What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-01 compared with 2022-02-04 · 382 added, 727 removed, 579 unchanged (66% of the section changed)

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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.

The information reflected in this 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.

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.

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.

In connection with the separation from DowDuPont, the Company entered into various manufacturing, supply and service related agreements with DuPont and Corteva, Inc.

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.

STATEMENT ON COVID-19 AND U.S.

GULF COAST FREEZE

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.

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.

STATEMENT ON RUSSIA AND UKRAINE CONFLICT

In February 2022, Russia invaded Ukraine resulting in the United States, Canada, the European Union and other countries imposing economic sanctions on Russia.

Dow continues to monitor and evaluate the broader economic impact, including sanctions imposed, the potential for additional sanctions and any responses from Russia that could directly affect the Company’s supply chain, business partners or customers.

At the time of this filing, the conflict between Russia and Ukraine has not had and is not expected to have a material impact on the Company's financial condition or results of operations.

In the first quarter of 2022, the Company recorded pretax asset related charges of $186 million due to the Russia and Ukraine conflict and the expectation that certain assets will not be recoverable.

The Company's remaining net asset exposure is not significant.

In the fourth quarter of 2022, the Company reversed certain asset related charges pertaining to the collectability of accounts receivables and inventory due to the Company's ability to recover a portion of the value of these assets.

The pretax gain recorded by the Company in the fourth quarter of 2022 was $68 million.

STATEMENT ON CURRENCY EXCHANGE RATES

The Company's global business operations give rise to market risk exposure related to changes in foreign currency exchange rates and international capital flows that may be affected by extensive regulations and controls, especially in developing or highly inflationary countries such as Argentina.

The Company continues to monitor these situations and take appropriate actions as necessary to manage the financial impact pursuant to established guidelines and policies.

If the Company is unable to manage certain exposures in a cost-effective manner it could have a significant negative impact on its future results of operations and cash flows.

A detailed discussion of these and other principal risks and uncertainties, which may negatively impact the future results of the Company, are included in Part I, Item 1A.

Risk Factors.

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laws and regulations.

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.

The following is a summary of the results for the Company for the year ended December 31, 2022:

The Company reported net sales in 2022 of $57 billion, up 4 percent from $55 billion in 2021, with increases across all geographic regions, except EMEAI, and operating segments, except Industrial Intermediates & Infrastructure, driven by an increase in local price of 11 percent, which was partially offset by a volume decrease of 3 percent and an unfavorable currency impact of 4 percent.

Local price increased 11 percent compared with 2021, with increases in all operating segments and geographic regions, primarily reflecting price gains due to tight supply and demand dynamics in the first half of the year.

Local price increased in Packaging & Specialty Plastics (up 7 percent), Industrial Intermediates & Infrastructure (up 11 percent) and Performance Materials & Coatings (up 21 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).

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.

Volume decreased 3 percent compared with 2021, with decreases in Industrial Intermediates & Infrastructure (down 7 percent) and Performance Materials & Coatings (down 6 percent).

Volume was flat in Packaging & Specialty Plastics.

Volume decreased in EMEAI (down 10 percent), partially offset by increases in the U.S.

& Canada (up 1 percent) and Latin America (up 1 percent).

Volume was flat in Asia Pacific.

Currency had an unfavorable impact of 4 percent on net sales compared with 2021, driven by EMEAI (down 9 percent) and Asia Pacific (down 3 percent).

Restructuring and asset related charges - net were $118 million in 2022, compared with $6 million in 2021, reflecting actions taken related to the Russia and Ukraine conflict in the current year.

Equity in earnings of nonconsolidated affiliates was $268 million in 2022, compared with $975 million in 2021, with lower equity earnings at all principal joint ventures, primarily driven by margin compression at Sadara Chemical Company ("Sadara") and the Kuwait 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.

and TDCC was income of $727 million and $714 million, respectively, in 2022, compared with expense of $35 million and $79 million, respectively, in 2021.

Sundry income (expense) - net increased primarily due to the successful and final resolution and recognition of a long-running patent infringement award.

Net income available for Dow Inc.

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was $6.28 per share in 2022, compared with $8.38 per share in 2021.

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 2022, the Company redeemed $750 million aggregate principal amount of 3.625 percent notes due May 2026.

In 2022, Dow Inc.

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Other notable events and highlights from the year ended December 31, 2022 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.

• 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.

• 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 January 31, 2022, the Company announced that Mary Draves, vice president of Environment, Health and Safety ("EH&S") and chief sustainability officer, announced her decision to retire in April 2022 after 32 years of service.

• On March 22, 2022, the Company announced that Jack Broodo, President of Dow Feedstocks and Energy, would retire at the end of July 2022 after 40 years of service with Dow.

• On March 30, 2022, Dow announced global capacity expansion in response to growing demand for mobility technologies.

• On April 7, 2022, the European Commission selected Dow ACCUTRACE™ Plus Fuel Marker as the new common fiscal marker for tax rebated fuels in the European Union.

• On April 13, 2022, the Dow Inc.

Board of Directors ("Board") approved a new share repurchase program authorizing up to $3 billion for the repurchase of the Company's common stock, with no expiration date.

• Effective April 14, 2022, following the Company's Annual Meeting of Stockholders, Jerri DeVard, former Executive Vice President and Chief Customer Officer of Office Depot, Inc., was elected to the Dow Inc.

• On May 31, 2022, Moody's Investors Service announced a credit rating upgrade for TDCC from Baa2 to Baa1, affirmed its P-2 rating and maintained a stable outlook.

On June 8, 2022, Standard & Poor’s affirmed TDCC’s BBB and A-2 rating, and revised its outlook to positive from stable.

On June 16, 2022, Fitch Ratings affirmed TDCC’s BBB+ and F2 rating, and revised its outlook to positive from stable.

These credit agencies' decisions were made as part of their annual review process and reflect the Company's supportive financial policies and strong operating performance.

• On September 7, 2022, Great Place to Work® and Fortune magazine honored Dow as one of the 2022 Best Workplaces in Manufacturing & Production™.

Dow ranked fourth in the large organization category, and this was the second consecutive year the Company was named to this prestigious list.

• On October 17, 2022 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.

announced it will accelerate the sustainability targets the Company set in 2020 by expanding its stop the waste target to a transform the waste target.

By 2030, Dow will transform plastic waste and other forms of alternative feedstock to commercialize 3 million metric tons of circular and renewable plastics solutions annually.

• On October 26, 2022, Dow announced its launch of the world’s first recyclable silicone self-sealing tire solution.

• On November 1, 2022, the Company announced that Diego Donoso, President of Packaging & Specialty Plastics, announced his decision to retire in the first quarter of 2023, after over 30 years of service.

