penalties recognized in the consolidated balance sheets$100
$109
$110

Total Gross Unrecognized Tax Benefits
In millions202020192018
Total unrecognized tax benefits at Jan 1$319 $314 $255 
Decreases related to positions taken on items from prior years(1)(1)(8)
Increases related to positions taken on items from prior years52 16 68 
Increases related to positions taken in the current year18 10 2 
Settlement of uncertain tax positions with tax authorities(14)(19)0 
Decreases due to expiration of statutes of limitations(1)0 (1)
Foreign exchange gain0 (1)(2)
Total unrecognized tax benefits at Dec 31$373 $319 $314 
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate$285 $234 $235 
Total amount of interest and penalties expense (benefit) recognized in "Provision for income taxes on continuing operations"$84 $(11)$(12)
Total accrual for interest and penalties recognized in the consolidated balance sheets$144 $100 $109 
On January 9, 2017, the U.S. Supreme Court denied
certiorari in the Company’s tax treatment of partnerships and transactions associated with Chemtech, a wholly owned subsidiary. The Company has fully accrued the position and does not expect a future impact to “Provision for income taxes on continuing operations” in the consolidated statements of income as a result of the ruling.


93

Prior to the separation, TDCC and its consolidated subsidiaries were included in DowDuPont's consolidated federal income tax group and consolidated tax return. Generally, the consolidated tax liability of the DowDuPont U.S. tax group for each year will bewas apportioned among the members of the consolidated group based on each member’s separate taxable income. TDCC and DuPont intend that, to the extent federal and/or state corporate income tax liabilities are reduced through the utilization of tax attributes of the other, settlement of any receivable and payable generated from the use of the other party’s sub-group attributes will be in accordance with a tax sharing agreement and/or tax matters agreement. At December 31, 2019,2020, the Company had a receivable of $312$261 million as part ofrelated to the tax sharing agreement, which is included in "Noncurrent receivables""Other current assets" in the consolidated balance sheets. At December 31, 2018, the Company had a receivable related to the tax sharing agreement of $89sheets ($312 million included in "Accounts and notes receivable - Other" in the consolidated balance sheets."Noncurrent receivables" at December 31, 2019).

Each year, the Company files tax returns in the various national, state and local income taxing jurisdictions in which it operates. These tax returns are subject to examination and possible challenge by the tax authorities. Positions challenged by the tax authorities may be settled or appealed by the Company. As a result, there is an uncertainty in income taxes recognized in the Company’s financial statements in accordance with accounting for income taxes and accounting for uncertainty in income taxes. The ultimate resolution of such uncertainties is not expected to have a material impact on the Company's results of operations.

105

Tax years that remain subject to examination for the Company’s major tax jurisdictions are shown below:

Tax Years Subject to Examination by Major Tax Jurisdiction at Dec 31, 20192020Earliest Open Year
Jurisdiction
Argentina20132014
Brazil20062015
Canada2012
China20092010
Germany20102014
Italy20152016
The Netherlands2016
Switzerland2016
United States:
Federal income tax2004
State and local income tax2004


The reserve for non-income tax contingencies related to issues in the United States and foreign locations was $44$33 million at December 31, 20192020 ($9144 million at December 31, 2018)2019). This is management’s best estimate of the potential liability for non-income tax contingencies. Inherent uncertainties exist in estimates of tax contingencies due to changes in tax law, both legislated and concluded through the various jurisdictions’ tax court systems. It is the opinion of the Company’s management that the possibility is remote that costs in excess of those accrued will have a material impact on the Company’s consolidated financial statements.



94
106

NOTE 109 - EARNINGS PER SHARE CALCULATIONS
The following tables provide earnings per share calculations of Dow Inc. for the years ended December 31, 2020, 2019, 2018, and 2017.2018. In accordance with the accounting guidance for earnings per share, 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 Calculations202020192018
In millions
Income (loss) from continuing operations, net of tax$1,294 $(1,717)$2,940 
Net income attributable to noncontrolling interests - continuing operations(69)(74)(102)
Net income attributable to participating securities - continuing operations 1
(9)(6)0 
Income (loss) from continuing operations attributable to common stockholders$1,216 $(1,797)$2,838 
Income from discontinued operations, net of tax$0 $445 $1,835 
Net income attributable to noncontrolling interests - discontinued operations0 (13)(32)
Income from discontinued operations attributable to common stockholders$0 $432 $1,803 
Net income (loss) attributable to common stockholders$1,216 $(1,365)$4,641 

Earnings (Loss) Per Share Calculations - Basic202020192018
Dollars per share
Income (loss) from continuing operations attributable to common stockholders$1.64 $(2.42)$3.80 
Income from discontinued operations, net of tax0 0.58 2.41 
Net income (loss) attributable to common stockholders$1.64 $(1.84)$6.21 

Earnings (Loss) Per Share Calculations - Diluted202020192018
Dollars per share
Income (loss) from continuing operations attributable to common stockholders$1.64 $(2.42)$3.80 
Income from discontinued operations, net of tax0 0.58 2.41 
Net income (loss) attributable to common stockholders$1.64 $(1.84)$6.21 

Share Count Information202020192018
Shares in millions
Weighted-average common shares outstanding - basic 2
740.5 742.5 747.2 
Plus dilutive effect of equity compensation plans 3
1.8 0 0 
Weighted-average common shares outstanding - diluted 2, 3
742.3 742.5 747.2 
Stock options and restricted stock units excluded from EPS calculations 4
14.2 20.8 0 
1.Restricted stock units are considered participating securities due to the Company's practice of paying dividend equivalents on unvested shares.
2.Share amounts for the year ended December 31, 2018 were based on 2,246.3 million DowDuPont common shares outstanding as of the Record Date for the April 1, 2019 distribution, less 4.6 million Employee Stock Ownership Plan ("ESOP") shares that had not been released and were not considered outstanding, adjusted for the Distribution Ratio. There was no dilutive effect for the year ended December 31, 2018 as the Company did not engage in activities giving rise to dilution.
3.The year ended December 31, 2019 reflected a loss from continuing operations, and as such, the basic share count was used for purposes of calculating earnings per share on a diluted basis.
4.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. For the year ended December 31, 2018, the Company did not engage in activities giving rise to dilution.

107
Net Income (Loss) for Earnings Per Share Calculations201920182017
In millions
Income (loss) from continuing operations, net of tax$(1,717)$2,940
$(1,287)
Net income attributable to noncontrolling interests - continuing operations(74)(102)(102)
Net income attributable to participating securities - continuing operations 1
(6)—
(8)
Income (loss) from continuing operations attributable to common stockholders$(1,797)$2,838
$(1,397)
Income from discontinued operations, net of tax$445
$1,835
$1,882
Net income attributable to noncontrolling interests - discontinued operations(13)(32)(28)
Net income attributable to participating securities - discontinued operations 1
—
—
(6)
Income from discontinued operations attributable to common stockholders$432
$1,803
$1,848
Net income (loss) attributable to common stockholders$(1,365)$4,641
$451
Earnings Per Share Calculations - Basic201920182017
Dollars per share
Income (loss) from continuing operations attributable to common stockholders$(2.42)$3.80
$(1.88)
Income from discontinued operations, net of tax0.58
2.41
2.48
Net income (loss) attributable to common stockholders$(1.84)$6.21
$0.60
Earnings Per Share Calculations - Diluted201920182017
Dollars per share
Income (loss) from continuing operations attributable to common stockholders$(2.42)$3.80
$(1.88)
Income from discontinued operations, net of tax0.58
2.41
2.48
Net income (loss) attributable to common stockholders$(1.84)$6.21
$0.60
Share Count Information201920182017
Shares in millions
Weighted-average common shares - basic 2, 3
742.5
747.2
744.8
Plus dilutive effect of equity compensation plans—
—
—
Weighted-average common shares - diluted 2, 3, 4
742.5
747.2
744.8
Stock options and restricted stock units excluded from EPS calculations 5
20.8
—
1.1
1.Restricted stock units (formerly termed deferred stock) are considered participating securities due to the Company's practice of paying dividend equivalents on unvested shares.
2.Share amounts for the year ended December 31, 2018 were based on 2,246.3 million DowDuPont common shares outstanding as of the Record Date for the April 1, 2019 distribution, less 4.6 million Employee Stock Ownership Plan ("ESOP") shares that had not been released and were not considered outstanding, adjusted for the Distribution Ratio. There was no dilutive effect for the year ended December 31, 2018 as the Company did not engage in activities giving rise to dilution.
3.Share amounts for the year ended December 31, 2017 were based on 2,246.3 million DowDuPont common shares outstanding as of the Record Date for the April 1, 2019 distribution, less 4.6 million ESOP shares that had not been released and were not considered outstanding, adjusted for the Distribution Ratio and further adjusted by 2.4 million shares for the effect of TDCC basic common shares outstanding during the pre-Merger period. The year ended December 31, 2017 reflected a loss from continuing operations, and as such, the basic share count was used for purposes of calculating earnings per share on a diluted basis.
4.The year ended December 31, 2019 reflected a loss from continuing operations, and as such, the basic share count was used for purposes of calculating earnings per share on a diluted basis.
5.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. For the year ended December 31, 2018, the Company did not engage in activities giving rise to dilution.


95

NOTE 1110 – INVENTORIES
The following table provides a breakdown of inventories:
Inventories at Dec 31  
In millions20192018
Finished goods$3,505
$4,313
Work in process1,122
1,335
Raw materials628
674
Supplies845
826
Total$6,100
$7,148
Adjustment of inventories to a LIFO basis114
(249)
Total inventories$6,214
$6,899

Inventories at Dec 31
In millions20202019
Finished goods$3,140 $3,505 
Work in process996 1,122 
Raw materials598 628 
Supplies933 845 
Total$5,667 $6,100 
Adjustment of inventories to the LIFO basis34 114 
Total inventories$5,701 $6,214 

Inventories valued on athe LIFO basis represented 30 percent of the total inventories at December 31, 2020 and 32 percent of the total inventories at December 31, 2019 and 34 percent of the total inventories at December 31, 2018.2019.


NOTE 1211 – PROPERTY
The following table provides a breakdown of property:
Property at Dec 31Estimated Useful 
Lives (Years)		20202019
In millions
Land and land improvements0-25$2,011 $2,177 
Buildings5-504,976 4,742 
Machinery and equipment3-2542,108 40,651 
Other property3-505,626 5,354 
Construction in progress 1
— 1,604 1,986 
Total property $56,325 $54,910 
1.The decrease is primarily related to the Company proactively reducing capital spending in 2020 to focus on cash and maintaining financial strength during the COVID-19 pandemic.
Property at Dec 31
Estimated Useful 
Lives (Years)
20192018
In millions
Land and land improvements0-25
$2,177
$2,059
Buildings5-50
4,742
4,745
Machinery and equipment3-25
40,651
40,250
Other property3-50
5,354
5,084
Construction in progress—
1,986
1,846
Total property $54,910
$53,984
In millions202020192018
Depreciation expense$2,092 $2,156 $2,174 
Capitalized interest$64 $80 $88 

In millions201920182017
Depreciation expense$2,156
$2,174
$1,955
Capitalized interest$80
$88
$240


108


NOTE 1312 – NONCONSOLIDATED AFFILIATES
The Company’s investments in companies accounted for using the equity method (“nonconsolidated affiliates”) and dividends received from nonconsolidated affiliates are shown in the following tables:

Investments in Nonconsolidated Affiliates at Dec 31
2019 1
2018 1
In millions
Investment in nonconsolidated affiliates$1,404
$3,320
Other noncurrent obligations(80)—
Net investment in nonconsolidated affiliates$1,324
$3,320
1.The carrying amount of the Company’s investments in nonconsolidated affiliates at December 31, 2019, was $51 million less than its share of the investees’ net assets, ($39 million less at December 31, 2018), exclusive of additional differences relating to EQUATE Petrochemical Company K.S.C.C. ("EQUATE"), Sadara and AgroFresh Solutions Inc. ("AFSI"), which are discussed separately in the disclosures that follow.

Dividends Received from Nonconsolidated Affiliates20192018
2017 1
In millions
Dividends from nonconsolidated affiliates$1,020
$663
$654

1.Includes a non-cash dividend of $7 million.

Investments in Nonconsolidated Affiliates at Dec 31
2020 1
2019 1
In millions
Investment in nonconsolidated affiliates$1,327 $1,404 
Other noncurrent obligations(169)(80)
Net investment in nonconsolidated affiliates$1,158 $1,324 

1.The carrying amount of the Company’s investments in nonconsolidated affiliates at December 31, 2020, was $55 million less than its share of the investees’ net assets, ($51 million less at December 31, 2019), exclusive of additional differences relating to Sadara, EQUATE Petrochemical Company K.S.C.C. ("EQUATE") and AgroFresh Solutions Inc. ("AFSI"), which are discussed separately in the disclosures that follow.
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Table of Contents

Dividends Received from Nonconsolidated Affiliates202020192018
In millions
Dividends from nonconsolidated affiliates$425 $1,020 $663 

Except for AFSI, the nonconsolidated affiliates in which the Company has investments are privately held companies; therefore, quoted market prices are not available.

Sadara
In 2011, the Company and Saudi Arabian Oil Company formed Sadara - a joint venture between the two companies that subsequently constructed and now operates a world-scale, fully integrated chemicals complex in Jubail Industrial City, Kingdom of Saudi Arabia. The Company has a 35 percent equity interest in this joint venture and has been, and continues to be, responsible for marketing the majority of Sadara’s products through the Company’s established sales channels. 

The Company’s investment in Sadara was $1,618 million less than Dow’s proportionate share of the carrying value of the underlying net assets held by Sadara at December 31, 2020 ($1,705 million less at December 31, 2019). This basis difference is primarily attributed to the long-lived assets of Sadara and is being amortized over the remaining useful lives of the assets. At December 31, 2020, the Company had a negative investment balance in Sadara of $22 million (0 at December 31, 2019) classified as “Other noncurrent obligations” in the Company’s consolidated balance sheets, related to the Company’s share of Sadara’s AOCL in 2020 offset by the basis difference amortization. The Company expects to continue to recognize its share of potential future losses reported by Sadara. See Note 16 for additional information related to guarantees.

In 2017, Sadara2019, the Company recorded impairment charges related to its investment in Sadara. The joint venture achieved full commercial operations of all its facilities.facilities in 2017. In December 2018, the joint venture successfully completed its Creditors Reliability Test, an extensive operational testing program designed to demonstrate the reliability of the joint venture’s full chemical complex by operating at high rates for an extended period of time. While Sadara hashad reached these operational milestones and hashad been generating positive EBITDA (a non-GAAP measure defined as earnings before interest, taxes, depreciation and amortization), the joint venture hashad yet to report positive net income. During the fourth quarter of 2019, Sadara tested its long-lived assets for impairment using long-term cash flow projections. Sadara’s U.S. GAAP impairment test utilized an undiscounted cash flow methodology, under which Sadara concluded its long-lived assets were recoverable. Due to Sadara's financial condition and its long-lived asset impairment test, Dow evaluated its equity method investment in Sadara for other-than-temporary impairment. The Company utilized a discounted cash flow methodology to measure the estimated fair value of its investment in Sadara, which was estimated to be zero (see Note 2423 for additional information on the fair value measurement). The Company determined the decline in value of its investment in Sadara was other-than-temporary due to Sadara’s financial performance since becoming commercially operational in 2017 and uncertainty around prospects for recovery in Sadara’s financial condition. In addition, the Company reserved certain accounts and notes receivable and accrued interest balances associated with Sadara due to uncertainty around the timing of collection. In total, the Company recorded a $1,755 million pretax charge in the fourth quarter of 2019 related to Sadara, included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics ($370 million), Industrial Intermediates & Infrastructure ($1,168 million) and Corporate ($217 million).

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At December 31, 2019,
In 2020, the Company’s investment in Sadara was $1,705Company loaned $333 million less than Dow’s proportionate share of the carrying value of the underlying net assets held by Sadara. This basis difference is attributed to the long-lived assets of Sadara and will be amortized over a period of 22 years as Sadara recognizes the associated depreciation expense, which represents the estimated remaining useful lives of Sadara’s long-lived assets. Due to the potential for Dow to continue providing financial support to Sadara that was accounted for as in substance common stock and classified as "Investment in nonconsolidated affiliates" in the Company expects to continue to recognize its share of potential future losses reported by Sadara.

Prior to the impairment of the Company’s investment in Sadara and reserve of certain notes receivable at December 31, 2019, theCompany's consolidated balance sheets. The Company loaned $473 million to Sadara and converted $380 million of the notes and accounts receivable into equity during 2019. In 2018, the Company converted $382 million of outstanding notes and accounts receivable with Sadara into equity, primarily due to a shareholder loan reduction agreement with Sadara. In 2017, the Company loaned $735 million to Sadara and converted $718 million to equity. At December 31, 20192020 and 2018,2019, the Company's note receivable with Sadara was 0. Potential future loans and investments will continue to be subject to evaluation for reserve and impairments.

EQUATE
The Company had a negative investment balance in EQUATE of $147 million at December 31, 2020 (negative $80 million at December 31, 2019,2019), classified as "Other noncurrent obligations" in the consolidated balance sheets. At December 31, 2018, the Company had an investment balance in EQUATE of $131 million, classified as "Investment in nonconsolidated affiliates" in the consolidated balance sheets. The Company's investment in EQUATE was $489$475 million less than the Company's proportionate share of EQUATE's underlying net assets at December 31, 20192020 ($502489 million less at December 31, 2018)2019), which represents the difference between the fair values of certain MEGlobal assets acquired by EQUATE and the Company's related valuation on a U.S. GAAP basis. A basis difference of $169$155 million at December 31, 20192020 ($184169 million at December 31, 2018)2019) is being amortized over the remaining useful lives of the assets and the remainder is considered a permanent difference.

AFSI
At December 31, 2019,2020, the Company had an investment in AFSI of $35 million0 ($4835 million at December 31, 2018)2019), classified as "Investment in nonconsolidated affiliates" in the consolidated balance sheets. At December 31, 2019,2020, the Company's investment in AFSI was $102$108 million less than the Company's proportionate share of AFSI's underlying net assets ($101102 million less at December 31, 2018)2019). This amount primarily relates to an other-than-temporary decline in the Company's investment in AFSI. At December 31, 2019,2020, the Company held a 4140 percent ownership interest in AFSI (42(41 percent at December 31, 2018)2019). See Note 25 for additional information on this investment.


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Transactions with Nonconsolidated Affiliates
The Company has service agreements with certain nonconsolidated affiliates, including contracts to manage the operations of manufacturing sites and the construction of new facilities; licensing and technology agreements; and marketing, sales, purchase, lease and sublease agreements.

The Company sells excess ethylene glycol produced at manufacturing facilities in the United States and Europe to MEGlobal, a subsidiary of EQUATE. The Company also sells ethylene to MEGlobal as a raw material for its ethylene glycol plants in Canada. Sales of these products to MEGlobal represented 1 percent of total net sales in 2020, 2019 2018 and 2017.2018. Sales of ethylene to MEGlobal are reflected in the Packaging & Specialty Plastics segment and represented 12 percent of the segment's sales in 2020 (1 percent in 2019 2018 and 2017.2018). Sales of ethylene glycol to MEGlobal are reflected in the Industrial Intermediates & Infrastructure segment and represented 1 percent of the segment's sales in 2020 (1 percent in 2019 and 2 percent of the segment's sales in 2018 and 2017.2018).

The Company is 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. Purchases of Sadara products represented 8 percent of "Cost of sales" in 2019 (92020 (8 percent in 20182019 and 49 percent in 2017)2018).

The Company purchases products from The SCG-Dow Group, primarily for marketing and distribution in Asia Pacific. Purchases of products from The SCG-Dow Group represented 23 percent of "Cost of sales" in 20192020 (2 percent in 20182019 and 3 percent in 2017)2018).

Sales to and purchases from other nonconsolidated affiliates were not material to the consolidated financial statements.

110

Balances due to or due from nonconsolidated affiliates at December 31, 20192020 and 20182019 were as follows:

Balances Due To or Due From Nonconsolidated Affiliates at Dec 3120192018
In millions
Accounts and notes receivable - Other$211
$556
Noncurrent receivables—
8
Total assets$211
$564
Accounts payable - Other$1,092
$1,347
Balances Due To or Due From Nonconsolidated Affiliates at Dec 3120202019
In millions
Accounts and notes receivable - Other$229 $211 
Accounts payable - Other$1,075 $1,092 

Principal Nonconsolidated Affiliates
The Company had an ownership interest in 3735 nonconsolidated affiliates at December 31, 2019 (382020 (37 at December 31, 2018)2019). The Company's principal nonconsolidated affiliates and its ownership interest (direct and indirect) for each at December 31, 2020, 2019 2018 and 20172018 are as follows:

Principal Nonconsolidated Affiliates at Dec 31CountryOwnership Interest
 201920182017
EQUATE Petrochemical Company K.S.C.C.Kuwait42.5%42.5%42.5%
The Kuwait Olefins Company K.S.C.C.Kuwait42.5%42.5%42.5%
The Kuwait Styrene Company K.S.C.C.Kuwait42.5%42.5%42.5%
Map Ta Phut Olefins Company Limited 1
Thailand32.77%32.77%32.77%
Sadara Chemical CompanySaudi Arabia35%35%35%
The SCG-Dow Group:    
Siam Polyethylene Company LimitedThailand50%50%50%
Siam Polystyrene Company LimitedThailand50%50%50%
Siam Styrene Monomer Company LimitedThailand50%50%50%
Siam Synthetic Latex Company LimitedThailand50%50%50%

1.The Company's effective ownership of Map Ta Phut Olefins Company Limited ("Map Ta Phut") is 32.77 percent, of which the Company directly owns 20.27 percent and indirectly owns 12.5 percent through its equity interest in Siam Polyethylene Company Limited.

Principal Nonconsolidated Affiliates at Dec 31CountryOwnership Interest
 202020192018
EQUATE Petrochemical Company K.S.C.C.Kuwait42.5 %42.5 %42.5 %
The Kuwait Olefins Company K.S.C.C.Kuwait42.5 %42.5 %42.5 %
The Kuwait Styrene Company K.S.C.C.Kuwait42.5 %42.5 %42.5 %
Map Ta Phut Olefins Company Limited 1
Thailand32.77 %32.77 %32.77 %
Sadara Chemical CompanySaudi Arabia35 %35 %35 %
The SCG-Dow Group:
Siam Polyethylene Company LimitedThailand50 %50 %50 %
Siam Polystyrene Company LimitedThailand50 %50 %50 %
Siam Styrene Monomer Company LimitedThailand50 %50 %50 %
Siam Synthetic Latex Company LimitedThailand50 %50 %50 %

1.The Company's effective ownership of Map Ta Phut Olefins Company Limited ("Map Ta Phut") is 32.77 percent, of which the Company directly owns 20.27 percent and indirectly owns 12.5 percent through its equity interest in Siam Polyethylene Company Limited.
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The Company’s investment in and equity earnings from its principal nonconsolidated affiliates are shown in the tables below:

Investment in Principal Nonconsolidated Affiliates at Dec 3120192018
In millions
Investment in nonconsolidated affiliates$963
$2,876
Other noncurrent obligations(80)—
Net investment in principal nonconsolidated affiliates$883
$2,876


Investment in Principal Nonconsolidated Affiliates at Dec 3120202019
In millions
Investment in nonconsolidated affiliates$922 $963 
Other noncurrent obligations(169)(80)
Net investment in principal nonconsolidated affiliates$753 $883 
Equity Earnings from Principal Nonconsolidated Affiliates201920182017
In millions
Equity in earnings of principal nonconsolidated affiliates$21
$561
$347

Equity in Earnings (Losses) of Principal Nonconsolidated Affiliates202020192018
In millions
Equity in earnings (losses) of principal nonconsolidated affiliates$(16)$21 $561 
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The summarized financial information that follows represents the combined accounts (at 100 percent) of the principal nonconsolidated affiliates.

Summarized Balance Sheet Information at Dec 3120192018
In millions
Current assets$5,302
$7,553
Noncurrent assets26,477
25,971
Total assets$31,779
$33,524
Current liabilities$3,743
$5,163
Noncurrent liabilities20,271
19,089
Total liabilities$24,014
$24,252
Noncontrolling interests$110
$72


Summarized Balance Sheet Information at Dec 3120202019
In millions
Current assets$5,044 $5,302 
Noncurrent assets25,298 26,477 
Total assets$30,342 $31,779 
Current liabilities$3,942 $3,743 
Noncurrent liabilities20,144 20,271 
Total liabilities$24,086 $24,014 
Noncontrolling interests$132 $110 
Summarized Income Statement Information 1
201920182017
In millions
Sales$10,905
$14,461
$11,629
Gross profit$644
$2,320
$1,992
Income (loss) from continuing operations, net of tax$(277)$1,173
$689

1.The results in this table reflect purchase and sale activity between certain principal nonconsolidated affiliates and the Company, as previously discussed in the "Transactions with Nonconsolidated Affiliates" section.

Summarized Income Statement Information 1
202020192018
In millions
Sales$9,470 $10,905 $14,461 
Gross profit$619 $644 $2,320 
Income (loss) from continuing operations, net of tax$(461)$(277)$1,173 

1.The results in this table reflect purchase and sale activity between certain principal nonconsolidated affiliates and the Company, as previously discussed in the "Transactions with Nonconsolidated Affiliates" section.


NOTE 1413 – GOODWILL AND OTHER INTANGIBLE ASSETS
The following table shows changes in the carrying amounts of goodwill by reportable segment for the years ended December 31, 20192020 and 2018:2019:

GoodwillPackaging & Specialty PlasticsIndustrial Intermediates & InfrastructurePerformance Materials & CoatingsTotal
In millions
Balance at Jan 1, 2018$5,043
$1,101
$3,689
$9,833
Foreign currency impact(24)(6)(39)(69)
Measurement period adjustment - ECP 1
82
—
—
82
Balance at Dec 31, 2018$5,101
$1,095
$3,650
$9,846
Foreign currency impact8
6
(24)(10)
Goodwill impairment—
—
(1,039)(1,039)
Other—
(1)—
(1)
Balance at Dec 31, 2019$5,109
$1,100
$2,587
$8,796

1. Goodwill recognized from the receipt of the ECP businesses as part of the separation from DowDuPont. See Note 4 for additional information.
GoodwillPackaging & Specialty PlasticsIndustrial Intermediates & InfrastructurePerformance Materials & CoatingsTotal
In millions
Balance at Jan 1, 2019$5,101 $1,095 $3,650 $9,846 
Foreign currency impact8 6 (24)(10)
Goodwill Impairment0 0 (1,039)(1,039)
Other0 (1)0 (1)
Balance at Dec 31, 2019$5,109 $1,100 $2,587 $8,796 
Foreign currency impact12 4 106 122 
Sale of rail infrastructure(2)0 0 (2)
Sale of marine and terminal infrastructure(4)(4)0 (8)
Balance at Dec 31, 2020$5,115 $1,100 $2,693 $8,908 


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The separation from DowDuPont did not impact the composition of the Company's six reporting units: Coatings & Performance Monomers, Consumer Solutions, Hydrocarbons & Energy, Industrial Solutions, Packaging and Specialty Plastics and Polyurethanes & Construction Chemicals. The ECP businesses received as part of the separation from DowDuPont are included in the Hydrocarbons & Energy and Packaging and Specialty Plastics reporting units. At December 31, 2019,2020, goodwill was carried by all reporting units except Coatings & Performance Monomers (“C&PM”).

Goodwill Impairments
The carrying amounts of goodwill at December 31, 2020 and 2019 were net of accumulated impairments of $309 million in Industrial Intermediates & Infrastructure ($309 million at December 31, 2018) and $2,530 million in Performance Materials & Coatings ($1,491 million at December 31, 2018).Coatings.


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Goodwill Impairment Testing
The Company performs an impairment test of goodwill annually in the fourth quarter. In 2019,2020, the Company performed qualitative assessments for all reporting units that carried goodwill. Based on the results of the qualitative assessments, the Company performed quantitative testing for 21 reporting units (1unit (2 in 20182019 and 41 in 2017) and a2018). The qualitative assessment was performed forassessments on the remaining reporting units. The qualitative assessmentsunits indicated that it was not more likely than not that fair value was less than the carrying value for those reporting units included in the qualitative test.units.

Upon completion of theThe quantitative testing conducted in the fourth quarter of 2017, the Company determined the C&PM reporting unit was impaired. Throughout 2017, the C&PM reporting unit did not consistently meet expected financial performance targets, primarily due to increasing commoditization in coatings markets2020 and competition, as well as customer consolidation in end markets which reduced growth opportunities. As a result, the C&PM reporting unit lowered future revenue and profitability expectations. The fair value of the C&PM reporting unit was determined using a discounted cash flow methodology that reflected reductions in projected revenue growth rates, primarily driven by modified sales volume and pricing assumptions, as well as revised expectations for future growth rates. These discounted cash flows did not support the carrying value of the C&PM reporting unit. As a result, the Company recorded a goodwill impairment charge for the C&PM reporting unit of $1,491 million in the fourth quarter of 2017, included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to the Performance Materials & Coatings segment. The C&PM reporting unit carried $1,071 million of goodwill at December 31, 2017. No other goodwill impairments were identified as a result of the 2017 testing.

Quantitative testing was performed on the C&PM reporting unit in the fourth quarter of 2018. The fair value of the reporting unit was determined using a discounted cash flow methodology that included plans to undertake modest, higher-return investments in several existing assets, improvements in cost performance and leveraging of technologies. While assessments supported a case for sustaining market growth consistent with GDP projections, the valuation also included adverse impacts related to increased customer purchasing leverage from ongoing customer consolidation. The resulting valuation was compared with the carrying value of the C&PM reporting and the Company2018 concluded that no goodwill impairmentimpairments existed.

Upon completion of the quantitative testing in the fourth quarter of 2019, the Company determined the C&PM reporting unit was impaired. During 2019, the C&PM reporting unit did not consistently meet expected financial performance targets, primarily due to the industry’s increased captive use of coatings products, which led to volume reductions; reduced margins for products across the portfolio due to changes in customer buying patterns and supply and demand balances; as well as a continuous trend of customer consolidation in end markets,end-markets, which reduced growth opportunities. As a result, the C&PM reporting unit lowered its future revenue and profitability projections. The fair value of the C&PM reporting unit was determined using a discounted cash flow methodology that reflected reductions in projected revenue growth rates due to lower sales volume and price assumptions, as well as reductions to future growth rates. These discounted cash flows did not support the carrying value of the C&PM reporting unit. As a result, the Company recorded a goodwill impairment charge of $1,039 million in the fourth quarter of 2019, included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to the Performance Materials & Coatings segment. The carrying value of the C&PM reporting unit's goodwill was 0 at December 31, 2019. No other goodwill impairments were identified as a result of the 2019 testing.


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Other Intangible Assets
The following table provides information regarding the Company’s other intangible assets:

Other Intangible Assets at Dec 3120192018
In millions
Gross
Carrying
Amount
Accum
Amort
Net
Gross
Carrying
Amount
Accum
Amort
Net  
Intangible assets with finite lives:      
Developed technology$2,634
$(1,467)$1,167
$2,634
$(1,252)$1,382
Software1,449
(893)556
1,404
(805)599
Trademarks/tradenames352
(342)10
352
(329)23
Customer-related3,207
(1,184)2,023
3,211
(993)2,218
Total other intangible assets, finite lives$7,642
$(3,886)$3,756
$7,601
$(3,379)$4,222
In-process research and development3
—
3
3
—
3
Total other intangible assets$7,645
$(3,886)$3,759
$7,604
$(3,379)$4,225

Other Intangible Assets at Dec 3120202019
In millionsGross
Carrying
Amount		Accum AmortNetGross
Carrying
Amount		Accum AmortNet
Intangible assets with finite lives:
Developed technology$2,638 $(1,677)$961 $2,634 $(1,467)$1,167 
Software1,489 (989)500 1,449 (893)556 
Trademarks/tradenames352 (343)9 352 (342)10 
Customer-related3,301 (1,419)1,882 3,207 (1,184)2,023 
Total other intangible assets, finite lives$7,780 $(4,428)$3,352 $7,642 $(3,886)$3,756 
In-process research and development0 0 0 3 0 3 
Total other intangible assets$7,780 $(4,428)$3,352 $7,645 $(3,886)$3,759 

The following table provides information regarding amortization expense from continuing operations related to intangible assets:

Amortization Expense from Continuing Operations201920182017
In millions
Other intangible assets, excluding software$419
$469
$400
Software 1
$96
$93
$82

1.Included in "Cost of sales" in the consolidated statements of income.
Amortization Expense from Continuing Operations202020192018
In millions
Other intangible assets, excluding software$401 $419 $469 
Software, included in "Cost of sales"$96 $96 $93 


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Total estimated amortization expense from continuing operations for the next five fiscal years, including amounts expected to be capitalized, is as follows:

Estimated Amortization Expense for Next Five Years
In millions
2020$492
2021$472
2022$411
2023$380
2024$364


Estimated Amortization Expense for Next Five Years
In millions
2021$477 
2022$415 
2023$384 
2024$366 
2025$275 


NOTE 1514 – TRANSFERS OF FINANCIAL ASSETS
Accounts Receivable Programs
The Company maintains committed accounts receivable facilities with various financial institutions, including in the United States, which expires in November 2022 (“U.S. A/R Program”) and in Europe, which expires in July 2023 (“Europe A/R Program” and together with the U.S. A/R Program, "the Programs"). Under the terms of the Programs, the Company may sell certain eligible trade accounts receivable at any point in time, up to $900 million for the U.S. A/R Program and up to €400 million for the Europe A/R Program. Under the terms of the Programs, 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. See Note 16 for additional information related to guarantees. There were 0 receivables sold under the Programs during the years ended December 31, 2020 and 2019.

