UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2020~~March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to___________

Commission File Number: 1-1463

Union Carbide Corporation

(Exact name of registrant as specified in its charter)


New York						13-1421730
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

7501 STATE HIGHWAY 185 NORTH, SEADRIFT, TX 77983

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 361-553-2997

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑

Yes

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☑

Yes

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☑

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐

Yes

☑

At ~~June 30, 2020,~~March 31, 2021, 935.51 shares of common stock were outstanding, all of which were held by the registrant’s parent, The Dow Chemical Company.

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) for Form 10-Q and is therefore filing this form with a reduced disclosure format.

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Union Carbide Corporation

QUARTERLY REPORT ON FORM 10-Q

For the quarterly period ended ~~June 30, 2020~~March 31, 2021

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Union Carbide Corporation and Subsidiaries

Throughout this Quarterly Report on Form 10-Q, except as otherwise indicated by the context, the terms "Corporation" or "UCC" as used herein mean Union Carbide Corporation and its subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this report other than purely historical information, including estimates, projections, statements relating to business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements" within the meaning of federal securities laws, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements often address expected future business and financial performance, financial condition, and other matters and often contain words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “outlook,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “will be,” “will continue,” “will likely result,” “would” and similar expressions, and variations or negatives of these words or phrases.

Forward-looking statements are based on current assumptions and expectations of future events that are subject to risks, uncertainties and other factors that are beyond the Corporation’s control, which may ~~appear throughout this report, including without limitation,~~cause actual results to differ materially from those projected, anticipated or implied in the ~~section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations." These~~ forward-looking statements and speak only as of the date the statements were made. These factors often address expected future business and financial performance and financial condition, including, but not limited to: the ~~potential~~continuing global and regional economic impacts of the coronavirus disease 2019 pandemic and ~~crude oil supply~~other public health-related risks and ~~price volatility~~events on the Corporation’s business; and ~~estimates regarding benefits achieved through~~developments related to contemplated restructuring activities and proposed divestitures or acquisitions such as workforce ~~reductions~~reduction, manufacturing facility and/or asset closure and related exit and disposal activities. In this context, forward looking statements often contain words or phrases such as "anticipate," "believe," "estimate," "expect," "intend," "may," "opportunity," "outlook," "plan," "project," "seek," "should," "strategy," "target," "will," "will be," "will continue," "will likely result," "would"activities, and ~~similar expressions~~the benefits and ~~variations or negatives~~costs associated with each of ~~these words. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from~~ the ~~forward-looking statements.~~foregoing.

Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. A detailed discussion of principal risks and uncertainties which may cause actual results and events to differ materially from ~~those projected, anticipated or implied in~~ such forward-looking statements is included in the section titled "Risk Factors" ~~contained in Part II, Item 1A of this Quarterly Report on Form 10-Q and~~ in Part I, Item 1A of the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019. UCC~~2020. These are not the only risks and uncertainties that the Corporation faces. There may be other risks and uncertainties that the Corporation is unable to identify at this time or that it does not currently expect to have a material impact on its business. If any of those risks or uncertainties develops into an actual event, it could have a material adverse effect on the Corporation’s business. The Corporation assumes no obligation to update or revise publicly any forward-looking statements whether because of new information, future events, or otherwise, except as required by securities and other applicable laws.

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PART I - FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

Union Carbide Corporation and Subsidiaries

Consolidated Statements of Income


		Three Months Ended						Six Months Ended							Three Months Ended
In millions (Unaudited)	In millions (Unaudited)	Jun 30, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019		In millions (Unaudited)	Mar 31, 2021		Mar 31, 2020
Net trade sales	Net trade sales	$	21	$	47	$	50	$	75	Net trade sales	$	34	$	29
Net sales to related companies	Net sales to related companies	849		992		1,862		2,242		Net sales to related companies	969		1,013
Total net sales	Total net sales	870		1,039		1,912		2,317		Total net sales	1,003		1,042
Cost of sales	Cost of sales	746		902		1,572		1,852		Cost of sales	1,037		826
Research and development expenses	Research and development expenses	5		7		11		13		Research and development expenses	6		6
Selling, general and administrative expenses	Selling, general and administrative expenses	2		—		4		2		Selling, general and administrative expenses	3		2
Restructuring charges		—		1		2		2
Integration and separation costs		—		1		—		2
Restructuring and asset related charges - net										Restructuring and asset related charges - net	0		2

Sundry income (expense) - net	Sundry income (expense) - net	(22)		(18)		(40)		(39)		Sundry income (expense) - net	(15)		(18)
Interest income	Interest income	2		10		9		19		Interest income	1		7
Interest expense and amortization of debt discount	Interest expense and amortization of debt discount	11		7		19		14		Interest expense and amortization of debt discount	7		8
Income before income taxes		86		113		273		412
Provision for income taxes		18		3		59		57
Net income attributable to Union Carbide Corporation		$	68	$	110	$	214	$	355
Income (loss) before income taxes										Income (loss) before income taxes	(64)		187
Provision (credit) for income taxes										Provision (credit) for income taxes	(15)		41
Net income (loss) attributable to Union Carbide Corporation										Net income (loss) attributable to Union Carbide Corporation	$	(49)	$	146

Depreciation	Depreciation	$	46	$	42	$	91	$	85	Depreciation	$	41	$	45
Capital expenditures	Capital expenditures	$	32	$	45	$	65	$	105	Capital expenditures	$	23	$	33

See Notes to the Consolidated Financial Statements.

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Union Carbide Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income


		Three Months Ended						Six Months Ended							Three Months Ended
In millions (Unaudited)	In millions (Unaudited)	Jun 30, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019		In millions (Unaudited)	Mar 31, 2021		Mar 31, 2020
Net income attributable to Union Carbide Corporation		$	68	$	110	$	214	$	355
Net income (loss) attributable to Union Carbide Corporation										Net income (loss) attributable to Union Carbide Corporation	$	(49)	$	146
Other comprehensive income, net of tax	Other comprehensive income, net of tax									Other comprehensive income, net of tax
Cumulative translation adjustments	Cumulative translation adjustments	—		—		3		—		Cumulative translation adjustments	0		3
Pension and other postretirement benefit plans	Pension and other postretirement benefit plans	19		14		39		29		Pension and other postretirement benefit plans	84		20
Total other comprehensive income	Total other comprehensive income	19		14		42		29		Total other comprehensive income	84		23
Comprehensive income attributable to Union Carbide Corporation	Comprehensive income attributable to Union Carbide Corporation	$	87	$	124	$	256	$	384	Comprehensive income attributable to Union Carbide Corporation	$	35	$	169

See Notes to the Consolidated Financial Statements.

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Union Carbide Corporation and Subsidiaries

Consolidated Balance Sheets


In millions, except share amounts (Unaudited)	In millions, except share amounts (Unaudited)	Jun 30, 2020		Dec 31, 2019		In millions, except share amounts (Unaudited)	Mar 31, 2021		Dec 31, 2020
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	11	$	11	Cash and cash equivalents	$	11	$	11
Accounts receivable:	Accounts receivable:					Accounts receivable:
Trade (net of allowance for doubtful receivables 2020: $—; 2019: $—)		16		26
Trade (net of allowance for doubtful receivables 2021: $0; 2020: $0)						Trade (net of allowance for doubtful receivables 2021: $0; 2020: $0)	24		26
Related companies	Related companies	595		658		Related companies	709		698
Other	Other	20		17		Other	35		27
Income taxes receivable	Income taxes receivable	355		337		Income taxes receivable	375		337
Notes receivable from related companies	Notes receivable from related companies	1,598		1,505		Notes receivable from related companies	1,055		1,660
Inventories	Inventories	227		247		Inventories	248		223
Other current assets	Other current assets	28		20		Other current assets	19		17
Total current assets	Total current assets	2,850		2,821		Total current assets	2,476		2,999
Investments	Investments					Investments
Investments in related companies	Investments in related companies	237		238		Investments in related companies	237		237

Other investments	Other investments	22		22		Other investments	22		22
Noncurrent receivables	Noncurrent receivables	120		118		Noncurrent receivables	129		124
Noncurrent receivables from related companies	Noncurrent receivables from related companies	66		66		Noncurrent receivables from related companies	68		66
Total investments	Total investments	445		444		Total investments	456		449
Property	Property					Property
Property	Property	7,307		7,247		Property	7,111		7,089
Less accumulated depreciation	Less accumulated depreciation	5,967		5,878		Less accumulated depreciation	5,865		5,824
Net property	Net property	1,340		1,369		Net property	1,246		1,265
Other Assets	Other Assets					Other Assets
Intangible assets (net of accumulated amortization 2020: $94; 2019: $90)		20		22
Intangible assets (net of accumulated amortization 2021: $99; 2020: $97)						Intangible assets (net of accumulated amortization 2021: $99; 2020: $97)	15		16
Operating lease right-of-use assets	Operating lease right-of-use assets	86		89		Operating lease right-of-use assets	119		123
Deferred income tax assets	Deferred income tax assets	492		507		Deferred income tax assets	472		494

Deferred charges and other assets	Deferred charges and other assets	29		26		Deferred charges and other assets	38		29
Total other assets	Total other assets	627		644		Total other assets	644		662
Total Assets	Total Assets	$	5,262	$	5,278	Total Assets	$	4,822	$	5,375
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current Liabilities	Current Liabilities					Current Liabilities
Notes payable to related companies	Notes payable to related companies	$	30	$	32	Notes payable to related companies	$	29	$	33
Notes payable - other		9		6

Long-term debt due within one year	Long-term debt due within one year	1		1		Long-term debt due within one year	2		2
Accounts payable:	Accounts payable:					Accounts payable:
Trade	Trade	204		218		Trade	260		229
Related companies	Related companies	334		386		Related companies	533		409
Other	Other	20		10		Other	16		28

