Dow Inc.
04/24/2026 | Press release | Distributed by Public on 04/24/2026 05:31
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
| MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
This Quarterly Report on Form 10-Q is a combined report being filed by Dow Inc. and The Dow Chemical Company and its consolidated subsidiaries ("TDCC" and together with Dow Inc., "Dow" or the "Company") due to the parent/subsidiary relationship between Dow Inc. and TDCC. The information reflected in the report is equally applicable to both Dow Inc. and TDCC, except where otherwise noted. Each of Dow Inc. and TDCC is filing information in this report on its own behalf and neither company makes any representation to the information relating to the other company.
Pursuant to General Instruction H(1)(a) and (b) for Form 10-Q "Omission of Information by Certain Wholly-Owned Subsidiaries," TDCC is filing this Form 10-Q with the reduced disclosure format.
Except as otherwise indicated by the context, the term "Union Carbide" means Union Carbide Corporation, a wholly owned subsidiary of the Company. Additionally, the term "Diamond Infrastructure Solutions" means Dow InfraCo, LLC, an entity that owns and operates infrastructure assets at certain Dow locations on the U.S. Gulf Coast and became a consolidated variable interest entity upon the sale of a portion of the entity's membership interests on May 1, 2025. The term "EMEAI" refers to the geographic region of Europe, Middle East, Africa and India.
Dow's website and its content are not deemed incorporated by reference into this report.
STATEMENT ON MIDDLE EAST CONFLICT
During the first quarter of 2026, heightened geopolitical tensions in the Middle East impacted conditions in and around the Strait of Hormuz, a critical maritime area through which a significant portion of global crude oil, refined products, and related chemical feedstocks are transported. The current conflict and geopolitical conditions in the Middle East have impacted the global chemical industry, resulting in damage to upstream oil and gas infrastructure and logistics challenges in the geographic region. The global supply chain disruptions have led to supply constraints in Asia Pacific and Europe, and lengthened transit times as production has increased in other regions to compensate for reduced production in the Middle East. Additionally, the Company's joint ventures located in the Middle East have been directly impacted by the conflict.
The Company operates in cost-advantaged geographic regions, including the U.S. & Canada and Latin America, which have not been directly impacted by the Middle East conflict. Additionally, the Company's feedstock flexibility has allowed the Company to operate its European assets competitively, despite the volatile energy and feedstock environment.
OUTLOOK
The Company is seeing rapid, positive momentum from its announced pricing actions in every business and every geographic region, as well as constructive impacts to its operating rates. Dow's purpose-built asset footprint, well-established supply chain routes and leading asset reliability are being leveraged to prioritize its customers and navigate the conflict in the Middle East. At the same time, Dow's teams remain focused on capturing growth in attractive markets while delivering cost savings and cash support. Transform to Outperform aims to radically simplify how Dow operates, reengineer processes and cost structures, and modernize how Dow serves its customers. These collective actions position the Company for improved growth and productivity, expanded margins and higher shareholder returns across the cycle.
OVERVIEW
The following is a summary of the results for the three months ended March 31, 2026:
•The Company reported net sales in the first quarter of 2026 of $9.8 billion, down 6 percent from $10.4 billion in the first quarter of 2025; Packaging & Specialty Plastics (down 7 percent), Industrial Intermediates & Infrastructure (down 8 percent) and flat in Performance Materials & Coatings. Net sales decreased in the U.S. & Canada (down 10 percent), Asia Pacific (down 6 percent) and EMEAI (down 3 percent), and was flat in Latin America.
•Local price decreased 7 percent compared with the first quarter of 2025 and was down in all operating segments; Packaging & Specialty Plastics (down 9 percent), Industrial Intermediates & Infrastructure (down 8 percent) and Performance Materials & Coatings (down 4 percent). Local price was down in all geographic regions; EMEAI and Latin America (both down 9 percent), Asia Pacific (down 8 percent) and the U.S. & Canada (down 6 percent).
•Volume decreased 2 percent compared with the first quarter of 2025 and was mixed by operating segment; Packaging & Specialty Plastics (down 1 percent), Industrial Intermediates & Infrastructure (down 4 percent) and Performance Materials & Coatings (up 2 percent). Volume increased in Latin America (up 9 percent) and was more than offset by a decrease in the U.S. & Canada (down 4 percent) and EMEAI (down 2 percent). Volume was flat in Asia Pacific.
•Currency had a favorable impact of 3 percent on net sales compared with the first quarter of 2025, driven by EMEAI (up 8 percent) and Asia Pacific (up 2 percent).
•Restructuring and asset related charges - net was $27 million in the first quarter of 2026, compared with $208 million in the first quarter of 2025. The first quarter of 2026 included charges related to severance and related benefit costs associated with Transform to Outperform and the first quarter of 2025 included primarily severance and related benefits costs associated with the 2025 Restructuring Program.
•Equity in losses of nonconsolidated affiliates was $303 million in the first quarter of 2026, compared with equity in losses of nonconsolidated affiliates of $20 million in the first quarter of 2025. The first quarter of 2026 included losses of $292 million primarily related to an adjustment to the Company's liability associated with its guarantee of Sadara's project financing debt and was related to Packaging & Specialty Plastics ($81 million) and Industrial Intermediates & Infrastructure ($211 million). Additionally, the Company suspended recognition of its share of equity losses from Sadara in the first quarter of 2026.
