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

FORM 10-Q


þ ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedMARCHMarch 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-20200331_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 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. þ   Yes    ¨  No
Dow Inc.☑Yes☐NoThe Dow Chemical Company☑Yes☐No
The Dow Chemical Company þ   Yes    ¨  No
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 and post such files).
Dow Inc. þ   Yes    ¨  No
The Dow Chemical Company þ   Yes    ¨  No
Dow Inc.☑Yes☐NoThe 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 filer¨
Accelerated
filer ¨
þ
Accelerated
filer
¨Non-accelerated filerþ
¨
Smaller reporting company¨
¨
Emerging growth company¨
The Dow Chemical Company
Large accelerated filer¨
Accelerated
filer ¨
Accelerated
filer
¨Non-accelerated filerþ
þ
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 ¨
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    þ  No
The Dow Chemical Company ¨   Yes    þ  No
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 share¨DOWYesNew York Stock Exchange☑NoThe Dow Chemical Company¨Yes☑No
At April 30, 2019, Dow Inc. had 748,824,164740,730,813 shares of common stock, outstanding. At April 30, 2019,$0.01 par value, outstanding at March 31, 2020. The Dow Chemical Company had 100 shares of common stock, $0.01 par value, outstanding at March 31, 2020, all of which were held by the registrant’s parent, Dow Inc.
This filing is a reduced disclosure format for The Dow Chemical Company as it meets the conditions set forth in General Instruction H(l)(a) and (b) for Form 10-Q.
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Dow Inc. and Subsidiaries
The Dow Chemical Company and Subsidiaries
QUARTERLY REPORT ON FORM 10-Q
For the quarterly period ended March 31, 20192020
TABLE OF CONTENTS


PAGE
PAGE
PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements.
5
Dow Inc. and Subsidiaries:
5
6
7
8
9
The Dow Chemical Company and Subsidiaries:
510
611
712
813
914
Dow Inc. and Subsidiaries and The Dow Chemical Company and Subsidiaries:
1015
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
3646
3751
3958
4364
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
4465
Item 4.
Controls and Procedures.
4465
Item 1.
Legal Proceedings.
4566
Item 1A.
Risk Factors.
4566
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
67
Item 4.
Mine Safety Disclosures.
4567
Item 5.
Other Information.Information.
4567
Item 6.
Exhibits.
4667
4769


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Dow Inc.
and Subsidiaries
The Dow Chemical Company and Subsidiaries

This Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, is a combined report being filed separately by Dow Inc. and The Dow Chemical Company and its consolidated subsidiaries (“TDCC” and together with Dow Inc., "Dow"“Dow” or the "Company"). This Quarterly Report on Form 10-Q 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 considering that the financial statements and disclosures of each company are substantially similar, the companies are filing a combined report for this Quarterly Report on Form 10-Q. The information reflected in the report is equally applicable to both Dow Inc. and TDCC, except where otherwise noted. Each of Dow Inc. and TDCC is filing information included in this report on its own behalf and neither company makes any representation as to the information relating to the other company.


Background
Effective AugustOn April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC, 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, 2017, pursuant to2019.

The separation was contemplated by the merger of equals transaction contemplated byeffective August 31, 2017, under the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017,2017. TDCC and E. I. du Pont de Nemours and Company and its consolidated subsidiaries (“DuPont”)Historical DuPont each merged with subsidiaries of DowDuPont Inc. (“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 a result of Dow Inc.'s Registration Statement on Form 10 becoming effective on March 12, 2019 with the U.S. Securities and Exchange Commission ("SEC"), Dow Inc. is now required to file a Quarterly Report on Form 10-Q. At March 31, 2019, Dow Inc. and TDCC were separate, wholly owned subsidiaries of DowDuPont. At March 31, 2019, Dow Inc. was a holding company that did not have subsidiaries or operations. As a result, financial statements of Dow Inc. have not been included in this Quarterly Report on Form 10-Q and, unless otherwise indicated, the unaudited interim consolidated financial statements and notes thereto relate to TDCC.

On April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC, owning all of the outstanding common shares of TDCC. For filings relating to the period commencing April 1, 2019 and thereafter, TDCC will be deemed the predecessor to Dow Inc. and the historical results of TDCC will be deemed the historical results of Dow Inc. for periods prior to and including March 31, 2019. As a result of the future relationship between Dow Inc. and TDCC, the companies are filing a combined report for this Quarterly Report on Form 10-Q.


FORWARD-LOOKING STATEMENTS
This presentationreport contains “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-looking statements often address expected future business and financial performance, financial condition, and other matters, and often contain words 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. 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,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 availableavailable; the actual and potential impacts of the coronavirus disease 2019 ("COVID-19") pandemic and the recent excess oil supply and related drop in oil prices; 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 involve risks, uncertainties and other factors that are beyond Dow’s control that could cause Dow’sactual results to differ materially from those projected, anticipated or implied in the forward-looking statements. These factors include, but are not limited to: fluctuations in energy and raw material prices; failure to develop and market new products and optimally manage product life cycles; significant litigation and environmental matters; failure to appropriately manage process safety and product stewardship issues; changes in laws and regulations or political conditions; 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,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.systems; and risks related to the actual and potential impacts of the COVID-19 pandemic and the recent excess oil supply and related drop in oil prices. 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) ourDow's inability to achieve some or all of the benefits that we expectit expects to receive from the separation from DowDuPont; (ii) certain tax risks associated with the separation,separation; (iii) our inability to make necessary changes to operate as a stand-alone company, (iv) the failure of ourDow's pro forma financial information to be a reliable indicator of ourDow's future results, (v) our inability to enjoy the same benefits of diversity, leverage and market reputation that we enjoyed as a combined company, (vi) restrictions under the intellectual property cross-license agreements, (vii) ourresults; (iv) Dow's inability to receive third-party consents required under the separation agreement, (viii) our customers, suppliers and others' perception of our financial stability on a stand alone basis, (ix)agreement; (v) non-compete restrictions under the separation agreement, (x)agreement; (vi) receipt of less favorable terms in the commercial agreements we will enterDow entered into with DuPont and Corteva, Inc. ("Corteva"), including restrictions under intellectual property cross-license agreements, than weDow would have received from an unaffiliated third partyparty; and (xi) our indemnification of(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. For a more detailed discussion of Dow’s risks and uncertainties, see the section titled “Risk Factors” contained in the Information Statement filed as Exhibit 99.1 to Amendment No. 4 to the Registration StatementPart II, Item 1A of Dow Inc.this Quarterly Report on Form 10, filed with the SEC on March 8, 2019,10-Q and Part I, Item 1A of TDCC'sthe combined Dow Inc. and TDCC Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 11, 2019.Dow undertakesInc. 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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PART I – FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS




Dow Inc. and Subsidiaries
Consolidated Statements of Income
Three Months Ended
In millions, except per share amounts (Unaudited)Mar 31,
2020		Mar 31,
2019
Net sales$9,770  $10,969  
Cost of sales8,230  9,142  
Research and development expenses179  190  
Selling, general and administrative expenses334  448  
Amortization of intangibles100  116  
Restructuring and asset related charges - net96  156  
Integration and separation costs65  452  
Equity in losses of nonconsolidated affiliates(89) (14) 
Sundry income (expense) - net(81) 69  
Interest income15  18  
Interest expense and amortization of debt discount215  241  
Income from continuing operations before income taxes396  297  
Provision for income taxes on continuing operations138  141  
Income from continuing operations, net of tax258  156  
Income from discontinued operations, net of tax—  445  
Net income258  601  
Net income attributable to noncontrolling interests19  45  
Net income available for Dow Inc. common stockholders$239  $556  
Per common share data:
Earnings per common share from continuing operations - basic$0.32  $0.16  
Earnings per common share from discontinued operations - basic—  0.58  
Earnings per common share - basic$0.32  $0.74  
Earnings per common share from continuing operations - diluted$0.32  $0.16  
Earnings per common share from discontinued operations - diluted—  0.58  
Earnings per common share - diluted$0.32  $0.74  
Weighted-average common shares outstanding - basic740.2  747.2  
Weighted-average common shares outstanding - diluted742.0  747.2  
Depreciation$515  $543  
Capital expenditures$395  $442  
See Notes to the Consolidated Financial Statements.

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Dow Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income
 Three Months Ended
In millions (Unaudited)Mar 31,
2020		Mar 31,
2019
Net income$258  $601  
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on investments(100) 67  
Cumulative translation adjustments(163) (31) 
Pension and other postretirement benefit plans142  141  
Derivative instruments(162) (75) 
Total other comprehensive income (loss)(283) 102  
Comprehensive income (loss)(25) 703  
Comprehensive income attributable to noncontrolling interests, net of tax19  51  
Comprehensive income (loss) attributable to Dow Inc.$(44) $652  
See Notes to the Consolidated Financial Statements.

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Dow Inc. and Subsidiaries
Consolidated Balance Sheets

In millions, except share amounts (Unaudited)Mar 31,
2020		Dec 31,
2019
Assets
Current Assets
Cash and cash equivalents (variable interest entities restricted - 2020: $44; 2019: $37)$3,633  $2,367  
Marketable securities1  21  
Accounts and notes receivable:
Trade (net of allowance for doubtful receivables - 2020: $43; 2019: $45)4,841  4,844  
Other2,770  2,711  
Inventories6,324  6,214  
Other current assets569  658  
Total current assets18,138  16,815  
Investments
Investment in nonconsolidated affiliates1,235  1,404  
Other investments (investments carried at fair value - 2020: $1,306; 2019: $1,584)2,136  2,588  
Noncurrent receivables697  1,063  
Total investments4,068  5,055  
Property
Property54,942  54,910  
Less accumulated depreciation34,136  33,914  
Net property (variable interest entities restricted - 2020: $286; 2019: $330)20,806  20,996  
Other Assets
Goodwill8,780  8,796  
Other intangible assets (net of accumulated amortization - 2020: $3,994; 2019: $3,886)3,636  3,759  
Operating lease right-of-use assets1,942  2,072  
Deferred income tax assets2,248  2,213  
Deferred charges and other assets1,068  818  
Total other assets17,674  17,658  
Total Assets$60,686  $60,524  
Liabilities and Equity
Current Liabilities
Notes payable$1,490  $586  
Long-term debt due within one year384  435  
Accounts payable:
Trade3,769  3,889  
Other1,815  2,064  
Operating lease liabilities - current384  421  
Income taxes payable468  522  
Accrued and other current liabilities2,811  2,762  
Total current liabilities11,121  10,679  
Long-Term Debt (variable interest entities nonrecourse - 2020: $30; 2019: $34)16,313  15,975  
Other Noncurrent Liabilities
Deferred income tax liabilities352  347  
Pension and other postretirement benefits - noncurrent9,832  10,083  
Asbestos-related liabilities - noncurrent1,048  1,060  
Operating lease liabilities - noncurrent1,622  1,739  
Other noncurrent obligations6,937  6,547  
Total other noncurrent liabilities19,791  19,776  
Stockholders’ Equity
Common stock (authorized 5,000,000,000 shares of $0.01 par value each;
issued 2020: 753,534,116 shares; 2019: 751,228,644 shares)
8  8  
Additional paid-in capital7,370  7,325  
Retained earnings16,763  17,045  
Accumulated other comprehensive loss(10,529) (10,246) 
Unearned ESOP shares(81) (91) 
Treasury stock at cost (2020: 12,803,303 shares; 2019: 9,729,834 shares)(625) (500) 
Dow Inc.’s stockholders’ equity12,906  13,541  
Noncontrolling interests555  553  
Total equity13,461  14,094  
Total Liabilities and Equity$60,686  $60,524  
See Notes to the Consolidated Financial Statements.
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Dow Inc. and Subsidiaries
Consolidated Statements of Cash Flows
In millions (Unaudited)Three Months Ended
Mar 31,
2020		Mar 31,
2019
Operating Activities
Net income$258  $601  
Less: Income from discontinued operations, net of tax—  445  
Income from continuing operations, net of tax258  156  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization724  743  
Credit for deferred income tax(57) (72) 
Earnings of nonconsolidated affiliates less than dividends received134  775  
Net periodic pension benefit cost64  41  
Pension contributions(63) (99) 
Net gain on sales of assets, businesses and investments(12) (2) 
Restructuring and asset related charges - net96  156  
Other net loss135  33  
Changes in assets and liabilities, net of effects of acquired and divested companies:
Accounts and notes receivable128  85  
Inventories(111) (47) 
Accounts payable(314) (452) 
Other assets and liabilities, net254  (274) 
Cash provided by operating activities - continuing operations1,236  1,043  
Cash provided by operating activities - discontinued operations3  338  
Cash provided by operating activities1,239  1,381  
Investing Activities
Capital expenditures(395) (442) 
Investment in gas field developments(5) (25) 
Proceeds from sales of property and businesses, net of cash divested11  —  
Investments in and loans to nonconsolidated affiliates(114) —  
Distributions and loan repayments from nonconsolidated affiliates6  —  
Purchases of investments(128) (173) 
Proceeds from sales and maturities of investments472  176  
Cash used for investing activities - continuing operations(153) (464) 
Cash used for investing activities - discontinued operations—  (34) 
Cash used for investing activities(153) (498) 
Financing Activities
Changes in short-term notes payable838  (16) 
Proceeds from issuance of long-term debt2,449  —  
Payments on long-term debt(2,275) (81) 
Purchases of treasury stock(125) —  
Proceeds from issuance of stock16  28  
Transaction financing, debt issuance and other costs(93) —  
Employee taxes paid for share-based payment arrangements(26) (45) 
Distributions to noncontrolling interests(1) (2) 
Dividends paid to stockholders(518) —  
Dividends paid to DowDuPont Inc.—  (535) 
Settlements and transfers related to separation from DowDuPont Inc.—  36  
Cash provided by (used for) financing activities - continuing operations265  (615) 
Cash used for financing activities - discontinued operations—  (18) 
Cash provided by (used for) financing activities265  (633) 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(86) 30  
Cash reclassified as held for sale—  (97) 
Summary
Increase in cash, cash equivalents and restricted cash1,265  183  
Cash, cash equivalents and restricted cash at beginning of period2,380  2,764  
Cash, cash equivalents and restricted cash at end of period$3,645  $2,947  
Less: Restricted cash and cash equivalents, included in "Other current assets"12  43  
Cash and cash equivalents at end of period$3,633  $2,904  
See Notes to the Consolidated Financial Statements.
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Dow Inc. and Subsidiaries
Consolidated Statements of Equity
 Three Months Ended
In millions (Unaudited)Mar 31,
2020		Mar 31,
2019
Common Stock
Balance at beginning and end of period$8  $—  
Additional Paid-in Capital
Balance at beginning of period7,325  7,042  
Common stock issued/sold16  —  
Issuance of parent company stock - DowDuPont Inc.—  28  
Stock-based compensation and allocation of ESOP shares29  83  
Balance at end of period7,370  7,153  
Retained Earnings
Balance at beginning of period17,045  35,460  
Net income available for Dow Inc. common stockholders239  556  
Dividends to stockholders(518) —  
Dividends to DowDuPont Inc.—  (535) 
Common control transaction—  35  
Adoption of accounting standards—  (111) 
Other(3) (2) 
Balance at end of period16,763  35,403  
Accumulated Other Comprehensive Loss
Balance at beginning of period(10,246) (9,885) 
Other comprehensive income (loss)(283) 102  
Balance at end of period(10,529) (9,783) 
Unearned ESOP Shares
Balance at beginning of period(91) (134) 
Allocation of ESOP shares10  29  
Balance at end of period(81) (105) 
Treasury Stock
Balance at beginning of period(500) —  
Treasury stock purchases(125) —  
Balance at end of period(625) —  
Dow Inc.'s stockholders' equity12,906  32,668  
Noncontrolling Interests555  1,180  
Total Equity$13,461  $33,848  
Dividends declared per share of common stock$0.70  $—  
See Notes to the Consolidated Financial Statements.

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The Dow Chemical Company and Subsidiaries
Consolidated Statements of Income
 
Three Months EndedThree Months Ended
In millions (Unaudited)Mar 31,
2019		Mar 31,
2018		In millions (Unaudited)Mar 31,
2020		Mar 31,
2019
Net sales$13,582
$14,899
Net sales$9,770  $10,969  
Cost of sales10,707
11,552
Cost of sales8,230  9,142  
Research and development expenses361
386
Research and development expenses179  190  
Selling, general and administrative expenses701
751
Selling, general and administrative expenses334  448  
Amortization of intangibles154
159
Amortization of intangibles100  116  
Restructuring and asset related charges - net232
165
Restructuring and asset related charges - net96  156  
Integration and separation costs408
202
Integration and separation costs65  452  
Equity in earnings of nonconsolidated affiliates13
243
Equity in losses of nonconsolidated affiliatesEquity in losses of nonconsolidated affiliates(89) (14) 
Sundry income (expense) - net73
83
Sundry income (expense) - net(82) 69  
Interest incomeInterest income16  18  
Interest expense and amortization of debt discount247
270
Interest expense and amortization of debt discount215  241  
Income before income taxes858
1,740
Provision for income taxes272
363
Income from continuing operations before income taxesIncome from continuing operations before income taxes396  297  
Provision for income taxes on continuing operationsProvision for income taxes on continuing operations138  141  
Income from continuing operations, net of taxIncome from continuing operations, net of tax258  156  
Income from discontinued operations, net of taxIncome from discontinued operations, net of tax—  445  
Net income586
1,377
Net income258  601  
Net income attributable to noncontrolling interests45
35
Net income attributable to noncontrolling interests19  45  
Net income available for The Dow Chemical Company common stockholder$541
$1,342
Net income available for The Dow Chemical Company common stockholder$239  $556  
 
Depreciation$598
$621
Depreciation$515  $543  
Capital expenditures$514
$423
Capital expenditures$395  $442  
See Notes to the Consolidated Financial Statements.



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The Dow Chemical Company and Subsidiaries
Consolidated Statements of Comprehensive Income
 
Three Months Ended Three Months Ended
In millions (Unaudited)Mar 31,
2019		Mar 31,
2018		In millions (Unaudited)Mar 31,
2020		Mar 31,
2019
Net income$586
$1,377
Net income$258  $601  
Other comprehensive income (loss), net of tax  Other comprehensive income (loss), net of tax
Unrealized gains (losses) on investments67
(25)Unrealized gains (losses) on investments(100) 67  
Cumulative translation adjustments(31)376
Cumulative translation adjustments(163) (31) 
Pension and other postretirement benefit plans141
126
Pension and other postretirement benefit plans142  141  
Derivative instruments(75)6
Derivative instruments(162) (75) 
Total other comprehensive income102
483
Comprehensive income688
1,860
Total other comprehensive income (loss)Total other comprehensive income (loss)(283) 102  
Comprehensive income (loss)Comprehensive income (loss)(25) 703  
Comprehensive income attributable to noncontrolling interests, net of tax51
28
Comprehensive income attributable to noncontrolling interests, net of tax19  51  
Comprehensive income attributable to The Dow Chemical Company$637
$1,832
Comprehensive income (loss) attributable to The Dow Chemical CompanyComprehensive income (loss) attributable to The Dow Chemical Company$(44) $652  
See Notes to the Consolidated Financial Statements.

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The Dow Chemical Company and Subsidiaries
Consolidated Balance Sheets
In millions, except share amounts (Unaudited)Mar 31,
2019		Dec 31,
2018		In millions, except share amounts (Unaudited)Mar 31,
2020		Dec 31,
2019
Assets  Assets
Current Assets  Current Assets
Cash and cash equivalents (variable interest entities restricted - 2019: $109; 2018: $82)$2,969
$2,669
Cash and cash equivalents (variable interest entities restricted - 2020: $44; 2019: $37)Cash and cash equivalents (variable interest entities restricted - 2020: $44; 2019: $37)$3,633  $2,367  
Marketable securities101
100
Marketable securities1  21  
Accounts and notes receivable:  Accounts and notes receivable:
Trade (net of allowance for doubtful receivables - 2019: $109; 2018: $106)8,428
8,246
Trade (net of allowance for doubtful receivables - 2020: $43; 2019: $45)Trade (net of allowance for doubtful receivables - 2020: $43; 2019: $45)4,841  4,844  
Other3,947
4,136
Other2,770  2,716  
Inventories9,508
9,260
Inventories6,324  6,214  
Other current assets708
852
Other current assets490  571  
Total current assets25,661
25,263
Total current assets18,059  16,733  
Investments  Investments
Investment in nonconsolidated affiliates3,321
3,823
Investment in nonconsolidated affiliates1,235  1,404  
Other investments (investments carried at fair value - 2019: $1,796; 2018: $1,699)2,737
2,648
Other investments (investments carried at fair value - 2020: $1,306; 2019: $1,584)Other investments (investments carried at fair value - 2020: $1,306; 2019: $1,584)2,136  2,588  
Noncurrent receivables345
394
Noncurrent receivables665  1,011  
Total investments6,403
6,865
Total investments4,036  5,003  
Property  Property
Property61,764
61,437
Property54,942  54,910  
Less accumulated depreciation38,272
37,775
Less accumulated depreciation34,136  33,914  
Net property (variable interest entities restricted - 2019: $718; 2018: $734)23,492
23,662
Net property (variable interest entities restricted - 2020: $286; 2019: $330)Net property (variable interest entities restricted - 2020: $286; 2019: $330)20,806  20,996  
Other Assets Other Assets
Goodwill13,812
13,848
Goodwill8,780  8,796  
Other intangible assets (net of accumulated amortization - 2019: $5,912; 2018: $5,762)4,743
4,913
Other intangible assets (net of accumulated amortization - 2020: $3,994; 2019: $3,886)Other intangible assets (net of accumulated amortization - 2020: $3,994; 2019: $3,886)3,636  3,759  
Operating lease right-of-use assets2,584
—
Operating lease right-of-use assets1,942  2,072  
Deferred income tax assets2,183
2,031
Deferred income tax assets2,248  2,213  
Deferred charges and other assets859
796
Deferred charges and other assets1,067  818  
Total other assets24,181
21,588
Total other assets17,673  17,658  
Total Assets$79,737
$77,378
Total Assets$60,574  $60,390  
Liabilities and Equity  Liabilities and Equity
Current Liabilities Current Liabilities
Notes payable$317
$305
Notes payable$1,490  $586  
Long-term debt due within one year2,369
340
Long-term debt due within one year384  435  
Accounts payable: Accounts payable:
Trade5,103
5,378
Trade3,769  3,889  
Other3,176
3,330
Other1,815  2,064  
Operating lease liabilities - current477
—
Operating lease liabilities - current384  421  
Income taxes payable699
791
Income taxes payable468  522  
Accrued and other current liabilities3,232
3,611
Accrued and other current liabilities2,314  2,233  
Total current liabilities15,373
13,755
Total current liabilities10,624  10,150  
Long-Term Debt (variable interest entities nonrecourse - 2019: $43; 2018: $75)17,160
19,254
Long-Term Debt (variable interest entities nonrecourse - 2020: $30; 2019: $34)Long-Term Debt (variable interest entities nonrecourse - 2020: $30; 2019: $34)16,313  15,975  
Other Noncurrent Liabilities Other Noncurrent Liabilities
Deferred income tax liabilities721
664
Deferred income tax liabilities352  347  
Pension and other postretirement benefits - noncurrent9,103
9,226
Pension and other postretirement benefits - noncurrent9,832  10,083  
Asbestos-related liabilities - noncurrent1,133
1,142
Asbestos-related liabilities - noncurrent1,048  1,060  
Operating lease liabilities - noncurrent2,126
—
Operating lease liabilities - noncurrent1,622  1,739  
Other noncurrent obligations5,975
5,368
Other noncurrent obligations6,555  6,174  
Total other noncurrent liabilities19,058
16,400
Total other noncurrent liabilities19,409  19,403  
Stockholders’ Equity  
Stockholder's EquityStockholder'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)—  —  
Additional paid-in capital7,153
7,042
Additional paid-in capital7,378  7,333  
Retained earnings29,701
29,808
Retained earnings16,905  17,313  
Accumulated other comprehensive loss(9,783)(9,885)Accumulated other comprehensive loss(10,529) (10,246) 
Unearned ESOP shares(105)(134)Unearned ESOP shares(81) (91) 
The Dow Chemical Company’s stockholders’ equity26,966
26,831
The Dow Chemical Company’s stockholder's equityThe Dow Chemical Company’s stockholder's equity13,673  14,309  
Noncontrolling interests1,180
1,138
Noncontrolling interests555  553  
Total equity28,146
27,969
Total equity14,228  14,862  
Total Liabilities and Equity$79,737
$77,378
Total Liabilities and Equity$60,574  $60,390  
See Notes to the Consolidated Financial Statements.

