Union Carbide Corporation
10/24/2025 | Press release | Distributed by Public on 10/24/2025 05:40
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
| MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Pursuant to General Instruction H(1)(a) and (b) for Form 10-Q "Omission of Information by Certain Wholly-Owned Subsidiaries," the Corporation is filing this Form 10-Q with the reduced disclosure format.
References to "TDCC" refer to The Dow Chemical Company and its consolidated subsidiaries, except as otherwise indicated by the context. Union Carbide Corporation (the "Corporation" or "UCC") has been a wholly owned subsidiary of TDCC since 2001. TDCC has been a wholly owned subsidiary of Dow Inc. since 2019.
TDCC conducts its worldwide operations through global businesses and the Corporation's business activities comprise components of TDCC's global businesses rather than stand-alone operations. Further, the Corporation sells substantially all of its products to TDCC in order to simplify the customer interface process. The Corporation's Board of Directors, acting pursuant to the authority delegated to it by TDCC, functions as the Corporation's chief operating decision maker ("CODM") to assess UCC's results and allocate resources for its operations. The Corporation's results are reported as a single operating segment as the consolidated statements of income are presented to the CODM without further disaggregation.
RESULTS OF OPERATIONS
Net Sales
Total net sales were $3,100 million for the first nine months of 2025 compared with $3,253 million for the first nine months of 2024, a decrease of 5 percent. Net sales to related companies, principally to TDCC, were $3,020 million for the first nine months of 2025 compared with $3,166 million for the first nine months of 2024, a decrease of 5 percent. Selling prices to TDCC are determined in accordance with the terms of an agreement between UCC and TDCC.
Average selling price for the first nine months of 2025 decreased 3 percent compared with the first nine months of 2024. Price was mixed by product line, with the most significant price decreases in polyethylene, acrylic monomers, ethanolamines and ethyleneamines, partially offset by price increases primarily in vinyl acetate monomers and oxo alcohols. Volume for the first nine months of 2025 decreased 2 percent compared with the first nine months of 2024. Volume was mixed by product line, with the most significant decreases in ethylene glycol, vinyl acetate monomers, glycol ethers, and plastics used for wire and cable applications, due primarily to lower operating rates resulting from lower demand, planned maintenance turnaround activity and the impact of a winter storm on the U.S. Gulf Coast in January 2025. Volume decreases were partially offset by volume increases in ethylene oxide, ethyleneamines and polyglycols.
Cost of Sales
Cost of sales was $3,137 million for the first nine months of 2025 compared with $3,000 million for the first nine months of 2024, an increase of 5 percent. Cost of sales as a percentage of net sales was 101.2 percent for the first nine months of 2025 compared with 92.2 percent for the first nine months of 2024. The increase in cost of sales as a percentage of net sales was primarily due to the impact of lower operating rates resulting from planned maintenance turnaround activity and the impact of a winter storm on the U.S. Gulf Coast in January 2025, higher feedstock and energy costs, and an increase in activity-based costs, including fuel gas, charged by related parties.
Restructuring and Asset Related Charges - Net
In the first quarter of 2025, the Corporation initiated targeted actions to further achieve its cost reduction initiatives in response to ongoing macroeconomic weakness, while reinforcing long-term competitiveness across the economic cycle. As a result of these actions, the Corporation recorded pretax charges of $6 million for severance and related benefit costs. See Note 4 to the Consolidated Financial Statements for additional information about the Corporation's restructuring activities and related charges.
The Corporation expects to incur additional costs in the future related to its restructuring activities, which will be recognized as incurred. The Corporation also expects to incur additional employee-related costs, including involuntary termination benefits, related to its other optimization activities. These costs cannot be reasonably estimated at this time.
Sundry Income (Expense) - Net
Sundry income (expense) - net includes a variety of income and expense items such as charges for management services provided by TDCC, dividend income, non-operating pension and other postretirement benefit plan credits or costs, commissions and gains and losses on sales of investments and assets and on foreign currency exchange.
Sundry income (expense) - net in the first nine months of 2025 was income of $643 million compared with expense of $70 million in the first nine months of 2024. The increase in sundry income was due to a distribution from Dow International Holdings Company, a related company in which the Corporation has an ownership interest, partially offset by increases in charges for management services provided by TDCC, and higher non-operating defined benefit pension costs resulting from lower expected returns on plan assets in 2025. See Note 10 to the Consolidated Financial Statements for additional information about the Corporation's defined benefit pension plans and Note 12 to the Consolidated Financial Statements for additional information about the Corporation's related party transactions.
Interest Income
Interest income was $77 million for the first nine months of 2025 compared with $104 million for the first nine months of 2024. The decrease in interest income primarily resulted from decreased interest rates.
Provision (Credit) for Income Taxes
The Corporation is subject primarily to U.S. federal and state taxes. For the first nine months of 2025, the Corporation reported a credit for income taxes of $7 million, which resulted in a negative effective tax rate of 1.1 percent, compared with a tax provision of $55 million for the first nine months of 2024, which resulted in an effective tax rate of 21.2 percent. The effective tax rate for the first nine months of 2025 reflects the impact of a $735 million nontaxable distribution received from a related company.