• On November 1, 2022, the Company announced that Karen S.

Carter, Chief Human Resources Officer and Chief Inclusion Officer for Dow, was named President of Packaging & Specialty Plastics.

• On November 8, 2022, the Company announced that Lisa Bryant was named Chief Human Resources Officer.

Effective December 15, 2022, the Board elected Lisa Bryant as an Executive Officer of the Company.

• Dow was named to FORTUNE's World's Most Admired Companies list for 2022.

• Dow was named to the JUST 100 list for the third consecutive year.

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.

• Dow received the 2022 Artificial Intelligence Excellence Award for its Predictive Intelligence capability.

• Dow received eight 2022 Edison Awards™, (two gold, four silver and two bronze) once again earning more awards than any other organization.

• Dow was named the 2022 Organization of the Year by the Society of Asian Scientists and Engineers for its contributions to science and engineering and its commitment to ensuring that inclusion, diversity and equity are a business imperative.

• Dow advanced to 15th place on the 2022 DiversityInc Top 50 Companies for Diversity list making it the fifth consecutive year on the list.

Dow was also included on six of DiversityInc's Specialty Lists including:

Top Companies for Executive Diversity Councils, Top Companies for People with Disabilities, Top Companies for Black Executives, Top Companies for Latino Executives, Top Companies for Employee Resource Groups and Top Companies for Environmental, Social and Governance.

• Dow was named a 2022 honoree 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.

• For the sixth consecutive year, Dow received a top score on the Disability Equality Index®, placing the Company among the “Best Places to Work for Disability Inclusion” for 2022.

• Dow was honored with a Leading Disability Employer Seal by the National Organization on Disability, marking the sixth consecutive year Dow has received the recognition.

• Dow was honored with a 2022 CIO 100 award for the Company's Digital Manufacturing Acceleration program.

• Dow received six R&D 100 Awards from R&D Magazine for innovative technologies including:

DOWSIL™ ICL-1000 Data Center Immersion Cooling Fluid, DURATRACK™ R-100 and AEH-100 Resins for Green Bike Lanes, ELVALOY™ RET MF 1177 Polymeric PCR Asphalt Paving Compatibilizer, Sustainable Collation Shrink Film enabled by REVOLOOP™, MaizeCare™ Clarity Polymer, and MAINCOTE™ HG-300 Emulsion.

• Dow was named one of the "2022 PEOPLE Companies that Care®" for the third consecutive year.

• Dow received four 2022 BIG™ Innovation Awards from the Business Intelligence Group.

• Dow was awarded 5-Stars in the areas of Employment and Governance in the 2022 Hispanic Association on Corporate Responsibility Corporate Inclusion Index™.

• Dow’s MaizeCare™ Clarity Polymer, a bio-based and biodegradable polymer with film-forming properties for crystal clear formulations, was recognized with an R&D 100 Award and a BIG™ Sustainability Product of the Year in the 2022 Sustainability Awards program.

• Dow's DOWSIL™ TC-6015 Thermally Conductive Encapsulant, an advanced, proven, silicone-based solution that provides exceptional thermal management for power electronics applications, won two prestigious 2022 innovation awards:

one from the Business Intelligence Group (BIG™) in the Manufacturing category;

and a Silver Edison Awards™ in the Industrial Technology category.

• In 2022, CDP (formerly Carbon Disclosure Project, an international non-profit specialized in environmental reporting) confirmed Dow's climate change score of A-.

In addition to the highlights above, the following events occurred subsequent to December 31, 2022:

• Dow has been named to the JUST 100 list, placing 55th overall, an 11-point improvement from last year, and securing the top spot for Communities in the Chemicals sector.

• On January 25, 2023, the Dow Inc.

Board approved restructuring actions ("2023 Restructuring Program") to achieve the Company's structural cost improvement initiatives in response to the continued economic impact from the global recessionary environment and to enhance its agility and long-term competitiveness across the economic cycle.

This program includes a global workforce cost reduction, decreasing turnaround spending, actions to rationalize the Company’s manufacturing assets, which includes asset write-down and write-off charges and related contract termination fees.

RESULTS OF OPERATIONS

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

For comparison of results of operations for the fiscal years ended December 31, 2021 and 2020, see Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 4, 2022.

The following tables summarize net sales and sales variance by operating segment and geographic region from the prior year:

Summary of Sales Results

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Net sales $ 56,902 $ 54,968

Pro forma net sales $ — $ — $ 42,998

Sales Variances by Operating Segment and Geographic Region - As Reported

Sales Variances by Operating Segment and Geographic Region

Percentage change from prior year Local Price & Product Mix Currency Volume Total Local Price & Product Mix Currency Volume

Portfolio & Other 1

Packaging & Specialty Plastics 7 % (3) % — % 4 % 50 % 2 % 2 % 54 %

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Total 11 % (4) % (3) % 4 % 40 % 2 % 1 % 43 %

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

Local Price & Product Mix Currency Volume Portfolio & Other 1

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) %

& 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) %

2022 Versus 2021

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.

The Company reported net sales of $56.9 billion in 2022, up 4 percent from $55.0 billion in 2021, with local price up 11 percent, an unfavorable currency impact of 4 percent and volume down 3 percent.

Net sales increased in all operating segments except Industrial Intermediates & Infrastructure and across all geographic regions except EMEAI.

Local price increased in all operating segments and across all geographic regions, primarily driven by tight supply and demand dynamics and increasing raw material prices, partially offset by slower macroeconomic growth in the second half of the year.

Local price increased in Packaging & Specialty Plastics (up 7 percent), Industrial Intermediates & Infrastructure (up 11 percent) and Performance Materials & Coatings (up 21 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).

Volume decreased 3 percent, driven by EMEAI (down 10 percent), which was partially offset by the U.S.

& Canada and Latin America (both up 1 percent), while volume was flat in Asia Pacific.

Volume was flat in Packaging & Specialty Plastics and decreased in Industrial Intermediates & Infrastructure (down 7 percent) and Performance Materials & Coatings (down 6 percent).

Currency unfavorably impacted net sales by 4 percent driven by EMEAI (down 9 percent) and Asia Pacific (down 3 percent).

Excluding the Hydrocarbons & Energy business, sales increased 1 percent.

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

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) %

& 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) %

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.

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 $48.3 billion in 2022, compared with $44.2 billion in 2021.

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.

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.

COS increased in 2022 primarily due to higher feedstocks, energy, other raw material costs, and logistics costs, partially offset by insurance recoveries related to certain weather-related events in the prior year.

COS as a percentage of net sales was 84.9 percent in 2022 compared with 80.4 percent in 2021.

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.

Research and development ("R&D") expenses were $851 million in 2022, compared with $857 million in 2021.

