DOW INC

For comparison of results of operations for the fiscal years ended December 31, 2023 and 2022, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on January 31, 2024.

Net Sales

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

The Company reported net sales of $43.0 billion in 2024, down 4 percent from $44.6 billion in 2023, with local price down 4 percent, and volume and currency both flat. Net sales decreased across all operating segments except Performance Materials & Coatings, and across all geographic regions. Local price decreased in all operating segments and across all geographic regions driven by industry supply and demand dynamics and lower global energy and feedstock costs. Local price decreased in Packaging & Specialty Plastics (down 4 percent), Industrial Intermediates & Infrastructure (down 6 percent) and Performance Materials & Coatings (down 3 percent). Volume increased 2 percent in the U.S. & Canada, decreased 1 percent in Latin America and was flat in EMEAI and Asia Pacific. Volume decreased in Packaging & Specialty Plastics (down 2 percent) and increased in Industrial Intermediates & Infrastructure (up 1 percent) and Performance Materials & Coatings (up 5 percent). Excluding the Hydrocarbons & Energy business, sales decreased 2 percent.

Cost of Sales

Cost of sales ("COS") was $38.4 billion in 2024, compared with $39.7 billion in 2023. COS decreased in 2024 primarily due to lower raw material costs, lower global energy and feedstock costs, and the impact of structural cost improvements, partially offset by increased planned maintenance turnaround spending. COS as a percentage of net sales was 89.3 percent in 2024, compared with 89.1 percent in 2023. The increase in COS as a percentage of net sales was driven by the impact of lower local price on flat net sales volume.

Research and Development Expenses

Research and development ("R&D") expenses were $810 million in 2024, compared with $829 million in 2023. R&D expenses decreased in 2024 primarily due to lower performance-based compensation costs.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses were $1,581 million in 2024, compared with $1,627 million in 2023. SG&A expenses decreased in 2024 primarily due to lower performance-based compensation costs, as well as lower fringe benefit expenses resulting from the U.S. pension plan freeze, which more than offset an increase in bad debt expense, including expense incurred as a result of a resolution of a customer dispute.

Amortization of Intangibles

Amortization of intangibles was $310 million in 2024, compared with $324 million in 2023. Amortization of intangibles decreased primarily due to the reduction in the intangible asset base, resulting primarily from the write-off of an intangible asset, certain intangible asset write-offs related to the divestiture of the Company's flexible packaging laminating adhesives business and certain intangible assets becoming fully amortized in 2024. See Note 12 to the Consolidated Financial Statements for additional information on intangible assets.

Restructuring and Asset Related Charges - Net

2023 Restructuring Program

On January 25, 2023, the Board approved restructuring actions to achieve the Company's structural cost improvement initiatives in response to the continued economic impact from the global recessionary environment and to enhance its agility and long-term competitiveness across the economic cycle. These actions are expected to be substantially complete by the end of the first quarter of 2025.

As a result of these actions, in 2023 the Company recorded pretax restructuring charges of $535 million, consisting of severance and related benefit costs of $344 million and asset write-downs and write-offs of $191 million. The restructuring charges by segment were as follows: $1 million in Packaging & Specialty Plastics, $50 million in Industrial Intermediates & Infrastructure, $49 million in Performance Materials & Coatings and $435 million in Corporate. These charges were partially offset by other asset related credit adjustments of $7 million in Corporate related to a prior restructuring program. See Note 5 to the Consolidated Financial Statements for additional information.

In 2024, the Company recorded pretax restructuring charges of $66 million, consisting of severance and related benefit costs of $41 million, asset write-downs and write-offs of $16 million and costs associated with exit and disposal activities of $9 million. The restructuring charges by segment were as follows: $8 million in Industrial Intermediates & Infrastructure, $7 million in Performance Materials & Coatings and $51 million in Corporate. In addition, the Company recognized pretax impairment charges of $37 million related to assets included in the divestiture of the Company's flexible packaging laminating adhesives business and related to Packaging & Specialty Plastics. See Note 5 to the Consolidated Financial Statements for additional information.

