DOW INC. 10-K

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On April 1, 2019, DowDuPont Inc. (“DowDuPont” and effective June 3, 2019, n/k/a DuPont de Nemours, Inc. or "DuPont") completed the separation of its materials science business and Dow Inc. became the direct parent company of The Dow Chemical Company and its consolidated subsidiaries (“TDCC” and together with Dow Inc., “Dow” or the “Company”), owning all of the outstanding common shares of TDCC. For filings related to the period commencing April 1, 2019 and thereafter, TDCC was deemed the predecessor to Dow Inc., and the historical results of TDCC are deemed the historical results of Dow Inc. for periods prior to and including March 31, 2019. As a result of the parent/subsidiary relationship between Dow Inc. and TDCC, and 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. The separation was contemplated by the merger of equals transaction effective August 31, 2017, under the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017. TDCC and E. I. du Pont de Nemours and Company and its consolidated subsidiaries (“Historical DuPont”) each merged with subsidiaries of DowDuPont and, as a result, TDCC and Historical DuPont became subsidiaries of DowDuPont (the “Merger”). Subsequent to the Merger, TDCC and Historical DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. Dow Inc. was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business. As of the effective date and time of the distribution, DowDuPont did not beneficially own 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 the applicable periods presented reflect the distribution of TDCC’s agricultural sciences business (“AgCo”) and specialty products business (“SpecCo”) as discontinued operations, as well as reflect the receipt of Historical DuPont’s ethylene and ethylene copolymers businesses (other than its ethylene acrylic elastomers business) (“ECP”) as a common control transaction from the closing of the Merger on August 31, 2017 ("Merger Date"). See Note 3 to the Consolidated Financial Statements and Dow Inc.'s Amendment No. 4 to the Registration Statement on Form 10 filed with the U.S. Securities and Exchange Commission ("SEC") on March 8, 2019 for additional information. Throughout this Annual Report on Form 10-K, unless otherwise indicated, amounts and activity are presented on a continuing operations basis. Except as otherwise indicated by the context, the term "Union Carbide" means Union Carbide Corporation and the term "Dow Silicones" means Dow Silicones Corporation, both wholly owned subsidiaries of the Company. Items Affecting Comparability of Financial Results As a result of the separation from DowDuPont, pro forma net sales and pro forma Operating EBIT for the year ended December 31, 2019 are provided in this section and based on the consolidated financial statements of TDCC, adjusted to give effect to the separation from DowDuPont as if it had been consummated on January 1, 2017. Pro forma adjustments include (1) the margin impact of various manufacturing, supply and service related agreements entered into with DuPont and Corteva, Inc. ("Corteva") in connection with the separation which provide for different pricing than the historical intercompany and intracompany pricing practices of TDCC and Historical DuPont, and (2) the elimination of the impact of events directly attributable to the Merger, internal reorganization and business realignment, separation, distribution and other related transactions (e.g., one-time transaction costs). These adjustments impacted the consolidated results as well as the reportable segments. See Note 26 to the Consolidated Financial Statements for a summary of the pro forma adjustments impacting segment measures for the year ended December 31, 2019. 29 Table of Contents STATEMENT ON COVID-19 AND U.S. GULF COAST FREEZE COVID-19 The pandemic caused by coronavirus disease 2019 ("COVID-19") has impacted all geographic regions where Dow products are produced and sold. Throughout this public health crisis, the Company has been focused on the health and safety of its employees, contractors, customers and suppliers around the world and maintaining the safe and reliable operations of its manufacturing sites. Although supply disruptions and related logistics issues have posed challenges across all modes of transportation, the Company’s manufacturing sites have continued to operate during the COVID-19 pandemic, with no significant impact to manufacturing whether through shutdowns or shortages in labor, raw materials or personal protective equipment. Contingency plans remain in place in the event of significant impacts from COVID-19 infection resurgences. In January 2022, the Company opened all sites and locations to employees, where permitted by local regulations, and continues to require that several health and safety measures be followed. All regions continue to follow on-site workforce restrictions in accordance with government regulations. At the time of this filing, approximately half of Dow’s global workforce is working remotely. The Company continues to encourage its workforce to practice safe behaviors in the workplace and while away from work to help prevent community spread of COVID-19. The Company is well-positioned for continued profitable growth in the ongoing economic recovery and improving industry cycle. The Company will maintain its disciplined focus on capital allocation priorities as it benefits from an improving cost structure, financial flexibility and a low-cost operating model. Through the ongoing market recovery, Dow has experienced increasing margins as differentiated parts of the portfolio see improved demand and underlying market dynamics, which has enabled a return to pre-COVID-19 sales levels and end-market growth across most businesses. The Company has continued to maintain a strong financial position and liquidity throughout the economic recession triggered by the COVID-19 pandemic and its ongoing recovery. At December 31, 2021, the Company had cash and committed and available forms of liquidity of $12.6 billion. The Company also has no substantive long-term debt maturities due until 2026. Additional information regarding the risks associated with the COVID-19 pandemic can be found in this report in Part 1, Item 1A, Risk Factors. U.S. Gulf Coast Freeze In the first quarter of 2021, Winter Storm Uri had a broad impact on the U.S. Gulf Coast and in particular across the entire state of Texas, which resulted in widespread utility and raw material supply disruptions and industry-wide production outages. All Dow ethylene production facilities located on the U.S. Gulf Coast were operational by March 31, 2021, along with all sites. As a result of the winter storm, the product and supply chain impacts across the industry created very tight supply dynamics and generated pricing momentum for both raw materials and finished goods. The Company remains close to its customers and continues to work diligently to meet demand needs. 30 Table of Contents Table of Contents Page About Dow 31 Overview 31 Results of Operations 34 Segment Results 41 Packaging & Specialty Plastics 41 Industrial Intermediates & Infrastructure 43 Performance Materials & Coatings 45 Corporate 46 Outlook 47 Liquidity and Capital Resources 48 Other Matters 57 Critical Accounting Estimates 57 Environmental Matters 61 Asbestos-Related Matters of Union Carbide Corporation 66 ABOUT DOW Dow combines global breadth; asset integration and scale; focused innovation and materials science expertise; leading business positions; and environmental, social and governance (ESG) leadership to achieve profitable growth and deliver a sustainable future. The Company’s ambition is to become the most innovative, customer centric, inclusive and sustainable materials science company in the world. 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 applications. Dow operates 104 manufacturing sites in 31 countries and employs approximately 35,700 people. In 2021, the Company had annual sales of $55 billion, of which 36 percent of the Company’s sales were to customers in the U.S. & Canada; 36 percent were in Europe, Middle East, Africa and India ("EMEAI"); while the remaining 28 percent were to customers in Asia Pacific and Latin America. In 2021, the Company and its consolidated subsidiaries did not operate in countries subject to U.S. economic sanctions and export controls as imposed by the U.S. State Department or in countries designated by the U.S. State Department as state sponsors of terrorism, including Cuba, Iran, the Democratic People's Republic of Korea (North Korea), Sudan and Syria. The Company has policies and procedures in place designed to ensure that it and its consolidated subsidiaries remain in compliance with applicable U.S. laws and regulations. OVERVIEW The following is a summary of the results from continuing operations for the Company for the year ended December 31, 2021: The Company reported net sales in 2021 of $55 billion, up 43 percent from $38.5 billion in 2020, with increases across all geographic regions and operating segments, driven by an increase in local price of 40 percent, a volume increase of 1 percent and a favorable currency impact of 2 percent. Local price increased 40 percent compared with the same period last year, with increases in all operating segments and geographic regions, primarily reflecting price gains due to tight supply and demand dynamics. Local price increased in Packaging & Specialty Plastics (up 50 percent), Industrial Intermediates & Infrastructure (up 40 percent) and Performance Materials & Coatings (up 19 percent). Volume increased 1 percent compared with 2020, with increases in Packaging & Specialty Plastics (up 2 percent) and Performance Materials & Coatings (up 1 percent), partially offset by a decrease in Industrial Intermediates & Infrastructure (down 2 percent). Volume increased in the U.S. & Canada (up 2 percent) and in EMEAI (up 3 percent), partially offset by decreases in Asia Pacific (down 4 percent) and Latin America (down 3 percent). 31 Table of Contents Currency had a favorable impact of 2 percent on net sales compared with 2020, driven by EMEAI (up 4 percent) and Asia Pacific (up 2 percent). Restructuring and asset related charges - net were $6 million in 2021, compared with $708 million in 2020, primarily reflecting actions taken under the 2020 Restructuring Program. Equity in earnings of nonconsolidated affiliates was $975 million in 2021, compared with equity losses of $18 million in 2020, primarily driven by margin expansion at Sadara Chemical Company ("Sadara") and the Kuwait and Thai joint ventures. Sundry income (expense) - net for Dow Inc. and TDCC was expense of $35 million and $79 million, respectively, in 2021, compared with income of $1,269 million and $1,274 million, respectively, in 2020. Sundry income (expense) - net decreased primarily due to losses on the early extinguishment of debt in the current year, compared with gains related to a legal matter, the sale of certain marine and terminal operations and the sale of certain rail infrastructure operations and assets, which were partially offset by losses on the early extinguishment of debt in the prior year. Net income available for Dow Inc. and TDCC common stockholder(s) was $6,311 million and $6,274 million, respectively, in 2021, compared with $1,225 million and $1,235 million, respectively, in 2020. Earnings per share for Dow Inc. was $8.38 per share in 2021, compared with $1.64 per share in 2020. In 2021, TDCC redeemed more than $1 billion of certain notes due in 2024 and completed cash tender offers resulting in over $1 billion of aggregate principal amount of certain notes being tendered and retired. The Company's proactive liability management actions to tender and redeem existing notes have resulted in no substantive long-term debt maturities due until 2026. In 2021, the Company executed strategic buy-outs of certain leased assets for approximately $690 million. In 2021, Dow Inc. declared and paid dividends to common stockholders of $2.80 per share ($2,073 million). In 2021, Dow Inc. repurchased $1,000 million of the Company's common stock. Other notable events and highlights from the year ended December 31, 2021 include: • Dow received three 2021 BIG Innovation Awards from the Business Intelligence Group for DOWSIL™ TC-3065 Thermally Conductive Gel; DOWSIL™ 993N Structural Glazing Sealant and Catalyst; and the world's first commercial polyurethane-carbon fiber spar cap for the new generation of wind blades. • Dow was named to Bloomberg’s 2021 Gender-Equality Index. • Dow was named by the Human Rights Campaign ("HRC") Foundation to its 2021 list of “Best Places to Work for LGBTQ+ Equality.” This marks the Company’s sixteenth consecutive year receiving a perfect score on HRC’s Corporate Equality Index. • On March 4, 2021, TDCC announced changes to the design of its U.S. tax-qualified and non-qualified retirement programs. Separately, TDCC elected to contribute $1 billion to its U.S. tax-qualified pension plans. • Dow was recognized with three Manufacturing Leadership Awards by the Manufacturing Leadership Council, a division of the National Association of Manufacturers. Dow’s Manufacturing 4.0 received the Enterprise Integration and Technology Award, the E2E Business Planning Program was awarded the Supply Chain Award, and Accelerating Innovation in Instrumentation & Sensors at Dow Texas Operations received the Industrial Internet of Things Award. • Dow received a 2021 CIO 100 award from IDG’s CIO for the digitalization of its end-to-end business planning platform. • On March 25, 2021, Dow Inc. (together with Sadara and the Saudi Arabian Oil Company) completed a debt re-profiling agreement for Sadara with agency creditors and commercial lenders. The re-profiled debt repayment schedule is better aligned to match Sadara's expected future cash flow generation. • Dow received two 2021 Ringier Technology Innovation Awards in the Plastics Raw Materials & Additives category including: Post-Consumer Recycled resin XUS60921.01 and Carpet tile with INFUSE™ polyolefin backing. 32 Table of Contents • Dow was named as one of the 2021 Fortune 100 Best Companies to Work For®; as well as, being recognized by Great Place to Work® in several other countries around the world including: 2021 Best Workplaces™ in Argentina, Colombia and Saudi Arabia. • On April 13, 2021, Fitch Ratings ("Fitch") reaffirmed TDCC’s BBB+ and F2 rating, and revised its outlook to stable from negative. The decision was made as part of Fitch’s annual review process. • Effective April 15, 2021, following the Company's Annual Meeting of Stockholders ("2021 Meeting") Dow Inc.'s Board elected Richard K. Davis to serve as Lead Director until the 2022 Annual Meeting of Stockholders. The Company also announced that Debra L. Dial, senior vice president and controller at AT&T Inc., and Luis Alberto Moreno, managing director at Allen & Co, LLC and former president of Inter-American Development Bank Group, were elected to the Board at the 2021 Meeting. Ajay Banga, Jacqueline K. Barton and James A. Bell retired from the Board following the 2021 Meeting as announced on February 11, 2021. • On April 21, 2021, Dow received a 2021 FutureEdge 50 award for its Predictive Intelligence capability, Dow Polyurethanes’ flagship digitalization initiative. The FutureEdge 50 awards annually recognize 50 organizations pushing the edge of innovation with breakthrough technologies to advance their business for the future. • Dow received 20 American Chemistry Council Responsible Care® awards for exemplary environmental, health and safety performance. Dow received awards for site safety, minimizing waste, improving energy efficiency, and its COVID-19 response. • Dow received six 2021 Edison Awards, including five Gold Edison Awards, for breakthrough technologies including: DOWSIL™ CC-8030 UV and Moisture Dual Cure Conformal Coating; DOWSIL™ TC-5515LT Thermally Conductive Gap Filler; DOWSIL™ TC-3065 Thermal Conductive Silicone Gel for 5G Optical Access Infrastructure; DOWSIL™ VE-8001 Flexible Silicone Adhesive by Dow; RHOBARR™ 320 Polyolefin Dispersion; and DOWSIL™ Crystal Clear Spacer. Dow is the first company to receive five Gold Edison Awards in a single year. • Dow was named to the 2021 DiversityInc Top 50 Companies for Diversity list for the fourth consecutive year. Dow was also included on three of DiversityInc's Specialty Lists including: Top Companies for Employee Resource Groups, Top Companies for People with Disabilities, and Top Companies for ESG. • Dow was named 2021 Manufacturer of the Year, Large Enterprise, by the Manufacturing Leadership Council, a division of the National Association of Manufacturers. The Manufacturer of the Year Award is given to the company that shows best-in-class achievement. • On June 10, 2021, Standard & Poor's ("S&P") announced a credit rating upgrade for TDCC from BBB- and A-3 to BBB and A-2, maintaining stable outlook. The decision from S&P reflects the expectation for an ongoing macroeconomic recovery, the Company’s supportive financial policies and the strengthening of its operating performance in 2021 relative to 2020. • Dow was named a 2021 honoree and the Materials Sector leader of The Civic 50 by Points of Light, the world’s largest organization committed to inspiring, equipping and engaging people to take action to change their communities and the world. • On June 24, 2021, Dow Inc. released “INtersections,” its first consolidated Environmental, Social and Governance ("ESG") Report highlighting the Company’s significant progress to fully integrate environmental stewardship and positive social impact throughout its operations, teams, supply chain and communities. This marked Dow's eighteenth year of voluntary reporting on sustainability. • For the fifth consecutive year, Dow has received a top score on the Disability Equality Index ®, placing the Company among the “Best Places to Work for Disability Inclusion” for 2021. • Dow received the “Best in Enterprise Resilience” certification from Everbridge as a part of their Critical Event Management (CEM) Certification™ Program. This recognition demonstrates Dow’s commitment to implementing best practices for enterprise resilience that keep employees safe and the company running safely, reliably and efficiently. • Dow was named to Seramount’s 2021 Inclusion Index (formerly known as the Diversity Best Practices Inclusion Index). This is the first year Dow was recognized on the list which includes a total of 45 organizations recognized for creating an inclusive workplace. • Dow was named one of the "2021 PEOPLE Companies that Care®" for the second consecutive year. 33 Table of Contents • Great Place to Work® and Fortune magazine have named Dow one of the 2021 Best