R&D expenses in 2022 decreased compared with 2021 primarily due to lower performance-based compensation costs and a decrease in fringe benefit expenses which reflected stock market declines compared with 2021.

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.

Selling, general and administrative ("SG&A") expenses were $1,675 million in 2022, compared with $1,645 million in 2021.

SG&A expenses in 2022 increased primarily due to higher bad debt reserves which offset lower performance-based compensation costs and a decrease in fringe benefit expenses which reflected stock market declines compared with 2021.

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 was $336 million in 2022, compared with $388 million in 2021.

Amortization of intangibles decreased primarily due to certain intangible assets becoming fully amortized.

See Note 12 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.

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.

Restructuring and Asset Related Charges - Net

2022 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.

In 2022, the Company recorded pretax asset related charges of $118 million due to the Russia and Ukraine conflict and the expectation that certain assets will not be recoverable.

These charges included the write-down of inventory, the recording of bad debt reserves and the impairment of other assets.

Asset related charges by segment in 2022 were as follows:

$8 million in Packaging & Specialty Plastics, $73 million in Industrial Intermediates & Infrastructure, $6 million in Performance Materials & Coatings and $31 million in Corporate.

See Note 5 to the Consolidated Financial Statements for additional information on restructuring and asset related charges.

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.

The Company’s share of equity in earnings of nonconsolidated affiliates was $268 million in 2022, compared with $975 million in 2021, with lower equity earnings at all principal joint ventures, primarily driven by margin compression at Sadara and the Kuwait joint ventures.

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.

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.

Sundry income (expense) - net for 2022 was income of $714 million, compared with expense of $79 million in 2021.

In 2022, sundry income (expense) - net included a $321 million gain related to the successful and final resolution and recognition of a long-running patent infringement award (related to Packaging & Specialty Plastics), a $60 million gain related to an adjustment to the Dow Silicones breast implant liability (related to Corporate), non-operating pension and postretirement benefit plan credits and gains on the sales of assets and investments.

These were partially offset by foreign currency exchange losses and an $8 million loss on the early extinguishment of debt (related to Corporate).

See Notes 6, 14, 15, 19 and 25 to the Consolidated Financial Statements for additional information.

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.

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See Notes 6, 14, 15, 19 and 25 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.

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.

Sundry income (expense) - net for 2022 was income of $727 million, compared with expense of $35 million in 2021.

In 2022, in addition to the amounts previously discussed above for TDCC, sundry income (expense) - net included a $4 million net gain associated with agreements entered into with DuPont and Corteva as part of the separation and distribution (related to Corporate).

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.

Interest expense and amortization of debt discount was $662 million in 2022, compared with $731 million in 2021.

Interest expense and amortization of debt discount decreased in 2022 primarily due to the liability management actions taken in 2021.

See Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 14 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.

Provision for Income Taxes on Continuing Operations

Provision for Income Taxes

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 7 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.

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.

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 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.

The provision for income taxes was $1,450 million in 2022, compared with $1,740 million in 2021, resulting in effective tax rates of 23.8 percent and 21.4 percent, respectively.

The provision for income taxes in 2022 was lower than 2021 primarily due to a decrease in pretax income, changes to geographic mix of earnings and a reduction in uncertain tax positions recognized.

The tax rate for 2022 in comparison to 2021 was impacted primarily by the level of equity earnings.

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.

Net income attributable to noncontrolling interests was $58 million in 2022, compared with $94 million in 2021.

See Notes 18 and 23 to the Consolidated Financial Statements for additional information.

Net Income (Loss) Available for the Common Stockholder(s)

Net Income Available for the Common Stockholder(s)

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.

common stockholders was $4,582 million in 2022, compared with $6,311 million in 2021.

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.

was $6.28 per share in 2022, compared with $8.38 per share in 2021.

See Note 8 to the Consolidated Financial Statements for details on Dow Inc.'s earnings per share calculations.

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.

Net income available for TDCC common stockholder was $4,583 million in 2022, compared with $6,274 million in 2021.

TDCC's common shares are owned solely by Dow Inc.

SEGMENT RESULTS

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The Company reports geographic information for the following regions:

& Canada, Asia Pacific, Latin America and EMEAI.

& Canada, EMEAI, Asia Pacific and Latin America.

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;

See Part I, Item 1.

Business for further discussion of the Company's segments.

The Company’s measure of profit/loss for segment reporting purposes is Operating EBIT 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 before income taxes") before interest, excluding the impact of significant items.

Operating EBIT by segment includes 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.

See Note 25 to the Consolidated Financial Statements for reconciliations of these measures.

For comparison of segment results for the fiscal years ended December 31, 2021 and 2020, see Part II, Item 7.

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.

("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

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Net sales $ 29,260 $ 28,128

Pro forma net sales $ 20,245

Operating EBIT $ 4,110 $ 6,638

Pro forma Operating EBIT $ 2,904

Equity earnings $ 359 $ 490

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Currency (3) 2

Volume 2 1 (3)

Total 4 % 54 %

Change in Pro Forma Net Sales from Prior Period due to:

Local price & product mix (12) %

2022 Versus 2021

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.

Packaging & Specialty Plastics net sales were $29,260 million in 2022, up 4 percent from net sales of $28,128 million in 2021.

Local price was up 7 percent, currency had an unfavorable impact of 3 percent, primarily in EMEAI and Asia Pacific, and volume was flat.

Local price increased in both businesses, primarily in EMEAI, and driven by gains in functional polymers and olefins which more than offset lower polyethylene prices.

Local price increased in Hydrocarbons & Energy as prices for co-products are generally correlated to Brent crude oil prices, which on average increased 40 percent compared with 2021.

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.

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.

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.

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.

Local price increased in Packaging and Specialty Plastics in EMEAI and Asia Pacific, notably in infrastructure material and flexible packaging applications, more than offsetting decreases in the U.S.

& Canada and Latin America.

Volume increased in Hydrocarbons & Energy across all geographic regions.

Volume decreased in Packaging and Specialty Plastics, primarily in EMEAI and the U.S.

& Canada, as supply constraints and lower demand more than offset improved demand in Latin America and Asia Pacific.

Operating EBIT was $4,110 million in 2022, down $2,528 million from Operating EBIT of $6,638 million in 2021.

Operating EBIT decreased primarily due to compression in integrated margins due to higher raw materials and energy costs and decreased equity earnings at the EQUATE and Sadara joint ventures.

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.

This transition began in July 2021 and is being implemented over the next five years.

Industrial Intermediates & Infrastructure

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Net sales $ 16,606 $ 16,851

Pro forma net sales $ 13,449

Operating EBIT $ 1,418 $ 2,282

Pro forma Operating EBIT $ 845

Equity earnings (losses) $ (91) $ 471

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Total (1) % 40 %

Change in Pro Forma Net Sales from Prior Period due to:

Local price & product mix (12) %

2022 Versus 2021

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.

