{"url_path":"/sec/cik-0000100790/10-k/2026/item-8","section_key":"item-8","section_title":"Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-02-03","source_url":"https://www.sec.gov/Archives/edgar/data/100790/0000029915-26-000004-index.html","accession_number":"0000029915-26-000004","cik":"0000100790","ticker":null,"issuer_name":"UNION CARBIDE CORP /NEW/","edgar_url":"https://www.sec.gov/Archives/edgar/data/100790/0000029915-26-000004-index.html","primary_entity_key":"0000100790","primary_entity_name":"UNION CARBIDE CORP /NEW/"},"word_count":14680,"has_tables":true,"body_markdown":"ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA\n\nREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM\n\nTo the Stockholder and the Board of Directors of Union Carbide Corporation\n\nOpinion on the Financial Statements\n\nWe have audited the accompanying consolidated balance sheets of Union Carbide Corporation and subsidiaries (the \"Corporation\") as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the \"financial statements\"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.\n\nBasis for Opinion\n\nThese financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on the Corporation's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.\n\nWe conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Corporation is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion.\n\nOur audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.\n\nCritical Audit Matter\n\nThe critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.\n\nAsbestos - Refer to Notes 1 and 12 to the Financial Statements\n\nCritical Audit Matter Description\n\nThe Corporation is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past several decades. The Corporation expects more asbestos-related suits to be filed against the Corporation and its former subsidiary Amchem Products, Inc. in the future, and will aggressively defend or reasonably resolve, as appropriate, both pending and future claims. Since 2003, the Corporation has engaged a third-party actuarial specialist to review the Corporation's historical asbestos-related claim and resolution activity in order to assist management in estimating the Corporation's asbestos-related liability. The Corporation considers\n\n26\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nquantitative and qualitative factors such as the nature of pending claims, trial experience of the Corporation and other asbestos defendants, current spending for defense and processing costs, significant appellate rulings and legislative developments, trends in the tort system, and their respective effects on expected future resolution costs.\n\nThe Corporation considers the following summarized assumptions and judgments in arriving at the estimated liability:\n\n•The average resolution value calculated by the Corporation to settle each pending and future claim\n\n•The Corporation’s estimation of the number of pending and future claims\n\n•The curve of how claims will occur over the estimated period through the terminal year\n\n•The estimated terminal year 2049 (date at which future claims will cease)\n\n•The acceptance rate applied to estimated future claims (the rate at which claims will be resolved with payment)\n\nGiven the significant judgments made by management to estimate the asbestos liability, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to average resolution value of pending and future claims, estimated number of pending and future claims, curve of how claims will occur, estimated terminal date, and acceptance rate applied to estimated future claims required a high degree of auditor judgment and an increased extent of effort, including the need to involve our actuarial specialists.\n\nHow the Critical Audit Matter Was Addressed in the Audit\n\nOur audit procedures related to management’s estimate and assumptions of the asbestos liability included the following, among other procedures:\n\n•We tested the effectiveness of controls related to the asbestos liability including management’s controls over the determination of average resolution value of pending and future claims, estimated number of pending and future claims, valuation of future claims, curve of how claims will occur, the estimated terminal date and the acceptance rate applied to estimated future claims.\n\n•We evaluated the methods and assumptions used by management to estimate the asbestos liability by:\n\n◦Testing the underlying data that served as the basis for the actuarial analysis, including historical claims, to test that the inputs to the actuarial estimate were reasonable.\n\n◦Comparing management’s prior-year assumptions of expected development and ultimate loss to actuals incurred during the current year to identify potential bias in the determination of the asbestos-related liabilities.\n\n•With the assistance of our actuarial specialists, we performed testing to develop an independent estimate of the asbestos-related liabilities and compared our estimate to management’s estimate.\n\n•We read external information included in regulatory filings and news releases to search for contradictory evidence.\n\n/s/ DELOITTE & TOUCHE LLP\n\nMidland, Michigan\n\nFebruary 3, 2026\n\nWe have served as the Corporation's auditor since 2001.\n\n27\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nUnion Carbide Corporation and Subsidiaries\n\nConsolidated Statements of Income\n\n(In millions) For the years ended Dec 31, 202520242023\n\nNet trade sales$104 $120 $147 \n\nNet sales to related companies3,885 4,157 4,149 \n\nTotal net sales3,989 4,277 4,296 \n\nCost of sales4,111 3,968 3,804 \n\nResearch and development expenses20 22 22 \n\nSelling, general and administrative expenses6 6 10 \n\nRestructuring and asset related charges - net6 — 14 \n\nSundry income (expense) - net579 (110)(25)\n\nInterest income100 134 49 \n\nInterest expense and amortization of debt discount7 8 16 \n\nIncome before income taxes518 297 454 \n\nProvision (credit) for income taxes(42)47 73 \n\nNet income attributable to Union Carbide Corporation$560 $250 $381 \n\nSee Notes to the Consolidated Financial Statements.\n\n28\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nUnion Carbide Corporation and Subsidiaries\n\nConsolidated Statements of Comprehensive Income\n\n(In millions) For the years ended Dec 31, 202520242023\n\nNet income attributable to Union Carbide Corporation$560 $250 $381 \n\nOther comprehensive income (loss), net of tax   \n\nCumulative translation adjustments(3)1 1 \n\nPension and other postretirement benefit plans36 (2)58 \n\nTotal other comprehensive income (loss)33 (1)59 \n\nComprehensive income attributable to Union Carbide Corporation$593 $249 $440 \n\nSee Notes to the Consolidated Financial Statements.\n\n29\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nUnion Carbide Corporation and Subsidiaries\n\nConsolidated Balance Sheets\n\n(In millions, except share amounts) At Dec 31,20252024\n\nAssets\n\nCurrent Assets  \n\nCash and cash equivalents$11 $11 \n\nAccounts receivable:\n\nTrade (net of allowance for doubtful receivables 2025: $—; 2024: $—)\n17 16 \n\nRelated companies684 846 \n\nOther18 18 \n\nIncome taxes receivable— 42 \n\nNotes receivable from related companies7 593 \n\nInventories278 296 \n\nOther current assets45 31 \n\nTotal current assets1,060 1,853 \n\nInvestments  \n\nInvestments in related companies237 237 \n\nOther investments13 12 \n\nNoncurrent receivables13 31 \n\nNoncurrent receivables from related companies1,724 1,642 \n\nTotal investments1,987 1,922 \n\nProperty  \n\nProperty5,858 5,732 \n\nLess accumulated depreciation4,747 4,611 \n\nNet property1,111 1,121 \n\nOther Assets  \n\nIntangible assets (net of accumulated amortization 2025: $96; 2024: $95)\n5 6 \n\nOperating lease right-of-use assets56 61 \n\nDeferred income tax assets289 253 \n\nDeferred charges and other assets16 17 \n\nTotal other assets366 337 \n\nTotal Assets$4,524 $5,233 \n\nLiabilities and Equity\n\nCurrent Liabilities  \n\nNotes payable to related companies$118 $19 \n\nLong-term debt due within one year2 126 \n\nAccounts payable:\n\nTrade220 336 \n\nRelated companies445 470 \n\nOther17 30 \n\nOperating lease liabilities - current12 12 \n\nIncome taxes payable20 21 \n\nAsbestos-related liabilities - current80 78 \n\nAccrued and other current liabilities120 136 \n\nTotal current liabilities1,034 1,228 \n\nLong-Term Debt143 143 \n\nOther Noncurrent Liabilities  \n\nPension and other postretirement benefits - noncurrent413 402 \n\nAsbestos-related liabilities - noncurrent628 713 \n\nOperating lease liabilities - noncurrent44 49 \n\nOther noncurrent obligations246 512 \n\nTotal other noncurrent liabilities1,331 1,676 \n\nStockholders' Equity  \n\nCommon stock (authorized: 1,000 shares of $0.01 par value each; issued: 935.51 shares)\n— — \n\nAdditional paid-in capital1,034 1,034 \n\nRetained earnings2,293 2,496 \n\nAccumulated other comprehensive loss(1,311)(1,344)\n\nUnion Carbide Corporation's stockholders' equity2,016 2,186 \n\nTotal Liabilities and Equity$4,524 $5,233 \n\nSee Notes to the Consolidated Financial Statements.\n\n30\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nUnion Carbide Corporation and Subsidiaries\n\nConsolidated Statements of Cash Flows\n\n(In millions) For the years ended Dec 31, 202520242023\n\nOperating Activities  \n\nNet income attributable to Union Carbide Corporation$560 $250 $381 \n\nAdjustments to reconcile net income to net cash provided by operating activities:\n\nDepreciation and amortization182 144 170 \n\nProvision (credit) for deferred income tax(47)4 (18)\n\nNet gain on sales of property and investments— (1)(1)\n\nDistribution from related company(735)— — \n\nNet gain on sale of ownership interest in related party— (2)(206)\n\nRestructuring and asset related charges - net6 — 14 \n\nNet periodic pension benefit cost75 27 184 \n\nPension contributions(2)(2)(2)\n\nOther, net1 — — \n\nChanges in assets and liabilities:\n\nAccounts and notes receivable(1)(4)31 \n\nRelated company receivables690 118 225 \n\nInventories18 (69)22 \n\nAccounts payable(129)68 4 \n\nRelated company payables74 1 26 \n\nAsbestos-related payments(83)(76)(80)\n\nOther assets and liabilities(377)108 (52)\n\nCash provided by operating activities232 566 698 \n\nInvesting Activities  \n\nCapital expenditures(137)(338)(274)\n\nProceeds from sale of ownership interest in related party— 2 206 \n\nChange in noncurrent receivable from related company58 (3)6 \n\nProceeds from sales of property and investments1 4 12 \n\nCash used for investing activities(78)(335)(50)\n\nFinancing Activities  \n\nDividends paid to parent(28)(228)(512)\n\nChanges in short-term notes payable— (1)(3)\n\nPayments on long-term debt(126)(2)(132)\n\nCash used for financing activities(154)(231)(647)\n\nSummary  \n\nChange in cash and cash equivalents— — 1 \n\nCash and cash equivalents at beginning of year11 11 10 \n\nCash and cash equivalents at end of year$11 $11 $11 \n\nSee Notes to the Consolidated Financial Statements.\n\n31\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nUnion Carbide Corporation and Subsidiaries\n\nConsolidated Statements of Equity\n\n(In millions) For the years ended Dec 31,202520242023\n\nCommon Stock  \n\nBalance at beginning and end of year$— $— $— \n\nAdditional Paid-in Capital  \n\nBalance at beginning of year1,034 1,034 141 \n\nCommon control transaction (Note 17)\n— — 893 \n\nBalance at end of year1,034 1,034 1,034 \n\nRetained Earnings  \n\nBalance at beginning of year2,496 2,474 2,605 \n\nNet income attributable to Union Carbide Corporation560 250 381 \n\nDistribution to parent(735)— — \n\nDividends declared(28)(228)(512)\n\nBalance at end of year2,293 2,496 2,474 \n\nAccumulated Other Comprehensive Loss, Net of Tax  \n\nBalance at beginning of year(1,344)(1,343)(1,402)\n\nOther comprehensive income (loss)33 (1)59 \n\nBalance at end of year(1,311)(1,344)(1,343)\n\nUnion Carbide Corporation's Stockholder's Equity$2,016 $2,186 $2,165 \n\nSee Notes to the Consolidated Financial Statements.