Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Dow Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Dow Inc. and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15(a)2 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 5, 2021, expressed an unqualified opinion on the Company's internal control over financial reporting.

Changes in Accounting Principles

As discussed in Note 1 to the financial statements, in the first quarter of 2019, the Company changed its method of accounting for leases due to the adoption of Accounting Standards Codification (ASC) Topic 842, Leases.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill – Annual Impairment Assessment – Refer to Note 1 and Note 13 to the financial statements

Critical Audit Matter Description

The Company tests goodwill for impairment annually (in the fourth quarter), or more frequently when events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit has declined below its carrying value. The Company utilizes a discounted cash flow methodology to calculate the fair value of its reporting units, which requires management to make significant estimates and assumptions related to projected revenue growth rates, discount rates, and earnings before interest, taxes, depreciation and amortization (“EBITDA”). Changes in these assumptions could have a significant impact on the fair value of the reporting unit and the amount of any goodwill impairment charge. As of December 31, 2020, the Company has six reporting units, all but one of which have goodwill.

Throughout 2020, the Coronavirus (COVID-19) has had substantial negative impact on the results of the Company’s operations and financial performance of its reporting units. With unprecedented volatility in global financial and commodities markets, the Company’s reporting units experienced decreased demand in certain end-customer markets, changes in supply and demand fundamentals, and margin compression caused by lowering of global energy prices. Given the uncertainty as to the ultimate severity and duration of the COVID-19 pandemic, the volatility in the value of Company’s shares, and uneven course of economic recovery, leading up to its annual goodwill impairment test in the fourth quarter the Company continuously monitored the impact of the pandemic on its reporting units to determine if it was more likely than not that the fair value was less than the carrying value for any of its reporting units. Based on the results of qualitative assessments completed as part of the annual impairment test for all reporting units, the Company moved to performing a quantitative test for one reporting unit. The discounted cash flows of this reporting unit supported a fair value in excess of the carrying value and as such no goodwill impairment charges were recorded.

Given the significant judgments made by management to estimate the fair value of the reporting unit, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to projected revenue growth rates, discount rates, EBITDA and EBITDA margin required a high degree of auditor judgment and an increased extent of effort, including the assistance of our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates and assumptions related to projected revenue growth rates, discount rates, EBITDA and EBITDA margin for the reporting unit subject to the quantitative test included the following, among other procedures:

With the assistance of our fair value specialists, we tested the effectiveness of internal controls over the goodwill impairment evaluation, including controls over the selection of the discount rates and over forecasts of future revenue growth rates, EBITDA, and EBITDA margin.
We performed a retrospective review comparing actual revenue and EBITDA results of the reporting unit for 2020 to the forecasted results from 2019.
We performed a retrospective review comparing management’s estimates and assumptions relating to revenue, EBITDA, and EBITDA margin projections for the reporting unit used for the purpose of current year’s annual impairment test to the projections previously used in connection with the prior year annual impairment test.
We evaluated the consistency of estimates and assumptions relating to revenue and EBITDA growth inherent in the discounted cash flow model for the reporting unit to those used by management in other annual forecasting activities.
With the assistance of our fair value specialists, we performed a benchmarking exercise comparing management’s estimates and assumptions related to revenue growth, EBITDA and EBITDA margin for the reporting unit as of the measurement date to the revenue growth, EBITDA and EBITDA margins of a peer group of public companies for the most recent three years and the projection period.
With the assistance of our fair value specialists, we evaluated (1) the valuation methodology used and (2) the projections of long-term revenue growth and the discount rates by testing the underlying source information, and by developing a range of independent estimates and comparing those to the rates selected by management.


/s/ DELOITTE & TOUCHE LLP
Midland, Michigan
February 5, 2021

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholder and the Board of Directors of The Dow Chemical Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of The Dow Chemical Company and subsidiaries (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and the schedule listed in the Index at Item 15(a)2 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Changes in Accounting Principles

As discussed in Note 1 to the financial statements, in the first quarter of 2019, the Company changed the method of accounting for leases due to the adoption of Accounting Standards Codification (ASC) Topic 842, Leases.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Critical Audit Matter

Goodwill – Annual Impairment Assessment – Refer to Note 1 and Note 13 to the financial statements

Critical Audit Matter Description

The Company tests goodwill for impairment annually (in the fourth quarter), or more frequently when events or changes in circumstances, indicate it is more likely than not that the fair value of a reporting unit has declined below its carrying value. In performing quantitative assessments, the Company utilizes a discounted cash flow methodology to calculate the fair value of its reporting units, which requires management to make significant estimates and assumptions related to projected revenue growth rates, discount rates, and earnings before interest, taxes, depreciation and amortization (“EBITDA”), and EBITDA margin. Changes in these assumptions could have a significant impact on the fair value of the reporting unit and the amount of any goodwill impairment charge. At December 31, 2020, the Company has six reporting units, all but one of which have goodwill.

How the Critical Audit Matter Was Addressed in the Audit

With the assistance of our fair value specialists, we tested the effectiveness of internal controls over the goodwill impairment evaluation, including quarterly impairment monitoring controls and controls over the selection of the discount rates and over forecasts of future revenue growth rates, EBITDA, and EBITDA margin.
We performed a retrospective review comparing actual revenue and EBITDA results of the reporting unit for 2020 to the forecasted results from 2019.
We performed a retrospective review comparing management’s estimates and assumptions relating to revenue, EBITDA, and EBITDA margin projections for the reporting unit used for the purpose of current year’s annual impairment test to the projections previously used in connection with the prior year annual impairment test.
We evaluated the consistency of estimates and assumptions relating to revenue and EBITDA growth inherent in the discounted cash flow model for the reporting unit to those used by management in other annual forecasting activities.
With the assistance of our fair value specialists, we performed a benchmarking exercise comparing management’s estimates and assumptions related to revenue growth, EBITDA and EBITDA margin for the reporting unit as of the measurement date to the revenue growth, EBITDA and EBITDA margins of a peer group of public companies for the most recent three years and the projection period.
With the assistance of our fair value specialists, we evaluated (1) the valuation methodology used and (2) the projections of long-term revenue growth and the discount rates by testing the underlying source information, and by developing a range of independent estimates and comparing those to the rates selected by management.


/s/ DELOITTE & TOUCHE LLP
Midland, Michigan
February 5, 2021

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

Dow Inc. and Subsidiaries

Consolidated Statements of Income


(In millions, except per share amounts) For the years ended Dec 31,	2020		2019		2018
Net sales	$	38,542	$	42,951	$	49,604
Cost of sales	33,346		36,657		41,074
Research and development expenses	768		765		800
Selling, general and administrative expenses	1,471		1,590		1,782
Amortization of intangibles	401		419		469
Restructuring, goodwill impairment and asset related charges - net	708		3,219		221
Integration and separation costs	239		1,063		1,179
Equity in earnings (losses) of nonconsolidated affiliates	(18)		(94)		555
Sundry income (expense) - net	1,269		461		96
Interest income	38		81		82
Interest expense and amortization of debt discount	827		933		1,063
Income (loss) from continuing operations before income taxes	2,071		(1,247)		3,749
Provision for income taxes on continuing operations	777		470		809
Income (loss) from continuing operations, net of tax	1,294		(1,717)		2,940
Income from discontinued operations, net of tax	—		445		1,835
Net income (loss)	1,294		(1,272)		4,775
Net income attributable to noncontrolling interests	69		87		134
Net income (loss) available for Dow Inc. common stockholders	$	1,225	$	(1,359)	$	4,641


Per common share data:
Earnings (loss) per common share from continuing operations - basic	$	1.64	$	(2.42)	$	3.80
Earnings per common share from discontinued operations - basic	—		0.58		2.41
Earnings (loss) per common share - basic	$	1.64	$	(1.84)	$	6.21
Earnings (loss) per common share from continuing operations - diluted	$	1.64	$	(2.42)	$	3.80
Earnings per common share from discontinued operations - diluted	—		0.58		2.41
Earnings (loss) per common share - diluted	$	1.64	$	(1.84)	$	6.21

Weighted-average common shares outstanding - basic	740.5		742.5		747.2
Weighted-average common shares outstanding - diluted	742.3		742.5		747.2

See Notes to the Consolidated Financial Statements.

Dow Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income


(In millions) For the years ended Dec 31,	2020		2019		2018
Net income (loss)	$	1,294	$	(1,272)	$	4,775
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on investments	40		115		(67)
Cumulative translation adjustments	205		(32)		(225)
Pension and other postretirement benefit plans	(778)		(899)		(40)
Derivative instruments	(76)		(338)		75
Total other comprehensive loss	(609)		(1,154)		(257)
Comprehensive income (loss)	685		(2,426)		4,518
Comprehensive income attributable to noncontrolling interests, net of tax	69		99		97
Comprehensive income (loss) attributable to Dow Inc.	$	616	$	(2,525)	$	4,421

See Notes to the Consolidated Financial Statements.

Dow Inc. and Subsidiaries

Consolidated Balance Sheets


(In millions, except share amounts) At Dec 31,	2020		2019
Assets
Current Assets
Cash and cash equivalents (variable interest entities restricted - 2020: $26; 2019: $37)	$	5,104	$	2,367

Accounts and notes receivable:
Trade (net of allowance for doubtful receivables - 2020: $51; 2019: $45)	4,839		4,844
Other	2,551		2,711
Inventories	5,701		6,214
Other current assets	889		679

Total current assets	19,084		16,815
Investments
Investment in nonconsolidated affiliates	1,327		1,404
Other investments (investments carried at fair value - 2020: $1,674; 2019: $1,584)	2,775		2,588
Noncurrent receivables	465		1,063
Total investments	4,567		5,055
Property
Property	56,325		54,910
Less: Accumulated depreciation	36,086		33,914
Net property (variable interest entities restricted - 2020: $232; 2019: $330)	20,239		20,996
Other Assets
Goodwill	8,908		8,796
Other intangible assets (net of accumulated amortization - 2020: $4,428; 2019: $3,886)	3,352		3,759
Operating lease right-of-use assets	1,856		2,072
Deferred income tax assets	2,215		2,213
Deferred charges and other assets	1,249		818
Total other assets	17,580		17,658
Total Assets	$	61,470	$	60,524
Liabilities and Equity
Current Liabilities
Notes payable	$	156	$	586
Long-term debt due within one year	460		435
Accounts payable:
Trade	3,763		3,889
Other	2,126		2,064
Operating lease liabilities - current	416		421
Income taxes payable	397		522

Accrued and other current liabilities	3,790		2,762

Total current liabilities	11,108		10,679
Long-Term Debt (variable interest entities nonrecourse - 2020: $6; 2019: $34)	16,491		15,975
Other Noncurrent Liabilities
Deferred income tax liabilities	405		347
Pension and other postretirement benefits - noncurrent	11,648		10,083
Asbestos-related liabilities - noncurrent	1,013		1,060
Operating lease liabilities - noncurrent	1,521		1,739
Other noncurrent obligations	6,279		6,547
Total other noncurrent liabilities	20,866		19,776
Stockholders’ Equity
Common stock (authorized 5,000,000,000 shares of $0.01 par value each; issued 2020: 755,993,198 shares; 2019: 751,228,644 shares)	8		8
Additional paid-in capital	7,595		7,325
Retained earnings	16,361		17,045
Accumulated other comprehensive loss	(10,855)		(10,246)
Unearned ESOP shares	(49)		(91)
Treasury stock at cost (2020: 12,803,303 shares; 2019: 9,729,834 shares)	(625)		(500)
Dow Inc.’s stockholders’ equity	12,435		13,541
Noncontrolling interests	570		553
Total equity	13,005		14,094
Total Liabilities and Equity	$	61,470	$	60,524

See Notes to the Consolidated Financial Statements.

Dow Inc. and Subsidiaries

Consolidated Statements of Cash Flows


(In millions) For the years ended Dec 31,	2020		2019		2018
Operating Activities
Net income (loss)	$	1,294	$	(1,272)	$	4,775
Less: Income from discontinued operations, net of tax	—		445		1,835
Income (loss) from continuing operations, net of tax	1,294		(1,717)		2,940
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	2,874		2,938		2,909
Provision (credit) for deferred income tax	258		(228)		(429)
Earnings of nonconsolidated affiliates less than dividends received	443		1,114		108
Net periodic pension benefit cost	266		144		279
Pension contributions	(299)		(261)		(1,651)
Net gain on sales of assets, businesses and investments	(802)		(81)		(38)


Restructuring, goodwill impairment and asset related charges - net	708		3,219		221

Other net loss	318		198		415
Changes in assets and liabilities, net of effects of acquired and divested companies:
Accounts and notes receivable	171		1,253		(855)
Inventories	515		668		(859)
Accounts payable	(84)		(948)		787
Other assets and liabilities, net	590		(586)		(731)
Cash provided by operating activities - continuing operations	6,252		5,713		3,096
Cash provided by (used for) operating activities - discontinued operations	(26)		217		1,158
Cash provided by operating activities	6,226		5,930		4,254
Investing Activities
Capital expenditures	(1,252)		(1,961)		(2,091)
Investment in gas field developments	(5)		(76)		(114)


Purchases of previously leased assets	(5)		(9)		(26)
Proceeds from sales of property and businesses, net of cash divested	929		84		47
Acquisitions of property and businesses, net of cash acquired	(130)		—		(20)

Investments in and loans to nonconsolidated affiliates	(333)		(638)		(18)
Distributions and loan repayments from nonconsolidated affiliates	7		89		55

Purchases of investments	(1,203)		(899)		(1,530)
Proceeds from sales and maturities of investments	1,122		1,252		1,214
Proceeds from interests in trade accounts receivable conduits	—		—		657
Other investing activities, net	29		—		—
Cash used for investing activities - continuing operations	(841)		(2,158)		(1,826)
Cash used for investing activities - discontinued operations	—		(34)		(369)
Cash used for investing activities	(841)		(2,192)		(2,195)
Financing Activities
Changes in short-term notes payable	(431)		307		(178)
Proceeds from issuance of short-term debt greater than three months	163		—		—
Payments on short-term debt greater than three months	(163)		—		—
Proceeds from issuance of long-term debt	4,672		2,287		1,999
Payments on long-term debt	(4,653)		(5,561)		(3,054)
Purchases of treasury stock	(125)		(500)		—
Proceeds from issuance of stock	108		93		112

Transaction financing, debt issuance and other costs	(175)		(119)		(70)
Employee taxes paid for share-based payment arrangements	(27)		(60)		(77)

Distributions to noncontrolling interests	(62)		(77)		(135)
Purchases of noncontrolling interests	—		(297)		—

Dividends paid to stockholders	(2,071)		(1,550)		—
Dividends paid to DowDuPont Inc.	—		(535)		(3,711)
Settlements and transfers related to separation from DowDuPont Inc.	—		1,935		(240)
Other financing activities, net	—		—		3
Cash used for financing activities - continuing operations	(2,764)		(4,077)		(5,351)
Cash used for financing activities - discontinued operations	—		(18)		(53)
Cash used for financing activities	(2,764)		(4,095)		(5,404)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	107		(27)		(99)
Summary
Increase (decrease) in cash, cash equivalents and restricted cash	2,728		(384)		(3,444)
Cash, cash equivalents and restricted cash at beginning of year	2,380		2,764		6,208
Cash, cash equivalents and restricted cash at end of year	$	5,108	$	2,380	$	2,764
Less: Restricted cash and cash equivalents, included in "Other current assets"	4		13		40
Cash and cash equivalents at end of year	$	5,104	$	2,367	$	2,724

See Notes to the Consolidated Financial Statements.

Dow Inc. and Subsidiaries

Consolidated Statements of Equity


(In millions, except per share amounts) For the years ended Dec 31,	2020		2019		2018




Common Stock
Balance at beginning of year	$	8	$	—	$	—

Common stock issued	—		8		—
Balance at end of year	8		8		—
Additional Paid-in Capital
Balance at beginning of year	7,325		7,042		6,553
Common stock issued / sold	108		57		—
Issuance of parent company stock - DowDuPont Inc.	—		28		112
Stock-based compensation and allocation of ESOP shares	162		235		377


Other	—		(37)		—
Balance at end of year	7,595		7,325		7,042
Retained Earnings
Balance at beginning of year	17,045		35,460		33,742
Net income (loss) available for Dow Inc.'s common stockholders	1,225		(1,359)		4,641
Dividends to stockholders	(2,071)		(1,550)		—
Dividends to DowDuPont Inc.	—		(535)		(3,711)
Common control transaction	177		(14,806)		(182)
Adoption of accounting standards (Note 1)	—		(151)		989
Other	(15)		(14)		(19)
Balance at end of year	16,361		17,045		35,460
Accumulated Other Comprehensive Loss
Balance at beginning of year	(10,246)		(9,885)		(8,591)
Other comprehensive loss	(609)		(1,154)		(257)
Common control transaction	—		793		—
Adoption of accounting standards (Note 1)	—		—		(1,037)
Balance at end of year	(10,855)		(10,246)		(9,885)
Unearned ESOP Shares
Balance at beginning of year	(91)		(134)		(189)
Stock-based compensation and allocation of ESOP shares	42		45		55
ESOP shares acquired	—		(2)		—
Balance at end of year	(49)		(91)		(134)
Treasury Stock
Balance at beginning of year	(500)		—		—

Treasury stock purchases	(125)		(500)		—


Balance at end of year	(625)		(500)		—
Dow Inc.'s stockholders' equity	12,435		13,541		32,483
Noncontrolling Interests	570		553		1,138
Total Equity	$	13,005	$	14,094	$	33,621

Dividends declared per share of common stock	$	2.80	$	2.10	$	—

See Notes to the Consolidated Financial Statements.

The Dow Chemical Company and Subsidiaries

Consolidated Statements of Income


(In millions) For the years ended Dec 31,	2020		2019		2018
Net sales	$	38,542	$	42,951	$	49,604
Cost of sales	33,343		36,657		41,074
Research and development expenses	768		765		800
Selling, general and administrative expenses	1,471		1,585		1,782
Amortization of intangibles	401		419		469
Restructuring, goodwill impairment and asset related charges - net	708		3,219		221
Integration and separation costs	239		1,039		1,179

Equity in earnings (losses) of nonconsolidated affiliates	(18)		(94)		555
Sundry income (expense) - net	1,274		573		96
Interest income	40		81		82
Interest expense and amortization of debt discount	827		952		1,063
Income (loss) from continuing operations before income taxes	2,081		(1,125)		3,749
Provision for income taxes on continuing operations	777		470		809
Income (loss) from continuing operations, net of tax	1,304		(1,595)		2,940
Income from discontinued operations, net of tax	—		445		1,835
Net income (loss)	1,304		(1,150)		4,775
Net income attributable to noncontrolling interests	69		87		134


Net income (loss) available for The Dow Chemical Company common stockholder	$	1,235	$	(1,237)	$	4,641

See Notes to the Consolidated Financial Statements.

The Dow Chemical Company and Subsidiaries

Consolidated Statements of Comprehensive Income


(In millions) For the years ended Dec 31,	2020		2019		2018
Net income (loss)	$	1,304	$	(1,150)	$	4,775
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on investments	40		115		(67)
Cumulative translation adjustments	205		(32)		(225)
Pension and other postretirement benefit plans	(778)		(899)		(40)
Derivative instruments	(76)		(338)		75
Total other comprehensive loss	(609)		(1,154)		(257)
Comprehensive income (loss)	695		(2,304)		4,518
Comprehensive income attributable to noncontrolling interests, net of tax	69		99		97
Comprehensive income (loss) attributable to The Dow Chemical Company	$	626	$	(2,403)	$	4,421

See Notes to the Consolidated Financial Statements.

The Dow Chemical Company and Subsidiaries

Consolidated Balance Sheets


(In millions, except share amounts) At Dec 31,	2020		2019
Assets
Current Assets
Cash and cash equivalents (variable interest entities restricted - 2020: $26; 2019: $37)	$	5,104	$	2,367

Accounts and notes receivable:
Trade (net of allowance for doubtful receivables - 2020: $51; 2019: $45)	4,839		4,844
Other	2,553		2,716
Inventories	5,701		6,214
Other current assets	801		592

Total current assets	18,998		16,733
Investments
Investment in nonconsolidated affiliates	1,327		1,404
Other investments (investments carried at fair value - 2020: $1,674; 2019: $1,584)	2,775		2,588
Noncurrent receivables	426		1,011
Total investments	4,528		5,003
Property
Property	56,325		54,910
Less: Accumulated depreciation	36,086		33,914
Net property (variable interest entities restricted - 2020: $232; 2019: $330)	20,239		20,996
Other Assets
Goodwill	8,908		8,796
Other intangible assets (net of accumulated amortization - 2020: $4,428; 2019: $3,886)	3,352		3,759
Operating lease right-of-use assets	1,856		2,072
Deferred income tax assets	2,215		2,213

Deferred charges and other assets	1,249		818

Total other assets	17,580		17,658
Total Assets	$	61,345	$	60,390
Liabilities and Equity
Current Liabilities
Notes payable	$	156	$	586
Long-term debt due within one year	460		435
Accounts payable:
Trade	3,763		3,889
Other	2,126		2,064
Operating lease liabilities - current	416		421
Income taxes payable	397		522
Accrued and other current liabilities	3,256		2,233

Total current liabilities	10,574		10,150
Long-Term Debt (variable interest entities nonrecourse - 2020: $6; 2019: $34)	16,491		15,975
Other Noncurrent Liabilities
Deferred income tax liabilities	405		347
Pension and other postretirement benefits - noncurrent	11,648		10,083
Asbestos-related liabilities - noncurrent	1,013		1,060
Operating lease liabilities - noncurrent	1,521		1,739
Other noncurrent obligations	6,124		6,174

Total other noncurrent liabilities	20,711		19,403

Stockholder's Equity
Common stock (authorized and issued 100 shares of $0.01 par value each)	—		—
Additional paid-in capital	7,603		7,333
Retained earnings	16,300		17,313
Accumulated other comprehensive loss	(10,855)		(10,246)
Unearned ESOP shares	(49)		(91)

The Dow Chemical Company’s stockholder's equity	12,999		14,309
Noncontrolling interests	570		553
Total equity	13,569		14,862
Total Liabilities and Equity	$	61,345	$	60,390

See Notes to the Consolidated Financial Statements.

The Dow Chemical Company and Subsidiaries

Consolidated Statements of Cash Flows


(In millions) For the years ended Dec 31,	2020		2019		2018
Operating Activities
Net income (loss)	$	1,304	$	(1,150)	$	4,775
Less: Income from discontinued operations, net of tax	—		445		1,835
Income (loss) from continuing operations, net of tax	1,304		(1,595)		2,940
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	2,874		2,938		2,909
Provision (credit) for deferred income tax	258		(228)		(429)
Earnings of nonconsolidated affiliates less than dividends received	443		1,114		108
Net periodic pension benefit cost	266		144		279
Pension contributions	(299)		(261)		(1,651)
Net gain on sales of assets, businesses and investments	(802)		(81)		(38)


Restructuring, goodwill impairment and asset related charges - net	708		3,219		221

Other net loss	320		213		415
Changes in assets and liabilities, net of effects of acquired and divested companies:
Accounts and notes receivable	171		1,253		(855)
Inventories	515		668		(859)
Accounts payable	(84)		(948)		787
Other assets and liabilities, net	589		(730)		(731)
Cash provided by operating activities - continuing operations	6,263		5,706		3,096
Cash provided by operating activities - discontinued operations	—		371		1,158
Cash provided by operating activities	6,263		6,077		4,254
Investing Activities
Capital expenditures	(1,252)		(1,961)		(2,091)
Investment in gas field developments	(5)		(76)		(114)


Purchases of previously leased assets	(5)		(9)		(26)
Proceeds from sales of property and businesses, net of cash divested	929		84		47
Acquisitions of property and businesses, net of cash acquired	(130)		—		(20)

Investments in and loans to nonconsolidated affiliates	(333)		(638)		(18)
Distributions and loan repayments from nonconsolidated affiliates	7		89		55

Purchases of investments	(1,203)		(899)		(1,530)
Proceeds from sales and maturities of investments	1,122		1,252		1,214
Proceeds from interests in trade accounts receivable conduits	—		—		657
Other investing activities, net	29		—		—
Cash used for investing activities - continuing operations	(841)		(2,158)		(1,826)
Cash used for investing activities - discontinued operations	—		(34)		(369)
Cash used for investing activities	(841)		(2,192)		(2,195)
Financing Activities
Changes in short-term notes payable	(431)		307		(178)
Proceeds from issuance of short-term debt greater than three months	163		—		—
Payments on short-term debt greater than three months	(163)		—		—
Proceeds from issuance of long-term debt	4,672		2,287		1,999
Payments on long-term debt	(4,653)		(5,561)		(3,054)

Proceeds from issuance of stock	108		93		112

Transaction financing, debt issuance and other costs	(175)		(119)		(70)
Employee taxes paid for share-based payment arrangements	(27)		(60)		(77)

Distributions to noncontrolling interests	(62)		(77)		(135)
Purchases of noncontrolling interests	—		(297)		—


Dividends paid to DowDuPont Inc.	—		(535)		(3,711)
Dividends paid to Dow Inc.	(2,233)		(201)		—
Settlements and transfers related to separation from DowDuPont Inc.	—		(61)		(240)
Other financing activities, net	—		—		3
Cash used for financing activities - continuing operations	(2,801)		(4,224)		(5,351)
Cash used for financing activities - discontinued operations	—		(18)		(53)
Cash used for financing activities	(2,801)		(4,242)		(5,404)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	107		(27)		(99)
Summary
Increase (decrease) in cash, cash equivalents and restricted cash	2,728		(384)		(3,444)
Cash, cash equivalents and restricted cash at beginning of year	2,380		2,764		6,208
Cash, cash equivalents and restricted cash at end of year	$	5,108	$	2,380	$	2,764
Less: Restricted cash and cash equivalents, included in "Other current assets"	4		13		40
Cash and cash equivalents at end of year	$	5,104	$	2,367	$	2,724

See Notes to the Consolidated Financial Statements.