Accounts Receivable Securitization Facilities
The Company historically sold trade accounts receivable of select North American entities and qualifying trade accounts receivable of select European entities on a revolving basis to certain multi-seller commercial paper conduit entities ("conduits"). The proceeds received were comprised of cash and interests in specified assets of the conduits (the receivables sold by the Company) that entitled the Company to the residual cash flows of such specified assets in the conduits after the commercial paper had been repaid. Neither the conduits nor the investors in those entities had recourse to other assets of the Company in the event of nonpayment by the debtors.

In the fourth quarter of 2017, the Company suspended further sales of trade accounts receivable through these facilities and began reducing outstanding balances through collections of trade accounts receivable previously sold to such conduits. In 2018, the Company recognized a loss of $7 million on the sale of these receivables, which is included in “Interest expense and amortization of debt discount” in the consolidated statements of income. The Company's interests in the conduits were reflected in "Investing Activities" in the consolidated statements of cash flows and were $657 million in 2018. In September and October 2018, the North American and European facilities, respectively, were amended and the terms of the agreements changed from off-balance sheet arrangements to secured borrowing arrangements. In November 2019 and July 2020, the North American and European facilities, respectively, were amended and are no longer secured borrowing arrangements. These facilities were not drawn upon during the period they were secured borrowing arrangements. See Note 1615 for additional information on the secured borrowing arrangements.

In 2018, the Company recognized a loss of $7 million on the sale of these receivables (loss of $25 million in 2017), which is included in “Interest expense and amortization of debt discount” in the consolidated statements of income. There were no sales of receivables through these facilities in 2019.


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114


Following is an analysis of certain cash flows between the Company and the conduits:

Cash Proceeds  
In millions20182017
Sale of receivables$—
$1
Collections reinvested in revolving receivables$—
$21,293
Interests in conduits 1
$657
$9,462

1.Presented in "Investing Activities" in the consolidated statements of cash flows.

North America Accounts Receivable Program
The Company maintains a committed accounts receivable facility in North America (“North America A/R Program”) with various financial institutions, which expires in November 2022. Under the terms of the North America A/R Program, the Company may sell certain eligible trade accounts receivable, up to $900 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. See Note 17 for additional information related to guarantees. There were 0 receivables sold during the year ended December 31, 2019.


NOTE 1615 – NOTES PAYABLE, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES
Notes Payable at Dec 31
In millions20202019
Commercial paper$0 $151 
Notes payable to banks and other lenders156 435 
Total notes payable$156 $586 
Year-end average interest rates3.89 %6.30 %
Notes Payable at Dec 31  
In millions20192018
Commercial paper$151
$10
Notes payable to banks and other lenders435
288
Total notes payable$586
$298
Year-end average interest rates6.30%8.28%


Long-Term Debt at Dec 312020 Average Rate20202019
Average
Rate		2019
In millions
Promissory notes and debentures:
Final maturity 20200 %$0 8.44 %$76 
Final maturity 20218.95 %173 8.95 %174 
Final maturity 20228.64 %121 3.50 %1,372 
Final maturity 20237.63 %250 7.64 %325 
Final maturity 2024 1
3.43 %1,017 3.37 %1,397 
Final maturity 20255.13 %625 5.26 %662 
Final maturity 2026 and thereafter 1
5.22 %10,888 5.73 %8,820 
Other facilities:
U.S. dollar loans0 %0 2.55 %2,000 
Foreign currency notes and loans, various rates and maturities1.41 %3,189 3.26 %592 
InterNotes®, varying maturities through 20503.56 %535 3.44 %928 
Finance lease obligations 2
518 395 
Unamortized debt discount and issuance costs(365)(331)
Long-term debt due within one year 3
(460)(435)
Long-term debt$16,491 $15,975 
1.Cost includes net fair value hedge adjustment gains of $69 million at December 31, 2020 ($1 million at December 31, 2019). See Note 22 for additional information.
Long-Term Debt at Dec 312019 Average Rate2019
2018
Average
Rate
2018
In millions
Promissory notes and debentures:    
Final maturity 2019—%$—
9.80%$7
Final maturity 20208.44%76
4.46%1,547
Final maturity 20218.95%174
4.71%1,424
Final maturity 20223.50%1,372
3.50%1,373
Final maturity 20237.64%325
7.64%325
Final maturity 20243.37%1,397
3.50%896
Final maturity 2025 and thereafter5.70%9,482
5.98%7,963
Other facilities:    
U.S. dollar loans, various rates and maturities2.55%2,000
3.59%4,533
Foreign currency loans, various rates and maturities3.26%592
3.20%708
InterNotes®, varying maturities through 20493.44%928
3.26%778
Finance lease obligations 1
 395
 371
Unamortized debt discount and issuance costs (331) (334)
Long-term debt due within one year 2
 (435) (338)
Long-term debt

$15,975


$19,253
2.See Note 17 for additional information.
3.Presented net of current portion of unamortized debt issuance costs.

1.See Note 18 for additional information.
2.Presented net of current portion of unamortized debt issuance costs.

Maturities of Long-Term Debt for Next Five Years at Dec 31, 2020
In millions
2021$460 
2022$236 
2023$381 
2024$1,079 
2025$717 

2020 Activity
In February 2020, the Company issued €2.25 billion aggregate principal amount of notes (“Euro Notes”). The Euro Notes included €1 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, ("Term Loan Facility”). 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 and related to Corporate.

102
115


Maturities of Long-Term Debt for Next Five Years at Dec 31, 2019
In millions
2020$435
2021$511
2022$1,513
2023 1
$2,508
2024$1,528

1.Assumes the option to extend maturity to 2023 will be exercised for the $2 billion Dow Silicones Term Loan Facility.
In the first quarter of 2020, the Company withdrew $800 million under various uncommitted bilateral credit arrangements, which were subsequently repaid in the second quarter of 2020.

In August 2020, the Company issued $2 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 and related to Corporate.

In 2020, the Company also issued an aggregate principal amount of $190 million of InterNotes®, and redeemed an aggregate principal amount of $180 million at maturity. In addition, the Company voluntarily repaid an aggregate principal amount of $400 million of InterNotes® with various maturities. As a result, the Company recognized a pretax loss on the early extinguishment of debt of $2 million, included in “Sundry income (expense) – net” in the consolidated statements of income and related to Corporate. Additionally, the Company repaid $134 million of long-term debt at maturity and approximately $29 million of long-term debt was repaid by consolidated variable interest entities.

Subsequent Event
On January 15, 2021, the Company announced a call for $118 million of InterNotes® with various maturities, which will settle on February 15, 2021.

2019 Activity
In 2019, the Company issued $2 billion of senior unsecured notes in an offering under Rule 144A of the Securities Act of 1933. The offering included $750 million aggregate principal amount of 4.80 percent notes due 2049; $750 million aggregate principal amount of 3.625 percent notes due 2026; and $500 million aggregate principal amount of 3.15 percent notes due 2024. In addition, the Company redeemed $1.5 billion of 4.25 percent notes with maturity in 2020 and $1.25 billion of 4.125 percent notes with maturity in 2021. As a result, the Company recognized a pretax loss of $100 million on the early extinguishment of debt, included in "Sundry income (expense) - net" in the consolidated statements of income and related to the Corporate segment.Corporate. The Company also issued an aggregate principal amount of $277 million of InterNotes®, and redeemed an aggregate principal amount of $122 million at maturity. Approximately $149 million of long-term debt (net of $16 million of issuances) was repaid by consolidated variable interest entities.

In 2019, Dow Silicones voluntarily repaid $2.5 billion of principal under a certain third party credit agreement ("the Term Loan Facility").Facility. As a result, Dow Silicones recognized a pretax loss of $2 million on the early extinguishment of debt, included in "Sundry income (expense) - net" in the consolidated statements of income and related to the Corporate segment. Dow Silicones also amended the Term Loan Facility to extend the maturity date on the remaining principal balance of $2 billion, making amounts borrowed under the Term Loan Facility payable in September 2021. In addition, this amendment includes options to extend the maturity date through September 2023, at Dow Silicones' election, which the Company intends to exercise.Corporate.

In October 2019, TDCC launched exchange offers for $4 billion of all the outstanding, unregistered senior notes that were issued in private offerings on November 30, 2018 and May 20, 2019, for identical, registered notes under the Securities Act of 1933 (the “Exchange Offers”). The Exchange Offers arewere with respect to the Company’s 3.15 percent notes due 2024, 4.55 percent notes due 2025, 3.625 percent notes due 2026, 4.80 percent notes due 2028, 5.55 percent notes due 2048 and 4.80 percent notes due 2049, and fulfilled the Company’s obligations contained in the registration rights agreements entered into in connection with the issuance of the aforementioned notes.

2018 Activity
In 2018, the Company redeemed $333 million of 5.70 percent notes at maturity and an aggregate principal amount of $91 million of InterNotes® at maturity. In addition, approximately $138 million of long-term debt was repaid by consolidated variable interest entities. The Company also called an aggregate principal amount of $343 million tax-exempt bonds of various interest rates and maturities in 2029, 2033 and 2038. As a result of these redemptions, the Company recognized a pretax loss of $6 million on the early extinguishment of debt, included in “Sundry income (expense) - net” in the consolidated statements of income and related to Corporate.

In November 2018, the Company issued $2 billion of senior unsecured notes in an offering under Rule 144A of the Securities Act of 1933. The offering included $900 million aggregate principal amount of 5.55 percent notes due
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2048; $600 million aggregate principal amount of 4.80 percent notes due 2028; and $500 million aggregate principal amount of 4.55 percent notes due 2025.

In December 2018, the Company tendered and redeemed $2.1 billion of 8.55 percent notes issued by the Company with maturity in 2019. As a result, the Company recognized a pretax loss of $48 million on the early extinguishment of debt, included in "Sundry income (expense) - net" in the consolidated statements of income and related to Corporate.

2017 Activity
In 2017, the Company redeemed $436 million of 6.00 percent notes that matured on September 15, 2017, and an aggregate principal amount of $32 million of InterNotes® at maturity. In addition, approximately $119 million of long-term debt was repaid by consolidated variable interest entities.


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Available Credit Facilities
The following table summarizes the Company's credit facilities:

Committed and Available Credit Facilities at Dec 31, 2019
In millionsCommitted CreditCredit AvailableMaturity DateInterest
Five Year Competitive Advance and Revolving Credit Facility$5,000
$5,000
October 2024Floating rate
Term Loan Facility 1
2,000
—
September 2023Floating rate
European Securitization Facility 2
448
448
October 2020Floating rate
Bilateral Revolving Credit Facility100
100
March 2020Floating rate
Bilateral Revolving Credit Facility100
100
March 2020Floating rate
Bilateral Revolving Credit Facility280
280
March 2020Floating rate
Bilateral Revolving Credit Facility200
200
May 2020Floating rate
Bilateral Revolving Credit Facility200
200
July 2020Floating rate
Bilateral Revolving Credit Facility100
100
August 2020Floating rate
Bilateral Revolving Credit Facility300
300
December 2020Floating rate
Bilateral Revolving Credit Facility300
300
December 2021Floating rate
Bilateral Revolving Credit Facility100
100
October 2024Floating rate
Bilateral Revolving Credit Facility100
100
October 2024Floating rate
Bilateral Revolving Credit Facility200
200
November 2024Floating rate
Total Committed and Available Credit Facilities$9,428
$7,428
  

1.Assumes the option to extend the Term Loan Facility will be exercised.
2.Equivalent to Euro 400 million.
Committed and Available Credit Facilities at Dec 31, 2020
In millionsCommitted CreditCredit AvailableMaturity DateInterest
Five Year Competitive Advance and Revolving Credit Facility$5,000 $5,000 October 2024Floating rate
Bilateral Revolving Credit Facility200 200 November 2021Floating rate
Bilateral Revolving Credit Facility300 300 December 2021Floating rate
Bilateral Revolving Credit Facility300 300 December 2021Floating rate
Bilateral Revolving Credit Facility150 150 March 2022Floating rate
Bilateral Revolving Credit Facility100 100 June 2022Floating rate
Bilateral Revolving Credit Facility200 200 September 2022Floating rate
Bilateral Revolving Credit Facility200 200 September 2023Floating rate
Bilateral Revolving Credit Facility250 250 September 2023Floating rate
Bilateral Revolving Credit Facility300 300 September 2023Floating rate
Bilateral Revolving Credit Facility100 100 October 2024Floating rate
Bilateral Revolving Credit Facility100 100 October 2024Floating rate
Bilateral Revolving Credit Facility200 200 November 2024Floating rate
Bilateral Revolving Credit Facility100 100 March 2025Floating rate
Bilateral Revolving Credit Facility250 250 March 2025Floating rate
Bilateral Revolving Credit Facility350 350 March 2025Floating rate
Total Committed and Available Credit Facilities$8,100 $8,100 

Secured Borrowings
In September 2018, the Company renewed its North American accounts receivable securitization facility for a one year term and amended the terms of the agreement from an off-balance sheet arrangement to a secured borrowing arrangement, with a borrowing capacity up to $800 million. Under the structure of the amended agreement, the Company had the option to use select trade accounts receivable to collateralize the credit facility with certain lenders. In November 2019, the facility was amended and is no longer a secured borrowing arrangement. It hadwas not been drawn upon during its term as a secured borrowing arrangement.

In October 2018, the Company renewed its European accounts receivable securitization facility for a two year term and amended the terms of the agreement from an off-balance sheet arrangement to a secured borrowing arrangement, with a borrowing capacity up to Euro 400€400 million. Under the structure of the amended agreement, the Company willhad the option to use select trade accounts receivable to collateralize the credit facility with certain lenders. At December 31, 2019 and 2018,In July 2020, the facility hadwas amended and is no longer a secured borrowing arrangement. It was not been drawn upon.upon during its term as a secured borrowing arrangement. See Note 14 for additional information related to the accounts receivable programs.

Letters of Credit
The Company utilizes letters of credit to support commitments made in the ordinary course of business. While the terms and amounts of letters of credit change, the Company generally has approximately $400 million of outstanding letters of credit at any given time. In addition, at December 31, 2020, the Company had a $220 million outstanding letter of credit related to a guarantee of the Company’s share of one future debt service schedule payment for Sadara. See Note 16 for additional information related to guarantees.
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Debt Covenants and Default Provisions
TDCC’s outstanding long-term debt has been issued primarily under indentures which contain, among other provisions, certain customary restrictive covenants with which TDCC must comply while the underlying notes are outstanding. Failure of TDCC to comply with any of its covenants, could result in a default under the applicable indenture and allow the note holders to accelerate the due date of the outstanding principal and accrued interest on the underlying notes.

TDCC's indenture covenants include obligations to not allow liens on principal U.S. manufacturing facilities, enter into sale and lease-back transactions with respect to principal U.S. manufacturing facilities, merge or consolidate with any other corporation, or sell, lease or convey, directly or indirectly, all or substantially all of TDCC’s assets. The outstanding debt also contains customary default provisions. TDCC remains in compliance with these covenants.


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TDCC’s primary, private credit agreements also contain certain customary restrictive covenant and default provisions in addition to the covenants set forth above with respect to TDCC’s debt. Significant other restrictive covenants and default provisions related to these agreements include:

(a)the obligation to maintain the ratio of TDCC’s consolidated indebtedness to consolidated capitalization at no greater than 0.65 to 1.00 at any time the aggregate outstanding amount of loans under the Five Year Competitive Advance and Revolving Credit Facility Agreement ("Revolving Credit Agreement") dated October 30, 2018, equals or exceeds $500 million,
(a)     the obligation to maintain the ratio of TDCC’s consolidated indebtedness to consolidated capitalization at no greater than 0.65 to 1.00 at any time the aggregate outstanding amount of loans under the Five Year Competitive Advance and Revolving Credit Facility Agreement ("Revolving Credit Agreement") dated October 30, 2018, equals or exceeds $500 million,

(b)a default if TDCC or an applicable subsidiary fails to make any payment, including principal, premium or interest, under the applicable agreement on other indebtedness of, or guaranteed by, TDCC or such applicable subsidiary in an aggregate amount of $100 million or more when due, or any other default or other event under the applicable agreement with respect to such indebtedness occurs which permits or results in the acceleration of $400 million or more in the aggregate of principal, and
(b)     a default if TDCC or an applicable subsidiary fails to make any payment, including principal, premium or interest, under the applicable agreement on other indebtedness of, or guaranteed by, TDCC or such applicable subsidiary in an aggregate amount of $100 million or more when due, or any other default or other event under the applicable agreement with respect to such indebtedness occurs which permits or results in the acceleration of $400 million or more in the aggregate of principal, and

(c)a default if TDCC or any applicable subsidiary fails to discharge or stay within 60 days after the entry of a final judgment against TDCC or such applicable subsidiary of more than $400 million.
(c)    a default if TDCC or any applicable subsidiary fails to discharge or stay within 60 days after the entry of a final judgment against TDCC or such applicable subsidiary of more than $400 million.

Failure of TDCC to comply with any of the covenants or default provisions could result in a default under the applicable credit agreement which would allow the lenders to not fund future loan requests and to accelerate the due date of the outstanding principal and accrued interest on any outstanding indebtedness.

On April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC. In conjunction with the separation, Dow Inc. is obligated, substantially concurrently with the issuance of any guarantee in respect of outstanding or committed indebtedness under TDCC's Revolving Credit Agreement, to enter into a supplemental indenture with TDCC and the trustee under TDCC’s existing 2008 base indenture governing certain notes issued by TDCC. Under such supplemental indenture, Dow Inc. will guarantee all outstanding debt securities and all amounts due under such existing base indenture and will become subject to certain covenants and events of default under the existing base indenture.

In addition, the Revolving Credit Agreement includes an event of default which would be triggered in the event Dow Inc. incurs or guarantees third party indebtedness for borrowed money in excess of $250 million or engages in any material activity or directly owns any material assets, in each case, subject to certain conditions and exceptions. Dow Inc. may, at its option, cure the event of default by delivering an unconditional and irrevocable guarantee to the administrative agent within thirty days of the event or events giving rise to such event of default.

No such events have occurred or have been triggered at the time of the filing of this Annual Report on Form 10-K.


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NOTE 1716 – COMMITMENTS AND CONTINGENT LIABILITIES
Environmental Matters
Introduction
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 December 31, 2019,2020, the Company had accrued obligations of $1,155$1,244 million for probable environmental remediation and restoration costs, including $207$248 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 or 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 the environmental liability. At December 31, 2018,2019, the Company had accrued obligations of $810$1,155 million for probable environmental remediation and restoration costs, including $156$207 million for the remediation of Superfund sites.


As part of the Company's 2020 Restructuring Program, in the third quarter of 2020, the Company recorded a pretax charge related to environmental remediation matters. This charge resulted from the Company's evaluation of the costs required to manage remediation activities at sites Dow will permanently shut down as part of its 2020 Restructuring Program. In addition, the Company recorded indemnification assets of $50 million related to Dow Silicones' environmental matters. The Company recognized a pretax charge, net of indemnifications, of $56 million, included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Performance Materials & Coatings ($52 million) and Corporate ($4 million). See Note 6 for additional information.
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In the third quarter of 2019, the Company recorded a pretax charge related to environmental remediation matters at a number of current and historical locations. The charge primarily resulted from: the culmination of long-standing negotiations and discussions with regulators and agencies, including technical studies supporting higher cost estimates for final or staged remediation plans; the Company’s evaluation of the cost required to manage remediation activities at sites affected by Dow’s separation from DowDuPont and related agreements with Corteva and DuPont; and, the Company’s review of its closure strategies and obligations to monitor ongoing operations and maintenance activities. In addition, the Company recorded indemnification assets of $48 million related to Dow Silicones’ environmental matters. The Company recognized a pretax charge, net of indemnifications, of $399 million related to these environmental matters, included in “Cost of sales” in the consolidated statements of income and related to Packaging & Specialty Plastics ($5 million), Industrial Intermediates & Infrastructure ($8 million), Performance Materials & Coatings ($50 million) and Corporate ($336 million).

The following table summarizes the activity in the Company's accrued obligations for environmental matters for the years ended December 31, 20192020 and 2018:2019:

Accrued Obligations for Environmental Matters20192018
In millions
Balance at Jan 1$810
$865
Accrual adjustment590
176
Payments against reserve(241)(208)
Foreign currency impact(4)(23)
Balance at Dec 31$1,155
$810

Accrued Obligations for Environmental Matters20202019
In millions
Balance at Jan 1$1,155 $810 
Accrual adjustment285 590 
Payments against reserve(198)(241)
Foreign currency impact2 (4)
Balance at Dec 31$1,244 $1,155 

The amounts charged to income on a pretax basis related to environmental remediation totaled $234 million in 2020, $588 million in 2019 and $176 million in 2018 and $163 million in 2017.2018. Capital expenditures for environmental protection were $80 million in 2020, $83 million in 2019 and $55 million in 2018 and $57 million in 2017.2018.
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Midland Off-Site Environmental Matters
On June 12, 2003, the Michigan Department of Environmental Quality ("MDEQ") issued a Hazardous Waste Operating License (the "License") to the Company’s Midland, Michigan, manufacturing site (the “Midland Site”), which was renewed and replaced by the MDEQ on September 25, 2015, and included provisions requiring the Company to conduct an investigation to determine the nature and extent of off-site contamination in the City of Midland soils, the Tittabawassee River and Saginaw River sediment and floodplain soils, and the Saginaw Bay, and, if necessary, undertake remedial action. In 2016, final regulatory approval was received from the MDEQ for the City of Midland and the Company is continuing the long term monitoring requirements of the Remedial Action Plan.

Tittabawassee and Saginaw Rivers, Saginaw Bay
The Company, the U.S. Environmental Protection Agency (“EPA”) and the State of Michigan ("State") entered into an administrative order on consent (“AOC”), effective January 21, 2010, that requires the Company to conduct a remedial investigation, a feasibility study and a remedial design for the Tittabawassee River, the Saginaw River and the Saginaw Bay, and pay the oversight costs of the EPA and the State under the authority of the Comprehensive Environmental Response, Compensation, and Liability Act. These actions, to be conducted under the lead oversight of the EPA, will build upon the investigative work completed under the State Resource Conservation Recovery Act program from 2005 through 2009.

The Tittabawassee River, beginning at the Midland Site and extending down to the first six miles of the Saginaw River, are designated as the first Operable Unit for purposes of conducting the remedial investigation, feasibility study and remedial design work. This work will be performed in a largely upriver to downriver sequence for eight geographic segments of the Tittabawassee and upper Saginaw Rivers. In the first quarter of 2012, the EPA requested the Company address the Tittabawassee River floodplain ("Floodplain") as an additional segment. In January 2015, the Company and the EPA entered into an order to address remediation of the Floodplain. The remedial work is expected to continue over the next threetwo years. The remainder of the Saginaw River and the Saginaw Bay are designated as a second Operable Unit and the work associated with that unit may also be geographically segmented. The AOC does not obligate the Company to perform removal or remedial action; that action can only be required by a separate order. The Company and the EPA have been negotiating orders separate from the AOC that obligate the Company to perform remedial actions under the scope of work of the AOC. The Company and the EPA have entered into six separate orders to perform limited remedial actions in seven of the eight geographic segments in the first Operable Unit, including the Floodplain. Dow has received from the EPA a Notice of Completion of Work for three of these six orders and the Company continues the long-term monitoring requirements. Dow also has entered into a separate order to perform a limited remedial action for certain properties located within the second Operable Unit.


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Alternative Dispute Resolution Process
The Company, the EPA, the U.S. Department of Justice ("DOJ"), and the natural resource damage trustees (which include the Michigan Office of the Attorney General, the Michigan Department of Environment, Great Lakes and Energy, the Michigan Department of Natural Resources, the U.S. Fish and Wildlife Service, the U.S. Bureau of Indian Affairs and the Saginaw-Chippewa Indian Tribe of Michigan) have been engaged in negotiations to seek to resolve potential governmental claims against the Company for natural resource damages related to historical off-site contamination associated with the City of Midland, the Tittabawassee and Saginaw Rivers and the Saginaw Bay. The Company and the governmental parties started meeting in the fall of 2005 and entered into a Confidentiality Agreement in December 2005.

On November 8, 2019, a proposed consent decree on this matter was filed inJuly 20, 2020, the U.S. District Court for the Eastern District of Michigan ("District Court"), entered a final consent decree in Civil Action No. 1:19-cv-13292 between the Company and federal, state and tribal trustees to resolve allegations of natural resource damages arising from the historic operations of the Company’s Midland Site. On November 14, 2019, a Notice of Lodging and Notice of Availability and Request for Comments on Draft Restoration Plan/Environmental Assessment was published in the Federal Register. Public comments on the proposedThe consent decree andrequired the draft Restoration Plan/Environmental Assessment were requiredCompany to pay a $15 million cash settlement to be submitted within 45 days of that publication.used for long-term maintenance and trustee-selected remediation projects with an additional $7 million to specified local projects managed by third parties. These funds were paid in December 2020. The consent decree further requires the Company to complete 13 additional environmental restoration projects which are valued by the trustees at approximately $77 million, to be conducted over the next several years.

At December 31, 2019,2020, the accrual for these off-site matters was $107 million (included in the total accrued obligation of $1,244 million). At December 31, 2019, the Company had an accrual for these off-site matters of $135 million (included in the total accrued obligation of $1,155 million). At December 31, 2018, the Company had an accrual for these off-site matters

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Environmental Matters Summary
It is the opinion of the Company’s management that the possibility is remote that costs in excess of those disclosed will have a material impact on the Company’s results of operations, financial condition or cash flows.

Litigation
Asbestos-Related Matters of Union Carbide Corporation
Introduction
Union Carbide is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-containing products located on Union Carbide’s premises and Union Carbide’s responsibility for asbestos suits filed against a former Union Carbide subsidiary, Amchem Products, Inc. ("Amchem"). In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to Union Carbide’s products. Union Carbide expects more asbestos-related suits to be filed against Union Carbide and Amchem in the future, and will aggressively defend or reasonably resolve, as appropriate, both pending and future claims.

Estimating the Asbestos-Related Liability

Based on a study completed by Ankura Consulting Group, LLC ("Ankura") in January 2003, Union Carbide increased its December 31, 2002, asbestos-related liability for pending and future claims for a 15-year period ending in 2017 to $2.2 billion, excluding future defense and processing costs. In subsequent years, Union Carbide compared current asbestos claim and resolution activity to the results of the most recent Ankura study at each balance sheet date to determine whether the accrual continued to be appropriate.

In 2016, Ankura completed a study to provide estimates for the undiscounted cost of disposing of pending and future claims against Union Carbide and Amchem through the terminal year of 2049, including a reasonable forecast of future defense and processing costs. Based on the study and Union Carbide’s internal review of asbestos claim and resolution activity, Union Carbide determined estimating the liability through the terminal year of 2049 was more appropriate due to increased knowledge and data about the costs to resolve claims and diminished volatility in filing rates. Union Carbide and the Company also determined that estimating and accruing a liability for future asbestos-related defense and processing costs was more appropriate as such costs represent expenditures related to legacy activities that do not contribute to current or future revenue generating activities of Union Carbide and the Company and is also reflective of the manner in which Union Carbide manages its asbestos-related exposure, including careful monitoring of the correlation between defense spending and resolution costs. As a result, in the fourth quarter of 2016, Union Carbide recorded a $1,113 million increase in its asbestos-related liability for pending and future claims, including future defense and processing costs. Each October, Union Carbide requests Ankura to review its historical asbestos claim and resolution activity through the third quarter of the current year, including asbestos-related defense and processing costs, to determine the appropriateness of updating the most recent study.


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In December 2017, Ankura stated that an update of its December 2016 study would not provide a more likely estimate of future events than the estimate reflected in the study and, therefore, the estimate in the study remained applicable. Based on Union Carbide's internal review process and Ankura's response, Union Carbide determined that no change to the accrual was required.

In December 2018, Ankura completed a study of Union Carbide's historical asbestos claim and resolution activity through September 30, 2018, including asbestos-related defense and processing costs, and provided estimates for the undiscounted cost of disposing of pending and future claims against Union Carbide and Amchem through the terminal year of 2049. Based on the study and Union Carbide's internal review process, it was determined that no adjustment to the accrual was required. At December 31, 2018, Union Carbide's asbestos-related liability for pending and future claims and defense and processing costs was $1,260 million, and approximately 16 percent of the recorded liability related to pending claims and approximately 84 percent related to future claims.

In December 2019, Ankura stated that an update of its December 2018 study would not provide a more likely estimate of future events than the estimate reflected in the study and, therefore, the estimate in the study remained applicable. Based on Union Carbide's internal review process and Ankura's response, Union Carbide determined that no change to the accrual was required. At December 31, 2019, the asbestos-related liability for pending and future claims against Union Carbide and Amchem, including future asbestos-related defense and processing costs, was $1,165 million, and approximately 18 percent of the recorded liability related to pending claims and approximately 82 percent related to future claims.


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In December 2020, Ankura completed a study of Union Carbide's historical asbestos claim and resolution activity through September 30, 2020, including asbestos-related defense and processing costs, and provided estimates for the undiscounted cost of disposing of pending and future claims against Union Carbide and Amchem through the terminal year of 2049. Based on the study and Union Carbide's internal review process, it was determined that no adjustment to the accrual was required. At December 31, 2020, the asbestos-related liability for pending and future claims against Union Carbide and Amchem, including future asbestos-related defense and processing costs, was $1,098 million, and approximately 22 percent of the recorded liability related to pending claims and approximately 78 percent related to future claims.

Summary
The Company's management believes the amounts recorded by Union Carbide for the asbestos-related liability, including defense and processing costs, reflect reasonable and probable estimates of the liability based upon current, known facts. However, future events, such as the number of new claims to be filed and/or received each year, the average cost of defending and disposing of each such claim, as well as the numerous uncertainties surrounding asbestos litigation in the United States over a significant period of time, could cause the actual costs for Union Carbide to be higher or lower than those projected or those recorded. Any such events could result in an increase or decrease in the recorded liability.

Because of the uncertainties described above, Union Carbide cannot estimate the full range of the cost of resolving pending and future asbestos-related claims facing Union Carbide and Amchem. As a result, it is reasonably possible that an additional cost of disposing of Union Carbide's asbestos-related claims, including future defense and processing costs, could have a material impact on the Company's results of operations and cash flows for a particular period and on the consolidated financial position.

Dow Silicones Chapter 11 Related Matters
Introduction
In 1995, Dow Silicones, then a 50:50 joint venture between the Company and Corning Incorporated ("Corning"), voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in order to resolve Dow Silicones’ breast implant liabilities and related matters (the “Chapter 11 Proceeding”). Dow Silicones emerged from the Chapter 11 Proceeding on June 1, 2004 (the “Effective Date”) and is implementing the Joint Plan of Reorganization (the “Plan”). The Plan provides funding for the resolution of breast implant and other product liability litigation covered by the Chapter 11 Proceeding and provides a process for the satisfaction of commercial creditor claims in the Chapter 11 Proceeding. As of June 1, 2016, Dow Silicones is a wholly owned subsidiary of the Company.

Breast Implant and Other Product Liability Claims
Under the Plan, a product liability settlement program administered by an independent claims office (the “Settlement Facility”) was created to resolve breast implant and other product liability claims. Product liability claimants rejecting the settlement program in favor of pursuing litigation must bring suit against a litigation facility (the “Litigation Facility”). Under the Plan, total payments committed by Dow Silicones to resolving product liability claims are capped at a maximum $2,350 million net present value (“NPV”) determined as of the Effective Date using a discount rate of 7 percent (approximately $4,019$4,081 million undiscounted at December 31, 2019)2020). Of this amount, no more than $400 million NPV determined as of the Effective Date can be used to fund the Litigation Facility.

Dow Silicones hashad an obligation to fund the Settlement Facility and the Litigation Facility over a 16-year period, commencing at the Effective Date. At December 31, 2019,2020, Dow Silicones and its insurers have made life-to-date payments of $1,762 million to the Settlement Facility and the Settlement Facility reported an unexpended balance of $74$58 million.


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In accordance with ASC Topic 450 "Accounting for Contingencies," the Company records a liability for breast implant and other product liability claims (“Implant Liability”), which reflects the estimated impact of the settlement of future claims primarily based on reportedpending claims. The claim filing levelsdeadline passed in the Revised Settlement Program (the “RSP”)June 2019. All claims have been received and on the resolution of almost all cases pending against the Litigation Facility. The RSP was a program sponsored by certain other breast implant manufacturers in the context of multi-district, coordinated federal breast implant cases and was open from 1995 through 2010. The RSP was also a revised successor to an earlier settlement plan involving Dow Silicones (prior to its bankruptcy filing). While Dow Silicones withdrew from the RSP, many of the benefit categories and payment levels in Dow Silicones settlement program were drawn from the RSP.are being processed. Based on the comparability in designclaims filed at and actual claim experience of both plans, management concludedbefore the deadline, Dow Silicones estimates that claim information from the RSP provides a reasonable basisit will be obligated to estimate future claim filing levels forcontribute an additional $160 million after the Settlement Facility.Facility balance is exhausted.


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In the third quarter of 2019, with the assistance of a third party consultant ("Consultant"), Dow Silicones updated its Implant Liability estimate, to $165 million, primarily reflecting a decrease in Class 16 claims, a decrease resulting from the passage of time, decreased claim filing activity and administrative costs compared with the previous estimate, and an increase in investment income resulting from insurance proceeds. Based on the Consultant's updated estimate and Dow Silicones own review of claim filing activity, Dow Silicones determined that an adjustment to the Implant Liability was required. Accordingly, in the third quarter of 2019, Dow Silicones decreased its Implant Liability in the third quarter of 2019 by $98 million included in "Sundry income (expense) - net" in the consolidated statements of income, and also decreased its corresponding Class 16 receivable in the third quarter of 2019, resulting in a charge of $13 million, both included in “Sundry income (expense) - net” in the consolidated statements of income (bothand related to Corporate. The estimate was updated again in the Corporate segment). second quarter of 2020 with the assistance of the Consultant, which primarily reflected decreased administrative costs compared with the previous estimate and an increase in investment income resulting from insurance proceeds.