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The Dow Chemical Company and Subsidiaries
Consolidated Statements of Cash Flows
 
Three Months Ended
In millions (Unaudited)In millions (Unaudited)Three Months Ended
Mar 31,
2019		Mar 31,
2018		Mar 31,
2020		Mar 31,
2019
Operating Activities Operating Activities
Net income$586
$1,377
Net income$258  $601  
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Less: Income from discontinued operations, net of taxLess: Income from discontinued operations, net of tax—  445  
Income from continuing operations, net of taxIncome from continuing operations, net of tax258  156  
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization840
837
Depreciation and amortization724  743  
Credit for deferred income tax(89)(67)Credit for deferred income tax(57) (72) 
Earnings of nonconsolidated affiliates less than dividends received750
287
Earnings of nonconsolidated affiliates less than dividends received134  775  
Net periodic pension benefit cost62
110
Net periodic pension benefit cost64  41  
Pension contributions(103)(308)Pension contributions(63) (99) 
Net (gain) loss on sales of assets, businesses and investments12
(33)
Net gain on sales of assets, businesses and investmentsNet gain on sales of assets, businesses and investments(12) (2) 
Restructuring and asset related charges - net232
165
Restructuring and asset related charges - net96  156  
Other net loss39
98
Other net loss136  33  
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 receivable(58)(1,524)Accounts and notes receivable128  85  
Inventories(266)(1,239)Inventories(111) (47) 
Accounts payable(468)823
Accounts payable(314) (452) 
Other assets and liabilities, net(111)(684)Other assets and liabilities, net256  (274) 
Cash provided by (used for) operating activities1,426
(158)
Cash provided by operating activities - continuing operationsCash provided by operating activities - continuing operations1,239  1,043  
Cash provided by operating activities - discontinued operationsCash provided by operating activities - discontinued operations—  338  
Cash provided by operating activitiesCash provided by operating activities1,239  1,381  
Investing Activities Investing Activities
Capital expenditures(514)(423)Capital expenditures(395) (442) 
Investment in gas field developments(25)(28)Investment in gas field developments(5) (25) 
Proceeds from sales of property and businesses, net of cash divested25
17
Proceeds from sales of property and businesses, net of cash divested11  —  
Proceeds from sale of ownership interests in nonconsolidated affiliates21
—
Investments in and loans to nonconsolidated affiliatesInvestments in and loans to nonconsolidated affiliates(114) —  
Distributions and loan repayments from nonconsolidated affiliatesDistributions and loan repayments from nonconsolidated affiliates6  —  
Purchases of investments(173)(557)Purchases of investments(128) (173) 
Proceeds from sales and maturities of investments180
454
Proceeds from sales and maturities of investments472  176  
Proceeds from interests in trade accounts receivable conduits—
445
Cash used for investing activities - continuing operationsCash used for investing activities - continuing operations(153) (464) 
Cash used for investing activities - discontinued operationsCash used for investing activities - discontinued operations—  (34) 
Cash used for investing activities(486)(92)Cash used for investing activities(153) (498) 
Financing Activities Financing Activities
Changes in short-term notes payable(17)293
Changes in short-term notes payable838  (16) 
Proceeds from issuance of long-term debtProceeds from issuance of long-term debt2,449  —  
Payments on long-term debt(80)(54)Payments on long-term debt(2,275) (81) 
Proceeds from issuance of parent company stock28
63
Proceeds from issuance of stockProceeds from issuance of stock16  28  
Transaction financing, debt issuance and other costsTransaction financing, debt issuance and other costs(93) —  
Employee taxes paid for share-based payment arrangements(54)(77)Employee taxes paid for share-based payment arrangements(26) (45) 
Distributions to noncontrolling interests(9)(24)Distributions to noncontrolling interests(1) (2) 
Dividends paid to parent(535)(1,057)
Other financing activities, net—
3
Cash used for financing activities(667)(853)
Dividends paid to Dow Inc.Dividends paid to Dow Inc.(643) —  
Dividends paid to DowDuPont Inc.Dividends paid to DowDuPont Inc.—  (535) 
Settlements and transfers related to separation from DowDuPont Inc.Settlements and transfers related to separation from DowDuPont Inc.—  36  
Cash provided by (used for) financing activities - continuing operationsCash provided by (used for) financing activities - continuing operations265  (615) 
Cash used for financing activities - discontinued operationsCash used for financing activities - discontinued operations—  (18) 
Cash provided by (used for) financing activitiesCash provided by (used for) financing activities265  (633) 
Effect of exchange rate changes on cash, cash equivalents and restricted cash30
100
Effect of exchange rate changes on cash, cash equivalents and restricted cash(86) 30  
Cash reclassified as held for saleCash reclassified as held for sale—  (97) 
Summary Summary
Increase (Decrease) in cash, cash equivalents and restricted cash303
(1,003)
Increase in cash, cash equivalents and restricted cashIncrease in cash, cash equivalents and restricted cash1,265  183  
Cash, cash equivalents and restricted cash at beginning of period2,709
6,207
Cash, cash equivalents and restricted cash at beginning of period2,380  2,764  
Cash, cash equivalents and restricted cash at end of period$3,012
$5,204
Cash, cash equivalents and restricted cash at end of period$3,645  $2,947  
Less: Restricted cash and cash equivalents, included in "Other current assets"43
18
Less: Restricted cash and cash equivalents, included in "Other current assets"12  43  
Cash and cash equivalents at end of period$2,969
$5,186
Cash and cash equivalents at end of period$3,633  $2,904  
See Notes to the Consolidated Financial Statements.

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The Dow Chemical Company and Subsidiaries
Consolidated Statements of Equity
 
Three Months Ended Three Months Ended
In millions (Unaudited)Mar 31,
2019		Mar 31,
2018		In millions (Unaudited)Mar 31,
2020		Mar 31,
2019
Common Stock  Common Stock
Balance at beginning and end of period$—
$—
Balance at beginning and end of period$—  $—  
Additional Paid-in Capital  Additional Paid-in Capital
Balance at beginning of period7,042
6,553
Balance at beginning of period7,333  7,042  
Issuance of parent company stock28
63
Issuance of parent company stock - Dow Inc.Issuance of parent company stock - Dow Inc.16  —  
Issuance of parent company stock - DowDuPont Inc.Issuance of parent company stock - DowDuPont Inc.—  28  
Stock-based compensation and allocation of ESOP shares83
142
Stock-based compensation and allocation of ESOP shares29  83  
Balance at end of period7,153
6,758
Balance at end of period7,378  7,153  
Retained Earnings  Retained Earnings
Balance at beginning of period29,808
28,050
Balance at beginning of period17,313  35,460  
Net income available for The Dow Chemical Company common stockholder541
1,342
 Net income available for The Dow Chemical Company common stockholder239  556  
Dividends to parent(535)(1,057)
Adoption of accounting standards (Notes 1, 2 and 6)(111)(68)
Dividends to Dow Inc.Dividends to Dow Inc.(643) —  
Dividends to DowDuPont Inc.Dividends to DowDuPont Inc.—  (535) 
Common control transactionCommon control transaction—  35  
Adoption of accounting standardsAdoption of accounting standards—  (111) 
Other(2)(6)Other(4) (2) 
Balance at end of period29,701
28,261
Balance at end of period16,905  35,403  
Accumulated Other Comprehensive Loss  Accumulated Other Comprehensive Loss
Balance at beginning of period(9,885)(8,591)Balance at beginning of period(10,246) (9,885) 
Other comprehensive income102
483
Adoption of accounting standards (Note 1)—
20
Other comprehensive income (loss)Other comprehensive income (loss)(283) 102  
Balance at end of period(9,783)(8,088)Balance at end of period(10,529) (9,783) 
Unearned ESOP Shares  Unearned ESOP Shares
Balance at beginning of period(134)(189)Balance at beginning of period(91) (134) 
Allocation of ESOP shares29
39
Allocation of ESOP shares10  29  
Balance at end of period(105)(150)Balance at end of period(81) (105) 
The Dow Chemical Company's stockholders' equity26,966
26,781
The Dow Chemical Company's stockholder's equityThe Dow Chemical Company's stockholder's equity13,673  32,668  
Noncontrolling Interests1,180
1,190
Noncontrolling Interests555  1,180  
Total Equity$28,146
$27,971
Total Equity$14,228  $33,848  
See Notes to the Consolidated Financial Statements.





















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Dow Inc. and Subsidiaries
The Dow Chemical Company and Subsidiaries
(Unaudited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
NotePage
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Note Page
1
Consolidated Financial Statements
10
2
Recent Accounting Guidance
12
3
Revenue
13
4
Restructuring and Asset Related Charges - Net
14
5
Inventories
16
6
Nonconsolidated Affiliates
16
7
Goodwill and Other Intangible Assets
17
8
Transfers of Financial Assets
18
9
Notes Payable, Long-Term Debt and Available Credit Facilities
18
10
Commitments and Contingent Liabilities
20
11
Leases
23
12
Stockholders' Equity
26
13
Noncontrolling Interests
27
14
Pension Plans and Other Postretirement Benefits
28
15
Financial Instruments
29
16
Fair Value Measurements
32
17
Variable Interest Entities
33
18
Related Party Transactions
34
19
Subsequent Event
35


NOTE 1 – CONSOLIDATED FINANCIAL STATEMENTS
Merger and Separation
Effective August 31, 2017, pursuant toOn 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 contemplated byeffective August 31, 2017, under the Agreement and Plan of Merger, (the "Merger Agreement"), dated as of December 11, 2015, as amended on March 31, 2017, The Dow Chemical Company and its consolidated subsidiaries (“TDCC”)2017. TDCC and E. I. du Pont de Nemours and Company and its consolidated subsidiaries (“Historical DuPont”) each merged with subsidiaries of DowDuPont Inc. (“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. (together with TDCC, “Dow”) 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 separation of its materials science business and Dow Inc. became the direct parent company of TDCC. See Note 193 for additional information.


Basis of Presentation
As a result of Dow Inc.'s Registration Statement on Form 10 becoming effective on March 12, 2019 with the U.S. Securities and Exchange Commission ("SEC"), Dow Inc. is now required to file a Quarterly Report on Form 10-Q. At March 31, 2019, Dow Inc. and TDCC were separate, wholly owned subsidiaries of DowDuPont. At March 31, 2019, Dow Inc. was a holding company that did not have subsidiaries or operations. As a result, financial statements of Dow Inc. have not been included in this Quarterly Report on Form 10-Q and, unless otherwise indicated, the unaudited interim consolidated financial statements and notes thereto relate to TDCC.

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 future relationship between Dow Inc. and TDCC, the companies are filing a combined report for this Quarterly Report on Form 10-Q.

The unaudited interim consolidated financial statements of Dow Inc. and TDCC were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect all adjustments (including normal recurring accruals) which, in the opinion of management, are considered necessary for the fair presentation of the results for the periods presented. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in TDCC'sthe combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2018.2019.


For
15
Table of Contents
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 considering that the financial statements and disclosures of each company are substantially similar, the companies are filing a combined report for this Quarterly Report on Form 10-Q. The information reflected in the report is equally applicable to both Dow Inc. and TDCC, except where otherwise noted.

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 all periods presented inreflect the unaudited interim consolidated financial statements, TDCC'sdistribution 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 shares were owned solely by DowDuPont. In accordance withcontrol transaction from the accounting guidanceclosing of the Merger on August 31, 2017. See Note 3 for earnings per share, the presentation of earnings per share is not required in financial statements of wholly owned subsidiaries.additional information.

From the Merger date through March 31, 2019,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 feedstocks, energy and raw materials that were consumed in each company's manufacturing process. In addition,Transactions between TDCC and DuPont have tolling arrangements and recognize product salesDow Inc. are treated as related party transactions for agriculture products.TDCC. See Note 1821 for additional information.


From the Merger date and through March 31, 2019, TDCC’s business activities were components of DowDuPont’s business operations. TDCC’s business activities, including the assessment of performance and allocation of resources, were reviewed and managed by DowDuPont. Information used by the chief operating decision maker of TDCC related to TDCC in its entirety. Accordingly, there were no separate reportable business segments for TDCC under Accounting Standards Codification ("ASC") Topic 280 “Segment Reporting” and TDCC's business results have been reported inThroughout this Quarterly Report on Form 10-Q, asunless otherwise indicated, amounts and activity are presented on a single operating segment.continuing operations basis.

Except as otherwise indicated by the context, the term "Union Carbide" means Union Carbide Corporation and "Dow Silicones" means Dow Silicones Corporation, both wholly owned subsidiaries of TDCC.the Company.


Adoption of Accounting Standards
2019
In the first quarter of 2019, TDCCthe Company adopted Accounting Standards Update ("ASU") 2016-02, "Leases (Topic 842)"," and the associated ASUs related(collectively, "Topic 842"). The net impact to Topic 842. See Notes 2“Retained earnings” was an increase of $72 million and 11 for additional information. TDCC added a significant accounting policy for leases aswas primarily a result of the adoptionrecognition of Topic 842:

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

Operating lease right-of-use (“ROU”) assets represent TDCC’s right to use an underlying asset for the lease term, and lease liabilities represent TDCC’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. TDCC uses the incremental borrowing rate (“IBR”) 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. Leasesdeferred gain associated with a termprior sale-leaseback transaction. See Note 13 for additional information.

Additionally, at January 1, 2019, certain nonconsolidated affiliates of 12 months or less at the commencement date are not recognized on the balance sheet and are expensed as incurred.

TDCC has lease agreements with lease and non-lease components,Company, which are accounted for as a single lease component for all classes of leased assets for which TDCC 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 presentedwere subsequently distributed as part of the ROU asset or lease liability.

Additionally, TDCC's consolidated balance sheet reflects the impact of the adoption ofseparation from DowDuPont, adopted ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" and the associated ASUs (collectively, "Topic 606"). The net impact to "Retained earnings" was a reduction of $183 million at January 1, 2019, by certain nonconsolidated affiliates of TDCC. See Note 6 for additional information.2019.




2018
In the first quarter of 2018, TDCC 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 adoption of these ASU's resulted in a net decrease of $68 million to retained earnings and a decrease of $20 million to accumulated other comprehensive loss ("AOCL") in the consolidated statements of equity at January 1, 2018.

Dividends
Effective with the Merger, TDCC no longer has publicly traded common stock. TDCC's common shares are owned solely by DowDuPont. As a result, following the Merger, TDCC’s Board of Directors ("Board") determined dividend distributions to DowDuPont. See Note 18 for additional information.


NOTE 2 – RECENT ACCOUNTING GUIDANCE
Recently Adopted Accounting Guidance
In the first quarter of 2019, TDCC2020, the Company adopted ASU 2016-02, "Leases (Topic 842)," and associated ASUs related to 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, issued in 2014. 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.

TDCC adopted Topic 842 using the modified retrospective transition approach, applying the new standard to leases existing at the date of initial adoption. TDCC 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, TDCC 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. TDCC 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 lease assets and liabilities of $2.7 billion at January 1, 2019. The net impact to retained earnings was an increase of $72 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 TDCC's consolidated statements of income and had no impact on cash flows. See Note 11 for additional information.

Accounting Guidance Issued But Not Adopted at March 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." The new standard is effectiveadoption of this guidance did not have a material impact on the consolidated financial statements. See Note 19 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. TDCC is currently evaluating the impact of adopting this guidance.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 adoption of this guidance did not 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 (collectively “Topic 326”). 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 adoption of this guidance did not have a material impact on the consolidated financial statements.

Accounting Guidance Issued But Not Adopted at March 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 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, 2019.2020. Early adoption is permitted, and an entity can electwith the amendments to apply the new guidancebe applied on a retrospective, modified retrospective or prospective or retrospective basis. TDCCbasis, depending on the specific amendment. The Company is currently evaluating the impact of adopting this guidance.



In March 2020, the FASB issued 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 amendments are intended to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. The new standard is effective March 12, 2020 through December 31, 2022, with the adoption date being dependent upon the Company’s election. The Company is currently evaluating the impact of adopting this guidance.



NOTE 3 – SEPARATION FROM DOWDUPONT
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.

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. The ECP assets received and liabilities assumed were recorded at DowDuPont's historical cost basis.
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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”) 205-20 “Discontinued Operations.” The results of operations of AgCo and SpecCo are presented as discontinued operations in the consolidated statements of income and are summarized in the table that follows:

Results of Operations of AgCo and SpecCoThree Months Ended
Mar 31, 2019
In millions
Net sales$2,953 
Cost of sales1,804 
Research and development expenses175 
Selling, general and administrative expenses262 
Amortization of intangibles61 
Restructuring and asset related charges - net78 
Equity in earnings of nonconsolidated affiliates28 
Sundry income (expense) - net(18)
Interest income3 
Interest expense and amortization of debt discount7 
Income from discontinued operations before income taxes$579 
Provision for income taxes134 
Income from discontinued operations, net of tax$445 

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.

The impacts of indemnifications and other post-separation matters relating to the Agreements were primarily reflected in the consolidated financial statements of Dow Inc. At March 31, 2020, the Company had assets of $51 million ($58 million at December 31, 2019) included in "Other current assets" and $32 million ($52 million at December 31, 2019) included in "Noncurrent receivables," and liabilities of $319 million ($352 million at December 31, 2019) included in "Accrued and other current liabilities" and $105 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 in "Other noncurrent obligations," with an offset to "Retained earnings" in the consolidated balance sheets of Dow Inc. At March 31, 2020,$130 million ($130 million at December 31, 2019) of this liability was recorded in "Accrued and other current liabilities" and $270 million ($270 million at December 31, 2019) was recorded in "Other noncurrent obligations" in the consolidated balance sheets. The final resolution of this liability is uncertain and any subsequent adjustments to the carrying value of this liability will be reflected in equity of Dow Inc. In the first quarter of 2020, Dow Inc. received a net payment of $6 million related to the Agreements, with $3 million recorded in "Cash flows from operating activities - discontinued operations" and $3 million recorded in "Other assets and liabilities, net" within "Cash flows from operating activities - continuing operations" in the Dow Inc. consolidated statements of cash flows.
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Integration and Separation Costs
Integration and separation costs, which reflect costs related to business separation activities, were $65 million for Dow Inc. and TDCC in the first quarter of 2020, compared with $452 million in the first quarter of 2019. Integration and separation costs related to business separation activities are expected to be substantially complete by the end of 2020.


NOTE 4 – REVENUE
Revenue Recognition
The majority of TDCC'sDow's revenue is derived from product sales. In the three months ended March 31, 2019 and 2018, 982020, 99 percent of TDCC'sDow's revenue related to product sales (99 percent for the three months ended March 31, 2019), with the remaining balance primarily related to TDCC'sthe Company's insurance operations and licensing of patents and technologies. Product sales consist of sales of TDCC'sDow's products to manufacturers and distributors and considers order confirmations or purchase orders, which in some cases are governed by master supply agreements, to be contracts with a customer. TDCCDow enters into licensing arrangements in which it licenses certain rights of its patents and technology to customers. Revenue from TDCC’sDow’s licenses for patents and technology is derived from sales-based royalties and licensing arrangements based on billing schedules established in each contract.


Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to unsatisfied or partially unsatisfied performance obligations. At March 31, 2019, TDCC2020, Dow had remainingunfulfilled performance obligations related to material rights granted to customers for contract renewal options of $100$829 million ($102826 million at December 31, 2018) and unfulfilled performance obligations for2019) related to the licensing of technology of $519 million ($407 million at December 31, 2018). TDCCtechnology. Dow expects revenue to be recognized for the remaining performance obligations over the next one to sixseven 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 TDCCDow has elected the right to invoice practical expedient, or variable consideration attributable to royalties for licenses of patents and technology. TDCCDow 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 2221 years. TDCCDow 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 TDCC'sthe consolidated balance sheets.


Disaggregation of Revenue
TDCCDow disaggregates its revenue from contracts with customers by principal product groupoperating segment and geographic region,business, as TDCCthe Company believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows.


Net Trade Sales by Segment and BusinessThree Months Ended
In millionsMar 31, 2020Mar 31, 2019
Hydrocarbons & Energy$1,219  $1,404  
Packaging and Specialty Plastics3,390  3,734  
Packaging & Specialty Plastics$4,609  $5,138  
Industrial Solutions$1,054  $1,127  
Polyurethanes & Construction Chemicals1,988  2,350  
Other3  3  
Industrial Intermediates & Infrastructure$3,045  $3,480  
Coatings & Performance Monomers$828  $902  
Consumer Solutions1,237  1,380  
Performance Materials & Coatings$2,065  $2,282  
Corporate$51  $69  
Total$9,770  $10,969  

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Net Trade Sales by Principal Product GroupThree Months Ended
In millionsMar 31, 2019Mar 31, 2018
Coatings & Performance Monomers$904
$954
Consumer Solutions1,365
1,363
Crop Protection1,124
1,122
Electronics & Imaging625
627
Hydrocarbons & Energy1,380
1,779
Industrial Biosciences119
135
Industrial Solutions 1 
1,104
1,156
Nutrition & Health152
156
Packaging and Specialty Plastics3,410
3,854
Polyurethanes & CAV 1
2,297
2,557
Safety & Construction424
444
Seed323
371
Transportation & Advanced Polymers284
304
Corporate69
73
Other2
4
Total$13,582
$14,899
1. Beginning in the third quarter of 2018, the Construction Chemicals principal product group was combined with the Polyurethanes & CAV principal product group. Also, certain product lines associated with the oil and gas industry were realigned from the Industrial Solutions principal product group to Polyurethanes & CAV principal product group. These changes have been retrospectively reflected in the results presented.


Net Trade Sales by Geographic RegionThree Months EndedNet Trade Sales by Geographic RegionThree Months Ended
In millionsMar 31, 2019Mar 31, 2018In millionsMar 31, 2020Mar 31, 2019
U.S. & Canada$4,884
$5,468
U.S. & Canada$3,550  $3,933  
EMEA 1
4,211
4,765
EMEAI 1
EMEAI 1
3,411  3,882  
Asia Pacific3,202
3,256
Asia Pacific1,845  2,101  
Latin America1,285
1,410
Latin America964  1,053  
Total$13,582
$14,899
Total$9,770  $10,969  
1. Europe, Middle East, Africa and Africa.India.


Contract BalancesAssets and Liabilities
TDCCDow 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 TDCC'sDow'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 TDCCthe 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 increase in contract liabilities from December 31, 2018 to March 31, 2019 was due to advanced payments from a customer related to long-term product supply agreements. Revenue recognized in the first three months of 20192020 from amounts included in contract liabilities at the beginning of the period was approximately $65$35 million (approximately $75$55 million in the first three months of 2018)2019). In the first three months of 2019,2020, the amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional was $14approximately $10 million (insignificant($15 million in the first three months of 2018)2019).


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


Contract Assets and LiabilitiesMar 31, 2020Dec 31, 2019
In millions
Accounts and notes receivable - Trade$4,841  $4,844  
Contract assets - current 1
$22  $41  
Contract assets - noncurrent 2
$17  $4  
Contract liabilities - current 3
$196  $193  
Contract liabilities - noncurrent 4
$1,602  $1,607  
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.
4. Included in "Other noncurrent obligations" in the consolidated balance sheets.
20
Contract BalancesMar 31, 2019Dec 31, 2018
In millions
Accounts and notes receivable - Trade$8,428
$8,246
Contract assets - current 1
$26
$37
Contract assets - noncurrent 2
$47
$47
Contract liabilities - current 3
$233
$165
Contract liabilities - noncurrent 4
$1,739
$1,390
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.
4.Included in "Other noncurrent obligations" in the consolidated balance sheets.


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NOTE 45 – RESTRUCTURING AND ASSET RELATED CHARGES - NET
Charges for restructuring programs and other asset related charges, which includes other asset impairments, were $232$96 million for the three months ended March 31, 20192020 ($165156 million for the three months ended March 31, 2018)2019). These charges were recorded in "Restructuring and asset related charges - net" in the consolidated statements of income and consist primarily of the following:income.


Restructuring Plans
DowDuPont Agriculture Division Restructuring Program
During the fourth quarter of 2018 and in connection with the ongoing integration activities, DowDuPont approved restructuring actions to simplify and optimize certain organizational structures within the Agriculture division in preparation for its intended separation as a standalone company ("Agriculture Division Program"). For the three months ended March 31, 2019, TDCC recorded a favorable adjustment of $4 million to the severance and related benefit costs reserve. The impact of this adjustment is shown as "Restructuring and asset related charges - net" in the consolidated statements of income. TDCC expects actions related to the Agriculture Division Program to be substantially complete by mid 2019.

TDCC recorded pretax restructuring charges of $21 million inception-to-date under the Agriculture Division Program, consisting of severance and related benefit costs of $20 million and asset write-downs and write-offs of $1 million.


The following table summarizes the activities related to the Agriculture Division Program. At March 31, 2019, $11 million ($23 million at December 31, 2018) was included in "Accrued and other current liabilities" in TDCC's consolidated balance sheets.