The Dow Chemical Company and Subsidiaries

Consolidated Statements of Equity


(In millions, except per share amounts) For the years ended Dec 31,	2020		2019		2018




Common Stock
Balance at beginning and end of year	$	—	$	—	$	—


Additional Paid-in Capital
Balance at beginning of year	7,333		7,042		6,553

Issuance of parent company stock - Dow Inc.	108		65		—
Issuance of parent company stock - DowDuPont Inc.	—		28		112
Stock-based compensation and allocation of ESOP shares	162		235		377


Other	—		(37)		—
Balance at end of year	7,603		7,333		7,042
Retained Earnings
Balance at beginning of year	17,313		35,460		33,742
Net income (loss) available for The Dow Chemical Company's common stockholder	1,235		(1,237)		4,641

Dividends to Dow Inc.	(2,233)		(201)		—
Dividends to DowDuPont Inc.	—		(535)		(3,711)
Common control transaction	—		(16,009)		(182)
Adoption of accounting standards (Note 1)	—		(151)		989
Other	(15)		(14)		(19)
Balance at end of year	16,300		17,313		35,460
Accumulated Other Comprehensive Loss
Balance at beginning of year	(10,246)		(9,885)		(8,591)
Other comprehensive loss	(609)		(1,154)		(257)
Common control transaction	—		793		—
Adoption of accounting standards (Note 1)	—		—		(1,037)
Balance at end of year	(10,855)		(10,246)		(9,885)
Unearned ESOP Shares
Balance at beginning of year	(91)		(134)		(189)
Stock-based compensation and allocation of ESOP shares	42		45		55
ESOP shares acquired	—		(2)		—
Balance at end of year	(49)		(91)		(134)







The Dow Chemical Company's stockholder's equity	12,999		14,309		32,483
Noncontrolling Interests	570		553		1,138
Total Equity	$	13,569	$	14,862	$	33,621

See Notes to the Consolidated Financial Statements.


Dow Inc. and Subsidiaries The Dow Chemical Company and Subsidiaries
Notes to the Consolidated Financial Statements

Table of Contents


Note		Page
1	Summary of Significant Accounting Policies	84
2	Recent Accounting Guidance	90
3	Separation from DowDuPont	91
4	Revenue	93
5	Divestitures	96
6	Restructuring, Goodwill Impairment and Asset Related Charges - Net	97
7	Supplementary Information	101
8	Income Taxes	103
9	Earnings Per Share Calculations	107
10	Inventories	108
11	Property	108
12	Nonconsolidated Affiliates	109
13	Goodwill and Other Intangible Assets	112
14	Transfers of Financial Assets	114
15	Notes Payable, Long-Term Debt and Available Credit Facilities	115
16	Commitments and Contingent Liabilities	119
17	Leases	127
18	Stockholders' Equity	129
19	Noncontrolling Interests	132
20	Pension Plans and Other Postretirement Benefits	133
21	Stock-Based Compensation	140
22	Financial Instruments	145
23	Fair Value Measurements	152
24	Variable Interest Entities	155
25	Related Party Transactions	156
26	Segments and Geographic Regions	157
27	Selected Quarterly Financial Data	162

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Merger and Separation

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

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements of Dow Inc. and TDCC were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which Dow exercises control and, when applicable, entities for which Dow has a controlling financial interest or is the primary beneficiary. Intercompany transactions and balances are eliminated in consolidation. Investments in nonconsolidated affiliates (20-50 percent owned companies or less than 20 percent owned companies over which significant influence is exercised) are accounted for using the equity method.

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

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

From the Merger Date through the separation, transactions between DowDuPont, TDCC and Historical DuPont and their affiliates were treated as related party transactions. Transactions between TDCC and Historical DuPont primarily consisted of the sale and procurement of certain raw materials that were consumed in each company's manufacturing process. Transactions between TDCC and Dow Inc. are treated as related party transactions for TDCC. See Note 25 for additional information.

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

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

Use of Estimates in Financial Statement Preparation

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

Significant Accounting Policies

Asbestos-Related Matters

Accruals for asbestos-related matters, including defense and processing costs, are recorded based on an analysis of claim and resolution activity, defense spending, and pending and future claims. These accruals are assessed at each balance sheet date to determine if the asbestos-related liability remains appropriate. Accruals for asbestos-related matters are included in the consolidated balance sheets in “Accrued and other current liabilities” and “Asbestos-related liabilities - noncurrent.” See Note 16 for additional information.

Legal Costs

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

Foreign Currency Translation

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

Environmental Matters

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

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

Cash and Cash Equivalents

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

Financial Instruments

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

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

Gains and losses on derivatives that are designated and qualify as cash flow hedging instruments are recorded in AOCL until the underlying transactions are recognized in income. Gains and losses on derivative and non-derivative instruments used as hedges of the Company’s net investment in foreign operations are recorded in AOCL as part of the cumulative translation adjustment.

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

Inventories

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

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

Property

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

Impairment and Disposal of Long-Lived Assets

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

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

Goodwill and Other Intangible Assets

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

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

Asset Retirement Obligations

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

Investments

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

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

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

Leases

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

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

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

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

Revenue

The Company recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. See Note 4 for additional information.

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

Severance Costs

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

Integration and Separation Costs

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

Income Taxes

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

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

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

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

Earnings per Common Share

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

Adoption of Accounting Standards

2019

Effective January 1, 2019, the Company adopted Accounting Standards Update ("ASU") 2016-02, “Leases (Topic 842),” and the associated ASUs (collectively, "Topic 842") and added the accounting policy on leases discussed in the section above. Adoption of the new standard resulted in the recording of operating lease ROU assets and lease liabilities of $2.3 billion at January 1, 2019. The net impact to “Retained earnings” was an increase of $32 million and was primarily a result of the recognition of a deferred gain associated with a prior sale-leaseback transaction. The impact is reflected in the "Adoption of accounting standards" line in the consolidated statements of equity of both Dow Inc. and TDCC. See Note 17 for additional information.

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

2018

The adoption of 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" in the first quarter of 2018 resulted in a net decrease of $68 million to "Retained earnings" and a decrease of $20 million to AOCL in the consolidated statements of equity at January 1, 2018. In the second quarter of 2018, the Company early adopted ASU 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02")." The adoption of this standard resulted in a $1,057 million increase to "Retained earnings" due to the reclassification from AOCL in the consolidated statements of equity at April 1, 2018. The impacts are reflected in the "Adoption of accounting standards" line in the consolidated statements of equity.

Change in Financial Statement Presentation

Consolidated Balance Sheets

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


Changes to the Consolidated Balance Sheets	Dec 31, 2019
	Dow Inc.				TDCC
In millions	As Filed		Updated		As Filed		Updated
Marketable securities	$	21	$	—	$	21	$	—
Other current assets	$	658	$	679	$	571	$	592

TDCC Dividends

Effective with the Merger, TDCC no longer had publicly traded common stock. TDCC's common shares were owned solely by its parent company, DowDuPont, prior to separation, and TDCC's Board of Directors ("Board") determined whether or not there would be a dividend distribution to DowDuPont. Effective with the separation from DowDuPont, TDCC became a wholly owned subsidiary of Dow Inc. and TDCC's Board determines whether or not there will be a dividend distribution to Dow Inc. See Notes 18 and 25 for additional information.

NOTE 2 – RECENT ACCOUNTING GUIDANCE

Recently Adopted Accounting Guidance

In the first quarter of 2020, the Company adopted ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which is part of the Financial 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," with certain requirements applied prospectively and all other requirements applied retrospectively. The adoption of this guidance did not have a material impact on the consolidated financial statements. See Note 23 for additional information.

In the first 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 that 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 Company elected to apply the standard prospectively and the adoption of this guidance did not have a material impact on the consolidated financial statements.

In the first quarter of 2020, the Company adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and the associated ASUs. The amendments replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Accordingly, companies are required to consider forward-looking information to estimate credit losses expected to occur over the estimated life of an asset, including losses that may be incurred in future periods. The amendments in the standard required application through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The adoption of this guidance did not have a material impact on the consolidated financial statements.

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

Accounting Guidance Issued But Not Adopted at December 31, 2020

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, "Income Taxes" and also improve consistent application by clarifying and amending existing guidance. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, with the amendments to be applied on a retrospective, modified retrospective or prospective basis, depending on the specific amendment. The Company will adopt the new guidance in the first quarter of 2021 and the adoption of this guidance is not expected to have a material impact on the consolidated financial statements.

NOTE 3 – SEPARATION FROM DOWDUPONT

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

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

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

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

Receipt of ECP

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

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 ASC 205-20 “Discontinued Operations” (“ASC 205-20”). The results of operations of AgCo and SpecCo are presented as discontinued operations in the consolidated statements of income and are summarized in the following table:


Results of Operations of AgCo and SpecCo	2019 1		2018
In millions
Net sales	$	2,953	$	12,187
Cost of sales	1,804		7,668
Research and development expenses	175		761
Selling, general and administrative expenses	262		1,108
Amortization of intangibles	61		249
Restructuring and asset related charges - net	78		411

Equity in earnings of nonconsolidated affiliates	28		400
Sundry income (expense) - net	(18)		(13)
Interest income	3		26
Interest expense and amortization of debt discount	7		56
Income from discontinued operations before income taxes	$	579	$	2,347
Provision for income taxes	134		512
Income from discontinued operations, net of tax	$	445	$	1,835

Results through March 31, 2019.

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

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

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

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

Continuing Involvement

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

Integration and Separation Costs

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

NOTE 4 – REVENUE

The majority of the Company's revenue is derived from product sales. In 2020, 99 percent of the Company's revenue related to product sales (98 percent in 2019 and 99 percent in 2018). The remaining sales were primarily related to the Company's insurance operations and licensing of patents and technologies.

Product Sales

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

Revenues from product sales are recognized when the customer obtains control of the product, which occurs at a point in time, usually upon shipment, with payment terms typically in the range of 30 to 60 days after invoicing, depending on business and geographic region. When the Company performs shipping and handling activities after the transfer of control to the customer (e.g., when control transfers prior to shipment), these are considered fulfillment activities, and accordingly, the costs are accrued when the related revenue is recognized. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. The Company elected to use the practical expedient to expense cash and non-cash sales incentives, as the amortization period for the costs to obtain the contract would have been one year or less.

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

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

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

Patents, Trademarks and Licenses

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

Remaining Performance Obligations

Remaining performance obligations represent the transaction price allocated to unsatisfied or partially unsatisfied performance obligations. At December 31, 2020, the Company had unfulfilled performance obligations of $977 million ($826 million at December 31, 2019) related to the licensing of technology and expects revenue to be recognized for the remaining performance obligations over the next seven years.

The remaining performance obligations are for product sales that have expected durations of one year or less, product sales of materials delivered through a pipeline for which the Company has elected the right to invoice practical expedient, or variable consideration attributable to royalties for licenses of patents and technology. The Company has received advance payments from customers related to long-term supply agreements that are deferred and recognized over the life of the contract, with remaining contract terms that range up to 21 years. The Company will have rights to future consideration for revenue recognized when product is delivered to the customer. These payments are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the consolidated balance sheets.

Disaggregation of Revenue

Dow disaggregates its revenue from contracts with customers by operating segment and business, as the Company believes it best depicts the nature, amount, timing and uncertainty of its revenue and cash flows. See details in the tables below:


Net Trade Sales by Segment and Business	2020		2019		2018
In millions
Hydrocarbons & Energy	$	4,271	$	5,357	$	7,587
Packaging and Specialty Plastics	14,030		14,888		16,608
Packaging & Specialty Plastics	$	18,301	$	20,245	$	24,195
Industrial Solutions	$	3,929	$	4,310	$	4,812
Polyurethanes & Construction Chemicals	8,080		9,117		10,615
Others	12		13		20
Industrial Intermediates & Infrastructure	$	12,021	$	13,440	$	15,447
Coatings & Performance Monomers	$	3,258	$	3,517	$	3,979
Consumer Solutions	4,693		5,406		5,698
Performance Materials & Coatings	$	7,951	$	8,923	$	9,677
Corporate	$	269	$	343	$	285
Total	$	38,542	$	42,951	$	49,604


Net Trade Sales by Geographic Region	2020		2019		2018
In millions
U.S. & Canada	$	13,582	$	15,549	$	17,809
EMEAI 1	12,969		14,612		17,406
Asia Pacific	8,165		8,676		9,404
Latin America	3,826		4,114		4,985
Total	$	38,542	$	42,951	$	49,604

1.Europe, Middle East, Africa and India.

Contract Assets and Liabilities

The Company receives payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract assets include amounts related to the Company’s contractual right to consideration for completed performance obligations not yet invoiced. Contract liabilities include payments received in advance of performance under the contract and are recognized in revenue when the performance obligations are met. "Contract liabilities - current" primarily reflects deferred revenue from prepayments from customers for product to be delivered in 12 months or less. "Contract liabilities - noncurrent" includes advance payments that the Company has received from customers related to long-term supply agreements and royalty payments that are deferred and recognized over the life of the contract.

Revenue recognized in 2020 from amounts included in contract liabilities at the beginning of the period was approximately $145 million (approximately $145 million in 2019 and $205 million in 2018). In 2020, the amount of contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional was approximately $25 million (approximately $15 million in 2019). The Company did not recognize any asset impairment charges related to contract assets in 2020, 2019, or 2018.

The following table summarizes the contract assets and liabilities at December 31, 2020 and 2019:


Contract Assets and Liabilities at Dec 31	2020		2019
In millions
Accounts and notes receivable - Trade	$	4,839	$	4,844
Contract assets - current 1	$	58	$	41
Contract assets - noncurrent 2	$	11	$	4
Contract liabilities - current 3	$	349	$	193
Contract liabilities - noncurrent 4	$	1,915	$	1,607

1.Included in "Other current assets" in the consolidated balance sheets.

2.Included in "Deferred charges and other assets" in the consolidated balance sheets.

3.Included in "Accrued and other current liabilities" in the consolidated balance sheets. The increase from December 31, 2019 to December 31, 2020 was primarily due to advance payments from customers related to royalty agreements.

4.Included in "Other noncurrent obligations" in the consolidated balance sheets. The increase from December 31, 2019 to December 31, 2020 was due to an advance payment from a customer related to a long-term product supply agreement.

NOTE 5 – DIVESTITURES

Divestiture of Rail Infrastructure Operations and Assets

On September 30, 2020, TDCC sold its rail infrastructure operations and assets, including existing agreements to provide rail services to unrelated third parties, at six sites in the U.S. & Canada to an affiliate of Watco Companies, L.L.C. for cash proceeds of $303 million, net of costs to sell and other adjustments and subject to customary post-closing adjustments. These assets are located at TDCC’s sites in Plaquemine and St. Charles, Louisiana; Freeport and Seadrift, Texas; and Fort Saskatchewan and Prentiss, Alberta, Canada. Divested operations included property with a net book value of $68 million and goodwill of $2 million ($16 million related to Packaging & Specialty Plastics and $54 million related to Corporate). TDCC retained ownership of the sites and underlying real property where the divested operations are located. TDCC and the buyer entered into mutual long-term service agreements designed to ensure the continuation of rail services for TDCC's existing operations at each site. The rail-service agreements include variable fees that have an initial term of 25 years. TDCC recognized a pretax gain of $233 million on the sale ($48 million related to Packaging & Specialty Plastics and $185 million related to Corporate), included in "Sundry income (expense) - net" in the consolidated statements of income.

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

Divestiture of Marine and Terminal Operations and Assets

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

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

NOTE 6 – RESTRUCTURING, GOODWILL IMPAIRMENT AND ASSET RELATED CHARGES - NET

The "Restructuring, goodwill impairment and asset related charges - net" line in the consolidated statements of income is used to record charges for restructuring programs, goodwill impairments, and other asset related charges, which includes other asset impairments.

Restructuring Programs

2020 Restructuring Program

On September 29, 2020, the Board of Dow Inc. approved restructuring actions to achieve the Company's structural cost improvement initiatives in response to the continued economic impact from the coronavirus disease 2019 ("COVID-19") pandemic. The restructuring program is designed to reduce structural costs and enable the Company to further enhance competitiveness while the COVID-19 economic recovery gains traction. This program includes a global workforce cost reduction of approximately 6 percent and actions to rationalize the Company's manufacturing assets, which include asset write-down and write-off charges, related contract termination fees and environmental remediation costs ("2020 Restructuring Program"). These actions are expected to be substantially complete by the end of 2021.

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


2020 Restructuring Program	Severance and Related Benefit Costs		Asset Write-downs and Write-offs		Costs Associated with Exit and Disposal Activities		Total
In millions
Packaging & Specialty Plastics	$	—	$	11	$	—	$	11
Industrial Intermediates & Infrastructure	—		22		—		22
Performance Materials & Coatings	—		116		61		177
Corporate	297		47		19		363
Total restructuring charges	$	297	$	196	$	80	$	573
Charges against the reserve	—		(196)		(5)		(201)
Cash payments	(8)		—		—		(8)
Reserve balance at Dec 31, 2020	$	289	$	—	$	75	$	364

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

Severance and Related Benefit Costs

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

Asset Write-downs and Write-offs

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

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

Costs Associated with Exit and Disposal Activities

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

DowDuPont Cost Synergy Program

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

The Company recorded pretax restructuring charges of $184 million in 2018, consisting of severance and related benefit costs of $137 million, asset write-downs and write-offs of $33 million and costs associated with exit and disposal activities of $14 million.

The Company recorded pretax restructuring charges of $292 million in 2019, consisting of severance and related benefit costs of $123 million, assets write-downs and write-offs of $143 million and costs associated with exit and disposal activities of $26 million.

For the year ended December 31, 2020, the Company recorded pretax restructuring charges of $86 million for severance and related benefit costs. Cash expenditures related to the Synergy Program were substantially complete at December 31, 2020.

The following table summarizes the activities related to the Synergy Program. At December 31, 2020, $21 million was included in "Accrued and other current liabilities" ($52 million at December 31, 2019) and $13 million ($19 million at December 31, 2019) was included in "Other noncurrent obligations" in the consolidated balance sheets.


DowDuPont Synergy Program	Severance and Related Benefit Costs		Asset Write-downs and Write-offs		Costs Associated with Exit and Disposal Activities		Total
In millions
Reserve balance at Dec 31, 2017	$	270	$	—	$	5	275
2018 restructuring charges
Packaging & Specialty Plastics	$	—	$	10	$	3	$	13
Industrial Intermediates & Infrastructure	—		—		11		11
Performance Materials & Coatings	—		7		—		7
Corporate	137		16		—		153
Total 2018 restructuring charges	$	137	$	33	$	14	$	184
Charges against the reserve	—		(33)		—		(33)
Cash payments	(197)		—		(12)		(209)
Reserve balance at Dec 31, 2018	$	210	$	—	$	7	$	217
2019 restructuring charges
Packaging & Specialty Plastics	$	—	$	—	$	1	$	1
Industrial Intermediates & Infrastructure	—		2		5		7
Performance Materials & Coatings	—		28		—		28
Corporate	123		113		20		256
Total 2019 restructuring charges	$	123	$	143	$	26	$	292
Charges against the reserve	—		(143)		—		(143)
Cash payments	(279)		—		(16)		(295)
Reserve balance at Dec 31, 2019	$	54	$	—	$	17	$	71
2020 restructuring charges



Corporate	90		—		—		90
Total 2020 restructuring charges	$	90	$	—	$	—	$	90
Charges against the reserve	(4)		—		—		(4)
Cash payments	(121)		—		(2)		(123)
Reserve balance at Dec 31, 2020	$	19	$	—	$	15	$	34

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

Asset Write-downs and Write-offs

The restructuring charges related to the write-down and write-off of assets in 2018 under the Synergy Program were as follows:

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

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

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

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

Costs Associated with Exit and Disposal Activities

The restructuring charges for costs associated with exit and disposal activities, including contract cancellation penalties and environmental remediation liabilities, totaled $14 million in 2018, $26 million in 2019 and zero in 2020.

The Company expects to incur additional costs in the future related to its restructuring activities. Future costs are expected to include demolition costs related to closed facilities and restructuring implementation costs. These costs will be recognized as incurred. The Company also expects to incur additional employee-related costs, including involuntary termination benefits, related to its other optimization activities. These costs cannot be reasonably estimated at this time.

2019 Goodwill Impairment

Upon completion of the goodwill impairment testing in the fourth quarter of 2019, the Company determined the fair value of the Coatings & Performance Monomers reporting unit was lower than its carrying amount. As a result, the Company recorded an impairment charge of $1,039 million in the fourth quarter of 2019, included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Performance Materials & Coatings. See Note 13 for additional information.

Asset Related Charges

2020 Charges

In 2020, the Company recognized pretax impairment charges of $49 million, including additional pretax impairment charges for capital additions made to a bio-ethanol manufacturing facility in Santa Vitoria, Minas Gerais, Brazil ("Santa Vitoria"), which was impaired in 2017 and divested in 2020, as well as charges for miscellaneous write-offs and write-downs of non-manufacturing assets and the write-down of certain corporate leased equipment. The impairment charges were included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics ($19 million), Performance Materials & Coatings ($15 million) and Corporate ($15 million). See Note 23 for additional information.

2019 Charges

On August 13, 2019, the Company entered into a definitive agreement to sell its acetone derivatives business to ALTIVIA Ketones & Additives, LLC. The transaction closed on November 1, 2019 and included the Company's acetone derivatives related inventory and production assets, located in Institute, West Virginia, in addition to the site infrastructure, land, utilities and certain railcars. The Company remains at the Institute site as a tenant. As a result of the planned transaction, the Company recognized a pretax impairment charge of $75 million in the third quarter of 2019, included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($24 million) and Corporate ($51 million). See Note 23 for additional information.

In the fourth quarter of 2019, upon completion of an evaluation of its equity method investment in Sadara Chemical Company ("Sadara") for other-than-temporary impairment, the Company determined that its investment in Sadara was other-than-temporarily impaired and it was written down to zero. Additionally, as part of Dow's evaluation of Sadara, the Company reserved certain of its notes and accounts receivable with Sadara due to uncertainty on the timing of collection. As a result, the Company recorded a $1,755 million charge related to Sadara, included in “Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($370 million), Industrial Intermediates & Infrastructure ($1,168 million) and Corporate ($217 million). See Notes 12 and 23 for additional information.

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

2018 Charges

In 2018, the Company recognized an additional pretax impairment charge of $34 million related primarily to capital additions at Santa Vitoria. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to the Packaging & Specialty Plastics segment. See Note 23 for additional information.

NOTE 7 – SUPPLEMENTARY INFORMATION


Sundry Income (Expense) – Net 1	Dow Inc.						TDCC
In millions	2020		2019		2018		2020		2019		2018
Non-operating pension and other postretirement benefit plan net credits 2	$	103	$	205	$	123	$	103	$	205	$	123
Foreign exchange gains (losses)	(62)		91		(119)		(65)		77		(119)
Gain on divestiture of marine and terminal operations and assets 3	233		—		—		233		—		—
Gain on divestiture of rail infrastructure operations and assets 3	499		—		—		499		—		—
Loss on early extinguishment of debt 4	(149)		(102)		(54)		(149)		(102)		(54)
Gain (loss) on divestitures and asset sale 5	(15)		(49)		—		(15)		2		—
Gain related to Nova ethylene asset matter 6	544		170		—		544		170		—
Gain on sales of other assets and investments	48		67		18		48		67		18
Dow Silicones breast implant liability adjustment 6	5		85		—		5		85		—
Indemnification and other transaction related credits (costs) 7	(21)		(69)		—		(11)		6		—
Loss on Dow Silicones commercial creditor matters 6	—		(50)		—		—		(50)		—
Post-closing adjustments related to Dow Silicones ownership restructure	—		—		(20)		—		—		(20)
Post-closing adjustments on divestiture of MEGlobal	—		—		20		—		—		20
Other - net	84		113		128		82		113		128
Total sundry income (expense) – net	$	1,269	$	461	$	96	$	1,274	$	573	$	96

1.Prior period amounts were updated to conform with the current year presentation.

2.See Note 20 for additional information.

3.See Note 5 for additional information.

4.See Note 15 for additional information.

5.The year ended December 31, 2020 primarily relates to a loss on the divestiture of a bio-ethanol manufacturing facility in Brazil, related to Packaging & Specialty Plastics. The year ended December 31, 2019 includes post-closing adjustments on previous divestitures, related to Corporate.

6.See Note 16 for additional information.

7.See Note 3 for additional information.

Accrued and Other Current Liabilities

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

Other Investments

The Company has investments in company-owned life insurance policies ("COLI"), which are recorded at their cash surrender value as of each balance sheet date, as provided below:


Investments in Company-Owned Life Insurance	Dec 31, 2020		Dec 31, 2019
In millions
Gross cash value	$	807	$	820
Less: Existing drawdowns 1	—		85
Investments in company-owned life insurance 2	$	807	$	735

1.Classified as "Proceeds from sales and maturities of investments" in the consolidated statements of cash flows.

2.Classified as "Other investments" in the consolidated balance sheets.

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

Supplemental Cash Flow Information

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


Supplemental Cash Flow Information	2020		2019		2018
In millions
Cash paid during year for:
Interest	$	842	$	993	$	1,143
Income taxes	$	518	$	881	$	1,193

NOTE 8 – INCOME TAXES

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


Geographic Allocation of Income and Provision for Income Taxes on Continuing Operations
In millions	2020		2019		2018
Income (loss) from continuing operations before income taxes
Domestic 1	$	(681)	$	(1,196)	$	745
Foreign 2	2,752		(51)		3,004
Income (loss) from continuing operations before income taxes	$	2,071	$	(1,247)	$	3,749
Current tax expense (benefit)
Federal	$	(176)	$	(287)	$	324
State and local	4		25		13
Foreign	691		960		901
Total current tax expense	$	519	$	698	$	1,238
Deferred tax expense (benefit)
Federal 3	$	184	$	52	$	(318)
State and local	19		19		(32)
Foreign	55		(299)		(79)
Total deferred tax expense (benefit)	$	258	$	(228)	$	(429)
Provision for income taxes on continuing operations	$	777	$	470	$	809
Income (loss) from continuing operations, net of tax	$	1,294	$	(1,717)	$	2,940

1.The 2019 amount includes approximately $1.4 billion of expense related to goodwill impairment and environmental matters. See Notes 13 and 16 for additional information.