•Net income attributable to noncontrolling interests was $88 million in the first quarter of 2026, compared with $17 million in the first quarter of 2025. The increase reflects the ownership interest in Diamond Infrastructure Solutions held by InfraPark Holdings, LLC ("InfraPark"), a subsidiary of a fund managed by Macquarie Asset Management. InfraPark purchased 40 percent of the membership interests in Diamond Infrastructure Solutions in the second quarter of 2025 and an additional 9 percent in the third quarter of 2025.
•Net loss available for Dow Inc. and TDCC common stockholder(s) was $533 million and $531 million in the first quarter of 2026, compared with $307 million and $305 million, respectively, in the first quarter of 2025. Loss per share for Dow Inc. was $0.74 per share in the first quarter of 2026, compared with $0.44 per share in the first quarter of 2025.
•Cash provided by operating activities - continuing operations was $1,124 million in the first quarter of 2026, up $1,020 million compared with the first quarter of 2025. The increase reflects a cash payment of approximately $1.0 billion (net of Canadian tax withholding) received by the Company on March 2, 2026, as part of a 2025 damages judgment and associated fees related to the ethylene asset matter with Nova Chemicals Corporation ("Nova").
•On February 18, 2026, Standard & Poor's announced a long-term credit rating change for TDCC from BBB to BBB- and a short-term credit rating change from A-2 to A-3, with its outlook remaining negative.
•On February 27, 2026, Moody's Ratings announced a long-term credit rating change for TDCC from Baa2 to Baa3 and a short-term credit rating change from P-2 to P-3, with its outlook remaining negative.
•On March 16, 2026, Fitch Ratings affirmed TDCC's BBB and F2 rating, with its outlook remaining stable.
In addition, the following events occurred subsequent to the first quarter of 2026:
•On April 9, 2026, Dow Inc. announced results from the 2026 Annual Stockholder Meeting, including the election of all incumbent directors to its Board of Directors ("Board").
•On April 9, 2026, Dow Inc. announced that its Board declared a dividend of $0.35 per share, payable on June 12, 2026, to shareholders of record as of May 29, 2026. This marks the 459th consecutive dividend paid by the Company or its affiliates since 1912.
•On April 14, 2026, Dow Inc. announced that its Board appointed Karen S. Carter as Chief Executive Officer of the Company, effective July 1, 2026. Ms. Carter will succeed Jim Fitterling, who will transition from Chief Executive Officer to Executive Chair effective July 1, 2026. The Board also appointed Karen S. Carter to serve as a Director of the Board, effective July 1, 2026.
RESULTS OF OPERATIONS
Net Sales
The following tables summarize net sales and sales variances by operating segment and geographic region from the prior year:
| Summary of Sales Results | Three Months Ended | |||||||
| In millions | Mar 31, 2026 | Mar 31, 2025 | ||||||
| Net sales | $ | 9,794 | $ | 10,431 | ||||
| Sales Variances by Operating Segment and Geographic Region |
Three Months Ended Mar 31, 2026
|
|||||||||||||
| Local Price & Product Mix | Currency | Volume | Total | |||||||||||
| Percentage change from prior year | ||||||||||||||
| Packaging & Specialty Plastics | (9) | % | 3 | % | (1) | % | (7) | % | ||||||
| Industrial Intermediates & Infrastructure | (8) | 4 | (4) | (8) | ||||||||||
| Performance Materials & Coatings | (4) | 2 | 2 | - | ||||||||||
| Total | (7) | % | 3 | % | (2) | % | (6) | % | ||||||
| Total, excluding the Hydrocarbons & Energy business | (7) | % | 3 | % | - | % | (4) | % | ||||||
| U.S. & Canada | (6) | % | - | % | (4) | % | (10) | % | ||||||
| EMEAI | (9) | 8 | (2) | (3) | ||||||||||
| Asia Pacific | (8) | 2 | - | (6) | ||||||||||
| Latin America | (9) | - | 9 | - | ||||||||||
| Total | (7) | % | 3 | % | (2) | % | (6) | % | ||||||
Net sales in the first quarter of 2026 were $9.8 billion, down 6 percent from $10.4 billion in the first quarter of 2025, with local price down 7 percent, volume down 2 percent, and a favorable currency impact of 3 percent. Net sales decreased in all operating segments except Performance Materials & Coatings and all geographic regions except Latin America. Local price decreased in all geographic regions and all operating segments, with Packaging & Specialty Plastics down 9 percent, Industrial Intermediates & Infrastructure down 8 percent, and Performance Materials & Coatings down 4 percent. Volume decreased 2 percent, driven by U.S. & Canada (down 4 percent) and EMEAI (down 2 percent) partially offset by increases in Latin America (up 9 percent). Volume decreased in Packaging & Specialty Plastics (down 1 percent) and Industrial Intermediates & Infrastructure (down 4 percent) and increased in Performance Materials & Coatings (up 2 percent). Currency favorably impacted net sales by 3 percent, driven by EMEAI (up 8 percent) and Asia Pacific (up 2 percent). Excluding the Hydrocarbons & Energy business, net sales decreased 4 percent.