Operating lease liabilities - current	Operating lease liabilities - current	16		16		Operating lease liabilities - current	19		19
Income taxes payable	Income taxes payable	25		25		Income taxes payable	22		23
Asbestos-related liabilities - current	Asbestos-related liabilities - current	95		105		Asbestos-related liabilities - current	85		85
Accrued and other current liabilities	Accrued and other current liabilities	142		126		Accrued and other current liabilities	127		139
Total current liabilities	Total current liabilities	876		925		Total current liabilities	1,093		967
Long-Term Debt	Long-Term Debt	472		473		Long-Term Debt	391		391
Other Noncurrent Liabilities	Other Noncurrent Liabilities					Other Noncurrent Liabilities
Pension and other postretirement benefits - noncurrent	Pension and other postretirement benefits - noncurrent	1,125		1,154		Pension and other postretirement benefits - noncurrent	680		1,340
Asbestos-related liabilities - noncurrent	Asbestos-related liabilities - noncurrent	1,038		1,060		Asbestos-related liabilities - noncurrent	995		1,013
Operating lease liabilities - noncurrent	Operating lease liabilities - noncurrent	70		74		Operating lease liabilities - noncurrent	101		105
Other noncurrent obligations	Other noncurrent obligations	189		194		Other noncurrent obligations	209		201
Total other noncurrent liabilities	Total other noncurrent liabilities	2,422		2,482		Total other noncurrent liabilities	1,985		2,659
Stockholder's Equity	Stockholder's Equity					Stockholder's Equity
Common stock (authorized: 1,000 shares of $0.01 par value each; issued: 935.51 shares)	Common stock (authorized: 1,000 shares of $0.01 par value each; issued: 935.51 shares)	—		—		Common stock (authorized: 1,000 shares of $0.01 par value each; issued: 935.51 shares)	0		0
Additional paid-in capital	Additional paid-in capital	141		141		Additional paid-in capital	141		141
Retained earnings	Retained earnings	2,974		2,922		Retained earnings	2,898		2,987
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,623)		(1,665)		Accumulated other comprehensive loss	(1,686)		(1,770)
Union Carbide Corporation's stockholder's equity	Union Carbide Corporation's stockholder's equity	1,492		1,398		Union Carbide Corporation's stockholder's equity	1,353		1,358

Total Liabilities and Equity	Total Liabilities and Equity	$	5,262	$	5,278	Total Liabilities and Equity	$	4,822	$	5,375

See Notes to the Consolidated Financial Statements.

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Union Carbide Corporation and Subsidiaries

Consolidated Statements of Cash Flows


		Six Months Ended							Three Months Ended
In millions (Unaudited)	In millions (Unaudited)	Jun 30, 2020		Jun 30, 2019		In millions (Unaudited)	Mar 31, 2021		Mar 31, 2020
Operating Activities	Operating Activities					Operating Activities
Net income attributable to Union Carbide Corporation		$	214	$	355
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss) attributable to Union Carbide Corporation						Net income (loss) attributable to Union Carbide Corporation	$	(49)	$	146
Adjustments to reconcile net income (loss) to net cash provided by operating activities:						Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	105		99		Depreciation and amortization	51		52
Provision for deferred income tax		3		15
Provision (credit) for deferred income tax						Provision (credit) for deferred income tax	(4)		1

Net gain on sales of property and investments	Net gain on sales of property and investments	(1)		—		Net gain on sales of property and investments	(1)		(1)

Restructuring charges		2		2
Net periodic pension benefit cost		27		26
Restructuring and asset related charges - net						Restructuring and asset related charges - net	0		2
Net periodic pension benefit cost (credit)						Net periodic pension benefit cost (credit)	(1)		14
Pension contributions	Pension contributions	(1)		(1)		Pension contributions	(547)		(1)

Other, net						Other, net	(1)		(1)
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts and notes receivable	Accounts and notes receivable	7		(24)		Accounts and notes receivable	(6)		1
Related company receivables	Related company receivables	(30)		129		Related company receivables	594		(48)
Inventories	Inventories	20		11		Inventories	(34)		4
Accounts payable	Accounts payable	(2)		6		Accounts payable	19		3
Related company payables	Related company payables	(54)		(70)		Related company payables	120		(95)
Asbestos-related payments	Asbestos-related payments	(32)		(42)		Asbestos-related payments	(18)		(18)
Other assets and liabilities	Other assets and liabilities	(34)		(63)		Other assets and liabilities	(58)		53
Cash provided by operating activities	Cash provided by operating activities	224		443		Cash provided by operating activities	65		112
Investing Activities	Investing Activities					Investing Activities
Capital expenditures	Capital expenditures	(65)		(105)		Capital expenditures	(23)		(33)
Change in noncurrent receivable from related company	Change in noncurrent receivable from related company	—		(3)		Change in noncurrent receivable from related company	(2)		0

Proceeds from sales of property		1		—

Proceeds from sales of investments		—		2

Cash used for investing activities	Cash used for investing activities	(64)		(106)		Cash used for investing activities	(25)		(33)
Financing Activities	Financing Activities					Financing Activities

Dividends paid to parent	Dividends paid to parent	(162)		(338)		Dividends paid to parent	(40)		(81)
Changes in short-term notes payable	Changes in short-term notes payable	3		1		Changes in short-term notes payable	0		2
Payments on long-term debt		(1)		—

Cash used for financing activities	Cash used for financing activities	(160)		(337)		Cash used for financing activities	(40)		(79)
Summary	Summary					Summary
Increase in cash and cash equivalents	Increase in cash and cash equivalents	—		—		Increase in cash and cash equivalents	0		0
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	11		13		Cash and cash equivalents at beginning of period	11		11
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	11	$	13	Cash and cash equivalents at end of period	$	11	$	11

See Notes to the Consolidated Financial Statements.

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Union Carbide Corporation and Subsidiaries

Consolidated Statements of Equity


		Three Months Ended						Six Months Ended							Three Months Ended
In millions (Unaudited)	In millions (Unaudited)	Jun 30, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019		In millions (Unaudited)	Mar 31, 2021		Mar 31, 2020
Common Stock	Common Stock									Common Stock
Balance at beginning and end of period	Balance at beginning and end of period	$	—	$	—	$	—	$	—	Balance at beginning and end of period	$	0	$	0
Additional Paid-in Capital	Additional Paid-in Capital									Additional Paid-in Capital
Balance at beginning and end of period	Balance at beginning and end of period	141		138		141		138		Balance at beginning and end of period	141		141

Retained Earnings	Retained Earnings									Retained Earnings
Balance at beginning of period	Balance at beginning of period	2,987		2,951		2,922		3,338		Balance at beginning of period	2,987		2,922

Net income attributable to Union Carbide Corporation		68		110		214		355
Net income (loss) attributable to Union Carbide Corporation										Net income (loss) attributable to Union Carbide Corporation	(49)		146
Dividends declared	Dividends declared	(81)		(178)		(162)		(810)		Dividends declared	(40)		(81)
Other		—		(1)		—		(1)

Balance at end of period	Balance at end of period	2,974		2,882		2,974		2,882		Balance at end of period	2,898		2,987
Accumulated Other Comprehensive Loss, Net of Tax	Accumulated Other Comprehensive Loss, Net of Tax									Accumulated Other Comprehensive Loss, Net of Tax
Balance at beginning of period	Balance at beginning of period	(1,642)		(1,546)		(1,665)		(1,561)		Balance at beginning of period	(1,770)		(1,665)

Other comprehensive income	Other comprehensive income	19		14		42		29		Other comprehensive income	84		23
Balance at end of period	Balance at end of period	(1,623)		(1,532)		(1,623)		(1,532)		Balance at end of period	(1,686)		(1,642)
Union Carbide Corporation's Stockholder's Equity	Union Carbide Corporation's Stockholder's Equity	$	1,492	$	1,488	$	1,492	$	1,488	Union Carbide Corporation's Stockholder's Equity	$	1,353	$	1,486

See Notes to the Consolidated Financial Statements.

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Union Carbide Corporation and Subsidiaries
(Unaudited)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

The unaudited interim consolidated financial statements of Union Carbide Corporation and its subsidiaries (the "Corporation" or "UCC") were prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and reflect all adjustments (including normal recurring accruals) which, in the opinion of management, are considered necessary for the fair presentation of the results for the periods presented. These statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020 ("2020 10-K").

The Corporation is a wholly owned subsidiary of The Dow Chemical Company ("TDCC"). In accordance with the accounting guidance for earnings per share, the presentation of earnings per share is not required in financial statements of wholly owned subsidiaries.

The Corporation’s business activities comprise components of TDCC’s global operations rather than stand-alone operations. TDCC conducts its worldwide operations through global businesses. Because there are no ~~separable~~separate reportable business segments for UCC under the accounting guidance related to segment reporting and no detailed business information is provided to a chief operating decision maker regarding the Corporation’s stand-alone operations, the Corporation’s results are reported as a single operating segment.

On April 1, 2019, DowDuPont Inc. (“DowDuPont” and effective June 3, 2019, n/k/a DuPont de Nemours, Inc.) completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC and its consolidated subsidiaries. The separation was contemplated by the merger of equals transaction effective August 31, 2017, under the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017. TDCC and E. I. du Pont de Nemours and Company and its consolidated subsidiaries ("Historical DuPont") each merged with subsidiaries of DowDuPont and, as a result, TDCC and Historical DuPont became subsidiaries of DowDuPont (the “Merger”). Subsequent to the Merger, TDCC and Historical DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. Dow Inc. was formed as a wholly owned subsidiary of DowDuPont to serve as the holding company for the materials science business. UCC remains a wholly owned subsidiary of TDCC. See Note 3 for additional information.

~~Table of Contents~~

Intercompany transactions and balances are eliminated in consolidation. Transactions with the Corporation’s parent company, TDCC, and other subsidiaries of TDCC, have been reflected as related company transactions in the consolidated financial statements. See Note 1211 for additional information.