Industrial Intermediates & Infrastructure net sales were $16,606 million in 2022, down 1 percent from $16,851 million in 2021, with local price up 11 percent, an unfavorable currency impact of 5 percent and volume down 7 percent.

Local price increased in both businesses and across all geographic regions, except Asia Pacific, primarily driven by strong supply and demand dynamics in the first half of the year and rising energy prices.

Currency unfavorably impacted sales in both businesses, primarily in EMEAI and Asia Pacific.

Volume in Polyurethanes & Construction Chemicals decreased in all geographic regions.

The volume decrease in Polyurethanes & Construction Chemicals was largely driven by inflationary pressure on demand for consumer durables, industrial and building and construction applications.

Volume in Industrial Solutions increased in all geographic regions, except Latin America and was driven by strong demand for pharmaceutical, energy and agricultural applications, as well as improved supply availability, as the prior year was impacted by Winter Storm Uri.

Operating EBIT was $1,418 million in 2022, down $864 million from Operating EBIT of $2,282 million in 2021.

Operating EBIT decreased primarily due to lower equity earnings from the Sadara, EQUATE and Map ta Phut joint ventures and inflationary pressure on demand.

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

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Net sales $ 10,764 $ 9,672

Pro forma net sales $ 8,961

Operating EBIT $ 1,328 $ 866

Pro forma Operating EBIT $ 918

Equity earnings $ 10 $ 7

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Currency (4) 2

Volume 1 (6) (3)

Portfolio & other — 1 3

Total 11 % 22 %

Change in Pro Forma Net Sales from Prior Period due to:

Local price & product mix — % (6) % (6) %

Currency — — (2)

Volume — (5) (1)

Portfolio & other — — —

Total — % (11) % (9) %

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

2022 Versus 2021

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.

Performance Materials & Coatings net sales were $10,764 million in 2022, up 11 percent from net sales of $9,672 million in 2021, with local price up 21 percent, an unfavorable currency impact of 4 percent, and volume down 6 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.

Consumer Solutions local price increased in both upstream siloxanes and downstream silicones due to favorable supply and demand dynamics and higher raw material costs, partially offset by price declines in upstream siloxanes late in the year on increased industry supply.

Local price increased in Coatings & Performance Monomers due to favorable supply and demand dynamics and higher raw material costs, partially offset by price declines late in the year as demand softened.

Volume decreased in both businesses due to lower demand.

Consumer Solutions volume decreased in all geographic regions except Asia Pacific, which was flat.

Coatings & Performance Monomers volume decreased in all geographic regions except the U.S.

& Canada, which was flat.

The unfavorable currency impact was driven by EMEAI and Asia Pacific.

Operating EBIT was $1,328 million in 2022, up $462 million from Operating EBIT of $866 million in 2021.

Operating EBIT increased primarily due to margin expansion and higher volume in Consumer Solutions.

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 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.

Operating EBIT increased primarily due to price gains in Consumer Solutions.

In millions 2022 2021

Net sales $ 272 $ 317

Pro forma net sales $ 343

Operating EBIT $ (266) $ (253)

Pro forma Operating EBIT $ (315)

Equity earnings (losses) $ (10) $ 7

2022 Versus 2021

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.

Net sales for Corporate, which primarily relate to the Company's insurance operations, were $272 million in 2022, down from net sales of $317 million in 2021.

Operating EBIT was a loss of $266 million in 2022, compared with a loss of $253 million in 2021.

Operating EBIT decreased primarily due to the Company's insurance operations, increased environmental costs and equity losses.

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.

In 2023, Dow remains focused on managing near-term dynamics while continuing to position the company for long-term value creation.

The Company recognizes initial positive signs from moderating inflation growth in the U.S., improving outlook for energy in Europe, and re-opening in China.

However, Dow will continue to take prudent, proactive actions by implementing a playbook of interventions focused on optimizing labor and purchased service costs, reducing turnaround spending, and enhancing productivity, which is collectively expected to deliver $1 billion in cost savings in 2023.

Going forward, Dow will continue to maintain its disciplined and balanced approach to capital allocation and focus on cash flow generation, while executing its strategic priorities for long-term sustainable and profitable growth.

In Packaging & Specialty Plastics, improved reliability and ongoing logistics improvements are expected to allow the Company to satisfy areas of resilient demand, notably in flexible food and specialty packaging, as well as higher-value functional polymers.

Local prices are expected to continue to be impacted by high energy costs and inflation.

The Company’s feedstock flexibility and advantaged regional footprint will put the segment in a position to navigate energy market dynamics throughout the year.

In-region presence and superior derivative flexibility will allow the segment to continue to optimize price and volume mix.

In Industrial Intermediates & Infrastructure, demand growth is expected in consumer and energy end-markets.

Market fundamentals will remain pressured for propylene oxide, polyols, isocyanates and derivatives systems, driven by lower-than-average growth in GDP, elevated raw material and energy costs and the impact of inflation on demand.

Increased industry supply of propylene oxide and polyols is expected to impact margins.

Recent and soon-to-be-completed investments in alkoxylation capacity are expected to service areas of resilient consumer demand in home care and pharmaceuticals.

In Performance Materials & Coatings, demand for performance silicones is expected to be in excess of GDP as the result of prioritization of key end-markets, most notably in mobility and electronics.

Local prices are expected to be impacted by inflation, energy costs in Europe and increased industry supply of siloxanes.

Coatings and acrylic monomers are expected to have improved supply availability from the prior year, especially for architectural coatings applications, while prices will be impacted by inflation and energy costs.

Other factors impacting operating segment profitability include an expected decrease in planned maintenance turnaround spending of approximately $300 million compared with 2022.

Projected Uses of Cash

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• 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 dividends from equity companies are expected to be approximately $350 million.

• Cash outflows related to the Company's 2023 Restructuring Program, including restructuring implementation costs, are expected to be approximately $400 million.

• Cash dividends from equity companies are expected to increase following increased equity earnings in 2021.

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.

The Company had cash and cash equivalents of $3,886 million at December 31, 2022 and $2,988 million at December 31, 2021, of which $1,789 million at December 31, 2022 and $1,745 million at December 31, 2021, was held by subsidiaries in foreign countries, including U.S.

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.

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however, these particular repatriation activities have not and are not expected to result in a significant incremental tax liability to the Company.

For comparison of cash flows for the fiscal years ended December 31, 2021 and 2020, see Part II, Item 7.