Dow Silicones' Implant Liability was $165$160 million at December 31, 20192020 ($263165 million at December 31, 2018)2019), of which $20$46 million ($20 million at December 31, 2019 ($111 million at December 31, 2018)2019) was included in “Accrued and other current liabilities” and $145$114 million ($145 million at December 31, 2019 ($152 million at December 31, 2018)2019) was included in "Other noncurrent obligations" in the consolidated balance sheets.

Dow Silicones is not aware of circumstances that would change the factors used in estimating the Implant Liability and believes the recorded liability reflects the best estimate of the remaining funding obligations under the Plan; however, the estimate relies upon a number of significant assumptions, including: future acceptance rates, disease mix, and payment values will be materially consistent with historical experience; no material negative outcomes in future controversies or disputes over Plan interpretation will occur; and the Plan will not be modified. If actual outcomes related to any of these assumptions prove to be materially different, the future liability to fund the Plan may be materially different than the amount estimated. If Dow Silicones was ultimately required to fund the full liability up to the maximum capped value, the liability would be $2,257 million at December 31, 2019.

Commercial Creditor Issues
The Plan provides that each of Dow Silicones commercial creditors (the “Commercial Creditors”) would receive in cash the sum of (a) an amount equal to the principal amount of their claims and (b) interest on such claims. Upon the Plan becoming effective, Dow Silicones paid approximately $1,500 million to the Commercial Creditors, representing principal and an amount of interest that Dow Silicones considers undisputed.

In 2006, the U.S. Court of Appeals for the Sixth Circuit concluded that there is a general presumption that contractually specified default interest should be paid by a solvent debtor to unsecured creditors (the “Interest Rate Presumption”) and permitting the Commercial Creditors to recover fees, costs, and expenses where allowed by relevant loan agreements. The matter was remanded to the U.S. District Court for the Eastern District of Michigan ("District Court") for further proceedings, including rulings on the facts surrounding specific claims and consideration of any equitable factors that would preclude the application of the Interest Rate Presumption. On May 10, 2017, the District Court entered a stipulated order resolving pending discovery motions and established a discovery schedule for the Commercial Creditors matter. As a result, Dow Silicones and its third party consultants conducted further analysis of the Commercial Creditors claims and defenses. This analysis indicated the estimated remaining liability to the Commercial Creditors to be within a range of $77 million to $260 million. No single amount within the range appeared to be a better estimate than any other amount within the range. Therefore, Dow Siliconesrecorded the minimum liability within the range, which resulted in a decrease to the Commercial Creditor liability of $33 million in the second quarter of 2017, which was included in "Sundry income (expense) - net" in the consolidated statements of income and related to Corporate. At December 31, 2018, the liability related to Dow Silicones' potential obligation to its Commercial Creditors was $82 million, included in "Accrued and other current liabilities" in the consolidated balance sheets.

On August 19, 2019, Dow Silicones entered into a settlement agreement with the Commercial Creditors related to the remaining, disputed portion, obligating Dow Silicones to pay $172 million, inclusive of the Commercial Creditors' legal costs. The settlement was approved by the District Court. As a result of the settlement agreement, in the third quarter of 2019, the Company recorded a pretax charge of $50 million, net of indemnifications of $37 million, included in "Sundry Income (expense) - net" in the consolidated statements of income and related to the Corporate segment.Corporate. The settlement was paid to the Commercial Creditors in the fourth quarter of 2019. The litigation is now concluded.


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Summary
The amounts recorded by Dow Silicones for the Chapter 11 related matters described above were based upon current, known facts, which management believes reflect reasonable and probable estimates of the liability. However, future events could cause the actual costs for Dow Silicones to be higher or lower than those projected or those recorded. Any such events could result in an increase or decrease in the recorded liability.

Other Litigation Matters
In addition to the specific matters described above, the Company is party to a number of other claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, employment matters, governmental tax and regulation disputes, contract and commercial litigation, and other actions. Certain of these actions purport to be class actions and seek damages in very large amounts. All such claims are being contested. The Company has an active risk management program consisting of numerous insurance policies secured from many carriers at various times. These policies may provide coverage that could be utilized to minimize the financial impact, if any, of certain contingencies described above. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of the Company.


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Indemnifications with Corning
In connection with the June 1, 2016 ownership restructure of Dow Silicones, the Company is indemnified by Corning for at least 50 percent of future losses associated with certain pre-closing liabilities, including the Implant Liability, Commercial Creditors issues and certain environmental matters described in the preceding sections, subject to certain conditions and limits. The maximum amount of indemnified losses which may be recovered are subject to a cap that declines over time. Indemnified losses are capped at (1) $1 billion between May 31, 2018 and May 31, 2023, and (2) 0 recoveries are permitted after May 31, 2023. The Company had indemnification assets of $100$115 million at December 31, 2019 (02020 ($100 million at December 31, 2018)2019), of which $370 ($37 million at December 31, 2019) was included in "Other current assets" and $63$115 million ($63 million at December 31, 2019) was included in "Noncurrent receivables" in the consolidated balance sheets.

Gain Contingency - Dow v. Nova Chemicals Corporation Patent Infringement Matter
OnIn December 9, 2010, Dow filed suit in the Federal Court in Ontario, Canada ("Federal Court") alleging that Nova Chemicals Corporation ("Nova") was infringing the Company's Canadian polyethylene patent 2,106,705 (the "'705 Patent"). Nova counterclaimed on the grounds of invalidity and non-infringement. In accordance with Canadian practice, the suit was bifurcated into a merits phase, followed by a damages phase. Following trial in the merits phase, in May 2014 the Federal Court ruled that the Company's '705 Patent was valid and infringed by Nova. Nova appealed to the Canadian Federal Court of Appeal, which affirmed the Federal Court decision in August 2016. Nova then sought leave to appeal its loss to the Supreme Court of Canada ("Court"), which dismissed Nova’s petition in April 2017. As a result, Nova has exhausted all appeal rights on the merits, and it is undisputed that Nova owes the Company the profits it earned from its infringing sales as determined in the trial for the damages phase.

OnIn April 19, 2017, the Federal Court issued a Public Judgment in the damages phase, which detailed its conclusions on how to calculate the profits to be awarded to the Company. The Company and Nova submitted their respective calculations of the damages to the Federal Court in May 2017. OnIn June 29, 2017, the Federal Court issued a Confidential Supplemental Judgment, concluding thatordered Nova mustto pay $645 million Canadian dollars (equivalent to $495 million U.S. dollars) to the Company, plus pre- and post-judgment interest, for which the Company received payment of $501 million from Nova onin July 6, 2017. Although Nova is appealing portions of the damages judgment, certain portions of it are indisputable and willcan be owed toretained by the Company regardless of the outcome of any further appeals by Nova. As a result of these actions and in accordance with ASC Topic 450-30 "Gain Contingencies," the Company recorded a $160 million pretax gain in the second quarter of 2017, related2017.

On September 15, 2020, the Canadian Federal Court of Appeal dismissed Nova's appeal of the damages judgment, thus affirming the trial court's decision in its entirety. In November 2020, Nova filed an application for leave to appeal this decision to the Packaging & Specialty Plastics segment, of which $137 million was includedCourt. Briefing is expected to be completed in "Sundry income (expense) - net"early 2021 and $23 million was included in "Selling, general and administrative expenses"the Company anticipates a decision in the consolidated statementsfirst half of income.2021 as to whether the Court will accept the appeal. The Court has complete discretion on whether to grant leave applications. At December 31, 2019,2020, the Company had $341 million (0 at December 31, 2019) included in "Accrued and other current liabilities" and 0 ($341 million at December 31, 2018)2019) included in "Other noncurrent obligations" related to the disputed portion of the damages judgment. The Company is confident of its chances of defendingto continue to defend the entire judgment on appeal,if the Court agrees to review it, particularly the trial court'sand appellate courts' determinations on important factual issues, which will be accorded deferential review on appeal.

Gain Contingency - Dow v. Nova Chemicals Corporation Ethylene Asset Matter
On September 18, 2019, the Court of the Queen’s Bench in Alberta, Canada, signed a judgment ordering Nova to pay the Company $1.43 billion Canadian dollars (equivalent to approximately $1.08 billion U.S. dollars) by October 11, 2019, for damages the Company incurred through 2012 related to the companies’ jointly-owned ethylene asset in Joffre, Alberta, Canada. The Court of the Queen's Bench in Alberta, Canada, which initially ruled in June 2018, found that Nova failed to operate the ethylene asset at full capacity for more than ten years, and furthermore, that Nova violated several contractual agreements related to the Company receiving its share of the asset’s ethylene production. These actions resulted in reduced productivity and sales for the Company. Nova has appealed the judgment, however, certain portions of it are not in dispute and are owed to the Company regardless of the outcome of Nova's appeal. As a result of these actions and in accordance with ASC Topic 450-30 “Gain Contingencies,” the Company recorded a $186 million pretax gain in the third quarter of 2019, of which $170 million was included in "Sundry income (expense) - net" and $16 million was included in

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"Selling, "Selling, general and administrative expenses" in the consolidated statements of income and related to Packaging & Specialty Plastics. 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. The Company has sought a refund of the entire amount remitted to CRA. On March 31, 2020, the CRA. At December 31, 2019, $265Company received the full refund from CRA, equivalent to $259 million U.S. dollars.
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In preparation for the June 2020 appellate hearing on the case, Nova provided the Court of the Queen's Bench in Alberta, Canada, an updated schedule of the financial impact of the issues on appeal, which explained that even if Nova prevails on all appeal issues, the Company would still be entitled to retain an amount in excess of the gain recognized in 2019. As a result, the Company recorded an $18 million pretax gain in the second quarter of 2020, of which $12 million was included in "Noncurrent receivables""Selling, general and administrative expenses" and $6 million was included in "Sundry income (expense) - net" in the Company's consolidated balance sheetsstatements of income and related to Packaging & Specialty Plastics. On September 16, 2020, the withholding taxCourt of Appeal of Alberta issued its decision, affirming the trial court's liability finding, upholding the majority of Dow's damages and $893requiring the trial court to recalculate a portion of damages. In the fourth quarter of 2020, Nova chose not to petition the Court to review the appellate court decision, making additional portions of the ruling in Dow’s favor final and no longer subject to dispute. As a result, the Company recorded a $552 million pretax gain in the fourth quarter of 2020, of which $538 million was included in "Sundry income (expense) - net" and $14 million was included in "Selling, general and administrative expenses" in the consolidated statements of income and related to Packaging & Specialty Plastics. At December 31, 2020, $323 million ($893 million at December 31, 2019) was included in "Other noncurrent obligations" in the Company's consolidated balance sheets related to the disputed portion of the damages judgment. Dow is confidentcontinues to seek an award of its chances of defendingadditional damages for the entire judgment on appeal, particularly the trial court's determinations on important factual and discretionary issues, which will be accorded deferential review on appeal.period from 2013 through 2018.

Purchase Commitments
The Company has outstanding purchase commitments and various commitments for take-or-pay or throughput agreements. The Company was not aware of any purchase commitments that were negotiated as part of a financing arrangement for the facilities that will provide the contracted goods or services or for the costs related to those goods or services at December 31, 20192020 and 2018.2019.

Guarantees
The following table provides a summary of the final expiration, maximum future payments and recorded liability reflected in the consolidated balance sheets for guarantees:

GuaranteesDec 31, 2019Dec 31, 2018
In millions
Final
Expiration
Maximum 
Future Payments
Recorded  
Liability  
Final
Expiration
Maximum 
Future Payments
Recorded  
Liability  
Guarantees2023$3,952
$10
2023$4,273
$22

GuaranteesDec 31, 2020Dec 31, 2019
In millionsFinal
Expiration		Maximum Future PaymentsRecorded LiabilityFinal
Expiration		Maximum Future PaymentsRecorded Liability
Guarantees2023$251 $2 2023$3,952 $10 

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 one year to less than fourthree years. The Company’s current expectation is that future payment or performance related to the non-performance of others is considered remote.

The Company has entered into guarantee agreements (“Guarantees”) related to project financing for Sadara.Sadara, a nonconsolidated affiliate. The total of an Islamic bond and additional project financing (collectively “Total Project Financing”) obtained by Sadara iswas approximately $12.5 billion. Sadara had $10.8 billion of Total Project Financing debt outstanding at December 31, 2019 ($11.7 billion at December 31, 2018). The Company's guarantee of2019. In November 2020, the remaining project completion conditions related to the Total Project Financing guarantees were fulfilled and the Company's guarantee obligations terminated. Subsequently, the Company provided a new guarantee in the form of a letter of credit for its share of one future debt service schedule payment up to $220 million. The guarantee is in proportion to the Company'sCompany’s 35 percent ownership interest in Sadara or upand is expected to approximately $3.9 billion whenremain in effect until the project financingre-profiling of Sadara’s debt is fully drawn. Sadara successfully completed an extensive operational testing program in December 2018, however, the Guarantees will be released upon the satisfactory fulfillment of certain project completion conditions, which is expected by the end ofin the first quarter of 2020,2021. See Note 12 for additional information.

In January 2021, Sadara reached an agreement in principle with its lenders to re-profile Sadara's outstanding project financing debt. In conjunction with completion of the Sadara debt re-profiling, the Company expects to guarantee approximately $1.3 billion of Sadara’s debt. The debt re-profiling is expected to include a grace period until June 2026, during which Sadara is obligated to make interest-only payments. Dow will also provide guarantees for its portion of all Sadara interest payments due during the grace period. Dow's pro-rata share of any potential shortfall during the grace period will be funded by a new $500 million revolving credit facility guaranteed by Dow,
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which is expected to be established by Sadara in the first quarter of 2021. Dow's existing $220 million letter of credit related to the guarantee of one future Sadara debt service schedule payment will be cancelled upon completion of the full re-profiling of Sadara's debt. All guarantees related to the debt re-profile and must occur no later than December 2020.revolving credit facility are in proportion to Dow’s 35 percent ownership interest in Sadara. As a result of these actions, the Company does not expect to provide any shareholder loans or equity contributions to Sadara in 2021.

Asset Retirement Obligations
The Company has 109106 manufacturing sites in 31 countries. Most of these sites contain numerous individual manufacturing operations, particularly at the Company’s larger sites. Asset retirement obligations are recorded as incurred and reasonably estimable, including obligations for which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the Company. The retirement of assets may involve such efforts as remediation and treatment of asbestos, contractually required demolition, and other related activities, depending on the nature and location of the assets; and retirement obligations are typically realized only upon demolition of those facilities. In identifying asset retirement obligations, the Company considers identification of legally enforceable obligations, changes in existing law, estimates of potential settlement dates and the calculation of an appropriate discount rate to be used in calculating the fair value of the obligations. The Company has a well-established global process to identify, approve and track the demolition of retired or to-be-retired facilities; and no assets are retired from service until this process has been followed. The Company typically forecasts demolition projects based on the usefulness of the assets; environmental, health and safety concerns; and other similar considerations. Under this process, as demolition projects are identified and approved, reasonable estimates are determined for the time frames during which any related asset retirement obligations are expected to be settled. For those assets where a range of potential settlement dates may be reasonably estimated, obligations are recorded. The Company routinely reviews all changes to items under consideration for demolition to determine if an adjustment to the value of the asset retirement obligation is required.

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The Company has recognized asset retirement obligations for the following activities: demolition and remediation activities at manufacturing sites primarily in theEurope, United States, Canada, Brazil, Argentina, Japan, United Arab Emirates, AustraliaCanada and Europe;Argentina; and capping activities at landfill sites in the United States, CanadaBrazil and Brazil.Canada. The Company has also recognized conditional asset retirement obligations related to asbestos encapsulation as a result of planned demolition and remediation activities at manufacturing and administrative sites primarily in the United States, Canada,Europe, Argentina Australia and Europe.Japan. The aggregate carrying amount of conditional asset retirement obligations recognized by the Company (included in the asset retirement obligations balance shown below) was $19$14 million at December 31, 20192020 ($2219 million at December 31, 2018)2019).

The following table shows changes in the aggregate carrying amount of the Company’s asset retirement obligations for the years ended December 31, 20192020 and 2018:2019:

Asset Retirement Obligations20192018
In millions
Balance at Jan 1$109
$100
Additional accruals10
9
Liabilities settled(7)(3)
Accretion expense2
3
Revisions in estimated cash flows3
—
Other(13)—
Balance at Dec 31$104
$109

Asset Retirement Obligations20202019
In millions
Balance at Jan 1$104 $109 
Additional accruals6 10 
Liabilities settled(3)(7)
Accretion expense3 2 
Revisions in estimated cash flows7 3 
Other(5)(13)
Balance at Dec 31$112 $104 

The discount rate used to calculate the Company’s asset retirement obligations at December 31, 2019,2020, was 2.120.42 percent (3.54(2.12 percent at December 31, 2018)2019). These obligations are included in the consolidated balance sheets as "Accrued and other current liabilities" and "Other noncurrent obligations."

The Company has not recognized conditional asset retirement obligations for which a fair value cannot be reasonably estimated in its consolidated financial statements. Assets that have not been submitted/reviewed for potential demolition activities are considered to have continued usefulness and are generally still operating normally. Therefore, without a plan to demolish the assets or the expectation of a plan, such as shortening the useful life of assets for depreciation purposes in accordance with the accounting guidance related to property, plant and equipment, the Company is unable to reasonably forecast a time frame to use for present value calculations. As such, the Company has not recognized obligations for individual plants/buildings at its manufacturing sites where
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estimates of potential settlement dates cannot be reasonably made. In addition, the Company has not recognized conditional asset retirement obligations for the capping of its approximately 36 underground storage wells and 131129 underground brine mining and other wells at Company-owned sites when there are no plans or expectations of plans to exit the sites. It is the opinion of the Company’s management that the possibility is remote that such conditional asset retirement obligations, when estimable, will have a material impact on the Company’s consolidated financial statements based on current costs.


NOTE 1817 - LEASES
Operating lease ROU assets are included in "Operating lease right-of-use assets" while finance lease ROU assets are included in "Net property" in the consolidated balance sheets. With respect to lease liabilities, operating lease liabilities are included in "Operating lease liabilities - current" and "Operating lease liabilities - noncurrent," and finance lease liabilities are included in "Long-term debt due within one year" and "Long-Term Debt" in the consolidated balance sheets.

Dow routinely leases sales and administrative offices, power plants, production facilities, warehouses and tanks for product storage, aircraft, motor vehicles, railcars, computers, office machines and equipment. Some leases contain renewal provisions, purchase options and escalation clauses and the terms for these leased assets vary depending on the lease agreement. These leased assets have remaining lease terms of up to 5055 years. See NotesNote 1 and 2 for additional information on leases.


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The components of lease cost for operating and finance leases for the yearyears ended December 31, 2020 and 2019 were as follows:

Lease CostYear Ended Dec 31, 2019
In millions
Operating lease cost$532
Finance lease cost 
Amortization of right-of-use assets - finance$39
Interest on lease liabilities - finance25
Total finance lease cost$64
Short-term lease cost$204
Variable lease cost198
Sublease income(4)
Total lease cost$994

Lease Cost20202019
In millions
Operating lease cost$484 $532 
Finance lease cost
Amortization of right-of-use assets - finance$58 $39 
Interest on lease liabilities - finance25 25 
Total finance lease cost$83 $64 
Short-term lease cost$213 $204 
Variable lease cost199 198 
Sublease income(5)(4)
Total lease cost$974 $994 

The following table provides supplemental cash flow information related to leases:

Other Lease InformationYear Ended Dec 31, 2019
In millions
Cash paid for amounts included in the measurement of lease liabilities: 
Operating cash flows for operating leases$544
Operating cash flows for finance leases$25
Financing cash flows for finance leases$34

Other Lease Information20202019
In millions
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$482 $544 
Operating cash flows for finance leases$25 $25 
Financing cash flows for finance leases$58 $34 


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The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at December 31, 2020 and 2019.

Lease PositionBalance Sheet ClassificationDec 31, 2019
In millions
Right-of-use assets obtained in exchange for lease obligations:  
Operating leases 1
 $2,476
Finance leases $89
Assets  
Operating lease assetsOperating lease right-of-use assets$2,072
Finance lease assetsProperty486
Finance lease amortizationAccumulated depreciation(167)
Total lease assets $2,391
Liabilities  
Current  
OperatingOperating lease liabilities - current$421
FinanceLong-term debt due within one year32
Noncurrent  
OperatingOperating lease liabilities - noncurrent1,739
FinanceLong-Term Debt363
Total lease liabilities $2,555
1.Includes $2.3 billion related to the adoption of Topic 842. See Note 2 for additional information.


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Lease Term and Discount RateDec 31, 2019
Weighted-average remaining lease term
Operating leases8.0 years
Finance leases12.3 years
Weighted-average discount rate
Operating leases4.09%
Finance leases6.28%

Lease PositionBalance Sheet ClassificationDec 31, 2020Dec 31, 2019
In millions
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 1
$185 $2,476 
Finance leases$178 $89 
Assets
Operating lease assetsOperating lease right-of-use assets$1,856 $2,072 
Finance lease assetsProperty665 486 
Finance lease amortizationAccumulated depreciation(216)(167)
Total lease assets$2,305 $2,391 
Liabilities
Current
OperatingOperating lease liabilities - current$416 $421 
FinanceLong-term debt due within one year54 32 
Noncurrent
OperatingOperating lease liabilities - noncurrent1,521 1,739 
FinanceLong-Term Debt464 363 
Total lease liabilities$2,455 $2,555 
1.Includes $2.3 billion for the period ended December 31, 2019 related to the adoption of Topic 842. See Note 1 for additional information.

The weighted-average remaining lease term and discount rate for leases recorded in the consolidated balance sheets at December 31, 2020 and 2019 are provided below:

Lease Term and Discount RateDec 31, 2020Dec 31, 2019
Weighted-average remaining lease term
Operating leases7.6 years8.0 years
Finance leases11.6 years12.3 years
Weighted-average discount rate
Operating leases3.84 %4.09 %
Finance leases5.41 %6.28 %

The following table provides the maturities of lease liabilities at December 31, 2019:2020:

Maturities of Lease Liabilities at Dec 31, 2019Operating LeasesFinance Leases
In millions
2020$492
$60
2021422
55
2022355
50
2023285
84
2024219
29
2025 and thereafter803
310
Total future undiscounted lease payments$2,576
$588
Less imputed interest416
193
Total present value of lease liabilities$2,160
$395

Maturities of Lease LiabilitiesOperating LeasesFinance Leases
In millions
2021$477 $78 
2022387 74 
2023312 98 
2024242 45 
2025164 41 
2026 and thereafter703 373 
Total future undiscounted lease payments$2,285 $709 
Less: Imputed interest348 191 
Total present value of lease liabilities$1,937 $518 

At December 31, 2019,2020, Dow had additional leases of approximately $71$56 million, primarily for buildings and equipment, which had not yet commenced. These leases are expected to commence in 20202021 and 2021,2022, with lease terms of up to 2010 years.

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Future minimum lease payments for operating leases accounted for under ASC 840, "Leases," with remaining non-cancelable terms in excess of one year at December 31, 2018 were as follows:

Minimum Lease Commitments at Dec 31, 2018 
In millions 
2019$366
2020329
2021296
2022269
2023227
2024 and thereafter855
Total$2,342


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 reflected in the consolidated balance sheets for residual value guarantees at December 31, 20192020 and 2018.2019. There was no$22 million of recorded liability related to these residual value guarantees at December 31, 2019,2020 (0 at December 31, 2019), as payment of such residual value guarantees was not determined to be probable. The lease agreements do not contain any material restrictive covenants.

Lease GuaranteesDec 31, 2019Dec 31, 2018
In millionsFinal ExpirationMaximum Future PaymentsRecorded LiabilityFinal ExpirationMaximum Future PaymentsRecorded Liability
Residual value guarantees2028$792
$—
2028$885
$130


Lease GuaranteesDec 31, 2020Dec 31, 2019
In millionsFinal ExpirationMaximum Future PaymentsRecorded LiabilityFinal ExpirationMaximum Future PaymentsRecorded Liability
Residual value guarantees2030$818 $22 2028$792 $0 


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NOTE 1918 – STOCKHOLDERS’ EQUITY
Merger with Historical DuPont
Effective with the Merger, each share of TDCC Common Stock (excluding any shares of TDCC Common Stock that were held in treasury, which were automatically canceled and retired for no consideration) was converted into the right to receive 1 fully paid and non-assessable share of DowDuPont Common Stock. As a result, in the third quarter of 2017, the Company recorded a reduction in "Treasury stock" of $935 million, a reduction in "Common stock" of $3,107 million and an increase in "Additional paid in capital" of $2,172 million in the consolidated balance sheets. See Note 3 for additional information.

Common Stock
Dow Inc.
Dow Inc. was incorporated in 2018 with 100 authorized and issued shares of common stock, par value $0.01 per share, owned solely by its parent company, DowDuPont. In the first quarter of 2019, in connection with the separation and distribution of DowDuPont’s materials science business, the number of authorized shares of common stock was increased to 5,000,000,000 shares, par value $0.01 per share, and Dow Inc.'s 100 shares of issued common stock were recapitalized into 748,771,240 shares of common stock. Dow Inc.'s common stock was solely owned by DowDuPont through March 31, 2019, and on April 1, 2019, Dow Inc. became an independent, publicly traded company. Dow Inc. common stock is listed on the NYSE under the symbol “DOW.” See NotesNote 3 and 4 for additional information.

The Company may issue shares of Dow Inc. common stock shares out of treasury stock or as new shares of common stock shares for purchases under the Employee Stock Purchase Plan ("ESPP"), for options exercised and for the release of restricted stock units ("RSUs") (formerly termed deferred stock), performance stock units ("PSUs") (formerly termed performance deferred stock) and restricted stock. Common stock shares issued to employees and non-employee directors was approximately 4.8 million in 2020. Subsequent to the separation from DowDuPont, the number of new Dow Inc. common stock shares issued to employees and non-employee directors was approximately 2.5 million in 2019. Prior to the Merger, the number of new TDCC common stock shares issued to employees and non-employee directors was 0 in 2017. See Note 2221 for additional information on changes to the Company's equity awards in connection with the Merger and separation from DowDuPont.awards.

TDCC
Effective with the Merger and through March 31, 2019, TDCC had 100 authorized and issued shares of common stock, par value $0.01 per share, owned solely by DowDuPont. Effective with the separation from DowDuPont, TDCC became a wholly owned subsidiary of Dow Inc., which now holds all 100 authorized and issued shares of common stock of TDCC. See NotesNote 3 and 4 for additional information.

Retained Earnings
Dow Inc.
There are no significant restrictions limiting Dow Inc.’s ability to pay dividends. Subsequent to the separation from DowDuPont, Dow Inc. declared dividends of $2.10$2.80 per share in 2019.2020 ($2.10 per share in 2019, subsequent to the separation from DowDuPont).

Undistributed earnings of nonconsolidated affiliates included in retained earnings were $716 million at December 31, 2020 and $852 million at December 31, 2019 and $1,856 million at December 31, 2018.2019.

TDCC
Prior to the Merger, TDCC declared dividends of $1.38 per share in 2017. Effective with the Merger, TDCC no longer had publicly traded common stock. TDCC's common shares were owned solely by DowDuPont, prior to the separation on April 1, 2019, and TDCC's Board of Directors determined whether or not there would be a dividend distribution to DowDuPont. Effective with the separation from DowDuPont on April 1, 2019, TDCC became a wholly owned subsidiary of Dow Inc. and TDCC's Board of Directors determines whether or not there will be a dividend distribution to Dow Inc. See Note 26 for additional information onIn 2020 and 2019, TDCC declared and paid dividends to Dow Inc. of $2,233 million and $201 million, respectively. In 2019 and 2018, TDCC declared and paid by TDCCdividends to DowDuPont of $535 million and Dow Inc.$3,711 million, respectively.

See Note 4 for information on the impact
129

Employee Stock Ownership Plan
The Dow Employee Stock Ownership Plan (the “ESOP”) is an integral part of The Dow Chemical Company Employees’ Savings Plan (the “Plan”“Savings Plan”). A significant majority of full-time employees in the United States are eligible to participate in the Savings Plan. The Company uses the ESOP to provide its matching contribution in the form of stock to Plan participants. Prior to the Merger, contributions were in the form of TDCC Common Stock. Effective with the Merger, shares of TDCC Common Stock held by the ESOP were converted into shares of DowDuPont Common Stock at a ratio of 1:1. Effective with the separation from DowDuPont, the DowDuPont Common Stock held by the ESOP received a Dow Inc. Common Stock share dividend at a ratio of 3:1, resulting

115

in the ESOP holding both DowDuPont and Dow Inc. shares. Subsequent to the separation from DowDuPont, the ESOP independent fiduciary sold the DowDuPont shares and purchased additional Dow Inc. shares with the proceeds.

In connection with the acquisition of Rohm and Haas on April 1, 2009, the Rohm and Haas Employee Stock Ownership Plan (the "Rohm and Haas ESOP") was merged into the Savings Plan, and the Company assumed the $78 million balance of debt at 9.8 percent interest with final maturity in 2020 that was used to finance share purchases by the Rohm and Haas ESOP in 1990. The debt was fully repaid in 2020 which resulted in an outstanding balance of the debt was $30 at December 31, 2020 ($3 million at December 31, 2019 and $10 million at December 31, 2018.2019).

Dividends on unallocated shares held by the ESOP are used by the ESOP to make debt service payments and to purchase additional shares if dividends exceed the debt service payments. Dividends on allocated shares are used by the ESOP to make debt service payments to the extent needed; otherwise, they are paid to the Savings Plan participants. Shares are released for allocation to participants based on the ratio of the current year’s debt service to the sum of the principal and interest payments over the life of the loan. The shares are allocated to Plan participants in accordance with the terms of the Savings Plan. The unallocated shares are excluded from the Company's earnings per share calculation.

Compensation expense for allocated shares is recorded at the fair value of the shares on the date of allocation. Compensation expense reflected in income from continuing operations for ESOP shares was $72 million in 2020, $77 million in 2019 and $144 million in 2018 and $200 million in 2017.2018. At December 31, 2019, 12.62020, 4.4 million shares out of a total 16.16.1 million shares held by the ESOP had been allocated to participants’ accounts and 3.51.7 million shares, at a fair value of $190$93 million, were considered unearned.

Treasury Stock
Dow Inc.
On April 1, 2019, Dow Inc.'s Board of Directors ratified the share repurchase program originally approved on March 15, 2019, authorizing up to $3 billion to be spent on the repurchase of the Company's common stock, with no expiration date. In 2019,2020, Dow Inc. repurchased $500$125 million of Dow Inc. common stock.stock ($500 million in 2019). At December 31, 2019, $2.52020, $2.4 billion of the share repurchase program authorization remained available for repurchases.

TDCC
In 2013, TDCC's Board of Directors approved a share buy-back program. As a result of subsequent authorizations approved by TDCC's Board of Directors, the total authorized amount of the share repurchase program was $9.5 billion. Effective with the Merger, the share repurchase program was canceled. Over the duration of the program, a total of $8.1 billion was spent on the repurchase of TDCC Common Stock.

The Company may issue shares for purchases under the ESPP,of Dow Inc. common stock out of treasury stock or as new shares of common stock for options exercised as well asand for the release of RSUs, PSUs and restricted stock out ofstock. The Company did not issue any treasury stock or as new common stock shares. The number of treasury shares issued to employees and non-employee directors under the Company’sits stock-based compensation programs are summarized infor the following table.years ended December 31, 2020 and 2019. See Note 2221 for additional information on changes to the CompanyCompany's equity awards in connection with the Merger and separation from DowDuPont.

Treasury Shares Issued Under Stock-Based Compensation Programs
2019 1
2018
2017 2
To employees and non-employee directors—
N/A14,194,282
1.Reflects Dow Inc. activity subsequent to the separation from DowDuPont.
2.Reflects TDCC activity prior to the Merger.

The following table provides a reconciliation of Dow Inc. common stock activity for the years ended December 31, 20192020 and 2018:2019:

Shares of Dow Inc. Common StockIssuedHeld in Treasury
Balance at Jan 1, 2019100 0 
Impact of recapitalization748,771,140 0 
Issued 1
2,457,404 0 
Repurchased— 9,729,834 
Balance at Jan 1, 2020751,228,644 9,729,834 
Issued 1
4,764,554 0 
Repurchased— 3,073,469 
Balance at Dec 31, 2020755,993,198 12,803,303 
1.Shares issued to employees and non-employee directors under the Company's equity compensation plans.
130
Shares of Dow Inc. Common StockIssuedHeld in Treasury
 
Balance at Jan 1, 2018—
—
Issued 1
100
—
Balance at Jan 1, 2019100
—
Impact of recapitalization748,771,140
—
Issued 2
2,457,404
—
Repurchased—
9,729,834
Balance at Dec 31, 2019751,228,644
9,729,834
1.Dow Inc. was incorporated in 2018 with 100 authorized and issued shares of common stock, par value $0.01 per share.
2.Shares issued to employees and non-employee directors under the Company's equity compensation plans.