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NOTE 2 - RECENT ACCOUNTING GUIDANCE

Recently Adopted Accounting Guidance ~~Issued But Not Adopted at June 30, 2020~~

In ~~December 2019,~~ the ~~Financial Accounting Standards Board (“FASB”) issued~~first quarter of 2021, the Corporation adopted Accounting Standards Update ~~("ASU")~~ 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, "Income Taxes" and improve consistent application by clarifying and amending existing guidance. The ~~new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early~~ adoption ~~is permitted, with the amendments to be applied on~~of this guidance did not have a ~~retrospective, modified retrospective or prospective basis, depending~~material impact on the ~~specific amendment. The Corporation is currently evaluating the impact of adopting this guidance.~~

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments are intended to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform onconsolidated financial reporting. The new standard is effective March 12, 2020 through December 31, 2022, with the adoption date being dependent upon the Corporation’s election. The Corporation is currently evaluating the impact of adopting this guidance.statements.

NOTE 3 ~~- BUSINESS SEPARATION~~

~~On April 1, 2019, DowDuPont completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC. UCC remains a wholly owned subsidiary of TDCC.~~

In the first quarter of 2019, in anticipation of DowDuPont's intended separation of its materials science business, UCC's assets and liabilities aligned with TDCC's specialty products business were transferred to TDCC as part of the internal reorganization steps to align TDCC's specialty products business to DowDuPont. In order to align entity ownership under TDCC, UCC distributed shares and assets to TDCC through dividends or asset distributions. As a result, in February 2019, UCC issued to TDCC a dividend of 1,067 shares of common stock of Dow International Holdings Company (“DIHC”), a cost method investment, resulting in a reduction in "Investments in related companies" of $401 million. UCC also transferred, as an asset distribution, the assets and liabilities aligned with TDCC's specialty products business for an additional dividend of $71 million to TDCC. The results of these transactions are reflected in “Investments in related companies” and “Retained earnings” in the consolidated balance sheets. See Note 12 for additional information.

The Corporation evaluated the impact of the specialty products product line transfer and determined it did not represent a strategic shift that had a major effect on the Corporation’s operations and financial results and did not qualify as an individually significant component of the Corporation. As a result, this transfer was not reported as discontinued operations.

~~NOTE 4~~ - REVENUE

Substantially all of the Corporation's revenue is generated by sales to TDCC. Products are sold to and purchased from TDCC at ~~market-based~~ prices determined in accordance with the terms of an agreement between UCC and TDCC. The Corporation's revenue related to sales of product was approximately 9899 percent for the three months ended ~~June 30, 2020 and 99 percent for the six months ended June 30, 2020~~March 31, 2021 (99 percent for the three ~~and six~~ months ended ~~June 30, 2019)~~March 31, 2020); the remaining revenue primarily related to the licensing of patents and technology. The Corporation sells its products to TDCC to simplify the customer interface process.

The Corporation’s contract liabilities include payments received in advance of performance under long-term contracts for product sales and royalties with remaining contract terms that range up to 2120 years. Amounts are recognized in revenue when the performance obligations for the contract are met. The Corporation has rights to additional consideration when product is delivered to the customer. The balance of contract liabilities was ~~$39~~$40 million at ~~June 30, 2020~~March 31, 2021 ($4140 million at December 31, ~~2019)~~2020), of which $3$5 million ($45 million at December 31, ~~2019)~~2020) was included in "Accrued and other current liabilities" and ~~$36~~$35 million ($3735 million at December 31, ~~2019)~~2020) was included in "Other noncurrent obligations" in the consolidated balance sheets.

~~Table of Contents~~

The Corporation disaggregates its revenue from contracts with customers by type of customer (sales to related parties and sales to trade customers) as presented in the consolidated statements of income and believes this disaggregation best depicts the nature, amount, timing and uncertainty of its revenue and cash flows. Substantially all of the product sales are made to the Corporation's parent company, TDCC, and there are no unique economic factors that affect revenue recognition and cash flows associated with these product sales.

NOTE 54 - INVENTORIES

The following table provides a breakdown of inventories:


Inventories	Inventories	Jun 30, 2020		Dec 31, 2019		Inventories	Mar 31, 2021		Dec 31, 2020
In millions	In millions										Mar 31, 2021	Dec 31, 2020
Finished goods	Finished goods	$	146	$	162	Finished goods	$	216	$	157
Work in process	Work in process	22		31		Work in process	29		23
Raw materials	Raw materials	43		47		Raw materials	45		38
Supplies	Supplies	88		92		Supplies	86		98
Total	Total	$	299	$	332	Total	$	376	$	316
Adjustment of inventories to a LIFO basis	Adjustment of inventories to a LIFO basis	(72)		(85)		Adjustment of inventories to a LIFO basis	(128)		(93)
Total inventories	Total inventories	$	227	$	247	Total inventories	$	248	$	223

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NOTE 65 - INTANGIBLE ASSETS

The following table provides information regarding the Corporation’s intangible assets:


Intangible Assets	Intangible Assets	Jun 30, 2020										Dec 31, 2019										Intangible Assets	Mar 31, 2021				Dec 31, 2020
In millions	In millions	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net		In millions	Gross Carrying Amount		Accum Amort		Net		Gross Carrying Amount		Accum Amort		Net
Intangible assets with finite lives:	Intangible assets with finite lives:													Intangible assets with finite lives:
Developed technology	Developed technology	$	33	$	(33)	$	—	$	33	$	(33)	$	—	Developed technology	$	33	$	(33)	$	0	$	33	$	(33)	$	0
Software	Software	81		(61)		20		79		(57)		22		Software	81		(66)		15		80		(64)		16
Total intangible assets	Total intangible assets	$	114	$	(94)	$	20	$	112	$	(90)	$	22	Total intangible assets	$	114	$	(99)	$	15	$	113	$	(97)	$	16

Total estimated amortization expense for ~~2020~~2021 and the five succeeding fiscal years, including amounts expected to be capitalized, is as follows:


Estimated Amortization Expense	Estimated Amortization Expense					Estimated Amortization Expense
In millions	In millions					In millions
2020		$	8
2021	2021	$	6	2021	$	6
2022	2022	$	5	2022	$	5
2023	2023	$	3	2023	$	3
2024	2024	$	1	2024	$	1
2025	2025	$	—	2025	$	1
2026				2026	$	0

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NOTE 76 - COMMITMENTS AND CONTINGENT LIABILITIES

A summary of the Corporation's commitments and contingent liabilities can be found in Note 14 to the Consolidated Financial Statements included in the 2020 10-K, which is incorporated by reference herein.

Environmental Matters

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law and existing technologies. At ~~June 30, 2020,~~March 31, 2021, the Corporation had accrued obligations of ~~$126~~$142 million for probable environmental remediation and restoration costs, including $19 million for the remediation of Superfund sites. These obligations are included in "Accrued and other current liabilities" and "Other noncurrent obligations" in the consolidated balance sheets. This is management’s best estimate of the costs for remediation and restoration with respect to environmental matters for which the Corporation has accrued liabilities, although it is reasonably possible that the ultimate cost with respect to these particular matters could range up to approximately two and a half times that amount. Consequently, it is reasonably possible that environmental remediation and restoration costs in excess of amounts accrued could have a material impact on the Corporation's results of operations, financial condition and cash flows. It is the opinion of the Corporation’s management that the possibility is remote that costs in excess of the range disclosed will have a material impact on the Corporation’s results of operations, financial condition and cash flows. Inherent uncertainties exist in these estimates primarily due to unknown environmental conditions, changing governmental regulations and legal standards regarding liability, and emerging remediation technologies for handling site remediation and restoration. As new or additional information becomes available and/or certain spending trends become known, management will evaluate such information in determination of the current estimate of the environmental liability. At December 31, ~~2019,~~2020, the Corporation had accrued obligations of ~~$132~~$133 million for probable environmental remediation and restoration costs, including ~~$20~~$18 million for the remediation of Superfund sites.

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Litigation

Asbestos-Related Matters

~~A summary of asbestos-related matters can be found in Note 14 to the Consolidated Financial Statements included in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2019.~~

~~Introduction~~

The Corporation is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past four 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 the Corporation’s products. The Corporation expects more asbestos-related suits to be filed against UCC and Amchem in the future, and will aggressively defend or reasonably resolve, as appropriate, both pending and future claims.

~~Estimating the Asbestos-Related Liability~~

Since 2003, the Corporation has engaged Ankura Consulting Group, LLC ("Ankura"), a third party actuarial specialist, to review the Corporation's historical asbestos-related claim and resolution activity in order to assist UCC management in estimating the asbestos-related liability. Each year, the Corporation requests Ankura to review its claim and resolution activity, including asbestos-related defense and processing costs, to determine the appropriateness of updating the most recent Ankura study.

Based on the review completed by Ankura in December 2019 and the Corporation's internal review process, the Corporation's total asbestos-related liability through the terminal year of 2049, including asbestos-related defense and processing costs, was $1,165 million at December 31, 2019, and was included in “Asbestos-related liabilities - current” and “Asbestos-related liabilities - noncurrent” in the consolidated balance sheets.

Each quarter, the Corporation reviews claims filed, settled and dismissed, as well as average settlement and resolution costs by disease category. The Corporation also considers additional quantitative and qualitative factors such as the nature of pending claims, trial experience of the Corporation and other asbestos defendants, current spending for defense and processing costs, significant appellate rulings and legislative developments, trends in the tort system, and their respective effects on expected future resolution costs. UCC management considers these factors in conjunction with the most recent ~~Ankura~~actuarial study and determines whether a change in the estimate is warranted. Based on the Corporation's review of ~~2020~~2021 activity, it was determined that no adjustment to the accrual was required at ~~June 30, 2020.~~March 31, 2021.