DowDuPont Agriculture Division ProgramSeverance and Related Benefit CostsAsset Write-downs and Write-offsTotal
In millions
2018 restructuring charges$24
$1
$25
Charges against the reserve—
(1)(1)
Cash payments(1)—
(1)
Reserve balance at Dec 31, 2018$23
$—
$23
Adjustments to the reserve(4)—
(4)
Cash payments(8)—
(8)
Reserve balance at Mar 31, 2019$11
$—
$11

DowDuPont Cost Synergy Program
In September and November 2017, DowDuPont approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the "Synergy Program") whichwhich was designed to integrate and optimize the organization following the Merger and in preparation for the business separations. ForIn the three months ended March 31, 2019, TDCCfirst quarter of 2020, the Company recorded pretax restructuring charges of $224$90 million consisting offor severance and related benefit costs of $72 million, asset write-downs and write-offs of $100 million and costs associated with exit and disposal activities of $52 million. Forcosts. These are the three months ended March 31, 2018, TDCC recorded pretaxfinal charges related to restructuring charges of $163 million, consisting of severance and related benefit costs of $104 million, asset write-downs and write-offs of $48 million and costs associated with exit and disposal activities of $11 million.actions under the DowDuPont Cost Synergy Program. The impact of these charges is shown as "Restructuring and asset related charges - net" in the consolidated statements of income. TDCCCompany expects actionscash expenditures related to the Synergy Program to be substantially complete by the end of 2019.2020. The following table summarizes the activities related to the Synergy Program, which are reflected on a continuing operations basis:


TDCC
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, 2018$210  $—  $7  $217  
 Packaging & Specialty Plastics$—  $—  $1  $1  
 Corporate52  76  15  143  
Total restructuring charges$52  $76  $16  $144  
Charges against the reserve—  (76) —  (76) 
Cash payments(79) —  (4) (83) 
Reserve balance at Mar 31, 2019$183  $—  $19  $202  
 Performance Materials & Coatings$—  $22  $—  $22  
 Corporate25  7  5  37  
Total restructuring charges$25  $29  $5  $59  
Charges against the reserve—  (29) —  (29) 
Cash payments(71) —  (2) (73) 
Reserve balance at Jun 30, 2019$137  $—  $22  $159  
 Industrial Intermediates & Infrastructure$—  $—  $5  $5  
 Performance Materials & Coatings—  1  —  1  
 Corporate46  4  —  50  
Total restructuring charges$46  $5  $5  $56  
Charges against the reserve—  (5) —  (5) 
Cash payments(77) —  (6) (83) 
Reserve balance at Sep 30, 2019$106  $—  $21  $127  
Industrial Intermediates & Infrastructure$—  $2  $—  $2  
Performance Materials & Coatings—  5  —  5  
Corporate—  26  —  26  
Total restructuring charges$—  $33  $—  $33  
Charges against the reserve—  (33) —  (33) 
Cash payments(52) —  (4) (56) 
Reserve balance at Dec 31, 2019$54  $—  $17  $71  
Corporate$90  $—  $—  $90  
Total restructuring charges$90  $—  $—  $90  
Cash payments(42) —  (1) (43) 
Reserve balance at Mar 31, 2020$102  $—  $16  $118  
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At March 31, 2020, $104 million of the reserve balance was included in "Accrued and other current liabilities" ($52 million at December 31, 2019) and $14 million was included in "Other noncurrent obligations" ($19 million at December 31, 2019) in the consolidated balance sheets.

The Company recorded pretax restructuring charges of $1,462$965 million inception-to-date under the Synergy Program on a continuing operations basis, consisting of severance and related benefit costs of $633$657 million, asset write-downs and write-offs of $613$263 million and costs associated with exit and disposal activities of $216$45 million.


The following table summarizes the activities related to the Synergy Program. At March 31, 2019, $250 million was included in "AccruedAsset Write-downs and other current liabilities" ($272 million at December 31, 2018) and $75 million was included in "Other noncurrent obligations" ($55 million at December 31, 2018) in TDCC's consolidated balance sheets.Write-offs

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, 2018$262
$—
$65
$327
2019 restructuring charges72
100
52
224
Charges against the reserve—
(100)—
(100)
Cash payments(97)—
(29)(126)
Reserve balance at Mar 31, 2019$237
$—
$88
$325

For the three months ended March 31, 2019, restructuring charges related to the write-down and write-off of assets totaled $100 million and primarily related to the impairment of leased, non-manufacturing facilities and the write-down of inventory aligned with the seed and crop protection principal product groups. The restructuring charges related to the write-down and write-off of assets for the three months ended March 31, 2018, totaled $48 million and related primarily to miscellaneous asset write-downs and write-offs, including the shutdown of several small manufacturing facilities and the write-off of non-manufacturing assets alignedand certain corporate facilities.

Costs Associated with seed activities.Exit and Disposal Activities

The restructuring charges for costs associated with exit and disposal activities included contract cancellation penalties and environmental remediation liabilities.
TDCC
The Company expects to incur additional costs in the future related to its restructuring activities. Future costs are expected to include demolition costs related to closed facilities and restructuring plan implementation costs; these costs will be recognized as incurred. TDCCThe 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.



Asset Related Charges

The Company recognized an additional pretax impairment charge of $6 million for the three months ended March 31, 2020, related to capital additions made to a biopolymers manufacturing facility in Santa Vitoria, Minas Gerais, Brazil, which was impaired in 2017 (charge of $12 million for the three months ended March 31, 2019). The impairment charge was included in “Restructuring and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics. See Note 19 for additional information.


NOTE 56 – SUPPLEMENTARY INFORMATION
The Company uses "Sundry income (expense) – net" to record 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.

For the three months ended March 31, 2020, "Sundry income (expense) - net" was expense of $81 million for Dow Inc. and expense of $82 million for TDCC compared with income of $69 million for the three months ended March 31, 2019. "Sundry income (expense) - net" decreased primarily due to an $86 million loss on the early extinguishment of debt (related to Corporate) and foreign currency exchange losses for the three months ended March 31, 2020 compared with foreign currency exchange gains for the three months ended March 31, 2019, as well as a decrease in non-operating pension and postretirement benefit plan credits. See Notes 11, 16 and 22 for additional information.

Other Investments
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, as provided below:

Investments in Company-owned Life InsuranceMar 31, 2020Dec 31, 2019
In millions
Gross cash value$828  $820  
Less: Existing drawdowns 1
$287  $85  
Investment in Company-owned life insurance 2
$541  $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.
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NOTE 7 - EARNINGS PER SHARE CALCULATIONS
The following tables provide earnings per share calculations for Dow Inc. for the three months ended March 31, 2020 and 2019. Earnings per share of TDCC is not presented as this information is not required in financial statements of wholly owned subsidiaries.

Net Income for Earnings Per Share CalculationsThree Months Ended
In millionsMar 31, 2020Mar 31, 2019
Income from continuing operations, net of tax$258  $156  
Net income attributable to noncontrolling interests - continuing operations19  32  
Net income attributable to participating securities - continuing operations 1
2  —  
Income from continuing operations attributable to common stockholders$237  $124  
Income from discontinued operations, net of tax$—  $445  
Net income attributable to noncontrolling interests - discontinued operations—  13  
Income from discontinued operations attributable to common stockholders$—  $432  
Net income attributable to common stockholders$237  $556  

Earnings Per Share Calculations - BasicThree Months Ended
Dollars per shareMar 31, 2020Mar 31, 2019
Income from continuing operations attributable to common stockholders$0.32  $0.16  
Income from discontinued operations attributable to common stockholders—  0.58  
Net income attributable to common stockholders$0.32  $0.74  

Earnings Per Share Calculations - DilutedThree Months Ended
Dollars per shareMar 31, 2020Mar 31, 2019
Income from continuing operations attributable to common stockholders$0.32  $0.16  
Income from discontinued operations attributable to common stockholders—  0.58  
Net income attributable to common stockholders$0.32  $0.74  

Share Count InformationThree Months Ended
Shares in millionsMar 31, 2020Mar 31, 2019
Weighted-average common shares - basic 2
740.2  747.2  
Plus dilutive effect of equity compensation plans1.8  —  
Weighted-average common shares - diluted 2
742.0  747.2  
Stock options and restricted stock units excluded from EPS calculations 3
15.5  —  
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 three months ended March 31, 2019, 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 three months ended March 31, 2019, as the Company did not engage in activities giving rise to dilution.
3. These outstanding options to purchase shares of common stock and restricted stock units were excluded from the calculation of diluted earnings per share because the effect of including them would have been antidilutive. For the three months ended March 31, 2019, the Company did not engage in activities giving rise to dilution.
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NOTE 8 – INVENTORIES
The following table provides a breakdown of inventories:


InventoriesMar 31, 2020Dec 31, 2019
In millions
Finished goods$3,607  $3,505  
Work in process1,080  1,122  
Raw materials590  628  
Supplies860  845  
Total$6,137  $6,100  
Adjustment of inventories to a LIFO basis187  114  
Total inventories$6,324  $6,214  


InventoriesMar 31, 2019Dec 31, 2018
In millions
Finished goods$5,703
$5,640
Work in process2,239
2,214
Raw materials940
941
Supplies891
880
Total$9,773
$9,675
Adjustment of inventories to a LIFO basis(265)(415)
Total inventories$9,508
$9,260


NOTE 69 – NONCONSOLIDATED AFFILIATES
TDCC'sThe Company's investments in companies accounted for using the equity method ("nonconsolidated affiliates"), by classification in the consolidated balance sheets, are shown in the following table:


Investments in Nonconsolidated AffiliatesMar 31, 2020Dec 31, 2019
In millions
Investment in nonconsolidated affiliates$1,235  $1,404  
Other noncurrent obligations(317) (80) 
Net investment in nonconsolidated affiliates$918  $1,324  
Investments in Nonconsolidated AffiliatesMar 31, 2019Dec 31, 2018
In millions
Investment in nonconsolidated affiliates$3,321
$3,823
Other noncurrent obligations(870)(495)
Net investment in nonconsolidated affiliates$2,451
$3,328

HSC Group
The carrying value of TDCC's investments in the HSC Group, which includes Hemlock Semiconductor L.L.C. and DC HSC Holdings LLC, was adjusted as a result of the HSC Group's adoption of Topic 606. The resulting impact to TDCC's investments in the HSC Group was a reduction to "Investment in nonconsolidated affiliates" of $71 million and an increase to "Other noncurrent obligations" of $168 million, as well as an increase to "Deferred income tax assets" of $56 million and a reduction to "Retained earnings" of $183 million in the consolidated balance sheet at January 1, 2019. The following table reflects the carrying value of the HSC Group investments at March 31, 2019 and December 31, 2018:

Investment in the HSC Group Investment
In millionsBalance Sheet ClassificationMar 31, 2019Dec 31, 2018
Hemlock Semiconductor L.L.C.Other noncurrent obligations$(658)$(495)
DC HSC Holdings LLCInvestment in nonconsolidated affiliates$485
$535

EQUATE
In the first quarter of 2019, EQUATE PetrochemicalMarch 2020, The Kuwait Styrene Company K.S.C.C. ("EQUATE") paid a dividend of $440$42 million, reflected in "Earnings of nonconsolidated affiliates less than dividends received" in the consolidated statements of cash flows. As a result, TDCCAt March 31, 2020, the Company had $276 million included in "Accounts and notes receivable - Other" in the consolidated balance sheets related to the Company's share of dividends declared by EQUATE Petrochemical Company K.S.C.C. ("EQUATE") and The Kuwait Olefins Company K.S.C.C. At March 31, 2020, the Company had a negative investment balance in EQUATE of $212$225 million (negative $80 million at MarchDecember 31, 2019,2019), classified as "Other noncurrent obligations" in the consolidated balance sheets.

At DecemberMarch 31, 2018, TDCC2020, the Company had ana negative investment balance in EQUATESadara Chemical Company (“Sadara”) of $131$92 million (0 at December 31, 2019) classified as "Investment in nonconsolidated affiliates"“Other noncurrent obligations” in the Company’s consolidated balance sheets.sheets, primarily related to the Company’s share of Sadara’s accumulated other comprehensive loss from the first quarter of 2020. The Company’s investment in Sadara was other-than-temporarily impaired in the fourth quarter of 2019 and Dow will continue to recognize its share of equity losses reported by Sadara due to funding commitments. For additional information, see Note 13 to the Consolidated Financial Statements included in the combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2019.

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NOTE 710 – GOODWILL AND OTHER INTANGIBLE ASSETS
The following table shows changes in the carrying amount of goodwill:goodwill by reportable segment:


GoodwillPackaging & Specialty PlasticsIndustrial Intermediates & InfrastructurePerformance Materials & CoatingsTotal
In millions
Net goodwill at Dec 31, 2019$5,109  $1,100  $2,587  $8,796  
Foreign currency impact(1) (1) (14) (16) 
Net goodwill at Mar 31, 2020$5,108  $1,099  $2,573  $8,780  
Goodwill 
In millions
Net goodwill at Dec 31, 2018$13,848
Foreign currency impact(36)
Net goodwill at Mar 31, 2019$13,812


The following table provides information regarding TDCC’sthe Company’s other intangible assets:


Other Intangible AssetsMar 31, 2020Dec 31, 2019
In millionsGross
Carrying
Amount		Accum
Amort		NetGross
Carrying
Amount		Accum
Amort		Net  
Intangible assets with finite lives:
Developed technology$2,636  $(1,518) $1,118  $2,634  $(1,467) $1,167  
Software1,458  (915) 543  1,449  (893) 556  
Trademarks/tradenames352  (342) 10  352  (342) 10  
Customer-related3,184  (1,219) 1,965  3,207  (1,184) 2,023  
Total other intangible assets, finite lives$7,630  $(3,994) $3,636  $7,642  $(3,886) $3,756  
In-process research and development—  —  —  3  —  3  
Total other intangible assets$7,630  $(3,994) $3,636  $7,645  $(3,886) $3,759  
Other Intangible AssetsMar 31, 2019Dec 31, 2018
In millions
Gross
Carrying
Amount
Accum
Amort
Net
Gross
Carrying
Amount
Accum
Amort
Net  
Intangible assets with finite lives:      
Developed technology$3,253
$(1,996)$1,257
$3,255
$(1,934)$1,321
Software1,539
(900)639
1,529
(876)653
Trademarks/tradenames680
(638)42
688
(631)57
Customer-related4,898
(2,211)2,687
4,911
(2,151)2,760
Other236
(167)69
243
(170)73
Total other intangible assets, finite lives$10,606
$(5,912)$4,694
$10,626
$(5,762)$4,864
In-process research and development49
—
49
49
—
49
Total other intangible assets$10,655
$(5,912)$4,743
$10,675
$(5,762)$4,913


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


Amortization Expense from Continuing OperationsThree Months Ended
In millionsMar 31, 2020Mar 31, 2019
Other intangible assets, excluding software$100  $116  
Software, included in “Cost of sales”$24  $24  
Amortization ExpenseThree Months Ended
In millionsMar 31, 2019Mar 31, 2018
Other intangible assets, excluding software$154
$159
Software, included in “Cost of sales”$25
$23


Total estimated amortization expense from continuing operations for 20192020 and the five succeeding fiscal years, including amounts expected to be capitalized, is as follows:


Estimated Amortization Expense from Continuing Operations
In millions
2020$491  
2021$467  
2022$404  
2023$372  
2024$354  
2025$266  

25
Estimated Amortization Expense
In millions
2019$659
2020$623
2021$594
2022$525
2023$492
2024$456



NOTE 8 – TRANSFERS OF FINANCIAL ASSETS
TDCC 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 TDCC) that entitled TDCC to the residual cash flows of such specified assets in the conduits after the commercial paper was repaid. Neither the conduits nor the investors in those entities had recourse to other assets of TDCC in the event of nonpayment by the debtors.

In the fourth quarter of 2017, TDCC 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 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. See Note 9 for additional information on the secured borrowing arrangements.

The following represents the cash flows between TDCC and the conduits:

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Cash ProceedsThree Months Ended
In millionsMar 31,
2019		Mar 31,
2018
Interests in conduits 1
$—
$445
1.Presented in "Investing Activities" in the consolidated statements of cash flows.


NOTE 911 – NOTES PAYABLE, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES

Notes PayableMar 31,
2020		Dec 31,
2019
In millions
Commercial paper$250  $151  
Notes payable to banks and other lenders 1
1,240  435  
Total notes payable$1,490  $586  
Period-end average interest rates3.78 %6.30 %
1.Includes $800 million drawn from uncommitted facilities in the first quarter of 2020.

Long-Term Debt2020 Average RateMar 31,
2020		2019
Average
Rate		Dec 31,
2019
In millions
Promissory notes and debentures:
Final maturity 20208.44 %$76  8.44 %$76  
Final maturity 20218.95 %173  8.95 %174  
Final maturity 20228.64 %121  3.50 %1,372  
Final maturity 20237.64 %325  7.64 %325  
Final maturity 20243.37 %1,397  3.37 %1,397  
Final maturity 20255.26 %662  5.26 %662  
Final maturity 2026 and thereafter5.73 %8,888  5.73 %8,820  
Other facilities:
U.S. dollar loans1.74 %1,250  2.55 %2,000  
Foreign currency notes and loans, various rates and maturities1.41 %3,040  3.26 %592  
InterNotes®, varying maturities through 20503.44 %702  3.44 %928  
Finance lease obligations 1
418  395  
Unamortized debt discount and issuance costs(355) (331) 
Long-term debt due within one year 2
(384) (435) 
Long-term debt$16,313  $15,975  
1.See Note 13 for additional information.
2.Presented net of current portion of unamortized debt issuance costs.

Maturities of Long-Term Debt for Next Five Years at Mar 31, 2020
In millions
2020$359  
2021$491  
2022$225  
2023 1
$1,693  
2024$1,504  
2025$780  
1.Assumes the option to extend will be exercised for the $1.25 billion Dow Silicones Term Loan Facility.

2020 Activity
In February 2020, the Company issued €2.25 billion aggregate principal amount of notes (“Euro Notes”). The Euro Notes included €1.0 billion aggregate principal amount of 0.50 percent notes due 2027, €750 million aggregate principal amount of 1.125 percent notes due 2032 and €500 million aggregate principal amount of 1.875 percent notes due 2040. The Euro Notes have a weighted average coupon rate of approximately 1.0 percent. With the net proceeds from the issuance of the Euro Notes, Dow Silicones voluntarily repaid $750 million of principal under a certain third party credit agreement (“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 $85 million on the early extinguishment of debt, included in “Sundry income (expense) – net” in the consolidated statements of income and related to the Corporate segment.
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Notes PayableMar 31,
2019		Dec 31,
2018
In millions
Commercial paper$—
$10
Notes payable to banks and other lenders317
295
Total notes payable$317
$305
Period-end average interest rates12.09%8.61%
At March 31, 2020, the Company's outstanding withdrawal amount under various uncommitted bilateral credit arrangements was $800 million, included in "Notes payable" in the consolidated balance sheets.


In the first three months of 2020, the Company also issued an aggregate principal amount of $37 million of InterNotes®, and redeemed an aggregate principal amount of $62 million at maturity. In addition, the Company voluntarily repaid an aggregate principal amount of $200 million of InterNotes® with various maturities. As a result, the Company recognized a pretax loss of $1 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.
Long-Term Debt2019 Average RateMar 31,
2019
2018
Average
Rate
Dec 31,
2018
In millions
Promissory notes and debentures:    
Final maturity 20199.80%$7
9.80%$7
Final maturity 20204.46%1,547
4.46%1,547
Final maturity 20214.71%1,424
4.71%1,424
Final maturity 20223.50%1,372
3.50%1,373
Final maturity 20237.64%325
7.64%325
Final maturity 20243.50%896
3.50%896
Final maturity 2025 and thereafter5.98%7,963
5.98%7,963
Other facilities:    
U.S. dollar loans, various rates and maturities3.52%4,533
3.59%4,533
Foreign currency loans, various rates and maturities3.19%714
3.21%713
Medium-term notes, varying maturities through 20253.33%703
3.26%778
Finance lease obligations 369
 369
Unamortized debt discount and issuance costs (324) (334)
Long-term debt due within one year 1
 (2,369) (340)
Long-term debt $17,160
 $19,254
1.Presented net of current portion of unamortized debt issuance costs.


Maturities of Long-Term Debt for Next Five Years at Mar 31, 2019
In millions
2019 1
$2,307
2020$1,839
2021 2
$4,249
2022$1,507
2023$500
2024$968
1.Includes $2.0 billion of current maturities related to the Dow Silicones term loan facility, repaid on April 5, 2019.
2.Assumes the option to extend will be exercised for $2.5 billion of the Dow Silicones term loan facility.


2019 Activity
In the first three months of 2019, TDCCthe Company redeemed an aggregate principal amount of $72 million of International Notes ("InterNotes")InterNotes® at maturity.

Term Loan Facility
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"). TDCC subsequently guaranteed the obligations of Dow Silicones under the Term Loan Facility and, as a result, the covenants and events of default applicable to the Term Loan Facility are substantially similar to the covenants and events of default set forth in TDCC's Five Year Competitive Advance and Revolving Credit Facility Agreement ("Revolving Credit Agreement"). In the second quarter of 2018, Dow Silicones exercised the 19-month extension option making amounts borrowed under the Term Loan Facility repayable on December 30, 2019. In addition, Dow Silicones amended the Term Loan Facility to include an additional 2-year extension option, at Dow Silicones' election, upon satisfaction of certain customary conditions precedent. On April 5, 2019, Dow Silicones voluntarily repaid $2.0 billion of principal, which was classified as "Long-term debt due within one year" in the consolidated balance sheets at March 31, 2019. Dow Silicones also intends to exercise the 2-year extension option on the remaining principal balance of $2.5 billion.


Available Credit Facilities
The following table summarizes TDCC'sthe Company's credit facilities:


Committed and Available Credit Facilities at Mar 31, 2020
In millionsCommitted CreditCredit AvailableMaturity DateInterest
Five Year Competitive Advance and Revolving Credit Facility$5,000  $5,000  October 2024Floating rate
Term Loan Facility 1
1,250  —  September 2023Floating rate
European Securitization Facility 2
440  440  October 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 Facility150  150  March 2022Floating 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 Facility275  275  March 2025Floating rate
Total committed and available credit facilities$8,765  $7,515  
Committed and Available Credit Facilities at Mar 31, 2019
In millionsCommitted CreditCredit AvailableMaturity DateInterest
Five Year Competitive Advance and Revolving Credit Facility$5,000
$5,000
October 2023Floating rate
Term Loan Facility 1
2,000
—
April 2019Floating rate
Term Loan Facility 2
2,500
—
December 2021Floating rate
North American Securitization Facility800
800
September 2019Floating rate
European Securitization Facility 3
450
450
October 2020Floating rate
Bilateral Revolving Credit Facility100
100
October 2019Floating rate
Bilateral Revolving Credit Facility 4
100
100
March 2020Floating rate
Bilateral Revolving Credit Facility100
100
March 2020Floating rate
Bilateral Revolving Credit Facility280
280
March 2020Floating rate
Bilateral Revolving Credit Facility100
100
March 2020Floating rate
Bilateral Revolving Credit Facility200
200
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
Total committed and available credit facilities$12,130
$7,630
  
1.Dow Silicones voluntarily repaid $2.0 billion of principal on April 5, 2019.
2.Assumes the option to extend the Dow Silicones term loan facility will be exercised.
3.Equivalent to Euro 400 million.
4.On March 9, 2019, TDCC renewed a $100 million Bilateral Revolving Credit Facility agreement, which has a maturity date in March 2020 and provides for interest at floating rates, as defined in the agreement.

1.Assumes the option to extend the Term Loan Facility will be exercised.

2.Equivalent to €400 million.

Debt Covenants and Default Provisions
Information on TDCC's debt covenants and default provisions can be found in Note 15 to the Consolidated Financial Statements included in TDCC's Annual Report on Form 10-K for the year ended December 31, 2018. There were no material changes to the debt covenants and default provisions related to TDCC’sthe Company's outstanding long-term debt and primary, private credit agreements in the first three months of 2019.

Subsequent Event
On April 1, 2019, DowDuPont completed2020. For additional information on the separation of its materials science businessCompany's debt covenants and default provisions, see Note 16 to the Consolidated Financial Statements included in the combined 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 withand 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 QuarterlyAnnual Report on Form 10-Q.10-K for the year ended December 31, 2019.

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NOTE 1012 – COMMITMENTS AND CONTINGENT LIABILITIES
Environmental Matters
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies. At March 31, 2019, TDCC2020, the Company had accrued obligations of $813$1,122 million for probable environmental remediation and restoration costs, including $159$205 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 currentbest estimate of the costs for remediation and restoration with respect to environmental matters for which TDCCthe Company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to approximately two 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 TDCC’sthe Company's results of operations, financial condition and cash flows. It is the opinion of TDCC’sthe Company’s management, however, that the possibility is remote that costs in excess of the range disclosed will have a material impact on TDCC’sthe Company’s results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration. As new or additional information becomes available and/or certain spending trends become known, management will evaluate such information in determination of the current estimate of environmental liability. In the second quarter of 2019, as a result of the business separations, and change in ownership of certain sites where there are remediation activities, additional costs may be incurred to effectively manage the ongoing activities. In addition, as a result of the potential culmination of long standing negotiations with regulators and/or agencies, additional charges for environmental matters may be recorded. Management believes that it is reasonably possible that the accrued obligation for environmental matters may be increased up to $400 million as a result of this review. At December 31, 2018, TDCC2019, the Company had accrued obligations of $820$1,155 million for probable environmental remediation and restoration costs, including $156$207 million for the remediation of Superfund sites.


Litigation
Asbestos-Related Matters of Union Carbide Corporation
A summary of Asbestos-Related Matters of Union Carbide Corporation can be found in Note 1617 to the Consolidated Financial Statements included in TDCC'sthe combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2018.2019.


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
Since 2003, Union Carbide has engaged Ankura Consulting Group, LLC ("Ankura"), a third party actuarial specialist, to review Union Carbide's historical asbestos-related claim and resolution activity in order to assist Union Carbide's management in estimating the asbestos-related liability. Each year, Union Carbide requests Ankura has reviewed theto review its claim and resolution activity, including asbestos-related defense and processing costs, to determine the appropriateness of updating the most recent Ankura study.