\n\n32\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nUnion Carbide Corporation and Subsidiaries\n\nNotes to the Consolidated Financial Statements\n\nTable of Contents\n\nNote Page\n\n1\n[Summary of Significant Accounting Policies](#i2aef629ae28d4ab08017402fb32766d6_82)\n\n[33](#i2aef629ae28d4ab08017402fb32766d6_82)\n\n2\n[Recent Accounting Guidance](#i2aef629ae28d4ab08017402fb32766d6_85)\n\n[36](#i2aef629ae28d4ab08017402fb32766d6_85)\n\n3\n[Revenue](#i2aef629ae28d4ab08017402fb32766d6_94)\n\n[37](#i2aef629ae28d4ab08017402fb32766d6_94)\n\n4\n[Restructuring and Asset Related Charges - Net](#i2aef629ae28d4ab08017402fb32766d6_106)\n\n[38](#i2aef629ae28d4ab08017402fb32766d6_106)\n\n5\n[Supplementary Information](#i2aef629ae28d4ab08017402fb32766d6_112)\n\n[38](#i2aef629ae28d4ab08017402fb32766d6_112)\n\n6\n[Income Taxes](#i2aef629ae28d4ab08017402fb32766d6_115)\n\n[40](#i2aef629ae28d4ab08017402fb32766d6_115)\n\n7\n[Inventories](#i2aef629ae28d4ab08017402fb32766d6_118)\n\n[42](#i2aef629ae28d4ab08017402fb32766d6_118)\n\n8\n[Property](#i2aef629ae28d4ab08017402fb32766d6_121)\n\n[43](#i2aef629ae28d4ab08017402fb32766d6_121)\n\n9\n[Investments in Related Companies](#i2aef629ae28d4ab08017402fb32766d6_124)\n\n[43](#i2aef629ae28d4ab08017402fb32766d6_124)\n\n10\n[Intangible Assets](#i2aef629ae28d4ab08017402fb32766d6_127)\n\n[43](#i2aef629ae28d4ab08017402fb32766d6_127)\n\n11\n[Notes Payable and Long-Term Debt](#i2aef629ae28d4ab08017402fb32766d6_130)\n\n[44](#i2aef629ae28d4ab08017402fb32766d6_130)\n\n12\n[Commitments and Contingencies](#i2aef629ae28d4ab08017402fb32766d6_133)\n\n[45](#i2aef629ae28d4ab08017402fb32766d6_133)\n\n13\n[Leases](#i2aef629ae28d4ab08017402fb32766d6_139)\n\n[47](#i2aef629ae28d4ab08017402fb32766d6_139)\n\n14\n[Accumulated Other Comprehensive Loss](#i2aef629ae28d4ab08017402fb32766d6_142)\n\n[49](#i2aef629ae28d4ab08017402fb32766d6_142)\n\n15\n[Pension Plans and Other Postretirement Benefits](#i2aef629ae28d4ab08017402fb32766d6_145)\n\n[50](#i2aef629ae28d4ab08017402fb32766d6_145)\n\n16\n[Fair Value Measurements](#i2aef629ae28d4ab08017402fb32766d6_151)\n\n[56](#i2aef629ae28d4ab08017402fb32766d6_151)\n\n17\n[Related Party Transactions](#i2aef629ae28d4ab08017402fb32766d6_157)\n\n[57](#i2aef629ae28d4ab08017402fb32766d6_157)\n\n18\n[Business and Geographic Regions](#i2aef629ae28d4ab08017402fb32766d6_160)\n\n[60](#i2aef629ae28d4ab08017402fb32766d6_160)\n\nNOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES\n\nPrinciples of Consolidation and Basis of Presentation\n\nExcept as otherwise indicated by the context, the terms \"Corporation\" and \"UCC\" as used herein mean Union Carbide Corporation and its consolidated subsidiaries and references to \"TDCC\" refer to The Dow Chemical Company and its consolidated subsidiaries. UCC is a wholly owned subsidiary of TDCC and TDCC is a wholly owned subsidiary of Dow Inc. Additionally, the term \"Diamond Infrastructure Solutions\" means Dow InfraCo, LLC, TDCC's consolidated variable interest entity that owns and operates infrastructure assets at certain TDCC and UCC locations on the U.S. Gulf Coast, which include the Corporation's sites in St. Charles, Louisiana, and Seadrift and Texas City, Texas. Infrastructure-related products and services provided to the Corporation by Diamond Infrastructure Solutions are billed to the Corporation in accordance with the terms of agreements between the parties.\n\nThe accompanying consolidated financial statements of the Corporation were prepared in accordance with accounting principles generally accepted in the United States of America (\"U.S. GAAP\") and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which the Corporation exercises control and, when applicable, entities for which the Corporation has a controlling financial interest. Investments in nonconsolidated affiliates (20-50 percent owned companies, joint ventures and partnerships) are accounted for using the equity method. In accordance with the accounting guidance for earnings per share, the presentation of earnings per share is not required in financial statements of wholly owned subsidiaries.\n\nTDCC conducts its worldwide operations through global businesses and the Corporation's business activities comprise components of TDCC's global businesses rather than stand-alone operations. Further, the Corporation sells substantially all of its products to TDCC in order to simplify the customer interface process. The Corporation's Board of Directors (\"Board\"), acting pursuant to the authority delegated to it by TDCC, functions as the Corporation's chief operating decision maker (\"CODM\") to assess UCC's results and allocate resources for its operations. The Corporation's results are reported as a single operating segment as the consolidated statements of income are presented to the CODM without further disaggregation.\n\n33\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nIntercompany transactions and balances are eliminated in consolidation. Transactions with TDCC and other subsidiaries of TDCC, including Diamond Infrastructure Solutions, have been reflected as related company transactions in the consolidated financial statements. See Note 17 for additional information.\n\nUse of Estimates in Financial Statement Preparation\n\nThe preparation of financial statements in accordance with U.S. GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The Corporation's consolidated financial statements include amounts that are based on management's best estimates and judgments. Actual results could differ from those estimates.\n\nSignificant Accounting Policies\n\nAsbestos-Related Matters\n\nAccruals for asbestos-related matters, including defense and processing costs, are recorded based on an analysis of claim and resolution activity, defense spending, and pending and future claims. These accruals are assessed at each balance sheet date to determine if the asbestos-related liability remains appropriate. Accruals for asbestos-related matters are included in the consolidated balance sheets in \"Asbestos-related liabilities - current\" and \"Asbestos-related liabilities - noncurrent.\" See Note 12 for additional information.\n\nLegal Costs\n\nThe Corporation expenses legal costs as incurred, with the exception of defense and processing costs associated with asbestos-related matters.\n\nForeign Currency Translation\n\nWhile the Corporation's consolidated subsidiaries are primarily based in the United States, the Corporation has small subsidiaries in Asia Pacific and other locations outside the United States. For those subsidiaries, the local currency has been primarily used as the functional currency. Translation gains and losses of those operations that use local currency as the functional currency are included in the consolidated balance sheets in \"Accumulated other comprehensive loss\" (\"AOCL\"). Where the U.S. dollar is used as the functional currency, foreign currency translation gains and losses are reflected in income.\n\nEnvironmental Matters\n\nAccruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law and existing technologies. These accruals are adjusted periodically as assessment and remediation efforts progress or as additional technical or legal information becomes available. Accruals for environmental liabilities are included in the consolidated balance sheets in \"Accrued and other current liabilities\" and \"Other noncurrent obligations\" at undiscounted amounts. Accruals for related insurance or other third-party recoveries for environmental liabilities are recorded when it is probable that a recovery will be realized and are included in the consolidated balance sheets in \"Accounts receivable - Other.\"\n\nEnvironmental costs are capitalized if the costs extend the life of the property, increase its capacity and/or mitigate or prevent contamination from future operations. Environmental costs are also capitalized in recognition of legal asset retirement obligations resulting from the acquisition, construction and/or normal operation of a long-lived asset. Costs related to environmental contamination treatment and cleanup are charged to expense. Estimated future incremental operations, maintenance and management costs directly related to remediation are accrued when such costs are probable and reasonably estimable.\n\nCash and Cash Equivalents\n\nCash and cash equivalents include time deposits and investments with maturities of three months or less at the time of purchase.\n\nFinancial Instruments\n\nThe Corporation calculates the fair value of financial instruments using quoted market prices when available. When quoted market prices are not available for financial instruments, the Corporation uses standard pricing models with market-based inputs that take into account the present value of estimated future cash flows.\n\n34\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nInventories\n\nInventories are stated at the lower of cost or net realizable value. The method of determining cost for each subsidiary varies among last-in, first-out (\"LIFO\"); first-in, first-out (\"FIFO\"); and average cost, and is used consistently from year to year.\n\nThe Corporation routinely utilizes exchange, swap and tolling arrangements with other companies for raw materials and finished goods to increase sourcing options, shorten delivery times, and reduce freight and other transportation costs. These transactions are treated as nonmonetary exchanges and are valued at cost.\n\nProperty\n\nLand, buildings and equipment are carried at cost less accumulated depreciation or amortization. Property under finance lease agreements is carried at the present value of lease payments over the lease term less accumulated amortization. Depreciation is based on the estimated service lives of depreciable assets and is calculated using the straight-line method. Fully depreciated assets are retained in property and accumulated depreciation accounts until they are disposed. In the case of disposals, assets and related accumulated depreciation are removed from the accounts, and the net amounts, less proceeds from disposal, are included in income.\n\nImpairment and Disposal of Long-Lived Assets\n\nThe Corporation evaluates long-lived assets (property, finite-lived intangible assets and lease right-of-use assets) for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When undiscounted future cash flows are not expected to be sufficient to recover an asset's carrying amount, the asset is written down to its fair value based on bids received from third parties or a discounted cash flow analysis based on market participant assumptions.\n\nLong-lived assets to be disposed of by sale, if material, are classified as held for sale and reported at the lower of carrying amount or fair value less cost to sell, and depreciation/amortization is ceased. Long-lived assets to be disposed of other than by sale are classified as held and used until they are disposed of and reported at the lower of carrying amount or fair value, and depreciation/amortization is recognized over the remaining useful life of the assets.\n\nIntangible Assets\n\nFinite-lived intangible assets, such as developed technology and software, are amortized over their estimated useful lives, generally on a straight-line basis for periods ranging primarily from 3 to 20 years.\n\nInvestments in Related Companies\n\nInvestments in related companies consist of the Corporation's ownership interests in TDCC subsidiaries located in the United States and Latin America. The Corporation accounts for these investments using the cost method as it does not have significant influence over the operating and financial policies of these related companies.\n\nLeases\n\nThe Corporation determines whether a contract contains a lease at contract inception. A contract contains a lease if there is an identified asset and the Corporation has the right to control the asset. Operating lease right-of-use (“ROU”) assets represent UCC’s right to use an underlying asset for the lease term, and lease liabilities represent UCC’s obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Corporation uses the incremental borrowing rate in determining the present value of lease payments, unless the implicit rate is readily determinable. If lease terms include options to extend or terminate the lease, the ROU asset and lease liability are measured based on the reasonably certain decision. Leases with a term of 12 months or less at the commencement date are not recognized on the balance sheet and are expensed as incurred.