The Corporation’s total asbestos-related liability for pending and future claims and defense and processing costs was ~~$1,133~~$1,080 million at ~~June 30, 2020,~~March 31, 2021 ($1,098 million at December 31, 2020), and was included in “Asbestos-related liabilities - current” and “Asbestos-related liabilities - noncurrent” in the consolidated balance sheets. At March 31, 2021, approximately 2024 percent of the recorded claim liability related to pending claims and approximately 8076 percent related to future claims.

~~Table of Contents~~

~~Summary~~

The Corporation's management believes the amounts recorded for the asbestos-related liability, including defense and processing costs, reflect reasonable and probable estimates of the liability based on current, known facts. However, future events, such as the number of new claims to be filed and/or received each year and the average cost of defending and disposing of each such claim, as well as the numerous uncertainties surrounding asbestos litigation in the United States over a significant period of time, could cause the actual costs for the Corporation to be higher or lower than those projected or those recorded. Any such event could result in an increase or decrease in the recorded liability.

Because of the uncertainties described above, the Corporation cannot estimate the full range of the cost of resolving pending and future asbestos-related claims facing UCC and Amchem. As a result, it is reasonably possible that an additional cost of disposing of asbestos-related claims, including future defense and processing costs, could have a material impact on the Corporation's results of operations and cash flows for a particular period and on the consolidated financial position.

~~Other Litigation Matters~~

The Corporation is also involved in a number of legal proceedings and claims with both private and governmental parties. These cover a wide range of matters, including, but not limited to: product liability; trade regulation; governmental tax and regulatory disputes; health, safety and environmental matters; employment matters; patent infringement; contracts; and commercial litigation. While it is not possible at this time to determine with certainty the ultimate outcome of any of the legal proceedings and claims referred to in this filing, management believes that the possibility is remote that the aggregate of all such other claims and lawsuits will have a material adverse impact on the results of operations, cash flows and financial position of the Corporation.

NOTE 87 - LEASES

For additional information on the Corporation's leases, see Note 15 to the Consolidated Financial Statements included in the ~~Corporation's Annual Report on Form 10-K for the year ended December 31, 2019.~~2020 10-K.

The components of lease cost for operating and finance leases for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:


Lease Cost	Lease Cost	Three Months Ended						Six Months Ended						Lease Cost	Three Months Ended
In millions	In millions	Jun 30, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019		In millions	Mar 31, 2021		Mar 31, 2020
Operating lease cost	Operating lease cost	$	5	$	5	$	10	$	11	Operating lease cost	$	5	$	5
Short-term lease cost	Short-term lease cost	5		7		11		14		Short-term lease cost	6		6
Variable lease cost	Variable lease cost	2		2		4		2		Variable lease cost	2		2

Amortization of right-of-use assets - finance		1		1		1		1

Total lease cost	Total lease cost	$	13	$	15	$	26	$	28	Total lease cost	$	13	$	13

The following table provides supplemental cash flow information related to leases:

Other Lease Information

Six Months Ended

Other Lease Information

Three Months Ended

In millions

Jun 30, 2020

Jun 30, 2019

In millions

Mar 31, 2021

Mar 31, 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

Financing cash flows for finance leases

—

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The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheets at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

Lease Position Balance Sheet Classification Jun 30, 2020 Dec 31, 2019
In millions
Right-of-use assets obtained in exchange for lease obligations:
Operating leases ¹
$ 3 $ 105
Assets
Operating lease assets Operating lease right-of-use assets $ 86 $ 89
Finance lease assets Property 12 12
Finance lease amortization Accumulated depreciation (7) (6)
Total lease assets $ 91 $ 95
Liabilities
Current
Operating Operating lease liabilities - current $ 16 $ 16
Finance Long-term debt due within one year 1 1
Noncurrent
Operating Operating lease liabilities - noncurrent 70 74
Finance Long-Term Debt 4 5
Total lease liabilities $ 91 $ 96

~~1. Includes $99 million for the period ended December 31, 2019 related to the adoption of ASU 2016-02, "Leases (Topic 842)," and the associated ASUs, in the first quarter of 2019.~~


Lease Position	Balance Sheet Classification	Mar 31, 2021		Dec 31, 2020
In millions
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		$	0	$	48
Finance leases		$	0	$	3
Assets
Operating lease assets	Operating lease right-of-use assets	$	119	$	123
Finance lease assets	Property	15		15
Finance lease amortization	Accumulated depreciation	(9)		(8)
Total lease assets		$	125	$	130
Liabilities
Current
Operating	Operating lease liabilities - current	$	19	$	19
Finance	Long-term debt due within one year	2		2
Noncurrent
Operating	Operating lease liabilities - noncurrent	101		105
Finance	Long-term debt	4		5
Total lease liabilities		$	126	$	131

Lease Term and Discount Rate Jun 30, 2020 Dec 31, 2019
Weighted-average remaining lease term
Operating leases 6.0 years 6.3 years
Finance leases 4.0 years 4.5 years
Weighted-average discount rate
Operating leases 4.17 % 4.13 %
Finance leases 4.22 % 4.22 %
The weighted-average remaining lease term and discount rate for leases recorded in the consolidated balance sheets at March 31, 2021 and December 31, 2020 are provided below:


Lease Term and Discount Rate	Mar 31, 2021		Dec 31, 2020
Weighted-average remaining lease term
Operating leases	7.3 years		7.5 years
Finance leases	3.2 years		3.4 years
Weighted-average discount rate
Operating leases	3.27	%	3.28	%
Finance leases	3.62	%	3.62	%

The following table provides the maturities of lease liabilities at ~~June 30, 2020:~~March 31, 2021:


Maturities of Lease Liabilities	Maturities of Lease Liabilities	Jun 30, 2020						Maturities of Lease Liabilities	Mar 31, 2021
		Operating Leases		Finance Leases			Operating Leases		Finance Leases
In millions	In millions										Operating Leases	Finance Leases
2020		$	10	$	1
2021	2021	18		2		2021	$	17	$	2
2022	2022	16		1		2022	22		2
2023	2023	14		1		2023	20		2
2024	2024	13		1		2024	20		1
2025 and thereafter		27		—
2025						2025	18		0
2026 and thereafter						2026 and thereafter	38		0
Total future undiscounted lease payments	Total future undiscounted lease payments	$	98	$	6	Total future undiscounted lease payments	$	135	$	7
Less imputed interest		12		1
Less: Imputed interest						Less: Imputed interest	15		1
Total present value of lease liabilities	Total present value of lease liabilities	$	86	$	5	Total present value of lease liabilities	$	120	$	6

At June 30, 2020, the Corporation had additional leases of approximately $16 million for equipment and a rail yard, which had not yet commenced. These leases are expected to commence in 2020 and 2021, with lease terms of up to 20 years.

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NOTE 98 - ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in the balances for each component of accumulated other comprehensive loss ("AOCL") for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:


Accumulated Other Comprehensive Loss	Accumulated Other Comprehensive Loss	Three Months Ended						Six Months Ended			Accumulated Other Comprehensive Loss			Three Months Ended
In millions	In millions	Jun 30, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019		In millions		Mar 31, 2021		Mar 31, 2020
Cumulative Translation Adjustment	Cumulative Translation Adjustment									Cumulative Translation Adjustment
Beginning balance	Beginning balance	$	(53)	$	(57)	$	(56)	$	(57)	Beginning balance		$	(55)	$	(56)
Gains on foreign currency translation		—		—		3		—
Unrealized gains (losses) on foreign currency translation										Unrealized gains (losses) on foreign currency translation		0		3

Ending balance	Ending balance	$	(53)	$	(57)	$	(53)	$	(57)	Ending balance		$	(55)	$	(53)
Pension and Other Postretirement Benefits	Pension and Other Postretirement Benefits									Pension and Other Postretirement Benefits
Beginning balance	Beginning balance	$	(1,589)	$	(1,489)	$	(1,609)	$	(1,504)	Beginning balance		$	(1,715)	$	(1,609)

Amortization and recognition of net loss ¹		25		19		51		38
Less: Tax expense (benefit) ²		(6)		(5)		(12)		(9)
Other comprehensive income, net of tax		19		14		39		29
Gains (losses) arising during the period 1										Gains (losses) arising during the period 1		87		0
Less: Tax (expense) benefit										Less: Tax (expense) benefit		(20)		0
Net gains (losses) arising during the period										Net gains (losses) arising during the period		67		0
Amortization and recognition of net loss 2										Amortization and recognition of net loss 2		22		26
Less: Tax expense (benefit) 3										Less: Tax expense (benefit) 3		(5)		(6)
Net loss reclassified from AOCL to net income (loss)										Net loss reclassified from AOCL to net income (loss)		17		20
Other comprehensive income (loss), net of tax										Other comprehensive income (loss), net of tax		84		20

Ending balance	Ending balance	$	(1,570)	$	(1,475)	$	(1,570)	$	(1,475)	Ending balance		$	(1,631)	$	(1,589)
Total AOCL ending balance	Total AOCL ending balance	$	(1,623)	$	(1,532)	$	(1,623)	$	(1,532)	Total AOCL ending balance		$	(1,686)	$	(1,642)

1.See Note 9 for additional information.

2.These AOCL components are included in the computation of net periodic benefit cost (credit) of the Corporation's defined benefit pension and other postretirement benefit plans. See Note 109 for additional information.

2. 3.Reclassified to "Provision (credit) for income taxes."

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NOTE 109 - PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

A summary of the Corporation's pension and other postretirement benefit plans can be found in Note 17 to the Consolidated Financial Statements included in the ~~Corporation's Annual Report on Form 10-K for~~2020 10-K.