Based on the review completed by Ankura in December 2018 Ankura review2019 and Union Carbide's owninternal review of the data,process, Union Carbide's total asbestos-related liability through the terminal year of 2049, including asbestos-related defense and processing costs, was $1,260$1,165 million at December 31, 2018,2019, and was included in “Accrued and other current liabilities” and “Asbestos-related liabilities - noncurrent” in the consolidated balance sheets.


Each quarter, Union Carbide reviews claims filed, settled and dismissed, as well as average settlement and resolution costs by disease category. Union Carbide also considers additional quantitative and qualitative factors such as the nature of pending claims, trial experience of Union Carbide and other asbestos defendants, current spending for defense and processing costs, significant appellate rulings and legislative developments, trends in the tort system, and their respective effects on expected future resolution costs. Union Carbide's management considers all these factors in conjunction with the most recent Ankura study and determines whether a change in the estimate is warranted. Based on Union Carbide's review of 20192020 activity, it was determined that no adjustment to the accrual was required at March 31, 2019.2020.

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Union Carbide’s asbestos-related liability for pending and future claims and defense and processing costs was $1,243$1,148 million at March 31, 2019,2020, and approximately 1719 percent of the recorded claim liability related to pending claims and approximately 8381 percent related to future claims.


Summary
TDCC'sThe Company's management believes the amounts recorded by Union Carbide for the asbestos-related liability, (includingincluding defense and processing costs)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 TDCC'sthe Company's results of operations and cash flows for a particular period and on the consolidated financial position.


Dow Silicones Chapter 11 Related Matters
A summary of the Dow Silicones Chapter 11 Related Matters can be found in Note 1617 to the Consolidated Financial Statements included in TDCC'sthe combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2018.2019.


Introduction
In 1995, Dow Silicones, then a 50:50 joint venture between TDCCthe 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 providesprovided 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 TDCC.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”). Dow Silicones has an obligation

to fund the Settlement Facility and is expected to make further contributions after the Litigation Facility over a 16-year period, commencing at the Effective Date.Settlement Facility's existing funds are exhausted. At March 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 $110$70 million. The claim filing deadline passed in June 2019. All claims have been received by the Settlement Facility and are being processed. Based on the claims filed at and before the deadline, Dow Silicones estimates that it will be obligated to contribute an additional $165 million after the Settlement Facility balance is exhausted.


Dow Silicones' liability for breast implant and other product liability claims ("Implant Liability")Liability was $263$165 million at March 31, 2019 and December 31, 2018, of which $157 million at March 31, 20192020 ($111165 million at December 31, 2018)2019), of which $45 million ($20 million at December 31, 2019) was included in “Accrued and other current liabilities” and $106$120 million at March 31, 2019 ($152145 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 claim filing levels in the Settlement Facility will be similar to those in a prior settlement program, which management uses to estimate future claim filing levels for the Settlement Facility; 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 $2,148 million at March 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. The actual amount of interest that will ultimately be paid to these Commercial Creditors is uncertain due to pending litigation between Dow Silicones and the Commercial Creditors regarding the appropriate interest rates to be applied to outstanding obligations from the 1995 bankruptcy filing date through the Effective Date, as well as the presence of any recoverable fees, costs and expenses. 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.

On May 10, 2017, the U.S. District Court for the Eastern District of Michigan 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 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. At March 31, 2019, the liability related to Dow Silicones' potential obligation to its Commercial Creditors in the Chapter 11 Proceeding was $83 million and is included in "Accrued and other current liabilities" in the consolidated balance sheets ($82 million at December 31, 2018). The actual amount of interest that will be paid to these creditors is uncertain and will ultimately be resolved through continued proceedings in the District Court.

Indemnifications
In connection with the June 1, 2016, ownership restructure of Dow Silicones, TDCC is indemnified by Corning for 50 percent of future losses associated with certain pre-closing liabilities, including the Implant Liability and Commercial Creditors matters described above, 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. Indemnification assets were insignificant at March 31, 2019 (zero at December 31, 2018).


Summary
The amounts recorded by Dow Silicones for the Chapter 11 related matters described above were based on 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.

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Other Litigation Matters
In addition to the specific matters described above, TDCCthe 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. TDCCThe 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 TDCC’sthe 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 TDCC.the Company.


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 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. The Company had indemnification assets of $100 million at March 31, 2020 ($100 million at December 31, 2019), of which $37 million ($37 million at December 31, 2019) was included in "Other current assets" and $63 million ($63 million at December 31, 2019) was included in "Noncurrent receivables" in the consolidated balance sheets. For additional information, see Note 17 to the Consolidated Financial Statements included in the combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2019.

Gain Contingency - TDCCDow v. Nova Chemicals Corporation Patent Infringement Matter
On December 9, 2010, TDCCDow filed suit in the Federal Court in Ontario, Canada ("Federal Court") alleging that Nova Chemicals Corporation ("Nova") was infringing TDCC'sthe Company's Canadian polyethylene patent 2,106,705. Nova counterclaimed on the grounds of invalidity and non-infringement. On June 29, 2017, the Federal Court issued a Confidential Supplemental Judgment, concluding that Nova must pay $645 million Canadian dollars (equivalent to $495 million U.S. dollars) to TDCC,the Company, plus pre- and post-judgment interest, for which TDCCthe Company received payment of $501 million from Nova on July 6, 2017. Although Nova is appealing portions of the damages judgment, certain portions of it are indisputable and will be owed to TDCCthe Company regardless of the outcome of any further appeals by Nova. At March 31, 2019, TDCC2020, the Company had $341 million ($341 million at December 31, 2018)2019) included in "Other noncurrent obligations" in the consolidated balance sheets related to the disputed portion of the damages judgment. TDCCThe Company is confident of its chances of defending the entire judgment on appeal, particularly the trial court's determinations on important factual issues, which will be accorded deferential review on appeal. SeeFor additional information, see Note 1617 to the Consolidated Financial Statements included in TDCC'sthe combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2019.

Gain Contingency - Dow v. Nova Chemicals Corporation Ethylene Asset Matter
On September 18, 2019, the Court of the Queen’s Bench in Alberta, Canada ("Court"), 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, which initially ruled in June 2018, found that Nova failed to operate the ethylene asset at full capacity for additional information.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. 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 sought a refund of the entire amount remitted to the CRA. On March 31, 2020, the Company received the full refund from CRA, equivalent to $259 million U.S. dollars. At March 31, 2020, $893 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 confident of its chances of defending 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.

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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:


GuaranteesMar 31, 2020Dec 31, 2019
In millionsFinal
Expiration		Maximum 
Future Payments		Recorded  
Liability  		Final
Expiration		Maximum 
Future Payments		Recorded  
Liability  
Guarantees2023$3,950  $10  2023$3,952  $10  
GuaranteesMar 31, 2019Dec 31, 2018
In millions
Final
Expiration
Maximum 
Future Payments
Recorded  
Liability  
Final
Expiration
Maximum 
Future Payments
Recorded  
Liability  
Guarantees2023$4,514
$15
2023$4,523
$25

Guarantees
Guarantees arise during the ordinary course of business from relationships with customers, committed accounts receivable facilities and nonconsolidated affiliates when TDCCthe 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 TDCCthe Company to make payments to the beneficiary of the guarantee. The majority of TDCC’sthe Company’s guarantees relate to debt of nonconsolidated affiliates, which have expiration dates ranging from less than one year to less than four years, and trade financing transactions in Latin America, which typically expire within one year of inception. TDCC’sthree years. The Company’s current expectation is that future payment or performance related to the non-performance of others is considered remote.


TDCCThe Company has entered into guarantee agreements ("Guarantees") related to project financing for Sadara Chemical Company ("Sadara"), a nonconsolidated affiliate.Sadara. The total of an Islamic bond and additional project financing (collectively “Total Project Financing”) obtained by Sadara is approximately $12.5 billion. Sadara had $11.7$10.8 billion of Total Project Financing outstanding at March 31, 20192020 ($11.710.8 billion at December 31, 2018)2019). TDCC's guaranteeThe Company's guarantee of the Total Project Financing is in proportion to TDCC'sthe Company's 35 percent ownership interest in Sadara, or up to approximately $4.2$3.9 billion when the project financing 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 middleend of 2019,the second quarter of 2020, and must occur no later than December 2020. In the first quarter of 2020, Sadara signed its final logistics service agreement, the final substantive step to project completion.




NOTE 1113 - 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.

TDCC 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 that currently range from 1 to 50 years. See Notes 1 and 2 forFor additional information on leases.the Company's leases, see Note 18 to the Consolidated Financial Statements included in the combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2019.


The components of lease cost for operating and finance leases for the three months ended March 31, 2020 and 2019 were as follows:


Lease CostThree Months Ended
In millionsMar 31, 2020Mar 31, 2019
Operating lease cost$120  $125  
Finance lease cost
Amortization of right-of-use assets - finance$13  $6  
Interest on lease liabilities - finance6  6  
Total finance lease cost$19  $12  
Short-term lease cost54  50  
Variable lease cost64  44  
Sublease income(1) (1) 
Total lease cost$256  $230  

31
Lease CostThree Months Ended
Mar 31, 2019
In millions
Operating lease cost$147
Finance lease cost 
Amortization of right-of-use assets - finance6
Interest on lease liabilities - finance6
Total finance lease cost$12
Short-term lease cost55
Variable lease cost85
Sublease income(1)
Total lease cost$298
Table of Contents

The following table provides supplemental cash flow information related to leases:


Other Lease InformationThree Months Ended
In millionsMar 31, 2020Mar 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$126  $133  
Operating cash flows for finance leases$6  $6  
Financing cash flows for finance leases$8  $3  
Other Lease InformationThree Months Ended
Mar 31, 2019
In millions
Cash paid for amounts included in the measurement of lease liabilities: 
Operating cash flows from operating leases$154
Operating cash flows from finance leases$6
Financing cash flows from finance leases$3


The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at March 31, 2020 and December 31, 2019:


Lease PositionBalance Sheet ClassificationMar 31, 2020Dec 31, 2019
In millions
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 1
$38  $2,476  
Finance leases$34  $89  
Assets
Operating lease assetsOperating lease right-of-use assets  $1,942  $2,072  
Finance lease assetsProperty  526  486  
Finance lease amortizationAccumulated depreciation  (179) (167) 
Total lease assets$2,289  $2,391  
Liabilities
Current
OperatingOperating lease liabilities - current  $384  $421  
FinanceLong-term debt due within one year  49  32  
Noncurrent
OperatingOperating lease liabilities - noncurrent  1,622  1,739  
FinanceLong-Term Debt  369  363  
Total lease liabilities$2,424  $2,555  
1. Includes $2.3 billion for the period ended December 31, 2019 related to the adoption of Topic 842.

Lease Term and Discount RateMar 31, 2020Dec 31, 2019
Weighted-average remaining lease term
Operating leases8.0 years8.0 years
Finance leases11.5 years12.3 years
Weighted-average discount rate
Operating leases4.10 %4.09 %
Finance leases6.04 %6.28 %

32
Lease PositionBalance Sheet ClassificationMar 31, 2019
In millions
Right-of-use assets obtained in exchange for lease obligations:  
Operating leases 1
 $2,714
Assets  
Operating lease assetsOperating lease right-of-use assets$2,584
Finance lease assetsProperty437
Finance lease amortizationAccumulated depreciation(143)
Total lease assets $2,878
Liabilities  
Current  
OperatingOperating lease liabilities - current$477
FinanceLong-term debt due within one year20
Noncurrent  
OperatingOperating lease liabilities - noncurrent2,126
FinanceLong-Term Debt349
Total lease liabilities $2,972
1.Includes $2.7 billion related to the adoption of Topic 842. See Note 2 for additional information.


Lease Term and Discount RateMar 31, 2019
Weighted-average remaining lease term
Operating leases8.7 years
Finance leases18.7 years
Weighted-average discount rate
Operating leases4.12%
Finance leases6.98%

The following table provides the maturities of lease liabilities at March 31, 2019:2020:


Maturities of Lease LiabilitiesMar 31, 2020
Operating LeasesFinance Leases
In millions
2020$338  $56  
2021409  64  
2022349  57  
2023281  82  
2024218  29  
2025 and thereafter806  310  
Total future undiscounted lease payments$2,401  $598  
Less imputed interest395  180  
Total present value of lease liabilities$2,006  $418  
Maturities of Lease Liabilities at Mar 31, 2019Operating LeasesFinance Leases
In millions
2019$437
$38
2020515
48
2021421
46
2022343
44
2023291
71
2024 and thereafter1,157
309
Total future undiscounted lease payments$3,164
$556
Less imputed interest561
187
Total present value of lease liabilities$2,603
$369


At March 31, 2019, TDCC2020, Dow had additional leases of approximately $45$65 million, primarily for buildings, a rail yard and equipment, which had not yet commenced. These leases are expected to commence later in 2019,2020 and 2021, with lease terms of 10up to 20 years.


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$412
2020369
2021328
2022297
2023253
2024 and thereafter978
Total$2,637

TDCCDow 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 paymentpayments and recorded liability reflected in the consolidated balance sheets for residual value guarantees at March 31, 20192020 and December 31, 2018.2019. There was no recorded liability related to these residual value guarantees at March 31, 2020 or 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 GuaranteesMar 31, 2020Dec 31, 2019
In millionsFinal ExpirationMaximum Future PaymentsRecorded LiabilityFinal ExpirationMaximum Future PaymentsRecorded Liability
Residual value guarantees2028$788  $—  2028$792  $—  

33
Lease GuaranteesMarch 31, 2019December 31, 2018
In millionsFinal ExpirationMaximum Future PaymentsRecorded LiabilityFinal ExpirationMaximum Future PaymentsRecorded Liability
Residual value guarantees2028$885
$—
2028$885
$130



NOTE 1214 – STOCKHOLDERS' EQUITY
Dow Inc.
Common Stock
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 continued to be solely owned by DowDuPont at March 31, 2019. See Note 19 for additional information.

TDCC
Accumulated Other Comprehensive LossACCUMULATED OTHER COMPREHENSIVE LOSS
The following table summarizes the changes and after-tax balances ofin each component of AOCLaccumulated other comprehensive loss ("AOCL") for the three months ended March 31, 20192020 and 2018:

Accumulated Other Comprehensive LossUnrealized Gains (Losses) on InvestmentsCumulative Translation AdjPension and Other Postretire BenefitsDerivative InstrumentsTotal Accum Other Comp Loss
In millions
Balance at Jan 1, 2018$17
$(1,481)$(6,998)$(109)$(8,571)
Other comprehensive income (loss) before reclassifications(26)376
—
(16)334
Amounts reclassified from accumulated other comprehensive income (loss)1
—
126
22
149
Net other comprehensive income (loss)$(25)$376
$126
$6
$483
Balance at Mar 31, 2018$(8)$(1,105)$(6,872)$(103)$(8,088)
      
Balance at Jan 1, 2019$(51)$(1,813)$(7,965)$(56)$(9,885)
Other comprehensive income (loss) before reclassifications68
(13)—
(68)(13)
Amounts reclassified from accumulated other comprehensive loss(1)(18)141
(7)115
Net other comprehensive income (loss)$67
$(31)$141
$(75)$102
Balance at Mar 31, 2019$16
$(1,844)$(7,824)$(131)$(9,783)

The tax effects on the net activity related to each component of other comprehensive income (loss) for the three months ended March 31, 2019 and 2018 were as follows:


Accumulated Other Comprehensive LossThree Months Ended
In millionsMar 31, 2020Mar 31, 2019
Unrealized Gains (Losses) on Investments
Beginning balance$64  $(51) 
Unrealized gains (losses) on investments(118) 86  
Less: Tax (expense) benefit25  (18) 
Net unrealized gains (losses) on investments(93) 68  
(Gains) losses reclassified from AOCL to net income 1
(9) (1) 
Less: Tax expense (benefit) 2
2  —  
Net (gains) losses reclassified from AOCL to net income(7) (1) 
Other comprehensive income (loss), net of tax(100) 67  
Ending balance$(36) $16  
Cumulative Translation Adjustment
Beginning balance$(1,135) $(1,813) 
Gains (losses) on foreign currency translation(161) (12) 
Less: Tax (expense) benefit12  (1) 
Net gains (losses) on foreign currency translation(149) (13) 
(Gains) losses reclassified from AOCL to net income 3
(14) (18) 
Other comprehensive income (loss), net of tax(163) (31) 
Ending balance$(1,298) $(1,844) 
Pension and Other Postretirement Benefits
Beginning balance$(8,781) $(7,965) 
Amortization and recognition of net loss and prior service credits 4
185  166  
Less: Tax expense (benefit) 2
(43) (25) 
Other comprehensive income (loss), net of tax142  141  
Ending balance$(8,639) $(7,824) 
Derivative Instruments
Beginning balance$(394) $(56) 
Gains (losses) on derivative instruments(176) (95) 
Less: Tax (expense) benefit10  27  
Net gains (losses) on derivative instruments(166) (68) 
(Gains) losses reclassified from AOCL to net income 5
7  (7) 
Less: Tax expense (benefit) 2
(3) —  
Net (gains) losses reclassified from AOCL to net income4  (7) 
Other comprehensive income (loss), net of tax(162) (75) 
Ending balance$(556) $(131) 
Total AOCL ending balance$(10,529) $(9,783) 
Tax Benefit (Expense) 1
Three Months Ended
In millionsMar 31, 2019Mar 31, 2018
Unrealized gains (losses) on investments$(18)$6
Cumulative translation adjustments(1)5
Pension and other postretirement benefit plans(25)(28)
Derivative instruments27
3
Tax expense from income taxes related to other comprehensive income (loss) items$(17)$(14)
1.Prior period amounts were updated to conform with the current year presentation.

1. Reclassified to "Net sales" and "Sundry income (expense) - net."

2. Reclassified to "Provision for income taxes on continuing operations."
A summary3. Reclassified to "Sundry income (expense) - net."
4. These AOCL components are included in the computation of net periodic benefit cost of the reclassifications outCompany's defined benefit pension and other postretirement benefit plans. See Note 16 for additional information.
5. Reclassified to "Cost of AOCL for the three months ended March 31, 2019sales," "Sundry income (expense) - net" and 2018 is provided as follows:

"Interest expense and amortization of debt discount."
34
Reclassifications Out of Accumulated Other Comprehensive LossThree Months EndedConsolidated Statements of Income Classification
Mar 31, 2019Mar 31, 2018
In millions
Unrealized (gains) losses on investments$(1)$2
See (1) below
   Tax benefit—
(1)See (2) below
   After tax$(1)$1
 
Cumulative translation adjustments$(18)$—
See (3) below
Pension and other postretirement benefit plans$166
$154
See (4) below
   Tax benefit(25)(28)See (2) below
   After tax$141
$126
 
Derivative instruments$(7)$27
See (5) below
   Tax benefit—
(5)See (2) below
   After tax$(7)$22
 
Total reclassifications for the period, after tax$115
$149
 
1."Net sales" and "Sundry income (expense) - net."
2."Provision for income taxes."
3."Sundry income (expense) - net."
4.These AOCL components are included in the computation of net periodic benefit cost of TDCC's defined benefit pension and other postretirement benefit plans. See Note 14 for additional information.
5."Cost of sales," "Sundry income (expense) - net" and "Interest expense and amortization of debt discount."


NOTE 1315 – NONCONTROLLING INTERESTS
Ownership interests in TDCC'sthe Company's subsidiaries held by parties other than TDCCthe Company are presented separately from TDCC'sthe Company's equity in the consolidated balance sheets as "Noncontrolling interests." The amount of consolidated net income attributable to TDCCthe Company and the noncontrolling interests are both presented on the face of the consolidated statements of income.


The following table summarizes the activity for equity attributable to noncontrolling interests for the three months ended March 31, 20192020 and 2018:2019:


Noncontrolling InterestsThree Months Ended

In millions
Mar 31, 2020Mar 31, 2019
Balance at beginning of period$553  $1,138  
Net income attributable to noncontrolling interests - continuing operations19  32  
Net income attributable to noncontrolling interests - discontinued operations—  13  
Distributions to noncontrolling interests 1
(1) (9) 
Cumulative translation adjustments(16) 7  
Other—  (1) 
Balance at end of period$555  $1,180  
Noncontrolling InterestsThree Months Ended

In millions
Mar 31, 2019Mar 31, 2018
Balance at beginning of period$1,138
$1,186
Net income attributable to noncontrolling interests45
35
Distributions to noncontrolling interests(9)(24)
Cumulative translation adjustments7
(6)
Other(1)(1)
Balance at end of period$1,180
$1,190
1.Includes amounts attributable to discontinued operations of $7 million for the three months ended March 31, 2019.






NOTE 1416 – PENSION PLANS AND OTHER POSTRETIREMENT BENEFITSBENEFIT PLANS
A summary of TDCC'sthe Company's pension plans and other postretirement benefitsbenefit plans can be found in Note 1921 to the Consolidated Financial Statements included in TDCC’sthe combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2018.2019. The following table provides the components of TDCC'sthe Company's net periodic benefit cost for all significant plans:


Net Periodic Benefit Cost for All Significant PlansThree Months Ended
In millionsMar 31,
2020		Mar 31,
2019
Defined Benefit Pension Plans:
Service cost$99  $112  
Interest cost192  241  
Expected return on plan assets(414) (417) 
Amortization of prior service credit(5) (6) 
Amortization of net loss192  132  
Net periodic benefit cost$64  $62  
Less: Discontinued operations—  21  
Net periodic benefit cost - continuing operations$64  $41  
Other Postretirement Benefit Plans:
Service cost$2  $2  
Interest cost9  14  
Amortization of net gain(2) (6) 
Net periodic benefit cost$9  $10  
Net Periodic Benefit Cost for All Significant PlansThree Months Ended
In millionsMar 31,
2019		Mar 31,
2018
Defined Benefit Pension Plans:  
Service cost$112
$133
Interest cost241
218
Expected return on plan assets(417)(406)
Amortization of prior service credit(6)(6)
Amortization of net loss132
171
Net periodic benefit cost$62
$110
   
Other Postretirement Benefits:  
Service cost$2
$3
Interest cost14
11
Amortization of net gain(6)(6)
Net periodic benefit cost$10
$8


Net periodic benefit cost, other than the service cost component, is included in "Sundry income (expense) - net" in the consolidated statements of income.



The Company's funding policy is to contribute to defined benefit pension plans in the United States and a number of other countries when pension laws and/or economics either require or encourage funding. The Company expects to contribute approximately $290 million to its pension plans in 2020, of which $63 million has been contributed through March 31, 2020.

35
NOTE 17 – STOCK-BASED COMPENSATION
A summary of the Company's stock-based compensation plans can be found in Note 22 to the Consolidated Financial Statements included in the combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2019.

Stock Incentive Plan
The Company grants stock-based compensation to employees and non-employee directors under the 2019 Stock Incentive Plan. Most of the Company's stock-based compensation awards are granted in the first quarter of each year.

In the first quarter of 2020, Dow Inc. granted the following stock-based compensation awards to employees and non-employee directors:

•2.2 million stock options with a weighted-average exercise price of $48.30 per share and a weighted-average fair value of $5.89 per share;
•2.0 million restricted stock units with a weighted-average fair value of $48.00 per share; and
•1.4 million performance stock units with a weighted-average fair value of $48.35 per share.


NOTE 1518 – FINANCIAL INSTRUMENTS
A summary of TDCC'sthe Company's financial instruments, risk management policies, derivative instruments and hedging activities can be found in Note 21 of23 to the Consolidated Financial Statements included in TDCC'sthe combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2018. If applicable, updates have been included in the respective section below.2019.