Cost of Sales
Cost of sales ("COS") was $9.2 billion in the first quarter of 2026, compared with $9.8 billion in the first quarter of 2025. COS decreased in the first quarter of 2026 primarily due to lower raw material, feedstock and energy costs and the impact of the Company's cost reduction initiatives. COS as a percentage of net sales was 93.5 percent in the first quarter of 2026 (93.6 percent in the first quarter of 2025).
Research and Development Expenses
Research and development ("R&D") expenses totaled $181 million in the first quarter of 2026, compared with $200 million in the first quarter of 2025. R&D expenses decreased in the first quarter of 2026 primarily due to the Company's cost reduction initiatives.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses totaled $417 million in the first quarter of 2026, compared with $366 million in the first quarter of 2025. SG&A expenses increased in the first quarter of 2026 primarily due to costs to achieve Transform to Outperform, partially offset by the impact of the Company's cost reduction initiatives.
Amortization of Intangibles
Amortization of intangibles was $46 million in the first quarter of 2026 compared with $76 million in the first quarter of 2025. Amortization of intangibles decreased primarily due to certain intangible assets becoming fully amortized in 2025.
Restructuring and Asset Related Charges - Net
Transform to Outperform
On January 26, 2026, the Dow Inc. Board of Directors ("Board") approved Transform to Outperform, a comprehensive set of actions designed to improve near-term Operating EBITDA by simplifying the Company's operating model, reducing its cost structure and delivering faster growth. As a result of these actions, in the first quarter of 2026, the Company recorded pretax charges of $27 million for severance and related benefit costs, related to Corporate. See Note 4 to the Consolidated Financial Statements for additional information.
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. As a result of these actions, in the first quarter of 2025, the Company recorded pretax charges of $207 million for severance and related benefits costs, related to Corporate. See Note 4 to the Consolidated Financial Statements for additional information.
2023 Restructuring Program
Actions related to the restructuring program approved by the Board on January 25, 2023 were complete at the end of the second quarter of 2025. In the first quarter of 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 4 to the Consolidated Financial Statements for additional information.
Equity in Losses of Nonconsolidated Affiliates
The Company's share of equity in losses of nonconsolidated affiliates was $303 million in the first quarter of 2026, compared with equity in losses of nonconsolidated affiliates of $20 million in the first quarter of 2025. The increase was primarily related to an adjustment to the Company's liability associated with its guarantee of Sadara's project financing debt and was related to Packaging & Specialty Plastics ($81 million) and Industrial Intermediates & Infrastructure ($211 million), and was partially offset by the Company's suspension of recognition of its share of equity losses from Sadara in the first quarter of 2026. Cash dividends from nonconsolidated affiliates were $199 million for the first three months of 2026, compared with $113 million for the first three months of 2025. See Notes 9 and 11 for additional information.
Sundry Income (Expense) - Net
Sundry income (expense) - net for the three months ended March 31, 2026 was income of $121 million, compared with income of $13 million for the three months ended March 31, 2025. The increase in sundry income is primarily due to foreign currency exchange gains, a gain associated with the Nova ethylene asset matter, and the absence of a loss on early extinguishment of debt that occurred in the first quarter of 2025, partially offset by lower non-operating pension and postretirement benefit plan credits. See Notes 5, 11 and 15 to the Consolidated Financial Statements for additional information.
Interest Expense and Amortization of Debt Discount
Interest expense and amortization of debt discount was $219 million in the first quarter of 2026, compared with $216 million in the first quarter of 2025. See Liquidity and Capital Resources in Management's Discussion and Analysis of Financial Condition and Results of Operations for additional information.
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. In the first quarter of 2026, the Company reported a provision for income taxes of $55 million, resulting in a negative effective tax rate of 14.1 percent. In the first quarter of 2025, the Company reported a credit for income taxes of $84 million, resulting in an effective tax rate of 22.5 percent. The reported provision (credit) for income taxes and effective tax rates for TDCC are substantially similar.
The provision for income taxes for the first quarter of 2026 was unfavorably impacted by tax expense related to the Nova ethylene asset matter, partially offset by tax benefits related to changes in uncertain tax positions. The credit for income taxes for the first quarter of 2025 was primarily due to the geographic mix of earnings.
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 GloBE into their legislation and several others are expected to enact these rules in the future. To date, such legislation has not materially impacted the Company's effective tax rate.
Net Income Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests was $88 million in the first quarter of 2026, compared with $17 million in the first quarter of 2025. The increase in net income attributable to noncontrolling interests reflects the ownership interest in Diamond Infrastructure Solutions held by InfraPark. InfraPark purchased 40 percent of the membership interests in Diamond Infrastructure Solutions in the second quarter of 2025 and an additional 9 percent in the third quarter of 2025. See Notes 14 and 19 to the Consolidated Financial Statements for additional information.
Net Loss Available for Common Stockholder(s)
Dow Inc.