Workplaces in Manufacturing & Production™. This is the first time Dow was named to this prestigious list, ranking third on the list. • Dow won two Sustainability Product of the Year awards in the 2021 Sustainability Awards program of Business Intelligence Group for SPECFLEX™ Microcellular Polyurethane and SYNTEGRA™ Polyurethane Dispersions for Microfiber. • On October 6, 2021, Dow Inc. held an Investor Day event where it announced the following: investment plans to deliver more than $3 billion of additional underlying EBITDA growth with a clear path to zero-carbon emissions (with respect to Scope 1, 2 and 3 carbon emissions, including offsets from product benefits and technology advancements); new renewable and cleaner power agreements which are expected to reduce Dow's Scope 2 emissions by more than 600,000 metric tons of carbon dioxide equivalent per year; a plan to build the world's first net-zero carbon emissions (with respect to Scope 1 and 2 carbon dioxide emissions, including technology advancements) ethylene and derivatives complex; and expansion of global capabilities for circular plastics, with initial products available for customers in 2022. • Dow earned multiple Critical Guidance Recognitions for recyclability from the Association of Plastic Recyclers ("APR"), in three product categories. ROBOND™ Adhesives, OPULUX™ Optical Finishes and SURLYN™ Ionomers were each recognized by APR for solving packaging design challenges. • Dow received two R&D 100 Awards from R&D Magazine for innovative technologies including: DOWSIL™ TC-4060 Thermal Gel and Multi-functional Sorbent Technology ("MUST"). • Five additional Dow sites received International Sustainability & Carbon Certification PLUS recognition for their compliance with rigorous tracking of sustainable feedstocks use. • DOWSIL™ TC-4060 Thermal Gel was awarded Best Product Innovation and SunSpheres™ BIO SPF Booster was awarded Product with Best Benefit to the Environment and Sustainability from Innovation Commodity Intelligence Services. • In 2021, CDP (formerly Carbon Disclosure Project, an international non-profit specialized in environmental reporting) improved Dow's climate change score to an A- from a B. In addition to the highlights above, the following events occurred subsequent to December 31, 2021: • For the third year, Dow was named to the JUST 100 list. Dow earned the top spot in the Chemicals sector overall and received the number one position in the Workers and Stakeholders & Governance categories versus industry peers. • Dow received three 2021 BIG Innovation Awards from the Business Intelligence Group for DOWSIL™ TC-2035 CV Adhesive, DOWSIL™ TC-6015 Thermally Conductive Encapsulant and UCARE™ Extreme Polymer. • Dow was named to Bloomberg’s 2022 Gender-Equality Index for the second consecutive year. • Dow was named by the Human Rights Campaign ("HRC") Foundation to its 2022 list of “Best Places to Work for LGBTQ+ Equality.” This marks the Company’s seventeenth consecutive year receiving a perfect score on HRC’s Corporate Equality Index. RESULTS OF OPERATIONS Net Sales The following tables summarize net sales, pro forma net sales and sales variance by operating segment and geographic region from the prior year: Summary of Sales Results In millions 2021 2020 2019 Net sales $ 54,968 $ 38,542 $ 42,951 Pro forma net sales $ — $ — $ 42,998 34 Table of Contents Sales Variances by Operating Segment and Geographic Region - As Reported 2021 2020 Percentage change from prior year Local Price & Product Mix Currency Volume Total Local Price & Product Mix Currency Volume Portfolio & Other 1 Total Packaging & Specialty Plastics 50 % 2 % 2 % 54 % (11) % — % 1 % — % (10) % Industrial Intermediates & Infrastructure 40 2 (2) 40 (5) — (6) — (11) Performance Materials & Coatings 19 2 1 22 (6) — (6) 1 (11) Total 40 % 2 % 1 % 43 % (7) % — % (3) % — % (10) % Total, excluding the Hydrocarbons & Energy business 37 % 2 % (2) % 37 % (5) % — % (4) % — % (9) % U.S. & Canada 42 % — % 2 % 44 % (5) % — % (8) % — % (13) % EMEAI 45 4 3 52 (12) — 1 — (11) Asia Pacific 25 2 (4) 23 (6) — — — (6) Latin America 48 — (3) 45 (7) — — — (7) Total 40 % 2 % 1 % 43 % (7) % — % (3) % — % (10) % 1. Portfolio & Other includes the sales impact of various manufacturing, supply and service related agreements entered into with DuPont and Corteva in connection with the separation, which provide for different pricing than the historical intercompany and intracompany pricing practices of TDCC and Historical DuPont. Sales Variances by Operating Segment and Geographic Region - As Reported Percentage change from prior year 2019 Local Price & Product Mix Currency Volume Portfolio & Other 1 Total Packaging & Specialty Plastics (12) % (1) % (3) % — % (16) % Industrial Intermediates & Infrastructure (12) (1) — — (13) Performance Materials & Coatings (6) (2) (3) 3 (8) Total (11) % (1) % (2) % 1 % (13) % Total, excluding the Hydrocarbons & Energy business (11) % (2) % 1 % 1 % (11) % U.S. & Canada (11) % — % (3) % 1 % (13) % EMEAI (9) (3) (4) — (16) Asia Pacific (12) (1) 5 — (8) Latin America (14) — (3) — (17) Total (11) % (1) % (2) % 1 % (13) % 1. Portfolio & Other includes the sales impact of various manufacturing, supply and service related agreements entered into with DuPont and Corteva in connection with the separation, which provide for different pricing than the historical intercompany and intracompany pricing practices of TDCC and Historical DuPont. 2021 Versus 2020 The Company reported net sales of $55 billion in 2021, up 43 percent from $38.5 billion in 2020, with local price up 40 percent, a favorable currency impact of 2 percent and volume up 1 percent. Net sales increased in all operating segments and across all geographic regions. Local price increased in all operating segments and across all geographic regions, primarily reflecting price gains due to tight supply and demand dynamics driven by logistics constraints and weather events. Local price increased in Packaging & Specialty Plastics (up 50 percent), Industrial Intermediates & Infrastructure (up 40 percent) and Performance Materials & Coatings (up 19 percent). Volume increased in Packaging & Specialty Plastics (up 2 percent) and Performance Materials & Coatings (up 1 percent). Volume decreased in Industrial Intermediates & Infrastructure (down 2 percent). Excluding the Hydrocarbons & Energy business, sales increased 37 percent. 35 Table of Contents 2020 Versus 2019 The Company reported net sales of $38.5 billion in 2020, down 10 percent from $43.0 billion in 2019, with local price down 7 percent and volume down 3 percent. Net sales decreased in all geographic regions and operating segments, reflecting impacts from the global COVID-19 pandemic on economies and supply and demand dynamics, most notably in the first half of the year. Local price decreased in all operating segments and in all geographic regions, primarily in response to lower global energy prices. Local price decreased in Packaging & Specialty Plastics (down 11 percent), Industrial Intermediates & Infrastructure (down 5 percent) and Performance Materials & Coatings (down 6 percent). Volume declined 3 percent, driven by the U.S. & Canada (down 8 percent), which was partially offset by demand growth in EMEAI (up 1 percent). Volume was flat in Asia Pacific and Latin America. Volume increased in Packaging & Specialty Plastics (up 1 percent) and decreased in Industrial Intermediates & Infrastructure and Performance Materials & Coatings (both down 6 percent). Excluding the Hydrocarbons & Energy business, sales declined 9 percent. Sales Variances by Operating Segment and Geographic Region - Pro Forma Basis 2020 1 2019 Percentage change from prior year Local Price & Product Mix Currency Volume Total Local Price & Product Mix Currency Volume Total Packaging & Specialty Plastics (11) % — % 1 % (10) % (12) % (1) % (3) % (16) % Industrial Intermediates & Infrastructure (5) — (6) (11) (12) (2) 1 (13) Performance Materials & Coatings (6) — (5) (11) (6) (2) (1) (9) Total (7) % — % (3) % (10) % (11) % (1) % (2) % (14) % Total, excluding the Hydrocarbons & Energy business (5) % — % (4) % (9) % (10) % (2) % 1 % (11) % U.S. & Canada (5) % — % (8) % (13) % (11) % — % (2) % (13) % EMEAI (12) — 1 (11) (9) (3) (4) (16) Asia Pacific (6) — — (6) (12) (1) 5 (8) Latin America (7) — — (7) (15) — (3) (18) Total (7) % — % (3) % (10) % (11) % (1) % (2) % (14) % 1. As reported net sales for the year ended December 31, 2020 compared with pro forma net sales for the year ended December 31, 2019. 2020 Versus 2019 - Pro Forma The Company reported net sales of $38.5 billion for 2020, down 10 percent from pro forma net sales of $43.0 billion in 2019, with local price down 7 percent and volume down 3 percent. Net sales decreased in all geographic regions and operating segments, reflecting impacts from the global COVID-19 pandemic on economies and supply and demand dynamics, most notably in the first half of the year. Local price decreased in all operating segments and in all geographic regions, primarily in response to lower global energy prices. Local price decreased in Packaging & Specialty Plastics (down 11 percent), Industrial Intermediates & Infrastructure (down 5 percent) and Performance Materials & Coatings (down 6 percent). Volume declined 3 percent, driven by the U.S. & Canada (down 8 percent), which was partially offset by an increase in EMEAI (up 1 percent). Volume was flat in Asia Pacific and Latin America. Volume increased in Packaging & Specialty Plastics (up 1 percent) and decreased in Industrial Intermediates & Infrastructure (down 6 percent) and Performance Materials & Coatings (down 5 percent). Excluding the Hydrocarbons & Energy business, sales declined 9 percent. Cost of Sales Cost of sales ("COS") was $44.2 billion in 2021, compared with $33.3 billion in 2020. COS increased in 2021 primarily due to higher feedstock and energy costs and impacts from Winter Storm Uri, which included higher raw material costs and repair costs. In 2021, COS included $146 million of costs associated with implementing the Company's digital acceleration program (related to Corporate). COS as a percentage of sales was 80.4 percent in 2021 compared with 86.5 percent in 2020. 36 Table of Contents COS was $33.3 billion in 2020, compared with $36.7 billion in 2019. COS decreased in 2020 primarily due to lower feedstock and other raw material costs, decreased sales volume and lower planned maintenance turnaround costs, which were partially offset by higher performance-based compensation costs. Operating rates declined significantly in the second quarter of 2020, as the Company temporarily idled certain manufacturing facilities and selectively adjusted operating rates at other facilities to balance production to demand in response to the COVID-19 pandemic. These facilities returned to more normalized operating rates in the third quarter of 2020. Overall, operating rates increased in the third and fourth quarters of 2020. In 2019, COS also included $75 million of transaction-related costs resulting from the separation from DowDuPont (related to Corporate) and $399 million of environmental charges related to Packaging & Specialty Plastics ($5 million), Industrial Intermediates & Infrastructure ($8 million), Performance Materials & Coatings ($50 million) and Corporate ($336 million). COS as a percentage of sales was 86.5 percent in 2020 compared with 85.3 percent in 2019. Research and Development Expenses Research and development ("R&D") expenses were $857 million in 2021, compared with $768 million in 2020 and $765 million in 2019. R&D expenses in 2021 increased compared with 2020 primarily due to increased performance-based compensation costs and fringe benefit expenses driven by stock market increases compared with the same period last year. R&D expenses in 2020 increased compared with 2019 primarily due to increased performance-based compensation costs which were partially offset by cost reductions. Selling, General and Administrative Expenses Selling, general and administrative ("SG&A") expenses were $1,645 million in 2021, compared with $1,471 million in 2020 and $1,590 million and $1,585 million for Dow Inc. and TDCC, respectively, in 2019. SG&A expenses in 2021 increased primarily due to increased performance-based compensation costs and fringe benefit expenses driven by stock market increases compared with the same period last year. SG&A expenses in 2020 decreased compared to 2019 primarily due to cost reductions which were partially offset by increased performance-based compensation costs. In 2020, SG&A was also favorably impacted by the recovery of legal costs related to the Nova Chemicals Corporation ("Nova") ethylene asset matter and the reversal of a bad debt reserve related to an arbitration judgment. See Note 16 to the Consolidated Financial Statements for additional information on the Nova litigation matters. Amortization of Intangibles Amortization of intangibles was $388 million in 2021, compared with $401 million in 2020 and $419 million in 2019. Amortization of intangibles decreased primarily due to certain intangible assets becoming fully amortized. See Note 13 to the Consolidated Financial Statements for additional information on intangible assets. Restructuring, Goodwill Impairment and Asset Related Charges - Net Restructuring, goodwill impairment and asset related charges - net were $6 million in 2021, $708 million in 2020 and $3,219 million in 2019. 2020 Restructuring Program On September 29, 2020, Dow Inc.'s Board approved restructuring actions to achieve the Company's structural cost improvement initiatives in response to the continued economic impact from the COVID-19 pandemic. The restructuring program was designed to reduce structural costs and enable the Company to further enhance competitiveness while the COVID-19 economic recovery gained traction. These actions were substantially complete by the end of 2021, except for certain cash payments expected to be made in 2022. In 2020, the Company recorded pretax restructuring charges of $573 million, consisting of severance and related benefit costs of $297 million, asset write-downs and write-offs of $196 million and costs associated with exit and disposal activities of $80 million. Restructuring charges by segment were as follows: $11 million in Packaging & Specialty Plastics, $22 million in Industrial Intermediates & Infrastructure, $177 million in Performance Materials & Coatings and $363 million in Corporate. In 2021, the Company recorded pretax restructuring charges of $12 million for asset write-downs and write-offs and $10 million for costs associated with exit and disposal activities. Restructuring charges by segment were as follows: $8 million in Packaging & Specialty Plastics, $1 million in Industrial Intermediates & Infrastructure, $10 million in Performance Materials & Coatings and $3 million in Corporate. In addition, the Company reduced pretax restructuring charges by $10 million for severance and related benefit costs, related to Corporate. 37 Table of Contents 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 restructuring charges below reflect charges from continuing operations. In 2019, the Company recorded pretax restructuring charges of $292 million, consisting of severance and related benefit costs of $123 million, asset write-downs and write-offs of $143 million and costs associated with exit and disposal activities of $26 million. Restructuring charges by segment were as follows: $1 million in Packaging & Specialty Plastics, $7 million in Industrial Intermediates & Infrastructure, $28 million in Performance Materials & Coatings and $256 million in Corporate. In 2020, the Company recorded pretax restructuring charges of $86 million and reduced pretax restructuring charges by $6 million in 2021, both for severance and related benefit costs (related to Corporate). Cash expenditures related to the Synergy Program were substantially complete at December 31, 2020. 2019 Goodwill Impairment Upon completion of th e goodwill impairment testing in the fourth quarter of 2019, the Company determined the fair value of the Coatings & Performance Monomers reporting unit was lower than its carrying amount. As a result, the Company recorded an impairment charge of $1,039 million in the fourth quarter of 2019 related to Performance Materials & Coatings. 2020 Asset Related 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. Impairment charges by segment were as follows: Packaging & Specialty Plastics ($19 million), Performance Materials & Coatings ($15 million) and Corporate ($15 million). See Note 23 for additional information. 2019 Asset Related Charges On August 13, 2019, the Company entered into a definitive agreement to sell its acetone derivatives business to ALTIVIA Ketones & Additives, LLC. The transaction closed on November 1, 2019 and included the Company's acetone derivatives related inventory and production assets, located in Institute, West Virginia, in addition to the site infrastructure, land, utilities and certain railcars. The Company remains at the Institute site as a tenant. As a result of the divestiture, the Company recognized a pretax impairment charge of $75 million in the third quarter of 2019. The impairment charge by segment was as follows: $24 million in Packaging & Specialty Plastics and $51 million in Corporate. In the fourth quarter of 2019, the Company concluded that its equity method investment in Sadara was other-than-temporarily impaired. The Company also reserved certain accounts and notes receivable and accrued interest balances due to uncertainty on the timing of collection. As a result, the Company recorded a $1,755 million pretax charge related to Sadara. The charge by segment was as follows: $370 million in Packaging & Specialty Plastics, $1,168 million in Industrial Intermediates & Infrastructure and $217 million in Corporate. In 2019, the Company recognized additional pretax impairment charges of $58 million related primarily to capital additions at its Santa Vitoria manufacturing facility, which was impaired in 2017. Impairment charges by segment were as follows: $44 million in Packaging & Specialty Plastics, $9 million in Performance Materials & Coatings and $5 million in Corporate. See Note 6 to the Consolidated Financial Statements for additional information on restructuring, goodwill impairment and asset related charges. Integration and Separation Costs Integration and separation costs, which reflect costs related to post-Merger integration and business separation activities, were $239 million in 2020 and $1,063 million and $1,039 million for Dow Inc. and TDCC, respectively, in 2019. Integration and business separation activities were completed as of December 31, 2020. Integration and separation costs are related to Corporate. 