116


Accumulated Other Comprehensive Loss
The changes in each component of AOCL for the years ended December 31, 2020, 2019 2018 and 20172018 were as follows:

Accumulated Other Comprehensive Loss201920182017
In millions
Unrealized Gains (Losses) on Investments   
Beginning balance 1
$(51)$17
$43
Unrealized gains (losses) on investments178
(93)38
Less: Tax (expense) benefit(38)19
(13)
Net unrealized gains (losses) on investments140
(74)25
(Gains) losses reclassified from AOCL to net income 2
(33)9
(110)
Less: Tax expense (benefit) 3
8
(2)39
Net (gains) losses reclassified from AOCL to net income(25)7
(71)
Other comprehensive income (loss), net of tax115
(67)(46)
Reclassification of stranded tax effects 4
—
(1)—
Ending balance$64
$(51)$(3)
Cumulative Translation Adjustment   
Beginning balance$(1,813)$(1,481)$(2,381)
Gains (losses) on foreign currency translation59
(215)1,006
Less: Tax (expense) benefit(2)(6)(98)
Net gains (losses) on foreign currency translation57
(221)908
(Gains) losses reclassified from AOCL to net income 5
(89)(4)(8)
Other comprehensive income (loss), net of tax(32)(225)900
Impact of common control transaction 6
710
—
—
Reclassification of stranded tax effects 4
—
(107)—
Ending balance$(1,135)$(1,813)$(1,481)
Pension and Other Postretirement Benefits   
Beginning balance$(7,965)$(6,998)$(7,389)
Gains (losses) arising during the period(1,699)(625)(3)
Less: Tax (expense) benefit413
130
(20)
Net gains (losses) arising during the period(1,286)(495)(23)
Amortization and recognition of net loss and prior service credits 7
504
594
607
Less: Tax expense (benefit) 3
(117)(139)(193)
Net loss and prior service credits reclassified from AOCL to net income387
455
414
Other comprehensive income (loss), net of tax(899)(40)391
Impact of common control transaction 6
83
—
—
Reclassification of stranded tax effects 4
—
(927)—
Ending balance$(8,781)$(7,965)$(6,998)
Derivative Instruments   
Beginning balance$(56)$(109)$(95)
Gains (losses) on derivative instruments(470)6
2
Less: Tax (expense) benefit101
(2)(1)
Net gains (losses) on derivative instruments(369)4
1
(Gains) losses reclassified from AOCL to net income 8
44
89
(13)
Less: Tax expense (benefit) 3
(13)(18)(2)
Net (gains) losses reclassified from AOCL to net income31
71
(15)
Other comprehensive income (loss), net of tax(338)75
(14)
Reclassification of stranded tax effects 4
—
(22)—
Ending balance$(394)$(56)$(109)
Total AOCL ending balance$(10,246)$(9,885)$(8,591)

1.The beginning balance of "Unrealized gains (losses) on investments" for 2018 was increased by $20 million to reflect the impact of adoption of ASU 2016-01.
2.Reclassified to "Net sales" and "Sundry income (expense) - net."
3.Reclassified to "Provision for income taxes."
4.Amounts reclassified to "Retained earnings" as a result of the adoption of ASU 2018-02.
5.Reclassified to "Sundry income (expense) - net."
6.Reclassified to "Retained earnings" as a result of the separation from DowDuPont on April 1, 2019. See Note 4 for additional information.
7.
Accumulated Other Comprehensive Loss202020192018
In millions
Unrealized Gains (Losses) on Investments
Beginning balance$64 $(51)$17 
Unrealized gains (losses) on investments104 178 (93)
Less: Tax (expense) benefit(23)(38)19 
Net unrealized gains (losses) on investments81 140 (74)
(Gains) losses reclassified from AOCL to net income 1
(54)(33)9 
Less: Tax expense (benefit) 2
13 8 (2)
Net (gains) losses reclassified from AOCL to net income(41)(25)7 
Other comprehensive income (loss), net of tax40 115 (67)
Reclassification of stranded tax effects 3
0 0 (1)
Ending balance$104 $64 $(51)
Cumulative Translation Adjustment
Beginning balance$(1,135)$(1,813)$(1,481)
Gains (losses) on foreign currency translation227 59 (215)
Less: Tax (expense) benefit25 (2)(6)
Net gains (losses) on foreign currency translation252 57 (221)
(Gains) losses reclassified from AOCL to net income 4
(47)(89)(4)
Other comprehensive income (loss), net of tax205 (32)(225)
Impact of common control transaction 5
0 710 0 
Reclassification of stranded tax effects 3
0 0 (107)
Ending balance$(930)$(1,135)$(1,813)
Pension and Other Postretirement Benefits
Beginning balance$(8,781)$(7,965)$(6,998)
Gains (losses) arising during the period(1,769)(1,699)(625)
Less: Tax (expense) benefit411 413 130 
Net gains (losses) arising during the period(1,358)(1,286)(495)
Amortization and recognition of net loss and prior service credits 6
753 504 594 
Less: Tax expense (benefit) 2
(173)(117)(139)
Net loss and prior service credits reclassified from AOCL to net income580 387 455 
Other comprehensive income (loss), net of tax(778)(899)(40)
Impact of common control transaction 5
0 83 0 
Reclassification of stranded tax effects 3
0 0 (927)
Ending balance$(9,559)$(8,781)$(7,965)
Derivative Instruments
Beginning balance$(394)$(56)$(109)
Gains (losses) on derivative instruments(96)(470)6 
Less: Tax (expense) benefit(1)101 (2)
Net gains (losses) on derivative instruments(97)(369)4 
(Gains) losses reclassified from AOCL to net income 7
30 44 89 
Less: Tax expense (benefit) 2
(9)(13)(18)
Net (gains) losses reclassified from AOCL to net income21 31 71 
Other comprehensive income (loss), net of tax(76)(338)75 
Reclassification of stranded tax effects 3
0 0 (22)
Ending balance$(470)$(394)$(56)
Total AOCL ending balance$(10,855)$(10,246)$(9,885)
1.Reclassified to "Net sales" and "Sundry income (expense) - net."
2.Reclassified to "Provision for income taxes on continuing operations."
3.Amounts reclassified to "Retained earnings" as a result of the adoption of ASU 2018-02.
4.Reclassified to "Sundry income (expense) - net."
5.Reclassified to "Retained earnings" as a result of the separation from DowDuPont on April 1, 2019. See Note 3 for additional information.
6.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 2120 for additional information.
8. 7.Reclassified to "Cost of sales," "Sundry income (expense) - net" and "Interest expense and amortization of debt discount."

117
131

NOTE 2019 – 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 years ended December 31, 2020, 2019 2018 and 2017:2018:

Noncontrolling Interests
In millions202020192018
Balance at Jan 1$553 $1,138 $1,186 
Net income attributable to noncontrolling interests - continuing operations69 74 102 
Net income attributable to noncontrolling interests - discontinued operations0 13 32 
Distributions to noncontrolling interests 1
(55)(77)(145)
Impact of common control transaction 2
0 (353)0 
Purchase of noncontrolling interests 3
0 (254)0 
Deconsolidation of noncontrolling interests 4
(7)0 0 
Cumulative translation adjustments9 12 (39)
Other1 0 2 
Balance at Dec 31$570 $553 $1,138 
1.Distributions to noncontrolling interests are net of $7 million in 2020 ($7 million in 2019 and $27 million in 2018) in dividends paid to a joint venture, which were reclassified to "Equity in earnings (losses) of nonconsolidated affiliates" in the consolidated statements of income. Also includes amounts attributable to discontinued operations of $7 million in 2019 and $37 million in 2018.
2.Related to the separation from DowDuPont. See Note 3 for additional information.
3.Related to the acquisition of full ownership in a propylene oxide manufacturing joint venture, which occurred on October 1, 2019. See Note 24 for additional information. As a result of this arrangement, the carrying value of the noncontrolling interest was removed, and “Additional paid-in capital” was adjusted by $38 million.
4.Related to the divestiture of the Company's interest in a cogeneration facility in Brazil in the third quarter of 2020. See Note 24 for additional information.


Noncontrolling Interests   
In millions201920182017
Balance at Jan 1$1,138
$1,186
$1,242
Net income attributable to noncontrolling interests - continuing operations74
102
102
Net income attributable to noncontrolling interests - discontinued operations13
32
28
Distributions to noncontrolling interests 1
(77)(145)(109)
Impact of common control transaction 2
(353)—
—
Purchase of noncontrolling interests 3
(254)—
—
Deconsolidation of noncontrolling interests 4
—
—
(119)
Cumulative translation adjustments12
(39)41
Other—
2
1
Balance at Dec 31$553
$1,138
$1,186
132
1.Distributions to noncontrolling interests are net of $7 million in 2019 ($27 million in 2018 and $20 million in 2017) in dividends paid to a joint venture, which were reclassified to "Equity in earnings of nonconsolidated affiliates" in the consolidated statements of income. Also includes amounts attributable to discontinued operations of $7 million in 2019 ($37 million in 2018 and $28 million in 2017)
2.Related to the separation from DowDuPont. See Note 4 for additional information.
3.Relates to the acquisition of full ownership in a propylene oxide manufacturing joint venture, which occurred on October 1, 2019. See Note 25 for additional information. As a result of this arrangement, the carrying value of the noncontrolling interest was removed, and “Additional paid-in capital” was adjusted by $38 million.
4.On June 30, 2017, the Company sold its ownership interest in the SKC Haas Display Films group of companies.



118

NOTE 2120 – PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
As a result of the Company’s separation from DowDuPont, the number of significant defined benefit pension plans administered by the Company decreased from 45 plans to 35 plans, with approximately $270 million of net unfunded pension liabilities transferred to DowDupont. Plans administered by other subsidiaries of DowDuPont that were transferred to the Company were not significant. There were no changes in the number of significant other postretirement benefit plans administered by the Company as a result of the separation. Existing Company plans that were significantly impacted by the transfer of active plan participants to DowDuPont were remeasured, resulting in curtailment gains and losses and recognition of special termination benefits.

Defined Benefit Pension Plans
The Company has both funded and unfunded defined benefit pension plans that cover employees in the United States and a number of other countries. The U.S. qualified plan covering the parent company is the largest plan. Benefits for employees hired before January 1, 2008, are based on length of service and the employee’s three highest consecutive years of compensation. Employees hired after January 1, 2008, earn benefits that are based on a set percentage of annual pay, plus interest.

The Company's funding policy is to contribute to the plans when pension laws and/or economics either require or encourage funding. In 2019,2020, the Company contributed $261$299 million to its continuing operations pension plans, ($266 million, including contributions to plans of discontinued operations). Total contributions in 2019 also included contributions to fund benefit payments for the Company's non-qualifiedunfunded pension plans. The Company expects to contribute approximately $250$300 million to its pension plans in 2020.2021.

The provisions of a U.S. non-qualified pension plan require the payment of plan obligations to certain participants upon a change in control of the Company, which occurred at the time of the Merger. Certain participants could elect to receive a lump-sum payment or direct the Company to purchase an annuity on their behalf using the after-tax proceeds of the lump sum. In the fourth quarter of 2017, the Company paid $940 million to plan participants and $230 million to an insurance company for the purchase of annuities, which were included in "Pension contributions" in the consolidated statements of cash flows. The Company also paid $205 million for income and payroll taxes for participants electing the annuity option, of which $201 million was included in "Cost of sales" and $4 million was included in "Selling, general and administrative expenses" in the consolidated statements of income and related to the Corporate segment. The Company recorded a settlement charge of $687 million associated with the payout in the fourth quarter of 2017, which was included in "Sundry income (expense) - net" in the consolidated statements of income and related to the Corporate segment.

The weighted-average assumptions used to determine pension plan obligations and net periodic benefit costs for all plans are summarized in the table below:

Weighted-Average Assumptions for All Pension PlansBenefit Obligations
at Dec 31		Net Periodic Costs
for the Year Ended
 20202019202020192018
Discount rate2.20 %2.81 %2.81 %3.50 %3.17 %
Interest crediting rate for applicable benefits3.55 %3.51 %3.51 %3.72 %3.61 %
Rate of compensation increase3.91 %3.92 %3.92 %3.92 %3.88 %
Expected return on plan assets7.00 %7.11 %7.11 %
Weighted-Average Assumptions for All Pension Plans
Benefit Obligations
 at Dec 31
Net Periodic Costs
for the Year Ended
 20192018201920182017
Discount rate2.81%3.69%3.50%3.17%3.52%
Interest crediting rate for applicable benefits3.51%3.72%3.72%3.61%3.45%
Rate of compensation increase3.92%3.84%3.92%3.88%3.90%
Expected return on plan assets—
—
7.11%7.11%7.16%

The weighted-average assumptions used to determine pension plan obligations and net periodic benefit costs for U.S. plans are summarized in the table below:

Weighted-Average Assumptions for U.S. Pension Plans
Benefit Obligations
 at Dec 31
Net Periodic Costs
for the Year Ended
 20192018201920182017
Discount rate3.41%4.39%4.15%3.66%4.11%
Interest crediting rate for applicable benefits4.50%4.50%4.50%4.50%4.50%
Rate of compensation increase4.25%4.25%4.25%4.25%4.25%
Expected return on plan assets—
—
7.92%7.92%7.91%


Weighted-Average Assumptions for U.S. Pension PlansBenefit Obligations
at Dec 31		Net Periodic Costs
for the Year Ended
20202019202020192018
Discount rate2.71 %3.41 %3.41 %4.15 %3.66 %
Interest crediting rate for applicable benefits4.50 %4.50 %4.50 %4.50 %4.50 %
Rate of compensation increase4.25 %4.25 %4.25 %4.25 %4.25 %
Expected return on plan assets7.95 %7.92 %7.92 %

119

Other Postretirement Benefit Plans
The Company provides certain health care and life insurance benefits to retired employees and survivors. The Company’s plans outside of the United States are not significant; therefore, this discussion relates to the U.S. plans only. The plans provide health care benefits, including hospital, physicians’ services, drug and major medical expense coverage, and life insurance benefits. In general, for employees hired before January 1, 1993, the plans provide benefits supplemental to Medicare when retirees are eligible for these benefits. The Company and the retiree share the cost of these benefits, with the Company portion increasing as the retiree has increased years of credited service, although there is a cap on the Company portion. The Company has the ability to change these benefits at any time. Employees hired after January 1, 2008, are not covered under the plans.

The Company funds most of the cost of these health care and life insurance benefits as incurred. In 2019,2020, the Company did not make any contributions to its other postretirement benefit plan trusts. The trusts did not hold assets at December 31, 2019.2020. The Company does not expect to contribute assets to its other postretirement benefit plan trusts in 2020.2021.

133

The weighted-average assumptions used to determine other postretirement benefit plan obligations and net periodic benefit costs for the U.S. plans are provided below:

Weighted-Average Assumptions for U.S. Other Postretirement Benefits Plans
Benefit Obligations
 at Dec 31
Net Periodic Costs
for the Year Ended
 20192018201920182017
Discount rate3.19%4.24%4.01%3.51%3.83%
Health care cost trend rate assumed for next year6.25%6.50%6.50%6.75%7.00%
Rate to which the cost trend rate is assumed to decline (the ultimate health care cost trend rate)5.00%5.00%5.00%5.00%5.00%
Year that the rate reaches the ultimate health care cost trend rate20252025202520252025

Weighted-Average Assumptions for U.S. Other Postretirement Benefits PlansBenefit Obligations
at Dec 31		Net Periodic Costs
for the Year Ended
20202019202020192018
Discount rate2.38 %3.19 %3.19 %4.01 %3.51 %
Health care cost trend rate assumed for next year6.75 %6.25 %6.25 %6.50 %6.75 %
Rate to which the cost trend rate is assumed to decline (the ultimate health care cost trend rate)5.00 %5.00 %5.00 %5.00 %5.00 %
Year that the rate reaches the ultimate health care cost trend rate20282025202520252025

Assumptions
The Company determines the expected long-term rate of return on plan assets by performing a detailed analysis of key economic and market factors driving historical returns for each asset class and formulating a projected return based on factors in the current environment. Factors considered include, but are not limited to, inflation, real economic growth, interest rate yield, interest rate spreads and other valuation measures and market metrics. The expected long-term rate of return for each asset class is then weighted based on the strategic asset allocation approved by the governing body for each plan. The Company’s historical experience with the pension fund asset performance is also considered.

The Company uses the spot rate approach to determine the discount rate utilized to measure the service cost and interest cost components of net periodic pension and other postretirement benefit costs for the U.S. and other selected countries. Under the spot rate approach, the Company calculates service costscost and interest costscost by applying individual spot rates from the Willis Towers Watson RATE:Link yield curve (based on high-quality corporate bond yields) for each selected country to the separate expected cash flow components of service cost and interest cost. Service cost and interest cost for all other plans are determined on the basis of the single equivalent discount rates derived in determining those plan obligations.

The discount rates utilized to measure the pension and other postretirement obligations of the U.S. qualified plans are based on the yield on high-quality corporate fixed income investments at the measurement date. Future expected actuarially determined cash flows for the Company’s U.S. plans are individually discounted at the spot rates under the Willis Towers Watson U.S. RATE:Link 60-90 corporate yield curve (based on 60th to 90th percentile high-quality corporate bond yields) to arrive at the plan’s obligations as of the measurement date.

The Company utilizes a modified version of the Society of Actuaries’ mortality tables released in 2014 and a modified version of the generational mortality improvement scale released in 2018 for purposes of measuring the U.S. pension and other postretirement obligations, based on an evaluation of the mortality experience of the Company’s pension plans. 


Separation from DowDuPont
As a result of the Company’s separation from DowDuPont in 2019, the number of significant defined benefit pension plans administered by the Company decreased from 45 plans to 35 plans, with approximately $270 million of net unfunded pension liabilities transferred to DowDuPont. Plans administered by other subsidiaries of DowDuPont that were transferred to the Company were not significant. There were no changes in the number of significant other postretirement benefit plans administered by the Company as a result of the separation. Existing Company plans that were significantly impacted by the transfer of active plan participants to DowDuPont were remeasured, resulting in curtailment gains and losses and recognition of special termination benefits.
120
134


Summarized information on the Company's pension and other postretirement benefit plans is as follows:

Change in Projected Benefit Obligations, Plan Assets and Funded Status of All Significant PlansDefined Benefit Pension PlansOther Postretirement Benefit Plans
In millions2020201920202019
Change in projected benefit obligations:
Benefit obligations at beginning of year$32,621 $29,600 $1,535 $1,478 
Impact of plans transferred to DowDuPont at separation0 (331)0 0 
Service cost399 396 7 8 
Interest cost767 921 40 49 
Plan participants' contributions12 12 0 0 
Actuarial changes in assumptions and experience3,021 3,904 7 148 
Benefits paid(1,569)(1,684)(132)(148)
Plan amendments8 0 0 0 
Acquisitions/divestitures/other 1
(692)(37)0 0 
Effect of foreign exchange rates791 14 7 3 
Termination benefits/curtailments/settlements 2
(49)(174)0 (3)
Benefit obligations at end of year$35,309 $32,621 $1,464 $1,535 
Change in plan assets:
Fair value of plan assets at beginning of year$24,908 $22,544 $0 $0 
Impact of plans transferred to DowDuPont at separation0 (61)0 0 
Actual return on plan assets2,877 3,790 0 0 
Employer contributions299 266 0 0 
Plan participants' contributions12 12 0 0 
Benefits paid(1,569)(1,684)0 0 
Other 3
(681)0 0 0 
Effect of foreign exchange rates571 41 0 0 
Settlements(11)0 0 0 
Fair value of plan assets at end of year$26,406 $24,908 $0 $0 
Funded status:
U.S. plans with plan assets$(5,873)$(4,768)$— $— 
Non-U.S. plans with plan assets(2,222)(2,207)— — 
All other plans(808)(738)(1,464)(1,535)
Funded status at end of year$(8,903)$(7,713)$(1,464)$(1,535)
Amounts recognized in the consolidated balance sheets at Dec 31:
Deferred charges and other assets$1,007 $623 $0 $0 
Accrued and other current liabilities(54)(49)(113)(128)
Pension and other postretirement benefits - noncurrent(9,856)(8,287)(1,351)(1,407)
Net amount recognized$(8,903)$(7,713)$(1,464)$(1,535)
Pretax amounts recognized in accumulated other comprehensive loss at Dec 31:
Net loss (gain)$12,736 $11,761 $(129)$(147)
Prior service credit(154)(177)0 0 
Pretax balance in accumulated other comprehensive loss at end of year$12,582 $11,584 $(129)$(147)
1.The 2020 impact relates primarily to the transfer of benefit obligations in the U.S. through the purchase of annuity contracts from an insurance company. The 2019 impact includes the divestiture of a business with pension benefit obligations of $53 million.
2.The 2020 impact relates to pension plan curtailments of a European plan resulting from the 2020 Restructuring Program and the settlement of certain plan obligations of a U.S. non-qualified pension plan resulting from lump-sum payments. The 2019 impact relates to plan curtailments and associated special termination benefits resulting from the reduction in plan participation due to the separation from DowDuPont.
3.The 2020 impact relates to the purchase of annuity contracts associated with the transfer of benefit obligations to an insurance company.

135
Change in Projected Benefit Obligations, Plan Assets and Funded Status of All Significant PlansDefined Benefit Pension PlansOther Postretirement Benefit Plans
In millions2019201820192018
Change in projected benefit obligations:    
Benefit obligations at beginning of year$29,600
$31,851
$1,478
$1,567
Impact of plans transferred to DowDuPont at separation(331)—
—
—
Service cost396
520
8
12
Interest cost921
886
49
45
Plan participants' contributions12
19
—
—
Actuarial changes in assumptions and experience3,904
(1,754)148
(13)
Benefits paid(1,684)(1,476)(148)(123)
Plan amendments—
17
—
—
Acquisitions/divestitures/other 1
(37)(45)—
—
Effect of foreign exchange rates14
(418)3
(10)
Termination benefits/curtailments/settlements(174)—
(3)—
Benefit obligations at end of year$32,621
$29,600
$1,535
$1,478
     
Change in plan assets:    
Fair value of plan assets at beginning of year$22,544
$23,401
$—
$—
Impact of plans transferred to DowDuPont at separation(61)—
—
—
Actual return on plan assets3,790
(742)—
—
Employer contributions266
1,656
—
—
Plan participants' contributions12
19
—
—
Benefits paid(1,684)(1,476)—
—
Effect of foreign exchange rates41
(314)—
—
Fair value of plan assets at end of year$24,908
$22,544
$—
$—
     
Funded status:



U.S. plans with plan assets$(4,768)$(4,066)$—
$—
Non-U.S. plans with plan assets(2,207)(2,041)—
—
All other plans(738)(695)(1,535)(1,478)
Plans of discontinued operations—
(254)—
—
Funded status at end of year$(7,713)$(7,056)$(1,535)$(1,478)
     
Amounts recognized in the consolidated balance sheets at Dec 31:    
Deferred charges and other assets$623
$491
$—
$—
Accrued and other current liabilities(49)(50)(128)(131)
Pension and other postretirement benefits - noncurrent(8,287)(7,227)(1,407)(1,347)
Liabilities of discontinued operations - current—
(270)—
—
Net amount recognized$(7,713)$(7,056)$(1,535)$(1,478)
     
Pretax amounts recognized in accumulated other comprehensive loss at Dec 31:    
Net loss (gain)$11,761
$10,841
$(147)$(315)
Prior service credit(177)(224)—
—
Pretax balance in accumulated other comprehensive loss at end of year$11,584
$10,617
$(147)$(315)
1.The 2019 impact includes the divestiture of a business with pension benefit obligations of $53 million.The 2018 impact includes the divestiture of a business with pension benefit obligations of $37 million.


121


A significant component of the overall increase in the Company's benefit obligation for the year ended December 31, 2020 was due to the change in weighted-average discount rates, which decreased from 2.81 percent at December 31, 2019 to 2.20 percent at December 31, 2020. A significant component of the overall increase in the Company's benefit obligation for the year ended December 31, 2019 was due to the change in weighted-average discount rates, which decreased from 3.69 percent at December 31, 2018 to 2.81 percent at December 31, 2019. A significant component of the overall decrease in the Company's benefit obligation for the year ended December 31, 2018 was due to the change in weighted-average discount rates, which increased from 3.17 percent at December 31, 2017 to 3.69 percent at December 31, 2018.

The accumulated benefit obligation for all significant pension plans was $31.4$34.1 billion and $28.3$31.4 billion at December 31, 20192020 and 2018,2019, respectively.

Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets at Dec 3120192018
In millions
Accumulated benefit obligations$26,959
$25,392
Fair value of plan assets$19,571
$18,902


Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets at Dec 3120202019
In millions
Accumulated benefit obligations$29,084 $26,959 
Fair value of plan assets$20,130 $19,571 
Pension Plans with Projected Benefit Obligations in Excess of Plan Assets at Dec 3120192018
In millions
Projected benefit obligations$28,013
$26,599
Fair value of plan assets$19,677
$19,051


Pension Plans with Projected Benefit Obligations in Excess of Plan Assets at Dec 3120202019
In millions
Projected benefit obligations$30,161 $28,013 
Fair value of plan assets$20,251 $19,677 
Net Periodic Benefit Costs for All Significant Plans for the Year Ended Dec 31Defined Benefit Pension PlansOther Postretirement Benefit Plans
In millions201920182017201920182017
Net Periodic Benefit Costs:      
Service cost$396
$520
$506
$8
$12
$14
Interest cost921
886
883
49
45
54
Expected return on plan assets(1,679)(1,644)(1,548)—
—
—
Amortization of prior service credit(20)(24)(25)—
—
—
Amortization of unrecognized (gain) loss574
642
638
(20)(24)(6)
Curtailment/settlement/other 1
(27)—
683
(3)—
—
Net periodic benefit costs$165
$380
$1,137
$34
$33
$62
Less: discontinued operations21
101
105
—
3
3
Net periodic benefit costs - continuing operations$144
$279
$1,032
$34
$30
$59
Changes in plan assets and benefit obligations recognized in other comprehensive (income) loss:      
Net (gain) loss$1,606
$584
$845
$145
$(13)$(199)
Prior service cost—
17
14
—
—
—
Amortization of prior service credit20
24
25
—
—
—
Amortization of unrecognized gain (loss)(574)(642)(638)20
24
6
Common control transaction 2
(112)—
—
—
—
—
Curtailment and settlement (gain) loss 1
27
—
(687)3
—
—
Total recognized in other comprehensive (income) loss$967
$(17)$(441)$168
$11
$(193)
Total recognized in net periodic benefit cost and other comprehensive (income) loss$1,132
$363
$696
$202
$44
$(131)

1.The 2019 impact relates to plan curtailments and associated special termination benefits resulting from the reduction in plan participation due to the separation of the Company from DowDuPont. The 2017 impact relates to the settlement of a U.S. non-qualified plan triggered by a change in control provision.
2.The 2019 impact is the result of the separation of the Company from DowDuPont.

Net Periodic Benefit Costs for All Significant Plans for the Year Ended Dec 31Defined Benefit Pension PlansOther Postretirement Benefit Plans
In millions202020192018202020192018
Net Periodic Benefit Costs:
Service cost$399 $396 $520 $7 $8 $12 
Interest cost767 921 886 40 49 45 
Expected return on plan assets(1,658)(1,679)(1,644)0 0 0 
Amortization of prior service credit(19)(20)(24)0 0 0 
Amortization of unrecognized (gain) loss773 574 642 (10)(20)(24)
Curtailment/settlement/other 1
9 (27)0 0 (3)0 
Net periodic benefit costs$271 $165 $380 $37 $34 $33 
Less: discontinued operations0 21 101 0 0 3 
Net periodic benefit costs - continuing operations$271 $144 $279 $37 $34 $30 
Changes in plan assets and benefit obligations recognized in other comprehensive (income) loss:
Net (gain) loss$1,753 $1,606 $584 $8 $145 $(13)
Prior service cost8 0 17 0 0 0 
Amortization of prior service credit19 20 24 0 0 0 
Amortization of unrecognized gain (loss)(773)(574)(642)10 20 24 
Common control transaction 2
0 (112)0 0 0 0 
Curtailment and settlement gain (loss) 1
(9)27 0 0 3 0 
Total recognized in other comprehensive (income) loss$998 $967 $(17)$18 $168 $11 
Total recognized in net periodic benefit cost and other comprehensive (income) loss$1,269 $1,132 $363 $55 $202 $44 
Net1.The 2020 impact relates to pension plan curtailments of a European plan resulting from the 2020 Restructuring Program and the settlement of certain plan obligations of a U.S. non-qualified pension plan resulting from lump-sum payments. The 2019 impact relates to plan curtailments and associated special termination benefits resulting from the reduction in plan participation due to the separation from DowDuPont.
2.The 2019 impact is the result of the separation from DowDuPont.

Except for plan curtailment costs related to the 2020 Restructuring Program, which are included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income, non-service cost components of net periodic benefit cost other than the service cost component, isare included in "Sundry income (expense) - net" in the consolidated statements of income. See Note 8Notes 6 and 7 for additional information.


122136


Estimated Future Benefit Payments
The estimated future benefit payments of continuing operations, reflecting expected future service, as appropriate, are presented in the following table:

Estimated Future Benefit Payments at Dec 31, 2019Defined Benefit Pension PlansOther Postretirement Benefit Plans
In millions
2020$1,561
$129
20211,571
124
20221,603
121
20231,636
118
20241,646
114
2025-20298,523
496
Total$16,540
$1,102

Estimated Future Benefit Payments at Dec 31, 2020Defined Benefit Pension PlansOther Postretirement Benefit Plans
In millions
2021$1,647 $114 
20221,595 103 
20231,593 102 
20241,604 101 
20251,641 100 
2026-20308,419 449 
Total$16,499 $969 

Plan Assets
Plan assets consist primarily of equity and fixed income securities of U.S. and foreign issuers, and include alternative investments, such as real estate, private market securitiesequity and absolute return strategies. AtPlan assets totaled $26.4 billion at December 31, 2019, plan assets totaled2020 and $24.9 billion at December 31, 2019 and included no directly held common stock of Dow Inc. At December 31, 2018, plan assets totaled $22.5 billion and included no directly held DowDuPont common stock.

The Company's investment strategy for the plan assets is to manage the assets in relation to the liability in order to pay retirement benefits to plan participants over the life of the plans. This is accomplished by identifying and managing the exposure to various market risks, diversifying investments across various asset classes and earning an acceptable long-term rate of return consistent with an acceptable amount of risk, while considering the liquidity needs of the plans.

The plans are permitted to use derivative instruments for investment purposes, as well as for hedging the underlying asset and liability exposure and rebalancing the asset allocation. The plans use value-at-risk, stress testing, scenario analysis and Monte Carlo simulations to monitor and manage both the risk within the portfolios and the surplus risk of the plans.

Equity securities primarily include investments in large- and small-cap companies located in both developed and emerging markets around the world. Fixed income securities include investment and non-investment grade corporate bonds of companies diversified across industries, U.S. treasuries, non-U.S. developed market securities, U.S. agency mortgage-backed securities, emerging market securities and fixed income related funds. Alternative investments primarily include investments in real estate, private equity limited partnerships and absolute return strategies. Other significant investment types include various insurance contracts and interest rate, equity, commodity and foreign exchange derivative investments and hedges.

The Company mitigates the credit risk of investments by establishing guidelines with investment managers that limit investment in any single issue or issuer to an amount that is not material to the portfolio being managed. These guidelines are monitored for compliance both by the Company and external managers. Credit risk related to derivative activity is mitigated by utilizing multiple counterparties, collateral support agreements and centralized clearing, where appropriate.

The Northern Trust Collective Government Short Term InvestmentA short-term investment money market fund is utilized as the sweep vehicle for the U.S. plans, which from time to time can represent a significant investment. For one U.S. plan, approximately 3431 percent of the liability is covered by a participating group annuity issued by Prudential Insurance Company.


123
137


The weighted-average target allocation for plan assets of the Company's pension plans is summarized as follows:

Target Allocation for Plan Assets at Dec 31, 20192020Target Allocation
Asset Category
Equity securities35%
Fixed income securities36
Alternative investments28
Other investments1
Total100%


Fair value calculations may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

For pension plan assets classified as Level 1 measurements (measured using quoted prices in active markets), total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.

For pension plan assets classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks. For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatilities obtained from various market sources. For other pension plan assets for which observable inputs are used, fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models.

For pension plan assets classified as Level 3 measurements, total fair value is based on significant unobservable inputs including assumptions where there is little, if any, market activity for the investment.

Certain pension plan assets are held in funds where fair value is based on an estimated net asset value per share (or its equivalent) as of the most recently available fund financial statements which are received on a monthly or quarterly basis. These valuations are reviewed for reasonableness based on applicable sector, benchmark and company performance. Adjustments to valuations are made where appropriate to arrive at an estimated net asset value per share at the measurement date. These funds are not classified within the fair value hierarchy.


124
138


The following table summarizes the bases used to measure the Company’s pension plan assets at fair value for the years ended December 31, 20192020 and 2018:2019:

Basis of Fair Value MeasurementsDec 31, 2020Dec 31, 2019
In millionsTotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Cash and cash equivalents$1,298 $1,103 $195 $0 $754 $675 $79 $0 
Equity securities:
U.S. equity securities 1
$3,934 $3,911 $22 $1 $3,844 $3,752 $91 $1 
Non - U.S. equity securities5,186 4,213 964 9 4,646 3,819 801 26 
Total equity securities$9,120 $8,124 $986 $10 $8,490 $7,571 $892 $27 
Fixed income securities:
Debt - government-issued$4,998 $128 $4,870 $0 $4,992 $197 $4,795 $0 
Debt - corporate-issued3,970 553 3,416 1 3,697 607 3,089 1 
Debt - asset-backed103 0 102 1 70 0 69 1 
Total fixed income securities$9,071 $681 $8,388 $2 $8,759 $804 $7,953 $2 
Alternative investments:
Private markets$13 $0 $0 $13 $11 $0 $0 $11 
Real estate51 51 0 0 25 25 0 0 
Derivatives - asset position697 2 695 0 574 2 572 0 
Derivatives - liability position(594)(1)(593)0 (513)(2)(511)0 
Total alternative investments$167 $52 $102 $13 $97 $25 $61 $11 
Other investments$472 $22 $448 $2 $411 $28 $383 $0 
Subtotal$20,128 $9,982 $10,119 $27 $18,511 $9,103 $9,368 $40 
Investments measured at net asset value:
Hedge funds$1,350 $1,595 
Private markets3,135 2,794 
Real estate1,886 2,110 
Total investments measured at net asset value$6,371 $6,499 
Items to reconcile to fair value of plan assets:
Pension trust receivables 2
$66    $70    
Pension trust payables 3
(159)   (172)   
Total$26,406    $24,908    
1.No Dow Inc. common stock was directly held at December 31, 2020 or December 31, 2019.
2.Primarily receivables for investment securities sold.
3.Primarily payables for investment securities purchased.