\n\nThe Corporation has lease agreements with lease and non-lease components, which are accounted for as a single lease component for nearly all classes of leased assets for which UCC is the lessee. Additionally, for certain equipment leases, the portfolio approach is applied to account for the operating lease ROU assets and lease liabilities. In the consolidated statements of income, lease expense for operating lease payments is recognized on a straight-line basis over the lease term. For finance leases, interest expense is recognized on the lease liability and the ROU asset is amortized over the lease term.\n\n35\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nSome leasing arrangements require variable payments that are dependent upon usage or output, or may vary for other reasons, such as insurance or tax payments. Variable lease payments are recognized as incurred and are not presented as part of the ROU asset or lease liability. See Note 13 for additional information.\n\nRevenue\n\nSubstantially all of the Corporation's revenues are generated by sales to TDCC. Revenue for product sales to related companies is recognized when the related company obtains control of the product, which occurs either at the time that production is complete or shipped free on board (\"FOB\") from UCC's manufacturing facility, in accordance with the sales agreement between the Corporation and TDCC. The Corporation recognizes revenue for product sales to trade customers when its customer obtains control of promised goods or services in an amount that reflects the consideration which the Corporation expects to receive in exchange for those goods or services. To determine revenue recognition, the Corporation performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. See Note 3 for additional information.\n\nSeverance Costs\n\nManagement routinely reviews its operations around the world in an effort to ensure competitiveness across its operations and geographic regions. When the reviews result in a workforce reduction related to the shutdown of facilities or other optimization activities, severance benefits are provided to employees primarily under ongoing benefit arrangements. These severance costs are accrued once management commits to a plan of termination and it becomes probable that employees will be entitled to benefits at amounts that can be reasonably estimated.\n\nIncome Taxes\n\nThe Corporation accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using enacted tax rates. The effect of a change in tax rates on deferred tax assets or liabilities is recognized in income in the period that includes the enactment date. The Corporation is included in the same consolidated federal income tax group and consolidated income tax return as TDCC. The Corporation accounts for its income taxes following the formula in the TDCC-UCC Tax Sharing Agreement used to compute the amount due to TDCC or UCC for UCC's share of taxable income and tax attributes on the consolidated income tax return. This method generally follows the separate return method. The amounts reported as income taxes payable or receivable represent the Corporation's payment obligation (or refundable amount) to TDCC based on a theoretical tax liability calculated on a separate return method.\n\nThe Corporation recognizes the financial statement effects of an uncertain income tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. The Corporation accrues for other tax contingencies when it is probable that a liability to a taxing authority has been incurred and the amount of the contingency can be reasonably estimated.\n\nProvision is made for taxes on undistributed earnings of foreign subsidiaries and related companies to the extent that such earnings are not deemed to be permanently invested.\n\nNOTE 2 - RECENT ACCOUNTING GUIDANCE\n\nRecently Adopted Accounting Guidance\n\nIn the fourth quarter of 2025, the Corporation prospectively adopted the annual disclosure requirements of Accounting Standards Update (\"ASU\") 2023-09, \"Income Taxes (Topic 740): Improvements to Income Tax Disclosures.\" The amendments in this ASU require a public business entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories. A public business entity is also required to provide a qualitative description of the states and local jurisdictions that make up the majority of the effect of the state and local income tax category and the net amount of income taxes paid, disaggregated by federal, state and foreign taxes and also disaggregated by individual jurisdictions. The amendments also remove certain disclosures that are no longer considered cost beneficial. See Notes 5 and 6 for applicable income tax-related disclosures required by this guidance.\n\n36\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nAccounting Guidance Issued But Not Adopted at December 31, 2025\n\nIn November 2024, the Financial Accounting Standards Board issued ASU 2024-03, \"Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,\" which is intended to improve disclosures about a public business entity's expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions. Such information should allow investors to better understand an entity's performance, assess future cash flows, and compare performance over time and with other entities. The amendments will require public business entities to disclose in the notes to the financial statements, at each interim and annual reporting period, specific information about certain costs and expenses, including purchases of inventory, employee compensation, depreciation, and intangible asset amortization included in each expense caption presented on the face of the income statement, and the total amount of an entity's selling expenses. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, and may be applied either prospectively or retrospectively. Early adoption is permitted. While the adoption of ASU 2024-03 will result in enhanced disclosures, the Corporation does not expect it will have a material impact on its financial condition or results of operations.\n\nNOTE 3 - REVENUE\n\nSubstantially all of the Corporation's revenue is generated by sales of products, primarily to TDCC. Products are sold to and purchased from TDCC at prices determined in accordance with the terms of an agreement between UCC and TDCC. The Corporation sells its products to TDCC to simplify the customer interface process.\n\nSubstantially all product sale contracts are short-term in nature and have original expected durations of one year or less. Revenue from product sales is recognized when TDCC or the trade customer obtains control of the Corporation’s product, which occurs at a point in time, typically at the time production is complete or product is shipped FOB from UCC’s manufacturing facility for sales to TDCC, or upon shipment for sales to trade customers. The Corporation’s payment terms are on average 30 to 60 days after invoicing. All shipping and handling activities that occur after control transfers to the customer are considered fulfillment activities. Certain long-term contracts include a series of distinct goods that are delivered continuously to the customer through a pipeline. For these types of product sales, the Corporation invoices the customer in an amount that directly corresponds with the value to the customer of the Corporation’s performance to date. As a result, revenue is recognized based on the amount billable to the customer in accordance with the right to invoice practical expedient.\n\nThe transaction price for product sales includes estimates for the most likely amount of consideration to which the Corporation will be entitled based on historical award experience and the Corporation’s best judgment at the time. Taxes collected and remitted to governmental authorities are excluded from the transaction price. For contracts with multiple performance obligations, the Corporation allocates the transaction price to each performance obligation on the basis of relative standalone selling price, which is based on the price charged to customers or estimated using the expected cost plus margin method.\n\nRevenue related to the initial licensing of patents and technology is recognized when the performance obligation is satisfied. Revenue related to sales-based royalties to which the Corporation expects to be entitled is estimated based on historical sales.\n\nThe Corporation’s contract liabilities include payments received in advance of performance under long-term contracts for product sales and royalties with remaining contract terms that range up to 15 years. Amounts are recognized in revenue when the performance obligations for the contract are met. The Corporation has rights to additional consideration when product is delivered to the customer. The balance of contract liabilities was $27 million at December 31, 2025 ($29 million at December 31, 2024), of which $2 million ($2 million at December 31, 2024) was included in \"Accrued and other current liabilities\" and $25 million ($27 million at December 31, 2024) was included in \"Other noncurrent obligations\" in the consolidated balance sheets.\n\nThe Corporation disaggregates its revenue from contracts with customers by type of customer (sales to related parties and sales to trade customers) as presented on the consolidated statements of income and believes this disaggregation best depicts the nature, amount, timing and uncertainty of its revenue and cash flows. Substantially all of the product sales are made to the Corporation's parent company, TDCC, and there are no unique economic factors that affect revenue recognition and cash flows associated with these product sales.\n\n37\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nNOTE 4 - RESTRUCTURING AND ASSET RELATED CHARGES - NET\n\n2025 Restructuring Program\n\nIn the first quarter of 2025, the Corporation initiated targeted actions to further achieve its cost reduction initiatives in response to ongoing macroeconomic weakness, while reinforcing long-term competitiveness across the economic cycle. These actions were substantially complete at the end of 2025. As a result of these actions, the Corporation recorded pretax restructuring charges of $6 million for severance and related benefit costs, included in \"Restructuring and asset related charges - net\" in the consolidated statements of income. The Corporation paid $4 million for severance and related benefit costs related to this program through December 31, 2025.\n\nAt December 31, 2025, a liability for severance and related benefit costs of $2 million was included in \"Accrued and other current liabilities\" in the consolidated balance sheets.\n\n2023 Restructuring Program\n\nIn the first quarter of 2023, the Corporation initiated restructuring actions to achieve its 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. The program included workforce cost reductions and actions to rationalize the Corporation's manufacturing assets, which included asset write-down and write-off charges. These actions were complete at the end of the second quarter of 2025. As a result of these actions, the Corporation recorded pretax restructuring charges of $14 million, included in \"Restructuring and asset related charges - net\" in the consolidated statements of income. The charges consisted of severance and related benefit costs of $12 million and asset write-downs and write-offs of $2 million. The Corporation paid $12 million for severance and related benefit costs related to this program through December 31, 2025.\n\nNOTE 5 - SUPPLEMENTARY INFORMATION\n\nSundry Income (Expense) - Net\n\nIn millions202520242023\n\nGeneral administrative and overhead type services and service fees 1\n$(69)$(69)$(72)\n\nDistribution and dividend income - related companies 1\n739 — — \n\nNet commission expense - related company 1\n(19)(20)(19)\n\nNon-operating pension and other postretirement benefit plan costs 2\n(69)(22)(144)\n\nGain on sale of ownership interest in related party 3\n— 2 206 \n\nNet gain on sales of property— 1 1 \n\nEquity in earnings of nonconsolidated affiliate 1\n— — 10 \n\nOther - net(3)(2)(7)\n\nTotal sundry income (expense) - net$579 $(110)$(25)\n\n1.See Note 17 for additional information.