The following table summarizes the fair value of financial instruments at March 31, 20192020 and December 31, 2018:2019:


Fair Value of Financial InstrumentsMar 31, 2019Dec 31, 2018Fair Value of Financial InstrumentsMar 31, 2020Dec 31, 2019
In millionsCostGainLossFair ValueCostGainLossFair ValueIn millionsCostGainLossFair ValueCostGainLossFair Value
Cash equivalents$345
$—
$—
$345
$566
$—
$—
$566
Cash equivalents:Cash equivalents:
Held-to-maturity securities 1
Held-to-maturity securities 1
$1,233  $—  $—  $1,233  $220  $—  $—  $220  
Money market fundsMoney market funds573  —  —  573  408  —  —  408  
Total cash equivalentsTotal cash equivalents$1,806  $—  $—  $1,806  $628  $—  $—  $628  
Marketable securities$101
$—
$—
$101
$100
$—
$—
$100
Marketable securities$1  $—  $—  $1  $21  $—  $—  $21  
Other investments:     Other investments:
Debt securities:   Debt securities:
Government debt 1
$694
$17
$(9)$702
$714
$9
$(23)$700
Government debt 2
Government debt 2
$458  $37  $(33) $462  $533  $33  $(11) $555  
Corporate bonds1,051
43
(21)1,073
1,026
20
(63)983
Corporate bonds877  43  (84) 836  944  80  (10) 1,014  
Total debt securities$1,745
$60
$(30)$1,775
$1,740
$29
$(86)$1,683
Total debt securities$1,335  $80  $(117) $1,298  $1,477  $113  $(21) $1,569  
Equity securities 2
16
5
—
21
16
1
(1)16
Equity securities 3
Equity securities 3
8  1  (1) 8  10  6  (1) 15  
Total other investments$1,761
$65
$(30)$1,796
$1,756
$30
$(87)$1,699
Total other investments$1,343  $81  $(118) $1,306  $1,487  $119  $(22) $1,584  
Total cash equivalents, marketable securities and other investments$2,207
$65
$(30)$2,242
$2,422
$30
$(87)$2,365
Total cash equivalents, marketable securities and other investments$3,150  $81  $(118) $3,113  $2,136  $119  $(22) $2,233  
Long-term debt including debt due within one year 3
$(19,529)$84
$(1,405)$(20,850)$(19,594)$351
$(971)$(20,214)
Long-term debt including debt due within one year 4
Long-term debt including debt due within one year 4
$(16,697) $384  $(1,326) $(17,639) $(16,410) $7  $(2,258) $(18,661) 
Derivatives relating to:   Derivatives relating to:
Interest rates$—
$—
$(181)$(181)$—
$—
$(64)$(64)
Interest rates 5
Interest rates 5
$—  $194  $(331) $(137) $—  $8  $(283) $(275) 
Foreign currency—
86
(14)72
—
120
(43)77
Foreign currency—  53  (39) 14  —  101  (21) 80  
Commodities 4
—
88
(147)(59)—
91
(178)(87)
Commodities 5
Commodities 5
—  133  (286) (153) —  59  (115) (56) 
Total derivatives$—
$174
$(342)$(168)$—
$211
$(285)$(74)Total derivatives$—  $380  $(656) $(276) $—  $168  $(419) $(251) 
1. The Company's held-to-maturity securities primarily included treasury bills and time deposits.
2. U.S. Treasury obligations, U.S. agency obligations, U.S. agency mortgage-backed securities and other municipalities’ obligations.
2.Equity securities with a readily determinable fair value.
3.Cost includes fair value hedge adjustments of $17 million at March 31, 2019 and $18 million at December 31, 2018 on $2,290 million of debt at March 31, 2019 and December 31, 2018.
4.Presented net of cash collateral where master netting arrangements allow.

3. Equity securities with a readily determinable fair value.
4. Cost includes fair value hedge adjustment gains of $68 million at March 31, 2020 and $1 million at December 31, 2019 on $2,790 million of debt at March 31, 2020 and $3,490 million of debt at December 31, 2019.
5. Presented net of cash collateral where master netting arrangements allow.
36
Cost approximates fair value for all other financial instruments.

Debt Securities
TDCC'sThe 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 three months ended March 31, 2020 and 2019:

Investing ResultsThree Months Ended
In millionsMar 31,
2020		Mar 31,
2019
Proceeds from sales of available-for-sale securities$248  $159  
Gross realized gains$16  $6  
Gross realized losses$(7) $(5) 

The following table summarizes the contractual maturities of the Company's investments in debt securities:

Contractual Maturities of Debt Securities at Mar 31, 2020 1
 CostFair Value
In millions
Within one year$12  $11  
One to five years363  340  
Six to ten years467  437  
After ten years493  510  
Total$1,335  $1,298  
1.Includes marketable securities with maturities of less than one year.

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 March 31, 2020 and December 31, 2019, aggregated by investment category:

Temporarily Impaired Debt SecuritiesLess than 12 months12 months or moreTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair ValueUnrealized Losses
In millions
Mar 31, 2020
Government debt 1
$109  $(22) $10  $(11) $119  $(33) 
Corporate bonds407  (66) 24  (18) 431  (84) 
Total temporarily impaired debt securities$516  $(88) $34  $(29) $550  $(117) 
Dec 31, 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 2018:other municipalities' obligations.

Investing ResultsThree Months Ended
In millionsMar 31,
2019		Mar 31,
2018
Proceeds from sales of available-for-sale securities$159
$348
Gross realized gains$6
$7
Gross realized losses$(5)$(9)


Equity Securities
TDCC’s investments in equity securities with a readily determinable fair value totaled $21 million at March 31, 2019 ($16 million at December 31, 2018). The aggregate carrying value of TDCC’s investments in equity securities where fair value is not readily determinable totaled $207 million at March 31, 2019 ($206 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 three months ended March 31, 2019 and 2018.2020. The net unrealized gainloss recognized in earnings on equity securities totaled $5$1 million for the three months ended March 31, 20192020 ($95 million net unrealized gain for the three months ended March 31, 2018)2019).



Investments in Equity SecuritiesMar 31, 2020Dec 31, 2019
In millions
Readily determinable fair value$8  $15  
Not readily determinable fair value$190  $189  

37
Derivative Instruments
The notional amounts of the Company's derivative instruments presented on a net basis at March 31, 2020 and December 31, 2019 were as follows:

Notional Amounts - NetMar 31, 2020Dec 31, 2019
In millions
Derivatives designated as hedging instruments:
Interest rate contracts$921  $922  
Foreign currency contracts$3,472  $6,253  
Derivatives not designated as hedging instruments:
Interest rate contracts$105  $145  
Foreign currency contracts$5,706  $5,567  

The notional amounts of the Company's commodity derivatives presented on a net basis at March 31, 2020 and December 31, 2019 were as follows:

Commodity Notionals - NetMar 31, 2020Dec 31, 2019Notional Volume Unit
Derivatives designated as hedging instruments:
Hydrocarbon derivatives20.06.1million barrels of oil equivalent
Derivatives not designated as hedging instruments:
Hydrocarbon derivatives0.40.1million barrels of oil equivalent
Power derivatives80.587.5thousands of megawatt hours

Maturity Dates of Derivatives Designated as Hedging InstrumentsYear
Interest rate contracts2021
Foreign currency contracts2021
Commodity contracts2022

38
The following tables provide the fair value and balance sheet classification of derivative instruments at March 31, 20192020 and December 31, 2018:2019:


Fair Value of Derivative InstrumentsMar 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$192  $(156) $36  
Foreign currency contractsOther current assets109  (80) 29  
Commodity contractsOther current assets82  (32) 50  
Commodity contractsDeferred charges and other assets67  (3) 64  
Total $450  $(271) $179  
Derivatives not designated as hedging instruments:
Interest rate contractsDeferred charges and other assets$158  $—  $158  
Foreign currency contractsOther current assets65  (41) 24  
Commodity contractsOther current assets22  (4) 18  
Commodity contractsDeferred charges and other assets1  —  1  
Total $246  $(45) $201  
Total asset derivatives $696  $(316) $380  
Liability derivatives
Derivatives designated as hedging instruments:
Interest rate contractsAccrued and other current liabilities$156  $(156) $—  
Foreign currency contractsAccrued and other current liabilities88  (80) 8  
Commodity contractsAccrued and other current liabilities152  (32) 120  
Commodity contractsOther noncurrent obligations148  (3) 145  
Total $544  $(271) $273  
Derivatives not designated as hedging instruments:
Interest rate contractsOther noncurrent obligations$331  $—  $331  
Foreign currency contractsAccrued and other current liabilities71  (40) 31  
Commodity contractsAccrued and other current liabilities24  (4) 20  
Commodity contractsOther noncurrent obligations1  —  1  
Total $427  $(44) $383  
Total liability derivatives $971  $(315) $656  
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.
39
Fair Value of Derivative InstrumentsMar 31, 2019
In millionsBalance Sheet ClassificationGross
Counterparty and Cash Collateral Netting 1
Net Amounts Included in the Consolidated Balance Sheet
Asset derivatives:    
Derivatives designated as hedging instruments:    
Foreign currency contractsOther current assets$161
$(89)$72
Commodity contractsOther current assets31
(5)26
Commodity contractsDeferred charges and other assets57
(4)53
Total $249
$(98)$151
Derivatives not designated as hedging instruments:    
Foreign currency contractsOther current assets$29
$(15)$14
Commodity contractsOther current assets8
(1)7
Commodity contractsDeferred charges and other assets4
(2)2
Total $41
$(18)$23
Total asset derivatives $290
$(116)$174
     
Liability derivatives:    
Derivatives designated as hedging instruments:    
Interest rate swapsOther noncurrent obligations$181
$—
$181
Foreign currency contractsAccrued and other current liabilities98
(89)9
Commodity contractsAccrued and other current liabilities93
(6)87
Commodity contractsOther noncurrent obligations60
(8)52
Total $432
$(103)$329
Derivatives not designated as hedging instruments:    
Foreign currency contractsAccrued and other current liabilities$20
$(15)$5
Commodity contractsAccrued and other current liabilities8
(4)4
Commodity contractsOther noncurrent obligations7
(3)4
Total $35
$(22)$13
Total liability derivatives $467
$(125)$342
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 TDCC 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) $—  
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  —  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, 2018
In millionsBalance Sheet ClassificationGross
Counterparty and Cash Collateral Netting 1
Net Amounts Included in the Consolidated Balance Sheet
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 swapsOther 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 TDCC 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. TDCCThe Company posted cash collateral of $20$6 million at March 31, 20192020 ($265 million at December 31, 2018)2019). There was no counterpartyCounterparties posted cash collateral postedof $1 million with TDCCthe Company at March 31, 20192020 ($343 million at December 31, 2018)2019).


Net Foreign Investment Hedges
40
For derivative instruments that are designated and qualify
Effect of Derivative Instruments
Amount of gain (loss) recognized in OCI 1
Amount of gain (loss) recognized in income 2
Income Statement Classification
Three months endedThree months ended
In millionsMar 31, 2020Mar 31, 2019Mar 31, 2020Mar 31, 2019
Derivatives designated as hedging
instruments:
Fair value hedges:
Interest rate contracts$—  $—  $24  $—  
Interest expense and amortization
  of debt discount 3
Excluded components 4
3  —  —  —  Interest expense and amortization
of debt discount
Cash flow hedges:
Interest rate contracts—  (106) —  —  Interest expense and amortization
of debt discount
Foreign currency contracts8  7  4  8  Cost of sales
Foreign currency contracts—  1  —  —  Sundry income (expense) - net
Commodity contracts(87) 55  (11) —  Cost of sales
Net foreign investment hedges:
Foreign currency contracts22  30  —  —  
Excluded components 4
22  86  14  25  Sundry income (expense) - net
Total derivatives designated as hedging
instruments		$(32) $73  $31  $33  
Derivatives not designated as hedging
instruments:
Interest rate contracts$—  $—  $(6) $—  Interest expense and amortization
of debt discount
Foreign currency contracts—  —  (19) (32) Sundry income (expense) - net
Commodity contracts—  —  11  (12) Cost of sales
Total derivatives not designated as
hedging instruments		$—  $—  $(14) $(44) 
Total derivatives$(32) $73  $17  $(11) 
1. OCI is defined as net foreign investment hedges, the effective portionother comprehensive income (loss).
2. Pretax amounts.
3. Gain (loss) recognized in income of derivatives is offset by gain (loss) recognized in income of the gain or loss onhedged item.
4. The excluded components are related to the derivative is included in “Cumulative Translation Adjustments” in AOCL. TDCC had outstanding foreign-currency denominated debttime value of the derivatives designated as a hedge of net foreign investment of $181 million at March 31, 2019 ($182 million at December 31, 2018). The results of hedges of TDCC’s net investment in foreign operations included in “Cumulative Translation Adjustments” in AOCL was a net loss of $36 million after tax for the three months ended March 31, 2019 (net loss of $43 million after tax for the three months ended March 31, 2018). For the three months ended March 31, 2019, TDCC recognized after tax gains of $86 million related to excluded components of net foreign investment hedges included in “Cumulative Translation Adjustments” in AOCL. For the three months ended March 31, 2019, gains of $25 million were amortized to “Sundry income (expense) - net” in the consolidated statements of income.hedges.


Fair Value Hedges
Subsequent to March 31, 2019, TDCC entered into interest rate contracts designated as a fair value hedge of underlying fixed rate debt obligations with maturity dates extending through 2048.

Income Statement Effect of Derivative Instruments
Foreign currency derivatives not designated as hedges are used to offset foreign exchange gains or losses resulting from the underlying exposures of foreign currency denominated assets and liabilities. The amount charged on a pretax basis related to foreign currency derivatives not designated as a hedge, which was included in “Sundry income (expense) - net” in the consolidated statements of income, was a gain of $31 million for the three months ended March 31, 2019 (loss of $17 million for the three months ended March 31, 2018). The income statement effects of other derivatives were immaterial.

Reclassification from AOCL
The following table provides the net after-tax amounts expected to be reclassified from AOCL to income within the next 12 months are a $1 million gain for interest rate contracts, a $42 million loss for commodity contracts, a $11 million gain for foreign currency contracts and a $57 million gain for excluded components.months:



Expected Reclassifications from AOCL within the next 12 monthsMar 31, 2020
In millions
Cash flow hedges:
Interest rate contracts$1 
Commodity contracts$(32)
Foreign currency contracts$9 
Net foreign investment hedges:
Excluded components$10 

41
NOTE 1619 – FAIR VALUE MEASUREMENTS
A summary of TDCC'sthe Company's recurring and nonrecurring fair value measurements can be found in Note 2224 to the Consolidated Financial Statements included in TDCC'sthe combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2018. If applicable, updates have been included in the respective section below.2019.


Fair Value Measurements on a Recurring Basis
The following tables summarizetable 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 BasisMar 31, 2019Dec 31, 2018Basis of Fair Value Measurements on a Recurring BasisMar 31, 2020Dec 31, 2019
Quoted Prices in Active Markets for Identical Items
(Level 1)		Significant Other Observable Inputs
(Level 2)		Total  Quoted Prices in Active Markets for Identical Items
(Level 1)		Significant Other Observable Inputs
(Level 2)		Total  Quoted Prices in Active Markets for Identical Items
(Level 1)		Significant Other Observable Inputs
(Level 2)		Total  Quoted Prices in Active Markets for Identical Items
(Level 1)		Significant Other Observable Inputs
(Level 2)		Total  
In millionsIn millions
Assets at fair value:    
Cash equivalents 1
$—
$345
$345
$—
$566
$566
Assets at fair valueAssets at fair value
Cash equivalentsCash equivalents
Held-to-maturity securities 1
Held-to-maturity securities 1
$—  $1,233  $1,233  $—  $220  $220  
Money market fundsMoney market funds—  573  573  —  408  408  
Marketable securities—
101
101
—
100
100
Marketable securities—  1  1  —  21  21  
Equity securities 2
21
—
21
16
—
16
Equity securities 2
8  —  8  15  —  15  
Debt securities: 2
    
Debt securities: 2
Government debt 3
—
702
702
—
700
700
Government debt 3
—  462  462  —  555  555  
Corporate bonds19
1,054
1,073
—
983
983
Corporate bonds20  816  836  22  992  1,014  
Derivatives relating to: 4
    
Derivatives relating to: 4
Interest ratesInterest rates—  350  350  —  35  35  
Foreign currency—
189
189
—
226
226
Foreign currency—  174  174  —  149  149  
Commodities10
90
100
17
93
110
Commodities31  141  172  23  67  90  
Total assets at fair value$50
$2,481
$2,531
$33
$2,668
$2,701
Total assets at fair value$59  $3,750  $3,809  $60  $2,447  $2,507  
Liabilities at fair value:      
Liabilities at fair valueLiabilities at fair value   
Long-term debt including debt due within one year 5
$—
$20,850
$20,850
$—
$20,214
$20,214
Long-term debt including debt due within one year 5
$—  $17,639  $17,639  $—  $18,661  $18,661  
Derivatives relating to: 4
     
Derivatives relating to: 4
Interest rates—
181
181
—
64
64
Interest rates—  487  487  —  310  310  
Foreign currency—
117
117
—
149
149
Foreign currency—  159  159  —  69  69  
Commodities13
155
168
23
189
212
Commodities18  307  325  14  137  151  
Total liabilities at fair value$13
$21,303
$21,316
$23
$20,616
$20,639
Total liabilities at fair value$18  $18,592  $18,610  $14  $19,177  $19,191  
1.Treasury bills, time deposits, and money market funds included in "Cash and cash equivalents" in the consolidated balance sheets and held at amortized cost, which approximates fair value.
2.TDCC’s investments in debt securities, which are primarily available-for-sale, and equity securities are included in “Other investments” in the consolidated balance sheets.
3.U.S. Treasury obligations, U.S. agency obligations, agency mortgage-backed securities and other municipalities’ obligations.
4.See Note 15 for the classification of derivatives in the consolidated balance sheets.
5.See Note 15
1. The Company's held-to-maturity securities primarily included treasury bills and time deposits.
2. 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.
3. U.S. Treasury obligations, U.S. agency obligations, U.S. agency mortgage-backed securities and other municipalities’ obligations.
4. See Note 18 for the classification of derivatives in the consolidated balance sheets.
5. See Note 18 for information on fair value measurements of long-term debt.

For equity securities calculated at net asset value per share (or its equivalent), TDCCthe Company had $121$114 million in private market securities and $29$22 million in real estate at March 31, 20192020 ($120117 million in private market securities and $29$18 million in real estate at December 31, 2018)2019). There are no redemption restrictions and the unfunded commitments on these investments were $87$66 million at March 31, 20192020 ($8976 million at December 31, 2018)2019).


Fair Value Measurements on a Nonrecurring Basis
As part of the Synergy Program, TDCC has or will shut down a number of manufacturing, R&D and corporate facilities around the world. In the first three months of 2019, inventory associated with this plan2020, the Company recognized an additional pretax impairment charge of $6 million related to capital additions made to the biopolymers manufacturing facility in Santa Vitoria, Minas Gerais, Brazil, which was impaired in 2017. The assets were written down to zero. In addition, impairments of leased, non-manufacturing facilities, which were classified as Level 3 measurements, resultedzero in a write-down of right-of-use assets to $80 million using unobservable inputs.2020. The impairment charges related to the Synergy Program, totaling $100 million, werecharge was included in "Restructuring“Restructuring and asset related charges - net"net” in the consolidated statements of income.income and related to Packaging & Specialty Plastics. See Note 45 for additional information on TDCC's restructuring activities.information.

42

NOTE 1720 – VARIABLE INTEREST ENTITIES
A summary of TDCC'sthe Company's variable interest entities ("VIEs") can be found in Note 2325 to the Consolidated Financial Statements included in TDCC’sthe combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2018.2019.


Assets and Liabilities of Consolidated VIEs
TDCC'sThe Company's consolidated financial statements include the assets, liabilities and results of operations of VIEs for which TDCCthe 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.


The following table summarizes the carrying amounts of these entities' assets and liabilities included in TDCC’sthe Company’s consolidated balance sheets at March 31, 20192020 and December 31, 2018:2019:


Assets and Liabilities of Consolidated VIEsMar 31,
2020		Dec 31,
2019
In millions
Cash and cash equivalents$44  $37  
Other current assets52  51  
Net property286  330  
Other noncurrent assets16  18  
Total assets 1
$398  $436  
Current liabilities$115  $141  
Long-term debt30  34  
Other noncurrent obligations19  21  
Total liabilities 2
$164  $196  
Assets and Liabilities of Consolidated VIEsMar 31,
2019		Dec 31,
2018
In millions
Cash and cash equivalents$109
$82
Other current assets116
114
Net property718
734
Other noncurrent assets60
45
Total assets 1
$1,003
$975
Current liabilities$318
$334
Long-term debt43
75
Other noncurrent obligations46
31
Total liabilities 2
$407
$440
1. All assets were restricted at March 31, 2020 and December 31, 2019.
1.All assets were restricted at March 31, 2019 and December 31, 2018.
2.All liabilities were nonrecourse at March 31, 2019 and December 31, 2018.

2. All liabilities were nonrecourse at March 31, 2020 and December 31, 2019.

Amounts presented in the consolidated balance sheets and the table above as restricted assets or nonrecourse obligations relating to consolidated VIEs at March 31, 20192020 and December 31, 2018,2019 are adjusted for intercompany eliminations and parental guarantees.

Subsequent Event
TDCC is a 50 percent indirect owner in a propylene oxide ("PO") manufacturing joint venture in Asia Pacific. TDCC has a variable interest in this joint venture relating to arrangements between the joint venture and TDCC, 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, TDCC executed an agreement to acquire full ownership in the PO manufacturing joint venture for an estimated cash purchase price of $312 million, with an expected closing date in the fourth quarter of 2019.


Nonconsolidated VIEs
The following table summarizes the carrying amounts of assets and liabilities included in the consolidated balance sheets at March 31, 20192020 and December 31, 2018,2019, related to variable interests in joint ventures or entities for which TDCCthe Company is not the primary beneficiary. TDCC'sThe Company's maximum exposure to loss is the same as the carrying amounts, unless otherwise noted below.amounts.


Carrying Amounts of Assets Related to Nonconsolidated VIEsMar 31,
2020		Dec 31,
2019
In millionsDescription of asset
Silicon joint ventures
Equity method investments 1
$102  $100  
1. Classified as "Investment in nonconsolidated affiliates" in the consolidated balance sheets.


Carrying Amounts of Assets and Liabilities Related to Nonconsolidated VIEs Mar 31,
2019		Dec 31,
2018
In millionsDescription of asset or liability
Hemlock Semiconductor L.L.C.
Equity method investment 1
$(658)$(495)
Silicon joint ventures
Equity method investments 2
$96
$100
AgroFresh Solutions, Inc.
Equity method investment 2
$45
$48
Other receivable 3
$8
$8
1.Classified as "Other noncurrent obligations" in the consolidated balance sheets. TDCC's maximum exposure to loss was zero at March 31, 2019 (zero at December 31, 2018).
2.Classified as "Investment in nonconsolidated affiliates" in the consolidated balance sheets.
3.Classified as "Accounts and notes receivable - Other" in the consolidated balance sheets.


NOTE 1821 – 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 date 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, as approved by Dow Inc.'s Board of Directors 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 first quarter of 2020, TDCC declared and paid a dividend of $643 million to Dow Inc. (0 in the first quarter of 2019). TDCC's outstanding intercompany loan balance with Dow Inc. was insignificant at March 31, 2020 and December 31, 2019.
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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 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. For the three months ended March 31, 2019, TDCC declared and paid dividends to DowDuPont of $535 million ($1,057 million for the three months ended March 31, 2018). At March 31, 2019, TDCC's outstanding intercompany loan balance was zero (insignificant at December 31, 2018). In addition, at March 31, 2019, TDCC had a receivable related to a tax sharing agreement with DowDuPont of $89 million ($89 million at December 31, 2018), included in "Accounts and notes receivable - Other" in the consolidated balance sheets.million.


Historical DuPont and its Affiliatesaffiliates
Prior to the separation from DowDuPont, TDCC sellssold to and procuresprocured from Historical DuPont and its affiliates certain feedstocks, energy and raw materials that arewere consumed in each company's manufacturing process. In addition, TDCC and DuPont have tolling arrangements and recognize product sales for agriculture products. The following table presents amounts due to or due from DuPont and its affiliates:

Balances Due To or Due From DuPont and its AffiliatesMar 31, 2019Dec 31, 2018
In millions
Accounts and notes receivable - Other$201
$288
Accounts payable - Other$112
$201

The following table presents revenue earned and expenses incurred related to transactions with Historical DuPont and its affiliates:


Sales to Historical DuPont and its AffiliatesThree months ended
In millionsMar 31,
2019
Net sales$12 
Cost of sales$9 

Purchases from Historical DuPont and its affiliates were insignificant for the three months ended March 31, 2019.


NOTE 22 – SEGMENTS AND GEOGRAPHIC REGIONS
Sales to DuPont and its AffiliatesThree Months Ended
In millionsMar 31, 2019Mar 31, 2018
Net sales$106
$43
Cost of sales$65
$26

TDCCDow’s measure of profit/loss for segment reporting purposes is Operating EBIT (for the three months ended March 31, 2020) and pro forma Operating EBIT (for the three months ended March 31, 2019) 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 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 from continuing operations before income taxes") before interest, plus pro forma adjustments, excluding the impact of significant items. Operating EBIT and pro forma Operating EBIT by segment include all operating items relating to the businesses; items that principally apply to Dow as a whole are assigned to Corporate. The Company also transferred certain feedstocks and energy to DuPont at cost which totaled $82 millionpresents pro forma net sales for the three months ended March 31, 2019 ($79 millionin 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 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.

Segment InformationPack. & Spec. PlasticsInd. Interm. & Infrast.Perf. Materials & CoatingsCorp.Total
In millions
Three months ended Mar 31, 2020
Net sales$4,609  $3,045  $2,065  $51  $9,770  
Equity in earnings (losses) of nonconsolidated affiliates5  (76) 1  (19) (89) 
Dow Inc. Operating EBIT 1
580  175  162  (74) 843  
Three months ended Mar 31, 2019
Net sales$5,138  $3,480  $2,282  $69  $10,969  
Pro forma net sales5,138  3,489  2,320  69  11,016  
Equity in earnings (losses) of nonconsolidated affiliates38  (48) —  (4) (14) 
Dow Inc. pro forma Operating EBIT 2
690  277  271  (95) 1,143  
1. Operating EBIT for TDCC for the three months ended March 31, 2018),2020 is substantially the same as that of Dow Inc. and was reflected in "Cost of sales"therefore has not been disclosed separately in the consolidated statementstable above. A reconciliation of income."Income from continuing operations, net of tax" to Operating EBIT is provided on the following page.

Purchases from DuPont and its affiliates were $115 million2. Pro forma Operating EBIT for TDCC for the three months ended March 31, 2019 ($44 million foris the three months ended March 31, 2018).