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:

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Operating activities 7,475 7,009 7,519 7,200

Investing activities - continuing operations (2,914) (841) (2,158) (2,914) (841) (2,158)

Investing activities - discontinued operations — — (34) — — (34)

Investing activities (2,970) (2,914) (2,970) (2,914)

Financing activities - continuing operations (6,071) (2,764) (4,077) (6,262) (2,801) (4,224)

Financing activities - discontinued operations — — (18) — — (18)

Financing activities (3,361) (6,071) (3,405) (6,262)

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Cash Flows from Operating Activities

Cash provided by operating activities from continuing operations in 2022 was primarily driven by the Company's cash earnings, dividends from equity method investments and cash provided by working capital, which were partially offset by performance-based compensation payments and pension contributions.

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.

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Days payables outstanding 60 57

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 used for operating activities from discontinued operations was 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.

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.

Cash used for investing activities in 2022 was primarily for capital expenditures and purchases of investments, which were partially offset by proceeds from sales and maturities of investments.

Cash used for investing activities 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.

The Company's capital expenditures were $1,823 million in 2022 and $1,501 million in 2021.

Capital spending was higher in 2022 as the Company continued the post-pandemic recovery and ramp up of investments in its higher return, lower risk and quick payback incremental growth projects.

The Company expects capital spending in 2023 to be approximately $2.2 billion.

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.

Capital spending in recent years has included the addition of a furnace to the Company's ethylene production facility in Alberta, Canada, which commenced operations in 2021;

the addition of an integrated methylene diphenyl diisocyanate ("MDI") distillation and prepolymers facility at its site in Freeport, Texas, which is expected to be completed in 2023;

and construction of a world-scale polyethylene unit on the U.S.

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.

Cash used for financing activities in 2022 included payments on long-term debt, which was more than 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.

included cash outflows for dividends paid to stockholders and purchases of treasury stock.

TDCC included cash outflows for dividends paid to Dow Inc.

Cash used for financing activities 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.

received cash as part of the separation from DowDuPont, which was more than offset by dividends paid to stockholders and purchases of treasury stock.

included cash outflows for dividends paid to stockholders and purchases of treasury stock.

TDCC included cash outflows for dividends paid to Dow Inc.

See Notes 14 and 17 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

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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.

Operating EBITDA

Dow defines Operating EBITDA as earnings (i.e., "Income before income taxes") before interest, depreciation and amortization, excluding the impact of significant items.

Cash Flow Conversion (Operating EBITDA to Cash Flow From Operations)

Dow defines Cash Flow Conversion (Operating EBITDA to cash flow from operations) as "Cash provided by operating activities - continuing operations," divided by 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.

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Reconciliation of Non-GAAP Cash Flow Measures

2021 2020 2019

Cash provided by operating activities - continuing operations (GAAP) $ 7,486 $ 7,069

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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.

Reconciliation of Cash Flow Conversion (Operating EBITDA to Cash Flow From Operations) Dow Inc.

In millions 2022 2021

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)

Net income (GAAP) $ 4,640 $ 6,405

+ Provision for income taxes 1,450 1,740

Income before income taxes $ 6,090 $ 8,145

- Interest income 173 55

+ Interest expense and amortization of debt discount 662 731

+ Pro forma adjustments ² — — 65

- Significant items 1

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Cash provided by operating activities - continuing operations (GAAP) $ 7,486 $ 7,069

Cash flow conversion (Operating EBITDA or pro forma Operating EBITDA to cash flow from operations) (non-GAAP) 4

Cash Flow Conversion (Operating EBITDA to cash flow from operations) (non-GAAP) 2

80.1 % 57.1 %

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

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).

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.

The year ended December 31, 2022 includes costs associated with implementing the Company's Digital Acceleration program and 2020 Restructuring Program, asset related charges due to the Russia and Ukraine conflict, a gain related to a legal matter with Nova, a gain related to an adjustment of the Dow Silicones breast implant liability, a loss on the early extinguishment of debt and activity related to the separation from DowDuPont.

The year ended December 31, 2021 includes costs associated with implementing the Company's Digital Acceleration program and 2020 Restructuring Program, 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 activity related to the separation from DowDuPont.

See Note 25 to the Consolidated Financial Statements for additional information.

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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.

and Euromarket commercial paper programs, committed and uncommitted credit facilities, committed accounts receivable facilities, a medium-term notes program, 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, 2022.

Cash and committed and available forms of liquidity were $12.6 billion at December 31, 2021.

Cash and committed and available forms of liquidity were $13.7 billion at December 31, 2022, an increase of $1.1 billion from December 31, 2021.

The Company also has no substantive long-term debt maturities due until 2027.

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and Euromarket commercial paper programs.

TDCC had no commercial paper outstanding at December 31, 2021 and 2020.

TDCC had $299 million of commercial paper outstanding at December 31, 2022 (zero in 2021).

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.

Subsequent to December 31, 2022, TDCC issued approximately $311 million of commercial paper.

Committed Credit Facilities

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Committed Accounts Receivable Facilities

In addition to the above committed credit facilities, the Company maintains a committed accounts receivable facility in the U.S.

In addition to the above committed credit facilities, the Company maintains an 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.

In 2022, the Company sold $391 million of receivables under the U.S.

and Europe committed accounts receivable facilities.

See Note 13 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

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While the terms and amounts of letters of credit change, TDCC generally has approximately $600 million of outstanding letters of credit at any given time.

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.

The Company had no outstanding monetization of its existing COLI policies' surrender value at December 31, 2022.

Early Settlement of Letters of Credit

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Shelf Registration - U.S.

On July 26, 2019, Dow Inc.

and TDCC filed a shelf registration statement with the SEC.

On June 13, 2022, Dow Inc.

and TDCC filed a shelf registration statement with the U.S.

Securities and Exchange Commission.

The shelf indicates that Dow Inc.

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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.

In 2022, TDCC filed a prospectus supplement under this shelf registration to register an undetermined amount of securities for issuance under InterNotes®.

Also, in 2022, TDCC filed a prospectus supplement under this shelf registration to register an undetermined amount of securities for issuance under a medium-term notes program.

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.

As shown in the following table, net debt is equal to total gross debt minus "Cash and cash equivalents" and "Marketable securities."

Total Debt at Dec 31 Dow Inc.

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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.

In the second quarter of 2022, the Company redeemed $750 million aggregate principal amount of 3.625 percent notes due May 2026.

In the fourth quarter of 2022, the Company issued $1.5 billion of senior unsecured notes.

The offering included $600 million aggregate principal amount of 6.30 percent notes due 2033 and $900 million aggregate principal amount of 6.90 percent notes due 2053.

In 2022, the Company issued an aggregate principal amount of $167 million of InterNotes®.