139
Basis of Fair Value MeasurementsDec 31, 2019Dec 31, 2018
In millionsTotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Cash and cash equivalents$754
$675
$79
$—
$877
$818
$59
$—
Equity securities:        
U.S. equity securities 1
$3,844
$3,752
$91
$1
$3,493
$3,251
$241
$1
Non - U.S. equity securities4,646
3,819
801
26
4,242
3,497
707
38
Total equity securities$8,490
$7,571
$892
$27
$7,735
$6,748
$948
$39
Fixed income securities:        
Debt - government-issued$4,992
$197
$4,795
$—
$4,751
$285
$4,466
$—
Debt - corporate-issued3,697
607
3,089
1
2,929
411
2,518
—
Debt - asset-backed70
—
69
1
90
—
89
1
Total fixed income securities$8,759
$804
$7,953
$2
$7,770
$696
$7,073
$1
Alternative investments:        
Private market securities$11
$—
$—
$11
$1
$—
$—
$1
Real estate25
25
—
—
19
19
—
—
Derivatives - asset position574
2
572
—
451
17
434
—
Derivatives - liability position(513)(2)(511)—
(506)(19)(487)—
Total alternative investments$97
$25
$61
$11
$(35)$17
$(53)$1
Other investments$411
$28
$383
$—
$380
$47
$333
$—
Subtotal$18,511
$9,103
$9,368
$40
$16,727
$8,326
$8,360
$41
Investments measured at net asset value:        
Hedge funds$1,595
   $1,637
   
Private market securities2,794
   2,196
   
Real estate2,110
   2,080
   
Total investments measured at net asset value$6,499
   $5,913
   
Items to reconcile to fair value of plan assets:        
Pension trust receivables 2
$70
 
 
 
$29
 
 
 
Pension trust payables 3
(172) 
 
 
(125) 
 
 
Total$24,908
 
 
 
$22,544
 
 
 
1.No Dow Inc. common stock was directly held at December 31, 2019. No DowDuPont common stock was directly held at December 31, 2018.
2.Primarily receivables for investment securities sold.
3.Primarily payables for investment securities purchased.


125


The following table summarizes the changes in the fair value of Level 3 pension plan assets for the years ended December 31, 20192020 and 2018:2019:

Fair Value Measurement of Level 3 Pension Plan AssetsEquity SecuritiesFixed Income SecuritiesAlternative InvestmentsOther InvestmentsTotal
In millions
Balance at Jan 1, 2018$40
$16
$—
$—
$56
Actual return on assets:    
Relating to assets sold during 2018—
4
(1)1
4
Relating to assets held at Dec 31, 2018(3)(4)—
—
(7)
Purchases, sales and settlements, net2
(15)2
(1)(12)
Balance at Dec 31, 2018$39
$1
$1
$—
$41
Actual return on assets:     
Relating to assets sold during 2019(2)—
—
—
(2)
Relating to assets held at Dec 31, 20191
—
(14)—
(13)
Purchases, sales and settlements, net(11)1
24
—
14
Balance at Dec 31, 2019$27
$2
$11
$—
$40

Fair Value Measurement of Level 3 Pension Plan AssetsEquity SecuritiesFixed Income SecuritiesAlternative InvestmentsOther InvestmentsTotal
In millions
Balance at Jan 1, 2019$39 $1 $1 $0 $41 
Actual return on assets:
Relating to assets sold during 2019(2)0 0 0 (2)
Relating to assets held at Dec 31, 20191 0 (14)0 (13)
Purchases, sales and settlements, net(11)1 24 0 14 
Balance at Dec 31, 2019$27 $2 $11 $0 $40 
Actual return on assets:
Relating to assets sold during 20200 0 (11)0 (11)
Relating to assets held at Dec 31, 2020(1)0 8 (1)6 
Purchases, sales and settlements, net(19)(1)5 3 (12)
Transfers into Level 3, net3 1 0 0 4 
Balance at Dec 31, 2020$10 $2 $13 $2 $27 

Defined Contribution Plans
U.S. employees may participate in defined contribution plans (Employee Savings Plans or 401(k) plans) by contributing a portion of their compensation, which is partially matched by the Company. Defined contribution plans also cover employees in some subsidiaries in other countries, including Australia,China, Brazil, Canada, Italy,Belgium, Spain and the United Kingdom. Expense of continuing operations recognized for all defined contribution plans was $156 million in 2020, $163 million in 2019 and $186 million in 2018 and $286 million in 2017.2018.


NOTE 2221 – STOCK-BASED COMPENSATION
The Company grants stock-based compensation to employees and non-employee directors in the form of stock incentive plans, which include stock options, stock appreciation rights, RSUs and restricted stock. The Company also provides stock-based compensation in the form of PSUs. The Company previously provided the Employee Stock Purchase Plan (“ESPP”), which granted eligible employees the right to purchase shares of the Company's common stock at a discounted price.

In connection with the Merger, on August 31, 2017 ("Conversion Date"), all outstanding TDCC stock options and RSU awards were converted into stock options and RSU awards with respect to DowDuPont common stock. The stock options and RSU awards had the same terms and conditions under the applicable plans and award agreements prior to the Merger. All outstanding and nonvested PSU awards were converted into RSU awards with respect to DowDuPont common stock at the greater of the applicable performance target or the actual performance as of the effective time of the Merger. Changes in the fair value of liability instruments are recognized as compensation expense each quarter. TDCC and Historical DuPont did not merge their stock-based compensation plans as a result of the Merger. TDCC and Historical DuPont stock-based compensation plans were assumed by DowDuPont and continued in place with the ability to grant and issue DowDuPont common stock until separation.

In connection with the separation on April 1, 2019, outstanding stock options, RSU and PSU awards were converted to Dow Inc. denominated awards under the “Employer Method,” or DowDuPont denominated awards under the “Shareholder Method,” and adjusted to maintain the intrinsic value of those awards before and after the date of the separation. In connection with the Corteva separation transaction on June 3, 2019, the outstanding DowDuPont denominated stock options, RSU and PSU awards were converted to Corteva and DuPont denominated awards and adjusted to maintain the intrinsic value of those awards before and after the date of the Corteva separation. The awards have the same terms and conditions under the applicable plans and award agreements prior to the separation transactions.


140

The conversions of stock awards resulted in 0 incremental compensation expense. Approximately 5,000 employees were impacted by the conversion on April 1, 2019 in connection with Dow Inc.'s separation from DowDuPont. Approximately 4,000 employees were impacted by the conversion on June 3, 2019 in connection with the Corteva separation transaction.

The total stock-based compensation expense included in continuing operations in the consolidated statements of income was $171 million, $158 million and $188 million in 2020, 2019 and $310 million in 2019, 2018, and 2017, respectively. The income tax benefits related to stock-based compensation arrangements were $39 million, $36 million and $42 million in 2020, 2019 and $115 million in 2019, 2018, and 2017, respectively. Amounts disclosed throughout the remainder of this footnote are inclusive of activity attributable to both continuing operations and discontinued operations, as the impact of discontinued operations is not significant.

126

Accounting for Stock-Based Compensation
The Company grants stock-based compensation awards that vest over a specified period or upon employees meeting certain performance and/or retirement eligibility criteria. The fair value of equity instruments issued to employees is measured on the grant date. The fair value of liability instruments (granted to executive employees subject to stock ownership requirements, that provide the recipient the option to elect to receive a cash payment equal to the value of the stock award on the date of delivery) is measured at the end of each quarter. The fair value of equity and liability instruments is expensed over the vesting period or, in the case of retirement, from the grant date to the date on which retirement eligibility provisions have been met and additional service is no longer required. The Company estimates expected forfeitures.

The Company historically used a lattice-based option valuation model to estimate the fair value of stock options and used a Monte Carlo simulation for the market portion of PSU awards. Effective with the first quarter of 2018 grant, the Company began usinguses the Black-Scholes option valuation model to estimate the fair value of stock options. This valuation methodology was adopted as a result of the Merger to align valuation methodologies with Historical DuPont and better align with industry practice. The Company used the Black-Scholes option valuation model for subscriptions to purchase shares under the ESPP. The weighted-average assumptions used to calculate total stock-based compensation are included in the following table:

Weighted-Average Assumptions201920182017
Dividend yield5.10%2.13%3.01%
Expected volatility26.10%23.34%23.71%
Risk-free interest rate2.43%2.83%1.28%
Expected life of stock options granted during period (years)6.1
6.2
7.5
Life of Employee Stock Purchase Plan (months)0
0
3

Weighted-Average Assumptions202020192018
Dividend yield5.80 %5.10 %2.13 %
Expected volatility26.70 %26.10 %23.34 %
Risk-free interest rate1.49 %2.43 %2.83 %
Expected life of stock options granted during period (years)6.16.16.2

The dividend yield assumption was equal to the dividend yield on the grant date, which reflected the Company's quarterly dividend payments of $0.70 per share in 2020 on Dow Inc. Common Stock ($0.70 per share in 2019 on Dow Inc. Common Stock ($0.38and $0.38 per share in 2018 on DowDuPont Common Stock and $0.46 per share in 2017 on TDCC Common Stock). The expected volatility assumptions for the 2017 stock options2020, 2019 and ESPP were based on an equal weighting of the historical daily volatility for the contractual term of the awards and current implied volatility from exchange-traded options. The expected volatility assumptions for the 2018 and 2019 stock options were based on an equal weighting of the historical daily volatility for the expected term of the awards and current implied volatility from exchange-traded options. The expected volatility assumption for the market portion of the 20172020 and 2019 PSU awards were based on historical daily volatility for the term of the award. The risk-free interest rate was based on the weighted-average of U.S. Treasury strip rates over the contractual term of the 2017 options. The risk-free interest rate was based on the U.S. Treasury strip rates over the expected life of the 20182020, 2019 and 20192018 options. The expected life of stock options granted was based on an analysis of historical exercise patterns.

Stock Incentive Plan
The Company has historically granted equity awards under various plans (the "Prior Plans"). On February 9, 2012, the Board authorized The Dow Chemical Company 2012 Stock Incentive Plan (the "2012 Plan"), which was approved by stockholders at TDCC's annual meeting on May 10, 2012 ("2012 Plan Effective Date") and became effective on that date. On February 13, 2014, the Board adopted The Dow Chemical Company Amended and Restated 2012 Stock Incentive Plan (the "2012 Restated Plan"). The 2012 Restated Plan was approved by stockholders at TDCC's annual meeting on May 15, 2014, and became effective on that date. The Prior Plans were superseded by the 2012 Plan and the 2012 Restated Plan (collectively, the "2012 Plan"). Under the 2012 Plan, the Company may grant options, RSUs, PSUs, restricted stock, stock appreciation rights and stock units to employees and non-employee directors until the tenth anniversary of the 2012 Plan Effective Date, subject to an aggregate limit and annual individual limits. The terms of the grants are fixed at the grant date. TDCC's stock-based compensation programs were assumed by DowDuPont and continued in place with the ability to grant and issue DowDuPont common stock until separation.
141

On April 1, 2019 ("Original Effective Date"), in connection with the separation, the Company adopted the 2019 Stock Incentive Plan (the "2019 Plan"). Under the 2019 Plan, the Company may grant stock options, RSUs, PSUs, stock appreciation rights and stock units to employees and non-employee directors until the tenth anniversary of the Original Effective Date, subject to an aggregate limit and annual individual limits. The terms of the grants are fixed at the grant date. At December 31, 2019,2020, there were approximately 2516 million shares of common stock available for grant under the 2019 Plan.

Stock Options
The Company grants stock options to certain employees, subject to certain annual and individual limits, with terms of the grants fixed at the grant date. The exercise price of each stock option equals the market price of the common stock on the grant date. Options vest from one to three years and have a maximum term of ten years.

127

The following table summarizes stock option activity for 2019:2020:

Stock Options2020
Shares in thousandsShares
Exercise
Price 1
Outstanding at Jan 1, 202021,265 $45.96 
Granted2,191 $48.30 
Exercised(3,002)$36.78 
Forfeited/Expired(202)$59.70 
Outstanding at Dec 31, 202020,252 $47.44 
Remaining contractual life in years4.63
Aggregate intrinsic value in millions$209 
Exercisable at Dec 31, 202016,564 $46.11 
Remaining contractual life in years3.76
Aggregate intrinsic value in millions$192 
Stock Options2019
Shares in thousandsShares
Exercise
Price 1
Outstanding at Jan 1, 201928,846
$46.70
Granted1,588
$54.89
Exercised(3,196)$30.02
Forfeited/Expired(239)$60.77
Conversion impact 2
(5,734)$59.62
Outstanding at Dec 31, 201921,265
$45.96
Remaining contractual life in years

4.62
Aggregate intrinsic value in millions$237


Exercisable at Dec 31, 201918,248
$43.34
Remaining contractual life in years

3.99
Aggregate intrinsic value in millions$237


1.Weighted-average per share.
2. Awards converted at April 1 and June 3 separations.

Additional Information about Stock Options   
In millions, except per share amounts201920182017
Weighted-average fair value per share of options granted$7.99
$15.38
$14.44
Total compensation expense for stock option plans$23
$68
$37
Related tax benefit$5
$15
$14
Total amount of cash received from the exercise of options$93
$112
$310
Total intrinsic value of options exercised 1
$77
$160
$286
Related tax benefit$17
$36
$106

Additional Information about Stock Options
In millions, except per share amounts202020192018
Weighted-average fair value per share of options granted$5.89 $7.99 $15.38 
Total compensation expense for stock option plans$22 $23 $68 
Related tax benefit$5 $5 $15 
Total amount of cash received from the exercise of options$108 $93 $112 
Total intrinsic value of options exercised 1
$41 $77 $160 
Related tax benefit$9 $17 $36 
1.Difference between the market price at exercise and the price paid by the employee to exercise the options.

Total unrecognized compensation cost related to unvested stock option awards of $18$8 million at December 31, 2019,2020, is expected to be recognized over a weighted-average period of 1.371.34 years.
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Restricted Stock Units
The Company grants RSUs to certain employees and non-employee directors. The grants vest after a designated period of time, generally three years for employees and two years for non-employee directors. The following table shows changes in nonvested RSUs:

RSU Awards2020
Shares in thousandsShares
Grant Date
Fair Value 1
Nonvested at Jan 1, 20202,454 $59.98 
Granted2,065 $47.66 
Vested(1,422)$55.53 
Canceled(90)$54.69 
Nonvested at Dec 31, 20203,007 $53.78 
RSU Awards2019
Shares in thousandsShares
Grant Date
Fair Value 1
Nonvested at Jan 1, 20199,735
$57.41
Granted1,821
$54.78
Vested(7,045)$53.22
Canceled(156)$60.84
Conversion impact 2
(1,901)$65.87
Nonvested at Dec 31, 20192,454
$59.98
1.Weighted-average per share.
2. Awards converted at April 1 and June 3 separations.


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Additional Information about RSUs   
In millions, except per share amounts201920182017
Weighted-average fair value per share of RSUs granted$54.78
$71.46
$61.29
Total fair value of RSUs vested 1
$375
$382
$179
Related tax benefit$84
$86
$66
Total compensation expense for RSU awards$110
$144
$178
Related tax benefit$25
$32
$66

1.Includes the fair value of shares vested in prior years and delivered in the reporting year.
Additional Information about RSUs
In millions, except per share amounts202020192018
Weighted-average fair value per share of RSUs granted$47.66 $54.78 $71.46 
Total fair value of RSUs vested 1
$106 $264 $382 
Related tax benefit$24 $59 $86 
Total compensation expense for RSU awards$93 $110 $144 
Related tax benefit$21 $25 $32 
1.Includes the fair value of shares vested in prior years and delivered in the reporting year.

In 2019,2020, the Company paid $17$4 million in cash, equal to the value of the stock award on the date of delivery, to certain executive employees to settle approximately 341,00085,000 RSUs (625,000(341,000 RSUs settled in cash for $19 million in 2019 and 625,000 RSUs settled in cash for $45 million in 2018 and no RSUs settled in cash in 2017)2018). Total unrecognized compensation cost related to RSU awards of $80$75 million at December 31, 20192020 is expected to be recognized over a weighted-average period of 1.831.69 years. At December 31, 2019,2020, approximately 2.21.3 million RSUs with a grant date weighted-average fair value per share of $60.79$53.91 had previously vested, but were not issued. These shares are scheduled to be issued to employees within six months to three years or upon retirement.

Total incremental pretax compensation expense resulting from the conversion of PSU awards into RSU awards was $25 million ($20 million was recognized in the second half of 2017 and $5 million was recognized over the remaining service period). Approximately 5,000 employees were impacted by the conversion.

Performance Stock Units
The Company grants PSUs to certain employees. The grants vest when the Company attains specified performance targets, such as return on capital and relative total shareholder return, over a predetermined period, generally one to three years. In November 2017, the Company granted PSUs to senior leadership measured on the realization of cost savings in connection with cost synergy commitments, as well as the Company’s ability to complete the business separations. Performance and payouts are determined independently for each metric. Compensation expense related to PSU awards is recognized over the lesser of the service or performance period. Changes in the fair value of liability instruments are recognized as compensation expense each quarter.

The following table shows the PSU awards granted:

PSU Awards
Target
Shares
Granted 1
Grant Date
Fair Value 2
Shares in thousands
YearPerformance Period
2019Apr 1, 2019 – Dec 31, 20211,173
$57.58
2017Sep 1, 2017 – Aug 31, 2019232
$71.16
2017 3
Jan 1, 2017 – Dec 31, 20191,728
$81.99

1.At the end of the performance period, the actual number of shares issued can range from 0 to 200 percent of target shares granted.
2.Weighted-average per share.
PSU Awards
Target
Shares
Granted 1
Grant Date
Fair
Value 2
Shares in thousands
YearPerformance Period
2020Jan 1, 2020 – Dec 31, 20221,426 $48.35 
2019Apr 1, 2019 – Dec 31, 20211,173 $57.58 
2017Sep 1, 2017 – Aug 31, 2019232 $71.16 
2017 3
Jan 1, 2017 – Dec 31, 20191,728 $81.99 
1.At the end of the performance period, the actual number of shares issued can range from 0 to 200 percent of target shares granted.
2.Weighted-average per share.
3.Converted to RSUs as a result of the Merger.
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The following table shows changes in nonvested PSUs:

PSUs2020
Shares in thousandsShares
Grant Date
Fair
Value 1
Nonvested at Jan 1, 20201,121 $57.58 
Granted1,426 $48.35 
Vested0 $0 
Canceled(59)$53.09 
Nonvested at Dec 31, 20202,488 $53.78 
PSUs2019
Shares in thousandsShares
Grant Date
Fair Value 1
Nonvested at Jan 1, 2019232
$71.16
Granted1,173
$57.58
Vested(232)$71.16
Canceled(52)$57.58
Nonvested at Dec 31, 20191,121
$57.58
1.Weighted-average per share.


Additional Information about PSUs 
In millions, except share amounts202020192018
Total fair value of PSUs vested and delivered 1
$0 $18 $0 
Related tax benefit$0 $4 $0 
Total compensation expense for PSU awards$56 $25 $12 
Related tax benefit$13 $6 $3 
Shares of PSUs settled in cash (in thousands) 2
0 162 0 
Total cash paid to settle PSUs 3
$0 $13 $0 
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3.Cash paid to certain executive employees for PSU awards vested in prior periods and delivered in the reporting year, equal to the value of the stock award on the date of delivery.
Additional Information about PSUs   
In millions, except share amounts201920182017
Total fair value of PSUs vested and delivered 1
$18
$—
$202
Related tax benefit$4
$—
$75
Total compensation expense for PSU awards$25
$12
$106
Related tax benefit$6
$3
$39
Shares of PSUs settled in cash (in thousands) 2
162
—
616
Total cash paid to settle PSUs 3
$13
$—
$38
1.Includes the fair value of shares vested in prior years and delivered in the reporting year.
2.PSU awards vested in prior years and delivered in the reporting year.
3.Cash paid to certain executive employees for PSU awards vested in prior periods and delivered in the reporting year, equal to the value of the stock award on the date of delivery.

Total unrecognized compensation cost related to PSU awards of $12$31 million at December 31, 2019,2020, is expected to be recognized over a weighted-average period of 1.861.67 years.

Restricted Stock
Under the 2012 Plan, the Company granted shares (including options, stock appreciation rights, stock units and restricted stock) to non-employee directors over the 10-year duration of the program, subject to the plan's aggregate limit as well as annual individual limits. The restricted stock issued under this plan cannot be sold, assigned, pledged or otherwise transferred by the non-employee director, until retirement or termination of service to the Company. The following table shows theIn 2018, 36,000 shares of restricted stock with a weighted average fair value of $62.82 were issued under this plan:
Restricted Stock
Shares Issued
(in thousands)
Weighted-Average Fair Value
Year
2019N/A
N/A
201836
$62.82
201733
$62.04


Employee Stock Purchase Plan
On February 9, 2012, the Board authorized The Dow Chemical Company 2012 Employee Stock Purchase Plan (the "2012 ESPP") which was approved by stockholders at TDCC’s annual meeting on May 10, 2012. When offered, most employees are eligible to purchase shares of common stock of TDCC valued at up to 10 percent of their annual base salary. The value is determined using the plan price multiplied by the number of shares subscribed to by the employee. The plan price of the stock is set at an amount equal to at least 85 percent of the fair market value (closing price) of the common stock on a date during the fourth quarter of the year prior to the offering, or the average fair market value (closing price) of the common stock over a period during the fourth quarter of the year prior to the offering, in each case, specified by the Chief Human Resources Officer. The most recent offering of the 2012 ESPP closed on July 15, 2017. The ESPP was not offered in 2018 andplan. In 2019 and no current offerings remain outstanding.2020, there were 0 restricted stock shares issued under this plan.

144
Additional Information about Employee Stock Purchase Plan 
In millions, except per share amounts2017
Weighted-average fair value per share of purchase rights granted$10.70
Total compensation expense for ESPP$38
Related tax benefit$14
Total amount of cash received from the exercise of purchase rights$179
Total intrinsic value of purchase rights exercised 1
$48
Related tax benefit$18
1.Difference between the market price at exercise and the price paid by the employee to exercise the purchase rights.



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NOTE 2322 – FINANCIAL INSTRUMENTS
The following table summarizes the fair value of financial instruments at December 31, 20192020 and 2018:2019:

Fair Value of Financial Instruments at Dec 31 1
20192018
In millionsCostGainLossFair ValueCostGainLossFair Value
Cash equivalents:        
Held to maturity securities 2
$220
$—
$—
$220
$410
$—
$—
$410
Money market funds408
—
—
408
156
—
—
156
Total cash equivalents$628
$—
$—
$628
$566
$—
$—
$566
Marketable securities$21
$—
$—
$21
$100
$—
$—
$100
Other investments:        
Debt securities:        
Government debt 3
$533
$33
$(11)$555
$714
$9
$(23)$700
Corporate bonds944
80
(10)1,014
1,026
20
(63)983
Total debt securities$1,477
$113
$(21)$1,569
$1,740
$29
$(86)$1,683
Equity securities 4
10
6
(1)15
16
1
(1)16
Total other investments$1,487
$119
$(22)$1,584
$1,756
$30
$(87)$1,699
Total cash equivalents, marketable securities and other investments$2,136
$119
$(22)$2,233
$2,422
$30
$(87)$2,365
Long-term debt including debt due within one year 5
$(16,410)$7
$(2,258)$(18,661)$(19,591)$351
$(972)$(20,212)
Derivatives relating to:        
Interest rates 6
$—
$8
$(283)$(275)$—
$—
$(64)$(64)
Foreign currency—
101
(21)80
—
120
(43)77
Commodities 6
—
59
(115)(56)—
91
(178)(87)
Total derivatives$—
$168
$(419)$(251)$—
$211
$(285)$(74)

1.Prior period amounts were updated to conform with the current year presentation.
2.The Company had held-to-maturity securities (primarily treasury bills and time deposits) classified as cash equivalents.
3.U.S. Treasury obligations, U.S. agency obligations, 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 $1 million at December 31, 2019 and losses of $18 million at December 31, 2018 on $3,490 million of debt at December 31, 2019 and $2,290 million of debt at December 31, 2018.
6.Presented net of cash collateral where master netting arrangements allow.
Fair Value of Financial Instruments at Dec 3120202019
In millionsCostGainLossFair ValueCostGainLossFair Value
Cash equivalents:
Held-to-maturity securities 1
$980 $0 $0 $980 $220 $0 $0 $220 
Money market funds484 0 0 484 408 0 0 408 
Total cash equivalents$1,464 $0 $0 $1,464 $628 $0 $0 $628 
Marketable securities 2
$45 $0 $0 $45 $21 $0 $0 $21 
Other investments:
Debt securities:
Government debt 3
$673 $35 $(10)$698 $533 $33 $(11)$555 
Corporate bonds822 119 (5)936 944 80 (10)1,014 
Total debt securities$1,495 $154 $(15)$1,634 $1,477 $113 $(21)$1,569 
Equity securities 4
6 34 0 40 10 6 (1)15 
Total other investments$1,501 $188 $(15)$1,674 $1,487 $119 $(22)$1,584 
Total cash equivalents, marketable securities and other investments$3,010 $188 $(15)$3,183 $2,136 $119 $(22)$2,233 
Long-term debt including debt due within one year 5
$(16,951)$6 $(3,659)$(20,604)$(16,410)$7 $(2,258)$(18,661)
Derivatives relating to:
Interest rates 6
$— $41 $(182)$(141)$— $8 $(283)$(275)
Foreign currency— 69 (84)(15)— 101 (21)80 
Commodities 6
— 63 (84)(21)— 59 (115)(56)
Total derivatives$— $173 $(350)$(177)$— $168 $(419)$(251)
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 $69 million at December 31, 2020 and losses of $1 million at December 31, 2019 on $3,314 million of debt at December 31, 2020 and $3,490 million of debt at December 31, 2019.
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 years ended December 31, 2020, 2019 2018 and 2017.2018.

Investing Results
In millions202020192018
Proceeds from sales of available-for-sale securities$837 $1,138 $1,053 
Gross realized gains$94 $51 $21 
Gross realized losses$40 $18 $30 

Investing Results   
In millions201920182017
Proceeds from sales of available-for-sale securities$1,138
$1,053
$245
Gross realized gains$51
$21
$5
Gross realized losses$18
$30
$—
145


131


The following table summarizes the contractual maturities of the Company’s investments in debt securities:

Contractual Maturities of Debt Securities at Dec 31, 2019 1
Amortized CostFair Value
In millions
Within one year$36
$39
One to five years391
406
Six to ten years534
554
After ten years516
570
Total$1,477
$1,569
Contractual Maturities of Debt Securities at Dec 31, 2020 1
CostFair
Value
In millions
Within one year$25 $25 
One to five years406 448 
Six to ten years649 685 
After ten years415 476 
Total$1,495 $1,634 
1.Includes marketable securities with maturities of less than one year.

Portfolio managers regularly review the Company’s holdings to determine if any investments in debt securities are other-than-temporarily impaired. The analysis includes reviewing the amount of the impairment, as well as the length of time it has been impaired.

The credit rating of the issuer, current credit rating trends, the trends of the issuer’s overall sector, the ability of the issuer to pay expected cash flows and the length of time the security has been in a loss position are considered in determining whether unrealized losses represent an other-than-temporary impairment. The Company did not have any credit-related losses in 2020, 2019 2018 or 2017.2018.

The following table provides the fair value and gross unrealized losses of the Company’s investments in debt securities that were deemed to be temporarily impaired at December 31, 20192020 and 2018,2019, aggregated by investment category:

Temporarily Impaired Debt Securities at
Dec 31
Less than 12 months12 months or moreTotal
Fair
Value
Unrealized
Losses
Fair
Value		Unrealized
Losses		Fair ValueUnrealized Losses
In millions
2019      
Government debt 1
$55
$(3)$23
$(8)$78
$(11)
Corporate bonds79
(3)52
(7)131
(10)
Total temporarily impaired debt securities$134
$(6)$75
$(15)$209
$(21)
2018      
Government debt 1
$287
$(17)$187
$(6)$474
$(23)
Corporate bonds724
(58)64
(5)788
(63)
Total temporarily impaired debt securities$1,011
$(75)$251
$(11)$1,262
$(86)

1.U.S. Treasury obligations, U.S. agency obligations, agency mortgage-backed securities and other municipalities' obligations.
Temporarily Impaired Debt Securities at
Dec 31		Less than 12 months12 months or moreTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair ValueUnrealized Losses
In millions
2020
Government debt 1
$124 $(3)$7 $(7)$131 $(10)
Corporate bonds55 (3)12 (2)67 (5)
Total temporarily impaired debt securities$179 $(6)$19 $(9)$198 $(15)
2019
Government debt 1
$55 $(3)$23 $(8)$78 $(11)
Corporate bonds79 (3)52 (7)131 (10)
Total temporarily impaired debt securities$134 $(6)$75 $(15)$209 $(21)
1.U.S. Treasury obligations, U.S. agency obligations, U.S. agency mortgage-backed securities and other municipalities' obligations.

Equity Securities
The Company’s investments in equity securities with a readily determinable fair value totaled $15 million at December 31, 2019 ($16 million at December 31, 2018). The net unrealized gains recognized in earnings on readily determinable equity securities totaled $5 million for the year ended December 31, 2019 ($7 million for the year ended December 31, 2018). The aggregate carrying value of the Company's investments in equity securities where fair value is not readily determinable totaled $189 million at December 31, 2019 ($204 million at December 31, 2018), reflecting the carrying value of the investments. There were no material adjustments to the carrying value of the not readily determinable investments for impairment or observable price changes for the year ended December 31, 2019.

Repurchase and Reverse Repurchase Agreement Transactions
2020. The Company enters into repurchase and reverse repurchase agreements. These transactions are accountednet unrealized gain recognized in earnings on equity securities totaled $32 million for as collateralized borrowings and lending transactions bearing a specified rate of interest and are short-term in nature with original maturities of 30 days or less. The underlying collateral is typically treasury bills with longer maturities than the repurchase agreement. The impact of these transactions is not material to the Company’s results. There were no repurchase or reverse repurchase agreements outstanding atyear ended December 31, 2019 and 2018.2020 ($5 million net unrealized gain for the year ended December 31, 2019).

Investments in Equity SecuritiesDec 31, 2020Dec 31, 2019
In millions
Readily determinable fair value$40 $15 
Not readily determinable fair value$215 $189 

Risk Management
The Company’s business operations give rise to market risk exposure due to changes in foreign exchange rates, interest rates, commodity prices and other market factors such as equity prices. To manage such risks effectively, the Company enters into hedging transactions, pursuant to established guidelines and policies that enable it to mitigate the adverse effects of financial market risk. Derivatives used for this purpose are designated as hedges per
146

the accounting guidance related to derivatives and

132

hedging activities, where appropriate. A secondary objective is to add value by creating additional non-specific exposure within established limits and policies; derivatives used for this purpose are not designated as hedges. The potential impact of creating such additional exposures is not material to the Company’s results. Accounting guidance requires companies to recognize all derivative instruments as either assets or liabilities at fair value.

The Company’s risk management program for interest rate, foreign currency and commodity risks is based on fundamental, mathematical and technical models that take into account the implicit cost of hedging. Risks created by derivative instruments and the mark-to-market valuations of positions are strictly monitored at all times, using value-at-risk and stress tests. Counterparty credit risk arising from these contracts is not significant because the Company minimizes counterparty concentration, deals primarily with major financial institutions of solid credit quality, and the majority of its hedging transactions mature in less than three months. In addition, the Company minimizes concentrations of credit risk through its global orientation by transacting with large, internationally diversified financial counterparties. It is the Company’s policy to not have credit risk-related contingent features in its derivative instruments. No significant concentration of counterparty credit risk existed at December 31, 2019.2020. The Company does not anticipate losses from credit risk, and the net cash requirements arising from counterparty risk associated with risk management activities are not expected to be material in 2020.2021.

The Company revises its strategies as market conditions dictate and management reviews its overall financial strategies and the impacts from using derivatives in its risk management program with the Company’s senior leadership who also reviews these strategies with the Dow Inc. Board and/or relevant committees thereof.

Derivative Instruments
The notional amounts of the Company's derivative instruments presented on a net basis at December 31, 20192020 and 2018,2019, were as follows:

Notional Amounts - NetDec 31, 2020Dec 31, 2019
In millions
Derivatives designated as hedging instruments
Interest rate contracts$612 $922 
Foreign currency contracts$3,784 $6,253 
Derivatives not designated as hedging instruments
Interest rate contracts$94 $145 
Foreign currency contracts$9,187 $5,567 
Notional Amounts - NetDec 31, 2019Dec 31, 2018
In millions
Derivatives designated as hedging instruments:  
Interest rate contracts$922
$2,049
Foreign currency contracts$6,253
$4,457
Derivatives not designated as hedging instruments:  
Interest rate contracts$145
$5
Foreign currency contracts$5,567
$19,285

The notional amounts of the Company's commodity derivatives presented on a net basis at December 31, 20192020 and 2018,2019, were as follows:

Commodity Notionals - NetDec 31, 2019Dec 31, 2018Notional Volume Unit
 
Derivatives designated as hedging instruments:   
Hydrocarbon derivatives6.1
39.9
million barrels of oil equivalent
Derivatives not designated as hedging instruments:   
Hydrocarbon derivatives0.1
1.2
million barrels of oil equivalent
Power derivatives87.5
73.9
thousands of megawatt hours


Commodity Notionals - NetDec 31, 2020Dec 31, 2019Notional Volume Unit
Derivatives designated as hedging instruments
Hydrocarbon derivatives10.9 6.1 million barrels of oil equivalent
Derivatives not designated as hedging instruments
Hydrocarbon derivatives0 0.1 million barrels of oil equivalent
Power derivatives0 87.5 thousands of megawatt hours

Maturity Dates of Derivatives Designated as HedgesHedging InstrumentsYear
Interest rate contracts2021
Foreign currency contracts1
20202021
Commodity contracts2022
1.The Company had foreign currency contracts primarily through 2020 with a nominal impact into the first quarter of 2021.


147

Interest Rate Risk Management
The main objective of interest rate risk management is to reduce the total funding cost to the Company and to alter the interest rate exposure to the desired risk profile. To achieve this objective, the Company hedges using interest rate swaps, “swaptions,” and exchange-traded instruments.