On March 4, 2021, TDCC announced changes to the ~~year ended~~design of its U.S. tax-qualified and non-qualified pension plans, including the plans of the Corporation (the “UCC Plans”). Effective December 31, ~~2019.~~ 2023 (“Effective Date”), the Corporation will freeze the pensionable compensation and credited service amounts used to calculate pension benefits for employees who participate in the UCC Plans. As a result, at the Effective Date and subject to any bargaining obligations required by law, active participants of the UCC Plans will not accrue additional benefits for future service and compensation. Additionally, contributions to U.S. tax-qualified and non-qualified defined contribution plans will be harmonized across the U.S. eligible employee population of TDCC and its consolidated subsidiaries. The new matching contribution, beginning January 1, 2022, will allow all eligible U.S. employees to receive matching contributions of up to 5 percent of their eligible compensation. In addition, beginning on January 1, 2024, all eligible U.S. employees will receive an automatic non-elective contribution of 4 percent of eligible compensation to their respective defined contribution plans.

The Corporation's funding policy is to contribute to pension plans when pension laws and/or economics either require or encourage funding. On March 4, 2021, the Corporation elected to contribute $545 million to its tax-qualified pension plan, funded by the Corporation's notes receivable from TDCC, and, as a result, increased its estimated total 2021 pension contributions to approximately $550 million, of which $547 million has been contributed through March 31, 2021.

In connection with the foregoing plan amendments, the Corporation remeasured the UCC Plans effective February 28, 2021, which resulted in a pretax actuarial gain of $87 million, reflected in other comprehensive income and inclusive of a $14 million reduction in the projected benefit obligation resulting from the plan amendments, and a pretax curtailment gain of $7 million, recognized in the first quarter of 2021.

The following table provides the components of the Corporation's net periodic benefit cost (credit) for all significant plans:


Net Periodic Benefit Cost for All Significant Plans		Three Months Ended						Six Months Ended
Net Periodic Benefit Cost (Credit) for All Significant Plans										Net Periodic Benefit Cost (Credit) for All Significant Plans	Three Months Ended
In millions	In millions	Jun 30, 2020		Jun 30, 2019		Jun 30, 2020		Jun 30, 2019		In millions		Mar 31, 2021		Mar 31, 2020
Defined Benefit Pension Plans:
Defined Benefit Pension Plans										Defined Benefit Pension Plans
Service cost	Service cost	$	8	$	9	$	17	$	18	Service cost		$	8	$	9
Interest cost	Interest cost	28		36		56		72		Interest cost		19		28
Expected return on plan assets	Expected return on plan assets	(50)		(53)		(100)		(106)		Expected return on plan assets		(51)		(50)
Amortization of net loss	Amortization of net loss	27		21		54		42		Amortization of net loss		30		27
Net periodic benefit cost		$	13	$	13	$	27	$	26
Curtailment gain										Curtailment gain		(7)		0
Net periodic benefit cost (credit)										Net periodic benefit cost (credit)		$	(1)	$	14

Other Postretirement Benefit Plan:
Service cost		$	1	$	—	$	1	$	—
Other Postretirement Benefit Plan										Other Postretirement Benefit Plan

Interest cost	Interest cost	2		2		3		4		Interest cost		$	1	$	1
Amortization of net gain	Amortization of net gain	(2)		(2)		(3)		(4)		Amortization of net gain		(1)		(1)
Net periodic benefit cost	Net periodic benefit cost	$	1	$	—	$	1	$	—	Net periodic benefit cost		$	0	$	0

Net periodic benefit cost (credit), other than the service cost component, is included in "Sundry income (expense) - net" in the consolidated statements of income.

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NOTE 1110 - FAIR VALUE MEASUREMENTS

The Corporation's financial instruments are classified as Level 2 measurements. For assets and liabilities classified as Level 2 measurements, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability, or by using observable market data points of similar, more liquid securities to imply the price. Market inputs are obtained from well-established and recognized vendors of market data and subjected to ~~tolerance/~~tolerance and quality checks.

The following table summarizes the fair value of the Corporation's financial instruments at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


Fair Value of Financial Instruments	Fair Value of Financial Instruments	Jun 30, 2020														Dec 31, 2019														Fair Value of Financial Instruments	Mar 31, 2021				Dec 31, 2020
In millions	In millions	Cost		Gain		Loss		Fair Value		Cost		Gain		Loss		Fair Value		In millions	Cost		Gain		Loss		Fair Value		Cost		Gain		Loss		Fair Value
Cash equivalents ¹	Cash equivalents ¹	$	10	$	—	$	—	$	10	$	10	$	—	$	—	$	10	Cash equivalents 1	$	10	$	0	$	0	$	10	$	10	$	0	$	0	$	10

Long-term debt including debt due within one year	Long-term debt including debt due within one year	$	(473)	$	—	$	(102)	$	(575)	$	(474)	$	—	$	(115)	$	(589)	Long-term debt including debt due within one year	$	(393)	$	0	$	(114)	$	(507)	$	(393)	$	0	$	(120)	$	(513)

1.Money market fund is included in "Cash and cash equivalents" in the consolidated balance sheets and held at amortized cost, which approximates fair value.

Cost approximates fair value for all other financial instruments.

NOTE 1211 - RELATED PARTY TRANSACTIONS

A summary of the Corporation's related party transactions can be found in Note 19 to the Consolidated Financial Statements included in the 2020 10-K.

Product and Services Agreements

The ~~Corporation sells its products to~~following table summarizes UCC’s transactions with TDCC ~~to simplify the customer interface process. Products are sold to~~ and purchased from TDCC at market-based prices in accordance with the terms of an agreement between UCC and TDCC. After each quarter, the Corporation and TDCC analyze the pricing used for the sales in that quarter and reach agreement on any necessary adjustments, at which point the prices are final. The Corporation also procures certain commodities and raw materials through a TDCC subsidiary related to product and pays a commission to that TDCC subsidiary based on the volume and type of commodities and raw materials purchased. The commission expense was included in "Sundry income (expense) - net" in the consolidated statements of income. Purchases from that TDCC subsidiary were $206 million in the second quarter of 2020 ($280 million in the second quarter of 2019) and $437 million during the first six months of 2020 ($614 million during the first six months of 2019). The decrease in purchase costsservices agreements for the three ~~and six~~ months ended ~~June 30, 2020 when compared with the same periods last year~~March 31, 2021 and 2020:


Product and Services Agreements Transactions	Three Months Ended
	Mar 31, 2021		Mar 31, 2020		Income Statement Classification
In millions
TDCC Subsidiary:
Commodity and raw materials purchases 1	$	483	$	231	Cost of sales
Commission expense	$	6	$	5	Sundry income (expense) - net
TDCC:
General administrative and overhead type services and service fee 2	$	17	$	8	Sundry income (expense) - net
Activity-based costs	$	19	$	23	Cost of sales

1.Period-end balances on hand are included in inventory. The increase in purchase costs was primarily due to ~~lower~~higher feedstock and energy ~~costs.~~costs, which reflect the impacts of Winter Storm Uri.

2.The increase in services and fees resulted from TDCC's periodic review of the actual cost of services provided to UCC in accordance with related agreements.

Dividends

The ~~Corporation has a master services agreement with~~following table summarizes cash dividends declared and paid to TDCC whereby TDCC provides services including, but not limited to: accounting; legal; treasury (investments, cash management, risk management, insurance); procurement; human resources; environmental; health and safety; and business management for UCC. Under the master services agreement with TDCC, general administrative and overhead type services that TDCC routinely allocates to various businesses are charged to UCC. The master services agreement cost allocation basis is headcount and includes a 10 percent service fee. This agreement resulted in expense of $8 million in the second quarter of 2020 ($6 million in the second quarter of 2019) and $16 million for the ~~first six~~three months ~~of 2020 ($12 million for the first six months of 2019) for general administrative~~ended March 31, 2021 and overhead type services and the 10 percent service fee, included in "Sundry income (expense) - net" in the consolidated statements of income. The remaining activity-based costs were $24 million in the second quarter of 2020 ($21 million in the second quarter of 2019) and $47 million for the first six months of 2020 ($44 million for the first six months of 2019), and were included in "Cost of sales" in the consolidated statements of income.2020:

Management believes the method used for determining expenses charged by TDCC is reasonable. TDCC provides these services by leveraging its centralized functional service centers to provide services at a cost that management believes provides an advantage to the Corporation.


Cash Dividends Declared and Paid	Three Months Ended
	Mar 31, 2021		Mar 31, 2020
In millions

Cash dividends declared and paid	$	40	$	81

~~The monitoring and execution of risk management policies related to interest rate and foreign currency risks, which are based on TDCC’s risk management philosophy, are provided as a service to UCC.~~

As part of TDCC’s cash management process, UCC is a party to revolving loans with TDCC that have interest rates based on LIBOR (London Interbank Offered Rate) with varying maturities. At June 30, 2020, the Corporation had a note receivable of $1.6 billion ($1.5 billion at December 31, 2019) from TDCC under a revolving loan agreement. The Corporation may draw from this note receivable in support of its daily working capital requirements and, as such, the net effect of cash inflows and outflows under this revolving loan agreement is presented in the consolidated statements of cash flows as an operating activity.

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The Corporation also has a separate revolving credit agreement with TDCC that allows the Corporation to borrow or obtain credit enhancements up to an aggregate of $1 billion that matures on December 30, 2020. TDCC may demand repayment with a 30-day written notice to the Corporation, subject to certain restrictions. A related collateral agreement provides for the replacement of certain existing pledged assets, primarily equity interests in various subsidiaries, with cash collateral. At June 30, 2020, $937 million was available under the revolving credit agreement ($937 million at December 31, 2019). The cash collateral was reported as “Noncurrent receivables from related companies” in the consolidated balance sheets.

On a quarterly basis, the Corporation's Board of Directors (the "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. In the second quarter of 2020, the Corporation declared and paid a cash dividend of $81 million to TDCC; cash dividends to TDCC totaled $162 million for the first six months of 2020. In the second quarter of 2019, the Corporation declared and paid a cash dividend of $178 million to TDCC; cash dividends to TDCC totaled $338 million for the first six months of 2019.

In the first quarter of 2019, in anticipation of the business separation activities to align TDCC's specialty products business with DowDuPont, UCC issued a stock dividend to TDCC for 63.4 percent of its ownership interest in DIHC, a cost method investment, which totaled $401 million. UCC also distributed assets and liabilities aligned with TDCC's specialty products business for an additional dividend to TDCC of $71 million. See Note 3 for additional information.