Equity in Earnings (Losses) of Nonconsolidated Affiliates

The Company’s share of equity in losses of nonconsolidated affiliates was $6 million in 2024, compared with losses of $119 million in 2023, driven primarily by improved equity earnings at the Kuwait joint ventures from higher prices and volumes and improved results at the Sadara joint venture, partially offset by margin compression from softer demand at the Thai joint ventures.

Sundry Income (Expense) - Net

Sundry income (expense) – net includes a variety of income and expense items such as foreign currency exchange gains and losses, dividends from investments, gains and losses on sales of investments and assets, non-operating pension and other postretirement benefit plan credits or costs, losses on early extinguishment of debt and certain litigation matters.

Sundry income (expense) - net for 2024 was income of $415 million and $404 million for Dow Inc. and TDCC, respectively, compared with expense of $280 million and $327 million for Dow Inc. and TDCC, respectively, in 2023. In 2024, sundry income (expense) - net included non-operating pension and postretirement benefit plan credits and gains on the sales of assets and investments, which were partially offset by foreign currency exchange losses. In 2023, sundry income (expense) - net included a $642 million non-cash settlement charge related to the purchase of nonparticipating group annuity contracts for certain pension plans (related to Corporate) and foreign currency exchange losses, including $109 million related to the December 2023 devaluation of the Argentine peso (related to Corporate), which were partially offset by non-operating pension and postretirement benefit plan credits, a $106 million gain associated with a legal matter with Nova Chemicals Corporation (related to Packaging & Specialty Plastics), and gains on the sales of assets and investments. See Notes 6, 15, 19 and 25, to the Consolidated Financial Statements for additional information.

In 2024 and 2023, in addition to the amounts previously discussed above for TDCC, sundry income (expense) - net for Dow Inc. included net gains of $13 million and $42 million, respectively, associated with agreements and matters with DuPont de Nemours, Inc. ("DuPont") and Corteva, Inc. ("Corteva") (related to Corporate).

Interest Expense and Amortization of Debt Discount

Interest expense and amortization of debt discount was $811 million in 2024, compared with $746 million in 2023. The increase in interest expense is primarily due to $1.25 billion of senior unsecured notes issued in connection with the Green Finance Framework in the first quarter of 2024 and borrowings outside of the United States. See Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 14 to the Consolidated Financial Statements for additional information related to debt financing activity.

Provision (Credit) for Income Taxes

The Company's effective tax rate fluctuates based on, among other factors, where income is earned, the level of income relative to tax attributes and the level of equity earnings, since most earnings from the Company's equity method investments are taxed at the joint venture level. The underlying factors affecting the Company's overall tax rate are summarized in Note 7 to the Consolidated Financial Statements.

The Company reported a tax provision of $399 million in 2024, resulting in an effective tax rate of 24.9 percent, compared with a tax credit of $4 million in 2023, resulting in an effective tax rate of negative 0.6 percent. The provision for income taxes and higher effective tax rate for 2024 was primarily due to the geographic mix of earnings, partially offset by adjustments and the reassessment of interest and penalties on a tax matter in foreign jurisdictions.

The credit for income taxes and lower effective tax rate in 2023 were primarily due to low pretax income, the geographic mix of earnings and increases in tax basis in assets located in foreign jurisdictions, partially offset by changes in uncertain tax positions in various jurisdictions.

The Company continues to monitor and evaluate legislative developments related to the Global Anti-Base Erosion Proposal ("GloBE") established by the Organization of Economic Cooperation and Development’s ("OECD") Pillar Two framework. Several countries in which the Company operates have adopted those rules into their legislation and several others are expected to implement in the future. To date, such legislation has not materially impacted the Company's effective tax rate. The Company continues to evaluate impacts as further guidance is released.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests was $85 million in 2024, compared with $71 million in 2023. See Notes 18 and 23 to the Consolidated Financial Statements for additional information.

Net Income Available for Common Stockholder(s)

Net income available for Dow Inc. common stockholders was $1,116 million in 2024, compared with $589 million in 2023. Earnings per share of Dow Inc. was $1.57 per share in 2024, compared with $0.82 per share in 2023. See Note 8 to the Consolidated Financial Statements for details on Dow Inc.'s earnings per share calculations.

TDCC

Net income available for the TDCC common stockholder was $1,127 million in 2024, compared with $556 million in 2023. TDCC's common shares are owned solely by Dow Inc.