Union Carbide Corporation
10/23/2026 | Press release | Distributed by Public on 10/23/2026 05:35
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
| MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Pursuant to General Instruction H(1)(a) and (b) for Form 10-Q "Omission of Information by Certain Wholly-Owned Subsidiaries," the Corporation is filing this Form 10-Q with the reduced disclosure format.
References to "TDCC" refer to The Dow Chemical Company and its consolidated subsidiaries, except as otherwise indicated by the context. Union Carbide Corporation (the "Corporation" or "UCC") has been a wholly owned subsidiary of TDCC since 2001. TDCC has been a wholly owned subsidiary of Dow Inc. since 2019. References to "Dow" refer to Dow Inc., together with TDCC and its consolidated subsidiaries. Additionally, the term "Diamond Infrastructure Solutions" means Dow InfraCo, LLC, TDCC's consolidated variable interest entity that owns and operates infrastructure assets at certain TDCC and UCC locations on the U.S. Gulf Coast, which include UCC's sites in St. Charles, Louisiana, and Seadrift and Texas City, Texas. Infrastructure-related products and services provided to UCC by Diamond Infrastructure Solutions are billed to UCC in accordance with the terms of agreements between the parties.
TDCC conducts its worldwide operations through global businesses and the Corporation's business activities comprise components of TDCC's global businesses rather than stand-alone operations. Further, the Corporation sells substantially all of its products to TDCC in order to simplify the customer interface process. The Corporation's Board of Directors, acting pursuant to the authority delegated to it by TDCC, functions as the Corporation's chief operating decision maker ("CODM") to assess UCC's results and allocate resources for its operations. The Corporation's results are reported as a single operating segment as the consolidated statements of income are presented to the CODM without further disaggregation.
STATEMENT ON MIDDLE EAST CONFLICT
During 2026, the ongoing conflict involving Iran, Israel, and the United States and the resulting regional instability have significantly disrupted global energy and petrochemical supply chains. The Strait of Hormuz remains a critical shipping corridor for crude oil, refined products, liquefied natural gas, and chemical feedstocks. Although diplomatic efforts continue and the intensity and nature of the conflict have varied, no comprehensive resolution has been reached. Continuing attacks and other security incidents involving commercial vessels, severe restrictions on maritime transit, and limitations on access to certain regional ports and trade routes have continued to affect global markets. These conditions have contributed to volatility in energy and feedstock prices, disruptions to regional production and logistics networks, longer transit times, and shifts in global trade flows as production and sourcing have been rebalanced to alternative regions. As a result, portions of the global chemical industry have experienced supply constraints, increased transportation and operating costs, and reduced supply chain reliability, particularly in Asia and Europe. The Corporation primarily operates in a cost-advantaged geographic region which has not been directly impacted by the Middle East conflict, allowing it to operate its assets competitively, despite the volatile global energy and feedstock environment.
RESULTS OF OPERATIONS
Net Sales
Total net sales were $3,659 million for the first nine months of 2026 compared with $3,100 million for the first nine months of 2025, an increase of 18 percent. Net sales to related companies, principally to TDCC, were $3,568 million for the first nine months of 2026 compared with $3,020 million for the first nine months of 2025, an increase of 18 percent. Selling prices to TDCC are determined in accordance with the terms of an agreement between UCC and TDCC.
Average selling price for the first nine months of 2026 increased 11 percent compared with the first nine months of 2025. Price increased in most product lines, with the most significant price increases in polyethylene, plastics used for wire and cable applications, vinyl acetate monomers and ethanolamines. Volume for the first nine months of 2026 increased 7 percent compared with the first nine months of 2025. Volume increased in most product lines, with the most significant increases in polyethylene, alkoxylates and glycol ethers, driven primarily by increased demand, reduced planned maintenance turnaround activity and improved equipment reliability and utility supply. The increase in alkoxylates is driven by the startup of a new production unit in mid-2025. These volume increases were partially offset by decreases in plastics used for wire and cable applications driven by lower demand and raw material shortages in ethylene glycols.
Cost of Sales
Cost of sales was $3,166 million for the first nine months of 2026 compared with $3,137 million for the first nine months of 2025, an increase of 1 percent. Cost of sales as a percentage of net sales was 86.5 percent for the first nine months of 2026 compared with 101.2 percent for the first nine months of 2025. The improvement was driven primarily by increases in average selling price, higher sales volume and the impact of the Corporation's cost reduction initiatives, which more than offset higher performance-based compensation costs, catalyst amortization expense and depreciation expense.
Selling, General and Administrative Expenses
For the first nine months of 2026, selling, general and administrative ("SG&A") expenses were $9 million, compared with $4 million in the first nine months of 2025. SG&A expenses for the nine months ended September 30, 2026 increased primarily due to legal costs and higher performance-based compensation costs.
Restructuring and Asset Related Charges - Net
In the second quarter of 2026, the Corporation initiated actions aligned to Transform to Outperform, a comprehensive set of actions designed by Dow Inc. to improve near-term operating measures by simplifying its operating model, reducing its cost structure and delivering faster growth. As a result of these actions, the Corporation recorded pretax charges of $19 million for severance and related benefit costs.
In the first quarter of 2025, the Corporation initiated targeted actions to further achieve its cost reduction initiatives in response to ongoing macroeconomic weakness, while reinforcing long-term competitiveness across the economic cycle. As a result of these actions, the Corporation recorded pretax charges of $6 million for severance and related benefit costs.
See Note 4 to the Consolidated Financial Statements for additional information about the Corporation's restructuring activities. The Corporation expects to incur additional costs in the future related to its restructuring activities, which will be recognized as incurred. The Corporation 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.