~~NOTE 13 - SUBSEQUENT EVENT~~

On July 2, 2020, TDCC entered into a definitive agreement to sell its rail infrastructure assets and related equipment at certain sites in the U.S. & Canada for expected cash proceeds in excess of $310 million. Included in the transaction are certain assets and equipment located at UCC's sites in St. Charles, Louisiana and Seadrift, Texas. TDCC will also enter into long-term service agreements with the buyer for the continuation of certain rail-related services for TDCC's and UCC's existing operations at these sites. The transaction is expected to close in the fourth quarter of 2020, subject to customary closing conditions, and the Corporation expects to record a gain on the transaction.

~~ITEM 2. MANAGEMENT’S~~


ITEM 2. 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 a 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. On April 1, 2019, DowDuPont Inc. (“DowDuPont” and effective June 3, 2019, n/k/a DuPont de Nemours, Inc.) completed the separation of its materials science business and Dow Inc. became the direct parent company of TDCC. The separation was contemplated by the merger of equals transaction effective August 31, 2017, under the Agreement and Plan of Merger, dated as of December 11, 2015, as amended on March 31, 2017. TDCC and E. I. du Pont de Nemours and Company and its consolidated subsidiaries ("Historical DuPont") each merged with subsidiaries of DowDuPont and, as a result, TDCC and Historical DuPont became subsidiaries of DowDuPont (the “Merger”). Subsequent to the Merger, TDCC and Historical DuPont engaged in a series of internal reorganization and realignment steps to realign their businesses into three subgroups: agriculture, materials science and specialty products. This included transferring certain Corporation assets and liabilities aligned with the specialty products business to TDCC (the "Business Separation"). Dow Inc. was formed ashas been a wholly owned subsidiary of ~~DowDuPont to serve as the holding company for the materials science business. UCC remains a wholly owned subsidiary of TDCC.~~Dow Inc. since 2019.

TDCC conducts its worldwide operations through global businesses. UCC's business activities comprise components of TDCC’s global businesses rather than stand-alone operations. Because there are no ~~separable~~separate reportable business segments for UCC and no detailed business information is provided to a chief operating decision maker regarding the Corporation’s stand-alone operations, the Corporation’s results are reported as a single operating segment.

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~~Statement~~Statements on COVID-19 and ~~Oil Price Volatility~~U.S. Gulf Coast Freeze

~~Overview~~COVID-19

Additional information regarding all actions taken by UCC since the onset of ~~UCC’s Response to COVID-19~~the pandemic can be found in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020 ("2020 10-K").

The pandemic caused by coronavirus disease 2019 ("COVID-19") has impacted all geographic regions where ~~UCC’s~~UCC's products are produced and sold. Financial markets were volatile towards the end of the first quarter and early in the second quarter of 2020, primarily due to uncertainty with respect to the severity and duration of the pandemic, coupled with fluctuations in crude oil prices due in part to the global spread of COVID-19. As the second quarter progressed, crude oil prices increased, driven by improved supply/demand fundamentals. Financial markets have also improved as economies in the U.S. and Western Europe have started to reopen.

Dow Inc. (together, with TDCC and its consolidated subsidiaries, ~~“Dow”~~"Dow") directs global safety, crisis management and security protocols for all of ~~Dow’s~~Dow's assets and workforce, which includes the assets and workforce of UCC. UCC’s primary manufacturing operations are in the United States, where efforts to contain the spread of COVID-19 resulted in significant mitigation measures, including social distancing and stay-at-home mandates, travel restrictions and/or bans, and restricted access to certain corporate facilities and manufacturing sites. The Corporation’s manufacturing facilities in the United States have been designated essential operations by state and local governments and all of UCC’s manufacturing sites and facilities, including its smaller sites in Asia Pacific, continue to operate and are doing so safely, having implemented social distancing and enhanced health, safety and sanitization measures as directed by Dow’s regional Crisis Management Teams (“CMTs”). The CMTs continue to work closely with site leadership and are adjusting alert levels as warranted on a site by site basis. UCC has also implemented necessary procedures to enable the workforce not essential to site operations to work remotely. The CMTs have initiated the implementation of Dow’s comprehensive Return to Workplace plan that is tailored for each site and includes a number of health and safety measures to be followed in a gradual and phased approach. The Corporation is also encouraging its workforce to follow safety measures when away from work to help prevent community spread of COVID-19.

During this public health crisis, ~~UCC~~Dow is focused on the health and safety of its employees, contractors, customers and suppliers around the world and maintaining the safe and reliable operations of its manufacturing sites. Although supply disruptions and related logistical issues have posed challenges across all modes of transportation, UCC’s manufacturing sites have continued to operate during the COVID-19 pandemic, with no significant impact to manufacturing whether through shutdowns or shortages in labor, raw materials or personal protective equipment. Supply chain and logistical challenges are expected to ~~ease through~~stabilize throughout 2021. Contingency plans remain in place in the ~~remainder~~event of ~~2020, absent~~ significant impacts from COVID-19 infection resurgences.

~~Recognizing the~~A significant ~~impact the COVID-19 pandemic would have on demand~~number of UCC employees continue to work remotely. The Corporation continues to encourage its workforce to practice safe behaviors in the ~~second quarter~~workplace and while away from work to help prevent community spread of ~~2020,~~COVID-19. Dow ~~took proactive measures~~and the Corporation continue to ~~electively focus on cash and maintain financial strength with a continued emphasis on safe, reliable operations and disciplined capital allocation. In~~monitor ongoing mitigation efforts to appropriately implement Dow's comprehensive Return to Workplace plan. UCC sites continue to follow on-site workforce restrictions in accordance with these actions, the Corporation reduced its 2020 capital expenditures target to approximately $130 million and temporarily idled one of the Corporation’s polyethylene production units in the U.S. to balance production to demand across markets more severely affected by restrained economic activity. Based on current demand, the polyethylene production unit has restarted.government regulations.

~~Review~~Prior to the weather-related events on the U.S. Gulf Coast discussed below, most end-markets for UCC products had substantially recovered from the impacts of ~~First Half 2020 Financial Impacts from COVID-19~~

~~The Corporation's sales declined 17 percent in the first six months of 2020, as the~~ COVID-19 ~~pandemic significantly impacted the global economy~~ and ~~supply/demand fundamentals. While demand has remained strong for products utilized in consumer applications, such as cleaning and detergent ingredients and food, health and hygiene packaging,~~ the Corporation ~~has~~ experienced ~~reduced~~improved demand ~~for products used in durable good end-markets, such as automotive.~~and expected a return to pre-COVID-19 sales levels.

~~Local prices declined~~U.S. Gulf Coast Freeze

Beginning in mid-February 2021, Winter Storm Uri had a broad impact on the ~~first quarter~~U.S. Gulf Coast and ~~continued~~in particular across the entire state of Texas, resulting in widespread utility and raw material supply disruptions and industry-wide production outages. UCC's Texas City, Texas, ("Texas City") and Seadrift, Texas, ("Seadrift") operations were severely impacted with significant production disruptions that extended into mid-March at Seadrift and late March at Texas City, primarily due to ~~decline in the second quarter of 2020, largely impacted by lower global energy prices. In March and April 2020, crude oil prices declined significantly, due in part~~precautionary shutdowns prior to the ~~COVID-19 pandemic, coupled with increased~~arrival of record low temperatures, raw material supply ~~from oil producers. Declines~~constraints and damage caused by extremely cold temperatures. While not as severely impacted, the Corporation's St. Charles, Louisiana, operations initiated certain precautionary shutdowns in ~~crude oil prices impact~~anticipation of the ~~pace~~record low temperatures and experienced raw material supply disruptions and equipment damage caused by the extreme cold. However, at March 31, 2021, UCC's ethylene production facilities and all sites were operational. As a result of ~~oil drilling~~the winter storm, the product and supply chain impacts created very tight industry supply fundamentals which resulted in ~~the U.S. & Canada, which makes natural gas, a significant by-product of oil drilling and the primary feedstock used~~higher raw material costs in ~~the U.S. by UCC and other ethylene producers, less cost advantaged. The Corporation has feedstock flexibility, driven by manufacturing assets that have the ability~~addition to produce ethylene from natural gas liquids or crude oil-based feedstocks, and benefits from Dow's comprehensive financial and physical hedging programs. The Corporation's feedstock flexibility and fully integrated feedstock position enable the Corporation to proactively respond to the challenges from oil price volatility.pricing momentum in certain end-markets.

The Corporation experienced margin compression in the second quarter, largely due to lower global energy prices. In the latter half of the second quarter, crude oil prices increased as supply/demand fundamentals improved, driving higher feedstock costs which should be beneficial to product prices and margins in the third quarter of 2020. See Results of Operations in this report for additional discussion of results for the three and six months ended June 30, 2020.

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In July 2020, Dow announced plans to take further disciplined actions, including plans to initiate a restructuring program in the third quarter of 2020, which is expected to impact the Corporation. These actions are necessary to maintain competitiveness while the economic recovery gains traction.

At the time of this filing, the ultimate severity and duration of the COVID-19 pandemic and oil price volatility cannot be reasonably estimated. The COVID-19 pandemic has had and could continue to have a substantial negative impact on the Corporation’s results of operations, financial condition and cash flows. The effects of the COVID-19 pandemic in the first six months of 2020 and the additional risks associated with these conditions are more fully discussed in this report in Part II, Item 1A, Risk Factors. The Corporation is actively monitoring for potential financial impacts from the COVID-19 pandemic and oil price volatility, including, but not limited to: evaluating the recoverability of its assets; enhancing cyber security monitoring; and evaluating ongoing appropriateness of its estimates.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020 in the U.S. The Corporation continues to assess the provisions and potential impacts of this legislation; however, there have been no significant impacts to the Corporation's results of operations or financial position resulting from the CARES Act in the three and six months ended June 30, 2020.