Net loss available for Dow Inc. common stockholders was $533 million, or $0.74 per share, in the first quarter of 2026, compared with $307 million, or $0.44 per share, in the first quarter of 2025. See Note 7 to the Consolidated Financial Statements for details on Dow Inc.'s earnings per share calculations.
TDCC
Net loss available for the TDCC common stockholder was $531 million in the first quarter of 2026, compared with $305 million in the first quarter of 2025. TDCC's common shares are owned solely by Dow Inc.
SEGMENT RESULTS
For further discussion of the Company's segments, see Part I, Item 1. Business of the combined Dow Inc. and TDCC Annual Report on Form 10-K for the fiscal year ended December 31, 2025 ("2025 10-K"), filed with the SEC on February 3, 2026.
Dow's measure of profit/loss for segment reporting purposes is Operating EBIT as this is the manner in which the chief executive officer, chief operating officer, chief financial officer, general counsel and corporate secretary, and senior vice president of corporate development, together the "executive committee" and chief operating decision maker ("CODM"), assesses performance and allocates resources. The CODM compares quarterly results to both the year-ago and sequential periods to assess performance and allocate resources to each segment. The Company defines Operating EBIT as earnings (i.e., "Loss before income taxes") before interest, excluding the impact of significant items. Operating EBIT by segment includes all operating items relating to the businesses; items that principally apply to Dow as a whole are assigned to Corporate. See Note 20 to the Consolidated Financial Statements for reconciliations of these measures.
PACKAGING & SPECIALTY PLASTICS
| Packaging & Specialty Plastics | Three Months Ended | |||||||
| In millions | Mar 31, 2026 | Mar 31, 2025 | ||||||
| Net sales | $ | 4,919 | $ | 5,310 | ||||
| Operating EBIT | $ | 208 | $ | 342 | ||||
|
Equity earnings (losses) 1
|
$ | (63) | $ | 39 | ||||
1.The three months ended March 31, 2026 includes a significant item for $81 million of losses related to an adjustment to the Company's liability associated with its guarantee of Sadara's project financing debt.
| Packaging & Specialty Plastics | Three Months Ended | ||||
| Percentage change from prior year | Mar 31, 2026 | ||||
| Change in Net Sales from Prior Period due to: | |||||
| Local price & product mix | (9) | % | |||
| Currency | 3 | ||||
| Volume | (1) | ||||
| Total | (7) | % | |||
Packaging & Specialty Plastics net sales were $4,919 million in the first quarter of 2026, down 7 percent from net sales of $5,310 million in the first quarter of 2025, with local price down 9 percent, volume down 1 percent and currency up 3 percent. Local price decreased in Packaging and Specialty Plastics in all geographic regions, driven by lower pricing of polyethylene and functional polymers. Local price decreased in Hydrocarbons & Energy in all geographic regions, driven by olefins and aromatics in the U.S. & Canada and EMEAI. Volume increased in Packaging and Specialty Plastics across all geographic regions, driven by higher volumes in polyethylene, partially offset by lower non-recurring licensing sales. Volume decreased in Hydrocarbons & Energy due to planned maintenance activity in the U.S. Gulf Coast and the impact from idling an integrated ethylene cracker in EMEAI in mid-2025. Currency had a favorable impact on sales in both businesses and was primarily driven by EMEAI.
Operating EBIT was $208 million in the first quarter of 2026, down $134 million from Operating EBIT of $342 million in the first quarter of 2025. Operating EBIT decreased primarily due to lower integrated margins, increased planned maintenance costs, and lower equity earnings, which were partially offset by the impact of the Company's cost reduction initiatives.
INDUSTRIAL INTERMEDIATES & INFRASTRUCTURE
| Industrial Intermediates & Infrastructure | Three Months Ended | |||||||
| In millions | Mar 31, 2026 | Mar 31, 2025 | ||||||
| Net sales | $ | 2,626 | $ | 2,855 | ||||
| Operating EBIT | $ | (118) | $ | (128) | ||||
|
Equity losses 1
|
$ | (242) | $ | (58) | ||||
1.The three months ended March 31, 2026 includes a significant item for $211 million of losses related to an adjustment to the Company's liability associated with its guarantee of Sadara's project financing debt.
| Industrial Intermediates & Infrastructure | Three Months Ended | ||||
| Percentage change from prior year | Mar 31, 2026 | ||||
| Change in Net Sales from Prior Period due to: | |||||
| Local price & product mix | (8) | % | |||
| Currency | 4 | ||||
| Volume | (4) | ||||
| Total | (8) | % | |||
Industrial Intermediates & Infrastructure net sales were $2,626 million in the first quarter of 2026, down 8 percent from net sales of $2,855 million in the first quarter of 2025, with local price down 8 percent, volume down 4 percent and currency up 4 percent. Local prices declined across both businesses and all geographic regions. Volume decreased in Polyurethanes & Construction Chemicals in all geographic regions except Latin America, due to lower volumes from the shutdown of a higher-cost upstream propylene oxide unit in the U.S. Gulf Coast in late 2025 and the impact of the Middle East conflict. Volume decreased in Industrial Solutions driven by declines in licensing revenue and the impact of the conflict in the Middle East, which more than offset higher volumes from recent alkoxylation investments. Currency favorably impacted sales in both businesses and was driven by EMEAI.