NOTE 19 – SUBSEQUENT EVENT
Separation from DowDuPont
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 recordsame 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. 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 New York Stock Exchange under the symbol “DOW.” Dow Inc. common stock began regular-way trading on April 2, 2019, the first day following the distribution.

Effective April 1, 2019, TDCC became a wholly owned subsidiary of Dow Inc. As of the effective date and time of the distribution, DowDuPont does not beneficially own any equity interest in Dow and will no longer consolidate Dow and its consolidated subsidiaries into its financial results. Beginning in the second quarter of 2019, Dow’s consolidated financial results will reflect the resultsthat of Dow Inc. and its consolidated subsidiaries - thattherefore has not been disclosed separately in the table above. A reconciliation of "Income from continuing operations, net of tax" to pro forma Operating EBIT is provided on the following page.

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Reconciliation of "Income from continuing operations, net of tax" to Operating EBITThree Months Ended
In millionsMar 31, 2020
Income from continuing operations, net of tax$258 
+ Provision for income taxes on continuing operations138 
Income from continuing operations before income taxes$396 
- Interest income15 
+ Interest expense and amortization of debt discount215 
- Significant items(247)
Operating EBIT$843 


Reconciliation of "Income from continuing operations, net of tax" to Pro Forma Operating EBITThree Months Ended
In millionsMar 31, 2019
Income from continuing operations, net of tax$156 
+ Provision for income taxes on continuing operations141 
Income from continuing operations before income taxes$297 
- Interest income18 
+ Interest expense and amortization of debt discount241 
+ Pro forma adjustments 1
65 
- Significant items(558)
Pro forma Operating EBIT$1,143 
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 after giving effectand Historical DuPont and (2) the elimination of the impact of events directly attributable to the distribution of TDCC’s agricultural sciences business (“AgCo”) and TDCC’s specialty products business (“SpecCo”) and the receipt of DuPont’s ethylene and ethylene copolymers businesses (other than its ethylene acrylic elastomers business) (“ECP”). The consolidated financial results of Dow for periods prior to April 1, 2019, will 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.separation, distribution and other related transactions (e.g., TDCCone-time transaction costs).

The following tables summarize the pretax impact of significant items by segment that are excluded from Operating EBIT and DowDuPont.pro forma Operating EBIT:


In connection with the
Significant Items by SegmentThree Months Ended Mar 31, 2020
Pack. & Spec. PlasticsInd. Interm. & Infrast.Perf. Mat. & CoatingsCorp.Total
In millions
Integration and separation costs 1
$—  $—  $—  $(65) $(65) 
Restructuring and asset related charges - net 2
(6) —  —  (90) (96) 
Loss on early extinguishment of debt 3
—  —  —  (86) (86) 
Total$(6) $—  $—  $(241) $(247) 
1. Costs related to business separation Dow Inc. entered into certain agreements with DowDuPont and/or Corteva,activities.
2. Includes Board approved restructuring plans and asset related charges, which include other asset impairments. See Note 5 for additional information.
3. The Company retired outstanding long-term debt resulting in a subsidiary of DowDuPont which was formedloss on early extinguishment. See Note 11 for additional information.

Significant Items by SegmentThree Months Ended Mar 31, 2019
Pack. & Spec. PlasticsInd. Interm. & Infrast.Perf. Mat. & CoatingsCorp.Total
In millions
Integration and separation costs 1
$—  $—  $—  $(402) $(402) 
Restructuring and asset related charges - net 2
(13) —  —  (143) (156) 
Total$(13) $—  $—  $(545) $(558) 
1. Costs related to serve as the parent company for DowDuPont’s agriculture business including the following: Separation and Distribution Agreement, Tax Matters Agreement, Employee Matters Agreement and Intellectual Property Cross-License Agreements. In addition to establishing the terms of the separation these agreements provide a framework for Dow’s interaction with DowDuPont and Corteva after the separation.

For additional information on the separation of the materials science business, referactivities. Excludes one-time transaction costs directly attributable to the Current Report on Form 8-K filed by Dow Inc. with the SEC on April 2, 2019, Amendment No. 4 to the Registration Statement on Form 10 ("Form 10") filed by Dow Inc. with the SEC on March 8, 2019,Merger.
2. Includes Board approved restructuring plans and asset related filings with the SEC. In addition, a summarycharges, which include other asset impairments. See Note 5 for additional information.
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Dividends
On April 11, 2019, Dow Inc.’s Board of Directors declared a dividend of $0.70 per share, payable on June 14, 2019, to shareholders of record on May 31, 2019, consistent with its March 7, 2019 action declaring that a cash dividend of $525 million would be paid effective upon separation from DowDuPont.

2019 Stock Incentive Plan
On April 1, 2019, in connection with the separation, Dow Inc. adopted the 2019 Stock Incentive Plan. Subsequent to March 31, 2019, Dow Inc. granted the following stock-based compensation awards to employees and non-employee directors:

1.6 million stock options with a weighted-average exercise price of $54.89 and a weighted-average fair value of $7.99 per share;
1.7 million restricted stock units with a weighted-average fair value of $54.89 per share; and
1.2 million performance stock units with a weighted-average fair value of $57.58 per share.





ITEM 2. 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 considering that the financial statements and disclosures of each company are substantially similar, the companies are filing a combined report for this Quarterly Report on Form 10-Q. The information reflected in the report is equally applicable to both Dow Inc. and TDCC, except where otherwise noted.

OVERVIEW
Merger with DuPont
Effective August 31, 2017, pursuant toThe separation was contemplated by the merger of equals transaction contemplated byeffective August 31, 2017, under the Agreement and Plan of Merger, (the "Merger Agreement"), dated as of December 11, 2015, as amended on March 31, 2017, The Dow Chemical Company and its consolidated subsidiaries (“TDCC”)2017. TDCC and E. I. du Pont de Nemours and Company and its consolidated subsidiaries (“Historical DuPont”) each merged with subsidiaries of DowDuPont Inc. (“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. (together with TDCC, “Dow”) was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business.


As a result of Dow Inc.'s Registration Statement on Form 10 becoming effective on March 12, 2019 with the U.S. Securities and Exchange Commission ("SEC"), Dow Inc. is now required to file a Quarterly Report on Form 10-Q. At March 31, 2019, Dow Inc. and TDCC were separate wholly owned subsidiaries of DowDuPont. At March 31, 2019, Dow Inc. was a holding company that did not have subsidiaries or operations. As a result, financial statements of Dow Inc. have not been included in this Quarterly Report on Form 10-Q and, unless otherwise indicated, Management’s Discussion and Analysis of Financial Condition and Results of Operations, relate to TDCC.

From the Merger date and through March 31, 2019, TDCC’s business activities were components of DowDuPont’s business operations. TDCC’s business activities, including the assessment of performance and allocation of resources, were reviewed and managed by DowDuPont. Information used by the chief operating decision maker of TDCC related to TDCC in its entirety. Accordingly, there were no separate reportable business segments for TDCC under Accounting Standards Codification Topic 280 “Segment Reporting” and TDCC's business results have been reported in this Quarterly Report on Form 10-Q as a single operating segment.

From the Merger date and through March 31, 2019, DowDuPont owned all of the common stock of TDCC. Pursuant to General Instruction H(1)(a) and (b) for Form 10-Q “Omission of Information by Certain Wholly-Owned Subsidiaries,” Dow is filing this Quarterly Report on Form 10-Q including required TDCC disclosures with a reduced disclosure format.

Subsequent Event - Separation from DowDuPont
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. 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 New York Stock Exchange under the symbol “DOW.” Dow Inc. common stock began regular-way trading on April 2, 2019, the first day following the distribution.

Effective April 1, 2019, TDCC became a wholly owned subsidiary of Dow Inc. As of the effective date and time of the distribution, DowDuPont does not beneficially own any equity interest in Dow and will no longer consolidateconsolidates Dow and its consolidated subsidiaries into its financial results. Beginning in the second quarter of 2019, Dow’sThe consolidated financial results will reflect the results of Dow Inc. and its consolidated subsidiaries - that is, TDCC after giving effect tofor all periods presented reflect the distribution of TDCC’s agricultural sciences business (“AgCo”) and TDCC’s specialty products business (“SpecCo”) andas 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”). The consolidated financial results of Dow for periods prior to April 1, 2019, will 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. See Note 3 to the Consolidated Financial Statements for additional information.

Throughout this Quarterly Report on Form 10-Q, 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, and "Dow Silicones" means Dow Silicones Corporation, both wholly owned subsidiaries of the Company.

Items Affecting Comparability of Financial Results
As a result of the future relationship between Dowseparation from DowDuPont, pro forma net sales and pro forma Operating EBIT are provided in this section which were based on the consolidated financial statements of TDCC, adjusted to give effect to the separation from DowDuPont as if it had been consummated on January 1, 2017. For the three months ended March 31, 2019, pro forma adjustments have been made for (1) the margin impact of various manufacturing, supply and service related agreements entered into with DuPont and Corteva, 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 and (2) the companies are filingelimination 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). These adjustments impacted the consolidated results as well as the reportable segments. See Note 22 to the Consolidated Financial Statements for a combined reportsummary of the pro forma adjustments impacting segment measures for this Quarterly Report on Form 10-Q.

the three months ended March 31, 2019. For additionalfurther information on the separation of the materials science business,unaudited pro forma financial information, please refer to the Company's Current Report on Form 8-K fileddated June 3, 2019.

Statement on COVID-19, Oil Supply and Second Quarter Outlook
The pandemic caused by coronavirus disease 2019 ("COVID-19") was first reported in Wuhan, China in December 2019 and has since spread to all geographic regions where Dow produces and sells its products. Financial markets have been volatile in 2020, primarily due to uncertainty with respect to the severity and duration of the pandemic, coupled with a significant drop in oil prices that began in early March 2020, driven by a collapse in demand due to the global spread of COVID-19 combined with increased supply from oil producers.

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. The Company has manufacturing operations and sales offices in all impacted geographic regions. 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
46
Crisis Management Teams (“CMTs”). The CMTs continue to work closely with site leadership to address the rapidly evolving situation and are adjusting alert levels as warranted on a site by site basis. The Company has also implemented necessary procedures to enable a significant portion of its employee base to work remotely. For much of March and continuing throughout April, nearly two-thirds of the Company's workforce was working remotely.

As the COVID-19 outbreak was identified and spread in China, the Company mobilized its Corporate CMT and Asia Pacific CMT to provide information and guidance to Company leadership and directed its workforce in China to institute crisis management protocols, including travel restrictions and other safety measures and adherence to government-directed guidelines. As the virus began to spread to other countries and geographic regions, and the effects of disrupted operations and supply chains began to be realized, each regional CMT established crisis management protocols and safety guidelines by region, country and/or manufacturing site. These teams have directed actions including imposing additional travel restrictions, transitioning large meetings from in-person to virtual formats, continuously assessing the Company’s information technology infrastructure to ensure readiness for a larger than ever remote workforce, staying well connected to customers, suppliers and business partners, planning for return to the workplace and continuously making operational adjustments as needed to ensure continued safety of the Company’s workforce and assets, while also ensuring the ability to continue to supply products to meet the world’s essential needs and evolving market demands.

During this public health crisis, the Company is focused on the health and safety of its employees, customers and suppliers around the world and maintaining safe and reliable operations of its manufacturing sites. As many of Dow’s businesses and products are deemed essential to critical global infrastructure, it is imperative that the Company continues to supply materials science solutions used in vital applications, including medical equipment and infrastructure, such as hospital beds and IV components; medical supplies and hand sanitizer; disposable non-woven plastics, surgical masks, tubing and vials and medical supply packaging; as well as personal and home hygiene and sanitization such as hard surface disinfectants, laundry detergent and hand soaps; and food supply and packaging. While the Company’s manufacturing sites have largely 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 disruptions and related logistical issues have posed challenges across all modes of transportation. Supply chain and logistical challenges are expected to continue in the second quarter of 2020.

In response to global needs related to the COVID-19 pandemic, in March 2020 the Company announced plans to produce hand sanitizer at five of its manufacturing sites around the world: Auburn, Michigan; South Charleston, West Virginia; Seneffe, Belgium; Hortolandia, Brazil and Stade, Germany. The Company does not regularly produce hand sanitizer, but already produces a large portion of the required ingredients at certain sites. A majority of the hand sanitizer produced is being donated to health systems and government agencies for distribution. Also, in April 2020, to help address the need for personal protective equipment ("PPE") among healthcare professionals, Dow developed a simplified face shield design and shared the design through an open-source file to help accelerate production rates of the critically-needed PPE. The Company is collaborating to produce 100,000 face shields for donation to the state of Michigan for distribution to hospitals and seeks to partner with other companies to continue to develop this critical PPE.

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 communities around the globe and $1 million to build community resilience in the recovery phase. The Company is also providing ways for employees to stay engaged and contribute through virtual volunteering and financial donations to front-line organizations.

Global markets have also been impacted by reduced demand for oil caused by the economic impact of the COVID-19 pandemic and a lack of support by oil producing nations to cut supply. These factors resulted in significant declines in crude oil prices in March 2020 that have extended through April 2020. Prices are expected to remain volatile until supply/demand conditions become more balanced. Declines in crude oil prices impact the pace of oil drilling in the U.S. & Canada, which makes natural gas, a significant by-product of oil drilling and the primary feedstock used in the U.S. by Dow Inc.and other ethylene producers, less cost advantaged. However, the Company has unmatched feedstock flexibility, driven by manufacturing assets that have the ability to produce ethylene from natural gas liquids or crude oil-based feedstocks, significant naphtha-based production capabilities, as well as comprehensive financial and physical hedging programs. Therefore, although a continuation of suppressed crude oil prices could result in additional margin compression, the Company’s feedstock flexibility, fully integrated feedstock position and differentiated product portfolio positions the Company well to respond to the current challenges.

The Company started 2020 with significant committed and available 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 and partially monetizing investments in Company-owned life insurance policies. At
47
March 31, 2020, the Company had more than $8 billion of committed and available forms of liquidity and $3.6 billion in cash and cash equivalents. The Company has no substantive long-term debt maturities until the second half of 2023.

The Company experienced mixed sales results in the first quarter as global demand has been dynamic as a result of the pandemic and suppressed oil prices. Sequentially, the quarter started with reduced demand in Asia Pacific, while increased demand was noted in Europe, Middle East, Africa and India ("EMEAI") and Latin America. Demand softened slightly in February in U.S. & Canada, EMEAI and Latin America while Asia Pacific reported modest improvement, primarily in China. Demand in March showed strong growth in EMEAI and U.S. & Canada and volume also increased in Asia Pacific. While the Company has noted reduced demand for products used in durable goods applications, including appliances, automotive and furniture and bedding, demand has remained strong for products utilized in consumer applications, such as cleaning and detergent ingredients and food, health and hygiene packaging. These demand patterns are expected to continue in the second quarter of 2020. Local prices also declined in the first quarter of 2020, largely impacted by lower global energy prices. See Results of Operations in this report for additional discussion on first quarter results.

The Company expects results of operations in the second quarter of 2020 will be negatively impacted as a result of the COVID-19 pandemic coupled with challenging oil supply/demand balances. Sales are estimated to decline 10 to 20 percent sequentially, with declines in all geographic regions, except Asia Pacific, and all operating segments. Local price is expected to decline in all operating segments due to lower feedstock and raw material costs – as a result of the declines in global energy prices - as well as demand reductions due to the COVID-19 pandemic. Global demand softness is expected in all operating segments which will result in margin compression. This outlook assumes the COVID-19 virus containment will continue in the coming weeks. It also assumes a gradual and sustainable return of global economic activity and reopening of economies in May and June, with an expected recovery beginning to take hold as the year progresses. Dow expects the largest global economic impact – and chemical industry impact – due to COVID-19 and lower global energy prices will be in the second quarter of 2020.

The Company has taken immediate and additional proactive measures to further strengthen its financial position. These actions include: further reducing the 2020 capital expenditure target to $1.25 billion; trimming operating expenses by $350 million; and unlocking another $500 million from working capital. The Company is also temporarily suspending share repurchases and will delay planned maintenance turnaround spending, where appropriate, without compromising safety and while also ensuring ability to serve customer needs. In addition, on April 30, 2020, the Company announced it is temporarily idling select manufacturing facilities to balance production to demand across markets more severely affected by restrained economic activity. This includes the idling of three polyethylene production units and two elastomers units for at least one month; running Dow's polyurethanes assets, including propylene oxide and methylene diphenyl diisocyanate ("MDI"),at reduced operating rates; reducing siloxanes rates globally and extending a planned maintenance turnaround at a silicones production unit in Zhangjiagang, China into May. Operationally, the Company will continue to take advantage of its global footprint and industry-leading asset capabilities, remain close to customers and ensure availability of products essential to consumers and instrumental to containing the global pandemic, such as hand sanitizer and materials for PPE. Dow is proud of the critical role the Company and industry continue to play during these extraordinary times and is confident that the actions being taken will position Dow to emerge even stronger when the global economy rebounds.

At the time of this filing, the ultimate severity and duration of the COVID-19 pandemic and suppressed oil prices cannot be reasonably estimated. The Company acknowledges that a prolonged pandemic, suppressed oil prices and corresponding market volatility could have a materially adverse effect on the Company’s results of operations, financial condition and cash flows. The risks associated with these conditions are more fully discussed in this report in Part II, Item 1A, Risk Factors. The Company is actively monitoring for potential financial impacts from the pandemic and suppressed oil prices, 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 U.S. The Company continues to assess the potential impacts of this legislation on its financial position and results of operations.
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OVERVIEW
The following is a summary of the results from continuing operations for the three months ended March 31, 2020:

•The Company reported net sales in the first quarter of 2020 of $9.8 billion, down 11 percent from $11.0 billion in the first quarter of 2019, with declines across all geographic regions and segments. These declines were due to a decrease in local price of 9 percent, a volume decline of 2 percent and a 1 percent unfavorable currency impact. Portfolio & Other was up 1 percent.

•Local price decreased 9 percent compared with the SECsame period last year, with decreases in Packaging & Specialty Plastics and Industrial Intermediates & Infrastructure (both down 9 percent) and Performance Materials & Coatings (down 8 percent). Local price decreased in all geographic regions, including double-digit declines in Latin America and U.S. & Canada, while Asia Pacific was down 8 percent and EMEAI was down 7 percent.

•Volume decreased 2 percent compared with the first quarter of 2019. Packaging & Specialty Plastics was flat. Volume decreased in Industrial Intermediates & Infrastructure (down 3 percent) and Performance Materials & Coatings (down 4 percent). Volume declined in all geographic regions, except Latin America.

•Currency had an unfavorable impact of 1 percent on Aprilnet sales, primarily driven by EMEAI (down 2 2019, Amendment No. 4percent) and Asia Pacific (down 1 percent).

•Research and development ("R&D") expenses were $179 million in the first quarter of 2020, compared with $190 million in the first quarter of 2019. Selling, general and administrative ("SG&A") expenses were $334 million in the first quarter of 2020, down from $448 million in the first quarter of 2019. R&D and SG&A expenses decreased primarily due to the Registration Statementimpact of stock market declines on Form 10 filedcertain fringe benefits as well as cost reductions. SG&A expenses were also favorably impacted in the first quarter of 2020 by the reversal of a bad debt reserve related to an arbitration judgment.

•Restructuring and asset related charges - net were $96 million in the first quarter of 2020, primarily reflecting final charges related to restructuring actions under the DowDuPont Cost Synergy Program.

•Integration and separation costs were $65 million in the first quarter of 2020, down from $452 million in the first quarter of 2019, reflecting the wind-down of business separation activities.

•Equity in losses of nonconsolidated affiliates was $89 million in the first quarter of 2020, compared with $14 million in the first quarter of 2019, primarily due to lower equity earnings from the Kuwait joint ventures and the Thai joint ventures.

•Sundry income (expense) - net for Dow Inc. and TDCC was expense of $81 million and expense of $82 million, respectively, in the first quarter of 2020, compared with income of $69 million in the first quarter of 2019. Sundry income (expense) - net decreased primarily due to a net loss of $86 million related to the early extinguishment of debt and foreign currency exchange losses in the first quarter of 2020 compared with foreign currency exchange gains in the first quarter of 2019, as well as a decrease in non-operating pension and postretirement benefit plan credits compared with the first quarter of 2019.

•Net income available for Dow Inc. and TDCC common stockholder(s) was $239 million in the first quarter of 2020, compared with $556 million in the first quarter of 2019. Earnings per share for Dow Inc. was $0.32 per share in the first quarter of 2020, compared with earnings per share of $0.74 in the first quarter of 2019 (earnings per share from continuing operations of $0.16 per share in the first quarter of 2019).

•On February 13, 2020, Dow Inc. announced that its Board of Directors ("Board") declared a dividend of $0.70 per share, paid on March 13, 2020, to shareholders of record on February 28, 2020.

•On February 25, 2020, TDCC announced the completion of a public offering of €2.25 billion aggregate principal amount of its notes. TDCC issued €1.0 billion of its 0.50 percent notes due 2027, €750 million of its 1.125 percent notes due 2032 and €500 million of its 1.875 percent notes due 2040 (collectively, the “Euro Notes”). The Euro Notes have a weighted average coupon rate of approximately 1.0 percent. In the first quarter of 2020, net proceeds from the Euro Notes were used to fund the redemption of existing notes and/or repay indebtedness, including repayment by Dow Silicones of $750 million of the outstanding $2.0 billion principal under a certain third party credit agreement (“Term Loan Facility”) and full redemption of TDCC’s 3.0 percent Notes due November 15, 2022, of which approximately $1.25 billion was outstanding.

•Dow Inc. withrepurchased $125 million of the SEC on March 8, 2019, and related filings withCompany's common stock in the SEC.

first quarter of 2020.
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Selected Financial DataThree Months Ended
In millionsMar 31,
2019		Mar 31,
2018
Net sales$13,582
$14,899
   
Cost of sales ("COS")$10,707
$11,552
Percent of net sales78.8%77.5%
   
Research and development expenses ("R&D")$361
$386
Percent of net sales2.7%2.6%
   
Selling, general and administrative expenses ("SG&A")$701
$751
Percent of net sales5.2%5.0%
   
Effective tax rate31.7%20.9%
   
Net income available for common stockholder$541
$1,342
•In March 2020, Dow announced a commitment of $3 million to aid COVID-19 relief efforts worldwide. This includes $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 communities around the globe and $1 million to build community resilience in the recovery phase.



•In response to global needs related to COVID-19, in March 2020 the Company announced plans to produce hand sanitizer at five of its manufacturing sites around the world: Auburn, Michigan; South Charleston, West Virginia; Seneffe, Belgium; Hortolandia, Brazil and Stade, Germany. A majority of the hand sanitizer produced will be donated to health systems and government agencies for distribution.

In addition to the highlights above, the following events occurred subsequent to the first quarter of 2020:

•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, executive vice president and president of global regions 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.

•On April 9, 2020, Dow Inc. announced that its Board declared a dividend of $0.70 per share, payable on June 12, 2020, to shareholders of record as of May 29, 2020.

•On April 9, 2020, Standard & Poor's ("S&P") announced a credit rating change for Dow 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. S&P is one of three credit rating agencies, and the only one to have adjusted Dow’s rating. On April 13, 2020, Fitch re-affirmed Dow’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.

•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. The Company is collaborating to produce 100,000 face shields for donation to the state of Michigan for distribution to hospitals and seeks to partner with other companies to continue to develop this critical PPE.

•On April 30, 2020, the Company announced the temporary idling or rate reductions of select manufacturing units to balance production with demand across markets more severely affected by restrained economic activity. This includes the idling of three polyethylene production units and two elastomers productions units for at least one month; running Dow's polyurethanes assets, including propylene oxide and methylene diphenyl diisocyanate ("MDI"), at reduced operating rates; reducing siloxane rates globally and extending a planned maintenance turnaround at a silicones production unit in Zhangjiagang, China into May.

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Selected Financial Data - Dow Inc. and TDCCThree Months Ended
In millionsMar 31,
2020		Mar 31,
2019
Net sales$9,770  $10,969  
Cost of sales ("COS")$8,230  $9,142  
Percent of net sales84.2 %83.3 %
R&D$179  $190  
Percent of net sales1.8 %1.7 %
SG&A$334  $448  
Percent of net sales3.4 %4.1 %
Effective tax rate34.8 %47.5 %
Net income available for common stockholder(s)$239  $556  


RESULTS OF OPERATIONS
Net Sales
The following table summarizestables summarize net sales, pro forma net sales and sales variances by segment and geographic region from the prior year:


Summary of Sales ResultsThree Months Ended
In millionsMar 31, 2020Mar 31, 2019
Net sales$9,770  $10,969  
Pro forma net sales$11,016  
Sales Variances by Geographic RegionThree Months Ended Mar 31, 2019
Local Price & Product MixCurrencyVolumePortfolio & OtherTotal
Percentage change from prior year
U.S. & Canada(7)%— %(4)%— %(11)%
EMEA 1
(7)(5)1
(1)(12)
Asia Pacific(9)(2)9
—
(2)
Latin America(10)(1)2
—
(9)
Total(8)%(2)%1 %— %(9)%

1.Europe, Middle East and Africa.