\n\n2.The 2025 expense includes pretax pension settlement charges of $37 million related to the termination of certain U.S. tax-qualified pension plans. The 2023 expense includes pretax pension settlement charges of $149 million related to the transfer of certain plan obligations to an insurance company. See Note 15 for additional information about the Corporation's pension and other postretirement benefit plans, including pension settlement charges.\n\n3.These amounts relate to the sale of the Corporation's ownership interest in Dow Technology Investments LLC. See Note 17 for additional information.\n\nSupplier Finance Program\n\nThe Corporation is a party to a supply chain financing (“SCF”) program, facilitated by TDCC, which can be used in the ordinary course of business to extend payment terms with the Corporation's vendors. Under the terms of this program, a vendor can voluntarily enter into an agreement with a participating financial intermediary to sell its receivables due from the Corporation. The vendor receives payment from the financial intermediary, and the Corporation pays the financial intermediary on the terms originally negotiated with the vendor, which generally range from 90 to 120 days. The vendor negotiates the terms of the agreements directly with the financial intermediary and the Corporation is not a party to that agreement. The financial intermediary may allow the participating vendor to utilize TDCC's creditworthiness in establishing credit spreads and associated costs, which may provide the vendor with more favorable terms than they would be able to secure on their own. Neither TDCC nor the Corporation provide guarantees related to the SCF program. At December 31, 2025, the Corporation's outstanding obligations confirmed as valid under the SCF program were $27 million ($36 million at December 31, 2024), included in “Accounts payable – Trade” in the consolidated balance sheets.\n\n38\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nThe following table summarizes the activity of the SCF program for the years ended December 31, 2025 and 2024:\n\nSupplier Finance Program Activity\n\nIn millions20252024\n\nConfirmed obligations outstanding at Jan 1$36 $27 \n\nInvoices confirmed to financial intermediary123 117 \n\nConfirmed invoices paid to financial intermediary(132)(108)\n\nConfirmed obligations outstanding at Dec 31$27 $36 \n\nSupplemental Cash Flow Information\n\nRequired supplementary cash flow information is presented in the following tables:\n\nSupplemental Cash Flow Information202520242023\n\nIn millions\n\nNoncash investing activities:\n\nCapitalized interest - related company term loan 1\n$82 $99 $— \n\nCash paid (received) for:\n\nInterest$17 $21 $26 \n\nIncome taxes, net of refunds 1\n$231 $(211)$102 \n\n1.See Note 17 for additional information.\n\nSupplemental Cash Flow Information - Cash Paid for Income Taxes - Disaggregated 1\n2025\n\nIn millions\n\nCash paid (received) for income taxes, net of refunds\n\nFederal$223 \n\nState and local\n\nOther state and local jurisdictions$(1)\n\nForeign\n\nOther foreign jurisdictions$9 \n\nTotal cash paid for income taxes, net of refunds$231 \n\n1.Disaggregated in accordance with ASU 2023-09, which was adopted prospectively in 2025.\n\n39\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nNOTE 6 - INCOME TAXES\n\nGeographic Allocation of Income and Provision for Income Taxes\n\nIn millions202520242023\n\nIncome (loss) before income taxes\n\nDomestic $518 $297 $455 \n\nForeign — — (1)\n\nIncome before income taxes$518 $297 $454 \n\nCurrent tax expense (benefit)\n\nFederal$(6)$45 $96 \n\nState and local1 (3)(6)\n\nForeign10 1 1 \n\nTotal current tax expense$5 $43 $91 \n\nDeferred tax expense (benefit)\n\nFederal$(39)$7 $(19)\n\nState and local(8)(3)1 \n\nTotal deferred tax expense (benefit)$(47)$4 $(18)\n\nProvision (credit) for income taxes $(42)$47 $73 \n\nNet income$560 $250 $381 \n\nReconciliation to U.S. Statutory Rate 1\n2025\n\nAmounts in millionsAmountPercent\n\nU.S. federal statutory tax rate$109 21.0 %\n\nState and local income taxes, net of federal income tax effect(9)(1.8)\n\nForeign tax effects\n\nPuerto Rico 2\n9 1.8 \n\nTax credits(9)(1.8)\n\nChanges in valuation allowances9 1.8 \n\nNontaxable or nondeductible items\n\nNontaxable distribution(155)(29.9)\n\nOther adjustments4 0.8 \n\nEffective tax rate$(42)(8.1)%\n\n1.Disaggregated in accordance with ASU 2023-09, which was adopted prospectively in 2025.\n\n2.Related to branch profits tax paid on a distribution received from a subsidiary.\n\nReconciliation to U.S. Statutory Rate 1\n20242023\n\nStatutory U.S. federal income tax rate21.0 %21.0 %\n\nUnrecognized tax benefits and related interest(1.1)(2.7)\n\nFederal tax accrual adjustments (2.1)— \n\nState and local tax impact(2.1)(1.2)\n\nOther - net0.1 (1.0)\n\nEffective tax rate15.8 %16.1 %\n\n1.As presented prior to adoption of ASU 2023-09, which was adopted prospectively in 2025.\n\n40\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nDeferred Tax Balances at Dec 3120252024\n\nIn millionsAssetsLiabilitiesAssetsLiabilities\n\nProperty$— $116 $— $109 \n\nTax loss and credit carryforwards89 — 13 — \n\nPostretirement benefit obligations98 — 95 — \n\nOther accruals and reserves226 — 251 — \n\nInventory1 — 1 — \n\nOther - net10 — 12 — \n\nSubtotal $424 $116 $372 $109 \n\nValuation allowances(19)— (10)— \n\nTotal $405 $116 $362 $109 \n\nOperating Loss and Tax Credit Carryforwards at Dec 3120252024\n\nIn millionsAssetsAssets\n\nOperating loss carryforwards\n\nExpire within 5 years$3 $4 \n\nExpire after 5 years or indefinite expiration69 4 \n\nTotal operating loss carryforwards$72 $8 \n\nTax credit carryforwards\n\nExpire within 5 years$1 $2 \n\nExpire after 5 years or indefinite expiration16 3 \n\nTotal tax credit carryforwards$17 $5 \n\nTotal tax loss and tax credit carryforwards$89 $13 \n\nUndistributed earnings of foreign subsidiaries and related companies that are deemed to be permanently invested were zero at December 31, 2025 and December 31, 2024. Accordingly, there are no unrecognized deferred tax liabilities related to such earnings.\n\nThe Corporation is included in TDCC's consolidated federal income tax group. Current and deferred tax expenses are calculated for the Corporation as a stand-alone group and are allocated to the group from the consolidated totals, consistent with the TDCC-UCC Tax Sharing Agreement. The amounts reported as income taxes payable or receivable represent the Corporation's payment obligation (or refundable amount) to TDCC based on a theoretical tax liability calculated on a separate return method.\n\nUnder this method, the U.S. Gulf Coast Infrastructure Assets transactions and sale of UCC's ownership interest in Dow Technology Investments LLC, as discussed in Note 17, resulted in the recognition of a $31 million tax payable at December 31, 2025 ($299 million at December 31, 2024), included in “Other noncurrent obligations” in the consolidated balance sheets.\n\n41\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nThe following table provides a reconciliation of the Corporation's unrecognized tax benefits:\n\nTotal Gross Unrecognized Tax Benefits\n\nIn millions202520242023\n\nTotal unrecognized tax benefits at Jan 1$8 $8 $8 \n\nDecreases related to positions taken on items from prior years— — — \n\nIncreases related to positions taken on items from prior years — — — \n\nTotal unrecognized tax benefits at Dec 31$8 $8 $8 \n\nTotal unrecognized tax benefits that, if recognized, would impact the effective tax rate$8 $8 $8 \n\nTotal amount of interest and penalties (benefit) recognized in \"Provision (credit) for income taxes\"$1 $(4)$(12)\n\nTotal accrual for interest and penalties recognized in the consolidated balance sheets$12 $11 $11 \n\nThe Corporation is currently under examination in a number of tax jurisdictions, including the U.S. federal and various state jurisdictions. The earliest open tax years are 2004 for state income taxes and 2012 for federal income taxes in the United States.\n\nOn July 4, 2025, U.S. legislation formally titled \"An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” (“the Act”) and commonly referred to as the One Big Beautiful Bill Act was signed into law. The Act, among other things, extended key provisions of the 2017 Tax Cuts and Jobs Act and introduced targeted changes to the U.S. federal income tax regime. The Act has not materially impacted the Corporation's effective tax rate.\n\nNOTE 7 - INVENTORIES\n\nThe following table provides a breakdown of inventories:\n\nInventories at Dec 31\n\nIn millions20252024\n\nFinished goods$218 $238 \n\nWork in process36 44 \n\nRaw materials78 72 \n\nSupplies111 94 \n\nTotal$443 $448 \n\nAdjustment of inventories to the LIFO basis(165)(152)\n\nTotal inventories$278 $296 \n\nInventories valued on the LIFO basis, principally U.S. chemicals and plastics product inventories, represented 59 percent of the total inventories at December 31, 2025 and 68 percent of the total inventories at December 31, 2024.\n\n42\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nNOTE 8 - PROPERTY\n\nThe following table provides a breakdown of property:\n\nProperty at Dec 31 Estimated Useful Lives (Years)\n\nIn millions20252024\n\nLand and land improvements\n0-25\n$68 $68 \n\nBuildings\n5-50\n268 259 \n\nMachinery and equipment\n3-25\n5,341 4,875 \n\nOther property\n3-30\n120 112 \n\nConstruction in progress— 61 418 \n\nTotal property$5,858 $5,732 \n\nThe following table provides information regarding depreciation expense and capitalized interest:\n\nIn millions202520242023\n\nDepreciation expense $146 $117 $146 \n\nCapitalized interest$9 $13 $8 \n\nNOTE 9 - INVESTMENTS IN RELATED COMPANIES\n\nThe Corporation's ownership interests in related companies at December 31, 2025 and 2024 were as follows:\n\nInvestments in Related Companies at Dec 31Ownership InterestInvestment Balance\n\nIn millions2025202420252024\n\nDow International Holdings Company5 %5 %$232 $232 \n\nDow Quimica Mexicana S.A. de C.V.14 %14 %5 5 \n\nTotal investments in related companies$237 $237 \n\nSee Note 17 for additional information about the Corporation's dividends and distributions received from its investments in related companies.\n\nNOTE 10 - INTANGIBLE ASSETS\n\nThe following table provides information regarding the Corporation's intangible assets:\n\nIntangible Assets at Dec 3120252024\n\nIn millionsGross Carrying AmountAccum AmortNetGross Carrying AmountAccum AmortNet\n\nIntangible assets with finite lives:\n\nDeveloped technology$33 $(33)$— $33 $(33)$— \n\nSoftware68 (63)5 68 (62)6 \n\nTotal intangible assets$101 $(96)$5 $101 $(95)$6 \n\nThe following table provides information regarding amortization expense:\n\nAmortization Expense\n\nIn millions202520242023\n\nSoftware, included in \"Cost of sales\"$2 $2 $3 \n\n43\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nTotal estimated amortization expense for the next five fiscal years, including amounts expected to be capitalized, is as follows:\n\nEstimated Amortization Expense for Next Five Years\n\nIn millions\n\n2026$2 \n\n2027$2 \n\n2028$1 \n\n2029$1 \n\n2030$— \n\nNOTE 11 - NOTES PAYABLE AND LONG-TERM DEBT\n\nNotes Payable at Dec 31\n\nIn millions20252024\n\nNotes payable to related companies 1\n$118 $19 \n\nYear-end average interest rates4.30 %3.15 %\n\n1.Includes borrowings on a revolving credit agreement with TDCC. See Note 17 for additional information.\n\nLong-Term Debt at Dec 31\n2025 Average Rate20252024 Average Rate2024\n\nIn millions\n\nPromissory notes and debentures:\n\nDebentures due 2025— %$— 6.79 %$12 \n\nDebentures due 2025— %— 7.50 %113 \n\nDebentures due 20967.75 %135 7.75 %135 \n\nFinance lease obligations 1\n12 11 \n\nUnamortized debt discount and issuance costs(2)(2)\n\nLong-term debt due within one year(2)(126)\n\nTotal long-term debt$143 $143 \n\n1.See Note 13 for additional information.\n\nMaturities of Long-Term Debt for Next Five Years at Dec 31, 2025\n\nIn millions\n\n2026$2 \n\n2027$2 \n\n2028$2 \n\n2029$2 \n\n2030$2 \n\n2025 Activity\n\nIn 2025, the Corporation repaid $125 million of long-term debt at maturity.\n\nLetters of Credit\n\nThe Corporation utilizes letters of credit to support commitments made in the ordinary course of business. While the terms and amounts of letters of credit change, UCC generally has approximately $10 million to $15 million of outstanding letters of credit at any given time.