RESULTS OF OPERATIONS

Net Sales

Total net sales were ~~$870~~$1,003 million in the ~~second~~first quarter of 2021 compared with $1,042 million in the first quarter of 2020, ~~compared with $1,039 million in the second quarter of 2019,~~ a decrease of ~~16 percent. Total net sales were $1,912 million for the first six months of 2020 compared with $2,317 million for the first six months of 2019, a decrease of 17~~4 percent. Net sales to related companies, principally to TDCC, ~~and based on market prices for the related products,~~ were ~~$849 million in the second quarter of 2020 compared with $992 million in the second quarter of 2019, a decrease of 14 percent. Net sales to related companies were $1,862~~$969 million in the first ~~six months~~quarter of ~~2020~~2021 compared with ~~$2,242~~$1,013 million in the first ~~six months~~quarter of ~~2019,~~2020, a decrease of 174 percent. Selling prices to TDCC are determined in accordance with the terms of an agreement between UCC and TDCC.

Average selling price ~~decreased 19~~increased 13 percent in the ~~second~~first quarter of ~~2020~~2021 compared with the same quarter last year. Price ~~decreased across all products except polyglycols,~~increased primarily in response to ~~lower~~tight supply and demand fundamentals in addition to higher feedstock and other raw material costs, with the ~~largest decreases~~most significant price increases in polyethylene ~~plastics used for wire~~ and ~~cable applications,~~acrylic monomers. Volume declined 17 percent in the first quarter of 2021 compared with the same quarter last year as the freeze and related impacts on the U.S. Gulf Coast severely limited production, with the most significant volume declines in oxo alcohols, ethylene oxide/ethylene glycol ~~("EO/EG")~~ and glycol ethers. Despite the impact of the COVID-19 pandemic, volume was up 3 percent in the second quarter of 2020 compared with the second quarter of 2019 with increases in vinyl acetate monomers, oxo alcohols and home and personal care products, partially offset by volume decreases resulting from the divestiture of the Corporation's acetone derivatives product line in the fourth quarter of 2019, and volume decreases in glycol ethers. Volume in the second quarter of 2019 was unfavorably impacted by planned maintenance turnaround activity at multiple production facilities.

In the first six months of 2020, average selling prices decreased 19 percent compared with the first six months of 2019, with price decreases across all products, primarily in response to lower feedstock and other raw material costs, with the largest decreases in polyethylene, oxo alcohols, glycol ethers, EO/EG and ethanolamines. Despite the impact of the COVID-19 pandemic, volume for the first six months of 2020 was up 2 percent compared with the first six months of 2019, with increases in EO/EG, driven by demand growth in the first quarter of 2020, polyethylene, which was impacted by railcar shortages in the first quarter of 2019, and vinyl acetate monomers, which was unfavorably impacted by planned maintenance turnaround activity in the second quarter of 2019. These volume increases were partially offset by volume decreases resulting from the divestiture of the Corporation's acetone derivatives product line in the fourth quarter of 2019 and the Business Separation.

Cost of Sales

Cost of sales was ~~$746 million in the second quarter of 2020 compared with $902 million in the second quarter of 2019, a decrease of 17 percent. Cost of sales decreased 15 percent from $1,852~~$1,037 million in the first ~~six months~~quarter of ~~2019 to $1,572~~2021 compared with $826 million in the first ~~six months~~quarter of ~~2020.~~2020, an increase of 26 percent. The ~~decline~~increase in cost of sales ~~for the three and six months ended June 30, 2020~~ was driven ~~primarily~~ by ~~lower~~higher feedstock and ~~other raw material~~energy costs, ~~the divestiture of the Corporation's acetone derivatives product line in the fourth quarter of 2019~~as well as repair and ~~the impact~~start-up costs totaling approximately $30 million, resulting from the ~~Business Separation.~~

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~~Research and Development ("R&D"), Selling, General and Administrative ("SG&A") Expenses~~

~~R&D expenses were $5 million in~~record low temperatures that impacted the ~~second quarter of 2020, compared with $7 million in the same period last year. For the first six months of 2020, R&D expenses were $11 million compared with $13 million~~U.S. Gulf Coast in the first ~~six months of 2019. SG&A expenses were $2 million in the second~~ quarter of 2020, compared with 0 in the same period last year due to a year-to-date adjustment in the second quarter of 2019. For the first six months of 2020, SG&A expenses were $4 million compared with $2 million in the first six months of 2019. The increase was driven primarily by administrative fees associated with ongoing service arrangements.

~~Restructuring Charges~~

In September and November 2017, the Corporation approved restructuring actions that were aligned with DowDuPont’s synergy targets. As the restructuring program has ended, the Corporation had no additional restructuring charges in the second quarter of 2020, compared with restructuring charges for severance and related benefit costs of $1 million in the second quarter of 2019. For the six months ended June 30, 2020, the Corporation recorded restructuring charges of $2 million for severance and related benefit costs, compared with $2 million for the six months ended June 30, 2019.2021.

Sundry Income (Expense) - Net

Sundry income (expense) – net includes a variety of income and expense items such as ~~gains or losses on foreign currency exchange, commissions,~~ charges for management services provided by TDCC, non-operating pension and other postretirement benefit plan credits or costs, ~~and~~commissions, gains and losses on sales of investments and ~~assets.~~ assets and gains and losses on foreign currency exchange.

Sundry income (expense) - net in the ~~second~~first quarter of ~~2020~~2021 was expense of ~~$22~~$15 million compared with expense of $18 million in the same quarter last year. ~~For the first six months of 2020, sundry income (expense) – net was expense of $40 million compared with expense of $39 million~~The decrease in the first ~~six months~~quarter of ~~2019. The~~2021 was primarily the result of non-operating pension benefit plan credits recognized in 2021 resulting from a remeasurement of pension plans to reflect the announced freeze of plan benefits, effective December 31, 2023, partially offset by an increase in ~~expense in the second quarter of 2020 was primarily a result of increased expenses associated with the master~~charges for management services ~~agreement with~~provided by TDCC.

Interest Income

Interest income was $2$1 million in the ~~second~~first quarter of ~~2020 ($9 million for the first six months of 2020)~~2021 compared ~~with$10~~with $7 million in the ~~second~~first quarter of ~~2019 ($19 million for the first six months of 2019).~~2020. The decrease in interest income primarily resulted from the impact of the significant drop in interest rates due to the current interest rate environment.

Interest Expense and Amortization of Debt Discount

Interest expense and amortization of debt discount was ~~$11 million in the second quarter of 2020 compared with~~ $7 million in the ~~second~~first quarter of ~~2019. For the first six months of 2020, interest expense and amortization of debt discount was $19 million~~2021 compared with ~~$14~~$8 million in the first ~~six months~~quarter of ~~2019. The increase in~~2020, reflecting reduced interest expense ~~and amortization~~resulting from the early extinguishment of debt ~~discount was primarily due to the payment of interest and penalties~~ in ~~May 2020 to settle sales and use tax disputes in Seadrift, Texas and Texas City, Texas.~~September 2020.

Provision (Credit) for Income Taxes

The Corporation reported a credit for income taxes of $15 million in the first quarter of 2021, which resulted in an effective tax rate of 23.4 percent, compared with a tax provision of ~~$18~~$41 million in the ~~second~~first quarter of 2020, which resulted in an effective tax rate of 20.9 percent, compared with a tax provision of $3 million in the second quarter of 2019, which resulted in an effective tax rate of 2.7 percent. For the first six months of 2020, the Corporation reported a tax provision of $59 million, which resulted in an effective tax rate of 21.6 percent, compared with a tax provision of $57 million for the first six months of 2019, which resulted in an effective tax rate of 13.821.9 percent. The effective tax rate fluctuates based on, among other factors, where income is earned. The tax rate was favorably impacted in the three and six months ended June 30, 2019, due to the restoration of tax basis in assets, driven by a court judgment that did not involve the Corporation, and deductions allowed in the U.S. for certain sales to foreign customers.

Net Income (Loss) Attributable to UCC

The Corporation reported a net ~~income~~loss of ~~$68 million in the second quarter of 2020 compared with $110 million in the second quarter of 2019. Net income for the first six months of 2020 was $214 million compared with $355~~$49 million in the first ~~six months~~quarter of ~~2019.~~2021 compared with net income of $146 million in the first quarter of 2020. The net loss reported in the first quarter of 2021 was driven primarily by production disruptions, higher feedstock and energy costs, and repair and start-up costs resulting from the extreme weather caused by Winter Storm Uri.

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Capital Expenditures

Capital spending in the ~~second~~first quarter of ~~2020~~2021 was ~~$32~~$23 million ~~($65 million for the first six months of 2020)~~ compared with ~~$45~~$33 million in the ~~second~~first quarter of ~~2019 ($105 million for the first six months of 2019).~~2020. Capital spending decreased as spending for U.S. Gulf Coast projects and site infrastructure projects continues to trend down and the Corporation ~~reduces its 2020~~continues to limit capital expenditures ~~target~~ to retain the financial strength of the Corporation and Dow Inc. while the COVID-19 economic recovery continues to gain traction.

Pension Plan Changes

~~Table~~On March 4, 2021, TDCC announced changes to the design of ~~Contents~~its U.S. tax-qualified and non-qualified pension plans, including the plans of the Corporation (the “UCC Plans”) and, effective December 31, 2023, the Corporation will freeze the pensionable compensation and credited service amounts used to calculate pension benefits for employees who participate in the plans. Additionally, the Corporation contributed $545 million to its tax-qualified pension plan, of which $81 million was anticipated to satisfy minimum required contributions based on the pre-existing plan design and market conditions at December 31, 2020.