Sales Variances by Segment and Geographic Region - As Reported
Three Months Ended Mar 31, 2020
Local Price & Product MixCurrencyVolume
Portfolio & Other 1
Total
Percentage change from prior year
Packaging & Specialty Plastics(9)%(1)%— %— %(10)%
Industrial Intermediates & Infrastructure(9) (1) (3) —  (13) 
Performance Materials & Coatings(8) (1) (4) 3  (10) 
Total(9)%(1)%(2)%1 %(11)%
U.S. & Canada(10)%— %(2)%2 %(10)%
EMEAI(7) (2) (3) —  (12) 
Asia Pacific(8) (1) (4) 1  (12) 
Latin America(13) —  5  —  (8) 
Total(9)%(1)%(2)%1 %(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.

Net sales in the first quarter of 20192020 were $13.6$9.8 billion, down 911 percent from $14.9$11.0 billion in the first quarter of last year, primarily due to decreaseda decrease in local price, and thea decrease in volume, an unfavorable impact from currency, and a favorable impact of Portfolio & Other. Sales decreased in all geographic regions and operating segments. Local price decreased 9 percent, primarily in response to lower feedstock and raw material costs, as well as unfavorable supply and demand fundamentals. Local price
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decreased in Packaging & Specialty Plastics and Industrial Intermediates & Infrastructure (both down 9 percent), in Performance Materials & Coatings (down 8 percent) and all geographic regions. Volume decreased 2 percent with declines in all geographic regions, except Latin America (up 5 percent). Volume was flat in Packaging & Specialty Plastics and decreased in Industrial Intermediates & Infrastructure (down 3 percent) and Performance Materials & Coatings (down 4 percent). The onset of the COVID-19 pandemic contributed to the volume decrease, primarily in Asia Pacific and in Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Currency unfavorably impacted net sales 1 percent compared with the same period last year, driven primarily by EMEAI (down 2 percent) and Asia Pacific (down 1 percent). Portfolio & Other favorably impacted net sales 1 percent and was flat in all segments with the exception of Performance Materials & Coatings (up 3 percent).

Sales Variances by Segment and Geographic Region - Pro Forma Basis
Three months ended Mar 31, 2020
Local Price & Product MixCurrencyVolumeTotal
Percentage change from prior year
Packaging & Specialty Plastics(9)%(1)%— %(10)%
Industrial Intermediates & Infrastructure(9) (1) (3) (13) 
Performance Materials & Coatings(7) (1) (3) (11) 
Total(8)%(1)%(2)%(11)%
Total, excluding the Hydrocarbons & Energy business(9)%(1)%(1)%(11)%
U.S. & Canada(9)%— %(1)%(10)%
EMEAI(7) (2) (3) (12) 
Asia Pacific(7) (1) (4) (12) 
Latin America(13) —  4  (9) 
Total(8)%(1)%(2)%(11)%

Net sales in the first quarter of 2020 were $9.8 billion, down 11 percent from pro forma net sales of $11.0 billion in the first quarter of last year, primarily due to a decrease in local price, a decrease in volume, and an unfavorable impact from currency. Sales decreased in all geographic regions with double-digit declines in EMEA (down 12 percent) and U.S. & Canada (down 11 percent).operating segments. Local price decreased 8 percent, primarily in response to lower feedstock and raw material costs.costs, as well as unfavorable supply and demand fundamentals. Local price decreased in Packaging & Specialty Plastics and Industrial Intermediates & Infrastructure (both down 9 percent), in Performance Materials & Coatings (down 7 percent) and in all geographic regions. Volume decreased 2 percent with declines in all geographic regions, and across most principal product groups, except Consumer Solutions, TransportationLatin America (up 4 percent). Volume decreased 1 percent excluding the Hydrocarbons & Advanced Polymers and Industrial Biosciences. Local priceEnergy business. Volume was flat in SafetyPackaging & Construction, NutritionSpecialty Plastics and decreased in Industrial Intermediates & HealthInfrastructure and ElectronicsPerformance Materials & Imaging.Coatings (both down 3 percent). The onset of the COVID-19 pandemic contributed to the overall volume decrease, primarily in Asia Pacific and in Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Currency unfavorably impacted net sales 21 percent compared with the same period last year, driven primarily by EMEAEMEAI (down 52 percent). Volume increased and Asia Pacific (down 1 percent as increases in Polyurethanes & CAV, Crop Protection, Safety & Construction, Packaging and Specialty Plastics, Consumer Solutions, Industrial Solutions and Electronics & Imaging more than offset declines in Hydrocarbons & Energy, Seed, Transportation & Advanced Polymers, Industrial Biosciences and Coatings & Performance Monomers. Volume was flat in Nutrition & Health. Volume increased in all geographic regions, except U.S & Canada (down 4 percent). Portfolio & Other was flat compared with the same period last year.


Cost of Sales
COS was $10.7$8.2 billion in the first quarter of 2019,2020, down from $11.6$9.1 billion in the first quarter of 2018. COS decreased in the first quarter of 2019, primarily due to lower feedstock and other raw material costs and decreased planned maintenance turnaround costs, lower commissioning expenses related to U.S. Gulf Coast growth projects and cost synergies which more than offset the impact of increased sales volume, which reflected additional supply from Sadara Chemical Company (“Sadara”).volume. COS as a percentage of net sales in the first quarter of 20192020 was 78.884.2 percent compared with 77.5(83.3 percent in the same period last year.first quarter of 2019).



Research and Development Expenses
R&D expenses totaled $361$179 million in the first quarter of 2019, down $25 million (6 percent) from $3862020, compared with $190 million in the first quarter of 2018.2019. R&D expenses decreased primarily due to the impact of stock market declines on certain fringe benefits as well as cost synergies.reductions.


Selling, General and Administrative Expenses
SG&A expenses were $701$334 million in the first quarter of 2019,2020, down $50 million (7 percent) from $751$448 million in the first quarter of last year.2019. SG&A expenses decreased primarily due to the impact of stock market declines on certain fringe benefits, cost synergies.reductions and stranded cost removal. SG&A expenses were also favorably impacted in the first quarter of 2020 by the reversal of a bad debt reserve related to an arbitration judgment.

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Amortization of Intangibles
Amortization of intangibles was $154$100 million in the first quarter of 2019,2020, down from $159$116 million in the first quarter of 2018.2019. See Note 710 to the Consolidated Financial Statements for additional information on intangible assets.


Restructuring and Asset Related Charges - Net
DowDuPont Agriculture Division Restructuring Program
During the fourth quarter of 2018 and in connection with the ongoing integration activities, DowDuPont approved restructuring actions to simplify and optimize certain organizational structures within the Agriculture division in preparation for its intended separation as a standalone company ("Agriculture Division Program"). For the three months ended March 31, 2019, TDCC recorded a favorable adjustment of $4 million to the severance and related benefit costs reserve. TDCC expects actions related to the Agriculture Division Program to be substantially complete by mid 2019.

DowDuPont Cost Synergy Program
In September and November 2017, DowDuPont approved post-merger restructuring actions under the DowDuPont Cost Synergy Program (the "Synergy Program") which iswas designed to integrate and optimize the organization following the Merger and in preparation for the business separations. The restructuring charges below reflect charges from continuing operations.

For the three months ended March 31, 2020, the Company recorded pretax restructuring charges of $90 million for severance and related benefit costs, related to the Corporate segment. These are the final charges related to the Synergy Program. For the three months ended March 31, 2019, TDCCthe Company recorded pretax restructuring charges of $224$144 million, consisting of severance and related benefit costs of $72$52 million, asset write-downs and write-offs of $100$76 million and costs associated with exit and disposal activities of $52$16 million. For the three months ended March 31, 2018, TDCC recorded pretax restructuring charges of $163 million, consisting of severance and related benefit costs of $104 million, asset write-downs and write-offs of $48 million and costs associated with exit and disposal activities of $11 million. TDCCThe Company expects actionscash expenditures related to the Synergy Program to be substantially complete by the end of 2019.2020.

Asset Related Charges
The Company recognized an additional pretax impairment charge of $6 million for the three months ended March 31, 2020, related to capital additions made to a biopolymers manufacturing facility in Santa Vitoria, Minas Gerais, Brazil, which was impaired in 2017 (charge of $12 million for the three months ended March 31, 2019). The impairment charge was related to the Packaging & Specialty Plastics segment. See Note 45 to the Consolidated Financial Statements for details on TDCC'sthe Company's restructuring activities.and asset related charges, including charges by segment.


Integration and Separation Costs
Integration and separation costs, which reflect costs related to post-Merger integration and business separation activities, were $65 million in the first quarter of 2020, down from $452 million in the first quarter of 2019. Further decreases in integration and separation costs are expected as well asbusiness separation activities wind down. Integration and separation costs are related to the ownership restructureCorporate segment.

Equity in Losses of Dow Silicones Corporation ("Dow Silicones") (through May 31, 2018), were $408Nonconsolidated Affiliates
The Company's share of the equity in losses of nonconsolidated affiliates was a loss of $89 million in the first quarter of 2020, compared with a loss of $14 million in the first quarter of 2019, up from $202 million in the first quarter of 2018. The increase was due to increased costs related to business separation activities.

Equity in Earnings of Nonconsolidated Affiliates
TDCC's share of the earnings of nonconsolidated affiliates was $13 million in the first quarter of 2019, down from $243 million in the first quarter of 2018, primarily due to increased equity losses from Sadara and lower equity earnings from the Kuwait joint ventures (due to lower monoethylene glycol prices) and polyethylene prices),lower equity earnings from the Thai joint ventures andventures. See Note 9 to the HSC Group.Consolidated Financial Statements for additional information.

Sundry Income (Expense) – Net
Sundry income (expense) – net includes a variety of income and expense items such as foreign currency exchange gains and losses, interest income, 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. Sundry

For the three months ended March 31, 2020, "Sundry income (expense) – net in the first quarter- net" was expense of 2019 was income$81 million for Dow Inc. and expense of $73$82 million a decrease of $10 millionfor TDCC compared with income of $83$69 million for the three months ended March 31, 2019. "Sundry income (expense) - net" decreased primarily due to an $86 million loss on the early extinguishment of debt (related to the Corporate segment) and foreign currency exchange losses for the three months ended March 31, 2020 compared with foreign currency exchange gains for the three months ended March 31, 2019, as well as a decrease in non-operating pension and postretirement benefit plan credits. See Notes 11, 16 and 22 to the first quarter of 2018.Consolidated Financial Statements for additional information.


Interest Expense and Amortization of Debt Discount
Interest expense and amortization of debt discount was $247$215 million in the first quarter of 2019,2020, down from $270$241 million in the first quarter of 2018, as lower interest bearing notes issued2019. The decrease is primarily due to the redemption of long-term debt in the fourth quarter of 2018 replaced higher interest bearing notes redeemed in the fourth quarter of 2018.2019.



Provision for Income Taxes
TDCC'sThe 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 of the earnings from TDCC'sthe Company's equity method investments are taxed at the joint venture level. The effective tax rate for the first quarter of 20192020 for both Dow Inc. and TDCC was 31.734.8 percent, compared with 20.947.5 percent for the first quarter of 2018.2019. The tax rate in the first quarter of 2020 was unfavorably impacted by geographic mix of earnings, equity losses and non-deductible restructuring costs. The tax rate in the first quarter of 2019 was unfavorably impacted by non-deductible restructuring costs and tax impacts related to spin preparation activities and favorably
53
impacted by tax benefits related to the issuance of stock-based compensation and deferred tax remeasurement in foreign jurisdictions. The

Income from Discontinued Operations, Net of Tax
Income from discontinued operations, net of tax ratewas $445 million in the first quarter of 2018 was favorably impacted by tax benefits2019, related to the issuancedistribution of stock-based compensationAgCo and unfavorably impacted by non-deductible restructuring costs and certain provisions inSpecCo to DowDuPont as a result of the Tax Cuts and Jobs Act relatedseparation. See Note 3 to the taxability of foreign earnings.Consolidated Financial Statements for additional information.


Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests from continuing operations was $45$19 million in the first quarter of 2019, up2020, down from $35$32 million in the first quarter of 2018.2019.


Net income attributable to noncontrolling interests from discontinued operations was zero in the first quarter of 2020, compared
with $13 million in the first quarter of 2019.

Net Income Available for the Common StockholderStockholder(s)
Dow Inc.
Net income available for Dow Inc. common stockholders was $239 million, or $0.32 per share, in the first quarter of 2020, compared with $556 million, or $0.74 per share, in the first quarter of 2019. See Note 7 to the Consolidated Financial Statements for details on Dow Inc.'s earnings per share calculations.

TDCC
Net income available for the TDCC common stockholder was $541$239 million in the first quarter of 2019, down from $1,3422020, compared with $556 million in the first quarter of 2018. From the Merger date and through March 31, 2019, TDCC had no publicly traded common stock. At March 31, 2019, TDCC's common shares were owned solely by its parent company, DowDuPont.2019. Following the separation from DowDuPont, TDCC's common shares are owned solely by Dow Inc.



SEGMENT RESULTS
Dow’s measure of profit/loss for segment reporting purposes is Operating EBIT for the three months ended March 31, 2020 and pro forma Operating EBIT for the three months ended March 31, 2019, 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 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 from continuing operations before income taxes") before interest, plus pro forma adjustments, excluding the impact of significant items. Operating EBIT and pro forma Operating EBIT by segment include 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 three months ended March 31, 2019, 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 various manufacturing, supply and service related agreements entered into with DuPont and Corteva in connection with the separation from DowDuPont which provide for different pricing than the historical intercompany and intracompany pricing practices of TDCC and Historical DuPont. See Note 22 to the Consolidated Financial Statements for reconciliations of these measures and a summary of the pro forma adjustments impacting segment measures for the three months ended March 31, 2019.


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; 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. 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 and Sadara, all joint ventures of the Company.

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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.

Packaging & Specialty PlasticsThree Months Ended
In millionsMar 31, 2020Mar 31, 2019
Net sales$4,609  $5,138  
Pro forma net sales$5,138  
Operating EBIT$580  
Pro forma Operating EBIT$690  
Equity earnings$5  $38  

Packaging & Specialty PlasticsThree Months Ended
Percentage change from prior yearMar 31, 2020
Change in Net Sales from Prior Period due to:
Local price & product mix(9)%
Currency(1)
Volume— 
Portfolio & other— 
Total(10)%
Change in Pro Forma Net Sales from Prior Period due to: 1
Local price & product mix(9)%
Currency(1)
Volume— 
Total(10)%
1. As reported net sales for the three months ended March 31, 2020 compared with pro forma net sales for the three months ended March 31, 2019.

Packaging & Specialty Plastics net sales were $4,609 million in the first quarter of 2020, down 10 percent from net sales and pro forma net sales of $5,138 million in the first quarter of 2019, with local price down 9 percent, an unfavorable currency impact of 1 percent, primarily in EMEAI, and volume flat. Local price decreased in both businesses and across all geographic regions driven by reduced polyethylene product prices and lower global energy prices. Price declines were reported in Hydrocarbons & Energy as prices for co-products are generally correlated to Brent crude oil prices, which, on average, declined by approximately 20 percent compared with the first quarter of 2019. Volume decreased in Hydrocarbons & Energy, primarily in Latin America and EMEAI, due to lower ethylene sales from increased internal derivative consumption. Volume increased in Packaging and Specialty Plastics in Asia Pacific, in spite of lower activity and demand in China due to the onset of the COVID-19 pandemic, and Latin America, more than offsetting declines in U.S. & Canada and EMEAI. Packaging and Specialty Plastics volume growth was driven by strong end-market growth in health and hygiene, rigid packaging and flexible food and specialty packaging applications.

Operating EBIT was $580 million in the first quarter of 2020, down 16 percent from pro forma Operating EBIT of $690 million in the first quarter of 2019. Operating EBIT decreased primarily due to lower polyethylene margins and reduced equity earnings, which more than offset volume gains in packaging applications.
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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, 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 & InfrastructureThree Months Ended
In millionsMar 31, 2020Mar 31, 2019
Net sales$3,045  $3,480  
Pro forma net sales$3,489  
Operating EBIT$175  
Pro forma Operating EBIT$277  
Equity losses$(76) $(48) 

Industrial Intermediates & InfrastructureThree Months Ended
Percentage change from prior yearMar 31, 2020
Change in Net Sales from Prior Period due to:
Local price & product mix(9)%
Currency(1)
Volume(3)
Portfolio & other— 
Total(13)%
Change in Pro Forma Net Sales from Prior Period due to: 1
Local price & product mix(9)%
Currency(1)
Volume(3)
Total(13)%
1. As reported net sales for the three months ended March 31, 2020 compared with pro forma net sales for the three months ended March 31, 2019.

Industrial Intermediates & Infrastructure net sales were $3,045 million in the first quarter of 2020, down 13 percent from $3,480 million in the first quarter of 2019. Net sales decreased 13 percent compared with pro forma net sales of $3,489 million in the same quarter last year, driven by local price declines of 9 percent, volume down 3 percent and an unfavorable currency impact of 1 percent. Local price decreased in both businesses and all geographic regions. The decrease in local price was primarily driven by lower feedstock and other raw material costs. Volume decreased in Polyurethanes & Construction Chemicals in all geographic regions except EMEAI, which increased slightly, and was attributable to weaker demand in furniture and bedding as well as automotive and aircraft deicing applications. The most significant volume decline was in Asia Pacific, particularly in China, primarily due to the impact of the onset of the COVID-19 pandemic.Volume increased in Industrial Solutions in all geographic regions except EMEAI, which decreased slightly. The overall increase in volume was attributable to stronger demand in surfactants and solvents used in cleaning applications, partially offset by weaker demand in oil and gas applications.
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Operating EBIT was $175 million in the first quarter of 2020, down 37 percent from pro forma Operating EBIT of $277 million in the first quarter of 2019. Operating EBIT decreased as a result of margin compression in polyurethanes applications, lower equity earnings from the Kuwait joint ventures and softer demand, which was partially offset by lower planned maintenance turnaround 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, home care and personal care 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 & CoatingsThree Months Ended
In millionsMar 31, 2020Mar 31, 2019
Net sales$2,065  $2,282  
Pro forma net sales$2,320  
Operating EBIT$162  
Pro forma Operating EBIT$271  
Equity earnings$1  $—  

Performance Materials & CoatingsThree Months Ended
Percentage change from prior yearMar 31, 2020
Change in Net Sales from Prior Period due to:
Local price & product mix(8)%
Currency(1)
Volume(4)
Portfolio & other3 
Total(10)%
Change in Pro Forma Net Sales from Prior Period due to: 1
Local price & product mix(7)%
Currency(1)
Volume(3)
Total(11)%
1. As reported net sales for the three months ended March 31, 2020 compared with pro forma net sales for the three months ended March 31, 2019.

Performance Materials & Coatings net sales were $2,065 million in the first quarter of 2020, down 10 percent from net sales of $2,282 million in the first quarter of 2019. Net sales decreased 11 percent compared with pro forma net sales of $2,320 million in the same quarter last year, with local price down 7 percent, volume down 3 percent and an unfavorable currency impact of 1 percent. Local price decreased in both businesses and all geographic regions. Consumer Solutions local price declined primarily due to lower pricing in upstream siloxanes across all geographic regions due to additional industry supply. Local price decreased in Coatings & Performance Monomers in response to lower feedstock and other raw material costs. Volume declines in EMEAI and Asia Pacific, which reflected the impact from the onset of the COVID-19 pandemic, were partially offset by growth in U.S. & Canada and Latin America. Consumer Solutions volume decreased due to lower demand in Asia Pacific and EMEAI, partially offset by demand growth in upstream siloxanes and home and personal care end-markets in U.S & Canada and Latin America. Coatings & Performance Monomers volume increased driven by higher merchant sales of acrylates and methacrylates as well as strong demand for industrial coatings applications, primarily in U.S. & Canada.

Operating EBIT was $162 million in the first quarter of 2020, down 40 percent from pro forma Operating EBIT of $271 million in the first quarter of 2019. Operating EBIT decreased primarily due to margin compression in upstream siloxanes as well as increased planned maintenance turnaround spending.
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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.

CorporateThree Months Ended
In millionsMar 31, 2020Mar 31, 2019
Net sales$51  $69  
Pro forma net sales$69  
Operating EBIT$(74) 
Pro forma Operating EBIT$(95) 
Equity losses$(19) $(4) 
Net sales for Corporate, which primarily relate to the Company's insurance operations, were $51 million in the first quarter of 2020, a decrease from net sales and pro forma net sales of $69 million in the first quarter of 2019.

Operating EBIT was a loss of $74 million in the first quarter of 2020, compared with a pro forma Operating EBIT loss of $95 million in the first quarter of 2019. Operating EBIT improved primarily due to cost reductions and stranded cost removal throughout 2019.


CHANGES IN FINANCIAL CONDITION
TDCCThe Company had cash and cash equivalents of $2,969$3,633 million at March 31, 20192020 and $2,669$2,367 million at December 31, 2018,2019, of which $2,269$1,603 million at March 31, 20192020 and $1,963$986 million at December 31, 2018,2019 was held by subsidiaries in foreign countries, including United States territories. For each of its foreign subsidiaries, TDCCDow 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. TDCCDow 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. During 2019, TDCC2020, Dow has repatriated and expects to continue repatriating certain funds from its non-U.S. subsidiaries that are not needed to finance local operations or separation activities; however, these particular repatriation activities have not and are not expected to result in a significant incremental tax liability to TDCC.the Company.

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TDCC'sThe 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
Three Months EndedThree Months Ended
Mar 31, 2020Mar 31, 2019Mar 31, 2020Mar 31, 2019
In millions
Cash provided by (used for):
Operating activities - continuing operations$1,236  $1,043  $1,239  $1,043  
Operating activities - discontinued operations3  338  —  338  
Operating activities1,239  1,381  1,239  1,381  
Investing activities - continuing operations(153) (464) (153) (464) 
Investing activities - discontinued operations—  (34) —  (34) 
Investing activities(153) (498) (153) (498) 
Financing activities - continuing operations265  (615) 265  (615) 
Financing activities - discontinued operations—  (18) —  (18) 
Financing activities265  (633) 265  (633) 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(86) 30  (86) 30  
Cash reclassified as held for sale—  (97) —  (97) 
Summary
Increase in cash, cash equivalents and restricted cash1,265  183  1,265  183  
Cash, cash equivalents and restricted cash at beginning of period2,380  2,764  2,380  2,764  
Cash, cash equivalents and restricted cash at end of period$3,645  $2,947  $3,645  $2,947  
Less: Restricted cash and cash equivalents, included in "Other current assets"12  43  12  43  
Cash and cash equivalents at end of period$3,633  $2,904  $3,633  $2,904  
Cash Flow SummaryThree Months Ended
In millionsMar 31, 2019Mar 31, 2018
Cash provided by (used for):  
Operating activities$1,426
$(158)
Investing activities(486)(92)
Financing activities(667)(853)
Effect of exchange rate changes on cash, cash equivalents and restricted cash30
100
Summary  
Increase (Decrease) in cash, cash equivalents and restricted cash$303
$(1,003)
Cash, cash equivalents and restricted cash at beginning of period2,709
6,207
Cash, cash equivalents and restricted cash at end of period$3,012
$5,204
Less: Restricted cash and cash equivalents, included in "Other current assets"43
18
Cash and cash equivalents at end of period$2,969
$5,186

Cash Flows from Operating Activities
InCash provided by operating activities from continuing operations increased in the first three months of 2020 compared with the first three months of 2019. The improvement was primarily due to an increase in cash earnings, a decrease in performance-based compensation payments and severance payments, a cash receipt for the refund of withholding tax related to the Nova ethylene asset matter and improvements in working capital, which were partially offset by a decrease in dividends received from nonconsolidated affiliates and the absence of advance payments from customers received in the first three months of 2019.

Net Working CapitalDow Inc.TDCC
Mar 31, 2020Mar 31, 2019Mar 31, 2020Mar 31, 2019
In millions
Current assets$18,138  $19,651  $18,059  $19,651  
Current liabilities11,121  12,737  10,624  12,737  
Net working capital$7,017  $6,914  $7,435  $6,914  
Current ratio1.63:11.54:11.70:11.54:1

Working Capital MetricsThree Months Ended
Mar 31, 2020Mar 31, 2019
Days sales outstanding in receivables 1
45  47  
Days sales in inventory69  68  
Days payables outstanding 2
63  66  
1. The decrease in days sales outstanding in receivables was primarily due to a decrease in average accounts receivable, which more than offset a decrease in net sales.
2. The decrease in days payables outstanding was primarily due to a decrease in average accounts payable, which more than offset a decrease in COS.
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Cash provided by operating activities from discontinued operations decreased in the first three months of 2020 compared with the first three months of 2019 cash provided by operating activities was $1,426 million, up $1,584 million compared with cashdue to 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 operatinginvesting activities of $158 millionfrom continuing operations in the first three months of 2018,2020 was primarily reflecting a decreasefor capital expenditures, purchases of investments and investments in cash used for working capital, advance payments from a customer for product supply agreements, lower pension contributions and higher dividends received fromloans to nonconsolidated affiliates (related to Sadara), which were partially offset by lower cash earnings.

proceeds from sales and maturities of investments, and included partial monetization of the Company's investment in company-owned life insurance policies. Cash Flowsused for investing activities from Operating Activities - Non-GAAP
The following table reconciles cash flows from operating activities to a non-GAAP measure regarding cash flows from operating activities excluding the impact of Accounting Standards Update ("ASU") 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" and related interpretive guidance for the three months ended March 31, 2018. 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 TDCC utilizescontinuing operations in support of its operating activities.