Additionally, the Company repaid $121 million of long-term debt at maturity and approximately $3 million of long-term debt was repaid by consolidated variable interest entities.

The Company may at any time repurchase certain debt securities in the open market or in privately negotiated transactions subject to:

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Management believes TDCC was in compliance with all of its covenants and default provisions at December 31, 2022.

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.

The Revolving Credit Agreement was extended in November 2022 and matures in November 2027.

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.

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Credit Ratings Long-Term Rating Short-Term Rating Outlook

Fitch Ratings BBB+ F2 Stable

Fitch Ratings BBB+ F2 Positive

Moody’s Investors Service Baa1 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.

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.

Standard & Poor’s BBB A-2 Positive

On May 31, 2022, Moody's Investors Service announced a credit rating upgrade for TDCC from Baa2 to Baa1, affirmed its P-2 rating and maintained a stable outlook.

On June 8, 2022, Standard & Poor’s affirmed TDCC’s BBB and A-2 rating, and revised its outlook to positive from stable.

On June 16, 2022, Fitch Ratings affirmed TDCC’s BBB+ and F2 rating, and revised its outlook to positive from stable.

These credit agencies' decisions were made as part of their annual review process and reflect the Company's supportive financial policies and strong operating performance.

has paid dividends on a quarterly basis and expects to continue to do so, subject to approval by the Dow Inc.

The dividends declared by the Dow Inc.

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:

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Dividends paid to common stockholders $ 2,006 $ 2,073

Reflects Dow Inc.

activity subsequent to the separation from DowDuPont.

Cash Dividends Declared and Paid

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common stockholders," excluding the impact of significant items.

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.

TDCC has committed to fund Dow Inc.'s dividends paid to common stockholders and share repurchases, as approved by the Dow Inc.

Board from time to time, as well as certain governance expenses.

Funding is accomplished through intercompany loans.

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For the year ended December 31, 2022, 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).

of $4,375 million ($3,264 million for the year ended December 31, 2021).

At December 31, 2022, TDCC's intercompany loan balance with Dow Inc.

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Share Repurchase Program

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.

On April 1, 2019, the Dow Inc.

Board ratified the share repurchase program originally approved on March 15, 2019, authorizing up to $3 billion for the repurchase of the Company's common stock, with no expiration date.

The Company completed the April 1, 2019 share repurchase program in the second quarter of 2022.

On April 13, 2022, the Dow Inc.

Board approved a new share repurchase program authorizing up to $3 billion for the repurchase of the Company's common stock, with no expiration date.

In 2022, the Company repurchased $2,325 million of its common stock.

At December 31, 2022, $2 billion of the new share repurchase program authorization remained available for repurchases.

As previously announced, the Company intends to repurchase shares to cover dilution over the cycle.

The Company may from time to time expand its share repurchases beyond dilution, based on a number of factors including macroeconomic conditions, free cash flow generation, and the Dow share price.

Any share repurchases, when coupled with the Company's dividends, are intended to implement the long-term strategy of targeting shareholder remuneration of 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 2022 and 2021, the Company contributed $235 million and $1,219 million to its pension plans, respectively, including contributions to fund benefit payments for its unfunded pension plans.

In the first quarter of 2021, the Company elected to contribute $1 billion to its U.S.

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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.

The 2020 Restructuring Program was substantially complete at December 31, 2021, with the exception of certain cash expenditures expected into 2023, 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 totaled $40 million in 2022.

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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:

In 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;

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The Company expects more than $300 million in incremental annual run rate Operating EBITDA generation by the end of 2023 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.

Digital acceleration pre-tax expenses totaled $230 million in 2022.

The Digital Acceleration program was completed at the end of 2022.

Contractual Obligations

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Additional information related to these obligations can be found in Notes 14, 15, 16 and 19 to the Consolidated Financial Statements.

Contractual Obligations at Dec 31, 2021 Payments Due In

Contractual Obligations at Dec 31, 2022

Payments Due In

In millions 2023 2024-2025 2026-2027 2028 and beyond Total

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Following are the Company’s accounting policies impacted by judgments, assumptions and estimates:

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

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For further discussion, see Environmental Matters in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes 1 and 15 to the Consolidated Financial Statements.

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.

Pension and Other Postretirement Benefits

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The underfunded amount decreased $2,040 million compared with December 31, 2021.

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 decrease in the underfunded amount in 2022 was primarily due to the market-related impact of higher discount rates partially offset by unfavorable returns on plan assets.

The assumption for the long-term rate for compensation levels for the U.S.

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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

At December 31, 2022, net losses of $3,123 million remain to be recognized in the calculation of the market-related value of plan assets.

These net losses will result in increases in future pension expense as they are recognized in the market-related value of assets.

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

Net Decrease in Market-Related Asset Value Due to Recognition of Prior Losses

Total $ 3,123

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.

The Company expects pension net periodic benefit cost ("NPBC") to decrease in 2023 by approximately $115 million, resulting in an NPBC credit.

The decrease is driven primarily by discount rate increases, resulting in a reduction in the amortization of actuarial losses, partially offset by higher interest cost.

A 25 basis point increase or decrease in the long-term return on assets assumption would change the Company’s NPBC credit for 2023 by $58 million.

A 25 basis point increase in the discount rate assumption would decrease the Company's NPBC credit for 2023 by $4 million.

A 25 basis point decrease in the discount rate assumption would decrease the Company's NPBC credit for 2023 by $23 million.

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.

At December 31, 2022, the Company had a net deferred tax liability balance of $150 million, after valuation allowances of $1,269 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

several years.

The ultimate resolution of such uncertainties could last 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.

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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.

Dow is committed to world-class environmental, health and safety (“EH&S”) performance, as demonstrated by industry-leading results, a long-standing commitment to Responsible Care®, a strong commitment to achieve the Company's 2025 Sustainability Goals and Dow's drive to deliver against new targets on climate protection and a circular economy.

These goals and targets set the standard for sustainability in the chemical industry, focusing on improvements in the Company’s local corporate citizenship and product stewardship, and by actively pursuing methods to reduce the Company's environmental impact.

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 implement the Company’s policies and requirements and meet performance objectives, leadership expectations and public commitments.

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.

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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 manages environmental data for reporting with a waste, water and emissions inventory system.

All manufacturing sites globally record their emissions and water use in the system.

The data is reviewed at the facility level and then by global coordinators before being aggregated for ESG reporting.

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.

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 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.

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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.

Sabotage, terrorism, war, 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.

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.

regulations with established risk-based and performance-based standards that must be met at U.S.

Coast Guard-regulated and Chemical Facility Anti-Terrorism Standards-regulated facilities promulgated by the U.S.

Department of Homeland Security.

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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

address both internal and external identifiable risks.