\n\n44\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nDebt Covenants and Default Provisions\n\nThe Corporation's outstanding public debt has been issued under indentures which contain, among other provisions, covenants that the Corporation must comply with while the underlying notes are outstanding. Such covenants are typically based on the Corporation's size and financial position and include, subject to the exceptions and qualifications contained in the indentures, obligations not to (i) allow liens on principal U.S. manufacturing facilities, (ii) enter into sale and lease-back transactions with respect to principal U.S. manufacturing facilities, or (iii) merge into or consolidate with any other entity or sell or convey all or substantially all of its assets. Failure of the Corporation to comply with any of these covenants could, after the passage of any applicable grace period, result in a default under the applicable indenture which would allow the note holders to accelerate the due date of the outstanding principal and accrued interest on the subject notes. No such events have occurred or have been triggered at the time of the filing of this Annual Report on Form 10-K.\n\nNOTE 12 - COMMITMENTS AND CONTINGENCIES\n\nEnvironmental Matters\n\nAccruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies.\n\nAt December 31, 2025, the Corporation had accrued obligations of $188 million for probable environmental remediation and restoration costs ($184 million at December 31, 2024), including $39 million for the remediation of Superfund sites ($35 million at December 31, 2024). This is management's best estimate of the costs for remediation and restoration with respect to environmental matters for which the Corporation has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to approximately two times that amount. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the Corporation's results of operations, financial condition and cash flows. It is the opinion of the Corporation's management, however, that the possibility is remote that costs in excess of the range disclosed will have a material impact on the Corporation's results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration. As new or additional information becomes available and/or certain spending trends become known, management will evaluate such information in determination of the current estimate of the environmental liability.\n\nThe following table summarizes the activity in the Corporation's accrued obligations for environmental matters for the years ended December 31, 2025 and 2024:\n\nAccrued Liability for Environmental Matters\n\nIn millions20252024\n\nBalance at Jan 1$184 $194 \n\nAccrual adjustment35 37 \n\nPayments against reserve(33)(47)\n\nForeign currency impact2 — \n\nBalance at Dec 31$188 $184 \n\nThe amounts charged to income on a pretax basis related to environmental remediation totaled $35 million in 2025, $37 million in 2024 and $44 million in 2023. Capital expenditures for environmental protection were $10 million in 2025, $16 million in 2024 and $47 million in 2023. The decrease in capital expenditures for environmental protection since 2023 was primarily due to the completion of two significant environmental protection projects on the U.S. Gulf Coast.\n\n45\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nLitigation\n\nAsbestos-Related Matters\n\nIntroduction\n\nThe Corporation is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past several decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that UCC sold in the past, alleged exposure to asbestos-containing products located on UCC’s premises and UCC’s responsibility for asbestos suits filed against a former UCC subsidiary, Amchem Products, Inc. (\"Amchem\"). In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to the Corporation’s products. The Corporation expects more asbestos-related suits to be filed against UCC and Amchem in the future, and will aggressively defend or reasonably resolve, as appropriate, both pending and future claims.\n\nEstimating the Asbestos-Related Liability\n\nThe Corporation has engaged Ankura Consulting Group, LLC (\"Ankura\") to perform periodic studies to estimate the undiscounted cost of disposing of pending and future claims against UCC and Amchem through the terminal year of 2049, including a reasonable forecast of future defense and processing costs. Each October, the Corporation requests Ankura to review its historical asbestos claim and resolution activity through the third quarter of the current year, including asbestos-related defense and processing costs, to determine the appropriateness of updating the most recent study. At each balance sheet date, the Corporation also compares current asbestos claim and resolution activity, including asbestos-related defense and processing costs, to the results of the most recent Ankura study to determine whether the accrual continues to be appropriate.\n\nIn December 2023, Ankura stated that an update of its December 2022 study would not provide a more likely estimate of future events than the estimate reflected in that study and, therefore, the estimate in that study remained applicable. Based on the Corporation's internal review process and Ankura's response, the Corporation determined that no adjustment to the accrual was required.\n\nIn December 2024, Ankura completed a study of the Corporation's historical asbestos claim and resolution activity through September 30, 2024, including asbestos-related defense and processing costs, and provided estimates for the undiscounted cost of disposing of pending and future claims against UCC and Amchem through the terminal year of 2049. Based on the study and the Corporation's internal review process, it was determined that no adjustment to the accrual was required. At December 31, 2024, the asbestos-related liability for pending and future claims against UCC and Amchem, including future asbestos-related defense and processing costs, was $791 million and approximately 23 percent of the recorded liability related to pending claims and approximately 77 percent related to future claims.\n\nIn December 2025, Ankura stated that an update of its December 2024 study would not provide a more likely estimate of future events than the estimate reflected in that study and, therefore, the estimate in that study remained applicable. Based on the Corporation's internal review process and Ankura's response, the Corporation determined that no adjustment to the accrual was required. At December 31, 2025, the asbestos-related liability for pending and future claims against UCC and Amchem, including future asbestos-related defense and processing costs, was $708 million, and approximately 28 percent of the recorded liability related to pending claims and approximately 72 percent related to future claims.\n\nSummary\n\nThe Corporation's management believes the amounts recorded for the asbestos-related liability, including defense and processing costs, reflect reasonable and probable estimates of the liability based on current, known facts. However, future events, such as the number of new claims to be filed and/or received each year, the average cost of defending and disposing of each such claim, as well as the numerous uncertainties surrounding asbestos litigation in the United States over a significant period of time, could cause the actual costs for the Corporation to be higher or lower than those projected or those recorded. Any such event could result in an increase or decrease in the recorded liability.\n\nBecause of the uncertainties described above, the Corporation cannot estimate the full range of the cost of resolving pending and future asbestos-related claims facing UCC and Amchem. As a result, it is reasonably possible that an additional cost of disposing of asbestos-related claims, including future defense and processing costs, could\n\n46\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nhave a material impact on the Corporation's results of operations and cash flows for a particular period and on the consolidated financial position.\n\nOther Litigation\n\nThe Corporation is also involved in a number of legal proceedings and claims with both private and governmental parties. These cover a wide range of matters, including, but not limited to: product liability; trade regulation; governmental tax and regulatory disputes; health, safety and environmental matters; employment matters; patent infringement; contracts; and commercial litigation. While it is not possible at this time to determine with certainty the ultimate outcome of any of the legal proceedings and claims referred to in this filing, management believes that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the results of operations, cash flows and financial position of the Corporation.\n\nPurchase Commitments\n\nThe Corporation has outstanding purchase commitments and various commitments for take-or-pay or throughput agreements. The Corporation was not aware of any purchase commitments that were negotiated as part of a financing arrangement for the facilities that will provide the contracted goods or services or for the costs related to those goods or services at December 31, 2025 and 2024.\n\nNOTE 13 - LEASES\n\nOperating lease ROU assets are included in \"Operating lease right-of-use assets\" and finance lease ROU assets are included in \"Net property\" in the consolidated balance sheets. With respect to lease liabilities, operating lease liabilities are included in \"Operating lease liabilities - current\" and \"Operating lease liabilities - noncurrent,\" and finance lease liabilities are included in \"Long-term debt due within one year\" and \"Long-Term Debt\" in the consolidated balance sheets.\n\nThe Corporation routinely leases product and utility production facilities, sales and administrative offices, warehouses and tanks for product storage, motor vehicles, railcars, office machines and equipment. Some leases contain renewal provisions, purchase options and escalation clauses. The terms for these leased assets vary depending on the lease agreement. These leased assets have remaining lease terms of up to 20 years. The Corporation's lease agreements do not contain any material residual value guarantees or restrictive covenants.\n\nThe components of lease cost for operating and finance leases for the years ended December 31, 2025, 2024 and 2023 were as follows:\n\nLease Cost202520242023\n\nIn millions\n\nOperating lease cost$15 $18 $25 \n\nShort-term lease cost55 57 41 \n\nVariable lease cost16 19 25 \n\nAmortization of right-of-use assets - finance2 2 3 \n\nInterest on lease liabilities1 — — \n\nTotal lease cost$89 $96 $94 \n\n47\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nThe following table provides supplemental cash flow and other information related to leases:\n\nOther Lease Information202520242023\n\nIn millions\n\nCash paid for amounts included in the measurement of lease liabilities:\n\nOperating cash flows for operating leases$15 $18 $24 \n\nOperating cash flows for finance leases$1 $— $— \n\nFinancing cash flows for finance leases$1 $2 $3 \n\nRight-of-use assets obtained in exchange for lease obligations:\n\nOperating leases $6 $2 $12 \n\nFinance leases$2 $11 $2 \n\nThe following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at December 31, 2025 and 2024:\n\nLease PositionBalance Sheet ClassificationDec 31, 2025Dec 31, 2024\n\nIn millions\n\nAssets\n\nOperating lease assetsOperating lease right-of-use assets$56 $61 \n\nFinance lease assetsProperty27 25 \n\nFinance lease amortizationAccumulated depreciation(15)(13)\n\nTotal lease assets$68 $73 \n\nLiabilities\n\nCurrent\n\nOperatingOperating lease liabilities - current$12 $12 \n\nFinanceLong-term debt due within one year2 1 \n\nNoncurrent\n\nOperatingOperating lease liabilities - noncurrent44 49 \n\nFinanceLong-Term Debt10 10 \n\nTotal lease liabilities$68 $72 \n\nThe weighted-average remaining lease term and discount rate for leases recorded in the consolidated balance sheets at December 31, 2025 and 2024 are provided below:\n\nLease Term and Discount RateDec 31, 2025Dec 31, 2024\n\nWeighted-average remaining lease term\n\nOperating leases6.1 years6.7 years\n\nFinance leases6.8 years7.9 years\n\nWeighted-average discount rate\n\nOperating leases4.91 %3.21 %\n\nFinance leases5.46 %5.49 %\n\n48\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nThe following table provides the maturities of lease liabilities at December 31, 2025:\n\nMaturities of Lease LiabilitiesDec 31, 2025\n\nIn millionsOperating LeasesFinance Leases\n\n2026\n$14 $2 \n\n202713 2 \n\n202811 2 \n\n20296 2 \n\n20305 2 \n\n2031 and thereafter 12 4 \n\nTotal future undiscounted lease payments$61 $14 \n\nLess: Imputed interest5 2 \n\nTotal present value of lease liabilities$56 $12 \n\nAt December 31, 2025, the Corporation had one additional lease of approximately $35 million, for a building, which had not yet commenced. This lease is expected to commence in 2027 with a term of 5 years.