2.The 2019 amount includes approximately $1.8 billion of expense for Sadara related charges. See Note 12 for additional information.

3.The 2018 amount reflects the tax impact of the Tax Cuts and Jobs Act which accelerated the utilization of tax credits and required remeasurement of all U.S. deferred tax assets and liabilities.


Reconciliation to U.S. Statutory Rate	2020		2019		2018
Statutory U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
Equity earnings effect	0.2		(3.2)		(3.3)
Foreign income taxed at rates other than the statutory U.S. federal income tax rate 1	1.7		(14.8)		6.7
U.S. tax effect of foreign earnings and dividends	3.9		1.9		(0.7)
Unrecognized tax benefits	3.3		1.0		0.2
Divestitures 2	(5.1)		—		0.8
Changes in valuation allowances	12.6		—		—
Impact of tax reform 3	—		11.1		(3.4)
Federal tax accrual adjustment 4	—		10.4		—
State and local income taxes	0.3		(4.4)		0.4
Sadara related charges 5	—		(29.5)		—
Goodwill impairment 6	—		(17.5)		—

Other - net	(0.4)		(13.7)		(0.1)
Effective tax rate	37.5	%	(37.7)	%	21.6	%

1.Includes the impact of valuation allowances and interest and penalties associated with uncertain tax positions in foreign jurisdictions. The 2020 impact from interest and penalties increased the effective tax rate by approximately 4 percent.

2.The 2020 impact relates to the divestiture of a bio-ethanol manufacturing facility in Brazil. See Note 6 for additional information.

3.Includes the impact of tax reform in Switzerland and the United States.

4.Primarily related to the favorable impact of the restoration of tax basis in assets, driven by a court judgment that did not involve the Company.

5.See Note 12 for additional information.

6.See Note 13 for additional information.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the United States. While the CARES Act has had no significant impact on the Company's provision for income taxes on continuing operations in 2020, the Company filed a tax loss carryback claim for $291 million in accordance with the provisions of the CARES Act. This resulted in an increase in "Accounts and notes receivable - other" and a decrease in "Deferred income tax assets" in the consolidated balance sheets.

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

On December 22, 2017, the Tax Cuts and Jobs Act ("The Act") was enacted. The Act reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred, created new provisions related to foreign sourced earnings, eliminated the domestic manufacturing deduction and moved to a hybrid territorial system. While the Company made a reasonable estimate of the effects of The Act on its deferred tax balances and the one-time transition tax at December 31, 2017, in accordance with Staff Accounting Bulletin 118, the income tax effects of The Act were refined upon obtaining, preparing and analyzing additional information during the measurement period as follows:

In 2018, the Company completed the remeasurement of its U.S. federal deferred tax assets and liabilities based on rates at which they are expected to reverse in the future, which is generally 21 percent, and recorded a benefit of $79 million to “Provision for income taxes on continuing operations” in the consolidated statements of income with respect to the remeasurement of the Company's deferred tax balances.
The Company adjusted the impact of the mandatory deemed repatriation of post-1986 undistributed foreign earnings and profits, which resulted in a one-time transition tax, and recorded a benefit in 2018 of $85 million to "Provision for income taxes on continuing operations" in the consolidated statements of income with respect to the one-time transition tax. The Company had sufficient tax credits to offset the tax liability associated with the one-time transition tax.
In 2018, the Company recorded an indirect impact of The Act related to prepaid tax on the intercompany sale of inventory. The amount recorded related to inventory was a charge of $38 million to "Provision for income taxes on continuing operations" in the consolidated statements of income.


Deferred Tax Balances at Dec 31	2020				2019
In millions	Assets		Liabilities		Assets		Liabilities
Property	$	499	$	3,388	$	494	$	3,177
Tax loss and credit carryforwards	2,004		—		1,920		—
Postretirement benefit obligations	2,712		250		2,432		210
Other accruals and reserves	1,507		43		1,678		43
Intangibles	124		638		120		688
Inventory	30		198		28		234

Investments	142		51		125		48

Other – net	858		196		851		120
Subtotal	$	7,876	$	4,764	$	7,648	$	4,520
Valuation allowances	(1,302)		—		(1,262)		—
Total	$	6,574	$	4,764	$	6,386	$	4,520


Operating Loss and Tax Credit Carryforwards at Dec 31	2020		2019
In millions	Assets		Assets
Operating loss carryforwards
Expire within 5 years	$	274	$	263
Expire after 5 years or indefinite expiration	1,031		1,133
Total operating loss carryforwards	$	1,305	$	1,396
Tax credit carryforwards
Expire within 5 years	$	434	$	32
Expire after 5 years or indefinite expiration	265		492
Total tax credit carryforwards	$	699	$	524
Total operating loss and tax credit carryforwards	$	2,004	$	1,920

Undistributed earnings of foreign subsidiaries and related companies that are deemed to be permanently invested amounted to $7,401 million at December 31, 2020 and $6,851 million at December 31, 2019. Undistributed earnings are subject to certain taxes upon repatriation, primarily where foreign withholding taxes apply. It is not practicable to calculate the unrecognized deferred tax liability on undistributed earnings.

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


Total Gross Unrecognized Tax Benefits
In millions	2020		2019		2018
Total unrecognized tax benefits at Jan 1	$	319	$	314	$	255
Decreases related to positions taken on items from prior years	(1)		(1)		(8)
Increases related to positions taken on items from prior years	52		16		68
Increases related to positions taken in the current year	18		10		2
Settlement of uncertain tax positions with tax authorities	(14)		(19)		—
Decreases due to expiration of statutes of limitations	(1)		—		(1)
Foreign exchange gain	—		(1)		(2)
Total unrecognized tax benefits at Dec 31	$	373	$	319	$	314
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate	$	285	$	234	$	235
Total amount of interest and penalties expense (benefit) recognized in "Provision for income taxes on continuing operations"	$	84	$	(11)	$	(12)
Total accrual for interest and penalties recognized in the consolidated balance sheets	$	144	$	100	$	109

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

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

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


Tax Years Subject to Examination by Major Tax Jurisdiction at Dec 31, 2020			Earliest Open Year
Jurisdiction
Argentina			2014
Brazil			2015
Canada			2012
China			2010
Germany			2014
Italy			2016
The Netherlands			2016
Switzerland			2016
United States:
Federal income tax			2004
State and local income tax			2004

The reserve for non-income tax contingencies related to issues in the United States and foreign locations was $33 million at December 31, 2020 ($44 million at December 31, 2019). This is management’s best estimate of the potential liability for non-income tax contingencies. Inherent uncertainties exist in estimates of tax contingencies due to changes in tax law, both legislated and concluded through the various jurisdictions’ tax court systems. It is the opinion of the Company’s management that the possibility is remote that costs in excess of those accrued will have a material impact on the Company’s consolidated financial statements.

NOTE 9 - EARNINGS PER SHARE CALCULATIONS

The following tables provide earnings per share calculations of Dow Inc. for the years ended December 31, 2020, 2019, and 2018. In accordance with the accounting guidance for earnings per share, earnings per share of TDCC is not presented as this information is not required in financial statements of wholly owned subsidiaries.


Net Income (Loss) for Earnings Per Share Calculations	2020		2019		2018
In millions
Income (loss) from continuing operations, net of tax	$	1,294	$	(1,717)	$	2,940
Net income attributable to noncontrolling interests - continuing operations	(69)		(74)		(102)

Net income attributable to participating securities - continuing operations 1	(9)		(6)		—
Income (loss) from continuing operations attributable to common stockholders	$	1,216	$	(1,797)	$	2,838
Income from discontinued operations, net of tax	$	—	$	445	$	1,835
Net income attributable to noncontrolling interests - discontinued operations	—		(13)		(32)

Income from discontinued operations attributable to common stockholders	$	—	$	432	$	1,803
Net income (loss) attributable to common stockholders	$	1,216	$	(1,365)	$	4,641


Earnings (Loss) Per Share Calculations - Basic	2020		2019		2018
Dollars per share
Income (loss) from continuing operations attributable to common stockholders	$	1.64	$	(2.42)	$	3.80
Income from discontinued operations, net of tax	—		0.58		2.41
Net income (loss) attributable to common stockholders	$	1.64	$	(1.84)	$	6.21


Earnings (Loss) Per Share Calculations - Diluted	2020		2019		2018
Dollars per share
Income (loss) from continuing operations attributable to common stockholders	$	1.64	$	(2.42)	$	3.80
Income from discontinued operations, net of tax	—		0.58		2.41
Net income (loss) attributable to common stockholders	$	1.64	$	(1.84)	$	6.21


Share Count Information	2020	2019	2018
Shares in millions
Weighted-average common shares outstanding - basic 2	740.5	742.5	747.2
Plus dilutive effect of equity compensation plans 3	1.8	—	—
Weighted-average common shares outstanding - diluted 2, 3	742.3	742.5	747.2
Stock options and restricted stock units excluded from EPS calculations 4	14.2	20.8	—

1.Restricted stock units are considered participating securities due to the Company's practice of paying dividend equivalents on unvested shares.

2.Share amounts for the year ended December 31, 2018 were based on 2,246.3 million DowDuPont common shares outstanding as of the Record Date for the April 1, 2019 distribution, less 4.6 million Employee Stock Ownership Plan ("ESOP") shares that had not been released and were not considered outstanding, adjusted for the Distribution Ratio. There was no dilutive effect for the year ended December 31, 2018 as the Company did not engage in activities giving rise to dilution.

3.The year ended December 31, 2019 reflected a loss from continuing operations, and as such, the basic share count was used for purposes of calculating earnings per share on a diluted basis.

4.These outstanding options to purchase shares of common stock and restricted stock units were excluded from the calculation of diluted earnings per share because the effect of including them would have been antidilutive. For the year ended December 31, 2018, the Company did not engage in activities giving rise to dilution.

NOTE 10 – INVENTORIES

The following table provides a breakdown of inventories:


Inventories at Dec 31
In millions	2020		2019
Finished goods	$	3,140	$	3,505
Work in process	996		1,122
Raw materials	598		628
Supplies	933		845
Total	$	5,667	$	6,100
Adjustment of inventories to the LIFO basis	34		114
Total inventories	$	5,701	$	6,214

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

NOTE 11 – PROPERTY

The following table provides a breakdown of property:


Property at Dec 31	Estimated Useful Lives (Years)	2020		2019
In millions
Land and land improvements	0-25	$	2,011	$	2,177
Buildings	5-50	4,976		4,742
Machinery and equipment	3-25	42,108		40,651
Other property	3-50	5,626		5,354
Construction in progress 1	—	1,604		1,986
Total property		$	56,325	$	54,910

1.The decrease is primarily related to the Company proactively reducing capital spending in 2020 to focus on cash and maintaining financial strength during the COVID-19 pandemic.


In millions	2020		2019		2018
Depreciation expense	$	2,092	$	2,156	$	2,174
Capitalized interest	$	64	$	80	$	88

NOTE 12 – NONCONSOLIDATED AFFILIATES

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


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

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


Dividends Received from Nonconsolidated Affiliates	2020		2019		2018
In millions
Dividends from nonconsolidated affiliates	$	425	$	1,020	$	663

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

Sadara

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

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

In 2019, the Company recorded impairment charges related to its investment in Sadara. The joint venture achieved full commercial operations of all its facilities in 2017. In December 2018, the joint venture successfully completed its Creditors Reliability Test, an extensive operational testing program designed to demonstrate the reliability of the joint venture’s full chemical complex by operating at high rates for an extended period of time. While Sadara had reached these operational milestones and had been generating positive EBITDA (a non-GAAP measure defined as earnings before interest, taxes, depreciation and amortization), the joint venture had yet to report positive net income. During the fourth quarter of 2019, Sadara tested its long-lived assets for impairment using long-term cash flow projections. Sadara’s U.S. GAAP impairment test utilized an undiscounted cash flow methodology, under which Sadara concluded its long-lived assets were recoverable. Due to Sadara's financial condition and its long-lived asset impairment test, Dow evaluated its equity method investment in Sadara for other-than-temporary impairment. The Company utilized a discounted cash flow methodology to measure the estimated fair value of its investment in Sadara, which was estimated to be zero (see Note 23 for additional information on the fair value measurement). The Company determined the decline in value of its investment in Sadara was other-than-temporary due to Sadara’s financial performance since becoming commercially operational in 2017 and uncertainty around prospects for recovery in Sadara’s financial condition. In addition, the Company reserved certain accounts and notes receivable and accrued interest balances associated with Sadara due to uncertainty around the timing of collection. In total, the Company recorded a $1,755 million pretax charge in the fourth quarter of 2019 related to Sadara, included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics ($370 million), Industrial Intermediates & Infrastructure ($1,168 million) and Corporate ($217 million).

In 2020, the Company loaned $333 million to Sadara that was accounted for as in substance common stock and classified as "Investment in nonconsolidated affiliates" in the Company's consolidated balance sheets. The Company loaned $473 million to Sadara and converted $380 million of the notes and accounts receivable into equity during 2019. In 2018, the Company converted $382 million of outstanding notes and accounts receivable with Sadara into equity, primarily due to a shareholder loan reduction agreement with Sadara. At December 31, 2020 and 2019, the Company's note receivable with Sadara was zero.

EQUATE

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

AFSI

At December 31, 2020, the Company had an investment in AFSI of zero ($35 million at December 31, 2019), classified as "Investment in nonconsolidated affiliates" in the consolidated balance sheets. At December 31, 2020, the Company's investment in AFSI was $108 million less than the Company's proportionate share of AFSI's underlying net assets ($102 million less at December 31, 2019). This amount primarily relates to an other-than-temporary decline in the Company's investment in AFSI. At December 31, 2020, the Company held a 40 percent ownership interest in AFSI (41 percent at December 31, 2019).

Transactions with Nonconsolidated Affiliates

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

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

The Company is responsible for marketing the majority of Sadara products outside of the Middle East zone through the Company’s established sales channels. Under this arrangement, the Company purchases and sells Sadara products for a marketing fee. Purchases of Sadara products represented 8 percent of "Cost of sales" in 2020 (8 percent in 2019 and 9 percent in 2018).

The Company purchases products from The SCG-Dow Group, primarily for marketing and distribution in Asia Pacific. Purchases of products from The SCG-Dow Group represented 3 percent of "Cost of sales" in 2020 (2 percent in 2019 and 2018).

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

Balances due to or due from nonconsolidated affiliates at December 31, 2020 and 2019 were as follows:


Balances Due To or Due From Nonconsolidated Affiliates at Dec 31	2020		2019
In millions
Accounts and notes receivable - Other	$	229	$	211



Accounts payable - Other	$	1,075	$	1,092

Principal Nonconsolidated Affiliates

The Company had an ownership interest in 35 nonconsolidated affiliates at December 31, 2020 (37 at December 31, 2019). The Company's principal nonconsolidated affiliates and its ownership interest (direct and indirect) for each at December 31, 2020, 2019 and 2018 are as follows:


Principal Nonconsolidated Affiliates at Dec 31	Country	Ownership Interest
	2020	2019		2018
EQUATE Petrochemical Company K.S.C.C.	Kuwait	42.5	%	42.5	%	42.5	%
The Kuwait Olefins Company K.S.C.C.	Kuwait	42.5	%	42.5	%	42.5	%
The Kuwait Styrene Company K.S.C.C.	Kuwait	42.5	%	42.5	%	42.5	%
Map Ta Phut Olefins Company Limited 1	Thailand	32.77	%	32.77	%	32.77	%

Sadara Chemical Company	Saudi Arabia	35	%	35	%	35	%
The SCG-Dow Group:
Siam Polyethylene Company Limited	Thailand	50	%	50	%	50	%
Siam Polystyrene Company Limited	Thailand	50	%	50	%	50	%
Siam Styrene Monomer Company Limited	Thailand	50	%	50	%	50	%
Siam Synthetic Latex Company Limited	Thailand	50	%	50	%	50	%

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

The Company’s investment in and equity earnings from its principal nonconsolidated affiliates are shown in the tables below:


Investment in Principal Nonconsolidated Affiliates at Dec 31	2020		2019
In millions
Investment in nonconsolidated affiliates	$	922	$	963
Other noncurrent obligations	(169)		(80)
Net investment in principal nonconsolidated affiliates	$	753	$	883


Equity in Earnings (Losses) of Principal Nonconsolidated Affiliates	2020		2019		2018
In millions
Equity in earnings (losses) of principal nonconsolidated affiliates	$	(16)	$	21	$	561

The summarized financial information that follows represents the combined accounts (at 100 percent) of the principal nonconsolidated affiliates.


Summarized Balance Sheet Information at Dec 31	2020		2019
In millions
Current assets	$	5,044	$	5,302
Noncurrent assets	25,298		26,477
Total assets	$	30,342	$	31,779
Current liabilities	$	3,942	$	3,743
Noncurrent liabilities	20,144		20,271
Total liabilities	$	24,086	$	24,014
Noncontrolling interests	$	132	$	110


Summarized Income Statement Information 1	2020		2019		2018
In millions
Sales	$	9,470	$	10,905	$	14,461
Gross profit	$	619	$	644	$	2,320
Income (loss) from continuing operations, net of tax	$	(461)	$	(277)	$	1,173

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

NOTE 13 – GOODWILL AND OTHER INTANGIBLE ASSETS

The following table shows changes in the carrying amounts of goodwill by reportable segment for the years ended December 31, 2020 and 2019:


Goodwill	Packaging & Specialty Plastics		Industrial Intermediates & Infrastructure		Performance Materials & Coatings		Total
In millions
Balance at Jan 1, 2019	$	5,101	$	1,095	$	3,650	$	9,846
Foreign currency impact	8		6		(24)		(10)

Goodwill Impairment	—		—		(1,039)		(1,039)
Other	—		(1)		—		(1)
Balance at Dec 31, 2019	$	5,109	$	1,100	$	2,587	$	8,796
Foreign currency impact	12		4		106		122
Sale of rail infrastructure	(2)		—		—		(2)
Sale of marine and terminal infrastructure	(4)		(4)		—		(8)

Balance at Dec 31, 2020	$	5,115	$	1,100	$	2,693	$	8,908

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

Goodwill Impairments

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

Goodwill Impairment Testing

The Company performs an impairment test of goodwill annually in the fourth quarter. In 2020, the Company performed qualitative assessments for all reporting units that carried goodwill. Based on the results of the qualitative assessments, the Company performed quantitative testing for one reporting unit (two in 2019 and one in 2018). The qualitative assessments on the remaining reporting units indicated that it was not more likely than not that fair value was less than the carrying value for those reporting units.

The quantitative testing conducted in 2020 and 2018 concluded that no goodwill impairments existed.

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

Other Intangible Assets

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


Other Intangible Assets at Dec 31	2020						2019
In millions	Gross Carrying Amount		Accum Amort		Net		Gross Carrying Amount		Accum Amort		Net
Intangible assets with finite lives:
Developed technology	$	2,638	$	(1,677)	$	961	$	2,634	$	(1,467)	$	1,167
Software	1,489		(989)		500		1,449		(893)		556
Trademarks/tradenames	352		(343)		9		352		(342)		10
Customer-related	3,301		(1,419)		1,882		3,207		(1,184)		2,023

Total other intangible assets, finite lives	$	7,780	$	(4,428)	$	3,352	$	7,642	$	(3,886)	$	3,756
In-process research and development	—		—		—		3		—		3
Total other intangible assets	$	7,780	$	(4,428)	$	3,352	$	7,645	$	(3,886)	$	3,759

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


Amortization Expense from Continuing Operations	2020		2019		2018
In millions
Other intangible assets, excluding software	$	401	$	419	$	469
Software, included in "Cost of sales"	$	96	$	96	$	93

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


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

NOTE 14 – TRANSFERS OF FINANCIAL ASSETS

Accounts Receivable Programs

The Company maintains committed accounts receivable facilities with various financial institutions, including in the United States, which expires in November 2022 (“U.S. A/R Program”) and in Europe, which expires in July 2023 (“Europe A/R Program” and together with the U.S. A/R Program, "the Programs"). Under the terms of the Programs, the Company may sell certain eligible trade accounts receivable at any point in time, up to $900 million for the U.S. A/R Program and up to €400 million for the Europe A/R Program. Under the terms of the Programs, the Company continues to service the receivables from the customer, but retains no interest in the receivables, and remits payment to the financial institutions. The Company also provides a guarantee to the financial institutions for the creditworthiness and collection of the receivables in satisfaction of the facility. See Note 16 for additional information related to guarantees. There were no receivables sold under the Programs during the years ended December 31, 2020 and 2019.

Accounts Receivable Securitization Facilities

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

In the fourth quarter of 2017, the Company suspended further sales of trade accounts receivable through these facilities and began reducing outstanding balances through collections of trade accounts receivable previously sold to such conduits. In 2018, the Company recognized a loss of $7 million on the sale of these receivables, which is included in “Interest expense and amortization of debt discount” in the consolidated statements of income. The Company's interests in the conduits were reflected in "Investing Activities" in the consolidated statements of cash flows and were $657 million in 2018. In September and October 2018, the North American and European facilities, respectively, were amended and the terms of the agreements changed from off-balance sheet arrangements to secured borrowing arrangements. In November 2019 and July 2020, the North American and European facilities, respectively, were amended and are no longer secured borrowing arrangements. These facilities were not drawn upon during the period they were secured borrowing arrangements. See Note 15 for additional information on the secured borrowing arrangements.

NOTE 15 – NOTES PAYABLE, LONG-TERM DEBT AND AVAILABLE CREDIT FACILITIES


Notes Payable at Dec 31
In millions	2020			2019
Commercial paper	$	—		$	151
Notes payable to banks and other lenders	156			435


Total notes payable	$	156		$	586
Year-end average interest rates	3.89		%	6.30		%


Long-Term Debt at Dec 31	2020 Average Rate		2020		2019 Average Rate		2019
In millions
Promissory notes and debentures:
Final maturity 2020	—	%	$	—	8.44	%	$	76
Final maturity 2021	8.95	%	173		8.95	%	174
Final maturity 2022	8.64	%	121		3.50	%	1,372
Final maturity 2023	7.63	%	250		7.64	%	325
Final maturity 2024 1	3.43	%	1,017		3.37	%	1,397
Final maturity 2025	5.13	%	625		5.26	%	662
Final maturity 2026 and thereafter 1	5.22	%	10,888		5.73	%	8,820
Other facilities:
U.S. dollar loans	—	%	—		2.55	%	2,000
Foreign currency notes and loans, various rates and maturities	1.41	%	3,189		3.26	%	592
InterNotes®, varying maturities through 2050	3.56	%	535		3.44	%	928

Finance lease obligations 2			518				395
Unamortized debt discount and issuance costs			(365)				(331)
Long-term debt due within one year 3			(460)				(435)
Long-term debt			$	16,491			$	15,975

1.Cost includes net fair value hedge adjustment gains of $69 million at December 31, 2020 ($1 million at December 31, 2019). See Note 22 for additional information.

2.See Note 17 for additional information.

3.Presented net of current portion of unamortized debt issuance costs.


Maturities of Long-Term Debt for Next Five Years at Dec 31, 2020
In millions
2021	$	460
2022	$	236
2023	$	381
2024	$	1,079
2025	$	717

2020 Activity

In February 2020, the Company issued €2.25 billion aggregate principal amount of notes (“Euro Notes”). The Euro Notes included €1 billion aggregate principal amount of 0.50 percent notes due 2027, €750 million aggregate principal amount of 1.125 percent notes due 2032 and €500 million aggregate principal amount of 1.875 percent notes due 2040. The Euro Notes have a weighted average coupon rate of approximately 1.0 percent. With the net proceeds from the issuance of the Euro Notes, Dow Silicones voluntarily repaid $750 million of principal under a certain third party credit agreement, ("Term Loan Facility”). In addition, the Company redeemed $1.25 billion of 3.0 percent notes issued by the Company with maturity in 2022. As a result, the Company recognized a pretax loss of $85 million on the early extinguishment of debt, included in “Sundry income (expense) – net” in the consolidated statements of income and related to Corporate.

In the first quarter of 2020, the Company withdrew $800 million under various uncommitted bilateral credit arrangements, which were subsequently repaid in the second quarter of 2020.

In August 2020, the Company issued $2 billion aggregate principal amount of notes. The notes included $850 million aggregate principal amount of 2.1 percent notes due 2030 and $1.15 billion aggregate principal amount of 3.6 percent notes due 2050 (together, the "Notes"). With the net proceeds from the issuance of the Notes, Dow Silicones voluntarily repaid the remaining $1.25 billion outstanding principal balance under the Term Loan Facility. In September 2020, the Company also used $556 million of aggregate proceeds from the Notes to fund cash tender offers for certain of its debt securities and certain debt securities of Union Carbide. In total, $493 million aggregate principal amount was tendered and retired. These actions resulted in a pretax loss of $62 million on the early extinguishment of debt included in "Sundry income (expense) – net" in the consolidated statements of income and related to Corporate.

In 2020, the Company also issued an aggregate principal amount of $190 million of InterNotes®, and redeemed an aggregate principal amount of $180 million at maturity. In addition, the Company voluntarily repaid an aggregate principal amount of $400 million of InterNotes® with various maturities. As a result, the Company recognized a pretax loss on the early extinguishment of debt of $2 million, included in “Sundry income (expense) – net” in the consolidated statements of income and related to Corporate. Additionally, the Company repaid $134 million of long-term debt at maturity and approximately $29 million of long-term debt was repaid by consolidated variable interest entities.

Subsequent Event

On January 15, 2021, the Company announced a call for $118 million of InterNotes® with various maturities, which will settle on February 15, 2021.

2019 Activity

In 2019, the Company issued $2 billion of senior unsecured notes in an offering under Rule 144A of the Securities Act of 1933. The offering included $750 million aggregate principal amount of 4.80 percent notes due 2049; $750 million aggregate principal amount of 3.625 percent notes due 2026; and $500 million aggregate principal amount of 3.15 percent notes due 2024. In addition, the Company redeemed $1.5 billion of 4.25 percent notes with maturity in 2020 and $1.25 billion of 4.125 percent notes with maturity in 2021. As a result, the Company recognized a pretax loss of $100 million on the early extinguishment of debt, included in "Sundry income (expense) - net" in the consolidated statements of income and related to Corporate. The Company also issued an aggregate principal amount of $277 million of InterNotes®, and redeemed an aggregate principal amount of $122 million at maturity. Approximately $149 million of long-term debt (net of $16 million of issuances) was repaid by consolidated variable interest entities.