Operating EBIT was a loss of $118 million in the first quarter of 2026, up $10 million from an Operating EBIT loss of $128 million in the first quarter of 2025. Operating EBIT increased primarily driven by lower raw material and energy costs, lower planned maintenance costs, suspended Sadara equity loss recognition, and the impact of the Company's cost reduction initiatives, partially offset by lower selling prices.
PERFORMANCE MATERIALS & COATINGS
| Performance Materials & Coatings | Three Months Ended | |||||||
| In millions | Mar 31, 2026 | Mar 31, 2025 | ||||||
| Net sales | $ | 2,080 | $ | 2,071 | ||||
| Operating EBIT | $ | 117 | $ | 49 | ||||
| Equity earnings | $ | 1 | $ | - | ||||
| Performance Materials & Coatings | Three Months Ended | ||||
| Percentage change from prior year | Mar 31, 2026 | ||||
| Change in Net Sales from Prior Period due to: | |||||
| Local price & product mix | (4) | % | |||
| Currency | 2 | ||||
| Volume | 2 | ||||
| Total | - | % | |||
Performance Materials & Coatings net sales were $2,080 million in the first quarter of 2026, flat compared to net sales of $2,071 million in the first quarter of 2025, with local price down 4 percent, volume up 2 percent, and a favorable currency impact of 2 percent. Coatings & Performance Monomers local price decreased across all geographic regions, primarily in acrylic monomers and architectural coatings. Local price decreased in Consumer Solutions in all geographic regions, except the U.S. and Canada, led by upstream siloxanes. Volume increased in Coatings & Performance Monomers driven by higher demand for acrylic monomers. Volume increased in Consumer Solutions in all geographic regions except EMEAI. Volume increased primarily in downstream silicones led by consumer and electronics. The favorable currency impact was driven by EMEAI and Asia Pacific in both businesses.
Operating EBIT was $117 million in the first quarter of 2026, up $68 million from Operating EBIT of $49 million in the first quarter of 2025. Operating EBIT increased in both businesses primarily due to the impact of the Company's cost reduction initiatives, lower planned maintenance costs, and reduced intangible asset amortization expenses in Consumer Solutions, partially offset by lower prices.
CORPORATE
| Corporate | Three Months Ended | |||||||
| In millions | Mar 31, 2026 | Mar 31, 2025 | ||||||
| Net sales | $ | 169 | $ | 195 | ||||
| Operating EBIT | $ | (53) | $ | (33) | ||||
| Equity earnings (losses) | $ | 1 | $ | (1) | ||||
Net sales for Corporate, which primarily relate to the Company's insurance operations, were $169 million in the first quarter of 2026, a decrease from net sales of $195 million in the first quarter of 2025.
Operating EBIT was a loss of $53 million in the first quarter of 2026, compared with a loss of $33 million in the first quarter of 2025. Operating EBIT decreased primarily due to higher environmental costs.
CHANGES IN FINANCIAL CONDITION
The Company had cash and cash equivalents of $4,110 million at March 31, 2026 and $3,816 million at December 31, 2025, of which $2,634 million at March 31, 2026 and $2,636 million at December 31, 2025 was held by subsidiaries in foreign countries, including U.S. territories. For each of its foreign subsidiaries, Dow 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 March 31, 2026, 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.
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 Flow Summary | Dow Inc. | TDCC | ||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||
| Mar 31, 2026 | Mar 31, 2025 | Mar 31, 2026 | Mar 31, 2025 | |||||||||||
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In millions
|
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| Cash provided by (used for): | ||||||||||||||
| Operating activities - continuing operations | $ | 1,124 | $ | 104 | $ | 1,129 | $ | 112 | ||||||
| Operating activities - discontinued operations | - | (13) | - | - | ||||||||||
| Operating activities | $ | 1,124 | $ | 91 | $ | 1,129 | $ | 112 | ||||||
| Investing activities | $ | (448) | $ | (401) | $ | (448) | $ | (401) | ||||||
| Financing activities | $ | (320) | $ | (521) | $ | (325) | $ | (542) | ||||||
Cash Flows from Operating Activities
Cash provided by operating activities from continuing operations in the first three months of 2026 was primarily driven by a cash receipt from Nova related to a judgment on the ethylene asset matter, the Company's cash earnings and dividends from equity method investments, partially offset by cash used for working capital, income tax payments and performance-based compensation. Cash provided by operating activities from continuing operations in the first three months of 2025 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 and performance-based compensation payments.
| Net Working Capital | Dow Inc. | TDCC | ||||||||||||
| Mar 31, 2026 | Dec 31, 2025 | Mar 31, 2026 | Dec 31, 2025 | |||||||||||
| In millions | ||||||||||||||
| Current assets | $ | 19,469 | $ | 18,062 | $ | 19,428 | $ | 18,027 | ||||||
| Current liabilities | 10,536 | 9,183 | 10,420 | 9,076 | ||||||||||
| Net working capital | $ | 8,933 | $ | 8,879 | $ | 9,008 | $ | 8,951 | ||||||
| Current ratio | 1.85:1 | 1.97:1 | 1.86:1 | 1.99:1 | ||||||||||
| Working Capital Metrics | Three Months Ended | |||||||
| Mar 31, 2026 | Mar 31, 2025 | |||||||
| Days sales outstanding in trade receivables | 46 | 42 | ||||||
| Days sales in inventory | 66 | 61 | ||||||
| Days payables outstanding | 56 | 59 | ||||||
Cash used for operating activities from discontinued operations in the first three months of 2025 reflected cash payments and receipts for certain agreements and matters related to the separation from DowDuPont Inc. ("DowDuPont").