\n\nNOTE 14 - ACCUMULATED OTHER COMPREHENSIVE LOSS\n\nThe changes in each component of AOCL for the years ended December 31, 2025, 2024 and 2023 were as follows:\n\nAccumulated Other Comprehensive Loss202520242023\n\nIn millions\n\nCumulative Translation Adjustment\n\nBeginning balance$(52)$(53)$(54)\n\nUnrealized gains (losses) on foreign currency translation(3)1 1 \n\nOther comprehensive income (loss), net of tax(3)1 1 \n\nEnding balance$(55)$(52)$(53)\n\nPension and Other Postretirement Benefits\n\nBeginning balance$(1,292)$(1,290)$(1,348)\n\nGains (losses) arising during the period(47)(57)(116)\n\nTax (expense) benefit11 13 25 \n\nNet gains (losses) arising during the period(36)(44)(91)\n\nAmortization of net loss reclassified from AOCL to net income 1\n94 55 194 \n\nTax expense (benefit) 2\n(22)(13)(45)\n\nNet loss reclassified from AOCL to net income72 42 149 \n\nOther comprehensive income (loss), net of tax36 (2)58 \n\nEnding balance$(1,256)$(1,292)$(1,290)\n\nTotal AOCL ending balance$(1,311)$(1,344)$(1,343)\n\n1.These AOCL components are included in the computation of net periodic benefit cost (credit) of the Corporation's defined benefit pension and other postretirement benefit plans. See Note 15 for additional information.\n\n2.Reclassified to \"Provision (credit) for income taxes.\"\n\n49\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nNOTE 15 - PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS\n\nPension Plans\n\nThe Corporation has both funded and unfunded defined benefit plans in the United States, which covered substantially all U.S. employees through December 31, 2023. In 2021, TDCC announced changes to the design of its U.S. tax-qualified and non-qualified pension plans, including the plans of the Corporation (collectively, the “UCC Plans”). As a result, effective December 31, 2023, the Corporation froze the pensionable compensation and credited service amounts used to calculate pension benefits for substantially all employees who participated in the UCC Plans, except for certain employees subject to collective bargaining agreements. In 2024, the Corporation froze pension benefits for substantially all remaining employees who participated in the UCC Plans.\n\nSeparately, in the fourth quarter of 2023, certain of the Corporation’s tax-qualified pension plans purchased a nonparticipating group annuity contract from an insurance company, irrevocably transferring certain benefit obligations and related plan assets to the insurer. This transaction did not require any cash funding from the Corporation and did not impact the pension benefits of participants. As a result of this transaction, the Corporation recognized a non-cash pretax settlement charge of $149 million in 2023, related to the accelerated recognition of a portion of the accumulated actuarial losses of the plan, recorded in “Sundry income (expense) – net” in the consolidated statements of income.\n\nIn the fourth quarter of 2025, the Corporation terminated certain U.S. tax-qualified pension plans, which included the tax-qualified benefit obligations for substantially all employees hired after January 1, 2008. These employees earned benefits based on a set percentage of annual pay, plus interest. As part of the plan termination process, participants were offered a lump sum distribution, an immediate monthly annuity or a deferred payment, with the annuity and deferred payment options administered by a highly rated insurance company that assumes responsibility for the future administration and payment of benefits. These transactions were funded with existing plan assets and did not require any cash funding from the Corporation. As a result of these actions, the Corporation recorded non-cash settlement charges of $37 million, related to the accelerated recognition of the accumulated actuarial losses of the plans, recorded in “Sundry income (expense) – net” in the consolidated statements of income.\n\nThe Corporation's funding policy is to contribute to plans when pension laws or economics either require or encourage funding. In 2025, UCC contributed $2 million to its pension plans, including contributions to fund benefit payments for its non-qualified supplemental plan. UCC expects to contribute approximately $1 million to its pension plans in 2026.\n\nThe weighted-average assumptions used to determine pension plan obligations and net periodic benefit cost are provided below:\n\nPension Plan Assumptions\nBenefit Obligations\nat Dec 31Net Periodic Benefit Cost\nfor the Year Ended\n\n20252024202520242023\n\nDiscount rate5.35 %5.67 %5.67 %5.25 %5.72 %\n\nInterest crediting rate for applicable benefits4.50 %3.47 %3.47 %4.50 %4.50 %\n\nRate of compensation increase 1\n— %— %— %4.25 %4.25 %\n\nExpected return on plan assets6.33 %6.40 %6.80 %\n\n1.The rate of compensation increase assumption is not relevant at December 31, 2025 and 2024, and for the year ended December 31, 2025, due to the freezing of plan benefits.\n\nOther Postretirement Benefit Plans\n\nThe Corporation provides certain health care and life insurance benefits to retired U.S. employees and survivors. The plan provides health care benefits, including hospital, physicians' services, drug and major medical expense coverage and life insurance benefits. The Corporation and the retiree share the cost of these benefits, with the Corporation portion increasing as the retiree has increased years of credited service, although there is a cap on the Corporation portion. The Corporation has the ability to change these benefits at any time. Employees hired after January 1, 2008, are not covered under this plan.\n\n50\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nThe Corporation funds most of the cost of these health care and life insurance benefits as incurred. In 2025, UCC did not make any contributions to its other postretirement benefit plan trust. Likewise, UCC does not expect to contribute assets to its other postretirement benefit plan trust in 2026.\n\nThe weighted-average assumptions used to determine other postretirement benefit plan obligations and net periodic benefit cost for the plan are provided in the following table:\n\nOther Postretirement Benefit Plan Assumptions\nBenefit Obligations\n\nat Dec 31\n\nNet Periodic Benefit Cost\n\nfor the Year Ended\n\n20252024202520242023\n\nDiscount rate5.28 %5.64 %5.64 %5.20 %5.56 %\n\nHealth care cost trend rate assumed for next year7.50 %7.00 %7.00 %6.50 %6.57 %\n\nRate to which the cost trend rate is assumed to decline (the ultimate health care cost trend rate)5.00 %5.00 %5.00 %5.00 %5.00 %\n\nYear that the rate reaches the ultimate health care cost trend rate20362033203320332033\n\nAssumptions\n\nThe Corporation determines the expected long-term rate of return on plan assets by performing a detailed analysis of key economic and market factors driving historical returns for each asset class and formulating a projected return based on factors in the current environment. Factors considered include, but are not limited to, inflation, real economic growth, interest rate yield, interest rate spreads, and other valuation measures and market metrics. The expected long-term rate of return for each asset class is then weighted based on the strategic asset allocation approved by the governing body for each plan. The Corporation's historical experience with the pension fund asset performance is also considered.\n\nThe Corporation uses the spot rate approach to determine the discount rate utilized to measure the service cost and interest cost components of net periodic pension and other postretirement benefit costs. Under the spot rate approach, the Corporation calculates service cost and interest cost by applying individual spot rates from the Willis Towers Watson U.S. RATE:Link 60-90 corporate yield curve (based on 60th to 90th percentile high-quality corporate bond yields) to the separate expected cash flow components of service cost and interest cost.\n\nThe discount rates utilized to measure the pension and other postretirement obligations of the plans were based on the yield on high-quality corporate fixed income investments at the measurement date. Future expected actuarially determined cash flows for the plans are individually discounted at the spot rates under the Willis Towers Watson U.S. RATE:Link 60-90 corporate yield curve (based on 60th to 90th percentile high-quality corporate bond yields) to arrive at the plan’s obligations as of the measurement date.\n\nThe Corporation's mortality assumption used for the U.S. plans is a benefit-weighted version of the Society of Actuaries' RP-2014 base table with future rates of mortality improvement based on a modified version of the assumptions used in the Social Security Administration's 2021 trustees report.\n\n51\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nSummarized information on the Corporation's pension and other postretirement benefit plans is as follows:\n\nChange in Projected Benefit Obligations, Plan Assets and Funded Status for All PlansDefined Benefit\nPension PlansOther Postretirement Benefit Plan\n\nIn millions2025202420252024\n\nChange in projected benefit obligations:\n\nBenefit obligations at beginning of year$2,468 $2,633 $120 $133 \n\nInterest cost125 129 7 7 \n\nActuarial changes in assumptions and experience90 (85)(4)(14)\n\nBenefits paid(208)(209)(8)(7)\n\nSettlement 1\n(53)— — — \n\nOther1 — — 1 \n\nBenefit obligations at end of year$2,423 $2,468 $115 $120 \n\nChange in plan assets:\n\nFair value of plan assets at beginning of year$2,177 $2,370 $— $— \n\nActual return on plan assets196 10 — — \n\nEmployer contributions2 2 — — \n\nBenefits paid(208)(209)— — \n\nSettlement 1\n(53)— — — \n\nOther— 4 — — \n\nFair value of plan assets at end of year$2,114 $2,177 $— $— \n\nFunded status at end of year$(309)$(291)$(115)$(120)\n\nNet amounts recognized in the consolidated balance sheets at Dec 31:\n\nAccrued and other current liabilities$(1)$(1)$(11)$(11)\n\nPension and other postretirement benefits - noncurrent(308)(290)(104)(109)\n\nNet amount recognized$(309)$(291)$(115)$(120)\n\nPretax amounts recognized in accumulated other comprehensive loss at Dec 31:\n\nNet loss (gain)$1,700 $1,756 $(95)$(104)\n\n1.The 2025 impact relates to the settlement and termination of certain U.S. tax-qualified pension plans.\n\nSignificant components of the overall decrease in the Corporation's benefit obligation for the year ended December 31, 2025, were benefits paid and settlement of certain pension benefit obligations, partially offset by interest cost and the change in weighted-average discount rates, which decreased from 5.67 percent at December 31, 2024, to 5.35 percent at December 31, 2025. Significant components of the overall decrease in the Corporation's benefit obligation for the year ended December 31, 2024 were benefits paid and the change in weighted-average discount rates, which increased from 5.25 percent at December 31, 2023, to 5.67 percent at December 31, 2024.\n\nThe accumulated benefit obligation for all defined benefit pension plans was $2.4 billion at December 31, 2025, and $2.5 billion at December 31, 2024.\n\n52\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nPension Plans with Accumulated Benefit Obligations or Pension Benefit Obligations in Excess of Plan Assets at Dec 31\n\nIn millions20252024\n\nAccumulated benefit obligations / Pension benefit obligations 1\n$2,423 $2,468 \n\nFair value of plan assets$2,114 $2,177 \n\n1.Cumulative accumulated pension obligations in excess of plan assets and cumulative pension benefit obligations in excess of plan assets are the same at December 31, 2025 and 2024.