38 Table of Contents Equity in Earnings (Losses) of Nonconsolidated Affiliates The Company’s share of equity in earnings of nonconsolidated affiliates was $975 million in 2021, compared with equity losses of $18 million in 2020 and $94 million in 2019. The equity earnings improvement in 2021 compared with 2020 was primarily due to margin expansion at Sadara driven by broad-based price increases, strong MEG prices at the Kuwait joint ventures and improved elastomer and polyethylene margins at the Thai joint ventures. In 2020, equity losses decreased compared with 2019 primarily due to lower equity losses from Sadara, driven by improved industry supply and demand dynamics in the third and fourth quarters of 2020, which were partially offset by lower equity earnings from the Kuwait joint ventures due to lower monoethylene glycol prices. See Note 12 to the Consolidated Financial Statements for additional information on the Company’s evaluation of its equity method investment in Sadara for other-than-temporary impairment in 2019. Sundry Income (Expense) - Net Sundry income (expense) – net includes a variety of income and expense items such as foreign currency exchange gains and losses, dividends from investments, gains and losses on sales of investments and assets, non-operating pension and other postretirement benefit plan credits or costs, losses on early extinguishment of debt and certain litigation matters. TDCC Sundry income (expense) - net for 2021 was expense of $79 million, compared with income of $1,274 million in 2020 and $573 million in 2019. In 2021, sundry income (expense) - net included a $574 million loss on the early extinguishment of debt (related to Corporate and included in "Other net loss" in the consolidated statements of cash flows), and foreign currency exchange losses. These were partially offset by non-operating pension and postretirement benefit plan credits, gains on the sale of assets and investments, a $54 million gain related to an arbitration award (related to Industrial Intermediates & Infrastructure), and a $16 million gain related to post-closing adjustments on the previous divestiture of a bio-ethanol manufacturing facility in Brazil (related to Packaging & Specialty Plastics). See Notes 7, 15, 16, 20 and 26 to the Consolidated Financial Statements for additional information. In 2020, sundry income (expense) - net included a $544 million gain related to the Nova ethylene asset matter (related to Packaging & Specialty Plastics), a $499 million gain related to the sale of certain U.S. Gulf Coast marine and terminal operations and assets ($17 million related to Packaging & Specialty Plastics, $61 million related to Industrial Intermediates & Infrastructure and $421 million related to Corporate), a $233 million gain related to the sale of rail infrastructure operations and assets in the U.S. & Canada ($48 million related to Packaging & Specialty Plastics and $185 million related to Corporate), and non-operating pension and postretirement benefit plan credits. These were partially offset by a $149 million loss on the early extinguishment of debt (related to Corporate and included in "Other net loss" in the consolidated statements of cash flows), foreign currency exchange losses, $11 million in charges associated with agreements entered into with DuPont and Corteva as part of the separation and distribution, which provides for cross-indemnities and allocations of obligations and liabilities for periods prior to, at and after completion of the separation (related to Corporate), a $13 million loss related to the divestiture of a bio-ethanol manufacturing facility in Brazil (related to Packaging & Specialty Plastics) and a $2 million loss on an asset sale (related to Corporate). See Notes 5, 7, 15, 16, 20 and 26 to the Consolidated Financial Statements for additional information. In 2019, sundry income (expense) - net included foreign currency exchange gains, non-operating pension and postretirement benefit plan credits and gains on sales of assets and investments, as well as a net gain of $205 million related to litigation matters, which included a $170 million gain related to a legal matter with Nova (related to Packaging & Specialty Plastics), and an $85 million gain related to an adjustment of the Dow Silicones breast implant liability (related to Corporate), which were partially offset by a $50 million charge (net of indemnifications of $37 million), related to the settlement of the Dow Silicones commercial creditor matters (related to Corporate). In 2019, sundry income (expense) - net also included a $102 million loss on the early extinguishment of debt (related to Corporate and included in "Other net loss" in the consolidated statements of cash flows) and a gain of $2 million on post-closing adjustments related to previous divestitures (related to Corporate). See Notes 7, 15, 16, 20 and 26 to the Consolidated Financial Statements for additional information. Dow Inc. Sundry income (expense) - net for 2021 was expense of $35 million, compared with income of $1,269 million in 2020 and $461 million in 2019. 39 Table of Contents In 2021, in addition to the amounts previously discussed above for TDCC, sundry income (expense) - net included $30 million in gains associated with the agreements entered into with DuPont and Corteva as part of the separation and distribution (related to Corporate). In 2020, in addition to the amounts previously discussed above for TDCC, sundry income (expense) - net included $10 million in charges associated with the agreements entered into with DuPont and Corteva as part of the separation and distribution (related to Corporate). In 2019, in addition to the amounts previously discussed above for TDCC, sundry income (expense) - net included a $51 million loss on post-closing adjustments related to a previous divestiture and $69 million in charges associated with the agreements entered into with DuPont and Corteva as part of the separation and distribution (both related to Corporate). See Notes 3, 7, 15, 16, 20 and 26 to the Consolidated Financial Statements for additional information. Interest Expense and Amortization of Debt Discount Interest expense and amortization of debt discount was $731 million in 2021, compared with $827 million in 2020 and $933 million and $952 million for Dow Inc. and TDCC, respectively, in 2019. Interest expense and amortization of debt discount decreased in 2021 primarily due to lower coupon rates and the redemption of debt. The decrease in 2020 is primarily due to TDCC's redemption of long-term debt in 2019 and debt issuances at lower coupon rates in 2020. See Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 15 to the Consolidated Financial Statements for additional information related to debt financing activity. In addition, TDCC had interest expense related to an intercompany loan with Dow Inc. in 2019. Provision for Income Taxes on Continuing Operations The Company's effective tax rate fluctuates based on, among other factors, where income is earned, the level of income relative to tax attributes and the level of equity earnings, since most earnings from the Company's equity method investments are taxed at the joint venture level. The underlying factors affecting the Company's overall tax rate are summarized in Note 8 to the Consolidated Financial Statements. The CARES Act was enacted on March 27, 2020 in the United States. There were no significant impacts to the Company's provision for income taxes on continuing operations in 2021 or 2020 as a result of the CARES Act legislation. The provision for income taxes on continuing operations was $1,740 million in 2021, compared with $777 million in 2020 and $470 million in 2019. The provision for income taxes in 2021 increased primarily due to an increase in pretax income and the recognition of uncertain tax positions in multiple jurisdictions. These factors resulted in an effective tax rate of 21.4 percent for Dow Inc. in 2021. The tax rate for 2020 was unfavorably impacted by valuation allowances of $260 million related to foreign tax credits and other attributes that are more likely than not to remain unutilized prior to their expiration. The tax rate for 2020 was favorably impacted by a capital loss resulting from the divestiture of the Santa Vitoria manufacturing facility. This resulted in an effective tax rate of 37.5 percent for Dow Inc. in 2020. The tax rate for 2019 was unfavorably impacted by non-deductible goodwill and investment impairments, geographic mix of earnings and reduced equity earnings. These factors resulted in a negative effective tax rate of 37.7 percent for Dow Inc. in 2019. In the fourth quarter of 2019, the Company recorded the impacts of tax law changes enacted in Switzerland. As a result, deferred tax assets increased by $92 million. Income from Discontinued Operations, Net of Tax Income from discontinued operations, net of tax was $445 million in 2019, related to the distribution of AgCo and SpecCo to DowDuPont as a result of the separation. See Note 3 to the Consolidated Financial Statements for additional information. 40 Table of Contents Net Income Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests was $94 million in 2021, $69 million in 2020 and $87 million in 2019. Net income attributable to noncontrolling interests from discontinued operations of $13 million in 2019 related to the distribution of AgCo and SpecCo to DowDuPont as a result of the separation are included in the amounts above. See Notes 19 and 24 to the Consolidated Financial Statements for additional information. Net Income (Loss) Available for the Common Stockholder(s) Dow Inc. Net income available for Dow Inc. common stockholders was $6,311 million in 2021, compared with $1,225 million in 2020 and a net loss of $1,359 million in 2019. Earnings per share of Dow Inc. was $8.38 per share in 2021, compared with $1.64 per share in 2020 and a loss of $1.84 per share in 2019. See Note 9 to the Consolidated Financial Statements for details on Dow Inc.'s earnings per share calculations. TDCC Net income available for TDCC common stockholder was $6,274 million in 2021, compared with $1,235 million in 2020 and a net loss of $1,237 million in 2019. Following the separation from DowDuPont, TDCC's common shares are owned solely by Dow Inc. SEGMENT RESULTS 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. The Company’s measure of profit/loss for segment reporting purposes is Operating EBIT (for the years ended December 31, 2021 and 2020) and pro forma Operating EBIT (for the year ended December 31, 2019) as this is the manner in which the Company's chief operating decision maker ("CODM") assesses performance and allocates resources. The Company defines Operating EBIT as earnings (i.e., "Income (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 by segment 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 year ended December 31, 2019, as it is included in management’s measure of segment performance and is regularly reviewed by the CODM. Pro forma net sales includes the impact of various manufacturing, supply and service related agreements entered into with DuPont and Corteva in connection with the separation which provide for different pricing than the historical intercompany and intracompany pricing practices of TDCC and Historical DuPont. See Note 26 to the Consolidated Financial Statements for reconciliations of these measures and a summary of the pro forma adjustments impacting segment measures, which are consistent with the pro forma adjustments included in the Current Report on Form 8-K filed on June 3, 2019, with the SEC. PACKAGING & SPECIALTY PLASTICS The Packaging & Specialty Plastics operating segment 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. These differentiators, plus collaboration at the customer’s design table, enable the segment to deliver more reliable, durable, higher-performing solutions designed for recyclability and enhanced plastics circularity and sustainability. The segment serves customers, brand owners and ultimately consumers in key markets including food and specialty packaging; industrial and consumer packaging; health and hygiene; caps, closures and pipe applications; consumer durables; mobility and transportation; and infrastructure. Ethylene is transferred to downstream derivative businesses at market-based prices, which are generally equivalent to prevailing market prices for large volume purchases. This segment also includes the results of The Kuwait Styrene Company K.S.C.C. and The SCG-Dow Group, as well as a portion of the results of EQUATE Petrochemical Company K.S.C.C. 41 Table of Contents ("EQUATE"), The Kuwait Olefins Company K.S.C.C. ("TKOC"), Map Ta Phut Olefins Company Limited ("Map Ta Phut") and Sadara, all joint ventures of the Company. The Company is responsible for marketing a majority of Sadara products outside of the Middle East zone through the Company's established sales channels. As part of this arrangement, the Company purchases and sells Sadara products for a marketing fee. In March 2021, Dow and the Saudi Arabian Oil Company agreed to transition the marketing rights and responsibilities for Sadara’s finished products to levels more consistent with each partner’s equity ownership. This transition began in July 2021 and is being implemented over the next five years. Packaging & Specialty Plastics In millions 2021 2020 2019 Net sales $ 28,128 $ 18,301 $ 20,245 Pro forma net sales $ 20,245 Operating EBIT $ 6,638 $ 2,325 Pro forma Operating EBIT $ 2,904 Equity earnings $ 490 $ 173 $ 162 Packaging & Specialty Plastics Percentage change from prior year 2021 2020 2019 Change in Net Sales from Prior Period due to: Local price & product mix 50 % (11) % (12) % Currency 2 — (1) Volume 2 1 (3) Total 54 % (10) % (16) % Change in Pro Forma Net Sales from Prior Period due to: Local price & product mix (12) % Currency (1) Volume (3) Total (16) % 2021 Versus 2020 Packaging & Specialty Plastics net sales were $28,128 million in 2021, up 54 percent from net sales of $18,301 million in 2020, with local price up 50 percent, volume up 2 percent and a favorable currency impact of 2 percent, primarily in EMEAI. Local price increased in both businesses and across all geographic regions, driven by tight supply and demand dynamics. Local price increased in Hydrocarbons & Energy as prices for co-products are generally correlated to Brent crude oil prices, which, on average, increased 64 percent compared with 2020. Local price increased in Packaging and Specialty Plastics driven by favorable supply and demand dynamics in polyethylene, notably in industrial and consumer packaging and flexible food and beverage packaging applications. Volume increased in Hydrocarbons & Energy, primarily in the U.S. & Canada and EMEAI, more than offsetting decreased volume in Asia Pacific. Volume decreased in Packaging and Specialty Plastics, primarily in Asia Pacific and Latin America as supply constraints continue to lower exports, more than offsetting an increase in the U.S. & Canada. Operating EBIT was $6,638 million in 2021, up $4,313 million from Operating EBIT of $2,325 million in 2020. Operating EBIT increased primarily due to integrated margin expansion and increased equity earnings at Sadara and the Thai and Kuwait joint ventures. 42 Table of Contents 2020 Versus 2019 Packaging & Specialty Plastics net sales were $18,301 million in 2020, down 10 percent from net sales and pro forma net sales of $20,245 million in 2019, with local price down 11 percent and volume up 1 percent. Net sales declined in the first half of the year, reflecting the impact of the COVID-19 pandemic, while strong supply and demand dynamics took hold in the second half of the year. Local price decreased in both businesses and across all geographic regions, driven by reduced polyethylene prices and lower global energy prices. Local price declined in Hydrocarbons & Energy as prices for co-products are generally correlated to Brent crude oil prices, which declined 33 percent compared with 2019. Volume increased in Hydrocarbons & Energy as increases in EMEAI were partially offset by declines in the U.S. & Canada, Asia Pacific and Latin America. Packaging and Specialty Plastics volume was flat as increases in flexible food and specialty packaging, industrial and consumer packaging and health and hygiene applications in Asia Pacific, Latin America and EMEAI were offset by reduced demand for functional polymers, primarily due to the COVID-19 pandemic, and lower catalyst licensing activity in the U.S. & Canada. Operating EBIT was $2,325 million in 2020, down 20 percent from pro forma Operating EBIT of $2,904 million in 2019. Operating EBIT decreased primarily due to integrated margin compression in both businesses. These declines more than offset cost reductions, decreased planned maintenance turnaround costs and increased equity earnings. INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE The Industrial Intermediates & Infrastructure operating segment 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 businesses' global scale and reach, world-class technology, 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 appliance, building and construction, mobility and transportation, adhesive and lubricant applications, among others. This segment also includes a portion of the results of EQUATE, TKOC, Map Ta Phut and Sadara, all joint ventures of the Company. The Company is responsible for marketing a majority of Sadara products outside of the Middle East zone through the Company's established sales channels. As part of this arrangement, the Company purchases and sells Sadara products for a marketing fee. In March 2021, Dow and the Saudi Arabian Oil Company agreed to transition the marketing rights and responsibilities for Sadara’s finished products to levels more consistent with each partner’s equity ownership. This transition began in July 2021 and is being implemented over the next five years. Industrial Intermediates & Infrastructure In millions 2021 2020 2019 Net sales $ 16,851 $ 12,021 $ 13,440 Pro forma net sales $ 13,449 Operating EBIT $ 2,282 $ 355 Pro forma Operating EBIT $ 845 Equity earnings (losses) $ 471 $ (166) $ (241) 43 Table of Contents Industrial Intermediates & Infrastructure Percentage change from prior year 2021 2020 2019 Change in Net Sales from Prior Period due to: Local price & product mix 40 % (5) % (12) % Currency 2 — (1) Volume (2) (6) — Total 40 % (11) % (13) % Change in Pro Forma Net Sales from Prior Period due to: Local price & product mix (12) % Currency (2) Volume 1 Total (13) % 2021 Versus 2020 Industrial Intermediates & Infrastructure net sales were $16,851 million in 2021, up 40 percent from $12,021 million in 2020, with local price up 40 percent, a favorable currency impact of 2 percent and volume down 2 percent. Local price increased in both businesses and across all geographic regions, primarily driven by strong supply and demand dynamics and rising energy prices. Currency favorably impacted sales in both businesses. Volume in Polyurethanes & Construction Chemicals decreased in the U.S. & Canada and Asia Pacific, partially offset by increased volume in EMEAI and Latin America. The volume decrease in Polyurethanes & Construction Chemicals was due to a decrease in vinyl chloride monomers mainly related to a planned transition of a low-margin co-producer contract as well as a decrease in isocyanates, which were partially offset by robust consumer demand in polyurethane systems. Despite strong consumer demand, volume in Industrial Solutions decreased in all geographic regions, except Latin America and was largely driven by weather-related supply constraints. Operating EBIT was $2,282 million in 2021, up $1,927 million from Operating EBIT of $355 million in 2020. Operating EBIT increased primarily due to margin expansion from strong supply and demand dynamics in Polyurethanes & Construction Chemicals and higher equity earnings at Sadara and the Kuwait joint ventures. 