Cash Flows from Investing Activities
Cash used for investing activities in the first three months of 2026 and 2025 was primarily for capital expenditures and purchases of investments, which were partially offset by proceeds from sales and maturities of investments.
The Company's capital expenditures were $503 million in the first three months of 2026, compared with $685 million in the first three months of 2025. The Company expects full year capital spending to be approximately $2.5 billion, including capital spending related to the construction of the Fort Saskatchewan Path2Zero project. As evidenced across this and prior economic cycles, the Company will proactively adjust its spending as economic conditions evolve.
Cash Flows from Financing Activities
Cash used for financing activities in the first three months of 2026 for Dow, Inc. was primarily related to dividends paid to stockholders and distributions to noncontrolling interests. TDCC included cash outflows for dividends paid to Dow Inc. Cash used for financing activities in the first three months of 2025 for Dow Inc. was primarily related to payments on long-term debt and dividends paid to stockholders, which were partially offset by proceeds from issuance of long-term debt. TDCC included cash outflows for dividends paid to Dow Inc.
Dow Inc. 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., "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.
|
Reconciliation of Free Cash Flow
|
Three Months Ended
|
|||||||
| Mar 31, 2026 | Mar 31, 2025 | |||||||
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In millions
|
||||||||
| Cash provided by operating activities - continuing operations (GAAP) | $ | 1,124 | $ | 104 | ||||
| Capital expenditures | (503) | (685) | ||||||
| Free Cash Flow (non-GAAP) | $ | 621 | $ | (581) | ||||
|
Reconciliation of Cash Flow Conversion (Cash Flow from Operations to Operating EBITDA)
|
Three Months Ended
|
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| Mar 31, 2026 | Mar 31, 2025 | |||||||
|
In millions
|
||||||||
| Net loss (GAAP) | $ | (445) | $ | (290) | ||||
| + Provision (credit) for income taxes | 55 | (84) | ||||||
| Loss before income taxes | $ | (390) | $ | (374) | ||||
| - Interest income | 42 | 28 | ||||||
| + Interest expense and amortization of debt discount | 219 | 216 | ||||||
| - Significant items ¹ | (367) | (416) | ||||||
| Operating EBIT (non-GAAP) | $ | 154 | $ | 230 | ||||
| + Depreciation and amortization | 719 | 714 | ||||||
| Operating EBITDA (non-GAAP) | $ | 873 | $ | 944 | ||||
| Cash provided by operating activities - continuing operations (GAAP) | $ | 1,124 | $ | 104 | ||||
|
Cash flow from operations to net income (GAAP) 2
|
N/A | N/A | ||||||
| Cash Flow Conversion (Cash flow from operations to Operating EBITDA) (non-GAAP) | 128.8 | % | 11.0 | % | ||||
1.The three months ended March 31, 2026 includes a loss due to change in fair value of the estimated liability associated with the Company's guarantee of Sadara's project financing debt, costs to achieve and severance and related benefit costs associated with Transform to Outperform and implementation costs associated with the Company's 2025 Restructuring Program, partially offset by a gain associated with a legal matter with Nova. The three months ended March 31, 2025 includes severance and related benefit costs associated with the Company's 2025 Restructuring Program, charges related to an arbitration agreement for historical product claims from a divested business, loss on early extinguishment of debt and restructuring charges and implementation and efficiency costs associated with the Company's 2023 Restructuring Program. See Note 20 to the Consolidated Financial Statements for additional information.
2.Cash flow from operations to net income is not applicable for the three months ended March 31, 2026 and 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, 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 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 March 31, 2026. Cash and committed and available forms of liquidity were $13.7 billion at March 31, 2026. The Company also has no substantive long-term debt maturities due until 2029. As a well-known seasoned issuer, the Company has ready access to debt capital markets, subject to market conditions, as an additional source of liquidity. 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 March 31, 2026. 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. TDCC did not issue commercial paper subsequent to March 31, 2026.
Committed Credit Facilities
The Company also has the ability to access liquidity through TDCC's committed and available credit facilities. At March 31, 2026, TDCC had total committed and available credit facilities of $8.2 billion.
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 March 31, 2026.
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 is set to expire in November 2028. The Company also maintains a committed accounts receivable facility in Europe where eligible trade accounts receivable, up to €400 million, may be sold at any point in time and is set to expire in March 2029. In the first three months of 2026, there were no sales of receivables under the committed accounts receivable facilities ($100 million in sales of receivables in the first three months of 2025). No sold receivables were outstanding with the facilities at March 31, 2026.