~~Subsequent Event - Sale~~In connection with the foregoing plan amendments and inclusive of ~~Rail Infrastructure Assets and Related Equipment~~

~~On July 2, 2020, TDCC entered into~~the additional discretionary contribution to the U.S. tax-qualified plan, the Corporation remeasured the UCC Plans effective February 28, 2021, which resulted in a ~~definitive agreement to sell its rail infrastructure assets and related equipment at certain sites~~decrease of $45 million in expected net periodic pension benefit cost for 2021, inclusive of a curtailment gain of $7 million, recognized in the U.S. & Canada for expected cash proceeds in excess of $310 million. Included in the transaction are certain assets and equipment located at UCC's sites in St. Charles, Louisiana and Seadrift, Texas. TDCC will also enter into long-term service agreements with the buyer for the continuation of certain rail-related services for TDCC's and UCC's operations at these sites. The transaction is expected to close in the fourthfirst quarter of ~~2020, subject to customary closing conditions, and the~~2021. The Corporation expects a net periodic pension benefit cost credit of approximately $5 million in 2021, inclusive of the curtailment gain. See Note 9 to ~~record a gain on~~ the ~~transaction.~~Consolidated Financial Statements for additional information related to the Corporation's pension plans.

OTHER MATTERS

Recent Accounting Guidance

See Note 2 to the Consolidated Financial Statements for a summary of recent accounting guidance.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity 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~~consolidated financial statements and accompanying notes. Note 1 to the Consolidated Financial Statements in the ~~Corporation’s Annual Report on Form~~Corporation's 2020 10-K ~~for the year ended December 31, 2019 ("2019 10-K")~~ describes the significant accounting policies and methods used in the preparation of the ~~Consolidated Financial Statements.~~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 in the Corporation’s ~~2019~~2020 10-K. Since December 31, ~~2019,~~2020, there have been no material changes in the Corporation’s accounting policies that are impacted by judgments, assumptions and estimates.

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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 four 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	Asbestos-Related Claim Activity	2020	2019	Asbestos-Related Claim Activity	2021	2020
Claims unresolved at Jan 1	Claims unresolved at Jan 1	11,117	12,780	Claims unresolved at Jan 1	9,126	11,117
Claims filed	Claims filed	2,194	2,819	Claims filed	1,110	1,296
Claims settled, dismissed or otherwise resolved	Claims settled, dismissed or otherwise resolved	(2,488)	(3,477)	Claims settled, dismissed or otherwise resolved	(1,428)	(1,269)
Claims unresolved at Jun 30		10,823	12,122
Claims unresolved at Mar 31				Claims unresolved at Mar 31	8,808	11,144
Claimants with claims against both UCC and Amchem	Claimants with claims against both UCC and Amchem	(3,555)	(4,217)	Claimants with claims against both UCC and Amchem	(2,541)	(3,809)
Individual claimants at Jun 30		7,268	7,905
Individual claimants at Mar 31				Individual claimants at Mar 31	6,267	7,335

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. In fact, there are no personal injury cases in which only the Corporation and/or Amchem are the sole named defendants. 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 76 to the Consolidated Financial Statements and Note 14 to the Consolidated Financial Statements included in the 2020 10-K, and Part II, Item 1. Legal Proceedings.

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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 ~~June 30, 2020.~~March 31, 2021.

Dividends

On a quarterly basis, the Corporation's Board of Directors (the "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. In the ~~second~~first quarter of ~~2020,~~2021, the Corporation declared and paid a cash dividend of ~~$81~~$40 million to TDCC ($~~162~~81 million for the first six months of 2020). In the second quarter of 2019, the Corporation declared and paid a cash dividend of $178 million ($338 million for the first six months of 2019). On July 20, 2020, the Board approved a dividend to TDCC of $25 million, payable on or before September 25, 2020.

Inin the first quarter of 2019, in anticipation of the business separation activities to align TDCC's specialty products business with DowDuPont, UCC issued a stock dividend to TDCC for 63.4 percent of its ownership interest in Dow International Holdings Company, a cost method investment, which totaled $401 million. UCC also distributed assets and liabilities aligned with TDCC's specialty products business for an additional dividend to TDCC of $71 million.2020).

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Omitted pursuant to General Instruction H of Form 10-Q.


ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Corporation carried out an evaluation, under the supervision and with the participation of the Corporation's Disclosure Committee and the Corporation's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures pursuant to paragraph (b) of Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Corporation's disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in the Corporation's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 and 15d-15 that was conducted during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.

2221

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Union Carbide Corporation and Subsidiaries PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

Litigation

Asbestos-Related Matters

No material developments in asbestos-related matters occurred in the ~~second~~first quarter of ~~2020.~~2021. For a current status of asbestos-related matters, see Note 76 to the Consolidated Financial Statements.

~~Environmental Proceedings~~

On October 23, 2019, UCC received a proposed Agreed Order from the Texas Commission on Environmental Quality (“TCEQ”) relating to emissions of ethylene oxide from a process leak at the Corporation's manufacturing facility in Seadrift, Texas. The proposed Agreed Order included an administrative penalty of $800,000. On December 30, 2019, the TCEQ sent a revised Agreed Order reducing the penalty to $600,000 based on UCC's corrective actions and allowing for half of the administrative penalty amount to be used to fund a Supplemental Environmental Project. UCC paid $300,000 in January 2020. The revised Agreed Order was approved by the TCEQ Commissioners on July 1, 2020.


ITEM 1A. RISK FACTORS

Since December 31, ~~2019,~~2020, there have been no material changes to the Corporation's Risk ~~Factors, except as noted below:~~

Public Health Crisis: A public health crisis or global outbreak of disease, including the pandemic caused by coronavirus disease 2019 (“COVID-19”) has had, and could continue to have, a negative effect on the Corporation's manufacturing operations, supply chain and workforce, creating disruptions that could continue to have a substantial negative impact on the Corporation’s results of operations, financial condition and cash flows.

UCC sells substantially all of its products to TDCC in order to simplify the worldwide customer interface process and, as a result, the Corporation is subject to many of the same global risk factors facing TDCC, including those presented by COVID-19. The pandemic caused by COVID-19 has impacted all geographic regions where UCC's products are produced and sold. The global, regional and local spread of COVID-19 has resulted in significant global mitigation measures, including government-directed quarantines, social distancing and shelter-in-place mandates, travel restrictions and/or bans, and restricted access to certain corporate facilities and manufacturing sites. Uncertainty with respect to the severity and duration of the COVID-19 pandemic, coupled with crude oil price fluctuations due in part to the global spread of COVID-19, has contributed to the volatility of financial markets. While the severity and duration of the COVID-19 pandemic in key geographic regions and end-markets cannot be reasonably estimated at this time, impacts to the Corporation include, but are not limited to: a decrease in demand for certain Corporation products; reduced profitability; supply chain disruptions impeding the Corporation’s ability to ship and/or receive product; temporary idling of select manufacturing facilities; interruptions or limitations to manufacturing operations imposed by local, state or federal governments; workforce absenteeism and distraction; labor shortages; and increased cyber security risk and data accessibility disruptions due to remote working arrangements. Additional risks may include, but are not limited to: shortages of key raw materials; asset impairment charges; increased obligations related to the Corporation’s pension and other postretirement benefit plans; and deferred tax valuation allowances. Disruptions and market volatility resulting from the COVID-19 pandemic have had and could continue to have a substantial negative impact on the Corporation’s results of operations, financial condition and cash flows.Factors.


ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

~~Table of Contents~~


ITEM 6. EXHIBITS


			EXHIBIT NO.						DESCRIPTION

			23 *						Ankura Consulting Group, LLC's Consent.
			31.1 *						Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
			31.2 *						Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
			32.1*						Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
			32.2 *						Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
			101.INS						The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
			101.SCH						Inline XBRL Taxonomy Extension Schema Document.
			101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
			101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
			101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.
			101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
			104						Cover Page Interactive Data File. The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

* Filed herewith

2422

Table of Contents


Union Carbide Corporation and Subsidiaries Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

UNION CARBIDE CORPORATION

~~Registrant~~


Date:			~~July 24, 2020~~April 23, 2021

	~~By:~~
/s/ RONALD C. EDMONDS
			Ronald C. Edmonds
			Controller and Vice President
			of Controllers and Tax
			The Dow Chemical Company
			Authorized Representative of
			Union Carbide Corporation


		~~By:~~	/s/ IGNACIO MOLINA
			Ignacio Molina
			Vice President, Treasurer and
			Chief Financial Officer

2523


		~~PAGE~~Page

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements.	4

	Consolidated Statements of ~~Income.~~Income.	4

	Consolidated Statements of Comprehensive Income.	5

	Consolidated Balance Sheets.	6

	Consolidated Statements of Cash Flows.	7

	Consolidated Statements of Equity.	8

	Notes to the Consolidated Financial Statements.	9

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	17

	Results of Operations.	1918

	Other Matters.	2119

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	2221

Item 4.	Controls and Procedures.	2221

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.	2322

Item 1A.	Risk Factors.	2322

Item 4.	Mine Safety Disclosures.	2322

Item 6.	Exhibits.	2422

SIGNATURES			2523


Note	Note		Page	Note		Page
1	1	Consolidated Financial Statements	9	1	Consolidated Financial Statements	9
2	2	Recent Accounting Guidance	10	2	Recent Accounting Guidance	10
3	3	Business Separation	10	3	Revenue	10
4	4	Revenue	10	4	Inventories	10
5	5	Inventories	11	5	Intangible Assets	11
6	6	Intangible Assets	11	6	Commitments and Contingent Liabilities	11
7	7	Commitments and Contingent Liabilities	12	7	Leases	12
8	8	Leases	13	8	Accumulated Other Comprehensive Loss	14
9	9	Accumulated Other Comprehensive Loss	15	9	Pension and Other Postretirement Benefit Plans	15
10	10	Pension and Other Postretirement Benefit Plans	15	10	Fair Value Measurements	16
11	11	Fair Value Measurements	16	11	Related Party Transactions	16
12		Related Party Transactions	16
13		Subsequent Event	17