In 2019, Dow Silicones voluntarily repaid $2.5 billion of principal under the Term Loan Facility. As a result, Dow Silicones recognized a pretax loss of $2 million on the early extinguishment of debt, included in "Sundry income (expense) - net" in the consolidated statements of income and related to Corporate.

In October 2019, TDCC launched exchange offers for $4 billion of all the outstanding, unregistered senior notes that were issued in private offerings on November 30, 2018 and May 20, 2019, for identical, registered notes under the Securities Act of 1933 (the “Exchange Offers”). The Exchange Offers were with respect to the Company’s 3.15 percent notes due 2024, 4.55 percent notes due 2025, 3.625 percent notes due 2026, 4.80 percent notes due 2028, 5.55 percent notes due 2048 and 4.80 percent notes due 2049, and fulfilled the Company’s obligations contained in the registration rights agreements entered into in connection with the issuance of the aforementioned notes.

2018 Activity

In 2018, the Company redeemed $333 million of 5.70 percent notes at maturity and an aggregate principal amount of $91 million of InterNotes® at maturity. In addition, approximately $138 million of long-term debt was repaid by consolidated variable interest entities. The Company also called an aggregate principal amount of $343 million tax-exempt bonds of various interest rates and maturities in 2029, 2033 and 2038. As a result of these redemptions, the Company recognized a pretax loss of $6 million on the early extinguishment of debt, included in “Sundry income (expense) - net” in the consolidated statements of income and related to Corporate.

In November 2018, the Company issued $2 billion of senior unsecured notes in an offering under Rule 144A of the Securities Act of 1933. The offering included $900 million aggregate principal amount of 5.55 percent notes due

2048; $600 million aggregate principal amount of 4.80 percent notes due 2028; and $500 million aggregate principal amount of 4.55 percent notes due 2025.

In December 2018, the Company tendered and redeemed $2.1 billion of 8.55 percent notes issued by the Company with maturity in 2019. As a result, the Company recognized a pretax loss of $48 million on the early extinguishment of debt, included in "Sundry income (expense) - net" in the consolidated statements of income and related to Corporate.

Available Credit Facilities

The following table summarizes the Company's credit facilities:


Committed and Available Credit Facilities at Dec 31, 2020
In millions	Committed Credit		Credit Available		Maturity Date	Interest
Five Year Competitive Advance and Revolving Credit Facility	$	5,000	$	5,000	October 2024	Floating rate
Bilateral Revolving Credit Facility	200		200		November 2021	Floating rate
Bilateral Revolving Credit Facility	300		300		December 2021	Floating rate
Bilateral Revolving Credit Facility	300		300		December 2021	Floating rate
Bilateral Revolving Credit Facility	150		150		March 2022	Floating rate
Bilateral Revolving Credit Facility	100		100		June 2022	Floating rate
Bilateral Revolving Credit Facility	200		200		September 2022	Floating rate
Bilateral Revolving Credit Facility	200		200		September 2023	Floating rate
Bilateral Revolving Credit Facility	250		250		September 2023	Floating rate
Bilateral Revolving Credit Facility	300		300		September 2023	Floating rate
Bilateral Revolving Credit Facility	100		100		October 2024	Floating rate
Bilateral Revolving Credit Facility	100		100		October 2024	Floating rate
Bilateral Revolving Credit Facility	200		200		November 2024	Floating rate
Bilateral Revolving Credit Facility	100		100		March 2025	Floating rate
Bilateral Revolving Credit Facility	250		250		March 2025	Floating rate
Bilateral Revolving Credit Facility	350		350		March 2025	Floating rate
Total Committed and Available Credit Facilities	$	8,100	$	8,100

Secured Borrowings

In September 2018, the Company renewed its North American accounts receivable securitization facility for a one year term and amended the terms of the agreement from an off-balance sheet arrangement to a secured borrowing arrangement, with a borrowing capacity up to $800 million. Under the structure of the amended agreement, the Company had the option to use select trade accounts receivable to collateralize the credit facility with certain lenders. In November 2019, the facility was amended and is no longer a secured borrowing arrangement. It was not drawn upon during its term as a secured borrowing arrangement.

In October 2018, the Company renewed its European accounts receivable securitization facility for a two year term and amended the terms of the agreement from an off-balance sheet arrangement to a secured borrowing arrangement, with a borrowing capacity up to €400 million. Under the structure of the amended agreement, the Company had the option to use select trade accounts receivable to collateralize the credit facility with certain lenders. In July 2020, the facility was amended and is no longer a secured borrowing arrangement. It was not drawn upon during its term as a secured borrowing arrangement. See Note 14 for additional information related to the accounts receivable programs.

Letters of Credit

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

Debt Covenants and Default Provisions

TDCC’s outstanding long-term debt has been issued primarily under indentures which contain, among other provisions, certain customary restrictive covenants with which TDCC must comply while the underlying notes are outstanding. Failure of TDCC to comply with any of its covenants, could result in a default under the applicable indenture and allow the note holders to accelerate the due date of the outstanding principal and accrued interest on the underlying notes.

TDCC's indenture covenants include obligations to not allow liens on principal U.S. manufacturing facilities, enter into sale and lease-back transactions with respect to principal U.S. manufacturing facilities, merge or consolidate with any other corporation, or sell, lease or convey, directly or indirectly, all or substantially all of TDCC’s assets. The outstanding debt also contains customary default provisions. TDCC remains in compliance with these covenants.

TDCC’s primary, private credit agreements also contain certain customary restrictive covenant and default provisions in addition to the covenants set forth above with respect to TDCC’s debt. Significant other restrictive covenants and default provisions related to these agreements include:

(a) the obligation to maintain the ratio of TDCC’s consolidated indebtedness to consolidated capitalization at no greater than 0.65 to 1.00 at any time the aggregate outstanding amount of loans under the Five Year Competitive Advance and Revolving Credit Facility Agreement ("Revolving Credit Agreement") dated October 30, 2018, equals or exceeds $500 million,

(b) a default if TDCC or an applicable subsidiary fails to make any payment, including principal, premium or interest, under the applicable agreement on other indebtedness of, or guaranteed by, TDCC or such applicable subsidiary in an aggregate amount of $100 million or more when due, or any other default or other event under the applicable agreement with respect to such indebtedness occurs which permits or results in the acceleration of $400 million or more in the aggregate of principal, and

(c) a default if TDCC or any applicable subsidiary fails to discharge or stay within 60 days after the entry of a final judgment against TDCC or such applicable subsidiary of more than $400 million.

Failure of TDCC to comply with any of the covenants or default provisions could result in a default under the applicable credit agreement which would allow the lenders to not fund future loan requests and to accelerate the due date of the outstanding principal and accrued interest on any outstanding indebtedness.

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

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

No such events have occurred or have been triggered at the time of the filing of this Annual Report on Form 10-K.

NOTE 16 – COMMITMENTS AND CONTINGENT LIABILITIES

Environmental Matters

Introduction

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. At December 31, 2020, the Company had accrued obligations of $1,244 million for probable environmental remediation and restoration costs, including $248 million for the remediation of Superfund sites. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the consolidated balance sheets. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to approximately one and a half times that amount. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the Company’s results of operations, financial condition and cash flows. It is the opinion of the Company’s management, however, that the possibility is remote that costs in excess of the range disclosed will have a material impact on the Company’s results of operations, financial condition or cash flows. Inherent uncertainties exist in these estimates primarily due to unknown conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration. As new or additional information becomes available and/or certain spending trends become known, management will evaluate such information in determination of the current estimate of the environmental liability. At December 31, 2019, the Company had accrued obligations of $1,155 million for probable environmental remediation and restoration costs, including $207 million for the remediation of Superfund sites.

As part of the Company's 2020 Restructuring Program, in the third quarter of 2020, the Company recorded a pretax charge related to environmental remediation matters. This charge resulted from the Company's evaluation of the costs required to manage remediation activities at sites Dow will permanently shut down as part of its 2020 Restructuring Program. In addition, the Company recorded indemnification assets of $50 million related to Dow Silicones' environmental matters. The Company recognized a pretax charge, net of indemnifications, of $56 million, included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Performance Materials & Coatings ($52 million) and Corporate ($4 million). See Note 6 for additional information.

In the third quarter of 2019, the Company recorded a pretax charge related to environmental remediation matters at a number of current and historical locations. The charge primarily resulted from: the culmination of long-standing negotiations and discussions with regulators and agencies, including technical studies supporting higher cost estimates for final or staged remediation plans; the Company’s evaluation of the cost required to manage remediation activities at sites affected by Dow’s separation from DowDuPont and related agreements with Corteva and DuPont; and, the Company’s review of its closure strategies and obligations to monitor ongoing operations and maintenance activities. In addition, the Company recorded indemnification assets of $48 million related to Dow Silicones’ environmental matters. The Company recognized a pretax charge, net of indemnifications, of $399 million related to these environmental matters, included in “Cost of sales” in the consolidated statements of income and related to Packaging & Specialty Plastics ($5 million), Industrial Intermediates & Infrastructure ($8 million), Performance Materials & Coatings ($50 million) and Corporate ($336 million).

The following table summarizes the activity in the Company's accrued obligations for environmental matters for the years ended December 31, 2020 and 2019:


Accrued Obligations for Environmental Matters	2020		2019
In millions
Balance at Jan 1	$	1,155	$	810
Accrual adjustment	285		590
Payments against reserve	(198)		(241)
Foreign currency impact	2		(4)
Balance at Dec 31	$	1,244	$	1,155

The amounts charged to income on a pretax basis related to environmental remediation totaled $234 million in 2020, $588 million in 2019 and $176 million in 2018. Capital expenditures for environmental protection were $80 million in 2020, $83 million in 2019 and $55 million in 2018.

Midland Off-Site Environmental Matters

On June 12, 2003, the Michigan Department of Environmental Quality ("MDEQ") issued a Hazardous Waste Operating License (the "License") to the Company’s Midland, Michigan, manufacturing site (the “Midland Site”), which was renewed and replaced by the MDEQ on September 25, 2015, and included provisions requiring the Company to conduct an investigation to determine the nature and extent of off-site contamination in the City of Midland soils, the Tittabawassee River and Saginaw River sediment and floodplain soils, and the Saginaw Bay, and, if necessary, undertake remedial action. In 2016, final regulatory approval was received from the MDEQ for the City of Midland and the Company is continuing the long term monitoring requirements of the Remedial Action Plan.

Tittabawassee and Saginaw Rivers, Saginaw Bay

The Company, the U.S. Environmental Protection Agency (“EPA”) and the State of Michigan ("State") entered into an administrative order on consent (“AOC”), effective January 21, 2010, that requires the Company to conduct a remedial investigation, a feasibility study and a remedial design for the Tittabawassee River, the Saginaw River and the Saginaw Bay, and pay the oversight costs of the EPA and the State under the authority of the Comprehensive Environmental Response, Compensation, and Liability Act. These actions, to be conducted under the lead oversight of the EPA, will build upon the investigative work completed under the State Resource Conservation Recovery Act program from 2005 through 2009.

The Tittabawassee River, beginning at the Midland Site and extending down to the first six miles of the Saginaw River, are designated as the first Operable Unit for purposes of conducting the remedial investigation, feasibility study and remedial design work. This work will be performed in a largely upriver to downriver sequence for eight geographic segments of the Tittabawassee and upper Saginaw Rivers. In the first quarter of 2012, the EPA requested the Company address the Tittabawassee River floodplain ("Floodplain") as an additional segment. In January 2015, the Company and the EPA entered into an order to address remediation of the Floodplain. The remedial work is expected to continue over the next two years. The remainder of the Saginaw River and the Saginaw Bay are designated as a second Operable Unit and the work associated with that unit may also be geographically segmented. The AOC does not obligate the Company to perform removal or remedial action; that action can only be required by a separate order. The Company and the EPA have been negotiating orders separate from the AOC that obligate the Company to perform remedial actions under the scope of work of the AOC. The Company and the EPA have entered into six separate orders to perform limited remedial actions in seven of the eight geographic segments in the first Operable Unit, including the Floodplain. Dow has received from the EPA a Notice of Completion of Work for three of these six orders and the Company continues the long-term monitoring requirements. Dow also has entered into a separate order to perform a limited remedial action for certain properties located within the second Operable Unit.

Alternative Dispute Resolution Process

The Company, the EPA, the U.S. Department of Justice and the natural resource damage trustees (which include the Michigan Office of the Attorney General, the Michigan Department of Environment, Great Lakes and Energy, the Michigan Department of Natural Resources, the U.S. Fish and Wildlife Service, the U.S. Bureau of Indian Affairs and the Saginaw-Chippewa Indian Tribe of Michigan) have been engaged in negotiations to seek to resolve potential governmental claims against the Company for natural resource damages related to historical off-site contamination associated with the City of Midland, the Tittabawassee and Saginaw Rivers and the Saginaw Bay. The Company and the governmental parties started meeting in the fall of 2005 and entered into a Confidentiality Agreement in December 2005.

On July 20, 2020, the U.S. District Court for the Eastern District of Michigan ("District Court") entered a final consent decree in Civil Action No. 1:19-cv-13292 between the Company and federal, state and tribal trustees to resolve allegations of natural resource damages arising from the historic operations of the Company’s Midland Site. The consent decree required the Company to pay a $15 million cash settlement to be used for long-term maintenance and trustee-selected remediation projects with an additional $7 million to specified local projects managed by third parties. These funds were paid in December 2020. The consent decree further requires the Company to complete 13 additional environmental restoration projects which are valued by the trustees at approximately $77 million, to be conducted over the next several years.

At December 31, 2020, the accrual for these off-site matters was $107 million (included in the total accrued obligation of $1,244 million). At December 31, 2019, the Company had an accrual for these off-site matters of $135 million (included in the total accrued obligation of $1,155 million).

Environmental Matters Summary

It is the opinion of the Company’s management that the possibility is remote that costs in excess of those disclosed will have a material impact on the Company’s results of operations, financial condition or cash flows.

Litigation

Asbestos-Related Matters of Union Carbide Corporation

Introduction

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

Estimating the Asbestos-Related Liability

Based on a study completed by Ankura Consulting Group, LLC ("Ankura") in January 2003, Union Carbide increased its December 31, 2002, asbestos-related liability for pending and future claims for a 15-year period ending in 2017 to $2.2 billion, excluding future defense and processing costs. In subsequent years, Union Carbide compared current asbestos claim and resolution activity to the results of the most recent Ankura study at each balance sheet date to determine whether the accrual continued to be appropriate.

In 2016, Ankura completed a study to provide estimates for the undiscounted cost of disposing of pending and future claims against Union Carbide and Amchem through the terminal year of 2049, including a reasonable forecast of future defense and processing costs. Based on the study and Union Carbide’s internal review of asbestos claim and resolution activity, Union Carbide determined estimating the liability through the terminal year of 2049 was more appropriate due to increased knowledge and data about the costs to resolve claims and diminished volatility in filing rates. Union Carbide and the Company also determined that estimating and accruing a liability for future asbestos-related defense and processing costs was more appropriate as such costs represent expenditures related to legacy activities that do not contribute to current or future revenue generating activities of Union Carbide and the Company and is also reflective of the manner in which Union Carbide manages its asbestos-related exposure, including careful monitoring of the correlation between defense spending and resolution costs. As a result, in the fourth quarter of 2016, Union Carbide recorded a $1,113 million increase in its asbestos-related liability for pending and future claims, including future defense and processing costs. Each October, Union Carbide requests Ankura to review its historical asbestos claim and resolution activity through the third quarter of the current year, including asbestos-related defense and processing costs, to determine the appropriateness of updating the most recent study.

In December 2018, Ankura completed a study of Union Carbide's historical asbestos claim and resolution activity through September 30, 2018, including asbestos-related defense and processing costs, and provided estimates for the undiscounted cost of disposing of pending and future claims against Union Carbide and Amchem through the terminal year of 2049. Based on the study and Union Carbide's internal review process, it was determined that no adjustment to the accrual was required.

In December 2019, Ankura stated that an update of its December 2018 study would not provide a more likely estimate of future events than the estimate reflected in the study and, therefore, the estimate in the study remained applicable. Based on Union Carbide's internal review process and Ankura's response, Union Carbide determined that no change to the accrual was required. At December 31, 2019, the asbestos-related liability for pending and future claims against Union Carbide and Amchem, including future asbestos-related defense and processing costs, was $1,165 million, and approximately 18 percent of the recorded liability related to pending claims and approximately 82 percent related to future claims.

In December 2020, Ankura completed a study of Union Carbide's historical asbestos claim and resolution activity through September 30, 2020, including asbestos-related defense and processing costs, and provided estimates for the undiscounted cost of disposing of pending and future claims against Union Carbide and Amchem through the terminal year of 2049. Based on the study and Union Carbide's internal review process, it was determined that no adjustment to the accrual was required. At December 31, 2020, the asbestos-related liability for pending and future claims against Union Carbide and Amchem, including future asbestos-related defense and processing costs, was $1,098 million, and approximately 22 percent of the recorded liability related to pending claims and approximately 78 percent related to future claims.

Summary

The Company's management believes the amounts recorded by Union Carbide for the asbestos-related liability, including defense and processing costs, reflect reasonable and probable estimates of the liability based upon current, known facts. However, future events, such as the number of new claims to be filed and/or received each year, the average cost of defending and disposing of each such claim, as well as the numerous uncertainties surrounding asbestos litigation in the United States over a significant period of time, could cause the actual costs for Union Carbide to be higher or lower than those projected or those recorded. Any such events could result in an increase or decrease in the recorded liability.

Because of the uncertainties described above, Union Carbide cannot estimate the full range of the cost of resolving pending and future asbestos-related claims facing Union Carbide and Amchem. As a result, it is reasonably possible that an additional cost of disposing of Union Carbide's asbestos-related claims, including future defense and processing costs, could have a material impact on the Company's results of operations and cash flows for a particular period and on the consolidated financial position.

Dow Silicones Chapter 11 Related Matters

Introduction

In 1995, Dow Silicones, then a 50:50 joint venture between the Company and Corning Incorporated ("Corning"), voluntarily filed for protection under Chapter 11 of the U.S. Bankruptcy Code in order to resolve Dow Silicones’ breast implant liabilities and related matters (the “Chapter 11 Proceeding”). Dow Silicones emerged from the Chapter 11 Proceeding on June 1, 2004 (the “Effective Date”) and is implementing the Joint Plan of Reorganization (the “Plan”). The Plan provides funding for the resolution of breast implant and other product liability litigation covered by the Chapter 11 Proceeding. As of June 1, 2016, Dow Silicones is a wholly owned subsidiary of the Company.

Breast Implant and Other Product Liability Claims

Under the Plan, a product liability settlement program administered by an independent claims office (the “Settlement Facility”) was created to resolve breast implant and other product liability claims. Product liability claimants rejecting the settlement program in favor of pursuing litigation must bring suit against a litigation facility (the “Litigation Facility”). Under the Plan, total payments committed by Dow Silicones to resolving product liability claims are capped at a maximum $2,350 million net present value (“NPV”) determined as of the Effective Date using a discount rate of seven percent (approximately $4,081 million undiscounted at December 31, 2020). Of this amount, no more than $400 million NPV determined as of the Effective Date can be used to fund the Litigation Facility.

Dow Silicones had an obligation to fund the Settlement Facility and the Litigation Facility over a 16-year period, commencing at the Effective Date. At December 31, 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 $58 million.

In accordance with ASC Topic 450 "Accounting for Contingencies," the Company records a liability for breast implant and other product liability claims (“Implant Liability”), which reflects the estimated impact of the settlement of pending claims. The claim filing deadline passed in June 2019. All claims have been received 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 $160 million after the Settlement Facility balance is exhausted.

In the third quarter of 2019, with the assistance of a third party consultant ("Consultant"), Dow Silicones updated its Implant Liability estimate, primarily reflecting a decrease in Class 16 claims, a decrease resulting from the passage of time, decreased claim filing activity and administrative costs compared with the previous estimate, and an increase in investment income resulting from insurance proceeds. Based on the Consultant's updated estimate and Dow Silicones own review of claim filing activity, Dow Silicones determined that an adjustment to the Implant Liability was required. Accordingly, in the third quarter of 2019, Dow Silicones decreased its Implant Liability $98 million and decreased its corresponding Class 16 receivable $13 million, both included in “Sundry income (expense) - net” in the consolidated statements of income and related to Corporate. The estimate was updated again in the second quarter of 2020 with the assistance of the Consultant, which primarily reflected decreased administrative costs compared with the previous estimate and an increase in investment income resulting from insurance proceeds.

Dow Silicones' Implant Liability was $160 million at December 31, 2020 ($165 million at December 31, 2019), of which $46 million ($20 million at December 31, 2019) was included in “Accrued and other current liabilities” and $114 million ($145 million at December 31, 2019) was included in "Other noncurrent obligations" in the consolidated balance sheets.

Dow Silicones is not aware of circumstances that would change the factors used in estimating the Implant Liability and believes the recorded liability reflects the best estimate of the remaining funding obligations under the Plan; however, the estimate relies upon a number of significant assumptions, including: future acceptance rates, disease mix, and payment values will be materially consistent with historical experience; no material negative outcomes in future controversies or disputes over Plan interpretation will occur; and the Plan will not be modified. If actual outcomes related to any of these assumptions prove to be materially different, the future liability to fund the Plan may be materially different than the amount estimated.

Commercial Creditor Issues

The Plan provides that each of Dow Silicones commercial creditors (the “Commercial Creditors”) would receive in cash the sum of (a) an amount equal to the principal amount of their claims and (b) interest on such claims. Upon the Plan becoming effective, Dow Silicones paid approximately $1,500 million to the Commercial Creditors, representing principal and an amount of interest that Dow Silicones considers undisputed. On August 19, 2019, Dow Silicones entered into a settlement agreement with the Commercial Creditors related to the remaining, disputed portion, obligating Dow Silicones to pay $172 million, inclusive of the Commercial Creditors' legal costs. The settlement was approved by the District Court. As a result of the settlement agreement, in the third quarter of 2019, the Company recorded a pretax charge of $50 million, net of indemnifications of $37 million, included in "Sundry Income (expense) - net" in the consolidated statements of income and related to Corporate. The settlement was paid to the Commercial Creditors in the fourth quarter of 2019. The litigation is now concluded.

Summary

The amounts recorded by Dow Silicones for the Chapter 11 related matters described above were based upon current, known facts, which management believes reflect reasonable and probable estimates of the liability. However, future events could cause the actual costs for Dow Silicones to be higher or lower than those projected or those recorded. Any such events could result in an increase or decrease in the recorded liability.

Other Litigation Matters

In addition to the specific matters described above, the Company is party to a number of other claims and lawsuits arising out of the normal course of business with respect to product liability, patent infringement, employment matters, governmental tax and regulation disputes, contract and commercial litigation, and other actions. Certain of these actions purport to be class actions and seek damages in very large amounts. All such claims are being contested. The Company has an active risk management program consisting of numerous insurance policies secured from many carriers at various times. These policies may provide coverage that could be utilized to minimize the financial impact, if any, of certain contingencies described above. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of the Company.

Indemnifications with Corning

In connection with the June 1, 2016 ownership restructure of Dow Silicones, the Company is indemnified by Corning for at least 50 percent of future losses associated with certain pre-closing liabilities, including the Implant Liability, Commercial Creditors issues and certain environmental matters described in the preceding sections, subject to certain conditions and limits. The maximum amount of indemnified losses which may be recovered are subject to a cap that declines over time. Indemnified losses are capped at $1 billion between May 31, 2018 and May 31, 2023, and no recoveries are permitted after May 31, 2023. The Company had indemnification assets of $115 million at December 31, 2020 ($100 million at December 31, 2019), of which zero ($37 million at December 31, 2019) was included in "Other current assets" and $115 million ($63 million at December 31, 2019) was included in "Noncurrent receivables" in the consolidated balance sheets.

Gain Contingency - Dow v. Nova Chemicals Corporation Patent Infringement Matter

In December 2010, Dow filed suit in the Federal Court in Ontario, Canada ("Federal Court") alleging that Nova Chemicals Corporation ("Nova") was infringing the Company's Canadian polyethylene patent 2,106,705 (the "'705 Patent"). Nova counterclaimed on the grounds of invalidity and non-infringement. In accordance with Canadian practice, the suit was bifurcated into a merits phase, followed by a damages phase. Following trial in the merits phase, in May 2014 the Federal Court ruled that the Company's '705 Patent was valid and infringed by Nova. Nova appealed to the Canadian Federal Court of Appeal, which affirmed the Federal Court decision in August 2016. Nova then sought leave to appeal its loss to the Supreme Court of Canada ("Court"), which dismissed Nova’s petition in April 2017. As a result, Nova has exhausted all appeal rights on the merits, and it is undisputed that Nova owes the Company the profits it earned from its infringing sales as determined in the trial for the damages phase.

In April 2017, the Federal Court issued a Public Judgment in the damages phase, which detailed its conclusions on how to calculate the profits to be awarded to the Company. In June 2017, the Federal Court ordered Nova to pay $645 million Canadian dollars (equivalent to $495 million U.S. dollars) to the Company, plus pre- and post-judgment interest, for which the Company received payment of $501 million from Nova in July 2017. Although Nova is appealing portions of the damages judgment, certain portions of it are indisputable and can be retained by the Company regardless of the outcome of any further appeals by Nova. As a result of these actions and in accordance with ASC Topic 450-30 "Gain Contingencies," the Company recorded a $160 million pretax gain in the second quarter of 2017.

On September 15, 2020, the Canadian Federal Court of Appeal dismissed Nova's appeal of the damages judgment, thus affirming the trial court's decision in its entirety. In November 2020, Nova filed an application for leave to appeal this decision to the Court. Briefing is expected to be completed in early 2021 and the Company anticipates a decision in the first half of 2021 as to whether the Court will accept the appeal. The Court has complete discretion on whether to grant leave applications. At December 31, 2020, the Company had $341 million (zero at December 31, 2019) included in "Accrued and other current liabilities" and zero ($341 million at December 31, 2019) included in "Other noncurrent obligations" related to the disputed portion of the damages judgment. The Company is confident of its chances to continue to defend the entire judgment if the Court agrees to review it, particularly the trial and appellate courts' determinations on important factual issues, which will be accorded deferential review on appeal.