133

Foreign Currency Risk Management
The global nature of the Company's business requires active participation in the foreign exchange markets. The Company has assets, liabilities and cash flows in currencies other than the U.S. dollar. The primary objective of the Company's foreign currency risk management is to optimize the U.S. dollar value of net assets and cash flows. To achieve this objective, the Company hedges on a net exposure basis using foreign currency forward contracts, over-the-counter option contracts, cross-currency swaps and nonderivative instruments in foreign currencies. Exposures primarily relate to assets, liabilities and bonds denominated in foreign currencies, as well as economic exposure, which is derived from the risk that currency fluctuations could affect the dollar value of future cash flows related to operating activities.

Commodity Risk Management
The Company has exposure to the prices of commodities in its procurement of certain raw materials. The primary purpose of commodity hedging activities is to manage the price volatility associated with these forecasted inventory purchases.

Derivatives Not Designated in Hedging Relationships
Foreign Currency Contracts
The Company also uses foreign exchange forward contracts, options and cross-currency swaps that are not designated as hedging instruments primarily to manage foreign currency exposure.

Commodity Contracts
The Company utilizes futures, options and swap instruments that are effective as economic hedges of commodity price exposures, but do not meet hedge accounting criteria for derivatives and hedging, to reduce exposure to commodity price fluctuations on purchases of raw materials and inventory.

Interest Rate Contracts
The Company uses swap instruments that are not designated as hedging instruments to manage interest rate exposures. The Company uses interest rate swaps, "swaptions," and exchange-traded instruments to accomplish this objective.

Accounting for Derivative Instruments and Hedging Activities
Cash Flow Hedges
For derivatives that are designated and qualify as cash flow hedging instruments, the gain or loss on the derivative is recorded in AOCL; it is reclassified to income in the same period or periods that the hedged transaction affects income. The unrealized amounts in AOCL fluctuate based on changes in the fair value of open contracts at the end of each reporting period. The Company anticipates volatility in AOCL and net income from its cash flow hedges. The amount of volatility varies with the level of derivative activities and market conditions during any period.

The portion of the mark-to-market effects of the foreign currency contracts is recorded in AOCL; it is reclassified to income in the same period or periods that the underlying item affects income.

Commodity swaps, futures and option contracts with maturities of not more than 4860 months are utilized and designated as cash flow hedges of forecasted commodity purchases. The designated portion of the mark-to-market effect of the cash flow hedge instrument is recorded in AOCL; it is reclassified to income in the same period or periods that the underlying commodity purchase affects income.

Fair Value Hedges
For interest rate instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedge item attributable to the hedged risk are recognized in current period income and reflected as “Interest expense and amortization of debt discount” in the consolidated statements of income, except for amounts excluded from the assessment of effectiveness that are recognized in earnings through an amortization approach.

148

Net Foreign Investment Hedges
The Company designates derivatives that qualify as effective net foreign investment hedges, the results of which are presented in the effect of derivative instruments table. In addition, the Company utilizes non-derivative instruments as net foreign investment hedges. The Company had outstanding foreign-currency denominated debt designated as a hedge of net foreign investment of $184$194 million at December 31, 20192020 ($182184 million at December 31, 2018)2019).


134

The following tables provide the fair value and gross balance sheet classification of derivative instruments at December 31, 20192020 and 2018:2019:

Fair Value of Derivative InstrumentsDec 31, 2019
In millionsBalance Sheet ClassificationGross
Counterparty and Cash Collateral Netting 1
Net Amounts Included in the Consolidated Balance Sheets
Asset derivatives:    
Derivatives designated as hedging instruments:    
Interest rate contractsOther current assets$21
$(13)$8
Foreign currency contractsOther current assets105
(36)69
Commodity contractsOther current assets44
(25)19
Commodity contractsDeferred charges and other assets28
(3)25
Total $198
$(77)$121
Derivatives not designated as hedging instruments:    
Interest rate contractsOther current assets$14
$(14)$—
Interest rate contractsDeferred charges and other assets—
—
—
Foreign currency contractsOther current assets44
(12)32
Commodity contractsOther current assets18
(3)15
Commodity contractsDeferred charges and other assets—
—
—
Total $76
$(29)$47
Total asset derivatives $274
$(106)$168
     
Liability derivatives:    
Derivatives designated as hedging instruments:    
Interest rate contractsAccrued and other current liabilities$23
$(13)$10
Interest rate contractsOther noncurrent obligations1
—
1
Foreign currency contractsAccrued and other current liabilities46
(36)10
Commodity contractsAccrued and other current liabilities95
(29)66
Commodity contractsOther noncurrent obligations38
(4)34
Total $203
$(82)$121
Derivatives not designated as hedging instruments:    
Interest rate contractsAccrued and other current liabilities$136
$(14)$122
Interest rate contractsOther noncurrent obligations150
—
150
Foreign currency contractsAccrued and other current liabilities23
(12)11
Commodity contractsAccrued and other current liabilities17
(3)14
Commodity contractsOther noncurrent obligations1
—
1
Total $327
$(29)$298
Total liability derivatives $530
$(111)$419

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 InstrumentsDec 31, 2020
In millionsBalance Sheet ClassificationGross
Counterparty and Cash Collateral Netting 1
Net Amounts Included in the Consolidated Balance Sheets
Asset derivatives
Derivatives designated as hedging instruments
Interest rate contractsOther current assets$3 $(3)$0 
Foreign currency contractsOther current assets39 (19)20 
Commodity contractsOther current assets146 (109)37 
Commodity contractsDeferred charges and other assets31 (8)23 
Total $219 $(139)$80 
Derivatives not designated as hedging instruments
Interest rate contractsDeferred charges and other assets$41 $0 $41 
Foreign currency contractsOther current assets74 (25)49 
Commodity contractsOther current assets4 (1)3 
Total $119 $(26)$93 
Total asset derivatives $338 $(165)$173 
Liability derivatives
Derivatives designated as hedging instruments
Interest rate contractsAccrued and other current liabilities$7 $(3)$4 
Foreign currency contractsAccrued and other current liabilities93 (19)74 
Commodity contractsAccrued and other current liabilities151 (112)39 
Commodity contractsOther noncurrent obligations48 (9)39 
Total $299 $(143)$156 
Derivatives not designated as hedging instruments
Interest rate contractsOther noncurrent obligations$178 $0 $178 
Foreign currency contractsAccrued and other current liabilities35 (25)10 
Commodity contractsAccrued and other current liabilities9 (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.
135
149


Fair Value of Derivative InstrumentsDec 31, 2018
In millionsBalance Sheet ClassificationGross
Counterparty and Cash Collateral Netting 1
Net Amounts Included in the Consolidated Balance Sheets
Asset derivatives:    
Derivatives designated as hedging instruments:    
Foreign currency contractsOther current assets$98
$(42)$56
Commodity contractsOther current assets47
(13)34
Commodity contractsDeferred charges and other assets18
(3)15
Total $163
$(58)$105
Derivatives not designated as hedging instruments:    
Foreign currency contractsOther current assets$128
$(64)$64
Commodity contractsOther current assets41
(1)40
Commodity contractsDeferred charges and other assets4
(2)2
Total $173
$(67)$106
Total asset derivatives $336
$(125)$211
     
Liability derivatives:    
Derivatives designated as hedging instruments:    
Interest rate contractsOther noncurrent obligations$64
$—
$64
Foreign currency contractsAccrued and other current liabilities46
(42)4
Commodity contractsAccrued and other current liabilities111
(18)93
Commodity contractsOther noncurrent obligations86
(9)77
Total $307
$(69)$238
Derivatives not designated as hedging instruments:    
Foreign currency contractsAccrued and other current liabilities$103
$(64)$39
Commodity contractsAccrued and other current liabilities7
(4)3
Commodity contractsOther noncurrent obligations8
(3)5
Total $118
$(71)$47
Total liability derivatives $425
$(140)$285

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 InstrumentsDec 31, 2019
In millionsBalance Sheet ClassificationGross
Counterparty and Cash Collateral Netting 1
Net Amounts Included in the Consolidated Balance Sheets
Asset derivatives
Derivatives designated as hedging instruments
Interest rate contractsOther current assets$21 $(13)$8 
Foreign currency contractsOther current assets105 (36)69 
Commodity contractsOther current assets44 (25)19 
Commodity contractsDeferred charges and other assets28 (3)25 
Total $198 $(77)$121 
Derivatives not designated as hedging instruments
Interest rate contractsOther current assets$14 $(14)$0 
Foreign currency contractsOther current assets44 (12)32 
Commodity contractsOther current assets18 (3)15 
Total $76 $(29)$47 
Total asset derivatives $274 $(106)$168 
Liability derivatives
Derivatives designated as hedging instruments
Interest rate contractsAccrued and other current liabilities$23 $(13)$10 
Interest rate contractsOther noncurrent obligations1 0 1 
Foreign currency contractsAccrued and other current liabilities46 (36)10 
Commodity contractsAccrued and other current liabilities95 (29)66 
Commodity contractsOther noncurrent obligations38 (4)34 
Total $203 $(82)$121 
Derivatives not designated as hedging instruments
Interest rate contractsAccrued and other current liabilities$136 $(14)$122 
Interest rate contractsOther noncurrent obligations150 0 150 
Foreign currency contractsAccrued and other current liabilities23 (12)11 
Commodity contractsAccrued and other current liabilities17 (3)14 
Commodity contractsOther noncurrent obligations1 0 1 
Total $327 $(29)$298 
Total liability derivatives $530 $(111)$419 
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 $5$7 million at December 31, 20192020 ($265 million at December 31, 2018)2019). Counterparties postedNaN cash collateral of $3 millionwas posted by counterparties with the Company at December 31, 20192020 ($343 million at December 31, 2018)2019).


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150


The following table summarizes the gain (loss) of derivative instruments in the consolidated statements of income and comprehensive income for the years ended December 31, 2020, 2019 and 2018:

Effect of Derivative Instruments
Amount of gain (loss) recognized in OCI 1
Amount of gain (loss) recognized in income 2
 Effect of Derivative Instruments
Amount of gain (loss) recognized in OCI 1
Amount of gain (loss) recognized in income 2
Income Statement Classification
In millions201920182017201920182017Income Statement ClassificationIn millions202020192018202020192018
Derivatives designated as hedging instruments:   Derivatives designated as hedging instruments:
Fair value hedges:   Fair value hedges:
Interest rate contracts$—
$—
$—
$17
$—
$(2)
Interest expense and amortization of debt discount 3
Interest rate contracts$0 $0 $0 $69 $17 $0 
Interest expense and amortization of debt discount 3
Excluded components 4
(3)—
—
—
—
—
 
Excluded components 4
7 (3)0 0 0 0 Interest expense and amortization of debt discount
Cash flow hedges:   Cash flow hedges:
Interest rate contracts(316)26
2
1
(3)4
Interest expense and amortization of debt discountInterest rate contracts0 (316)26 (2)1 (3)Interest expense and amortization of debt discount
Foreign currency contracts16
19
(30)28
(18)7
Cost of salesForeign currency contracts(20)16 19 3 28 (18)Cost of sales
Foreign currency contracts10
(3)(5)8
—
(17)Sundry income (expense) - netForeign currency contracts0 10 (3)0 8 0 Sundry income (expense) - net
Commodity contracts(6)(46)37
(81)(69)10
Cost of salesCommodity contracts(8)(6)(46)(31)(81)(69)Cost of sales
Net investment hedges:   
Net foreign investment hedges:Net foreign investment hedges:
Foreign currency contracts(52)116
(73)—
—
—
 Foreign currency contracts(38)(52)116 0 0 0 
Excluded components 4
162
—
—
99
—
—
Sundry income (expense) - net
Excluded components 4
27 162 0 20 99 0 Sundry income (expense) - net
Total derivatives designated as hedging instruments$(189)$112
$(69)$72
$(90)$2
 Total derivatives designated as hedging instruments$(32)$(189)$112 $59 $72 $(90)
Derivatives not designated as hedging instruments:   Derivatives not designated as hedging instruments:
Interest rate contracts$—
$—
$—
$(4)$—
$—
Interest expense and amortization of debt discountInterest rate contracts$0 $0 $0 $(16)$(4)$0 Interest expense and amortization of debt discount
Foreign currency contracts—
—
—
45
101
(289)Sundry income (expense) - netForeign currency contracts0 0 0 28 45 101 Sundry income (expense) - net
Commodity contracts—
—
—
(28)(12)(9)Cost of salesCommodity contracts0 0 0 11 (28)(12)Cost of sales
Total derivatives not designated as hedging instruments$—
$—
$—
$13
$89
$(298) Total derivatives not designated as hedging instruments$0 $0 $0 $23 $13 $89 
Total derivatives$(189)$112
$(69)$85
$(1)$(296) Total derivatives$(32)$(189)$112 $82 $85 $(1)
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.
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 to be reclassified from AOCL to income within the next 12 months:

Expected Reclassifications from AOCL within the next 12 monthsDec 31,
2019
 
Cash flow hedges 
Interest rate contracts$2
Commodity contracts$(23)
Foreign currency contracts$5
Net investment hedges 
Excluded components$26

Expected Reclassifications from AOCL within the next 12 monthsDec 31,
2020
Cash flow hedges:
Interest rate contracts$(8)
Commodity contracts$(1)
Foreign currency contracts$(18)
Net foreign investment hedges:
Excluded components$2 


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151

NOTE 2423 – FAIR VALUE MEASUREMENTS
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 1
Dec 31, 2019Dec 31, 2018
In millionsLevel 1Level 2Total  Level 1Level 2Total  
Assets at fair value:      
Cash equivalents      
Held to maturity securities 2
$—
$220
$220
$—
$410
$410
Money market funds—
408
408
—
156
156
Marketable securities—
21
21
—
100
100
Equity securities 3
15
—
15
16
—
16
Debt securities: 3
   

 
Government debt 4
—
555
555
—
700
700
Corporate bonds22
992
1,014
—
983
983
Derivatives relating to: 5
   

 
Interest rates—
35
35
—
—
—
Foreign currency—
149
149
—
226
226
Commodities23
67
90
17
93
110
Total assets at fair value$60
$2,447
$2,507
$33
$2,668
$2,701
Liabilities at fair value:      
Long-term debt including debt due within one year 6
$—
$18,661
$18,661
$—
$20,212
$20,212
Derivatives relating to: 5
      
Interest rates—
310
310
—
64
64
Foreign currency—
69
69
—
149
149
Commodities14
137
151
23
189
212
Total liabilities at fair value$14
$19,177
$19,191
$23
$20,614
$20,637

1.Prior period amounts were updated to conform with the current year presentation.
2.The Company had held-to-maturity securities (primary treasury bills and time deposits) classified as cash equivalents.
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, agency mortgage-backed securities and other municipalities’ obligations.
5.See Note 23 for the classification of derivatives in the consolidated balance sheets.
6.See Note 23 for information on fair value measurements of long-term debt.
Basis of Fair Value Measurements on a Recurring BasisDec 31, 2020Dec 31, 2019
In millionsLevel 1Level 2TotalLevel 1Level 2Total
Assets at fair value:
Cash equivalents:
Held-to-maturity securities 1
$0 $980 $980 $0 $220 $220 
Money market funds0 484 484 0 408 408 
Marketable securities 2
0 45 45 0 21 21 
Equity securities 3
40 0 40 15 0 15 
Debt securities: 3
Government debt 4
0 698 698 0 555 555 
Corporate bonds28 908 936 22 992 1,014 
Derivatives relating to: 5
Interest rates0 44 44 0 35 35 
Foreign currency0 113 113 0 149 149 
Commodities8 173 181 23 67 90 
Total assets at fair value$76 $3,445 $3,521 $60 $2,447 $2,507 
Liabilities at fair value:   
Long-term debt including debt due within one year 6
$0 $20,604 $20,604 $0 $18,661 $18,661 
Derivatives relating to: 5
Interest rates0 185 185 0 310 310 
Foreign currency0 128 128 0 69 69 
Commodities7 201 208 14 137 151 
Total liabilities at fair value$7 $21,118 $21,125 $14 $19,177 $19,191 
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 22 for the classification of derivatives in the consolidated balance sheets.
6.See Note 22 for information on fair value measurements of long-term debt.

For assets and liabilities classified as Level 1 measurements (measured using quoted prices in active markets), total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.

For assets and liabilities classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability, or by using observable market data points of similar, more liquid securities to imply the price. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks.

For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatilities obtained from various market sources. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance/quality checks.
152

For all other assets and liabilities for which observable inputs are used, fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models. See Note 2322 for further information on the types of instruments used by the Company for risk management.

There were 0 transfers between Levels 1 and 2 in the years ended December 31, 20192020 and 2018.2019.

138

For assets 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 interests held in trade accounts receivable conduits is determined by calculating the expected amount of cash to be received using the key input of anticipated credit losses in the portfolio of receivables sold that have not yet been collected. Given the short-term nature of the underlying receivables, discount rate and prepayments are not factors in determining the fair value of the interests. See Note 1514 for further information on assets classified as Level 3 measurements.

For equity securities calculated at net asset value per share (or its equivalent), the Company had $117$111 million in private market securitiesequity and $19 million in real estate at December 31, 2020 ($117 million in private equity and $18 million in real estate at December 31, 2019 ($120 million in private market securities and $29 million in real estate at December 31, 2018)2019). There are no redemption restrictions and the underfundedunfunded commitments on these investments were $76$63 million at December 31, 20192020 ($8976 million at December 31, 2018)2019).

The following table summarizes the changes in fair value measurements using Level 3 inputs for the year ended December 31, 2018:

Fair Value Measurements Using Level 3 Inputs for Interests Held in Trade Accounts Receivable Conduits 1
2018
In millions
Balance at Jan 1$677
Gain (loss) included in earnings 2
3
Settlements 3
(680)
Balance at Dec 31$—

Fair Value Measurements Using Level 3 Inputs for Interests Held in Trade Accounts Receivable Conduits2018
In millions
Balance at Jan 1$677 
Gain (loss) included in earnings 1
3 
1.
Settlements 2
Included in "Accounts and notes receivable – Other" in the consolidated balance sheets. See Note 15 for additional information.
(680)
2.Balance at Dec 31Included in "Selling, general and administrative expenses" in the consolidated statements of income.$
0 
3.Includes noncash transactions of $23 million for the year ended December 31, 2018.
1.Included in "Selling, general and administrative expenses" in the consolidated statements of income.
2.Includes noncash transactions of $23 million for the year ended December 31, 2018.

Fair Value Measurements on a Nonrecurring Basis
The following table summarizes the bases used to measure certain assets at fair value on a nonrecurring basis in the consolidated balance sheets in 2020, 2019 2018 and 2017:2018:

Basis of Fair Value Measurements on a Nonrecurring Basis at Dec 31(Level 3)Total Losses
In millions
2019  
Assets at fair value:  
Long-lived assets, other assets and equity method investments$162
$(2,031)
Goodwill$—
$(1,039)
2018  
Assets at fair value:  
Long-lived assets and other assets$—
$(67)
2017  
Assets at fair value:  
Long-lived assets, intangible assets, other assets and equity method investments$61
$(955)
Goodwill$—
$(1,491)

Basis of Fair Value Measurements on a Nonrecurring Basis at Dec 31(Level 3)Total Losses
In millions
2020
Assets at fair value:
Long-lived assets and other assets$121 $(245)
2019
Assets at fair value:
Long-lived assets, other assets and equity method investments$162 $(2,031)
Goodwill$0 $(1,039)
2018
Assets at fair value:
Long-lived assets and other assets$0 $(67)

2020 Fair Value Measurements on a Nonrecurring Basis
As part of the 2020 Restructuring Program, the Company has or will shut down and write off several small manufacturing facilities and miscellaneous assets around the world. The assets associated with this plan were written down to zero. In addition, impairments of leased, non-manufacturing facilities, which were classified as Level 3 measurements, resulted in a write-down of right-of-use assets to a fair value of $110 million using unobservable inputs. The impairment charges related to the 2020 Restructuring Program, totaling $196 million, were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated
153

statements of income and related to Packaging & Specialty Plastics ($11 million), Industrial Intermediates & Infrastructure ($22 million), Performance Materials & Coatings ($116 million) and Corporate ($47 million).

In 2020, the Company recognized impairment charges of $30 million related to the write-down of a non-manufacturing asset and certain corporate leased equipment and the write-off of a capital project. The assets, classified as Level 3 measurements, were valued at $11 million using unobservable inputs. The impairment charges were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Performance Materials & Coatings ($15 million) and Corporate ($15 million).

In 2020, the Company recognized an additional pretax impairment charge of $19 million related to capital additions made to a bio-ethanol manufacturing facility in Santa Vitoria, Minas Gerais, Brazil, which was impaired in 2017. The assets were written down to zero in 2020. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics. On September 29, 2020, the Company divested the bio-ethanol manufacturing facility. See Note 6 for additional information.

2019 Fair Value Measurements on a Nonrecurring Basis
As part of the Synergy Program, the Company has or will shut down and write-off several small manufacturing facilities, non-manufacturing assets and certain corporate facilities around the world. In 2019, manufacturing facilities associated with this plan were written down to zero. In addition, impairments of leased, non-manufacturing facilities, which were classified as Level 3 measurements, resulted in a write-down of right-of-use assets to a fair value of $152 million using unobservable inputs. The impairment charges related to the Synergy Program, totaling $143 million, were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Industrial Intermediates & Infrastructure ($2 million), Performance Materials & Coatings ($28 million) and Corporate ($113 million).

In 2019, the Company recognized an additional pretax impairment charge of $44 million related to capital additions made to Santa Vitoria, which was impaired in 2017. The assets were written down to zero in 2019. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics.


139

In 2019, the Company recognized impairment charges of $14 million related to non-manufacturing assets. The assets, classified as Level 3 measurements, were valued at $10 million using unobservable inputs. The impairment charges were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Performance Materials & Coatings ($9 million) and Corporate ($5 million).

In 2019, the Company recognized an impairment charge of $75 million resulting from the planned divestiture of its acetone derivatives business to ALTIVIA Ketones & Additives, LLC. The transaction closed on November 1, 2019 and included the Company's acetone derivatives related inventory and production assets, located in Institute, West Virginia, in addition to the site infrastructure, land and utilities. The assets, classified as Level 3 measurements and valued using unobservable inputs, were written down to zero in 2019, except for inventory, which was sold at the lower of cost or market. The impairment charge was included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($24 million) and Corporate ($51 million).

In the fourth quarter of 2019, the Company performed its annual goodwill impairment testing utilizing a discounted cash flow methodology as its valuation technique. As a result, the Company determined the fair value of the C&PM reporting unit was lower than its carrying amount and recorded an impairment charge of $1,039 million, included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Performance Materials & Coatings. See Note 1413 for additional information on the impairment charge.

In the fourth quarter of 2019, the Company concluded that its equity method investment in Sadara, classified as a Level 3 measurement and valued using unobservable inputs, was other-than-temporarily impaired and written down to zero. Additionally, the Company reserved certain accounts and notes receivable and accrued interest balances due to uncertainty on the timing of collection. As a result, the Company recorded a $1,755 million charge related to Sadara. The charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics ($370 million), Industrial Intermediates & Infrastructure ($1,168 million) and Corporate ($217 million). See Note 1312 for additional information.
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2018 Fair Value Measurements on a Nonrecurring Basis
The Company has or will shut down a number of manufacturing and other non-manufacturing facilities and corporate facilities around the world as part of its restructuring programs. In 2018, the manufacturing facilities and related assets and corporate facilities associated with these programs were written down to zero. The impairment charges related to the restructuring programs, totaling $33 million, were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($10 million), Performance Materials & Coatings ($7 million) and Corporate ($16 million).

In 2018, the Company recognized an additional pretax impairment charge of $34 million related primarily to capital additions made to Santa Vitoria, which was impaired in 2017. The assets were written down to 0 in 2018. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to the Packaging & Specialty Plastics segment.

2017 Fair Value Measurements on a Nonrecurring Basis
The Company has or will shut down a number of manufacturing, R&D and corporate facilities around the world as part of the Synergy Program. The manufacturing facilities and related assets (including intangible assets), corporate facilities and data centers associated with this plan were written down to 0 in the fourth quarter of 2017. The impairment charges related to the Synergy Program, totaling $87 million, were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($33 million), Industrial Intermediates & Infrastructure ($12 million), Performance Materials & Coatings ($9 million) and Corporate ($33 million). See Note 76 for additional information on the Company's restructuring activities.

In the fourth quarter of 2017, the Company recognized a $622 million pretax impairment charge related to Santa Vitoria. The Company determined it would not pursue an expansion of the facility’s ethanol mill into downstream derivative products, primarily as a result of cheaper ethane-based production as well as the Company’s new assets coming online on the U.S. Gulf Coast which can be used to meet growing market demands in Brazil. As a result of this decision, cash flow analysis indicated the carrying amount of the impacted assets was not recoverable and the assets were written down to 0 in the fourth quarter of 2017. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to the Packaging & Specialty Plastics segment. See Notes 7 and 25 for additional information.


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The Company also recognized other pretax impairment charges of $246 million in the fourth quarter of 2017, including charges related to manufacturing assets of $159 million, an equity method investment of $81 million and other assets of $6 million. The assets, classified as Level 3 measurements, were valued at $61 million using unobservable inputs, including assumptions a market participant would use to measure the fair value of the group of assets, which included projected cash flows. The impairment charges were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($83 million), Industrial Intermediates & Infrastructure ($5 million), Performance Materials & Coatings ($58 million) and Corporate ($100 million). See Note 7 for additional information.

In the fourth quarter of 2017, the Company performed its annual goodwill impairment testing utilizing a discounted cash flow methodology as its valuation technique. As a result, the Company determined the fair value of the C&PM reporting unit was lower than its carrying amount and recorded an impairment charge of $1,491 million, included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Performance Materials & Coatings. See Note 14 for additional information on the impairment charge.

See Note 7 for additional information on the Company's restructuring activities.


NOTE 2524 – VARIABLE INTEREST ENTITIES
Consolidated Variable Interest Entities ("VIEs")
The Company holds a variable interest in the following joint ventures or entities for which it is the primary beneficiary:

Asia Pacific joint venturesJoint Ventures
The Company has variable interests in two joint ventures that own and operate manufacturing and logistics facilities, which produce chemicals and provide services in Asia Pacific. The Company's variable interests in these joint ventures relate to arrangements between the joint ventures and the Company, involving the majority of the output on take-or-pay terms with pricing ensuring a guaranteed return to the joint ventures.

The Company was a 50 percent indirect owner in a propylene oxide ("PO") manufacturing joint venture in Asia Pacific. The Company had a variable interest in this joint venture relating to arrangements between the joint venture and the Company involving the majority of the output on take-or-pay terms, with pricing ensuring a guaranteed return to the joint venture. On April 30, 2019, the Company executed an agreement to acquire full ownership in the PO manufacturing joint venture. The transaction closed on October 1, 2019, for a cash purchase price of $331 million. Approximately half of the purchase price was attributed to the Company’s proportionate equity interest in the entity that owned the PO manufacturing joint venture, which is accounted for under the equity method of accounting, and was classified as "Investments in and loans to nonconsolidated affiliates" in the consolidated statements of cash flows. The remaining $166 million was classified as "Purchases of noncontrolling interests" in the consolidated statements of cash flows.

Ethylene storage joint ventureStorage Joint Venture
The Company has variable interests in a joint venture that provides ethylene storage in Alberta, Canada. The Company's variable interests relate to arrangements involving a majority of the joint venture's storage capacity on take-or-pay terms with pricing ensuring a guaranteed return to the joint venture; and favorably priced leases provided to the joint venture. The Company provides the joint venture with operation and maintenance services and utilities.

Cogeneration in Brazil
The Company holdsheld variable interests in a cogeneration facility in Brazil relatedthat provided power to the production of ethanol from sugarcane.Company's bio-ethanol manufacturing facility. The Company's variable interests arewere the result of a tolling arrangement where it providesprovided fuel to the entity and purchasespurchased a majority of the cogeneration facility’s output on terms that ensureensured a return to the entity’s equity holders. On September 29, 2020, the Company divested its bio-ethanol manufacturing facility and is no longer a party to the tolling arrangement with the cogeneration facility.

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 reflected in "Net income attributable to noncontrolling interests" in the consolidated statements of income and "Noncontrolling interests" in the consolidated balance sheets.


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155


The following table summarizes the carrying amounts of these entities’ assets and liabilities included in the Company’s consolidated balance sheets at December 31, 20192020 and 2018:2019:

Assets and Liabilities of Consolidated VIEs at Dec 31  
In millions20192018
Cash and cash equivalents$37
$71
Other current assets51
101
Net property330
683
Other noncurrent assets18
14
Total assets 1
$436
$869
Current liabilities$141
$307
Long-term debt34
75
Other noncurrent obligations21
14
Total liabilities 2
$196
$396

1.All assets were restricted at December 31, 2019 and 2018.
2.All liabilities were nonrecourse at December 31, 2019 and 2018.
Assets and Liabilities of Consolidated VIEs at Dec 31
In millions20202019
Cash and cash equivalents$26 $37 
Other current assets44 51 
Net property232 330 
Other noncurrent assets17 18 
Total assets 1
$319 $436 
Current liabilities$73 $141 
Long-term debt6 34 
Other noncurrent obligations18 21 
Total liabilities 2
$97 $196 
1.All assets were restricted at December 31, 2020 and 2019.
2.All liabilities were nonrecourse at December 31, 2020 and 2019.

Amounts presented in the consolidated balance sheets and the table above as restricted assets or nonrecourse obligations relating to consolidated VIEs at December 31, 20192020 and 20182019 are adjusted for intercompany eliminations and parental guarantees.eliminations.

Nonconsolidated VIEs
The Company holds a variable interest in the following entities for which the Company is not the primary beneficiary:

Silicon joint venturesJoint Ventures
The Company holds minority voting interests in certain joint ventures that produce silicon inputs for the Company. These joint ventures operate under supply agreements that sell inventory to the equity owners using pricing mechanisms that guarantee a return, therefore shielding the joint ventures from the obligation to absorb expected losses. As a result of the pricing mechanisms of these agreements, these entities are determined to be VIEs. The Company is not the primary beneficiary, as it does not hold the power to direct the activities that most significantly impact the economic performance of these entities; therefore, the entities are accounted for under the equity method of accounting. The Company's maximum exposure to loss as a result of its involvement with these variable interest entities is determined to be the carrying value of the investment in these entities. At December 31, 2019,2020, the Company's investment in these joint ventures was $100$107 million ($100 million at December 31, 2018)2019), classified as "Investment in nonconsolidated affiliates" in the consolidated balance sheets, representing the Company's maximum exposure to loss.

AgroFresh Solutions Inc.
The Company held a variable interest in AgroFresh Solutions Inc. ("AFSI"), a company that produces and sells proprietary technologies for the horticultural market. The variable interest in AFSI related to a tax receivable agreement that entitled the Company to additional consideration in the form of tax savings, which was contingent on the operations and earnings of AFSI. The Company was not the primary beneficiary, as it is a minority shareholder in AFSI and AFSI is governed by a board of directors, the composition of which is mandated by AFSI's corporate governance requirements that a majority of the directors be independent. In December 2019, the Company and AFSI settled the tax receivable agreement and the Company's receivable with AFSI was 0 at December 31, 2019 ($8 million at December 31, 2018, classified as "Accounts and notes receivable - Other" in the consolidated balance sheets). The Company continues to be a minority shareholder, but does not have a controlling financial interest in AFSI.


NOTE 2625 – RELATED PARTY TRANSACTIONS
Effective with the separation from DowDuPont on April 1, 2019, TDCC became a wholly owned subsidiary of Dow Inc. and reported transactions with Dow Inc. as related party transactions. From the Merger dateDate through March 31, 2019, TDCC reported transactions with DowDuPont and Historical DuPont and its affiliates as related party transactions.

TDCC
TDCC has committed to fund Dow Inc.'s dividends paid to common stockholders and share repurchases, andas 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. In the fourth quarter of2020 and 2019, TDCC declared and paid a dividend of $201 milliondividends to Dow Inc. of $2,233 million and $201 million, respectively. At December 31, 2020 and 2019, TDCC's intercompany loan balance with Dow Inc. was insignificant.


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DowDuPont
Pursuant to the Agreement and Plan of Merger, Agreement,dated as of December 11, 2015, as amended on March 31, 2017, and prior to the separation from DowDuPont, TDCC committed to fund a portion of DowDuPont's dividends paid to common stockholders and certain governance expenses. In addition, share repurchases by DowDuPont were partially funded by TDCC through 2018. Funding was accomplished through intercompany loans. On a quarterly basis, TDCC's Board reviewed and determined a dividend distribution to DowDuPont to settle the intercompany loans. The dividend distribution considered the level of TDCC’s earnings and cash flows and the outstanding intercompany loan balances. In 2019, TDCC declared and paid dividends to DowDuPont of $535 million ($3,711 million in 2018). At December 31, 2018, TDCC's outstanding intercompany loan balance was insignificant.

Historical DuPont and its Affiliates
Prior to the separation from DowDuPont, TDCC sold to and procured from Historical DuPont and its affiliates certain raw materials that were consumed in each company's manufacturing process. The following table presents amounts due to or due from Historical DuPont and its affiliates at December 31, 2018:

Balances Due To or Due From Historical DuPont and its AffiliatesDec 31, 2018
In millions
Accounts and notes receivable - Other$89
Accounts payable - Other$19

The following table presents revenue earned and expenses incurred related to transactions with Historical DuPont and its affiliates, prior to the separation from DowDuPont:affiliates:

Sales to Historical DuPont and its Affiliates20192018
In millions
Net sales$12
$55
Cost of sales$9
$42

Sales to Historical DuPont and its Affiliates20192018
In millions
Net sales$12 $55 
Cost of sales$9 $42 

Purchases from Historical DuPont and its affiliates were insignificant for 2019 and 2018.