In addition, the Company has an uncommitted accounts receivable facility in the United States providing additional liquidity, set to expire in November 2028. The Company also maintains an uncommitted accounts receivable facility in Europe providing additional liquidity, set to expire in March 2029. There were no sales of receivables under the uncommitted accounts receivable facilities in the first three months of 2026 ($147 million in sales of receivables in the first three months of 2025). No sold receivables were outstanding with the facilities at March 31, 2026. See Note 10 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. There were no sales of receivables under the discounting facilities in the first three months of 2026 ($285 million sales of receivables in the first three months of 2025). No sold receivables were outstanding with the facilities at March 31, 2026. See Note 10 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.
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 March 31, 2026, the Company had monetized $193 million of its existing COLI policies' surrender value ($197 million at December 31, 2025). See Note 5 to the Consolidated Financial Statements for additional information.
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."
| Total Debt | Dow Inc. | TDCC | ||||||||||||
| Mar 31, 2026 | Dec 31, 2025 | Mar 31, 2026 | Dec 31, 2025 | |||||||||||
|
In millions
|
||||||||||||||
| Notes payable | $ | 88 | $ | 90 | $ | 88 | $ | 90 | ||||||
| Long-term debt due within one year | 793 | 222 | 793 | 222 | ||||||||||
| Long-term debt | 17,254 | 17,849 | 17,254 | 17,849 | ||||||||||
| Gross debt | $ | 18,135 | $ | 18,161 | $ | 18,135 | $ | 18,161 | ||||||
| - Cash and cash equivalents | 4,110 | 3,816 | 4,110 | 3,816 | ||||||||||
|
- Marketable securities 1
|
410 | 385 | 410 | 385 | ||||||||||
| Net debt | $ | 13,615 | $ | 13,960 | $ | 13,615 | $ | 13,960 | ||||||
| Total equity | $ | 16,763 | $ | 17,522 | $ | 16,965 | $ | 17,726 | ||||||
| Gross debt as a percent of total capitalization | 52.0 | % | 50.9 | % | 51.7 | % | 50.6 | % | ||||||
| Net debt as a percent of total capitalization | 44.8 | % | 44.3 | % | 44.5 | % | 44.1 | % | ||||||
1.Included in "Other current assets" in the consolidated balance sheets.
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 to consolidated capitalization as defined in the Revolving Credit Agreement was 0.49 to 1.00 at March 31, 2026. Management believes TDCC was in compliance with all of its covenants and default provisions at March 31, 2026. For information on TDCC's debt covenants and default provisions, see Note 14 to the Consolidated Financial Statements included in the 2025 10-K. 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 the first three months of 2026.
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
At March 31, 2026, TDCC's credit ratings were as follows:
| Credit Ratings | Long-Term Rating | Short-Term Rating | Outlook | ||||||||
| Fitch Ratings | BBB | F2 | Stable | ||||||||
| Moody's Ratings | Baa3 | P-3 | Negative | ||||||||
| Standard & Poor's | BBB- | A-3 | Negative | ||||||||
On February 18, 2026, Standard & Poor's announced a long-term credit rating change for TDCC from BBB to BBB- and a short-term credit rating change from A-2 to A-3, with its outlook remaining negative. On February 27, 2026, Moody's Ratings announced a long-term credit rating change for TDCC from Baa2 to Baa3 and a short-term credit rating change from P-2 to P-3, with its outlook remaining negative. The credit rating agencies' decisions reflect the impact of market conditions on the Company's operating results and cash flow, while recognizing the Company's
liquidity, strong asset base and strategic cost actions. On March 16, 2026, Fitch Ratings affirmed TDCC's BBB and F2 rating, with its outlook remaining stable.
Dividends
Dow Inc.
Dow Inc. has paid dividends on a quarterly basis since the separation from DowDuPont and expects to continue to do so, subject to approval by the Board. The following table summarizes dividends declared and paid to common stockholders of record in 2026:
| Dow Inc. Dividends Declared and Paid | |||||||||||
| Declaration Date | Record Date | Payment Date | Amount (per share) | ||||||||
| February 12, 2026 | February 27, 2026 | March 13, 2026 | $ | 0.35 | |||||||
| April 9, 2026 | May 29, 2026 | June 12, 2026 | $ | 0.35 | |||||||
TDCC
TDCC has committed to fund Dow Inc.'s dividends paid to common stockholders and share repurchases, as approved by the Board, as well as certain governance expenses. Funding is accomplished through intercompany loans. TDCC's Board reviews and determines a dividend distribution to Dow Inc. to settle the intercompany loans. For the three months ended March 31, 2026, TDCC declared and paid a dividend to Dow Inc. of $257 million ($515 million dividend declared and paid to Dow Inc. for the three months ended March 31, 2025). At March 31, 2026, TDCC's intercompany loan balance with Dow Inc. was insignificant.
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 the first quarter of 2026 or 2025. At March 31, 2026, 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 of Operating Net Income over the economic cycle.