Gain Contingency - Dow v. Nova Chemicals Corporation Ethylene Asset Matter

On September 18, 2019, the Court of the Queen’s Bench in Alberta, Canada, signed a judgment ordering Nova to pay the Company $1.43 billion Canadian dollars (equivalent to approximately $1.08 billion U.S. dollars) by October 11, 2019, for damages the Company incurred through 2012 related to the companies’ jointly-owned ethylene asset in Joffre, Alberta, Canada. The Court of the Queen's Bench in Alberta, Canada, which initially ruled in June 2018, found that Nova failed to operate the ethylene asset at full capacity for more than ten years, and furthermore, that Nova violated several contractual agreements related to the Company receiving its share of the asset’s ethylene production. These actions resulted in reduced productivity and sales for the Company. Nova has appealed the judgment, however, certain portions of it are not in dispute and are owed to the Company regardless of the outcome of Nova's appeal. As a result of these actions and in accordance with ASC Topic 450-30 “Gain Contingencies,” the Company recorded a $186 million pretax gain in the third quarter of 2019, of which $170 million was included in "Sundry income (expense) - net" and $16 million was included in "Selling, general and administrative expenses" in the consolidated statements of income and related to Packaging & Specialty Plastics. In October 2019, Nova paid $1.08 billion Canadian dollars (equivalent to approximately $0.8 billion U.S. dollars) directly to the Company, and remitted $347 million Canadian dollars to the Canada Revenue Agency ("CRA") for the tax account of one of the Company's subsidiaries. The Company sought a refund of the entire amount remitted to CRA. On March 31, 2020, the Company received the full refund from CRA, equivalent to $259 million U.S. dollars.

In preparation for the June 2020 appellate hearing on the case, Nova provided the Court of the Queen's Bench in Alberta, Canada, an updated schedule of the financial impact of the issues on appeal, which explained that even if Nova prevails on all appeal issues, the Company would still be entitled to retain an amount in excess of the gain recognized in 2019. As a result, the Company recorded an $18 million pretax gain in the second quarter of 2020, of which $12 million was included in "Selling, general and administrative expenses" and $6 million was included in "Sundry income (expense) - net" in the consolidated statements of income and related to Packaging & Specialty Plastics. On September 16, 2020, the Court of Appeal of Alberta issued its decision, affirming the trial court's liability finding, upholding the majority of Dow's damages and requiring the trial court to recalculate a portion of damages. In the fourth quarter of 2020, Nova chose not to petition the Court to review the appellate court decision, making additional portions of the ruling in Dow’s favor final and no longer subject to dispute. As a result, the Company recorded a $552 million pretax gain in the fourth quarter of 2020, of which $538 million was included in "Sundry income (expense) - net" and $14 million was included in "Selling, general and administrative expenses" in the consolidated statements of income and related to Packaging & Specialty Plastics. At December 31, 2020, $323 million ($893 million at December 31, 2019) was included in "Other noncurrent obligations" in the Company's consolidated balance sheets related to the disputed portion of the damages judgment. Dow continues to seek an award of additional damages for the period from 2013 through 2018.

Purchase Commitments

The Company has outstanding purchase commitments and various commitments for take-or-pay or throughput agreements. The Company was not aware of any purchase commitments that were negotiated as part of a financing arrangement for the facilities that will provide the contracted goods or services or for the costs related to those goods or services at December 31, 2020 and 2019.

Guarantees

The following table provides a summary of the final expiration, maximum future payments and recorded liability reflected in the consolidated balance sheets for guarantees:


Guarantees	Dec 31, 2020					Dec 31, 2019
In millions	Final Expiration	Maximum Future Payments		Recorded Liability		Final Expiration	Maximum Future Payments		Recorded Liability
Guarantees	2023	$	251	$	2	2023	$	3,952	$	10

Guarantees arise during the ordinary course of business from relationships with customers, committed accounts receivable facilities and nonconsolidated affiliates when the Company undertakes an obligation to guarantee the performance of others (via delivery of cash or other assets) if specified triggering events occur. With guarantees, such as commercial or financial contracts, non-performance by the guaranteed party triggers the obligation of the Company to make payments to the beneficiary of the guarantee. The majority of the Company’s guarantees relate to debt of nonconsolidated affiliates, which have expiration dates ranging from less than one year to less than three years. The Company’s current expectation is that future payment or performance related to the non-performance of others is considered remote.

The Company has entered into guarantee agreements related to Sadara, a nonconsolidated affiliate. The total of an Islamic bond and additional project financing (collectively “Total Project Financing”) obtained by Sadara was approximately $12.5 billion. Sadara had $10.8 billion of Total Project Financing debt outstanding at December 31, 2019. In November 2020, the remaining project completion conditions related to the Total Project Financing guarantees were fulfilled and the Company's guarantee obligations terminated. Subsequently, the Company provided a new guarantee in the form of a letter of credit for its share of one future debt service schedule payment up to $220 million. The guarantee is in proportion to the Company’s 35 percent ownership interest in Sadara and is expected to remain in effect until the re-profiling of Sadara’s debt is completed which is expected in the first quarter of 2021. See Note 12 for additional information.

In January 2021, Sadara reached an agreement in principle with its lenders to re-profile Sadara's outstanding project financing debt. In conjunction with completion of the Sadara debt re-profiling, the Company expects to guarantee approximately $1.3 billion of Sadara’s debt. The debt re-profiling is expected to include a grace period until June 2026, during which Sadara is obligated to make interest-only payments. Dow will also provide guarantees for its portion of all Sadara interest payments due during the grace period. Dow's pro-rata share of any potential shortfall during the grace period will be funded by a new $500 million revolving credit facility guaranteed by Dow,

which is expected to be established by Sadara in the first quarter of 2021. Dow's existing $220 million letter of credit related to the guarantee of one future Sadara debt service schedule payment will be cancelled upon completion of the full re-profiling of Sadara's debt. All guarantees related to the debt re-profile and revolving credit facility are in proportion to Dow’s 35 percent ownership interest in Sadara. As a result of these actions, the Company does not expect to provide any shareholder loans or equity contributions to Sadara in 2021.

Asset Retirement Obligations

The Company has 106 manufacturing sites in 31 countries. Most of these sites contain numerous individual manufacturing operations, particularly at the Company’s larger sites. Asset retirement obligations are recorded as incurred and reasonably estimable, including obligations for which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the Company. The retirement of assets may involve such efforts as remediation and treatment of asbestos, contractually required demolition, and other related activities, depending on the nature and location of the assets; and retirement obligations are typically realized only upon demolition of those facilities. In identifying asset retirement obligations, the Company considers identification of legally enforceable obligations, changes in existing law, estimates of potential settlement dates and the calculation of an appropriate discount rate to be used in calculating the fair value of the obligations. The Company has a well-established global process to identify, approve and track the demolition of retired or to-be-retired facilities; and no assets are retired from service until this process has been followed. The Company typically forecasts demolition projects based on the usefulness of the assets; environmental, health and safety concerns; and other similar considerations. Under this process, as demolition projects are identified and approved, reasonable estimates are determined for the time frames during which any related asset retirement obligations are expected to be settled. For those assets where a range of potential settlement dates may be reasonably estimated, obligations are recorded. The Company routinely reviews all changes to items under consideration for demolition to determine if an adjustment to the value of the asset retirement obligation is required.

The Company has recognized asset retirement obligations for the following activities: demolition and remediation activities at manufacturing sites primarily in Europe, United States, Japan, United Arab Emirates, Canada and Argentina; and capping activities at landfill sites in the United States, Brazil and Canada. The Company has also recognized conditional asset retirement obligations related to asbestos encapsulation as a result of planned demolition and remediation activities at manufacturing and administrative sites primarily in the United States, Europe, Argentina and Japan. The aggregate carrying amount of conditional asset retirement obligations recognized by the Company (included in the asset retirement obligations balance shown below) was $14 million at December 31, 2020 ($19 million at December 31, 2019).

The following table shows changes in the aggregate carrying amount of the Company’s asset retirement obligations for the years ended December 31, 2020 and 2019:


Asset Retirement Obligations	2020		2019
In millions
Balance at Jan 1	$	104	$	109
Additional accruals	6		10
Liabilities settled	(3)		(7)
Accretion expense	3		2
Revisions in estimated cash flows	7		3
Other	(5)		(13)
Balance at Dec 31	$	112	$	104

The discount rate used to calculate the Company’s asset retirement obligations at December 31, 2020, was 0.42 percent (2.12 percent at December 31, 2019). These obligations are included in the consolidated balance sheets as "Accrued and other current liabilities" and "Other noncurrent obligations."

The Company has not recognized conditional asset retirement obligations for which a fair value cannot be reasonably estimated in its consolidated financial statements. Assets that have not been submitted/reviewed for potential demolition activities are considered to have continued usefulness and are generally still operating normally. Therefore, without a plan to demolish the assets or the expectation of a plan, such as shortening the useful life of assets for depreciation purposes in accordance with the accounting guidance related to property, plant and equipment, the Company is unable to reasonably forecast a time frame to use for present value calculations. As such, the Company has not recognized obligations for individual plants/buildings at its manufacturing sites where

estimates of potential settlement dates cannot be reasonably made. In addition, the Company has not recognized conditional asset retirement obligations for the capping of its approximately 36 underground storage wells and 129 underground brine mining and other wells at Company-owned sites when there are no plans or expectations of plans to exit the sites. It is the opinion of the Company’s management that the possibility is remote that such conditional asset retirement obligations, when estimable, will have a material impact on the Company’s consolidated financial statements based on current costs.

NOTE 17 - LEASES

Operating lease ROU assets are included in "Operating lease right-of-use assets" while finance lease ROU assets are included in "Net property" in the consolidated balance sheets. With respect to lease liabilities, operating lease liabilities are included in "Operating lease liabilities - current" and "Operating lease liabilities - noncurrent," and finance lease liabilities are included in "Long-term debt due within one year" and "Long-Term Debt" in the consolidated balance sheets.

Dow routinely leases sales and administrative offices, power plants, production facilities, warehouses and tanks for product storage, aircraft, motor vehicles, railcars, computers, office machines and equipment. Some leases contain renewal provisions, purchase options and escalation clauses and the terms for these leased assets vary depending on the lease agreement. These leased assets have remaining lease terms of up to 55 years. See Note 1 for additional information on leases.

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


Lease Cost	2020		2019
In millions
Operating lease cost	$	484	$	532
Finance lease cost
Amortization of right-of-use assets - finance	$	58	$	39
Interest on lease liabilities - finance	25		25
Total finance lease cost	$	83	$	64
Short-term lease cost	$	213	$	204
Variable lease cost	199		198
Sublease income	(5)		(4)
Total lease cost	$	974	$	994

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


Other Lease Information	2020		2019
In millions

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	482	$	544
Operating cash flows for finance leases	$	25	$	25
Financing cash flows for finance leases	$	58	$	34

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


Lease Position	Balance Sheet Classification	Dec 31, 2020		Dec 31, 2019
In millions
Right-of-use assets obtained in exchange for lease obligations:
Operating leases 1		$	185	$	2,476
Finance leases		$	178	$	89
Assets
Operating lease assets	Operating lease right-of-use assets	$	1,856	$	2,072
Finance lease assets	Property	665		486
Finance lease amortization	Accumulated depreciation	(216)		(167)
Total lease assets		$	2,305	$	2,391
Liabilities
Current
Operating	Operating lease liabilities - current	$	416	$	421
Finance	Long-term debt due within one year	54		32
Noncurrent
Operating	Operating lease liabilities - noncurrent	1,521		1,739
Finance	Long-Term Debt	464		363
Total lease liabilities		$	2,455	$	2,555

1.Includes $2.3 billion for the period ended December 31, 2019 related to the adoption of Topic 842. See Note 1 for additional information.

The weighted-average remaining lease term and discount rate for leases recorded in the consolidated balance sheets at December 31, 2020 and 2019 are provided below:


Lease Term and Discount Rate	Dec 31, 2020		Dec 31, 2019
Weighted-average remaining lease term
Operating leases	7.6 years		8.0 years
Finance leases	11.6 years		12.3 years
Weighted-average discount rate
Operating leases	3.84	%	4.09	%
Finance leases	5.41	%	6.28	%

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


Maturities of Lease Liabilities	Operating Leases		Finance Leases
In millions
2021	$	477	$	78
2022	387		74
2023	312		98
2024	242		45
2025	164		41
2026 and thereafter	703		373
Total future undiscounted lease payments	$	2,285	$	709
Less: Imputed interest	348		191
Total present value of lease liabilities	$	1,937	$	518

At December 31, 2020, Dow had additional leases of approximately $56 million, primarily for buildings and equipment, which had not yet commenced. These leases are expected to commence in 2021 and 2022, with lease terms of up to 10 years.

Dow provides guarantees related to certain leased assets, specifying the residual value that will be available to the lessor at lease termination through the sale of the assets to the lessee or third parties. The following table provides a summary of the final expiration, maximum future payments and recorded liability reflected in the consolidated balance sheets for residual value guarantees at December 31, 2020 and 2019. There was $22 million of recorded liability related to these residual value guarantees at December 31, 2020 (zero at December 31, 2019), as payment of such residual value guarantees was determined to be probable. The lease agreements do not contain any material restrictive covenants.


Lease Guarantees	Dec 31, 2020					Dec 31, 2019
In millions	Final Expiration	Maximum Future Payments		Recorded Liability		Final Expiration	Maximum Future Payments		Recorded Liability
Residual value guarantees	2030	$	818	$	22	2028	$	792	$	—

NOTE 18 – STOCKHOLDERS’ EQUITY

Common Stock

Dow Inc.

Dow Inc. was incorporated in 2018 with 100 authorized and issued shares of common stock, par value $0.01 per share, owned solely by its parent company, DowDuPont. In the first quarter of 2019, in connection with the separation and distribution of DowDuPont’s materials science business, the number of authorized shares of common stock was increased to 5,000,000,000 shares, par value $0.01 per share, and Dow Inc.'s 100 shares of issued common stock were recapitalized into 748,771,240 shares of common stock. Dow Inc.'s common stock was solely owned by DowDuPont through March 31, 2019, and on April 1, 2019, Dow Inc. became an independent, publicly traded company. Dow Inc. common stock is listed on the NYSE under the symbol “DOW.” See Note 3 for additional information.

The Company may issue shares of Dow Inc. common stock out of treasury stock or as new shares of common stock for options exercised and for the release of restricted stock units ("RSUs"), performance stock units ("PSUs") and restricted stock. Common stock shares issued to employees and non-employee directors was approximately 4.8 million in 2020. Subsequent to the separation from DowDuPont, the number of new Dow Inc. common stock shares issued to employees and non-employee directors was approximately 2.5 million in 2019. See Note 21 for additional information on the Company's equity awards.

TDCC

Effective with the Merger and through March 31, 2019, TDCC had 100 authorized and issued shares of common stock, par value $0.01 per share, owned solely by DowDuPont. Effective with the separation from DowDuPont, TDCC became a wholly owned subsidiary of Dow Inc., which now holds all 100 authorized and issued shares of common stock of TDCC. See Note 3 for additional information.

Retained Earnings

Dow Inc.

There are no significant restrictions limiting Dow Inc.’s ability to pay dividends. Dow Inc. declared dividends of $2.80 per share in 2020 ($2.10 per share in 2019, subsequent to the separation from DowDuPont).

Undistributed earnings of nonconsolidated affiliates included in retained earnings were $716 million at December 31, 2020 and $852 million at December 31, 2019.

TDCC

Effective with the Merger, TDCC no longer had publicly traded common stock. TDCC's common shares were owned solely by DowDuPont, prior to the separation on April 1, 2019, and TDCC's Board determined whether or not there would be a dividend distribution to DowDuPont. Effective with the separation from DowDuPont on April 1, 2019, TDCC became a wholly owned subsidiary of Dow Inc. and TDCC's Board determines whether or not there will be a dividend distribution to Dow Inc. In 2020 and 2019, TDCC declared and paid dividends to Dow Inc. of $2,233 million and $201 million, respectively. In 2019 and 2018, TDCC declared and paid dividends to DowDuPont of $535 million and $3,711 million, respectively.

Employee Stock Ownership Plan

The Dow Employee Stock Ownership Plan (the “ESOP”) is an integral part of The Dow Chemical Company Employees’ Savings Plan (the “Savings Plan”). A significant majority of full-time employees in the United States are eligible to participate in the Savings Plan. The Company uses the ESOP to provide its matching contribution in the form of stock to Plan participants. Effective with the Merger, shares of TDCC Common Stock held by the ESOP were converted into shares of DowDuPont Common Stock at a ratio of 1:1. Effective with the separation from DowDuPont, the DowDuPont Common Stock held by the ESOP received a Dow Inc. Common Stock share dividend at a ratio of 3:1, resulting in the ESOP holding both DowDuPont and Dow Inc. shares. Subsequent to the separation from DowDuPont, the ESOP independent fiduciary sold the DowDuPont shares and purchased additional Dow Inc. shares with the proceeds.

In connection with the acquisition of Rohm and Haas on April 1, 2009, the Rohm and Haas Employee Stock Ownership Plan (the "Rohm and Haas ESOP") was merged into the Savings Plan, and the Company assumed the $78 million balance of debt at 9.8 percent interest with final maturity in 2020 that was used to finance share purchases by the Rohm and Haas ESOP in 1990. The debt was fully repaid in 2020 which resulted in an outstanding balance of zero at December 31, 2020 ($3 million at December 31, 2019).

Dividends on unallocated shares held by the ESOP are used by the ESOP to make debt service payments and to purchase additional shares if dividends exceed the debt service payments. Dividends on allocated shares are used by the ESOP to make debt service payments to the extent needed; otherwise, they are paid to the Savings Plan participants. Shares are released for allocation to participants based on the ratio of the current year’s debt service to the sum of the principal and interest payments over the life of the loan. The shares are allocated to Plan participants in accordance with the terms of the Savings Plan. The unallocated shares are excluded from the Company's earnings per share calculation.

Compensation expense for allocated shares is recorded at the fair value of the shares on the date of allocation. Compensation expense reflected in income from continuing operations for ESOP shares was $72 million in 2020, $77 million in 2019 and $144 million in 2018. At December 31, 2020, 4.4 million shares out of a total 6.1 million shares held by the ESOP had been allocated to participants’ accounts and 1.7 million shares, at a fair value of $93 million, were considered unearned.

Treasury Stock

Dow Inc.

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

The Company may issue shares of Dow Inc. common stock out of treasury stock or as new shares of common stock for options exercised and for the release of RSUs, PSUs and restricted stock. The Company did not issue any treasury shares to employees and non-employee directors under its stock-based compensation programs for the years ended December 31, 2020 and 2019. See Note 21 for additional information on changes to the Company's equity awards in connection with the separation from DowDuPont.

The following table provides a reconciliation of Dow Inc. common stock activity for the years ended December 31, 2020 and 2019:


Shares of Dow Inc. Common Stock	Issued	Held in Treasury

Balance at Jan 1, 2019	100	—
Impact of recapitalization	748,771,140	—
Issued 1	2,457,404	—
Repurchased	—	9,729,834
Balance at Jan 1, 2020	751,228,644	9,729,834

Issued 1	4,764,554	—
Repurchased	—	3,073,469
Balance at Dec 31, 2020	755,993,198	12,803,303

1.Shares issued to employees and non-employee directors under the Company's equity compensation plans.

Accumulated Other Comprehensive Loss

The changes in each component of AOCL for the years ended December 31, 2020, 2019 and 2018 were as follows:


Accumulated Other Comprehensive Loss	2020		2019		2018
In millions
Unrealized Gains (Losses) on Investments
Beginning balance	$	64	$	(51)	$	17
Unrealized gains (losses) on investments	104		178		(93)
Less: Tax (expense) benefit	(23)		(38)		19
Net unrealized gains (losses) on investments	81		140		(74)
(Gains) losses reclassified from AOCL to net income 1	(54)		(33)		9
Less: Tax expense (benefit) 2	13		8		(2)
Net (gains) losses reclassified from AOCL to net income	(41)		(25)		7
Other comprehensive income (loss), net of tax	40		115		(67)
Reclassification of stranded tax effects 3	—		—		(1)
Ending balance	$	104	$	64	$	(51)
Cumulative Translation Adjustment
Beginning balance	$	(1,135)	$	(1,813)	$	(1,481)
Gains (losses) on foreign currency translation	227		59		(215)
Less: Tax (expense) benefit	25		(2)		(6)
Net gains (losses) on foreign currency translation	252		57		(221)
(Gains) losses reclassified from AOCL to net income 4	(47)		(89)		(4)
Other comprehensive income (loss), net of tax	205		(32)		(225)
Impact of common control transaction 5	—		710		—
Reclassification of stranded tax effects 3	—		—		(107)
Ending balance	$	(930)	$	(1,135)	$	(1,813)
Pension and Other Postretirement Benefits
Beginning balance	$	(8,781)	$	(7,965)	$	(6,998)
Gains (losses) arising during the period	(1,769)		(1,699)		(625)
Less: Tax (expense) benefit	411		413		130
Net gains (losses) arising during the period	(1,358)		(1,286)		(495)
Amortization and recognition of net loss and prior service credits 6	753		504		594
Less: Tax expense (benefit) 2	(173)		(117)		(139)
Net loss and prior service credits reclassified from AOCL to net income	580		387		455
Other comprehensive income (loss), net of tax	(778)		(899)		(40)
Impact of common control transaction 5	—		83		—
Reclassification of stranded tax effects 3	—		—		(927)
Ending balance	$	(9,559)	$	(8,781)	$	(7,965)
Derivative Instruments
Beginning balance	$	(394)	$	(56)	$	(109)
Gains (losses) on derivative instruments	(96)		(470)		6
Less: Tax (expense) benefit	(1)		101		(2)
Net gains (losses) on derivative instruments	(97)		(369)		4
(Gains) losses reclassified from AOCL to net income 7	30		44		89
Less: Tax expense (benefit) 2	(9)		(13)		(18)
Net (gains) losses reclassified from AOCL to net income	21		31		71
Other comprehensive income (loss), net of tax	(76)		(338)		75
Reclassification of stranded tax effects 3	—		—		(22)
Ending balance	$	(470)	$	(394)	$	(56)
Total AOCL ending balance	$	(10,855)	$	(10,246)	$	(9,885)

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

2.Reclassified to "Provision for income taxes on continuing operations."

3.Amounts reclassified to "Retained earnings" as a result of the adoption of ASU 2018-02.

4.Reclassified to "Sundry income (expense) - net."

5.Reclassified to "Retained earnings" as a result of the separation from DowDuPont on April 1, 2019. See Note 3 for additional information.

6.These AOCL components are included in the computation of net periodic benefit cost of the Company's defined benefit pension and other postretirement benefit plans. See Note 20 for additional information.

7.Reclassified to "Cost of sales," "Sundry income (expense) - net" and "Interest expense and amortization of debt discount."

NOTE 19 – NONCONTROLLING INTERESTS

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

The following table summarizes the activity for equity attributable to noncontrolling interests for the years ended December 31, 2020, 2019 and 2018:


Noncontrolling Interests
In millions	2020		2019		2018
Balance at Jan 1	$	553	$	1,138	$	1,186
Net income attributable to noncontrolling interests - continuing operations	69		74		102
Net income attributable to noncontrolling interests - discontinued operations	—		13		32
Distributions to noncontrolling interests 1	(55)		(77)		(145)


Impact of common control transaction 2	—		(353)		—
Purchase of noncontrolling interests 3	—		(254)		—



Deconsolidation of noncontrolling interests 4	(7)		—		—
Cumulative translation adjustments	9		12		(39)
Other	1		—		2
Balance at Dec 31	$	570	$	553	$	1,138

1.Distributions to noncontrolling interests are net of $7 million in 2020 ($7 million in 2019 and $27 million in 2018) in dividends paid to a joint venture, which were reclassified to "Equity in earnings (losses) of nonconsolidated affiliates" in the consolidated statements of income. Also includes amounts attributable to discontinued operations of $7 million in 2019 and $37 million in 2018.

2.Related to the separation from DowDuPont. See Note 3 for additional information.

3.Related to the acquisition of full ownership in a propylene oxide manufacturing joint venture, which occurred on October 1, 2019. See Note 24 for additional information. As a result of this arrangement, the carrying value of the noncontrolling interest was removed, and “Additional paid-in capital” was adjusted by $38 million.

4.Related to the divestiture of the Company's interest in a cogeneration facility in Brazil in the third quarter of 2020. See Note 24 for additional information.

NOTE 20 – PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

Defined Benefit Pension Plans

The Company has both funded and unfunded defined benefit pension plans that cover employees in the United States and a number of other countries. The U.S. qualified plan covering the parent company is the largest plan. Benefits for employees hired before January 1, 2008, are based on length of service and the employee’s three highest consecutive years of compensation. Employees hired after January 1, 2008, earn benefits that are based on a set percentage of annual pay, plus interest.

The Company's funding policy is to contribute to the plans when pension laws and/or economics either require or encourage funding. In 2020, the Company contributed $299 million to its pension plans, including contributions to fund benefit payments for the Company's unfunded pension plans. The Company expects to contribute approximately $300 million to its pension plans in 2021.