NOTE 2726 – SEGMENTS AND GEOGRAPHIC REGIONS
Dow combines one of the broadest technology sets in the industry withglobal breadth, asset integration and scale, focused innovation and global scaleleading business positions to achieve profitable growth andgrowth. The Company's ambition is to become the most innovative, customer centric, inclusive and sustainable materials science company.company, with a purpose to deliver a sustainable future for the world through our materials science expertise and collaboration with our partners. Dow’s portfolio of performance materials,plastics, industrial intermediates, coatings and plasticssilicones businesses delivers a broad range of differentiated science-based products and solutions for ourits customers in high-growth market segments, such as packaging, infrastructure, mobility and consumer care. Dow operates 109106 manufacturing sites in 31 countries and employs approximately 36,50035,700 people.

Effective with the Merger, TDCC's business activities were components of DowDuPont's businessThe Company conducts its worldwide operations and were reported as a single operating segment. Following the separation from DowDuPont, the Company changed the manner in which its business activities were managed. The Company's portfolio now includesthrough six global businesses which are organized into the following operating segments: Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Corporate contains the reconciliation between the totals for the operating segments and the Company's totals. The Company did not aggregate any operating segments when determining its reportable segments.

Following the separation from DowDuPont, the Company changed its practice of transferring ethylene to its downstream derivative businesses at cost to transferring ethylene at market prices. The Company also changed certain of its Corporate segment allocation practices including costs previously assigned to AgCo and SpecCo, which are now allocated to the operating segments. These changes have been consistently applied to all periods presented.

Dow reportedreports geographic information for the following regions: U.S. & Canada, Asia Pacific, Latin America and EMEAI. As a result ofThe Company transfers ethylene to its downstream derivative businesses at market prices. The Company also allocated costs previously assigned to AgCo and SpecCo ("stranded costs") to the separation from DowDuPont, the Company changed the geographic alignment for the country of India to be reflected in EMEAI (previously reported in Asia Pacific).operating segments.

Dow’s measure of profit/loss for segment reporting purposes is Operating EBIT (for the year ended December 31, 2020) and pro forma Operating EBIT (for the years ended December 31, 2019 and 2018) as this is the manner in which the Company's chief operating decision maker ("CODM") assesses performance and allocates resources. The Company defines Operating EBIT as earnings (i.e., "Income (loss) from continuing operations before income taxes") before interest, excluding the impact of significant items. The Company defines pro forma Operating EBIT as earnings (i.e., "Income (loss) from continuing operations before income taxes") before interest, plus pro forma adjustments, excluding the impact of significant items. ProOperating EBIT and pro forma Operating EBIT by segment includesinclude all operating items relating

143

to the businesses; items that principally apply to Dow as a whole are assigned to Corporate. Pro forma Operating EBIT has been reflected retrospectively for all periods presented, and reconciliations are provided at the end of this footnote. The Company also presents pro forma net sales for the years ended December 31, 2019 and 2018 in this footnote as it is included in management's measure of segment performance and is regularly reviewed by the CODM. Pro forma net sales includes the impact of ECP from January 1, 2017 through August 31, 2017, as well as the 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.


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Corporate Profile
Dow conducts its worldwide operations through global businesses which are reflected in the following reportable segments:

Packaging & Specialty Plastics
Packaging & Specialty Plastics consists of two highly integrated global businesses: Hydrocarbons & Energy and Packaging and Specialty Plastics. The segment employs the industry’s broadest polyolefin product portfolio, supported by the Company’s proprietary catalyst and manufacturing process technologies, to work at the customer’s design table throughout the value chain to deliver more reliable and durable, higher performing, and more sustainable plastics to customers in food and specialty packaging; industrial and consumer packaging; health and hygiene; caps, closures and pipe applications; consumer durables; automotive;mobility and transportation; and infrastructure. This segment includes the results of The Kuwait Styrene Company K.S.C.C. and The SCG-Dow Group, as well as a portion of the results of EQUATE, The Kuwait Olefins Company K.S.C.C. ("TKOC"), Map Ta Phut and Sadara, all joint ventures of the Company.

Industrial Intermediates & Infrastructure
Industrial Intermediates & Infrastructure consists of two customer-centric global businesses - Industrial Solutions and Polyurethanes & Construction Chemicals - that develop important intermediate chemicals that are essential to manufacturing processes, as well as downstream, customized materials and formulations that use advanced development technologies. These businesses primarily produce and market ethylene oxide and propylene oxide derivatives that are aligned to market segments as diverse as appliances, coatings, electronics, surfactants for cleaning and sanitization, infrastructure and oil and gas. The global scale and reach of these businesses, world-class technology and R&D capabilities and materials science expertise enable the Company to be a premier solutions provider offering customers value-add sustainable solutions to enhance comfort, energy efficiency, product effectiveness and durability across a wide range of home comfort and appliances, building and construction, adhesives and lubricant applications, among others. This segment includes a portion of the Company's share of the results of EQUATE, TKOC, Map Ta Phut and Sadara.

Performance Materials & Coatings
Performance Materials & Coatings includes industry-leading franchises that deliver a wide array of solutions into consumer and infrastructure end-markets. The segment consists of two global businesses: Coatings & Performance Monomers and Consumer Solutions. These businesses primarily utilize the Company's acrylics-, cellulosics- and silicone-based technology platforms to serve the needs of the architectural and industrial coatings,coatings; home care and personal carecare; consumer and electronics; mobility and transportation; industrial and chemical processing; and building and infrastructure end-markets. Both businesses employ materials science capabilities, global reach and unique products and technology to combine chemistry platforms to deliver differentiated offerings to customers.

Corporate
Corporate includes certain enterprise and governance activities (including insurance operations, environmental operations, etc.); non-business aligned joint ventures; non-business aligned litigation expenses; and discontinued or non-aligned businesses.

Sales are attributed to geographic region based on customer location; long-lived assets are attributed to geographic region based on asset location.

Geographic Region Information
United 
States
EMEAI
Rest of 
World
Total
In millions
2019    
Sales to external customers$14,437
$14,612
$13,902
$42,951
Long-lived assets$14,571
$2,649
$3,776
$20,996
2018


 
Sales to external customers$16,613
$17,406
$15,585
$49,604
Long-lived assets$14,750
$2,657
$4,011
$21,418
2017    
Sales to external customers$15,316
$15,226
$13,188
$43,730
Long-lived assets$14,771
$2,547
$4,266
$21,584

Geographic Region InformationUnited 
States		EMEAIRest of 
World		Total
In millions
2020
Sales to external customers$12,547 $12,969 $13,026 $38,542 
Long-lived assets$13,833 $2,813 $3,593 $20,239 
2019
Sales to external customers$14,437 $14,612 $13,902 $42,951 
Long-lived assets$14,571 $2,649 $3,776 $20,996 
2018
Sales to external customers$16,613 $17,406 $15,585 $49,604 
Long-lived assets$14,750 $2,657 $4,011 $21,418 

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158


Segment InformationPack. & Spec. PlasticsInd. Interm. & Infrast.Perf. Materials & CoatingsCorp.Total
In millions
2020
Net sales$18,301 $12,021 $7,951 $269 $38,542 
Restructuring and asset related charges - net 1
30 22 192 464 708 
Equity in earnings (losses) of nonconsolidated affiliates173 (166)6 (31)(18)
Operating EBIT 2
2,325 355 314 (279)2,715 
Depreciation and amortization1,372 605 870 27 2,874 
Total assets30,069 12,220 13,915 5,266 61,470 
Investments in nonconsolidated affiliates661 531 108 27 1,327 
Capital expenditures678 268 306 0 1,252 
2019
Net sales$20,245 $13,440 $8,923 $343 $42,951 
Pro forma net sales20,245 13,449 8,961 343 42,998 
Restructuring, goodwill impairment and asset related charges - net 1
439 1,175 1,076 529 3,219 
Equity in earnings (losses) of nonconsolidated affiliates162 (241)5 (20)(94)
Pro forma Operating EBIT 3
2,904 845 918 (315)4,352 
Depreciation and amortization1,435 594 877 32 2,938 
Total assets29,522 11,753 14,059 5,190 60,524 
Investments in nonconsolidated affiliates675 568 101 60 1,404 
Capital expenditures1,039 452 470 0 1,961 
2018
Net sales$24,195 $15,447 $9,677 $285 $49,604 
Pro forma net sales24,237 15,465 9,865 285 49,852 
Restructuring, goodwill impairment and asset related charges - net 1
46 11 21 143 221 
Equity in earnings (losses) of nonconsolidated affiliates287 284 4 (20)555 
Pro forma Operating EBIT 3
3,593 1,767 1,246 (370)6,236 
Depreciation and amortization1,385 607 888 29 2,909 
Total assets 4
30,279 14,092 16,050 3,378 63,799 
Investments in nonconsolidated affiliates1,278 1,850 99 93 3,320 
Capital expenditures1,231 433 427 0 2,091 
1.See Note 6 for information regarding the Company's restructuring programs, goodwill impairment and other asset related charges.
Segment InformationPack. & Spec. PlasticsInd. Interm. & Infrast.Perf. Materials & CoatingsCorp.Total
In millions
2019     
Net sales$20,245
$13,440
$8,923
$343
$42,951
Pro forma net sales20,245
13,449
8,961
343
42,998
Restructuring, goodwill impairment and asset related charges - net 1
439
1,175
1,076
529
3,219
Equity in earnings (losses) of nonconsolidated affiliates162
(241)5
(20)(94)
Pro forma Operating EBIT 2
2,904
845
918
(315)4,352
Depreciation and amortization1,435
594
877
32
2,938
Total assets29,522
11,753
14,059
5,190
60,524
Investments in nonconsolidated affiliates675
568
101
60
1,404
Capital expenditures1,039
452
470
—
1,961
2018     
Net sales$24,195
$15,447
$9,677
$285
$49,604
Pro forma net sales24,237
15,465
9,865
285
49,852
Restructuring, goodwill impairment and asset related charges - net 1
46
11
21
143
221
Equity in earnings (losses) of nonconsolidated affiliates287
284
4
(20)555
Pro forma Operating EBIT 2
3,593
1,767
1,246
(370)6,236
Depreciation and amortization1,385
607
888
29
2,909
Total assets 3
30,279
14,092
16,050
3,378
63,799
Investments in nonconsolidated affiliates1,278
1,850
99
93
3,320
Capital expenditures1,231
433
427
—
2,091
2017     
Net sales$21,504
$12,951
$8,892
$383
$43,730
Pro forma net sales22,546
12,951
8,892
383
44,772
Restructuring, goodwill impairment and asset related charges - net 1
716
17
1,578
428
2,739
Equity in earnings (losses) of nonconsolidated affiliates190
172
40
(8)394
Pro forma Operating EBIT 2
3,712
1,470
817
(422)5,577
Depreciation and amortization1,055
572
885
34
2,546
Total assets 3
30,633
14,115
17,483
4,342
66,573
Investments in nonconsolidated affiliates1,184
1,700
103
120
3,107
Capital expenditures2,034
310
463
—
2,807
2.Operating EBIT for TDCC in 2020 is substantially the same as that of Dow Inc. and therefore is not disclosed separately in the table above. A reconciliation of "Income from continuing operations, net of tax" to Operating EBIT is provided on the following page.
1.See Note 7 for information regarding the Company's restructuring programs, goodwill impairment and other asset related charges.
2.Pro forma Operating EBIT for TDCC in 2019 is substantially the same as that of Dow Inc. (same for 2018 and 2017)
3.Pro forma Operating EBIT for TDCC in 2019 is substantially the same as that of Dow Inc. (same for 2018) and therefore is not disclosed separately in the table above. A reconciliation of "Income (loss) from continuing operations, net of tax" to pro forma Operating EBIT is provided on the following page.
4.Excludes assets of discontinued operations of $19,900 million.

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Reconciliation of "Income from continuing operations, net of tax" to pro forma Operating EBIT is provided on the following page.2020
In millions
Income from continuing operations, net of tax$1,294 
3.+ Provision for income taxes on continuing operationsExcludes assets of discontinued operations of $19,900 million and $19,279 million for 2018 and 2017, respectively.

Reconciliation of "Income (loss) from continuing operations, net of tax" to Pro Forma Operating EBIT201920182017
In millions
Income (loss) from continuing operations, net of tax$(1,717)$2,940
$(1,287)
+ Provision for income taxes on continuing operations470
809
1,524
Income (loss) from continuing operations before income taxes$(1,247)$3,749
$237
- Interest income81
82
66
+ Interest expense and amortization of debt discount933
1,063
914
+ Pro forma adjustments 1
65
180
1,120
- Significant items(4,682)(1,326)(3,372)
Pro forma Operating EBIT$4,352
$6,236
$5,577

777 
1.Income from continuing operations before income taxesPro forma adjustments include: (1) the margin impact of various manufacturing, supply$2,071 
- Interest income38 
+ Interest expense 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 inclusion of ECP for the period of January 1, 2017 through August 31, 2017, (3) the removal of the amortization of ECP's inventory step-up recognized in connection with the Merger (4) 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) and (5) the elimination of the effect of a consummated divestiture agreed to with certain regulatory agencies as a condition of approval for the Merger.debt discount827 
- Significant items145 
Operating EBIT$2,715 


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Reconciliation of "Income (loss) from continuing operations, net of tax" to Pro Forma Operating EBIT20192018
In millions
Income (loss) from continuing operations, net of tax$(1,717)$2,940 
+ Provision for income taxes on continuing operations470 809 
Income (loss) from continuing operations before income taxes$(1,247)$3,749 
- Interest income81 82 
+ Interest expense and amortization of debt discount933 1,063 
+ Pro forma adjustments 1
65 180 
- Significant items(4,682)(1,326)
Pro forma Operating EBIT$4,352 $6,236 
Table1.Pro forma adjustments include: (1) the margin impact of Contentsvarious 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).


The following tables summarize the pretax impact of significant items by segment that are excluded from Operating EBIT and pro forma Operating EBIT:

Significant Items by Segment for 2020Pack. & Spec. PlasticsInd. Interm. & Infrast.Perf. Materials & CoatingsCorp.Total
In millions
Integration and separation costs 1
$0 $0 $0 $(239)$(239)
Restructuring and asset related charges - net 2
(30)(22)(192)(464)(708)
Warranty accrual adjustment of exited business 3
0 0 0 11 11 
Restructuring implementation costs 4
0 0 0 (10)(10)
Net gain on divestitures and asset sale 5
52 61 0 604 717 
Litigation related charges, awards and adjustments 6
544 0 0 0 544 
Loss on early extinguishment of debt 7
0 0 0 (149)(149)
Indemnification and other transaction related costs 8
0 0 0 (21)(21)
Total$566 $39 $(192)$(268)$145 
1.Costs related to business separation activities.
2.Includes Board approved restructuring plans and asset-related charges, which include other asset impairments. See Note 6 for additional information.
3.Includes an adjustment to the warranty accrual of an exited business.
4.Includes costs associated with implementing the Company's 2020 Restructuring Program.
5.Primarily related to a gain on the sale of rail infrastructure in the U.S. and Canada and a gain on the sale of marine and terminal operations and assets in the U.S. See Notes 5 and 7 for additional information.
6.Includes recognition of gains associated with a legal matter with Nova. See Note 16 for additional information.
7.The Company retired outstanding long-term debt resulting in a loss on early extinguishment. See Note 15 for additional information.
8.Primarily related to charges associated with agreements entered into with DuPont and Corteva as part of the separation and distribution which, among other matters, provides for cross-indemnities and allocations of obligations and liabilities for periods prior to, at and after the completion of the separation.


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Significant Items by Segment for 2019Pack. & Spec. PlasticsInd. Interm. & Infrast.Perf. Materials & CoatingsCorp.Total
In millions
Indemnification and other transaction related costs 1
$—
$—
$—
$(144)$(144)
Integration and separation costs 2
—
—
—
(1,013)(1,013)
Restructuring, goodwill impairment and asset related charges - net 3
(439)(1,175)(1,076)(529)(3,219)
Loss on divestitures 4
—
(5)—
(44)(49)
Loss on early extinguishment of debt 5
—
—
—
(102)(102)
Environmental charges 6
(5)(8)(50)(336)(399)
Warranty accrual adjustment of exited business 7
—
—
—
39
39
Litigation related charges, awards and adjustments 8
170
—
—
35
205
Total$(274)$(1,188)$(1,126)$(2,094)$(4,682)
1.Includes charges primarily 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.
2.Costs related to post-Merger integration and business separation activities. Excludes one-time transaction costs directly attributable to the Merger.
3.Includes Board approved restructuring plans and asset-related charges (see Note 7 for additional information); a charge related to Sadara (see Note 13 for additional information) and an impairment charge related to goodwill associated with the Coatings & Performance Monomers reporting unit (see Note 14 for additional information).
4.Includes post-closing adjustments on previous divestitures.
5.The Company retired outstanding long-term debt resulting in a loss on early extinguishment. See Note 16 for additional information.
6.Related to environmental remediation, primarily resulting from the culmination of long-standing negotiations with regulators and/or agencies and review of additional costs to manage ongoing remediation activities resulting from Dow’s separation from DowDuPont and related agreements with Corteva and DuPont. See Note 17 for additional information.
7.Includes an adjustment to the warranty accrual of an exited business.
8.Includes a gain associated with a legal settlement with Nova, as well as a gain related to an adjustment of the Dow Silicones breast implant liability and a charge related to the settlement of the Dow Silicones commercial creditor matters. See Note 17 for additional information.

Significant Items by Segment for 2018Pack. & Spec. PlasticsInd. Interm. & Infrast.Perf. Materials & CoatingsCorp.Total
In millions
Impact of Dow Silicones ownership restructure 1
$—
$—
$(20)$—
$(20)
Integration and separation costs 2
—
—
—
(1,074)(1,074)
Restructuring, goodwill impairment and asset related charges - net 3
(46)(11)(21)(120)(198)
Gain on divestiture 4
—
20
—
—
20
Transaction costs and productivity actions 5
—
—
—
(54)(54)
Total$(46)$9
$(41)$(1,248)$(1,326)
1.Includes a loss related to a post-closing adjustment related to the Dow Silicones ownership restructure.    
2.Costs related to post-Merger integration and separation and distribution activities, and costs related to the Dow Silicones ownership restructure.
3.Includes Board approved restructuring plans and asset-related charges, which include other asset impairments. See Note 7 for additional information.
4.Includes a gain related to the Company's sale of its equity interest in MEGlobal.
5.The Company retired outstanding notes payable resulting in a loss on early extinguishment. See Note 16 for additional information.

Significant Items by Segment for 2017

Pack. & Spec. PlasticsInd. Interm. & Infrast.Perf. Materials & CoatingsCorp.Total
In millions
Litigation related charges, awards and adjustments 1
$137
$—
$—
$—
$137
Integration and separation costs 2
—
—
—
(716)(716)
Restructuring, goodwill impairment and asset related charges - net 3
(716)(17)(1,578)(431)(2,742)
Gain on divestiture 4
—
—
—
7
7
Transaction costs and productivity actions 5
—
—
—
(58)(58)
Total$(579)$(17)$(1,578)$(1,198)$(3,372)
1.Includes a gain associated with a patent infringement matter with Nova. See Note 17 for additional information.
2.Costs related to post-Merger integration, separation and distribution activities, and costs related to the Dow Silicones ownership restructure.
3.Includes Board approved restructuring plans, goodwill impairment and asset-related charges, which includes other asset impairments. See Note 7 for additional information.
4.Includes post-closing adjustments related to the split-off of the Company's chlorine value chain.
5.Includes implementation costs associated with the Company's restructuring programs and other productivity actions.

146
Significant Items by Segment for 2019Pack. & Spec. PlasticsInd. Interm. & Infrast.Perf. Materials & CoatingsCorp.Total
In millions
Integration and separation costs 1
$0 $0 $0 $(1,013)$(1,013)
Restructuring, goodwill impairment and asset related charges - net 2
(439)(1,175)(1,076)(529)(3,219)
Warranty accrual adjustment of exited business 3
0 0 0 39 39 
Environmental charges 4
(5)(8)(50)(336)(399)
Loss on divestitures 5
0 (5)0 (44)(49)
Loss on early extinguishment of debt 6
0 0 0 (102)(102)
Litigation related charges, awards and adjustments 7
170 0 0 35 205 
Indemnification and other transaction related costs 8
0 0 0 (144)(144)
Total$(274)$(1,188)$(1,126)$(2,094)$(4,682)
1.Costs related to post-Merger integration and business separation activities. Excludes one-time transaction costs directly attributable to the Merger.
2.Includes Board approved restructuring plans and asset related charges (see Note 6 for additional information); a charge related to Sadara (see Note 12 for additional information) and an impairment charge related to goodwill associated with the Coatings & Performance Monomers reporting unit (see Note 13 for additional information).
3.Includes an adjustment to the warranty accrual of an exited business.
4.Related to environmental remediation, primarily resulting from the culmination of long-standing negotiations with regulators and/or agencies and review of additional costs to manage ongoing remediation activities resulting from Dow’s separation from DowDuPont and related agreements with Corteva and DuPont. See Note 16 for additional information.
5.Includes post-closing adjustments on previous divestitures.
6.The Company retired outstanding long-term debt resulting in a loss on early extinguishment. See Note 15 for additional information.
7.Includes a gain associated with a legal matter with Nova, as well as a gain related to an adjustment of the Implant Liability and a charge related to the settlement of the Commercial Creditor matters. See Note 16 for additional information.
8.Includes charges primarily 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.

Significant Items by Segment for 2018Pack. & Spec. PlasticsInd. Interm. & Infrast.Perf. Materials & CoatingsCorp.Total
In millions
Impact of Dow Silicones ownership restructure 1
$0 $0 $(20)$0 $(20)
Integration and separation costs 2
0 0 0 (1,074)(1,074)
Restructuring and asset related charges - net 3
(46)(11)(21)(120)(198)
Gain on divestiture 4
0 20 0 0 20 
Loss on early extinguishment of debt 5
0 0 0 (54)(54)
Total$(46)$9 $(41)$(1,248)$(1,326)
1.Includes a loss related to a post-closing adjustment related to the Dow Silicones ownership restructure.
2.Costs related to post-Merger integration and separation and distribution activities, and costs related to the Dow Silicones ownership restructure.
3.Includes Board approved restructuring plans and asset-related charges, which include other asset impairments. See Note 6 for additional information.
4.Includes a gain related to the Company's sale of its equity interest in MEGlobal.
5.The Company retired outstanding notes payable resulting in a loss on early extinguishment. See Note 15 for additional information.

161

NOTE 2827 - SELECTED QUARTERLY FINANCIAL DATA
2019     
In millions, except per share amounts (Unaudited)
1st 1
2nd3rd4thYear
Dow Inc.     
Net sales$10,969
$11,014
$10,764
$10,204
$42,951
Cost of sales$9,142
$9,420
$9,377
$8,718
$36,657
Gross margin$1,827
$1,594
$1,387
$1,486
$6,294
Restructuring, goodwill impairment and asset related charges - net 2
$156
$65
$147
$2,851
$3,219
Integration and separation costs 3
$452
$348
$164
$99
$1,063
Income (loss) from continuing operations, net of tax$156
$90
$347
$(2,310)$(1,717)
Income from discontinued operations net of tax$445
$—
$—
$—
$445
Net income (loss) 4
$601
$90
$347
$(2,310)$(1,272)
Net income (loss) attributable to Dow Inc.$556
$75
$333
$(2,323)$(1,359)
Earnings (loss) per common share from continuing operations - basic 5
$0.16
$0.10
$0.45
$(3.14)$(2.42)
Earnings (loss) per common share from continuing operations -
diluted 5
$0.16
$0.10
$0.45
$(3.14)$(2.42)
Dividends declared per share of common stock 6
N/A
$0.70
$0.70
$0.70
$2.10
Market price range of common stock:     
High 6
N/A
$59.71
$52.79
$55.99
$59.71
Low 6
N/A
$46.76
$40.71
$43.85
$40.71
TDCC     
Net sales$10,969
$11,014
$10,764
$10,204
$42,951
Cost of sales$9,142
$9,419
$9,377
$8,719
$36,657
Gross margin$1,827
$1,595
$1,387
$1,485
$6,294
Restructuring, goodwill impairment and asset related charges - net 2
$156
$65
$147
$2,851
$3,219
Integration and separation costs$452
$324
$164
$99
$1,039
Income (loss) from continuing operations, net of tax$156
$217
$324
$(2,292)$(1,595)
Income from discontinued operations net of tax$445
$—
$—
$—
$445
Net income (loss) 3
$601
$217
$324
$(2,292)$(1,150)
Net income (loss) attributable to The Dow Chemical Company$556
$202
$310
$(2,305)$(1,237)

1.The amounts presented for the first quarter of 2019 have been updated from the amounts reported in the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2019, to reflect the effects of the separation from DowDuPont. See reconciliation on the following page.
2.See Note 7 for additional information.
3.See Note 4 for additional information.
4.See Notes 4, 9,
2020
In millions, except per share amounts (Unaudited)1st2nd3rd4thYear
Dow Inc.
Net sales$9,770 $8,354 $9,712 $10,706 $38,542 
Cost of sales$8,230 $7,610 $8,371 $9,135 $33,346 
Gross margin$1,540 $744 $1,341 $1,571 $5,196 
Restructuring and asset related charges (credits) - net 1
$96 $6 $617 $(11)$708 
Integration and separation costs 2
$65 $46 $63 $65 $239 
Net income (loss) 3
$258 $(217)$(1)$1,254 $1,294 
Net income (loss) attributable to Dow Inc.$239 $(225)$(25)$1,236 $1,225 
Earnings (loss) per common share from continuing operations - basic 4
$0.32 $(0.31)$(0.04)$1.66 $1.64 
Earnings (loss) per common share from continuing operations - diluted 4
$0.32 $(0.31)$(0.04)$1.65 $1.64 
Dividends declared per share of common stock$0.70 $0.70 $0.70 $0.70 $2.80 
Market price range of common stock:
High$53.75 $45.90 $51.07 $57.73 $57.73 
Low$22.00 $27.04 $39.44 $45.18 $22.00 
TDCC
Net sales$9,770 $8,354 $9,712 $10,706 $38,542 
Cost of sales$8,230 $7,608 $8,371 $9,134 $33,343 
Gross margin$1,540 $746 $1,341 $1,572 $5,199 
Restructuring and asset related charges (credits) - net 1
$96 $6 $617 $(11)$708 
Integration and separation costs 2
$65 $46 $63 $65 $239 
Net income (loss) 3
$258 $(217)$(1)$1,264 $1,304 
Net income (loss) attributable to The Dow Chemical Company$239 $(225)$(25)$1,246 $1,235 
1.See Note 6 for additional information.
2.See Note 3 for additional information.
3.See Notes 5, 7, 15 and 16 for information on additional items materially impacting "Net income (loss)." The fourth quarter of 2020 includes a gain related to the sale of marine and terminal operations and assets and a gain associated with a legal matter with Nova. The third quarter of 2020 includes a gain related to the sale of rail infrastructure operations and assets and a loss on the early extinguishment of debt. The first quarter of 2020 includes a loss on the early extinguishment of debt.
4.Earnings per common share amounts relate only to Dow Inc. as TDCC common shares are not publicly traded and are all owned by Dow Inc. Due to quarterly changes in the share count and the allocation of income to participating securities, the sum of the four quarters does not equal the earnings per share amount calculated for the year.






162

2019
In millions, except per share amounts (Unaudited)1st2nd3rd4thYear
Dow Inc.
Net sales$10,969 $11,014 $10,764 $10,204 $42,951 
Cost of sales$9,142 $9,420 $9,377 $8,718 $36,657 
Gross margin$1,827 $1,594 $1,387 $1,486 $6,294 
Restructuring, goodwill impairment and asset related charges - net 1
$156 $65 $147 $2,851 $3,219 
Integration and separation costs 2
$452 $348 $164 $99 $1,063 
Income (loss) from continuing operations, net of tax$156 $90 $347 $(2,310)$(1,717)
Income from discontinued operations net of tax$445 $0 $0 $0 $445 
Net income (loss) 3
$601 $90 $347 $(2,310)$(1,272)
Net income (loss) attributable to Dow Inc.$556 $75 $333 $(2,323)$(1,359)
Earnings (loss) per common share from continuing operations - basic 4
$0.16 $0.10 $0.45 $(3.14)$(2.42)
Earnings (loss) per common share from continuing operations - diluted 4
$0.16 $0.10 $0.45 $(3.14)$(2.42)
Dividends declared per share of common stock 5
N/A$0.70 $0.70 $0.70 $2.10 
Market price range of common stock:
High 5
N/A$59.71 $52.79 $55.99 $59.71 
Low 5
N/A$46.76 $40.71 $43.85 $40.71 
TDCC
Net sales$10,969 $11,014 $10,764 $10,204 $42,951 
Cost of sales$9,142 $9,419 $9,377 $8,719 $36,657 
Gross margin$1,827 $1,595 $1,387 $1,485 $6,294 
Restructuring, goodwill impairment and asset related charges - net 1
$156 $65 $147 $2,851 $3,219 
Integration and separation costs 2
$452 $324 $164 $99 $1,039 
Income (loss) from continuing operations, net of tax$156 $217 $324 $(2,292)$(1,595)
Income from discontinued operations net of tax$445 $0 $0 $0 $445 
Net income (loss) 3
$601 $217 $324 $(2,292)$(1,150)
Net income (loss) attributable to The Dow Chemical Company$556 $202 $310 $(2,305)$(1,237)
1.See Note 6 for additional information.
2.See Note 3 for additional information.
3.See Notes 3, 8, 15 and 16 and 17 for information on additional items materially impacting "Net income (loss)." The fourth quarter of 2019 included a gain related to the effects of Swiss tax reform and a loss on the early extinguishment of debt. The third quarter of 2019 included a charge related to environmental remediation, a charge related to the settlement of the Dow Silicones commercial creditor matters, a gain related to an adjustment to the Dow Silicones breast implant liability and a gain associated with a legal settlement of the Commercial Creditor matters, a gain related to an adjustment to the Implant Liability and a gain associated with a legal matter with Nova. The second quarter of 2019 included charges associated with agreements entered into with DuPont and Corteva as part of the separation from DowDuPont.
5.Earnings per common share amounts relate only to Dow Inc. as TDCC common shares are not publicly traded and are all owned by Dow Inc. Due to quarterly changes in the share count and the allocation of income to participating securities, the sum of the four quarters does not equal the earnings per share amount calculated for the year.
6.Dow Inc.'s common stock was solely owned by DowDuPont through March 31, 2019, and on April 1, 2019, Dow Inc. became an independent, publicly traded company.


147

2018     
In millions, except per share amounts (Unaudited)1st2nd3rd4thYear
Net sales$12,237
$12,789
$12,634
$11,944
$49,604
Cost of sales$9,980
$10,540
$10,456
$10,098
$41,074
Gross margin$2,257
$2,249
$2,178
$1,846
$8,530
Restructuring, goodwill impairment and asset related charges - net 1
$87
$40
$48
$46
$221
Integration and separation costs 2
$224
$262
$313
$380
$1,179
Income from continuing operations, net of tax$925
$810
$714
$491
$2,940
Income from discontinued operations, net of tax$514
$554
$335
$432
$1,835
Net income 3
$1,439
$1,364
$1,049
$923
$4,775
Net income attributable to Dow Inc. and The Dow Chemical Company$1,404
$1,333
$1,013
$891
$4,641
Earnings per common share from continuing operations - basic 4
$1.21
$1.05
$0.91
$0.63
$3.80
Earnings per common share from continuing operations -
diluted 4
$1.21
$1.05
$0.91
$0.63
$3.80

1.See Note 7 for additional information.
2.See Note 4 for additional information.
3.Includes tax adjustments related to The Act, enacted on December 22, 2017. See Note 9 for additional information.
4.Earnings per common share amounts relate only to Dow Inc. as TDCC common shares are not publicly traded and are all owned by Dow Inc.

Effective with the separation from DowDuPont,DowDuPont.
4.Earnings per common share amounts relate only to Dow Inc. as TDCC common shares are not publicly traded and are all owned by Dow Inc. Due to quarterly changes in the Company's consolidated financial results reflectshare count and the distributionallocation of AgCo and SpecCo as discontinued operations, as well asincome to participating securities, the receipt of ECP as a common control transaction from the closingsum of the Merger on August 31, 2017. The following table providesfour quarters does not equal the reconciliation of the amounts reported in the Company's Quarterly Report on Form 10-Qearnings per share amount calculated for the period endedyear.
5.Dow Inc.'s common stock was solely owned by DowDuPont through March 31, 2019, to the amounts presented for the first quarter ofand on April 1, 2019, on the previous page. See Note 4 for additional information on the separation from DowDuPont.Dow Inc. became an independent, publicly traded company.

Reconciliation - First Quarter 2019As FiledDistribution of AgCo and SpecCoReceipt of ECPUpdated
In millions (Unaudited)
Net sales$13,582
$(2,954)$341
$10,969
Cost of sales$10,707
$(1,805)$240
$9,142
Gross margin$2,875
$(1,149)$101
$1,827
Restructuring, goodwill impairment and asset related charges - net$232
$(78)$2
$156
Integration and separation costs$408
$—
$44
$452
Income from continuing operations, net of tax$586
$(445)$15
$156
Income from discontinued operations, net of tax$—
$445
$—
$445
Net income$586
$—
$15
$601
Net income available for common stockholders$541
$—
$15
$556



163

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.



148

ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, Dow Inc. and The Dow Chemical Company (the "Companies") carried out an evaluation, under the supervision and with the participation of the Companies' Disclosure Committee and the Companies' management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Companies' disclosure controls and procedures pursuant to paragraph (b) of Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Companies' disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting
There were no changes in the Companies' internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companies' internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Companies' internal control framework and processes are designed to provide reasonable assurance to management and the Board of Directors regarding the reliability of financial reporting and the preparation of the Companies' consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.

The Companies' internal control over financial reporting includes those policies and procedures that:

•pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Companies;
•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Companies are being made only in accordance with authorizations of management and Directors of the Companies; and
•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companies' assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, any system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements.