The Company continues to improve its security plans, placing emphasis on the safety of Dow communities and people by being prepared to meet risks at any level and to address both internal and external identifiable risks.

The security plan includes regular vulnerability assessments, security audits, mitigation efforts and physical security upgrades designed to reduce vulnerability.

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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.

The Company participates with chemical associations globally and participates as an active member of the Global Congress on Chemical Security and Emerging Threats 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

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.

Climate Protection

Addressing climate-related risks and opportunities is part of Dow’s overall climate strategy.

This science-based strategy includes a phased approach to decarbonize while meeting growing demand for Dow's products and contributing to a low-carbon future through continued investment in new products, technologies and processes.

In 2020, Dow announced commitments to reduce its net annual Scope 1 and 2 carbon emissions by an additional 5 million metric tons by 2030 versus its 2020 baseline, a 15 percent reduction and a 30 percent reduction since 2005 as Dow had reduced its carbon emissions 15 percent between 2005 and 2020.

Additionally, Dow announced its intention to be carbon neutral by 2050 (Scope 1+2+3, as defined by the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard, plus product benefits).

Reflecting Dow's focus to make meaningful progress in the near term, Dow intends to reduce its carbon emissions by approximately 2 million metric tons from 2022 to 2025 while growing underlying earnings.

Dow is also committed to advancing water stewardship within the Company's operations and to working collaboratively to enhance water management at the watershed level.

As part of this commitment, Dow has set a global target to reduce freshwater intake intensity by 20 percent at its key water-stressed sites by 2025.

Despite these commitments, climate change-related risks and uncertainties, legal or regulatory responses to climate change, and failure to meet climate change commitments could negatively impact Dow’s operations, financial condition and/or reputation.

Climate-related risks include both physical and transition risks.

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.

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.

Climate-related physical risks include more frequent severe weather events, potential changes in precipitation patterns, water scarcity and extreme variability in weather patterns, which can disrupt the operations of the Company as well as those of its customers, partners and vendors.

In 2021, Dow partnered with S&P Global Trucost (Trucost) to assess the Company’s exposure to climate-related physical risks based on the geographic location of manufacturing operations.

The risks assessed included water stress, heat waves, cold waves, droughts, hurricanes, wildfires and flooding.

The analysis included an assessment of the physical risks using a baseline year of 2020 with time periods ranging to 2050, and scenarios of low, moderate and high climate change.

Based on the Trucost methodology, which scores the exposure of sites to physical risks relative to global conditions, Dow was assessed at moderate exposure in 2050 under all scenarios, with a weighted average that is slightly lower than the average of the materials industry (as defined by Trucost).

Dow will use this information to inform decision-making at sites with respect to managing climate-related physical risks.

Transition Risks

Climate-related transition risks include the availability, development and affordability of lower greenhouse gas emissions technology, the effects of carbon pricing and changes in public sentiment, regulations, taxes, public mandates or requirements.

Climate Opportunities and Actions

There are also significant climate opportunities for Dow, including the ability to be a leader in the development of lower emissions technology, such as Dow’s 2021 announcement to build a net-zero (Scope 1 & 2 emissions) ethylene and derivatives complex in Alberta, Canada.

Additional opportunity actions to achieve carbon neutrality include expanding access to clean power, developing lower carbon emissions manufacturing technology, such as Dow's proprietary FCDh technology, and collaborating with Shell to develop electrified cracking technology powered by clean energy.

Dow’s technology and materials science leadership also provide a significant opportunity to deploy materials to help reduce emissions for customers and industries that will allow Dow to capture value from increasing demand for low-carbon and sustainable products.

These are just some examples of critical steps on Dow’s path to carbon neutrality by 2050 while enabling business growth.

The potential impacts of climate-related risks and opportunities are part of Dow’s climate strategy and factored into the Company’s business and financial planning.

When assessing the magnitude of impact, Dow evaluates elements such as changes to the cost of raw materials, impact on operating cost (e.g., energy costs, costs of complying with regulation), cost of investment in new technology to reduce emissions, impact to the price at which products can be sold, impact of potential lost sales or, in the case of opportunities, improvements in production, increased revenues, cost efficiencies and market share gained.

In addition, there could be impacts that need to be considered that cannot be financially quantified (e.g., reputational impact of certain risks and opportunities).

Dow is taking specific actions to mitigate identified climate-related physical and transition risks, while also advancing opportunities in several key areas.

These include:

• Optimizing Manufacturing Facilities and Processes for Sustainability:

Dow is investing approximately $1 billion in annual capital spending allocation to decarbonize assets, in a phased approach, while growing capacity.

This investment plan includes large, industry-leading projects, such as the announced net-zero carbon emissions (Scope 1 & 2 emissions) site in Alberta, Canada, as well as emissions-reduction investments in existing facilities and replacement of end-of-life carbon intensive assets with state-of-the-art, carbon-efficient and sustainable technologies.

In 2021, Dow implemented energy efficiency and emissions reduction projects, reducing energy consumption by 1.232 million kilojoules per year and amounting to 611,500 metric tons of carbon dioxide ("CO 2 ") reduction.

In 2021, Dow’s Terneuzen site outlined a roadmap to support the Dutch Climate Agreement and enable a reduction of 1.7 million metric tons of CO 2 annually by 2030 versus a 2020 baseline.

These projects are part of Dow’s roadmap that will enable the Company to decarbonize its manufacturing while meeting growing demand for its products and includes replacing end-of-life assets with high-efficiency, low-carbon assets.

Dow is also working to reduce water use and the potential impact of water stress.

One example is the Company’s commitment to 100 percent water circularity by 2025 at Dow’s site in Terneuzen, The Netherlands.

• Increasing Clean Energy in Purchased Power Mix:

Dow continues to invest in cost-efficient clean energy, including wind, solar and hydropower, across operations.

In 2021, Dow expanded access to renewable power to more than 900 megawatts, so that more than 25 percent of purchased electricity comes from renewable sources.

Dow is a leading user of renewable energy in the chemical industry and in the top 20 among global corporations according to BloombergNEF.

Dow is also collaborating with X-energy with the intent to deploy carbon-free small modular nuclear technology options at one of the Company's U.S.

sites by approximately 2030.

• Developing Next Generation, Low-Carbon Manufacturing Technologies:

Dow is investing in longer-term, future-focused manufacturing technologies that will be critical in the decarbonization of the Company's manufacturing.

For example, Dow is collaborating with Shell on technology to electrically heat steam cracker furnaces.

Combining electrical cracking with clean electricity sources would reduce the CO 2 footprint of the production process to near zero emissions.

Dow also developed its proprietary FCDh technology, which can be used to make cracking a less carbon intensive process, and has installed the technology in a mixed-feed cracker in Louisiana to produce on-purpose propylene, reducing energy use and emissions by up to 20 percent.