Sundry Income (Expense) - Net
Sundry income (expense) - net includes a variety of income and expense items such as charges for management services provided by TDCC, dividend income and other distributions received from the Corporation's investments in related companies, pension and other postretirement benefit plan credits or costs, commissions, and gains and losses on sales of investments and assets and on foreign currency exchange.
Sundry income (expense) - net in the first nine months of 2026 was expense of $82 million compared with income of $643 million in the first nine months of 2025. Sundry income (expense) - net in the first nine months of 2026 was favorably impacted by decreases in charges for services provided by TDCC, partially offset by higher defined benefit pension costs resulting from lower expected returns on plan assets. Sundry income (expense) - net in the first nine months of 2025 was favorably impacted by a $735 million distribution from Dow International Holdings Company, a related company in which the Corporation has an ownership interest. See Note 10 to the Consolidated Financial Statements for additional information about the Corporation's defined benefit pension plans and Note 12 to the Consolidated Financial Statements for additional information about the Corporation's related party transactions.
Interest Income
Interest income was $60 million for the first nine months of 2026 compared with $77 million for the first nine months of 2025. The decrease in interest income primarily resulted from the reduction in notes receivable from TDCC and decreased interest rates.
Interest Expense and Amortization of Debt Discount
Interest expense and amortization of debt discount was $10 million for the first nine months of 2026 compared with $5 million for the first nine months of 2025. The increase primarily resulted from lower capitalized interest on lower capital expenditures and higher average borrowings on the Corporation's revolving credit agreement with TDCC.
Provision (Credit) for Income Taxes
The Corporation is subject primarily to U.S. federal and state taxes. For the first nine months of 2026, the Corporation reported a provision for income taxes of $61 million, which resulted in an effective tax rate of 14.6 percent, compared with a credit for income taxes of $7 million for the first nine months of 2025, which resulted in a negative effective tax rate of 1.1 percent. The effective tax rate for the first nine months of 2026 was favorably impacted by a decrease in income tax liabilities related to a prior year due to the expiration of a statute of limitations. The effective tax rate for the first nine months of 2025 reflects the impact of a $735 million nontaxable distribution received from a related company.
Net Income Attributable to UCC
The Corporation reported net income of $356 million for the first nine months of 2026 compared with net income of $660 million for the first nine months of 2025. Net income in 2026 was driven by price and volume increases compared with 2025, which resulted in improved operating margins. Net income in 2025 was driven by a $735 million distribution from Dow International Holdings Company, partially offset by negative operating margins.
Capital Expenditures
Capital expenditures in the first nine months of 2026 were $44 million compared with $129 million in the first nine months of 2025 as significant projects, including an alkoxylation production unit at Seadrift, Texas, were completed.
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 Corporation'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 Corporation's accounting policies that are impacted by judgments, assumptions and estimates.
Asbestos-Related Matters
The Corporation is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past several decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that UCC sold in the past, alleged exposure to asbestos-containing products located on UCC's premises, and UCC's responsibility for asbestos suits filed against a former UCC subsidiary, Amchem Products, Inc. ("Amchem"). In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to UCC's products.
The table below provides information regarding asbestos-related claims pending against the Corporation and Amchem based on criteria developed by UCC and its external consultants:
| Asbestos-Related Claim Activity | 2026 | 2025 | ||||||
| Claims unresolved at Jan 1 | 7,158 | 5,813 | ||||||
| Claims filed | 3,614 | 3,407 | ||||||
| Claims settled, dismissed or otherwise resolved | (4,193) | (2,719) | ||||||
|
Claims unresolved at Sep 30
|
6,579 | 6,501 | ||||||
| Claimants with claims against both UCC and Amchem | (1,097) | (1,192) | ||||||
|
Individual claimants at Sep 30
|
5,482 | 5,309 | ||||||
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 UCC, 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 the Corporation's litigation and settlement experience, the Corporation does not consider the damages alleged against it and Amchem to be a meaningful factor in its determination of any potential asbestos-related liability.
For additional information, see Asbestos-Related Matters in Note 7 to the Consolidated Financial Statements; Part II, Item 1. Legal Proceedings; and Note 12 to the Consolidated Financial Statements included in the 2025 10-K.
Debt Covenants and Default Provisions
The Corporation's outstanding public debt has been issued under indentures which contain, among other provisions, covenants that the Corporation must comply with while the underlying notes are outstanding. Such covenants are typically based on the Corporation's size and financial position and include, subject to the exceptions and qualifications contained in the indentures, obligations not to (i) allow liens on principal U.S. manufacturing facilities, (ii) enter into sale and lease-back transactions with respect to principal U.S. manufacturing facilities, or (iii) merge into or consolidate with any other entity or sell or convey all or substantially all of its assets. Failure of the Corporation to comply with any of these covenants could, after the passage of any applicable grace period, result in a default under the applicable indenture which would allow the note holders to accelerate the due date of the outstanding principal and accrued interest on the subject notes. Management believes the Corporation was in compliance with the covenants referred to above at September 30, 2026.
Dividends
On a quarterly basis, the Corporation's Board of Directors ("Board") reviews and determines if there will be a dividend distribution to its parent company and sole shareholder, TDCC. The Board takes into consideration the level of earnings and cash flows, among other factors, in determining the amount of the dividend distribution. The Corporation did not declare any dividends for the first nine months of 2026. For the first nine months of 2025, the Corporation declared and paid cash dividends of $28 million.
Additionally, as part of TDCC's continuing efforts to optimize its intercompany financing structure, the Corporation received a distribution of $735 million in the third quarter of 2025 from Dow International Holdings Company, a related company in which the Corporation holds a 4.7 percent ownership interest, which was subsequently distributed to TDCC. See Note 12 to the Consolidated Financial Statements for additional information about the Corporation's dividends and distributions.
Union Carbide Corporation published this content on October 23, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 23, 2026 at 11:36 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]