2020 Versus 2019 Industrial Intermediates & Infrastructure net sales were $12,021 million in 2020, down 11 percent from $13,440 million in 2019. Net sales decreased 11 percent from pro forma net sales of $13,449 million in 2019, with volume down 6 percent and local price down 5 percent. Weak demand for products used in consumer durable good end-markets, including construction, furniture and bedding, appliances and automotive, drove volume declines in Polyurethanes & Construction Chemicals in all geographic regions, reflecting the impact of the COVID-19 pandemic on consumer activities and buying patterns, most notably in the first half of the year. Volume in Industrial Solutions was also impacted by the COVID-19 pandemic, with decreases in the U.S. & Canada and Latin America which were partially offset by increases in Asia Pacific and EMEAI. The volume decline in Industrial Solutions was due to weakened demand in industrial, energy and automotive end-markets partially offset by stronger demand for products used in electronics, agriculture and pharma applications. Local price decreased in both businesses and in all geographic regions, primarily due to lower global energy prices and raw material costs. Operating EBIT was $355 million in 2020, down 58 percent from pro forma Operating EBIT of $845 million in 2019. Operating EBIT decreased due to lower demand and margin compression, which were partially offset by cost reductions, decreased equity losses and lower planned maintenance turnaround costs. The overall decrease in equity losses was driven by lower equity losses from Sadara partially offset by decreased equity earnings from EQUATE. 44 Table of Contents PERFORMANCE MATERIALS & COATINGS The Performance Materials & Coatings operating segment includes industry-leading franchises that deliver a wide array of solutions into consumer, infrastructure and mobility 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, market-driven and sustainable innovations to customers. Performance Materials & Coatings In millions 2021 2020 2019 Net sales $ 9,672 $ 7,951 $ 8,923 Pro forma net sales $ 8,961 Operating EBIT $ 866 $ 314 Pro forma Operating EBIT $ 918 Equity earnings $ 7 $ 6 $ 5 Performance Materials & Coatings Percentage change from prior year 2021 2020 2019 Change in Net Sales from Prior Period due to: Local price & product mix 19 % (6) % (6) % Currency 2 — (2) Volume 1 (6) (3) Portfolio & other — 1 3 Total 22 % (11) % (8) % Change in Pro Forma Net Sales from Prior Period due to: 1 Local price & product mix — % (6) % (6) % Currency — — (2) Volume — (5) (1) Portfolio & other — — — Total — % (11) % (9) % 1. As reported net sales for the year ended December 31, 2020 compared with pro forma net sales for the year ended December 31, 2019. 2021 Versus 2020 Performance Materials & Coatings net sales were $9,672 million in 2021, up 22 percent from net sales of $7,951 million in 2020, with local price up 19 percent, volume up 1 percent, and a favorable currency impact of 2 percent. Local price increased in both businesses and across all geographic regions. Consumer Solutions local price increased in both upstream siloxanes and downstream silicones due to favorable supply and demand dynamics and higher raw material costs. Local price increased in Coatings & Performance Monomers primarily due to improved supply and demand dynamics and higher raw material costs in acrylic monomers and architectural coatings. Volume increased i n the U.S. & Canada, Asia Pacific and Latin America, which was partially offset by a decrease in EMEAI. Consumer Solutions volume increased due to higher demand in all geographic regions partially offset by planned maintenance turnaround activity. Volume decreased in Coatings & Performance Monomers in all geographic regions primarily due to supply availability challenges caused by weather-related outages and third-party supply and logistics constraints. The favorable currency impact was driven by Asia Pacific and EMEAI. Operating EBIT was $866 million in 2021, up $552 million from Operating EBIT of $314 million in 2020. Operating EBIT increased primarily due to margin expansion and higher volume in Consumer Solutions. 45 Table of Contents 2020 Versus 2019 Performance Materials & Coatings net sales were $7,951 million in 2020, down 11 percent from net sales of $8,923 million in 2019. Net sales decreased 11 percent from pro forma net sales of $8,961 million in 2019, with local price down 6 percent and volume down 5 percent. Local price decreased in both businesses and across all geographic regions. Consumer Solutions local price declined in all regions, primarily in upstream siloxanes due to weak supply and demand dynamics. Local price decreased in Coatings & Performance Monomers in response to lower feedstock and other raw material costs. Volume declined in all geographic regions except Latin America, reflecting the impact from the COVID-19 pandemic. Consumer Solutions volume decreased as growth in home care applications was more than offset by lower demand for products used in automotive, industrial, construction and personal care end-markets as consumer activities and buying patterns were limited by the COVID-19 pandemic. Coatings & Performance Monomers volume increased in all geographic regions, except EMEAI. Volume gains were driven by higher demand for methacrylates used in protective applications, for architectural coatings as consumers continued do-it-yourself projects at home, and higher demand for vinyl acetate monomers. Operating EBIT was $314 million in 2020, down 66 percent from pro forma Operating EBIT of $918 million in 2019. Operating EBIT decreased primarily due to margin compression, lower demand in siloxanes as a result of the COVID-19 pandemic and higher manufacturing and planned maintenance turnaround costs that more than offset volume gains in Coatings & Performance Monomers and lower SG&A costs. CORPORATE Corporate includes certain enterprise and governance activities (including insurance operations, environmental operations, etc.); non-business aligned joint ventures; non-business aligned litigation expenses; and discontinued or non-aligned businesses. Corporate In millions 2021 2020 2019 Net sales $ 317 $ 269 $ 343 Pro forma net sales $ 343 Operating EBIT $ (253) $ (279) Pro forma Operating EBIT $ (315) Equity earnings (losses) $ 7 $ (31) $ (20) 2021 Versus 2020 Net sales for Corporate, which primarily relate to the Company's insurance operations, were $317 million in 2021, up from net sales of $269 million in 2020. Operating EBIT was a loss of $253 million in 2021, compared with Operating EBIT loss of $279 million in 2020. Operating EBIT improved primarily due to improved equity earnings. 2020 Versus 2019 Net sales for Corporate, which primarily relate to the Company's insurance operations, were $269 million in 2020, down from net sales and pro forma net sales of $343 million in 2019. Operating EBIT was a loss of $279 million in 2020, compared with a pro forma Operating EBIT loss of $315 million in 2019. Compared with 2019, Operating EBIT improved primarily due to cost reductions and stranded cost removal throughout 2019. 46 Table of Contents OUTLOOK Operating Segments & End-Market Expectations In 2022, economic forecasts are projecting above average global gross domestic product ("GDP") growth rates due to strong industrial and consumer demand trends which have the potential to positively impact sales volume. Inflationary impacts on natural gas and feedstocks, driven by external macroeconomic and geopolitical factors, remain a potential risk in the near-term, but are expected to be moderate as warmer weather lowers demand for heating supply. The Company anticipates constructive global demand for crude oil compared with 2021 due to ongoing recovery in travel and mobility. Crude oil fundamentals suggest global supply will lag the growing demand that provides support to oil prices and oil-to-gas spreads. In Packaging & Specialty Plastics, supply improvements following significant weather-related disruptions in 2021 are expected to drive sales volume on continued underlying demand strength, notably in flexible food and specialty packaging, industrial and consumer packaging and functional polymers. Integrated margins are expected to stabilize with recent industry supply additions. The Company’s regional feedstock cost advantages will help offset elevated raw material and energy costs. Other important factors that will impact performance are raw material and logistics challenges; industry operating rates; and timing of additional industry capacity startups. In Industrial Intermediates & Infrastructure, volume growth is expected across the portfolio, driven by continued underlying demand strength for products used in furniture and bedding, appliances, automotive, construction, electronics and pharma applications. The methylene diphenyl diisocyanate value chain is expected to remain tight with industry capacity additions trailing demand growth. Propylene oxide is expected to be impacted by new capacity entering the market, particularly in Asia Pacific. Ethylene oxide supply is expected to remain tight, with limited industry capacity additions in the near-term and continued demand strength. Margins for the segment are expected to benefit from high-value specialties aligned to strategic incremental growth capacity additions. In Performance Materials & Coatings, sales growth is expected in downstream silicones, particularly for products used in mobility and transportation, high performance building and construction, industrial, consumer, and electronics applications. The Company continues to pursue incremental downstream silicones capacity debottlenecking and growth projects to meet demand growth in consumer-driven end-markets. Within siloxanes, increased supply availability is expected to drive sales volume. Global demand strength in architectural and industrial coatings is expected to drive sales volume. The Company remains well-positioned to benefit from its customers’ shift to sustainable chemistries where Dow has unique technologies and solutions to offer in both business units. Other factors impacting operating segment profitability include: • Planned maintenance turnaround spending is expected to increase approximately $100 million compared with 2021 due to inflationary pressures on materials and labor. • Equity in earnings of nonconsolidated affiliates is expected to decrease compared with 2021 as margins compress on industry supply additions, lower Asian olefins and mono ethylene glycol prices, and increasing raw material costs. Projected Uses of Cash Items that may impact the consolidated statements of cash flows in 2022 include: • Cash contributions to pension plans are expected to be approximately $250 million. • Capital expenditures are expected to be approximately $2.2 billion. • Cash expenditures related to the Digital Acceleration program are expected to be $250 million in 2022. • Cash outflows related to the Company's 2020 Restructuring Program, including restructuring implementation costs, are expected to be approximately $175 million. • Cash dividends from equity companies are expected to increase following increased equity earnings in 2021. 47 Table of Contents LIQUIDITY AND CAPITAL RESOURCES The Company had cash and cash equivalents of $2,988 million at December 31, 2021 and $5,104 million at December 31, 2020, of which $1,745 million at December 31, 2021 and $862 million at December 31, 2020, was held by subsidiaries in foreign countries, including United States territories. For each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States. The cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign investments. Dow has the ability to repatriate additional funds to the U.S., which could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or U.S. state income taxes and the impact of foreign currency movements. At December 31, 2021, management believed that sufficient liquidity was available in the United States. The Company has and expects to continue repatriating certain funds from its non-U.S. subsidiaries that are not needed to finance local operations; however, these particular repatriation activities have not and are not expected to result in a significant incremental tax liability to the Company. The Company’s cash flows from operating, investing and financing activities, as reflected in the consolidated statements of cash flows, are summarized in the following table: Cash Flow Summary Dow Inc. TDCC In millions 2021 2020 2019 2021 2020 2019 Cash provided by (used for): Operating activities - continuing operations $ 7,069 $ 6,252 $ 5,713 $ 7,200 $ 6,263 $ 5,706 Operating activities - discontinued operations (60) (26) 217 — — 371 Operating activities 7,009 6,226 5,930 7,200 6,263 6,077 Investing activities - continuing operations (2,914) (841) (2,158) (2,914) (841) (2,158) Investing activities - discontinued operations — — (34) — — (34) Investing activities (2,914) (841) (2,192) (2,914) (841) (2,192) Financing activities - continuing operations (6,071) (2,764) (4,077) (6,262) (2,801) (4,224) Financing activities - discontinued operations — — (18) — — (18) Financing activities (6,071) (2,764) (4,095) (6,262) (2,801) (4,242) Effect of exchange rate changes on cash, cash equivalents and restricted cash (99) 107 (27) (99) 107 (27) Summary Increase (decrease) in cash, cash equivalents and restricted cash (2,075) 2,728 (384) (2,075) 2,728 (384) Cash, cash equivalents and restricted cash at beginning of year 5,108 2,380 2,764 5,108 2,380 2,764 Cash, cash equivalents and restricted cash at end of year $ 3,033 $ 5,108 $ 2,380 $ 3,033 $ 5,108 $ 2,380 Less: Restricted cash and cash equivalents, included in "Other current assets" 45 4 13 45 4 13 Cash and cash equivalents at end of year $ 2,988 $ 5,104 $ 2,367 $ 2,988 $ 5,104 $ 2,367 48 Table of Contents Cash Flows from Operating Activities Cash provided by operating activities from continuing operations in 2021 was primarily driven by the Company's cash earnings and dividends from equity method investments, which were partially offset by cash used for working capital requirements, pension contributions and performance-based compensation payments. Cash provided by operating activities from continuing operations in 2020 was primarily driven by the Company's cash earnings, cash receipts related to an advance payment from a customer and the Nova ethylene asset matter, dividends from equity method investments and working capital improvements, which were partially offset by pension contributions. Cash provided by operating activities from continuing operations in 2019 was primarily driven by the Company's cash earnings, dividends from equity method investments, working capital improvements, cash receipts related to an advance payment from a customer and the Nova ethylene asset matter, which were partially offset by performance-based compensation payments and pension contributions. Net Working Capital and Current Ratio at Dec 31 Dow Inc. TDCC In millions 2021 2020 2021 2020 Current assets $ 20,848 $ 19,084 $ 20,837 $ 18,998 Current liabilities 13,226 11,108 13,046 10,574 Net working capital $ 7,622 $ 7,976 $ 7,791 $ 8,424 Current ratio 1.58:1 1.72:1 1.60:1 1.80:1 Working Capital Metrics Twelve Months Ended Dec 31, 2021 Dec 31, 2020 Days sales outstanding in trade receivables 40 48 Days sales in inventory 54 65 Days payables outstanding 57 66 Cash provided by (used for) operating activities from discontinued operations primarily related to cash payments and receipts the Company had with DuPont and Corteva that related to certain agreements and matters related to the separation from DowDuPont. See Note 3 to the Consolidated Financial Statements for additional information. Cash Flows from Investing Activities Cash used for investing activities from continuing operations in 2021 was primarily for capital expenditures and purchases of investments and previously leased assets, which were partially offset by proceeds from sales and maturities of investments. Cash used for investing activities from continuing operations in 2020 was primarily for capital expenditures, purchases of investments, investments in and loans to nonconsolidated affiliates (related to Sadara) and acquisitions of property and businesses, which were partially offset by proceeds from sales and maturities of investments and proceeds from sales of property and businesses. Cash used for investing activities from continuing operations in 2019 was primarily for capital expenditures, purchases of investments and investments in and loans to nonconsolidated affiliates, which were partially offset by proceeds from sales and maturities of investments. The Company loaned Sadara $333 million in 2020 and $473 million in 2019. As a result of Sadara's debt re-profiling completed in the first quarter of 2021, the Company did not provide any shareholder loans or equity contributions to Sadara in 2021. See Notes 12 and 16 to the Consolidated Financial Statements for additional information. The Company's capital expenditures related to continuing operations were $1,501 million in 2021, $1,252 million in 2020 and $1,961 million in 2019. Capital spending was higher in 2021 as the Company ramped up its growth projects and investments to keep pace with demand recovery. The Company expects capital spending in 2022 to be approximately $2.2 billion. 