Cash Flows from Operating Activities Excluding Impact of ASU 2016-15 and Additional Interpretive Guidance (non-GAAP)Three Months Ended
In millionsMar 31, 2018
Cash flows from operating activities - Updated for impact of ASU 2016-15 and additional interpretive guidance (GAAP)$(158)
Less: Impact of ASU 2016-15 and additional interpretive guidance445
Cash flows from operating activities - Excluding impact of ASU 2016-15 and additional interpretive guidance (non-GAAP)$287

Cash Flows from Investing Activities
In the first three months of 2019 cash usedwas primarily for investing activities was $486 million, primarily due to capital expenditures and purchases of investments, which were partially offset by proceeds from sales and maturities of investments. In the first three months of 2018, cash used for investing activities was $92 million, primarily due to purchases of investments and

The Company's capital expenditures, whichincluding capital expenditures of consolidated variable interest entities, were partially offset by proceeds from sales and maturities of investments and proceeds from interests in trade accounts receivable conduits.

Capital spending was $514$395 million in the first three months of 2019,2020, compared with $423$442 million in the first three months of 2018. TDCC2019. The Company expects full year capital spending in 20192020 to be approximately $2.5 billion, below depreciation and amortization expense and inclusive of capital$1.25 billion. The Company will adjust its spending for targeted cost synergy and business separation projects.through the year as economic conditions develop.


In the first three months of 2019, TDCC waived $1352020, the Company loaned $114 million of accounts receivable with Sadara, which was converted into equity. TDCCto Sadara. The Company expects to loan Sadara up to $500 million in 2020. Due to the potential for Dow to continue providing financial support to Sadara, during the remainderCompany will continue to recognize its share of 2019. All or a portionequity losses reported by Sadara.

Cash used in investing activities from discontinued operations in the first three months of 2019 was primarily for capital expenditures, partially offset by proceeds from the loans to Sadara could potentially be converted into equitysale of property and businesses and proceeds from sales of ownership interests in future periods.nonconsolidated affiliates.


Cash Flows from Financing Activities
Cash provided by financing activities from continuing operations in the first three months of 2020 included proceeds from issuance of long-term debt and an increase in short-term notes payable, which were partially offset by payments on long-term debt and transaction financing, debt issuance and other costs. 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 the first three months of 2019 cashincluded dividends paid to DowDuPont and payments on long-term debt. See Note 11 to the Consolidated Financial Statements for additional information related to the issuance and retirement of debt.

Cash used for financing activities decreasedfrom discontinued operations in the first three months of 2019 primarily related to $667 million compareddistributions to noncontrolling interests and employee taxes paid for share-based payment arrangements.

Dow Inc. Non-GAAP Cash Flow Measures
Free Cash Flow
Dow defines free cash flow as cash flows from operating activities - continuing operations, less capital expenditures. Under this definition, free cash flow represents the cash generated by the Company from operations after investing in its asset base. Free cash flow, combined with $853 millioncash balances and other sources of liquidity, represents the cash available to fund obligations and provide returns to shareholders. Free cash flow is an integral financial measure used in the Company's financial planning process.

Operating EBITDA and Pro Forma Operating EBITDA
Dow defines Operating EBITDA (for the three months ended March 31, 2020) as earnings (i.e., "Income from continuing operations before income taxes") before interest, depreciation and amortization, excluding the impact of significant items. Pro forma Operating EBITDA (for the three months ended March 31, 2019) is defined as earnings (i.e., "Income from continuing operations before income taxes") before interest, depreciation and amortization, plus pro forma adjustments, excluding the impact of significant items.

Cash Flow Conversion (Operating EBITDA or Pro Forma Operating EBITDA to Cash Flow From Operations)
Dow defines cash flow conversion (Operating EBITDA or pro forma Operating EBITDA to cash flow from operations) as cash flows from operating activities - continuing operations, 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 to cash flow.
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These financial measures are not recognized in accordance with U.S. GAAP 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 period last year, primarily duemanner and, accordingly, Dow's definitions may not be consistent with the methodologies used by other companies.

Reconciliation of Free Cash FlowThree Months Ended
Mar 31, 2020Mar 31, 2019
In millions
Cash provided by operating activities - continuing operations (GAAP)$1,236  $1,043  
Capital expenditures(395) (442) 
Free cash flow (Non-GAAP)$841  $601  

Reconciliation of Cash Flow Conversion (Operating EBITDA or Pro Forma OperatingThree Months Ended
EBITDA to Cash Flow From Operations)Mar 31, 2020
Mar 31, 2019 1
In millions
Income from continuing operations, net of tax (GAAP)$258  $156  
+ Provision for income taxes on continuing operations138  141  
Income from continuing operations before income taxes$396  $297  
- Interest income15  18  
+ Interest expense and amortization of debt discount215  241  
+ Pro forma adjustments ²—  65  
- Significant items ³(247) (558) 
Operating EBIT (Non-GAAP)$843  $1,143  
+ Depreciation and amortization724  743  
Operating EBITDA (Non-GAAP)$1,567  $1,886  
Cash flows from operating activities - continuing operations (GAAP)$1,236  $1,043  
Cash flow conversion (Operating EBITDA or pro forma Operating EBITDA to cash flow from operations) (Non-GAAP)78.9 %55.3 %
1. Operating EBIT, depreciation and amortization and Operating EBITDA for the three months ended March 31, 2019 are presented on a pro forma basis.
2. Pro forma adjustments for the three months ended March 31, 2019 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 a decrease in dividends paid, which was partially offset by less commercial paper issued during the period.

Subsequent Event
On April 1, 2019, Dow Inc. received a cash contribution of $2,024 million from DowDuPont as part of theMerger, internal reorganization and business realignment, steps between Dow Inc.separation, distribution and other related transactions (e.g., TDCCone-time transaction costs).
3. Includes integration and DowDuPont.separation costs, restructuring and asset related charges - net and loss on early extinguishment of debt. See Note 22 to the Consolidated Financial Statements for additional information.


Liquidity & Financial Flexibility
TDCC’sThe Company’s primary source of incremental liquidity is cash flows from operating activities. The generation of cash from operations and TDCC'sthe Company's ability to access debtcapital markets is expected to meet TDCC’sthe Company’s cash requirements for working capital, capital expenditures, debt maturities, contributions to pension plans, dividend distributions to its parent companystockholders, share repurchases and other needs. In addition to cash from operating activities, TDCC’sthe 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, a U.S. retail note program (“InterNotes®”) and other debt markets.

The Company started 2020 with significant committed and available 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 and otherpartially monetizing investments in Company-owned life insurance policies. At March 31, 2020, the Company had more than $8 billion of committed and available forms of liquidity and $3.6 billion in cash and cash equivalents. The Company has no substantive long-term debt markets.maturities until the second half of 2023. 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 no$250 million of commercial paper outstanding at March 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 March 31, 2019,2020, TDCC issued approximately $1,650$430 million of commercial paper.

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Committed Credit Facilities
In the event TDCC has short-term liquidity needs and is unable to issue commercial paper for any reason, TDCCThe Company also has the ability to access liquidity through itsTDCC's committed and available credit facilities. At March 31, 2019,2020, TDCC had total committed credit facilities of $12.1$8.8 billion and available credit facilities of $7.6$7.5 billion. In the first quarter of 2020, Dow Silicones voluntarily repaid $750 million of principal under a certain third party credit agreement. See Note 911 to the Consolidated Financial Statements for additional information on committed and available credit facilities.


Committed Accounts Receivable Facility
In connection withaddition to the ownership restructure of Dow Silicones on May 31, 2016, Dow Silicones incurred $4.5 billion of indebtedness underabove committed credit facilities, the Company maintains a certain third party credit agreement ("Term Loan Facility"). On April 5, 2019, Dow Silicones voluntarily repaid $2.0 billion of principal oncommitted accounts receivable facility in North America where eligible trade accounts receivable, up to $900 million, may be sold at any point in time. For additional information, see Note 15 to the Term Loan Facility, which was classified as "Long-term debt due within one year"Consolidated Financial Statements included in the consolidatedcombined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2019.

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 sheets atsheet date. The Company has the ability to monetize its investment in its COLI policies as an additional source of liquidity. At March 31, 2019. Dow Silicones intends to exercise2020, the 2-year extension option on the remaining principal balanceCompany had monetized $287 million of $2.5 billion.its existing COLI policies' value ($85 million at December 31, 2019). See Note 96 to the Consolidated Financial Statements for additional information oninformation.

Uncommitted Credit Facilities
Dow has entered into various uncommitted bilateral credit arrangements as a potential source of excess liquidity. The Company has proactively drawn $800 million against these facilities at March 31, 2020. These lines can be used to support short-term liquidity needs and for general purposes, including letters of credit. See Note 11 to the Term Loan Facility.Consolidated Financial Statements for additional information.


Debt
As TDCCthe Company continues to maintain its strong balance sheet and financial flexibility, management is focused on net debt (a non-GAAP financial measure), as TDCCthe 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 March 31, 2019,2020, net debt as a percent of total capitalization decreasedincreased to 37.351.9 percent and 50.6 percent for Dow Inc. and TDCC, respectively, compared with 38.050.9 percent and 49.6 percent for Dow Inc. and TDCC, respectively, at December 31, 2018, primarily2019.

Total DebtDow Inc.TDCC
Mar 31, 2020Dec 31, 2019Mar 31, 2020Dec 31, 2019
In millions
Notes payable$1,490  $586  $1,490  $586  
Long-term debt due within one year384  435  384  435  
Long-term debt16,313  15,975  16,313  15,975  
Gross debt$18,187  $16,996  $18,187  $16,996  
 - Cash and cash equivalents3,633  2,367  3,633  2,367  
 - Marketable securities1  21  1  21  
Net debt$14,553  $14,608  $14,553  $14,608  
Total equity$13,461  $14,094  $14,228  $14,862  
Gross debt as a percent of total capitalization57.5 %54.7 %56.1 %53.3 %
Net debt as a percent of total capitalization51.9 %50.9 %50.6 %49.6 %

In February 2020, the Company issued €2.25 billion aggregate principal amount of notes (“Euro Notes”). The Euro Notes include €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. In addition, the Company redeemed $1.25 billion of 3.0 percent notes issued by the Company with maturity in 2022.

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 increase in cash.

offer to do so.
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Total DebtMar 31, 2019Dec 31, 2018
In millions
Notes payable$317
$305
Long-term debt due within one year2,369
340
Long-term debt17,160
19,254
Gross debt$19,846
$19,899
 - Cash and cash equivalents2,969
2,669
 - Marketable securities101
100
Net debt$16,776
$17,130
Gross debt as a percent of total capitalization41.4%41.6%
Net debt as a percent of total capitalization37.3%38.0%

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 to consolidated capitalization as defined in the Revolving Credit Agreement was 0.410.54 to 1.00 at March 31, 2019.2020. Management believes TDCC was in compliance with all of its covenants and default provisions at March 31, 2019.2020. For information on TDCC's debt covenants and default provisions, see Note 1516 to the Consolidated Financial Statements included in TDCC'sthe combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2018.2019. There were no material changes to the debt covenants and default provisions related to TDCC’s outstanding long-term debt and primary, private credit agreements in the first quarterthree months of 2019.2020.


Subsequent Event
On April 1, 2019, DowDuPont completedWhile taking into consideration 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 Quarterly Report on Form 10-Q.

Managementcurrent economic environment, management expects that TDCCthe Company will continue to have sufficient liquidity and financial flexibility to meet all of its business obligations.


Credit Ratings
At April 30, 2019,2020, TDCC's credit ratings were as follows:


Credit RatingsLong-Term RatingShort-Term RatingOutlook
Standard & Poor’sBBBBBB- A-2A-3 Stable
Moody’s Investors ServiceBaa2P-2P-2 Stable
Fitch RatingsBBB+F2StableF2 Negative


On April 9, 2020, S&P announced a credit rating change for Dow 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 re-affirmed Dow’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.
On April 11, 2019,February 13, 2020, Dow Inc.’s announced that its Board declared a dividend of Directors$0.70 per share, paid on March 13, 2020, to shareholders of record on February 28, 2020. On April 9, 2020, Dow Inc. announced that its Board declared a dividend of $0.70 per share, payable on June 14, 2019,12, 2020, to shareholders of record onas of May 31, 2019, consistent with its March 7, 2019 action declaring that a cash dividend of $525 million would be paid effective upon separation from DowDuPont.29, 2020.


TDCC
Effective with the Merger,separation from DowDuPont on April 1, 2019, TDCC no longerbecame a wholly owned subsidiary of Dow Inc. TDCC has publicly traded common stock. At March 31, 2019, TDCC's common shares were owned solely by its parent company, DowDuPont. Pursuant to the Merger Agreement, TDCC committed to fund a portion of DowDuPont'sDow Inc.'s dividends paid to common stockholders and share repurchases, as approved by Dow Inc.'s Board from time to time, as well as certain governance expenses. In addition, share repurchases by DowDuPont were partially funded by TDCC through 2018. Funding wasis accomplished through intercompany loans. On a quarterly basis, TDCC's Board of Directors reviewedreviews and determineddetermines a dividend distribution to DowDuPontDow Inc. 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 three months ended March 31, 2019,2020, TDCC declared and paid dividendsa dividend to DowDuPontDow Inc. of $535 million ($1,057 million for the three months ended$643 million. At March 31, 2018).2020, TDCC's intercompany loan balance with Dow Inc. was insignificant. See Note 1821 to the Consolidated Financial Statements for additional information.


Share Repurchase Program
On February 25,April 1, 2019, Dow Inc. announced a new's Board of Directors ratified the share repurchase program originally approved on March 15, 2019, authorizing up to $3.0 billion shareto be spent on the repurchase program. The program hasof the Company's common stock, with no expiration date. In the first quarter of 2020, Dow Inc. repurchased $125 million of the Company's common stock. At March 31, 2020, approximately $2.4 billion of the share repurchase program authorization remained available for repurchases. At this time, Dow Inc. does not expect to repurchase additional shares in 2020, but will continue to evaluate economic conditions.


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 Company's funding policy is to contribute to funded plans when pension laws and/or economics either require or encourage funding. The Company expects to contribute approximately $290 million to its pension plans in 2020, of which $63 million has been contributed through March 31, 2020. See Note 16 to the Consolidated Financial
63
Statements and Note 21 to the Consolidated Financial Statements included in the combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2019 for additional information concerning the Company's pension plans.

Restructuring
The activities related to the DowDuPont Agriculture Division Program and the Synergy Program are expected to result in additional cash expenditures of approximately $350$120 million, primarily through the end of 2019,2020, consisting of severance and related benefit costs and costs associated with exit and disposal activities, including environmental remediation (see Note 45 to the Consolidated Financial Statements). TDCCThe Company expects to incur additional costs in the future related to its restructuring activities. Future costs are expected to include demolition costs related to closed facilities and restructuring plan implementation costs; these costs will be recognized as incurred. TDCCThe 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.


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 $408 million for the three months ended March 31, 2019 and $202 million for the three months ended March 31, 2018. Integration and separation costs related to post-Merger integration and business separation activities are expected to declineresult in additional cash expenditures of approximately $130 million to $190 million through the remainderend of 2019, but are expected to be significant in 2019.2020.



Contractual Obligations
Information related to TDCC’sthe Company’s contractual obligations, commercial commitments and expected cash requirements for interest can be found in Notes 15, 16, 17, 18 and 1921 to the Consolidated Financial Statements included in TDCC’sthe combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2018.2019. With the exception of the items noted below, there have been no material changes in TDCC’sthe Company’s contractual obligations since December 31, 2018.2019.


Contractual Obligations at Mar 31, 2020Payments Due In
In millions20202021-20222023-20242025 and beyondTotal
  Long-term debt obligations 1
$359  $716  $3,197  $12,780  $17,052  
  Expected cash requirements for interest 2
$571  $1,442  $1,326  $7,736  $11,075  
  Operating leases 3
$338  $758  $499  $806  $2,401  
Contractual Obligations at Mar 31, 2019Payments Due In 
In millions20192020-20212022-20232024 and beyondTotal
Long-term debt obligations 1
$2,307
$6,088
$2,007
$9,451
$19,853
Expected cash requirements for interest 2
$673
$1,629
$1,168
$6,907
$10,377
Operating leases$437
$936
$634
$1,157
$3,164
1.Excludes unamortized debt discount and issuance costs of $355 million. Includes finance lease obligations of $418 million. Assumes the option to extend will be exercised for the $1.25 billion Dow Silicones Term Loan Facility.
1.Excludes unamortized debt discount and issuance costs of $324 million. Includes finance lease obligations of $369 million. Assumes the option to extend will be exercised for $2.5 billion of the Dow Silicones Term Loan Facility.
2.Cash requirements for interest on long-term debt was calculated using current interest rates at March 31, 2019, and includes $4,919 million of various floating rate notes.

2.Cash requirements for interest on long-term debt was calculated using current interest rates and exchange rates at March 31, 2020, and includes $1,579 million of various floating rate notes.
3.Includes imputed interest of $395 million.

Off-Balance Sheet Arrangements
Off-balance sheet arrangements are obligations TDCCthe Company has with nonconsolidated entities related to transactions, agreements or other contractual arrangements. TDCCThe Company holds variable interests in joint ventures accounted for under the equity method of accounting. TDCCThe Company is not the primary beneficiary of these joint ventures and therefore is not required to consolidate these entities (see Note 1720 to the Consolidated Financial Statements).


Guarantees arise during the ordinary course of business from relationships with customers, committed accounts receivable facilities and nonconsolidated affiliates when TDCCthe Company undertakes an obligation to guarantee the performance of others if specific triggering events occur. TDCCThe Company had outstanding guarantees at March 31, 20192020 of $4,514$3,950 million, down from $4,523$3,952 million at December 31, 2018.2019. Additional information related to guarantees can be found in the "Guarantees" section of Note 1012 to the Consolidated Financial Statements.


Fair Value Measurements
See Note 1619 to the Consolidated Financial Statements 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”) 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 included in TDCC’sthe combined Dow Inc. and TDCC Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 10-K”2019
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("2019 10-K") describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. TDCC’sThe Company’s accounting policies that are impacted by judgments, assumptions and estimates are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in TDCC’s 2018the 2019 10-K. Since December 31, 2018,2019, there have been no material changes in TDCC’sthe Company’s accounting policies that are impacted by judgments, assumptions and estimates.


Asbestos-Related Matters of Union Carbide Corporation
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”). 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.consultants:


Asbestos-Related Claim Activity20202019
Claims unresolved at Jan 111,117  12,780  
Claims filed1,296  1,383  
Claims settled, dismissed or otherwise resolved(1,269) (1,569) 
Claims unresolved at Mar 3111,144  12,594  
Claimants with claims against both Union Carbide and Amchem(3,809) (4,509) 
Individual claimants at Mar 317,335  8,085  
Asbestos-Related Claim Activity20192018
Claims unresolved at Jan 112,780
15,427
Claims filed1,383
1,932
Claims settled, dismissed or otherwise resolved(1,569)(3,026)
Claims unresolved at Mar 3112,594
14,333
Claimants with claims against both Union Carbide and Amchem(4,509)(5,148)
Individual claimants at Mar 318,085
9,185


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 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 Asbestos-Related Matters of Union Carbide Corporation in Note 1012 to the Consolidated Financial Statements and Part II, Item 1. Legal Proceedings.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Omitted asSee Note 18 to the Consolidated Financial Statements and Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in the combined Dow Inc. and TDCC pursuant to General Instruction HAnnual Report on Form 10-K for the year ended December 31, 2019, for information on the Company's utilization of Form 10-Q.financial instruments and an analysis of the sensitivity of these instruments.




ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, 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.

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Dow Inc. and Subsidiaries
The Dow Chemical Company and Subsidiaries
PART II – OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS
Asbestos-Related Matters of Union Carbide Corporation
No material developments regarding this matter occurred in the first quarter of 2019.2020. For a current status of this matter, see Note 1012 to the Consolidated Financial Statements.


Environmental Matters
On July 7, 2018, TheIn April 2012 and May 2015, Dow ChemicalSilicones Corporation ("Dow Silicones"), a wholly owned subsidiary of the Company, (“TDCC”) received an informal notice thatthe following notifications from the U.S. Environmental Protection Agency ("EPA"), Region 6 was contemplating filing5 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 proposed penalty for allegedNotice of Violation alleging a number of violations uncovered during a prior inspection relatedrelating to the management of hazardous wastes at its Freeport, Texas, manufacturing facility,the Facility pursuant to the Risk Management PlanResource Conservation and Recovery Act. On June 25, 2019, the U.S. Department of Justice 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 Clean Air Act. On March 4, 2019,Facility predating the EPAownership 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 TDCC entered into a Consent Agreementenhancements at the site that will cost approximately $2 million, as well as additional environmental studies and Final Order, which TDCC agreed to pay a fine of $260,349 and certify compliance with specified regulations with the EPA.

On March 5, 2019, Union Carbide Corporation ("Union Carbide"), a wholly owned subsidiary of TDCC, received an informal notice that the EPA, Region 6 was contemplating filing a Notice of Violation with a proposed penalty for alleged violations uncovered during a prior inspection relatedother actions. Pursuant to the management of hazardous materials at Union Carbide's Seadrift, Texas, manufacturing facility, pursuant toconsent decree, Dow Silicones paid the Risk Management Plan requirementsaforementioned penalty plus interest, totaling $4,607,973, on February 14, 2020. Implementation of the Clean Air Act. Discussions between the EPA and Union Carbide areconsent decree is ongoing.




ITEM 1A. RISK FACTORS
Dow Inc.’s Information Statement, dated March 12,Since December 31, 2019, attached as Exhibit 99.1 to the Dow Inc. Form 8-K filed with the U.S. Securities and Exchange Commission on April 1, 2019, includes a discussion of risk factors identified by Dow Inc. under the heading “Risk Factors.” Therethere have been no material changes to suchthe Company's Risk Factors, whichexcept as noted below:

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 could have a material adverse impact on the Company’s financial condition, results of operations and cash flows.
The pandemic caused by COVID-19 was first reported in Wuhan, China, in December 2019 and has since spread to all geographic regions where Dow products are incorporatedproduced 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 pandemic, coupled with a significant drop in oil prices that began in early March 2020 driven by reference into Item 1Aa collapse in demand due to the global spread of COVID-19 combined with increased supply from oil producers, 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 may include, but are not limited to: fluctuations in the Company’s stock price due to market volatility; a decrease in demand for the Company’s products; reduced profitability; large-scale supply chain disruptions impeding the Company’s ability to ship and/or receive product; potential interruptions or limitations to manufacturing operations imposed by local, state or federal governments; shortages of key raw materials; workforce absenteeism and distraction; labor shortages; customer credit concerns; cyber security and data accessibility disruptions due to remote working arrangements; reduced sources of liquidity; increased borrowing costs; fluctuations in foreign currency markets; potential impairment in the carrying value of goodwill; other asset impairment charges; increased obligations related to the Company’s pension and other postretirement benefit plans; and deferred tax valuation allowances. Business disruptions and market volatility resulting from the COVID-19 pandemic could have a material adverse impact on this Quarterly Reportthe Company’s results of operations, financial condition and cash flows.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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 March 31, 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
January 2020—  $—  —  $2,500  
February 20201,044,550  $47.87  1,044,550  $2,450  
March 20202,028,919  $36.97  2,028,919  $2,375  
First quarter 20203,073,469  $40.67  3,073,469  $2,375  
1. On April 1, 2019, Dow Inc.'s Board of Directors ratified the share repurchase program originally approved on Form 10-Q.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.




ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.




ITEM 5. OTHER INFORMATION
Not applicable.




ITEM 6. EXHIBITS
EXHIBIT NO.DESCRIPTION
2.1
4.3 		Separation and Distribution Agreement, dated as of April 1, 2019, by and among Corteva, Inc., Dow Inc. and DowDuPont 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).
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).
4.3Dow 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.
10.123 *
Tax Matters Agreement, dated as of April 1, 2019, by and among DowDuPont Inc., Dow 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, dated as of April 1, 2019, by and among DowDuPont Inc., Dow 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
MatCo/SpecCo Intellectual Property Cross License Agreement, dated as of April 1, 2019, by and between Dow Inc. et al and DowDuPont Inc. et al (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
MatCo/AgCo Intellectual Property Cross License Agreement, dated as of April 1, 2019, by and between Dow Inc. et al and Corteva, Inc. et al (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).
10.8 *
The Dow Chemical Company Elective Deferral Plan (Pre-2005), restated and effective as of April 1, 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.
23 *
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.
101.INSThe instance document does not appear in the Interactive Data File because its XBRL Instance Document.tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
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.

* Filed herewith

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Dow Inc.
The Dow Chemical Company and Subsidiaries
Trademark Listing

The following registered trademark of Incapital Holdings appears in this report: InterNotes®
68

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


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


DOW INC.
THE DOW CHEMICAL COMPANY
Date: May 3, 20191, 2020




/s/ RONALD C. EDMONDS
Ronald C. Edmonds
Controller and Vice President
of Controllers and Tax

47
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