DOW CHEMICAL CO /DE/

For comparison of results of operations for the fiscal years ended December 31, 2024 and 2023, 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, 2024, filed with the SEC on February 4, 2025.

Net Sales

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

1. Portfolio & Other includes the sales impact of the flexible packaging laminating adhesives business, which was sold to Arkema S.A. in the fourth quarter of 2024.

The Company reported net sales of $40.0 billion in 2025, down 7 percent from $43.0 billion in 2024, with local price down 7 percent and volume, currency and portfolio & other flat. Net sales decreased across all operating segments and geographic regions. Local price decreased across all operating segments and geographic regions driven by industry supply and demand dynamics and lower global energy and feedstock costs. Local price decreased in Packaging & Specialty Plastics (down 8 percent), Industrial Intermediates & Infrastructure (down 6 percent) and Performance Materials & Coatings (down 3 percent). Volume was flat with gains in the U.S. & Canada (up 2 percent) and in Asia Pacific (up 1 percent) offset by declines in EMEAI (down 4 percent) and in Latin America (down 2 percent). Volume was flat in Packaging & Specialty Plastics and Industrial Intermediates & Infrastructure and declined in Performance Materials & Coatings (down 2 percent). Packaging & Specialty Plastics was favorably impacted by currency (up 1 percent) and unfavorably impacted by portfolio & other (down 1 percent). Excluding the Hydrocarbons & Energy business, net sales decreased 7 percent.

Cost of Sales

Cost of sales ("COS") was $37.4 billion in 2025, compared with $38.4 billion in 2024. COS decreased in 2025 primarily due to lower raw material, feedstock and energy costs, the impact of the Company's cost reduction initiatives, and lower planned maintenance turnaround spending, partially offset by the impact of lower operating rates. COS as a percentage of net sales was 93.7 percent in 2025, compared with 89.3 percent in 2024. 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 $752 million in 2025, compared with $810 million in 2024. R&D expenses decreased in 2025 primarily due to the Company's cost reduction initiatives and lower performance-based compensation costs.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses were $1,392 million in 2025, compared with $1,581 million in 2024. SG&A expenses decreased in 2025 primarily due to the impact of lower third-party purchased services, the impact of the Company's cost reduction initiatives, lower performance-based compensation costs and decreased bad debt expense.

Amortization of Intangibles

Amortization of intangibles was $231 million in 2025, compared with $310 million in 2024. Amortization of intangibles decreased primarily due to certain intangible assets becoming fully amortized in 2025. See Note 12 to the Consolidated Financial Statements for additional information on intangible assets.

Restructuring, Goodwill Impairment and Asset Related Charges - Net

2025 Restructuring Program

On January 27, 2025, the Board approved targeted actions to further achieve the Company's cost reduction initiatives in response to ongoing macroeconomic uncertainty, while reinforcing its long-term competitiveness across the economic cycle. These actions are expected to be substantially complete by the end of 2026.

On June 30, 2025, the Board approved restructuring actions to rationalize the Company's global asset footprint, including certain actions identified as part of the Company's previously announced strategic review of its European assets and certain corporate and other assets, and to enhance the Company's competitiveness over the economic cycle. The program includes asset write-down and write-off charges, severance and related benefit costs and other exit and disposal costs.

As a result of these actions, the Company recorded pretax restructuring charges in 2025 of $862 million, consisting of severance and related benefit costs of $389 million, asset write-downs and write-offs of $349 million and costs associated with exit and disposal activities of $124 million. The restructuring charges by segment were as follows: $165 million in Packaging & Specialty Plastics, $95 million in Industrial Intermediates & Infrastructure, $150 million in Performance Materials & Coatings and $452 million in Corporate. See Note 5 to the Consolidated Financial Statements for additional information.

2023 Restructuring Program

Actions related to the 2023 Restructuring Program were complete at the end of the second quarter of 2025. In 2025, the Company recorded an additional pretax restructuring charge of $5 million for asset write-downs and write-offs and an asset related credit adjustment of $4 million, related to Industrial Intermediates & Infrastructure. See Note 5 to the Consolidated Financial Statements for additional information.

2025 Goodwill Impairment

Upon completion of the annual goodwill impairment testing in the fourth quarter of 2025, the Company determined the fair value of the Polyurethanes & Construction Chemicals reporting unit was lower than its carrying amount. As a result, the Company recorded an impairment charge of $690 million, related to Industrial Intermediates & Infrastructure. See Notes 5, 12 and 22 to the Consolidated Financial Statements for additional information.

Asset Related Charges

In 2025, the Company recognized a $303 million pretax impairment charge related to assets used for chlor-alkali, propylene oxide and brine production in Latin America. Due to challenging economic conditions in the region, the Company performed a held-and-used impairment analysis and the assets were written down to their fair value. The impairment charge was related to Industrial Intermediates & Infrastructure ($232 million) and Packaging & Specialty Plastics ($71 million). See Notes 5 and 22 for additional information.

Equity in Earnings (Losses) of Nonconsolidated Affiliates

The Company’s share of equity in losses of nonconsolidated affiliates was $240 million in 2025, compared with losses of $6 million in 2024, primarily driven by continued integrated margin compression at the Company's principal 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 2025 was income of $140 million and $157 million for Dow Inc. and TDCC, respectively, compared with income of $415 million and $404 million for Dow Inc. and TDCC, respectively, in 2024. In 2025, sundry income (expense) - net included non-operating pension and postretirement benefit plan credits, a gain from the divestiture of the Company's soil fumigation product line (related to Industrial Intermediates & Infrastructure), a gain from the divestiture of its ownership interest in DowAksa (related to Corporate), foreign currency exchange gains, and gains on the sales of other assets and investments, partially offset by a loss on early extinguishment of debt and pension settlement charges (both related to Corporate). 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. See Notes 4, 6, 19 and 25, to the Consolidated Financial Statements for additional information.

In 2025 and 2024, in addition to the amounts previously discussed above for TDCC, sundry income (expense) - net for Dow Inc. included a net loss of $17 million and a net gain of $13 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 $865 million in 2025, compared with $811 million in 2024. The increase in interest expense is primarily due to $1.4 billion of senior unsecured notes issued in the third quarter of 2025 and increased issuances of commercial paper in 2025. 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 credit of $67 million in 2025, resulting in an effective tax rate of 2.7 percent, compared with a tax provision of $399 million in 2024, resulting in an effective tax rate of 24.9 percent and 24.8 percent for Dow Inc. and TDCC, respectively. The credit for income taxes was favorably impacted by the sale of a portion of the Company's membership interest in its wholly owned subsidiary, Diamond Infrastructure Solutions, as well as the recording of a tax benefit stemming from the U.S. Tax Court's decision in Varian Medical Systems Inc. v.

Commissioner. These benefits were partially offset by the geographic mix of earnings, valuation allowances recorded in certain foreign jurisdictions, losses attributable to jurisdictions for which no tax benefit can be recognized, and non-deductible goodwill impairment.

The provision for income taxes and higher effective tax rate in 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 Company continues to monitor and evaluate legislative developments related to the Global Anti-Base Erosion Proposal Regime ("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.

On 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 Company's effective tax rate.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests was $179 million in 2025, compared with $85 million in 2024. The increase in net income attributable to noncontrolling interests was primarily driven by the sale of 49 percent of the membership interests of Diamond Infrastructure Solutions in 2025. See Notes 18 and 23 to the Consolidated Financial Statements for additional information.

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

Net income (loss) available for Dow Inc. common stockholders was a loss of $2,623 million in 2025, compared with income of $1,116 million in 2024. Earnings (loss) per share of Dow Inc. was a loss of $3.70 per share in 2025, compared with earnings of $1.57 per share in 2024. See Note 8 to the Consolidated Financial Statements for details on Dow Inc.'s earnings per share calculations.

TDCC

Net income (loss) available for the TDCC common stockholder was a loss of $2,598 million in 2025, compared with income of $1,127 million in 2024. TDCC's common shares are owned solely by Dow Inc.