The weighted-average assumptions used to determine pension plan obligations and net periodic benefit costs for all plans are summarized in the table below:


Weighted-Average Assumptions for All Pension Plans	Benefit Obligations at Dec 31				Net Periodic Costs for the Year Ended
	2020		2019		2020		2019		2018
Discount rate	2.20	%	2.81	%	2.81	%	3.50	%	3.17	%
Interest crediting rate for applicable benefits	3.55	%	3.51	%	3.51	%	3.72	%	3.61	%
Rate of compensation increase	3.91	%	3.92	%	3.92	%	3.92	%	3.88	%
Expected return on plan assets					7.00	%	7.11	%	7.11	%

The weighted-average assumptions used to determine pension plan obligations and net periodic benefit costs for U.S. plans are summarized in the table below:


Weighted-Average Assumptions for U.S. Pension Plans	Benefit Obligations at Dec 31				Net Periodic Costs for the Year Ended
	2020		2019		2020		2019		2018
Discount rate	2.71	%	3.41	%	3.41	%	4.15	%	3.66	%
Interest crediting rate for applicable benefits	4.50	%	4.50	%	4.50	%	4.50	%	4.50	%
Rate of compensation increase	4.25	%	4.25	%	4.25	%	4.25	%	4.25	%
Expected return on plan assets					7.95	%	7.92	%	7.92	%

Other Postretirement Benefit Plans

The Company provides certain health care and life insurance benefits to retired employees and survivors. The Company’s plans outside of the United States are not significant; therefore, this discussion relates to the U.S. plans only. The plans provide health care benefits, including hospital, physicians’ services, drug and major medical expense coverage, and life insurance benefits. In general, for employees hired before January 1, 1993, the plans provide benefits supplemental to Medicare when retirees are eligible for these benefits. The Company and the retiree share the cost of these benefits, with the Company portion increasing as the retiree has increased years of credited service, although there is a cap on the Company portion. The Company has the ability to change these benefits at any time. Employees hired after January 1, 2008, are not covered under the plans.

The Company funds most of the cost of these health care and life insurance benefits as incurred. In 2020, the Company did not make any contributions to its other postretirement benefit plan trusts. The trusts did not hold assets at December 31, 2020. The Company does not expect to contribute assets to its other postretirement benefit plan trusts in 2021.

The weighted-average assumptions used to determine other postretirement benefit plan obligations and net periodic benefit costs for the U.S. plans are provided below:


Weighted-Average Assumptions for U.S. Other Postretirement Benefits Plans	Benefit Obligations at Dec 31				Net Periodic Costs for the Year Ended
	2020		2019		2020		2019		2018
Discount rate	2.38	%	3.19	%	3.19	%	4.01	%	3.51	%
Health care cost trend rate assumed for next year	6.75	%	6.25	%	6.25	%	6.50	%	6.75	%
Rate to which the cost trend rate is assumed to decline (the ultimate health care cost trend rate)	5.00	%	5.00	%	5.00	%	5.00	%	5.00	%
Year that the rate reaches the ultimate health care cost trend rate	2028		2025		2025		2025		2025

Assumptions

The Company determines the expected long-term rate of return on plan assets by performing a detailed analysis of key economic and market factors driving historical returns for each asset class and formulating a projected return based on factors in the current environment. Factors considered include, but are not limited to, inflation, real economic growth, interest rate yield, interest rate spreads and other valuation measures and market metrics. The expected long-term rate of return for each asset class is then weighted based on the strategic asset allocation approved by the governing body for each plan. The Company’s historical experience with the pension fund asset performance is also considered.

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

The discount rates utilized to measure the pension and other postretirement obligations of the U.S. plans are based on the yield on high-quality corporate fixed income investments at the measurement date. Future expected actuarially determined cash flows for the Company’s U.S. plans are individually discounted at the spot rates under the Willis Towers Watson U.S. RATE:Link 60-90 corporate yield curve (based on 60th to 90th percentile high-quality corporate bond yields) to arrive at the plan’s obligations as of the measurement date.

The Company utilizes a modified version of the Society of Actuaries’ mortality tables released in 2014 and a modified version of the generational mortality improvement scale released in 2018 for purposes of measuring the U.S. pension and other postretirement obligations, based on an evaluation of the mortality experience of the Company’s pension plans.

Separation from DowDuPont

As a result of the Company’s separation from DowDuPont in 2019, the number of significant defined benefit pension plans administered by the Company decreased from 45 plans to 35 plans, with approximately $270 million of net unfunded pension liabilities transferred to DowDuPont. Plans administered by other subsidiaries of DowDuPont that were transferred to the Company were not significant. There were no changes in the number of significant other postretirement benefit plans administered by the Company as a result of the separation. Existing Company plans that were significantly impacted by the transfer of active plan participants to DowDuPont were remeasured, resulting in curtailment gains and losses and recognition of special termination benefits.

Summarized information on the Company's pension and other postretirement benefit plans is as follows:


Change in Projected Benefit Obligations, Plan Assets and Funded Status of All Significant Plans	Defined Benefit Pension Plans				Other Postretirement Benefit Plans
In millions	2020		2019		2020		2019
Change in projected benefit obligations:
Benefit obligations at beginning of year	$	32,621	$	29,600	$	1,535	$	1,478
Impact of plans transferred to DowDuPont at separation	—		(331)		—		—
Service cost	399		396		7		8
Interest cost	767		921		40		49
Plan participants' contributions	12		12		—		—
Actuarial changes in assumptions and experience	3,021		3,904		7		148
Benefits paid	(1,569)		(1,684)		(132)		(148)
Plan amendments	8		—		—		—
Acquisitions/divestitures/other 1	(692)		(37)		—		—
Effect of foreign exchange rates	791		14		7		3
Termination benefits/curtailments/settlements 2	(49)		(174)		—		(3)
Benefit obligations at end of year	$	35,309	$	32,621	$	1,464	$	1,535

Change in plan assets:
Fair value of plan assets at beginning of year	$	24,908	$	22,544	$	—	$	—
Impact of plans transferred to DowDuPont at separation	—		(61)		—		—
Actual return on plan assets	2,877		3,790		—		—
Employer contributions	299		266		—		—
Plan participants' contributions	12		12		—		—
Benefits paid	(1,569)		(1,684)		—		—
Other 3	(681)		—		—		—
Effect of foreign exchange rates	571		41		—		—
Settlements	(11)		—		—		—
Fair value of plan assets at end of year	$	26,406	$	24,908	$	—	$	—

Funded status:
U.S. plans with plan assets	$	(5,873)	$	(4,768)	$	—	$	—
Non-U.S. plans with plan assets	(2,222)		(2,207)		—		—
All other plans	(808)		(738)		(1,464)		(1,535)

Funded status at end of year	$	(8,903)	$	(7,713)	$	(1,464)	$	(1,535)

Amounts recognized in the consolidated balance sheets at Dec 31:
Deferred charges and other assets	$	1,007	$	623	$	—	$	—
Accrued and other current liabilities	(54)		(49)		(113)		(128)
Pension and other postretirement benefits - noncurrent	(9,856)		(8,287)		(1,351)		(1,407)


Net amount recognized	$	(8,903)	$	(7,713)	$	(1,464)	$	(1,535)

Pretax amounts recognized in accumulated other comprehensive loss at Dec 31:
Net loss (gain)	$	12,736	$	11,761	$	(129)	$	(147)
Prior service credit	(154)		(177)		—		—
Pretax balance in accumulated other comprehensive loss at end of year	$	12,582	$	11,584	$	(129)	$	(147)

1.The 2020 impact relates primarily to the transfer of benefit obligations in the U.S. through the purchase of annuity contracts from an insurance company. The 2019 impact includes the divestiture of a business with pension benefit obligations of $53 million.

2.The 2020 impact relates to pension plan curtailments of a European plan resulting from the 2020 Restructuring Program and the settlement of certain plan obligations of a U.S. non-qualified pension plan resulting from lump-sum payments. The 2019 impact relates to plan curtailments and associated special termination benefits resulting from the reduction in plan participation due to the separation from DowDuPont.

3.The 2020 impact relates to the purchase of annuity contracts associated with the transfer of benefit obligations to an insurance company.

A significant component of the overall increase in the Company's benefit obligation for the year ended December 31, 2020 was due to the change in weighted-average discount rates, which decreased from 2.81 percent at December 31, 2019 to 2.20 percent at December 31, 2020. A significant component of the overall increase in the Company's benefit obligation for the year ended December 31, 2019 was due to the change in weighted-average discount rates, which decreased from 3.69 percent at December 31, 2018 to 2.81 percent at December 31, 2019.

The accumulated benefit obligation for all significant pension plans was $34.1 billion and $31.4 billion at December 31, 2020 and 2019, respectively.


Pension Plans with Accumulated Benefit Obligations in Excess of Plan Assets at Dec 31	2020		2019
In millions
Accumulated benefit obligations	$	29,084	$	26,959
Fair value of plan assets	$	20,130	$	19,571


Pension Plans with Projected Benefit Obligations in Excess of Plan Assets at Dec 31	2020		2019
In millions
Projected benefit obligations	$	30,161	$	28,013

Fair value of plan assets	$	20,251	$	19,677


Net Periodic Benefit Costs for All Significant Plans for the Year Ended Dec 31	Defined Benefit Pension Plans						Other Postretirement Benefit Plans
In millions	2020		2019		2018		2020		2019		2018
Net Periodic Benefit Costs:
Service cost	$	399	$	396	$	520	$	7	$	8	$	12
Interest cost	767		921		886		40		49		45
Expected return on plan assets	(1,658)		(1,679)		(1,644)		—		—		—
Amortization of prior service credit	(19)		(20)		(24)		—		—		—
Amortization of unrecognized (gain) loss	773		574		642		(10)		(20)		(24)
Curtailment/settlement/other 1	9		(27)		—		—		(3)		—
Net periodic benefit costs	$	271	$	165	$	380	$	37	$	34	$	33
Less: discontinued operations	—		21		101		—		—		3
Net periodic benefit costs - continuing operations	$	271	$	144	$	279	$	37	$	34	$	30
Changes in plan assets and benefit obligations recognized in other comprehensive (income) loss:
Net (gain) loss	$	1,753	$	1,606	$	584	$	8	$	145	$	(13)
Prior service cost	8		—		17		—		—		—
Amortization of prior service credit	19		20		24		—		—		—
Amortization of unrecognized gain (loss)	(773)		(574)		(642)		10		20		24
Common control transaction 2	—		(112)		—		—		—		—
Curtailment and settlement gain (loss) 1	(9)		27		—		—		3		—
Total recognized in other comprehensive (income) loss	$	998	$	967	$	(17)	$	18	$	168	$	11
Total recognized in net periodic benefit cost and other comprehensive (income) loss	$	1,269	$	1,132	$	363	$	55	$	202	$	44

1.The 2020 impact relates to pension plan curtailments of a European plan resulting from the 2020 Restructuring Program and the settlement of certain plan obligations of a U.S. non-qualified pension plan resulting from lump-sum payments. The 2019 impact relates to plan curtailments and associated special termination benefits resulting from the reduction in plan participation due to the separation from DowDuPont.

2.The 2019 impact is the result of the separation from DowDuPont.

Except for plan curtailment costs related to the 2020 Restructuring Program, which are included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income, non-service cost components of net periodic benefit cost are included in "Sundry income (expense) - net" in the consolidated statements of income. See Notes 6 and 7 for additional information.

Estimated Future Benefit Payments

The estimated future benefit payments of continuing operations, reflecting expected future service, as appropriate, are presented in the following table:


Estimated Future Benefit Payments at Dec 31, 2020	Defined Benefit Pension Plans		Other Postretirement Benefit Plans
In millions
2021	$	1,647	$	114
2022	1,595		103
2023	1,593		102
2024	1,604		101
2025	1,641		100
2026-2030	8,419		449
Total	$	16,499	$	969

Plan Assets

Plan assets consist primarily of equity and fixed income securities of U.S. and foreign issuers, and include alternative investments, such as real estate, private equity and absolute return strategies. Plan assets totaled $26.4 billion at December 31, 2020 and $24.9 billion at December 31, 2019 and included no directly held common stock of Dow Inc.

The Company's investment strategy for the plan assets is to manage the assets in relation to the liability in order to pay retirement benefits to plan participants over the life of the plans. This is accomplished by identifying and managing the exposure to various market risks, diversifying investments across various asset classes and earning an acceptable long-term rate of return consistent with an acceptable amount of risk, while considering the liquidity needs of the plans.

The plans are permitted to use derivative instruments for investment purposes, as well as for hedging the underlying asset and liability exposure and rebalancing the asset allocation. The plans use value-at-risk, stress testing, scenario analysis and Monte Carlo simulations to monitor and manage both the risk within the portfolios and the surplus risk of the plans.

Equity securities primarily include investments in large- and small-cap companies located in both developed and emerging markets around the world. Fixed income securities include investment and non-investment grade corporate bonds of companies diversified across industries, U.S. treasuries, non-U.S. developed market securities, U.S. agency mortgage-backed securities, emerging market securities and fixed income related funds. Alternative investments primarily include investments in real estate, private equity and absolute return strategies. Other significant investment types include various insurance contracts and interest rate, equity, commodity and foreign exchange derivative investments and hedges.

The Company mitigates the credit risk of investments by establishing guidelines with investment managers that limit investment in any single issue or issuer to an amount that is not material to the portfolio being managed. These guidelines are monitored for compliance both by the Company and external managers. Credit risk related to derivative activity is mitigated by utilizing multiple counterparties, collateral support agreements and centralized clearing, where appropriate.

A short-term investment money market fund is utilized as the sweep vehicle for the U.S. plans, which from time to time can represent a significant investment. For one U.S. plan, approximately 31 percent of the liability is covered by a participating group annuity issued by Prudential Insurance Company.

The weighted-average target allocation for plan assets of the Company's pension plans is summarized as follows:


Target Allocation for Plan Assets at Dec 31, 2020	Target Allocation
Asset Category
Equity securities	35	%
Fixed income securities	36
Alternative investments	28
Other investments	1
Total	100	%

Fair value calculations may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

For pension plan assets classified as Level 1 measurements (measured using quoted prices in active markets), total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.

For pension plan assets classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks. For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatilities obtained from various market sources. For other pension plan assets for which observable inputs are used, fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models.

For pension plan assets classified as Level 3 measurements, total fair value is based on significant unobservable inputs including assumptions where there is little, if any, market activity for the investment.

Certain pension plan assets are held in funds where fair value is based on an estimated net asset value per share (or its equivalent) as of the most recently available fund financial statements which are received on a monthly or quarterly basis. These valuations are reviewed for reasonableness based on applicable sector, benchmark and company performance. Adjustments to valuations are made where appropriate to arrive at an estimated net asset value per share at the measurement date. These funds are not classified within the fair value hierarchy.

The following table summarizes the bases used to measure the Company’s pension plan assets at fair value for the years ended December 31, 2020 and 2019:


Basis of Fair Value Measurements	Dec 31, 2020								Dec 31, 2019
In millions	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	1,298	$	1,103	$	195	$	—	$	754	$	675	$	79	$	—
Equity securities:
U.S. equity securities 1	$	3,934	$	3,911	$	22	$	1	$	3,844	$	3,752	$	91	$	1
Non - U.S. equity securities	5,186		4,213		964		9		4,646		3,819		801		26
Total equity securities	$	9,120	$	8,124	$	986	$	10	$	8,490	$	7,571	$	892	$	27
Fixed income securities:
Debt - government-issued	$	4,998	$	128	$	4,870	$	—	$	4,992	$	197	$	4,795	$	—
Debt - corporate-issued	3,970		553		3,416		1		3,697		607		3,089		1
Debt - asset-backed	103		—		102		1		70		—		69		1
Total fixed income securities	$	9,071	$	681	$	8,388	$	2	$	8,759	$	804	$	7,953	$	2
Alternative investments:

Private markets	$	13	$	—	$	—	$	13	$	11	$	—	$	—	$	11
Real estate	51		51		—		—		25		25		—		—
Derivatives - asset position	697		2		695		—		574		2		572		—
Derivatives - liability position	(594)		(1)		(593)		—		(513)		(2)		(511)		—
Total alternative investments	$	167	$	52	$	102	$	13	$	97	$	25	$	61	$	11
Other investments	$	472	$	22	$	448	$	2	$	411	$	28	$	383	$	—
Subtotal	$	20,128	$	9,982	$	10,119	$	27	$	18,511	$	9,103	$	9,368	$	40
Investments measured at net asset value:
Hedge funds	$	1,350							$	1,595
Private markets	3,135								2,794
Real estate	1,886								2,110
Total investments measured at net asset value	$	6,371							$	6,499
Items to reconcile to fair value of plan assets:
Pension trust receivables 2	$	66							$	70
Pension trust payables 3	(159)								(172)
Total	$	26,406							$	24,908

1.No Dow Inc. common stock was directly held at December 31, 2020 or December 31, 2019.

2.Primarily receivables for investment securities sold.

3.Primarily payables for investment securities purchased.

The following table summarizes the changes in the fair value of Level 3 pension plan assets for the years ended December 31, 2020 and 2019:


Fair Value Measurement of Level 3 Pension Plan Assets	Equity Securities		Fixed Income Securities		Alternative Investments		Other Investments		Total
In millions
Balance at Jan 1, 2019	$	39	$	1	$	1	$	—	$	41
Actual return on assets:
Relating to assets sold during 2019	(2)		—		—		—		(2)
Relating to assets held at Dec 31, 2019	1		—		(14)		—		(13)
Purchases, sales and settlements, net	(11)		1		24		—		14


Balance at Dec 31, 2019	$	27	$	2	$	11	$	—	$	40
Actual return on assets:
Relating to assets sold during 2020	—		—		(11)		—		(11)
Relating to assets held at Dec 31, 2020	(1)		—		8		(1)		6
Purchases, sales and settlements, net	(19)		(1)		5		3		(12)
Transfers into Level 3, net	3		1		—		—		4

Balance at Dec 31, 2020	$	10	$	2	$	13	$	2	$	27

Defined Contribution Plans

U.S. employees may participate in defined contribution plans by contributing a portion of their compensation, which is partially matched by the Company. Defined contribution plans also cover employees in some subsidiaries in other countries, including China, Brazil, Canada, Belgium, Spain and the United Kingdom. Expense of continuing operations recognized for all defined contribution plans was $156 million in 2020, $163 million in 2019 and $186 million in 2018.

NOTE 21 – STOCK-BASED COMPENSATION

The Company grants stock-based compensation to employees and non-employee directors in the form of stock incentive plans, which include stock options, stock appreciation rights, RSUs and restricted stock. The Company also provides stock-based compensation in the form of PSUs.

In connection with the Merger, on August 31, 2017 ("Conversion Date"), all outstanding TDCC stock options and RSU awards were converted into stock options and RSU awards with respect to DowDuPont common stock. The stock options and RSU awards had the same terms and conditions under the applicable plans and award agreements prior to the Merger. All outstanding and nonvested PSU awards were converted into RSU awards with respect to DowDuPont common stock at the greater of the applicable performance target or the actual performance as of the effective time of the Merger. Changes in the fair value of liability instruments are recognized as compensation expense each quarter. TDCC and Historical DuPont did not merge their stock-based compensation plans as a result of the Merger. TDCC and Historical DuPont stock-based compensation plans were assumed by DowDuPont and continued in place with the ability to grant and issue DowDuPont common stock until separation.

In connection with the separation on April 1, 2019, outstanding stock options, RSU and PSU awards were converted to Dow Inc. denominated awards under the “Employer Method,” or DowDuPont denominated awards under the “Shareholder Method,” and adjusted to maintain the intrinsic value of those awards before and after the date of the separation. In connection with the Corteva separation transaction on June 3, 2019, the outstanding DowDuPont denominated stock options, RSU and PSU awards were converted to Corteva and DuPont denominated awards and adjusted to maintain the intrinsic value of those awards before and after the date of the Corteva separation. The awards have the same terms and conditions under the applicable plans and award agreements prior to the separation transactions.

The conversions of stock awards resulted in no incremental compensation expense. Approximately 5,000 employees were impacted by the conversion on April 1, 2019 in connection with Dow Inc.'s separation from DowDuPont. Approximately 4,000 employees were impacted by the conversion on June 3, 2019 in connection with the Corteva separation transaction.

The total stock-based compensation expense included in continuing operations in the consolidated statements of income was $171 million, $158 million and $188 million in 2020, 2019 and 2018, respectively. The income tax benefits related to stock-based compensation arrangements were $39 million, $36 million and $42 million in 2020, 2019 and 2018, respectively. Amounts disclosed throughout the remainder of this footnote are inclusive of activity attributable to both continuing operations and discontinued operations, as the impact of discontinued operations is not significant.

Accounting for Stock-Based Compensation

The Company grants stock-based compensation awards that vest over a specified period or upon employees meeting certain performance and/or retirement eligibility criteria. The fair value of equity instruments issued to employees is measured on the grant date. The fair value of liability instruments (granted to executive employees subject to stock ownership requirements, that provide the recipient the option to elect to receive a cash payment equal to the value of the stock award on the date of delivery) is measured at the end of each quarter. The fair value of equity and liability instruments is expensed over the vesting period or, in the case of retirement, from the grant date to the date on which retirement eligibility provisions have been met and additional service is no longer required. The Company estimates expected forfeitures.

The Company uses the Black-Scholes option valuation model to estimate the fair value of stock options. The weighted-average assumptions used to calculate total stock-based compensation are included in the following table:


Weighted-Average Assumptions	2020		2019		2018
Dividend yield	5.80	%	5.10	%	2.13	%
Expected volatility	26.70	%	26.10	%	23.34	%
Risk-free interest rate	1.49	%	2.43	%	2.83	%
Expected life of stock options granted during period (years)	6.1		6.1		6.2

The dividend yield assumption was equal to the dividend yield on the grant date, which reflected the Company's quarterly dividend payments of $0.70 per share in 2020 on Dow Inc. Common Stock ($0.70 per share in 2019 on Dow Inc. Common Stock and $0.38 per share in 2018 on DowDuPont Common Stock). The expected volatility assumptions for the 2020, 2019 and 2018 stock options were based on an equal weighting of the historical daily volatility for the expected term of the awards and current implied volatility from exchange-traded options. The expected volatility assumption for the market portion of the 2020 and 2019 PSU awards were based on historical daily volatility for the term of the award. The risk-free interest rate was based on the U.S. Treasury strip rates over the expected life of the 2020, 2019 and 2018 options. The expected life of stock options granted was based on an analysis of historical exercise patterns.

Stock Incentive Plan

The Company has historically granted equity awards under various plans (the "Prior Plans"). On February 9, 2012, the Board authorized The Dow Chemical Company 2012 Stock Incentive Plan (the "2012 Plan"), which was approved by stockholders at TDCC's annual meeting on May 10, 2012 ("2012 Plan Effective Date") and became effective on that date. On February 13, 2014, the Board adopted The Dow Chemical Company Amended and Restated 2012 Stock Incentive Plan (the "2012 Restated Plan"). The 2012 Restated Plan was approved by stockholders at TDCC's annual meeting on May 15, 2014, and became effective on that date. The Prior Plans were superseded by the 2012 Plan and the 2012 Restated Plan (collectively, the "2012 Plan"). Under the 2012 Plan, the Company may grant options, RSUs, PSUs, restricted stock, stock appreciation rights and stock units to employees and non-employee directors until the tenth anniversary of the 2012 Plan Effective Date, subject to an aggregate limit and annual individual limits. The terms of the grants are fixed at the grant date. TDCC's stock-based compensation programs were assumed by DowDuPont and continued in place with the ability to grant and issue DowDuPont common stock until separation.

On April 1, 2019 ("Original Effective Date"), in connection with the separation, the Company adopted the 2019 Stock Incentive Plan (the "2019 Plan"). Under the 2019 Plan, the Company may grant stock options, RSUs, PSUs, stock appreciation rights and stock units to employees and non-employee directors until the tenth anniversary of the Original Effective Date, subject to an aggregate limit and annual individual limits. The terms of the grants are fixed at the grant date. At December 31, 2020, there were approximately 16 million shares of common stock available for grant under the 2019 Plan.

Stock Options

The Company grants stock options to certain employees, subject to certain annual and individual limits, with terms of the grants fixed at the grant date. The exercise price of each stock option equals the market price of the common stock on the grant date. Options vest from one to three years and have a maximum term of ten years. The following table summarizes stock option activity for 2020:


Stock Options	2020
Shares in thousands	Shares		Exercise Price 1
Outstanding at Jan 1, 2020	21,265		$	45.96
Granted	2,191		$	48.30
Exercised	(3,002)		$	36.78
Forfeited/Expired	(202)		$	59.70
Outstanding at Dec 31, 2020	20,252		$	47.44
Remaining contractual life in years			4.63
Aggregate intrinsic value in millions	$	209
Exercisable at Dec 31, 2020	16,564		$	46.11
Remaining contractual life in years			3.76
Aggregate intrinsic value in millions	$	192

1.Weighted-average per share.


Additional Information about Stock Options
In millions, except per share amounts	2020		2019		2018
Weighted-average fair value per share of options granted	$	5.89	$	7.99	$	15.38
Total compensation expense for stock option plans	$	22	$	23	$	68
Related tax benefit	$	5	$	5	$	15
Total amount of cash received from the exercise of options	$	108	$	93	$	112
Total intrinsic value of options exercised 1	$	41	$	77	$	160
Related tax benefit	$	9	$	17	$	36

1.Difference between the market price at exercise and the price paid by the employee to exercise the options.

Total unrecognized compensation cost related to unvested stock option awards of $8 million at December 31, 2020, is expected to be recognized over a weighted-average period of 1.34 years.

Restricted Stock Units

The Company grants RSUs to certain employees and non-employee directors. The grants vest after a designated period of time, generally three years for employees and two years for non-employee directors. The following table shows changes in nonvested RSUs:


RSU Awards	2020
Shares in thousands	Shares	Grant Date Fair Value 1
Nonvested at Jan 1, 2020	2,454	$	59.98
Granted	2,065	$	47.66
Vested	(1,422)	$	55.53
Canceled	(90)	$	54.69
Nonvested at Dec 31, 2020	3,007	$	53.78

1.Weighted-average per share.


Additional Information about RSUs
In millions, except per share amounts	2020		2019		2018
Weighted-average fair value per share of RSUs granted	$	47.66	$	54.78	$	71.46
Total fair value of RSUs vested 1	$	106	$	264	$	382
Related tax benefit	$	24	$	59	$	86
Total compensation expense for RSU awards	$	93	$	110	$	144
Related tax benefit	$	21	$	25	$	32

1.Includes the fair value of shares vested in prior years and delivered in the reporting year.