49 Table of Contents Capital spending in recent years has included an expansion of the Company's new ethylene production facility in Freeport, Texas, which commenced operations in 2020, bringing the facility's total ethylene capacity to 2,000 kilotonnes per annum and making it the largest ethylene cracker in the world; the addition of a furnace to the Company's ethylene production facility in Alberta, Canada, which commenced operations in 2021; the retrofit of one of the Company's Louisiana steam crackers with Dow's proprietary fluidized catalytic dehydrogenation ("FCDh") technology to produce on-purpose propylene and the addition of a new specialty alkoxylation reactor in Plaquemine, Louisiana, which are both expected to be completed in the second half of 2022; and the addition of an integrated MDI distillation and prepolymers facility at its site in Freeport, Texas, which is expected to be completed in 2023. Cash used for investing activities from discontinued operations in 2019 was primarily for capital expenditures, partially offset by proceeds from the sales of property, businesses and ownership interests in nonconsolidated affiliates. Cash Flows from Financing Activities Cash used for financing activities from continuing operations in 2021 included payments on long-term debt and transaction financing, debt issuance and other costs, which were partially offset by proceeds from issuance of common stock. In addition, Dow Inc. included cash outflows for dividends paid to stockholders and purchases of treasury stock and TDCC included cash outflows for dividends paid to Dow Inc. Cash used for financing activities from continuing operations in 2020 included payments on long-term debt, changes in short-term notes payable and transaction financing, debt issuance and other costs, which were partially offset by proceeds from issuance of long-term debt. In addition, Dow Inc. included cash outflows for dividends paid to stockholders and purchases of treasury stock and TDCC included cash outflows for dividends paid to Dow Inc. Cash used for financing activities from continuing operations in 2019 included payments on long-term debt and dividends paid to DowDuPont, which were partially offset by proceeds from issuance of long-term debt. In addition, Dow Inc. received cash as part of the separation from DowDuPont, which was more than offset by dividends paid to stockholders and purchases of treasury stock. See Notes 15 and 18 to the Consolidated Financial Statements for additional information related to the issuance and retirement of debt and the Company's share repurchases and dividends. Cash used for financing activities from discontinued operations in 2019 primarily related to distributions to noncontrolling interests and employee taxes paid for share-based payment arrangements. Non-GAAP Cash Flow Measures Free Cash Flow Dow defines free cash flow as "Cash provided by operating activities - continuing operations," less capital expenditures. Under this definition, free cash flow represents the cash generated by Dow from operations after investing in its asset base. Free cash flow, combined with cash balances and other sources of liquidity, represents the cash available to fund obligations and provide returns to shareholders. Free cash flow is an integral financial measure used in the Company's financial planning process. Operating EBITDA and Pro Forma Operating EBITDA Dow defines Operating EBITDA (for the years ended December 31, 2021 and 2020) as earnings (i.e., "Income from continuing operations before income taxes") before interest, depreciation and amortization, excluding the impact of significant items. Pro forma Operating EBITDA (for the year ended December 31, 2019) is defined as earnings (i.e. "Income (loss) from continuing operations before income taxes") before interest, depreciation and amortization, plus pro forma adjustments, excluding the impact of significant items. Cash Flow Conversion (Operating EBITDA or Pro Forma Operating EBITDA to Cash Flow From Operations) Dow defines cash flow conversion (Operating EBITDA or pro forma Operating EBITDA to cash flow from operations) as "Cash provided by operating activities - continuing operations," divided by Operating EBITDA or pro forma Operating EBITDA. Management believes cash flow conversion is an important financial metric as it helps the Company determine how efficiently it is converting its earnings into cash flow. These financial measures are not recognized in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and should not be viewed as alternatives to U.S. GAAP financial measures of performance. All companies do not calculate non-GAAP financial measures in the same manner and, accordingly, Dow's definitions may not be consistent with the methodologies used by other companies. 50 Table of Contents Reconciliation of Non-GAAP Cash Flow Measures Dow Inc. In millions 2021 2020 2019 Cash provided by operating activities - continuing operations (GAAP) $ 7,069 $ 6,252 $ 5,713 Capital expenditures (1,501) (1,252) (1,961) Free cash flow (non-GAAP) 1 $ 5,568 $ 5,000 $ 3,752 1. Free cash flow for the year ended December 31, 2021 reflects a $1 billion elective pension contribution. Reconciliation of Cash Flow Conversion (Operating EBITDA or Pro Forma Operating EBITDA to Cash Flow From Operations) Dow Inc. In millions 2021 2020 2019 1 Income (loss) from continuing operations, net of tax (GAAP) $ 6,405 $ 1,294 $ (1,717) + Provision for income taxes on continuing operations 1,740 777 470 Income (loss) from continuing operations before income taxes $ 8,145 $ 2,071 $ (1,247) - Interest income 55 38 81 + Interest expense and amortization of debt discount 731 827 933 + Pro forma adjustments ² — — 65 - Significant items ³ (712) 145 (4,682) Operating EBIT (non-GAAP) $ 9,533 $ 2,715 $ 4,352 + Depreciation and amortization 2,842 2,874 2,938 Operating EBITDA (non-GAAP) $ 12,375 $ 5,589 $ 7,290 Cash provided by operating activities - continuing operations (GAAP) $ 7,069 $ 6,252 $ 5,713 Cash flow conversion (Operating EBITDA or pro forma Operating EBITDA to cash flow from operations) (non-GAAP) 4 57.1 % 111.9 % 78.4 % 1. Operating EBIT, depreciation and amortization and Operating EBITDA for the year ended December 31, 2019 is presented on a pro forma basis. 2. Pro forma adjustments for the year ended December 31, 2019 include: (1) the margin impact of various manufacturing, supply and service related agreements entered into with DuPont and Corteva in connection with the separation which provide for different pricing than the historical intercompany and intracompany pricing practices of TDCC and Historical DuPont and (2) the elimination of the impact of events directly attributable to the Merger, internal reorganization and business realignment, separation, distribution and other related transactions (e.g., one-time transaction costs). 3. The year ended December 31, 2021 includes costs associated with the Company's digital acceleration program; restructuring, implementation costs and asset related charges - net; a loss on early extinguishment of debt; a gain on a previous divestiture, litigation related charges, awards and adjustments; and indemnification and other transaction related costs. The year ended December 31, 2020 includes integration and separation costs, restructuring, implementation costs and asset related charges - net, a gain on a warranty accrual adjustment of an exited business, a net gain on divestitures and asset sale, a gain related to a legal matter with Nova, a loss on early extinguishment of debt and a loss associated with agreements entered into with DuPont and Corteva as part of the separation and distribution. The year ended December 31, 2019 includes integration and separation costs, restructuring, goodwill impairment and asset related charges - net, a gain on a warranty accrual adjustment of an exited business, environmental charges, a loss related to previous divestitures, a loss on early extinguishment of debt, a net gain related to litigation matters and a loss associated with agreements entered into with DuPont and Corteva as part of the separation and distribution. See Note 26 to the Consolidated Financial Statements for additional information. 4. Cash flow conversion for the year ended December 31, 2021 reflects a $1 billion elective pension contribution. Liquidity & Financial Flexibility The Company’s primary source of incremental liquidity is cash flows from operating activities. The generation of cash from operations and the Company's ability to access capital markets is expected to meet the Company’s cash requirements for working capital, capital expenditures, debt maturities, contributions to pension plans, dividend distributions to stockholders, share repurchases and other needs. In addition to cash from operating activities, the Company’s current liquidity sources also include TDCC's U.S. and Euromarket commercial paper programs, committed and uncommitted credit facilities, committed accounts receivable facilities, a U.S. retail note program (“InterNotes®”) and other debt markets. The Company continues to maintain a strong financial position with all of its committed credit facilities undrawn and fully available at December 31, 2021. Cash and committed and available forms of liquidity were $12.6 billion at December 31, 2021. The Company also has no substantive long-term debt maturities due until 2026. Additional details on sources of liquidity are as follows: 51 Table of Contents Commercial Paper TDCC issues promissory notes under its U.S. and Euromarket commercial paper programs. TDCC had no commercial paper outstanding at December 31, 2021 and 2020. TDCC maintains access to the commercial paper market at competitive rates. Amounts outstanding under TDCC's commercial paper programs during the period may be greater or less than the amount reported at the end of the period. Subsequent to December 31, 2021, TDCC issued approximately $1.3 billion of commercial paper. Committed Credit Facilities The Company also has the ability to access liquidity through TDCC's committed and available credit facilities. At December 31, 2021, TDCC had total committed and available credit facilities of $8.1 billion. See Note 15 to the Consolidated Financial Statements for additional information on committed and available credit facilities. Committed Accounts Receivable Facilities In addition to the above committed credit facilities, the Company maintains a committed accounts receivable facility in the U.S. where eligible trade accounts receivable, up to $900 million, may be sold at any point in time. The Company also maintains a committed accounts receivable facility in Europe where eligible trade accounts receivable, up to €500 million, may be sold at any point in time. At December 31, 2021, there were no receivables sold under the U.S. and Europe committed accounts receivable facilities. See Note 14 to the Consolidated Financial Statements for additional information . Company-Owned Life Insurance The Company has investments in company-owned life insurance ("COLI") policies, which are recorded at their cash surrender value as of each balance sheet date. The Company has the ability to monetize its investment in its COLI policies as an additional source of liquidity. In the first quarter of 2021, the Company monetized $200 million of its existing COLI policies' surrender value. In the second quarter of 2021, the Company repaid the drawdown against the cash surrender value. The Company had no outstanding monetization of its existing COLI policies' surrender value at December 31, 2021. See Note 7 to the Consolidated Financial Statements for additional information. Uncommitted Credit Facilities The Company has entered into various uncommitted bilateral credit arrangements as a potential source of excess liquidity. These lines can be used to support short-term liquidity needs and for general purposes, including letters of credit. The Company had no drawdowns outstanding at December 31, 2021. Letters of Credit TDCC utilizes letters of credit to support commitments made in the ordinary course of business. While the terms and amounts of letters of credit change, TDCC generally has approximately $400 million of outstanding letters of credit at any given time. Early Settlement of Letters of Credit The Company utilizes, from time-to-time, letters of credit discounting programs to manage and expedite the settlement of letters of credit in certain regions. These letters of credit are associated with accounts receivable and the Company retains no interest in the transferred letters of credit or receivables once sold. Shelf Registration - U.S. On July 26, 2019, Dow Inc. and TDCC filed a shelf registration statement with the SEC. The shelf indicates that Dow Inc. may offer common stock; preferred stock; depositary shares; debt securities; guarantees; warrants to purchase common stock, preferred stock and debt securities; and stock purchase contracts and stock purchase units, with pricing and availability of any such offerings depending on market conditions. The shelf also indicates that TDCC may offer debt securities, guarantees and warrants to purchase debt securities, with pricing and availability of any such offerings depending on market conditions. Also on July 26, 2019, TDCC filed a new prospectus supplement under this shelf registration to register an unlimited amount of securities for issuance under InterNotes®. The shelf registration expires on July 26, 2022. The Company expects to renew the shelf registration. 52 Table of Contents Debt As the Company continues to maintain its strong balance sheet and financial flexibility, management is focused on net debt (a non-GAAP financial measure), as the Company believes this is the best representation of its financial leverage at this point in time. As shown in the following table, net debt is equal to total gross debt minus "Cash and cash equivalents" and "Marketable securities." At December 31, 2021, net debt as a percentage of total capitalization for Dow Inc. and TDCC decreased to 37.9 percent and 37.5 percent, respectively, compared with 47.9 percent and 46.8 percent, respectively, at December 31, 2020. Total Debt at Dec 31 Dow Inc. TDCC In millions 2021 2020 2021 2020 Notes payable $ 161 $ 156 $ 161 $ 156 Long-term debt due within one year 231 460 231 460 Long-term debt 14,280 16,491 14,280 16,491 Gross debt $ 14,672 $ 17,107 $ 14,672 $ 17,107 - Cash and cash equivalents 2,988 5,104 2,988 5,104 - Marketable securities 1 245 45 245 45 Net debt $ 11,439 $ 11,958 $ 11,439 $ 11,958 Total equity $ 18,739 $ 13,005 $ 19,029 $ 13,569 Gross debt as a percentage of total capitalization 43.9 % 56.8 % 43.5 % 55.8 % Net debt as a percentage of total capitalization 37.9 % 47.9 % 37.5 % 46.8 % 1. Included in "Other current assets" in the consolidated balance sheets. In the second quarter of 2021, the Company redeemed $208 million aggregate principal amount of 3.15 percent notes due May 2024 and $811 million aggregate principal amount of 3.50 percent notes due October 2024. In the third quarter of 2021, the Company completed cash tender offers for certain debt securities. In total, $1,042 million aggregate principal amount was tendered and retired. In addition, the Company voluntarily repaid $81 million of long-term debt due within one year. The Company may at any time repurchase certain debt securities in the open market or in privately negotiated transactions subject to: the applicable terms under which any such debt securities were issued, certain internal approvals of the Company, and applicable laws and regulations of the relevant jurisdiction in which any such potential transactions might take place. This in no way obligates the Company to make any such repurchases nor should it be considered an offer to do so. TDCC’s public debt instruments and primary, private credit agreements contain, among other provisions, certain customary restrictive covenant and default provisions. TDCC’s most significant debt covenant with regard to its financial position is the obligation to maintain the ratio of its consolidated indebtedness to consolidated capitalization at no greater than 0.70 to 1.00 at any time the aggregate outstanding amount of loans under the Five Year Competitive Advance and Revolving Credit Facility Agreement ("Revolving Credit Agreement") equals or exceeds $500 million. The ratio of TDCC’s consolidated indebtedness as defined in the Revolving Credit Agreement was .40 to 1.00 at December 31, 2021. Management believes TDCC was in compliance with all of its covenants and default provisions at December 31, 2021. The Revolving Credit Agreement was extended in November 2021 to include favorable updates to the terms and conditions and matures in November 2026. On April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC. In conjunction with the separation, Dow Inc. is obligated, substantially concurrently with the issuance of any guarantee in respect of outstanding or committed indebtedness under the Revolving Credit Agreement, to enter into a supplemental indenture with TDCC and the trustee under TDCC’s existing 2008 base indenture governing certain notes issued by TDCC. Under such supplemental indenture, Dow Inc. will guarantee all outstanding debt securities and all amounts due under such existing base indenture and will become subject to certain covenants and events of default under the existing base indenture. 53 Table of Contents In addition, the Revolving Credit Agreement includes an event of default which would be triggered in the event Dow Inc. incurs or guarantees third party indebtedness for borrowed money in excess of $250 million or engages in any material activity or directly owns any material assets, in each case, subject to certain conditions and exceptions. Dow Inc. may, at its option, cure the event of default by delivering an unconditional and irrevocable guarantee to the administrative agent within thirty days of the event or events giving rise to such event of default. No such events have occurred or have been triggered at the time of the filing of this Annual Report on Form 10-K. See Note 15 to the Consolidated Financial Statements for information related to TDCC’s notes payable and long-term debt activity and information on TDCC’s debt covenants and default provisions. While taking into consideration the current economic environment, management expects that the Company will continue to have sufficient liquidity and financial flexibility to meet all of its business obligations. Credit Ratings TDCC's credit ratings at January 31, 2022 were as follows: Credit Ratings Long-Term Rating Short-Term Rating Outlook Fitch Ratings BBB+ F2 Stable Moody’s Investors Service Baa2 P-2 Stable Standard & Poor’s BBB A-2 Stable On April 13, 2021, Fitch reaffirmed TDCC’s BBB+ and F2 rating, and revised its outlook to stable from negative. The decision was made as part of Fitch’s annual review process. On June 10, 2021, S&P announced a credit rating upgrade for TDCC from BBB- and A-3 to BBB and A-2, maintaining stable outlook. The decision from S&P reflects the expectation for an ongoing macroeconomic recovery, the Company’s supportive financial policies and the strengthening of its operating performance in 2021 relative to 2020. Dividends Dow Inc. Dow Inc. has paid dividends on a quarterly basis since the separation from DowDuPont and expects to continue to do so, subject to approval by the Board. The dividends declared by the Board align to the Company's strategy announced in 2018 of returning approximately 45 percent of operating net income 1 to the shareholders through the dividend and total shareholder remuneration of approximately 65 percent, when including share repurchases, over the economic cycle. The following tables provide information on dividends declared and paid to common stockholders: Dividends Paid for the Years Ended Dec 31 2021 2020 2019 1 In millions, except per share amounts Dividends paid, per common share $ 2.80 $ 2.80 $ 2.10 Dividends paid to common stockholders $ 2,073 $ 2,071 $ 1,550 1. Reflects Dow Inc. activity subsequent to the separation from DowDuPont. Dow Inc. Cash Dividends Declared and Paid Declaration Date Record Date Payment Date Amount (per share) February 11, 2021 February 26, 2021 March 12, 2021 $ 0.70 April 15, 2021 May 28, 2021 June 11, 2021 $ 0.70 August 12, 2021 August 31, 2021 September 10, 2021 $ 0.70 October 14, 2021 November 30, 2021 December 10, 2021 $ 0.70 1. Operating net income is a non-GAAP measure that Dow defines as "Net income (loss) available for Dow Inc. common stockholders," excluding the impact of significant items. 