Management assessed the effectiveness of the Companies' internal control over financial reporting and concluded that, as of December 31, 2019,2020, such internal control is effective. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013).

The Companies' independent auditors, Deloitte & Touche LLP,, with direct access to the Companies' Board of Directors through the Audit Committee of Dow Inc., have audited the consolidated financial statements prepared by the Companies. Their reports on the consolidated financial statements are included in Part II, Item 8. Financial Statements and Supplementary Data. Deloitte & Touche LLP’s reports on the Companies' internal control over financial reporting are referenced therein and included herein.

February 7, 2020


164
/s/ JIM FITTERLING/s/ HOWARD UNGERLEIDER
Jim FitterlingHoward Ungerleider
Chief Executive OfficerPresident and Chief Financial Officer
/s/ RONALD C. EDMONDS
Ronald C. Edmonds
Controller and Vice President of Controllers and Tax



149


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Dow Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Dow Inc. and subsidiaries (the “Company”) as of December 31, 2019,2020, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2020, based on criteria established in Internal Control -— Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2019,2020, of the Company and the financial statement schedule listed in the Index at Item 15(a)2 and our report dated February 7, 2020,5, 2021, expressed an unqualified opinion on those financial statements and financial statement schedule and included an explanatory paragraph regarding a) a change in the method of accounting for revenue due to the adoption of Accounting Standards Codification (ASC) Topic 606, Revenue From Contracts with Customers, in the first quarter of 2018 and b) a change in the method of accounting for leases due to the adoption of ASC Topic 842, Leases, in the first quarter of 2019.schedule.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



/S/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLPMidland, Michigan
Midland, Michigan
February 7, 20205, 2021

150
165


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholder and the Board of Directors of The Dow Chemical Company
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of The Dow Chemical Company and subsidiaries (the “Company”) as of December 31, 2019,2020, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2020, based on criteria established in Internal Control -— Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2019,2020, of the Company and the financial statement schedule listed in the Index at Item 15(a)2 and our report dated February 7, 2020,5, 2021, expressed an unqualified opinion on those financial statements and financial statement schedule and included an explanatory paragraph regarding a) a change in the method of accounting for revenue due to the adoption of Accounting Standards Codification (ASC) Topic 606, Revenue From Contracts with Customers, in the first quarter of 2018 and b) a change in the method of accounting for leases due to the adoption of ASC Topic 842, Leases, in the first quarter of 2019.schedule.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



/S/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLPMidland, Michigan
Midland, Michigan
February 7, 20205, 2021


151
166

ITEM 9B. OTHER INFORMATION
None.



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Dow Inc. and Subsidiaries
The Dow Chemical Company and Subsidiaries
PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information relating to Directors, certain executive officers and certain corporate governance matters (including identification of Audit Committee members and financial expert(s)) is contained in the definitive Proxy Statement for the 20202021 Annual Meeting of Stockholders of Dow Inc. and is incorporated herein by reference. See also the information regarding executive officers of the registrant set forth in Part I, Item 1. Business under the caption "Executive Officers of the Registrant" in reliance on General Instruction G to Form 10-K.

This information is omitted for The Dow Chemical Company pursuant to General Instruction I of Form 10-K.


ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation and the Company's equity compensation plans is contained in the definitive Proxy Statement for the 20202021 Annual Meeting of Stockholders of Dow Inc. and is incorporated herein by reference.

This information is omitted for The Dow Chemical Company pursuant to General Instruction I of Form 10-K.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information with respect to beneficial ownership of Dow Inc. common stock by each Director and all Directors and executive officers of the Company as a group is contained in the definitive Proxy Statement for the 20202021 Annual Meeting of Stockholders of Dow Inc. and is incorporated herein by reference.

Information relating to any person who beneficially owns in excess of 5 percent of the total outstanding shares of Dow Inc. common stock is contained in the definitive Proxy Statement for the 20202021 Annual Meeting of the Stockholders of Dow Inc. and is incorporated herein by reference.

Information with respect to compensation plans under which equity securities are authorized for issuance is contained in the definitive Proxy Statement for the 20202021 Annual Meeting of Stockholders of Dow Inc. and is incorporated herein by reference.

This information is omitted for The Dow Chemical Company pursuant to General Instruction I of Form 10-K.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Reportable relationships and related transactions, if any, as well as information relating to director independence are contained in the definitive Proxy Statement for the 20202021 Annual Meeting of Stockholders of Dow Inc. and are incorporated herein by reference.

This information is omitted for The Dow Chemical Company pursuant to General Instruction I of Form 10-K.


168

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Independent Registered Public Accountants
Information with respect to fees and services related to the Company's independent auditors, Deloitte & Touche LLP ("Deloitte"), and the disclosure of the Audit Committee's pre-approval policies and procedures are contained in the definitive Proxy Statement for the 20202021 Annual Meeting of Stockholders of Dow Inc. and are incorporated herein by reference.


153

The Audit Committee of Dow Inc. carefully considers the qualifications and competence of candidates for the independent registered public accounting firm. In accordance with its pre-approval policies and procedures, the Audit Committee pre-approved all professional services rendered by and associated fees paid to Deloitte, for the Companies, for the years ended December 31, 20192020 and 2018.2019. Professional services were performed by Deloitte, its member firms of Deloitte Touche Tohmatsu Limited, and their respective affiliates (“Deloitte Entities”). Total fees paid to the Deloitte Entities are shown by category in the following table:

Type of Fees
In thousands20202019
Audit Fees 1
$21,237 $25,142 
Audit-Related Fees 2
2,807 4,438 
Tax Fees 3
2,053 2,780 
Total$26,097 $32,360 
1.The aggregate fees billed for the integrated audit of the Company's annual financial statements and internal control over financial reporting, the reviews of the financial statements in quarterly reports on Form 10-Q, comfort letters, consents, statutory audits, and other regulatory filings. For 2020 and 2019, the fees include $135,000 and $850,000 respectively, which were associated with supporting the DuPont de Nemours, Inc. filings with the U.S. Securities and Exchange Commission ("SEC") for the period prior to the separation from DowDuPont Inc.
2.The aggregate fees billed primarily for audits of carve-out financial statements, assessment of controls relating to outsourced services, audits and reviews supporting divestiture activities, and agreed-upon procedures engagements.
3.The aggregate fees billed primarily for corporate tax consulting services, the preparation of expatriate employees' tax returns and tax compliance services.

169
Type of Fees  
In thousands20192018
Audit Fees 1
$25,142
$26,199
Audit-Related Fees 2
4,438
6,976
Tax Fees 3
2,780
600
Total$32,360
$33,775

1.The aggregate fees billed for the integrated audit of the Company's annual financial statements and internal control over financial reporting, the reviews of the financial statements in quarterly reports on Form 10-Q, comfort letters, consents, statutory audits, and other regulatory filings. For 2019, the fees include $850,000 associated with supporting the DuPont de Nemours, Inc. SEC filings for the period prior to the separation from DowDuPont Inc.
2.The aggregate fees billed primarily for audits of carve-out financial statements, assessment of controls relating to outsourced services, audits and reviews supporting divestiture activities, and agreed-upon procedures engagements.
3.The aggregate fees billed primarily for corporate tax consulting services, the preparation of expatriate employees' tax returns and tax compliance services.

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Dow Inc. and Subsidiaries
The Dow Chemical Company and Subsidiaries
PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)The following documents are filed as part of this report:ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)    The following documents are filed as part of this report:

(1)    The Company’s 2020 Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm are included in Part II, Item 8. Financial Statements and Supplementary Data.

(2)    Financial Statement Schedules – The following Financial Statement Schedule should be read in conjunction with the Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm included in Part II, Item 8. Financial Statements and Supplementary Data:
(1)The Company’s 2019 Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm are included in Part II, Item 8. Financial Statements and Supplementary Data.

(2)Financial Statement Schedules – The following Financial Statement Schedule should be read in conjunction with the Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm included in Part II, Item 8. Financial Statements and Supplementary Data:
Schedule IIValuation and Qualifying Accounts
Schedules other than the one listed above are omitted due to the absence of conditions under which they are required or because the information called for is included in the Consolidated Financial Statements or the Notes to the Consolidated Financial Statements.

(3)    The following exhibits are filed with or incorporated by reference into this Annual Report on Form 10-K:

(3)The following exhibits are filed with or incorporated by reference into this Annual Report on Form 10-K:

Exhibit No.Description of Exhibit

2.1
2.1    Separation and Distribution Agreement, effective as of April 1, 2019, by and among Dow Inc., DuPont de Nemours, Inc. (formerly known as DowDuPont Inc.), and Corteva, Inc. (incorporated by reference to Exhibit 2.1 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).

2.2    Shareholders' Agreement, dated as of October 8, 2011, between Dow Saudi Arabia Holding B.V. and Performance Chemicals Holding Company (incorporated by reference to Exhibit 99.1 to The Dow Chemical Company's Current Report on Form 8-K/A filed with the SEC on June 27, 2012).

2.2.1    First Amendment, effective June 1, 2012, to the Shareholders' Agreement, dated as of October 8, 2011, between Performance Chemicals Holding Company, Dow Saudi Arabia Holding B.V., Saudi Arabian Oil Company, Dow Europe Holding B.V. and The Dow Chemical Company (incorporated by reference to Exhibit 99.1 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on February 14, 2013).

2.3    Transaction Agreement, dated as of December 10, 2015, among The Dow Chemical Company, Corning Incorporated, Dow Corning Corporation and HS Upstate Inc. (incorporated by reference to Exhibit 2.1 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on December 11, 2015).

2.3.1    Tax Matters Agreement, dated as of December 10, 2015, among The Dow Chemical Company, Corning Incorporated, Dow Corning Corporation and HS Upstate Inc. (incorporated by reference to Exhibit 2.2 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on December 11, 2015).

3.1    Amended and Restated Certificate of Incorporation of Dow Inc. (incorporated by reference to Exhibit 3.1 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).

3.2    Amended and Restated Bylaws of Dow Inc. (incorporated by reference to Exhibit 3.2 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).

3.3    Amended and Restated Certificate of Incorporation of The Dow Chemical Company (incorporated by reference to Exhibit 3.1 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on September 1, 2017).


2.2
Shareholders' Agreement, dated as of October 8, 2011, between Dow Saudi Arabia Holding B.V. and Performance Chemicals Holding Company (incorporated by reference to Exhibit 99.1 to The Dow Chemical Company's Current Report on Form 8-K/A filed with the SEC on June 27, 2012).

2.2.1
First Amendment, effective June 1, 2012, to the Shareholders' Agreement, dated as of October 8, 2011, between Performance Chemicals Holding Company, Dow Saudi Arabia Holding B.V., Saudi Arabian Oil Company, Dow Europe Holding B.V. and The Dow Chemical Company (incorporated by reference to Exhibit 99.1 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on February 14, 2013).

2.3
Transaction Agreement, dated as of December 10, 2015, among The Dow Chemical Company, Corning Incorporated, Dow Corning Corporation and HS Upstate Inc. (incorporated by reference to Exhibit 2.1 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on December 11, 2015).

2.3.1
Tax Matters Agreement, dated as of December 10, 2015, among The Dow Chemical Company, Corning Incorporated, Dow Corning Corporation and HS Upstate Inc. (incorporated by reference to Exhibit 2.2 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on December 11, 2015).

3.1
Amended and Restated Certificate of Incorporation of Dow Inc. (incorporated by reference to Exhibit 3.1 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).

3.2
Amended and Restated Bylaws of Dow Inc. (incorporated by reference to Exhibit 3.2 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).

3.3
Amended and Restated Certificate of Incorporation of The Dow Chemical Company (incorporated by reference to Exhibit 3.1 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on September 1, 2017).

3.4
Amended and Restated Bylaws of The Dow Chemical Company (incorporated by reference to Exhibit 3.2 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on September 1, 2017).

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4.1
Indenture, dated as of April 1, 1992 (the "1992 Indenture"), between The Dow Chemical Company and the First National Bank of Chicago, as trustee (incorporated by reference to Exhibit 4.1 to The Dow Chemical Company's Registration Statement on Form S-3, File No. 333-88617, filed with the SEC on October 8, 1999 (the "S-3 Registration Statement"))3.4    Amended and Restated Bylaws of The Dow Chemical Company (incorporated by reference to Exhibit 3.2 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on September 1, 2017).

4.1.1
Supplemental Indenture, dated as of January 1, 1994, between The Dow Chemical Company and The First National Bank of Chicago, as trustee, to the 1992 Indenture (incorporated by reference to Exhibit 4.2 to the S-3 Registration Statement).

4.1.2
Second Supplemental Indenture, dated as of October 1, 1999, between The Dow Chemical Company and Bank One Trust Company, N.A. (formerly The First National Bank of Chicago), as trustee, to the 1992 Indenture (incorporated by reference to Exhibit 4.3 to the S-3 Registration Statement).

4.1.3
Third Supplemental Indenture, dated as of May 15, 2001, between The Dow Chemical Company and Bank One Trust Company, N.A. (formerly The First National Bank of Chicago), as trustee, to the 1992 Indenture (incorporated by reference to Exhibit 4.4 to The Dow Chemical Company's Registration Statement on Form S-4, File No. 333-67368 filed with the SEC on August 13, 2001).

4.2
Indenture, dated May 1, 2008 (the "2008 Indenture"), between The Dow Chemical Company and The Bank of New York Trust Company, N.A., as trustee, (incorporated by reference to Exhibit 4.1 to Post-Effective Amendment No. 1 to The Dow Chemical Company's Registration Statement on Form S-3, File No. 333-140859, filed with the SEC on May 6, 2008).

4.2.1
First Supplemental Indenture, dated November 30, 2018, between The Dow Chemical Company, Dow Inc. (formerly known as Dow Holdings Inc.), and The Bank of New York Mellon Trust Company, N.A., as trustee, to the 2008 Indenture (incorporated by reference to Exhibit 4.1 to The Dow Chemical Company's Current Report on Form 8‑K filed with the SEC on December 3, 2018).

4.2.2
Second Supplemental Indenture, dated May 20, 2019, between The Dow Chemical Company, Dow Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the 2008 Indenture (incorporated by reference to Exhibit 4.1 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on May 20, 2019).

4.3*
Indenture, dated July 26, 2019 (the "2019 Indenture"), between The Dow Chemical Company and The Bank of New York Trust Company, N.A., as trustee.

4.4Dow Inc. agrees to provide the SEC, on request, copies of all other such indentures and instruments that define the rights of holders of long-term debt of Dow Inc. and its consolidated subsidiaries, including The Dow Chemical Company, pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K.

4.5*
Description of Securities registered under Section 12 of the Securities Exchange Act of 1934.

10.1
Tax Matters Agreement, effective as of April 1, 2019, by and among Dow Inc., DuPont de Nemours, Inc. (formerly known as DowDuPont Inc.), and Corteva Inc. (incorporated by reference to Exhibit 10.1 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).

10.2
Employee Matters Agreement, effective as of April 1, 2019, by and among Dow Inc., DuPont de Nemours, Inc. (formerly known as DowDupont Inc.), and Corteva, Inc. (incorporated by reference to Exhibit 10.2 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).

10.3
Intellectual Property Cross-License Agreement, effective as of April 1, 2019, by and among Dow Inc. and DuPont de Nemours, Inc. (formerly known as DowDuPont Inc.) (incorporated by reference to Exhibit 10.3 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).

10.4
Intellectual Property Cross-License Agreement, dated as of April 1, 2019, by and among Dow Inc. and Corteva, Inc. (incorporated by reference to Exhibit 10.4 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).

10.5
Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).


4.1    Indenture, dated as of April 1, 1992 (the "1992 Indenture"), between The Dow Chemical Company and the First National Bank of Chicago, as trustee (incorporated by reference to Exhibit 4.1 to The Dow Chemical Company's Registration Statement on Form S-3, File No. 333-88617, filed with the SEC on October 8, 1999 (the "S-3 Registration Statement")).

4.1.1    Supplemental Indenture, dated as of January 1, 1994, between The Dow Chemical Company and The First National Bank of Chicago, as trustee, to the 1992 Indenture (incorporated by reference to Exhibit 4.2 to the S-3 Registration Statement).

4.1.2    Second Supplemental Indenture, dated as of October 1, 1999, between The Dow Chemical Company and Bank One Trust Company, N.A. (formerly The First National Bank of Chicago), as trustee, to the 1992 Indenture (incorporated by reference to Exhibit 4.3 to the S-3 Registration Statement).

4.1.3    Third Supplemental Indenture, dated as of May 15, 2001, between The Dow Chemical Company and Bank One Trust Company, N.A. (formerly The First National Bank of Chicago), as trustee, to the 1992 Indenture (incorporated by reference to Exhibit 4.4 to The Dow Chemical Company's Registration Statement on Form S-4, File No. 333-67368 filed with the SEC on August 13, 2001).

4.2    Indenture, dated May 1, 2008 (the "2008 Indenture"), between The Dow Chemical Company and The Bank of New York Trust Company, N.A., as trustee, (incorporated by reference to Exhibit 4.1 to Post-Effective Amendment No. 1 to The Dow Chemical Company's Registration Statement on Form S-3, File No. 333-140859, filed with the SEC on May 6, 2008).

4.2.1    First Supplemental Indenture, dated November 30, 2018, between The Dow Chemical Company, Dow Inc. (formerly known as Dow Holdings Inc.), and The Bank of New York Mellon Trust Company, N.A., as trustee, to the 2008 Indenture (incorporated by reference to Exhibit 4.1 to The Dow Chemical Company's Current Report on Form 8‑K filed with the SEC on December 3, 2018).

4.2.2    Second Supplemental Indenture, dated May 20, 2019, between The Dow Chemical Company, Dow Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee, to the 2008 Indenture (incorporated by reference to Exhibit 4.1 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on May 20, 2019).

4.3    Indenture, dated July 26, 2019 (the "2019 Indenture"), between The Dow Chemical Company and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.3 to Dow Inc. and The Dow Chemical Company's Annual Report on Form 10-K filed with the SEC on February 7, 2020).

4.4    Dow Inc. agrees to provide the SEC, on request, copies of all other such indentures and instruments that define the rights of holders of long-term debt of Dow Inc. and its consolidated subsidiaries, including The Dow Chemical Company, pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K.

4.5*    Description of Securities registered under Section 12 of the Securities Exchange Act of 1934.

10.1    Tax Matters Agreement, effective as of April 1, 2019, by and among Dow Inc., DuPont de Nemours, Inc. (formerly known as DowDuPont Inc.), and Corteva Inc. (incorporated by reference to Exhibit 10.1 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).


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10.2    Employee Matters Agreement, effective as of April 1, 2019, by and among Dow Inc., DuPont de Nemours, Inc. (formerly known as DowDuPont Inc.), and Corteva, Inc. (incorporated by reference to Exhibit 10.2 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).

10.5.1
10.3    Intellectual Property Cross-License Agreement, effective as of April 1, 2019, by and among Dow Inc. and DuPont de Nemours, Inc. (formerly known as DowDuPont Inc.) (incorporated by reference to Exhibit 10.3 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).

10.4    Intellectual Property Cross-License Agreement, dated as of April 1, 2019, by and among Dow Inc. and Corteva, Inc. (incorporated by reference to Exhibit 10.4 to Dow Inc.'s Current Report on Form 8-K filed with the SEC on April 2, 2019).

10.5    Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).

10.5.1    Form of Performance Stock Unit Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.1 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).

10.5.2    Form of Restricted Stock Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.2 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).

10.5.3    Form of Restricted Stock Unit Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.3 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).

10.5.4    Form of Stock Appreciation Right Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.4 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).

10.5.5    Form of Stock Option Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.5 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).

10.5.6    Form of Restricted Stock Unit Award Agreement (Director) under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.6 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).

10.6    The Dow Chemical Company Executives' Supplemental Retirement Plan - Restricted and Cadre Benefits, as restated and effective September 1, 2017 (incorporated by reference to Exhibit 10(a)(iv) to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on November 3, 2017).

10.6.1    An Amendment to The Dow Chemical Company Executives' Supplemental Retirement Plan - Restricted and Cadre Benefits, effective January 1, 2018 (incorporated by reference to Exhibit 10.1.2 to The Dow Chemical Company's Annual Report on Form 10-K for the year ended December 31, 2018).

10.7    The Dow Chemical Company Executives' Supplemental Retirement Plan - Supplemental Benefits, as restated and effective September 1, 2017 (incorporated by reference to Exhibit 10(a)(v) to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on November 3, 2017).

10.8    The Dow Chemical Company Elective Deferral Plan (Pre-2005), restated and effective as of April 1, 2019 (incorporated by reference to Exhibit 10.8 to Dow Inc. and The Dow Chemical Company's Quarterly Report on Form 10-Q filed with the SEC on May 3, 2019).


10.5.2
Form of Restricted Stock Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.2 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).

10.5.3
Form of Restricted Stock Unit Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.3 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).

10.5.4
Form of Stock Appreciation Right Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.4 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).

10.5.5
Form of Stock Option Award Agreement under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.5 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).

10.5.6
Form of Restricted Stock Unit Award Agreement (Director) under the Dow Inc. 2019 Stock Incentive Plan effective as of April 1, 2019 (incorporated by reference to Exhibit 4.4.6 to Dow Inc.'s Registration Statement on Form S-3 filed with the SEC on April 1, 2019).

10.6
The Dow Chemical Company Executives' Supplemental Retirement Plan - Restricted and Cadre Benefits, as restated and effective September 1, 2017 (incorporated by reference to Exhibit 10(a)(iv) to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on November 3, 2017).

10.6.1
An Amendment to The Dow Chemical Company Executives' Supplemental Retirement Plan - Restricted and Cadre Benefits, effective January 1, 2018 (incorporated by reference to Exhibit 10.1.2 to The Dow Chemical Company's Annual Report on Form 10-K for the year ended December 31, 2018).

10.7
The Dow Chemical Company Executives' Supplemental Retirement Plan - Supplemental Benefits, as restated and effective September 1, 2017 (incorporated by reference to Exhibit 10(a)(v) to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on November 3, 2017).

10.8
The Dow Chemical Company Elective Deferral Plan (Pre-2005), restated and effective as of April 1, 2019 (incorporated by reference to Exhibit 10.8 to Dow Inc. and The Dow Chemical Company's Quarterly Report on Form 10-Q filed with the SEC on May 3, 2019).

10.9
The Dow Chemical Company Elective Deferral Plan (Post 2004), restated and effective as of April 1, 2019 (incorporated by reference to Exhibit 4.1 to The Dow Chemical Company's Registration Statement on Form S-8 POS filed with the SEC on April 1, 2019).

10.10
Dow Inc. Voluntary Deferred Compensation Plan for Non-Employee Directors, restated and effective as of April 1, 2019 (incorporated by reference to Exhibit 10.10 to Dow Inc. and The Dow Chemical Company's Quarterly Report on Form 10-Q filed with the SEC on May 3, 2019).

10.11
Employment agreement dated February 14, 2006, between Heinz Haller and The Dow Chemical Company, incorporated by reference to Exhibit 10(ii) to The Dow Chemical Company Annual Report on Form 10-K for the year ended December 31, 2008.

21*
Subsidiaries of Dow Inc.

23.1.1*
Consent of Independent Registered Public Accounting Firm for Dow Inc.

23.1.2*
Consent of Independent Registered Public Accounting Firm for The Dow Chemical Company.

23.2*
Ankura Consulting Group, LLC's Consent.

31.1*
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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10.9    The Dow Chemical Company Elective Deferral Plan (Post 2004), restated and effective as of April 1, 2019 (incorporated by reference to Exhibit 4.1 to The Dow Chemical Company's Registration Statement on Form S-8 POS filed with the SEC on April 1, 2019).

32.1*
10.10    Dow Inc. Voluntary Deferred Compensation Plan for Non-Employee Directors, restated and effective as of April 1, 2019 (incorporated by reference to Exhibit 10.10 to Dow Inc. and The Dow Chemical Company's Quarterly Report on Form 10-Q filed with the SEC on May 3, 2019).

21*    Subsidiaries of Dow Inc.

23.1.1*    Consent of Independent Registered Public Accounting Firm for Dow Inc.

23.1.2*    Consent of Independent Registered Public Accounting Firm for The Dow Chemical Company.

23.2*    Ankura Consulting Group, LLC's Consent.

31.1*    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*    Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1    Guarantee relating to the 9.80% Debentures of Rohm and Haas Company (incorporated by reference to Exhibit 99.6 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on April 1, 2009).

101.INS    The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH    Inline XBRL Taxonomy Extension Schema Document.

101.CAL    Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF    Inline XBRL Taxonomy Extension Definition Linkbase Document.

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104    Cover Page Interactive Data File. The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.


32.2*
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1
Guarantee relating to the 9.80% Debentures of Rohm and Haas Company (incorporated by reference to Exhibit 99.6 to The Dow Chemical Company's Current Report on Form 8-K filed with the SEC on April 1, 2009).

101.INSThe instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCHInline XBRL Taxonomy Extension Schema Document.

101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.

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101.LABInline XBRL Taxonomy Extension Label Linkbase Document.

101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.

104Cover Page Interactive Data File. The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

*Filed herewith

A copy of any exhibit can be obtained via the Internet through the Investor Relations section of the Company's website (www.dow.com/investors), or the Company will provide a copy of any exhibit upon receipt of a written request for the particular exhibit or exhibits desired. All requests should be addressed to the Controller and Vice President of Controllers and Tax of the Company at the address of the Company’s principal executive offices. The referenced website and its content are not deemed incorporated by reference into this report.


ITEM 16. FORM 10-K SUMMARY
Not applicable.



158

Dow Inc. and Subsidiaries
The Dow Chemical Company and Subsidiaries
Valuation and Qualifying AccountsSchedule IIITEM 16. FORM 10-K SUMMARY
Not applicable.


173
(In millions) For the years ended Dec 31,201920182017
Accounts Receivable - Allowance for Doubtful Receivables   
Balance at beginning of year$42
$59
$51
Additions charged to expenses 1
24
10
23
Additions charged to other accounts 2
—
4
2
Deductions from reserves 3
(21)(31)(17)
Balance at end of year$45
$42
$59
Inventory - Obsolescence Reserve   
Balance at beginning of year$23
$18
$34
Additions charged to expenses19
7
5
Deductions from reserves 4
(7)(2)(21)
Balance at end of year$35
$23
$18
Reserves for Other Investments and Noncurrent Receivables   
Balance at beginning of year$460
$430
$350
Additions charged to expenses 1
1,758
44
83
Deductions from reserves(3)(14)(3)
Balance at end of year$2,215
$460
$430
Deferred Tax Assets - Valuation Allowance   
Balance at beginning of year$1,225
$1,255
$936
Additions charged to expenses140
152
369
Deductions from reserves(103)(182)(50)
Balance at end of year$1,262
$1,225
$1,255
1.In 2019, additions charged to expenses for "Accounts Receivable - Allowance for Doubtful Receivables" included $2 million and additions charged to expenses for "Reserves for Other Investments and Noncurrent Receivables" included $1,753 million related to the Company's investment in Sadara Chemical Company. See Note 13 to the Consolidated Financial Statements for additional information.
2.Additions to allowance for doubtful accounts charged to other accounts were classified as "Accounts and notes receivable - Other" in the consolidated balance sheets. These reserves relate to the Company's sale of trade accounts receivable. Anticipated credit losses in the portfolio of receivables sold were used to fair value the Company's interests held in trade accounts receivable conduits. See Notes 15 and 24 to the Consolidated Financial Statements for additional information.
3.Deductions included write-offs, recoveries, currency translation adjustments and other miscellaneous items.
4.Deductions included disposals and currency translation adjustments.



159

Dow Inc. and Subsidiaries
The Dow Chemical Company and Subsidiaries
Valuation and Qualifying AccountsSignaturesSchedule II


(In millions) For the years ended Dec 31,202020192018
Accounts Receivable - Allowance for Doubtful Receivables
Balance at beginning of year$45 $42 $59 
Additions charged to expenses 1
22 24 10 
Additions charged to other accounts 2
0 0 4 
Deductions from reserves 3
(16)(21)(31)
Balance at end of year$51 $45 $42 
Inventory - Obsolescence Reserve
Balance at beginning of year$35 $23 $18 
Additions charged to expenses2 19 7 
Deductions from reserves 4
(14)(7)(2)
Balance at end of year$23 $35 $23 
Reserves for Other Investments and Noncurrent Receivables
Balance at beginning of year$2,215 $460 $430 
Additions charged to expenses 1
7 1,758 44 
Deductions from reserves 5
(129)(3)(14)
Balance at end of year$2,093 $2,215 $460 
Deferred Tax Assets - Valuation Allowance
Balance at beginning of year$1,262 $1,225 $1,255 
Additions charged to expenses313 140 152 
Deductions from reserves(273)(103)(182)
Balance at end of year$1,302 $1,262 $1,225 
1.In 2019, additions charged to expenses for "Accounts Receivable - Allowance for Doubtful Receivables" included $2 million and additions charged to expenses for "Reserves for Other Investments and Noncurrent Receivables" included $1,753 million related to the Company's investment in Sadara Chemical Company ("Sadara"). See Note 12 to the Consolidated Financial Statements for additional information.
2.Additions to allowance for doubtful receivables charged to other accounts were classified as "Accounts and notes receivable - Other" in the consolidated balance sheets. These reserves relate to the Company's sale of trade accounts receivable. Anticipated credit losses in the portfolio of receivables sold were used to fair value the Company's interests held in trade accounts receivable conduits. See Notes 14 and 23 to the Consolidated Financial Statements for additional information.
3.Deductions included write-offs, recoveries, currency translation adjustments and other miscellaneous items.
4.Deductions included disposals and currency translation adjustments.
5.In 2020, deductions from reserves for "Reserves for Other Investments and Noncurrent Receivables" included $77 million related to the Company's investment in Sadara. See Note 12 to the Consolidated Financial Statements for additional information.


174

Dow Inc. and Subsidiaries
The Dow Chemical Company and Subsidiaries
Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this reportAnnual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.authorized, on February 5, 2021.

DOW INC.
THE DOW CHEMICAL COMPANY
DOW INC.
THE DOW CHEMICAL COMPANY
/s/ RONALD C. EDMONDS
Ronald C. Edmonds, Controller and Vice President of Controllers and Tax
February 7, 2020
(Authorized Signatory and Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this reportAnnual Report on Form 10-K has been signed below on February 5, 2021 by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ SAMUEL R. ALLEN/s/ JEFF M. FETTIGRONALD C. EDMONDS
Samuel R. Allen, Director, Dow Inc.Jeff M. Fettig, Non-Executive Chairman,Ronald C. Edmonds, Controller and Vice President of Controllers and Tax, Dow Inc.
and TDCC (Authorized Signatory and Principal Accounting Officer)
February 7, 2020February 7, 2020
/s/ AJAY BANGA/s/ JIM FITTERLINGJEFF M. FETTIG
Ajay Banga, Director, Dow Inc.Jeff M. Fettig, Lead Director, Dow Inc.
/s/ GAURDIE BANISTER JR./s/ JIM FITTERLING
Gaurdie Banister Jr., Director, Dow Inc.Jim Fitterling, Director, Chairman and Chief Executive Officer, Dow Inc. and TDCC (Principal Executive Officer)
February 7, 2020February 7, 2020
/s/ JACQUELINE K. BARTON/s/ JACQUELINE C. HINMAN
Jacqueline K. Barton, Director, Dow Inc.Jacqueline C. Hinman, Director, Dow Inc.
February 7, 2020February 7, 2020
/s/ JAMES A. BELL/s/ RUTH G. SHAWHOWARD UNGERLEIDER
James A. Bell, Director, Dow Inc.Ruth G. Shaw, Director, Dow Inc.
February 7, 2020February 7, 2020
/s/ WESLEY G. BUSH/s/ HOWARD UNGERLEIDER
Wesley G. Bush, Director, Dow Inc.Howard Ungerleider, President and Chief Financial Officer, Dow Inc. and TDCC;
Director, TDCC (Principal Financial Officer)
February 7, 2020February 7, 2020
/s/ WESLEY G. BUSH/s/ JILL S. WYANT
Wesley G. Bush, Director, Dow Inc.Jill S. Wyant, Director, Dow Inc.
/s/ RICHARD K. DAVIS/s/ DANIEL W. YOHANNES
Richard K. Davis, Director, Dow Inc.Daniel W. Yohannes, Director, Dow Inc.
February 7, 2020February 7, 2020
/s/ RONALD C. EDMONDS
Ronald C. Edmonds, Controller and Vice President of Controllers and Tax
February 7, 2020

175
160

Dow Inc. and Subsidiaries

The Dow Chemical Company and Subsidiaries
Trademark Listing

The following trademarks or service marks of The Dow Chemical Company and certain affiliated companies of Dow appear in this report: ACOUSTICRYL, ACRYSOL, AFFINITY, AMPLIFY, AQUASET, AVANSE, CARBOWAX, DOW, DOWANOL, DOWSIL, DOWTHERM, ECOFAST, ELITE, ENGAGE, EVOLV3D, EVOQUE, FORMASHIELD, IMAGIN3D, MAINCOTE, MOBILITYSCIENCE, NEOSEED, NORDEL, OPULUX, PRIMAL, RENUVA,RHOBARR, RHOPLEX, SENTRY, SILASTIC, SUNSPHERES, SYL-OFF, TAMOL, TERGITOL, TRITON, UCAR, UCARTHERM, UCON, VERSENE, VORARAD, WALOCEL

The following registered trademark of Disability:IN appears in this report: Disability Equality Index®

The following registered trademark of Incapital Holdings appears in this report: InterNotes®

The following registered service mark of American Chemistry Council in the United States appears in this report:
Responsible Care®

The following trademarksregistered trademark of E.I. du Pont de Nemours and Company or an affiliated company of DuPont appearGreat Place to Work® Institute, Inc. appears in this report: GREAT STUFFGreat Place to Work®
™, SMART DISPENSER™

The following registered trademark of The National Safety Council appears in this report: Green Cross for Safety®





































® ™ Trademark of The Dow Chemical Company ("TDCC") or an affiliated company, except as otherwise specified.

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