\n\nNet Periodic Benefit Cost (Credit) for All Plans for the Year Ended Dec 31Defined Benefit Pension PlansOther Postretirement Benefit Plan\n\nIn millions202520242023202520242023\n\nNet Periodic Benefit Cost (Credit):\n\nService cost$— $— $32 $— $— $— \n\nInterest cost125 129 147 7 7 7 \n\nExpected return on plan assets(157)(169)(204)— — — \n\nAmortization of net (gain) loss70 67 60 (13)(12)(15)\n\nSettlement loss 1\n37 — 149 — — — \n\nNet periodic benefit cost (credit)$75 $27 $184 $(6)$(5)$(8)\n\nChanges in plan assets and benefit obligations recognized in other comprehensive (income) loss:\n\nNet (gain) loss$51 $71 $109 $(4)$(14)$7 \n\nAmortization of net gain (loss)(70)(67)(60)13 12 15 \n\nSettlement loss 1\n(37)— (149)— — — \n\nTotal recognized in other comprehensive (income) loss$(56)$4 $(100)$9 $(2)$22 \n\nTotal recognized in net periodic benefit cost and other comprehensive (income) loss$19 $31 $84 $3 $(7)$14 \n\n1.The 2025 impact relates to the settlement and termination of certain U.S. tax-qualified pension plans. The 2023 impact relates to the settlement of certain pension benefit obligations through the purchase of a nonparticipating group annuity contract from an insurance company.\n\nNet periodic benefit cost (credit), other than the service cost component, is included in \"Sundry income (expense) - net\" in the consolidated statements of income. See Note 5 for additional information.\n\nEstimated Future Benefit Payments\n\nThe estimated future benefit payments, reflecting expected future service, as appropriate, are presented in the following table:\n\nEstimated Future Benefit Payments at Dec 31, 2025\nDefined Benefit Pension PlansOther Postretirement Benefit Plan\n\nIn millions\n\n2026$243 $11 \n\n2027207 11 \n\n2028203 11 \n\n2029199 10 \n\n2030194 10 \n\n2031 - 2035891 43 \n\nTotal$1,937 $96 \n\n53\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nPlan Assets\n\nPlan assets consist primarily of equity and fixed income securities of U.S. and foreign issuers, and include alternative investments, such as real estate, private equity and other absolute return strategies. Plan assets totaled $2.1 billion at December 31, 2025 and $2.2 billion at December 31, 2024 and included no directly held common stock of Dow Inc.\n\nThe Corporation's investment strategy for plan assets is to manage the assets in relation to the liability in order to pay retirement benefits to plan participants over the life of the plans. This is accomplished by identifying and managing the exposure to various market risks, diversifying investments across various asset classes and earning an acceptable long-term rate of return consistent with an acceptable amount of risk, while considering the liquidity needs of the plan.\n\nThe plan is permitted to use derivative instruments for investment purposes, as well as for hedging the underlying asset and liability exposures and rebalancing the asset allocation. The plan uses value-at-risk, stress testing, scenario analysis and Monte Carlo simulation to monitor and manage both the risk within the portfolios and the surplus risk of the plan.\n\nEquity securities primarily include investments in large- and small-cap companies located in both developed and emerging markets around the world. Fixed income securities are primarily U.S. dollar based and include U.S. treasuries and investment grade corporate bonds of companies diversified across industries. Alternative investments primarily include investments in real estate, private equity and absolute return strategies. Other significant investment types include various insurance contracts and interest rate, equity, commodity and foreign exchange derivative investments and hedges.\n\nThe Corporation mitigates the credit risk of investments by establishing guidelines with investment managers that limit investment in any single issue or issuer to an amount that is not material to the portfolio being managed. These guidelines are monitored for compliance both by the Corporation and the external managers. Credit risk related to derivative activity is mitigated by utilizing multiple counterparties, collateral support agreements, and centralized clearing where appropriate. A short-term investment money market fund is utilized as the sweep vehicle for the pension plan, which from time to time can represent a significant investment.\n\nThe weighted-average target allocation for plan assets of the Corporation's pension plan is summarized as follows:\n\nTarget Allocation for Plan Assets at Dec 31, 2025\nTarget Allocation\n\nAsset Category\n\nEquity securities24 %\n\nFixed income securities48 \n\nAlternative investments28 \n\nTotal100 %\n\nFair value calculations may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Corporation believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.\n\nFor pension plan assets classified as Level 1 measurements (measured using quoted prices in active markets), total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.\n\nFor pension plan assets classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks. For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs such as foreign exchange rates, commodity prices, swap rates, interest rates, and implied volatilities\n\n54\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nobtained from various market sources. For other assets for which observable inputs are used, fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models.\n\nFor pension plan assets classified as Level 3 measurements, total fair value is based on significant unobservable inputs including assumptions where there is little, if any, market activity for the investment.\n\nCertain pension plan assets are held in funds where fair value is based on an estimated net asset value per share (or its equivalent) as of the most recently available fund financial statements which are received on a monthly or quarterly basis. These valuations are reviewed for reasonableness based on applicable sector, benchmark and company performance. Adjustments to valuations are made where appropriate to arrive at an estimated net asset value per share at the measurement date. These funds are not classified within the fair value hierarchy.\n\nThe following table summarizes the bases used to measure the Corporation’s pension plan assets at fair value at December 31, 2025 and 2024:\n\nBasis of Fair Value MeasurementsDec 31, 2025Dec 31, 2024\n\nIn millionsTotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3\n\nCash and cash equivalents$322 $287 $35 $— $178 $157 $21 $— \n\nEquity securities:\n\nU.S. equity securities $262 $262 $— $— $153 $153 $— $— \n\nNon - U.S. equity securities105 104 — 1 225 213 11 1 \n\nTotal equity securities$367 $366 $— $1 $378 $366 $11 $1 \n\nFixed income securities:\n\nDebt - government-issued$524 $— $524 $— $660 $— $660 $— \n\nDebt - corporate-issued186 — 186 — 216 — 216 — \n\nDebt - asset-backed23 — 23 — 34 — 34 — \n\nTotal fixed income securities$733 $— $733 $— $910 $— $910 $— \n\nAlternative investments:\n\nDerivatives - asset position$8 $— $8 $— $12 $— $12 $— \n\nDerivatives - liability position(37)— (37)— (47)— (47)— \n\nTotal alternative investments$(29)$— $(29)$— $(35)$— $(35)$— \n\nSubtotal$1,393 $653 $739 $1 $1,431 $523 $907 $1 \n\nInvestments measured at net asset value:\n\nHedge funds$88 $140 \n\nPrivate markets495 460 \n\nReal estate140 155 \n\nTotal investments measured at net asset value$723 $755 \n\nItems to reconcile to fair value of plan assets:\n\nPension trust receivables 1\n$1 $1 \n\nPension trust payables 2\n(3)(10)\n\nTotal$2,114 $2,177 \n\n1.Primarily receivables for investment securities sold.\n\n2.Primarily payables for investment securities purchased.\n\nThere were no changes in fair value of Level 3 pension plan assets for the years ended December 31, 2025 and 2024.\n\n55\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nDefined Contribution Plans\n\nU.S. employees may participate in defined contribution plans by contributing a portion of their compensation, which is partially matched by the Corporation. In addition, beginning on January 1, 2024, all eligible U.S. employees also receive an automatic non-elective contribution of 4 percent of eligible compensation to their respective defined contribution plans. Expense recognized for all defined contribution plans was $20 million in 2025, $21 million in 2024 and $12 million in 2023.\n\nNOTE 16 - FAIR VALUE MEASUREMENTS\n\nThe Corporation's financial instruments are classified as Level 2 measurements. For assets and liabilities classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability, or by using observable market data points of similar, more liquid securities to imply the price. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks.\n\nAssets that are measured using significant other observable inputs are primarily valued by reference to quoted prices of similar assets in active markets, adjusted for any terms specific to that asset. For all other assets for which observable inputs are used, fair value is derived through the use of fair value models, such as a discounted cash flow model or other standard pricing models. There were no transfers between Levels 1 and 2 in the years ended December 31, 2025 and 2024.\n\nThe following table summarizes the fair value of the Corporation's financial instruments at December 31, 2025 and 2024:\n\nFair Value of Financial Instruments20252024\n\nIn millionsCostGainLossFair ValueCostGainLossFair Value\n\nCash equivalents 1\n$11 $— $— $11 $11 $— $— $11 \n\nLong-term debt including debt due within one year$(145)$— $(12)$(157)$(269)$— $(26)$(295)\n\n1.Money market fund is included in \"Cash and cash equivalents\" in the consolidated balance sheets and held at amortized cost, which approximates fair value.\n\nCost approximates fair value for all other financial instruments.\n\nFair Value Measurements on a Nonrecurring Basis\n\nIn 2023, as part of the 2023 Restructuring Program, the Corporation rationalized its manufacturing assets to achieve its structural cost improvement initiatives. The manufacturing assets associated with this plan, classified as Level 3 measurements and valued using unobservable inputs, were written down to zero and the Corporation recorded an impairment charge of $2 million, which was included in \"Restructuring and asset related charges - net\" in the consolidated statements of income.\n\n56\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nNOTE 17 - RELATED PARTY TRANSACTIONS\n\nU.S. Gulf Coast Infrastructure Assets\n\nAs part of the Corporation's and TDCC's application of a best-owner mindset when reviewing non-product producing assets and to allow UCC and TDCC to have more visibility into the operations and economics of such assets, on November 1, 2023, UCC and certain other TDCC subsidiaries contributed certain production supporting infrastructure assets on the U.S. Gulf Coast (which are not product-producing assets themselves) to a TDCC subsidiary, now known as Diamond Infrastructure Solutions, that will manage the contributed assets in exchange for a membership interest (\"Common Control Membership Interest\") in the subsidiary. The carrying value of net assets contributed by UCC was $389 million. In connection with this contribution, TDCC and UCC entered into various agreements, designating UCC to receive or provide certain site services as defined under the agreements. Such agreements were designed to ensure the continuation of services to support UCC's existing operations. UCC recognized equity earnings of $10 million in the fourth quarter of 2023 related to this investment, recorded in \"Sundry income (expense) - net\" in the consolidated statements of income.\n\nOn December 1, 2023, UCC sold its Common Control Membership Interest to another TDCC subsidiary in exchange for a $1,543 million term loan receivable, recorded in \"Noncurrent receivables from related companies\" in the consolidated balance sheets. This loan bears interest based on alternative reference rates and matures on December 1, 2043. This transaction was accounted for as a transfer between entities under common control, which resulted in an increase to additional paid in capital of $893 million, net of tax of $251 million, and recorded in \"Additional Paid-in Capital\" in the consolidated statements of equity. Interest on the term loan is capitalized, resulting in a term loan balance of $1,724 million at December 31, 2025 ($1,642 million at December 31, 2024).