54 Table of Contents TDCC Effective with the Merger, TDCC no longer has publicly traded common stock. From the Merger Date through March 31, 2019, TDCC's common shares were owned solely by DowDuPont. Pursuant to the Merger Agreement, TDCC committed to fund a portion of DowDuPont's dividends paid to common stockholders and certain governance expenses. Funding was accomplished through intercompany loans. On a quarterly basis, TDCC's Board reviewed and determined a dividend distribution to DowDuPont to settle the intercompany loans. The dividend distribution considered the level of TDCC’s earnings and cash flows and the outstanding intercompany loan balances. TDCC declared and paid dividends to DowDuPont of $535 million for the year ended December 31, 2019. See Note 25 to the Consolidated Financial Statements for additional information. Effective with the separation from DowDuPont on April 1, 2019, TDCC became a wholly owned subsidiary of Dow Inc. TDCC has committed to fund Dow Inc.'s dividends paid to common stockholders, share repurchases and certain governance expenses. Funding is accomplished through intercompany loans. TDCC's Board reviews and determines a dividend distribution to Dow Inc. to settle the intercompany loans. For the year ended December 31, 2021, TDCC declared and paid dividends to Dow Inc. of $3,264 million ($2,233 million for the year ended December 31, 2020 and $201 million for the year ended December 31, 2019). At December 31, 2021, TDCC's intercompany loan balance with Dow Inc. was insignificant. See Note 25 to the Consolidated Financial Statements for additional information. Share Repurchase Program Dow Inc. On April 1, 2019, Dow Inc.'s Board ratified the share repurchase program originally approved on March 15, 2019, authorizing up to $3.0 billion to be spent on the repurchase of the Company's common stock, with no expiration date. In 2021, Dow Inc. repurchased $1.0 billion of the Company's common stock. At December 31, 2021, approximately $1.4 billion of the share repurchase program authorization remained available for repurchases. As previously announced, the Company intends to, at a minimum, repurchase shares to cover dilution. The Company may expand share repurchases beyond dilution as favorable economic conditions develop. Any share repurchases, when coupled with the Company's dividends, is intended to implement the long-term strategy of ensuring shareholder remuneration is approximately 65 percent over the economic cycle. 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. In 2021, 2020 and 2019, the Company contributed $1,219 million, $299 million and $261 million to its continuing operations pension plans respectively, including contributions to fund benefit payments for its non-qualified pension plans ($1,219 million, $299 million and $266 million, including contributions to plans of discontinued operations). In the first quarter of 2021, the Company elected to contribute $1 billion to its U.S. tax-qualified pension plans, which is included in the 2021 contribution amount above. This contribution was based on the Company's funding policy, which is to contribute to defined benefit pension plans when pension laws and/or economics either require or encourage funding. The Company expects to contribute approximately $180 million to its pension plans in 2022. On March 4, 2021, the Company announced changes to the design of its U.S. tax-qualified and non-qualified pension plans (collectively, the "U.S. Plans") and, effective December 31, 2023, the Company will freeze the pensionable compensation and credited service amounts used to calculate pension benefits for employees who participate in the U.S. Plans. See Note 20 to the Consolidated Financial Statements for additional information concerning the Company’s pension plans. Restructuring The actions related to the 2020 Restructuring Program are expected to result in additional cash expenditures of $168 million, primarily through the third quarter of 2022, consisting of severance and related benefit costs and costs associated with exit and disposal activities, including contract cancellation penalties and environmental remediation. Restructuring implementation costs, primarily decommissioning and demolition activities related to asset actions, are expected to result in additional cash expenditures of approximately $50 million, primarily through the third quarter of 2022. Restructuring implementation costs totaled $63 million in 2021. 55 Table of Contents The Company expects to incur additional costs in the future related to its restructuring activities, which will be recognized as incurred. The Company also expects to incur additional employee-related costs, including involuntary termination benefits related to its other optimization activities. These costs cannot be reasonably estimated at this time. See Note 6 to the Consolidated Financial Statements for additional information on the Company's restructuring activities. Digital Acceleration In the first quarter of 2021, Dow announced plans to further advance and expand its digitalization efforts to deliver long-term value creation, by accelerating investment in three key areas: expanding digital tools to accelerate materials science innovation; further enhancing the e-commerce buying and fulfillment experience for Dow's customers; and adopting real-time digital manufacturing insights, operational data intelligence and demand sensing to enhance the productivity and reliability of Dow’s operations. The Company expects more than $300 million in incremental annual run rate Operating EBITDA generation by the end of 2025 related to digital acceleration, with an additional one-time $100 million in structural working capital efficiency gains, driven in part by enhanced planning from digital tools. The activities related to digital acceleration are expected to result in additional cash expenditures of approximately $250 million, primarily through the end of 2022. Digital acceleration expenses totaled $169 million in 2021. Contractual Obligations The following table summarizes the Company’s contractual obligations, commercial commitments and expected cash requirements for interest at December 31, 2021. Additional information related to these obligations can be found in Notes 15, 16, 17 and 20 to the Consolidated Financial Statements. Contractual Obligations at Dec 31, 2021 Payments Due In In millions 2022 2023-2024 2025-2026 2027 and beyond Total Dow Inc. Long-term debt obligations 1 $ 231 $ 464 $ 1,213 $ 12,900 $ 14,808 Expected cash requirements for interest 2 631 1,207 1,149 7,409 10,396 Pension and other postretirement benefits 280 587 594 6,089 7,550 Operating leases 3 346 499 326 570 1,741 Purchase obligations 4 2,953 4,337 2,579 3,428 13,297 Other noncurrent obligations 5 — 910 677 1,391 2,978 Total $ 4,441 $ 8,004 $ 6,538 $ 31,787 $ 50,770 TDCC Long-term debt obligations 1 $ 231 $ 464 $ 1,213 $ 12,900 $ 14,808 Expected cash requirements for interest 2 631 1,207 1,149 7,409 10,396 Pension and other postretirement benefits 280 587 594 6,089 7,550 Operating leases 3 346 499 326 570 1,741 Purchase obligations 4 2,953 4,337 2,579 3,428 13,297 Other noncurrent obligations 5 — 884 578 1,368 2,830 Total $ 4,441 $ 7,978 $ 6,439 $ 31,764 $ 50,622 1. Excludes unamortized debt discount and issuance costs of $297 million. Includes finance lease obligations of $869 million. 2. Cash requirements for interest on long-term debt was calculated using current interest rates at December 31, 2021, and includes $53 million of various floating rate notes. 3. Includes imputed interest of $278 million. 4. Includes outstanding purchase orders and other commitments greater than $1 million obtained through a survey conducted within the Company. 5. Includes liabilities related to asbestos litigation, environmental remediation, legal matters and other noncurrent liabilities. In addition to these items, Dow Inc. includes liabilities related to noncurrent obligations with DuPont and Corteva. The table excludes uncertain tax positions due to uncertainties in the timing of the effective settlement of tax positions with the respective taxing authorities and deferred tax liabilities as it is impractical to determine whether there will be a cash impact related to these liabilities. The table also excludes deferred revenue as it does not represent future cash requirements arising from contractual payment obligations. The Company expects to meet its contractual obligations through its normal sources of liquidity and believes it has the financial resources to satisfy these contractual obligations. 56 Table of Contents Off-Balance Sheet Arrangements Off-balance sheet arrangements are obligations the Company has with nonconsolidated entities related to transactions, agreements or other contractual arrangements. The Company holds variable interests in joint ventures accounted for under the equity method of accounting. The Company is not the primary beneficiary of these joint ventures and therefore is not required to consolidate these entities (see Note 24 to the Consolidated Financial Statements). In addition, see Note 14 to the Consolidated Financial Statements for information regarding the transfer of financial assets. Guarantees arise during the ordinary course of business from relationships with customers, committed accounts receivable facilities and nonconsolidated affiliates when the Company undertakes an obligation to guarantee the performance of others if specific triggering events occur. Additional information related to guarantees can be found in the “Guarantees” section of Note 16 to the Consolidated Financial Statements. Fair Value Measurements See Note 20 to the Consolidated Financial Statements for information related to fair value measurements of pension and other postretirement benefit plan assets; see Note 22 for information related to other-than-temporary impairments; and, see Note 23 for additional information concerning fair value measurements. OTHER MATTERS Recent Accounting Guidance See Note 2 to the Consolidated Financial Statements for a summary of recent accounting guidance. Critical Accounting Estimates The preparation of financial statements and related disclosures in accordance with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 1 to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. Following are the Company’s accounting policies impacted by judgments, assumptions and estimates: Litigation The Company is subject to legal proceedings and claims arising out of the normal course of business including product liability, patent infringement, employment matters, governmental tax and regulation disputes, contract and commercial litigation and other actions. The Company routinely assesses the legal and factual circumstances of each matter, the likelihood of any adverse outcomes to these matters, as well as ranges of probable losses. A determination of the amount of the reserves required, if any, for these contingencies is made after thoughtful analysis of each known claim. The Company has an active risk management program consisting of numerous insurance policies secured from many carriers covering various timeframes. These policies may provide coverage that could be utilized to minimize the financial impact, if any, of certain contingencies. The required reserves may change in the future due to new developments in each matter. For further discussion, see Note 16 to the Consolidated Financial Statements. Asbestos-Related Matters of Union Carbide Corporation Union Carbide is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-containing products located on Union Carbide’s premises, and Union Carbide’s responsibility for asbestos suits filed against a former Union Carbide subsidiary, Amchem Products, Inc. ("Amchem"). Each year, Ankura Consulting Group, LLC ("Ankura") performs a review for Union Carbide based upon historical asbestos claims, resolution and asbestos-related defense and processing costs, through the terminal year of 2049. Union Carbide compares current asbestos claim and resolution activity, including asbestos-related defense and processing costs, to the results of the most recent Ankura study at each balance sheet date to determine whether the asbestos-related liability continues to be appropriate. For additional information, see Part I, Item 3. Legal Proceedings; Asbestos-Related Matters of Union Carbide Corporation in Management’s Discussion and Analysis of Financial Condition and Results of Operations; and Notes 1 and 16 to the Consolidated Financial Statements. 57 Table of Contents Environmental Matters The Company determines the costs of environmental remediation of its facilities and formerly owned facilities based on evaluations of current law and existing technologies. Inherent uncertainties exist in such evaluations primarily due to unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies. The recorded liabilities are adjusted periodically as remediation efforts progress, or as additional technical or legal information becomes available. At December 31, 2021, the Company had accrued obligations of $1,220 million for probable environmental remediation and restoration costs, including $237 million for the remediation of Superfund sites. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Company has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to approximately two times that amount. For further discussion, see Environmental Matters in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes 1 and 16 to the Consolidated Financial Statements. Goodwill The Company performs goodwill impairment testing at the reporting unit level. Reporting units are the level at which discrete financial information is available and reviewed by business management on a regular basis. The Company tests goodwill for impairment annually (in the fourth quarter), or more frequently when events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit has declined below its carrying value. Goodwill is evaluated for impairment using qualitative and/or quantitative testing procedures. The separation from DowDuPont on April 1, 2019, did not impact the composition of the Company's six reporting units: Coatings & Performance Monomers, Consumer Solutions, Hydrocarbons & Energy, Industrial Solutions, Packaging and Specialty Plastics and Polyurethanes & Construction Chemicals. The ECP businesses received as part of the separation from DowDuPont are included in the Hydrocarbons & Energy and Packaging and Specialty Plastics reporting units. At December 31, 2021, goodwill was carried by five out of six of the Company's reporting units. The Company has the option to first perform qualitative testing to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors assessed at the Company level include, but are not limited to, GDP growth rates, long-term hydrocarbon and energy prices, equity and credit market activity, discount rates, foreign exchange rates and overall financial performance. Qualitative factors assessed at the reporting unit level include, but are not limited to, changes in industry and market structure, competitive environments, planned capacity and new product launches, cost factors such as raw material prices, and financial performance of the reporting unit. If the Company chooses not to complete qualitative testing for a given reporting unit or if the initial assessment indicates that it is more likely than not that the estimated fair value of a reporting unit is less than its carrying value, additional quantitative testing is required. Quantitative testing requires the fair value of the reporting unit to be compared with its carrying value. If the reporting unit's carrying value exceeds its fair value, an impairment charge is recognized for the difference. The Company utilizes a discounted cash flow methodology to calculate the fair value of its reporting units. This valuation technique has been selected by management as the most meaningful valuation method due to the limited number of market comparables for the Company's reporting units. However, where market comparables are available, the Company includes EBIT/EBITDA multiples as part of the reporting unit valuation analysis. The discounted cash flow valuations are completed using the following key assumptions: projected revenue growth rates or compounded annual growth rates, discount rates, tax rates, terminal values, currency exchange rates, and forecasted long-term hydrocarbon and energy prices, by geographic region and by year, which include the Company's key feedstocks as well as natural gas and crude oil (due to its correlation to naphtha). Currency exchange rates and long-term hydrocarbon and energy prices are established for the Company as a whole and applied consistently to all reporting units, while revenue growth rates, discount rates and tax rates are established by reporting unit to account for differences in business fundamentals and industry risk. These key assumptions drive projected EBIT/EBITDA and EBIT/EBITDA margins, which are key elements of management’s internal control over the reporting unit valuation analysis. 