On July 4, 2025, U.S. legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14" ("the Act") and commonly referred to as the One Big Beautiful Bill Act was signed into law. The Act, among other things, extended key provisions of the 2017 Tax Cuts and Jobs Act and introduced targeted changes to the U.S. federal income tax regime. Based on the analysis performed by the Corporation to date, the Act is not expected to have a material impact on the effective tax rate.
Net Income Attributable to UCC
The Corporation reported net income of $660 million for the first nine months of 2025 compared with $204 million for the first nine months of 2024. Net income for the first nine months of 2025 was driven by a distribution from a related company as part of TDCC's intercompany financing arrangements, partially offset by lower sales volume, due primarily to the impact of lower operating rates and lower demand, and higher feedstock and energy costs.
Capital Expenditures
Capital expenditures in the first nine months of 2025 were $129 million compared with $262 million in the first nine months of 2024 as projects on the U.S. Gulf Coast were completed.
Pension Plans
As part of its ongoing pension de-risking initiatives, the Corporation initiated the termination of certain tax-qualified defined benefit pension plans which include the tax-qualified benefit obligations for substantially all employees hired after January 1, 2008, who earned benefits based on a set percentage of annual pay, plus interest. As part of the plan termination process, the Corporation offered participants of these plans annuity or lump sum distribution options. Final asset distributions are expected to be paid from plan assets in the fourth quarter of 2025. The Corporation anticipates that these asset distributions will result in a non-cash settlement charge in the range of $30 million to $40 million. See Note 10 to the Consolidated Financial Statements and Note 15 to the Consolidated Financial Statements included in the 2024 10-K for additional information related to the Corporation's pension plans.
OTHER MATTERS
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 and accompanying notes. Note 1 to the Consolidated Financial Statements included in the 2024 10-K describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. The Corporation's critical accounting policies that are impacted by judgments, assumptions and estimates are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in the 2024 10-K. Since December 31, 2024, there have been no material changes in the Corporation's accounting policies that are impacted by judgments, assumptions and estimates.
Asbestos-Related Matters
The Corporation is and has been involved in a large number of asbestos-related suits filed primarily in state courts during the past several decades. These suits principally allege personal injury resulting from exposure to asbestos-containing products and frequently seek both actual and punitive damages. The alleged claims primarily relate to products that UCC sold in the past, alleged exposure to asbestos-containing products located on UCC's premises, and UCC's responsibility for asbestos suits filed against a former UCC subsidiary, Amchem Products, Inc. ("Amchem"). In many cases, plaintiffs are unable to demonstrate that they have suffered any compensable loss as a result of such exposure, or that injuries incurred in fact resulted from exposure to UCC's products.
The table below provides information regarding asbestos-related claims pending against the Corporation and Amchem based on criteria developed by UCC and its external consultants:
| Asbestos-Related Claim Activity | 2025 | 2024 | ||||||
| Claims unresolved at Jan 1 | 5,813 | 6,367 | ||||||
| Claims filed | 3,407 | 3,472 | ||||||
| Claims settled, dismissed or otherwise resolved | (2,719) | (4,469) | ||||||
|
Claims unresolved at Sep 30
|
6,501 | 5,370 | ||||||
| Claimants with claims against both UCC and Amchem | (1,192) | (963) | ||||||
|
Individual claimants at Sep 30
|
5,309 | 4,407 | ||||||
Plaintiffs' lawyers often sue numerous defendants in individual lawsuits or on behalf of numerous claimants. As a result, the damages alleged are not expressly identified as to UCC, Amchem or any other particular defendant, even when specific damages are alleged with respect to a specific disease or injury. For these reasons and based upon the Corporation's litigation and settlement experience, the Corporation does not consider the damages alleged against it and Amchem to be a meaningful factor in its determination of any potential asbestos-related liability.
For additional information, see Asbestos-Related Matters in Note 7 to the Consolidated Financial Statements; Part II, Item 1. Legal Proceedings; and Note 12 to the Consolidated Financial Statements included in the 2024 10-K.
Debt Covenants and Default Provisions
The Corporation's outstanding public debt has been issued under indentures which contain, among other provisions, covenants that the Corporation must comply with while the underlying notes are outstanding. Such covenants are typically based on the Corporation's size and financial position and include, subject to the exceptions and qualifications contained in the indentures, obligations not to (i) allow liens on principal U.S. manufacturing facilities, (ii) enter into sale and lease-back transactions with respect to principal U.S. manufacturing facilities, or (iii) merge into or consolidate with any other entity or sell or convey all or substantially all of its assets. Failure of the Corporation to comply with any of these covenants could, after the passage of any applicable grace period, result in a default under the applicable indenture which would allow the note holders to accelerate the due date of the outstanding principal and accrued interest on the subject notes. Management believes the Corporation was in compliance with the covenants referred to above at September 30, 2025.
Dividends and Distributions
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. For the first nine months of 2025, the Corporation declared and paid cash dividends of $28 million to TDCC ($228 million for the first nine months of 2024).
Additionally, as part of TDCC's continuing efforts to optimize its intercompany financing structure, the Corporation received a distribution of $735 million in the third quarter of 2025 from Dow International Holdings Company, a related company in which the Corporation holds a 4.7 percent ownership interest, which was subsequently distributed to TDCC. See Note 12 to the Consolidated Financial Statements for additional information about the Corporation's dividends and distributions.
Union Carbide Corporation published this content on October 24, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 24, 2025 at 11:40 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]