In 2020, the Company paid $4 million in cash, equal to the value of the stock award on the date of delivery, to certain executive employees to settle approximately 85,000 RSUs (341,000 RSUs settled in cash for $19 million in 2019 and 625,000 RSUs settled in cash for $45 million in 2018). Total unrecognized compensation cost related to RSU awards of $75 million at December 31, 2020 is expected to be recognized over a weighted-average period of 1.69 years. At December 31, 2020, approximately 1.3 million RSUs with a grant date weighted-average fair value per share of $53.91 had previously vested, but were not issued. These shares are scheduled to be issued to employees within six months to three years or upon retirement.

Performance Stock Units

The Company grants PSUs to certain employees. The grants vest when the Company attains specified performance targets, such as return on capital and relative total shareholder return, over a predetermined period, generally one to three years. In November 2017, the Company granted PSUs to senior leadership measured on the realization of cost savings in connection with cost synergy commitments, as well as the Company’s ability to complete the business separations. Performance and payouts are determined independently for each metric. Compensation expense related to PSU awards is recognized over the lesser of the service or performance period. Changes in the fair value of liability instruments are recognized as compensation expense each quarter.

The following table shows the PSU awards granted:


PSU Awards		Target Shares Granted 1	Grant Date Fair Value 2
Shares in thousands
Year	Performance Period
2020	Jan 1, 2020 – Dec 31, 2022	1,426	$	48.35
2019	Apr 1, 2019 – Dec 31, 2021	1,173	$	57.58
2017	Sep 1, 2017 – Aug 31, 2019	232	$	71.16
2017 3	Jan 1, 2017 – Dec 31, 2019	1,728	$	81.99

1.At the end of the performance period, the actual number of shares issued can range from zero to 200 percent of target shares granted.

2.Weighted-average per share.

3.Converted to RSUs as a result of the Merger.

The following table shows changes in nonvested PSUs:


PSUs	2020
Shares in thousands	Shares	Grant Date Fair Value 1
Nonvested at Jan 1, 2020	1,121	$	57.58
Granted	1,426	$	48.35
Vested	—	$	—
Canceled	(59)	$	53.09
Nonvested at Dec 31, 2020	2,488	$	53.78

1.Weighted-average per share.


Additional Information about PSUs
In millions, except share amounts	2020		2019		2018
Total fair value of PSUs vested and delivered 1	$	—	$	18	$	—
Related tax benefit	$	—	$	4	$	—
Total compensation expense for PSU awards	$	56	$	25	$	12
Related tax benefit	$	13	$	6	$	3
Shares of PSUs settled in cash (in thousands) 2	—		162		—
Total cash paid to settle PSUs 3	$	—	$	13	$	—

1.Includes the fair value of shares vested in prior years and delivered in the reporting year.

2.PSU awards vested in prior years and delivered in the reporting year.

3.Cash paid to certain executive employees for PSU awards vested in prior periods and delivered in the reporting year, equal to the value of the stock award on the date of delivery.

Total unrecognized compensation cost related to PSU awards of $31 million at December 31, 2020, is expected to be recognized over a weighted-average period of 1.67 years.

Restricted Stock

Under the 2012 Plan, the Company granted shares (including options, stock appreciation rights, stock units and restricted stock) to non-employee directors over the 10-year duration of the program, subject to the plan's aggregate limit as well as annual individual limits. The restricted stock issued under this plan cannot be sold, assigned, pledged or otherwise transferred by the non-employee director, until retirement or termination of service to the Company. In 2018, 36,000 shares of restricted stock with a weighted average fair value of $62.82 were issued under this plan. In 2019 and 2020, there were no restricted stock shares issued under this plan.

NOTE 22 – FINANCIAL INSTRUMENTS

The following table summarizes the fair value of financial instruments at December 31, 2020 and 2019:


Fair Value of Financial Instruments at Dec 31	2020								2019
In millions	Cost		Gain		Loss		Fair Value		Cost		Gain		Loss		Fair Value
Cash equivalents:
Held-to-maturity securities 1	$	980	$	—	$	—	$	980	$	220	$	—	$	—	$	220
Money market funds	484		—		—		484		408		—		—		408
Total cash equivalents	$	1,464	$	—	$	—	$	1,464	$	628	$	—	$	—	$	628
Marketable securities 2	$	45	$	—	$	—	$	45	$	21	$	—	$	—	$	21
Other investments:
Debt securities:
Government debt 3	$	673	$	35	$	(10)	$	698	$	533	$	33	$	(11)	$	555
Corporate bonds	822		119		(5)		936		944		80		(10)		1,014
Total debt securities	$	1,495	$	154	$	(15)	$	1,634	$	1,477	$	113	$	(21)	$	1,569
Equity securities 4	6		34		—		40		10		6		(1)		15
Total other investments	$	1,501	$	188	$	(15)	$	1,674	$	1,487	$	119	$	(22)	$	1,584
Total cash equivalents, marketable securities and other investments	$	3,010	$	188	$	(15)	$	3,183	$	2,136	$	119	$	(22)	$	2,233
Long-term debt including debt due within one year 5	$	(16,951)	$	6	$	(3,659)	$	(20,604)	$	(16,410)	$	7	$	(2,258)	$	(18,661)
Derivatives relating to:
Interest rates 6	$	—	$	41	$	(182)	$	(141)	$	—	$	8	$	(283)	$	(275)
Foreign currency	—		69		(84)		(15)		—		101		(21)		80
Commodities 6	—		63		(84)		(21)		—		59		(115)		(56)
Total derivatives	$	—	$	173	$	(350)	$	(177)	$	—	$	168	$	(419)	$	(251)

1.The Company's held-to-maturity securities primarily included treasury bills and time deposits.

2.The Company's investments in marketable securities are included in "Other current assets" in the consolidated balance sheets.

3.U.S. Treasury obligations, U.S. agency obligations, U.S. agency mortgage-backed securities and other municipalities’ obligations.

4.Equity securities with a readily determinable fair value.

5.Cost includes fair value hedge adjustment gains of $69 million at December 31, 2020 and losses of $1 million at December 31, 2019 on $3,314 million of debt at December 31, 2020 and $3,490 million of debt at December 31, 2019.

6.Presented net of cash collateral where master netting arrangements allow.

Cost approximates fair value for all other financial instruments.

Debt Securities

The Company’s investments in debt securities are primarily classified as available-for-sale. The following table provides the investing results from available-for-sale securities for the years ended December 31, 2020, 2019 and 2018.


Investing Results
In millions	2020		2019		2018
Proceeds from sales of available-for-sale securities	$	837	$	1,138	$	1,053
Gross realized gains	$	94	$	51	$	21
Gross realized losses	$	40	$	18	$	30

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


Contractual Maturities of Debt Securities at Dec 31, 2020 1	Cost		Fair Value
In millions
Within one year	$	25	$	25
One to five years	406		448
Six to ten years	649		685
After ten years	415		476
Total	$	1,495	$	1,634

1.Includes marketable securities with maturities of less than one year.

Portfolio managers regularly review the Company’s holdings to determine if any investments in debt securities are other-than-temporarily impaired. The analysis includes reviewing the amount of the impairment, as well as the length of time it has been impaired.

The credit rating of the issuer, current credit rating trends, the trends of the issuer’s overall sector, the ability of the issuer to pay expected cash flows and the length of time the security has been in a loss position are considered in determining whether unrealized losses represent an other-than-temporary impairment. The Company did not have any credit-related losses in 2020, 2019 or 2018.

The following table provides the fair value and gross unrealized losses of the Company’s investments in debt securities that were deemed to be temporarily impaired at December 31, 2020 and 2019, aggregated by investment category:


Temporarily Impaired Debt Securities at Dec 31	Less than 12 months				12 months or more				Total
Fair Value	Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
In millions
2020
Government debt 1	$	124	$	(3)	$	7	$	(7)	$	131	$	(10)
Corporate bonds	55		(3)		12		(2)		67		(5)
Total temporarily impaired debt securities	$	179	$	(6)	$	19	$	(9)	$	198	$	(15)
2019
Government debt 1	$	55	$	(3)	$	23	$	(8)	$	78	$	(11)
Corporate bonds	79		(3)		52		(7)		131		(10)
Total temporarily impaired debt securities	$	134	$	(6)	$	75	$	(15)	$	209	$	(21)

1.U.S. Treasury obligations, U.S. agency obligations, U.S. agency mortgage-backed securities and other municipalities' obligations.

Equity Securities

There were no material adjustments to the carrying value of the not readily determinable investments for impairment or observable price changes for the year ended December 31, 2020. The net unrealized gain recognized in earnings on equity securities totaled $32 million for the year ended December 31, 2020 ($5 million net unrealized gain for the year ended December 31, 2019).


Investments in Equity Securities	Dec 31, 2020		Dec 31, 2019
In millions
Readily determinable fair value	$	40	$	15
Not readily determinable fair value	$	215	$	189

Risk Management

The Company’s business operations give rise to market risk exposure due to changes in foreign exchange rates, interest rates, commodity prices and other market factors such as equity prices. To manage such risks effectively, the Company enters into hedging transactions, pursuant to established guidelines and policies that enable it to mitigate the adverse effects of financial market risk. Derivatives used for this purpose are designated as hedges per

the accounting guidance related to derivatives and hedging activities, where appropriate. A secondary objective is to add value by creating additional non-specific exposure within established limits and policies; derivatives used for this purpose are not designated as hedges. The potential impact of creating such additional exposures is not material to the Company’s results. Accounting guidance requires companies to recognize all derivative instruments as either assets or liabilities at fair value.

The Company’s risk management program for interest rate, foreign currency and commodity risks is based on fundamental, mathematical and technical models that take into account the implicit cost of hedging. Risks created by derivative instruments and the mark-to-market valuations of positions are strictly monitored at all times, using value-at-risk and stress tests. Counterparty credit risk arising from these contracts is not significant because the Company minimizes counterparty concentration, deals primarily with major financial institutions of solid credit quality, and the majority of its hedging transactions mature in less than three months. In addition, the Company minimizes concentrations of credit risk through its global orientation by transacting with large, internationally diversified financial counterparties. It is the Company’s policy to not have credit risk-related contingent features in its derivative instruments. No significant concentration of counterparty credit risk existed at December 31, 2020. The Company does not anticipate losses from credit risk, and the net cash requirements arising from counterparty risk associated with risk management activities are not expected to be material in 2021.

The Company revises its strategies as market conditions dictate and management reviews its overall financial strategies and the impacts from using derivatives in its risk management program with the Company’s senior leadership who also reviews these strategies with the Dow Inc. Board and/or relevant committees thereof.

Derivative Instruments

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


Notional Amounts - Net	Dec 31, 2020		Dec 31, 2019
In millions
Derivatives designated as hedging instruments
Interest rate contracts	$	612	$	922
Foreign currency contracts	$	3,784	$	6,253
Derivatives not designated as hedging instruments
Interest rate contracts	$	94	$	145
Foreign currency contracts	$	9,187	$	5,567

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


Commodity Notionals - Net	Dec 31, 2020	Dec 31, 2019	Notional Volume Unit

Derivatives designated as hedging instruments
Hydrocarbon derivatives	10.9	6.1	million barrels of oil equivalent





Derivatives not designated as hedging instruments
Hydrocarbon derivatives	—	0.1	million barrels of oil equivalent
Power derivatives	—	87.5	thousands of megawatt hours


Maturity Dates of Derivatives Designated as Hedging Instruments			Year
Interest rate contracts			2021
Foreign currency contracts			2021
Commodity contracts			2022

Interest Rate Risk Management

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

Foreign Currency Risk Management

The global nature of the Company's business requires active participation in the foreign exchange markets. The Company has assets, liabilities and cash flows in currencies other than the U.S. dollar. The primary objective of the Company's foreign currency risk management is to optimize the U.S. dollar value of net assets and cash flows. To achieve this objective, the Company hedges on a net exposure basis using foreign currency forward contracts, over-the-counter option contracts, cross-currency swaps and nonderivative instruments in foreign currencies. Exposures primarily relate to assets, liabilities and bonds denominated in foreign currencies, as well as economic exposure, which is derived from the risk that currency fluctuations could affect the dollar value of future cash flows related to operating activities.

Commodity Risk Management

The Company has exposure to the prices of commodities in its procurement of certain raw materials. The primary purpose of commodity hedging activities is to manage the price volatility associated with these forecasted inventory purchases.

Derivatives Not Designated in Hedging Relationships

Foreign Currency Contracts

The Company also uses foreign exchange forward contracts, options and cross-currency swaps that are not designated as hedging instruments primarily to manage foreign currency exposure.

Commodity Contracts

The Company utilizes futures, options and swap instruments that are effective as economic hedges of commodity price exposures, but do not meet hedge accounting criteria for derivatives and hedging, to reduce exposure to commodity price fluctuations on purchases of raw materials and inventory.

Interest Rate Contracts

The Company uses swap instruments that are not designated as hedging instruments to manage interest rate exposures. The Company uses interest rate swaps, "swaptions," and exchange-traded instruments to accomplish this objective.

Accounting for Derivative Instruments and Hedging Activities

Cash Flow Hedges

For derivatives that are designated and qualify as cash flow hedging instruments, the gain or loss on the derivative is recorded in AOCL; it is reclassified to income in the same period or periods that the hedged transaction affects income. The unrealized amounts in AOCL fluctuate based on changes in the fair value of open contracts at the end of each reporting period. The Company anticipates volatility in AOCL and net income from its cash flow hedges. The amount of volatility varies with the level of derivative activities and market conditions during any period.

The portion of the mark-to-market effects of the foreign currency contracts is recorded in AOCL; it is reclassified to income in the same period or periods that the underlying item affects income.

Commodity swaps, futures and option contracts with maturities of not more than 60 months are utilized and designated as cash flow hedges of forecasted commodity purchases. The designated portion of the mark-to-market effect of the cash flow hedge instrument is recorded in AOCL; it is reclassified to income in the same period or periods that the underlying commodity purchase affects income.

Fair Value Hedges

For interest rate instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedge item attributable to the hedged risk are recognized in current period income and reflected as “Interest expense and amortization of debt discount” in the consolidated statements of income, except for amounts excluded from the assessment of effectiveness that are recognized in earnings through an amortization approach.

Net Foreign Investment Hedges

The Company designates derivatives that qualify as effective net foreign investment hedges, the results of which are presented in the effect of derivative instruments table. In addition, the Company utilizes non-derivative instruments as net foreign investment hedges. The Company had outstanding foreign-currency denominated debt designated as a hedge of net foreign investment of $194 million at December 31, 2020 ($184 million at December 31, 2019).

The following tables provide the fair value and balance sheet classification of derivative instruments at December 31, 2020 and 2019:


Fair Value of Derivative Instruments		Dec 31, 2020
In millions	Balance Sheet Classification	Gross		Counterparty and Cash Collateral Netting 1		Net Amounts Included in the Consolidated Balance Sheets
Asset derivatives
Derivatives designated as hedging instruments
Interest rate contracts	Other current assets	$	3	$	(3)	$	—
Foreign currency contracts	Other current assets	39		(19)		20
Commodity contracts	Other current assets	146		(109)		37
Commodity contracts	Deferred charges and other assets	31		(8)		23
Total		$	219	$	(139)	$	80
Derivatives not designated as hedging instruments
Interest rate contracts	Deferred charges and other assets	$	41	$	—	$	41
Foreign currency contracts	Other current assets	74		(25)		49
Commodity contracts	Other current assets	4		(1)		3
Total		$	119	$	(26)	$	93
Total asset derivatives		$	338	$	(165)	$	173

Liability derivatives
Derivatives designated as hedging instruments
Interest rate contracts	Accrued and other current liabilities	$	7	$	(3)	$	4
Foreign currency contracts	Accrued and other current liabilities	93		(19)		74
Commodity contracts	Accrued and other current liabilities	151		(112)		39
Commodity contracts	Other noncurrent obligations	48		(9)		39
Total		$	299	$	(143)	$	156
Derivatives not designated as hedging instruments
Interest rate contracts	Other noncurrent obligations	$	178	$	—	$	178
Foreign currency contracts	Accrued and other current liabilities	35		(25)		10
Commodity contracts	Accrued and other current liabilities	9		(3)		6
Total		$	222	$	(28)	$	194
Total liability derivatives		$	521	$	(171)	$	350

1.Counterparty and cash collateral amounts represent the estimated net settlement amount when applying netting and set-off rights included in master netting arrangements between the Company and its counterparties and the payable or receivable for cash collateral held or placed with the same counterparty.


Fair Value of Derivative Instruments		Dec 31, 2019
In millions	Balance Sheet Classification	Gross		Counterparty and Cash Collateral Netting 1		Net Amounts Included in the Consolidated Balance Sheets
Asset derivatives
Derivatives designated as hedging instruments
Interest rate contracts	Other current assets	$	21	$	(13)	$	8
Foreign currency contracts	Other current assets	105		(36)		69
Commodity contracts	Other current assets	44		(25)		19
Commodity contracts	Deferred charges and other assets	28		(3)		25
Total		$	198	$	(77)	$	121
Derivatives not designated as hedging instruments
Interest rate contracts	Other current assets	$	14	$	(14)	$	—

Foreign currency contracts	Other current assets	44		(12)		32
Commodity contracts	Other current assets	18		(3)		15

Total		$	76	$	(29)	$	47
Total asset derivatives		$	274	$	(106)	$	168

Liability derivatives
Derivatives designated as hedging instruments
Interest rate contracts	Accrued and other current liabilities	$	23	$	(13)	$	10
Interest rate contracts	Other noncurrent obligations	1		—		1
Foreign currency contracts	Accrued and other current liabilities	46		(36)		10
Commodity contracts	Accrued and other current liabilities	95		(29)		66
Commodity contracts	Other noncurrent obligations	38		(4)		34
Total		$	203	$	(82)	$	121
Derivatives not designated as hedging instruments
Interest rate contracts	Accrued and other current liabilities	$	136	$	(14)	$	122
Interest rate contracts	Other noncurrent obligations	150		—		150
Foreign currency contracts	Accrued and other current liabilities	23		(12)		11
Commodity contracts	Accrued and other current liabilities	17		(3)		14
Commodity contracts	Other noncurrent obligations	1		—		1
Total		$	327	$	(29)	$	298
Total liability derivatives		$	530	$	(111)	$	419

Assets and liabilities related to forward contracts, interest rate swaps, currency swaps, options and other conditional or exchange contracts executed with the same counterparty under a master netting arrangement are netted. Collateral accounts are netted with corresponding assets or liabilities, when applicable. The Company posted cash collateral of $7 million at December 31, 2020 ($5 million at December 31, 2019). No cash collateral was posted by counterparties with the Company at December 31, 2020 ($3 million at December 31, 2019).

The following table summarizes the gain (loss) of derivative instruments in the consolidated statements of income and comprehensive income for the years ended December 31, 2020, 2019 and 2018:


Effect of Derivative Instruments	Amount of gain (loss) recognized in OCI 1						Amount of gain (loss) recognized in income 2						Income Statement Classification
In millions	2020		2019		2018		2020		2019		2018
Derivatives designated as hedging instruments:
Fair value hedges:
Interest rate contracts	$	—	$	—	$	—	$	69	$	17	$	—	Interest expense and amortization of debt discount 3
Excluded components 4	7		(3)		—		—		—		—		Interest expense and amortization of debt discount
Cash flow hedges:
Interest rate contracts	—		(316)		26		(2)		1		(3)		Interest expense and amortization of debt discount
Foreign currency contracts	(20)		16		19		3		28		(18)		Cost of sales
Foreign currency contracts	—		10		(3)		—		8		—		Sundry income (expense) - net
Commodity contracts	(8)		(6)		(46)		(31)		(81)		(69)		Cost of sales
Net foreign investment hedges:
Foreign currency contracts	(38)		(52)		116		—		—		—
Excluded components 4	27		162		—		20		99		—		Sundry income (expense) - net
Total derivatives designated as hedging instruments	$	(32)	$	(189)	$	112	$	59	$	72	$	(90)
Derivatives not designated as hedging instruments:
Interest rate contracts	$	—	$	—	$	—	$	(16)	$	(4)	$	—	Interest expense and amortization of debt discount
Foreign currency contracts	—		—		—		28		45		101		Sundry income (expense) - net
Commodity contracts	—		—		—		11		(28)		(12)		Cost of sales
Total derivatives not designated as hedging instruments	$	—	$	—	$	—	$	23	$	13	$	89
Total derivatives	$	(32)	$	(189)	$	112	$	82	$	85	$	(1)

1.OCI is defined as other comprehensive income (loss).

2.Pretax amounts.

3.Gain (loss) recognized in income of derivatives is offset by gain (loss) recognized in income of the hedged item.

4.The excluded components are related to the time value of the derivatives designated as hedges.

The following table provides the net after-tax amounts to be reclassified from AOCL to income within the next 12 months:


Expected Reclassifications from AOCL within the next 12 months	Dec 31, 2020
Cash flow hedges:
Interest rate contracts	$	(8)
Commodity contracts	$	(1)
Foreign currency contracts	$	(18)
Net foreign investment hedges:
Excluded components	$	2

NOTE 23 – FAIR VALUE MEASUREMENTS

Fair Value Measurements on a Recurring Basis

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis:


Basis of Fair Value Measurements on a Recurring Basis	Dec 31, 2020				Dec 31, 2019
In millions	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets at fair value:
Cash equivalents:
Held-to-maturity securities 1	$	—	$	980	$	980	$	—	$	220	$	220
Money market funds	—		484		484		—		408		408
Marketable securities 2	—		45		45		—		21		21
Equity securities 3	40		—		40		15		—		15
Debt securities: 3
Government debt 4	—		698		698		—		555		555
Corporate bonds	28		908		936		22		992		1,014
Derivatives relating to: 5
Interest rates	—		44		44		—		35		35
Foreign currency	—		113		113		—		149		149
Commodities	8		173		181		23		67		90
Total assets at fair value	$	76	$	3,445	$	3,521	$	60	$	2,447	$	2,507
Liabilities at fair value:
Long-term debt including debt due within one year 6	$	—	$	20,604	$	20,604	$	—	$	18,661	$	18,661

Derivatives relating to: 5
Interest rates	—		185		185		—		310		310
Foreign currency	—		128		128		—		69		69
Commodities	7		201		208		14		137		151
Total liabilities at fair value	$	7	$	21,118	$	21,125	$	14	$	19,177	$	19,191

1.The Company's held-to-maturity securities primarily included treasury bills and time deposits.

2.The Company's investments in marketable securities are included in "Other current assets" in the consolidated balance sheets.

3.The Company's investments in debt securities, which are primarily available-for-sale, and equity securities are included in "Other investments" in the consolidated balance sheets.

4.U.S. Treasury obligations, U.S. agency obligations, U.S. agency mortgage-backed securities and other municipalities' obligations.

5.See Note 22 for the classification of derivatives in the consolidated balance sheets.

6.See Note 22 for information on fair value measurements of long-term debt.

For assets and liabilities classified as Level 1 measurements (measured using quoted prices in active markets), total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.

For assets and liabilities classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability, or by using observable market data points of similar, more liquid securities to imply the price. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks.

For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatilities obtained from various market sources. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance/quality checks.

For all other assets and liabilities for which observable inputs are used, fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models. See Note 22 for further information on the types of instruments used by the Company for risk management.

There were no transfers between Levels 1 and 2 in the years ended December 31, 2020 and 2019.

For assets classified as Level 3 measurements, the fair value is based on significant unobservable inputs including assumptions where there is little, if any, market activity. The fair value of the Company’s interests held in trade accounts receivable conduits is determined by calculating the expected amount of cash to be received using the key input of anticipated credit losses in the portfolio of receivables sold that have not yet been collected. Given the short-term nature of the underlying receivables, discount rate and prepayments are not factors in determining the fair value of the interests. See Note 14 for further information on assets classified as Level 3 measurements.

For equity securities calculated at net asset value per share (or its equivalent), the Company had $111 million in private equity and $19 million in real estate at December 31, 2020 ($117 million in private equity and $18 million in real estate at December 31, 2019). There are no redemption restrictions and the unfunded commitments on these investments were $63 million at December 31, 2020 ($76 million at December 31, 2019).

The following table summarizes the changes in fair value measurements using Level 3 inputs for the year ended December 31, 2018:


Fair Value Measurements Using Level 3 Inputs for Interests Held in Trade Accounts Receivable Conduits	2018
In millions
Balance at Jan 1	$	677
Gain (loss) included in earnings 1	3

Settlements 2	(680)
Balance at Dec 31	$	—

1.Included in "Selling, general and administrative expenses" in the consolidated statements of income.

2.Includes noncash transactions of $23 million for the year ended December 31, 2018.

Fair Value Measurements on a Nonrecurring Basis

The following table summarizes the bases used to measure certain assets at fair value on a nonrecurring basis in the consolidated balance sheets in 2020, 2019 and 2018:


Basis of Fair Value Measurements on a Nonrecurring Basis at Dec 31	(Level 3)		Total Losses
In millions
2020
Assets at fair value:
Long-lived assets and other assets	$	121	$	(245)
2019
Assets at fair value:
Long-lived assets, other assets and equity method investments	$	162	$	(2,031)
Goodwill	$	—	$	(1,039)
2018
Assets at fair value:
Long-lived assets and other assets	$	—	$	(67)

2020 Fair Value Measurements on a Nonrecurring Basis

As part of the 2020 Restructuring Program, the Company has or will shut down and write off several small manufacturing facilities and miscellaneous assets around the world. The assets associated with this plan were written down to zero. In addition, impairments of leased, non-manufacturing facilities, which were classified as Level 3 measurements, resulted in a write-down of right-of-use assets to a fair value of $110 million using unobservable inputs. The impairment charges related to the 2020 Restructuring Program, totaling $196 million, were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated

statements of income and related to Packaging & Specialty Plastics ($11 million), Industrial Intermediates & Infrastructure ($22 million), Performance Materials & Coatings ($116 million) and Corporate ($47 million).

In 2020, the Company recognized impairment charges of $30 million related to the write-down of a non-manufacturing asset and certain corporate leased equipment and the write-off of a capital project. The assets, classified as Level 3 measurements, were valued at $11 million using unobservable inputs. The impairment charges were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Performance Materials & Coatings ($15 million) and Corporate ($15 million).