2021 Goodwill Impairment Testing In 2021, there were no events or changes in circumstances that warranted interim goodwill impairment testing. In the fourth quarter of 2021, qualitative testing was performed for all reporting units carrying goodwill. Based on the results of the qualitative testing, the Company did not perform quantitative testing on any reporting units. For the qualitative testing, management considered factors at both the Company level and the reporting unit level. Based on the qualitative testing for the reporting units, management concluded it is not more likely than not that the fair value of the reporting unit is less than the carrying value of the reporting unit. 58 Table of Contents Pension and Other Postretirement Benefits The amounts recognized in the consolidated financial statements related to pension and other postretirement benefits are determined from actuarial valuations. Inherent in these valuations are assumptions including expected return on plan assets, discount rates at which the liabilities could have been settled at December 31, 2021, rate of increase in future compensation levels, mortality rates and health care cost trend rates. These assumptions are updated annually and are disclosed in Note 20 to the Consolidated Financial Statements. In accordance with U.S. GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, affect expense recognized and obligations recorded in future periods. The U.S. pension plans represent 71 percent of the Company’s pension plan assets and 70 percent of the pension obligations. 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 (including all plans prior to adoption) are determined on the basis of the single equivalent discount rates derived in determining those plan obligations. The following information relates to the U.S. plans only; a similar approach is used for the Company’s non-U.S. plans. The Company determines the expected long-term rate of return on assets by performing a detailed analysis of historical and expected returns based on the strategic asset allocation approved by the Company's Investment Committee and the underlying return fundamentals of each asset class. The Company’s historical experience with the pension fund asset performance is also considered. The expected return of each asset class is derived from a forecasted future return confirmed by historical experience. The expected long-term rate of return is an assumption and not what is expected to be earned in any one particular year. The weighted-average long-term rate of return assumption used for determining net periodic pension expense for 2021 was 7.96 percent. The weighted-average assumption to be used for determining 2022 net periodic pension expense is 7.95 percent. Future actual pension expense will depend on future investment performance, changes in future discount rates and various other factors related to the population of participants in the Company’s pension plans. The discount rates utilized to measure the pension and other postretirement obligations of the U.S. plans are based on the yield on high-quality corporate fixed income investments at the measurement date. Future expected actuarially determined cash flows for the Company’s U.S. plans are individually discounted at the spot rates under the Willis Towers Watson U.S. RATE:Link 60-90 corporate yield curve (based on 60th to 90th percentile high-quality corporate bond yields) to arrive at the plan’s obligations as of the measurement date. The weighted average discount rate utilized to measure pension obligations increased to 3.04 percent at December 31, 2021, from 2.71 percent at December 31, 2020. At December 31, 2021, the U.S. tax-qualified plans were underfunded on a projected benefit obligation basis by $2,585 million. The underfunded amount decreased $3,288 million compared with December 31, 2020. The decrease in the underfunded amount in 2021 was primarily due to the impact of higher discount rates, overall favorable asset returns, a $1 billion contribution to the U.S. tax-qualified pension plans, and plan design changes. The assumption for the long-term rate for compensation levels for the U.S. tax-qualified plans was unchanged. The Company uses a generational mortality table to determine the duration of its pension and other postretirement obligations. 59 Table of Contents The following discussion relates to the Company’s significant pension plans. The Company bases the determination of pension expense on a market-related valuation of plan assets that reduces year-to-year volatility. This market-related valuation recognizes investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose represent the difference between the expected return calculated using the market-related value of plan assets and the actual return based on the market value of plan assets. Since the market-related value of plan assets recognizes gains or losses over a five-year period, the future value will be impacted when previously deferred gains or losses are recorded. Over the life of the plans, both gains and losses have been recognized and amortized. At December 31, 2021, net gains of $1,628 million remain to be recognized in the calculation of the market-related value of plan assets. These net gains will result in decreases in future pension expense as they are recognized in the market-related value of assets. The net increase in the market-related value of assets due to the recognition of prior gains is presented in the following table: Net Increase in Market-Related Asset Value Due to Recognition of Prior Gains In millions 2022 $ 329 2023 770 2024 377 2025 152 Total $ 1,628 Exclusive of one-time curtailment gains recognized in 2021, the Company expects pension expense to decrease in 2022 by approximately $25 million. The decrease is driven by a reduction in the amortization of actuarial losses. A 25 basis point increase or decrease in the long-term return on assets assumption would change the Company’s total pension expense for 2022 by $62 million. A 25 basis point increase in the discount rate assumption would decrease the Company's total pension expense for 2022 by $53 million. A 25 basis point decrease in the discount rate assumption would increase the Company's total pension expense for 2022 by $55 million. A 25 basis point change in the long-term return and discount rate assumptions would have an immaterial impact on the other postretirement benefit expense for 2022. Income Taxes Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. Based on the evaluation of available evidence, both positive and negative, the Company recognizes future tax benefits, such as net operating loss carryforwards and tax credit carryforwards, to the extent that realizing these benefits is considered to be more likely than not. At December 31, 2021, the Company had a net deferred tax asset balance of $852 million, after valuation allowances of $1,391 million. In evaluating the ability to realize the deferred tax assets, the Company relies on, in order of increasing subjectivity, taxable income in prior carryback years, the future reversals of existing taxable temporary differences, tax planning strategies and forecasted taxable income using historical and projected future operating results. At December 31, 2021, the Company had deferred tax assets for tax loss and tax credit carryforwards of $1,784 million, $864 million of which is subject to expiration in the years 2022 through 2026. In order to realize the deferred tax assets for operating tax loss and tax credit carryforwards, the Company needs taxable income of approximately $25,034 million across multiple jurisdictions. The taxable income needed to realize the deferred tax assets for operating tax loss and tax credit carryforwards that are subject to expiration from 2022 through 2026 is approximately $14,748 million. The Company files tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world. Tax authorities have the ability to review and challenge matters that could be subject to differing interpretation of applicable tax laws and regulations as they relate to the amount, character, timing or inclusion of revenue and expenses or the sustainability of tax attributes. The ultimate resolution of such uncertainties could last 60 Table of Contents several years. When an uncertain tax position is identified, the Company considers and interprets complex tax laws and regulations in order to determine the need for recognizing a provision in its financial statements. Significant judgment is required in determining the timing and measurement of uncertain tax positions. The Company utilizes internal and external expertise in interpreting tax laws to support the Company's tax positions. The Company recognizes the financial statement effects of an uncertain income tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination. At December 31, 2021, the Company had uncertain tax positions for both domestic and foreign issues of $580 million and $502 million for interest and penalties. Environmental Matters Environmental Policies Dow is committed to world-class environmental, health and safety (“EH&S”) performance, as demonstrated by industry-leading performance, a long-standing commitment to Responsible Care®, and a strong commitment to achieve the Company's 2025 Sustainability Goals – goals that set the standard for sustainability in the chemical industry by focusing on improvements in the Company’s local corporate citizenship and product stewardship, and by actively pursuing methods to reduce its environmental impact. To meet the Company’s public commitments, as well as the stringent laws and government regulations related to environmental protection and remediation to which its global operations are subject, the Company has well-defined policies, requirements and management systems. The Company's EH&S Management System (“EMS”) defines the “who, what, when and how” needed for the businesses to achieve the Company’s policies, requirements, performance objectives, leadership expectations and public commitments. To ensure effective utilization, the EMS is integrated into a company-wide management system for EH&S, Operations, Quality and Human Resources. The Company believes third-party verification and transparent public reporting are cornerstones of world-class EH&S performance and building public trust. Numerous Dow sites in Europe, Latin America, Asia Pacific and the U.S. & Canada have received third-party verification of the Company’s compliance with Responsible Care® and with outside specifications such as ISO-14001. The Company continues to be a global champion of Responsible Care® and has worked to broaden the application and impact of Responsible Care® around the world through engagement with suppliers, customers and joint venture partners. Dow's EH&S policies help to ensure the Company achieves its annual health and safety performance targets and the Company seeks to continuously improve on these targets through process and personal safety project implementations. Improvement in these areas, as well as environmental compliance, remains a top management priority, as the Company continues to implement its 2025 Sustainability Goals and progressive, multi-decade sustainability targets announced in 2020 that include advancing a circular economy and climate protection. Progress is reviewed regularly by management and with the Environment, Health, Safety & Technology Committee of the Board. Detailed information on Dow’s performance regarding environmental matters and goals is accessible through the Company's Science & Sustainability webpage at www.dow.com/sustainability . Dow's website and its content are not deemed incorporated by reference into this report. Chemical Security Public and political attention continues to be placed on the protection of critical infrastructure, including the chemical industry, from security threats. Terrorist attacks, natural disasters and cyber incidents have increased global concerns about the security and safety of chemical production and distribution. Many, including the Company and the American Chemistry Council, have called for uniform risk-based and performance-based national standards for securing the U.S. chemical industry. U.S. regulations set forth risk-based and performance-based standards that must be met at U.S. Coast Guard-regulated facilities. The Company is subject to U.S. Chemical Plant Security regulations and Chemical Facility Anti-Terrorism Standards which were implemented by the U.S. Department of Homeland Security. The Company is also subject to the requirements of the Rail Transportation Security Rule issued by the U.S. Transportation Security Administration. The Company continues to support uniform risk-based national standards for securing the chemical industry. Since 1988, the Company has maintained a comprehensive, multi-level security plan that focuses on security, emergency planning, preparedness and response. This plan, which has been activated in response to significant world and national events, is reviewed on an annual basis. The Company continues to improve its security plans, placing emphasis on the safety of Dow communities and people by being prepared to meet risks at any level and to 61 Table of Contents address both internal and external identifiable risks. The security plan includes regular vulnerability assessments, security audits, mitigation efforts and physical security upgrades designed to reduce vulnerability. The Company’s security plans are also designed to avert interruptions of normal business operations that could materially and adversely affect the Company’s results of operations, financial condition and cash flows. The Company played a key role in the development and implementation of the American Chemistry Council’s Responsible Care® Security Code ("Security Code"), which requires that all aspects of security – including facility, transportation and cyberspace – be assessed and gaps addressed. Through the global implementation of the Security Code, the Company has permanently heightened the level of security – not just in the United States, but worldwide. The Company employs several hundred employees and contractors in its Emergency Services and Security department worldwide. In 2019, the Company established its Global Security Operations Center ("GSOC") to provide 24-hour/day, 365-day/year real-time monitoring of global risks to Dow assets and people. The GSOC employs state-of-the-art social media monitoring, threat reporting and geo-fencing capabilities to analyze global risks and report those risks, facilitating decision-making and actions to prevent Dow crises. Through the implementation of the Security Code, including voluntary security enhancements and upgrades, the Company is well-positioned to comply with U.S. chemical facility regulations and other regulatory security frameworks. The Company participates with the American Chemistry Council to periodically review and update the Security Code. The Company continues to work collaboratively across the supply chain on Responsible Care®, supply chain design, emergency preparedness, shipment visibility and transportation of hazardous materials. The Company cooperated with public and private entities to lead the implementation of advanced tank car design, and track and trace technologies. Further, the Company’s Distribution Risk Review process addresses potential threats in all modes of transportation across the Company’s supply chain. To reduce vulnerabilities, the Company maintains security measures that meet or exceed regulatory and industry security standards in all areas in which they operate. The Company's initiatives relative to chemical security, emergency preparedness and response, Community Awareness and Emergency Response and crisis management are implemented consistently at all Dow sites on a global basis. Each Dow site has established outreach programs designed to engage community stakeholders with objectives centered around awareness of Dow operations, products, and efforts to protect worker and community health and the environment. These programs also educate community members on emergency planning and response, emissions and waste, future site plans to reduce waste and emissions, and process safety systems. Finally, these outreach efforts establish an opportunity for Dow site leaders to hear about community stakeholder expectations and address questions and concerns about safety, health, environmental or other issues. The Company participates with chemical associations globally and participates as an active member of the U.S. delegation to the G7 Global Partnership Sub-Working Group on Chemical Security and in positions of leadership in the U.S. Chemical Sector Coordinating Council. Climate Change Climate change matters for the Company are likely to be driven by several categories of risks related to the transition to a lower-carbon economy (“Transition Risks”) and risks related to the physical impacts of climate change (“Physical Risks”). Transition Risks Transition Risks include carbon pricing mechanisms, transition to lower greenhouse gas emissions technology, increased cost of raw materials, and mandates on and regulation of existing products and services. Carbon pricing is a market-based strategy to address climate change by putting a monetary value on greenhouse gas emissions, allowing for the costs of climate impacts and opportunities for low-carbon energy options to be reflected in production and consumption choices. Approximately 35 percent of Dow’s Scope 1 and 2 greenhouse gas emissions are generated from operations in Canada and the European Union (“EU”) where carbon pricing is already in place. As part of the European Green Deal, the European Commission proposed a 2030 greenhouse gas emissions reduction target of at least 55 percent below 1990 levels, with a goal for the EU to be carbon neutral by 2050. In China, an emissions trading system, initially proposed to cover the power sector only, is expected to gradually expand to cover a total of eight sectors, including the petrochemical and chemical industries, though no specific timeline for implementation and expansion has been outlined. These carbon pricing mechanisms will not only increase Dow’s direct costs to operate but will also result in increased energy costs. Dow mitigates the direct cost impact of existing regulation through research and 62 Table of Contents development projects designed to increase energy efficiency, and capital investment projects that will reduce the Company’s energy usage and carbon footprint. The Company is also exploring options for carbon capture, utilization and storage (“CCUS”) and electrification of Dow’s processes. Dow sees CCUS as a mechanism to help bridge the time period between the onset of increased carbon regulation and the technology available to economically