Dow is leveraging the learnings from the FCDh development to also advance ethane dehydrogenation technology for ethylene and propylene production, which has the potential to reduce emissions by 40 to 50 percent.

• Collaborating With the Supply Chain to Tackle ‘Upstream’ Carbon Emissions:

Dow is working closely with its suppliers to set emissions reduction targets and to embed ESG performance as a metric in supplier selection, contracting, and relationship management.

Approximately 70 percent of Dow’s emissions footprint fall into the Scope 3 categories and more than half of those come from the raw materials, transportation, and other services purchased as a company.

Reducing Scope 3 emissions is a tremendous challenge for all companies.

Dow recognizes the significant opportunity it has to work with suppliers to reduce those emissions, just as Dow's customers are looking to the Company to reduce emissions for the Dow products they buy.

Dow was recently recognized as a Global Supplier Engagement Leader by CDP, placing among the top 8 percent of companies that disclose their data to CDP.

CDP's Supplier Engagement Rating system independently evaluates supplier engagement practices with the aim of accelerating action to reduce emissions in global supply chains.

• Developing Low-Carbon Products, Technologies and Services:

Dow products are essential to a low carbon future, and the Company wants the world’s best brands to look to Dow to help them achieve their goals and make their products more sustainable.

Dow is helping its customers achieve their climate goals by providing products that facilitate energy efficiency, light weighting, fuel transition, circularity, increased operational efficiency, resource reductions and reduced emissions.

Examples include Dow’s MobilityScience™ platform, which is focused on developing cutting-edge material innovations that will enable the next generation of electric and autonomous vehicles to achieve longer range, greater comfort, enhanced safety, and a lower carbon footprint.

Dow’s ENDURANCE™ compounds for cable systems support next-generation, longer-life, and lower-carbon emissions infrastructure, including on- and off-shore windfarms.

Dow’s Novel ENDURANCE™ HFDD 4201 enables significantly lower-carbon emissions (approximately 80 percent), and material and energy savings during cable production.

Additionally, in September 2022, Dow introduced DOWSIL™ Immersion Cooling Technology, a next-generation solution for cooling hyperscale cloud enterprise data centers with optimized efficiency and sustainability.

DOWSIL™ ICL-1000 Fluid, the first product in this new technology family, is estimated to absorb heat about one thousand times more efficiently than air-cooled systems, resulting in up to a 95 percent reduction in energy use for server cooling and up to a 50 percent reduction in overall data center power consumption.

This product can also be recycled to increase its circularity.

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.

Dow’s vision for turning the tide on plastic waste is centered on solving challenges:

from designing for recyclability at the beginning of a product’s life to increasing Dow's capacity to use plastic waste as feedstock and other alternative feedstock, enabling plastic waste to be blended with virgin plastic as recycled resins, and building and partnering in industrial ecosystems to close the loop.

The issue is complex, and through partnerships, Dow is working across the value chain to improve access to collection, recycling, and processing infrastructure and to create new circular business models.

Improving circularity of plastics through recycling and reuse is critical to a world that is also targeting carbon emissions reduction.

The lower-carbon benefits of polyethylene-based packaging serve as a key driver and source of value, as well as the lifecycle perspective of plastic versus other available materials.

Moving to circular products includes increasing the share of plastics production from circular feedstocks.

In 2020, Dow announced "stop the waste" and "close the loop" targets to address plastic waste and, in 2022, Dow committed to accelerating the circular ecosystem by turning waste and alternative feedstock into raw materials that help deliver 3 million metric tons per year of circular and renewable solutions by 2030 with a new "transform the waste" sustainability target.

Meeting this expanded “transform the waste” target will require investments in technologies and infrastructure and strategic partnerships.

To do this, Dow will expand its efforts to “stop the waste” by building industrial ecosystems to collect, reuse or recycle waste and expand its portfolio to meet rapidly growing demand.

Dow expects the waste required to produce this expanded target to surpass and replace the original 1 million metric ton stop the waste goal.

Dow is also catalyzing a circular economy for plastics through global partnerships with non-governmental

organizations and investors, such as the Alliance to End Plastic Waste, The Recycling Partnership, Circulate Capital and Closed Loop Partners.

Additionally, Dow is accelerating its progress through several recently announced circular and mechanical offtake agreements and projects that will help contribute to achieving the new target, including:

• Agreements with Mura Technology to construct multiple world-scale advanced recycling facilities in the U.S.

and Europe, collectively adding as much as 600 kilotons of annual capacity.

• An investment to build the largest single hybrid recycling site in France, managed by Valoregen, which will secure a source of post-consumer resins (“PCR”) for Dow.

• Mechanical recycling collaboration with Boomera LAR in Brazil.

• An investment in Mr.

Green Africa and an agreement to co-develop more traceable, fair, and high-quality PCR that can be used in the production of new flexible plastic packaging.

• A memorandum of understanding with Lucro Plastecycle to develop and launch polyethylene film solutions using PCR plastics in India.

• The launch of a bold new collaboration with WM to improve consumer recycling for hard-to-recycle plastic films throughout the U.S.

by allowing consumers to recycle these materials directly in their curbside recycling.

Once operating at full capacity, this collaboration is expected to divert more than 120,000 metric tons of plastic film from landfills annually.

Dow is also working directly with its customers, brand owners and the value chain to help customers redesign and create packaging solutions that are both high-performance and recyclable or made with circular polymers.

Dow continuously invests in application development, packaging redesign and infrastructure improvements to deliver on the Company's circularity goals.

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.

It is about creating innovative solutions that are sustainable and continuing to invest in an industrial ecosystem for the circular economy.

Environmental Remediation

For comparison of environmental remediation-related matters for the fiscal years ended December 31, 2021 and 2020, see Part II, Item 7.

The Company accrues the costs of remediation of its facilities and formerly owned facilities based on current law and regulatory requirements.

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In 2022, the Company spent $37 million ($38 million in 2021) 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 $1,192 million at December 31, 2022, compared with $1,220 million at December 31, 2021.

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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.

The amounts charged to income on a pretax basis related to environmental remediation totaled $176 million in 2022 and $158 million in 2021.

The amounts charged to income on a pretax basis related to operating the Company's current pollution abatement facilities, excluding internal recharges, totaled $773 million in 2022 and $761 million in 2021.

Capital expenditures for environmental protection were $137 million in 2022 and $65 million in 2021.

Asbestos-Related Matters of Union Carbide Corporation

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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.

For comparison of asbestos-related matters of Union Carbide Corporation for the fiscal years ended December 31, 2021 and 2020, see Part II, Item 7.

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:

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis