DOW CHEMICAL CO /DE/

The Company had cash and cash equivalents of $3,816 million at December 31, 2025 and $2,189 million at December 31, 2024, of which $2,636 million at December 31, 2025 and $1,427 million at December 31, 2024, was held by subsidiaries in foreign countries, including U.S. territories. For each of its foreign subsidiaries, the Company makes an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States.

Cash held by foreign subsidiaries for permanent reinvestment is generally used to finance the subsidiaries' operational activities and future foreign investments. Dow has the ability to repatriate additional funds to the United States, which could result in an adjustment to the tax liability for foreign withholding taxes, foreign and/or U.S. state income taxes and the impact of foreign currency movements. At December 31, 2025, management believed that sufficient liquidity was available in the United States. The Company has and expects to continue repatriating certain funds from its non-U.S. subsidiaries that are not needed to finance local operations; however, these particular repatriation activities have not and are not expected to result in a significant incremental tax liability to the Company.

For comparison of cash flows 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.

The Company’s cash flows from operating, investing and financing activities, as reflected in the consolidated statements of cash flows, are summarized in the following table:

Cash Flows from Operating Activities

Cash provided by operating activities from continuing operations in 2025 was primarily driven by the Company's cash earnings, advance payments received from customers related to long-term supply contracts and dividends from equity method investments, which were partially offset by cash used for working capital, performance-based compensation, pension contributions and severance payments related to the 2025 Restructuring Program. Cash provided by operating activities from continuing operations in 2024 was primarily driven by the Company's cash earnings and dividends from equity method investments, which were partially offset by cash used for working capital, performance-based compensation payments, pension contributions and severance payments related to the 2023 Restructuring Program.

Cash provided by (used for) operating activities from discontinued operations reflected cash payments and receipts for certain agreements and matters related to the Company's separation from DowDuPont Inc.

Cash Flows from Investing Activities

Cash used for investing activities in 2025 and 2024 was primarily for capital expenditures and purchases of investments, which were partially offset by proceeds from sales and maturities of investments. In addition, 2025 included a cash inflow related to proceeds from incentives related to capital expenditures, the sale of the soil fumigation product line and certain related assets and the divestiture of the Company's ownership interest in DowAksa. Cash used for investing activities in 2024 also included a cash inflow for the sale of the flexible packaging laminating adhesives business and a cash outflow for the acquisition of Circulus Holdings, LLC, a U.S. mechanical recycling company.

The Company's capital expenditures were $2,479 million in 2025 and $2,940 million in 2024. Capital spending was lower in 2025 as the Company reduced its full year capital spending plan to approximately $2.5 billion. The primary driver for the decrease was the Company’s decision to delay construction of the Fort Saskatchewan Path2Zero project. The Company now expects to start up the first and second phases of the project by the end of 2029 and 2030, respectively. The Company expects capital spending for this key growth project to average approximately $1.5 billion annually through 2030. In total, the Company expects capital spending in 2026 to be approximately $2.5 billion, including capital spending related to the construction of the Fort Saskatchewan Path2Zero project. As evidenced across the current and prior economic cycles, the Company will adjust its spending as economic conditions evolve.

Capital spending in recent years has included the construction of a world-scale polyethylene unit on the U.S. Gulf Coast, which was completed in 2025; a new reactor to expand alkoxylation capacity in Europe, mechanically completed in 2025 and expected to begin product qualification and ramp-up activities in early 2026; and construction of the world's first net-zero Scope 1 and 2 carbon dioxide equivalent ("CO 2 e") emissions integrated ethylene and derivatives complex in Alberta, Canada.

Cash Flows from Financing Activities

Cash provided by financing activities in 2025 for Dow Inc. was primarily related to proceeds from the sale of a minority stake in Diamond Infrastructure Solutions and proceeds from the issuance of long-term debt, which were partially offset by dividends paid to stockholders and payments on long-term debt. TDCC included cash outflows for dividends paid to Dow Inc. Cash used for financing activities in 2024 was primarily related to dividends paid to stockholders, purchases of treasury stock and payments on long-term debt, which were partially offset by proceeds from the issuance of long-term debt. TDCC included cash outflows for dividends paid to Dow Inc. See Notes 14 and 17 to the Consolidated Financial Statements for additional information related to the issuance and retirement of debt and the Company's share repurchases and dividends.

Non-GAAP Cash Flow Measures

Free Cash Flow

Dow defines Free Cash Flow as "Cash provided by operating activities - continuing operations," less capital expenditures. Under this definition, Free Cash Flow represents the cash generated by Dow from operations after investing in its asset base. Free Cash Flow, combined with cash balances and other sources of liquidity, represents the cash available to fund obligations and provide returns to shareholders. Free Cash Flow is an integral financial measure used in the Company's financial planning process.

Operating EBITDA

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

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

Dow defines Cash Flow Conversion (Cash flow from operations to Operating EBITDA) as "Cash provided by operating activities - continuing operations," divided by Operating EBITDA. Management believes Cash Flow Conversion is an important financial metric as it helps the Company determine how efficiently it is converting its earnings into cash flow.

These financial measures are not recognized in accordance with accounting principles generally accepted in the United States of America ("GAAP") and should not be viewed as alternatives to GAAP financial measures of performance. All companies do not calculate non-GAAP financial measures in the same manner and, accordingly, Dow's definitions may not be consistent with the methodologies used by other companies.

1. The year ended December 31, 2025, includes severance and related benefit costs, costs associated with exit and disposal activities and impairment charges related to the 2025 Restructuring Program; an impairment charge related to goodwill associated with the Polyurethanes & Construction Chemicals reporting unit, non-cash settlement charges related to the termination of certain Company pension plans in the United States and the United Kingdom, an impairment charge related to assets used for chlor-alkali, propylene oxide and brine production in Latin America, charges related to an arbitration agreement for historical product claims from a divested business, charges associated with agreements entered into with DuPont de Nemours, Inc. and Corteva, Inc. as part of the separation and distribution, a loss on early extinguishment of debt, the settlement of a claim related to water storage groundwater contamination matters, implementation costs associated with the Company's 2025 Restructuring Program and the sale of membership interests of Diamond Infrastructure Solutions and restructuring charges and implementation and efficiency costs associated with the Company's 2023 Restructuring Program; partially offset by a gain on the sale of the soil fumigation product line and divestiture of ownership interest in DowAksa and a gain associated with the reassessment of liabilities for certain accrued Groundwater Matters. The year ended December 31, 2024, includes restructuring charges and implementation and efficiency costs associated with the Company's 2023 Restructuring Program, gains associated with a previously impaired equity investment, impairment charges related to the write-down of certain manufacturing assets, a charge related to an arbitration settlement agreement for historical product claims from a divested business and activity related to the separation from DowDuPont. See Note 25 to the Consolidated Financial Statements for additional information.

2. Cash flow from operations to net income is not applicable for the year ended December 31, 2025 due to a net loss for the period.

Liquidity & Financial Flexibility

The Company’s primary source of incremental liquidity is cash flows from operating activities. The generation of cash from operations over the economic cycle and the Company's ability to access capital markets is expected to meet the Company’s cash requirements for working capital, capital expenditures, debt maturities, contributions to pension plans, dividend distributions to stockholders, restructuring payments, share repurchases and other needs. In addition to cash from operating activities, the Company’s current liquidity sources also include TDCC's U.S. and Euromarket commercial paper programs, committed and uncommitted credit facilities, committed and uncommitted accounts receivable facilities, a medium-term notes program, a U.S. retail note program (“InterNotes®”) and other debt markets.

The Company continues to maintain a strong financial position with all of its committed credit facilities undrawn and fully available at December 31, 2025. Cash and committed and available forms of liquidity were $13.6 billion at December 31, 2025, an increase of $1.6 billion from December 31, 2024. The Company also has no substantive long-term debt maturities due until 2029. Additional details on sources of liquidity are as follows:

Commercial Paper

TDCC issues promissory notes under its U.S. and Euromarket commercial paper programs. TDCC had no commercial paper outstanding at December 31, 2025 and 2024. TDCC maintains access to the commercial paper market at competitive rates. Amounts outstanding under TDCC's commercial paper programs during the period may be greater or less than the amount reported at the end of the period. Subsequent to December 31, 2025, TDCC issued commercial paper with none outstanding at February 3, 2026.

Committed Credit Facilities

The Company also has the ability to access liquidity through TDCC's committed and available credit facilities. At December 31, 2025, TDCC had total committed and available credit facilities of $8.3 billion. See Note 14 to the Consolidated Financial Statements for additional information on committed and available credit facilities.

Uncommitted Credit Facilities

The Company has entered into various uncommitted bilateral credit arrangements as a potential source of excess liquidity. These lines can be used to support short-term liquidity needs and for general purposes. The Company had no drawdowns outstanding at December 31, 2025.

Accounts Receivable Securitization Facilities

In addition to the above credit facilities, the Company maintains a committed accounts receivable facility in the United States where eligible trade accounts receivable, up to $900 million, may be sold at any point in time and expires in November 2028. The Company also maintains a committed accounts receivable facility in Europe where eligible trade accounts receivable, up to €500 million, may be sold at any point in time. This facility expires in March 2026, with renegotiations expected to be completed prior to the expiration. In 2025, there were $106 million in sales of receivables under the U.S. and Europe committed accounts receivable facilities ($290 million in sales of receivables in 2024). At December 31, 2025 and 2024, no material balances of sold receivables remained outstanding.

In addition, the Company has an uncommitted accounts receivable facility in the United States providing additional liquidity, set to expire in November 2028. In 2025, sales of receivables under this facility were $147 million ($378 million in sales of receivables in 2024). At December 31, 2025 and 2024, no material balances of sold receivables remained outstanding. See Note 13 to the Consolidated Financial Statements for additional information.

Early Settlement of Letters of Credit

The Company utilizes, from time-to-time, letters of credit discounting programs to manage and expedite the settlement of letters of credit in certain regions. These letters of credit are associated with accounts receivable and the Company retains no interest in the transferred letters of credit or receivables once sold.

Accounts Receivable Discounting Facilities

The Company has access to accounts receivable discounting facilities, under which receivables are transferred with limited recourse. The Company retains no interest in the transferred receivables once sold. In 2025, sales of receivables under these facilities were $285 million ($865 million in sales of receivables in 2024). At December 31, 2025, no material balances of sold receivables remained outstanding ($287 million remained outstanding at December 31, 2024). See Note 13 to the Consolidated Financial Statements for additional information.

The Company maintains these facilities and also participates in certain customers’ supply chain financing and other early pay programs as a routine source of working capital.

Letters of Credit

TDCC utilizes letters of credit to support commitments made in the ordinary course of business. While the terms and amounts of letters of credit change, TDCC generally has approximately $600 million of outstanding letters of credit at any given time.

Company-Owned Life Insurance

The Company has investments in company-owned life insurance ("COLI") policies, which are recorded at their cash surrender value as of each balance sheet date. The Company has the ability to monetize its investment in its COLI policies as an additional source of liquidity. At December 31, 2025, the Company had monetized $197 million of its existing COLI polices' surrender value (zero at December 31, 2024). See Note 6 to the Consolidated Financial Statements for additional information.

Shelf Registration - United States

On June 13, 2025, Dow Inc. and TDCC filed a shelf registration statement with the U.S. Securities and Exchange Commission. The shelf indicates that Dow Inc. may offer common stock; preferred stock; depositary shares; debt securities; guarantees; warrants to purchase common stock, preferred stock and debt securities; and stock purchase contracts and stock purchase units, with pricing and availability of any such offerings depending on market conditions. The shelf also indicates that TDCC may offer debt securities, guarantees and warrants to purchase debt securities, with pricing and availability of any such offerings depending on market conditions. In 2025, TDCC filed a prospectus supplement under this shelf registration to register an undetermined amount of securities for issuance under InterNotes®. Also, in 2025, TDCC filed a prospectus supplement under this shelf registration to register an undetermined amount of securities for issuance under a medium-term notes program.

Debt

As the Company continues to maintain its strong balance sheet and financial flexibility, management is focused on net debt (a non-GAAP financial measure), as the Company believes this is the best representation of its financial leverage at this point in time. As shown in the following table, net debt is equal to total gross debt minus "Cash and cash equivalents" and "Marketable securities."

1. Included in "Other current assets" in the consolidated balance sheets.

In the first quarter of 2025, the Company completed debt neutral liability management activities. The Company issued $1 billion of senior unsecured notes. This offering included $400 million aggregate principal amount of 5.35 percent notes due 2035 and $600 million aggregate principal amount of 5.95 percent notes due 2055. The Company used the proceeds to complete cash tender offers for certain debt securities. In total, $943 million aggregate principal amount was tendered and retired. As a result, the Company recognized a pretax loss of $60 million on the early extinguishment of debt, included in "Sundry income (expense) - net" in the consolidated statements of income, related to Corporate.

In the third quarter of 2025, the Company issued $1.4 billion of senior unsecured notes. This offering included $750 million aggregate principal amount of 4.80 percent notes due 2031 and $650 million aggregate principal amount of 5.65 percent notes due 2036. Additionally, the Company redeemed $55 million aggregate principal amount of 9.40 percent notes due 2039. As a result of the redemption, the Company recognized a pretax loss of $18 million on the early extinguishment of debt, included in "Sundry income (expense) - net" in the consolidated statements of income, related to Corporate.

In 2025, the Company issued an aggregate principal amount of $378 million of InterNotes®. Additionally, the Company repaid $334 million of long-term debt at maturity.

The Company may at any time repurchase certain debt securities in the open market or in privately negotiated transactions subject to: the applicable terms under which any such debt securities were issued, certain internal approvals of the Company, and applicable laws and regulations of the relevant jurisdiction in which any such potential transactions might take place. This in no way obligates the Company to make any such repurchases nor should it be considered an offer to do so.

TDCC’s public debt instruments and primary, private credit agreements contain, among other provisions, certain customary restrictive covenant and default provisions. TDCC’s most significant debt covenant with regard to its financial position is the obligation to maintain the ratio of its consolidated indebtedness to consolidated capitalization at no greater than 0.70 to 1.00 at any time the aggregate outstanding amount of loans under the Five Year Competitive Advance and Revolving Credit Facility Agreement ("Revolving Credit Agreement") equals or exceeds $500 million. The ratio of TDCC’s consolidated indebtedness as defined in the Revolving Credit Agreement was 0.48 to 1.00 at December 31, 2025. Management believes TDCC was in compliance with all of its covenants and default provisions at December 31, 2025. For information on TDCC's debt covenants and default provisions, see Note 14. There were no material changes to the debt covenants and default provisions related to TDCC’s outstanding long-term debt and primary, private credit agreements in 2025.

Dow Inc. is obligated, substantially concurrently with the issuance of any guarantee in respect of outstanding or committed indebtedness under the Revolving Credit Agreement, to enter into a supplemental indenture with TDCC and the trustee under TDCC’s existing 2008 base indenture governing certain notes issued by TDCC. Under such supplemental indenture, Dow Inc. will guarantee all outstanding debt securities and all amounts due under such existing base indenture and will become subject to certain covenants and events of default under the existing base indenture.

In addition, the Revolving Credit Agreement includes an event of default which would be triggered in the event Dow Inc. incurs or guarantees third party indebtedness for borrowed money in excess of $250 million or engages in any material activity or directly owns any material assets, in each case, subject to certain conditions and exceptions. Dow Inc. may, at its option, cure the event of default by delivering an unconditional and irrevocable guarantee to the administrative agent within thirty days of the event or events giving rise to such event of default.

No such events have occurred or have been triggered at the time of the filing of this Annual Report on Form 10-K. See Note 14 to the Consolidated Financial Statements for information related to TDCC’s notes payable and long-term debt activity and information on TDCC’s debt covenants and default provisions.

While taking into consideration the current economic environment, management expects that the Company will continue to have sufficient liquidity and financial flexibility to meet all of its business obligations.

Credit Ratings

TDCC's credit ratings at January 31, 2026 were as follows:

On February 21, 2025, Standard & Poor's affirmed TDCC's BBB and A-2 rating, and revised its outlook to negative from stable. Standard & Poor's decision was made as part of their annual review process and reflects the Company's supportive financial policies, scale, liquidity and cost-advantaged footprint.

On July 7, 2025, Moody's Ratings announced a long-term credit rating change for TDCC from Baa1 to Baa2 and affirmed TDCC's P-2 rating and its outlook of negative. On July 31, 2025, Fitch Ratings announced a long-term credit rating change for TDCC from BBB+ to BBB and a short-term credit rating change from F1 to F2, with its outlook remaining stable. The credit rating agencies' decisions were made to reflect the impact of current market conditions on the Company's operating results and cash flow, including the impact of global trade policy uncertainty and capacity additions in the industry, while recognizing the Company's strong asset base, strategic cost actions and long-term commitment to maintaining investment-grade quality.

Dividends

Dow Inc. has paid dividends on a quarterly basis and expects to continue to do so, subject to approval by the Board. On July 24, 2025, the Company announced a 50 percent reduction to its quarterly dividend. The following tables provide information on dividends declared and paid to common stockholders:

TDCC

TDCC has committed to fund Dow Inc.'s dividends paid to common stockholders and share repurchases, as approved by the Board from time to time, as well as certain governance expenses. Funding is accomplished through intercompany loans. TDCC's Board of Directors reviews and determines a dividend distribution to Dow Inc. to settle the intercompany loans. For the year ended December 31, 2025, TDCC declared $1,491 million of dividends and paid $1,503 million of dividends to Dow, Inc. ($2,578 million of dividends declared and $2,485 million of dividends paid to Dow, Inc. for the year ended December 31, 2024). At December 31, 2025, TDCC's intercompany loan balance with Dow Inc. was insignificant. See Note 24 to the Consolidated Financial Statements for additional information.

Share Repurchase Program

On April 13, 2022, the Board approved a share repurchase program authorizing up to $3 billion for the repurchase of the Company's common stock, with no expiration date. The Company did not repurchase any of its common stock in 2025. At December 31, 2025, approximately $931 million of the share repurchase program authorization remained available for repurchases. As previously announced, the Company intends to repurchase shares at a minimum to cover dilution over the economic cycle. The Company may from time to time expand its share repurchases beyond dilution, based on a number of factors including macroeconomic conditions, free cash flow generation, and the Dow share price. Any share repurchases, when coupled with the Company's dividends, are intended to implement the long-term strategy of targeting shareholder remuneration of approximately 65 percent over the economic cycle.

Pension Plans

The Company has both funded and unfunded defined benefit pension plans in the United States and a number of other countries. The Company’s funding policy is to contribute to funded plans when pension laws and/or economics either require or encourage funding. In 2025 and 2024, the Company contributed $209 million and $121 million to its pension plans, respectively, including contributions to fund benefit payments for its unfunded pension plans. Additionally, in the second quarter of 2024, the Company received a pension plan reversion of approximately $70 million for a portion of the excess funding of one of its plans in Europe, included in "Other assets and liabilities, net" in the consolidated statements of cash flows. The Company expects to contribute approximately $180 million to its pension plans in 2026.

In the fourth quarter of 2025, as part of its ongoing pension derisking initiatives, the Company 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 provided with various benefit payment or distribution options. The Company also terminated a certain European pension plan, with the plan purchasing nonparticipating annuity contracts for the benefit of plan participants. These transactions were funded with existing plan assets and did not require any cash funding from the Company. These actions resulted in non-cash settlement charges of $323 million, primarily related to the accelerated recognition of the accumulated actuarial losses of the plans. Additional actions by the Company resulted in total noncash settlement charges across all plans of $342 million for the year ended December 31, 2025.

See Note 19 to the Consolidated Financial Statements for additional information related to the Company’s pension plans, including pension plan terminations.

Restructuring

The 2025 Restructuring Program is expected to result in additional cash expenditures of approximately $625 million primarily over the next four years and consist primarily of severance and related benefit costs, implementation costs related to decommissioning and demolition and additional costs associated with exit and disposal activities. Restructuring implementation costs totaled $53 million for the year ended December 31, 2025.

Restructuring implementation and efficiency costs related to the 2023 Restructuring Program were $50 million for the year ended December 31, 2025 ($230 million for the year ended December 31, 2024).

The Company expects to incur additional costs in the future related to its restructuring activities, which will be recognized as incurred. The Company also expects to incur additional employee-related costs, including involuntary termination benefits related to its other optimization activities. These costs cannot be reasonably estimated at this time. See Note 5 to the Consolidated Financial Statements for additional information on the Company's restructuring activities.

Contractual Obligations

The following table summarizes the Company’s contractual obligations, commercial commitments and expected cash requirements for interest at December 31, 2025. Additional information related to these obligations can be found in Notes 14, 15, 16 and 19 to the Consolidated Financial Statements.

1. Excludes unamortized debt discount and issuance costs of $226 million. Includes finance lease obligations of $1,126 million and net fair value hedge adjustment gains of $27 million.

2. Cash requirements for interest on long-term debt was calculated using current interest rates at December 31, 2025, and includes $130 million of various floating rate notes.

3. Includes imputed interest of $282 million.

4. Includes a $1.3 billion purchase commitment for the use of a water supply reservoir asset expected to commence in 2028, as discussed in Note 15 to the Consolidated Financial Statements, and outstanding purchase orders and other commitments greater than $1 million obtained through a survey conducted within the Company. The increase from December 31, 2024 was primarily due to supply agreements related to the Company's Fort Saskatchewan Path2Zero project and contract term extensions.

5. Includes liabilities related to asbestos litigation, environmental remediation, legal matters and other noncurrent liabilities. In addition to these items, Dow Inc. includes liabilities related to noncurrent obligations with DuPont and Corteva. The table excludes uncertain tax positions due to uncertainties in the timing of the effective settlement of tax positions with the respective taxing authorities. The table also excludes deferred revenue as it does not represent future cash requirements arising from contractual payment obligations.

The Company expects to meet its contractual obligations through its normal sources of liquidity and believes it has the financial resources to satisfy these contractual obligations.

Off-Balance Sheet Arrangements

Off-balance sheet arrangements are obligations the Company has with nonconsolidated entities related to transactions, agreements or other contractual arrangements. The Company holds variable interests in joint ventures accounted for under the equity method of accounting. The Company is not the primary beneficiary of these joint ventures and therefore is not required to consolidate these entities (see Note 23 to the Consolidated Financial Statements). In addition, see Note 13 to the Consolidated Financial Statements for information regarding the transfer of financial assets.

Guarantees arise during the ordinary course of business from relationships with customers, committed accounts receivable facilities and nonconsolidated affiliates when the Company undertakes an obligation to guarantee the performance of others if specific triggering events occur. Additional information related to guarantees can be found in the “Guarantees” section of Note 15 to the Consolidated Financial Statements.

Fair Value Measurements

See Note 19 to the Consolidated Financial Statements for information related to fair value measurements of pension and other postretirement benefit plan assets; see Note 21 for information related to other-than-temporary impairments; and, see Note 22 for additional information concerning fair value measurements.