\n\nSale of Ownership Interest in Dow Technology Investments LLC (\"DTIL\")\n\nIn December 2023, the Corporation sold a portion of its 50 percent ownership interest in DTIL, which had no carrying value, to its joint venture partner, Dow Global Technologies LLC (\"DGTL\"), a TDCC subsidiary, thereby reducing UCC's ownership interest in DTIL to 0.5 percent. As part of this transaction, the Corporation received cash proceeds and recognized a pretax gain of $206 million, recorded in \"Sundry income (expense) - net\" in the consolidated statements of income. In 2024, the Corporation sold its remaining ownership interest to DGTL for cash proceeds of $2 million and recognized a pretax gain, recorded in \"Sundry income (expense) - net\" in the consolidated statements of income.\n\nThe Corporation evaluated the divestment of the infrastructure assets on the U.S. Gulf Coast and the sale of its ownership interest in DTIL and determined they did not represent strategic shifts that had a major effect on the Corporation’s operations and financial results and did not qualify as an individually significant component of the Corporation. As a result, the transactions are not reported as discontinued operations.\n\nProduct and Services Agreements\n\nThe Corporation sells its products to TDCC to simplify the customer interface process. Products are sold to and purchased from TDCC at prices determined in accordance with the terms of an agreement between UCC and TDCC. After each quarter, the Corporation and TDCC analyze the pricing used for the sales in that quarter and reach agreement on any necessary adjustments, at which point the prices are final. The Corporation also procures certain commodities, raw materials, pipeline, storage and site services through TDCC and Diamond Infrastructure Solutions and pays commissions and service fees based on the services, volume and type of commodities and raw materials purchased.\n\nThe Corporation also has a master services agreement with TDCC, whereby TDCC provides services including, but not limited to: accounting; legal; treasury (investments, cash management, risk management, insurance); procurement; human resources; environmental; health and safety; and business management for UCC. Under the master services agreement with TDCC, general administrative and overhead type services that TDCC routinely allocates to various businesses are charged to UCC. The master services agreement cost allocation basis is headcount and includes a 10 percent service fee.\n\n57\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nThe following table summarizes UCC’s transactions with TDCC and Diamond Infrastructure Solutions related to product and services agreements for the years ended December 31, 2025, 2024 and 2023:\n\nProduct and Services Agreements Transactions202520242023Income Statement\n\nIn millionsClassification\n\nActivity-based costs 1\n$692 $599 $158 Cost of sales\n\nCommodity and raw materials purchases 2\n$1,056 $996 $1,078 Cost of sales\n\nCommission expense$19 $20 $19 Sundry income (expense) - net\n\nGeneral administrative and overhead type services and service fee$69 $69 $72 Sundry income (expense) - net\n\n1.The increase in activity-based costs was primarily due to the impact of higher fuel gas and energy costs and other charges in 2025. The 2024 increase in activity-based costs was a result of UCC's divestment of its infrastructure assets in the fourth quarter of 2023 (\"Infrastructure Divestment\"), at which time certain site infrastructure-related services previously administered independently by the Corporation were subsequently performed by Diamond Infrastructure Solutions and billed to the Corporation, resulting in increased related party activity-based costs. The Infrastructure Divestment resulted in certain changes in other cost flows, which further increased activity-based costs. Activity-based costs include short-term lease cost of $15 million related to pipeline and site services for the year ended December 31, 2025 ($16 million for the year ended December 31, 2024), included in Lease Cost in Note 13.\n\n2.Period-end balances on hand are included in inventory. The 2025 increase in purchase costs was primarily driven by higher raw material prices partially offset by lower volumes. The 2024 decrease in purchase costs was primarily due to changes in cost flows resulting from the Infrastructure Divestment.\n\nManagement believes the method used for determining expenses charged by TDCC is reasonable. TDCC provides these services by leveraging its centralized functional service centers to provide services at a cost that management believes provides an advantage to the Corporation.\n\nThe monitoring and execution of risk management policies related to interest rate and foreign currency risks, which are based on TDCC’s risk management philosophy, are provided as a service to UCC.\n\nThe Corporation experienced an unplanned shutdown of its manufacturing site in Seadrift, Texas, in October 2023, resulting in lost sales and margins in the fourth quarter of 2023. These losses were covered, in part, by an insurance program purchased by TDCC from its insurance affiliate. In the first quarter of 2024, the Corporation recorded insurance recoveries of $22 million from TDCC for covered losses, included in \"Cost of sales\" in the consolidated statements of income.\n\nTax Sharing Agreement\n\nIn accordance with the Tax Sharing Agreement between the Corporation and TDCC, the Corporation makes payments to TDCC to cover the Corporation's estimated federal tax liability; payments were $223 million in 2025, $90 million in 2024 and $113 million in 2023.\n\nThe Corporation recorded decreases of approximately $280 million of its income tax and related interest receivable during 2024 due to tax audit closures. These amounts were settled through the Corporation's cash management process with TDCC and are reflected in \"Related company receivables\" and \"Other assets and liabilities\" in the consolidated statements of cash flows.\n\nDuring 2025, TDCC sold minority portions of its membership interests in Diamond Infrastructure Solutions. The Corporation previously sold its membership interests in Diamond Infrastructure Solutions to another TDCC subsidiary in 2023. As a result of TDCC's sales of membership interests, $268 million of the noncurrent tax liability resulting from UCC's 2023 divestment became due. At December 31, 2025, $219 million has been settled through the Corporation's cash management process with TDCC and $49 million is recorded in \"Accounts payable - Related companies\" in the consolidated balance sheets.\n\nCash Management\n\nAs part of TDCC’s cash management process, UCC is a party to a revolving loan with TDCC that allows TDCC to borrow an aggregate outstanding amount not to exceed $2 billion. The agreement, which became effective on December 2, 2024, earns interest based on alternative reference rates and matures annually, with automatic one year extensions unless either party terminates the agreement. This agreement amended and restated a prior revolving loan agreement that was scheduled to mature on December 30, 2024, and earned interest based on alternative reference rates. At December 31, 2025, the Corporation had a note receivable of $7 million ($593 million at December 31, 2024) from TDCC under the amended and restated revolving loan agreement.\n\n58\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nThe Corporation also has a separate revolving credit agreement with TDCC that allows the Corporation to borrow or obtain credit enhancements up to an aggregate of $2 billion. The agreement, which became effective December 2, 2024, charges interest based on alternative reference rates and matures annually, with automatic one year extensions unless either party terminates the agreement. The agreement amended and restated a prior revolving credit agreement that was scheduled to expire on December 30, 2024. TDCC may demand repayment with a 30-day written notice to the Corporation, subject to certain restrictions. At December 31, 2025, the Corporation had a note payable to TDCC of $100 million (zero at December 31, 2024), and $1,863 million remained available under the amended and restated revolving credit agreement ($1,943 million at December 31, 2024). At December 31, 2024, TDCC also held certain cash collateral balances from UCC related to credit enhancements under the previous agreement, which were reported as \"Accounts receivable - Related companies\" in the consolidated balance sheets and repaid to the Corporation in 2025.\n\nThe Corporation may draw from the revolving loan and credit agreements in support of its daily working capital requirements and, as such, the net effect of cash inflows and outflows under the agreements is presented in the consolidated statements of cash flows as an operating activity.\n\nDividends and Distributions\n\nOn a quarterly basis, the Board reviews and determines if there will be a dividend distribution to its parent company and sole shareholder, TDCC. The Board takes into consideration the level of earnings and cash flows, among other factors, in determining the amount of the dividend distribution.\n\nThe following table summarizes cash dividends declared and paid to TDCC for 2025, 2024 and 2023:\n\nCash Dividends Declared and Paid202520242023\n\nIn millions\n\nCash dividends declared and paid$28 $228 $512 \n\nThe Corporation received dividends from its related company investments of $4 million during the year ended December 31, 2025, recorded in \"Sundry income (expense) - net\" in the consolidated statements of income.\n\nAs part of TDCC's continuing efforts to optimize its intercompany financing structure, the Corporation received a pro-rata distribution of a portion of a note receivable totaling $735 million during the year ended December 31, 2025, from Dow International Holdings Company. The distribution was recorded in “Sundry income (expense) – net” in the consolidated statements of income and was subsequently distributed to TDCC and presented as \"Distribution to parent\" in the consolidated statements of equity for the year ended December 31, 2025. These nontaxable transactions were executed in accordance with TDCC's intercompany cash management process. See Note 9 for additional information about the Corporation's related company investments.\n\n59\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)\n\nNOTE 18 - BUSINESS AND GEOGRAPHIC REGIONS\n\nTDCC conducts its worldwide operations through global businesses and the Corporation's business activities comprise components of TDCC's global businesses rather than stand-alone operations, as the Corporation sells substantially all of its products to TDCC in order to simplify the customer interface process. The Board, acting pursuant to the authority delegated to it by its parent company, TDCC, functions as the Corporation's CODM to assess UCC's results and allocate resources for its operations. The Corporation's results are reported as a single operating segment as the consolidated statements of income are presented to the CODM without further disaggregation.\n\nSales are attributed to geographic regions based on customer location; long-lived assets are attributed to geographic regions based on asset location. Sales to external customers and long-lived assets by geographic region were as follows:\n\nGeographic Region InformationUnited StatesAsia PacificRest of WorldTotal\n\nIn millions\n\n2025\n\nSales to external customers 1\n$100 $4 $— $104 \n\nLong-lived assets$1,087 $15 $9 $1,111 \n\n2024\n\nSales to external customers 1\n$119 $1 $— $120 \n\nLong-lived assets$1,093 $18 $10 $1,121 \n\n2023\n\nSales to external customers 1\n$117 $30 $— $147 \n\nLong-lived assets$862 $21 $11 $894 \n\n1.Of total sales to external customers, sales in Malaysia were approximately 4 percent in 2025, 1 percent in 2024 and 20 percent in 2023, and are included in Asia Pacific.\n\n60\n\n[Table of Contents](#i2aef629ae28d4ab08017402fb32766d6_7)"}