reduce Dow’s greenhouse gas emissions. Dow also incorporates a theoretical internal carbon price into its business planning and risk management strategies. This theoretical price of carbon is also included in internal calculations used for prioritizing capital projects. Ultimately the goal of utilizing an internal carbon price is to mitigate the risk of Dow’s carbon exposure to help ensure future resiliency. Physical Risks Operationally, climate change may result in more frequent severe weather events, potential changes in precipitation patterns and extreme variability in weather patterns, which can disrupt operations. Several of Dow’s production facilities are located in water-scarce areas and water shortages could impact normal production. Changes in average precipitation could have an impact on the availability and price of water. The Company has engineered susceptible facilities, particularly on the U.S. Gulf Coast, to better withstand severe weather and rising sea levels, and continues to study the long-term implications of changing climate parameters on water availability, plant siting issues and other impacts. Preparedness plans are developed that detail actions needed in the event of severe weather. These measures have historically been in place and these activities and associated costs are driven by normal operational preparedness. Climate Action The transition to a low-carbon economy remains one of society's fundamental challenges. The Company continues to progress toward its defined 2025 Sustainability Goals, which are the foundation of Dow's efforts to help lead the transition to a sustainable planet and society, and is taking further action to lessen its carbon impact moving forward. In 2020, the Company announced a new, multi-decade target to reduce its net annual greenhouse gas emissions by 5 million metric tons by 2030, compared with its 2020 baseline, a reduction of approximately 15 percent, and announced its intention to be carbon neutral by 2050 (Scopes 1+2+3, as defined by the Greenhouse Gas Protocol, plus product benefits). To achieve the 2030 carbon reduction target, Dow developed a climate protection action plan which includes the following elements: • Optimizing energy efficiency of facilities and processes • Increasing renewables in purchased power mix • Investments in CCUS • Developing low-carbon technologies for emission reductions • Deploying materials to enable greenhouse gas emissions reductions for customers and industries The action plan has resulted in new and expanded renewable power purchase agreements. In 2020, Dow increased its existing access to renewable power by more than 50 percent, to over 800 megawatts of renewable power, exceeding its 2025 Sustainability Goal target of 750 megawatts. The Company also initiated a joint development agreement with Shell to develop electrified cracking technology, powered by clean energy. In 2021, Dow announced additional renewable and cleaner power agreements that increase Dow's access to over 850 megawatts of renewable power and are expected to reduce Scope 2 emissions by more than 600,000 metric tons of carbon dioxide equivalent per year. Dow also announced a plan to build the world’s first net-zero carbon emissions (with respect to Scope 1 and 2 carbon dioxide emissions, including technology advancements) site in Alberta, Canada, which will decarbonize 20 percent of Dow’s global ethylene capacity while growing polyethylene supply, with expected completion by 2030. At Dow's largest European manufacturing site in Terneuzen, The Netherlands, the Company has outlined a multi-generational plan to reduce current carbon emissions at the site by more than 40 percent by 2030, as part of the Company's goal to reduce Company-wide carbon emissions an additional 15 percent by 2030, and to be carbon neutral by 2050. Other steps the Company will take to achieve its 2030 greenhouse gas emissions reduction target include: procuring more renewable energy at multiple sites, modernizing Louisiana Operations energy assets, completing U.S. Gulf Coast flare recovery projects and advancing silicones feedstock capabilities in Brazil. The Company expects to allocate approximately $1 billion of capital expenditures annually to decarbonize its global asset base in a phased, site-by-site approach while driving growth. 63 Table of Contents The Task Force on Climate-related Financial Disclosures (“TCFD”) has developed a framework to help organizations more effectively disclose climate-related risks and opportunities through existing reporting processes. Dow’s 2020 ESG Report includes disclosures aligned to the TCFD framework, which includes four core pillars: governance, strategy, risk management, and metrics and targets. The Company intends to meet its commitment to fully implement the recommendations of the TCFD as part of the Company’s 2021 ESG Report, to be published in 2022. Advancing a Circular Economy Transitioning to a circular economy is vital to both preserving and protecting Earth’s natural resources and to the success of Dow's businesses. To help advance a circular economy, Dow invests in new product technology, value chain partnerships, business models and waste management infrastructure to discover and scale sustainable solutions that extend the useful life of materials and the resources that are used to make them. In 2020, Dow announced "stop the waste" and "close the loop" goals to address plastic waste. Dow's “stop the waste” goal is the Company's commitment to invest and/or collaborate in key technologies and infrastructure to significantly increase global recycling. As part of this goal, Dow intends to enable 1 million metric tons of plastic to be collected, reused or recycled through direct actions and partnerships by 2030. Dow will further "stop the waste" through application development, where more recycled plastics can be incorporated into key applications; through critical partnerships such as Circulate Capital and the Alliance to End Plastic Waste; and through incorporating waste into advanced recycling technologies. Dow continues to look for market applications for recycled plastics to keep plastic out of landfills. One way to help stop the flow of this waste is to use recycled polymer modified asphalt for roads, parking lots, and other pavement. Polymer modified asphalt ("PMA") is a proven solution for making better pavement. Dow's ELVALOY™ Reactive Elastomeric Terpolymer products have been enhancing PMAs for more than 30 years, resulting in excellent performance, long service life, and lower life cycle costs compared to conventional, neat asphalt. Dow's “close the loop” goal is the Company's commitment to work directly with its customers, brand owners and the value chain to help customers redesign and promote reusable or recyclable packaging applications where there is a clear environmental benefit and enable 100 percent of Dow products sold into packaging applications to be reusable or recyclable by 2035. Today, Dow enables approximately 80 percent of its products sold into packaging applications to be reusable or recyclable and continues to pursue application development, packaging redesign and infrastructure improvements to deliver on the Company's 100 percent commitment. As one of the world’s largest producers of plastic, Dow wants to put an end to plastic waste. Eliminating plastic waste is about more than just recycling and reusing. It is about creating innovative solutions that are sustainable and investing in the circular economy through recyclability and efficiency for plastic packaging. Dow aims to keep plastic waste out of the environment and retain its value as a resource by increasing impact through partnerships and delivering circular economy solutions. Environmental Remediation The Company accrues the costs of remediation of its facilities and formerly owned facilities based on current law and regulatory requirements. The nature of such remediation can include management of soil and groundwater contamination. The accounting policies adopted to properly reflect the monetary impacts of environmental matters are discussed in Note 1 to the Consolidated Financial Statements. To assess the impact on the financial statements, environmental experts review currently available facts to evaluate the probability and scope of potential liabilities. Inherent uncertainties exist in such evaluations primarily due to unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and the ability to apply remediation technologies. These liabilities are adjusted periodically as remediation efforts progress or as additional technical or legal information becomes available. The Company had an accrued liability of $983 million at December 31, 2021, related to the remediation of current or former Dow-owned sites. At December 31, 2020, the liability related to remediation was $996 million. 64 Table of Contents In addition to current and former Dow-owned sites, under the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and equivalent state laws (hereafter referred to collectively as "Superfund Law"), the Company is liable for remediation of other hazardous waste sites where the Company allegedly disposed of, or arranged for the treatment or disposal of, hazardous substances. Because Superfund Law imposes joint and several liability upon each party at a site, the Company has evaluated its potential liability in light of the number of other companies that have also been named potentially responsible parties (“PRPs”) at each site, the estimated apportionment of costs among all PRPs, and the financial ability and commitment of each to pay its expected share. The Company’s remaining liability for the remediation of Superfund sites was $237 million at December 31, 2021 ($248 million at December 31, 2020). The Company has not recorded any third-party recovery related to these sites as a receivable. Information regarding environmental sites is provided below: Environmental Sites Dow-owned Sites 1 Superfund Sites 2 2021 2020 2021 2020 Number of sites at Jan 1 185 178 132 133 Sites added during year 2 7 5 — Sites closed during year (16) — (3) (1) Number of sites at Dec 31 171 185 134 132 1. Dow-owned sites are sites currently or formerly owned by the Company. In the United States, remediation obligations are imposed by the Resource Conservation and Recovery Act or analogous state law. At December 31, 2021, 24 of these sites (24 sites at December 31, 2020) were formerly owned by Dowell Schlumberger, Inc., a group of companies in which the Company previously owned a 50 percent interest. The Company sold its interest in Dowell Schlumberger in 1992. 2. Superfund sites are sites, including sites not owned by the Company, where remediation obligations are imposed by Superfund Law. Additional information is provided below for the Company’s Midland, Michigan, manufacturing site and Midland off-site locations (collectively, the "Midland sites"), as well as a Superfund site in Wood-Ridge, New Jersey, the locations for which the Company has the largest potential environmental liabilities. In the early days of operations at the Midland manufacturing site, wastes were usually disposed of on-site, resulting in soil and groundwater contamination, which has been contained and managed on-site under a series of Resource Conservation and Recovery Act permits and regulatory agreements . The Hazardous Waste Operating License for the Midland manufacturing site, issued in 2003, and renewed and replaced in September 2015, also included provisions for the Company to conduct an investigation to determine the nature and extent of off-site contamination from historic Midland manufacturing site operations. In January 2010, the Company, the U.S. Environmental Protection Agency ("EPA") and the State of Michigan ("State") entered into an Administrative Order on Consent that requires the Company to conduct a remedial investigation, a feasibility study and a remedial design for the Tittabawassee River, the Saginaw River and the Saginaw Bay, and pay the oversight costs of the EPA and the State under the authority of CERCLA. See Note 16 to the Consolidated Financial Statements for further information relating to Midland off-site environmental matters. Rohm and Haas, a wholly owned subsidiary of the Company, is a PRP at the Wood-Ridge, New Jersey Ventron/Velsicol Superfund Site, and the adjacent Berry’s Creek Study Area ("BCSA") (collectively, the "Wood-Ridge sites"). Rohm and Haas is a successor in interest to a company that owned and operated a mercury processing facility, where wastewater and waste handling resulted in contamination of soils and adjacent creek sediments. In 2018, the Berry’s Creek Study Area Potentially Responsible Party Group (“PRP Group”), consisting of over 100 PRPs, completed a Remedial Investigation/Feasibility Study for the BCSA. During that time, the EPA concluded that an “iterative or adaptive approach” was appropriate for cleaning up the BCSA. Thus, each phase of remediation will be followed by a period of monitoring to assess its effectiveness and determine if there is a need for more work. In September 2018, the EPA signed a Record of Decision ("ROD 1") which describes the initial phase of the EPA’s plan to clean-up the BCSA. ROD 1 will remediate waterways and major tributaries in the most contaminated part of the BCSA. The PRP Group has signed agreements with the EPA to design the selected remedy. Although there is currently much uncertainty as to what will ultimately be required to remediate the BCSA and Rohm and Haas's share of these costs has yet to be determined, the range of activities that are required in the interim Record of Decision is known in general terms. 65 Table of Contents At December 31, 2021, the Company had accrued liabilities totaling $358 million ($370 million at December 31, 2020) for environmental remediation at the Midland and Wood-Ridge sites. In 2021, the Company spent $38 million ($53 million in 2020) for environmental remediation at the Midland and Wood-Ridge sites. During the third quarter of 2020, the Company accrued additional liabilities totaling $106 million related to environmental remediation matters resulting from the Company's evaluation of the costs required to manage remediation activities at sites Dow will permanently shut down as part of its 2020 Restructuring Program. In addition, the Company recorded indemnification assets of $50 million related to Dow Silicones' environmental matters. Net of indemnifications, the Company recognized a pretax charge of $56 million related to these environmental matters, included in "Restructuring, goodwill impairment and asset related charges - net" in the consolidated statements of income. During the third quarter of 2019, the Company accrued additional liabilities totaling $447 million related to environmental remediation matters at a number of current and historical locations. The additional accrual primarily resulted from: the culmination of long-standing negotiations and discussions with regulators and agencies, including technical studies supporting higher cost estimates for final or staged remediation plans; the Company’s evaluation of the cost required to manage remediation activities at sites affected by Dow’s separation from DowDuPont and related agreements with Corteva and DuPont; and, the Company’s review of its closure strategies and obligations to monitor ongoing operations and maintenance activities. In addition, the Company recorded indemnification assets of $48 million related to Dow Silicones’ environmental matters. Net of indemnifications, the Company recognized a pretax charge of $399 million related to these environmental matters, included in “Cost of sales” in the consolidated statements of income. In total, the Company’s accrued liability for probable environmental remediation and restoration costs was $1,220 million at December 31, 2021, compared with $1,244 million at December 31, 2020. 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 two times that amount. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the Company’s results of operations, financial condition and cash flows. It is the opinion of the Company’s management, however, that the possibility is remote that costs in excess of the range disclosed will have a material impact on the Company’s results of operations, financial condition and cash flows. The amounts charged to income on a pretax basis related to environmental remediation totaled $158 million in 2021, $234 million in 2020 and $588 million in 2019. The amounts charged to income on a pretax basis related to operating the Company's current pollution abatement facilities, excluding internal recharges, totaled $761 million in 2021, $616 million in 2020 and $677 million in 2019. Capital expenditures for environmental protection were $65 million in 2021, $80 million in 2020 and $83 million in 2019. Asbestos-Related Matters of Union Carbide Corporation Union Carbide is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that Union Carbide sold in the past, alleged exposure to asbestos-containing products located on Union Carbide’s premises, and Union Carbide’s responsibility for asbestos suits filed against a former Union Carbide subsidiary, Amchem. In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to Union Carbide’s products. 66 Table of Contents The table below provides information regarding asbestos-related claims pending against Union Carbide and Amchem based on criteria developed by Union Carbide and its external consultants: Asbestos-Related Claim Activity 2021 2020 2019 Claims unresolved at Jan 1 9,126 11,117 12,780 Claims filed 4,233 4,857 5,743 Claims settled, dismissed or otherwise resolved (4,612) (6,848) (7,406) Claims unresolved at Dec 31 8,747 9,126 11,117 Claimants with claims against both Union Carbide and Amchem (2,139) (2,904) (3,837) Individual claimants at Dec 31 6,608 6,222 7,280 Plaintiffs’ lawyers often sue numerous defendants in individual lawsuits or on behalf of numerous claimants. As a result, the damages alleged are not expressly identified as to Union Carbide, Amchem or any other particular defendant, even when specific damages are alleged with respect to a specific disease or injury. In fact, there are no asbestos personal injury cases in which only Union Carbide and/or Amchem are the sole named defendants. For these reasons and based upon Union Carbide’s litigation and settlement experience, Union Carbide does not consider the damages alleged against Union Carbide and Amchem to be a meaningful factor in its determination of any potential asbestos-related liability. For additional information see Part I, Item 3. Legal Proceedings and Asbestos-Related Matters of Union Carbide Corporation in Note 16 to the Consolidated Financial Statements. 67 Table of Contents