Pension Plans
The Company has both funded and unfunded defined benefit pension plans that cover employees in the United States and a number of other countries. The Company's funding policy is to contribute to funded plans when pension laws and/or economics either require or encourage funding. See Note 15 to the Consolidated Financial Statements and Note 19 to the Consolidated Financial Statements included in the 2025 10-K for additional information related to the Company's pension plans.
Restructuring and Transform to Outperform
The 2025 Restructuring Program is expected to result in additional cash expenditures of approximately $445 million primarily over the next three years and consists primarily of severance and related benefits costs, implementation costs related to decommissioning and demolition and additional costs associated with exit and disposal activities. Restructuring implementation costs totaled $21 million for the three months ended March 31, 2026.
Transform to Outperform is expected to result in additional cash expenditures of approximately $1.2 billion over the next two years and consists of severance and related benefit costs, implementation costs, and other costs incurred to achieve the intended uplift in Operating EBITDA. Costs to achieve totaled $53 million for the three months ended March 31, 2026.
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, including Transform to Outperform. These costs cannot be reasonably estimated at this time. See Note 4 to the Consolidated Financial Statements for additional information on the Company's restructuring activities.
Contractual Obligations
Information related to the Company's contractual obligations, commercial commitments and expected cash requirements for interest can be found in Notes 14, 15, 16 and 19 to the Consolidated Financial Statements included in the 2025 10-K. With the exception of the items noted below, there have been no material changes in the Company's contractual obligations since December 31, 2025.
|
Contractual Obligations at Mar 31, 2026
|
Payments Due In | ||||||||||||||||
| In millions | 2026 | 2027-2028 | 2029-2030 | 2031 and beyond | Total | ||||||||||||
| Dow Inc. | |||||||||||||||||
|
Operating leases 1
|
$ | 303 | $ | 653 | $ | 354 | $ | 503 | $ | 1,813 | |||||||
|
Other noncurrent obligations 2
|
$ | - | $ | 756 | $ | 542 | $ | 2,377 | $ | 3,675 | |||||||
| Total | $ | 303 | $ | 1,409 | $ | 896 | $ | 2,880 | $ | 5,488 | |||||||
| TDCC | |||||||||||||||||
|
Operating leases 1
|
$ | 303 | $ | 653 | $ | 354 | $ | 503 | $ | 1,813 | |||||||
|
Other noncurrent obligations 2
|
$ | - | $ | 756 | $ | 542 | $ | 2,239 | $ | 3,537 | |||||||
| Total | $ | 303 | $ | 1,409 | $ | 896 | $ | 2,742 | $ | 5,350 | |||||||
1.Includes imputed interest of $319 million.
2.Includes liabilities related to asbestos litigation, environmental remediation, legal matters and other noncurrent liabilities. Also includes the updated fair value of the project financing debt guarantee liability with Sadara, which increased $298 million in the first quarter of 2026. In addition to these items, Dow Inc. includes liabilities related to noncurrent obligations with DuPont de Nemours, Inc. and Corteva, Inc. 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.
Fair Value Measurements
See Note 18 to the Consolidated Financial Statements for information concerning fair value measurements.
OTHER MATTERS
Critical Accounting Estimates
The preparation of financial statements and related disclosures in accordance with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 1 to the Consolidated Financial Statements included in the 2025 10-K describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. The Company's critical accounting policies that are impacted by judgments, assumptions and estimates are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in the 2025 10-K. Since December 31, 2025, there have been no material changes in the Company's accounting policies that are impacted by judgments, assumptions and estimates.
Asbestos-Related Matters of Union Carbide Corporation
Union Carbide 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 Union Carbide sold in the past, alleged exposure to asbestos-containing products located on Union Carbide's premises, and Union Carbide's responsibility for asbestos suits filed against a former Union Carbide 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 Union Carbide's products.
The table below provides information regarding asbestos-related claims pending against Union Carbide and Amchem based on criteria developed by Union Carbide and its external consultants:
| Asbestos-Related Claim Activity | 2026 | 2025 | ||||||
| Claims unresolved at Jan 1 | 7,158 | 5,813 | ||||||
| Claims filed | 1,016 | 1,025 | ||||||
| Claims settled, dismissed or otherwise resolved | (523) | (756) | ||||||
|
Claims unresolved at Mar 31
|
7,651 | 6,082 | ||||||
| Claimants with claims against both Union Carbide and Amchem | (1,303) | (1,013) | ||||||
|
Individual claimants at Mar 31
|
6,348 | 5,069 | ||||||
Plaintiffs' lawyers often sue numerous defendants in individual lawsuits or on behalf of numerous claimants. As a result, the damages alleged are not expressly identified as to Union Carbide, Amchem or any other particular defendant, even when specific damages are alleged with respect to a specific disease or injury. For these reasons and based upon Union Carbide's litigation and settlement experience, Union Carbide does not consider the damages alleged against Union Carbide and Amchem to be a meaningful factor in its determination of any potential asbestos-related liability.
For additional information, see Asbestos-Related Matters of Union Carbide Corporation in Note 11 to the Consolidated Financial Statements; Part II, Item 1. Legal Proceedings; and Note 15 to the Consolidated Financial Statements included in the 2025 10-K.
Dow Inc. published this content on April 24, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on April 24, 2026 at 11:31 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]