In 2020, the Company recognized an additional pretax impairment charge of $19 million related to capital additions made to a bio-ethanol manufacturing facility in Santa Vitoria, Minas Gerais, Brazil, which was impaired in 2017. The assets were written down to zero in 2020. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics. On September 29, 2020, the Company divested the bio-ethanol manufacturing facility. See Note 6 for additional information.

2019 Fair Value Measurements on a Nonrecurring Basis

As part of the Synergy Program, the Company has or will shut down and write-off several small manufacturing facilities, non-manufacturing assets and certain corporate facilities around the world. In 2019, manufacturing facilities associated with this plan were written down to zero. In addition, impairments of leased, non-manufacturing facilities, which were classified as Level 3 measurements, resulted in a write-down of right-of-use assets to a fair value of $152 million using unobservable inputs. The impairment charges related to the Synergy Program, totaling $143 million, were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Industrial Intermediates & Infrastructure ($2 million), Performance Materials & Coatings ($28 million) and Corporate ($113 million).

In 2019, the Company recognized an additional pretax impairment charge of $44 million related to capital additions made to Santa Vitoria, which was impaired in 2017. The assets were written down to zero in 2019. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics.

In 2019, the Company recognized impairment charges of $14 million related to non-manufacturing assets. The assets, classified as Level 3 measurements, were valued at $10 million using unobservable inputs. The impairment charges were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Performance Materials & Coatings ($9 million) and Corporate ($5 million).

In 2019, the Company recognized an impairment charge of $75 million resulting from the planned divestiture of its acetone derivatives business to ALTIVIA Ketones & Additives, LLC. The transaction closed on November 1, 2019 and included the Company's acetone derivatives related inventory and production assets, located in Institute, West Virginia, in addition to the site infrastructure, land and utilities. The assets, classified as Level 3 measurements and valued using unobservable inputs, were written down to zero in 2019, except for inventory, which was sold at the lower of cost or market. The impairment charge was included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($24 million) and Corporate ($51 million).

In the fourth quarter of 2019, the Company performed its annual goodwill impairment testing utilizing a discounted cash flow methodology as its valuation technique. As a result, the Company determined the fair value of the C&PM reporting unit was lower than its carrying amount and recorded an impairment charge of $1,039 million, included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Performance Materials & Coatings. See Note 13 for additional information on the impairment charge.

In the fourth quarter of 2019, the Company concluded that its equity method investment in Sadara, classified as a Level 3 measurement and valued using unobservable inputs, was other-than-temporarily impaired and written down to zero. Additionally, the Company reserved certain accounts and notes receivable and accrued interest balances due to uncertainty on the timing of collection. As a result, the Company recorded a $1,755 million charge related to Sadara. The charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to Packaging & Specialty Plastics ($370 million), Industrial Intermediates & Infrastructure ($1,168 million) and Corporate ($217 million). See Note 12 for additional information.

2018 Fair Value Measurements on a Nonrecurring Basis

The Company has or will shut down a number of manufacturing and other non-manufacturing facilities and corporate facilities around the world as part of its restructuring programs. In 2018, the manufacturing facilities and related assets and corporate facilities associated with these programs were written down to zero. The impairment charges related to the restructuring programs, totaling $33 million, were included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income and related to Packaging & Specialty Plastics ($10 million), Performance Materials & Coatings ($7 million) and Corporate ($16 million).

In 2018, the Company recognized an additional pretax impairment charge of $34 million related primarily to capital additions made to Santa Vitoria, which was impaired in 2017. The assets were written down to zero in 2018. The impairment charge was included in “Restructuring, goodwill impairment and asset related charges - net” in the consolidated statements of income and related to the Packaging & Specialty Plastics segment.

See Note 6 for additional information on the Company's restructuring activities.

NOTE 24 – VARIABLE INTEREST ENTITIES

Consolidated Variable Interest Entities ("VIEs")

The Company holds a variable interest in the following joint ventures or entities for which it is the primary beneficiary:

Asia Pacific Joint Ventures

The Company has variable interests in two joint ventures that own and operate manufacturing and logistics facilities, which produce chemicals and provide services in Asia Pacific. The Company's variable interests in these joint ventures relate to arrangements between the joint ventures and the Company, involving the majority of the output on take-or-pay terms with pricing ensuring a guaranteed return to the joint ventures.

The Company was a 50 percent indirect owner in a propylene oxide ("PO") manufacturing joint venture in Asia Pacific. The Company had a variable interest in this joint venture relating to arrangements between the joint venture and the Company involving the majority of the output on take-or-pay terms, with pricing ensuring a guaranteed return to the joint venture. On April 30, 2019, the Company executed an agreement to acquire full ownership in the PO manufacturing joint venture. The transaction closed on October 1, 2019, for a cash purchase price of $331 million. Approximately half of the purchase price was attributed to the Company’s proportionate equity interest in the entity that owned the PO manufacturing joint venture, which is accounted for under the equity method of accounting, and was classified as "Investments in and loans to nonconsolidated affiliates" in the consolidated statements of cash flows. The remaining $166 million was classified as "Purchases of noncontrolling interests" in the consolidated statements of cash flows.

Ethylene Storage Joint Venture

The Company has variable interests in a joint venture that provides ethylene storage in Alberta, Canada. The Company's variable interests relate to arrangements involving a majority of the joint venture's storage capacity on take-or-pay terms with pricing ensuring a guaranteed return to the joint venture; and favorably priced leases provided to the joint venture. The Company provides the joint venture with operation and maintenance services and utilities.

Cogeneration in Brazil

The Company held variable interests in a cogeneration facility in Brazil that provided power to the Company's bio-ethanol manufacturing facility. The Company's variable interests were the result of a tolling arrangement where it provided fuel to the entity and purchased a majority of the cogeneration facility’s output on terms that ensured a return to the entity’s equity holders. On September 29, 2020, the Company divested its bio-ethanol manufacturing facility and is no longer a party to the tolling arrangement with the cogeneration facility.

Assets and Liabilities of Consolidated VIEs

The Company's consolidated financial statements include the assets, liabilities and results of operations of VIEs for which the Company is the primary beneficiary. The other equity holders’ interests are reflected in "Net income attributable to noncontrolling interests" in the consolidated statements of income and "Noncontrolling interests" in the consolidated balance sheets.

The following table summarizes the carrying amounts of these entities’ assets and liabilities included in the Company’s consolidated balance sheets at December 31, 2020 and 2019:


Assets and Liabilities of Consolidated VIEs at Dec 31
In millions	2020		2019
Cash and cash equivalents	$	26	$	37
Other current assets	44		51
Net property	232		330
Other noncurrent assets	17		18
Total assets 1	$	319	$	436
Current liabilities	$	73	$	141
Long-term debt	6		34
Other noncurrent obligations	18		21
Total liabilities 2	$	97	$	196

1.All assets were restricted at December 31, 2020 and 2019.

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

Amounts presented in the consolidated balance sheets and the table above as restricted assets or nonrecourse obligations relating to consolidated VIEs at December 31, 2020 and 2019 are adjusted for intercompany eliminations.

Nonconsolidated VIEs

The Company holds a variable interest in the following entities for which the Company is not the primary beneficiary:

Silicon Joint Ventures

The Company holds minority voting interests in certain joint ventures that produce silicon inputs for the Company. These joint ventures operate under supply agreements that sell inventory to the equity owners using pricing mechanisms that guarantee a return, therefore shielding the joint ventures from the obligation to absorb expected losses. As a result of the pricing mechanisms of these agreements, these entities are determined to be VIEs. The Company is not the primary beneficiary, as it does not hold the power to direct the activities that most significantly impact the economic performance of these entities; therefore, the entities are accounted for under the equity method of accounting. The Company's maximum exposure to loss as a result of its involvement with these variable interest entities is determined to be the carrying value of the investment in these entities. At December 31, 2020, the Company's investment in these joint ventures was $107 million ($100 million at December 31, 2019), classified as "Investment in nonconsolidated affiliates" in the consolidated balance sheets, representing the Company's maximum exposure to loss.

NOTE 25 – 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 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 2020 and 2019, TDCC declared and paid dividends to Dow Inc. of $2,233 million and $201 million, respectively. At December 31, 2020 and 2019, TDCC's intercompany loan balance with Dow Inc. was insignificant.

DowDuPont

Pursuant to the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017, and prior to the separation from DowDuPont, TDCC committed to fund a portion of DowDuPont's dividends paid to common stockholders and certain governance expenses. In addition, share repurchases by DowDuPont were partially funded by TDCC through 2018. In 2019, TDCC declared and paid dividends to DowDuPont of $535 million ($3,711 million in 2018).

Historical DuPont and its Affiliates

Prior to the separation from DowDuPont, TDCC sold to and procured from Historical DuPont and its affiliates certain raw materials that were consumed in each company's manufacturing process. The following table presents revenue earned and expenses incurred related to transactions with Historical DuPont and its affiliates:


Sales to Historical DuPont and its Affiliates	2019		2018
In millions
Net sales	$	12	$	55
Cost of sales	$	9	$	42

Purchases from Historical DuPont and its affiliates were insignificant for 2019 and 2018.

NOTE 26 – SEGMENTS AND GEOGRAPHIC REGIONS

Dow combines global breadth, asset integration and scale, focused innovation and leading business positions to achieve profitable growth. The Company's ambition is to become the most innovative, customer centric, inclusive and sustainable materials science company, with a purpose to deliver a sustainable future for the world through our materials science expertise and collaboration with our partners. Dow’s portfolio of plastics, industrial intermediates, coatings and silicones businesses delivers a broad range of differentiated science-based products and solutions for its customers in high-growth market segments, such as packaging, infrastructure, mobility and consumer care. Dow operates 106 manufacturing sites in 31 countries and employs approximately 35,700 people.

The Company conducts its worldwide operations through six global businesses which are organized into the following operating segments: Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure and Performance Materials & Coatings. Corporate contains the reconciliation between the totals for the operating segments and the Company's totals. The Company did not aggregate any operating segments when determining its reportable segments. The Company reports geographic information for the following regions: U.S. & Canada, Asia Pacific, Latin America and EMEAI. The Company transfers ethylene to its downstream derivative businesses at market prices. The Company also allocated costs previously assigned to AgCo and SpecCo ("stranded costs") to the operating segments.

Dow’s measure of profit/loss for segment reporting purposes is Operating EBIT (for the year ended December 31, 2020) and pro forma Operating EBIT (for the years ended December 31, 2019 and 2018) as this is the manner in which the Company's chief operating decision maker ("CODM") assesses performance and allocates resources. The Company defines Operating EBIT as earnings (i.e., "Income (loss) from continuing operations before income taxes") before interest, excluding the impact of significant items. The Company defines pro forma Operating EBIT as earnings (i.e., "Income (loss) from continuing operations before income taxes") before interest, plus pro forma adjustments, excluding the impact of significant items. 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 years ended December 31, 2019 and 2018 in this footnote as it is included in management's measure of segment performance and is regularly reviewed by the CODM. Pro forma net sales includes the impact of 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.

Corporate Profile

Dow conducts its worldwide operations through global businesses which are reflected in the following reportable segments:

Packaging & Specialty Plastics

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

Industrial Intermediates & Infrastructure

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

Performance Materials & Coatings

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

Corporate

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

Sales are attributed to geographic region based on customer location; long-lived assets are attributed to geographic region based on asset location.


Geographic Region Information	United States		EMEAI		Rest of World		Total
In millions
2020
Sales to external customers	$	12,547	$	12,969	$	13,026	$	38,542
Long-lived assets	$	13,833	$	2,813	$	3,593	$	20,239
2019
Sales to external customers	$	14,437	$	14,612	$	13,902	$	42,951
Long-lived assets	$	14,571	$	2,649	$	3,776	$	20,996
2018
Sales to external customers	$	16,613	$	17,406	$	15,585	$	49,604
Long-lived assets	$	14,750	$	2,657	$	4,011	$	21,418


Segment Information	Pack. & Spec. Plastics		Ind. Interm. & Infrast.		Perf. Materials & Coatings		Corp.		Total
In millions
2020
Net sales	$	18,301	$	12,021	$	7,951	$	269	$	38,542
Restructuring and asset related charges - net 1	30		22		192		464		708
Equity in earnings (losses) of nonconsolidated affiliates	173		(166)		6		(31)		(18)
Operating EBIT 2	2,325		355		314		(279)		2,715
Depreciation and amortization	1,372		605		870		27		2,874
Total assets	30,069		12,220		13,915		5,266		61,470
Investments in nonconsolidated affiliates	661		531		108		27		1,327
Capital expenditures	678		268		306		—		1,252
2019
Net sales	$	20,245	$	13,440	$	8,923	$	343	$	42,951
Pro forma net sales	20,245		13,449		8,961		343		42,998
Restructuring, goodwill impairment and asset related charges - net 1	439		1,175		1,076		529		3,219
Equity in earnings (losses) of nonconsolidated affiliates	162		(241)		5		(20)		(94)
Pro forma Operating EBIT 3	2,904		845		918		(315)		4,352
Depreciation and amortization	1,435		594		877		32		2,938
Total assets	29,522		11,753		14,059		5,190		60,524
Investments in nonconsolidated affiliates	675		568		101		60		1,404
Capital expenditures	1,039		452		470		—		1,961
2018
Net sales	$	24,195	$	15,447	$	9,677	$	285	$	49,604
Pro forma net sales	24,237		15,465		9,865		285		49,852
Restructuring, goodwill impairment and asset related charges - net 1	46		11		21		143		221
Equity in earnings (losses) of nonconsolidated affiliates	287		284		4		(20)		555
Pro forma Operating EBIT 3	3,593		1,767		1,246		(370)		6,236
Depreciation and amortization	1,385		607		888		29		2,909
Total assets 4	30,279		14,092		16,050		3,378		63,799
Investments in nonconsolidated affiliates	1,278		1,850		99		93		3,320
Capital expenditures	1,231		433		427		—		2,091

1.See Note 6 for information regarding the Company's restructuring programs, goodwill impairment and other asset related charges.

2.Operating EBIT for TDCC in 2020 is substantially the same as that of Dow Inc. and therefore is not disclosed separately in the table above. A reconciliation of "Income from continuing operations, net of tax" to Operating EBIT is provided on the following page.

3.Pro forma Operating EBIT for TDCC in 2019 is substantially the same as that of Dow Inc. (same for 2018) and therefore is not disclosed separately in the table above. A reconciliation of "Income (loss) from continuing operations, net of tax" to pro forma Operating EBIT is provided on the following page.

4.Excludes assets of discontinued operations of $19,900 million.


Reconciliation of "Income from continuing operations, net of tax" to Operating EBIT	2020
In millions
Income from continuing operations, net of tax	$	1,294
+ Provision for income taxes on continuing operations	777
Income from continuing operations before income taxes	$	2,071
- Interest income	38
+ Interest expense and amortization of debt discount	827
- Significant items	145
Operating EBIT	$	2,715


Reconciliation of "Income (loss) from continuing operations, net of tax" to Pro Forma Operating EBIT	2019		2018
In millions
Income (loss) from continuing operations, net of tax	$	(1,717)	$	2,940
+ Provision for income taxes on continuing operations	470		809
Income (loss) from continuing operations before income taxes	$	(1,247)	$	3,749
- Interest income	81		82
+ Interest expense and amortization of debt discount	933		1,063
+ Pro forma adjustments 1	65		180
- Significant items	(4,682)		(1,326)
Pro forma Operating EBIT	$	4,352	$	6,236

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

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


Significant Items by Segment for 2020	Pack. & Spec. Plastics		Ind. Interm. & Infrast.		Perf. Materials & Coatings		Corp.		Total
In millions
Integration and separation costs 1	$	—	$	—	$	—	$	(239)	$	(239)
Restructuring and asset related charges - net 2	(30)		(22)		(192)		(464)		(708)
Warranty accrual adjustment of exited business 3	—		—		—		11		11
Restructuring implementation costs 4	—		—		—		(10)		(10)
Net gain on divestitures and asset sale 5	52		61		—		604		717
Litigation related charges, awards and adjustments 6	544		—		—		—		544
Loss on early extinguishment of debt 7	—		—		—		(149)		(149)
Indemnification and other transaction related costs 8	—		—		—		(21)		(21)
Total	$	566	$	39	$	(192)	$	(268)	$	145

1.Costs related to business separation activities.

2.Includes Board approved restructuring plans and asset-related charges, which include other asset impairments. See Note 6 for additional information.

3.Includes an adjustment to the warranty accrual of an exited business.

4.Includes costs associated with implementing the Company's 2020 Restructuring Program.

5.Primarily related to a gain on the sale of rail infrastructure in the U.S. and Canada and a gain on the sale of marine and terminal operations and assets in the U.S. See Notes 5 and 7 for additional information.

6.Includes recognition of gains associated with a legal matter with Nova. See Note 16 for additional information.

7.The Company retired outstanding long-term debt resulting in a loss on early extinguishment. See Note 15 for additional information.

8.Primarily related to charges associated with agreements entered into with DuPont and Corteva as part of the separation and distribution which, among other matters, provides for cross-indemnities and allocations of obligations and liabilities for periods prior to, at and after the completion of the separation.


Significant Items by Segment for 2019	Pack. & Spec. Plastics		Ind. Interm. & Infrast.		Perf. Materials & Coatings		Corp.		Total
In millions
Integration and separation costs 1	$	—	$	—	$	—	$	(1,013)	$	(1,013)
Restructuring, goodwill impairment and asset related charges - net 2	(439)		(1,175)		(1,076)		(529)		(3,219)
Warranty accrual adjustment of exited business 3	—		—		—		39		39
Environmental charges 4	(5)		(8)		(50)		(336)		(399)
Loss on divestitures 5	—		(5)		—		(44)		(49)
Loss on early extinguishment of debt 6	—		—		—		(102)		(102)
Litigation related charges, awards and adjustments 7	170		—		—		35		205
Indemnification and other transaction related costs 8	—		—		—		(144)		(144)
Total	$	(274)	$	(1,188)	$	(1,126)	$	(2,094)	$	(4,682)

1.Costs related to post-Merger integration and business separation activities. Excludes one-time transaction costs directly attributable to the Merger.

2.Includes Board approved restructuring plans and asset related charges (see Note 6 for additional information); a charge related to Sadara (see Note 12 for additional information) and an impairment charge related to goodwill associated with the Coatings & Performance Monomers reporting unit (see Note 13 for additional information).

3.Includes an adjustment to the warranty accrual of an exited business.

4.Related to environmental remediation, primarily resulting from the culmination of long-standing negotiations with regulators and/or agencies and review of additional costs to manage ongoing remediation activities resulting from Dow’s separation from DowDuPont and related agreements with Corteva and DuPont. See Note 16 for additional information.

5.Includes post-closing adjustments on previous divestitures.

6.The Company retired outstanding long-term debt resulting in a loss on early extinguishment. See Note 15 for additional information.

7.Includes a gain associated with a legal matter with Nova, as well as a gain related to an adjustment of the Implant Liability and a charge related to the settlement of the Commercial Creditor matters. See Note 16 for additional information.

8.Includes charges primarily associated with agreements entered into with DuPont and Corteva as part of the separation and distribution which, among other matters, provides for cross-indemnities and allocations of obligations and liabilities for periods prior to, at and after the completion of the separation.


Significant Items by Segment for 2018	Pack. & Spec. Plastics		Ind. Interm. & Infrast.		Perf. Materials & Coatings		Corp.		Total
In millions
Impact of Dow Silicones ownership restructure 1	$	—	$	—	$	(20)	$	—	$	(20)
Integration and separation costs 2	—		—		—		(1,074)		(1,074)
Restructuring and asset related charges - net 3	(46)		(11)		(21)		(120)		(198)
Gain on divestiture 4	—		20		—		—		20
Loss on early extinguishment of debt 5	—		—		—		(54)		(54)
Total	$	(46)	$	9	$	(41)	$	(1,248)	$	(1,326)

1.Includes a loss related to a post-closing adjustment related to the Dow Silicones ownership restructure.

2.Costs related to post-Merger integration and separation and distribution activities, and costs related to the Dow Silicones ownership restructure.

3.Includes Board approved restructuring plans and asset-related charges, which include other asset impairments. See Note 6 for additional information.

4.Includes a gain related to the Company's sale of its equity interest in MEGlobal.

5.The Company retired outstanding notes payable resulting in a loss on early extinguishment. See Note 15 for additional information.

NOTE 27 - SELECTED QUARTERLY FINANCIAL DATA


2020
In millions, except per share amounts (Unaudited)	1st		2nd		3rd		4th		Year
Dow Inc.
Net sales	$	9,770	$	8,354	$	9,712	$	10,706	$	38,542
Cost of sales	$	8,230	$	7,610	$	8,371	$	9,135	$	33,346
Gross margin	$	1,540	$	744	$	1,341	$	1,571	$	5,196
Restructuring and asset related charges (credits) - net 1	$	96	$	6	$	617	$	(11)	$	708
Integration and separation costs 2	$	65	$	46	$	63	$	65	$	239

Net income (loss) 3	$	258	$	(217)	$	(1)	$	1,254	$	1,294
Net income (loss) attributable to Dow Inc.	$	239	$	(225)	$	(25)	$	1,236	$	1,225
Earnings (loss) per common share from continuing operations - basic 4	$	0.32	$	(0.31)	$	(0.04)	$	1.66	$	1.64
Earnings (loss) per common share from continuing operations - diluted 4	$	0.32	$	(0.31)	$	(0.04)	$	1.65	$	1.64
Dividends declared per share of common stock	$	0.70	$	0.70	$	0.70	$	0.70	$	2.80
Market price range of common stock:
High	$	53.75	$	45.90	$	51.07	$	57.73	$	57.73
Low	$	22.00	$	27.04	$	39.44	$	45.18	$	22.00
TDCC
Net sales	$	9,770	$	8,354	$	9,712	$	10,706	$	38,542
Cost of sales	$	8,230	$	7,608	$	8,371	$	9,134	$	33,343
Gross margin	$	1,540	$	746	$	1,341	$	1,572	$	5,199
Restructuring and asset related charges (credits) - net 1	$	96	$	6	$	617	$	(11)	$	708
Integration and separation costs 2	$	65	$	46	$	63	$	65	$	239


Net income (loss) 3	$	258	$	(217)	$	(1)	$	1,264	$	1,304
Net income (loss) attributable to The Dow Chemical Company	$	239	$	(225)	$	(25)	$	1,246	$	1,235

1.See Note 6 for additional information.

2.See Note 3 for additional information.

3.See Notes 5, 7, 15 and 16 for information on additional items materially impacting "Net income (loss)." The fourth quarter of 2020 includes a gain related to the sale of marine and terminal operations and assets and a gain associated with a legal matter with Nova. The third quarter of 2020 includes a gain related to the sale of rail infrastructure operations and assets and a loss on the early extinguishment of debt. The first quarter of 2020 includes a loss on the early extinguishment of debt.

4.Earnings per common share amounts relate only to Dow Inc. as TDCC common shares are not publicly traded and are all owned by Dow Inc. Due to quarterly changes in the share count and the allocation of income to participating securities, the sum of the four quarters does not equal the earnings per share amount calculated for the year.


2019
In millions, except per share amounts (Unaudited)	1st		2nd		3rd		4th		Year
Dow Inc.
Net sales	$	10,969	$	11,014	$	10,764	$	10,204	$	42,951
Cost of sales	$	9,142	$	9,420	$	9,377	$	8,718	$	36,657
Gross margin	$	1,827	$	1,594	$	1,387	$	1,486	$	6,294
Restructuring, goodwill impairment and asset related charges - net 1	$	156	$	65	$	147	$	2,851	$	3,219
Integration and separation costs 2	$	452	$	348	$	164	$	99	$	1,063
Income (loss) from continuing operations, net of tax	$	156	$	90	$	347	$	(2,310)	$	(1,717)
Income from discontinued operations net of tax	$	445	$	—	$	—	$	—	$	445
Net income (loss) 3	$	601	$	90	$	347	$	(2,310)	$	(1,272)
Net income (loss) attributable to Dow Inc.	$	556	$	75	$	333	$	(2,323)	$	(1,359)
Earnings (loss) per common share from continuing operations - basic 4	$	0.16	$	0.10	$	0.45	$	(3.14)	$	(2.42)
Earnings (loss) per common share from continuing operations - diluted 4	$	0.16	$	0.10	$	0.45	$	(3.14)	$	(2.42)
Dividends declared per share of common stock 5	N/A		$	0.70	$	0.70	$	0.70	$	2.10
Market price range of common stock:
High 5	N/A		$	59.71	$	52.79	$	55.99	$	59.71
Low 5	N/A		$	46.76	$	40.71	$	43.85	$	40.71
TDCC
Net sales	$	10,969	$	11,014	$	10,764	$	10,204	$	42,951
Cost of sales	$	9,142	$	9,419	$	9,377	$	8,719	$	36,657
Gross margin	$	1,827	$	1,595	$	1,387	$	1,485	$	6,294
Restructuring, goodwill impairment and asset related charges - net 1	$	156	$	65	$	147	$	2,851	$	3,219
Integration and separation costs 2	$	452	$	324	$	164	$	99	$	1,039
Income (loss) from continuing operations, net of tax	$	156	$	217	$	324	$	(2,292)	$	(1,595)
Income from discontinued operations net of tax	$	445	$	—	$	—	$	—	$	445
Net income (loss) 3	$	601	$	217	$	324	$	(2,292)	$	(1,150)
Net income (loss) attributable to The Dow Chemical Company	$	556	$	202	$	310	$	(2,305)	$	(1,237)

1.See Note 6 for additional information.

2.See Note 3 for additional information.

3.See Notes 3, 8, 15 and 16 for information on additional items materially impacting "Net income (loss)." The fourth quarter of 2019 included a gain related to the effects of Swiss tax reform and a loss on the early extinguishment of debt. The third quarter of 2019 included a charge related to environmental remediation, a charge related to the settlement of the Commercial Creditor matters, a gain related to an adjustment to the Implant Liability and a gain associated with a legal matter with Nova. The second quarter of 2019 included charges associated with agreements entered into with DuPont and Corteva as part of the separation from DowDuPont.

5.Dow Inc.'s common stock was solely owned by DowDuPont through March 31, 2019, and on April 1, 2019, Dow Inc. became an independent, publicly traded company.

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